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: June 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 August 2, 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
June 30, 1996 and December 31, 1995.................... 5
Consolidated Statements of Income for
the Six Months Ended June 30, 1996 and 1995............ 6 - 7
Consolidated Statement of Changes in Stockholder's
Equity for the Six Months Ended June 30, 1996 and 1995.. 8
Consolidated Statements of Cash Flows for
the Six Months Ended June 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 $654,447 in the first six
months of 1996. The Company had net income in the first six months of 1995 of
$621,833. This is an increase of 5.2% or $32,614.
The results of operations for the six month periods ended June 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 $131,666 or 5.2% comparing June 1996 to
1995. Interest income and expense have both increased. Interest income has
increased $401,903 or 9.4% and interest expense has increased $270,237 or 15.7%.
Other income has improved because of increasing service fees last August. Other
income has increased $93,542 or 25.2%. The Limited Partnership entitled Johnson
Williams Limited Partnership has reached break even, earning $189 in the first
six months of 1996 compared to a loss of $21,655 in 1995. Other expenses have
also increased from last year to this year. They have increased $174,816 or 8.9%
comparing last year's first six months to this year. Salaries and benefits have
increased by $126,745 which have been partially offset by the decrease in
accruals for FDIC premiums. Those accruals have decreased by $105,985.
<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 26.23% on
June 30, 1996 as compared to 24.52% in December 31, 1995.
The Company has a $270,883 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 six months of 1996 was $120,000 as
compared to $120,000 in 1995.
The Company had net charge-offs of $148,039 and $76,355 in the first six months
of 1996 and 1995, respectively. Net charge-offs to average loans was 0.17% in
1996 and 0.09% in 1995.
Total nonperforming assets, which consist of nonaccrual loans and foreclosed
properties, were $46,605 at June 31, 1996. This is a decrease of $424,123 since
March 31, 1996. This decrease 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 $1,471,890 at June 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 two large real estate loan customers
and one agricultural loan. All three 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 54.8% at June 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 June 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 June 30, 1996 were
$6.1 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 June 30, 1996 was 10.85% 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 six months (annualized) of 1996 was 1.06%
as compared to 1.08% in the first six months of 1995. Return on average equity
(annualized) for the same period was 9.77%, compared to 10.13% for 1995.
<PAGE>
Eagle Financial Services, Inc. and Subsidiary
Consolidated Balance Sheets
As of June 30, 1996 and December 31, 1995
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
<S> <C>
Assets
Cash and due from banks $4,645,747 $4,106,467
Securities held to maturity (fair value:
1996, $24,863,183; 1995, $23,332,317) 25,387,623 23,290,979
Securities available for sale, at fair value 2,177,814 3,327,169
Federal funds sold 1,409,000 --
Loans (net of unearned income) 86,027,202 85,871,203
Less allowance for loan losses (831,549) (828,104)
Net loans 85,195,653 85,043,099
Premises and equipment 4,314,553 3,493,722
Other real estate owned 46,605 46,605
Intangible assets 677,921 --
Other assets 2,337,525 2,184,812
Total assets $126,192,441 $121,492,853
Liabilities and Stockholders' Equity
Liabilities
Deposits:
Noninterest bearing $12,721,454 $11,971,823
Interest bearing 98,828,516 93,640,739
Total deposits $111,549,970 $105,612,562
Federal funds purchased -- 1,867,000
Other liabilities 956,546 892,872
Total liabilities $112,506,516 $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 1,841,895 1,782,186
Retained Earnings 10,114,112 9,612,627
Unrealized loss on securities
available for sale, net (12,615) (12,606)
Total stockholders' equity $13,685,925 $13,120,419
Total liabilities and stockholders' equity $126,192,441 $121,492,853
</TABLE>
<PAGE>
Eagle Financial Services, Inc. and Subsidiary
Consolidated Statements of Income
For the Periods Ended June 30, 1996 and 1995
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
<S> <C>
Interest Income
Interest and fees on loans $1,947,835 $1,858,889 $3,858,349 $3,653,022
Interest on securities held to
maturity:
Taxable interest income 327,895 209,581 636,319 426,414
Interest income exempt from
federal income taxes 42,201 41,696 83,626 83,392
Interest and dividends on securities
available for sale, taxable 35,360 49,889 77,099 99,443
Interest on federal funds sold 13,800 3,688 17,307 8,526
Total interest income $2,367,091 $2,163,743 $4,672,700 $4,270,797
Interest Expense
Interest on deposits $976,287 $852,670 $1,934,225 $1,659,910
Interest on federal funds purchased 6,098 28,338 53,358 54,653
Interest on Federal Home Loan Bank
advances -- -- -- 2,783
Total interest expense $982,385 $881,008 $1,987,583 $1,717,346
Net interest income $1,384,706 $1,282,735 $2,685,117 $2,553,451
Provision For Loan Losses 60,000 60,000 120,000 120,000
Net interest income after
provision for loan losses $1,324,706 $1,222,735 $2,565,117 $2,433,451
Other Income
Trust Department income $41,891 $37,500 $90,244 $75,000
Service charges on deposits 146,854 91,802 265,250 171,288
Other service charges and fees 46,329 37,758 89,962 101,401
Income (Loss) on equity investment 1,495 (1,326) 189 (21,655)
Other operating income 6,534 22,403 19,211 45,280
$243,103 $188,137 $464,856 $371,314
</TABLE>
<PAGE>
Eagle Financial Services, Inc. and Subsidiary
Consolidated Statements of Income
For the Periods Ended June 30, 1996 and 1995
<TABLE>
<CAPTION>
<S> <C>
Other Expenses
Salaries and wages $433,785 $368,586 $840,877 $728,413
Pension and other employee benefits 119,915 97,838 225,469 211,188
Occupancy expenses 85,864 56,495 162,205 114,100
Equipment expenses 142,447 91,590 203,416 177,082
FDIC assessment 500 53,743 1,500 107,485
Intangible amortization 12,710 -- 14,909 --
Other operating expenses 312,898 298,067 697,079 632,371
$1,108,119 $966,319 $2,145,455 $1,970,639
Income before income taxes $459,690 $444,553 $884,518 $834,126
Income Tax Expense 115,342 109,590 230,071 212,293
Net Income $344,348 $334,963 $654,447 $621,833
Earnings Per Share $0.49 $0.48 $0.94 $0.90
</TABLE>
<PAGE>
Eagle Financial Services, Inc. and Subsidiary
Consolidated Statements of Changes in Stockholders' Equity
Periods Ended June 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 621,833 621,833
Net change in unrealized (loss)
on securities available for sale 96,075 96,075
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 (6) (84) (90)
Balance, June 30, 1995 $1,731,192 $1,690,508 $9,209,211 ($27,023) $12,603,888
Balance, December 31, 1995 $1,738,212 $1,782,186 $9,612,627 ($12,606) $13,120,419
Net income 654,447 654,447
Net change in unrealized (loss)
on securities available for sale (9) (9)
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) (132) (141)
Balance, June 30, 1996 $1,742,533 $1,841,895 $10,114,112 ($12,615) $13,685,925
</TABLE>
<PAGE>
Eagle Financial Services, Inc. and Subsidiary
Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 1996 and 1995
<TABLE>
<CAPTION>
Six Months Ended
1996 1995
<S> <C>
Cash Flows from Operating Activities
Net income $654,447 $621,833
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 177,408 131,440
Amortization of intangible assets 21,209 6,300
(Gain) loss on equity investment (189) 21,655
Provision for loan losses 120,000 120,000
(Decrease) in other assets (158,824) (127,546)
Decrease in other liabilities 63,674 186,014
Net cash provided by operating activities $877,725 $959,696
Cash Flows from Investing Activities
Proceeds from maturities of securities held to maturity $2,506,966 $3,586,135
Purchases of securities held to maturity (4,603,619) (53,580)
Proceeds from maturities of securities available for sale 1,253,855 271,000
Purchases of securities available for sale (104,500) (73,088)
Purchase of bank premises and equipment (998,239) (472,900)
Acquisition of intangible assets (692,830) --
Net (increase) in loans (272,554) (2,845,304)
Net cash received from (used in) investing activities ($2,910,921) $412,263
Cash Flows from Financing Activities
Net increase in demand deposits, NOW accounts,
money market and savings accounts $4,936,296 $2,462,301
Net increase in certificates of deposit 1,001,112 333,952
Net (decrease) in federal funds purchased (1,867,000) --
(Decrease) of Federal Home Loan Bank advance -- (3,000,000)
Cash dividends paid (88,791) (83,305)
Retirement of common stock (141) (89)
Net cash received from (used in) financing activities $3,981,476 ($287,141)
Increase in cash and cash equivalents $1,948,280 $1,084,818
Cash and Cash Equivalents
Beginning 4,106,467 5,813,599
Ending $6,054,747 $6,898,417
</TABLE>
<PAGE>
Eagle Financial Services, Inc. and Subsidiary
Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 1996 and 1995
<TABLE>
<CAPTION>
Six Months Ended
1996 1995
<S> <C>
Supplemental Disclosures of Cash Flow Information
Cash payments for:
Interest $1,975,021 $1,593,841
Income taxes $259,523 $264,830
Supplemental Schedule of Non-Cash Financing
Activities:
Issuance of common stock, dividend investment plan $64,171 $61,647
Unrealized gain (loss) on securities available for sale ($9) $96,075
</TABLE>
<PAGE>
EAGLE FINANCIAL SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 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: August 2, 1996 /s/ LEWIS M. EWING
Lewis M. Ewing
President and CEO
Date: August 2, 1996 /s/ JOHN R. MILLESON
John R. Milleson
Executive Vice President and
Treasurer
Date: August 2, 1996 /s/ JAMES W. MCCARTY, JR.
James W. McCarty, Jr.
Controller
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 4,646
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 1,409
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 2,178
<INVESTMENTS-CARRYING> 25,388
<INVESTMENTS-MARKET> 24,863
<LOANS> 86,027
<ALLOWANCE> 832
<TOTAL-ASSETS> 126,192
<DEPOSITS> 111,550
<SHORT-TERM> 0
<LIABILITIES-OTHER> 957
<LONG-TERM> 0
<COMMON> 3,584
0
0
<OTHER-SE> 10,101
<TOTAL-LIABILITIES-AND-EQUITY> 126,192
<INTEREST-LOAN> 3,858
<INTEREST-INVEST> 798
<INTEREST-OTHER> 17
<INTEREST-TOTAL> 4,673
<INTEREST-DEPOSIT> 1,934
<INTEREST-EXPENSE> 1,988
<INTEREST-INCOME-NET> 2,685
<LOAN-LOSSES> 120
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,145
<INCOME-PRETAX> 885
<INCOME-PRE-EXTRAORDINARY> 885
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 654
<EPS-PRIMARY> 0.94
<EPS-DILUTED> 0.94
<YIELD-ACTUAL> 4.78
<LOANS-NON> 0
<LOANS-PAST> 1,472
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 494
<ALLOWANCE-OPEN> 828
<CHARGE-OFFS> 142
<RECOVERIES> 26
<ALLOWANCE-CLOSE> 832
<ALLOWANCE-DOMESTIC> 44
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 788
</TABLE>
