PR Newswire | Oct 29, 2021 08:01AM EDT

And Quarterly Dividend

10/29 07:00 CDT

Eagle Financial Services, Inc. Announces 2021 Third Quarter Financial Results And Quarterly Dividend BERRYVILLE, Va., Oct. 29, 2021

BERRYVILLE, Va., Oct. 29, 2021 /PRNewswire/ -- Eagle Financial Services, Inc. (OTCQX: EFSI), the holding company for Bank of Clarke County, whose divisions include Eagle Investment Group, announced its third quarter 2021 results and quarterly dividend. On October 28, 2021, the Board of Directors announced a quarterly common stock cash dividend of $0.28 per common share, payable on November 19, 2021, to shareholders on record on November 8, 2021. Select highlights for the third quarter include:

* Net income of $2.9 million * Deposit growth of $31.3 million * Basic and diluted earnings per share of $0.83 * Loan activity: * PPP forgiveness - $19.3 million * Sales - $29.8 million * Net growth - $45.8 million

Brandon Lorey, President and CEO, stated"Against the headwinds of over $19 million in PPP runoff, Eagle Financial Services delivered record net loan growth of $46 million (excluding PPP growth in Q2 2020) or 14% annualized with core deposit growth at 11% (annualized). The Bank remains poised for continued organic loan and deposit growth through its newly opened Loan Production Office in Frederick Maryland alongside the continued growth in Loudoun, Clarke, Frederick (VA), and Winchester. We remain focused on growing our fee income capabilities through continued loan sales, fee restructuring, and growth within the Eagle Investment Group which saw an increase in Assets Under Management (AUM) of over $169 million (91% over June 2021) during the quarter. I would like to thank our employees for their continued focus on serving the financial needs of our customers as we maneuver through 2021.

Income Statement Review

Net income for the quarter ended September 30, 2021 was $2.9 million reflecting a decrease of 4.3% from the quarter ended June 30, 2021 and a decrease of 15.6% from the quarter ended September 30, 2020. The decrease from both periods was mainly driven by increases in noninterest expenses as the Company continues to invest in its employees and other resources as it continues to grow. Net income was $3.0 million for the three-month period ended June 30, 2021 and $3.4 million for the quarter ended September 30, 2020.

Net interest income for the quarters ended September 30, 2021 and June 30, 2021 was $10.4 million and $10.0 million, respectively. Net interest income was $9.5 million for the quarter ended September 30, 2020. The increase in net interest income from the quarters ended June 30, 2021 and September 30, 2020 resulted primarily from growth in the Company's loan portfolio and reduced interest expense on deposit accounts.

Total loan interest income was $10.0 million and $9.7 million for the quarters ended September 30, 2021 and June 30, 2021, respectively. Total loan interest income was $9.3 million for the quarter ended September 30, 2020. Total loan interest income increased $737 thousand or 7.9% from the quarter ended September 30, 2020 to the quarter ended September 30, 2021. Average loans for the quarter ended September 30, 2021 were $902.8 million compared to $798.4 million for the quarter ended September 30, 2020. The tax equivalent yield on average loans for the quarter ended September 30, 2021 was 4.42%, a decrease of five basis points from the quarter ended June 30, 2021 and down 23 basis points from the 4.65% average yield for the same time period in 2020. The majority of this decrease in yield can be attributed to the SBA Paycheck Protection Program ("PPP") loans. The average balance of SBA PPP loans outstanding during the quarter ended September 30, 2021 was $50.9 million. These loans have a 1.00% interest rate, which is much lower than the existing portfolio's yield. Fee income and interest income earned on SBA PPP loans during the nine months ended September 30, 2021 were $2.2 million and $174 thousand, respectively.

Interest and dividend income from the investment portfolio was $707 thousand for the quarter ended September 30, 2021 compared to $649 thousand for the quarter ended June 30, 2021. Interest income and dividend income from the investment portfolio was $830 thousand for the quarter ended September 30, 2020. Average investments for the quarter ended September 30, 2021 were $179.5 million compared to $175.5 million for the quarter ended June 30, 2021. Average investments were $144.1 million for the quarter ended September 30, 2020. The tax equivalent yield on average investments for the quarter ended September 30, 2021 was 1.62%, up seven basis points from 1.55% for the quarter ended June 30, 2021 and down 78 basis points from 2.40% for the quarter ended September 30, 2020.

Total interest expense was $383 thousand for the three months ended September 30, 2021 and $434 thousand and $683 thousand for three months ended June 30, 2021 and September 30, 2020, respectively. The decrease in interest expense resulted from the reduction in interest rates paid on deposit accounts. The average cost of interest-bearing liabilities decreased four and 25 basis points when comparing the quarter ended September 30, 2021 to the quarters ended June 30, 2021 and September 30, 2020, respectively. The average balance of interest-bearing liabilities increased $28.8 million from the quarter ended June 30, 2021 to the quarter ended September 30, 2021. The average balance of interest-bearing liabilities increased $102.3 million from the quarter ended September 30, 2020 to the same period in 2021.

The net interest margin was 3.56% for the quarter ended September 30, 2021. For the quarters ended June 30, 2021 and September 30, 2020, the net interest margin was 3.56% and 3.86%, respectively. The Company's net interest margin is not a measurement under accounting principles generally accepted in the United States, but it is a common measure used by the financial services industry to determine how profitably earning assets are funded. The Company's net interest margin is calculated by dividing tax equivalent net interest income by total average earning assets. Tax equivalent net interest income is calculated by grossing up interest income for the amounts that are non-taxable (i.e., municipal income) then subtracting interest expense. The tax rate utilized is 21%.

Noninterest income was $2.9 million for the quarter ended September 30, 2021, which represented an increase of $231 thousand or 8.7% from the $2.7 million for the three months ended June 30, 2021. The increase was driven mostly by the increase of $127 thousand in gain on sale of loans held for sale recognized during the quarter ended September 30, 2021. Noninterest income for the quarter ended September 30, 2020 was $2.2 million. The increase between the quarters ended September 30, 2021 and September 30, 2020 was driven by several factors included the gain on sale of loans held for sale as well as increases in ATM fee income. In addition, income from fiduciary activities increased $122 or 32.0% due to an increase in assets under management during the third quarter of 2021. These increases were partially offset by loss on sale of AFS securities.

Noninterest expense increased $796 thousand, or 9.1%, to $9.5 million for the quarter ended September 30, 2021 from $8.7 million for the quarter ended June 30, 2021. Noninterest expense was $7.5 million for the quarter ended September 30, 2020, representing an increase of $2.1 million or 27.6% when comparing to the quarter ended September 30, 2021 to the quarter ended September 30, 2020. Much of this increase resulted from the increase in salaries and benefits expenses. Annual pay increases, newly hired employees, incentive plan accruals and increased insurance costs have attributed to these increases. The number of full-time equivalent employees (FTEs) has increased from 191 and 213 at September 30, 2020 and June 30, 2021, respectively, to 215 at September 30, 2021.

Asset Quality and Provision for Loan Losses

Nonperforming assets consist of nonaccrual loans, loans 90 days or more past due and still accruing, other real estate owned (foreclosed properties), and repossessed assets. Nonperforming assets decreased from $5.4 million or 0.44% of total assets at June 30, 2021 to $3.7 million or 0.30% of total assets at September 30, 2021. This decrease resulted from one nonaccrual loan totalling $774 thousand paying off during the quarter ended September 30, 2021. In addition, two OREO properties were sold and one loan past due 90 days and still accruing paid off during the quarter ended September 30, 2021. Nonperforming assets were $4.7 million at September 30, 2020. Total nonaccrual loans were $3.5 million at September 30, 2021 and $4.4 million at June 30, 2021. Nonaccrual loans were $4.3 million at September 30, 2020. The majority of all nonaccrual loans are secured by real estate and management evaluates the financial condition of these borrowers and the value of any collateral on these loans. The results of these evaluations are used to estimate the amount of losses which may be realized on the disposition of these nonaccrual loans. Other real estate owned was at $193 thousand at September 30, 2021 and $423 thousand at June 30, 2021.

The Company may, under certain circumstances, restructure loans in troubled debt restructurings as a concession to a borrower when the borrower is experiencing financial distress. Formal, standardized loan restructuring programs are not utilized by the Company. Each loan considered for restructuring is evaluated based on customer circumstances and may include modifications to one or more loan provision. Such restructured loans are included in impaired loans but may not necessarily be nonperforming loans. At September 30, 2021, the Company had 17 troubled debt restructurings totalling $2.7 million. Approximately $1.9 million or 14 loans are performing loans, while the remaining loans are on non-accrual status. At June 30, 2021, the Company had 17 troubled debt restructurings totaling $2.8 million. Approximately $2.0 million or 14 loans were performing loans, while the remaining loans were on non-accrual status.

The Company realized $50 thousand in net recoveries for the quarter ended September 30, 2021 versus $58 thousand in net recoveries for the three months ended June 30, 2021. During the three months ended September 30, 2020, $196 thousand in net recoveries were recognized. The amount of provision for loan losses reflects the results of the Bank's analysis used to determine the adequacy of the allowance for loan losses. The Company recorded a provision for loan losses of $300 thousand for the quarter ended September 30, 2021. The Company recognized provision for loan losses of $284 thousand and $100 thousand for the quarters ended June 30, 2021 and September 30, 2020, respectively. The provision for the quarters ended September 30, 2021, June 30, 2021 and September 30, 2020 resulted mostly from loan growth during the quarter. The ratio of allowance for loan losses to total loans was 0.91% at September 30, 2021 and 0.92% at June 30, 2021. The ratio of allowance for loan losses to total loans was 0.83% at September 30, 2020. Excluding outstanding PPP loans, the allowance for loan losses as a percentage of total loans was 0.94% at September 30, 2021 and June 30, 2021 and 0.98% as September 30, 2020. The ratio of allowance for loan losses to total nonaccrual loans was 239.18% at September 30, 2021. The ratio of allowance for loan losses to total nonaccrual loans was 182.71% and 155.10% at June 30, 2021 and September 30, 2020, respectively. Management's judgment in determining the level of the allowance is based on evaluations of the collectability of loans while taking into consideration such factors as trends in delinquencies and charge-offs, changes in the nature and volume of the loan portfolio, current economic conditions that may affect a borrower's ability to repay and the value of collateral, overall portfolio quality and review of specific potential losses. The Company is committed to maintaining an allowance at a level that adequately reflects the risk inherent in the loan portfolio.

Total Consolidated Assets

Total consolidated assets of the Company at September 30, 2021 were $1.25 billion, which represented an increase of $33.6 million or 2.8% from total assets of $1.22 billion at June 30, 2021. At September 30, 2020 total consolidated assets were $1.07 billion. Total loans increased $45.8 million from $878.4 million at June 30, 2021 to $924.2 million at September 30, 2021. During the quarter, $19.3 million in SBA PPP loans were forgiven and $29.8 million in loans were sold. The Company sold $6.7 million in mortgage loans on the secondary market and $23.1 million of loans from the commercial and consumer loan portfolios. These loan sales resulted in gains of $486 thousand. Total securities increased $25.0 million from $177.5 million at June 30, 2021, to $202.5 million at September 30, 2021. At September 30, 2020 total investment securities were $153.7 million and total loans were $788.9 million. The growth in total loans and total assets was largely due to regular loan portfolio growth as the Company expands lending types and markets.

Deposits and Other Borrowings

Total deposits increased $31.3 million to $1.13 billion at September 30, 2021 from $1.10 billion at June 30, 2021. At September 30, 2020 total deposits were $955.2 million. The growth in deposits was mainly organic growth as we expand and grow into newer market areas.

The Company had no outstanding borrowings from the Federal Home Loan Bank of Atlanta at September 30, 2021, December 31, 2020 or September 30, 2020.

Equity

Shareholders' equity was $109.8 million and $107.6 million at September 30, 2021 and June 30, 2021, respectively. Shareholders' equity was $103.9 million at September 30, 2020. The book value of the Company at September 30, 2021 was $32.21 per common share. Total common shares outstanding were 3,449,204 at September 30, 2021. On October 28, 2021, the board of directors declared a $0.28 per common share cash dividend for shareholders of record as of November 8, 2021 and payable on November 19, 2021.

COVID-19 Impacts

The COVID-19 crisis has changed our communities, both in the way we live and the way we do business. While circumstances continue to change, the Company is continuing to work steadfastly to meet and exceed the needs of its customers, employees, and the communities in which it does business. Customers' banking needs have continued to be fulfilled through multiple banking channels including mobile, digital, and adjusted-schedule physical. In efforts to assist local businesses during this pandemic, the Company originated 1,372 PPP loans (through two rounds of lending), totaling $132.1 million, into the hands of our community's small businesses. During the quarter ended September 30, 2021, $19.3 million of PPP loans were forgiven. As of September 30, 2021, $28.9 million in PPP loans are still outstanding. In addition to local small businesses, the Company worked with its consumer and commercial customers through its loan deferral program whereby customers experiencing hardships due to COVID-19 were granted a deferral in loan payments for up to 90 days. During 2020 and through the quarter ended March 31, 2021, the Company approved 256 deferrals with loan balances totalling approximately $127.5 million for its customers experiencing hardships related to COVID-19. As of September 30, 2021, all loans had begun making payments on their loans after the deferral date had passed.

Cautionary Note Regarding Forward-Looking Statements

Certain information contained in this discussion may include "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements relate to the Company's future operations and are generally identified by phrases such as "the Company expects," "the Company believes" or words of similar import. Although the Company believes that its expectations with respect to the forward-looking statements are based upon reliable assumptions within the bounds of its knowledge of its business and operations, there can be no assurance that actual results, performance or achievements of the Company will not differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements.

Factors that could have a material adverse effect on the operations and future prospects of the Company include, but are not limited to: changes in interest rates and general economic conditions; the effects of the COVID-19 pandemic, including on the Company's credit quality and business operations, as well as its impact on general economic and financial market conditions; the legislative and regulatory climate; monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and Federal Reserve; the quality or composition of the Company's loan or investment portfolios; demand for loan products; deposit flows; competition; demand for financial services in the Company's market area; acquisitions and dispositions; the Company's ability to keep pace with new technologies; a failure in or breach of the Company's operational or security systems or infrastructure, or those of third-party vendors or other service providers, including as a result of cyberattacks; the Company's capital and liquidity requirements; changes in tax and accounting rules, principles, policies and guidelines; and other factors included in the Company's Annual Report on Form 10-K for the year ended December 31, 2020 and other filings with the Securities and Exchange Commission.

EAGLE FINANCIAL SERVICES, INC.

KEY STATISTICS

For the Three Months Ended

3Q21 2Q21 1Q21 4Q20 3Q20

Net Income (dollars in $ 2,873 $ 3,003 $ 2,862 $ 2,506 $ 3,406thousands)

Earnings per share, basic $ 0.83 $ 0.87 $ 0.84 $ 0.74 $ 0.99

Earnings per share, $ 0.83 $ 0.87 $ 0.84 $ 0.74 $ 0.99diluted

Return on average total 0.92 % 1.01 % 1.02 % 0.91 % 1.30 %assets

Return on average total 10.48 % 11.47 % 11.04 % 9.56 % 13.21 %equity

Dividend payout ratio 33.73 % 31.03 % 32.14 % 35.14 % 26.26 %

Fee revenue as a percent 16.40 % 15.79 % 15.62 % 15.61 % 15.85 %of total revenue

Net interest margin(1) 3.56 % 3.56 % 3.62 % 3.63 % 3.86 %

Yield on average earning 3.69 % 3.71 % 3.81 % 3.85 % 4.14 %assets

Rate on averageinterest-bearing 0.23 % 0.27 % 0.32 % 0.40 % 0.48 %liabilities

Net interest spread 3.46 % 3.44 % 3.49 % 3.45 % 3.66 %

Tax equivalent adjustmentto net interest income $ 37 $ 50 $ 53 $ 56 $ 61(dollars in thousands)

Non-interest income to 0.92 % 0.89 % 0.86 % 0.81 % 0.84 %average assets

Non-interest expense to 3.05 % 2.95 % 2.82 % 2.92 % 2.84 %average assets

Efficiency ratio(2) 71.31 % 67.83 % 66.25 % 69.21 % 64.43 %

The net interest margin is calculated by dividing tax equivalent net interest income by total average earning assets. Tax equivalent interest income is calculated by grossing up interest income for the amounts that are non-taxable (i.e., municipal income) then subtracting interest expense. The rate utilized is 21%. See the table below for the quarterly tax(1) equivalent net interest income and the reconciliation of net interest income to tax equivalent net interest income. The Company's net interest margin is a common measure used by the financial service industry to determine how profitable earning assets are funded. Because the Company earns a fair amount of nontaxable interest income due to the mix of securities in its investment security portfolio, net interest income for the ratio is calculated on a tax equivalent basis as described above.

The efficiency ratio is not a measurement under accounting principles generally accepted in the United States. It is calculated by dividing non-interest expense by the sum of tax equivalent net interest income and non-interest income excluding gains and losses on the investment portfolio and sales of repossessed assets. The tax rate utilized is 21%. See the(2) table below for the quarterly tax equivalent net interest income and a reconciliation of net interest income to tax equivalent net interest income. The Company calculates this ratio in order to evaluate its overhead structure or how effectively it is operating. An increase in the ratio from period to period indicates the Company is losing a larger percentage of its income to expenses. The Company believes that the efficiency ratio is a reasonable measure of profitability.

EAGLE FINANCIAL SERVICES, INC.

SELECTED FINANCIAL DATA BY QUARTER

3Q21 2Q21 1Q21 4Q20 3Q20

BALANCE SHEETRATIOS

Loans to 81.74 % 79.90 % 81.93 % 82.55 % 84.35 %deposits

Averageinterest-earningassets to 173.86 % 176.80 % 174.95 % 175.23 % 173.54 %average-interestbearingliabilities

PER SHARE DATA

Dividends $ 0.28 $ 0.27 $ 0.27 $ 0.26 $ 0.26

Book value 32.21 31.59 30.92 31.05 30.65

Tangible book 32.21 31.59 30.92 31.05 30.65value

SHARE PRICE DATA

Closing price $ 34.20 $ 34.10 $ 31.99 $ 29.50 $ 25.20

Diluted earnings 10.30 9.80 9.52 9.97 6.36multiple(1)

Book value 1.06 1.08 1.03 0.95 0.82multiple(2)

COMMON STOCKDATA

Outstandingshares at end of 3,449,204 3,437,782 3,429,686 3,405,035 3,416,013period

Weighted averageshares 3,448,352 3,433,057 3,426,839 3,410,220 3,413,304outstanding

Weighted averageshares 3,448,352 3,433,057 3,426,839 3,410,220 3,413,304outstanding,diluted

CAPITAL RATIOS

Total equity to 8.76 % 8.83 % 8.87 % 9.30 % 9.68 %total assets

CREDIT QUALITY

Net charge-offs (0.01) % (0.01) % (0.01) % 0.03 % (0.02) %to average loans

Totalnon-performing 0.38 % 0.56 % 0.49 % 0.58 % 0.53 %loans to totalloans

Totalnon-performing 0.30 % 0.44 % 0.41 % 0.48 % 0.44 %assets to totalassets

Non-accrualloans to:

total loans 0.38 % 0.51 % 0.49 % 0.58 % 0.53 %

total assets 0.28 % 0.36 % 0.36 % 0.43 % 0.40 %

Allowance forloan losses to:

total loans 0.91 % 0.92 % 0.88 % 0.85 % 0.83 %

non-performing 226.79 % 151.22 % 160.64 % 130.46 % 140.10 %assets

non-accrual 239.18 % 182.71 % 179.82 % 146.85 % 155.10 %loans

NON-PERFORMINGASSETS:

(dollars inthousands)

Loans delinquent $ - $ 500 $ - $ - $ -over 90 days

Non-accrual 3,532 4,432 4,313 4,832 4,286loans

Other realestate owned and 193 423 515 607 442repossessedassets

NET LOANCHARGE-OFFS(RECOVERIES):

(dollars inthousands)

Loans charged $ 45 $ 19 $ 5 $ 300 $ 22off

(Recoveries) (95) (77) (66) (33) (218)

Net charge-offs (50) (58) (61) 267 (196)(recoveries)

PROVISION FORLOAN LOSSES $ 300 $ 284 $ 599 $ 702 $ 100(dollars inthousands)

ALLOWANCE FORLOAN LOSSSUMMARY

(dollars inthousands)

Balance at thebeginning of $ 8,098 $ 7,756 $ 7,096 $ 6,661 $ 6,365period

Provision 300 284 599 702 100

Net charge-offs (50) (58) (61) 267 (196)(recoveries)

Balance at the $ 8,448 $ 8,098 $ 7,756 $ 7,096 $ 6,661end of period

The diluted earnings multiple (or price earnings ratio) is calculated by dividing the period's closing market price per share by total equity per(1) weighted average shares outstanding, diluted for the period. The diluted earnings multiple is a measure of how much an investor may be willing to pay for $1.00 of the Company's earnings.

The book value multiple (or price to book ratio) is calculated by dividing(2) the period's closing market price per share by the period's book value per share. The book value multiple is a measure used to compare the Company's market value per share to its book value per share.

EAGLE FINANCIAL SERVICES, INC.

CONSOLIDATED BALANCE SHEETS

(dollars in thousands)

Unaudited Unaudited Unaudited Audited Unaudited

09/30/2021 06/30/2021 03/31/2021 12/31/2020 9/30/2020

Assets

Cash and due $ 68,168 $ 104,229 $ 86,916 $ 79,698 $ 63,774from banks

Federal funds 240 234 234 222 270sold

Securitiesavailable for 202,488 177,536 175,033 166,222 153,688sale, at fairvalue

Loans held 1,148 1,073 - - -for sale

Loans, net ofallowance for 914,628 869,271 867,195 829,238 799,040loan losses

Bank premisesand 18,572 18,627 18,822 18,725 18,906equipment,net

Other assets 47,509 48,174 36,757 36,047 37,582

Total assets $ 1,252,753 $ 1,219,144 $ 1,184,957 $ 1,130,152 $ 1,073,260

LiabilitiesandShareholders'Equity

Liabilities

Deposits:

Noninterestbearing $ 448,217 $ 441,051 $ 435,296 $ 407,576 $ 379,198demanddeposits

Savings andinterestbearing 557,804 532,269 504,775 476,864 446,687demanddeposits

Time deposits 124,644 126,078 127,918 128,658 129,353

Total $ 1,130,665 $ 1,099,398 $ 1,067,989 $ 1,013,098 $ 955,238deposits

Federal HomeLoan Bank - - - - -advances

Other 12,286 12,144 11,904 11,980 14,139liabilities

Commitmentsand - - - - -contingentliabilities

Total $ 1,142,951 $ 1,111,542 $ 1,079,893 $ 1,025,078 $ 969,377liabilities

Shareholders'Equity

Preferredstock, $10 - - - - -par value

Common stock,$2.50 par 8,521 8,515 8,495 8,460 8,472value

Surplus 11,750 11,426 11,021 10,811 10,862

Retained 88,446 86,539 84,462 82,524 80,907earnings

Accumulatedother 1,085 1,122 1,086 3,279 3,642comprehensiveincome

Totalshareholders' $ 109,802 $ 107,602 $ 105,064 $ 105,074 $ 103,883equity

Totalliabilitiesand $ 1,252,753 $ 1,219,144 $ 1,184,957 $ 1,130,152 $ 1,073,260shareholders'equity

EAGLE FINANCIAL SERVICES, INC.

CONSOLIDATED STATEMENTS OF INCOME

(dollars in thousands)

Unaudited

9/30/ 6/30/ 3/31/ 12/31/ 9/30/ 2021 2021 2021 2020 2020

Interest and DividendIncome

Interest and fees on $ 10,049 $ 9,749 $ 9,408 $ 9,249 $ 9,312loans

Interest on federal funds - - - - -sold

Interest and dividends onsecurities available forsale:

Taxable interest income 600 530 466 588 660

Interest income exempt 96 107 118 127 142from federal income taxes

Dividends 11 12 12 14 28

Interest on deposits in 26 15 12 12 8banks

Total interest and $ 10,782 $ 10,413 $ 10,016 $ 9,990 $ 10,150dividend income

Interest Expense

Interest on deposits $ 383 $ 434 $ 487 $ 592 $ 683

Total interest expense $ 383 $ 434 $ 487 $ 592 $ 683

Net interest income $ 10,399 $ 9,979 $ 9,529 $ 9,398 $ 9,467

Provision For Loan Losses 300 284 599 702 100

Net interest income after $ 10,099 $ 9,695 $ 8,930 $ 8,696 $ 9,367provision for loan losses

Noninterest Income

Income from fiduciary $ 503 $ 399 $ 341 $ 317 $ 381activities

Service charges on 301 241 217 246 220deposit accounts

Other service charges and 1,374 1,354 1,309 1,255 1,251fees

Gain on the sale of bank - - - 5 -premises and equipment

(Loss) gain on sales of - (52) 76 - 158AFS securities

Gain on sale of loans HFS 486 359 - - -

Officer insurance income 145 118 105 93 102

Other operating income 72 231 379 335 104

Total noninterest income $ 2,881 $ 2,650 $ 2,427 $ 2,251 $ 2,216

Noninterest Expenses

Salaries and employee $ 5,947 $ 5,310 $ 4,716 $ 4,874 $ 4,739benefits

Occupancy expenses 450 413 456 380 414

Equipment expenses 246 238 224 222 282

Advertising and marketing 168 198 108 198 152expenses

Stationery and supplies 27 60 38 50 28

ATM network fees 285 312 250 272 252

Other real estate owned 32 6 (1) 13 (3)expenses

Loss (gain) on the saleof other real estate 26 92 10 (11) -owned

FDIC assessment 169 133 107 105 75

Computer software expense 282 281 189 198 200

Bank franchise tax 199 195 189 177 178

Professional fees 289 369 460 261 188

Data processing fees 418 373 402 493 301

Other operating expenses 985 747 768 855 659

Total noninterest $ 9,523 $ 8,727 $ 7,916 $ 8,087 $ 7,465expenses

Income before income $ 3,457 $ 3,618 $ 3,441 $ 2,860 $ 4,118taxes

Income Tax Expense 584 615 579 354 712

Net income $ 2,873 $ 3,003 $ 2,862 $ 2,506 $ 3,406

Earnings Per Share

Net income per common $ 0.83 $ 0.87 $ 0.84 $ 0.74 $ 0.99share, basic

Net income per common $ 0.83 $ 0.87 $ 0.84 $ 0.74 $ 0.99share, diluted

EAGLE FINANCIAL SERVICES, INC.

Average Balances, Income and Expenses, Yields and Rates

(dollars in thousands)

September 30, 2021 June 30, 2021 September 30, 2020

Interest Interest Interest

Average Income/ Average Average Income/ Average Average Income/ Average

Assets: Balance Expense Rate Balance Expense Rate Balance Expense Rate

Securities:

Taxable $ 164,203 $ 611 1.47 % $ 159,246 $ 542 1.36 % $ 122,761 $ 688 2.23 %

Tax-Exempt (1) 15,338 122 3.14 % 16,237 135 3.35 % 21,374 180 3.35 %

Total Securities $ 179,541 $ 733 1.62 % $ 175,483 $ 677 1.55 % $ 144,135 $ 868 2.40 %

Loans:

Taxable $ 893,781 $ 10,006 4.44 % $ 862,078 $ 9,667 4.50 % $ 784,302 $ 9,226 4.68 %

Non-accrual 3,834 - - % 4,280 - - % 4,229 - - %

Tax-Exempt (1) 5,191 54 4.13 % 9,473 104 4.39 % 9,873 109 4.40 %

Total Loans $ 902,806 $ 10,060 4.42 % $ 875,831 $ 9,771 4.47 % $ 798,404 $ 9,335 4.65 %

Federal funds sold 232 - 0.12 % 234 - 0.08 % 254 - 0.07 %

Interest-bearingdeposits in other 83,133 26 0.12 % 83,366 15 0.08 % 42,740 8 0.07 %banks

Total earning $ 1,161,878 $ 10,819 3.69 % $ 1,130,634 $ 10,463 3.71 % $ 981,304 $ 10,211 4.14 %assets

Allowance for loan (8,195) (7,862) (6,520)losses

Total non-earning 86,862 78,573 71,375assets

Total assets $ 1,240,545 $ 1,201,345 $ 1,046,159

Liabilities andShareholders'Equity:

Interest-bearingdeposits:

NOW accounts $ 151,624 $ 79 0.21 % $ 144,914 $ 79 0.22 % $ 112,267 $ 78 0.28 %

Money market 229,864 137 0.24 % 213,311 148 0.28 % 189,033 191 0.40 %accounts

Savings accounts 161,192 24 0.06 % 155,065 22 0.06 % 128,009 23 0.07 %

Time deposits:

$250,000 and more 67,325 79 0.47 % 67,706 114 0.67 % 76,072 249 1.30 %

Less than $250,000 58,261 64 0.43 % 58,520 71 0.49 % 60,096 142 0.94 %

Totalinterest-bearing $ 668,266 $ 383 0.23 % $ 639,516 $ 434 0.27 % $ 565,477 $ 683 0.48 %deposits

Totalinterest-bearing $ 668,266 $ 383 0.23 % $ 639,516 $ 434 0.27 % $ 565,477 $ 683 0.48 %liabilities

Noninterest-bearingliabilities:

Demand deposits 452,122 443,397 364,473

Other Liabilities 11,392 12,265 13,664

Total liabilities $ 1,131,780 $ 1,095,178 $ 943,614

Shareholders' 108,765 106,167 102,545equity

Total liabilitiesand shareholders' $ 1,240,545 $ 1,201,345 $ 1,046,159equity

Net interest income $ 10,436 $ 10,029 $ 9,528

Net interest spread 3.46 % 3.44 % 3.66 %

Interest expense asa percent of 0.13 % 0.15 % 0.28 %average earningassets

Net interest margin 3.56 % 3.56 % 3.86 %

(1) Income and yields are reported on tax-equivalent basis using a federal tax rate of 21%.

EAGLE FINANCIAL SERVICES, INC.

Reconciliation of Tax-Equivalent Net Interest Income

(dollars in thousands)

Three Months Ended

9/30/ 6/30/ 3/31/ 12/31/ 9/30/ 2021 2021 2021 2020 2020

GAAP Financial Measurements:

Interest Income - Loans $ 10,049 $ 9,749 $ 9,408 $ 9,249 $ 9,312

Interest Income - Securities and 733 664 608 741 838Other Interest-Earnings Assets

Interest Expense - Deposits 383 434 487 592 683

Interest Expense - Other - - - - -Borrowings

Total Net Interest Income $ 10,399 $ 9,979 $ 9,529 $ 9,398 $ 9,467

Non-GAAP Financial Measurements:

Add: Tax Benefit on Tax-Exempt $ 11 $ 22 $ 22 $ 22 $ 23Interest Income - Loans

Add: Tax Benefit on Tax-Exempt 26 28 31 34 38Interest Income - Securities

Total Tax Benefit on Tax-Exempt $ 37 $ 50 $ 53 $ 56 $ 61Interest Income

Tax-Equivalent Net Interest Income $ 10,436 $ 10,029 $ 9,582 $ 9,454 $ 9,528

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SOURCE Eagle Financial Services, Inc.