Eagle Financial Services, Inc. Announces 2009 Annual and Fourth Quarter Financial Results

Jan 29, 2010, 15:27 ET from Eagle Financial Services, Inc.

BERRYVILLE, Va., Jan. 29 /PRNewswire-FirstCall/ -- Eagle Financial Services, Inc. (OTC Bulletin Board: EFSI), the holding company for Bank of Clarke County, whose divisions include Eagle Investment Group, announces annual and fourth quarter 2009 financial results.  The Company's common stock is listed for trading on the Over-the-Counter (OTC) Bulletin Board under the ticker symbol EFSI.

Fourth Quarter and Annual 2009 Financial Highlights:

    
    
                                                 Q4       Annual
                                                ---       ------
    Net income (000's)                         $792       $3,441
    Diluted EPS                               $0.25        $1.08
    Net Interest Margin                        4.52%        4.31%
    Total equity to assets                                  9.65%
    Allowance for loan losses to total loans                1.48%
    Total loan growth (000's)                              $14.0
    Retail deposit growth (000's)                          $27.2

John R. Milleson, President and CEO, stated, "Although 2009 earnings were not at a desired level of performance, the Bank's annual results compare favorably to those of its peers.  Our 2009 earnings were adversely affected mostly because of two matters:  the increase in the Bank's provision for loan losses and the increase in the Bank's FDIC premium.  Challenging times remain for our economy and the banking industry.  The Company will continue its focus on providing sound financial services to the communities it serves while sustaining its conservative approach to banking principles as it has during the past 129 years.  I take comfort and pride in the fact that we are an independent, community bank."

Net Interest Income and Net Interest Margin

Net interest income for the quarter ended December 31, 2009 was $5.5 million which represented an increase of 16.7% when compared to $4.7 million for the same period in 2008.  Net interest income for the year ended December 31, 2009 was $20.7 million which represented an increase of 9.2% when compared to $18.9 million in 2008.  This increase in net interest income resulted mostly from the decline in the Company's funding costs.  

Total loan interest income was $5.9 million for the quarter ended December 31, 2009, reflecting a decrease of $38,000 from the quarter ended December 31, 2008.  Total loan interest income was $23.0 million for the year ended December 31, 2009, reflecting a decrease of $1.8 million from the year ended December 31, 2008.  Average loans for the quarter ended December 31, 2009 were $400.0 million compared to $390.4 million for the same period in 2008.  Average loans for the year ended December 31, 2009 were $391.4 million compared to $389.9 million for the same period in 2008.  The tax equivalent yield on average loans for the quarter ended December 31, 2009 was 5.92%, down 18 basis points from the same time period in 2008.  The tax equivalent yield on average loans for the year ended December 31, 2009 was 5.91%, down 48 basis points from the same time period in 2008.  Interest income from the investment portfolio was $617,000 for the quarter ended December 31, 2009 and $1.2 million for the same period in 2008.  Interest income from the investment portfolio was $4.4 million for the year ended December 31, 2009 and $4.6 million for the same period in 2008.  

Total interest expense for the three months ended December 31, 2009 decreased $1.0 million when compared to the three months ended December 31, 2008. Total interest expense for the year ended December 31, 2009 decreased $3.7 million when compared to the year ended December 31, 2008. The average cost of interest bearing liabilities decreased 98 basis points when comparing the quarter ended December 31, 2009 to the same time period in 2008.  The average cost of interest bearing liabilities decreased 97 basis points when comparing the year ended December 31, 2009 to the same time period in 2008.  The average balance of interest bearing liabilities decreased $1.1 million from the quarter ended December 31, 2008 to the same period in 2009.  The average balance of interest bearing liabilities increased $2.9 million from the year ended December 31, 2008 to the same period in 2009.

The net interest margin was 4.52% for the quarter December 31, 2009.  When compared to the quarter ended December 31, 2008, the net interest margin increased 54 basis points. The net interest margin was 4.31% for the year ended December 31, 2009.  When compared to the year ended December 31, 2008, the net interest margin increased 29 basis points. This increase was attributable to the decreased balance and cost of interest bearing liabilities.

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 34%.

Asset Quality and Provision for Loan Losses

Provisions for loan losses were $1.5 million for the three months ended December 31, 2009, compared to $1.1 million for the quarter ended December 31, 2008. Provisions for loan losses were $4.4 million for the year ended December 31, 2009, compared to $2.3 million for the year ended December 31, 2008. Given the level of problem loans and continued uncertainty in the economy, the Company deemed it prudent to increase its allowance for loan losses.

Non performing assets increased from $4.6 million or .88% of total assets at December 31, 2008 to $7.9 million or 1.48% of total assets at December 31, 2009. This increase mostly resulted from additions to non accrual loans and other real estate owned. During the fourth quarter of 2009, the Bank placed approximately 21 loans on non accrual status. The majority of these loans is secured by real estate and has allocated specific allowances. Two real estate assets valued at $456,000 had been foreclosed upon during the fourth quarter of 2009 while the Bank also sold two pieces of other real estate owned recorded at $293,000 during the same period.  Additionally, an allowance for other real estate owned of $198,000 was established during the fourth quarter of 2009.  

Loans greater than 90 days past due decreased from $510,000 at December 31, 2008 to $13,000 at December 31, 2009. The Company realized $376,000 in net charge-offs for the quarter ended December 31, 2009 versus $490,000 for the same period in 2008. The Company realized $2.9 million in net charge-offs for the year ended December 31, 2009 versus $980,000 for the same period in 2008. Early in 2009, the Company developed a troubled credit group to monitor past due loans, identify potential problem credits, and develop action plans to work through its troubled loans as promptly as possible.

Given the current economic environment, it is anticipated there could be an increase in past due loans, non performing loans and other real estate owned.  However, the increase is not expected to be as significant as that experienced during 2009.  The Company believes that the allowance for loan losses will be maintained at a level adequate to mitigate any negative impact resulting from such increases.  

Noninterest Income and Noninterest Expense

Noninterest income was $1.3 million for the quarters ended December 31, 2009 and 2008.  Noninterest income was $4.6 million for the years ended December 31, 2009 and 2008.  Noninterest expense was $4.4 million and $3.7 million for the quarters ended December 31, 2009 and 2008, respectively. Noninterest expense was $16.5 million and $15.8 million for the years ended December 31, 2009 and 2008, respectively.   Despite the impact of the increase in FDIC insurance premiums of $604,000 and the loss provision for other real estate owned of $198,000 for the year ended December 31, 2009, the Company has diligently managed and monitored its other operating expenses.

Total Consolidated Assets

Total consolidated assets of the Company at December 31, 2009 were $535.4 million, which represented an increase of $7.3 million or 1.4% from total assets of $528.1 million at December 31, 2008.  Total loans increased $14.0 million from $390.1 million at December 31, 2008 to $404.1 million at December 31, 2009.  Considering the current interest rate and competitive market environment, the Company has been conscientious about maintaining both its underwriting standards and its net interest margin and thereby cautious about the growth it has accepted in the loan portfolio.

Deposits and Other Borrowings

Total deposits, which include brokered deposits, increased $11.6 million to $398.1 million at December 31, 2009 from $386.5 million at December 31, 2008. The Company held $9.9 million in brokered deposits at December 31, 2009.  At December 31, 2008 brokered deposits were $25.5 million.

Securities sold under agreement to repurchase were $14.0 million at December 31, 2009 and $14.7 million at December 31, 2008. Borrowings with the Federal Home Loan Bank of Atlanta were $62.3 million at December 31, 2009 and $70.0 million at December 31, 2008.

Equity

Shareholders' equity at December 31, 2009 and December 31, 2008 was $51.6 million and $46.8 million, respectively. The book value of the Company at December 31, 2009 was $16.14 per common share. Total common shares outstanding were 3,199,636 at December 31, 2009.  On January 20, 2010, the board of directors declared a $0.17 per common share cash dividend for shareholders of record as of February 1, 2010 and payable on February 16, 2010.

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. For details on factors that could affect expectations, see the risk factors and other cautionary language included in the Company's Annual Report on Form 10-K for the year ended December 31, 2008, and other filings with the Securities and Exchange Commission.

    
    
    
    EAGLE FINANCIAL SERVICES, INC.
    KEY STATISTICS           
                                         For the Three Months Ended
                                    4Q09    3Q09    2Q09    1Q09    4Q08
                                    ----    ----    ----    ----    ----
    
    Net Income (dollars in
     thousands)                     $792    $790    $904    $955   $1,715
    Earnings per share, basic      $0.25   $0.25   $0.29   $0.30    $0.54
    Earnings per share, diluted    $0.25   $0.25   $0.28   $0.30    $0.54
    
    Return on average total
     assets                         0.59%   0.60%   0.71%   0.74%    1.31%
    Return on average total
     equity                         6.15%   6.33%   7.80%   8.27%   15.00%
    Dividend payout ratio          68.00%  68.00%  58.62%  56.67%   31.48%
    Fee revenue as a percent of
     total revenue                 18.06%  11.35%  15.44%  15.13%   20.91%
    
    Net interest margin(1)          4.52%   4.51%   4.24%   3.98%    3.98%
    Yield on average earning
     assets                         5.67%   5.73%   5.67%   5.66%    5.94%
    Yield on average interest-
     bearing liabilities            1.49%   1.56%   1.82%   2.12%    2.47%
    Net interest spread             4.18%   4.17%   3.85%   3.54%    3.47%
    Tax equivalent adjustment to
     net interest income (dollars
     in thousands)                  $191    $195    $187    $182     $171
    
    Non-interest income to
     average assets                 0.96%   0.67%   0.95%   0.92%    0.96%
    Non-interest expense to
     average assets                 3.26%   3.20%   3.10%   2.92%    2.87%
    
    Efficiency ratio(2)            62.43%  60.82%  62.88%  63.04%   60.86%
    
    
    (1)  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 34%.  For the
    quarters ended December 31, 2009 and December 31, 2008 net interest
    income on a tax equivalent basis was $5.7 million and $4.9 million,
    respectively.  For the quarters ended September 30, June 30 and
    March 31, 2009 net interest income on a tax equivalent basis was
    $5.6 million, $5.3 million and $4.9 million, respectively.  See the
    table below for a 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 non taxable 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.
    
    
    (2)  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. The tax rate utilized is 34%. For the
    quarters ended December 31, 2009 and December 31, 2008 net interest
    income on a tax equivalent basis was $5.7 million and $4.9 million,
    respectively.  For the quarters ended September 30, June 30 and
    March 31, 2009 net interest income on a tax equivalent basis was
    $5.6 million, $5.3 million and $4.9 million, respectively. See the
    table below for a reconciliation of net interest income to tax
    equivalent net interest income. Total non interest income, excluding
    gains and losses on the investment portfolio, for the quarters ended
    December 31, 2009 and December 31, 2008, was $1.3 million. Total non
    interest income, excluding gains and losses on the investment
    portfolio, for the quarters ended September 30, June 30, and March
    31, 2009, was $1.3 million, $1.3 million and $1.2 million,
    respectively. 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
    
                                          4Q09        3Q09       2Q09
                                          ----        ----       ----
    BALANCE SHEET RATIOS
      Loans to deposits                    101.50%    104.31%    102.20%
      Average interest-earning
       assets to average-interest bearing
       liabilities                         129.55%    136.59%    126.56%
    PER SHARE DATA
      Dividends                             $0.17      $0.17      $0.17
      Book value                           $16.14     $15.88     $15.28
      Tangible book value                  $16.13     $15.88     $15.26
    SHARE PRICE DATA
      Closing price                        $15.75     $15.35     $15.00
      Diluted earnings multiple(1)           0.98       0.97       0.98
      Book value multiple(2)                 0.98       0.97       0.98
    COMMON STOCK DATA
      Outstanding shares at end of
       period                           3,199,636  3,190,304  3,180,899
      Weighted average shares
       outstanding                      3,194,970  3,185,806  3,169,197
      Weighted average shares
       outstanding, diluted             3,202,595  3,193,758  3,172,659
    CAPITAL RATIOS
      Total equity to total assets           9.65%      9.72%      9.30%
    CREDIT QUALITY
      Net charge-offs to average loans       0.37%      0.14%      0.43%
      Total non-performing loans to
       total loans                           1.27%      0.34%      0.54%
      Total non-performing assets to
       total assets                          1.48%      0.81%      0.82%
      Non-accrual loans to:
            total loans                      1.26%      0.27%      0.53%
            total assets                     0.95%      0.20%      0.39%
      Allowance for loan losses to:
            total loans                      1.48%      1.25%      1.13%
           non-performing assets            75.46%    116.68%    102.74%
           non-accrual loans               117.08%    458.66%    213.60%
    NON-PERFORMING ASSETS:
    (dollars in thousands)
          Loans delinquent over 90 days       $13       $284        $50
          Non-accrual loans                 5,099      1,067      2,052
          Other real estate owned and
           repossessed assets               2,799      2,845      2,164
    NET LOAN CHARGE-OFFS (RECOVERIES): 
    (dollars in thousands)
          Loans charged off                  $448       $617     $1,727
          (Recoveries)                        (72)       (79)       (52)
      Net charge-offs (recoveries)            376        537      1,675
    PROVISION FOR LOAN LOSSES
     (dollars in thousands)                $1,450     $1,050     $1,050
    ALLOWANCE FOR LOAN LOSS SUMMARY
    (dollars in thousands)
      Balance at the beginning of
       period                              $4,896     $4,383     $5,008
      Provision                             1,450      1,050      1,050
      Net charge-offs (recoveries)            376        537      1,675
      Balance at the end of period         $5,970     $4,896     $4,383
    
    
    
                                                   1Q09          4Q08
                                                   ----          ----
    BALANCE SHEET RATIOS
      Loans to deposits                             96.85%       100.79%
      Average interest-earning assets to
        average-interest bearing liabilities       125.56%       125.86%
    PER SHARE DATA
      Dividends                                     $0.17         $0.17
      Book value                                   $14.74        $14.79
      Tangible book value                          $14.71        $14.76
    SHARE PRICE DATA
      Closing price                                $14.60        $16.10
      Diluted earnings multiple(1)                   0.99          1.09
      Book value multiple(2)                         0.99          1.09
    COMMON STOCK DATA
      Outstanding shares at end of period       3,167,250     3,166,530
      Weighted average shares outstanding       3,162,666     3,148,570
      Weighted average shares outstanding,
       diluted                                  3,166,620     3,156,646
    CAPITAL RATIOS
      Total equity to total assets                   8.72%         8.87%
    CREDIT QUALITY
      Net charge-offs to average loans               0.08%         0.13%
      Total non-performing loans to total loans      1.52%         1.00%
      Total non-performing assets to total assets    1.30%         0.88%
      Non-accrual loans to:
            total loans                              1.10%         0.87%
            total assets                             0.80%         0.64%
      Allowance for loan losses to:
            total loans                              1.29%         1.16%
           non-performing assets                    72.12%        97.67%
           non-accrual loans                       116.66%       133.56%
    NON-PERFORMING ASSETS:
    (dollars in thousands)
          Loans delinquent over 90 days            $1,624          $510
          Non-accrual loans                         4,293         3,385
          Other real estate owned and
           repossessed assets                       1,027           734
    NET LOAN CHARGE-OFFS (RECOVERIES):
    (dollars in thousands)
          Loans charged off                          $361          $521
          (Recoveries)                                (48)          (31)
      Net charge-offs (recoveries)                    313           490
    PROVISION FOR LOAN LOSSES (dollars in
     thousands)                                      $800        $1,100
    ALLOWANCE FOR LOAN LOSS SUMMARY
    (dollars in thousands)
      Balance at the beginning of period           $4,521        $3,911
      Provision                                       800         1,100
      Net charge-offs (recoveries)                    313           490
      Balance at the end of period                 $5,008        $4,521
    
    
    (1)  The diluted earnings multiple (or price earnings ratio) is
    calculated by dividing the period's closing market price per share
    by total equity per 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.
    (2)  The book value multiple (or price to book ratio) is calculated
    by dividing 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          Audited
                                                 12/31/2009        12/31/2008
                                                 ----------        ----------
    Assets
    Cash and due from banks                         $7,353            $7,287
    Federal funds sold                                 179            11,052
    Securities available for sale, at fair value   101,210            98,919
    Loans, net of allowance for loan losses        398,096           385,565
    Bank premises and equipment, net                14,778            15,377
    Other assets                                    13,816             9,942
                                                    ------             -----
                  Total assets                    $535,432          $528,142
                                                  ========          ========
    
    Liabilities and Shareholders' Equity
    Liabilities
        Deposits:
           Noninterest bearing demand deposits     $90,575           $81,340
           Savings and interest bearing
            demand deposits                        170,485           154,622
           Time deposits                           137,047           150,565
                                                   -------           -------
              Total deposits                      $398,107          $386,527
        Federal funds purchased and securities
           sold under agreements to repurchase      14,016            14,693
        Federal Home Loan Bank advances             62,250            70,000
        Trust preferred capital notes                7,217             7,217
        Other liabilities                            2,198             2,876
        Commitments and contingent liabilities           -                 -
                                                       ---               ---
                  Total liabilities               $483,788          $481,313
                                                  --------          --------
    
    Shareholders' Equity
        Preferred stock, $10 par value                  $-                $-
        Common stock, $2.50 par value                7,999             7,888
        Surplus                                      8,504             7,796
        Retained earnings                           34,049            32,779
        Accumulated other comprehensive income       1,092            (1,634)
                                                     -----            ------
                  Total shareholders' equity       $51,644           $46,829
                                                   -------           -------
                  Total liabilities and
                   shareholders' equity           $535,432          $528,142
                                                  ========          ========
    
    
    
    EAGLE FINANCIAL SERVICES, INC.
    CONSOLIDATED STATEMENTS OF INCOME
    (dollars in thousands)
    
                                   Three Months Ended            Year Ended
                                     December 31,               December 31,
                                      ------------             ------------
                                  2009          2008        2009          2008
                                 ----           ----        ----          ----
                              Unaudited       Unaudited   Unaudited    Audited
    
    Interest and Dividend Income
      Interest and fees
       on loans               $5,934           $5,972      $23,001    $24,790
      Interest on
       federal funds sold          1                2           10         45
      Interest and dividends on
       securities available for
       sale:
        Taxable interest
         income                  617              757        2,784      2,766
        Interest income
         exempt from federal 
         income taxes            304              271        1,194      1,142
        Dividends                113              141          461        691
      Interest on deposits 
        in banks                   -                1            3          5
                                 ---              ---          ---        ---
           Total interest and
            dividend income   $6,969           $7,144      $27,453    $29,439
                              ------           ------      -------    -------
    Interest Expense
      Interest on deposits      $806           $1,551       $4,040     $6,978
      Interest on federal 
       funds purchased and
       securities sold under
       agreements to repurchase   98              113          392        482
      Interest on
       Federal Home Loan
       Bank advances             464              670        2,042      2,706
      Interest on trust
       preferred capital
       notes                      80               80          319        346
                                 ---              ---          ---        ---
           Total interest
            expense           $1,448           $2,414       $6,793    $10,512
                              ------           ------       ------    -------
           Net interest
            income            $5,521           $4,730      $20,660    $18,927
    Provision For Loan
     Losses                    1,450            1,100        4,350      2,310
                               -----            -----        -----      -----
           Net interest
            income after
            provision for
            loan losses       $4,071           $3,630      $16,310    $16,617
                              ------           ------      -------    -------
    Noninterest Income
      Income from fiduciary
       activities               $174             $211         $818       $911
      Service charges on
       deposit accounts          522              567        2,053      2,333
      Other service
       charges and fees          534              473        2,148      2,565
      Gain on the sale
       of loans                    -                -            -        376
      (Loss) Gain on the
       sale of bank
       premises and
       equipment                  (5)               -           (5)       742
      (Loss) on the sale
       of repossessed
       assets                     15               28          (35)       (42)
      (Loss) on sales of
       AFS securities             20                -         (419)    (2,488)
      Other operating
       income                     29              (26)          66        212
                                 ---              ---          ---        ---
           Total noninterest
            income            $1,289           $1,253       $4,626     $4,609
                              ------           ------       ------     ------
    Noninterest Expenses
      Salaries and
       employee benefits      $2,312           $2,122       $9,262     $9,069
      Occupancy expenses         134              288        1,069      1,189
      Equipment expenses         153              181          666        700
      Advertising and
       marketing
       expenses                   85              115          409        406
      Stationery and
       supplies                   94               82          311        326
      ATM network fees            20              (18)         104        323
      FDIC assessment            216               62          801        197
      Provision for
       other real estate
       owned                     198                -          198          -
      Other operating
       expenses                1,152              913        3,660      3,604
                               -----              ---        -----      -----
      Total noninterest
       expenses               $4,364           $3,745      $16,480     $15,814
                              ------           ------      -------     -------
      Income before
       income taxes             $996           $1,138       $4,456      $5,412
    Income Tax Expense           204             (577)       1,015       1,357
                                 ---             ----        -----       -----
           Net income           $792           $1,715       $3,441      $4,055
                                ====           ======       ======      ======
    Earnings Per Share
      Net income per
       common share,
       basic                   $0.25            $0.54        $1.09       $1.29
                               =====            =====        =====       =====
       Net income per
        common share,
        diluted                $0.25            $0.54        $1.08       $1.29
                               =====            =====        =====       =====
    
    
    
    EAGLE FINANCIAL SERVICES, INC.
    Average Balances, Income and Expenses, Yields and Rates
    (dollars in thousands)
    
    
                                        For the Three Months Ended December,
                                        ------------------------------------
                                                        2009
                                                        ----
    
                                                       Interest
                                         Average        Income/     Average
    Assets:                              Balance        Expense      Rate
                                         -------        -------      ----
    Securities:
            Taxable                       65,116          2,897      4.45%
            Tax-Exempt (1)                32,872          1,827      5.56%
                                          ------          -----
                Total Securities          97,988          4,724      4.82%
    Loans:
            Taxable                      394,194         23,271      5.90%
            Tax-Exempt (1)                 5,808            410      7.06%
                                           -----            ---
                Total Loans              400,002         23,681      5.92%
    Federal funds sold                     3,073              4      0.13%
    Interest-bearing deposits in
     other banks                             177              -      0.00%
                                             ---            ---
                Total earning assets     501,240         28,408      5.67%
                                                         ------
    
    Allowance for loan losses             (5,222)
    Total non-earning assets              34,881
                                          ------
    Total assets                         530,899
                                         =======
    
    Liabilities and Shareholders' Equity:
    Interest-bearing deposits:
            NOW accounts                  66,525            307      0.46%
            Money market accounts         61,233            443      0.72%
            Savings accounts              36,927             72      0.19%
    Time deposits:
            $100,000 and more             46,328            755      1.62%
            Less than $100,000            90,998          1,621      1.78%
                                          ------          -----
                Total interest-bearing
                 deposits                302,011          3,198      1.06%
    Federal  funds purchased and
     securities sold under agreements to
     repurchase                           15,426            390      5.23%
    Federal Home Loan Bank advances       62,250          1,843      2.96%
    Trust preferred capital notes          7,217            317      4.40%
                                           -----            ---
                Total interest-bearing
                 liabilities             386,904          5,747      1.49%
                                         -------          -----
    Noninterest-bearing liabilities:
            Demand deposits               89,016
            Other Liabilities              3,910
                                           -----
                Total liabilities        479,830
    Shareholders' equity                  51,069
                                          ------
    Total liabilities and
     shareholders' equity                530,899
                                         =======
    
    
    Net interest income                                  22,661
                                                         ======
    
    Net interest spread                                              4.18%
    Interest expense as a percent
     of average earning assets                                       1.15%
    Net interest margin                                              4.52%
    
    
    
                                        For the Three Months Ended December,
                                        ------------------------------------
                                                      2008
                                                      ----
                                                       Interest
                                        Average        Income/     Average
    Assets:                             Balance        Expense       Rate
                                        -------        -------       ----
    Securities:
            Taxable                       66,448          3,563      5.36%
            Tax-Exempt (1)                29,820          1,629      5.46%
                                          ------          -----
                Total Securities          96,268          5,192      5.39%
    Loans:
            Taxable                      385,022         23,451      6.09%
            Tax-Exempt (1)                 5,348            364      6.81%
                                           -----            ---
                Total Loans              390,370         23,815      6.10%
    Federal funds sold                     1,623              8      0.49%
    Interest-bearing deposits in
     other banks                             124              4      3.23%
                                             ---            ---
                Total earning assets     488,385         29,019      5.94%
                                                         ------
    
    Allowance for loan losses             (3,856)
    Total non-earning assets              33,380
                                          ------
    Total assets                         517,909
                                         =======
    
    Liabilities and Shareholders' Equity:
    Interest-bearing deposits:
            NOW accounts                  56,762            554      0.98%
            Money market accounts         55,341            942      1.70%
            Savings accounts              33,855            193      0.57%
    Time deposits:
            $100,000 and more             61,083          1,881      3.08%
            Less than $100,000            82,106          2,582      3.14%
                                          ------          -----
                Total interest-bearing
                 deposits                289,147          6,152      2.13%
    Federal  funds purchased and
     securities sold under agreements to
     repurchase                           17,584            451      2.56%
    Federal Home Loan Bank advances       74,076          2,658      3.59%
    Trust preferred capital notes          7,217            317      4.39%
                                           -----            ---
                Total interest-bearing
                 liabilities             388,024          9,578      2.47%
                                         -------          -----
    Noninterest-bearing liabilities:
            Demand deposits               81,802
            Other Liabilities              2,715
                                           -----
                Total liabilities        472,541
    Shareholders' equity                  45,368
                                          ------
    Total liabilities and
     shareholders' equity                517,909
                                         =======
    
    
    Net interest income                                  19,441
                                                         ======
    
    Net interest spread                                              3.47%
    Interest expense as a percent
     of average earning assets                                       1.96%
    Net interest margin                                              3.98%
    
    
    (1)  Income and yields are reported on a tax equivalent basis using a 
    federal tax rate of 34%.
    
    
    
    EAGLE FINANCIAL SERVICES, INC.
    Average Balances, Income and Expenses, Yields and Rates
    (dollars in thousands)
    
                                         For the Year Ended December,
                                                   2009
                                                   ----
                                                       Interest
                                         Average       Income/    Average
    Assets:                              Balance       Expense     Rate
                                         -------       -------     ----
    Securities:
            Taxable                       67,341          3,246      4.82%
            Tax-Exempt (1)                32,460          1,809      5.57%
                                          ------          -----
                Total Securities          99,801          5,055      5.06%
    Loans:
            Taxable                      385,423         22,729      5.90%
            Tax-Exempt (1)                 5,974            413      6.92%
                                           -----            ---
                Total Loans              391,397         23,142      5.91%
    Federal funds sold                     4,937             10      0.21%
    Interest-bearing deposits in
     other banks                             222              3      1.20%
                                             ---            ---
                Total earning assets     496,357         28,209      5.68%
                                                         ------
    
    Allowance for loan losses             (4,673)
    Total non-earning assets              34,649
                                          ------
    Total assets                         526,333
                                         =======
    
    Liabilities and Shareholders' Equity:
    Interest-bearing deposits:
            NOW accounts                  60,338            306      0.51%
            Money market accounts         60,001            543      0.90%
            Savings accounts              36,160            108      0.30%
    Time deposits:
            $100,000 and more             51,455          1,941      3.77%
            Less than $100,000            94,523          1,142      1.21%
                                          ------          -----
                Total interest-bearing
                 deposits                302,477          4,040      1.34%
    Federal funds purchased and
     securities sold under agreements to
     repurchase                           15,736            392      2.49%
    Federal Home Loan Bank advances       63,709          2,042      3.21%
    Trust preferred capital notes          7,217            319      4.42%
                                           -----            ---
                Total interest-bearing
                 liabilities             389,139          6,793      1.75%
                                         -------          -----
    Noninterest-bearing liabilities:
            Demand deposits               84,876
            Other Liabilities              3,478
                                           -----
                Total liabilities        477,492
    Shareholders' equity                  48,841
                                          ------
    Total liabilities and
     shareholders' equity                526,333
                                         =======
    
    
    Net interest income                                  21,416
                                                         ======
    
    Net interest spread                                              3.93%
    Interest expense as a percent
     of average earning assets                                       1.37%
    Net interest margin                                              4.31%
    
    
    
                                         For the Year Ended December,
                                         ----------------------------
                                                     2008
                                                     ----
                                                       Interest
                                         Average       Income/    Average
    Assets:                              Balance       Expense     Rate
                                         -------       -------     ----
    Securities:
            Taxable                       65,099          3,457      5.31%
            Tax-Exempt (1)                30,566          1,731      5.67%
                                          ------          -----
                Total Securities          95,665          5,188      5.42%
    Loans:
            Taxable                      385,214         24,575      6.38%
            Tax-Exempt (1)                 4,651            325      6.99%
                                           -----            ---
                Total Loans              389,865         24,900      6.39%
    Federal funds sold                     2,195             45      2.05%
    Interest-bearing deposits in
     other banks                             198              5      2.53%
                                             ---            ---
                Total earning assets     487,923         30,138      6.18%
                                                         ------
    
    Allowance for loan losses             (3,466)
    Total non-earning assets              31,714
                                          ------
    Total assets                         516,171
                                         =======
    
    Liabilities and Shareholders' Equity:
    Interest-bearing deposits:
            NOW accounts                  60,774            680      1.12%
            Money market accounts         52,464            975      1.86%
            Savings accounts              33,748            214      0.63%
    Time deposits:
            $100,000 and more             68,732          2,451      3.57%
            Less than $100,000            74,445          2,658      3.57%
                                          ------          -----
                Total interest-bearing
                 deposits                290,163          6,978      2.40%
    Federal  funds purchased and
     securities sold under agreements to
     repurchase                           17,119            482      2.82%
    Federal Home Loan Bank advances       71,762          2,706      3.77%
    Trust preferred capital notes          7,217            346      4.79%
                                           -----            ---
                Total interest-bearing
                 liabilities             386,261         10,512      2.72%
                                         -------         ------
    Noninterest-bearing
     liabilities:
            Demand deposits               81,033
            Other Liabilities              2,823
                                           -----
                Total liabilities        470,117
    Shareholders' equity                  46,054
                                          ------
    Total liabilities and
     shareholders' equity                516,171
                                         =======
    
    
    Net interest income                                  19,626
                                                         ======
    
    Net interest spread                                              3.46%
    Interest expense as a percent
     of average earning assets                                       2.15%
    Net interest margin                                              4.02%
    
    
    (1)  Income and yields are reported on a tax equivalent basis using a
    federal tax rate of 34%.
    
    
    
    EAGLE FINANCIAL SERVICES, INC.
    Reconciliation of Tax-Equivalent Net Interest Income
    (dollars in thousands)
    
    
                                     Three Months Ended
                                     ------------------
                   12/31/2009 9/30/2009   6/30/2009  3/31/2009 12/31/2008
                   ---------- ---------   ---------  --------- ----------
    
    GAAP Financial
     Measurements:
       Interest
        Income -
        Loans          $5,934    $5,765      $5,698     $5,604     $5,972
       Interest
        Income -
        Securities
        and Other
        Interest-
        Earnings
        Assets          1,035     1,092       1,170      1,155      1,172
       Interest
        Expense -
        Deposits          806       826       1,080      1,328      1,551
       Interest
        Expense -
        Other
        Borrowings        642       668         704        739        863
                          ---       ---         ---        ---        ---
    Total Net
     Interest Income   $5,521    $5,363      $5,084     $4,692     $4,730
    
    Non-GAAP
     Financial
     Measurements:
       Add:  Tax
        Benefit on
        Tax-Exempt
        Interest
        Income -
        Loans             $35       $37         $33        $35        $31
       Add:  Tax
        Benefit on
        Tax-Exempt
        Interest
        Income -
        Securities        156       158         154        147        140
                          ---       ---         ---        ---        ---
    Total Tax
     Benefit on
     Tax-Exempt
     Interest
     Income              $191      $195        $187       $182       $171
                         ----      ----        ----       ----       ----
    Tax-
     Equivalent Net 
     Interest Income   $5,712    $5,558      $5,271     $4,874     $4,901
                       ======    ======      ======     ======     ======

SOURCE Eagle Financial Services, Inc.