Eagle Financial Services, Inc. Announces 2011 Third Quarter Financial Results and Quarterly Dividend

Oct 26, 2011, 13:22 ET from Eagle Financial Services, Inc.

BERRYVILLE, Va., Oct. 26, 2011 /PRNewswire/ -- Eagle Financial Services, Inc. (OTC BULLETIN BOARD: EFSI), the holding company for Bank of Clarke County, whose divisions include Eagle Investment Group, announces third quarter 2011 financial results and a quarterly dividend of $0.18 per common share.  The Company's common stock is listed for trading on the Over-the-Counter (OTC) Bulletin Board under the ticker symbol EFSI.

Third Quarter 2011 Financial Results:

  • Net income of $1.1 million
  • Diluted earnings per share $0.34
  • Net interest margin of 4.34%
  • Allowance for loan losses at 1.94% of total loans
  • Total equity to assets of  10.14%
  • Dividend of $0.18 per share

John R. Milleson, President and CEO, stated "The Bank of Clarke County is proud to announce another quarter of solid, steady profits.  As each quarter comes and goes in the life of the Bank of Clarke County, I can't help but appreciate the foundation that our predecessors laid that continually gives us direction and insight.  Our decisions over the past several years to adhere to conservative, sound banking and to look out for the long term instead of quick short term growth have served us well.  Our focus continues to be on profitability and steady, balanced growth and serving our shareholders."

Net Interest Income and Net Interest Margin

Net interest income for the quarter ended September 30, 2011 was $5.7 million and increased 2.3% when compared to $5.6 million for the quarter ended June 30, 2011. Net interest income was $5.6 million for the quarter ended September 30, 2010.

Total interest income on loans was $5.8 million for the quarter ended September 30, 2011, reflecting an increase of $39,000 from the quarter ended June 30, 2011. Total loan interest income was $5.9 million for the quarter ended September 30, 2010.  Average loans for the quarter ended September 30, 2011 were $402.9 million compared to $403.1 million for the quarter ended June 30, 2011.  Total average accruing loans were $399.2 million for the three months ended September 30, 2011 and $398.1 million for the quarter ended June 30, 2011.  For the third quarter of 2010, total average loans were $410.9 million and average accruing loans were $401.2 million. The tax equivalent yield on average loans for the quarter ended September 30, 2011 was 5.69%, down two basis points from 5.71% for the quarter ended June 30, 2011.  Interest income from the investment portfolio was $1.2 million for the quarter ended September 30, 2011, an increase of $17,000 from the quarter ended June 30, 2011. Average investments were $123.0 million for the quarter ended September 30, 2011 and $116.1 million for the quarter ended June 30, 2011.  Interest income from the investment portfolio was $1.1 million for the quarter ended September 30, 2010.

Total interest expense for the three months ended September 30, 2011 decreased $70,000 from $1.3 million for the three months ended June 30, 2011 to $1.2 million. The average cost of interest bearing liabilities decreased seven basis points when comparing the quarter ended September 30, 2011 to the quarter ended June 30, 2011.  The average balance of interest bearing liabilities decreased $1.5 million from the quarter ended June 30, 2011.  The net interest margin was 4.34% for the quarter ended September 30, 2011 and 4.32% for the quarter June 30, 2011.  For the quarter ended September 30, 2010, total interest expense was $1.4 million and the net interest margin was 4.31%.

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%. Refer to the table included in this document that reconciles tax-equivalent net interest income, which is not a measurement under accounting principles generally accepted in the United States of America (GAAP), to net interest income.

Asset Quality and Provision for Loan Losses

Nonperforming assets consist of loans 90 days past due and still accruing interest, nonaccrual loans, other real estate owned (foreclosed properties), and repossessed assets.  Nonperforming assets decreased from $8.6 million or 1.47% of total assets at June 30, 2011 to $6.3 million or 1.10% of total assets at September 30, 2011. This decrease mostly resulted from the charge off of non-accrual loans. During the third quarter of 2011, the Bank placed three loans totaling $562,000 on non-accrual status. 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 non-accrual loans.  Most of the non-accrual loans are secured by real estate and have allocated specific allowances.  Four real estate assets valued at $729,000 had been foreclosed upon during the third quarter of 2011 while the Bank sold four pieces of other real estate owned recorded at a net value of $940,000 during the same period.  Loans greater than 90 days past due and still accruing decreased from $492,000 at June 30, 2011 to $165,000 at September 30, 2011.  Nonperforming assets were $12.2 million or 2.18% of total assets at September 30, 2010.

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, 2011, the Company had 25 troubled debt restructurings totaling $10.4 million. All but one of the loans, totaling $202,000, are considered performing loans.  

The Company realized $993,000 in net charge-offs for the quarter ended September 30, 2011 versus $343,000 for the three months ended June 30, 2011. The Company has 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. Net charge-offs for the nine months ended September 30, 2011 and 2010 were $2.1 million and $2.3 million, respectively.

Provisions for loan losses were $1.1 million for the three months ended September 30, 2011 and $900,000 for the quarter ended June 30, 2011. The provisions for loan losses for the quarter ended September 30, 2010 were $2.9 million.  The allowance for loan losses was $7.9 million, or 1.94% of total outstanding loans, at September 30, 2011. At June 30, 2011 and September 30, 2010, the allowance for loan losses was $7.8 million.  The amount of provision for loan losses during each quarter reflects the results of the Bank's analysis used to determine the adequacy of the allowance for loan losses.  Given the current economic environment, it is anticipated that in the short term there could be an increase in past due loans, nonperforming loans and other real estate owned.  However, the increase is not expected to be as significant as that experienced during 2010.  The Company is committed to maintaining an allowance at a level adequate to mitigate any negative impact resulting from such increases and that adequately reflects the risk inherent in the loan portfolio.  

Non-Interest Income and Non-Interest Expense

Non-interest income was $1.4 million for the quarter ended September 30, 2011 and $1.5 million for the quarter ended June 30, 2011. Noninterest income for the three months ended September 30, 2010 was $1.5 million.

Noninterest expense was $4.6 million for the quarter ended September 30, 2011.  This represents an increase of $123,000 or 2.8% from $4.4 million for the quarter ended June 30, 2011. The increase results mostly from increases in salaries and employee benefits expense categories.   The Company continues to diligently manage and monitor its other operating expenses. Total noninterest expense for the quarter ended September 30, 2010 was $4.3 million.

Total Consolidated Assets

Total consolidated assets of the Company at September 30, 2011 were $571.3 million, which represented a decrease of $11.0 million or 1.9% from total assets of $582.4 million at June 30, 2011. At September 30, 2010, total consolidated assets were $559.0 million. Cash and due from banks increased $20.9 million from $39.8 million at June 30, 2011.  Total loans increased from $402.5 million at June 30, 2011 to $406.5 at September 30, 2011.  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. Total loans were $412.9 million at September 30, 2010.

Deposits and Other Borrowings

Total deposits, which include brokered deposits, were unchanged from June 30, 2011 at $450.0 million. At September 30, 2010, total deposits were $426.7 million.  The Company held $18.9 million in brokered deposits at September 30, 2011 and $19.0 million at June 30, 2011.  At September 30, 2010 brokered deposits were $19.9 million.

Fed funds purchased and securities sold under agreement to repurchase decreased $3.2 million since June 30, 2011 and were $10.0 million at September 30, 2011.  Fed funds purchased and securities sold under agreement to repurchase were $14.9 million at September 30, 2010. Borrowings with the Federal Home Loan Bank of Atlanta decreased $10.0 million from June 30, 2011 to $42.3 million at September 30, 2011. Borrowings with the Federal home Loan Bank of Atlanta were $52.3 million at September 30, 2010.  

Equity

Shareholders' equity at September 30, 2011 was $57.9 million, reflecting an increase of $1.4 million from $56.5 million at June 30, 2011.  At September 30, 2010 shareholders' equity was $54.9 million. The book value of the Company at September 30, 2011 was $17.61 per common share. Total common shares outstanding were 3,306,853 at September 30, 2011.  On October 19, 2011, the board of directors declared a $0.18 per common share cash dividend for shareholders of record as of November 1, 2011 and payable on November 15, 2011.

-----------------------

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, 2010, and other filings with the Securities and Exchange Commission.


EAGLE FINANCIAL SERVICES, INC.










KEY STATISTICS

For the Three Months Ended


3Q11


2Q11


1Q11


4Q10


3Q10











Net Income (dollars in thousands)

$          1,139


$          1,323


$          1,167


$         462


$           81

Earnings per share, basic

$            0.34


$            0.40


$            0.36


$        0.14


$        0.03

Earnings per share, diluted

$            0.34


$            0.40


$            0.36


$        0.14


$        0.02











Return on average total assets

0.78%


0.92%


0.84%


0.33%


0.06%

Return on average total equity

7.91%


9.58%


8.79%


3.36%


0.59%

Dividend payout ratio

52.94%


45.00%


50.00%


128.57%


566.67%

Fee revenue as a percent of total revenue

20.43%


20.65%


20.48%


20.22%


21.01%











Net interest margin(1)

4.34%


4.32%


4.39%


4.41%


4.31%

Yield on average earning assets

5.21%


5.26%


5.35%


5.41%


5.34%

Yield on average interest-bearing liabilities

1.15%


1.22%


1.26%


1.31%


1.35%

Net interest spread

4.06%


4.03%


4.09%


4.10%


3.99%

Tax equivalent adjustment to net interest income (dollars in thousands)

$             214


$             202


$             193


$         202


$         198











Non-interest income to average assets

0.96%


1.08%


1.01%


0.90%


1.04%

Non-interest expense to average assets

3.13%


3.10%


3.25%


3.07%


3.03%











Efficiency ratio(2)

61.33%


60.70%


62.40%


59.10%


59.22%



(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 nontaxable (i.e., municipal income) then subtracting interest expense.  The rate utilized is 34%.  See the table below for the quarterly tax 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.  


(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 and sales of repossessed assets. The tax rate utilized is 34%. See the table below for the quarterly tax equivalent net interest income and a reconciliation of net interest income to tax equivalent net interest income. Total non-interest income, excluding gains and losses on the investment portfolio and sales of repossessed assets, for the five quarters reflected in the table above was $1.5 million. 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












3Q11


2Q11


1Q11


4Q10


3Q10

BALANCE SHEET RATIOS











Loans to deposits

90.34%


89.44%


91.67%


95.26%


96.78%


Average interest-earning assets to











   average-interest bearing liabilities

132.26%


130.75%


130.62%


131.31%


130.60%

PER SHARE DATA











Dividends

$            0.18


$            0.18


$            0.18


$            0.18


$            0.18


Book value

17.61


17.23


16.76


16.50


16.86


Tangible book value

17.61


17.23


16.76


16.50


16.86

SHARE PRICE DATA











Closing price

$          16.10


$          17.95


$          16.22


$          16.50


$          17.00


Diluted earnings multiple(1)

11.84


11.22


11.26


29.46


212.50


Book value multiple(2)

0.91


1.04


0.97


1.00


1.10

COMMON STOCK DATA











Outstanding shares at end of period

3,306,853


3,297,098


3,279,940


3,262,249


3,254,204


Weighted average shares outstanding

3,302,082


3,286,551


3,274,898


3,243,292


3,249,236


Weighted average shares outstanding, diluted

3,311,472


3,294,331


3,281,586


3,250,868


3,259,231

CAPITAL RATIOS











Total equity to total assets

10.14%


9.70%


9.57%


9.64%


9.82%

CREDIT QUALITY











Net charge-offs to average loans

0.25%


0.09%


0.18%


0.70%


1.51%


Total non-performing loans to total loans

0.69%


1.21%


1.48%


2.05%


2.44%


Total non-performing assets to total assets

1.10%


1.47%


1.52%


1.83%


2.18%


Non-accrual loans to:











     total loans

0.65%


1.09%


1.48%


2.05%


2.39%


     total assets

0.46%


0.75%


1.04%


1.50%


1.77%


Allowance for loan losses to:











     total loans

1.94%


1.95%


1.80%


1.74%


1.90%


    non-performing assets

125.47%


91.58%


83.96%


69.77%


64.20%


    non-accrual loans

299.47%


178.57%


121.97%


84.89%


79.35%

NON-PERFORMING ASSETS:










(dollars in thousands)











   Loans delinquent over 90 days

$             165


$             492


$                 4


$               10


$             208


   Non-accrual loans    

2,635


4,387


5,966


8,377


9,870


   Other real estate owned and repossessed assets

3,489


3,675


2,697


1,805


2,122

NET LOAN CHARGE-OFFS (RECOVERIES):










(dollars in thousands)











   Loans charged off

$          1,110


$             684


$             834


$          3,045


$          1,618


   (Recoveries)

(117)


(341)


(100)


(149)


(58)


Net charge-offs (recoveries)

993


343


734


2,896


1,560

PROVISION FOR LOAN LOSSES (dollars in thousands)

$          1,050


$             900


$             900


$          2,175


$          2,850

ALLOWANCE FOR LOAN LOSS SUMMARY










(dollars in thousands)











Balance at the beginning of period

$          7,834


$          7,277


$          7,111


$          7,832


$          6,542


Provision

1,050


900


900


2,175


2,850


Net charge-offs (recoveries)

993


343


734


2,896


1,560


Balance at the end of period

$          7,891


$          7,834


$          7,277


$          7,111


$          7,832













(1)  The diluted earnings multiple is calculated by dividing the period's closing market price per share by the annualized diluted earnings per share 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


Unaudited


Unaudited


Audited


Unaudited


9/30/2011


6/30/2011


3/31/2011


12/31/2010


9/30/2010











Assets










Cash and due from banks

$        18,839


$        39,769


$        30,769


$       13,468


$       12,439

Federal funds sold

-


-


-


-


-

Securities available for sale, at fair value

123,699


116,783


113,360


113,775


112,175

Loans, net of allowance for loan losses

398,649


394,640


396,631


401,338


405,075

Bank premises and equipment, net

15,728


15,772


15,826


15,712


15,881

Other assets

14,421


15,407


14,752


14,045


13,402

             Total assets

$      571,366


$      582,371


$      571,338


$     558,338


$     558,972











Liabilities and Shareholders' Equity










Liabilities










   Deposits:










      Noninterest bearing demand deposits

$      104,153


$      104,786


$      103,568


$       97,754


$       97,409

      Savings and interest bearing demand deposits

194,035


193,729


183,660


184,548


177,798

      Time deposits

151,819


151,459


153,390


146,492


151,456

         Total deposits

$      450,007


$      449,974


$      440,618


$     428,794


$     426,663

   Federal funds purchased and securities










       sold under agreements to repurchase

10,000


13,240


14,050


14,395


14,920

   Federal Home Loan Bank advances

42,250


52,250


52,250


52,250


52,250

   Trust preferred capital notes

7,217


7,217


7,217


7,217


7,217

   Other liabilities

3,939


3,201


2,507


1,853


3,047

   Commitments and contingent liabilities

-


-


-


-


-

             Total liabilities

$      513,413


$      525,882


$      516,642


$     504,509


$     504,097











Shareholders' Equity










   Preferred stock, $10 par value

$                -


$                -


$                -


$               -


$               -

   Common stock, $2.50 par value

8,224


8,199


8,159


8,124


8,090

   Surplus

9,628


9,434


9,208


9,076


8,930

   Retained earnings

37,276


36,730


35,997


35,420


35,544

   Accumulated other comprehensive income

2,795


2,126


1,332


1,209


2,311

             Total shareholders' equity

$        57,923


$        56,489


$        54,696


$       53,829


$       54,875

             Total liabilities and shareholders' equity

$      571,366


$      582,371


$      571,338


$     558,338


$     558,972















EAGLE FINANCIAL SERVICES, INC.










CONSOLIDATED STATEMENTS OF INCOME










(dollars in thousands)










Unaudited











Three Months Ended


9/30/2011


6/30/2011


3/31/2011


12/31/2010


9/30/2010











Interest and Dividend Income










       Interest and fees on loans

$          5,750


$          5,711


$          5,731


$          5,974


$          5,875

       Interest on federal funds sold

-


-


-


-


-

       Interest and dividends on securities available for sale:










             Taxable interest income

603


739


714


520


753

             Interest income exempt from federal income taxes

367


336


327


330


320

             Dividends

189


65


61


227


-

       Interest on deposits in banks

11


13


6


11


1

                   Total interest and dividend income

$          6,920


$          6,864


$          6,839


$          7,062


$          6,949

Interest Expense










       Interest on deposits

$             595


$             635


$             661


$             693


$             741

       Interest on federal funds purchased and securities










           sold under agreements to repurchase

93


91


90


96


97

       Interest on Federal Home Loan Bank advances

420


453


438


468


461

       Interest on trust preferred capital notes

80


79


78


80


80

                  Total interest expense

$          1,188


$          1,258


$          1,267


$          1,337


$          1,379

                  Net interest income

$          5,732


$          5,606


$          5,572


$          5,725


$          5,570

Provision For Loan Losses

1,050


900


900


2,175


2,850

                  Net interest income after provision for loan losses

$          4,682


$          4,706


$          4,672


$          3,550


$          2,720

Noninterest Income










       Income from fiduciary activities

$             189


$             241


$             268


$             207


$             248

       Service charges on deposit accounts

406


396


387


423


438

       Other service charges and fees

861


839


774


786


794

       (Loss) Gain on the sale of bank premises and equipment

-


-


-


(83)


-

       (Loss) on the sale of repossessed assets

(78)


(134)


(48)


(92)


3

       (Loss) on sales of AFS securities

(8)


163


-


-


-

       Other operating income

24


37


24


36


(8)

                   Total noninterest income

$          1,394


$          1,542


$          1,405


$          1,277


$          1,475

Noninterest Expenses










       Salaries and employee benefits

$          2,688


$          2,487


$          2,413


$          2,396


$          2,334

       Occupancy expenses

286


282


309


309


260

       Equipment expenses

164


183


161


156


172

       Advertising and marketing expenses

157


125


125


97


138

       Stationery and supplies

53


69


99


65


69

       ATM network fees

131


132


114


145


194

       FDIC assessment

170


177


199


181


179

       Other operating expenses

918


989


1,084


1,007


943

                   Total noninterest expenses

$          4,567


$          4,444


$          4,504


$          4,356


$          4,289

                   Income before income taxes

1,509


1,804


$          1,573


$             471


$             (94)

Income Tax Expense

370


481


406


9


(175)

                   Net income

$          1,139


$          1,323


$          1,167


$             462


$               81

Earnings Per Share










       Net income per common share, basic

$            0.34


$            0.40


$            0.36


$            0.14


$            0.03

       Net income per common share, diluted

$            0.34


$            0.40


$            0.36


$            0.14


$            0.02





EAGLE FINANCIAL SERVICES, INC.

Average Balances, Income and Expenses, Yields and Rates

(dollars in thousands)

















For the Three Months Ended


September 30, 2011


June 30, 2011


September 30, 2010




Interest





Interest





Interest



Average


Income/

Average


Average


Income/

Average


Average


Income/

Average

Assets:

Balance


Expense

Rate


Balance


Expense

Rate


Balance


Expense

Rate

Securities:















       Taxable

$82,404


$3,142

3.81%


$79,749


$3,225

4.04%


$  75,933


$      2,971

3.91%

       Tax-Exempt (1)

40,608


2,206

5.43%


36,342


2,042

5.62%


34,188


1,924

5.63%

           Total Securities

$123,011


$5,348

4.35%


$116,091


$5,267

4.54%


$110,121


$      4,895

4.45%

Loans:















       Taxable

$394,869


$22,616

5.73%


$393,202


$22,685

5.77%


$395,778


$    23,056

5.69%

        Non-accrual

3,709


-

0.00%


5,072


-

0.00%


9,652


-


       Tax-Exempt (1)

4,297


296

6.89%


4,868


337

6.92%


5,439


383

7.03%

           Total Loans

$402,875


$22,912

5.69%


$403,141


$23,021

5.71%


$410,869


$    23,439

5.73%

Federal funds sold

-


-

0.00%


0


0

0.00%


170


-

0.00%

Interest-bearing deposits in other banks

21,204


44

0.21%


25,021


52

0.21%


9,710


20

0.20%

           Total earning assets

$543,381


$28,304

5.21%


$539,182


$28,340

5.26%


$530,870


$    28,354

5.34%

Allowance for loan losses

(7,609)





(7,531)





(6,736)




Total non-earning assets

42,551





42,806





37,020




Total assets

$578,323





$574,457





$561,154



















Liabilities and Shareholders' Equity:















Interest-bearing deposits:















       NOW accounts

$71,334


$141

0.20%


$69,553


$177

0.26%


$  68,847


$         243

0.35%

       Money market accounts

77,176


309

0.40%


72,754


379

0.52%


67,903


387

0.57%

       Savings accounts

46,211


54

0.12%


45,000


58

0.13%


40,467


66

0.16%

Time deposits:















       $100,000 and more

63,169


622

0.98%


63,045


631

1.00%


62,489


758

1.21%

       Less than $100,000

87,477


1,234

1.41%


88,651


1,298

1.46%


88,291


1,485

1.68%

           Total interest-bearing deposits

$345,367


$2,360

0.68%


$339,003


$2,544

0.75%


327,997


2,939

0.90%

Federal  funds purchased and securities















    sold under agreements to repurchase

11,655


371

3.18%


13,905


369

2.65%


14,933


385

2.58%

Federal Home Loan Bank advances

46,598


1,665

3.57%


52,250


1,816

3.48%


56,326


1,829

3.25%

Trust preferred capital notes

7,217


317

4.39%


7,217


317

4.40%


7,217


317

4.40%

           Total interest-bearing liabilities

$410,837


$4,713

1.15%


$412,375


$5,046

1.22%


406,473


5,470

1.35%

Noninterest-bearing liabilities:















       Demand deposits

107,041





104,133





95,627




       Other Liabilities

3,313





2,585





3,804




           Total liabilities

$521,191





$519,093





$505,904




Shareholders' equity

57,132





55,364





55,250




Total liabilities and shareholders' equity

$578,323





$574,457





$561,154



















Net interest income



$23,591





$23,294





$    22,884

















Net interest spread




4.06%





4.03%





3.99%

Interest expense as a percent of















    average earning assets




0.87%





0.94%





1.03%

Net interest margin




4.34%





4.32%





4.31%


(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


9/30/2011

6/30/2011

3/31/2011

12/31/2010

9/30/2010







GAAP Financial Measurements:






  Interest Income - Loans

$        5,750

$         5,711

$        5,731

$        5,974

$        5,875

  Interest Income - Securities and Other Interest-Earnings Assets

1,170

1,153

1,108

1,088

1,074

  Interest Expense - Deposits

595

635

661

693

741

  Interest Expense - Other Borrowings

593

623

606

644

638

Total Net Interest Income

$        5,732

$         5,606

$        5,572

$        5,725

$        5,570







Non-GAAP Financial Measurements:






  Add:  Tax Benefit on Tax-Exempt Interest Income - Loans

$             25

$              29

$             25

$             32

$             33

  Add:  Tax Benefit on Tax-Exempt Interest Income - Securities

189

173

168

170

165

Total Tax Benefit on Tax-Exempt Interest Income

$           214

$            202

$           193

$           202

$           198

Tax-Equivalent Net Interest Income

$        5,946

$         5,808

$        5,765

$        5,927

$        5,768




SOURCE Eagle Financial Services, Inc.