Eagle Financial Services (EFSI) 8-K Eagle Financial Services, Inc. Announces 2019 Third Quarter Financial Results

EXHIBIT 99.1

EAGLE FINANCIAL SERVICES, INC. ANNOUNCES

2019 THIRD QUARTER FINANCIAL RESULTS

AND QUARTERLY DIVIDEND

Contact: Kathleen J. Chappell, Vice President and CFO 540-955-2510           kchappell@bankofclarke.com

BERRYVILLE, VIRGINIA(October 18, 2019) – Eagle Financial Services, Inc. (OTCQX:EFSI), the holding company for Bank of Clarke County, whose divisions include Eagle Investment Group, reported increased quarterly earnings and continued solid financial performance. The Board of Directors announced a quarterly common stock cash dividend of $0.26 per common share, payable on November 15, 2019, to shareholders of record on November 1, 2019. Select highlights for the third quarter include:

• Net income of $2.2 million

• Net interest margin of 4.01%

• ALLL of 0.77% of total loans

• EPS of $0.65 per common share

Brandon Lorey, President and CEO, stated “Not only am I proud to announce that the Company delivered a continued solid performance for the third quarter of 2019, but also that the Bank of Clarke County has again been named the best Financial Institution, Financial Planning, and Customer Service winner by the Winchester Star. Despite continued market pressure on loan pricing, the Bank remains committed to protecting its net interest margin while showing year to date loan growth above 5.0% with pristine asset quality. We remain dedicated to growing the balance sheet with high quality, new client relationships and increasing net interest andnon-interest income levels. Furthermore, I am pleased to announce that the Company has again increased its shareholders’ dividend for the upcoming quarter, showing our commitment to sharing the positive results of a sound and competitive banking institution with our stockholders.”

Income Statement Review

Net income was $2.2 million for the third quarter of 2019, up $371,000 from the same period one year ago and up $105,000 from the previous quarter ended June 30, 2019. These increases were driven by increased loan interest income and increased other service charges and fees.

Net interest income increased $263,000 to $8.0 million for the quarter ended September 30, 2019 when compared to the quarter ended June 30, 2019. Net interest income increased $526,000 from the $7.4 million for the quarter ended September 30, 2018. These increases resulted mostly from the increases in loan income generated by both increased volume and yield.

Total loan interest income was $8.0 million for the quarter ended September 30, 2019 and $7.7 million for the quarter ended June 30, 2019. Total loan interest income increased $930,000 from $7.1 million for the quarter ended September 30, 2018. These increases resulted from both increased loan volume and loan yield.

Average loans for the quarter ended September 30, 2019 were $637.3 million compared to $626.6 million for the quarter ended June 30, 2019. Total average accruing loans were $634.5 million for the three months ended September 30, 2019 and $622.6 million for the quarter ended June 30, 2019. For the third quarter of 2018, total average loans were $588.9 million and average accruing loans were $587.8 million. The tax equivalent yield on average loans for the quarter ended September 30, 2019 was 5.01%, up seven basis

points from 4.94% for the quarter ended June 30, 2019 and up 21 basis points from 4.80% for the same quarter in 2018. Interest income from the investment portfolio was $971,000 for the quarter ended September 30, 2019 and $1.0 million for the quarter ended June 30, 2019. Average investments were $141.9 million for the quarter ended September 30, 2019 and $143.3 million for the quarter ended June 30, 2019. Interest income from the investment portfolio was $980,000 while average investments were $140.0 million for the quarter ended September 30, 2018. The tax equivalent yield on average investments for the quarter ended September 30, 2019 was 2.87%, down 10 basis points from 2.97% for the quarter ended June 30, 2019 and down 11 basis points from 2.98% for the same quarter in 2018.

Total interest expense was $1.1 million for the three months ended September 30 and June 30, 2019. The average cost of interest-bearing liabilities increased two basis points when comparing the quarter ended September 30, 2019 to the quarter ended June 30, 2019. The average balance of interest-bearing liabilities increased $12.6 million from the quarter ended June 30, 2019. The net interest margin was 4.01% for the quarter ended September 30, 2019 and 4.02% for the quarter ended June 30, 2019. For the quarter ended September 30, 2018, total interest expense was $705,000 and the net interest margin was 4.04%.

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 arenon-taxable (i.e., municipal income) then subtracting interest expense. The tax rate utilized is 21%.

Noninterest income increased $341,000 to $2.2 million for the three months ended September 30, 2019 when compared to the $1.9 million for the quarter ended June 30, 2019. Noninterest income increased $415,000 when comparing the quarter ended September 30, 2019 to the same period in 2018. These increases are mostly attributed to increases in other service charges and fees. Specifically, fees related to safe deposit box rentals, ATM fees, service release premiums and commissions from sales ofnon-deposit investments.

Noninterest expense was $7.4 million for the quarter ended September 30, 2019. This represents an increase of $587,000 or 8.60% from $6.8 million for the quarter ended June 30, 2019. The increases in salaries and employee benefits and loss on the sale of other real estate owned contribute to the majority of this $587,000. The September 30, 2019 quarter’s increase in salaries and employee benefits expense of $246,000 resulted mostly from the expenses incurred for the hiring and relocation of the Company’s new CEO. In July 2019, the Company appointed Brandon C. Lorey to succeed John R. Milleson as President and CEO. On October 4, 2019, the Company agreed to sell a commercial property that it held as other real estate owned at an approximated loss of $377,000. The property, located in Front Royal, VA, was foreclosed upon in August 2019 and had an estimated value of $880,000.

Noninterest expense increased $101,000 or 1.38% from the quarter ended September 30, 2019 when compared to $7.3 million for the quartered ended September 30, 2018. This $101,000 increase results mostly from the expenses incurred for the hiring and relocation of the Company’s new CEO.

Income tax expense increased $51,000 when comparing the quarter ended September 30, 2019 to the quarter ended June 30, 2019. Income tax expense increased $492,000 when comparing the quarter ended September 30, 2019 to the same period in 2018. During the third quarter of 2018, the Company recognized a $316,000 estimated tax credit related to its investment in a qualified affordable housing project. For additional details regarding the Company’s qualified affordable housing project investments, please see the Company’s Annual Report on Form10-K for the year ended December 31, 2018, and other filings with the Securities and Exchange Commission.

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 $4.4 million or 0.53% of total assets at June 30, 2019 to $2.6 million or 0.30% of total assets at September 30, 2019. This decrease was driven by the $2.3 million decrease innon-accrual loans. During the third quarter of 2019, threenon-accrual loans, totaling $1.1 million had been charged off while an additional twonon-accrual loans, totaling $1.4 million, were paid. There were six loans, totaling $431,000, that were placed onnon-accrual status during the quarter ended September 30, 2019. Other changes tonon-accrual loan balances resulted from loan payments. Most of thenon-accrual loans at September 30, 2019 are secured by real estate. Management regularly evaluates the financial condition of borrowers with loans onnon-accrual status 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 thesenon-accrual loans. Other real estate owned was $442,000 at September 30, 2019 and $2.0 million at September 30, 2018. The Company held no other real estate owned at June 30, 2019. On August 23, 2019, the Bank took ownership of two pieces of property: one is a residential property located in Berryville, VA and the other is commercial restaurant property located in Front Royal, VA. After consideration of estimated selling costs, the properties were recorded as other real estate owned with individual balances of $183,00 and $827,000, respectively. On October 4, 2019, the Company accepted a purchase offer on the commercial property of $275,000. In order to recognize the estimated loss of $377,000 at September 30, 2019, a $568,000 valuation allowance was recorded. Loans greater than 90 days past due and still accruing totaled $61,000 and $68,000 at September 30 and June 30, 2019, respectively. At September 30, 2018, there were no loans that were greater than 90 days past due and still accruing. Nonperforming assets were $3.2 million or 0.40% of total assets at September 30, 2018.

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, 2019, the Company had 19 troubled debt restructurings totaling $3.1 million and all but five loans, totaling $549,000, are performing loans.

The Company realized $261,000 in net charge-offs for the quarter ended September 30, 2019 and $906,000 in net charge-offs for the quarter ended June 30, 2019. Net recoveries for the quarter ended September 30, 2018 were $25,000.

The Company recorded a provision for loan losses of $117,000 and $256,000 for the quarters ended September 30 and June 30, 2019, respectively. A provision for loan losses of $140,000 was recorded for the quarter ended September 30, 2018. The allowance for loan losses was $4.9 million, or 0.77% of total outstanding loans, at September 30, 2019. At June 30, 2019, the allowance for loan losses was $5.0 million or 0.79% of total outstanding loans. The allowance for loan losses was $4.7 million or 0.79% of total outstanding loans at September 30, 2018. 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. 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, 2019 were $851.4 million, which represented an increase of $17.9 million or 2.15% from total assets of $833.5 million at June 30, 2019. Most of this increase is reflected in cash and due from banks. Cash and due from banks was positively impacted from the quarter’s $4.5 million in deposit growth as well as the proceeds from the $10.0 million Federal Home Loan Bank advance. At September 30, 2018, total consolidated assets were $786.1 million. Total loans were relatively flat when comparing September 30, 2019 to June 30, 2019. At September 30, 2019, total loans increased $39.8 million to $638.3 million from $598.5 million at September 30, 2018.

Deposits and Other Borrowings

Total deposits increased $4.5 million to $735.4 million at September 30, 2019 from $730.9 million at June 30, 2019. At September 30, 2018, total deposits were $693.3 million.

Federal Home Loan Bank advances totaled $10.0 million at September 30, 2019, an increase of $10.0 million from June 30, 2019 and September 30, 2018. On August 12, 2019, the Company borrowed $10.0 million from the Federal Home Loan Bank of Atlanta. The borrowing is a convertible advance with a three-month call date and a10-year maturity date.

Equity

Shareholders’ equity at September 30, 2019 was $94.6 million, reflecting an increase of $1.9 million from $92.7 million at June 30, 2019. At September 30, 2018 shareholders’ equity was $84.8 million. The book value of the Company at September 30, 2019 was $27.73 per common share. Total common shares outstanding were 3,439,980 at September 30, 2019. On October 16, 2019, the board of directors declared a $0.26 per common share cash dividend for shareholders of record as of November 1, 2019, and payable on November 15, 2019.

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 Form10-K for the year ended December 31, 2018, and other filings with the Securities and Exchange Commission.

EAGLE FINANCIAL SERVICES, INC.

KEY STATISTICS

	For the Three Months Ended
	3Q19			2Q19			1Q19			4Q18			3Q18
Net Income(dollars in thousands)	$	2,231		$	2,126		$	2,572		$	2,081		$	1,860
Earnings per share, basic	$	0.65		$	0.62		$	0.74		$	0.60		$	0.54
Earnings per share, diluted	$	0.65		$	0.62		$	0.74		$	0.60		$	0.54
Return on average total assets		1.05	%		1.04	%		1.31	%		1.05	%		0.94	%
Return on average total equity		9.44	%		9.37	%		11.74	%		9.65	%		8.68	%
Dividend payout ratio		38.46	%		40.32	%		33.78	%		40.00	%		44.44	%
Fee revenue as a percent of total revenue		21.05	%		19.33	%		17.30	%		17.52	%		19.39	%
Net interest margin(1)		4.01	%		4.02	%		4.14	%		4.05	%		4.04	%
Yield on average earning assets		4.58	%		4.57	%		4.67	%		4.48	%		4.42	%
Yield on average interest-bearing liabilities		0.94	%		0.92	%		0.87	%		0.73	%		0.64	%
Net interest spread														3.78	%
Tax equivalent adjustment to net interest income (dollars in thousands)	$	82		$	88		$	93		$	98		$	99
Non-interest income to average assets		1.05	%		0.92	%		0.94	%		0.81	%		0.91	%
Non-interest expense to average assets		3.50	%		3.34	%		3.17	%		3.06	%		3.70	%
Efficiency ratio(2)		72.28	%		70.68	%		65.18	%		66.05	%		78.36	%

(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 21%. 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 dividingnon-interest expense by the sum of tax equivalent net interest income andnon-interest income excluding gains and losses on the investment portfolio and sales of repossessed assets. The tax rate utilized is 21%. 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. 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

	3Q19			2Q19			1Q19			4Q18			3Q18
BALANCE SHEET RATIOS
Loans to deposits		86.79	%		87.45	%		87.53	%		86.31	%		86.32	%
Average interest-earning assets to average-interest bearing liabilities		166.55	%		167.00	%		167.37	%		168.35	%		168.16	%
PER SHARE DATA
Dividends	$	0.25		$	0.25		$	0.25		$	0.24		$	0.24
Book value		27.73			27.22			26.50			25.58			24.58
Tangible book value		27.73			27.22			26.50			25.58			24.58
SHARE PRICE DATA
Closing price	$	29.52		$	31.00		$	30.55		$	30.99		$	37.30
Diluted earnings multiple(1)		11.35			12.50			10.32			12.91			17.27
Book value multiple(2)		1.06			1.14			1.15			1.21			1.52
COMMON STOCK DATA
Outstanding shares at end of period		3,439,980			3,431,516			3,459,549			3,445,914			3,473,833
Weighted average shares outstanding		3,436,660			3,425,305			3,458,213			3,469,048			3,474,246
Weighted average shares outstanding, diluted		3,436,660			3,425,305			3,458,213			3,469,048			3,474,246
CAPITAL RATIOS
Total equity to total assets		11.11	%		11.13	%		11.28	%		10.96	%		10.79	%
CREDIT QUALITY
Net charge-offs to average loans		0.16	%		0.57	%		-0.02	%		-0.14	%		-0.02	%
Totalnon-performing loans to total loans		0.33	%		0.70	%		0.53	%		0.46	%		0.19	%
Totalnon-performing assets to total assets		0.30	%		0.53	%		0.42	%		0.37	%		0.40	%
Non-accrual loans to:
total loans		0.32	%		0.69	%		0.53	%		0.35	%		0.19	%
total assets		0.24	%		0.53	%		0.40	%		0.26	%		0.15	%
Allowance for loan losses to:
total loans		0.77	%		0.79	%		0.92	%		0.90	%		0.79	%
non-performing assets		190.98	%		113.22	%		168.39	%		186.91	%		148.30	%
non-accrual loans		237.66	%		114.98	%		173.85	%		257.60	%		411.62	%
NON-PERFORMING ASSETS:
(dollars in thousands)
Loans delinquent over 90 days	$	61		$	68		$	—		$	695		$	—
Non-accrual loans		2,058			4,379			3,270			2,118			1,145
Other real estate owned and repossessed assets		442			—			106			106			2,033
NET LOAN CHARGE-OFFS (RECOVERIES):
(dollars in thousands)
Loans charged off	$	311		$	960		$	10		$	50		$	18
(Recoveries)		(50	)		(54	)		(45	)		(264	)		(43	)
Net charge-offs (recoveries)		261			906			(35	)		(214	)		(25	)
PROVISION FOR LOAN LOSSES (dollars in thousands)	$	117		$	256		$	194		$	529		$	140
ALLOWANCE FOR LOAN LOSS SUMMARY
(dollars in thousands)
Balance at the beginning of period	$	5,035		$	5,685		$	5,456		$	4,713		$	4,548
Provision		117			256			194			529			140
Net charge-offs (recoveries)		261			906			(35	)		(214	)		(25	)
Balance at the end of period	$	4,891		$	5,035		$	5,685		$	5,456		$	4,713

(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
	9/30/2019		6/30/2019		3/31/2019		12/31/2018			9/30/2018
Assets
Cash and due from banks	$	38,916	$	18,133	$	12,214	$	18,353		$	13,176
Federal funds sold		240		228		—		—			—
Securities available for sale, at fair value		139,351		142,864		145,145		145,468			141,566
Loans, net of allowance for loan losses		633,389		634,161		613,523		601,371			593,754
Bank premises and equipment, net		19,363		19,152		19,209		19,083			19,504
Other assets		20,160		18,966		18,626		15,342			18,074
Total assets	$	851,419	$	833,504	$	808,717	$	799,617		$	786,074
Liabilities and Shareholders’ Equity
Liabilities
Deposits:
Noninterest bearing demand deposits	$	265,483	$	253,751	$	255,567	$	251,184		$	256,738
Savings and interest-bearing demand deposits		348,436		356,301		336,109		336,778			327,612
Time deposits		121,481		120,872		115,763		115,142			108,987
Total deposits	$	735,400	$	730,924	$	707,439	$	703,104		$	693,337
Federal funds purchased and securities sold under agreements to repurchase		—		—		355		1,871			1,158
Federal Home Loan Bank advances		10,000		—		—		—			—
Other liabilities		11,390		9,838		9,739		7,043			6,749
Commitments and contingent liabilities		—		—		—		—			—
Total liabilities	$	756,790	$	740,762	$	717,533	$	712,018		$	701,244
Shareholders’ Equity
Preferred stock, $10 par value	$	—	$	—	$	—	$	—		$	—
Common stock, $2.50 par value		8,532		8,519		8,603		8,573			8,629
Surplus		11,472		11,183		12,116		11,992			12,680
Retained earnings		72,970		71,599		70,328		68,587			67,340
Accumulated other comprehensive income		1,655		1,441		137		(1,553	)		(3,819	)
Total shareholders’ equity	$	94,629	$	92,742	$	91,184	$	87,599		$	84,830
Total liabilities and shareholders’ equity	$	851,419	$	833,504	$	808,717	$	799,617		$	786,074

EAGLE FINANCIAL SERVICES, INC.

CONSOLIDATED STATEMENTS OF INCOME

(dollars in thousands)

Unaudited

	Three Months Ended
	9/30/2019			6/30/2019		3/31/2019			12/31/2018			9/30/2018
Interest and Dividend Income
Interest and fees on loans	$	8,022		$	7,690	$	7,518		$	7,257		$	7,092
Interest on federal funds sold		1			1		—			—			1
Interest and dividends on securities available for sale:
Taxable interest income		750			760		785			767			701
Interest income exempt from federal income taxes		205			227		242			259			263
Dividends		16			16		16			16			16
Interest on deposits in banks		90			55		31			24			58
Total interest and dividend income	$	9,084		$	8,749	$	8,592		$	8,323		$	8,131
Interest Expense
Interest on deposits	$	1,123		$	1,055	$	944		$	796		$	704
Interest on federal funds purchased and securities sold under agreements to repurchase		—			5		23			15			1
Interest on Federal Home Loan Bank advances		9			—		—			—			—
Total interest expense	$	1,132		$	1,060	$	967		$	811		$	705
Net interest income	$	7,952		$	7,689	$	7,625		$	7,512		$	7,426
Provision For Loan Losses		117			256		194			529			140
Net interest income after provision for loan losses	$	7,835		$	7,433	$	7,431		$	6,983		$	7,286
Noninterest Income
Income from fiduciary activities	$	369		$	376	$	282		$	301		$	316
Service charges on deposit accounts		306			282		285			305			302
Other service charges and fees		1,466			1,191		1,071			992			1,172
Gain on the sale of bank premises and equipment		16			—		120			—			—
Gain (Loss) on sales of AFS securities		(4	)		—		(3	)		—			6
Officer insurance income		(22	)		—		—			(19	)		(20	)
Other operating income		88			29		89			30			28
Total noninterest income	$	2,219		$	1,878	$	1,844		$	1,609		$	1,804
Noninterest Expenses
Salaries and employee benefits	$	4,120		$	3,874	$	3,542		$	3,486		$	3,666
Occupancy expenses		386			401		428			368			374
Equipment expenses		206			217		202			229			233
Advertising and marketing expenses		190			249		218			166			209
Stationery and supplies		49			37		29			49			42
ATM network fees		265			331		230			268			192
Other real estate owned expenses		51			—		—			15			24
(Gain) loss on foreclosure and sale of other real estate		376			70		—			—			987
FDIC assessment		35			53		53			56			56
Computer software expense		114			110		110			110			114
Bank franchise tax		173			164		146			152			152
Professional fees		206			237		385			218			260
Data processing fees		363			303		240			281			270
Other operating expenses		877			778		648			691			731
Total noninterest expenses	$	7,411		$	6,824	$	6,231		$	6,089		$	7,310
Income before income taxes		2,643			2,487		3,044		$	2,503			1,780
Income Tax Expense		412			361		472			422			(80	)
Net income	$	2,231		$	2,126	$	2,572		$	2,081		$	1,860
Earnings Per Share
Net income per common share, basic	$	0.65		$	0.62	$	0.74		$	0.60		$	0.54
Net income per common share, diluted	$	0.65		$	0.62	$	0.74		$	0.60		$	0.54

EAGLE FINANCIAL SERVICES, INC.

Average Balances, Income and Expenses, Yields and Rates

(dollars in thousands)

	For the Three Months Ended
	September 30, 2019								June 30, 2019								September 30, 2018
Assets:	Average Balance			Interest Income/ Expense		Average Yield			Average Balance			Interest Income/ Expense		Average Yield			Average Balance			Interest Income/ Expense		Average Yield
Securities:
Taxable	$	112,368		$	3,039		2.70	%	$	110,498		$	3,114		2.82	%	$	101,045		$	2,846		2.82	%
Tax-Exempt(1)		29,489			1,028		3.49	%		32,841			1,150		3.50	%		38,935			1,320		3.39	%
Total Securities	$	141,857		$	4,068		2.87	%	$	143,339		$	4,264		2.97	%	$	139,980		$	4,166		2.98	%
Loans:
Taxable	$	622,738		$	31,406		5.04	%	$	610,621		$	30,418		4.98	%	$	575,231		$	27,698		4.82	%
Nonaccrual		2,767			—		0.00	%		3,949			—		0.00	%		1,135			—		0.00	%
Tax-Exempt(1)		11,757			527		4.48	%		12,020			541		4.50	%		12,531			556		4.44	%
Total Loans	$	637,262		$	31,933		5.01	%	$	626,590		$	30,959		4.94	%	$	588,897		$	28,254		4.80	%
Federal funds sold		248			5		2.01	%		206			5		2.27	%		173			3		2.01	%
Interest-bearing deposits in other banks		17,725			359		2.03	%		9,232			221		2.39	%		11,440			229		2.00	%
Total earning assets	$	794,325		$	36,365		4.58	%	$	775,418		$	35,448		4.57	%	$	739,355		$	32,652		4.42	%
Allowance for loan losses		(5,092	)							(5,773	)							(4,629	)
Total non-earning assets		49,838								50,957								48,952
Total assets	$	839,071							$	820,602							$	783,678
Liabilities and Shareholders’ Equity:
Interest-bearing deposits:
NOW accounts	$	88,400		$	436		0.49	%	$	88,052		$	480		0.55	%	$	93,694		$	339		0.36	%
Money market accounts		156,715			1,635		1.04	%		152,063			1,517		1.00	%		133,045			953		0.72	%
Savings accounts		104,785			211		0.20	%		105,330			212		0.20	%		104,772			183		0.17	%
Time deposits:
$100,000 and more		60,146			891		1.48	%		55,959			1,178		2.10	%		71,282			759		1.06	%
Less than $100,000		61,289			1,283		2.09	%		62,112			846		1.36	%		36,760			561		1.53	%
Total interest-bearing deposits	$	471,335		$	4,456		0.95	%	$	463,516		$	4,233		0.91	%	$	439,553		$	2,795		0.64	%
Federal funds purchased and securities sold under agreements to repurchase		48			1		2.60	%		812			22		2.67	%		122			2		1.61	%
Federal Home Loan Bank advances		5,538			34		0.62	%		—			—		0.00	%		—			—		0.00	%
Total interest-bearing liabilities	$	476,921		$	4,492		0.94	%	$	464,328		$	4,255		0.92	%	$	439,675		$	2,797		0.64	%
Noninterest-bearing liabilities:
Demand deposits		257,664								255,521								250,068
Other Liabilities		10,697								9,715								8,877
Total liabilities	$	745,282							$	729,564							$	698,620
Shareholders’ equity		93,789								91,038								85,058
Total liabilities and shareholders’ equity	$	839,071							$	820,602							$	783,678
Net interest income				$	31,874							$	31,193							$	29,855
Net interest spread							3.64	%							3.66	%							3.78	%
Interest expense as a percent of average earning assets							0.57	%							0.55	%							0.38	%
Net interest margin							4.01	%							4.02	%							4.04	%

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

EAGLE FINANCIAL SERVICES, INC.

Reconciliation ofTax-Equivalent Net Interest Income

(dollars in thousands)

	Three Months Ended
	9/30/2019		6/30/2019		3/31/2019		12/31/2018		9/30/2018
GAAP Financial Measurements:
Interest Income - Loans	$	8,022	$	7,690	$	7,518	$	7,257	$	7,092
Interest Income - Securities and Other Interest-Earnings Assets		1,062		1,059		1,075		1066		1,039
Interest Expense - Deposits		1,123		1,055		944		797		704
Interest Expense - Other Borrowings		9		5		25		14		1
Total Net Interest Income	$	7,952	$	7,689	$	7,624	$	7,512	$	7,426
Non-GAAP Financial Measurements:
Add: Tax Benefit onTax-Exempt Interest Income - Loans	$	28	$	28	$	28	$	29	$	29
Add: Tax Benefit onTax-Exempt Interest Income - Securities		54		60		64		69		70
Total Tax Benefit onTax-Exempt Interest Income		82		88		92		98	$	99
Tax-Equivalent Net Interest Income	$	8,034	$	7,777	$	7,716	$	7,610	$	7,525