UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C.  20549

- -------------------------------------------------------------------------------
                                   Form 10-Q

          X        Quarterly Report Under Section 13 or 15(d) of the Securities
      ---------    Exchange Act of 1934
                   For the quarterly period ended September 30, 1999

                   Transition Report Under Section 13 or 15(d) of the Exchange
      ---------    Act

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

                         EAGLE FINANCIAL SERVICES, INC
             (Exact name of registrant as specified in its charter)

          Virginia                                           54-1601306
(State or other jurisdiction of                            (I.R.S. employer
incorporation or organization)                            identification no.)


          Post Office Box 391
          Berryville, Virginia                                 22611
(Address of principal executive offices)                     (Zip Code)

                                 (540) 955-2510
              (Registrant's telephone number, including area code)

Indicate by check mark whether the  registrant  (1) has filed all  documents and
reports  required to be filed by Section 13 or 15(d) of the Securities  Exchange
Act of 1934 during the preceding 12 months (or for such shorter  period that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

The  number  of  shares of the  Registrant's  Common  Stock  ($2.50  par  value)
outstanding as of November 12,1999 was 1,425,191.


                                         1


                         EAGLE FINANCIAL SERVICES, INC.

                               INDEX TO FORM 10-Q

PART I.  FINANCIAL INFORMATION

Item 1.      Financial Statements (Unaudited)    ............................ 3

                 Consolidated Balance Sheets as of
                 September 30, 1999 and December 31, 1998    ................ 3

                 Consolidated Statements of Income for the Three
                 and Nine Months Ended September 30, 1999 and 1998    ....... 4

                 Consolidated Statements of Shareholders' Equity for
                 the Nine Months Ended September 30, 1999 and 1998    ....... 5

                 Consolidated Statements of Cash Flows for
                 the Nine Months Ended September 30, 1999 and 1998    ....... 6

                 Notes to Consolidated Financial Statements    .............. 7

Item 2.      Management's Discussion and Analysis of
             Financial Condition and Results of Operations    ............... 8

Item 3.      Quantitative and Qualitative Disclosures
             about Market Risk    ........................................... 9


PART II.  OTHER INFORMATION

Item 1.      Legal Proceedings    ...........................................10
Item 2.      Changes in Securities    .......................................10
Item 3.      Defaults Upon Senior Securities    .............................10
Item 4.      Submission of Matters to a Vote of Security Holders    .........10
Item 5.      Other Information    ...........................................10
Item 6.      Exhibits and reports on Form 8-K    ............................11


                                         2


PART I.  FINANCIAL INFORMATION

Item 1.      Financial Statements

                  Eagle Financial Services, Inc. and Subsidiary
                           Consolidated Balance Sheets
                   As of September 30, 1999 and December 31, 1998




                                              Sept 30, 1999       Dec 31, 1998
                                             ---------------    ---------------
                                                          
Assets
Cash and due from banks                      $    5,732,737     $    5,313,475
Federal funds sold                                        0          2,323,000
Securities (fair value:  1999,
  $40,836,678; 1998, $43,239,752)                41,574,196         43,081,952
Loans, net of unearned discounts                113,970,587         95,933,498
   Less allowance for loan losses                (1,964,445)          (925,171)
                                             ---------------    ---------------
           Net loans                         $  112,922,620     $   95,008,327
Bank premises and equipment, net                  3,976,458          4,117,903
Other assets                                      3,715,789          3,279,902
                                             ---------------    ---------------
           Total assets                      $  167,921,800     $  153,124,559
                                             ===============    ===============
Liabilities and Shareholders' Equity
Liabilities
    Deposits:
       Noninterest bearing demand deposits   $   25,005,831     $   21,289,370
       Interest bearing demand deposits,
          money market and savings accounts      53,375,636         50,933,486
       Time deposits                             56,439,089         57,987,032
                                             ---------------    ---------------
          Total deposits                     $  134,820,556     $  130,209,888
    Federal funds purchased and securities
       sold under agreements to repurchase       10,197,792            695,915
    Federal Home Loan Bank advances               5,000,000          5,000,000
    Other liabilities                               896,320          1,025,255
    Commitments and contingent liabilities                0                  0
                                             ---------------    ---------------
           Total liabilities                 $  150,914,668     $  136,931,058
                                             --------------     ---------------
Shareholders' Equity
    Preferred Stock, $10 par value;
        500,000 shares authorized
        and unissued                         $            0     $            0
    Common Stock, $2.50 par value;
         authorized 5,000,000 shares;
         issued 1999, 1,424,326; issued
         1998, 1,418,341 shares                   3,560,815          3,545,853
    Surplus                                       2,451,838          2,307,615
    Retained Earnings                            11,122,966         10,262,104
    Accumulated other comprehensive income         (128,487)            77,929
                                             ---------------    ---------------
           Total shareholders' equity        $   17,007,132     $   16,193,501
                                             ---------------    ---------------
           Total liabilities and
              shareholders' equity           $  167,921,800     $  153,124,559
                                             ===============    ===============



                                         3


                  Eagle Financial Services, Inc. and Subsidiary
                        Consolidated Statements of Income
                  For the Periods Ended September 30, 1999 and 1998




                                                     Three Months Ended                 Nine Months Ended
                                                        September 30                       September 30
                                                     1999             1998              1999             1998
                                                ---------------  ---------------   ---------------  ---------------
                                                                                        
    Interest Income
      Interest and fees on loans                $    2,222,801   $    1,837,649    $    6,265,983   $    5,327,780
      Interest on federal funds sold                       826           26,820            14,426           92,414
      Interest on securities held to maturity:
          Taxable interest income                      297,335          496,989           864,020        1,489,112
          Interest income exempt from
            federal income taxes                       117,959           58,707           324,538          145,168
      Interest and dividends on securities
        available for sale:
          Taxable interest income                      141,471           28,191           461,699          112,150
          Interest income exempt from
             federal income taxes                        7,106                0            17,970                0
          Dividends                                     28,291           18,400            78,319           51,098
      Interest on deposits in banks                        407              444               898            1,514
                                                ---------------  ---------------   ---------------  ---------------
                Total interest income           $    2,816,196   $    2,467,200    $    8,027,853   $    7,219,236
                                                ---------------  ---------------   ---------------  ---------------
    Interest Expense
      Interest on deposits                      $      999,097   $    1,082,540    $    2,896,336   $    3,148,836
      Interest on federal funds purchased and
          securities sold under agreements
          to repurchase                                 75,455            4,297           132,476            6,130
      Interest on Federal Home Loan
          Bank advances                                 63,122                0           187,308                0
                                                ---------------  ---------------   ---------------  ---------------

                Total interest expense          $    1,137,674   $    1,086,837    $    3,216,120   $    3,154,966
                                                ---------------  ---------------   ---------------  ---------------

                Net interest income             $    1,678,522   $    1,380,363    $    4,811,733   $    4,064,270
      Provision For Loan Losses                         80,000           65,000           230,000          202,500
                                                ---------------  ---------------   ---------------  ---------------

                Net interest income after
                provision for loan losses       $    1,598,522   $    1,315,363    $    4,581,733   $    3,861,770
                                                ---------------  ---------------   ---------------  ---------------

    Other Income
      Trust Department income                   $       99,602   $       85,334    $      263,788   $      261,694
      Service charges on deposits                      192,150          137,670           475,556          409,764
      Other service charges and fees                   252,553           93,990           668,612          260,279
      Gain (loss) on equity investment                  (4,194)          (1,774)           (7,511)          (3,284)
      Other operating income                            28,831          128,082            90,426          330,566
                                                ---------------  ---------------   ---------------  ---------------

                                                $      568,942   $      443,302         1,490,871        1,259,019
                                                ---------------  ---------------   ---------------  ---------------
    Other Expenses
      Salaries and wages                        $      683,186   $      594,866    $    1,993,103   $    1,726,812
      Pension and other employee benefits              140,987          149,884           341,499          440,171
      Occupancy expenses                               103,563           69,970           324,565          277,493
      Equipment expenses                               139,621          113,511           406,478          358,746
      Stationary and supplies                           49,460           34,728           150,484          141,929
      Postage                                           34,164           30,332           103,535           96,080
      Credit card expense                               52,744           35,724           130,459          118,836
      Bank franchise tax                                25,692           31,793            75,948           79,793
      ATM network fees                                  63,130           30,083           131,389           69,147
      Other operating expenses                         255,592          210,542           756,761          609,491
                                                ---------------  ---------------   ---------------  ---------------

                                                $    1,548,139   $    1,301,433    $    4,414,221   $    3,918,498
                                                ---------------  ---------------   ---------------  ---------------

               Income before income taxes       $      619,325   $      457,232    $    1,658,383   $    1,202,291
    Income Tax Expense                                 163,979          108,831           399,825          262,394
                                                ---------------  ---------------   ---------------  ---------------

                Net Income                      $      455,346   $      348,401    $    1,258,558   $      939,897
                                                ===============  ===============   ===============  ===============
    Net income per common share,
       basic and diluted                        $         0.32   $         0.25    $         0.89   $         0.67
                                                ===============  ===============   ===============  ===============



                                         4


                 Eagle Financial Services, Inc. and Subsidiary
                Consolidated Statements of Shareholders' Equity
               For the Nine Months Ended September 30, 1999 and 1998



                                                                                 Accumulated
                                                                                    Other
                                         Common                     Retained    Comprehensive Comprehensive
                                         Stock        Surplus       Earnings    Income (Loss)     Income          Total
                                      ------------  ------------  ------------  ------------   ------------   --------------
                                                                                            
Balance, December 31, 1997            $ 3,521,213   $ 2,107,826   $ 9,419,266   $     9,810                   $  15,058,115
Comprehensive income:
  Net income                                                          939,897                  $   939,897          939,897
  Other comprehensive income:
    Unrealized gain on
      securities available for
      sale, net of deferred
      income taxes of $17,964                                                         34,872         34,872           34,872
                                                                                               ------------
  Total comprehensive income                                                                   $   974,769
                                                                                               ============
  Issuance of common stock, dividend
    investment plan (5,683 shares)         14,208       124,321                                                     138,529
  Dividends declared ($0.16 per share)                               (338,499)                                     (338,499)
  Fractional shares purchased                  (7)          (76)                                                        (83)
                                      ------------  ------------  ------------  ------------                  --------------
Balance, September 30, 1998           $ 3,535,414   $ 2,232,071   $10,020,664   $    44,682                   $  15,832,831
                                      ============  ============  ============  ============                  ==============

Balance, December 31, 1998            $ 3,545,853   $ 2,307,615   $10,262,104   $    77,929                     $16,193,501
Comprehensive income:
  Net income                                                        1,258,558                  $ 1,258,558        1,258,558
  Other comprehensive income:
    Unrealized (loss) on
      securities available for
      sale, net of deferred
      income taxes of $106,336                                                     (206,416)      (206,416)        (206,416)
                                                                                                ------------
  Total comprehensive income                                                                    $ 1,052,142
                                                                                                ============
  Issuance of common stock, dividend
    investment plan (5,991 shares)          14,976      144,375                                                     159,351
  Dividends declared ($0.28 per share)                                (397,696)                                    (397,696)
  Fractional shares purchased                  (14)        (152)                                                       (166)
                                       ------------  ------------  ------------  -----------                    ------------
Balance, September 30, 1999            $ 3,560,815  $ 2,451,838    $11,122,966   $ (128,487)                    $17,007,132
                                       ============  ============  ============  ===========                   =============



                                         5


                  Eagle Financial Services, Inc. and Subsidiary
                      Consolidated Statements of Cash Flows
               For the Nine Months Ended September 30, 1999 and 1998



                                                         Nine Months Ended
                                                           September 30
                                                      1999             1998
                                                  -------------   -------------
                                                            
Cash Flows from Operating Activities
  Net income                                      $  1,258,558    $    939,897
  Adjustments to reconcile net income to
   net cash provided by operating activities:
    Depreciation and amortization                      335,304         276,209
    Amortization of intangible assets                   42,149          38,113
    Loss on equity investment                            7,511           3,284
    Provision for loan losses                          230,000         202,500
    Premium amortization (discount accretion)
     on securities, net                                 60,516          (8,375)
    Changes in assets and liabilities:
      (Increase) in other assets                      (523,798)       (100,787)
      (Decrease) in other liabilities                  (22,599)        (46,533)
                                                  -------------   -------------
      Net cash provided by operating activities   $  1,387,641    $  1,304,308
                                                  -------------   -------------
Cash Flows from Investing Activities
  Proceeds from maturities and principal
   payments on securities held to maturity        $  6,793,349    $ 17,394,343
  Proceeds from maturities and principal
   payments on securities available for sale         4,123,775       2,132,000
  Purchases of securities held to maturity          (8,453,579)    (23,217,798)
  Purchases of securities available for sale        (1,329,057)       (460,688)
  Purchases of bank premises and equipment            (155,608)       (333,260)
  Proceeds from sale of other real estate owned              0               0
  Net (increase) decrease in loans                 (18,144,293)     (8,615,879)
                                                  -------------   -------------
      Net cash (used in) investing activities     $(17,165,413)   $(13,101,282)
                                                  -------------   -------------
Cash Flows from Financing Activities
  Net increase in demand deposits,
   money market and savings accounts              $  6,158,611    $  5,474,887
  Net increase (decrease) in certificates
     of deposits                                    (1,547,943)      2,212,712
  Net increase in federal funds purchased and
   securities sold under agreements to repurchase    9,501,877       1,766,911
  Cash dividends paid                                 (238,345)       (199,970)
  Fractional shares purchased                             (166)            (83)
                                                  -------------   -------------
      Net cash provided by financing activities   $ 13,874,034    $  9,254,457
                                                  -------------   -------------
      Increase (decrease) in cash and
        cash equivalents                          $ (1,903,738)   $ (2,542,518)

Cash and Cash Equivalents
  Beginning                                          7,636,475       7,542,309
                                                  -------------   -------------
  Ending                                          $  5,732,737    $  4,999,791
                                                  =============   =============

Supplemental Disclosures of Cash Flow Information
  Cash payments for:

    Interest                                      $  3,251,490    $  3,283,453
                                                  =============   =============
    Income taxes                                  $    505,627    $    157,073
                                                  =============   =============

Supplemental Schedule of Non-Cash Investing and
 Financing Activities:
   Issuance of common stock,
    dividend investment plan                      $    159,351    $    138,529
                                                  =============   =============
   Unrealized gain (loss) on securities
    available for sale                            $   (312,752)   $     52,836
                                                  =============   =============
   Other real estate acquired in
    Settlement of loans                           $          0    $     16,495
                                                  =============   =============



                                         6


                         EAGLE FINANCIAL SERVICES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 1999

(1)      The accompanying  unaudited financial  statements have been prepared in
         accordance with generally accepted  accounting  principals from interim
         financial  information  and  with  the  instructions  to Form  10-Q and
         Article 10 of Regulation S-X.  Accordingly,  they do not include all of
         the information and footnotes required by generally accepted accounting
         principles.

(2)      In the opinion of  management,  the  accompanying  unaudited  financial
         statements contain all adjustments (consisting of only normal recurring
         accruals)  necessary  to present  fairly the  financial  position as of
         September 30, 1999 and December 31, 1998, and the results of operations
         and cash flows for the three months and nine months ended September 30,
         1999 and 1998.  The statements  should be read in conjunction  with the
         Notes to Financial  Statements  included in the Company's Annual Report
         for the year ended December 31, 1998.

(3)      The results of  operations  for the three and nine month  periods ended
         September  30, 1999 and 1998,  are not  necessarily  indicative  of the
         results to be expected for the full year.

(4)      Securities  held to maturity and available for sale as of September 30,
         1999 and December 31, 1998, are:


                                       Sep 30, 1999             Dec 31, 1998
Held to Maturity                     Amortized Cost           Amortized Cost
- ----------------                     --------------           --------------
                                                        
U.S. Treasury securities             $      121,982           $      121,981
Obligations of U.S. government
 corporations and agencies                3,510,100                6,490,582
Mortgage-backed securities                9,990,102               10,609,645
Obligations of states and political
 subdivisions                            16,651,672               11,445,246
                                     --------------           --------------
                                     $   30,273,856           $   28,667,454
                                     ==============           ==============

                                      Sep 30, 1999             Dec 31, 1998
                                       Fair Value               Fair Value
                                     --------------           --------------
U.S. Treasury securities             $      126,155           $      132,256
Obligations of U.S. government
 corporations and agencies                3,471,250                6,577,962
Mortgage-backed securities                9,710,621               10,588,410
Obligations of states and political
 subdivisions                            16,228,312               11,526,626
                                     --------------           --------------
                                     $   29,536,338           $   28,825,254
                                     ==============           ==============




                                      Sep 30, 1999             Dec 31, 1998
Available for Sale                   Amortized Cost           Amortized Cost
- ------------------                   --------------           --------------
                                                        
Obligations of U.S. government
 corporations and agencies           $    4,153,346           $    5,150,116
Mortgage-backed securities                4,988,611                7,421,338
Obligations of states and political
 Subdivisions                               687,172                  497,157
Other                                     1,665,888                1,227,812
                                     --------------           --------------
                                     $   11,495,017           $   14,296,423
                                     ==============           ==============

                                      Sep 30, 1999             Dec 31, 1998
                                       Fair Value               Fair Value
                                     --------------           --------------
Obligations of U.S. government
 corporations and agencies           $    4,146,927           $    5,226,059
Mortgage-backed securities                4,859,609                7,438,446
Obligations of states and political
 Subdivisions                               662,341                  498,268
Other                                     1,631,463                1,251,725
                                     --------------           --------------
                                     $   11,300,340           $   14,414,498
                                     ==============           ==============


(5)     Net loans at September 30, 1999 and December 31, 1998 are summarized as
        follows (In Thousands):


                                              Sep 30, 1999        Dec 31, 1998
                                            ---------------     ---------------
                                                         
Loans secured by real estate:
  Construction and land development         $        3,055      $        2,168
  Secured by farmland                                6,679               3,565
  Secured by 1-4 family residential                 59,326              51,444
  Nonfarm, nonresidential loans                     19,649              16,902
Loans to finance agricultural production               545                 745
Commercial and industrial loans                      9,055               6,463
Loans to individuals                                14,344              13,603
Loans to U.S. state and political
 subdivisions                                        1,275               1,093
All other loans                                         95                 100
                                            ---------------     ---------------
Gross loans                                 $      114,023      $       96,083

Less:
  Unearned income                                      (52)               (150)
  Allowance for loan losses                         (1,048)               (925)
                                            ---------------     ---------------
Loans, net                                  $      112,923      $       95,008
                                            ===============     ===============


(6)     Allowance for Loan Losses


                                             Sep 30, 1999      Sep 30, 1998      Dec 31, 1998
                                            --------------    --------------    --------------
                                                                       
Balance, beginning                          $     925,171     $     748,558     $     748,558
Provision charged to operating expense            230,000           202,500           371,886
Recoveries added to the allowance                  80,978            82,551            98,208
Loan losses charged to the allowance             (188,182)         (203,633)         (293,481)
                                            --------------    --------------    --------------
Balance, ending                             $   1,047,967     $     829,976     $     925,171
                                            ==============    ==============    ==============


(7)     New Accounting Pronouncements

There are no new accounting pronouncements to disclose within this Form 10-Q.


                                         7



Item 2.      Management's Discussion and Analysis of Financial Condition and
             Results of Operations

PERFORMANCE SUMMARY

Net  income  of the  company  for the  first  nine  months  of 1999 and 1998 was
$1,258,558  and  $939,897,  respectively.  This is an  increase  of  $318,661 or
33.90%.  Net interest  income after provision for loan losses for the first nine
months of 1999 and 1998 was $4,581,733 and $3,861,770,  respectively. This is an
increase of $719,963 or 18.64%.  Total other income increased $231,852 or 18.42%
from  $1,259,019  for the first nine months of 1998 to $1,490,871  for the first
nine months of 1999.  Total  other  expenses  increased  $495,723 or 12.65% from
$3,918,498  during the first nine months of 1998 to $4,414,221  during the first
nine months of 1999.

Earnings  per common share  outstanding  (basic and diluted) was $0.89 and $0.67
for the nine months ended September 30, 1999 and 1998, respectively.  Annualized
return on average assets for the nine month periods ended September 30, 1999 and
1998 was 1.07% and 0.91%, respectively.  Annualized return on average equity for
the nine month periods  ended  September 30, 1999 and 1998 was 10.14% and 8.14%,
respectively.

PROVISION AND ALLOWANCE FOR LOAN LOSSES

The provision for loan losses is based upon management's  estimate of the amount
required to maintain an adequate  allowance  for loan losses  reflective  of the
risks in the loan  portfolio.  The Company reviews the adequacy of the allowance
for loan  losses  monthly  and  utilizes  the  results of these  evaluations  to
establish the provision for loan losses.  The allowance is maintained at a level
believed by management to absorb  potential  losses in the loan  portfolio.  The
methodology  considers  specific  identifications,  specific and estimate pools,
trends in  delinquencies,  local and regional  economic trends,  concentrations,
commitments,  off balance sheet  exposure and other  factors.  The provision for
loan  losses  for the nine  month  periods  ended  September  30,  1999 and 1998
increased  $27,500 from $202,500 in 1998 to $230,000 in 1999.  The allowance for
loan losses  increased  $122,796 or 13.27%  during the first nine months of 1999
from  $925,171 at December 31, 1998 to  $1,047,967  at September  30, 1999.  The
allowance as a percentage of total loans decreased from 0.96% as of December 31,
1998 to 0.92% as of  September  30,  1999.  The Company had net  charge-offs  of
$107,204 and $121,082 for the first nine months of 1999 and 1998,  respectively.
The ratio of net charge-offs to average loans decreased from 0.15% for the first
nine months of 1998 to 0.10% for the first nine months of 1999.

The coverage of the  allowance  for loan losses over  non-performing  assets and
loans 90 days past due and still  accruing  interest  increased  from 154.36% at
December 31, 1998 to 230.93% at September 30, 1999.  Loans past due greater than
90 days and still accruing interest decreased from $372,101 at December 31, 1998
to $315,601 at September 30, 1999.

Loans are viewed as  potential  problem  loans  when  management  questions  the
ability of the borrower to comply with current repayment terms.  These loans are
subject to  constant  review by  management  and their  status is  reviewed on a
regular  basis.  The  amount  of  problem  loans as of  September  30,  1999 was
$860,639.  Most of these loans are well secured and management  expects to incur
only immaterial losses on their disposition.

BALANCE SHEET

Total assets  increased  $14.8 million or 9.66% from $153.1  million at December
31, 1998 to $167.9  million at September  30, 1999.  Securities  decreased  $1.5
million  or 3.50%  during the first  nine  months of 1999 from $43.1  million at
December 31, 1998 to $41.6 million at September 30, 1999. Loans, net of unearned
discounts  increased  $18.1  million or 18.80% during the same period from $95.9
million at December 31, 1998 to $114.0 million at September 30, 1999.

Total liabilities increased $14.0 million or 10.21% during the first nine months
of 1999 from $136.9  million at December 31, 1998 to $150.9 million at September
30, 1999. Total deposits  increased $4.6 million or 3.54% during the same period
from $130.2 at December 31, 1998 to $134.8 million at September 30, 1999.  Total
shareholders'  equity  increased  $0.8  million  or 5.02%  during the first nine
months of 1999 from  $16.2  million at  December  31,  1998 to $17.0  million at
September 30, 1999.

SHAREHOLDERS' EQUITY

The  Company  continues  to  be  a  well  capitalized   financial   institution.
Shareholders' equity per share increased $0.52 or 4.55% from $11.42 per share at
December  31, 1998 to $11.94 per share at September  30,  1999.  During 1998 the
Company paid $0.33 per share in dividends.  The Company's  1999 total  dividends
for the first  three  quarters  was $0.28 per share.  The Company has a Dividend
Investment  Plan that reinvests the dividends of  participating  shareholders in
Company stock.

LIQUIDITY AND MARKET RISK

Asset and  liability  management  assures  liquidity  and  maintains the balance
between rate sensitive assets and  liabilities.  Liquidity  management  involves
meeting the present and future  financial  obligations  of the Company  with the
sale or maturity of assets or through the occurrence of additional  liabilities.
Liquidity  needs are met with cash on hand,  deposits  in banks,  federal  funds
sold,  securities classified as available for sale and loans maturing within one
year.  Total liquid  assets were $40.6  million at September  30, 1999 and $44.3
million  at  December  31,  1998.  These  represent  26.91%  and 32.38% of total
liabilities as of September 30, 1999 and December 31, 1998, respectively.

There have been no material changes in Quantitative and Qualitative  Disclosures
about Market Risk as reported at December 31, 1998 in the Company's Form 10-K.

YEAR 2000

During 1997 the  Company's  subsidiary  (the Bank) began to assess the effect of
the Year 2000 on its systems,  vendors,  and  customers.  In January  1998,  the
Bank's Board of Directors  approved a Year 2000 Compliance Plan which identifies
particular  steps  necessary to achieve Year 2000  readiness  and a timeline for
accomplishing  these steps.  The plan also named the Bank's Year 2000  committee
which includes members of senior management, operations, and data processing.

The Bank has completed  testing of its systems and has renovated areas with Year
2000  deficiencies.  The overall test  objective of the Bank is to utilize proxy
testing of systems rather than  attempting to simulate future date periods using
production  equipment.  During  October 1998 an employee of the Bank was sent to
the site of our core  processing  vendor to  participate  in regional user group
testing for the software.  Actual data from a bank was used to test the critical
dates  identified  by the Federal  Financial  Institutions  Examination  Council
(F.F.I.E.C.).  A  representative  from the Bank  returned to the  vendor's  site
during  February  1999 to  complete  testing of the  auxiliary  products  of the
software  which the Bank  uses.  Proxy  testing  was also  utilized  to test the
software used for the Bank's Trust Department. Other softwares, which operate in
a microcomputer  environment,  were installed on a stand-alone test computer and
tested using future critical dates. During March 1999 the company's ATM machines
were evaluated for Year 2000 readiness.  The Bank's  maintenance vendor upgraded
parts and software to ensure these machines are Year 2000 ready.

The overall cost of preparing for the Year 2000 has not had a material effect on
the Company's consolidated  financial statements.  The Bank has incurred nominal
fees for  participating  in proxy  testing  which  cover  the cost of using  the
vendor's equipment, supplies, and personnel. The Bank also incurred hardware and
software  costs  to  upgrade  ATM's to be Year  2000  ready.  The Bank  utilized
existing personnel to perform testing and document Year 2000 efforts, therefore,
no outside consulting fees were incurred in achieving Year 2000 readiness.

Although the Company has no reason to conclude  that a failure  will occur,  the
most likely  worst-case  Year 2000 scenario would entail a disruption or failure
of the  Company's  power  supplier's or voice and data  transmission  supplier's
capability to provide power or data  transmission  services to a computer system
or facility.  If such a failure were to occur,  the Company would  implement its
contingency  plan.  While it is  impossible  to  quantify  the  impact of such a
scenario,   the  most  reasonably  likely   worst-case   scenario  would  entail
diminishment of service levels, some customer inconvenience and additional costs
associated with implementing the contingency plan.

Although  the Bank is  confident  that its  efforts  will  result in a  seamless
transition  into the Year  2000,  a  contingency  plan has been  prepared  which
addresses carrying on normal operations despite any Year 2000 problems which may
be  encountered.  Through a careful plan for  processing at the end of the year,
all of the Bank's data and system  files will be protected  by  performing  Year
2000 back-up procedures, in addition to normal back-up procedures, onto magnetic
tapes which will be stored in a  designated  secure area.  All year-end  reports
will be printed for access to account and customer information in the event that
the systems are unable to operate  due to a program or utility  company  problem
which hinders normal processing procedures.


                                         8


Item 3.      Quantitative and Qualitative Disclosures about Market Risk

             The information required by Part I, Item 3., is incorporated herein
by reference to the section titled LIQUIDITY AND MARKET RISK within Part I, Item
2  "Management's  Discussion and Analysis of Financial  Condition and Results of
Operation."


                                         9


PART II.  OTHER INFORMATION

Item 1.      Legal proceedings.

               None.

Item 2.      Changes in securities.

               None.

Item 3.      Defaults upon senior securities.

               None.

Item 4.      Submission of matters to a vote of security holders.

               None.

Item 5.      Other Information.

               None.


                                         10


Item 6.      Exhibits and Reports on Form 8-K.

(a)    Exhibits

       The following exhibits, when applicable, are filed with this Form 10-Q or
       incorporated by reference to previous filings.

            Number                    Description
            ---------                 -----------------------------------------

            Exhibit 2.                Not applicable.

            Exhibit 3.             (i)  Articles  of  Incorporation  of
                                        Registrant   (incorporated   herein   by
                                        reference to Exhibit 3.1 of Registrant's
                                        Form   S-4    Registration    Statement,
                                        Registration No. 33-43681.)

                                   (ii) Bylaws   of   Registrant   (incorporated
                                        herein by  reference  to Exhibit  3.2 of
                                        Registrant's   Form   S-4   Registration
                                        Statement, Registration No. 33-43681)

            Exhibit 4.                 Not applicable.

            Exhibit 10.                Material Contracts.

                  10.1                 Description  of  Executive   Supplemental
                                       Income Plan (incorporated by reference to
                                       Exhibit  10.1  to  the  Company's  Annual
                                       Report  on Form  10-K for the year  ended
                                       December 31, 1996).

                  10.2                 Lease  Agreement  between  Bank of Clarke
                                       County     (tenant)    and     Winchester
                                       Development   Company   (landlord)  dated
                                       August 1, 1992 for the  branch  office at
                                       625 East Jubal Early  Drive,  Winchester,
                                       Virginia    (incorporated    herein    by
                                       reference   to   Exhibit   10.2   of  the
                                       Company's  Annual Report on Form 10-K for
                                       the year ended December 31, 1995).

                  10.3                 Lease  Agreement  between  Bank of Clarke
                                       County     (tenant)    and     Winchester
                                       Development Company (landlord) dated July
                                       1, 1997 for an  office at 615 East  Jubal
                                       Early   Drive,    Winchester,    Virginia
                                       (incorporated   herein  by  reference  to
                                       Exhibit 10.3 of the  Company's  Quarterly
                                       Report on Form 10-Q for the quarter ended
                                       June 30, 1997).

                  10.4                 Lease  Agreement  between  Bank of Clarke
                                       County   (tenant)  and  Steven  R.  Koman
                                       (landlord) dated December 2, 1997 for the
                                       branch  office  at  40  West   Piccadilly
                                       Street,       Winchester,        Virginia
                                       (incorporated   herein  by  reference  to
                                       Exhibit  10.4  of  the  Company's  Annual
                                       Report  on Form  10-K for the year  ended
                                       December 31, 1997).

            Exhibit 11.                Computation of Per Share Earnings
                                       (incorporated herein as Exhibit 11).

            Exhibit 15.                Not applicable.

            Exhibit 18.                Not applicable.

            Exhibit 19.                Not applicable.

            Exhibit 22.                Not applicable.

            Exhibit 23.                Not applicable.

            Exhibit 24.                Not applicable.

            Exhibit 27.                Financial Data Schedule
                                       (incorporated herein as Exhibit 27).

            Exhibit 99.                Not applicable.

(b) Reports on Form 8-K.

     No  reports  on Form 8-K were  filed by the  registrant  during  the  first
quarter of 1999.


                                         11


SIGNATURES

        Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

                                  EAGLE FINANCIAL SERVICES, INC.


Date:          November 12, 1999      /s/ JOHN R. MILLESON
                                    --------------------------
                                    John R. Milleson
                                    President, Chief Executive
                                    Officer, and Treasurer


Date:          November 12, 1999      /s/ JAMES W. MCCARTY, JR.
                                    --------------------------
                                    James W. McCarty, Jr.
                                    Vice President, Chief Financial
                                    Officer, and Secretary


                                         12