EAGLE FINANCIAL SERVICES, INC. ANNOUNCES 2022 FOURTH QUARTER FINANCIAL RESULTS

BERRYVILLE, Va.

,

Jan. 31, 2023

/PRNewswire/ — Eagle Financial Services, Inc. (OTCQX: EFSI), the holding company for Bank of

Clarke

, whose divisions include Bank of Clarke Wealth Management, announced its fourth quarter 2022 results. Select highlights for the fourth quarter include:

Net income of

$3.2 million
Basic and diluted earnings per share of

$0.92
Loan activity:

Sales –

$58.6 million
Net growth –

$121.5 million

Brandon Lorey

, President and CEO, stated,

“The Bank of

Clarke

and its employees delivered a number of records for Eagle Financial Services, Inc. in 2022, including loan growth, earnings, earnings per share, and revenue, despite a significantly higher interest rate environment driving increased competition for core deposits. For the year, the Bank’s commercial and residential lending team along with our niche marine division, LV Finance, delivered loan growth of

$338.0 million

or 25.5%. The Bank also reached a new after-tax earnings record of

$14.5 million

translating to a record EPS of

$4.17

per share and top line revenue of

$62.6 million

. Additionally, the Bank’s Trust and Wealth Management division broke through the

$500 million

threshold in Assets Under Management (AUM) over the year and contributed over

$1 million

in after tax-revenue to the company, more than three times its historical contribution. We continue to remain focused on our customers, community, and shareholders by providing the customer service of Main Street with the product set of Wall Street. Thanks to our phenomenal staff for their continued and tireless work in putting our customers in the center of everything we do, as we work to earn the moniker of being the trusted financial partners for all we serve in the Valley and

Northern Virginia

.”

Income Statement Review

Net income for the quarter ended December 31, 2022 was

$3.2 million

reflecting a decrease of 21.7% from the quarter ended

September 30, 2022

and an increase of 40.0% from the quarter ended December 31, 2021. The decrease from the quarter ended

September 30, 2022

was primarily due to the

$930 thousand

provision for loan losses that was expensed during the fourth quarter of 2022 to keep pace with loan growth. The increase from the quarter ended December 31, 2021 was mainly driven by increased net interest income led by strong loan growth. Net income was

$4.1 million

for the three-month period ended

September 30, 2022

and

$2.3 million

for the quarter ended December 31, 2021.

Net interest income for the quarter ended December 31, 2022 was

$13.3 million

reflecting an increase of 2.8% from the quarter ended

September 30, 2022

and an increase of 19.5% from the quarter ended December 31, 2021. Net interest income was

$12.9 million

and

$11.1 million

for the quarters ended

September 30, 2022

and December 31, 2021, respectively. The increase in net interest income from the quarters ended

September 30, 2022

and December 31, 2021 resulted primarily from growth in the Company’s loan portfolio along with the rising interest rate environment.

Total loan interest income was

$15.1 million

and

$13.3 million

for the quarters ended December 31, 2022 and

September 30, 2022

, respectively. Total loan interest income was

$10.7 million

for the quarter ended December 31, 2021. Total loan interest income increased

$4.4 million

or 41.7% from the quarter ended December 31, 2021 to the quarter ended December 31, 2022. Average loans for the quarter ended December 31, 2022 were

$1.26 billion

compared to

$963.9 million

for the quarter ended December 31, 2021. The tax equivalent yield on average loans for the quarter ended December 31, 2022 was 4.78%, an increase of 38 basis points from the 4.40% average yield for the same time period in 2021. The majority of this increase in yield can be attributed to the current rising interest rate environment.

Interest and dividend income from the investment portfolio was

$879 thousand

for the quarter ended December 31, 2022 compared to

$932 thousand

for the quarter ended

September 30, 2022

. Interest income and dividend income from the investment portfolio was

$784 thousand

for the quarter ended December 31, 2021. The decrease in interest and dividend income between the third and fourth quarters of 2022 resulted from the sale of securities during the third quarter of 2022. The increase in interest and dividend income between the quarters ended December 31, 2022 and December 31, 2021 resulted from the increase in yields on securities purchased during 2022. Average investments for the quarter ended December 31, 2022 were

$154.3 million

compared to

$197.1 million

for the quarter ended December 31, 2021. The tax equivalent yield on average investments for the quarter ended December 31, 2022 was 2.26%, up 19 basis points from 2.07% for the quarter ended

September 30, 2022

and up 62 basis points from 1.64% for the quarter ended December 31, 2021.

Total interest expense was

$2.9 million

for the three months ended December 31, 2022 and

$1.5 million

and

$373 thousand

for three months ended

September 30, 2022

and December 31, 2021, respectively. The increase in interest expense resulted from increases on rates paid on deposit accounts, the subordinated notes that the Company issued on

March 31, 2022

, which are currently paying a 4.5% fixed rate, and Federal Home Loan Bank advances of

$175 million

entered into during the third and fourth quarters of 2022. The average cost of interest-bearing liabilities increased 57 and 103 basis points when comparing the quarter ended December 31, 2022 to the quarters ended

September 30, 2022

and December 31, 2021, respectively. The average balance of interest-bearing liabilities increased

$65.6 million

from the quarter ended

September 30, 2022

to the quarter ended December 31, 2022. The average balance of interest-bearing liabilities increased

$225.6 million

from the quarter ended December 31, 2021 to the same period in 2022.

The net interest margin was 3.68% for the quarter ended December 31, 2022. For the quarters ended

September 30, 2022

and December 31, 2021, the net interest margin was 3.72% and 3.67%, respectively. The Company’s net interest margin is not a measurement under accounting principles generally accepted in

the United States

, but it is a common measure used by the financial services industry to determine how profitably earning assets are funded. The Company’s net interest margin is calculated by dividing tax equivalent net interest income by total average earning assets. Tax equivalent net interest income is calculated by grossing up interest income for the amounts that are non-taxable (i.e., municipal income) then subtracting interest expense. The tax rate utilized is 21%.

Noninterest income was

$3.1 million

for the quarter ended December 31, 2022, which represented a decrease of

$75 thousand

or 2.4% from the

$3.2 million

for the three months ended

September 30, 2022

. Noninterest income for the quarter ended December 31, 2021 was

$3.4 million

. The

$273 thousand

or 8.1% decrease between the quarters ended December 31, 2021 and December 31, 2022 was driven mainly by lower gains on the sale of loans held for sale which were largely impacted by the rising interest rate environment.

Noninterest expense increased

$490 thousand

, or 4.4%, to

$11.5 million

for the quarter ended December 31, 2022 from

$11.1 million

for the quarter ended

September 30, 2022

. The largest increase was in other operating expenses, which includes loan expense. This increase was due mainly to the high loan volume experienced during the fourth quarter of 2022. Noninterest expense was

$11.9 million

for the quarter ended December 31, 2021, representing a decrease of

$335 thousand

or 2.8% when comparing the quarter ended December 31, 2022 to the quarter ended December 31, 2021. An increase in salaries and benefits expenses was noted between the fourth quarter of 2022 and the same period in 2021. Annual pay increases, newly hired employees, incentive plan accruals and increased insurance costs have attributed to these increases. The number of full-time equivalent employees (FTEs) has increased from 221 at December 31, 2021, to 241 at December 31, 2022. This increase was offset by a large decrease in professional fees and more specifically, legal expenses. Legal expenses were higher in the fourth quarter of 2021 primarily from the expansion of the Bank’s wealth management business line and also its build out of the marine lending division. Approximately

$2.0 million

of those expenses were one-time fees.

Asset Quality and Provision for Loan Losses

Nonperforming assets consist of nonaccrual loans, loans 90 days or more past due and still accruing, other real estate owned (foreclosed properties), and repossessed assets. Nonperforming assets increased from

$2.4 million

or 0.16% of total assets at

September 30, 2022

to

$2.6 million

or 0.16% of total assets at December 31, 2022. Nonperforming assets were

$2.8 million

at December 31, 2021. Total nonaccrual loans were

$2.2 million

at December 31, 2022 and

$2.4 million

at

September 30, 2022

. Nonaccrual loans were

$2.7 million

at December 31, 2021. The majority of all nonaccrual loans are secured by real estate and management evaluates the financial condition of these borrowers and the value of any collateral on these loans. The results of these evaluations are used to estimate the amount of losses which may be realized on the disposition of these nonaccrual loans. Other real estate owned was

$108 thousand

and zero at December 31, 2022 and

September 30, 2022

, respectively.

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 December 31, 2022, the Company had 28 troubled debt restructurings totaling

$4.6 million

. Approximately

$4.4 million

or 26 loans are performing loans, while the remaining loans are on non-accrual status. At

September 30, 2022

, the Company had 26 troubled debt restructurings totaling

$4.4 million

. Approximately

$4.2 million

or 24 loans were performing loans, while the remaining loans were on non-accrual status.

The Company realized

$454 thousand

in net charge-offs for the quarter ended December 31, 2022 versus

$895 thousand

in net recoveries for the three months ended

September 30, 2022

. During the three months ended December 31, 2021,

$39 thousand

in net recoveries were recognized. The amount of provision for loan losses reflects the results of the Bank’s analysis used to determine the adequacy of the allowance for loan losses. The Company recorded

$930 thousand

in provision for loan loss for the quarter ended December 31, 2022 due to the significant growth of the loan portfolio during the quarter. The Company recognized provision for loan losses of zero and

$300 thousand

for the quarters ended

September 30, 2022

and December 31, 2021, respectively. The lack of provision for the quarter ended

September 30, 2022

was due to the large net recovery that was recognized during the quarter. The provision for the quarter ended December 31, 2021 resulted mostly from loan growth during the quarter. The ratio of allowance for loan losses to total loans was 0.85% at December 31, 2022 and 0.89% at

September 30

, 2022. The ratio of allowance for loan losses to total loans was 0.89% at December 31, 2021. The decrease in the ratio of the allowance for loan losses to total loans is mainly attributable to the type of new loans that are being originated in the portfolio. The majority of growth has been in the commercial real estate and marine loan pools, which have a lower allocation percentage than the overall portfolio. The ratio of allowance for loan losses to total nonaccrual loans was 518.86% at December 31, 2022. The ratio of allowance for loan losses to total nonaccrual loans was 442.59% and 488.85% at

September 30, 2022

and December 31, 2021, respectively. Management’s judgment in determining the level of the allowance is based on evaluations of the collectability of loans while taking into consideration such factors as trends in delinquencies and charge-offs, changes in the nature and volume of the loan portfolio, current economic conditions that may affect a borrower’s ability to repay and the value of collateral, overall portfolio quality and review of specific potential losses. The Company is committed to maintaining an allowance at a level that adequately reflects the risk inherent in the loan portfolio.

Total Consolidated Assets

Total consolidated assets of the Company at December 31, 2022 were

$1.62 billion

, which represented an increase of

$143.6 million

or 9.75% from total assets of

$1.47 billion

at

September 30, 2022

. At December 31, 2021, total consolidated assets were

$1.30 billion

. Total net loans increased

$121.5 million

from

$1.19 billion

at

September 30, 2022

to

$1.31 billion

at December 31, 2022. During the quarter ended December 31, 2022,

$58.6 million

in loans were sold. The Company sold

$961 thousand

in mortgage loans on the secondary market and

$57.7 million

of loans from the commercial and consumer loan portfolios. These loan sales resulted in net gains of

$55 thousand

. Total securities increased

$2.0 million

from

$156.4 million

at

September 30, 2022

, to

$158.4 million

at December 31, 2022. At December 31, 2021, total investment securities were

$193.4 million

and net loans were

$976.9 million

. The growth in total loans and total assets was largely due to organic loan portfolio growth as the Company expands lending types and markets.

Deposits and Other Borrowings

Total deposits increased to

$1.26 billion

as of December 31, 2022 when compared to

September 30, 2022

deposits of

$1.25 billion

. At December 31, 2021 total deposits were

$1.18 billion

. The growth in deposits was mainly organic growth as the Company continues to expand and grow into newer market areas.

The Company had

$175.0 million

and

$75.0 million

, respectively, in outstanding borrowings from the Federal Home Loan Bank of

Atlanta

at December 31, 2022 and

September 30

, 2022. There were no outstanding borrowings from the Federal Home Loan Bank as of December 31, 2021. At December 31, 2022, the Company had

$33.0 million

outstanding in fed funds purchased. There were no outstanding fed funds purchased as of

September 30, 2022

or December 31, 2021. These borrowings were used mainly to fund the strong loan growth that occurred during the quarter ended December 31, 2022.

On

March 31, 2022

, the Company entered into Subordinated Note Purchase Agreements with certain qualified institutional buyers and accredited institutional investors, pursuant to which the Company issued 4.50% Fixed-to-Floating Rate Subordinated Notes due 2032, in the aggregate principal amount of

$30.0 million

.

Equity

Shareholders’ equity was

$101.7 million

and

$98.5 million

at December 31, 2022 and

September 30, 2022

, respectively. Shareholders’ equity was

$110.3 million

at December 31, 2021. The decrease in shareholder’s equity at December 31, 2022 in comparison to December 31, 2021 was driven by the other comprehensive loss from the unrealized loss on available for sale securities. The book value of the Company at December 31, 2022 was

$29.15

per common share. Total common shares outstanding were 3,490,086 at December 31, 2022. On

January 25, 2023

, the board of directors declared a

$0.30

per common share cash dividend for shareholders of record as of

February 6, 2023

and payable on

February 17, 2023

.

Cautionary Note Regarding Forward-Looking Statements

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

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

December 31, 2021

and other filings with the Securities and Exchange Commission.

EAGLE FINANCIAL SERVICES, INC. KEY STATISTICS

	For the Three Months Ended
	4Q22			3Q22			2Q22			1Q22			4Q21
Net Income (dollars in thousands)	$	3,197		$	4,082		$	3,992		$	3,250		$	2,283
Earnings per share, basic	$	0.92		$	1.17		$	1.14		$	0.94		$	0.66
Earnings per share, diluted	$	0.92		$	1.17		$	1.14		$	0.94		$	0.66
Return on average total assets		0.83	%		1.12	%		1.16	%		0.99	%		0.70	%
Return on average total equity		12.70	%		15.93	%		15.86	%		12.08	%		8.20	%
Dividend payout ratio		32.61	%		24.79	%		24.56	%		29.79	%		42.42	%
Fee revenue as a percent of total revenue		14.92	%		16.11	%		15.73	%		15.32	%		15.16	%
Net interest margin(1)		3.68	%		3.72	%		3.70	%		3.61	%		3.67	%
Yield on average earning assets		4.48	%		4.14	%		3.93	%		3.73	%		3.79	%
Rate on average interest-bearing liabilities		1.25	%		0.68	%		0.38	%		0.21	%		0.22	%
Net interest spread		3.23	%		3.46	%		3.55	%		3.52	%		3.57	%
Tax equivalent adjustment to net interest income (dollars in thousands)	$	20		$	32		$	25		$	27		$	32
Non-interest income to average assets		0.80	%		0.87	%		1.12	%		0.99	%		1.04	%
Non-interest expense to average assets		2.99	%		3.04	%		3.07	%		3.02	%		3.66	%
Efficiency ratio(2)		70.53	%		65.73	%		66.62	%		68.87	%		81.53	%


(1)	The net interest margin is calculated by dividing tax equivalent net interest income by total average earning assets. Tax equivalent interest income is calculated by grossing up interest income for the amounts that are non-taxable (i.e., municipal income) then subtracting interest expense. The rate utilized is 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 dividing non-interest expense by the sum of tax equivalent net interest income and non-interest income excluding gains and losses on the investment portfolio and sales of repossessed assets. The tax rate utilized is 21%. See the 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

	4Q22			3Q22			2Q22			1Q22			4Q21
BALANCE SHEET RATIOS
Loans to deposits		104.72	%		95.83	%		91.01	%		82.96	%		83.73	%
Average interest-earning assets to average-interest bearing liabilities		155.58	%		161.11	%		166.35	%		173.69	%		173.49	%
PER SHARE DATA
Dividends	$	0.30		$	0.29		$	0.28		$	0.28		$	0.28
Book value		29.15			28.28			28.58			29.37			32.22
Tangible book value		29.15			28.28			28.58			29.37			32.22
SHARE PRICE DATA
Closing price	$	35.95		$	36.92		$	35.44		$	35.45		$	34.65
Diluted earnings multiple(1)		9.77			7.89			7.77			9.43			13.13
Book value multiple(2)		1.23			1.31			1.24			1.21			1.08
COMMON STOCK DATA
Outstanding shares at end of period		3,490,086			3,483,571			3,481,188			3,477,020			3,454,128
Weighted average shares outstanding		3,489,764			3,487,555			3,479,573			3,472,332			3,451,383
Weighted average shares outstanding, diluted		3,489,764			3,482,820			3,479,591			3,472,332			3,451,383
CAPITAL RATIOS
Common equity Tier 1 capital ratio		8.80	%		9.35	%		9.67	%		10.19	%		10.72	%
Tier 1 risk-based capital ratio		8.80	%		9.35	%		9.67	%		10.19	%		10.72	%
Total risk-based capital ratio		10.34	%		10.98	%		11.33	%		11.94	%		11.58	%
Tier 1 leverage ratio		7.84	%		8.09	%		8.34	%		8.44	%		8.57	%
Total equity to total assets		6.29	%		6.69	%		7.09	%		7.43	%		8.46	%
CREDIT QUALITY
Net charge-offs to average loans		0.04	%		(0.08)	%		(0.02)	%		0.00	%		—	%
Total non-performing loans to total loans		0.19	%		0.20	%		0.19	%		0.26	%		0.28	%
Total non-performing assets to total assets		0.16	%		0.16	%		0.15	%		0.19	%		0.21	%
Non-accrual loans to:
total loans		0.16	%		0.20	%		0.18	%		0.26	%		0.28	%
total assets		0.13	%		0.16	%		0.14	%		0.19	%		0.21	%
Allowance for loan losses to:
total loans		0.85	%		0.89	%		0.88	%		0.91	%		0.89	%
non-performing assets		433.45	%		442.59	%		472.67	%		357.47	%		317.68	%
non-accrual loans		518.86	%		442.59	%		488.85	%		357.47	%		322.70	%
NON-PERFORMING ASSETS:
(dollars in thousands)
Loans delinquent over 90 days	$	318		$	—		$	69		$	—		$	43
Non-accrual loans		2,162			2,427			2,015			2,606			2,723
Other real estate owned and repossessed assets		108			—			—			—			—
NET LOAN CHARGE-OFFS (RECOVERIES):
(dollars in thousands)
Loans charged off	$	491		$	80		$	41		$	47		$	42
(Recoveries)		(37)			(975)			(213)			(35)			(81)
Net charge-offs (recoveries)		454			(895)			(172)			12			(39)
PROVISION FOR LOAN LOSSES (dollars in thousands)	$	930		$	—		$	360		$	540		$	300
ALLOWANCE FOR LOAN LOSS SUMMARY
(dollars in thousands)
Balance at the beginning of period	$	10,742		$	9,847		$	9,315		$	8,787		$	8,448
Provision		930			—			360			540			300
Net charge-offs (recoveries)		454			(895)			(172)			12			(39)
Balance at the end of period	$	11,218		$	10,742		$	9,847		$	9,315		$	8,787


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

EAGLE FINANCIAL SERVICES, INC. CONSOLIDATED BALANCE SHEETS (dollars in thousands)

	Unaudited 12/31/2022		Unaudited 09/30/2022		Unaudited 06/30/2022		Unaudited 03/31/2022		Audited 12/31/2021
Assets
Cash and due from banks	$	66,531	$	30,782	$	31,457	$	86,965	$	63,840
Federal funds sold		363		5,153		680		8,945		228
Securities available for sale, at fair value		158,389		156,361		181,162		194,554		193,370
Loans held for sale		153		90		399		843		876
Loans, net of allowance for loan losses		1,312,565		1,191,099		1,110,993		1,012,144		976,933
Bank premises and equipment, net		18,064		17,972		18,155		18,333		18,249
Bank owned life insurance		23,862		23,731		23,593		23,415		23,236
Other assets		36,790		47,932		36,074		29,096		26,306
Total assets	$	1,616,717	$	1,473,120	$	1,402,513	$	1,374,295	$	1,303,038
Liabilities and Shareholders’ Equity
Liabilities
Deposits:
Noninterest bearing demand deposits	$	478,750	$	491,184	$	477,540	$	489,426	$	470,355
Savings and interest-bearing demand deposits		627,431		632,081		638,951		619,224		583,296
Time deposits		157,894		130,849		115,022		122,673		123,584
Total deposits	$	1,264,075	$	1,254,114	$	1,231,513	$	1,231,323	$	1,177,235
Federal funds purchased		32,980		—		28,575		—		—
Federal Home Loan Bank advances		175,000		75,000		—		—		—
Subordinated debt		29,377		29,360		29,343		29,327		—
Other liabilities		13,556		16,146		13,592		11,542		15,523
Commitments and contingent liabilities		—		—		—		—		—
Total liabilities	$	1,514,988	$	1,374,620	$	1,303,023	$	1,272,192	$	1,192,758
Shareholders’ Equity
Preferred stock, $10 par value		—		—		—		—		—
Common stock, $2.50 par value		8,619		8,600		8,594		8,586		8,556
Surplus		13,278		13,003		12,594		12,260		12,115
Retained earnings		100,278		98,128		95,058		92,040		89,764
Accumulated other comprehensive (loss)		(20,446)		(21,231)		(16,756)		(10,783)		(155)
Total shareholders’ equity	$	101,729	$	98,500	$	99,490	$	102,103	$	110,280

Total liabilities and shareholders’ equity	$	1,616,717	$	1,473,120	$	1,402,513	$	1,374,295	$	1,303,038

EAGLE FINANCIAL SERVICES, INC. CONSOLIDATED STATEMENTS OF INCOME (dollars in thousands) Unaudited

	Three Months Ended				Year Ended
	December 31,				December 31,
	2022		2021		2022		2021
Interest and Dividend Income
Interest and fees on loans	$	15,117	$	10,665	$	50,682	$	39,871
Interest on federal funds sold		15		—		30		—
Interest and dividends on securities available for sale:
Taxable interest income		815		676		3,292		2,272
Interest income exempt from federal income taxes		4		98		221		419
Dividends		60		10		109		45
Interest on deposits in banks		153		16		352		69
Total interest and dividend income	$	16,164	$	11,465	$	54,686	$	42,676
Interest Expense
Interest on deposits	$	1,474	$	373	$	2,941	$	1,677
Interest on federal funds purchased		151		—		170		—
Interest on Federal Home Loan Bank advances		891		—		1,295		—
Interest on subordinated debt		392		—		1,067		—
Total interest expense	$	2,908	$	373	$	5,473	$	1,677
Net interest income	$	13,256	$	11,092	$	49,213	$	40,999
Provision For Loan Losses		930		300		1,830		1,483
Net interest income after provision for loan losses	$	12,326	$	10,792	$	47,383	$	39,516
Noninterest Income
Income from fiduciary activities	$	1,072	$	922	$	4,149	$	1,891
Service charges on deposit accounts		423		366		1,618		1,087
Other service charges and fees		944		903		3,943		5,252
(Loss) on the sale of bank premises and equipment		(8)		—		(11)		—
(Loss) gain on sales of AFS securities		—		—		(737)		24
Gain on sale of loans HFS		331		813		1,875		1,658
Officer insurance income		219		160		714		527
Other operating income		108		198		1,794		881
Total noninterest income	$	3,089	$	3,362	$	13,345	$	11,320
Noninterest Expenses
Salaries and employee benefits	$	6,857	$	5,881	$	25,730	$	21,854
Occupancy expenses		506		484		2,068		1,803
Equipment expenses		307		251		1,121		959
Advertising and marketing expenses		332		185		770		659
Stationery and supplies		64		30		199		155
ATM network fees		233		288		1,210		1,135
Other real estate owned expenses		34		4		34		41
Loss on the sale of other real estate owned		—		73		—		201
FDIC assessment		184		197		614		606
Computer software expense		270		244		960		996
Bank franchise tax		233		198		886		781
Professional fees		409		2,642		2,019		3,760
Data processing fees		393		348		1,779		1,541
Other operating expenses		1,726		1,058		5,667		3,558
Total noninterest expenses	$	11,548	$	11,883	$	43,057	$	38,049
Income before income taxes	$	3,867	$	2,271	$	17,671	$	12,787
Income Tax Expense		670		(12)		3,150		1,766
Net income	$	3,197	$	2,283	$	14,521	$	11,021
Earnings Per Share
Net income per common share, basic	$	0.92	$	0.66	$	4.17	$	3.20
Net income per common share, diluted	$	0.92	$	0.66	$	4.17	$	3.20

EAGLE FINANCIAL SERVICES, INC. Average Balances, Income and Expenses, Yields and Rates (dollars in thousands)

	For the Year Ended
	December 31, 2022							December 31, 2021
			Interest							Interest
	Average		Income/		Average			Average		Income/		Average
Assets:	Balance		Expense		Yield			Balance		Expense		Yield
Securities:
Taxable	$	172,501	$	3,401		1.97	%	$	162,717	$	2,317		1.42	%
Tax-Exempt (1)		8,305		280		3.37	%		15,936		530		3.33	%
Total Securities	$	180,806	$	3,681		2.04	%	$	178,653	$	2,847		1.59	%
Loans:
Taxable	$	1,121,429	$	50,509		4.50	%	$	889,035	$	39,643		4.46	%
Non-accrual		2,350		—		—	%		4,024		—		—	%
Tax-Exempt (1)		5,671		218		3.85	%		6,734		289		4.29	%
Total Loans	$	1,129,450	$	50,727		4.49	%	$	899,793	$	39,932		4.44	%
Federal funds sold		5,311		30		0.57	%		223		—		0.10	%
Interest-bearing deposits in other banks		27,251		352		1.29	%		68,868		69		0.10	%
Total earning assets	$	1,340,468	$	54,790		4.09	%	$	1,143,513	$	42,848		3.75	%
Allowance for loan losses		(9,852)							(7,980)
Total non-earning assets		95,639							83,146
Total assets	$	1,426,255						$	1,218,679
Liabilities and Shareholders’ Equity:
Interest-bearing deposits:
NOW accounts	$	173,843	$	663		0.38	%	$	145,652	$	312		0.21	%
Money market accounts		270,725		1,155		0.43	%		225,960		583		0.26	%
Savings accounts		179,709		130		0.07	%		156,861		92		0.06	%
Time deposits:
$250,000 and more		62,757		560		0.89	%		67,287		411		0.61	%
Less than $250,000		62,907		433		0.69	%		58,565		279		0.48	%
Total interest-bearing deposits	$	749,941	$	2,941		0.39	%	$	654,325	$	1,677		0.26	%
Federal funds purchased		7,882		170		2.16	%		1		—		0.36	%
Federal Home Loan Bank advances		39,589		1,295		3.27	%		—		—		—	%
Subordinated debt		22,193		1,067		4.81	%		—		—
Total interest-bearing liabilities	$	819,605	$	5,473		0.67	%	$	654,326	$	1,677		0.26	%
Noninterest-bearing liabilities:
Demand deposits		485,061							443,662
Other Liabilities		18,293							12,521
Total liabilities	$	1,322,959						$	1,110,509
Shareholders’ equity		103,296							108,170
Total liabilities and shareholders’ equity	$	1,426,255						$	1,218,679
Net interest income			$	49,317						$	41,171
Net interest spread						3.42	%						3.49	%
Interest expense as a percent of average earning assets						0.41	%						0.15	%
Net interest margin						3.68	%						3.60	%

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

EAGLE FINANCIAL SERVICES, INC. Average Balances, Income and Expenses, Yields and Rates (dollars in thousands)

	For the Three Months Ended
	December 31, 2022							December 31, 2021
			Interest							Interest
	Average		Income/		Average			Average		Income/		Average
Assets:	Balance		Expense		Yield			Balance		Expense		Yield
Securities:
Taxable	$	153,747	$	875		2.26	%	$	182,802	$	687		1.49	%
Tax-Exempt (1)		533		5		4.15	%		14,318		124		3.46	%
Total Securities	$	154,280	$	880		2.26	%	$	197,120	$	811		1.64	%
Loans:
Taxable	$	1,245,038	$	15,045		4.79	%	$	957,695	$	10,643		4.42	%
Non-accrual		2,311		—		—	%		3,416		—		—	%
Tax-Exempt (1)		9,492		91		3.82	%		2,804		27		3.80	%
Total Loans	$	1,256,841	$	15,136		4.78	%	$	963,915	$	10,670		4.40	%
Federal funds sold		3,609		15		1.70	%		215		—		0.13	%
Interest-bearing deposits in other banks		20,305		153		2.98	%		48,473		16		0.13	%
Total earning assets	$	1,432,724	$	16,184		4.48	%	$	1,206,307	$	11,497		3.79	%
Allowance for loan losses		(10,657)							(8,583)
Total non-earning assets		108,753							90,757
Total assets	$	1,530,820						$	1,288,481
Liabilities and Shareholders’ Equity:
Interest-bearing deposits:
NOW accounts	$	177,190	$	318		0.71	%	$	154,889	$	79		0.20	%
Money market accounts		280,439		578		0.82	%		250,326		143		0.23	%
Savings accounts		177,565		40		0.09	%		166,438		25		0.06	%
Time deposits:
$250,000 and more		64,223		296		1.83	%		65,670		66		0.40	%
Less than $250,000		75,395		242		1.27	%		57,981		60		0.41	%
Total interest-bearing deposits	$	774,812	$	1,474		0.75	%	$	695,304	$	373		0.21	%
Federal funds purchased		26,476		151		2.26	%		1		—		0.64	%
Federal Home Loan Bank advances		90,217		891		3.92	%		—		—		—	%
Subordinated debt		29,366		392		5.29	%		—		—
Total interest-bearing liabilities	$	920,871	$	2,908		1.25	%	$	695,305	$	373		0.22	%
Noninterest-bearing liabilities:
Demand deposits		493,373							468,801
Other Liabilities		16,737							13,892
Total liabilities	$	1,430,981						$	1,177,998
Shareholders’ equity		99,839							110,483
Total liabilities and shareholders’ equity	$	1,530,820						$	1,288,481
Net interest income			$	13,276						$	11,124
Net interest spread						3.23	%						3.57	%
Interest expense as a percent of average earning assets						0.81	%						0.12	%
Net interest margin						3.68	%						3.67	%

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

EAGLE FINANCIAL SERVICES, INC. Reconciliation of Tax-Equivalent Net Interest Income (dollars in thousands)

	Three Months Ended
	12/31/2022		9/30/2022		6/30/2022		3/31/2022		12/31/2021
GAAP Financial Measurements:
Interest Income – Loans	$	15,117	$	13,282	$	11,663	$	10,620	$	10,665
Interest Income – Securities and Other Interest-Earnings Assets		1,047		1,084		984		889		800
Interest Expense – Deposits		1,474		714		383		370		373
Interest Expense – Other Borrowings		1,434		753		345		—		—
Total Net Interest Income	$	13,256	$	12,899	$	11,919	$	11,139	$	11,092
Non-GAAP Financial Measurements:
Add: Tax Benefit on Tax-Exempt Interest Income – Loans	$	19	$	16	$	5	$	5	$	6
Add: Tax Benefit on Tax-Exempt Interest Income – Securities		1		16		20		22		26
Total Tax Benefit on Tax-Exempt Interest Income	$	20	$	32	$	25	$	27	$	32
Tax-Equivalent Net Interest Income	$	13,276	$	12,931	$	11,944	$	11,166	$	11,124

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SOURCE Eagle Financial Services, Inc.

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