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

About this update from Eagle Financial Services Inc

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 View original content to download multimedia: https://www.prnewswire.com/news-releases/eagle-financial-services-inc-announces-2022-fourth-quarter-financial-results-301735440.html SOURCE Eagle Financial Services, Inc.

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