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
<PAGE>
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
<PAGE>
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
<TABLE>
<CAPTION>
Sept 30, 1999 Dec 31, 1998
--------------- ---------------
<S> <C> <C>
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
=============== ===============
</TABLE>
3
<PAGE>
Eagle Financial Services, Inc. and Subsidiary
Consolidated Statements of Income
For the Periods Ended September 30, 1999 and 1998
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1999 1998 1999 1998
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
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
=============== =============== =============== ===============
</TABLE>
4
<PAGE>
<TABLE>
Eagle Financial Services, Inc. and Subsidiary
Consolidated Statements of Shareholders' Equity
For the Nine Months Ended September 30, 1999 and 1998
<CAPTION>
Accumulated
Other
Common Retained Comprehensive Comprehensive
Stock Surplus Earnings Income (Loss) Income Total
------------ ------------ ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
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
============ ============ ============ =========== =============
</TABLE>
5
<PAGE>
Eagle Financial Services, Inc. and Subsidiary
Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 1999 and 1998
<TABLE>
<CAPTION>
Nine Months Ended
September 30
1999 1998
------------- -------------
<S> <C> <C>
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
============= =============
</TABLE>
6
<PAGE>
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:
<TABLE>
<CAPTION>
Sep 30, 1999 Dec 31, 1998
Held to Maturity Amortized Cost Amortized Cost
- ---------------- -------------- --------------
<S> <C> <C>
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
============== ==============
</TABLE>
<TABLE>
<CAPTION>
Sep 30, 1999 Dec 31, 1998
Available for Sale Amortized Cost Amortized Cost
- ------------------ -------------- --------------
<S> <C> <C>
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
============== ==============
</TABLE>
(5) Net loans at September 30, 1999 and December 31, 1998 are summarized as
follows (In Thousands):
<TABLE>
<CAPTION>
Sep 30, 1999 Dec 31, 1998
--------------- ---------------
<S> <C> <C>
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
=============== ===============
</TABLE>
(6) Allowance for Loan Losses
<TABLE>
<CAPTION>
Sep 30, 1999 Sep 30, 1998 Dec 31, 1998
-------------- -------------- --------------
<S> <C> <C> <C>
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
============== ============== ==============
</TABLE>
(7) New Accounting Pronouncements
There are no new accounting pronouncements to disclose within this Form 10-Q.
7
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
EXHIBIT 11
EAGLE FINANCIAL SERVICES, INC. AND SUBSIDIARY
Computations of Weighted Average Shares Outstanding and Earnings Per Share
(Shares Outstanding End of Month)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
JAN --- --- 1,418,341 1,408,485
FEB --- --- 1,420,287 1,410,433
MAR --- --- 1,420,287 1,410,433
APR --- --- 1,420,287 1,410,433
MAY --- --- 1,422,201 1,412,320
JUN --- --- 1,422,201 1,412,320
JUL 1,424,201 1,412,320 1,422,201 1,412,320
AUG 1,424,326 1,414,166 1,424,326 1,414,166
SEP 1,424,326 1,414,166 1,424,326 1,414,166
OCT --- --- --- ---
NOV --- --- --- ---
DEC --- --- --- ---
------------ ------------ ------------ ------------
4,272,853 4,240,652 12,794,457 12,705,706
3 3 9 9
- ------------ ------------ ------------ ------------ ------------
Weighted
Average
Shares
Outstanding 1,424,284 1,413,551 1,421,606 1,411,675
- ------------ ------------ ------------ ------------ ------------
Net Income $ 455,346 $ 348,401 $ 1,258,558 $ 939,897
- ------------ ------------ ------------ ------------ ------------
Earnings Per
Share, Basic
and Diluted $ 0.32 $ 0.25 $ 0.89 $ 0.67
- ------------ ------------ ------------ ------------ ------------
</TABLE>
13
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1999
<CASH> 5,709
<INT-BEARING-DEPOSITS> 24
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 11,300
<INVESTMENTS-CARRYING> 30,274
<INVESTMENTS-MARKET> 29,536
<LOANS> 113,971
<ALLOWANCE> 1,048
<TOTAL-ASSETS> 167,922
<DEPOSITS> 134,821
<SHORT-TERM> 10,198
<LIABILITIES-OTHER> 896
<LONG-TERM> 5,000
<COMMON> 3,561
0
0
<OTHER-SE> 13,446
<TOTAL-LIABILITIES-AND-EQUITY> 167,922
<INTEREST-LOAN> 6,266
<INTEREST-INVEST> 1,747
<INTEREST-OTHER> 15
<INTEREST-TOTAL> 8,028
<INTEREST-DEPOSIT> 2,896
<INTEREST-EXPENSE> 3,216
<INTEREST-INCOME-NET> 4,812
<LOAN-LOSSES> 230
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 4,414
<INCOME-PRETAX> 1,658
<INCOME-PRE-EXTRAORDINARY> 1,658
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,259
<EPS-BASIC> 0.89
<EPS-DILUTED> 0.89
<YIELD-ACTUAL> 4.61
<LOANS-NON> 138
<LOANS-PAST> 316
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 861
<ALLOWANCE-OPEN> 925
<CHARGE-OFFS> 188
<RECOVERIES> 81
<ALLOWANCE-CLOSE> 1,048
<ALLOWANCE-DOMESTIC> 1,048
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
