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Eagle Financial Services, Inc. Announces 2018 Second Quarter Dividend and Financial Results

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Eagle Financial Services, Inc. Announces 2018 Second Quarter Dividend and Financial Results

PR Newswire

BERRYVILLE, Va., July 18, 2018 /PRNewswire/ -- Eagle Financial Services, Inc. (OTCQX:EFSI), the holding company for Bank of Clarke County, whose divisions include Eagle Investment Group, reported quarterly earnings and continued strong performance for the second quarter of 2018. Additionally, on July 18, 2018, the Board of Directors announced a quarterly common stock cash dividend of $0.24 per common share, payable on August 13, 2018, to shareholders of record on July 30, 2018. Select highlights for the second quarter include:  

  • Net Income of $2.5 million
  • Net Interest Margin of 4.17%
  • Return on Average Assets of 1.31%
  • Return on Average Equity of 12.12%
  • Earnings per Share, Basic of $0.73

John R. Milleson, President and CEO, stated "We continued our strong financial performance for the second quarter of 2018.  Considering the current and projected rising interest rate environment, we are focused on the maintenance of our net interest margin and dedicated to growing the balance sheet with new loan relationships and increasing net interest income levels. I am very proud to announce that the Company has again increased its shareholders' dividend for the upcoming quarter, showing our commitment to sharing with our stockholders the positive results of a sound and competitive banking institution."

Income Statement Review

Net income of $2.5 million for the quarter ended June 30, 2018 was unchanged when compared to the quarter ended March 31, 2018. Net income for the quarter ended June 30, 2017 was $2.0 million. Much of the increase from the quarter ended June 30, 2017 related to the increase in net interest income.      

Net interest income increased $372,000 or 5.28% from the quarter ended March 31, 2018. This increase in net interest income was driven mostly by increased yield on the loan volume experienced by the Bank during the quarter. Net interest income increased 9.86% or $667,000 from $6.8 million for the quarter ended June 30, 2017 to $7.4 million for the quarter ended June 30, 2018.  This increase is attributed to increased loan volume and yield.   

Total loan interest income was $7.0 million and $6.5 million for the quarters ended June 30 and March 31, 2018, respectively. For the quarter ended June 30, 2017, total loan interest income was $6.1 million. Average loans for the quarter ended June 30, 2018 were $581.4 million compared to $575.4 million for the quarter ended March 31, 2018.  Total average accruing loans were $577.8 million for the three months ended June 30, 2018 and $571.8 million for the quarter ended March 31, 2018.  For the second quarter of 2017, total average loans were $534.8 million and average accruing loans were $528.8 million. The tax equivalent yield on average loans for the quarters ended June 30 and March 31, 2018 was 4.85% and 4.62%, respectively.  The tax equivalent yield on loans for the quarter ended June 30, 2017 was 4.51%.  Interest income from the investment portfolio was $953,000 for the quarter ended June 30, 2018 and $881,000 for the same period ended March 31, 2018.  Average investments were $136.1 million for the quarter ended June 30, 2018 and $130.0 million for the quarter ended March 31, 2018.  Interest income from the investment portfolio was $879,000 for the quarter ended June 30, 2017 while average investments were $132.9 million for the same time period.

Total interest expense was $573,000 for the three months ended June 30, 2018 and $426,000 for the quarter ended March 31, 2018. When compared to the quarter ended March 31, 2018, the average cost of interest bearing liabilities increased 13 basis points to 0.53% for the quarter ended June 30, 2018.  The average balance of interest bearing liabilities increased by $5.1 million from the quarter ended March 31, 2018. The net interest margin was 4.17% for the quarter ended June 30, 2018 and 4.05% for the quarter March 31, 2018.  For the quarter ended June 30, 2017, total interest expense was $248,000 and the net interest margin was 4.15%.

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%. The table at the end of this document reconciles tax-equivalent net interest income, which is not a measurement under accounting principles generally accepted in the United States of America (GAAP), to net interest income.

Non-interest income was $1.7 million and $1.8 million for the quarters ended June 30 and March 31, 2018, respectively. When comparing the quarter ended June 30, 2018 to the quarter ended March 31, 2018, fees from fiduciary activities decreased $145,000 or 32.66%.  This decrease results mostly from the collection of a one-time fee related to the settlement of a real estate transaction during the first quarter of 2018.  Fees from fiduciary activities decreased $10,000 or 3.24% from the quarter ended June 30, 2017 to the same period in 2018. The amount of income from fiduciary activities is determined by the number of active accounts and total assets under management. Also, income fluctuated due to changes in market value.  These fluctuations do not necessarily indicate future results. Other service charges and fees increased $87,000 when comparing the three months ended June 30, 2018 to the same period ended March 31, 2018.  Other service charges and fees increased $91,000 when comparing the three months ended June 30, 2018 to the same period ended June 20, 2017. These increases were mostly driven by the increases in ATM fees.  Other operating income decreased by $61,000 or 79.22% when comparing the three months ended June 30, 2018 to the three months ended March 31, 2018. During the first quarter of 2018, the Bank adjusted its ownership interest in Bankers Insurance, LLC.  The increase in ownership adjustment was $79,000 and was based upon Bankers Insurance, LLC 2016 schedule K-1. Other operating income decreased by $25,000 or 60.98% when comparing the quarter ended June 30, 2018 to the same period ended June 30, 2017.  This decrease related to fewer commissions earned and recorded from the Bank's investment in Bankers Insurance, LLC during the quarter ended June 30, 2018.  

Noninterest expense increased $536,000 to $6.2 million when comparing the quarter ended March 31, 2018 to the quarter ended June 30, 2018.  This increase is mostly attributed to the adjustment made to a gain recognized on other real estate owned for the quarter ended March 31, 2018. During the first quarter of 2018, the Bank recognized $397,000 gain upon the foreclosure of residential real estate collateral. During the quarter ended June 30, 2018, the Bank recorded a $282,000 valuation allowance for that other real estate owned asset and reduced the previously recognized gain accordingly.  When compared to the $5.7 million for the quarter ended June 30, 2017, noninterest expense was $419,000 or 7.29% higher for the quarter ended June 30, 2018. This increase also relates to the $282,000 other real estate owned valuation allowance recognized during the quarter ended June 30, 2018.

Asset Quality and Provision for Loan Losses

Nonperforming assets consist of loans 90 days past due and still accruing interest, nonaccrual loans, other real estate owned (foreclosed properties), and repossessed assets.  At June 30, 2018, nonperforming assets were $4.1 million or 0.53% of total assets, a decrease of $1.0 million when compared to the $5.1 million at March 31, 2018.  During the second quarter of 2018, the Bank placed one loan totaling approximately $84,000 on non-accrual status while seven non-accrual loans totaling approximately $750,000 had been removed from non-accrual status and subsequently closed. Management regularly evaluates the financial condition of borrowers with loans on non-accrual status and the value of any collateral on these loans.  The results of these evaluations are used to estimate the amount of losses which may be realized on the disposition of these non-accrual loans.  The majority of the non-accrual loans are secured by real estate.  No real estate assets had been foreclosed upon or sold during the second quarter of 2018.   There were no loans greater than 90 days past due and still accruing at June 30, 2018, a decrease of $18,000 from March 31, 2018. At June 30, 2017, there were no loans greater than 90 days past due and still accruing.  Nonperforming assets were $5.7 million or 0.77% of total assets at June 30, 2017.

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 June 30, 2018, the Company had 20 troubled debt restructurings totaling $4.3 million, of which 18 loans, totaling $4.2 million, were considered performing loans. 

The Company realized $115,000 in net recoveries for the quarter ended June 30, 2018 compared to $86,000 in net charge offs for the three months ended March 31, 2018. For the quarter ended June 30, 2017, the Company realized net recoveries of $219,000. The Company recorded a negative provision for loan losses of $97,000 and $230,000 for the quarters ended June 30, 2018 and 2017, respectively.  For the quarter ended March 31, 2018, a provision for loan losses of $205,000 was recorded.  The allowance for loan losses was $4.5 million, or 0.78% of total outstanding loans, at June 30, 2018 and March 31, 2018.  At June 30, 2017, the allowance for loan losses was $4.4 million or 0.80% of total outstanding loans.  The amount of provision for loan losses during each quarter reflects the results of the Bank's analysis used to determine the adequacy of the allowance for loan losses.  The Company is committed to maintaining an allowance at a level that adequately reflects the risk inherent in the loan portfolio. 

Total Consolidated Assets

Total consolidated assets of the Company at June 30, 2018 were $775.2 million, which represented a decrease of $673,000 or 0.09% from total assets of $775.9 million at March 31, 2018. Total loans increased from $581.6 million at March 31, 2018 to $586.8 million at June 30, 2018.  Total securities available for sale increased from $130.0 million at March 31, 2018 to $139.5 million at June 30, 2018. At June 30, 2017, total consolidated assets were $744.0 million while total loans were $554.2 million and total securities available for sale were $133.6 million.

Deposits and Other Borrowings

Total deposits were $682.1 million at June 30, 2018.  This reflects a decrease of 0.52% or $3.5 million from $685.6 million at March 31, 2018.  At June 30, 2017, total deposits were $632.0 million.  There were no borrowings with the Federal Home Loan Bank of Atlanta at June 30 and March 31, 2018. Borrowings with the Federal Home Loan Bank of Atlanta were $20.0 million at June 30, 2017.  

Equity

Shareholders' equity at June 30, 2018 was $84.8 million, reflecting an increase of $1.7 million from $83.1 million at March 31, 2018.  At June 30, 2017 shareholders' equity was $83.2 million. The book value of the Company at June 30, 2018 was $24.57 per common share. Total common shares outstanding were 3,473,555 at June 30, 2018.  On July 18, 2018, the board of directors declared a $0.24 per common share cash dividend for shareholders of record as of July 30, 2018, and payable on August 13, 2018.

Certain information contained in this discussion may include "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements relate to the Company's future operations and are generally identified by phrases such as "the Company expects," "the Company believes" or words of similar import. Although the Company believes that its expectations with respect to the forward-looking statements are based upon reliable assumptions within the bounds of its knowledge of its business and operations, there can be no assurance that actual results, performance or achievements of the Company will not differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. For details on factors that could affect expectations, see the risk factors and other cautionary language included in the Company's Annual Report on Form 10-K for the year ended December 31, 2017, and other filings with the Securities and Exchange Commission.

 

EAGLE FINANCIAL SERVICES, INC.










KEY STATISTICS

For the Three Months Ended


2Q18


1Q18


4Q17


3Q17


2Q17






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