EAGLE FINANCIAL SERVICES INC
For the period ended Sep 30, 2026. Filed Nov 9, 2026.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2026 · Filed Nov 9, 2026
EFSI$45.87+0.4%Stored close · as of Nov 9, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2026-06-30; filed 2026-08-10.
0000880641-26-000023
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-09-30; filed 2026-11-09.
0000880641-26-000031
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 184 previous paragraphs and 199 current paragraphs.
102 unchanged; 70 reworded; 27 added; 12 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 24 previous and 24 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (27)
Current report
On September 7, 2026, the Company, John Marshall Bancorp, Inc., a Virginia corporation (“JMSB”) and George Sub, Inc., a newly formed Virginia corporation and a wholly owned subsidiary of JMSB (“Merger Sub”) entered into an Agreement and Plan of Merger (the “Merger Agreement”). The Merger Agreement provides that, upon the terms and subject to the conditions set forth therein, Merger Sub will merge with and into the Company, with the Company continuing as the surviving corporation (the "First Merger"), and immediately thereafter, the Company will merge with and into JMSB, with JMSB as the surviving corporation. The Merger Agreement was approved by the board of directors of each of the Company and JMSB on September 7, 2026. Subject to the terms and conditions of the Merger Agreement, at the effective time of the First Merger, each outstanding share of common stock of the Company, excluding certain specified shares owned by the Company, JMSB or their respective subsidiaries, will be converted into the right to receive 2.00 shares of common stock of JMSB, with cash to be paid in lieu of any fractional shares. The transaction is expected to close in the first quarter of 2027, subject to customary closing conditions, including receipt of required regulatory approvals, approval by the shareholders of the Company and JMSB, and the satisfaction or waiver of the other conditions set forth in the Merger Agreement. There can be no assurance that the transaction will be completed within the expected timeframe or at all.
Current report
the occurrence of any event, change or other circumstances that could give rise to the right of the Company or JMSB to terminate the Merger Agreement;
Current report
the outcome of any legal proceedings or governmental inquiries or actions that may be instituted against the Company, JMSB, or the combined company;
Current report
the possibility that the proposed transaction will not close when expected or at all because required regulatory, shareholder or other approvals or consents are not received or other conditions to closing are not satisfied on a timely basis or at all or are obtained subject to conditions that are not anticipated (and the risk that required regulatory approvals may result in the imposition of conditions that could adversely affect the combined company or the expected benefits of the proposed transaction);
Current report
the ability of the Company or JMSB to meet expectations regarding the timing, completion and accounting and tax treatments of the proposed transaction;
Current report
any changes of, including the risk that any announcements relating to the proposed transaction could have adverse effects on, the market price of the common stock of the Company or JMSB;
Current report
the possibility that the anticipated benefits or synergies of the proposed transaction will not be realized when expected or at all, including as a result of the impact of, or problems arising from, the integration of the two companies or as a result of the strength of the economy and competitive factors in the areas where the Company and JMSB do business, and such integration may be more difficult, time-consuming or costly than expected and may result in unexpected liabilities or operational disruptions;
Current report
certain restrictions during the pendency of the proposed transaction that may impact the Company's and JMSB’s ability to pursue certain business opportunities or strategic transactions;
Current report
the possibility that the transaction may be more expensive to complete than anticipated, including as a result of unexpected factors or events;
Current report
diversion of the Company management’s or JMSB management's attention from ongoing business operations and opportunities;
Current report
(1) Adjusted to exclude merger-related expenses in connection with the Company's pending merger with JMSB during the three months ended September 30, 2026. See "Non-GAAP Financial Measures" for a reconciliation to comparable measures calculated in accordance with GAAP.
Current report
The provision for credit losses increased for the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025, reflecting higher historical loss factors and specific reserve allocations, partially offset by lower qualitative factor adjustments. For the three months ended September 30, 2026, these same components also affected the change from the three months ended September 30, 2025. However, the change in provision attributable to the qualitative factor adjustments slightly offset the historical loss factor and specific reserve allocations, resulting in an overall decrease in provision for credit losses for the three-month period.
Current report
The qualitative factor for the nature, terms, and volume of the loan portfolio is intended to capture incremental risk arising from portfolio growth that is not otherwise reflected in the quantitative estimate. During the three months ended September 30, 2026, this factor was refined to provide a more representative assessment of sustained portfolio growth trends and their relationship to expected credit losses. This refinement was the primary reason for the lower qualitative factor adjustment.
Current report
Gain on sale of other assets during the nine months ended September 30, 2026 reflects the Company's sale of its membership interest in Bearing to an unaffiliated third party in May 2026.
Current report
Computer software and equipment expenses increased during the three and nine months ended September 30, 2026 compared to the same periods in 2025 reflecting higher costs of system solutions enhancing security and operational efficiency throughout the organization.
Current report
Professional fees increased during the three and nine months ended September 30, 2026 primarily due to higher expenses related to employee recruitment fees and legal fees on loan matters, as well as consulting fees in conjunction with the purchase of tax credits.
Current report
In September 2026, the Company entered into a Merger Agreement, which is discussed above and in Note 2. As a result, the Company incurred merger-related expenses totaling $342 thousand during the three and nine months ended September 30, 2026. These expenses are expected to occur through the closing date of the transaction, anticipated in the first quarter of 2027. There were no merger-related expenses incurred during the three and nine months ended September 30, 2025.
Current report
Income tax expense decreased during the third quarter 2026 compared to the 2025 period due to the purchase of tax credits, which resulted in a negative adjustment to income tax expense of $400 thousand, and lower income recognized during the 2026 quarterly period.
Current report
The effective tax rate was 17.36% and 20.44% for the three and nine months ended September 30, 2026, respectively. The effective tax rate varied from the statutory rate primarily due to the purchase of $5 million of tax credits at a discounted rate of $0.93/dollar, partially offset by $342 thousand of merger-related expenses, that are non-deductible for tax purposes, in connection with the Company's proposed merger with JMSB announced in September 2026.
Current report
Gain on sale of loans increased during the three and nine months ended September 30, 2026 compared to the same 2025 periods. Higher sales volume drove the increase during the three months ended September 30, 2026 compared to three months ended September 30, 2025. For the nine months ended September 30, 2026, sales volume was slightly lower, however certain mortgage loans sold from portfolio during the nine months ended September 30, 2025 were priced at par, thereby causing gain on sale income during the 2025 year-to-date period to be lower.
Current report
Noninterest expense increased during the three and nine months ended September 30, 2026 over the 2025 periods primarily due to an increase in salaries and employee benefits, reflecting the Company's continued investment in staffing and increased benefits expenses including annual incentive plan accruals, medical insurance, 401K match, and stock-based compensation. Additional noninterest expense increases related to bank franchise tax, merger-related expenses, loan costs and charitable contributions.
Current report
Income tax expense for the three months ended September 30, 2026 decreased from the three months ended September 30, 2025 primarily due to the purchase of $5 million of tax credits, which resulted in a negative adjustment to income tax expense of $400 thousand. The increase in income tax expense during the nine months ended September 30, 2026 was primarily due to the Company's net income level compared to the nine months ended September 30, 2025, partially offset by the tax credit adjustment. The 2025 period included the recognized loss on the sale of securities during the first quarter of 2025.
Current report
Changes in the provision for credit losses for the three and nine months ended September 30, 2026 compared to the same periods in 2025 reflected an increase in the historical loss factor due to cumulative net charge-off activity, a specific reserve allocation, and declining loan balances. For the three months ended September 30, 2026, the effect of declining loan balances more than offset the other drivers resulting in a year-over-year decrease compared to three months ended September 30, 2025.
Current report
For the three months ended September 30, 2026, the marine segment had net recoveries of $8 thousand compared to net charge-offs of $467 thousand during the three months ended September 30, 2025. Net charge-offs were $359 thousand and $581 thousand for the nine months ended September 30, 2026 and 2025, respectively. Additionally, at September 30, 2026 specific reserve allocations totaled $557 thousand, compared to none at September 30, 2025.
Current report
Residential owner occupied loans increased $16.1 million, or 8.99%, since December 31, 2025, with most of the growth occurring during the third quarter of 2026. The increase reflects a shift in market demand toward non-conforming adjustable-rate loans in response to the rising interest rate environment. These loans are less interest rate sensitive than conforming fixed-rate mortgages originated for sale.
Current report
During the nine months ended September 30, 2025, charge-offs primarily reflected losses on three marine vessels that were repossessed, a $468 thousand partial write-down on a nonaccrual owner-occupied commercial real estate loan, and write-downs totaling $2.2 million, which included a $1.2 million deficiency balance, related to a non-owner occupied commercial loan relationship consisting of four residential multifamily income producing properties.
Current report
Recoveries during the nine months ended September 30, 2025 totaled $478 thousand resulting in net charge-offs of $3.4 million for the nine months ended September 30, 2025.
Removed paragraphs (12)
Previous report
(1) Adjusted to exclude the gain on sale of other assets in connection with the Company's sale of its membership interest in Bearing during the three months ended June 30, 2026. See "Non-GAAP Financial Measures" for a reconciliation to comparable measures calculated in accordance with GAAP.
Previous report
Gain on sale of loans decreased during the three months ended June 30, 2026 compared to 2025 reflecting a decrease attributable to SBA loans due to a lower volume sold, partially offset by an increase attributable to a higher volume of mortgage loans sold. The Company sold $28.2 million in loans on the secondary market during the three months ended June 30, 2026, consisting of mortgage loans totaling $24.3 million and SBA commercial loans totaling $3.9 million. This compares to sales of $25.5 million during the three months ended June 30, 2025, consisting of $17.1 million mortgage loans and $8.4 million SBA loans.
Previous report
Gain on sale of other assets increased during the three months ended June 30, 2026. The Company sold its membership interest in Bearing to an unaffiliated third party. A pre-tax gain of $3.5 million was recognized from this sale and is recorded in gain on sale of other assets.
Previous report
Other operating income increased for the three and six months ended June 30, 2026 compared to the same periods in 2025 primarily due to $80 thousand cash distribution received during the quarter from the Company's investment in housing equity fund.
Previous report
Advertising and marketing expenses increased during the three and six months ended June 30, 2026 compared to 2025 mainly due to higher business development and digital marketing campaigns.
Previous report
Computer software expenses increased $97 thousand and $169 thousand during the three and six months ended June 30, 2026 respectively, compared to the same period in 2025 reflecting ongoing investments in technology to enhance systems security and improve operational efficiencies.
Previous report
Data processing fees decreased during the three and six months ended June 30, 2026 compared to the same period in 2025 reflecting core provider contract price discounts in 2026.
Previous report
The increase in income tax expense during the six months ended June 30, 2026 compared to the six months ended June 30, 2025 reflects the level of net income recognized during the first half of 2026 compared to a net loss recognized during the 2025 period as well as the proportional amortization expense adjustment recorded during the second quarter of 2026.
Previous report
The effective tax rate for the three and six months ended June 30, 2026 was also impacted by the proportional amortization expense adjustment, causing it to exceed the statutory rate of 21%. The effective tax rate for the three and six months ended June 30, 2025 was below the statutory rate of 21% due primarily to the recognition of tax-exempt life insurance income and the Company's net loss position for the six months ended June 30, 2025.
Previous report
The increase in income tax expense during the six months ended June 30, 2026 was due to the Company's net income compared to its net loss recorded during six months ended June 30, 2025, which was directly related to the recognized loss on the sale of securities during the 2025 period.
Previous report
Provision for credit losses increased primarily due to an increase in the historical loss factor, which was partially offset by declining loan balances during the three and six months ended June 30, 2026 compared to the three and six months ended June 30, 2025. Net charge-offs were $367 thousand for the three and six months ended June 30, 2026 and $114 thousand for the three and six months ended June 30, 2025.
Previous report
During the six months ended June 30, 2025, charge-offs were primarily related to a non-owner occupied commercial loan relationship consisting of four residential multifamily income producing properties totaling $971 thousand. Recoveries were $361 thousand resulting in net charge-offs of $1.1 million for the six months ended June 30, 2025.
Reworded paragraphs (70)
Previous wording
The purpose of this discussion is to focus on certain information relevant to the Company’s financial condition, results of operations, liquidity and capital resources. This discussion should be read in conjunction with the Company’s Audited Consolidated Financial Statements and notes thereto included in the 2025 Form 10-K, and in conjunction with the Unaudited Consolidated Financial Statements and notes thereto presented in Part I, Item 1, Financial Statements, of this Form 10-Q. Operating results for the three and six months ended June 30, 2026 are not necessarily indicative of the results for the full-year ending December 31, 2026 or any future period.
Current wording
The purpose of this discussion is to focus on certain information relevant to the Company’s financial condition, results of operations, liquidity and capital resources. This discussion should be read in conjunction with the Company’s Audited Consolidated Financial Statements and notes thereto included in the 2025 Form 10-K, and in conjunction with the Unaudited Consolidated Financial Statements and notes thereto presented in Part I, Item 1, Financial Statements, of this Form 10-Q. Operating results for the three and nine months ended September 30, 2026 are not necessarily indicative of the results for the full-year ending December 31, 2026 or any future period.
Previous wording
At June 30, 2026, the Company had total assets of $1.85 billion, net loans of $1.48 billion, total deposits of $1.60 billion, and shareholders’ equity of $193.9 million.
Current wording
At September 30, 2026, the Company had total assets of $1.87 billion, net loans of $1.51 billion, total deposits of $1.62 billion, and shareholders’ equity of $195.3 million.
Previous wording
This report refers to certain financial measures that are computed under a basis other than GAAP ("non-GAAP"). The Company uses certain non-GAAP financial measures, including non-GAAP net income, non-GAAP noninterest income, non-GAAP earnings per share, non-GAAP return on average equity and average assets, tax-equivalent net interest income and efficiency ratio, to provide meaningful supplemental information regarding the Company's operational performance and to enhance investors' overall understanding of such financial performance. The methodology for determining these non-GAAP measures may differ among companies. Non-GAAP measures are supplemental and not a substitute for, or more important than, financial measures prepared in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures which may be presented by other companies.
Current wording
This report refers to certain financial measures that are computed under a basis other than GAAP ("non-GAAP"). The Company uses certain non-GAAP financial measures, including non-GAAP net income, non-GAAP noninterest income and expense, non-GAAP earnings per share, non-GAAP return on average equity and average assets, tax-equivalent net interest income and efficiency ratio, to provide meaningful supplemental information regarding the Company's operational performance and to enhance investors' overall understanding of such financial performance. The methodology for determining these non-GAAP measures may differ among companies. Non-GAAP measures are supplemental and not a substitute for, or more important than, financial measures prepared in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures which may be presented by other companies.
Previous wording
The Company executed significant non-recurring transactions during the second quarter of 2026 and the first quarter of 2025 that significantly impacted the Company's operating results for the respective periods. In May 2026, the Company sold its membership interest in Bearing Insurance Group, LLC ("Bearing") to an unaffiliated third party and recognized a pre-tax gain of $3.5 million. During the first quarter of 2025, the Company executed balance sheet repositioning transactions and recorded a realized loss on the sale of the available for sale securities totaling $12.4 million. These transactions significantly impacted the Company's operating results and certain performance metrics and ratios for the three months ended June 30, 2026 and the six months ended June 30, 2026 and 2025.
Current wording
The Company executed significant non-recurring transactions during the second quarter of 2026 and the first quarter of 2025 that significantly impacted the Company's operating results for the respective periods. In May 2026, the Company sold its membership interest in Bearing Insurance Group, LLC ("Bearing") to an unaffiliated third party and recognized a pre-tax gain of $3.5 million. During the first quarter of 2025, the Company executed balance sheet repositioning transactions and recorded a realized loss on the sale of the available for sale securities totaling $12.4 million. Additionally, the Company incurred merger-related expenses during the third quarter of 2026 related to the announced merger with JMSB in September 2026. Merger-related expenses are anticipated to occur through the closing date of the transaction. These transactions significantly impacted the Company's operating results and certain performance metrics and ratios for the three months ended September 30, 2026 and the nine months ended September 30, 2026 and 2025.
Previous wording
The following table reconciles the GAAP reported measure to the adjusted non-GAAP measure to show the impact of significant non-recurring transactions for the periods presented:
Current wording
The following table reconciles the GAAP reported measure to the adjusted non-GAAP measure to show the impact of significant non-recurring transactions and merger-related expenses for the periods presented:
Previous wording
This report contains statements that are "forward looking statements." The Company may also make forward looking statements in other documents that are filed with the Securities and Exchange Commission, in our annual reports to shareholders, in press releases and other written materials, and in oral statements made by our officers, directors, or employees. Forward looking statements include statements regarding our expectations, intentions, and objectives, or other expressions that predict or indicate future events and trends and which do not relate to historical matters. The words “believe,” “expect,” “may,” “will,” “should,” "could," “projects,” “contemplates,” “anticipates,” “forecasts,” “intends,” or other similar words or terms are intended to identify forward looking statements. You should not rely on forward looking statements, as they involve known and unknown risks, uncertainties, and other factors, some of which are beyond our control. These risks, uncertainties, and other factors may cause our actual results, performance, or achievements to be materially different than the anticipated future results, performance, or achievements expressed or implied by the forward looking statements.
Current wording
This report contains statements that are "forward looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. The Company may also make forward looking statements in other documents that are filed with the Securities and Exchange Commission, in our annual reports to shareholders, in press releases and other written materials, and in oral statements made by our officers, directors, or employees. Forward looking statements include statements regarding future plans, strategies and expectations of the Company, JMSB and the combined company, otherwise relating to the proposed transaction of the Company and JMSB, or our expectations, intentions, and objectives, or other expressions that predict or indicate future events and trends and which do not relate to historical matters. The words “believe,” “expect,” “may,” “will,” “should,” "could," “projects,” “contemplates,” “anticipates,” “forecasts,” “intends,” or other similar words or terms are intended to identify forward looking statements. You should not rely on forward looking statements, as they involve known and unknown risks, uncertainties, and other factors, some of which are beyond our, JMSB's and the combined company's control. These risks, uncertainties, and other factors may cause our actual results, performance, or achievements to be materially different than the anticipated future results, performance, or achievements expressed or implied by the forward looking statements.
Previous wording
The following tables present a summarized consolidated statement of operations for the periods indicated:
Current wording
The following tables present a summarized consolidated statement of income for the periods indicated:
Previous wording
(1) Adjusted to exclude the gain on sale of other assets in connection with the Company's sale of its membership interest in Bearing and the loss on sale of securities in connection with the Company's balance sheet repositioning transactions recognized during the six months ended June 30, 2026 and 2025, respectively. See "Non-GAAP Financial Measures" for a reconciliation to comparable measures calculated in accordance with GAAP.
Current wording
(1) Adjusted to exclude the gain on sale of other assets in connection with the Company's sale of its membership interest in Bearing, merger-related expenses in connection with the Company's pending merger with JMSB, and the loss on sale of securities in connection with the Company's balance sheet repositioning transactions recognized during the nine months ended September 30, 2026 and 2025. See "Non-GAAP Financial Measures" for a reconciliation to comparable measures calculated in accordance with GAAP.
Previous wording
The Company's net income decreased during the three months ended June 30, 2026, compared to the three months ended June 30, 2025 primarily due to a higher provision for credit losses and increased noninterest expenses, mostly offset by an increase in noninterest income and improved net interest income.
Current wording
The Company's net income decreased during the three months ended September 30, 2026, compared to the three months ended September 30, 2025 primarily due to higher noninterest expenses, partially offset by improved net interest income and lower income tax expense.
Previous wording
During the six months ended June 30, 2026 the Company's net income increased compared to the six months ended June 30, 2025 primarily due to loss on the sale of available for sale securities totaling $12.4 million, or $9.8 million, net of tax, recognized during the prior year period. The 2026 year-to-date period also increased due to improved net interest income and gain on sale of other assets, which was mostly offset by higher noninterest expenses and provision for credit losses over the corresponding 2025 period.
Current wording
During the nine months ended September 30, 2026 the Company's net income increased compared to the nine months ended September 30, 2025 primarily due to loss on the sale of available for sale securities totaling $12.4 million, or $9.8 million, net of tax, recognized during the prior year period. The 2026 year-to-date period also increased due to improved net interest income and gain on sale of other assets, which was more than offset by higher noninterest expense, provision for credit losses, and income tax expense over the corresponding 2025 period.
Previous wording
(1) Adjusted to exclude the gain on sale of other assets in connection with the Company's second quarter 2026 sale of its membership interest in Bearing and the loss on sale of securities in connection with the Company's balance sheet repositioning transactions during the first quarter of 2025. See "Non-GAAP Financial Measures" for a reconciliation to comparable measures calculated in accordance with GAAP.
Current wording
(1) Adjusted to exclude merger-related expenses incurred during the third quarter 2026 in connection with the Company's pending merger with JMSB, gain on sale of other assets in connection with the Company's second quarter 2026 sale of its membership interest in Bearing and the loss on sale of securities in connection with the Company's balance sheet repositioning transactions during the first quarter of 2025. See "Non-GAAP Financial Measures" for a reconciliation to comparable measures calculated in accordance with GAAP.
Previous wording
The following table shows average balance, interest, and yield/rate information, as well as net interest margin on a tax- equivalent basis for the six months ended June 30, 2026 and 2025 (dollars in thousands):
Current wording
The following table shows average balance, interest, and yield/rate information, as well as net interest margin on a tax- equivalent basis for the nine months ended September 30, 2026 and 2025 (dollars in thousands):
Previous wording
The year-over-year improvements in net interest income, tax-equivalent net interest income, net interest spread, and net interest margin demonstrate the benefits of the balance sheet repositioning strategy completed in March 2025, in which the Company raised capital, increased cash on hand and replaced lower-yielding investment securities with higher yielding securities. The Company has deployed capital to reduce its reliance on wholesale borrowings and for meaningful loan growth.
Current wording
The year-over-year improvements in net interest income, net interest spread, and net interest margin reflect a reduction in cost associated with time deposits and continue to demonstrate the benefits of the balance sheet repositioning strategy completed in March 2025, in which the Company raised capital, increased cash on hand and replaced lower-yielding investment securities with higher yielding securities. In turn, the Company deployed capital to reduce its reliance on wholesale borrowings and higher cost deposits and to fund meaningful loan growth.
Previous wording
The increase in net interest income during the three and six months ended June 30, 2026 primarily reflects decreases in the average balances of interest-bearing liabilities and reductions in the average rates paid while being partially offset by lower income from interest-earning assets, namely federal funds sold and interest-bearing deposits in other banks.
Current wording
The increase in net interest income during the three and nine months ended September 30, 2026 primarily reflects decreases in the average balances of interest-bearing liabilities and reductions in the average rates paid while being partially offset by lower income from interest-earning assets, namely federal funds sold and interest-bearing deposits in other banks. The decline in the average balances of federal funds sold and interest-bearing deposits in other banks outpaced average balance growth in loans, slightly outweighing earnings on loans.
Previous wording
Net interest income, on a tax-equivalent basis, was $17.0 million and $15.7 million for the three months ended June 30, 2026 and 2025, respectively, an increase of $1.3 million, or 8.0%. For the six months ended June 30, 2026 and 2025, tax-equivalent net interest income was $32.9 million and $29.1 million, respectively, an increase of $3.8 million, or 13.1%.
Current wording
Net interest income, on a tax-equivalent basis, was $17.6 million and $17.2 million for the three months ended September 30, 2026 and 2025, respectively, an increase of $422 thousand, or 2.45%. For the nine months ended September 30, 2026 and 2025, tax-equivalent net interest income was $50.6 million and $46.3 million, respectively, an increase of $4.3 million, or 9.2%.
Previous wording
The Company's net interest spread and net interest margin increased 50 basis points and 44 basis points, respectively, for the three months ended June 30, 2026 compared to the three months ended June 30, 2025. For the six months ended June 30, 2026, the Company's net interest spread and net interest margin increased 58 basis points and 54 basis points, respectively, compared to six months ended June 30, 2025. Ongoing margin pressures include loan demand unpredictability, deposit competition, and elevated funding costs.
Current wording
The Company's net interest spread and net interest margin increased 52 basis points and 37 basis points, respectively, for the three months ended September 30, 2026 compared to the three months ended September 30, 2025. For the nine months ended September 30, 2026, the Company's net interest spread and net interest margin increased 57 basis points and 48 basis points, respectively, compared to nine months ended September 30, 2025. Ongoing margin pressures include loan demand unpredictability, deposit competition, and elevated funding costs.
Previous wording
Total average balance of securities increased by $329 thousand and $2.4 million for the three and six months ended June 30, 2026, respectively, from the average balance in the prior year periods. The average yield on securities decreased three basis points during the three months ended June 30, 2026 compared to the three months ended June 30, 2025. During the six months ended June 30, 2026, the average yield on securities increased 70 basis points compared to the six months ended June 30, 2025, reflecting the sale of lower-yielding securities and reinvestment into higher-yielding securities in the first quarter of 2025.
Current wording
Total average balance of securities decreased by $15.0 million and $3.5 million for the three and nine months ended September 30, 2026, respectively, from the average balance in the prior year periods. The average yield on securities decreased 34 basis points during the three months ended September 30, 2026 compared to the three months ended September 30, 2025. During the nine months ended September 30, 2026, the average yield on securities increased 35 basis points compared to the nine months ended September 30, 2025, reflecting the sale of lower-yielding securities and reinvestment into higher-yielding securities in the first quarter of 2025.
Previous wording
The total average loan balances for the three months ended June 30, 2026 increased $55.2 million and for the six months ended June 30, 2026 increased $29.4 million compared to the same periods in 2025. The increase in average balances reflect strong growth in commercial real estate, construction, commercial and industrial, and home equity lines of credit loan portfolios, offset by continued amortization of the marine loan portfolio. The year-to-date change was also impacted by the sale of a pool of mortgage loans totaling $18.8 million early in the first quarter of 2025.
Current wording
The total average loan balances for the three months ended September 30, 2026 increased $66.3 million and for the nine months ended September 30, 2026 increased $42.0 million compared to the same periods in 2025. The increase in average balances reflects growth in commercial real estate, construction, commercial and industrial, and residential owner occupied loan portfolios, offset by continued amortization of the marine loan portfolio. The year-to-date change was also impacted by the sale of a pool of mortgage loans totaling $18.8 million early in the first quarter of 2025.
Previous wording
Total average balance of federal funds sold and interest-bearing deposits in other banks decreased $133.9 million and $90.5 million during the three and six months ended June 30, 2026, respectively, compared to the three and six months ended June 30, 2025, largely due to loan growth and the payoff of maturing borrowings.
Current wording
Total average balance of federal funds sold and interest-bearing deposits in other banks decreased $186.8 million and $123.0 million during the three and nine months ended September 30, 2026, respectively, compared to the three and nine months ended September 30, 2025, largely due to funding loan growth and the payoff of maturing borrowings.
Previous wording
Total average interest-bearing deposit balances for three and six months ended June 30, 2026 decreased $46.3 million and $33.8 million from the same periods in 2025. For the three months ended June 30, 2026, average balances of time deposits and savings accounts decreased $67.3 million and $7.7 million, respectively, partially offset by NOW and money market accounts which increased $10.3 million and $18.5 million, respectively. The average rate paid on interest-bearing deposits decreased 31 basis points and 35 basis points during the three and six months ended June 30, 2026, respectively, compared to the three and six months ended June 30, 2025 reflecting lower average rates paid on time deposits.
Current wording
Total average interest-bearing deposit balances for three and nine months ended September 30, 2026 decreased $10.3 million and $25.9 million from the same periods in 2025. For the three months ended September 30, 2026, average balances of time deposits decreased $28.3 million and were partially offset by a net average balance increase of $18.0 million in lower cost savings and interest-bearing demand deposits. The average rate paid on interest-bearing deposits decreased 20 basis points and 30 basis points during the three and nine months ended September 30, 2026, respectively, compared to the three and nine months ended September 30, 2025 primarily reflecting lower average rates paid on time deposits.
Previous wording
The average balance of FHLB advances decreased $40.8 million and $61.4 million during the three and six months ended June 30, 2026, respectively, compared to the three and six months ended June 30, 2025 due to maturing advances that were not replaced with new borrowings. During March 2026, the Company's remaining FHLB borrowings were fully paid down, which materially reduced our reliance on wholesale funding.
Current wording
The average balance of FHLB advances decreased $40.0 million and $54.2 million during the three and nine months ended September 30, 2026, respectively, compared to the three and nine months ended September 30, 2025 due to maturing advances that were not replaced with new borrowings. During March 2026, the Company's remaining FHLB borrowings were fully paid down, which materially reduced our reliance on wholesale funding.
Previous wording
The increase in the provision for credit losses for the three and six months ended June 30, 2026 and 2025 included the impact of a change in historical loss factors driven by charge-offs, higher qualitative factors adjustments including forecasted economic conditions and loan growth, and higher specific reserve allocations on individually evaluated nonaccrual loans.
Current wording
The provision for credit losses includes the impact of a change in historical loss factors driven by charge-offs, changes in qualitative factors adjustments including forecasted economic conditions and loan growth, and specific reserve allocations on individually evaluated nonaccrual loans.
Previous wording
For both the three and six months ended June 30, 2026, net charge-offs totaled $2.2 million, compared to net charge-offs totaling $159 thousand and $1.1 million during the three and six months ended June 30, 2025, respectively. The higher qualitative factor adjustment was primarily driven by loan growth in the commercial and industrial and construction loan portfolios.
Current wording
For the three and nine months ended September 30, 2026, net charge-offs totaled $1.0 million and $3.2 million, compared to net charge-offs totaling $2.3 million and $3.4 million during the three and nine months ended September 30, 2025, respectively.
Previous wording
Specific reserve allocations totaled $3.1 million at June 30, 2026, compared to $1.5 million at June 30, 2025, primarily reflecting new or increased allocations on commercial loan relationships during the first half of 2026. At June 30, 2026, five commercial loan relationships comprised $2.7 million, or 89%, of the total specific reserve allocation, including two commercial and industrial relationships, two multi-family commercial real estate relationships, and one relationship with both commercial and industrial and commercial real estate exposure. The $1.6 million increase from June 30, 2025 was primarily attributable to four commercial loan relationships for which specific allocations were recorded based on updated collateral information and one new nonaccrual relationship added during the second quarter of 2026, partially offset by charge-off of loan balances with previously established specific reserve balances.
Current wording
Specific reserve allocations totaled $3.4 million at September 30, 2026, compared to $333 thousand at September 30, 2025, primarily reflecting new and increased allocations on commercial loan relationships during 2026. At September 30, 2026, six commercial loan relationships comprised $3.1 million, or 91%, of the total specific reserve allocation, including two commercial and industrial relationships, two multi-family commercial real estate relationships, one owner-occupied commercial real estate exposure, and one marine relationship. The $3.1 million increase from September 30, 2025 was primarily attributable to these six relationships. Specific allocations on three of these commercial loan relationships were recorded based on updated collateral information, while three new nonaccrual relationships requiring specific allocations were added during the second and third quarters of 2026. These increases were partially offset by charge-offs of loan balances with previously established specific reserve balances.
Previous wording
Total noninterest income (loss) was $8.6 million and $4.9 million for the three months ended June 30, 2026 and 2025, respectively, and $13.5 million and $(3.6) million for the six months ended June 30, 2026 and 2025, respectively. Management reviews the activities which generate noninterest income on an ongoing basis. The following table provides the components of noninterest income for the three and six months ended June 30, 2026 and 2025, which are included within the respective Consolidated Statements of Operations headings.
Current wording
Total noninterest income was $5.3 million and $5.2 million for the three months ended September 30, 2026 and 2025, respectively, and $18.8 million and $1.5 million for the nine months ended September 30, 2026 and 2025, respectively. Management reviews the activities which generate noninterest income on an ongoing basis. The following table provides the components of noninterest income for the three and nine months ended September 30, 2026 and 2025, which are included within the respective Consolidated Statements of Income headings.
Previous wording
Wealth management fee income increased from 2025 to 2026. Wealth management fee income is comprised of income from fiduciary activities as well as commissions from the sale of non-deposit investment products. The amount of income from fiduciary activities is determined by the number of active accounts and total assets under management. Since June 30, 2025, assets under management increased $55.0 million, or 10.1%, to $599.0 million, reflecting increases in market value and new business accounts. Additionally, per transaction fees for estates and other services have also contributed to the year over year increase in revenue. Partially offsetting these increases was a decrease in investment sales commissions.
Current wording
Wealth management fee income increased during the nine months ended September 30, 2026 compared to the same period in 2025. Wealth management fee income is comprised of income from fiduciary activities as well as commissions from the sale of non-deposit investment products. The amount of income from fiduciary activities is determined by the number of active accounts and total assets under management. Since September 30, 2025, assets under management increased $58.4 million, or 10.8%, to $601.6 million, reflecting increases in market value and new business accounts. Additionally, termination fees have also contributed to the year over year increase in revenue. Partially offsetting these increases was a decrease in investment sales commissions and estate settlement fees.
Previous wording
Service charges on deposit accounts increased during the three and six months ended June 30, 2026 compared to the same period in 2025. The increase is mainly driven by higher overdraft charges and account analysis income.
Current wording
Service charges on deposit accounts increased during the three and nine months ended September 30, 2026 compared to the same period in 2025. The increase is mainly driven by higher overdraft charges and account analysis income.
Previous wording
The Company executed balance sheet repositioning transactions within its investment securities portfolio during March 2026. The sale of $99.2 million of available for sale debt securities, with a fair value of $86.8 million, resulted in a net pre-tax loss of $12.4 million during the six months ended June 30, 2025. There were no sales of available for sale debt securities in the three and six months ended June 30, 2026.
Current wording
The Company executed balance sheet repositioning transactions within its investment securities portfolio during March 2025. The sale of $99.2 million of available for sale debt securities, with a fair value of $86.8 million, resulted in a net pre-tax loss of $12.4 million during the nine months ended September 30, 2025. There were no sales of available for sale debt securities in the three and nine months ended September 30, 2026.
Previous wording
Gain on sale of loans increased during the six months ended June 30, 2026 when compared to the same period in 2025. The 2026 year-to-date volume of sales declined, however, $18.3 million of portfolio mortgage loans sold during the six months ended June 30, 2025 were priced at par, which had a minimal impact on income. Excluding the portfolio loan sale, sold loan volume increased during the six months ended June 30, 2026. The Company sold $52.3 million loans on the secondary market, consisting of $40.9 million of mortgage loans and $11.4 million of SBA commercial loans during the six months ended June 30, 2026. This compares to total loan sales of $60.7 million, consisting of $32.0 million of mortgage loans originated for sale, $9.9 million SBA commercial loans, and a pool of $18.8 million residential mortgage loans held for investment during the six months ended June 30, 2025.
Current wording
Gain on sale of loans increased during the three and nine months ended September 30, 2026 when compared to the same periods in 2025. Higher sales volume drove the increase during three months ended September 30, 2026 compared to three months ended September 30, 2025. For the nine months ended September 30, 2026, sales volume was slightly lower, due to sales of $18.3 million of portfolio mortgage loans sold during the nine months ended September 30, 2025. These portfolio mortgage loans were priced at par and had a minimal impact on income. Excluding the portfolio loan sale, sold loan volume increased during the nine months ended September 30, 2026. The Company sold $85.0 million loans on the secondary market, consisting of $66.0 million of mortgage loans and $19.0 million of SBA commercial loans during the nine months ended September 30, 2026. This compares to total loan sales of $88.6 million during the nine months ended September 30, 2025, consisting of $53.5 million of mortgage loans originated for sale, $16.3 million SBA commercial loans, and a pool of $18.8 million residential mortgage loans held for investment.
Previous wording
Income from holdings in small business investment companies increased during the six months ended June 30, 2026 compared to the same period in 2025. The increase during the current year period is mainly attributed to higher cash distributions received, based on the results of their performance and difference in timing of distributions.
Current wording
Income from holdings in small business investment companies increased during the three and nine months ended September 30, 2026, compared to the same periods in 2025. The increases during the current year periods are mainly attributed to higher cash distributions received, based on the results of their performance and difference in timing of distributions.
Previous wording
Total noninterest expenses increased $2.1 million, or 16%, for the three months ended June 30, 2026 and $3.8 million, or 14%, for the six months ended June 30, 2026 compared to the same periods in 2025. The following table presents the components of noninterest expense for the three and six months ended June 30, 2026 and 2025, which are included within the respective Consolidated Statements of Operations headings.
Current wording
Total noninterest expenses increased $1.8 million, or 12%, for the three months ended September 30, 2026 and $5.5 million, or 14%, for the nine months ended September 30, 2026 compared to the same periods in 2025. The following table presents the components of noninterest expense for the three and nine months ended September 30, 2026 and 2025, which are included within the respective Consolidated Statements of Income headings.
Previous wording
Salaries and employee benefits increased during the three and six months ended June 30, 2026 over 2025, primarily reflecting increases in salaries due to investments in staffing and higher annual incentive compensation plan accruals as certain performance metrics were attained. Further contributing to the increases were higher stock-based compensation expense and employee medical insurance costs. The Company's number of full-time equivalent employees ("FTE's") has increased from 244 at June 30, 2025 to 259 at June 30, 2026.
Current wording
Salaries and employee benefits increased during the three and nine months ended September 30, 2026 over 2025, primarily reflecting increases in salaries due to investments in staffing and higher annual incentive compensation plan accruals as certain performance metrics were attained. Further contributing to the increases were higher stock-based compensation expense and employee medical insurance costs. The Company's number of full-time equivalent employees ("FTE's") has increased from 249 at September 30, 2025 to 261 at September 30, 2026.
Previous wording
FDIC assessment expense, which is based in part on asset size and capital levels, decreased during the three and six months ended June 30, 2026 compared to the same periods in 2025. The decreased expense primarily reflects an improvement in the financial ratio portions of the assessment rate reflecting a stronger capital position largely due to improved net income during 2026 and the capital raise completed in early 2025.
Current wording
FDIC assessment expense, which is based in part on asset size and capital levels, decreased during the nine months ended September 30, 2026 compared to the same period in 2025. The decreased expense primarily reflects an improvement in the financial ratio portions of the assessment rate reflecting a stronger capital position largely due to improved net income during 2026 and the capital raise completed in early 2025.
Previous wording
Bank Franchise tax increased during the three and six months ended June 30, 2026 compared to the same period in 2025 due to a higher estimate for 2026, reflective of the Bank's capital level.
Current wording
Bank Franchise tax increased during the three and nine months ended September 30, 2026 compared to the same periods in 2025 due to a higher estimate for 2026, reflective of the Bank's capital level.
Previous wording
Other operating expenses increased by $541 thousand, or 35%, and $1.1 million, or 39%, during the three and six months ended June 30, 2026, respectively, compared to the three and six months ended June 30, 2025. The increases largely reflect higher expenses related to volume based costs, loan collection, and other loan costs as well as higher charitable contributions primarily driven by the Bank's matching of donations from a very successful "Give with BOC" campaign. Partially offsetting this was a decline in fraudulent transaction activity costs in 2026 compared to 2025.
Current wording
Other operating expenses increased during the nine months ended September 30, 2026 compared to the same period in 2025. The increase largely reflects higher expenses related to volume based costs, loan collection, and other loan costs as well as higher charitable contributions primarily driven by the Bank's matching of donations from a very successful "Give with BOC" campaign. Partially offsetting this was a decline in fraudulent transaction activity costs in 2026 compared to 2025.
Previous wording
The efficiency ratio of the Company was 70.29% and 64.91% for the three months ended June 30, 2026 and 2025, respectively and 69.16% and 68.23% for the six months ended June 30, 2026 and 2025. The decline in the efficiency ratio during the 2026 periods reflects increases in noninterest expenses, partially offset by increases in net interest income. The efficiency ratio is not a measurement under GAAP. It is calculated by dividing noninterest expense by the sum of tax equivalent net interest income and noninterest income. The Company adjusts for non-recurring items such as gains and losses on the investment portfolio and other gains/losses from OREO, repossessed or other assets, disposals of bank premises and equipment, etc. The tax rate utilized is 21%. The Company calculates and reviews this ratio as a means of evaluating operational efficiency.
Current wording
The efficiency ratio of the Company was 68.76% and 64.06% for the three months ended September 30, 2026 and 2025, respectively and 69.02% and 66.68% for the nine months ended September 30, 2026 and 2025. The deterioration in the efficiency ratio during the 2026 periods reflects increases in noninterest expenses, partially offset by increases in net interest income. The efficiency ratio is not a measurement under GAAP. It is calculated by dividing noninterest expense by the sum of tax equivalent net interest income and noninterest income. The Company adjusts for non-recurring or non-operating items such as gains and losses on the investment portfolio and other gains/losses from OREO, repossessed or other assets, merger-related expenses, disposals of bank premises and equipment, etc. The tax rate utilized is 21%. The Company calculates and reviews this ratio as a means of evaluating operational efficiency.
Previous wording
The calculation of the efficiency ratio for the three and six months ended June 30, 2026 and 2025 was as follows:
Current wording
The calculation of the efficiency ratio for the three and nine months ended September 30, 2026 and 2025 was as follows:
Previous wording
The following table presents the Company's income tax provision (benefit) and effective tax rate for the periods indicated:
Current wording
The following table presents the Company's income tax provision and effective tax rate for the periods indicated:
Previous wording
Income tax expense for the three months ended June 30, 2026 was comprised of federal and state income taxes of $1.5 million and $65 thousand, respectively. For the three months ended June 30, 2025, the Company recognized income tax expense of $1.3 million, comprised of federal and state income taxes of $1.2 million and $56 thousand, respectively.
Current wording
Income tax expense for the three months ended September 30, 2026 was comprised of federal and state income taxes of $850 thousand and $148 thousand, respectively. For the three months ended September 30, 2025, the Company recognized income tax expense of $1.3 million, comprised of federal and state income taxes of $1.3 million and $27 thousand, respectively.
Previous wording
For the six months ended June 30, 2026, income tax expense was comprised of federal and state income taxes of $2.4 million and $109 thousand, respectively. For the six months ended June 30, 2025, the Company recognized a net income tax benefit of $846 thousand, which represented a federal income tax benefit partially offset by state income taxes of $58 thousand.
Current wording
For the nine months ended September 30, 2026, income tax expense was comprised of federal and state income taxes of $3.2 million and $260 thousand, respectively. For the nine months ended September 30, 2025, the Company recognized federal and state income taxes of $452 thousand and $84 thousand, respectively.
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