EAGLE FINANCIAL SERVICES INC
For the period ended Sep 30, 2025. Filed Nov 13, 2025.
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, 2025 · Filed Nov 13, 2025
EFSI$45.71+0.8%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-06-30; filed 2025-08-13.
0000950170-25-107957
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-09-30; filed 2025-11-13.
0001193125-25-279991
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 161 previous paragraphs and 170 current paragraphs.
64 unchanged; 50 reworded; 49 added; 45 removed; 2 previous and 7 current paragraphs rearranged.
Tables are not compared: 10 previous and 20 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 (49)
Current report
CRITICAL ACCOUNTING ESTIMATES
Current report
The financial statements of the Company are prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"), which requires us to make estimates and assumptions. Actual results could differ from those estimates. The accounting estimate with the greatest uncertainty and susceptibility to significant near-term change for the Company is the allowance for credit losses on loans.
Current report
The realized loss on the sale of the available for sale securities, which resulted from the balance sheet repositioning transactions during the first quarter of 2025, significantly impacted the Company's operating results and certain performance metrics and ratios. The following table reconciles the GAAP reported measure to the adjusted non-GAAP measure to show the impact of the loss on sales of securities during the three and nine months ended September 30, 2025.
Current report
For additional information and calculations of tax-equivalent net interest income and efficiency ratio, see the sections entitled "Tax-Equivalent Net Interest Income" and "Efficiency Ratio" below.
Current report
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 report
Some of the factors that might cause these differences include the following:
Current report
the Company's ability to successfully resolve non-performing assets;
Current report
political developments, including government shutdowns, and other significant disruptions and changes in the funding, size, scope, and efficiencies of the federal government, its agencies and services;
Current report
You should carefully review all of these factors and you should be aware that there may be other factors that cause these differences. These forward looking statements were based on information, plans, and estimates at the date of this report, and we assume no obligation to update any forward looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes.
Current report
Summary
Current report
The following table presents a summarized consolidated statement of income and performance metrics and ratios for the periods indicated:
Current report
The Company's net income increased $2.2 million, or 63.1%, during the three months ended September 30, 2025, compared to the three months ended September 30, 2024 and decreased $5.3 million, or 57.6%, during the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024. During the nine months ended September 30, 2025, net income was significantly impacted by a recognized loss on the sale of available for sale securities totaling $9.8 million, net of tax, while both the three and nine month periods in 2025 experienced a strong increase in net interest income over the corresponding 2024 periods.
Current report
Average Balances, Income and Expenses, Yields and Rates (Tax-Equivalent Basis)
Current report
Refer to section entitled "Tax-Equivalent Net Interest Income" for the reconciliation of tax-equivalent net interest income.
Current report
Refer to section entitled "Tax-Equivalent Net Interest Income" for the reconciliation of tax-equivalent net interest income.
Current report
Tax-Equivalent Net Interest Income
Current report
The year-over-year improvements in net interest income, tax-equivalent net interest income, net interest spread, and net interest margin primarily reflect the impact of the balance sheet repositioning strategy, pursuant to which the Company raised capital, increased cash on hand and replaced lower-yielding investment securities with higher yielding securities. Declining average rates paid on interest-bearing deposits and maturities of FHLB advances also contributed to the increase in net interest income, which was partially offset by higher average balances of time deposits during the 2025 periods.
Current report
Net interest income, on a tax-equivalent basis, was $17.2 million and $13.2 million for the three months ended September 30, 2025 and 2024, respectively, an increase of $4.0 million, or 30.6%. For the nine months ended September 30, 2025 and 2024, net interest income, on a tax-equivalent basis, was $46.3 million and $37.8 million, respectively, which represents an increase of $8.5 million, or 22.5%.
Current report
Total average balance of securities decreased by $12.8 million and $20.2 million for the three and nine months ended September 30, 2025, respectively, from the average balances in the prior year periods primarily due to routine paydowns and maturities in the portfolio. The average yield on securities increased 177 basis points and 129 basis points during the three and nine months ended September 30, 2025, respectively, compared to the three and nine months ended September 30, 2024 reflecting the sale of lower-yielding securities and reinvestment into higher-yielding securities in the first quarter of 2025.
Current report
The total average loan balances for the three and nine months ended September 30, 2025 decreased $26.3 million and $4.9 million, respectively, from the same periods in 2024 largely reflecting the sale of a pool of mortgage loans totaling $18.8 million early in the first quarter of 2025 ahead of the Company's public offering and continuing paydowns and payoffs in the marine loan portfolio as the Company is no longer accepting new marine business. These decreases were partially offset by new loan growth in the commercial real estate loan portfolios.
Current report
Total average interest-bearing deposit balances for three and nine months ended September 30, 2025 increased $55.8 million $107.1 million, respectively, from the same periods in 2024. These increases were primarily in NOW accounts and time deposits. The average rate paid on interest-bearing deposits has decreased 33 basis points and 12 basis points during the three and nine months ended September 30, 2025, respectively, compared to the three and nine months ended September 30, 2024 reflecting lower short-term market interest rates.
Current report
The average balance of FHLB advances decreased $108.8 million and $83.1 million during the three and nine months ended September 30, 2025, respectively, compared to the three and nine months ended September 30, 2024 due to maturing advances that were not replaced with new borrowings.
Current report
Volume and Rate Analysis (Tax-Equivalent Basis)
Current report
Interest income and expense are affected by fluctuation in interest rates, by changes in the volume of earning assets and interest-bearing liabilities, and by the interaction of rate and volume factors. Changes attributable to both volume and rate have been allocated proportionately based on the relationship of the absolute dollar amount of change in each. The following table provides information about changes in rate and volume (dollars in thousands):
Current report
The provision for credit losses results from management's review of the adequacy of the allowance for credit losses. The allowance for credit losses is management’s estimate, at the reporting date, of expected lifetime credit losses and includes consideration of current forecasted economic conditions. Estimating the amount required to maintain an adequate allowance for credit losses involves a high degree of judgment.
Current report
The following table presents the provision for credit losses:
Current report
The provision for credit losses for the three and nine months ended September 30, 2025 and 2024 included the impact of net losses and specific reserve allocations on individually evaluated nonaccrual loans and reflected management's estimate of forecasted economic conditions and changes in loan balances.
Current report
During the three months ended September 30, 2025 and 2024, net charge-offs totaled $2.3 million and $1.2 million, respectively, and $3.4 million and $1.5 million during the nine months ended September 30, 2025 and 2024.
Current report
Specific reserve allocations totaled $333 thousand at September 30, 2025 reflecting three commercial loan relationships and totaled $268 thousand at September 30, 2024, allocated to one commercial loan relationship.
Current report
The increase in service charges on deposit accounts during 2025 reflects growth in the number of accounts as well as higher levels of overdraft charges.
Current report
Gain on loan sales during the three months ended September 30, 2025 and 2024 reflected sales of $21.6 million and $14.9 million of mortgage loans, respectively, and $6.4 million and $4.2 million of SBA commercial loans, respectively.
Current report
Bank owned life insurance income ("BOLI") decreased during three and nine months ended September 30, 2025 due to BOLI settlements received during the prior year periods.
Current report
Other operating income increased for the three and nine months ended September 30, 2025 due to loan swap fee income recognized on agreements with initial notional balances totaling $15.7 million, which resulted in a gain of $179 thousand. There was no loan swap fee income generated during the three and nine months ended September 30, 2024.
Current report
Data processing fees decreased reflecting core provider pricing discounts recognized during 2025.
Current report
Efficiency Ratio
Current report
The following table presents the Company's income tax provision and applicable tax rates for the periods indicated:
Current report
Provision for credit losses increased reflecting charge-off activity partially offset by declining loan balances during the three months ended September 30, 2025 compared to the three months ended September 30, 2024.
Current report
The carrying amounts of the Company's available for sale securities are as follows:
Current report
Total securities available for sale increased $49 thousand, or 0.04% during 2025. The Company purchased $102.2 million of securities during the nine months ended September 30, 2025, which includes $66.0 million as part of the balance sheet repositioning transactions in the first quarter of 2025. The Company had total maturities, calls, and principal repayments of $19.8 million and sales of $99.2 million during the nine months ended September 30, 2025.
Current report
Residential real estate loans decreased primarily due to the portfolio loan sale in early 2025.
Showing the first 40 of 49 passages. Open the source sections for the rest.
Removed paragraphs (45)
Previous report
MANAGEMENT’S STRATEGY
Previous report
OPERATING STRATEGY
Previous report
The Bank is a locally managed financial institution as well as predominately locally owned. While the Company expanded its ownership to institutional investors though a public offering of its common stock in February 2025, its operating strategy remains the same. This operating strategy allows the Bank to be flexible and responsive in the products and services it offers and to further grow by lending funds to local residents and businesses at a competitive price that reflects the inherent risk of lending. The Bank strives to fund these loans through deposits gathered from local residents and businesses. The Bank prices its deposits by comparing alternative sources of funds and selecting the lowest cost available. When deposits are not adequate to fund asset growth, the Bank relies on borrowings, both short and long term. The Bank’s primary source of borrowed funds is the Federal Home Loan Bank of Atlanta which offers numerous terms and rate structures to the Bank.
Previous report
As interest rates change, the Bank attempts to maintain its net interest margin by changing the price, terms, and mix of its financial assets and liabilities. The Bank also earns fees on services provided through its trust department, secondary market mortgage activities, BOLI, and deposit operations. The Bank also incurs noninterest expenses such as compensating employees, maintaining and acquiring fixed assets, and purchasing goods and services necessary to support its daily operations.
Previous report
The Bank has a marketing department which seeks to develop new business. This is accomplished through an ongoing calling program whereby account officers visit with existing and potential customers to discuss the products and services offered. The Bank utilizes traditional advertising such as television commercials, radio ads, newspaper ads, and billboards as well as electronic materials, emails, and social media posts.
Previous report
LENDING POLICIES
Previous report
Administration and supervision over the lending process is provided by the Bank’s Credit Administration Department. The principal risk associated with the Bank’s loan portfolio is the creditworthiness of its borrowers. In an effort to manage this risk, the Bank’s policy gives loan amount approval limits to individual loan officers based on their position and level of experience. Credit risk is increased or decreased, depending on the type of loan and prevailing economic conditions. In consideration of the different types of loans in the portfolio, the risk associated with real estate mortgage loans, commercial loans and consumer loans varies based on employment levels, consumer confidence, fluctuations in the value of real estate and other conditions that affect the ability of borrowers to repay debt.
Previous report
The Company has written policies and procedures to help manage credit risk. The Company utilizes a loan review process that includes formulation of portfolio management strategy, guidelines for underwriting standards and risk assessment, procedures for ongoing identification and management of credit deterioration, and regular portfolio reviews to establish loss exposure and to ascertain compliance with the Company’s policies.
Previous report
The Bank uses a tiered approach to approve credit requests consisting of individual lending authorities, joint approval of Co-Approval officers (Executive, Regional Credit Officer, Small Business Credit Officer), and a director loan committee. Lending limits for individuals are set by the Board of Directors and are determined by loan purpose, collateral type, and internal risk rating of the borrower. The highest individual authority (Executive) is assigned to the Bank’s President/ Chief Executive Officer, Chief Banking Officer and Chief Credit Officer (approval authority only). Two Executive officers may combine their authority to approve loan requests to borrowers with credit exposure up to $10.0 million on a secured basis and $6.0 million unsecured. Three Executive officers may combine to approve loan requests to borrowers with credit exposure up to $15.0 million on a secured basis and $9.0 million unsecured. Consumer Central Lenders are individual lenders who have been assigned to an Approval Category (A through F) based upon their level of experience and job function. Consumer Central Lenders can co-approve consumer, home equity lines of credit and home equity loan requests up to their stated authorities. Officers in Categories A through F have lesser authorities and with approval of an Executive officer may extend loans to borrowers with exposure of $5.0 million on a secured basis and $3.0 million unsecured. Officers in Categories A through F can also utilize the co-approval of the Regional and Small Business Credit Officers to extend loans with exposures up to $2.5 million and $1.5 million respectively on a secured basis, and up to $1 million and $750 thousand respectively on an unsecured basis. Loans exceeding $15.0 million and up to the Bank’s legal lending limit can be approved by the Risk Committee consisting of four directors (three directors constituting a quorum). The Director’s Loan Committee also reviews and approves changes to the Bank’s Loan Policy as presented by management.
Previous report
The following sections discuss the major loan categories within the total loan portfolio:
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One-to-Four-Family Residential Real Estate Lending
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Residential lending activity may be generated by the Bank’s loan officer solicitations, referrals by real estate professionals, and existing or new bank customers. Loan applications are taken by a Bank loan officer. As part of the application process, information is gathered concerning income, employment and credit history of the applicant. The valuation of residential collateral is provided by independent fee appraisers who have been approved by the Bank’s Directors Loan Committee. In connection with residential real estate loans, the Bank requires title insurance, hazard insurance and, if applicable, flood insurance. In addition to traditional residential mortgage loans secured by a first or junior lien on the property, the Bank offers home equity lines of credit.
Previous report
Commercial Real Estate Lending
Previous report
Commercial real estate loans are secured by various types of commercial real estate in the Bank’s market area, including multi-family residential buildings, commercial buildings and offices, small shopping centers and churches. Commercial real estate loan originations are obtained through broker referrals, direct solicitation of developers and continued business from customers. In its underwriting of commercial real estate, the Bank’s loan to original appraised value ratio is generally 80% or less. Commercial real estate lending entails significant additional risk as compared with residential mortgage lending. Commercial real estate loans typically involve larger loan balances concentrated with single borrowers or groups of related borrowers. Additionally, the repayment of loans secured by income producing properties is typically dependent on the successful operation of a business or a real estate project and thus may be subject, to a greater extent, to adverse conditions in the real estate market or the economy, in general. The Bank’s commercial real estate loan underwriting criteria require an examination of debt service coverage ratios, the borrower’s creditworthiness, prior credit history and reputation, and the Bank typically requires personal guarantees or endorsements of the borrowers’ principal owners.
Previous report
Construction and Land Development Lending
Previous report
The Bank makes local construction loans, primarily residential, and land acquisition and development loans. The construction loans are secured by residential houses under construction and the underlying land for which the loan was obtained. The average life of most construction loans is less than one year and the Bank offers both fixed and variable rate interest structures. The interest rate structure offered to customers depends on the total amount of these loans outstanding and the impact of the interest rate structure on the Bank’s overall interest rate risk. There are two characteristics of construction lending which impact its overall risk as compared to residential mortgage lending. First, there is more concentration risk due to the extension of a large loan balance through several lines of credit to a single developer or contractor. Second, there is more collateral risk due to the fact that loan funds are provided to the borrower based upon the estimated value of the collateral after completion. This could cause an inaccurate estimate of the amount needed to complete construction or an excessive loan-to-value ratio. To mitigate the risks associated with construction lending, the Bank generally limits loan amounts to 80% of the estimated appraised value of the finished construction project. The Bank also obtains a first lien on the property as security for its construction loans and typically requires personal guarantees from the borrower’s principal owners. Finally, the Bank performs inspections of the construction projects to ensure that the percentage of construction completed correlates with the amount of draws on the construction line of credit.
Previous report
Commercial and Industrial Lending
Previous report
Commercial business loans generally have more risk than residential mortgage loans, but have higher yields. To manage these risks, the Bank generally obtains appropriate collateral and personal guarantees from the borrower’s principal owners and monitors the financial condition of its business borrowers. Residential mortgage loans generally are made on the basis of the borrower’s ability to make repayment from employment and other income and are secured by real estate whose value tends to be readily ascertainable. In contrast, commercial business loans typically are made on the basis of the borrower’s ability to make repayment from cash flow from its business and are secured by business assets, such as commercial real estate, accounts receivable, equipment and inventory. As a result, the availability of funds for the repayment of commercial business loans is substantially dependent on the success of the business itself. Furthermore, the collateral for commercial business loans may depreciate over time and generally cannot be appraised with as much precision as residential real estate.
Previous report
Consumer Lending
Previous report
The Bank offers various secured and unsecured consumer loans, which include personal installment loans, personal lines of credit, automobile loans, and credit card loans. The Bank originates its consumer loans within its geographic market area and these loans are generally made to customers with whom the Bank has an existing relationship. Consumer loans generally entail greater risk than residential mortgage loans, particularly in the case of consumer loans which are unsecured or secured by rapidly depreciable assets such as automobiles. In such cases, any repossessed collateral on a defaulted consumer loan may not provide an adequate source of repayment of the outstanding loan balance as a result of the greater likelihood of damage, loss or depreciation. Consumer loan collections are dependent on the borrower’s continuing financial stability, and thus are more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy. Furthermore, the application of various federal and state laws, including federal and state bankruptcy and insolvency laws, may limit the amount which can be recovered on such loans.
Previous report
The underwriting standards employed by the Bank for consumer loans include a determination of the applicant’s payment history on other debts and an assessment of ability to meet existing obligations and payments on the proposed loan. The stability of the applicant’s monthly income may be determined by verification of gross monthly income from primary employment, and from any verifiable secondary income. Although creditworthiness of the applicant is the primary consideration, the underwriting process also includes an analysis of the value of the security in relation to the proposed loan amount.
Previous report
Marine Lending
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The Bank’s marine loan portfolio is comprised of retail marine vessel loans originated through August 2023, at which time the Company ceased accepting new marine lending business. At present, the Company expects to hold the retained outstanding loans until they are ultimately repaid. Retail loans were generally limited to premium manufacturers with established relationships with the Company which have a vested interest in the secondary market pricing of their respective brand due to the limited inventory available for resale. Consequently, while not contractually committed, manufacturers will often support secondary resale values which can have the effect of reducing losses from non-performing retail marine loans. Retail borrowers generally have very high credit scores, substantial down payments, substantial net worth, personal liquidity, and excess cash flow.
Previous report
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Previous report
The financial statements of the Company are prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The financial information contained within these statements is, to a significant extent, based on measurements of the financial effects of transactions and events that have already occurred. A variety of factors could affect the ultimate value that is obtained when earning income, recognizing an expense, recovering an asset or relieving a liability. In addition, GAAP itself may change from one previously acceptable method to another method. Although the economics of the transactions would be the same, the timing of events that would impact the transactions could change.
Previous report
The Company makes forward looking statements in this report that are subject to risks and uncertainties. These forward looking statements include statements regarding our expectations, intentions or objectives concerning our profitability, liquidity, allowance for loan losses, interest rate sensitivity, market risk, growth strategy, and financial and other goals. The words “believes,” “expects,” “may,” “will,” “should,” "could," “projects,” “contemplates,” “anticipates,” “forecasts,” “intends,” or other similar words or terms are intended to identify forward looking statements. These forward looking statements are subject to significant uncertainties because they are based upon or are affected by factors including:
Previous report
Because of these uncertainties, actual future results may be materially different from the results indicated by these forward looking statements. In addition, past results of operations do not necessarily indicate future results.
Previous report
Net Income (Loss)
Previous report
Net income for the three months ended June 30, 2025, was $5.3 million compared to $3.2 million for the three months ended June 30, 2024 and, for the six months ended June 30, 2025 and 2024, net (loss) income was ($1.7 million) and $5.7 million, respectively. Earnings (loss) per share, basic and diluted, were $0.98 and $0.89 for the three months ended June 30, 2025 and 2024, respectively, and $(0.34) and $1.61 for the six months ended June 30, 2025 and 2024, respectively.
Previous report
The Company's operating results for the six months ended June 30, 2025 were significantly impacted by the recognized loss on the sale of available for sale securities as part of its balance sheet repositioning strategy completed in the first quarter of 2025. The sale resulted in a net of tax loss of $9.8 million, or $(1.97) per share, and reduced ROA and ROE, on an annualized basis, by 1.03% and 12.62%, respectively, for the six months ended June 30, 2025. The balance sheet repositioning resulted in an increase in interest and dividend income earned on the available for sale investment securities portfolio for three and six months ended June 30, 2025 of $362 thousand and $291 thousand, respectively, compared to the same periods in 2024.
Previous report
Total interest and dividend income was $48.3 million and $43.7 million for the six months ended June 30, 2025 and 2024, respectively, which represents an increase of $4.6 million, or 10.71%. Total interest and dividend income for the three months ended June 30, 2025 and 2024 was $24.8 million and $21.7 million, respectively, which represents an increase of $3.1 million, or 14.15%. The increases in interest income during the 2025 periods were driven by increases in the average balance of the interest-earning assets, specifically federal funds sold and deposits in other banks, and increases in the average yield on securities driven by the newly restructured securities portfolio, mostly offset by a decline in the yield earned on federal funds sold and deposits in other banks. Average interest-earning assets increased $157.4 million, or 9.41%, during the six months ended June 30, 2025 compared to the six months ended June 30, 2024, while the average yield on earning assets increased by eight basis points over the same period, primarily reflecting a 104 basis point increase attributable to the securities portfolio offset by an 88 basis point decrease attributable to federal funds sold and interest-bearing deposits in other banks. For the three months ended June 30, 2025 the average balance of earning assets increased $166.7 million and the average yield increased 19 basis points compared to the three months ended June 30, 2024. The 19 basis point increase was largely comprised of a 175 basis point increase in the securities portfolio average yield and an 88 basis point decrease in the average yield on federal funds sold and interest-bearing deposits in other banks.
Previous report
Total interest expense was $19.3 million and $19.1 million for the six months ended June 30, 2025 and 2024, respectively, which represents an increase of $213 thousand, or 1.12%. Total interest expense was $9.1 million and $9.6 million for the three months ended June 30, 2025 and 2024, respectively, which represents a decrease of $465 thousand, or 4.85%. Balance growth in higher paying deposit accounts partially offset by lower rates paid on these deposits and balance declines in FHLB advances were the main drivers for the change in interest expense during the six months ended June 30, 2025 compared to the same period in 2024. The $213 thousand increase in interest expense during the six months ended June 30, 2025 is comprised of a $1.8 million, or 12.24%, increase attributable primarily to time deposit accounts and a $1.6 million, or 47.19%, decrease attributable to FHLB advances. Time deposits contributed $1.6 million of the $1.8 million increase in deposit interest expense due to average balance increases of $39.1 million and $57.0 million on time deposits of $250,000 or more and time deposits of less than $250,000, respectively, and declines in the average rate paid of 27 basis points and 19 basis points, respectively. During the six months ended June 30, 2025 and 2024 the average balance of total interest-bearing deposits was $1.19 billion and $1.05 billion, respectively, and the average rate paid was 2.85% for both the six months ended June 30, 2025 and 2024. Competition for and rates paid on deposit accounts continues to be strong. The $1.6 million decrease in interest expense on FHLB advances was due to advance maturities during the six months ended June 30, 2025 reducing the average balance by $70.0 million compared to the 2024 prior year period. These matured advances were not replaced as the Company has reduced its reliance on wholesale borrowings since completing its capital raise during the first quarter of 2025.
Previous report
The decrease in interest expense during the three months ended June 30, 2025 compared to the three months ended June 30, 2024 of $465 thousand is comprised of a $748 thousand, or 9.95%, increase attributable to deposit accounts and a decrease of $1.2 million, or 70.85%, attributable to FHLB advances. Higher-paying time deposits contributed $599 thousand of the increase in deposit interest expense reflecting an $89.8 million increase in average balance of time deposits, net of declines in the average rate paid of 39 basis points on time deposits of $250,000 or more and 35 basis points on time deposits of less than $250,000. The average rate paid on total interest-bearing deposits for the three months ended June 30, 2025 was 2.78% compared to 2.88% for the three months ended June 30, 2024. The decrease in interest expense on FHLB advances during the three months ended June 30, 2025 reflects lower borrowing levels as advances have not been replaced upon their maturity. The average balance of FHLB advances was $40.8 million and $145.1 million with an average rate of 4.90% and 4.74% during the three months ended June 30, 2025 and 2024, respectively.
Previous report
Net interest margin has improved during the three and six months ended June 30, 2025 primarily due to the repositioning of the securities portfolio during the first quarter of 2025, retention of maturing time deposits at lower rates, and the reduction in FHLB advances. Ongoing margin pressures include deposit pricing, the Bank's continued strategy of originating mortgage loans for sale, and an increase in nonaccrual loans during the six months ended June 30, 2025.
Previous report
The tax-equivalent yield on earning assets was 5.33% for the six months ended June 30, 2025 compared to 5.25% for the six months ended June 30, 2024, an increase of eight basis points during the current year period. The tax-equivalent yield on securities increased 104 basis points for the six months ended June 30, 2025, compared to the six months ended June 30, 2024. The tax equivalent yield on loans increased 12 basis points from 5.50% for the six months ended June 30, 2024 to 5.62% for the same time period in 2025. For the three months ended June 30, 2025 and 2024, the tax-equivalent yield on earning assets was 5.41% and 5.22%, respectively, an increase of 19 basis points in the current year period. The tax-equivalent yields on securities and loans also increased during the three month period in 2025 compared to 2024 by 175 basis points and 21 basis points, respectively.
Previous report
The average rate on interest-bearing liabilities decreased 11 basis points to 3.01% from 3.12% for the six months ended June 30, 2025 compared to the corresponding 2024 period and decreased 24 basis points to 2.90% for the three months ended June 30, 2025 compared to 3.14% for the three months ended June 30, 2024. The average rate on interest-bearing deposits remained the same at 2.85% for the six months ended June 30, 2025 and 2024 and decreased ten basis points to 2.78% during the three months ended June 30, 2025 compared to 2.88% during the three months ended June 30, 2024, reflecting declining rates on higher paying time deposits. The average rate on FHLB advances increased 16 basis points from 4.74% and increased 10 basis points from 4.73% for the three and six months ended June 30, 2024, respectively, to 4.90% and 4.83% for the three and six months ended June 30, 2025. The increases in the average rate on FHLB advances were due to the maturity of lower cost advances during the first and early-second quarter of 2025, compared to the remaining outstanding advance of $40.0 million at June 30, 2025 with a rate of 4.83%. The Company's reliance on wholesale borrowings has lessened since completing its capital raise in February 2025 and therefore, maturing advances were not replaced with new advances.
Previous report
The provision for credit losses for the six months ended June 30, 2025 and 2024 was $1.9 million and $656 thousand, respectively. The provision for credit losses for the three months ended June 30, 2025 and 2024 was $668 thousand and $181 thousand, respectively. The provision for credit losses for the six months ended June 30, 2025 resulted largely from a $3.1 million provision against the commercial real estate portfolio due to charge-offs of $971 thousand and specific reserves of $1.1 million, reflecting one individually evaluated relationship of four loans totaling $11.5 million. Additional specific reserves of $381 thousand represent five commercial and industrial loan relationships with loan balances totaling $1.2 million. Partially offsetting these increases were recoveries and decreases in loan balances.
Previous report
Other service charges and fees decreased primarily due to a higher level of collection fees experienced during the three and six months ended June 30, 2024 compared to three and six months ended June 30, 2025.
Previous report
Other operating income decreased for the three and six months ended June 30, 2025 due to the receipt of a BOLI settlement, which resulted in a gain of $254 thousand during the three and six months ended June 30, 2024.
Previous report
Advertising and marketing expenses decreased during the three and six months ended June 30, 2025 compared to the same periods in 2024, reflecting fewer advertising campaigns and a marketing bonus credit related to the Bank's credit card provider relationship.
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Previous wording
The purpose of this discussion is to focus on important factors affecting the Company’s financial condition, results of operations, liquidity and capital resources. This discussion should be read in conjunction with the Company’s Consolidated Financial Statements and the Notes to the Consolidated Financial Statements presented in Part I, Item 1, Financial Statements, of this Form 10-Q and Part II, Item 8, Financial Statements and Supplementary Data, of the 2024 Form 10-K.
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 Annual Report on Form 10-K for the year ended December 31, 2024, 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, 2025 are not necessarily indicative of the results for the full-year ending December 31, 2025 or any future period.
Previous wording
Eagle Financial Services, Inc. is a bank holding company which owns 100% of the stock of Bank of Clarke (the “Bank” and, collectively with Eagle Financial Services, Inc., the “Company”, “we”, “us” or “our”). Accordingly, the results of operations for the Company are dependent upon the operations of the Bank. The Bank conducts a commercial banking business which consists of attracting deposits from the general public and investing those funds in commercial, consumer and real estate loans and municipal and U.S. government agency securities. The Bank’s deposits are insured by the Federal Deposit Insurance Corporation to the maximum extent permitted by law. At June 30, 2025, the Company had total assets of $2.04 billion, net loans of $1.42 billion, total deposits of $1.77 billion, and shareholders’ equity of $179.6 million. The Company’s net loss was $1.7 million for the six months ended June 30, 2025.
Current wording
Eagle Financial Services, Inc. is a bank holding company which owns 100% of the stock of Bank of Clarke (the “Bank” and, collectively with Eagle Financial Services, Inc., the “Company”, “we”, “us” or “our”). Accordingly, the results of operations for the Company are dependent upon the operations of the Bank.
Previous wording
The Company strives to be an outstanding financial institution in its market by building solid sustainable relationships with: (1) its customers, by providing highly personalized customer service, a network of conveniently placed branches and ATMs, a competitive variety of products/services and courteous, professional employees, (2) its employees, by providing generous benefits, a positive work environment, advancement opportunities and incentives to exceed expectations, (3) its communities, by participating in local concerns, providing monetary support, supporting employee volunteerism and providing employment opportunities, and (4) its shareholders, by providing sound profits and returns, sustainable growth, regular dividends and committing to its local, independent status.
Current wording
The Company strives to be an outstanding financial institution in its market by building solid sustainable relationships with its customers, employees, communities, and shareholders.
Previous wording
During the first quarter of 2025 the Company executed a balance sheet repositioning of its investment securities portfolio, selling available for sale securities with an amortized cost balance of $99.2 million resulting in a net realized pre-tax loss of $12.4 million and reinvesting $66.0 million into purchases of available for sale securities. Additionally, the Company completed an underwritten public offering of 1,796,875 shares of its common stock at a public offering price of $32.00 per share. Net proceeds from the offering were $53.5 million. These transactions are further described below.
Current wording
During the first quarter of 2025 the Company executed a balance sheet repositioning of its investment securities portfolio, selling available for sale securities with an amortized cost balance of $99.2 million resulting in a net realized pre-tax loss of $12.4 million and reinvesting $66.0 million into purchases of available for sale securities. Additionally, the Company completed an underwritten public offering of 1,796,875 shares of its common stock at a public offering price of $32.00 per share. Net proceeds from the offering were $53.5 million.
Previous wording
The provision for credit losses is based upon management’s estimate of the amount required to maintain an adequate allowance for credit losses. The Company's calculation of the provision for credit losses consists of changes in the allowance for credit losses on loans and the reserve for unfunded loan commitments. The allowance for credit losses on loans represents management’s current estimate of expected credit losses over the contractual term of loans held for investment, and is recorded at an amount that, in management’s judgment, reduces the recorded investment in loans to the net amount expected to be collected. Management’s judgment in determining the level of the allowance is based on evaluations of historical loan losses, current conditions and reasonable and supportable forecasts relevant to the collectability of loans. This evaluation is inherently subjective because it requires estimates that are susceptible to significant revision as more information becomes available. The amount of provision for credit losses on loans is affected by several factors including the growth rate of loans, net charge-offs (recoveries), and the estimated amount of expected losses within the loan portfolio.
Current wording
The Company establishes the allowance for credit losses through charges to earnings in the form of a provision for credit losses. Loan losses are charged against the allowance for credit losses for the difference between the carrying value of the loan and the estimated net realizable value or fair value of the collateral, if collateral dependent, when management believes that the collectability of the principal is unlikely. Subsequent recoveries, if any, are credited to the allowance. The allowance represents management’s current estimate of expected credit losses over the contractual term of loans held for investment, and is recorded at an amount that, in management’s judgment, reduces the recorded investment in loans to the net amount expected to be collected. Management’s judgment in determining the level of the allowance is based on evaluations of historical loan losses, current conditions and reasonable and supportable forecasts relevant to the collectability of loans.
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 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, 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
Return on average equity ("ROE") measures the utilization of shareholders’ equity in generating net income. This measurement is affected by the same factors as ROA with consideration to how much of the Company’s assets are funded by shareholders. The ROE of the Company, on an annualized basis, for the three months ended June 30, 2025 and 2024 was 11.93% and 11.89%, respectively, and for the six months ended June 30, 2025 and 2024 was (2.19)% and 10.71%, respectively.
Current wording
Return on average equity ("ROE") measures the utilization of shareholders’ equity in generating net income. This measurement is affected by the same factors as ROA with consideration to how much of the Company’s assets are funded by shareholders.
Previous wording
Return on average assets ("ROA") measures how efficiently the Company uses its assets to produce net income. Factors reflected within this efficiency include the Company’s asset mix, funding sources, pricing, fee generation, and cost control. The ROA of the Company, on an annualized basis, for the three months ended June 30, 2025 and 2024 was 1.09% and 0.72%, respectively. For the six months ended June 30, 2025 and 2024 annualized ROA was (0.18)% and 0.65%, respectively.
Current wording
Return on average assets ("ROA") measures how efficiently the Company uses its assets to produce net income. Factors reflected within this efficiency include the Company’s asset mix, funding sources, pricing, fee generation, and cost control.
Previous wording
The following table shows interest income on earning assets and related average yields as well as interest expense on interest-bearing liabilities and related average rates paid for the three months ended June 30, 2025 and 2024 (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 three months ended September 30, 2025 and 2024 (dollars in thousands):
Previous wording
The following table shows interest income on earning assets and related average yields as well as interest expense on interest-bearing liabilities and related average rates paid for the six months ended June 30, 2025 and 2024 (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, 2025 and 2024 (dollars in thousands):
Previous wording
The net interest margin was 3.20% and 2.96% for the six months ended June 30, 2025 and 2024, respectively, and 3.42% and 2.92% for the three months ended June 30, 2025 and 2024, respectively. The net interest margin is calculated on a tax-equivalent basis. Tax-equivalent net interest income (Non-GAAP) is calculated by adding the tax benefit on certain securities and loans, whose interest is tax-exempt, to total interest income then subtracting total interest expense. The tax rate used to calculate the tax benefit was 21% for 2025 and 2024.
Current wording
The following table reconciles tax-equivalent net interest income, which is not a measurement under GAAP, to net interest income. Tax-equivalent net interest income (Non-GAAP) is calculated by adding the tax benefit on certain securities and loans, whose interest is tax-exempt, to total interest income then subtracting total interest expense. The tax rate used to calculate the tax benefit was 21% for 2025 and 2024.
Previous wording
Net interest income is our primary source of revenue, representing the difference between interest and fees earned on interest-earning assets and the interest paid on deposits and other interest-bearing liabilities. The level of net interest income is impacted primarily by variations in the volume and mix of these assets and liabilities, as well as changes in interest rates. Net interest income was $15.7 million and $12.2 million for the three months ended June 30, 2025 and 2024, respectively, an increase of $3.5 million, or 29.1%. Net interest income was $29.0 million and $24.6 million for the six months ended June 30, 2025 and 2024, respectively, which represents an increase of $4.4 million, or 18.2%. The year-over-year increases for both periods primarily reflects the impact of the balance sheet repositioning strategy, which raised capital and cash on hand and replaced lower-yielding investment securities with higher yielding securities. Declining average rates paid on interest-bearing deposits and maturities of FHLB advances also impacted net interest income.
Current wording
Net interest income is our primary source of revenue, representing the difference between interest and fees earned on interest-earning assets and the interest paid on deposits and other interest-bearing liabilities. The level of net interest income is impacted primarily by variations in the volume and mix of these assets and liabilities, as well as changes in interest rates.
Previous wording
The Company's net interest spread and net interest margin increased 19 basis points and 24 basis points, respectively, for the six months ended June 30, 2025 compared to six months ended June 30, 2024. For the three months ended June 30, 2025, the Company's net interest spread and net interest margin increased 43 basis points and 50 basis points, respectively, compared to the three months ended June 30, 2024.
Current wording
The Company's net interest spread and net interest margin increased 25 basis points and 35 basis points, respectively, for the nine months ended September 30, 2025 compared to nine months ended September 30, 2024. For the three months ended September 30, 2025, the Company's net interest spread and net interest margin increased 39 basis points and 55 basis points, respectively, compared to the three months ended September 30, 2024. Ongoing margin pressures include deposit pricing, the Bank's continued strategy of originating mortgage loans for sale, and an increase in nonaccrual loans during the nine months ended September 30, 2025.
Previous wording
The increase in the tax-equivalent yield on earning assets for the three and six months ended June 30, 2025 reflects the impact of the balance sheet repositioning transactions, which replaced lower-yielding investment securities with higher yielding securities, higher yielding loan originations, and increased average balances of federal funds sold and interest-bearing deposits in other banks, which were bolstered by the impact of the proceeds received from the public offering and increased deposit balances.
Current wording
Total average balance of federal funds sold and interest-bearing deposits in other banks have increased $216.3 million and $189.2 million during the three and nine months ended September 30, 2025, respectively, compared to the three and nine months ended September 30, 2024, which were bolstered by the impact of the proceeds received from the public offering and increased deposit balances.
Previous wording
Total noninterest income (loss) was $4.9 million and $4.3 million for the three months ended June 30, 2025 and 2024, respectively and for the six months ended June 30, 2025 and 2024 was $(3.6) million and $7.8 million, 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, 2025 and 2024, which are included within the respective Consolidated Statements of Operations headings. Variances that the Company believes require explanation are discussed below the table.
Current wording
Total noninterest income was $5.2 million and $5.3 million for the three months ended September 30, 2025 and 2024, respectively, and $1.5 million and $13.0 million, respectively for the nine months ended September 30, 2025 and 2024. 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, 2025 and 2024, which are included within the respective Consolidated Statements of Income headings.
Previous 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 six months ended June 30, 2025. Management utilized the proceeds from the public offering capital raise completed in February 2025 to enable the balance sheet repositioning.
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. Management utilized the proceeds from the public offering capital raise completed in February 2025 to enable the balance sheet repositioning.
Previous wording
Gain on sale of loans increased during the three and six months ended June 30, 2025 when compared to the same period in 2024. The Company sold $50.8 million in mortgage loans on the secondary market, consisting of $32.0 million of loans originated for sale and a pool of $18.8 million residential mortgage loans held for investment, and $9.9 million SBA commercial loans during the six months ended June 30, 2025. This compares to loan sales consisting of $25.5 million in mortgage loans and $2.6 million SBA commercial loans during the six months ended June 30, 2024. Loan sales resulted in gains of $1.5 million and $653 thousand during the six months ended June 30, 2025 and 2024, respectively. Gain on loan sales during the three months ended June 30, 2025 and 2024 was $1.1 million and $492 thousand, respectively, reflecting sales of $17.1 million mortgage loans and $8.4 million SBA commercial loans. The Company intends to continue originating mortgage loans for sale, whereas the mortgage portfolio sale was completed early in the 2025 quarter, at par, and ahead of the Company's public offering in order to bolster on-balance sheet liquidity.
Current wording
Gain on sale of loans increased during the three and nine months ended September 30, 2025 when compared to the same periods in 2024. The Company sold $72.3 million in mortgage loans on the secondary market, consisting of $53.5 million of loans originated for sale and a $18.8 million pool of residential mortgage loans held for investment, and $16.3 million of SBA commercial loans during the nine months ended September 30, 2025. This compares to loan sales consisting of $40.4 million in mortgage loans and $6.9 million SBA commercial loans during the nine months ended September 30, 2024. The Company intends to continue originating mortgage loans for sale, whereas the mortgage portfolio sale was completed in the first quarter of 2025, at par, and ahead of the Company's public offering in order to bolster on-balance sheet liquidity.
Previous wording
Income from holdings in small business investment companies decreased $126 thousand and $232 thousand the three and six months ended June 30, 2025, respectively, compared to the same period in 2024. The decreases during the current year period can be mainly attributed to lower cash distributions received, based on the results of their performance and timing of distributions.
Current wording
Income from holdings in small business investment companies decreased during three and nine months ended September 30, 2025, respectively, compared to the same period in 2024. The decreases during the current year period are mainly attributed to lower cash distributions received, based on the results of their performance and timing of distributions.
Previous wording
Total noninterest expenses increased $889 thousand, or 7.11%, for the three months ended June 30, 2025 and $1.1 million, or 4.42%, for the six months ended June 30, 2025 compared to the same periods in 2024. The following table presents the components of noninterest expense for the three and six months ended June 30, 2025 and 2024, which are included within the respective Consolidated Statements of Operations headings. Variances that the Company believes require explanation are discussed below the table.
Current wording
Total noninterest expenses increased $1.5 million, or 11.28%, for the three months ended September 30, 2025 and $2.6 million, or 6.76%, for the nine months ended September 30, 2025 compared to the same periods in 2024. The following table presents the components of noninterest expense for the three and nine months ended September 30, 2025 and 2024, 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, 2025 over 2024, reflecting increases in salaries, commission and employee insurance expense, partially offset by a decrease in the annual incentive plan expense. The Company's number of full-time equivalent employees ("FTE's") has increased from 244 at June 30, 2024 to 245 at June 30, 2025.
Current wording
Salaries and employee benefits increased during the three and nine months ended September 30, 2025 over 2024, reflecting increases in salaries, commission and employee insurance expense, and annual incentive plan expense. The Company's number of full-time equivalent employees ("FTE's") has increased from 233 at September 30, 2024 to 249 at September 30, 2025.
Previous wording
Occupancy expenses increased during the three and six months ended June 30, 2025 largely due to the impact of the sales-leaseback transaction of the Company's operating center and branch building in December 2024. Rental expense, net of building depreciation increased $137 thousand and $250 thousand, during the three and six months ended June 30, 2025, respectively, compared to the 2024 periods. The increase in rental expense also reflects a new long-term lease executed during the first quarter of 2025 as the Company is moving its current loan production office and establishing a full-service branch in McLean, Viriginia.
Current wording
Occupancy expenses increased during the three and nine months ended September 30, 2025 largely due to the impact of the sales-leaseback transaction of the Company's operating center and branch building in December 2024. Rental expense, net of building depreciation increased $133 thousand and $382 thousand, during the three and nine months ended September 30, 2025, respectively, compared to the 2024 periods. The increase in rental expense also reflects a new long-term lease executed during the first quarter of 2025 as the Company has moved its standalone loan production office and established a full-service branch in McLean, Viriginia.
Previous wording
Three repossessed marine vessels were sold during the first quarter of 2025, resulting in the recognition of a $133 thousand loss during the six months ended June 30, 2025. There were no sales of repossessed assets during the three months ended June 30, 2025 or the three and six months ended June 30, 2024.
Current wording
Three repossessed marine vessels were sold during the first quarter of 2025, resulting in the recognition of a $133 thousand loss during the nine months ended September 30, 2025. There were no sales of repossessed assets during the three months ended September 30, 2025 compared to the sale of one repossessed marine vessel during the three and nine months ended September 30, 2024, which resulted in a loss of $204 thousand.
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, 2025 over 2024. The decrease in FDIC assessment reflects an improvement in the capital and financial ratio portion of the assessment rate, due to 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 three and nine months ended September 30, 2025 compared to the same periods in 2024. The decrease in FDIC assessment reflects an improvement in the capital and financial ratio portion of the assessment rate, largely due to the capital raise completed in early 2025.
Previous wording
Computer software expenses increased during the three and six months ended June 30, 2025 as the Company continues to invest in technology to enhance systems security and drive operational efficiencies.
Current wording
Computer software expenses increased during the three and nine months ended September 30, 2025 as the Company continues to invest in technology to enhance systems security and drive operational efficiencies.
Previous wording
Professional fees increased during the three and six months ended June 30, 2025 compared to the same periods in 2024 primarily due to legal fees related to loan matters and outside recruitment services.
Current wording
Professional fees increased during the three and nine months ended September 30, 2025 compared to the same periods in 2024 primarily due to legal fees related to loan matters, outside recruitment services, and internal audit services.
Previous wording
Other operating expenses increased by $145 thousand, or 8.75%, and $101 thousand, or 3.13%, during the three and six months ended June 30, 2025 compared to the three and six months ended June 30, 2024, largely reflecting a higher level of fraudulent activity related to customer accounts and higher expenses related to volume based costs and loan collection costs.
Current wording
Other operating expenses increased by $412 thousand, or 27.56%, and $513 thousand, or 10.88%, during the three and nine months ended September 30, 2025 compared to the three and nine months ended September 30, 2024, largely reflecting a higher level of fraudulent activity related to customer accounts, higher expenses related to volume based costs and loan collection costs, an increase in director expenses, and greater travel costs related to investor relations activities.
Previous wording
The efficiency ratio of the Company was 64.91% and 77.00% for the three months ended June 30, 2025 and 2024, respectively. The efficiency ratio of the Company was 68.23% and 77.36% for the six months ended June 30, 2025 and 2024, respectively. The improvement in the efficiency ratio during 2025 reflects an increase in net interest and noninterest 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 (loss). The Company adjusts for non-recurring items such as gains and losses on the investment portfolio and other gains/losses from OREO, repossessed 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 64.06% and 71.34% for the three months ended September 30, 2025 and 2024, respectively, and 66.68% and 75.22% for the nine months ended September 30, 2025 and 2024, respectively. The improvement in the efficiency ratio during 2025 reflects an increase in net interest and noninterest 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 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.
Previous wording
The calculation of the efficiency ratio for the three and six months ended June 30, 2025 and 2024 was as follows:
Current wording
The calculation of the efficiency ratio for the three and nine months ended September 30, 2025 and 2024 was as follows:
Previous wording
Income tax expense of $1.3 million and $585 thousand was recognized during the three months ended June 30, 2025 and 2024, respectively. For the six months ended June 30, 2025 an income tax benefit of $788 thousand was recognized compared to income tax expense of $1.1 million during the six months ended June 30, 2024. The effective tax rate was 19.52% and 15.52% for the three months ended June 30, 2025 and 2024, respectively. The effective tax (benefit) rate for six months ended June 30, 2025 and 2024 was (31.62%) and 15.85%, respectively. The year over year comparisons include tax-exempt income on investment securities and loans, BOLI income, income tax credits on qualified affordable housing project investments, and qualified rehabilitation credits. Additionally, during the six months ended June 30, 2025, the effective tax (benefit) rate was also impacted by the balance sheet repositioning transactions. Qualified affordable housing project investments are discussed in Note 11 to the Consolidated Financial Statements.
Current wording
The year over year comparisons include tax-exempt income on investment securities and loans, BOLI income, income tax credits on qualified affordable housing project investments, and qualified rehabilitation credits. Additionally, during the nine months ended September 30, 2025, the effective tax rate was impacted by the balance sheet repositioning transactions, which resulted in a pre-tax loss of $12.4 million with an associated tax benefit of $2.6 million, calculated by using the federal statutory tax rate of 21%. Qualified affordable housing project investments are discussed in Note 11 to the Consolidated Financial Statements.
Previous wording
The following table presents a summarized statement of operations for the community banking business segment for the three and six months ended June 30, 2025 and 2024:
Current wording
The following table presents a summarized statement of income for the community banking business segment for the three and nine months ended September 30, 2025 and 2024:
Previous wording
Net interest income increased during the three and six months ended June 30, 2025 compared to the three and six months ended June 30, 2024 primarily due to income earned on: i) non-marine loans; ii) the investment securities portfolio, which was restructured in the first quarter of 2025 to sell and replace lower yielding investments with higher yielding securities; iii) higher levels of earning deposit balances in other other banks; and iv) reduction in borrowings expense as FHLB advances have matured. These increases were partially offset by an increase in interest-bearing deposit expense due to growth in average balances. Higher levels of interest-earning deposits balances in other banks reflects proceeds received from the capital raise and sales of available for sale securities completed during the first quarter of 2025, as well as increases in customer deposit balances.
Current wording
Net interest income increased during the three and nine months ended September 30, 2025 compared to the three and nine months ended September 30, 2024 primarily due to income earned on: i) non-marine loans; ii) the investment securities portfolio, which was restructured in the first quarter of 2025 to sell and replace lower yielding investments with higher yielding securities; iii) higher levels of earning deposit balances in other other banks; and iv) reduction in borrowings expense as FHLB advances have matured. These increases were partially offset by an increase in interest-bearing deposit expense due to growth in average balances. Higher levels of interest-earning deposits balances in other banks reflects proceeds received from the capital raise and sales of available for sale securities completed during the first quarter of 2025, as well as increases in customer deposit balances.
Previous wording
Provision for credit losses increased primarily due to charge-offs totaling $971 thousand and a specific reserve of $1.1 million related to a $11.5 million commercial real estate loan relationship, partially offset by recoveries and decreases in loan balances.
Current wording
Provision for credit losses reflects charge-offs totaling $2.0 million and $3.2 million for the three and nine months ended September 30, 2025, specific reserves of $333 thousand related to three commercial loans totaling $2.3 million, partially offset by recoveries and decreases in loan balances.
Previous wording
The decrease in income tax expense during the six months ended June 30, 2025 was directly related to the recognized loss on the sale of securities.
Current wording
The decrease in income tax expense during the nine months ended September 30, 2025 was directly related to the recognized loss on the sale of securities.
Previous wording
The following table presents a summarized statement of operations for the marine lending segment for the three and six months ended June 30, 2025 and 2024:
Current wording
The following table presents a summarized statement of income for the marine lending segment for the three and nine months ended September 30, 2025 and 2024:
Previous wording
Marine Lending net revenues declined $149 thousand and $661 thousand for the three and six months ended June 30, 2025 compared to the corresponding periods in 2024. This was due to pay downs in the portfolio, which are not being replaced with new loan originations. The marine loan portfolio totaled $196.4 million and $236.9 million at June 30, 2025 and June 30, 2024, respectively.
Current wording
Net revenues declined due to pay downs in the portfolio, which are not being replaced with new loan originations. The marine loan portfolio totaled $185.9 million and $225.9 million at September 30, 2025 and September 30, 2024, respectively.
Previous wording
The following table presents a summarized statement of operations for the wealth management segment for the three and six months ended June 30, 2025 and 2024:
Current wording
The following table presents a summarized statement of income for the wealth management segment for the three and nine months ended September 30, 2025 and 2024:
Previous wording
Net revenue increased during the three and six months ended June 30, 2025 over the 2024 periods due to increases in trust services income reflecting fees earned on a higher level of assets under management and estate settlements and increases in investment sales revenue.
Current wording
Net revenue increased during the three and nine months ended September 30, 2025 over the 2024 periods due to increases in trust services income reflecting fees earned on a higher level of assets under management and estate settlements and increases in investment sales revenue. The increase in noninterest expense reflects increases in salaries and employee benefits expenses.
Previous wording
Total securities available for sale were $120.9 million at June 30, 2025, compared to $121.3 million at December 31, 2024. This represents a decrease of $423 thousand, or 0.35%. The Company purchased $91.2 million of securities during the six months ended June 30, 2025. The Company had total maturities, calls, and principal repayments of $6.9 million and sales of $99.2 million during the six months ended June 30, 2025. Note 4 to the Consolidated Financial Statements provides additional details about the Company’s securities portfolio at June 30, 2025 and December 31, 2024. The Company had a net unrealized loss on available for sale securities of $9.2 million at June 30, 2025 as compared to a net unrealized loss of $23.6 million at December 31, 2024. Unrealized gains or losses on available for sale securities are reported within shareholders’ equity, net of the related deferred tax effect, as accumulated other comprehensive income (loss).
Current wording
Net unrealized loss on available for sale securities was $7.1 million at September 30, 2025 as compared to a net unrealized loss of $23.6 million at December 31, 2024. Unrealized gains or losses on available for sale securities are reported within shareholders’ equity, net of the related deferred tax effect, as accumulated other comprehensive income (loss).
Previous wording
The Company’s primary use of funds is supporting lending activities from which it derives the greatest amount of interest income. Gross loans were $1.44 billion and $1.47 billion at June 30, 2025 and December 31, 2024, respectively. This represents a decrease of $28.4 million, or 1.94%, during the six months ended June 30, 2025. The ratio of gross loans to deposits decreased during the six months ended June 30, 2025 from 93.14% at December 31, 2024 to 81.44% at June 30, 2025 reflecting the decrease in gross loans, compounded by a 12.15% increase in deposits during the same time period.
Current wording
Gross loans were $1.46 billion and $1.47 billion at September 30, 2025 and December 31, 2024, respectively. This represents a decrease of $7.1 million, or 0.49%, during the nine months ended September 30, 2025. The ratio of gross loans to deposits decreased during the nine months ended September 30, 2025 from 93.14% at December 31, 2024 to 88.21% at September 30, 2025 reflecting the decrease in gross loans, compounded by a 5.07% increase in deposits during the same time period.
Previous wording
The loan portfolio consists primarily of loans for owner-occupied single-family dwellings and loans secured by commercial real estate. Note 5 to the Consolidated Financial Statements provides the composition of the loan portfolio at June 30, 2025 and December 31, 2024. During the six months ended June 30, 2025, through the normal course of business, $60.7 million in loans were sold, consisting primarily of mortgage loans. Included in total loans sold was a pool of residential mortgage loans totaling $18.8 million, which was sold at par. This pool was sold in January 2025, ahead of the Company's public offering, to bolster on-balance sheet liquidity. Loan sales resulted in net gains of $1.5 million during the six months ended June 30, 2025. Loan sales, paydowns within the marine portfolio, and significant payoffs of commercial and industrial loans related to the sales of two customers' businesses caused the balance of gross loans to experience a net decline, while being partially offset by modest loans originations, primarily secured by real estate.
Current wording
The loan portfolio consists primarily of loans for owner-occupied single-family dwellings and loans secured by commercial real estate. Loan sales, paydowns within the marine portfolio, and significant payoffs of commercial and industrial loans related to the sales of two customers' businesses caused the balance of gross loans to experience a net decline, while being partially offset by growth in the commercial real estate loans portfolios.
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Current report — wording carried from elsewhere
The Bank conducts a commercial banking business which consists of attracting deposits from the general public and investing those funds in commercial, consumer and real estate loans and mortgage-backed securities, municipal and U.S. government agency securities. The Bank’s deposits are insured by the Federal Deposit Insurance Corporation to the maximum extent permitted by law.
Current report — wording carried from elsewhere
At September 30, 2025, the Company had total assets of $1.93 billion, net loans of $1.45 billion, total deposits of $1.66 billion, and shareholders’ equity of $185.6 million.
Current report — wording carried from elsewhere
The Company’s primary use of funds is supporting lending activities from which it derives the greatest amount of interest income. Details of the Company's loan portfolio are presented below:
Current report — wording carried from elsewhere
During the nine months ended September 30, 2025, through the normal course of business, $88.6 million in loans were sold, consisting primarily of mortgage loans. Included in total loans sold was a pool of residential mortgage loans totaling $18.8 million, which was sold at par. This pool was sold in January 2025, ahead of the Company's public offering, to bolster on-balance sheet liquidity.
Current report — wording carried from elsewhere
Loans risk rated as classified, include substandard, doubtful, and loss loans increased primarily due to two large commercial real estate relationships being placed on nonaccrual status during the first quarter of 2025, including a $2.2 million owner-occupied relationship and an $5.5 million non-owner occupied relationship. Two additional commercial real estate relationships, each totaling $1.8 million, were added to nonaccrual loans during the third quarter of 2025.
Current report — wording carried from elsewhere
All other loans were classified as pass, exhibiting acceptable history of profits, cash flow ability and liquidity.
Current report — wording carried from elsewhere
The following table provides the composition of total deposits at September 30, 2025 and December 31, 2024.
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
The Company establishes the allowance for credit losses through charges to earnings in the form of a provision for credit losses. Loan losses are charged against the allowance for credit losses for the difference between the carrying value of the loan and the estimated net realizable value or fair value of the collateral, if collateral dependent, when management believes that the collectability of the principal is unlikely. Subsequent recoveries, if any, are credited to the allowance. The allowance represents management’s current estimate of expected credit losses over the contractual term of loans held for investment, and is recorded at an amount that, in management’s judgment, reduces the recorded investment in loans to the net amount expected to be collected. Management’s judgment in determining the level of the allowance is based on evaluations of historical loan losses, current conditions and reasonable and supportable forecasts relevant to the collectability of loans. The measurement of the allowance for credit losses is based in part on forecasts of unemployment, inflation, as well as the consumer price index, and may also consider other factors, which we believe to be indicative of risk factors related to collectability. Management also assesses the risk of credit losses arising from changes in economic conditions; the nature and volume of the loan portfolio; the volume and severity of delinquencies and adversely classified loan balances; lending policy and procedures; credit administration and lending staff; loan review; concentrations of credit and the value of underlying collateral in determining the recorded balance of the allowance for credit losses. This evaluation is inherently subjective because it requires estimates that are susceptible to significant revision as more information becomes available. In evaluating the level of the allowance, we consider a range of possible assumptions and outcomes related to the various factors identified above. Refer to the 2024 Form 10-K for additional detail concerning the determination of the allowance for credit losses on loans.
Previous report — wording carried elsewhere
The following table reconciles tax-equivalent net interest income, which is not a measurement under GAAP, to net interest income.