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What changed in EAGLE FINANCIAL SERVICES INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of EAGLE FINANCIAL SERVICES INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+484 added−433 removedSource: 10-K (2025-03-31) vs 10-K (2024-03-29)

Top changes in EAGLE FINANCIAL SERVICES INC's 2024 10-K

484 paragraphs added · 433 removed · 325 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

55 edited+33 added−19 removed167 unchanged
Biggest changeIf the Company is required to materially increase the level of the allowance for credit losses or incurs additional expenses to determine the appropriate level of the allowance for credit losses, such changes could adversely affect the Company’s capital levels, financial condition and results of operations. 16 Increasing scrutiny and evolving expectations from customers, regulators, investors, and other stakeholders with respect to environmental, social and governance (ESG) practices may impose additional costs on the Company or expose it to new or additional risks.
Biggest changeSuch changes could also impact the capital levels of the Bank, or require the Company to incur additional personnel or technology costs. Increasing scrutiny and evolving expectations from customers, regulators, investors, and other stakeholders with respect to environmental, social and governance ("ESG") practices may impose additional costs on the Company or expose it to new or additional risks.
Under the Community Reinvestment Act and related regulations, depository institutions have an affirmative obligation to assist in meeting the credit needs of their market areas, including low and moderate-income areas, consistent with safe and sound banking practice.
Community Reinvestment Act . Under the Community Reinvestment Act and related regulations, depository institutions have an affirmative obligation to assist in meeting the credit needs of their market areas, including low and moderate-income areas, consistent with safe and sound banking practice.
To date, the Company has not experienced a significant compromise, significant data loss or any material financial losses related to cybersecurity attacks, but the Company’s 12 systems and those of its customers and third-party service providers are under constant threat and it is possible that the Company could experience a significant event in the future.
To date, the Company has not experienced a significant compromise, significant data loss or any material financial losses related to cybersecurity attacks, but the Company’s systems and those of its customers and third-party service providers are under constant threat and it is possible that the Company 12 could experience a significant event in the future.
Because the Company’s common stock is registered with the SEC, it is currently subject to these requirements. 10 Incentive Compensation. In June 2010, the Federal Reserve issued a final rule on incentive compensation policies intended to ensure that the incentive compensation policies of banking organizations do not undermine the safety and soundness of such organizations by encouraging excessive risk-taking.
Because the Company’s common stock is registered with the SEC, it is currently subject to these requirements. Incentive Compensation. In June 2010, the Federal Reserve issued a final rule on incentive compensation policies intended to ensure that the incentive compensation policies of banking organizations do not undermine the safety and soundness of such organizations by encouraging excessive risk-taking.
In that event, the Company might have to increase the provision for loan losses, which could have a material adverse effect on its operating results and financial condition. An inadequate allowance for credit losses would reduce our earnings. Our earnings are significantly affected by our ability to properly originate, underwrite and service loans.
In that event, the Company might have to increase the provision for credit losses, which could have a material adverse effect on its operating results and financial condition. An inadequate allowance for credit losses would reduce our earnings. Our earnings are significantly affected by our ability to properly originate, underwrite and service loans.
The final rule is expected to go into effect on April 1, 2024, but most provisions of the rule, including the new tests, the need to define retail lending assessment areas, and the data collection requirements, will become applicable on January 1, 2026. Reporting of the collected data will not be required until 2027.
The final rule is expected to go into effect on April 1, 2024, but most provisions of the rule, including the new tests, the need to define retail lending 8 assessment areas, and the data collection requirements, will become applicable on January 1, 2026. Reporting of the collected data will not be required until 2027.
In addition, such events could affect the stability of the Company’s deposit base, cause economic or market uncertainty, negatively impact consumer confidence, impair the ability of borrowers to repay outstanding loans, impair the value of collateral securing loans, cause significant property damage, result in loss of revenue, and/or cause the Company to incur additional expenses.
In addition, such events 15 could affect the stability of the Company’s deposit base, cause economic or market uncertainty, negatively impact consumer confidence, impair the ability of borrowers to repay outstanding loans, impair the value of collateral securing loans, cause significant property damage, result in loss of revenue, and/or cause the Company to incur additional expenses.
The primary source of money to pay our cash dividends comes from dividends paid to the Company by the Bank. The Bank’s ability to pay dividends to the Company is subject to, among other things, its earnings, financial condition and applicable 17 regulations, which in some instances limit the amount that may be paid as dividends.
The primary source of money to pay our cash dividends comes from dividends paid to the Company by the Bank. The Bank’s ability to pay dividends to the Company is subject to, among other things, its earnings, financial condition and applicable regulations, which in some instances limit the amount that may be paid as dividends.
NOW accounts, money market deposit accounts and other types of accounts that permit payments or transfers to third parties fall within the definition of transaction accounts and are subject to these reserve requirements, as are any nonpersonal time deposits at an institution. The reserve percentages are subject to adjustment by the Federal Reserve.
NOW accounts, money market deposit accounts 7 and other types of accounts that permit payments or transfers to third parties fall within the definition of transaction accounts and are subject to these reserve requirements, as are any nonpersonal time deposits at an institution. The reserve percentages are subject to adjustment by the Federal Reserve.
While public confidence in the banking 14 system has stabilized, deposit outflows caused by reputational concerns or events affecting the banking industry generally could adversely affect the Company’s liquidity, financial condition, and results of operations. Operational Risks Our exposure to operational risk may adversely affect our business.
While public confidence in the banking system has stabilized, deposit outflows caused by reputational concerns or events affecting the banking industry generally could adversely affect the Company’s liquidity, financial condition, and results of operations. Operational Risks Our exposure to operational risk may adversely affect our business.
This category of laws includes the Bank Secrecy Act of 1970, the Money Laundering Control Act of 1986, the USA PATRIOT Act of 2001, and the Anti-Money Laundering Act of 2020. The Anti-Money Laundering Act of 2020, the most sweeping anti-money laundering legislation in 20 years, requires various federal agencies to promulgate regulations implementing a number of its provisions.
This category of laws includes the Bank Secrecy Act of 1970, the Money Laundering Control Act of 1986, the USA PATRIOT Act of 2001, and the Anti-Money Laundering Act of 2020. The Anti-Money Laundering Act 9 of 2020, the most sweeping anti-money laundering legislation in 20 years, requires various federal agencies to promulgate regulations implementing a number of its provisions.
A common equity Tier 1 capital ratio of 4.5% of risk-weighted assets also was added with the rules effective January 1, 2015. Each of the federal bank regulatory agencies also has established a minimum leverage capital ratio of Tier 1 capital to average adjusted assets (“Tier 1 leverage ratio”).
A common equity Tier 1 capital ratio of 4.5% of risk-weighted assets also was added with the rules effective January 1, 2015. 6 Each of the federal bank regulatory agencies also has established a minimum leverage capital ratio of Tier 1 capital to average adjusted assets (“Tier 1 leverage ratio”).
Certain aspects of the Dodd-Frank Act remain subject to rulemaking and interpretation and will take effect over several years, and their impact on the Company or the financial industry is difficult to predict before such regulations or interpretations are adopted.
Certain aspects of the Dodd-Frank Act remain subject to rulemaking 10 and interpretation and will take effect over several years, and their impact on the Company or the financial industry is difficult to predict before such regulations or interpretations are adopted.
As a result, defaults by, or even rumors or questions about, one or more financial services institutions, or the financial services industry generally, have led to market-wide liquidity problems and could lead to losses or defaults by us or by other institutions.
As a result, defaults by, or even rumors or questions about, one or 14 more financial services institutions, or the financial services industry generally, have led to market-wide liquidity problems and could lead to losses or defaults by us or by other institutions.
The Dodd-Frank Act also provides that banks may not “purchase an asset from, or sell an asset to” a bank insider (or their related interests) unless (i) the transaction is conducted on market terms between the parties, and (ii) if the proposed transaction represents more than 10 percent of the capital stock and surplus of the bank, it has been approved in advance by a majority of the bank’s non-interested directors. 8 Community Reinvestment Act .
The Dodd-Frank Act also provides that banks may not “purchase an asset from, or sell an asset to” a bank insider (or their related interests) unless (i) the transaction is conducted on market terms between the parties, and (ii) if the proposed transaction represents more than 10 percent of the capital stock and surplus of the bank, it has been approved in advance by a majority of the bank’s non-interested directors.
The “Tier 2 capital” consists of cumulative preferred stock, long-term perpetual preferred stock, a limited amount of subordinated and other qualifying debt (including certain hybrid capital instruments), and a limited amount of the allowance for loan losses, including reserves for off-balance sheet commitments.
The “Tier 2 capital” consists of cumulative preferred stock, long-term perpetual preferred stock, a limited amount of subordinated and other qualifying debt (including certain hybrid capital instruments), and a limited amount of the allowance for credit losses, including reserves for off-balance sheet commitments.
As directed by the Economic Growth, Regulatory Relief and Consumer Protection Act (the “Economic Growth Act”), the federal banking regulators jointly issued a final rule in 2019 that permits qualifying banks that have less than $10 billion in total consolidated assets to elect to be subject to a 9% “community bank leverage ratio.” A qualifying bank that has chosen the proposed framework is not required to calculate the existing risk-based and leverage capital requirements and would be considered to have met the capital ratio requirements to be “well capitalized” under prompt corrective action rules, provided it has a community bank leverage ratio greater than 9%. 7 Other Safety and Soundness Regulations .
As directed by the Economic Growth, Regulatory Relief and Consumer Protection Act (the “Economic Growth Act”), the federal banking regulators jointly issued a final rule in 2019 that permits qualifying banks that have less than $10 billion in total consolidated assets to elect to be subject to a 9% “community bank leverage ratio.” A qualifying bank that has chosen the proposed framework is not required to calculate the existing risk-based and leverage capital requirements and would be considered to have met the capital ratio requirements to be “well capitalized” under prompt corrective action rules, provided it has a community bank leverage ratio greater than 9%.
For purposes of this annual report on Form 10-K, the terms the "Company," "our," "us" and "we" refer to Eagle Financial Services, Inc. and our subsidiaries as a combined entity, unless this report otherwise indicates or the context otherwise requires. The Bank has thirteen full-service branches, two loan production offices, and one drive-through only facility.
For purposes of this annual report on Form 10-K, the terms the "Company," "our," "us" and "we" refer to Eagle Financial Services, Inc. and our subsidiary as a combined entity, unless this report otherwise indicates or the context otherwise requires. The Bank has thirteen full-service branches, two loan production offices, one wealth management office and one drive-through only facility.
Based on total deposits at June 30, 2023 as reported to the FDIC, the Bank has 9.27% of the total deposits in its market area. The Company’s primary deposit market area includes Clarke County, Frederick County, Loudoun County, Fauquier County and the City of Winchester. Supervision and Regulation General .
Based on total deposits at June 30, 2024 as reported to the FDIC, the Bank has 9.60% of the total deposits in its market area. The Company’s primary deposit market area includes Clarke County, Frederick County, Loudoun County, Fauquier County and the City of Winchester. Supervision and Regulation General .
During 2023, the Company paid total dividends of $4.2 million, including cash dividends that were reinvested in Company stock. Insurance of Accounts, Assessments and Regulation by the FDIC . The Bank’s deposits are insured up to applicable limits by the FDIC.
During 2024, the Company paid total dividends of $4.3 million, including cash dividends that were reinvested in Company stock. Insurance of Accounts, Assessments and Regulation by the FDIC . The Bank’s deposits are insured up to applicable limits by the FDIC.
The reports are made available on this website as soon as practicable following the filing of the reports with the SEC. In addition, certain committee charters and the Company's Code of Ethics are available on the Company's website. The information is free of charge and may be reviewed, downloaded and printed from the website at any time.
The reports are made available on this website as soon as practicable following the filing of the reports with the SEC. The information is free of charge and may be reviewed, downloaded and printed from the Company website or http://www.sec.gov at any time. In addition, certain committee charters and the Company's Code of Ethics are available on the Company's website.
Further, the growth in economic activity and in the demand for goods and services, coupled with labor shortages, supply chain disruptions and other factors, has contributed to rising inflationary pressures, the Federal Reserve’s responsive interest rate hikes, and the risk of recession.
Over the past several years, the growth in economic activity and in the demand for goods and services, coupled with labor shortages, supply chain disruptions and other factors, has contributed to rising inflationary pressures, the Federal Reserve’s responsive interest rate hikes, and the risk of recession.
Item 1. Business General Eagle Financial Services, Inc. is a bank holding company that was incorporated in 1991. The company is headquartered in Berryville, Virginia and conducts its operations through its subsidiary, Bank of Clarke (the “Bank”). The Bank changed its name from Bank of Clarke County to Bank of Clarke in 2022. The Bank is chartered under Virginia law.
Item 1. Business General Eagle Financial Services, Inc. is a bank holding company that was incorporated in 1991. The company is headquartered in Berryville, Virginia and conducts its operations through its subsidiary, Bank of Clarke (the “Bank”). The Bank is chartered under Virginia law.
However, if the Bank fails to meet these minimum capital guidelines and/or other regulatory requirements, the Bank could be subject to regulatory restrictions, including limitations on paying dividends to the holding company for shareholder dividends and share repurchases and paying discretionary bonuses, or experience other adverse consequences that could cause its financial condition to be materially and adversely affected.
However, if the Bank fails to meet these minimum capital guidelines and/or other regulatory requirements, the Bank could be subject to regulatory restrictions, including limitations on paying dividends to the holding company for shareholder dividends and share repurchases and paying discretionary bonuses, or experience other adverse consequences that could cause its financial condition to be materially and adversely affected. 16 Changes in accounting standards could impact reported earnings and capital.
The CFPB further removed the Regulation P provision that allowed for use of the alternative delivery method for annual privacy notices because the CFPB believes the alternative delivery method will no longer be used in light of the annual notice exception. Anti-Money Laundering Laws and Regulations.
The CFPB further removed the Regulation P provision that allowed for use of the alternative delivery method for annual privacy notices because the CFPB believes the alternative delivery method will no longer be used in light of the annual notice exception.
At December 31, 2023, loans secured by real estate totaled $1.0 billion and represented 71.5% of the Company’s loan portfolio, net of net deferred loan costs and premiums.
At December 31, 2024, loans secured by real estate totaled $1.1 billion and represented 75.1% of the Company’s loan portfolio, net of net deferred loan costs and premiums.
The Company believes that its growth and success depends heavily upon the skills of its senior management team. The Company also depends on the experience of its subsidiary’s officers and on their relationships with the customers they serve.
The Company relies heavily on its senior management team and the unexpected loss of key officers could adversely affect operations. The Company believes that its growth and success depends heavily upon the skills of its senior management team. The Company also depends on the experience of its subsidiary’s officers and on their relationships with the customers they serve.
The Bank of Clarke Wealth Management Division, a division of the Bank, provides both a full-service trust department and a separate brokerage area. The trust department features a full range of fiduciary expertise, including service as trustee of personal trusts, service as guardian or conservator by court appointment, fiduciary investment management, estate settlement, and agency for trustees.
The trust department features a full range of fiduciary expertise, including service as trustee of personal trusts, service as guardian or conservator by court appointment, fiduciary investment management, estate settlement, and agency for trustees.
Changes in accounting standards could impact reported earnings and capital. The authorities that promulgate accounting standards, including the Financial Accounting Standards Board (the “FASB”), the SEC, and other regulatory authorities, periodically change the financial accounting and reporting standards that govern the preparation of the Company’s consolidated financial statements.
The authorities that promulgate accounting standards, including the Financial Accounting Standards Board (the “FASB”), the SEC, and other regulatory authorities, periodically change the financial accounting and reporting standards that govern the preparation of the Company’s consolidated financial statements.
The rules implemented the Basel III regulatory capital reforms from the Basel Committee on Banking Supervision and certain provisions of the Dodd-Frank Act. 6 Under these risk-based capital requirements of the Federal Reserve, the Bank is required to maintain a minimum ratio of total capital (which is defined as core capital and supplementary capital less certain specified deductions from total capital such as reciprocal holdings of depository institution capital instruments and equity investments) to risk-weighted assets of at least 8.0%.
Under these risk-based capital requirements of the Federal Reserve, the Bank is required to maintain a minimum ratio of total capital (which is defined as core capital and supplementary capital less certain specified deductions from total capital such as reciprocal holdings of depository institution capital instruments and equity investments) to risk-weighted assets of at least 8.0%.
The Company fully expects that the financial institution industry will remain heavily regulated in the near future and that additional laws or regulations may be adopted further regulating specific banking practices. Wage and Hour Division, Department of Labor.
The Company fully expects that the financial institution industry will remain heavily regulated in the near future and that additional laws or regulations may be adopted further regulating specific banking practices. 11 Item 1 A.
The Bank has thirteen ATM locations in its trade area and issues debit cards to deposit customers. These cards can be used to withdraw cash at most ATMs through the Bank’s membership in both regional and national networks. These cards can also be used to make purchases at retailers who accept transactions through the same regional and national networks.
The Bank has thirteen ATM locations in its trade area and issues debit cards to deposit customers. These cards can be used to withdraw cash at most ATMs through the Bank’s membership in both regional and national networks. The Bank offers telephone banking, internet banking, and mobile banking to its customers.
A number of these banks and other financial institutions are significantly larger and have substantially greater access to capital and other resources, as well as larger lending limits and branch systems, and offer a wider array of banking services.
Certain divisions within the banking subsidiary face competition from wealth management and investment brokerage firms. A number of these banks and other financial institutions are significantly larger and have substantially greater access to capital and other resources, as well as larger lending limits and branch systems, and offer a wider array of banking services.
Further, the effects of climate change may negatively impact regional and local economic activity, which could lead to an adverse effect on customers and impact the communities in which the Company operates. Overall, climate change, its effects and the resulting, unknown impact could have a material adverse effect on the Company’s financial condition and results of operations.
Further, the effects of climate change may negatively impact regional and local economic activity, which could lead to an adverse effect on customers and impact the communities in which the Company operates.
If the Company is unable to access funding sufficient to support our business operations and growth strategies or are unable to access such funding on attractive terms, the Company may not be able to implement our business strategies or satisfy our obligations. Market Risks The Company’s success depends upon its ability to compete effectively in the banking industry.
If the Company is unable to access funding sufficient to support our business operations and growth strategies or are unable to access such funding on attractive terms, the Company may not be able to implement our business strategies or satisfy our obligations.
The occurrence of any such events in the future and the economic impact from such events could have a material adverse effect on the Company's business, which, in turn, could have a material adverse effect on its financial condition and results of operations. 15 The Company relies heavily on its senior management team and the unexpected loss of key officers could adversely affect operations.
The occurrence of any such events in the future and the economic impact from such events could have a material adverse effect on the Company's business, which, in turn, could have a material adverse effect on its financial condition and results of operations.
The Company considers relations with its employees to be excellent, receiving a Great Place to Work® certified. designation in the fourth quarter of 2023. Securities and Exchange Commission Filings The Company maintains an internet website at www.bankofclarke.bank .
The Company considers relations with its employees to be excellent, and has obtained its second a Great Place to Work® certified. designation for the annual period through June 2025. Securities and Exchange Commission Filings The Company maintains an internet website at www.bankofclarke.bank .
Increased ESG related compliance costs could result in increases to the Company’s overall operational costs. Failure to adapt to or comply with regulatory requirements or investor or stakeholder expectations and standards could negatively impact the Company’s reputation, ability to do business with certain partners, and the Company’s stock price.
Further, failure to adapt to or comply with regulatory requirements or investor or stakeholder expectations and standards or to act responsibly in these areas could negatively impact the Company’s reputation, ability to do business with certain partners, and stock price.
These factors include competition, federal economic, monetary and fiscal policies, and general economic conditions. In addition, changes in interest rates may negatively affect both the returns on and market value of the Company’s investment securities. During 2022 and early 2023, the FRB increased the federal funds rate 11 times and has held such rates steady since July 2023.
These factors include competition, federal economic, monetary and fiscal policies, and general economic conditions. In addition, changes in interest rates may negatively affect both the returns on and market value of the Company’s investment securities.
The Bank of Clarke is a member in Bankers Title Shenandoah, LLC, which sells title insurance and is an investor in Virginia Bankers Insurance Center, LLC, which serves as the broker for insurance sales through its member banks. Bank of Clarke is also an investor in low-income housing projects in Virginia and building rehabilitation projects in surrounding states.
The Bank is a member in Bankers Title Shenandoah, LLC, which sells title insurance and is an investor in Bearing Insurance Group, LLC, which serves as the broker for insurance sales through its member banks. The Bank invests in qualified affordable housing projects.
The loss of one or more of these officers could disrupt the Company’s operations and impair its ability to implement its business strategy, which could adversely affect the Company’s financial condition and performance. Legal, Regulatory and Compliance Risks Government measures to regulate the financial industry, including the Dodd-Frank Act, subject us to increased regulation and could adversely affect us.
The loss of one or more of these officers could disrupt the Company’s operations and impair its ability to implement its business strategy, which could adversely affect the Company’s financial condition and performance.
Companies are facing increasing scrutiny from customers, regulators, investors, and other stakeholders related to ESG practices and disclosure. Investor advocacy groups, investment funds, and influential investors are also increasingly focused on these practices, especially as they relate to climate risk, hiring practices, the diversity of the work force, and racial and social justice issues.
Companies are facing increasing scrutiny from customers, regulators, investors, and other stakeholders related to ESG practices and disclosures especially as they relate to climate risk, hiring practices, the diversity of the work force, racial and social justice issues, support for local communities, and corporate governance and transparency.
Effective January 1, 2015, the Federal Reserve adopted capital rules intended to revise and strengthen its risk-based and leverage capital requirements and its method for calculating risk-weighted assets.
Effective January 1, 2015, the Federal Reserve adopted capital rules intended to revise and strengthen its risk-based and leverage capital requirements and its method for calculating risk-weighted assets. The rules implemented the Basel III regulatory capital reforms from the Basel Committee on Banking Supervision and certain provisions of the Dodd-Frank Act.
An institution may not disclose to a non-affiliated third party, other than to a consumer reporting agency, customer account numbers or other similar account identifiers for marketing purposes.
An institution may not disclose to a non-affiliated third party, other than to a consumer reporting agency, customer account numbers or other similar account identifiers for marketing purposes. The GLBA also provides that the states may adopt customer privacy protections that are more strict than those contained in the act.
The Company’s banking subsidiary faces competition from banks and other financial institutions, including savings and loan associations, savings banks, finance companies and credit unions for deposits, loans and other financial services in our market area. Certain divisions within the banking subsidiary face competition from wealth management and investment brokerage firms.
Market Risks The Company’s success depends upon its ability to compete effectively in the banking industry. The Company’s banking subsidiary faces competition from banks and other financial institutions, including savings and loan associations, savings banks, finance companies and credit unions for deposits, loans and other financial services in our market area.
The Company attempts to limit its exposure to this risk by applying good underwriting practices at origination, evaluating the appraisals used to establish property values, and routinely monitoring the financial condition of borrowers.
The Company attempts to limit its exposure to this risk by applying good underwriting practices at origination, evaluating the appraisals used to establish property values, and routinely monitoring the financial condition of borrowers. If the value of real estate serving as collateral for the loan portfolio were to decline materially, a significant part of the loan portfolio could become under-collateralized.
To qualify for this exception, a financial institution must not share nonpublic personal information about customers except as described in certain statutory exceptions.
Regulation P provides an exception under which financial institutions that meet certain conditions are not required to provide annual privacy notices to customers. To qualify for this exception, a financial institution must not share nonpublic personal information about customers except as described in certain statutory exceptions.
These investments generate tax credits for the Bank. Employees The Company, including the Bank, had 92 officers, 142 other full-time and 9 part-time employees (or 241 full-time equivalent employees) at December 31, 2023. None of the Company’s employees are represented by a union or covered under a collective bargaining agreement.
Employees The Company, including the Bank, has 231 full-time equivalent employees at December 31, 2024, representing 75 officers, 150 other, non-officer, full-time employees and 6 part-time employees. None of the Company’s employees are represented by a union or covered under a collective bargaining agreement.
We cannot assure you that volume of trading in our common shares will increase in the future. The stock market can be volatile, and fluctuations in our operating results and other factors could cause our stock price to decline.
We cannot assure you that volume of trading in our common shares will increase in the future. The market price of our common stock may be volatile, and we may not be able to meet investor or analyst expectations.
The Bank offers telephone banking, internet banking, and mobile banking to its customers. Internet banking also offers online bill payment to consumer and commercial customers. The Bank offers other commercial deposit account services such as ACH origination and remote deposit capture.
Internet banking also offers online bill payment to consumer and commercial customers. The Bank offers other commercial deposit account services such as ACH origination and remote deposit capture. The Bank of Clarke Wealth Management Division, a division of the Bank, provides both a full-service trust department and a separate brokerage area.
There is a limited trading market for our common shares, and you may not be able to resell your shares at or above the price you paid for them. Although our common shares are listed for trading under the symbol “EFSI,” the trading in our common shares has substantially less liquidity than many other publicly traded companies.
Although our common shares are listed for trading under the symbol “EFSI,” the trading in our common shares has substantially less liquidity than many other publicly traded companies.
As a financial institution, we are heavily regulated at the state and federal levels. These laws and regulations are generally intended to benefit consumers, borrowers and depositors, but not investors. Our success depends on our ability to maintain compliance with existing and new laws and regulations.
The Company is subject to extensive regulation and supervision that govern almost all aspects of its operations. These laws and regulations are generally intended to benefit consumers, borrowers and depositors, but not investors. Our success depends on our ability to maintain compliance with existing and new laws and regulations.
Risks Relating to Our Securities There can be no assurances concerning continuing dividend payments. Our common stockholders are only entitled to receive the dividends declared by our Board of Directors.
Our common stockholders are only entitled to receive the dividends declared by our Board of Directors out of funds legally available for such payments.
The stock market has experienced, and may continue to experience, fluctuations that significantly impact the market prices of securities issued by many companies. Market fluctuations could adversely affect our stock price. These fluctuations have often been unrelated or disproportionate to the operating performance of particular companies.
In addition, the stock market in general has experienced extreme volatility that has often been unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the market price of our common stock over the short, medium or long term, regardless of our actual performance.
New government regulations could also result in new or more stringent forms of ESG oversight and expanding mandatory and voluntary reporting, diligence, and disclosure. Climate change and related legislative and regulatory initiatives may result in operational changes and expenditures that could significantly impact the Company’s business.
New rules and regulations also could result in new or more stringent forms of ESG oversight and reporting, diligence, and disclosure. Complying with ESG-related rules, regulations and/or stakeholder expectations could result in increases to the Company’s overall operational costs and increased management time and attention.
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The GLBA also provides that the states may adopt customer privacy protections that are more strict than those contained in the act. 9 Regulation P provides an exception under which financial institutions that meet certain conditions are not required to provide annual privacy notices to customers.
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The general purpose of these investments is to encourage and assist participants in investing in low-income residential rental properties located in the Commonwealth of Virginia, develop and implement strategies to maintain projects as low-income housing, provide tax credits and other tax benefits to investors, and to preserve and protect project assets.
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On December 16, 2019, the Department of Labor issued a final rule, the rule updates a number of regulations on the calculation of overtime compensation both to provide clarity and to better reflect the 21st-century workplace.
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The Bank has not opted into the CBRL framework at December 31, 2024 as its leverage ratio was 8.79%. Other Safety and Soundness Regulations .
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These changes will promote compliance with the FLSA, provide appropriate and updated guidance in an area of evolving law and practice, and encourage employers to provide additional and innovative benefits to workers without fear of costly litigation. This final rule was effective on January 15, 2020. CARES Act.
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In October 2024, the CFPB adopted a new rule that requires financial service providers, such as the Bank, to make certain data available to consumers upon request regarding the products or services they obtain from the provider.
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In response to the COVID-19 pandemic, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act on March 27, 2020. Among other things, the CARES Act included the Small Business Administration's Paycheck Protection Program.
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The rule is intended to give consumers control over their financial data, including with whom it is shared, and encourage competition in the provision of consumer financial products and services.
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Under the Paycheck Protection Program, funds were authorized for small business loans to pay payroll and group health costs, salaries and commissions, mortgage and rent payments, utilities, and interest on other debt. The loans were provided through participating financial institutions, including the Bank, that processed loan applications and serviced the loans. 11 Item 1 A.
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Compliance is required beginning April 1, 2028 for depository institutions with at least $3 billion in total assets and beginning April 1, 2029 for depository institutions with at least $1.5 billion in total assets. Anti-Money Laundering Laws and Regulations.
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If the value of real estate serving as collateral for the loan portfolio were to continue to decline materially, a significant part of the loan portfolio could become under-collateralized.
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The Company depends on the Bank for cash flow, and the Bank’s ability to make cash distributions is restricted, which could impact the Company’s ability to satisfy its obligations. The Company is a bank holding company with no material activities other than activities incidental to holding the common stock of the Bank.
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Although the domestic and global economies have largely recovered from the COVID-19 pandemic, certain consequences of the pandemic continue to impact the macroeconomic environment and may persist for some time. For example, the COVID-19 pandemic could have long-lasting impacts certain industries due to changes in consumer behavior and business practices, including remote work and business travel.
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The Company’s principal source of funds to pay distributions on its common stock and service any of its obligations, other than further issuances of securities, is dividends received from the Bank. The holding company, Eagle Financial Services, Inc., is a legal entity separate and distinct from the Bank.
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We face, and expect to continue to face, increased public and legislative scrutiny as well as stricter and more comprehensive regulation of our financial services practices. The Dodd-Frank Act includes significant changes in the financial regulatory landscape and has increased our operations and compliance costs in the short-term.
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Furthermore, the Bank is not obligated to pay dividends to the Company, and any dividends paid to the Company would depend on the earnings or financial condition of the Bank, various business considerations, and applicable law and regulation.
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Future legislation, regulation and government policy, which are beyond our control, may change rapidly and unpredictably and could affect the banking industry as a whole, including our business and results of operations, in ways that are difficult to predict.
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As is generally the case for banking institutions, the profitability of the Bank is subject to the fluctuating cost and availability of money, changes in interest rates, and economic conditions in general. In addition, various federal statutes and regulations limit the amount of dividends that the Bank may pay to the Company without regulatory approval.
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We expect that financial institutions will remain heavily regulated in the near future and that additional laws or regulations may be adopted further regulating specific banking practices.
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Legal, Regulatory and Compliance Risks The Company operates in a highly regulated industry, and the laws and regulations that govern the Company’s operations, including changes in them or the Company’s failure to comply with them, and regulatory actions implementing such laws and regulations, may adversely affect the Company.
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As a result of the provisions in the Dodd-Frank Act and other current or future laws and regulations applicable to the Bank, we could experience additional costs, as well as limitations on the products and services we offer and on our ability to efficiently pursue business opportunities, which may adversely affect our businesses, financial condition or results of operations.
Added
Changes to laws, regulations, or regulatory policies, or supervisory guidance, including changes in interpretation or implementation of laws, regulations, policies, or supervisory guidance, could affect the Company in substantial and unpredictable ways.
Removed
Such changes could also impact the capital levels of the Bank, or require the Company to incur additional personnel or technology costs. Most notably, new guidance on the calculation of credit reserves using current expected credit losses, referred to as CECL, was finalized in June 2016. The standard was effective for the Company beginning January 1, 2023.
Added
Regulatory responses in connection with unforeseen stress events, including failures of banks and other financial institutions, often lead to increased regulatory scrutiny and heightened supervisory expectations and could adversely impact the Company’s business, financial condition, and results of operations, or alter or disrupt the Company’s planned future strategies and actions.
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To implement the new standard, the Company has and will incur costs related to data collection and documentation, technology and training.

… 27 more changes not shown on this page.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe Company’s Compliance and Security Officer, who oversees the Company’s information security programs, has over 10 years of experience and reports to the Chief Operating Officer. The Compliance and Security Officer is designated as the program coordinator responsible for coordinating and overseeing the Information Security Program.
Biggest changeThe Company’s Chief Technology Officer (“CTO”) oversees the Company’s information technology programs and investments. The Company’s CTO has over 30 years of information technology experience. The Company’s Compliance and 20 Security Officer, who oversees the Company’s information security programs, has over 10 years of experience and reports to the Chief Operating Officer.
The Incident Response Team has overall authority and responsibility for preparing and responding to incidents and consists of various sub-teams including representation from operations, technology, risk, compliance, human resources, and marketing.
The Incident Response Team has overall authority and responsibility for preparing and responding to incidents and consists of various sub-teams including representation from operations, technology, risk, compliance, human resources, and marketing. While key personnel have identified roles, this team ensures appropriate reports, statuses, and decisions are presented to the Executive Management and the Board of Directors.
Removed
While key personnel have identified roles, this team ensures appropriate reports, statuses, and decisions are presented to the Executive Management and the Board of Directors. 19 The Company’s Chief Technology Officer (“CTO”) oversees the Company’s information technology programs and investments. The Company’s CTO has over 30 years of information technology experience.
Added
The Compliance and Security Officer is designated as the program coordinator responsible for coordinating and overseeing the Information Security Program.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeAt December 31, 2023, Bank of Clarke operated thirteen full-service branches, one loan production office, and one drive-through only facility in the Virginia communities of Berryville, Winchester, Boyce, Stephens City, Purcellville, Warrenton, Leesburg, Ashburn and Fairfax. The Bank also operated one loan production office in the Maryland community of Frederick.
Biggest changeAt December 31, 2024, Bank of Clarke operated thirteen full-service branches, one loan production office, and one drive-through only facility in the Virginia communities of Berryville, Winchester, Boyce, Stephens City, Purcellville, Warrenton, Leesburg, Ashburn and Fairfax. The Bank also operated one loan production office in the Maryland community of Frederick.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Leg al Proceedings There are no material pending legal proceedings to which the Company is a party or of which the property of the Company is subject. Item 4. Mine S afety Disclosures None. 20 PAR T II
Biggest changeItem 3. Leg al Proceedings There are no material pending legal proceedings to which the Company is a party or of which the property of the Company is subject. Item 4. Mine S afety Disclosures None. 21 PAR T II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 20 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 21 Item 6. Reserved 21 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 22 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 46
Biggest changeItem 4. Mine Safety Disclosures 21 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 22 Item 6. Reserved 22 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 23 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 48

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeIssuer Purchases of Equity Securities for the Quarter Ended December 31, 2023 On June 21, 2023, the Corporation renewed the stock repurchase program to repurchase up to 150,000 shares of its common stock prior to June 30, 2024. During 2023, the Company purchased 8,531 shares of its Common Stock under its stock repurchase program at an average price of $35.34.
Biggest changeIssuer Purchases of Equity Securities for the Quarter Ended December 31, 2024 On September 18, 2024, the Company re-authorized the purchase of up to 150,000 shares of its common stock under its stock repurchase program, which expires on June 30, 2025.
Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plan Maximum Number of Shares that may Yet Be Purchased Under the Plan October 1 - October 31, 2023 — $ — — 145,059 November 1 - November 30, 2023 — — — 145,059 December 1 - December 31, 2023 — — — 145,059 — $ — — 145,059
Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plan Maximum Number of Shares that may Yet Be Purchased Under the Plan October 1 - October 31, 2024 — $ — — 148,122 November 1 - November 30, 2024 — — — 148,122 December 1 - December 31, 2024 — — — 148,122 — $ — — 148,122
As of March 22, 2024, the Company had approximately 868 shareholders of record. The Company has historically paid dividends on a quarterly basis. The final determination of the timing, amount and payment of dividends on the Common Stock is at the discretion of the Company’s Board of Directors.
As of that date, the closing price of our common stock on the Exchange was $32.66. The Company has historically paid dividends on a quarterly basis. The final determination of the timing, amount and payment of dividends on the Common Stock is at the discretion of the Company’s Board of Directors.
Item 5. Market for Registrant’s Common Equity, Related St ockholder Matters and Issuer Purchases of Equity Securities The Company’s common stock is quoted on the OTC Markets Group's OTCQX Market under the symbol “EFSI.” The OTC Markets Group provides information about the common stock to professional market makers who match sellers with buyers.
Item 5. Market for Registrant’s Common Equity, Related St ockholder Matters and Issuer Purchases of Equity Securities The Company’s common stock is traded on The Nasdaq Capital Market (the "Exchange") under the symbol “EFSI.” As of March 21, 2025, the Company had approximately 845 shareholders of record.
The following table details the Company's purchases of its common stock during the fourth quarter pursuant to the stock repurchase program discussed above.
During 2024, the Company purchased 7,868 shares of its Common Stock under its stock repurchase program at an average price of $30.08. The Company did not purchase any of its common stock during the fourth quarter pursuant to the stock repurchase program discussed above and as shown in the following table.
Removed
Securities brokers can obtain information from the OTC Markets Group when working with clients. When a client decides to initiate a transaction, the broker will contact one of the stock’s market makers. Any over-the-counter market quotations in the Company’s common stock reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThese combined also could result in the Company having to borrow wholesale funding to fund asset growth which is more expensive than deposits. 28 Average Balances, Income and Expenses, Yields and Rates (dollars in thousands) Years Ended December 31, 2023 December 31, 2022 Average Interest Income/ Average Average Interest Income/ Average Balance Expense Rate Balance Expense Rate Assets: Securities: Taxable $ 150,187 $ 3,663 2.44 % $ 172,501 $ 3,401 1.97 % Tax-Exempt (1) 507 21 4.13 % 8,305 280 3.37 % Total Securities $ 150,694 $ 3,684 2.45 % $ 180,806 $ 3,681 2.04 % Loans: (2) Taxable 1,418,916 75,127 5.29 % 1,121,429 50,509 4.50 % Non-accrual 3,458 — — % 2,350 — — % Tax-Exempt (1) 10,106 497 4.91 % 5,671 218 3.85 % Total Loans $ 1,432,480 $ 75,624 5.28 % $ 1,129,450 $ 50,727 4.49 % Federal funds sold and interest-bearing deposits in other banks 118,789 3,928 3.31 % 32,562 382 1.17 % Total earning assets $ 1,701,963 $ 83,236 4.89 % $ 1,342,818 $ 54,790 4.08 % Allowance for loan losses (14,176 ) (9,852 ) Total non-earning assets 59,388 93,289 Total assets $ 1,747,175 $ 1,426,255 Liabilities and Shareholders' Equity: Interest-bearing deposits: NOW accounts $ 244,277 $ 5,238 2.14 % $ 173,843 $ 663 0.38 % Money market accounts 257,496 4,491 1.74 % 270,725 1,155 0.43 % Savings accounts 151,556 185 0.12 % 179,709 130 0.07 % Time deposits: $250,000 and more 116,077 4,756 4.10 % 62,757 560 0.89 % Less than $250,000 219,809 8,960 4.08 % 62,907 433 0.69 % Total interest-bearing deposits $ 989,215 $ 23,630 2.39 % $ 749,941 $ 2,941 0.39 % Federal funds purchased 2,801 70 2.50 % 7,882 170 2.16 % Federal Home Loan Bank advances 162,548 7,720 4.75 % 39,589 1,295 3.27 % Subordinated debt 29,408 1,417 4.82 % 22,193 1,067 4.81 % Total interest-bearing liabilities $ 1,183,972 $ 32,837 2.77 % $ 819,605 $ 5,473 0.67 % Noninterest-bearing liabilities: Demand deposits 442,539 485,061 Other Liabilities 17,328 18,293 Total liabilities $ 1,643,839 $ 1,322,959 Shareholders' equity 103,336 103,296 Total liabilities and shareholders' equity $ 1,747,175 $ 1,426,255 Net interest income $ 50,399 $ 49,317 Net interest spread 2.12 % 3.42 % Interest expense as a percent of average earning assets 1.93 % 0.41 % Net interest margin 2.96 % 3.68 % (1) Income and yields are reported on a tax-equivalent basis using the federal tax rate of 21%.
Biggest changeThe following table titled “Average Balances, Income and Expenses, Yields and Rates” displays the composition of interest earning assets and interest bearing liabilities and their respective yields and rates for the years ended December 31, 2024 and 2023. 29 Average Balances, Income and Expenses, Yields and Rates (dollars in thousands) Years Ended December 31, 2024 December 31, 2023 Average Interest Income/ Average Average Interest Income/ Average Balance Expense Rate Balance Expense Rate Assets: Securities: Taxable $ 138,205 $ 3,551 2.57 % $ 150,187 $ 3,663 2.44 % Tax-Exempt (1) 495 20 4.09 % 507 21 4.13 % Total Securities $ 138,700 $ 3,571 2.58 % $ 150,694 $ 3,684 2.45 % Loans: (2) Taxable 1,446,705 81,366 5.62 % 1,418,916 75,127 5.29 % Non-accrual 3,774 — — % 3,458 — — % Tax-Exempt (1) 10,405 523 5.02 % 10,106 497 4.91 % Total Loans $ 1,460,884 $ 81,889 5.61 % $ 1,432,480 $ 75,624 5.28 % Federal funds sold and interest-bearing deposits in other banks 114,189 5,975 5.23 % 118,789 3,893 3.28 % Total earning assets $ 1,713,773 $ 91,435 5.34 % $ 1,701,963 $ 83,201 4.89 % Allowance for credit losses (14,793 ) (14,176 ) Total non-earning assets 105,840 59,388 Total assets $ 1,804,820 $ 1,747,175 Liabilities and Shareholders' Equity: Interest-bearing deposits: NOW accounts $ 259,372 $ 6,097 2.35 % $ 244,277 $ 5,238 2.14 % Money market accounts 263,960 5,989 2.27 % 257,496 4,491 1.74 % Savings accounts 134,893 155 0.12 % 151,556 185 0.12 % Time deposits: $250,000 and more 153,398 7,260 4.73 % 116,077 4,756 4.10 % Less than $250,000 276,580 12,353 4.47 % 219,809 8,960 4.08 % Total interest-bearing deposits $ 1,088,203 $ 31,854 2.93 % $ 989,215 $ 23,630 2.39 % Federal funds purchased 11 — 4.19 % 2,801 70 2.50 % Federal Home Loan Bank advances 145,383 6,823 4.69 % 162,548 7,720 4.75 % Subordinated debt 29,476 1,417 4.81 % 29,408 1,417 4.82 % Total interest-bearing liabilities $ 1,263,073 $ 40,094 3.17 % $ 1,183,972 $ 32,837 2.77 % Noninterest-bearing liabilities: Demand deposits 412,646 442,539 Other Liabilities 17,714 17,328 Total liabilities $ 1,693,433 $ 1,643,839 Shareholders' equity 111,387 103,336 Total liabilities and shareholders' equity $ 1,804,820 $ 1,747,175 Net interest income $ 51,341 $ 50,364 Net interest spread 2.17 % 2.12 % Interest expense as a percent of average earning assets 2.34 % 1.93 % Net interest margin 3.00 % 2.96 % (1) Income and yields are reported on a tax-equivalent basis using the federal tax rate of 21%.
The Bank generally originates its consumer loans within its geographic market area and these loans are largely made to customers with whom the Bank has an existing relationship. Consumer loans 25 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.
The Bank generally originates its consumer loans within its geographic market area and these loans are largely 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.
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.
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 27 consider a range of possible assumptions and outcomes related to the various factors identified above.
The amount of allowance for credit losses allocated to each loan category is based on the amount of delinquent loans in that loan category, the status of nonperforming assets in that loan category, the historical losses for that loan category, the evaluation of qualitative factors impacting the portfolio and the financial condition of certain borrowers whose financial conditional is monitored on a periodic basis.
The amount of allowance for credit losses allocated to each loan category is based on the amount of delinquent loans in that loan category, the status of nonperforming assets in that loan category, the historical losses for that loan category, the evaluation of qualitative factors impacting the portfolio and the financial condition of certain borrowers 42 whose financial conditional is monitored on a periodic basis.
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.
Officers in Categories A through F 25 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.
The weighted average yield is calculated based on the relative amortized costs of the securities. Although mortgage-backed securities have definitive maturities, they provide monthly principal curtailments which can be reinvested at a prevailing rate and for a different term.
The weighted average is calculated based on the relative amortized costs of the securities. Although mortgage-backed securities have definitive maturities, they provide monthly principal curtailments which can be reinvested at a prevailing rate and for a different term.
Allowance for Credit Losses on Loans 40 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.
Allowance for Credit Losses on Loans 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.
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 wealth management fees is determined by the number of active accounts and total assets under management.
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.
These forward looking statements include statements regarding 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,” “projects,” “contemplates,” “anticipates,” “forecasts,” “intends,” or other similar words or terms are intended to identify forward looking statements.
These forward looking statements include statements regarding our profitability, liquidity, allowance for credit losses, interest rate sensitivity, market risk, growth strategy, and financial and other goals. The words “believes,” “expects,” “may,” “will,” “should,” “projects,” “contemplates,” “anticipates,” “forecasts,” “intends,” or other similar words or terms are intended to identify forward looking statements.
OFF-BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS Note 18 to the Consolidated Financial Statements provides information about the off-balance sheet arrangements which arise through the lending activities of the Company. These arrangements increase the degree of both credit and interest rate risk beyond that which is recognized through the financial assets and liabilities on the consolidated balance sheets. 45
OFF-BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS Note 18 to the Consolidated Financial Statements provides information about the off-balance sheet arrangements which arise through the lending activities of the Company. These arrangements increase the degree of both credit and interest rate risk beyond that which is recognized through the financial assets and liabilities on the consolidated balance sheets. 47
Additionally, at December 31, 2023, the most recent notification from the Federal Reserve categorized the Bank as well-capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since the notification that management believes have changed the Bank’s category.
Additionally, at December 31, 2024, the most recent notification from the Federal Reserve categorized the Bank as well-capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since the notification that management believes have changed the Bank’s category.
The table titled “Allocation of Allowance for Credit Losses on Loans” shows the amount of the allowance for credit losses which is allocated to the indicated loan categories, along with that category’s percentage of total loans, at December 31, 2023 and 2022.
The table titled “Allocation of Allowance for Credit Losses on Loans” shows the amount of the allowance for credit losses which is allocated to the indicated loan categories, along with that category’s percentage of total loans, at December 31, 2024 and 2023.
Loans exceeding $15.0 million and up to the Bank’s legal lending limit can be approved by the Director Loan Committee consisting of four directors (three directors 24 constituting a quorum). The Director’s Loan Committee also reviews and approves changes to the Bank’s Loan Policy as presented by management.
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.
Accordingly, these loans are risk rated at a level of substandard or lower. At December 31, 2023, other potential problem loans totaled $2.4 million.
Accordingly, these loans are risk rated at a level of substandard or lower. At December 31, 2024, other potential problem loans totaled $2.4 million.
As part of the sale, the Company reduced its workforce associated with the marine lending division, as it expects to cease accepting new marine lending business. Subsequent to the sale of these assets, the Company retained ownership of approximately $260.5 million of marine vessel retail loans which continue to constitute a significant portion of the Company's assets, revenues, and earnings.
As part of the sale, the Company reduced its workforce associated with the marine lending division, and ceased accepting new marine lending business. Subsequent to the sale of these assets, the Company retained ownership of approximately $260.5 million of marine vessel retail loans which continue to constitute a significant portion of the Company's assets, revenues, and earnings.
The ROA of the Company, on an annualized basis, was 0.54% and 1.02% for 2023 and 2022, respectively. 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 the shareholders.
The ROA of the Company, on an annualized basis, was 0.85% and 0.54% for 2024 and 2023, respectively. 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 the shareholders.
These forward looking statements are subject to significant uncertainties because they are based upon or are affected by factors including: • difficult market conditions in our industry; • effects of soundness of other financial institutions; • potential impact on us of existing and future legislation and regulations; • the ability to successfully manage growth or implement growth strategies if the Bank is unable to identify attractive markets, locations or opportunities to expand in the future, expand into new markets, or successfully implement new product lines; • competition with other banks and financial institutions, and companies outside of the banking industry, including those companies that have substantially greater access to capital and other resources; • the successful management of interest rate risk; • risks inherent in making loans such as repayment risks and fluctuating collateral values; • changes in general economic and business conditions in the market area; • reliance on the management team, including the ability to attract and retain key personnel; • changes in interest rates and interest rate policies; • maintaining capital levels adequate to support growth; • maintaining cost controls and asset qualities as new branches are opened or acquired; • demand, development and acceptance of new products and services; • deposit flows; • problems with technology utilized by the Bank; • changing trends in customer profiles and behavior; • geopolitical conditions, including acts or threats of terrorism, international hostilities, or actions taken by the U.S. or other governments in response to acts or threats of terrorism and/or military conflicts, which could impact business and economic conditions in the U.S. and abroad; • the Company’s potential exposure to fraud, negligence, computer theft, and cyber-crime • changes in accounting policies and banking and other laws and regulations; and • other factors described in Item 1A., “Risk Factors,” above.
These forward looking statements are subject to significant uncertainties because they are based upon or are affected by factors including: • difficult market conditions in our industry; • the ability to successfully manage growth or implement growth strategies if the Bank is unable to identify attractive markets, locations or opportunities to expand in the future or if the Bank is unable to successfully integrate new branches, business lines or other growth opportunities into its existing operations; • competition with other banks and financial institutions, and companies outside of the banking industry, including those companies that have substantially greater access to capital and other resources; • the successful management of interest rate risk; • risks inherent in making loans such as repayment risks and fluctuating collateral values; • changes in general economic and business conditions in the Bank’s market area; • reliance on the Bank’s management team, including the ability to attract and retain key personnel; • changes in interest rates and interest rate policies; • maintaining capital levels adequate to support growth; • maintaining cost controls and asset qualities as new branches are opened or acquired; • demand, development and acceptance of new products and services; • deposit flows; • the Bank's ability to manage liquidity; • the cost and availability of secondary funding sources; • effects of the soundness of other financial institutions; • problems with technology utilized by the Bank; • changing trends in customer profiles and behavior; • geopolitical conditions, including acts or threats of terrorism, international hostilities, or actions taken by the U.S. or other governments in response to acts or threats of terrorism and/or military conflicts, which could impact business and economic conditions in the U.S. and abroad; • the Company's potential exposure to fraud, negligence, computer theft, and cyber-crime; • potential impact on us of existing and future legislation and regulations; • changes in accounting policies and banking and other law and regulations; and • other factors described in Item 1A., “Risk Factors,” in this annual report on Form 10-K.
The table titled “Average Deposits and Rates Paid” shows the average deposit balances and average rates paid for 2023 and 2022.
The table titled “Average Deposits and Rates Paid” shows the average deposit balances and average rates paid for 2024 and 2023.
Note 9 to the Consolidated Financial Statements provides a reconciliation between income tax expense computed using the federal statutory income tax rate and the Company’s actual income tax expense during 2023 and 2022. 34 Business Segments The Company has three reportable operating segments: community banking, marine lending and wealth management.
Note 9 to the Consolidated Financial Statements provides a reconciliation between income tax expense computed using the federal statutory income tax rate and the Company’s actual income tax expense during 2024 and 2023. Business Segments The Company has three reportable operating segments: community banking, marine lending and wealth management. See Note 27 to the Consolidated Financial Statements.
During 2023, the Company sold $32.1 million in mortgage loans on the secondary market, $51.7 million of loans from the commercial and consumer loan portfolios and $8.0 million in Small Business Association ("SBA") loans.
During 2024, the Company sold $59.0 million in mortgage loans on the secondary market and $14.3 million in Small Business Association ("SBA") loans. During 2023, the Company sold $32.1 million in mortgage loans on the secondary market, $51.7 million of loans from the commercial and consumer loan portfolios and $8.0 million in SBA loans.
The ability to dispose of available for sale securities prior to maturity provides management more options to react to future rate changes and provides more liquidity, when needed, to meet short-term obligations. The Company had net unrealized losses on available for sale securities of $22.8 million and $25.9 million at December 31, 2023 and 2022, respectively.
The ability to dispose of available for sale securities prior to maturity provides management more options to react to future rate changes and provides more liquidity, when needed, to meet short-term obligations. The Company had net unrealized losses on available for sale securities of $23.6 million and $22.8 million at December 31, 2024 and 2023, respectively.
Basic and diluted earnings per share were $2.66 and $4.17 for 2023 and 2022, respectively. Return on average assets (“ROA”) measures how efficiently the Company uses its assets to produce net income. Some issues reflected within this efficiency include the Company’s asset mix, funding sources, pricing, fee generation, and cost control.
Basic and diluted earnings per share were $4.32 and $2.66 for 2024 and 2023, respectively. 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.
Reciprocal deposit accounts balances (included in total money market account and NOW account balances) increased from $59.5 million to $115.7 million at December 31, 2022 and December 31, 2023, respectively. The reciprocal deposits balance at December 31, 2023 and December 31, 2022 consists of money market and NOW accounts obtained through the ICS network.
Reciprocal deposit accounts balances (included in total money market account and NOW account balances) increased from $115.7 million to $152.0 million at December 31, 2023 and December 31, 2024, respectively. The reciprocal deposits balance at December 31, 2024 and December 31, 2023 consists of money market and NOW accounts obtained through the ICS network.
As of or for the Years Ended December 31, 2023 2022 2021 2020 2019 (dollars in thousands, except per share amounts) Income Statement Data: Interest and dividend income $ 83,128 $ 54,686 $ 42,676 $ 38,908 $ 35,454 Interest expense 32,837 5,473 1,677 3,281 4,239 Net interest income $ 50,291 $ 49,213 $ 40,999 $ 35,627 $ 31,215 Provision for credit losses 1,649 1,830 1,483 1,457 629 Net interest income after provision for credit losses $ 48,642 $ 47,383 $ 39,516 $ 34,170 $ 30,586 Noninterest income 14,745 13,345 11,320 8,579 7,759 Net revenue $ 63,387 $ 60,728 $ 50,836 $ 42,749 $ 38,345 Noninterest expenses 52,754 43,057 38,049 29,441 26,776 Income before income taxes $ 10,633 $ 17,671 $ 12,787 $ 13,308 $ 11,569 Applicable income taxes 1,276 3,150 1,766 2,136 1,810 Net Income $ 9,357 $ 14,521 $ 11,021 $ 11,172 $ 9,759 Performance Ratios: Return on average assets 0.54 % 1.02 % 0.90 % 1.11 % 1.18 % Return on average equity 9.05 % 14.06 % 10.28 % 11.03 % 10.60 % Shareholders’ equity to assets 5.94 % 6.29 % 8.46 % 9.30 % 10.98 % Dividend payout ratio 45.11 % 27.58 % 34.38 % 31.80 % 35.21 % Non-performing loans to total loans 0.40 % 0.19 % 0.28 % 0.57 % 0.34 % Non-performing assets to total assets 0.34 % 0.16 % 0.21 % 0.47 % 0.27 % Share and Per Share Data: Net income, basic $ 2.66 $ 4.17 $ 3.20 $ 3.27 $ 2.84 Net income, diluted 2.66 4.17 3.20 3.27 2.84 Cash dividends declared 1.20 1.15 1.10 1.04 1.00 Book value 30.78 29.15 31.93 30.86 28.08 Market price 30.00 35.95 34.65 29.50 31.05 Average shares outstanding, basic 3,523,547 3,482,368 3,440,080 3,417,543 3,438,410 Average shares outstanding, diluted 3,523,547 3,482,368 3,440,080 3,417,543 3,438,410 Balance Sheet Data: Total securities $ 147,011 $ 158,389 $ 193,370 $ 166,222 $ 166,200 Total loans 1,462,686 1,323,783 985,720 836,334 644,760 Total assets 1,825,597 1,616,717 1,303,038 1,130,152 877,320 Total deposits 1,506,322 1,264,075 1,177,235 1,013,087 771,544 Shareholders’ equity 108,379 101,729 110,280 105,074 96,326 23 MANAGEMENT’S STRATEGY 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 our local, independent status.
As of or for the Years Ended December 31, 2024 2023 2022 2021 2020 (dollars in thousands, except per share amounts) Income Statement Data: Interest and dividend income $ 91,321 $ 83,093 $ 54,686 $ 42,676 $ 38,908 Interest expense 40,094 32,837 5,473 1,677 3,281 Net interest income $ 51,227 $ 50,256 $ 49,213 $ 40,999 $ 35,627 Provision for credit losses 2,551 1,649 1,830 1,483 1,457 Net interest income after provision for credit losses $ 48,676 $ 48,607 $ 47,383 $ 39,516 $ 34,170 Noninterest income 21,557 14,780 13,345 11,320 8,579 Net revenue $ 70,233 $ 63,387 $ 60,728 $ 50,836 $ 42,749 Noninterest expenses 51,332 52,754 43,057 38,049 29,441 Income before income taxes $ 18,901 $ 10,633 $ 17,671 $ 12,787 $ 13,308 Applicable income taxes 3,558 1,276 3,150 1,766 2,136 Net Income $ 15,343 $ 9,357 $ 14,521 $ 11,021 $ 11,172 Performance Ratios: Return on average assets 0.85 % 0.54 % 1.02 % 0.90 % 1.11 % Return on average equity 13.77 % 9.05 % 14.06 % 10.28 % 11.03 % Shareholders’ equity to assets 6.38 % 5.94 % 6.29 % 8.46 % 9.30 % Dividend payout ratio 28.01 % 45.11 % 27.58 % 34.38 % 31.80 % Non-performing loans to total loans 0.14 % 0.40 % 0.19 % 0.28 % 0.57 % Non-performing assets to total assets 0.14 % 0.34 % 0.16 % 0.21 % 0.47 % Share and Per Share Data: Net income, basic $ 4.32 $ 2.66 $ 4.17 $ 3.20 $ 3.27 Net income, diluted 4.32 2.66 4.17 3.20 3.27 Cash dividends declared 1.21 1.20 1.15 1.10 1.04 Book value 33.52 30.78 29.15 31.93 30.86 Market price 36.40 30.00 35.95 34.65 29.50 Average shares outstanding, basic 3,553,919 3,523,547 3,482,368 3,440,080 3,417,543 Average shares outstanding, diluted 3,553,919 3,523,547 3,482,368 3,440,080 3,417,543 Balance Sheet Data: Total securities $ 128,887 $ 147,011 $ 158,389 $ 193,370 $ 166,222 Total loans 1,467,049 1,462,686 1,323,783 985,720 836,334 Total assets 1,866,215 1,825,597 1,616,717 1,303,038 1,130,152 Total deposits 1,575,156 1,506,322 1,264,075 1,177,235 1,013,087 Shareholders’ equity 118,987 108,379 101,729 110,280 105,074 24 MANAGEMENT’S STRATEGY 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 our local, independent status.
During 2022, the Company purchased 4,442 shares of its Common Stock under its stock repurchase program at an average price of $34.79. At December 31, 2023, and 2022, Management believes the Bank met all capital adequacy requirements to which it was subject.
During 2023, the Company purchased 8,531 shares of its Common Stock under its stock repurchase program at an average price of $35.34. At December 31, 2024, and 2023, Management believes the Bank met all capital adequacy requirements to which it was subject.
The effective tax rate is below the statutory rate of 21%, due primarily to tax credits on qualified affordable housing project investments as discussed in Note 25 to the Consolidated Financial Statements as well as qualified rehabilitation credits.
The effective tax rate is below the statutory rate of 21%, due primarily to the recognition of tax-exempt life insurance income, qualified rehabilitation credits and tax credits on qualified affordable housing project investments as discussed in Note 25 to the Consolidated Financial Statements.
Loan Portfolio The Company’s primary use of funds is supporting lending activities from which it derives the greatest amount of interest income. Gross loans net of net deferred costs and premiums were $1.46 billion and $1.32 billion at December 31, 2023 and 2022, respectively. This represents an increase of $138.8 million or 10.55% for 2023.
Loan Portfolio The Company’s primary use of funds is supporting lending activities from which it derives the greatest amount of interest income. Gross loans net of net deferred costs and premiums were $1.47 billion and $1.46 billion at December 31, 2024 and 2023, respectively. This represents an increase of $4.4 million or 0.30% for 2024.
This is an increase of $3.5 million when compared to the December 31, 2022 balance of $2.6 million. This increase resulted mostly from an increase in nonaccrual loans. Nonaccrual loans were $5.6 million at December 31, 2023 and $2.2 million at the end of 2022.
This is a decrease of $3.5 million when compared to the December 31, 2023 balance of $6.1 million. This decrease resulted mostly from a decrease in nonaccrual loans. Nonaccrual loans were $2.1 million at December 31, 2024 and $5.6 million at the end of 2023.
Pursuant to the Federal Reserve’s Small Bank Holding Company and Savings and Loan Holding Company Policy Statement, qualifying bank holding companies with total consolidated assets of less than $3 billion, such as the Company, are not subject to consolidated regulatory capital requirements. 44 Analysis of Bank Capital (dollars in thousands) December 31, 2023 December 31, 2022 Tier 1 Capital: Common stock $ 1,682 $ 1,682 Capital surplus 9,773 29,773 Retained earnings 144,151 111,759 Nonmortgage servicing assets (153 ) (684 ) Total Tier 1 capital $ 155,453 $ 142,530 Common equity tier 1 capital $ 155,453 $ 142,530 Tier 2 Capital: Allowable portion of allowance for credit losses and reserve for off-balance sheet commitments $ 13,472 Total Tier 2 capital $ 13,472 Total risk-based capital $ 168,925 Risk weighted assets $ 1,513,802 Capital Ratios: Common equity Tier 1 capital ratio 10.27 % n/a Tier 1 risk-based capital ratio 10.27 % n/a Total risk-based capital ratio 11.16 % n/a Tier 1 leverage ratio 8.48 % 9.15 % Note 15 to the Consolidated Financial Statements provides additional discussion and analysis of regulatory capital requirements.
Pursuant to the Federal Reserve’s Small Bank Holding Company and Savings and Loan Holding Company Policy Statement, qualifying bank holding companies with total consolidated assets of less than $3 billion, such as the Company, are not subject to consolidated regulatory capital requirements. 45 Analysis of Bank Capital (dollars in thousands) December 31, 2024 December 31, 2023 Tier 1 Capital: Common stock $ 1,682 $ 1,682 Capital surplus 9,773 9,773 Retained earnings 155,016 144,151 Nonmortgage servicing assets (326 ) (153 ) Total Tier 1 capital $ 166,145 $ 155,453 Common equity tier 1 capital $ 166,145 $ 155,453 Tier 2 Capital: Allowable portion of allowance for credit losses and reserve for off-balance sheet commitments $ 14,493 $ 13,472 Total Tier 2 capital $ 14,493 $ 13,472 Total risk-based capital $ 180,638 $ 168,925 Risk weighted assets $ 1,504,960 $ 1,513,802 Capital Ratios: Common equity Tier 1 capital ratio 11.04 % 10.27 % Tier 1 risk-based capital ratio 11.04 % 10.27 % Total risk-based capital ratio 12.00 % 11.16 % Tier 1 leverage ratio 8.79 % 8.48 % Note 15 to the Consolidated Financial Statements provides additional discussion and analysis of regulatory capital requirements.
The average rate on total interest-bearing deposits increased 200 basis points from 2022 to 2023. The Federal Reserve's interest rate increases beginning early 2022 and continuing into 2023 heightened interest rates paid on deposit accounts. In general, deposit pricing is done in response to monetary policy actions and yield curve changes.
The average rate on total interest-bearing deposits increased 54 basis points from 2023 to 2024. The Federal Reserve's interest rate increases began in early 2022, continued into 2023 and have remained heightened during 2024 impacting interest rates paid on deposit accounts. In general, deposit pricing is done in response to monetary policy actions and yield curve changes.
The Bank attempts 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 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.
As part of the sale, the Company sold its interest in marine vessel floor plan loans totaling $52.8 million and reduced its workforce associated with the marine lending division as it expects to cease accepting new marine lending business.
As part of the sale, the Company sold its interest in marine vessel floor plan loans totaling $52.8 million and reduced its workforce associated with the marine lending division as it ceased accepting new marine lending business. Subsequent to the sale of these assets, the Company retained ownership of marine vessel retail loans.
Income Taxes Income tax expense was $1.3 million and $3.2 million for the years ended December 31, 2023 and 2022, respectively. These amounts correspond to an effective tax rate of 12.00% and 17.83% for 2023 and 2022, respectively.
Income Taxes Income tax expense was $3.6 million and $1.3 million for the years ended December 31, 2024 and 2023, respectively. These amounts correspond to an effective tax rate of 18.82% and 12.00% for 2024 and 2023, respectively.
The Company’s net income was $9.4 million for the year ended December 31, 2023. 22 The following table presents selected financial data, which was derived from the Company’s audited financial statements for the periods indicated.
The Company’s net income was $15.3 million for the year ended December 31, 2024. 23 The following table presents selected financial data, which was derived from the Company’s audited financial statements for the periods indicated.
Maturity Distribution and Yields of Securities December 31, 2023 Due in one year or less Due after 1 through 5 years Due after 5 through 10 years Due after 10 years Total Securities available for sale: Obligations of U.S. government corporations and agencies — % 2.15 % 2.65 % — % 2.60 % Mortgage-backed securities — % — % 1.10 % 1.74 % 1.73 % Obligations of states and political subdivisions, taxable 3.57 % 2.93 % 3.01 % — % 3.10 % Subordinated debt — % — % 4.28 % — % — % Total taxable 3.57 % 2.69 % 2.55 % 1.74 % 1.92 % Obligations of states and political subdivisions, tax-exempt (1) — % — % 4.01 % — % — % Total 3.57 % 2.69 % 2.59 % 1.74 % 1.92 % 37 (1) Yields on tax-exempt securities have been computed on a tax-equivalent basis using a federal tax rate of 21%.
Maturity Distribution and Yields of Securities December 31, 2024 Due in one year or less Due after 1 through 5 years Due after 5 through 10 years Due after 10 years Total Securities available for sale: Obligations of U.S. government corporations and agencies — % 2.59 % 2.46 % — % 2.57 % Mortgage-backed securities — % — % 1.07 % 1.76 % 1.73 % Obligations of states and political subdivisions, taxable 3.42 % 2.85 % 2.79 % — % 2.96 % Subordinated debt — % — % 4.28 % — % 4.28 % Total taxable 3.42 % 2.65 % 2.60 % 1.76 % 1.90 % Obligations of states and political subdivisions, tax-exempt (1) — % 3.19 % — % — % 3.19 % Total 3.42 % 2.67 % 2.60 % 1.76 % 1.90 % (1) Yields on tax-exempt securities have been computed on a tax-equivalent basis using a federal tax rate of 21%.
The Company has a Dividend Investment Plan that allows participating shareholders to reinvest the dividends in Company stock. During 2023, the Company purchased 8,531 shares of its Common Stock under its stock repurchase program at an average price of $35.34.
The Company has a Dividend Investment Plan that allows participating shareholders to reinvest the dividends in Company stock. During 2024, the Company purchased 7,868 shares of its Common Stock under its stock repurchase program at an average price of $30.08.
The provision for credit losses was $1.6 million for 2023 and $1.8 million for 2022.
The provision for credit losses was $2.6 million for 2024 and $1.6 million for 2023.
The table titled “Nonperforming Assets and Credit Ratios” shows the amount of nonperforming assets and loans past due 90 days and accruing interest outstanding for the past two years.
Nonperforming and Other Assets Nonperforming assets consist of nonaccrual loans, loans past due 90 days and accruing interest, other real estate owned (foreclosed properties), and repossessed assets. The table titled “Nonperforming Assets and Credit Ratios” shows the amount of nonperforming assets and loans past due 90 days and accruing interest outstanding for the past two years.
Noninterest Expenses Total noninterest expenses were $52.8 million and $43.1 million during 2023 and 2022, respectively. This represents an increase of $9.7 million or 22.52% during 2023. The following table provides the components of noninterest expense for the twelve months ended December 31, 2023 and 2022, which are included within the respective Consolidated Statements of Income headings.
Noninterest Expenses Total noninterest expenses were $51.3 million and $52.8 million during 2024 and 2023, respectively. This represents a decrease of $1.4 million or 2.70% during 2024. The following table provides the components of noninterest expense for the twelve months ended December 31, 2024 and 2023, which are included within the respective Consolidated Statements of Income headings.
The Company’s senior management monitors the liquidity position regularly and attempts to maintain a position which utilizes available funds most efficiently. As a result of the Company’s management of liquid assets and the ability to generate liquidity through liability funding, management believes that the Company maintains overall liquidity sufficient to satisfy its depositors’ requirements and meet its customers’ credit needs.
As a result 46 of the Company’s management of liquid assets and the ability to generate liquidity through liability funding, management believes that the Company maintains overall liquidity sufficient to satisfy its depositors’ requirements and meet its customers’ credit needs.
The tax rate used to calculate the tax benefit was the federal statutory rate of 21%. The table titled “Tax-Equivalent Net Interest Income” reconciles net interest income to tax-equivalent net interest income, which is not a measurement under GAAP, for the years ended December 31, 2023 and 2022.
The table titled “Tax-Equivalent Net Interest Income” reconciles net interest income to tax-equivalent net interest income, which is not a measurement under GAAP, for the years ended December 31, 2024 and 2023.
Interest-bearing deposits, which include NOW accounts, money market accounts, regular savings accounts and time deposits, increased $284.4 million or 36.21% from $785.3 million at December 31, 2022 to $1.07 billion at December 31, 2023.
Interest-bearing deposits, which include NOW accounts, money market accounts, regular savings accounts and time deposits, increased $99.3 million, or 9.28%, from $1.07 billion at December 31, 2023 to $1.17 billion at December 31, 2024.
Net interest income is derived from the volume of earning assets and the rates earned on those assets as compared to the cost of funds. Total interest income was $83.1 million for 2023 and $54.7 million for 2022, which represents an increase of $28.4 million or 52.01% for 2023.
Net interest income is derived from the volume of earning assets and the rates earned on those assets as compared to the cost of funds. Total interest income was $91.3 million for 2024 and $83.1 million for 2023, which represents an increase of $8.2 million or 9.90% for 2024.
The table titled “Volume and Rate Analysis” provides information about the effect of changes in financial assets and liabilities and changes in rates on net interest income. Tax-equivalent net interest income increased $1.1 million during 2023.
The following table titled “Volume and Rate Analysis (Tax-Equivalent Basis)” provides information about the effect of changes in financial assets and liabilities and changes in rates on net interest income. Tax-equivalent net interest income increased $977 thousand during 2024.
(2) Interest and yields on loans include the amortization/accretion of origination costs/fees as well as any purchase premiums or discounts. 29 Tax-Equivalent Net Interest Income (dollars in thousands) Twelve Months Ended December 31, 2023 2022 (in thousands) GAAP Financial Measurements: Interest Income - Loans $ 75,520 $ 50,682 Interest Income - Securities and Other Interest-Earnings Assets 7,608 4,004 Interest Expense - Deposits 23,630 2,941 Interest Expense - Other Borrowings 9,207 2,532 Total Net Interest Income $ 50,291 $ 49,213 Non-GAAP Financial Measurements: Add: Tax Benefit on Tax-Exempt Interest Income - Loans (1) $ 104 $ 45 Add: Tax Benefit on Tax-Exempt Interest Income - Securities (1) 4 59 Total Tax Benefit on Tax-Exempt Interest Income $ 108 $ 104 Tax-Equivalent Net Interest Income $ 50,399 $ 49,317 (1) Tax benefit was calculated using the federal statutory tax rate of 21%.
(2) Interest and yields on loans include the amortization/accretion of origination costs/fees as well as any purchase premiums or discounts. 30 Tax-Equivalent Net Interest Income (dollars in thousands) Twelve Months Ended December 31, 2024 2023 (in thousands) GAAP Financial Measurements: Interest Income - Loans $ 81,779 $ 75,520 Interest Income - Securities and Other Interest-Earnings Assets 9,542 7,573 Interest Expense - Deposits 31,854 23,630 Interest Expense - Other Borrowings 8,240 9,207 Total Net Interest Income $ 51,227 $ 50,256 Non-GAAP Financial Measurements: Add: Tax Benefit on Tax-Exempt Interest Income - Loans (1) $ 110 $ 104 Add: Tax Benefit on Tax-Exempt Interest Income - Securities (1) 4 4 Total Tax Benefit on Tax-Exempt Interest Income $ 114 $ 108 Tax-Equivalent Net Interest Income $ 51,341 $ 50,364 (1) Tax benefit was calculated using the federal statutory tax rate of 21%.
The following paragraphs provide information about activities which are included within the respective Consolidated Statements of Income headings. Variances that the Company believes require explanation are discussed below the table.
The following table provides the components of noninterest income for the twelve months ended December 31, 2024 and 2023, which are included within the respective Consolidated Statements of Income headings. The following paragraphs provide information about activities which are included within the respective Consolidated Statements of Income headings. Variances that the Company believes require explanation are discussed below the table.
During 2023, one of the Company's rehabilitation tax credit investments was finalized and the total amount of credits to be received was determined and certified. The effective tax rate is also impacted by tax-exempt income on investment securities and loans.
During both 2024 and 2023, qualified rehabilitation projects were completed and the corresponding tax credits were finalized with the total amount of credits to be received determined and certified. The effective tax rate is also impacted by tax-exempt income on investment securities and loans.
Additional information on the purpose and the methods for measuring the allowance for credit losses on loans are discussed in the Critical Accounting Policies section above. Charged-off loans were $741 thousand and $659 thousand for 2023 and 2022, respectively. Recoveries were $298 thousand and $1.3 million for 2023 and 2022, respectively. Net charge-offs were $443 thousand for 2023.
Additional information on the purpose and the methods for measuring the allowance for credit losses on loans is discussed in the Critical Accounting Policies section above. Charged-off loans were $2.8 million and $741 thousand for 2024 and 2023, respectively. Recoveries were $853 thousand and $298 thousand for 2024 and 2023, respectively.
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.
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.
Our common stock’s book value per share increased $1.63 or 5.60% to $30.78 per share at December 31, 2023 from $29.15 per share at December 31, 2022. During 2023, the Company paid $1.20 per share in dividends as compared to $1.15 per share for 2022.
Our common stock’s book value per share increased $2.74, or 8.90%, to $33.52 per share at December 31, 2024 from $30.78 per share at December 31, 2023. During 2024, the Company paid $1.21 per share in dividends as compared to $1.20 per share for 2023.
The difference between the amount of other real estate owned and the settlement proceeds is recognized as a gain or loss on the sale of other real estate owned.
The difference between the amount of other real estate owned and the settlement proceeds is recognized as a gain or loss on the sale of other real estate owned. A net gain of $7 thousand was recognized on the sale of other real estate owned during the twelve months ended December 31, 2023.
At December 31, 2023, the Company had total assets of $1.83 billion, net loans of $1.45 billion, total deposits of $1.51 billion and shareholders’ equity of $108.4 million.
At December 31, 2024, the Company had total assets of $1.87 billion, net loans of $1.45 billion, total deposits of $1.58 billion and shareholders’ equity of $119.0 million.
The ROE for the Company was 9.05% and 14.06% for 2023 and 2022, respectively. Net Interest Income Net interest income, the difference between total interest income and total interest expense, is the Company’s primary source of earnings. Net interest income was $50.3 million for 2023 and $49.2 million for 2022, which represents an increase of $1.1 million or 2.19%.
Net Interest Income Net interest income, the difference between total interest income and total interest expense, is the Company’s primary source of earnings. Net interest income was $51.2 million for 2024 and $50.3 million for 2023, which represents an increase of $971 thousand or 1.93%.
The gross amount of interest income that would have been recognized on nonaccrual loans was $140 thousand for 2023 and $93 thousand for 2022. None of this interest income was included in net income for 2023 or 2022. A total of 13 loans totaling $4.1 million were placed on nonaccrual during 2023.
The gross amount of interest income that would have been recognized on nonaccrual loans was $81 thousand for 2024 and $140 thousand for 2023. None of this interest income was included in net income for 2024 or 2023.
OPERATING STRATEGY The Bank is a locally owned and managed financial institution. This allows the Bank to be flexible and responsive in the products and services it offers. The Bank grows primarily by lending funds to local residents and businesses at a competitive price that reflects the inherent risk of lending.
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.
Nonperforming Assets and Credit Ratios (dollars in thousands) December 31, 2023 2022 Nonaccrual loans $ 5,645 $ 2,162 Loans past due 90 days and accruing interest 181 318 Other real estate owned and repossessed assets 304 108 Total nonperforming assets $ 6,130 $ 2,588 Allowance for credit losses on loans $ 14,493 $ 11,218 Gross loans $ 1,462,686 $ 1,323,783 Allowance for credit losses on loans to nonperforming assets 236 % 433 % Allowance for credit losses on loans to total loans 0.99 % 0.85 % Allowance for credit losses on loans to nonaccrual loans 257 % 519 % Nonaccrual loans to total loans 0.40 % 0.19 % Non-performing assets to period end loans, other real estate owned and repossessed assets 0.42 % 0.20 % Other potential problem loans are defined as performing loans that possess certain risks that management has identified that could result in the loans not being repaid in accordance with their terms.
There were two loan modifications to borrowers experiencing financial difficulty totaling $355 thousand during the year ended December 31, 2023 while no loans were modified during 2024. 41 Nonperforming Assets and Credit Ratios (dollars in thousands) December 31, 2024 2023 Nonaccrual loans $ 2,072 $ 5,645 Loans past due 90 days and accruing interest — 181 Other real estate owned and repossessed assets 514 304 Total nonperforming assets $ 2,586 $ 6,130 Allowance for credit losses on loans $ 15,027 $ 14,493 Gross loans $ 1,467,049 $ 1,462,686 Allowance for credit losses on loans to nonperforming assets 581 % 236 % Allowance for credit losses on loans to total loans 1.02 % 0.99 % Allowance for credit losses on loans to nonaccrual loans 725 % 257 % Nonaccrual loans to total loans 0.14 % 0.40 % Non-performing assets to period end loans, other real estate owned and repossessed assets 0.18 % 0.42 % Other potential problem loans are defined as performing loans that possess certain risks that management has identified that could result in the loans not being repaid in accordance with their terms.
Certificates of Deposit and Other Time Deposits Otherwise Uninsured (dollars in thousands) Within Three Months Three to Six Months Six to Twelve Months Over One Year Total Percent of Total Deposits December 31, 2023 $ 27,686 $ 33,392 $ 44,972 $ 130 $ 106,180 7.05 % CAPITAL RESOURCES Total shareholders’ equity on December 31, 2023 was $108.4 million, reflecting a percentage of total assets of 5.94% as compared to $101.7 million and 6.29% at December 31, 2022.
Certificates of Deposit and Other Time Deposits Otherwise Uninsured (dollars in thousands) Within Three Months Three to Six Months Six to Twelve Months Over One Year Total Percent of Total Deposits December 31, 2024 $ 36,881 $ 42,233 $ 45,898 $ 4,520 $ 129,532 8.22 % 44 CAPITAL RESOURCES Total shareholders’ equity on December 31, 2024 was $119.0 million, reflecting a percentage of total assets of 6.38% as compared to $108.4 million and 5.94% at December 31, 2023.
The average balance of non-maturity interest-bearing deposits increased $29.1 million or 4.65% from $624.3 million during 2022 to $653.3 million in 2023. The Company also actively pursued time deposits during 2023 adding $210.2 million, or 28.03%, in average balances, primarily in amounts less than $250,000.
The average balance of non-maturity interest-bearing deposits increased $4.9 million or 0.75% from $653.3 million during 2023 to $658.2 million in 2024. The Company also actively pursued time deposits during 2024 adding $94.1 million, or 28.01%, in average balances, primarily in amounts less than $250,000. These time deposits were obtained through pricing and customer outreach efforts.
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. 27 RESULTS OF OPERATIONS Net Income Net income for 2023 was $9.4 million, a decrease of $5.2 million or 35.56% from 2022’s net income of $14.5 million.
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. 28 RESULTS OF OPERATIONS Net Income Net income for 2024 was $15.3 million, an increase of $6.0 million or 63.97% from 2023’s net income of $9.4 million.
Maturities of Certificates of Deposit and Other Time Deposits of $250,000 and Greater (dollars in thousands) Within Three Months Three to Six Months Six to Twelve Months Over One Year Total Percent of Total Deposits December 31, 2023 $ 40,372 $ 44,333 $ 70,761 $ 380 $ 155,846 10.35 % 42 The table titled “Certificates of Deposit and Other Time Deposits Otherwise Uninsured" shows the balances of certificates of deposit that were in excess of the FDIC insurance limit at December 31, 2023.
Maturities of Certificates of Deposit and Other Time Deposits of $250,000 and Greater (dollars in thousands) Within Three Months Three to Six Months Six to Twelve Months Over One Year Total Percent of Total Deposits December 31, 2024 $ 48,631 $ 64,733 $ 72,898 $ 9,520 $ 195,782 12.43 % The table titled “Certificates of Deposit and Other Time Deposits Otherwise Uninsured" shows the balances of certificates of deposit that were in excess of the FDIC insurance limit at December 31, 2024.
Note 1 to the Consolidated Financial Statements presented in Item 8, Financial Statements and Supplementary Data, of the 2023 Form 10-K, provides additional information concerning the determination of the allowance for credit losses on loans. 26 FORWARD LOOKING STATEMENTS The Company makes forward looking statements in this report that are subject to risks and uncertainties.
Note 1 to the Consolidated Financial Statements presented in Item 8, Financial Statements and Supplementary Data, of the 2024 Form 10-K, provides additional information concerning the determination of the allowance for credit losses on loans. NON-GAAP FINANCIAL MEASURES This report refers to certain financial measures that are computed under a basis other than GAAP ("non-GAAP").
The total amount maturing within one year is $106.1 million or 99.88% of the total amount outstanding.
The total amount maturing within one year is $186.3 million, or 95.14%, of the total amount outstanding.
At December 31, 2022, the Bank was a qualifying institution and elected to utilize the CBLR to measure capital adequacy. As such, the related amounts and ratios for December 31, 2022, are presented below using the CLBR.
At December 31, 2022, the Bank was a qualifying institution and elected to utilize the CBLR to measure capital adequacy. During 2023, the Bank fell below the minimum ratio of 9% and therefore, the amounts and ratios at December 31, 2024 and 2023 are presented using the risk-based capital framework and not the CLBR.
Average Deposits and Rates Paid (dollars in thousands) Years Ended December 31, 2023 2022 Amount Rate Amount Rate Noninterest-bearing $ 442,539 $ 485,061 Interest-bearing: NOW accounts 244,277 2.14 % 173,843 0.38 % Money market accounts 257,496 1.74 % 270,725 0.43 % Regular savings accounts 151,556 0.12 % 179,709 0.07 % Time deposits: $250,000 and more 116,077 4.10 % 62,757 0.89 % Less than $250,000 219,809 4.08 % 62,907 0.69 % Total interest-bearing $ 989,215 2.39 % $ 749,941 0.39 % Total deposits $ 1,431,754 $ 1,235,002 Noninterest-bearing demand deposits, which are comprised of checking accounts, decreased $42.1 million or 8.80% from $478.8 million at December 31, 2022 to $436.6 million at December 31, 2023.
Average Deposits and Rates Paid (dollars in thousands) Years Ended December 31, 2024 2023 Amount Rate Amount Rate Noninterest-bearing $ 412,646 $ 442,539 Interest-bearing: NOW accounts 259,372 2.35 % 244,277 2.14 % Money market accounts 263,960 2.27 % 257,496 1.74 % Regular savings accounts 134,893 0.12 % 151,556 0.12 % Time deposits: $250,000 and more 153,398 4.73 % 116,077 4.10 % Less than $250,000 276,580 4.47 % 219,809 4.08 % Total interest-bearing $ 1,088,203 2.93 % $ 989,215 2.39 % Total deposits $ 1,500,849 $ 1,431,754 43 Noninterest-bearing demand deposits, which are comprised of checking accounts, decreased $30.4 million, or 6.97%, from $436.6 million at December 31, 2023 to $406.2 million at December 31, 2024.
Subsequent to the sale of these assets, the Company retained ownership of marine vessel retail loans, which had a balance of $251.2 million as of December 31, 2023. At present, the Company expects to hold the retained outstanding loans until they are ultimately repaid.
Subsequent to the sale of these assets, the Company retained ownership of approximately $260.5 million of marine vessel retail loans which continue to constitute a significant portion of the Company's assets, revenues, and earnings. At present, the Company expects to hold the retained outstanding loans until they are ultimately repaid.
The Company had 241 full-time equivalent employees (FTEs) at both December 31, 2022 and December 31, 2023. As part of the sale of the marine finance assets during the third quarter, the Company reduced its workforce associated with the marine lending division as it expects to cease accepting new marine lending business.
As part of the sale of the marine finance assets during the third quarter of 2023, the Company reduced its workforce associated with the marine lending division and ceased accepting new marine lending business.
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.
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.
The ratio of net loans to deposits decreased during the year from 104.72% to 97.10% at December 31, 2022 and December 31, 2023, respectively. Loans secured by real estate were $1.04 billion, or 71.51%, and $928.3 million, or 70.52%, of total loans at December 31, 2023 and 2022, respectively. This represents an increase of $112.3 million or 12.10% for 2023.
The ratio of gross loans, net of deferred costs and premiums, to deposits decreased during the year from 97.10% to 93.14% at December 31, 2023 and December 31, 2024, respectively. Loans secured by real estate were $1.10 billion, or 75.10%, and $1.04 billion, or 71.51%, of total loans at December 31, 2024 and 2023, respectively.
Consumer installment loans were $42.4 million, or 2.92%, and $44.8 million, or 3.41%, of total loans at December 31, 2023 and 2022, respectively. This represents an decrease of $2.4 million or 5.40% for 2023. Commercial and industrial loans were $107.8 million, or 7.41%, and $99.6 million, or 7.57%, of total loans at December 31, 2023 and 2022, respectively.
This represents an increase of $56.3 million, or 5.41%, for 2024. Consumer installment loans were $31.0 million, or 2.12%, and $42.4 million, or 2.92%, of total loans at December 31, 2024 and 2023, respectively. This represents a decrease of $11.4 million, or 26.88%, for 2024.
The table titled “Maturities of Certificates of Deposit and Other Time Deposits of $250,000 and Greater” shows the amount of certificates of deposit of $250,000 and more maturing within the time periods indicated at December 31, 2023. The total amount maturing within one year is $155.5 million or 99.76% of the total amount outstanding.
Core deposits totaled $1.30 billion, or 82.49%, and $1.26 billion, or 85.54%, of total deposits at December 31, 2024 and 2023, respectively. The table titled “Maturities of Certificates of Deposit and Other Time Deposits of $250,000 and Greater” shows the amount of certificates of deposit of $250,000 and more maturing within the time periods indicated at December 31, 2024.
Total interest expense was $32.8 million for 2023 and $5.5 million for 2022, which represents an increase of $27.4 million or 499.98% in 2023. The increase in total interest income, total interest expense and net interest income during 2023 was driven by the growth in interest-earning assets, interest-bearing liabilities and the rising interest rate environment.
Total interest expense was $40.1 million for 2024 and $32.8 million for 2023, which represents an increase of $7.3 million or 22.10% in 2024. The increase in total interest income, total interest expense and net interest income during 2024 was driven by higher rates, growth in interest-bearing liabilities and, to a lesser extent, growth in interest-earning assets.
Total capital is comprised of Tier 1 capital plus the allowable portion of the allowance for loan losses and any excess trust preferred securities that do not qualify as Tier 1 capital. 43 Effective January 1, 2015, the Federal Reserve issued final risk-based capital rules to align with the Basel III regulatory capital framework and meet certain requirements of the Dodd-Frank Act.
Effective January 1, 2015, the Federal Reserve issued final risk-based capital rules to align with the Basel III regulatory capital framework and meet certain requirements of the Dodd-Frank Act.
The net interest margin was 2.96% for 2023 and 3.68% for 2022. The net interest margin is calculated by dividing tax-equivalent net interest income by total average earnings assets. Tax-equivalent net interest income 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.
Tax-equivalent net interest income 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 the federal statutory rate of 21%.
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 can co-approve consumer, home equity lines of credit and home equity loan requests up to their stated authorities.
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 on their level of experience and job function.
The calculation of the efficiency ratio for the twelve months ended December 31, 2023 and 2022 was as follows: December 31, 2023 2022 (in thousands) Summary of Operating Results: Noninterest expenses $ 52,754 $ 43,057 Less: (Gain) on other real estate owned (7 ) — Adjusted noninterest expenses $ 52,761 $ 43,057 Net interest income $ 50,291 $ 49,213 Noninterest income $ 14,745 $ 13,345 Less: (Loss) on sales of securities — (737 ) Less: Gain on the sale of marine finance assets 435 — Less: Gain (loss) on the sale and disposal of premises and equipment 14 (11 ) Adjusted noninterest income $ 14,296 $ 14,093 Tax equivalent adjustment (1) 108 104 Total net interest income and noninterest income, adjusted $ 64,695 $ 63,410 Efficiency ratio 81.55 % 67.90 % (1) Includes tax-equivalent adjustments on loans and securities using the federal statutory tax rate of 21%.
The Company calculates and reviews this ratio as a means of evaluating operational efficiency. 35 The calculation of the efficiency ratio for the twelve months ended December 31, 2024 and 2023 was as follows: December 31, 2024 2023 (in thousands) Summary of Operating Results: Noninterest expenses (GAAP) $ 51,332 $ 52,754 Less: Loss (Gain) on other real estate owned and repossessed assets 204 (7 ) Adjusted noninterest expenses (non-GAAP) $ 51,128 $ 52,761 Net interest income $ 51,227 $ 50,256 Noninterest income (GAAP) $ 21,557 $ 14,780 Less: Gain on the sale of marine finance assets — 435 Less: Gain on the sale and disposal of premises and equipment 3,863 14 Less: Life insurance proceeds 935 — Adjusted noninterest income (non-GAAP) $ 16,759 $ 14,331 Tax equivalent adjustment (1) 114 108 Total net interest income and noninterest income, adjusted (non-GAAP) $ 68,100 $ 64,695 Efficiency ratio 75.08 % 81.55 % (1) Includes tax-equivalent adjustments on loans and securities using the federal statutory tax rate of 21%.
The tax-equivalent yield on earning assets increased 81 basis points from 2022 to 2023. The tax-equivalent yield on securities increased 41 basis points from 2022 to 2023. The tax-equivalent yield on loans increased 79 basis points from 2022 to 2023. The increase in the tax-equivalent yield on earning assets resulted mostly from the increase in the tax-equivalent yield on loans.
The tax-equivalent yield on earning assets increased 45 basis points from 2023 to 2024. The tax-equivalent yield on securities increased 13 basis points from 2023 to 2024. The tax-equivalent yield on loans increased 33 basis points from 2023 to 2024.
Total money market account balances decreased $1.7 million or 0.62% from $265.3 million at December 31, 2022 to $263.6 million at December 31, 2023 and regular savings accounts decreased $33.5 million or 19.39% from $173.0 million at December 31, 2022 to $139.5 million at December 31, 2023.
Total money market account balances increased $5.5 million, or 2.08%, from $263.6 million at December 31, 2023 to $269.1 million at December 31, 2024 and regular savings accounts decreased $8.1 million, or 5.79%, from $139.5 million at December 31, 2023 to $131.4 million at December 31, 2024.
At December 31, 2023 and 2022, the Company had remaining credit availability in the amounts of $169.6 million and $105.7 million, respectively, with the Federal Home Loan Bank of Atlanta. The Company also had unused lines of credit with financial institutions of $78.0 million at December 31, 2023 and 2022.
The Company also had unused lines of credit with financial institutions of $78.0 million at December 31, 2024 and 2023.
The table titled “Maturity Schedule of Selected Loans” shows the different loan categories and the period during which they mature. For loans maturing in more than one year, the table also shows a breakdown between fixed rate loans and floating rate loans. The table indicates that $567.1 million or 38.97% of the loan portfolio matures within five years.
At present, the Company expects to hold the retained outstanding loans until they are ultimately repaid. The table titled “Maturity Schedule of Selected Loans” shows the various loan categories and the period during which they mature. For loans maturing in more than one year, the table also shows a breakdown between fixed rate loans and floating rate loans.
The provision for credit losses in 2023 reflects loan growth during the year, largely in the residential and commercial real estate portfolios. Net charge-offs during 2023 totaled $443 thousand. The provision for loan losses in 2022 reflects loan growth in the portfolio partially offset by net recoveries of $601 thousand during 2022.
The provision for credit losses in 2023 reflects loan growth during the year, largely in the residential and commercial real estate portfolios. Net charge-offs during 2023 totaled $443 thousand. The Company is committed to maintaining an allowance that it believes will adequately absorb the current expected losses in the loan portfolio.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeCredit quality information by class at December 31, 2023 and December 31, 2022 was as follows: 70 December 31, 2023 Term Loan Amortized Cost Basis by Origination Year (in thousands) 2023 2022 2021 2020 2019 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total Mortgage real estate loans: Construction & Secured by Farmland Pass $ 34,617 $ 21,460 $ 7,584 $ 4,851 $ 2,389 $ 2,829 $ 7,052 $ 57 $ 80,839 Special Mention — 1,173 — — 1,040 815 — — 3,028 Classified — — — 145 — 133 — — 278 Total $ 34,617 $ 22,633 $ 7,584 $ 4,996 $ 3,429 $ 3,777 $ 7,052 $ 57 $ 84,145 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — HELOCs Pass $ — $ — $ — $ — $ — $ — $ 47,610 $ — $ 47,610 Special Mention — — — — — — 49 — 49 Classified — — — — — — 15 — 15 Total $ — $ — $ — $ — $ — $ — $ 47,674 $ — $ 47,674 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Residential First Lien - Investor Pass $ 19,394 $ 23,205 $ 31,371 $ 10,667 $ 4,054 $ 22,265 $ — $ 367 $ 111,323 Special Mention — 1,273 — 1,180 626 1,944 — — 5,023 Classified — — 1,085 — — — — — 1,085 Total $ 19,394 $ 24,478 $ 32,456 $ 11,847 $ 4,680 $ 24,209 $ — $ 367 $ 117,431 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Residential First Lien - Owner Occupied Pass $ 59,007 $ 33,793 $ 23,749 $ 35,783 $ 3,932 $ 20,413 $ — $ 589 $ 177,266 Special Mention — — — — — 258 — — 258 Classified — — — — — 656 — — 656 Total $ 59,007 $ 33,793 $ 23,749 $ 35,783 $ 3,932 $ 21,327 $ — $ 589 $ 178,180 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Residential Junior Liens Pass $ 2,562 $ 2,902 $ 3,429 $ 1,486 $ 606 $ 1,613 $ — $ 189 $ 12,787 Special Mention — — — — — — — — — Classified — — — — — 27 — 17 44 Total $ 2,562 $ 2,902 $ 3,429 $ 1,486 $ 606 $ 1,640 $ — $ 206 $ 12,831 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Commercial - Owner Occupied Pass $ 36,736 $ 68,868 $ 40,707 $ 22,871 $ 13,971 $ 50,059 $ 3,088 $ 4,364 $ 240,664 Special Mention — 3,817 64 2,145 1,877 1,402 — — 9,305 Classified — — 967 498 — 8 — 14 1,487 Total $ 36,736 $ 72,685 $ 41,738 $ 25,514 $ 15,848 $ 51,469 $ 3,088 $ 4,378 $ 251,456 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Commercial - Non-Owner Occupied & Multifamily Pass $ 56,510 $ 88,518 $ 64,005 $ 65,075 $ 15,563 $ 34,619 $ 1,196 $ 5,651 $ 331,137 Special Mention 624 4,748 3,685 5,060 — — — — 14,117 Classified — — — 2,355 — 1,270 — — 3,625 Total $ 57,134 $ 93,266 $ 67,690 $ 72,490 $ 15,563 $ 35,889 $ 1,196 $ 5,651 $ 348,879 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Commercial and industrial loans: SBA PPP loans Pass $ — $ — $ 51 $ — $ — $ — $ — $ — $ 51 Special Mention — — — — — — — — — Classified — — — — — — — — — Total $ — $ — $ 51 $ — $ — $ — $ — $ — $ 51 71 December 31, 2023 Term Loan Amortized Cost Basis by Origination Year (in thousands) 2023 2022 2021 2020 2019 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Other commercial and industrial loans Pass $ 15,052 $ 26,798 $ 8,659 $ 4,824 $ 2,629 $ 3,898 $ 43,188 $ 1,005 $ 106,053 Special Mention 1,125 — — 13 1 9 220 344 1,712 Classified — — — 3 — — 9 — 12 Total $ 16,177 $ 26,798 $ 8,659 $ 4,840 $ 2,630 $ 3,907 $ 43,417 $ 1,349 $ 107,777 Current period gross charge-offs $ 231 $ 81 $ — $ — $ — $ — $ — $ — $ 312 Marine loans Pass $ 86,001 $ 128,456 $ 35,492 $ 667 $ — $ — $ — $ — $ 250,616 Special Mention — — — — — — — — — Classified 367 185 — — — — — — 552 Total $ 86,368 $ 128,641 $ 35,492 $ 667 $ — $ — $ — $ — $ 251,168 Current period gross charge-offs $ — $ 126 $ — $ — $ — $ — $ — $ — $ 126 Consumer loans Pass $ 3,427 $ 13,950 $ 6,205 $ 8,687 $ 1,747 $ 21 $ 8,354 $ 28 $ 42,419 Special Mention — — — — — — — — — Classified — — — — — — — — — Total $ 3,427 $ 13,950 $ 6,205 $ 8,687 $ 1,747 $ 21 $ 8,354 $ 28 $ 42,419 Current period gross charge-offs $ — $ 3 $ — $ 66 $ — $ — $ 52 $ — $ 121 Overdrafts Pass $ — $ — $ — $ — $ — $ — $ — $ — $ — Special Mention — — — — — — — — — Classified 253 — — — — — — — 253 Total $ 253 $ — $ — $ — $ — $ — $ — $ — $ 253 Current period gross charge-offs $ 182 $ — $ — $ — $ — $ — $ — $ — $ 182 Other loans Pass $ 69 $ 10,176 $ — $ — $ — $ 2,587 $ 55 $ 8 $ 12,895 Special Mention — — — — — — — — — Classified — — — — — — — — — Total $ 69 $ 10,176 $ — $ — $ — $ 2,587 $ 55 $ 8 $ 12,895 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Total by Risk Category Pass $ 313,375 $ 418,126 $ 221,252 $ 154,911 $ 44,891 $ 138,304 $ 110,543 $ 12,258 $ 1,413,660 Special Mention 1,749 11,011 3,749 8,398 3,544 4,428 269 344 33,492 Classified 620 185 2,052 3,001 — 2,094 24 31 8,007 Total $ 315,744 $ 429,322 $ 227,053 $ 166,310 $ 48,435 $ 144,826 $ 110,836 $ 12,633 $ 1,455,159 Total current period gross charge-offs $ 413 $ 210 $ — $ 66 $ — $ — $ 52 $ — $ 741 72 As of December 31, 2022 (in thousands) INTERNAL RISK RATING GRADES Pass Special Mention Substandard Doubtful Loss Total Commercial - Non Real Estate: Commercial & Industrial $ 247,061 $ 526 $ 72 $ — $ — $ 247,659 Commercial Real Estate: Owner Occupied 212,074 20,020 21 — — 232,115 Non-owner occupied 257,625 16,189 1,706 — — 275,520 Construction and Farmland: Residential 11,235 — 21 — — 11,256 Commercial 69,427 153 8,815 — — 78,395 Residential: Equity Lines 43,124 310 154 — — 43,588 Single family 251,247 5,972 951 — — 258,170 Multifamily 39,806 — — — — 39,806 All other loans 12,721 — — — — 12,721 Total $ 1,144,320 $ 43,170 $ 11,740 $ — $ — $ 1,199,230 Performing Nonperforming Consumer Credit Exposure by Payment Activity $ 116,908 $ 202 NOTE 5.
Biggest changeCredit quality information by class at December 31, 2024 was as follows: 71 December 31, 2024 Term Loan Amortized Cost Basis by Origination Year (in thousands) 2024 2023 2022 2021 2020 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total Mortgage real estate loans: Construction & Secured by Farmland Pass $ 33,338 $ 25,777 $ 13,722 $ 3,830 $ 4,758 $ 3,908 $ 3,055 $ — $ 88,388 Special Mention — 6,781 — — — — — — 6,781 Classified — — — — — 31 — — 31 Total $ 33,338 $ 32,558 $ 13,722 $ 3,830 $ 4,758 $ 3,939 $ 3,055 $ — $ 95,200 Current period gross charge-offs $ — $ — $ — $ — $ — $ 94 $ 94 HELOCs Pass $ — $ — $ — $ — $ — $ — $ 50,454 $ — $ 50,454 Special Mention — — — — — — 192 — 192 Classified — — — — — — — — — Total $ — $ — $ — $ — $ — $ — $ 50,646 $ — $ 50,646 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ 14 $ — $ 14 Residential First Lien - Investor Pass $ 7,567 $ 15,074 $ 18,816 $ 27,722 $ 10,729 $ 21,201 $ — $ 559 $ 101,668 Special Mention — 696 370 1,053 — 295 — — 2,414 Classified — — — — — — — 1,828 1,828 Total $ 7,567 $ 15,770 $ 19,186 $ 28,775 $ 10,729 $ 21,496 $ — $ 2,387 $ 105,910 Current period gross charge-offs $ — $ — $ — $ 150 $ — $ — $ — $ — $ 150 Residential First Lien - Owner Occupied Pass $ 25,982 $ 57,230 $ 33,257 $ 22,387 $ 33,514 $ 19,438 $ — $ 387 $ 192,195 Special Mention 45 623 — — — 592 — — 1,260 Classified — — — — — 610 — — 610 Total $ 26,027 $ 57,853 $ 33,257 $ 22,387 $ 33,514 $ 20,640 $ — $ 387 $ 194,065 Current period gross charge-offs $ — $ — $ — $ — $ — $ 103 $ — $ — $ 103 Residential Junior Liens Pass $ 991 $ 2,191 $ 2,484 $ 2,942 $ 555 $ 1,762 $ — $ 175 $ 11,100 Special Mention — — — — 70 — — — 70 Classified — — — — — — — 14 14 Total $ 991 $ 2,191 $ 2,484 $ 2,942 $ 625 $ 1,762 $ — $ 189 $ 11,184 Current period gross charge-offs $ — $ — $ — $ — $ — $ 10 $ — $ — $ 10 Commercial - Owner Occupied Pass $ 29,892 $ 32,228 $ 75,213 $ 36,558 $ 21,827 $ 45,648 $ 2,623 $ 2,856 $ 246,845 Special Mention — 364 3,995 5,523 — 14,770 — — 24,652 Classified — — — 739 — — — — 739 Total $ 29,892 $ 32,592 $ 79,208 $ 42,820 $ 21,827 $ 60,418 $ 2,623 $ 2,856 $ 272,236 Current period gross charge-offs $ — $ — $ — $ — $ — $ 7 $ — $ — $ 7 Commercial - Non-Owner Occupied & Multifamily Pass $ 28,275 $ 43,596 $ 106,921 $ 55,945 $ 65,561 $ 44,949 $ 5,397 $ 5,834 $ 356,478 Special Mention — — 1,384 7,584 1,446 788 — — 11,202 Classified — — — — — — — — — Total $ 28,275 $ 43,596 $ 108,305 $ 63,529 $ 67,007 $ 45,737 $ 5,397 $ 5,834 $ 367,680 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Commercial and industrial loans: SBA PPP loans Pass $ — $ — $ — $ 28 $ — $ — $ — $ — $ 28 Special Mention — — — — — — — — — Classified — — — — — — — — — Total $ — $ — $ — $ 28 $ — $ — $ — $ — $ 28 72 December 31, 2024 Term Loan Amortized Cost Basis by Origination Year (in thousands) 2024 2023 2022 2021 2020 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Other commercial and industrial loans Pass $ 28,978 $ 8,605 $ 17,187 $ 4,512 $ 3,324 $ 3,614 $ 37,618 $ 2,064 $ 105,902 Special Mention 411 1,095 — 1,915 — 3 — 86 3,510 Classified — 903 — — — — — — 903 Total $ 29,389 $ 10,603 $ 17,187 $ 6,427 $ 3,324 $ 3,617 $ 37,618 $ 2,150 $ 110,315 Current period gross charge-offs $ — $ 32 $ 8 $ — $ 63 $ — $ 135 $ — $ 238 Marine loans Pass $ — $ 68,970 $ 110,481 $ 30,011 $ 633 $ — $ — $ — $ 210,095 Special Mention — — — — — — — — — Classified — — — — — — — — — Total $ — $ 68,970 $ 110,481 $ 30,011 $ 633 $ — $ — $ — $ 210,095 Current period gross charge-offs $ — $ 1,371 $ 199 $ 208 $ — $ — $ — $ — $ 1,778 Consumer loans Pass $ 2,700 $ 1,987 $ 10,787 $ 5,274 $ 7,221 $ 1,117 $ 1,834 $ 13 $ 30,933 Special Mention — — — — — — — — — Classified — — — 84 — — — — 84 Total $ 2,700 $ 1,987 $ 10,787 $ 5,358 $ 7,221 $ 1,117 $ 1,834 $ 13 $ 31,017 Current period gross charge-offs $ — $ 13 $ 4 $ 47 $ 167 $ — $ 78 $ — $ 309 Overdrafts Pass $ — $ — $ — $ — $ — $ — $ — $ — $ — Special Mention — — — — — — — — — Classified 309 — — — — — — — 309 Total $ 309 $ — $ — $ — $ — $ — $ — $ — $ 309 Current period gross charge-offs $ 141 $ — $ — $ — $ — $ — $ — $ — $ 141 Other loans Pass $ — $ 54 $ 9,500 $ — $ — $ 2,281 $ 76 $ — $ 11,911 Special Mention — — — — — — — — — Classified — — — — — — — — — Total $ — $ 54 $ 9,500 $ — $ — $ 2,281 $ 76 $ — $ 11,911 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Total by Risk Category Pass $ 157,723 $ 255,712 $ 398,368 $ 189,209 $ 148,122 $ 143,918 $ 101,057 $ 11,888 $ 1,405,997 Special Mention 456 9,559 5,749 16,075 1,516 16,448 192 86 50,081 Classified 309 903 — 823 — 641 — 1,842 4,518 Total $ 158,488 $ 266,174 $ 404,117 $ 206,107 $ 149,638 $ 161,007 $ 101,249 $ 13,816 $ 1,460,596 Total current period gross charge-offs $ 141 $ 1,416 $ 211 $ 405 $ 230 $ 214 $ 227 $ — $ 2,844 Credit quality information by class at December 31, 2023 was as follows: 73 December 31, 2023 Term Loans Amortized Cost Basis by Origination Year (in thousands) 2023 2022 2021 2020 2019 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total Mortgage real estate loans: Construction & Secured by Farmland Pass $ 34,617 $ 21,460 $ 7,584 $ 4,851 $ 2,389 $ 2,829 $ 7,052 $ 57 $ 80,839 Special Mention — 1,173 — — 1,040 815 — — 3,028 Classified — — — 145 — 133 — — 278 Total $ 34,617 $ 22,633 $ 7,584 $ 4,996 $ 3,429 $ 3,777 $ 7,052 $ 57 $ 84,145 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — HELOCs Pass $ — $ — $ — $ — $ — $ — $ 47,610 $ — $ 47,610 Special Mention — — — — — — 49 — 49 Classified — — — — — — 15 — 15 Total $ — $ — $ — $ — $ — $ — $ 47,674 $ — $ 47,674 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Residential First Lien - Investor Pass $ 19,394 $ 23,205 $ 31,371 $ 10,667 $ 4,054 $ 22,265 $ — $ 367 $ 111,323 Special Mention — 1,273 — 1,180 626 1,944 — — 5,023 Classified — — 1,085 — — — — — 1,085 Total $ 19,394 $ 24,478 $ 32,456 $ 11,847 $ 4,680 $ 24,209 $ — $ 367 $ 117,431 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Residential First Lien - Owner Occupied Pass $ 59,007 $ 33,793 $ 23,749 $ 35,783 $ 3,932 $ 20,413 $ — $ 589 $ 177,266 Special Mention — — — — — 258 — — 258 Classified — — — — — 656 — — 656 Total $ 59,007 $ 33,793 $ 23,749 $ 35,783 $ 3,932 $ 21,327 $ — $ 589 $ 178,180 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Residential Junior Liens Pass $ 2,562 $ 2,902 $ 3,429 $ 1,486 $ 606 $ 1,613 $ — $ 189 $ 12,787 Special Mention — — — — — — — — — Classified — — — — — 27 — 17 44 Total $ 2,562 $ 2,902 $ 3,429 $ 1,486 $ 606 $ 1,640 $ — $ 206 $ 12,831 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Commercial - Owner Occupied Pass $ 36,736 $ 68,868 $ 40,707 $ 22,871 $ 13,971 $ 50,059 $ 3,088 $ 4,364 $ 240,664 Special Mention — 3,817 64 2,145 1,877 1,402 — — 9,305 Classified — — 967 498 — 8 — 14 1,487 Total $ 36,736 $ 72,685 $ 41,738 $ 25,514 $ 15,848 $ 51,469 $ 3,088 $ 4,378 $ 251,456 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Commercial - Non-Owner Occupied & Multifamily Pass $ 56,510 $ 88,518 $ 64,005 $ 65,075 $ 15,563 $ 34,619 $ 1,196 $ 5,651 $ 331,137 Special Mention 624 4,748 3,685 5,060 — — — — 14,117 Classified — — — 2,355 — 1,270 — — 3,625 Total $ 57,134 $ 93,266 $ 67,690 $ 72,490 $ 15,563 $ 35,889 $ 1,196 $ 5,651 $ 348,879 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Commercial and industrial loans: SBA PPP loans Pass $ — $ — $ 51 $ — $ — $ — $ — $ — $ 51 Special Mention — — — — — — — — — Classified — — — — — — — — — Total $ — $ — $ 51 $ — $ — $ — $ — $ — $ 51 74 December 31, 2023 Term Loans Amortized Cost Basis by Origination Year (in thousands) 2023 2022 2021 2020 2019 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Other commercial and industrial loans Pass $ 15,052 $ 26,798 $ 8,659 $ 4,824 $ 2,629 $ 3,898 $ 43,188 $ 1,005 $ 106,053 Special Mention 1,125 — — 13 1 9 220 344 1,712 Classified — — — 3 — — 9 — 12 Total $ 16,177 $ 26,798 $ 8,659 $ 4,840 $ 2,630 $ 3,907 $ 43,417 $ 1,349 $ 107,777 Current period gross charge-offs $ 231 $ 81 $ — $ — $ — $ — $ — $ — $ 312 Marine loans Pass $ 86,001 $ 128,456 $ 35,492 $ 667 $ — $ — $ — $ — $ 250,616 Special Mention — — — — — — — — — Classified 367 185 — — — — — — 552 Total $ 86,368 $ 128,641 $ 35,492 $ 667 $ — $ — $ — $ — $ 251,168 Current period gross charge-offs $ — $ 126 $ — $ — $ — $ — $ — $ — $ 126 Consumer loans Pass $ 3,427 $ 13,950 $ 6,205 $ 8,687 $ 1,747 $ 21 $ 8,354 $ 28 $ 42,419 Special Mention — — — — — — — — — Classified — — — — — — — — — Total $ 3,427 $ 13,950 $ 6,205 $ 8,687 $ 1,747 $ 21 $ 8,354 $ 28 $ 42,419 Current period gross charge-offs $ — $ 3 $ — $ 66 $ — $ — $ 52 $ — $ 121 Overdrafts Pass $ — $ — $ — $ — $ — $ — $ — $ — $ — Special Mention — — — — — — — — — Classified 253 — — — — — — — 253 Total $ 253 $ — $ — $ — $ — $ — $ — $ — $ 253 Current period gross charge-offs $ 182 $ — $ — $ — $ — $ — $ — $ — $ 182 Other loans Pass $ 69 $ 10,176 $ — $ — $ — $ 2,587 $ 55 $ 8 $ 12,895 Special Mention — — — — — — — — — Classified — — — — — — — — — Total $ 69 $ 10,176 $ — $ — $ — $ 2,587 $ 55 $ 8 $ 12,895 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Total by Risk Category Pass $ 313,375 $ 418,126 $ 221,252 $ 154,911 $ 44,891 $ 138,304 $ 110,543 $ 12,258 $ 1,413,660 Special Mention 1,749 11,011 3,749 8,398 3,544 4,428 269 344 33,492 Classified 620 185 2,052 3,001 — 2,094 24 31 8,007 Total $ 315,744 $ 429,322 $ 227,053 $ 166,310 $ 48,435 $ 144,826 $ 110,836 $ 12,633 $ 1,455,159 Total current period gross charge-offs $ 413 $ 210 $ — $ 66 $ — $ — $ 52 $ — $ 741 75 NOTE 5.
Financial Statements and Supplementary Data Report of Independent Registered Public Accounting Firm To the Board of Directors and Shareholders Eagle Financial Services, Inc.
Financial Statements and Supplementary Data Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of Eagle Financial Services, Inc.
Loan Swaps The Company enters into interest rate swaps with certain qualifying commercial loan customers to meet their interest rate risk management needs. The Company simultaneously enters into interest rate swaps with dealer counterparties, with identical notional amounts and offsetting terms.
The Company enters into interest rate swaps with certain qualifying commercial loan customers to meet their interest rate risk management needs. The Company simultaneously enters into interest rate swaps with dealer counterparties, with identical notional amounts and offsetting terms.
In addition to the quantitative component, the collectively evaluated ACL also includes a qualitative component which aggregates management’s assessment of available information relevant to assessing collectability that is not captured in the quantitative loss estimation process. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.
In addition to the quantitative component, the collectively evaluated ACL also includes a qualitative component which aggregates management’s assessment of available information relevant to assessing collectability that is not captured in the quantitative loss estimation process. This evaluation 50 is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.
Control over transferred assets is deemed to be surrendered when the assets have been isolated from the Company, the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.
Control over transferred assets is deemed to be surrendered when the assets have been isolated from the Company, the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and 61 the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.
Refer to Note 13 for further discussion of the Company's accounting for its leasing arrangements. 59 Other Real Estate Owned Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at the fair value of the property, less estimated selling costs at the date of foreclosure.
Refer to Note 13 for further discussion of the Company's accounting for its leasing arrangements. Other Real Estate Owned Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at the fair value of the property, less estimated selling costs at the date of foreclosure.
The Company concluded that a credit loss does not exist in its securities portfolio at December 31, 2023, an d no impairment loss has been recognized based on the fact that (1) changes in fair value were caused primarily by fluctuations in interest rates, (2) securities with unrealized losses had generally high credit quality, (3) the Company intends to hold these investments in debt securities to maturity and it is more-likely-than-not that the Company will not be required to sell these investments before a recovery of its investment, and (4) issuers have continued to make timely payments of principal and interest.
The Company concluded that a credit loss does not exist in its securities portfolio at December 31, 2024, an d no impairment loss has been recognized based on the fact that (1) changes in fair value were caused primarily by fluctuations in interest rates, (2) securities with unrealized losses had generally high credit quality, (3) the Company intends to hold these investments in debt securities to maturity and it is more-likely-than-not that the Company will not be required to sell these investments before a recovery of its investment, and (4) issuers have continued to make timely payments of principal and interest.
Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.
Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.
The three levels are defined as follows: • Level 1 Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. • Level 2 Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. • Level 3 Inputs to the valuation methodology are unobservable and significant to the fair value measurement. 85 The following section provides a description of the valuation methodologies used for instruments measured at fair value on a recurring basis, as well as the general classification of such instruments pursuant to the valuation hierarchy: Securities Available for Sale: Where quoted prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy.
The three levels are defined as follows: • Level 1 Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. • Level 2 Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. • Level 3 Inputs to the valuation methodology are unobservable and significant to the fair value measurement. 87 The following section provides a description of the valuation methodologies used for instruments measured at fair value on a recurring basis, as well as the general classification of such instruments pursuant to the valuation hierarchy: Securities Available for Sale: Where quoted prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy.
Factors considered by management include economic conditions including reasonable and supportable forecasts of economic conditions; the nature and volume of the loan portfolio; the volume and severity of delinquencies and adversely classified loan balances; ending policy and procedures; credit administration and lending staff; loan review; concentrations of credit and the value of underlying collateral.
Factors considered by management include economic conditions including reasonable and supportable forecasts of economic 60 conditions; the nature and volume of the loan portfolio; the volume and severity of delinquencies and adversely classified loan balances; ending policy and procedures; credit administration and lending staff; loan review; concentrations of credit and the value of underlying collateral.
Revenue and expenses from operations and changes in the valuation allowance are included in the (gain) loss on other real estate owned line item in the consolidated statements of income. Bank Owned Life Insurance The Company has purchased life insurance on certain key individuals.
Revenue and expenses from operations and changes in the valuation allowance are included in the gain on other real estate owned line item in the consolidated statements of income. Bank Owned Life Insurance The Company has purchased life insurance on certain key individuals.
The ability of the Company’s debtors to honor their contracts is dependent upon the real estate and general economic conditions in these areas. 56 Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off generally are reported at their outstanding unpaid principal balances adjusted for the charge-offs, unearned discounts, any deferred fees or costs on originated loans, and the allowance for credit losses.
The ability of the Company’s debtors to honor their contracts is dependent upon the real estate and general economic conditions in these areas. 58 Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off generally are reported at their outstanding unpaid principal balances adjusted for the charge-offs, unearned discounts, any deferred fees or costs on originated loans, and the allowance for credit losses.
The investment in these securities is recorded at cost and they are reported on the Company’s consolidated balance sheet as restricted investments. 55 Allowance for Credit Losses on Securities For available for sale debt securities in an unrealized loss position, management first assesses whether the Company intends to sell, or if it is likely that the Company will be required to sell the security before recovery of its amortized cost basis.
The investment in these securities is recorded at cost and they are reported on the Company’s consolidated balance sheet as restricted investments. 57 Allowance for Credit Losses on Securities For available for sale debt securities in an unrealized loss position, management first assesses whether the Company intends to sell, or if it is likely that the Company will be required to sell the security before recovery of its amortized cost basis.
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. 57 Construction and Land Development Lending There are two characteristics of construction lending which impact its overall risk as compared to residential mortgage lending.
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. 59 Construction and Land Development Lending There are two characteristics of construction lending which impact its overall risk as compared to residential mortgage lending.
During the normal course of business, various legal claims arise from time to time which, in the opinion of management, will have no material effect on the Company’s consolidated financial statements. The Bank was required to maintain a total compensating balance on deposit with two correspondent banks in the amount of $ 250 thousand at December 31, 2023 and 2022.
During the normal course of business, various legal claims arise from time to time which, in the opinion of management, will have no material effect on the Company’s consolidated financial statements. The Bank was required to maintain a total compensating balance on deposit with two correspondent banks in the amount of $ 250 thousand at December 31, 2024 and 2023.
These loans consisted of one-to-four family residential loans originated for sale in the secondary market at December 31, 2023. Fair value is based on prices the secondary markets are currently offering for similar loans using observable market data which is not materially different than cost due to the short duration between origination and sale (Level 2).
These loans consisted of one-to-four family residential loans originated for sale in the secondary market at December 31, 2024 . Fair value is based on prices the secondary markets are currently offering for similar loans using observable market data which is not materially different than cost due to the short duration between origination and sale (Level 2).
The collectively evaluated ACL consists of quantitative and qualitative components. The quantitative component consists of loss estimates derived from the Company’s application of its cohort methodology, which identifies and tracks respective losses generated by specific cohorts (or pools) of loans over their remaining lives. These estimates consider large amounts of data over an extended period of time.
The collectively evaluated ACLL consists of quantitative and qualitative components. The quantitative component consists of loss estimates derived from the Company’s application of its cohort methodology, which identifies and tracks respective losses generated by specific cohorts (or pools) of loans over their remaining lives. These estimates consider large amounts of data over an extended period of time.
Any write-downs based on the asset’s fair value at the date of acquisition are charged to the allowance for loan losses. After foreclosure, valuations are periodically performed by management and property held for sale is carried at the lower of the new cost basis or fair value less estimated cost to sell.
Any write-downs based on the asset’s fair value at the date of acquisition are charged to the allowance for credit losses. After foreclosure, valuations are periodically performed by management and property held for sale is carried at the lower of the new cost basis or fair value less estimated cost to sell.
The line of credit amount is determined by the creditworthiness of the Bank and, in particular, its regulatory capital ratios, which are discussed in Note 15. Federal funds purchased generally mature each business day. At December 31, 2023 these available lines totaled $ 78.0 million.
The line of credit amount is determined by the creditworthiness of the Bank and, in particular, its regulatory capital ratios, which are discussed in Note 15. Federal funds purchased generally mature each business day. At December 31, 2024 these available lines totaled $ 78.0 million.
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
The following table presents the amortized cost of loans that were modified during the twelve months ended December 31, 2023 by loan portfolio segment: Twelve Months Ended December 31, 2023 (in thousands) Term Extension Total % of Total Class of Loans Mortgage real estate loans: Residential First Lien - Owner Occupied $ 355 $ 355 0.20 % Total $ 355 $ 355 None of the loans that were modified defaulted during the twelve months ended December 31, 2023 and the loans remained current with contractual payments as of December 31, 2023.
The following table presents the amortized cost of loans that were modified during the twelve months ended December 31, 2023 by loan portfolio segment: Twelve Months Ended December 31, 2023 (dollars in thousands) Term Extension Total % of Total Class of Loans Mortgage real estate loans: Residential First Lien - Owner Occupied $ 355 $ 355 0.20 % Total $ 355 $ 355 None of the loans that were modified during the twelve months ended December 31, 2023 had defaulted and the loans remained current with contractual payments as of December 31, 2024.
Management monitors rates and maturities of assets and liabilities and attempts to minimize interest rate risk by adjusting the terms of new loans and deposits and by investing in securities with terms that mitigate the Company’s overall interest rate risk. 90 NOTE 22.
Management monitors rates and maturities of assets and liabilities and attempts to minimize interest rate risk by adjusting the terms of new loans and deposits and by investing in securities with terms that mitigate the Company’s overall interest rate risk. 93 NOTE 22.
There is a realm of uncertainty in using these assumptions but the analysis does provide the Bank with the ability to estimate interest rate risk position over time. 46 The table below examines the EVE.
There is a realm of uncertainty in using these assumptions but the analysis does provide the Bank with the ability to estimate interest rate risk position over time. 48 The table below examines the EVE.
The following table presents risk ratings by loan portfolio segment and origination year (for 2023 only). Descriptions of these ratings are as follows: Pass Pass loans exhibit acceptable history of profits, cash flow ability and liquidity. Sufficient cash flow exists to service the loan. All obligations have been paid by the borrower in an as agreed manner.
The following table presents risk ratings by loan portfolio segment and origination year. Descriptions of these ratings are as follows: Pass Pass loans exhibit acceptable history of profits, cash flow ability and liquidity. Sufficient cash flow exists to service the loan. All obligations have been paid by the borrower in an as agreed manner.
Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Eagle Financial Services, Inc. and its subsidiary (the Company) as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income (loss), changes in shareholders’ equity and cash flows for the years then ended, and the related notes to the consolidated financial statements (collectively, the financial statements).
Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Eagle Financial Services, Inc. and its subsidiary (the Company) as of December 31, 2024 and 2023, the related consolidated statements of income, comprehensive income, changes in shareholders’ equity and cash flows for the years then ended, and the related notes to the consolidated financial statements (collectively, the financial statements).
Restricted stock provides grantees with rights to shares of common stock upon completion of a service period or achievement of Company performance measures. During the restriction period, all shares are considered outstanding and dividends are paid to the grantee. Outside directors are periodically granted restricted shares which, beginning in 2023, vest over a period of one year .
Restricted stock provides grantees with rights to shares of common stock upon completion of a service period or achievement of Company performance measures. During the restriction period, all shares are considered outstanding and dividends are paid to the grantee. Outside directors are periodically granted restricted shares which vest over a period of one year .
At December 31, 2023 and 2022 , the balance of the investments for qualified affordable housing projects was $ 2.0 million and $ 2.3 million, respectively. These balances are reflected in Other assets on the Consolidated Balance Sheets. There were no unfunded commitments related to the Company's qualified affordable housing projects at December 31, 2023 and 2022.
At December 31, 2024 and 2023 , the balance of the investments for qualified affordable housing projects was $ 1.3 million and $ 2.0 million, respectively. These balances are reflected in Other assets on the Consolidated Balance Sheets. There were no unfunded commitments related to the Company's qualified affordable housing projects at December 31, 2024 and 2023.
The Company's long-term borrowings with the FHLB were $ 145.0 million and $ 0 at December 31, 2023 and 2022, respectively. Federal fund lines of credit are extended to the Bank by nonaffiliated banks with which a correspondent banking relationship exists.
The Company's long-term borrowings with the FHLB were $ 95.0 million and $ 145.0 million at December 31, 2024 and 2023, respectively. Federal fund lines of credit are extended to the Bank by nonaffiliated banks with which a correspondent banking relationship exists.
The Company records any fair value adjustments on a nonrecurring basis. No nonrecurring fair value adjustments were recorded on loans held for sale at December 31, 2023 and December 31, 2022.
The Company records any fair value adjustments on a nonrecurring basis. No nonrecurring fair value adjustments were recorded on loans held for sale at December 31, 2024 and December 31, 2023.
Maturities may differ from contractual maturities primarily in mortgage-backed securities (others could be called) because the mortgages underlying the securities may be called or repaid without any penalties.
Maturities may differ from contractual maturities primarily in mortgage-backed securities because the mortgages underlying the securities may be called or repaid without any penalties.
With few exceptions, the Company is no longer subject to federal, state, or local income tax examinations for years prior to 2020.
With few exceptions, the Company is no longer subject to federal, state, or local income tax examinations for years prior to 2021.
The agreement provides that if employment is terminated for reasons other than death or disability prior to age 65 , the amount of benefits could be reduced or forfeited. The executive supplemental income benefit liability was $ 4 thousand and $ 8 thousand at December 31, 2023 and 2022 , respectively.
The agreement provides that if employment is terminated for reasons other than death or disability prior to age 65 , the amount of benefits could be reduced or forfeited. The executive supplemental income benefit liability was $ 4 thousand at December 31, 2024 and 2023 .
Transactions with Directors and Officers The Bank grants loans to and accepts deposits from its directors, principal officers and related parties of such persons during the ordinary course of business. The aggregate balance of loans to directors, principal officers and their related parties was $ 5.0 million and $ 5.1 million at December 31, 2023 and 2022 , respectively.
Transactions with Directors and Officers The Bank grants loans to and accepts deposits from its directors, principal officers and related parties of such persons during the ordinary course of business. The aggregate balance of loans to directors, principal officers and their related parties was $ 5.7 million and $ 5.0 million at December 31, 2024 and 2023 , respectively.
The amendments should be applied on a prospective basis; however, retrospective application is permitted. The Company does not expect the adoption of ASU 2023-09 to have a material impact on our consolidated financial statements.
The amendments should be applied on a prospective basis; however, retrospective application is permitted. The Company does not expect the adoption of ASU 2023-09 to have a material impact on its consolidated financial statements . NOTE 2.
Shares of common stock purchased through the Plan can be purchased at a price equal to the market price of the shares. No changes have been made to the operation of the dividend reinvestment features of th e Plan during 2023 and 2022. NOTE 18.
Shares of common stock purchased through the Plan can be purchased at a price equal to the market price of the shares. No changes have been made to the operation of the dividend reinvestment features of the Plan during 2024 and 2023. NOTE 18.
The executive supplemental income benefit expense, based on the present value of the retirement benefits, was $ 29 thousand in 2023 and 2022. The plan is unfunded; however, life insurance has been acquired on the lives of these employees in amounts sufficient to discharge the plan’s obligations.
The executive supplemental income benefit expense, based on the present value of the retirement benefits, was $ 27 thousand in 2024 and $ 29 thousand in 2023. The plan is unfunded; however, life insurance has been acquired on the lives of these employees in amounts sufficient to discharge the plan’s obligations. NOTE 12.
Compensation expense was $ 1.2 million and $ 1.0 million during December 31, 2023 and 2022 , respectively. The total grant date fair value of restricted stock which vested was $ 579 thousand and $ 741 thousand for the years ended December 31, 2023 and 2022 , respectively.
Compensation expense was $ 912 thousand and $ 1.2 million during December 31, 2024 and 2023 , respectively. The total grant date fair value of restricted stock which vested was $ 1.0 million and $ 579 thousand for the years ended December 31, 2024 and 2023 , respectively.
The Company does not typically enter into long-term revenue contracts with customers, and therefore, does not experience significant contract balances. As of December 31, 2023 and December 31, 2022 , the Company did not have any significant contract balances. 84 NOTE 20.
The Company does not typically enter into long-term revenue contracts with customers, and therefore, does not experience significant contract balances. As of December 31, 2024 and December 31, 2023 , the Company did not have any significant contract balances. 86 NOTE 20.
The Company has elected to exclude accrued interest receivable from the amortized cost basis. Accrued interest totaled $ 4.6 million and $ 3.5 million at December 31, 2023 and 2022, and is included in the other assets line item in the Consolidated Balance Sheets. Interest income is accrued on the unpaid principal balance.
The Company has elected to exclude accrued interest receivable from the amortized cost basis. Accrued interest totaled $ 4.8 million and $ 4.6 million at December 31, 2024 and 2023, and is included in the other assets line item in the Consolidated Balance Sheets. Interest income is accrued on the unpaid principal balance.
In 2023, the Company sold non-mortgage loans totaling approximatel y $ 59.6 million a s part of its portfolio management strategies that were previously classified as held for investment. Gains and losses on sales of loans are recorded based on the differential between the sales proceeds and carrying value of the underlying loans.
In 2024, the Company sold non-mortgage loans totaling approximatel y $ 14.3 million a s part of its portfolio management strategies that were previously classified as held for investment. Gains and losses on sales of loans are recorded based on the differential between the sales proceeds and carrying value of the underlying loans.
The debt balance of $ 30.0 million is presented net of unamortized issuance costs of $ 556 thousand and $ 623 thousand at December 31, 2023 and 2022 , respectively. 76 NOTE 9. Income Taxes The Company files income tax returns with the United States of America, the Commonwealth of Virginia and West Virginia.
The debt balance of $ 30.0 million is presented net of unamortized issuance costs of $ 488 thousand and $ 556 thousand at December 31, 2024 and 2023 , respectively. 78 NOTE 9. Income Taxes The Company files income tax returns with the United States of America, the Commonwealth of Virginia and West Virginia.
Funds available for loans or advances by the Bank to the Company amounted to $ 16.9 million at December 31, 2023 . NOTE 17. Dividend Investment Plan The Company has a Dividend Investment Plan, which allows participants’ dividends to purchase additional shares of common stock at its fair market value on each dividend record date.
Funds available for loans or advances by the Bank to the Company amounted to $ 18.1 million at December 31, 2024. 83 NOTE 17. Dividend Investment Plan The Company has a Dividend Investment Plan, which allows participants’ dividends to purchase additional shares of common stock at its fair market value on each dividend record date.
(2) Includes income within the scope of Topic 606 of $327 thousand and $309 thousand for the years ended December 31, 2023 and 2022 , respectively. The remaining balance is outside the scope of Topic 606.
(2) Includes income within the scope of Topic 606 of $ 440 thousand and $ 327 thousand for the years ended December 31, 2024 and 2023 , respectively. The remaining balance is outside the scope of Topic 606 .
Twelve Months Ended December 31, 2023 2022 Average number of common shares outstanding 3,523,547 3,482,368 Effect of dilutive common stock — — Average number of common shares outstanding used to calculate diluted earnings per share 3,523,547 3,482,368 There were no potentially dilutive securities outstanding in 2023 or 2022 .
Twelve Months Ended December 31, 2024 2023 Average number of common shares outstanding 3,553,919 3,523,547 Effect of dilutive common stock — — Average number of common shares outstanding used to calculate diluted earnings per share 3,553,919 3,523,547 There were no potentially dilutive securities outstanding in 2024 or 2023 .
Contributions under the plan amounted to $ 2.2 million in 2023 and $ 1.9 million in 2022. 78 The Company has established an Executive Supplemental Income Plan for certain key employees. Benefits are to be paid in monthly installments following retirement or death.
Contributions under the plan amounted to $ 2.2 million in 2024 and 2023. 80 The Company has established an Executive Supplemental Income Plan for certain key employees. Benefits are to be paid in monthly installments following retirement or death.
NOTE 25. Qualified Affordable Housing Project Investments The Company invests in qualified affordable housing projects.
Qualified Affordable Housing Project Investments The Company invests in qualified affordable housing projects.
The total vest date fair value of restricted stock which vested was $ 609 thousand and $ 819 thousand for the years ended December 31, 2023 and 2022 , respectively. Unrecognized compensation cost related to unvested restricted stock was $ 456 thousand at December 31, 2023 .
The total vest date fair value of restricted stock which vested was $ 883 thousand and $ 609 thousand for the years ended December 31, 2024 and 2023 , respectively. Unrecognized compensation cost related to unvested restricted stock was $ 583 thousand at December 31, 2024 .
Total estimated credits to be received during 2023 are $ 354 thousand based on the most recent quarterly estimates received from the funds. Total tax credits and other tax benefits recognized during 2023 and 2022 were $ 389 thousand and $ 387 thousand, respectively. 95 NOTE 26.
Total estimated credits to be received during 2024 are $ 304 thousand based on the most recent quarterly estimates received from the funds. Total tax credits and other tax benefits recognized during 2024 and 2023 were $ 304 thousand and $ 389 thousand, respectively. NOTE 26.
Borrowings The Company has borrowings in the form of federal funds purchased, Federal Home Loan Bank of Atlanta ("FHLB") advances and subordinated notes. The following table presents selected information on short-term borrowings for the years ended December 31, 2023 and 2022, consisting of FHLB advances and federal funds purchased.
Borrowings The Company has access to borrowings in the form of federal funds purchased, Federal Home Loan Bank of Atlanta ("FHLB") advances and subordinated notes. The following table presents selected information on short-term borrowings for the years ended December 31, 2024 and 2023, which consisted of FHLB advances.
Carrying amounts of restricted securities at December 31, 2023 and 2022 were as follows: December 31, 2023 December 31, 2022 (in thousands) Federal Reserve Bank Stock $ 344 $ 944 Federal Home Loan Bank Stock 9,084 8,149 Community Bankers’ Bank Stock 140 140 $ 9,568 $ 9,233 The amortized cost and fair value of securities available for sale at December 31, 2023, by contractual maturity, are shown below.
Carrying amounts of restricted securities at December 31, 2024 and 2023 were as follows: December 31, 2024 December 31, 2023 (in thousands) Federal Reserve Bank Stock $ 344 $ 344 Federal Home Loan Bank Stock 7,073 9,084 Community Bankers’ Bank Stock 140 140 $ 7,557 $ 9,568 The amortized cost and fair value of securities available for sale at December 31, 2024, by contractual maturity, are shown below.
Time deposits with balances of less than $250,000 included $ 30.1 million and $ 4.6 million in brokered certificates of deposit at December 31, 2023 and 2022, respectively.
Time deposits with balances of less than $250,000 included $ 30.0 million and $ 30.1 million in brokered certificates of deposit at December 31, 2024 and 2023, respectively.
Income tax expense for the years ended December 31, 2023 and 2022 consisted of the following components: December 31, 2023 2022 (in thousands) Current tax expense $ 2,785 $ 3,236 Deferred tax (benefit) ( 1,509 ) ( 86 ) $ 1,276 $ 3,150 The following table reconciles income tax expense to the statutory federal corporate income tax amount, which was calculated by applying the federal corporate income tax rate to pre-tax income for the years ended December 31, 2023 and 2022.
Income tax expense for the years ended December 31, 2024 and 2023 consisted of the following components: December 31, 2024 2023 (in thousands) Current tax expense $ 2,958 $ 2,785 Deferred tax accrual (benefit) 600 ( 1,509 ) $ 3,558 $ 1,276 The following table reconciles income tax expense to the statutory federal corporate income tax amount, which was calculated by applying the federal corporate income tax rate to pre-tax income for the years ended December 31, 2024 and 2023.
Loans which share common risk characteristics are pooled and collectively evaluated by the Company using historical data, as well as assessments of current conditions and reasonable and supportable forecasts of future conditions. The Company’s ACL related to collectively evaluated loans represented the entirety of the total recorded ACL of $14.49 million as of December 31, 2023.
Loans which share common risk characteristics are pooled and collectively evaluated by the Company using historical data, as well as assessments of current conditions and reasonable and supportable forecasts of future conditions. The Company’s ACLL related to collectively evaluated loans represented $14.8 million of the total recorded ACLL of $15.0 million as of December 31, 2024.
AND SUBSIDIARY Consolidated Statements of Comprehensive Income (Loss) Years Ended December 31, 2023 and 2022 (dollars in thousands) 2023 2022 Net income $ 9,357 $ 14,521 Other comprehensive income (loss): Changes in benefit obligations and plan assets for post retirement benefit plans, net of reclassification adjustments, net of deferred income tax of $( 3 ) and $ 0 for the years ended December 31, 2023 and 2022, respectively ( 5 ) — Unrealized gain (loss) on available for sale securities, net of reclassification adjustments, net of deferred income tax of $ 650 and ($ 5,394 ) for the years ended December 31, 2023 and 2022, respectively 2,445 ( 20,291 ) Total other comprehensive income (loss) 2,440 ( 20,291 ) Total comprehensive income (loss) $ 11,797 $ ( 5,770 ) See Notes to Consolidated Financial Statements 52 EAGLE FINANCIAL SERVICES, INC.
AND SUBSIDIARY Consolidated Statements of Comprehensive Income Years Ended December 31, 2024 and 2023 (dollars in thousands) 2024 2023 Net income $ 15,343 $ 9,357 Other comprehensive (loss) income: Changes in benefit obligations and plan assets for post retirement benefit plans, net of reclassification adjustments, net of deferred income tax of $( 2 ) and $( 3 ) for the years ended December 31, 2024 and 2023, respectively ( 9 ) ( 5 ) Unrealized (loss) gain on available for sale securities, net of reclassification adjustments, net of deferred income tax of $( 166 ) and $ 650 for the years ended December 31, 2024 and 2023, respectively ( 625 ) 2,445 Total other comprehensive (loss) income ( 634 ) 2,440 Total comprehensive income $ 14,709 $ 11,797 See Notes to Consolidated Financial Statements 54 EAGLE FINANCIAL SERVICES, INC.
At December 31, 2023 and 2022, the following financial instruments were outstanding whose contract amounts represent credit risk: December 31, 2023 December 31, 2022 (dollars in thousands) Commitments to extend credit $ 37,724 $ 27,927 Unfunded commitments under lines of credit 227,717 191,259 Commercial and standby letters of credit 3,964 7,069 Commitments to extend credit are agreements to lend to a customer as long as the terms offered are acceptable and certain other conditions are met.
At December 31, 2024 and 2023, the following financial instruments were outstanding whose contract amounts represent credit risk: December 31, 2024 December 31, 2023 (dollars in thousands) Commitments to extend credit $ 32,793 $ 37,724 Unfunded commitments under lines of credit 196,903 227,717 Commercial and standby letters of credit 2,602 3,964 Commitments to extend credit are agreements to lend to a customer as long as the terms offered are acceptable and certain other conditions are met.
Collateral-dependent individually evaluated loans are classified within Level 3 of the fair value hierarchy. Any fair value adjustments are recorded in the period incurred as a provision for credit losses on the Consolidated Statements of Income. There were no individually evaluated collateral dependent loans recorded at fair value at December 31, 2023 or 2022.
Collateral-dependent individually evaluated loans are classified within Level 3 of the fair value hierarchy. Any fair value adjustments are recorded in the period incurred as a provision for credit losses on the Consolidated Statements of Income.
The following table presents the Bank’s actual capital amounts and ratios at December 31, 2023 and 2022: Actual Minimum Capital Requirement Minimum To Be Well Capitalized Under Prompt Corrective Action Provisions Amount Ratio Amount Ratio Amount Ratio (dollars in thousands) December 31, 2023 Common Equity Tier 1 Capital to Risk Weighted Assets $ 155,453 10.27 % $ 68,121 4.50 % $ 98,397 6.50 % Total Capital to Risk Weighted Assets 168,925 11.16 % 121,104 8.00 % 151,380 10.00 % Tier 1 Capital to Risk Weighted Assets 155,453 10.27 % 90,828 6.00 % 121,104 8.00 % Tier 1 Capital to Average Assets 155,453 8.48 % 73,367 4.00 % 91,709 5.00 % December 31, 2022 Tier 1 Capital to Average Assets 142,530 9.15 % n/a n/a 140,210 9.00 % In addition to the minimum regulatory capital required for capital adequacy purposes under the risk-based capital framework, financial institutions also required to maintain a minimum capital conservation buffer of greater than 2.5 % in order to avoid restrictions on capital distributions and other payments.
The following table presents the Bank’s actual capital amounts and ratios at December 31, 2024 and 2023: Actual Minimum Capital Requirement Minimum To Be Well Capitalized Under Prompt Corrective Action Provisions Amount Ratio Amount Ratio Amount Ratio (dollars in thousands) December 31, 2024 Common Equity Tier 1 Capital to Risk Weighted Assets $ 166,145 11.04 % $ 67,723 4.50 % $ 97,822 6.50 % Total Capital to Risk Weighted Assets 180,638 12.00 % 120,397 8.00 % 150,496 10.00 % Tier 1 Capital to Risk Weighted Assets 166,145 11.04 % 90,298 6.00 % 120,397 8.00 % Tier 1 Capital to Average Assets 166,145 8.79 % 75,568 4.00 % 94,460 5.00 % December 31, 2023 Common Equity Tier 1 Capital to Risk Weighted Assets $ 155,453 10.27 % $ 68,121 4.50 % $ 98,397 6.50 % Total Capital to Risk Weighted Assets 168,925 11.16 % 121,104 8.00 % 151,380 10.00 % Tier 1 Capital to Risk Weighted Assets 155,453 10.27 % 90,828 6.00 % 121,104 8.00 % Tier 1 Capital to Average Assets 155,453 8.48 % 73,367 4.00 % 91,709 5.00 % In addition to the minimum regulatory capital required for capital adequacy purposes under the risk-based capital framework, financial institutions also required to maintain a minimum capital conservation buffer of greater than 2.5 % in order to avoid restrictions on capital distributions and other payments.
The amendments in this ASU were applied prospectively, except for the transition method related to the recognition and measurement of TDRs, which was applied using a modified retrospective transition method. 62 Pending Adoption In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740), Improvements to Income Tax Disclosures." The amendments in this ASU require an entity to disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold, which is greater than five percent of the amount computed by multiplying pretax income by the entity's applicable statutory rate, on an annual basis.
In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740), Improvements to Income Tax Disclosures." The amendments in this ASU require an entity to disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold, which is greater than five percent of the amount computed by multiplying pretax income by the entity's applicable statutory rate, on an annual basis.
The net deferred tax asset at December 31, 2023 and 2022 consisted of the following components: December 31, 2023 2022 (in thousands) Deferred tax assets: Allowance for credit losses $ 3,043 $ 2,342 Reserve for unfunded commitments 101 14 Share-based compensation 327 222 Accrued postretirement benefits 18 21 Home equity origination costs 85 81 Accrued incentive benefit 89 — Nonaccrual interest 75 48 Lease liabilities 977 1,045 Credit carryforward 1,689 648 Securities available for sale 4,790 5,440 Other 25 26 $ 11,219 $ 9,887 Deferred tax liabilities: Property and equipment $ 853 $ 710 Right-of-use assets 921 1,001 Loan servicing rights 32 144 $ 1,806 $ 1,855 Net deferred tax asset $ 9,413 $ 8,032 The Company has not recorded a valuation allowance for deferred tax assets because management believes that it is more likely than not that they will be ultimately realized.
The net deferred tax asset at December 31, 2024 and 2023 consisted of the following components: December 31, 2024 2023 (in thousands) Deferred tax assets: Allowance for credit losses $ 3,156 $ 3,043 Reserve for unfunded commitments 106 101 Share-based compensation 306 327 Accrued postretirement benefits 21 18 Home equity origination costs 95 85 Accrued incentive benefit — 89 Nonaccrual interest 20 75 Lease liabilities 2,054 977 Credit carryforward 1,033 1,689 Securities available for sale 4,956 4,790 Other — 25 $ 11,747 $ 11,219 Deferred tax liabilities: Property and equipment $ 709 $ 853 Right-of-use assets 1,988 921 Loan servicing rights 68 32 $ 2,765 $ 1,806 Net deferred tax asset $ 8,982 $ 9,413 The Company has not recorded a valuation allowance for deferred tax assets because management believes that it is more likely than not that they will be ultimately realized.
The following table presents balances of financial assets and liabilities measured at fair value on a recurring basis at December 31, 2023 and December 31, 2022: Fair Value Measurements at December 31, 2023 Using Balance as of Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs December 31, 2023 (Level 1) (Level 2) (Level 3) (in thousands) Assets: Securities available for sale Obligations of U.S. government corporations and agencies $ 8,591 $ — $ 8,591 $ — Mortgage-backed securities 118,822 — 118,822 — Obligations of states and political subdivisions 5,931 — 5,931 — Subordinated debt 4,099 — 4,099 — Derivative: Interest rate swaps on loans 1,465 — 1,465 — Total assets at fair value $ 138,908 $ — $ 138,908 $ — Liabilities: Interest rate swaps on loans $ 1,465 $ 1,465 $ — Total liabilities at fair value $ 1,465 $ — $ 1,465 $ — 86 Fair Value Measurements at December 31, 2022 Using Balance as of Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs December 31, 2022 (Level 1) (Level 2) (Level 3) (in thousands) Assets: Securities available for sale Obligations of U.S. government corporations and agencies $ 9,135 $ — $ 9,135 $ — U.S. treasury notes — — — Mortgage-backed securities 129,153 — 129,153 — Obligations of states and political subdivisions 6,607 — 6,607 — Subordinated debt 4,261 — 4,261 — Derivative: Interest rate swaps on loans 1,017 — 1,017 — Total assets at fair value $ 150,173 $ — $ 150,173 $ — Liabilities: Interest rate swaps on loans $ 1,017 $ 1,017 $ — Total liabilities at fair value $ 1,017 $ — $ 1,017 $ — Certain financial assets are measured at fair value on a nonrecurring basis in accordance with GAAP.
The following table presents balances of financial assets and liabilities measured at fair value on a recurring basis at December 31, 2024 and December 31, 2023: Fair Value Measurements at December 31, 2024 Using Balance as of Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs December 31, 2024 (Level 1) (Level 2) (Level 3) (in thousands) Assets: Securities available for sale Obligations of U.S. government corporations and agencies $ 7,668 $ — $ 7,668 $ — Mortgage-backed securities 104,967 — 104,967 — Obligations of states and political subdivisions 4,645 — 4,645 — Subordinated debt 4,050 — 4,050 — Derivative: Interest rate swaps on loans 1,466 — 1,466 — Fair value swap 93 — 93 — Total assets at fair value $ 122,889 $ — $ 122,889 $ — Liabilities: Interest rate swaps on loans $ 1,466 $ 1,466 $ — Total liabilities at fair value $ 1,466 $ — $ 1,466 $ — 88 Fair Value Measurements at December 31, 2023 Using Balance as of Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs December 31, 2023 (Level 1) (Level 2) (Level 3) (in thousands) Assets: Securities available for sale Obligations of U.S. government corporations and agencies $ 8,591 $ — $ 8,591 $ — Mortgage-backed securities 118,822 — 118,822 — Obligations of states and political subdivisions 5,931 — 5,931 — Subordinated debt 4,099 — 4,099 — Derivative: Interest rate swaps on loans 1,465 — 1,465 — Total assets at fair value $ 138,908 $ — $ 138,908 $ — Liabilities: Interest rate swaps on loans $ 1,465 $ 1,465 $ — Total liabilities at fair value $ 1,465 $ — $ 1,465 $ — Certain financial assets are measured at fair value on a nonrecurring basis in accordance with GAAP.
December 31, 2023 Notional Amount Assets Liabilities (in thousands) Customer-related interest rate swap contracts: Matched interest rate swaps with borrower $ 41,051 $ 844 $ 621 Matched interest rate swaps with counterparty 41,051 621 844 December 31, 2022 Notional Amount Assets Liabilities (in thousands) Customer-related interest rate swap contracts: Matched interest rate swaps with borrower $ 23,141 $ 1,017 $ — Matched interest rate swaps with counterparty 23,141 — 1,017 NOTE 27.
December 31, 2024 Notional Amount Assets Liabilities (in thousands) Customer-related interest rate swap contracts: Matched interest rate swaps with borrower $ 44,203 $ 276 $ 1,190 Matched interest rate swaps with counterparty 44,203 1,190 276 December 31, 2023 Notional Amount Assets Liabilities (in thousands) Customer-related interest rate swap contracts: Matched interest rate swaps with borrower $ 41,051 $ 844 $ 621 Matched interest rate swaps with counterparty 41,051 621 844 NOTE 27.
Nonvested restricted shares are included in the weighted average number of common shares used to compute basic earnings per share because of dividend participation and voting rights.
Earnings Per Common Share Basic earnings per share represents income available to common shareholders divided by the weighted average number of common shares outstanding during the period. Nonvested restricted shares are included in the weighted average number of common shares used to compute basic earnings per share because of dividend participation and voting rights.
These balances reflect total principal additions of $ 544 thous and and total principal payments of $ 689 thousand, during 2023. The aggregate balance of deposits from directors, principal officers and their related parties was $ 7.0 mil lion and $ 11.1 million at December 31, 2023 and 2022 , respectively. 80 NOTE 15.
These balances reflect total principal additions of $ 1.4 million and total principal payments of $ 726 thousand, during 2024. The aggregate balance of deposits from directors, principal officers and their related parties was $ 7.4 million and $ 7.0 million at December 31, 2024 and 2023 , respectively. 82 NOTE 15.
(3) Includes income within the scope of Topic 606 of $778 thousand and $1.2 million for the years ended December 31, 2023 and 2022 , respectively. The remaining balance is outside the scope of Topic 606.
(3) Includes income within the scope of Topic 606 of $ 406 thousand and $ 393 thousand for the years ended December 31, 2024 and 2023 , respectively. The remaining balance is outside the scope of Topic 606.
(Parent Company Only) Statements of Income Years Ended December 31, 2023 and 2022 (dollars in thousands) 2023 2022 Income Dividends from subsidiary bank $ 4,000 $ — Total income $ 4,000 $ — Expenses Interest expense on subordinated debt $ 1,417 $ 1,067 Other operating expenses 523 369 Total expenses $ 1,940 $ 1,436 Income (loss) before income tax (benefit) and equity in undistributed earnings of subsidiary bank $ 2,060 $ ( 1,436 ) Income Tax (Benefit) ( 413 ) ( 315 ) Income (loss) before equity in undistributed earnings of subsidiary bank $ 2,473 $ ( 1,121 ) Equity in Undistributed Net Income of Subsidiary Bank 6,884 15,642 Net income $ 9,357 $ 14,521 Comprehensive income (loss) $ 11,797 $ ( 5,770 ) 93 EAGLE FINANCIAL SERVICES, INC.
(Parent Company Only) Statements of Income Years Ended December 31, 2024 and 2023 (dollars in thousands) 2024 2023 Income Dividends from subsidiary bank $ 5,000 $ 4,000 Total income $ 5,000 $ 4,000 Expenses Interest expense on subordinated debt $ 1,417 $ 1,417 Other operating expenses 432 523 Total expenses $ 1,849 $ 1,940 Income before income tax (benefit) and equity in undistributed earnings of subsidiary bank $ 3,151 $ 2,060 Income Tax (Benefit) ( 361 ) ( 413 ) Income before equity in undistributed earnings of subsidiary bank $ 3,512 $ 2,473 Equity in Undistributed Net Income of Subsidiary Bank 11,831 6,884 Net income $ 15,343 $ 9,357 Comprehensive income $ 14,709 $ 11,797 96 EAGLE FINANCIAL SERVICES, INC.
We have served as the Company's auditor since 2015. Winchester, Virginia March 29, 2024 49 EAGLE FINANCIAL SERVICES, INC.
We have served as the Company's auditor since 2015. Winchester, Virginia March 31, 2025 51 EAGLE FINANCIAL SERVICES, INC.
The Company’s performance obligations on revenue generated from deposit accounts are generally satisfied immediately, when the transaction occurs, or by month-end. Typically, the duration of a contract does not extend beyond the services performed.
Service Charges on Deposit Accounts Service charges on deposit accounts are principally comprised of overdrawn account fees, account maintenance charges and other activity based fees. The Company’s performance obligations on revenue generated from deposit accounts are generally satisfied immediately, when the transaction occurs, or by month-end. Typically, the duration of a contract does not extend beyond the services performed.
The following table presents the activity for restricted stock awards for the years ended December 31, 2023 and 2022: Twelve Months Ended December 31, 2023 2022 Shares Weighted Average Grant Date Fair Value Shares Weighted Average Grant Date Fair Value Nonvested, beginning of period 38,780 $ 33.47 31,738 $ 30.70 Granted 37,941 35.79 31,648 35.19 Vested ( 17,402 ) 33.26 ( 23,079 ) 32.11 Forfeited ( 2,405 ) 35.40 ( 1,527 ) 32.13 Nonvested, end of period 56,914 $ 35.06 38,780 $ 33.47 The Company recognizes compensation expense over the vesting period based on the fair value of the Company's stock on the grant date.
The following table presents the activity for restricted stock awards for the years ended December 31, 2024 and 2023: Twelve Months Ended December 31, 2024 2023 Shares Weighted Average Grant Date Fair Value Shares Weighted Average Grant Date Fair Value Nonvested, beginning of period 56,914 $ 35.06 38,780 $ 33.47 Granted 41,940 30.00 37,941 35.79 Vested ( 29,426 ) 34.40 ( 17,402 ) 33.26 Forfeited ( 5,385 ) 35.38 ( 2,405 ) 35.40 Nonvested, end of period 64,043 $ 32.02 56,914 $ 35.06 The Company recognizes compensation expense over the vesting period based on the fair value of the Company's stock on the grant date.
Certain non-executive officers also were granted restricted shares which vest over a three year service period.
Restricted shares are also granted to certain non-executive officers and generally vest over a three year service period.
Right-of-use assets and leases liabilities are included in other assets and other liabilities, respectively, in the Consolidated Balance Sheets. 79 The following tables present information about the Company’s leases: (dollars in thousands) December 31, 2023 December 31, 2022 Lease liability $ 4,653 $ 4,978 Right-of-use asset $ 4,387 $ 4,766 Weighted average remaining lease term 14 years 14 years Weighted average discount term 3.09 % 3.04 % Twelve Months Ended Lease Cost December 31, 2023 December 31, 2022 Operating lease cost $ 528 $ 528 Variable lease cost — — Short-term lease cost 14 15 Total lease cost $ 542 $ 543 Cash paid for amounts included in the measurement of lease liabilities $ 473 $ 466 A maturity analysis of operating lease liabilities and reconciliation of the undiscounted cash flows to the total operating lease liabilities is as follows: As of Lease payments due December 31, 2023 Twelve months ending December 31, 2024 $ 480 Twelve months ending December 31, 2025 504 Twelve months ending December 31, 2026 397 Twelve months ending December 31, 2027 391 Twelve months ending December 31, 2028 395 Thereafter 3,754 Total undiscounted cash flows $ 5,921 Discount ( 1,268 ) Lease liability $ 4,653 NOTE 14.
Right-of-use assets and leases liabilities are included in other assets and other liabilities, respectively, in the Consolidated Balance Sheets. 81 The following tables present information about the Company’s leases: (dollars in thousands) December 31, 2024 December 31, 2023 Lease liability $ 9,779 $ 4,653 Right-of-use asset $ 9,465 $ 4,387 Weighted average remaining lease term 12 years 14 years Weighted average discount term 4.16 % 3.09 % Twelve Months Ended Lease Cost December 31, 2024 December 31, 2023 Operating lease cost $ 528 $ 528 Variable lease cost — — Short-term lease cost 14 14 Total lease cost $ 542 $ 542 Cash paid for amounts included in the measurement of lease liabilities $ 480 $ 473 A maturity analysis of operating lease liabilities and reconciliation of the undiscounted cash flows to the total operating lease liabilities is as follows: As of Lease payments due December 31, 2024 Twelve months ending December 31, 2025 $ 1,025 Twelve months ending December 31, 2026 932 Twelve months ending December 31, 2027 943 Twelve months ending December 31, 2028 964 Twelve months ending December 31, 2029 986 Thereafter 7,973 Total undiscounted cash flows $ 12,823 Discount ( 3,044 ) Lease liability $ 9,779 NOTE 14.
At December 31, 2023 , the reserve balance totaled $ 479 thousand.
At December 31, 2024 and 2023 , the reserve balance totaled $ 505 thousand and $ 479 thousand, respectively.
These leases offer the option to extend the lease term and the Company has included such extensions in its calculation of the lease liability to the extent the options are reasonably certain of being exercised.
The Company has five long-term lease agreements for office properties which are all classified as operating leases. These leases offer the option to extend the lease term and the Company has included such extensions in its calculation of the lease liability to the extent the options are reasonably certain of being exercised.
At December 31, 2023 , the Bank’s retained earnings available for the payment of dividends to the Company was $ 32.3 million. Accordingly, $ 103.9 million of the Company’s equity in the net assets of the Bank was restricted at December 31, 2023 .
At December 31, 2024 , the Bank’s retained earnings available for the payment of dividends to the Company was $ 34.4 million. Accordingly, $ 112.5 million of the Company’s equity in the net assets of the Bank was restricted at December 31, 2024 .
The allowance for credit losses is also increased by recoveries of amounts previously charged-off and is reduced by charge-offs on loans.
Allowance for Credit Losses on Loans The allowance for credit losses is established through charges to earnings in the form of a provision for credit losses. The allowance for credit losses is also increased by recoveries of amounts previously charged-off and is reduced by charge-offs on loans.
The net result of these interest rate swaps is that the customer pays a fixed rate of interest and the Company receives a floating rate. These back-to-back loan swaps are derivative financial instruments and are reported at fair value in “other assets” and “other liabilities” in the Consolidated Balance Sheets.
The net result of these interest rate swaps is that the customer pays a fixed rate of interest and the Company receives a floating rate. These back-to-back loan swaps are derivative financial instruments not designated as hedges and are reported in other assets and other liabilities in the Consolidated Balance Sheets.
(Parent Company Only) Statements of Cash Flows Years Ended December 31, 2023 and 2022 (dollars in thousands) 2023 2022 Cash Flows from Operating Activities Net Income $ 9,357 $ 14,521 Adjustments to reconcile net income to net cash provided by (used in) operating activities Stock-based compensation expense 1,213 1,017 Undistributed earnings of subsidiary bank ( 6,884 ) ( 15,642 ) Amortization of debt issuance costs 67 51 Changes in assets and liabilities: (Increase) in other assets ( 451 ) ( 330 ) Increase in other liabilities — 338 Net cash provided by (used in) operating activities $ 3,302 $ ( 45 ) Cash Flows from Investing Activities Capital contribution to bank subsidiary $ ( 6,000 ) $ ( 20,000 ) Net cash (used in) investing activities $ ( 6,000 ) $ ( 20,000 ) Cash Flows from Financing Activities Issuance of subordinated debt, net of issuance costs $ — $ 29,326 Cash dividends paid ( 4,229 ) ( 3,808 ) Issuance of common stock, employee benefit plan 132 164 Retirement of common stock ( 302 ) ( 154 ) Net cash (used in) provided by financing activities $ ( 4,399 ) $ 25,528 (Decrease) increase in cash $ ( 7,097 ) $ 5,483 Cash Beginning $ 8,222 $ 2,739 Ending $ 1,125 $ 8,222 94 NOTE 24.
(Parent Company Only) Statements of Cash Flows Years Ended December 31, 2024 and 2023 (dollars in thousands) 2024 2023 Cash Flows from Operating Activities Net Income $ 15,343 $ 9,357 Adjustments to reconcile net income to net cash provided by operating activities Stock-based compensation expense 912 1,213 Undistributed earnings of subsidiary bank ( 11,831 ) ( 6,884 ) Amortization of debt issuance costs 67 67 Changes in assets and liabilities: Decrease (increase) in other assets 429 ( 451 ) Net cash provided by operating activities $ 4,920 $ 3,302 Cash Flows from Investing Activities Capital contribution to bank subsidiary $ — $ ( 6,000 ) Net cash (used in) investing activities $ — $ ( 6,000 ) Cash Flows from Financing Activities Cash dividends paid ( 4,299 ) ( 4,229 ) Issuance of common stock, employee benefit plan — 132 Retirement of common stock ( 237 ) ( 302 ) Net cash (used in) financing activities $ ( 4,536 ) $ ( 4,399 ) Increase (decrease) increase in cash $ 384 $ ( 7,097 ) Cash Beginning $ 1,125 $ 8,222 Ending $ 1,509 $ 1,125 97 NOTE 24.
Bank Premises and Equipment, Net The major classes of bank premises and equipment and the total accumulated depreciation at December 31, 2023 and 2022 were as follows: December 31, 2023 2022 (in thousands) Land $ 6,644 $ 6,644 Buildings and improvements 19,247 18,649 Furniture and equipment 9,729 9,345 $ 35,620 $ 34,638 Less accumulated depreciation 17,512 16,574 Bank premises and equipment, net $ 18,108 $ 18,064 74 Depreciation expense on buildings and improvements was $ 498 thousand and $ 486 thousand for the years ended 2023 and 2022 , respectively.
Bank Premises and Equipment, Net The major classes of bank premises and equipment and the total accumulated depreciation at December 31, 2024 and 2023 were as follows: December 31, 2024 2023 (in thousands) Land $ 6,119 $ 6,644 Buildings and improvements 13,671 19,247 Furniture and equipment 9,967 9,729 $ 29,757 $ 35,620 Less accumulated depreciation 15,418 17,512 Bank premises and equipment, net $ 14,339 $ 18,108 Depreciation expense on buildings and improvements was $ 504 thousand and $ 498 thousand for the years ended 2024 and 2023 , respectively.
Changes to accumulated other comprehensive (loss) by components are shown in the following tables for the years ended December 31, 2023 and 2022: Twelve Months Ended December 31, 2023 2022 Unrealized Gains and Losses on Available for Sale Securities Change in Benefit Obligations and Plan Assets for the Post Retirement Benefit Plan Total Unrealized Gains and Losses on Available for Sale Securities Change in Benefit Obligations and Plan Assets for the Post Retirement Benefit Plan Total (dollars in thousands) (dollars in thousands) January 1 $ ( 20,465 ) $ 19 $ ( 20,446 ) $ ( 174 ) $ 19 $ ( 155 ) Other comprehensive income (loss) before reclassifications 3,095 ( 8 ) 3,087 ( 26,422 ) — ( 26,422 ) Reclassifications from other comprehensive (loss) — — — 737 — 737 Tax effect of current period changes ( 650 ) 3 ( 647 ) 5,394 — 5,394 Current period changes net of taxes 2,445 ( 5 ) 2,440 ( 20,291 ) — ( 20,291 ) December 31 $ ( 18,020 ) $ 14 $ ( 18,006 ) $ ( 20,465 ) $ 19 $ ( 20,446 ) For the years ended December 31, 2023 and 2022 , $ 0 and ($ 737 ) thousand, respectively, was reclassified out of accumulated other comprehensive (loss) and appeared as loss on sale of securities in the Consolidated Statement of Income.
Changes to accumulated other comprehensive (loss) by components are shown in the following tables for the years ended December 31, 2024 and 2023: Twelve Months Ended December 31, 2024 2023 Unrealized Gains and Losses on Available for Sale Securities Change in Benefit Obligations and Plan Assets for the Post Retirement Benefit Plan Total Unrealized Gains and Losses on Available for Sale Securities Change in Benefit Obligations and Plan Assets for the Post Retirement Benefit Plan Total (dollars in thousands) (dollars in thousands) January 1 $ ( 18,020 ) $ 14 $ ( 18,006 ) $ ( 20,465 ) $ 19 $ ( 20,446 ) Other comprehensive (loss) income before reclassifications ( 791 ) ( 11 ) ( 802 ) 3,095 ( 8 ) 3,087 Tax effect of current period changes 166 2 168 ( 650 ) 3 ( 647 ) Current period changes net of taxes ( 625 ) ( 9 ) ( 634 ) 2,445 ( 5 ) 2,440 December 31 $ ( 18,645 ) $ 5 $ ( 18,640 ) $ ( 18,020 ) $ 14 $ ( 18,006 ) For the years ended December 31, 2024 and 2023 , there were no reclassifications out of accumulated other comprehensive loss. 94 NOTE 23.
December 31, 2023 2022 (dollars in thousands) Balance at year-end $ 20,000 $ 207,980 Average balance during the year $ 45,801 $ 47,470 Average interest rate during the year 4.68 % 3.09 % Maximum month-end balance during the year $ 150,000 $ 207,980 At December 31, 2023 and 2022 , the Company's short-term FHLB advances totaled $ 20.0 million and $ 175.0 million, respectively, and federal funds purchased totaled $ 0 and $ 33.0 million, respectively.
December 31, 2024 2023 (dollars in thousands) Balance at year-end $ 25,000 $ 20,000 Average balance during the year $ 6,418 $ 45,801 Average interest rate during the year 4.65 % 4.68 % Maximum month-end balance during the year $ 25,000 $ 150,000 At December 31, 2024 and 2023 , the Company's short-term FHLB advances totaled $ 25.0 million and $ 20.0 million, respectively.
During the twelve months ended December 31, 2023 and 2022 , the Company recognized amortization expense of $ 265 thousand and $ 278 thousand. The amortization expense was included in Other operating expenses on the Consolidated Statements of Income.
During the twelve months ended December 31, 2024 and 2023 , the Company recognized amortization expense of $ 295 thousand and $ 265 thousand. Beginning in 2024, upon adoption of ASU 2023-02, the amortization expense was included in income tax expense, while in 2023 and prior it was included in other operating expenses on the Consolidated Statements of Income.

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