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What changed in EAGLE FINANCIAL SERVICES INC's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of EAGLE FINANCIAL SERVICES INC's 2024 and 2025 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 2025 report.

+484 added−480 removedSource: 10-K (2026-03-16) vs 10-K (2025-03-31)

Top changes in EAGLE FINANCIAL SERVICES INC's 2025 10-K

484 paragraphs added · 480 removed · 324 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

58 edited+15 added−23 removed174 unchanged
Biggest changeOn February 10, 2025, the Company completed a public offering increasing its common shares outstanding by 1,796,875 shares, or 50.2%, at a price of $32.00. Volatility in the market price of our common stock may negatively impact the price at with our common stock may be sold and may also negatively impact the timing of any sale.
Biggest changeYou may not be able to resell your shares at or above the price you paid and may lose part or all of your investment as a result. Our stock price can fluctuate widely. On February 10, 2025, the Company completed a public offering increasing its common shares outstanding by 1,796,875 shares, or 50.2%, at a price of $32.00.
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.
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.
The federal banking agencies expect financial institutions to establish lines of defense and ensure that their risk management processes also address the risk posed by compromised customer credentials, and also expect financial institutions to maintain sufficient business continuity planning processes to ensure rapid recovery, resumption and maintenance of the institution’s operations after a cyber-attack.
The federal banking agencies expect financial institutions to establish lines of defense and ensure that their risk management processes also address the risk posed by compromised customer credentials, and also expect financial institutions to maintain sufficient business continuity planning processes to ensure rapid recovery, resumption and maintenance of the institution’s operations 9 after a cyber-attack.
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.
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.
The FDIC’s claim for reimbursement under the cross guarantee provisions is superior to claims of shareholders of the insured depository institution or its holding company but is subordinate to claims of depositors, secured creditors and nonaffiliated holders of subordinated debt of the commonly controlled insured depository institutions. Federal Reserve System .
The FDIC’s claim for reimbursement under the cross guarantee provisions is superior to claims of shareholders of the insured depository institution or its holding company but is subordinate to claims of depositors, secured creditors and nonaffiliated holders of subordinated debt of the commonly controlled insured depository institutions. 7 Federal Reserve System .
Governmental agencies, including the Department of Housing and Urban Development, the Federal Trade Commission and the Department of Justice, have become concerned that prospective borrowers experience discrimination in their efforts to obtain loans from depository and other lending institutions. These agencies have brought litigation against depository institutions alleging discrimination against borrowers.
Governmental agencies, including the Department of Housing and Urban Development, the Federal Trade Commission and the Department of Justice, have become concerned that prospective borrowers experience discrimination in their efforts to obtain loans from depository and other lending institutions. 8 These agencies have brought litigation against depository institutions alleging discrimination against borrowers.
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.
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.
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 .
The Company considers relations with its employees to be excellent, and 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 .
The Company’s ability to grow and expand depends upon its ability to open new branch locations, attract new deposits to the existing and new branch locations, and identify attractive loan and investment opportunities. The Company may not be able to implement its growth strategy if it is unable to identify attractive markets or branch locations.
The Company’s ability to grow and expand depends upon its ability to open new branch locations, attract new deposits to the existing and new branch locations, and identify attractive loan and investment opportunities. The Company may not be able to implement its growth 15 strategy if it is unable to identify attractive markets or branch locations.
The Sarbanes-Oxley Act implemented a number of laws affecting corporate governance, accounting obligations and corporate reporting. The Sarbanes-Oxley Act is applicable to all companies with equity securities registered or that file reports under the Securities Exchange Act of 1934.
Sarbanes-Oxley Act of 2002. The Sarbanes-Oxley Act implemented a number of laws affecting corporate governance, accounting obligations and corporate reporting. The Sarbanes-Oxley Act is applicable to all companies with equity securities registered or that file reports under the Securities Exchange Act of 1934.
Financial holding companies continue to be subject to the overall oversight and supervision of the Federal Reserve, but the GLBA applies the concept of functional regulation to the activities conducted by subsidiaries. For example, insurance activities would be subject to supervision and regulation by state insurance authorities.
Financial holding companies continue to be subject to the overall oversight and supervision of the Federal Reserve, but the GLBA applies the concept of 5 functional regulation to the activities conducted by subsidiaries. For example, insurance activities would be subject to supervision and regulation by state insurance authorities.
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.
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.
The market price of our common stock may continue to fluctuate widely in response to a variety of factors including the risk factors described herein and, among other things: • actual or anticipated variations in quarterly or annual operating results, financial conditions, or credit quality; • changes in business or economic conditions; • changes in accounting standards, policies, guidance, interpretations, or principles; • prevailing interest rates; • changes in recommendations or research reports about us or the financial services industry in general published by securities analysts; • the failure of securities analysts to cover, or to continue to cover, us; • changes in financial estimates or publication of research reports and recommendations by financial analysts or actions taken by rating agencies with respect to us or other financial institutions; • news reports relating to trends, concerns, and other issues in the financial services industry; • reports related to the impact of natural or man-made disasters in our market; • perceptions in the marketplace regarding us and our competitors; • sudden increases in the demand for our common stock, including as a result of any "short squeezes"; • significant acquisitions or business combinations, strategic partnerships, joint ventures, or capital commitments by or involving us or our competitors; • additional investments from third parties; • additions or departures of key personnel; • future sales or issuance of additional shares of our common stock; • fluctuations in the market price of our competitors' common stock and the operating results of our competitors; • changes or proposed changes in laws or regulations, or differing interpretations thereof, affecting our business, or enforcement of these laws or regulations, including as a result of the 2024 U.S. presidential election; • new technology used, or services offered, by competitors; 18 • additional investments from third parties; or • geopolitical conditions such as acts or threats of terrorism, pandemics, or military conflicts.
The market price of our common stock may continue to fluctuate widely in response to a variety of factors including the risk factors described herein and, among other things: • actual or anticipated variations in quarterly or annual operating results, financial conditions, or credit quality; • changes in business or economic conditions; • changes in accounting standards, policies, guidance, interpretations, or principles; • prevailing interest rates; • changes in recommendations or research reports about us or the financial services industry in general published by securities analysts; • the failure of securities analysts to cover, or to continue to cover, us; • changes in financial estimates or publication of research reports and recommendations by financial analysts or actions taken by rating agencies with respect to us or other financial institutions; • news reports relating to trends, concerns, and other issues in the financial services industry; 18 • reports related to the impact of natural or man-made disasters in our market; • perceptions in the marketplace regarding us and our competitors; • sudden increases in the demand for our common stock, including as a result of any "short squeezes"; • significant acquisitions or business combinations, strategic partnerships, joint ventures, or capital commitments by or involving us or our competitors; • additional investments from third parties; • additions or departures of key personnel; • future sales or issuance of additional shares of our common stock; • fluctuations in the market price of our competitors' common stock and the operating results of our competitors; • changes or proposed changes in laws or regulations, or differing interpretations thereof, affecting our business, or enforcement of these laws or regulations; • new technology used, or services offered, by competitors; • additional investments from third parties; or • geopolitical conditions such as acts or threats of terrorism, pandemics, or military conflicts.
Although the Company has not elected to become a financial holding company in order to exercise the broader activity powers provided by the GLBA, the Company may elect do so in the future. 5 Payment of Dividends .
Although the Company has not elected to become a financial holding company in order to exercise the broader activity powers provided by the GLBA, the Company may elect do so in the future. Payment of Dividends .
Future legislation, regulation, and government policy could affect the banking industry as a whole, including the business and results of operations of the Company and the Bank, in ways that are difficult to predict.
Future legislation, regulation, and government policy could affect the banking industry as a whole, including the business and results of operations of the Company and the Bank, in ways 10 that are difficult to predict.
As a state-chartered commercial bank, the Bank is subject to regulation, supervision and examination by the Virginia State Corporation Commission’s Bureau of Financial Institutions. It is also subject to regulation, supervision and examination by the Federal Reserve.
As a state-chartered commercial bank, the Bank is subject to regulation, supervision and examination by the Virginia State Corporation Commission’s Bureau of Financial Institutions. The Bank is also subject to regulation, supervision and examination by the Federal Reserve.
While the recently passed Economic Growth Act requires that federal banking regulators establish a simplified leverage capital framework for smaller banks, these more stringent capital requirements could, among other things, limit banking operations and activities, and growth of loan portfolios, in order to focus on retention of earnings to improve capital levels.
While the Economic Growth Act requires that federal banking regulators establish a simplified leverage capital framework for smaller banks, these more stringent capital requirements could, among other things, limit banking operations and activities, and growth of loan portfolios, in order to focus on retention of earnings to improve capital levels.
Such 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.
Such changes could also impact the capital levels of the Bank, or require the Company to incur additional personnel or technology costs. 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 Dodd-Frank Act, the federal banking agencies have established stricter capital requirements and leverage limits for banks and bank holding companies that are based on the Basel III regulatory capital reforms. The Basel III Capital Rules require banking organizations to maintain significantly more capital and adopted more demanding regulatory capital risk weightings and calculations.
Under the Dodd-Frank Act, the federal banking agencies have established stricter capital requirements and leverage limits for banks and bank holding companies that are based on the Basel III regulatory capital reforms. The Basel III Capital Rules require banking organizations to maintain significantly more capital and adopt more demanding regulatory capital risk weightings and calculations.
Although these provisions may have the effect of delaying, deferring or preventing a change in control, the Company believes that the benefits of increased protection through the potential ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure the Company outweigh the disadvantages of discouraging these proposals because, among other things, negotiation of such proposals could result in an improvement of their terms. 19 Item 1B.
Although these provisions may have the effect of delaying, deferring or preventing a change in control, the Company believes that the benefits of increased protection through the potential ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure the Company outweigh the disadvantages of discouraging these proposals because, among other things, negotiation of such proposals could result in an improvement of their terms.
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.
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 fifteen full-service branches, one loan production office, one wealth management office and one drive-through only facility.
The financial services industry is continually undergoing rapid technological change with frequent introductions of new technology-driven products and services. The effective use of technology increases efficiency and enables financial institutions and other firms to better serve customers and to reduce costs.
The financial services industry is continually undergoing rapid technological change with frequent introductions of new technology-driven products and services, including artificial intelligence. The effective use of technology increases efficiency and enables financial institutions and other firms to better serve customers and to reduce costs.
Other federal and state laws, including various consumer and compliance laws, govern the activities of the Bank, the investments that it makes and the aggregate amount of loans that it may grant to one borrower. The following sections summarize some of the significant federal and state laws applicable to the Company and its subsidiary.
Other federal and state laws, including various consumer and compliance laws, govern the activities of the Company and the Bank, the investments that they may make and the aggregate amount of loans that the Bank may grant to one borrower. The following sections summarize some of the significant federal and state laws applicable to the Company and its subsidiary.
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.
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.
Under the GLBA, bank holding companies that are well-capitalized and well-managed and meet other conditions can elect to become “financial holding companies.” As financial holding companies, they and their subsidiaries are permitted to acquire or engage in previously impermissible activities such as insurance underwriting, securities underwriting and distribution, travel agency activities, insurance agency activities, merchant banking and other activities that the Federal Reserve determines to be financial in nature or complementary to these activities.
Under the Gramm-Leach-Bliley Act (“GLBA”), bank holding companies that are well-capitalized and well-managed and meet other conditions can elect to become “financial holding companies.” As financial holding companies, they and their subsidiaries are permitted to acquire or engage in additional activities such as insurance underwriting, securities underwriting and distribution, travel agency activities, insurance agency activities, merchant banking and other activities that the Federal Reserve determines to be financial in nature or complementary to these activities.
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.
During 2025, the Company paid total dividends of $6.1 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 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.
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.
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.
At December 31, 2025, loans secured by real estate totaled $1.1 billion and represented 77.4% of the Company’s loan portfolio, net of net deferred loan costs and premiums.
As fully phased in effective January 1, 2019, the rules require the Bank to maintain (i) a minimum ratio of common equity Tier 1 to risk-weighted assets of at least 4.5%, plus a 2.5% “capital conservation buffer” (which is added to the 4.5% common equity Tier 1 ratio, effectively resulting in a minimum ratio of common equity Tier 1 to risk-weighted assets of at least 7.0%); (ii) a minimum ratio of Tier 1 capital to risk-weighted assets of at least 6.0%, plus the 2.5% capital conservation buffer (which is added to the 6.0% Tier 1 capital ratio, effectively resulting in a minimum Tier 1 capital ratio of 8.5%); (iii) a minimum ratio of total capital to risk-weighted assets of at least 8.0%, plus the 2.5% capital conservation buffer (which is added to the 8.0% total capital ratio, effectively resulting in a minimum total capital ratio of 10.5%); and (iv) a minimum leverage ratio of 4.0%, calculated as the ratio of Tier 1 capital to average assets.
The Basel III final rules and capital conservation buffer requires the Bank to maintain: (i) a minimum ratio of common equity Tier 1 to risk-weighted assets of at least 4.5%, plus a 2.5% capital conservation buffer (which is added to the 4.5% common equity Tier 1 ratio, effectively resulting in a minimum ratio of common equity Tier 1 to risk-weighted assets of at least 7.0%); (ii) a minimum ratio of Tier 1 capital to risk-weighted assets of at least 6.0%, plus the 2.5% capital conservation buffer (which is added to the 6.0% Tier 1 capital ratio, effectively resulting in a minimum Tier 1 capital ratio of 8.5%); (iii) a minimum ratio of total capital to risk-weighted assets of at least 8.0%, plus the 2.5% capital conservation buffer (which is added to the 8.0% total capital ratio, effectively resulting in a minimum total capital ratio of 10.5%); and (iv) a minimum leverage ratio of 4.0%, calculated as the ratio of Tier 1 capital to average assets.
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.
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.
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.
Employees The Company, including the Bank, has 254 full-time equivalent employees at December 31, 2025, representing 86 officers, 161 other, non-officer, full-time employees and 8 part-time employees. None of the Company’s employees are represented by a union or covered under a collective bargaining agreement.
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.
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.
Either of these factors could reduce the Company’s net interest margin and net interest income and could have a material adverse effect on the Company’s business, financial condition, results of operations, liquidity and cash flows from operations. 13 Further, if local customer deposits are not sufficient to fund the Company’s normal operations and growth, we may rely on secondary sources of liquidity, such as borrowings from the Federal Home Loan Bank of Atlanta ("FHLB"), and federal funds lines of credit with larger institutions; however, there can be no assurance that these arrangements will be available to us when needed on favorable terms, or at all, or that they will be sufficient to meet future liquidity needs.
Further, if local customer deposits are not sufficient to fund the Company’s normal operations and growth, we may rely on secondary sources of liquidity, such as borrowings from the Federal Home Loan Bank of Atlanta ("FHLB"), and federal funds lines of credit with larger institutions; however, there can be no assurance that these arrangements will be available to us when needed on favorable terms, or at all, or that they will be sufficient to meet future liquidity needs.
The Company’s computer systems and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance, or other disruptions. A breach of any kind could compromise systems and the information stored there could be accessed, damaged, or disclosed.
The continued evolution and increased usage of artificial intelligence technologies may further increase these risks. The Company’s computer systems and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance, or other disruptions. A breach of any kind could compromise systems and the information stored there could be accessed, damaged, or disclosed.
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 .
Based on total deposits at June 30, 2025 as reported to the FDIC, the Bank has 11.94% of the total deposits in its primary deposit market area of Clarke County, Frederick County, Loudoun County, Fauquier County and the City of Winchester.
The Bank is subject to stringent capital and liquidity requirements as a result of the Basel III regulatory capital reforms and the Dodd-Frank Act. The Bank is subject to capital adequacy guidelines and other regulatory requirements specifying minimum amounts and types of capital which it must maintain. From time to time, regulators implement changes to these regulatory capital adequacy guidelines.
The Bank is subject to capital adequacy guidelines and other regulatory requirements specifying minimum amounts and types of capital which it must maintain. From time to time, regulators implement changes to these regulatory capital adequacy guidelines.
The Company could be adversely affected by economic conditions in its market area. The Company’s branches are located in the counties of Clarke, Frederick, Fauquier, and Loudoun, the towns of Purcellville, Leesburg and Ashburn, and the City of Winchester. The Company also operates loan production offices in the counties of Fairfax (Virginia) as well as Frederick (Maryland).
The Company’s branches are located in the counties of Clarke, Frederick, Fauquier, Loudoun, and Fairfax the towns of Purcellville, Leesburg and Ashburn, and the City of Winchester. The Company also operates loan production offices in the counties of Fairfax (Virginia) and Frederick (Maryland).
In addition, the Company faces competition from market place lenders and other financial technology firms, which may provide competitive services quickly and in innovative ways and may have fewer regulatory constraints and lower cost structures. This competition may reduce or limit our margins and our market share and may adversely affect our results of operations and financial condition.
In addition, the Company faces competition from market place lenders and other financial technology firms, which may provide competitive services quickly and in innovative ways and may have fewer regulatory constraints and lower cost structures.
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.
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.
The lack of empirical data surrounding the credit and other financial risks posed by climate change render it impossible to predict how specifically climate change may impact the Company’s financial condition and results of operations; however, the physical effects of climate change may also directly impact the Company.
Among other things, the Company and its customers could face cost increases, compliance-related risks, asset value reductions and operating process changes. 17 The lack of empirical data surrounding the credit and other financial risks posed by climate change render it impossible to predict how specifically climate change may impact the Company’s financial condition and results of operations; however, the physical effects of climate change may also directly impact the Company.
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.
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. Internet banking also offers online bill payment to consumer and commercial customers.
Our common stockholders are only entitled to receive the dividends declared by our Board of Directors out of funds legally available for such payments.
Risks Relating to an Investment in Our Common Stock 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 out of funds legally available for such payments.
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%.
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 (" CBLR").
The Bank’s main office is located at 2 East Main Street in Berryville, Virginia. The Bank opened for business on April 1, 1881. The Bank has Virginia offices located in Clarke County, Frederick County, Fauquier County, Loudoun County and Fairfax County, as well as the Towns of Leesburg, Ashburn and Purcellville and the City of Winchester.
The Bank has Virginia offices located in Clarke County, Frederick County, Fauquier County, Loudoun County and Fairfax County, as well as the towns of Leesburg and Purcellville and the City of Winchester. The Bank has a Maryland office located in Frederick.
At this time, it is unclear what laws, regulations, and policies may change and whether future changes or uncertainty surrounding future changes will adversely affect the Company’s operating environment and therefore its business, financial condition, and results of operations.
At this time, however, it is unclear what the impacts to the rulemaking, supervision, examination, and enforcement priorities of the federal banking agencies will be, what laws, regulations, and policies may change, and whether future changes or uncertainty surrounding future changes will adversely affect the Company’s operating environment, and therefore its business, financial condition, and results of operations. 16 The Bank is subject to stringent capital and liquidity requirements as a result of the Basel III regulatory capital reforms and the Dodd-Frank Act.
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.
The Federal Reserve has adopted capital rules implementing the Basel III regulatory capital reforms from the Basel Committee on Banking Supervision and certain provisions of the Dodd-Frank Act.
The Bank has a Maryland office located in Frederick. This market area is located in the Shenandoah Valley of Virginia, Northern Virginia and Frederick, Maryland. The Bank offers a wide range of retail and commercial banking services, including demand, savings and time deposits and consumer, mortgage and commercial loans.
The Bank offers a wide range of retail and commercial banking services, including demand, savings and time deposits and consumer, mortgage and commercial loans. The Bank has fourteen ATM locations in its trade area and issues debit cards to deposit customers.
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.
Failure to act responsibly or in line with regulatory and stakeholder expectations in a number of areas, such as climate risk, human capital and hiring practices, human rights, support for local communities, and corporate governance and transparency, could negatively impact the Company’s reputation, ability to do business with certain partners, and stock price.
An unsatisfactory rating can significantly delay or even prohibit regulatory approval of a proposed transaction by a bank holding company or its depository institution subsidiaries. In October 2023, the Office of the Comptroller of the Currency ("OCC"), the Federal Reserve System Board and the FDIC finalized comprehensive revisions to their CRA regulations.
An unsatisfactory rating can significantly delay or even prohibit regulatory approval of a proposed transaction by a bank holding company or its depository institution subsidiaries. Fair Lending; Consumer Laws . In addition to the Community Reinvestment Act, other federal and state laws regulate various lending and consumer aspects of the banking business.
There is no assurance that any such losses would not materially and adversely affect our results of operations. In addition, financial challenges at other banking institutions could lead to depositor concerns that spread within the banking industry.
There is no assurance that any such losses would not materially and adversely affect our results of operations. Operational Risks Our exposure to operational risk may adversely affect our business.
Adverse incidents could impact the value of the Company’s brand, the cost of its operations and/or relationships with customers, investors or employees, any of which could adversely affect its business and results. Climate change and related legislative and regulatory initiatives may result in operational changes and expenditures that could significantly impact the Company’s business.
If the Company is unable to meet its social- or environmentally-related goals or evolving and divergent stakeholder expectations and industry standards, it could negatively impact the value of the Company’s brand, the cost of its operations and/or relationships with customers, investors or employees, any of which could adversely affect its business and results.
These occurrences could have a material adverse effect on the Company’s net interest income or our results of operations. The Company relies substantially on deposits obtained from customers in its target markets to provide liquidity and support growth.
Either of these factors could reduce the Company’s net interest margin and net interest income and could have a material adverse effect on the Company’s business, financial condition, results of operations, liquidity and cash flows from operations.
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 .
In November 2025, the federal banking regulators issued a proposal that would lower the leverage ratio for purposes of the CBLR framework from 9% to 8%. As of December 31, 2025, the Bank has not opted into the CBLR framework. Other Safety and Soundness Regulations .
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.
Companies are facing increasing scrutiny from customers, regulators, investors, and other stakeholders related to corporate social responsibility, environmental concerns, governance and related practices.
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 on the Nasdaq Capital Market, the trading volume in our common shares may be lower than other larger financial institutions or publicly traded companies.
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.
The rules, regulations and expectations of regulators, customers, investors, associates, and other stakeholders with respect to these matters continue to evolve, which could result in increases to the Company’s overall operational costs and increased management time and attention. Further, as these rules, regulations and expectations continue to evolve, the Company’s stakeholders may have differing views on related matters.
The Company expects that the Trump administration will seek to implement a regulatory agenda that is significantly different than that of the Biden administration, impacting the rulemaking, supervision, examination, and enforcement priorities of the federal banking agencies.
The Company expects the Trump administration will implement a regulatory agenda that could reduce and streamline certain prudential and regulatory requirements applicable to banking organizations at a federal level.
The Federal Reserve has not advised the Company or the Bank of any specific minimum leverage ratio applicable to either entity. The capital requirements that became effective January 1, 2015 were phased in over a four-year period.
The Federal Reserve has not advised the Company or the Bank of any specific minimum leverage ratio applicable to either entity. Banks also are required to maintain additional capital known as the "capital conservation buffer." The capital conservation buffer is designed to absorb losses during periods of economic stress.
Removed
In November 1999, Congress enacted the Gramm-Leach-Bliley Act (“GLBA”), which made substantial revisions to the statutory restrictions separating banking activities from other financial activities.
Added
The Bank’s main office is located at 2 East Main Street in Berryville, Virginia. The Bank opened for business on April 1, 1881. The Bank's market area is located in the Shenandoah Valley of Virginia, Northern Virginia and Frederick, Maryland.
Removed
The capital conservation buffer requirement was phased in beginning January 1, 2016, at 0.625% of risk-weighted assets, increasing by the same amount each year until fully implemented at 2.5% effective January 1, 2019. The capital conservation buffer is designed to absorb losses during periods of economic stress.
Added
During the third quarter of 2025, the Bank opened its first full-service branch in Fairfax County, providing an opportunity to expand strategically and deliver its distinctive brand of community banking to Fairfax County. Adding Fairfax County to the the Bank's primary deposit market area increases the number of competing banking offices by approximately 66%.
Removed
The objectives in issuing the final rule include strengthening the achievement of the core purpose of the statute, adapting to changes in the banking industry, including the expanded role of mobile and online banking, tailoring performance standards to account for differences in bank size and business models and local conditions, confirming that CRA and fair lending responsibilities are mutually reinforcing, and promoting a consistent regulatory approach that applies to banks regulated by all three agencies.
Added
Under the expanded market area, the Bank's has 1.29% of total deposits at June 30, 2025, as reported to the FDIC. Supervision and Regulation General .
Removed
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.
Added
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%.
Removed
In addition to numerous technical revisions, the final rule introduces major changes to the CRA regulations in four key areas: (A) the delineation of assessment areas; (B) the overall evaluation framework and performance standards and metrics; (C) the definition of community development activities; and (D) data collection and reporting.
Added
These occurrences could have a material adverse effect on the Company’s net interest income or our results of operations. Inflation can have an adverse impact on our business and on our customers. The future rate of inflation and other economic factors remain uncertain, and the Federal Reserve may decrease or increase interest rates slower or faster than anticipated.
Removed
The new evaluation framework is “tailored” based on the size of the bank. Fair Lending; Consumer Laws . In addition to the Community Reinvestment Act, other federal and state laws regulate various lending and consumer aspects of the banking business.
Added
If inflation increases and interest rates rise, the value of our investment securities, particularly those with longer maturities, will decrease, although this effect is less pronounced for floating rate instruments.
Removed
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.
Added
Prolonged periods of inflation also may impact our profitability by negatively impacting our costs and expenses, including elevated funding costs and expenses related to talent acquisition and retention, and negatively impacting the demand for our products and services.
Removed
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.
Added
Moreover, our customers are also affected by inflation and the rising costs of goods and services used in their households and businesses, which could have a negative impact on their ability to repay their loans. 13 The Company relies substantially on deposits obtained from customers in its target markets to provide liquidity and support growth.
Removed
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.
Added
The financial services industry continues to undergo rapid technological change with introductions of new technologies and services, including new ways that customers can make payments or manage their accounts, including through use of stablecoins and other forms of cryptocurrency, tokens, and other digital assets or alternative payment systems.This competition may reduce or limit our margins and our market share and may adversely affect our results of operations and financial condition. 14 The Company could be adversely affected by economic conditions in its market area.
Removed
In 2023, the SEC issued a final rule that requires disclosure of material cybersecurity incidents, as well as cybersecurity risk management, strategy and governance.
Added
If such events were to occur again in the future and result in the receivership of financial institutions, there is no guarantee that the systemic risk exception would be invoked to allow the FDIC to complete its resolution of such financial institutions in a manner that fully protects depositors or counterparties.
Removed
Under this rule, banking organizations that are SEC registrants must generally disclose information about a material cybersecurity incident within four business days of determining it is material with periodic updates as to the status of the incident in subsequent filings as necessary. Sarbanes-Oxley Act of 2002.
Added
Scrutiny, or the perception that the Company’s efforts are too ambitious or misdirected, could expose the Company to the risk of investigations, litigation and other proceedings or reputational harm.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeMaterial Effects of Cybersecurity Threats While cybersecurity risks have the potential to materially affect the Company's business, financial condition, and results of operations, the Company does not believe that risks from cybersecurity threats or attacks, including because of any previous cybersecurity incidents, have materially affected the Company, including its business strategy, results of operations or financial condition.
Biggest changeMaterial Effects of Cybersecurity Threats 20 While cybersecurity risks have the potential to materially affect the Company's business, financial condition, and results of operations, the Company does not believe that risks from cybersecurity threats or attacks, including because of any previous cyb ersecurity incidents, have materially affected the Company, including its business strategy, results of operations or financial condition.
Item 1C. Cybersecurity Risk Management and Strategy Cybersecurity risks are constantly evolving and becoming increasingly pervasive across all industries. To mitigate these risks and protect sensitive customer data, financial transactions, and our information systems, the Company has implemented a comprehensive Information Security Program (“Program”) which is a component of its overarching enterprise risk management program.
Item 1C. Cybersecurity 19 Risk Management and Strategy Cybersecurity risks are constantly evolving and becoming increasingly pervasive across all industries. To mitigate these risks and protect sensitive customer data, financial transactions, and our information systems, the Company has implemented a comprehensive Information Security Program (“Program”) which is a component of its overarching enterprise risk management program.
Management promptly reviews results of these audits to initiate necessary remediation, which are then reviewed by the Audit Committee. The Board of Directors has designated the Security Committee and Incident Response Team with responsibilities related to information security and cybersecurity. The Security Committee is a management committee with representation from operations, technology, compliance, risk, and senior management.
Management promptly reviews results of these audits to initiate necessary remediation, which are then reviewed by the Audit Committee. The Board of Directors has designated the Security Committee and Incident Response Team with responsibilities related to inform ation security and cybersecurity. The Security Committee is a management committee with representation from operations, technology, compliance, risk, and senior management.
For more information on how cybersecurity risk may materially affect the Company’s business strategy, results of operations or financial condition, refer to Item 1A, Risk Factors of this Form 10-K.
For more information on how cybersecurity risk may materially affect the Company’s business strategy, results of operations or fin ancial condition, refer to Item 1A, Risk Factors of this Form 10-K.
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. 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 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 Securi ty Officer, who oversees the Company’s information security programs, has over 10 years of experience and reports to the Chief Operating Officer.

Item 2. Properties

Properties — owned and leased real estate

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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.
Biggest changeAt December 31, 2025, Bank of Clarke operated fifteen 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 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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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
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 52

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeTotal 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
Biggest changeTotal 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, 2025 — $ — — 150,000 November 1 - November 30, 2025 — — — 150,000 December 1 - December 31, 2025 818 39.80 818 149,182 818 $ — 818 149,182
Issuer 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.
Issuer Purchases of Equity Securities for the Quarter Ended December 31, 2025 On June 18, 2025, 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, 2026.
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.
As of that date, the closing price of our common stock on the Exchange was $34.56. 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 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.
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 3, 2026, the Company had approximately 818 shareholders of record.
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.
During 2025, the Company purchased 9,598 shares of its Common Stock under its stock repurchase program at an average price of $36.58. The Company purchased 818 shares of its common stock during the fourth quarter pursuant to the stock repurchase program discussed above and as shown in the following table.

Item 7. Management's Discussion & Analysis

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

107 edited+99 added−99 removed50 unchanged
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%.
Biggest changeThis measurement is affected by the same factors as ROA with consideration to how much of the Company’s assets are funded by the shareholders. 30 Average Balances, Income and Expenses, Yields and Rates (Tax-Equivalent Basis) The following table shows average balance, interest, and yield/rate information, as well as net interest margin on a tax- eq uivalent basis for the years ended December 31, 2025 and 2024 (dollars in thousands): Years Ended December 31, 2025 December 31, 2024 Average Interest Income/ Average Average Interest Income/ Average Balance Expense Rate Balance Expense Rate Assets: Securities: Taxable $ 120,646 $ 4,792 3.97 % $ 138,205 $ 3,551 2.57 % Tax-Exempt (1) 87 4 4.60 % 495 20 4.09 % Total Securities $ 120,733 $ 4,796 3.97 % $ 138,700 $ 3,571 2.58 % Loans: (2) Taxable 1,432,473 81,978 5.72 % 1,446,705 81,366 5.62 % Non-accrual 11,944 — — % 3,774 — — % Tax-Exempt (1) 9,769 496 5.08 % 10,405 523 5.02 % Total Loans $ 1,454,186 $ 82,474 5.67 % $ 1,460,884 $ 81,889 5.61 % Federal funds sold and interest-bearing deposits in other banks 269,375 11,840 4.40 % 114,189 5,975 5.23 % Total earning assets $ 1,844,294 $ 99,110 5.37 % $ 1,713,773 $ 91,435 5.34 % Allowance for credit losses (15,351 ) (14,793 ) Total non-earning assets 109,176 105,840 Total assets $ 1,938,119 $ 1,804,820 Liabilities and Shareholders' Equity: Interest-bearing deposits: NOW accounts $ 300,711 $ 6,654 2.21 % $ 259,372 $ 6,097 2.35 % Money market accounts 273,390 6,033 2.21 % 263,960 5,989 2.27 % Savings accounts 128,007 142 0.11 % 134,893 155 0.12 % Time deposits: $250,000 and more 176,777 7,568 4.28 % 153,398 7,260 4.73 % Less than $250,000 292,311 11,782 4.03 % 276,580 12,353 4.47 % Total interest-bearing deposits $ 1,171,196 $ 32,179 2.75 % $ 1,088,203 $ 31,854 2.93 % Federal funds purchased 4 — NM 11 — NM Federal Home Loan Bank advances 57,603 2,795 4.85 % 145,383 6,823 4.69 % Subordinated debt 29,543 1,417 4.80 % 29,476 1,417 4.81 % Total interest-bearing liabilities $ 1,258,346 $ 36,391 2.89 % $ 1,263,073 $ 40,094 3.17 % Noninterest-bearing liabilities: Demand deposits 486,606 412,646 Other Liabilities 22,409 17,714 Total liabilities $ 1,767,361 $ 1,693,433 Shareholders' equity 170,758 111,387 Total liabilities and shareholders' equity $ 1,938,119 $ 1,804,820 Net interest income $ 62,719 $ 51,341 Net interest spread 2.48 % 2.17 % Interest expense as a percent of average earning assets 1.97 % 2.34 % Net interest margin (3) 3.40 % 3.00 % (1) Income and yields are reported on a tax-equivalent basis using the federal tax rate of 21%.
The capital conservation buffer rule requires the Bank to maintain (i) a minimum ratio of common equity Tier 1 to risk-weighted assets of at least 4.5%, plus a 2.5% “capital conservation buffer” (which is added to the 4.5% common equity Tier 1 ratio, effectively resulting in a minimum ratio of common equity Tier 1 to risk-weighted assets of at least 7.0%), (ii) a minimum ratio of Tier 1 capital to risk-weighted assets of at least 6.0%, plus the 2.5% capital conservation buffer (which is added to the 6.0% Tier 1 capital ratio, effectively resulting in a minimum Tier 1 capital ratio of 8.5%), (iii) a minimum ratio of total capital to risk-weighted assets of at least 8.0%, plus the 2.5% capital conservation buffer (which is added to the 8.0% total capital ratio, effectively resulting in a minimum total capital ratio of 10.5%), and (iv) a minimum leverage ratio of 4.0%, calculated as the ratio of Tier 1 capital to average assets.
The capital conservation buffer rule requires the Bank to maintain (i) a minimum ratio of common equity Tier 1 to 49 risk-weighted assets of at least 4.5%, plus a 2.5% “capital conservation buffer” (which is added to the 4.5% common equity Tier 1 ratio, effectively resulting in a minimum ratio of common equity Tier 1 to risk-weighted assets of at least 7.0%), (ii) a minimum ratio of Tier 1 capital to risk-weighted assets of at least 6.0%, plus the 2.5% capital conservation buffer (which is added to the 6.0% Tier 1 capital ratio, effectively resulting in a minimum Tier 1 capital ratio of 8.5%), (iii) a minimum ratio of total capital to risk-weighted assets of at least 8.0%, plus the 2.5% capital conservation buffer (which is added to the 8.0% total capital ratio, effectively resulting in a minimum total capital ratio of 10.5%), and (iv) a minimum leverage ratio of 4.0%, calculated as the ratio of Tier 1 capital to average assets.
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.
Consumer Central Lenders can co-approve consumer, home equity lines of credit and home equity loan requests up to their stated authorities. 25 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.
Management also assesses the risk of credit losses arising from changes in economic conditions; the nature and volume of the loan portfolio; the volume and severity of delinquencies and adversely classified loan balances; lending policy and procedures; credit administration and lending staff; loan review; concentrations of credit and the value of underlying collateral in determining the recorded balance of the allowance for credit losses.
Management also assesses the risk of credit losses arising from changes in economic conditions; the nature 27 and volume of the loan portfolio; the volume and severity of delinquencies and adversely classified loan balances; lending policy and procedures; credit administration and lending staff; loan review; concentrations of credit and the value of underlying collateral in determining the recorded balance of the allowance for credit losses.
This evaluation is inherently subjective because it requires estimates that are susceptible to significant revision as more information becomes available. In evaluating the level of the allowance, we 27 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 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 42 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 whose financial conditional is monitored on a periodic 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.
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.
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").
Note 1 to the Consolidated Financial Statements presented in Item 8, Financial Statements and Supplementary Data, of the 2025 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 final rules require the Bank to comply with the following minimum capital ratios: (i) a common equity Tier 1 capital ratio of 4.5% of risk-weighted assets; (ii) a Tier 1 capital ratio of 6.0% of risk-weighted assets; (iii) a total capital ratio of 8.0% of risk-weighted assets; and (iv) a leverage ratio of 4.0% of total assets.
The risk-based capital rules require the Bank to comply with the following minimum capital ratios: (i) a common equity Tier 1 capital ratio of 4.5% of risk-weighted assets; (ii) a Tier 1 capital ratio of 6.0% of risk-weighted assets; (iii) a total capital ratio of 8.0% of risk-weighted assets; and (iv) a leverage ratio of 4.0% of total assets.
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.
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, 2025 and 2024.
The Bank also earns fees on services provided through the Bank of Clarke Wealth Management Division, which is the Bank’s investment management division that offers both trust services and investment sales, mortgage originations and deposit operations.
The Bank also earns fees on services provided through the Bank of Clarke Wealth Management Division, which is the Bank’s investment management division that offers both trust services and investment sales, mortgage originations, loan sales to the secondary market, and deposit operations.
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.
The gross amount of interest income that would have been recognized on nonaccrual loans was $672 thousand for 2025 and $81 thousand for 2024. None of this interest income was included in net income for 2025 or 2024.
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.
As of or for the Years Ended December 31, 2025 2024 2023 2022 2021 (dollars in thousands, except per share amounts) Income Statement Data: Interest and dividend income $ 99,005 $ 91,321 $ 83,093 $ 54,686 $ 42,676 Interest expense 36,391 40,094 32,837 5,473 1,677 Net interest income $ 62,614 $ 51,227 $ 50,256 $ 49,213 $ 40,999 Provision for credit losses 3,701 2,551 1,649 1,830 1,483 Net interest income after provision for credit losses $ 58,913 $ 48,676 $ 48,607 $ 47,383 $ 39,516 Noninterest income 6,883 21,557 14,780 13,345 11,320 Net revenue $ 65,796 $ 70,233 $ 63,387 $ 60,728 $ 50,836 Noninterest expenses 55,871 51,332 52,754 43,057 38,049 Income before income taxes $ 9,925 $ 18,901 $ 10,633 $ 17,671 $ 12,787 Income tax expense 1,711 3,558 1,276 3,150 1,766 Net Income $ 8,214 $ 15,343 $ 9,357 $ 14,521 $ 11,021 Performance Ratios: Return on average assets 0.42 % 0.85 % 0.54 % 1.02 % 0.90 % Return on average equity 4.81 % 13.77 % 9.05 % 14.06 % 10.28 % Shareholders’ equity to assets 10.00 % 6.38 % 5.94 % 6.29 % 8.46 % Dividend payout ratio 77.99 % 28.01 % 45.11 % 27.58 % 34.38 % Non-performing loans to total loans 0.98 % 0.14 % 0.40 % 0.19 % 0.28 % Non-performing assets to total assets 0.77 % 0.14 % 0.34 % 0.16 % 0.21 % Share and Per Share Data: Net income, basic $ 1.59 $ 4.32 $ 2.66 $ 4.17 $ 3.20 Net income, diluted 1.59 4.32 2.66 4.17 3.20 Cash dividends declared 1.24 1.21 1.20 1.15 1.10 Book value 35.14 33.52 30.78 29.15 31.93 Market price 39.80 36.40 30.00 35.95 34.65 Average shares outstanding, basic 5,178,488 3,553,919 3,523,547 3,482,368 3,440,080 Average shares outstanding, diluted 5,178,488 3,553,919 3,523,547 3,482,368 3,440,080 Balance Sheet Data: Total securities $ 123,329 $ 128,887 $ 147,011 $ 158,389 $ 193,370 Total loans 1,473,077 1,467,049 1,462,686 1,323,783 985,720 Total assets 1,888,626 1,866,215 1,825,597 1,616,717 1,303,038 Total deposits 1,607,360 1,575,156 1,506,322 1,264,075 1,177,235 Shareholders’ equity 188,839 118,987 108,379 101,729 110,280 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.
The following table presents a summarized statement of operations for the community banking business segment for the twelve months ended December 31, 2024 and 2023.
The following table presents a summarized statement of income for the community banking business segment for the twelve months ended December 31, 2025 and 2024.
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.
The following table provides the components of noninterest income for the twelve months ended December 31, 2025 and 2024, which are included within the respective Consolidated Statements of Income headings. Variances that the Company believes require explanation are discussed below the table.
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.
Some of the factors that might cause these differences include the following: • 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; • the Company's ability to successfully resolve non-performing assets; • 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 economic impact of duties, tariffs or other barriers or restrictions on trade, any retaliatory counter measures, or the volatility and uncertainty arising there from; • political developments, including government shutdowns, and other significant disruptions and changes in the funding, size, scope, and efficiencies of the federal government, its agencies and services; • 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.
Gain on the sale and disposal of bank premises and equipment was $3.9 million for the year ended December 31, 2024 reflecting the sale of the Company's operating center and branch building in a sales-leaseback transaction during the fourth quarter, resulting in a realized gain of $3.9 million.
Gain on the sale and disposal of bank premises and equipment decreased during the year ended December 31, 2025 due to sale of the Company's operating center and branch building in a sales-leaseback transaction during the fourth quarter of 2024, which resulted in a realized gain of $3.9 million.
Other noninterest income for the twelve months ended December 31, 2024 was up by $6.4 million, or 87.70% compared to the same period in 2023 primarily reflecting the sale of the Company's operating center and branch building in a sales-leaseback transaction, resulting in a realized gain of $3.9 million.
Other noninterest income for the twelve months ended December 31, 2025 decreased compared to the same period in 2024 primarily reflecting the sale of the Company's operating center and branch building in a sales-leaseback transaction, resulting in a realized gain of $3.9 million during 2024.
Three marine vessels and three commercial vehicles, were repossessed during 2024 and placed into repossessed assets. Sales of repossessed assets during 2024 included the three commercial vehicles and a marine vessel repossessed in 2023. A net loss of $204 thousand was recognized on the sale of repossessed assets for the twelve months ended December 31, 2024.
Sales of repossessed assets during 2025 included three marine vessel repossessed in 2024 and three of the four marine vessels repossessed during 2025. A net loss of $302 thousand and $204 thousand was recognized on the sale of repossessed assets for the twelve months ended December 31, 2025 and 2024, respectively.
Gains on properties acquired through foreclosure where the fair value less costs to sell exceeds the related loan balance and there have been no prior charge-offs are recorded to current earnings. In addition, the Company may, under certain circumstances, modify loans.
Gains on properties acquired through foreclosure where the fair value less costs to sell exceeds the related loan balance and there have been no prior charge-offs are recorded to current earnings. Loans secured by other assets, such as marine vessels, are recorded in a similar manner when a repossession occurs. In addition, the Company may, under certain circumstances, modify loans.
This commitment is more fully discussed in the “Asset Quality” section. 32 Noninterest Income Total noninterest income was $21.6 million and $14.8 million during 2024 and 2023, respectively. This represents an increase of $6.8 million or 45.85% for 2024. Management reviews the activities which generate noninterest income on an ongoing basis.
This commitment is more fully discussed in the “Asset Quality” section. Noninterest Income Total noninterest income was $6.9 million and $21.6 million during 2025 and 2024, respectively. This represents a decrease of $14.7 million or 68.07% for 2025. Management reviews the activities which generate noninterest income on an ongoing basis.
Marine Lending The Bank's marine loan portfolio is comprised of originated retail loans. In August 2023, the Company completed a sale of specific assets from its marine lending segment and reduced its workforce associated with the marine lending division, as it ceased accepting new marine lending business.
Marine Lending The Bank's marine loan portfolio is comprised of originated retail loans. The Company ceased accepting new marine business in August 2023, upon completion of a sale of specific assets from its marine lending segment.
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.
Wealth management fee income is primarily comprised of income from fiduciary activities and 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. Income from investment sales increased due to the continued attractiveness of brokerage and advisory investments products.
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.
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.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation The purpose of this discussion is to focus on the important factors affecting the financial condition, results of operations, liquidity and capital resources of Eagle Financial Services, Inc. (the “Company”).
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation The purpose of this discussion is to focus on certain information relevant to the Company’s financial condition, results of operations, liquidity and capital resources.
This 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.
This increase of $12.0 million when compared to the December 31, 2024 balance of $2.6 million resulted mostly from the increase in nonaccrual loans. Nonaccrual loans were $14.4 million at December 31, 2025 and $2.1 million at the end of 2024.
The provision for credit losses in 2024 resulted largely from a $1.9 million provision against the marine portfolio due to charge-offs against six marine loans totaling $1.8 million.
The provision for credit losses in 2024 resulted largely from a $1.9 million provision against the marine portfolio due to charge-offs against six marine loans totaling $1.8 million. Specific reserve allocations were $467 thousand and $248 thousand at December 31, 2025 and 2024, respectively.
The Company uses certain non-GAAP financial measures, including tax-equivalent net interest income and efficiency ratio, to provide meaningful supplemental information regarding the Company's operational performance and to enhance investors' overall understanding of such financial performance. The methodology for determining these non-GAAP measures may differ among companies.
The Company uses certain non-GAAP financial measures, including non-GAAP net income, non-GAAP noninterest income, non-GAAP earnings per share, non-GAAP return on average equity and average assets, tax-equivalent net interest income and efficiency ratio, to provide meaningful supplemental information regarding the Company's operational performance and to enhance investors' overall understanding of such financial performance.
OPERATING STRATEGY The Bank is a locally managed financial institution as well as predominantly locally owned. While the Company expanded its ownership to institutional investors though a public offering of its common stock in February 2025, its operating strategy remains the same. The public offering increased the number of shares outstanding by 50% and added approximately $53.5 million in capital.
OPERATING STRATEGY The Bank is a locally managed, commercial focused banking institution operating in several of the country's most attractive markets. The Company expanded its ownership to institutional investors through a public offering of its common stock in February 2025, increasing the number of shares outstanding by 50% and added approximately $53.5 million in capital.
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 calculation of the efficiency ratio for the twelve months ended December 31, 2025 and 2024 was as follows: December 31, 2025 2024 (in thousands) Summary of Operating Results: Noninterest expenses (GAAP) $ 55,871 $ 51,332 Less: Loss on other real estate owned and repossessed assets 353 204 Adjusted noninterest expenses (non-GAAP) $ 55,518 $ 51,128 Net interest income $ 62,614 $ 51,227 Noninterest income (GAAP) $ 6,883 $ 21,557 Less: (Loss) on sales of securities (12,425 ) — Less: (Loss) Gain on the sale and disposal of premises and equipment (19 ) 3,863 Less: Life insurance proceeds — 935 Adjusted noninterest income (non-GAAP) $ 19,327 $ 16,759 Tax equivalent adjustment (1) 105 114 Total net interest income and noninterest income, adjusted (non-GAAP) $ 82,046 $ 68,100 Efficiency ratio 67.67 % 75.08 % (1) Includes tax-equivalent adjustments on loans and securities using the federal statutory tax rate of 21%.
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.
During 2025, the Company sold $89.7 million in mortgage loans on the secondary market and $21.8 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 SBA loans.
The provision for credit losses in 2024 and 2023 reflected the level of net charge-offs and the specific reserve allocation in addition to loan growth in the portfolio.
The provision for credit losses for the years ended December 31, 2025 and 2024 was $3.7 million and $2.6 million, respectively. The provision for credit losses in 2025 and 2024 reflected the level of net charge-offs and the specific reserve allocation in addition to loan growth in the portfolio.
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.
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, 2025 $ 59,007 $ 59,308 $ 62,892 $ 3,047 $ 184,254 11.46 % 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, 2025.
Beginning in the third quarter of 2024, the Company pledged available for sale mortgage-backed securities with the Federal Reserve Bank discount window, which reduced its liquid assets and reinforced its ability to obtain liquidity from the Federal Reserve Bank discount window. At December 31, 2024 the Company had $74.0 million in funds available through the discount window.
The Company pledges available for sale mortgage-backed securities with the Federal Reserve Bank discount window, which while reducing its liquid assets it reinforces its ability to obtain liquidity from the Federal Reserve Bank discount window. At December 31, 2025 the Company had $63.2 million in funds available through the discount window.
The table indicates that $620.7 million or 42.50% of the loan portfolio matures within five years.
The table indicates that $764.6 million or 52.11% of the loan portfolio matures within five years.
These loan sales resulted in gains of $2.1 million and $1.4 million during the years ended December 31, 2024 and 2023, respectively. Income from holdings in small business investment companies increased during 2024 as the result of higher cash distributions received compared to 2023. The level of distributions are based on the results of the individual companies performance.
These loan sales resulted in gains of $3.4 million and $2.1 million during the years ended December 31, 2025 and 2024, respectively. Income from holdings in small business investment companies decreased during 2025 compared to 2024.
Services charges on deposit accounts increased when comparing the year ended December 31, 2024 to 2023. This increase is mainly due to increases in overdraft charges. Overdraft charges can fluctuate based on changes in customer activity and number of accounts.
Services charges on deposit accounts increased when comparing the year ended December 31, 2025 to 2024. This increase is mainly due to growth in the number of accounts as well as higher levels of overdraft charges.
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.
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. Return on average equity (“ROE”) measures the utilization of shareholders’ equity in generating net income.
The total amount maturing within one year is $186.3 million, or 95.14%, of the total amount outstanding.
The total amount maturing within one year is $181.2 million, or 98.35%, of the total amount outstanding.
The total amount maturing within one year is $125.0 million, or 96.51%, of the total amount outstanding.
The total amount maturing within one year is $121.7 million, or 98.54%, of the total amount outstanding.
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
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. 51
The Bank also incurs noninterest expenses associated with compensating employees, maintaining and acquiring fixed assets, and purchasing goods and services necessary to support its daily operations. The Bank has a marketing department which seeks to develop new business.
The Bank also incurs noninterest expenses associated with compensating employees, maintaining and acquiring fixed assets, and purchasing goods and services necessary to support its daily operations. The Bank maintains a full-service marketing department dedicated to driving new business and increasing awareness of the Bank's banking, lending, and wealth management offerings across its footprint.
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.
These amounts correspond to an effective tax rate of 17.24% and 18.82% for 2025 and 2024, respectively. Total income tax expense is comprised of federal and state income taxes of $1.6 million and $100 thousand, respectively, for the year ended December 31, 2025 and $3.4 million and $134 thousand, respectively, for the year ended December 31, 2024.
See further discussion of gain on sales of loans under the caption "Noninterest Income" above.
See further discussion of wealth management revenues under the caption "Noninterest Income" above.
Accordingly, the results of operations for the Company are dependent upon the operations of the Bank. The Bank conducts a commercial banking business which consists of attracting deposits from the general public and investing those funds in commercial, consumer and real estate loans and corporate, municipal and U.S. government agency securities.
The Bank conducts a commercial banking business which consists of attracting deposits from the general public and investing those funds in commercial, consumer and real estate loans and mortgage-backed securities, municipal and U.S. government agency securities. The Bank’s deposits are insured by the Federal Deposit Insurance Corporation to the maximum extent permitted by law.
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.
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, 2025 $ 42,257 $ 35,559 $ 43,892 $ 1,797 $ 123,505 7.68 % CAPITAL RESOURCES Total shareholders’ equity on December 31, 2025 was $188.9 million, reflecting a percentage of total assets of 10.00% as compared to $119.0 million and 6.38% at December 31, 2024.
For real estate loans, upon foreclosure, the properties are recorded at the fair value of the property based on current appraisals and other current market trends, less selling costs. If a write down of the OREO property is necessary at the time of foreclosure, the amount is charged-off against the allowance for credit losses on loans.
Finally, there may be actual losses that require additional provisions for credit losses to be charged against earnings. For real estate loans, upon foreclosure, the properties are recorded at the fair value of the property based on current appraisals and other current market trends, less selling costs.
(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%.
Twelve Months Ended December 31, 2025 2024 (in thousands) GAAP Financial Measurements: Interest Income - Loans $ 82,370 $ 81,779 Interest Income - Securities and Other Interest-Earnings Assets 16,635 9,542 Interest Expense - Deposits 32,179 31,854 Interest Expense - Other Borrowings 4,212 8,240 Total Net Interest Income $ 62,614 $ 51,227 Non-GAAP Financial Measurements: Add: Tax Benefit on Tax-Exempt Interest Income - Loans (1) $ 104 $ 110 Add: Tax Benefit on Tax-Exempt Interest Income - Securities (1) 1 4 Total Tax Benefit on Tax-Exempt Interest Income $ 105 $ 114 Tax-Equivalent Net Interest Income $ 62,719 $ 51,341 (1) Tax benefit was calculated using the federal statutory tax rate of 21%.
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.
This represents an increase of $4.5 million or 8.84% during 2025. 35 The following table provides the components of noninterest expense for the twelve months ended December 31, 2025 and 2024, 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.
There are three negative implications for earnings when a loan is placed on non-accrual status. First, all interest accrued but unpaid at the date that the loan is placed on non-accrual status is either deducted from interest income or written off as a loss.
First, all interest accrued but unpaid at the date that the loan is placed on non-accrual status is either deducted from interest income or written off as a loss. Second, accruals of interest are discontinued until it becomes certain that both principal and interest can be repaid.
The Company adjusts for non-recurring items such as gains and losses on investment portfolio sales and other gains/losses from OREO, repossessed assets, sale or disposals of bank assets, etc. The tax rate utilized is 21%.
The efficiency ratio is not a measurement under GAAP. It is calculated by dividing total noninterest expenses by the sum of tax-equivalent net interest income and total noninterest income. The Company adjusts for non-recurring items such as gains and losses on investment portfolio sales and other gains/losses from OREO, repossessed assets, sale or disposals of bank assets, etc.
Management’s judgment in determining the level of the allowance is based on evaluations of historical loan losses, current conditions and reasonable and supportable forecasts relevant to the collectability of loans.
Management’s judgment in determining the level of the allowance is based on evaluations of historical loan losses, current conditions and reasonable and supportable forecasts relevant to the collectability of loans. Loans that share common risk characteristics are evaluated collectively using a loss-rate, or cohort methodology to estimate its current expected credit losses on loans.
Analysis of Allowance for Credit Losses (dollars in thousands) Years Ended December 31, 2024 2023 Net charge-offs (recoveries) Average loans outstanding Net charge-offs (recoveries) to average loans outstanding Net charge-offs (recoveries) Average loans outstanding Net charge-offs (recoveries) to average loans outstanding Construction and Farmland $ (8 ) $ 89,383 (0.01 )% $ (8 ) $ 89,340 (0.01 )% Residential Real Estate (70 ) 367,706 (0.02 )% (18 ) 329,185 (0.01 )% Commercial Real Estate (155 ) 618,843 (0.03 )% — 597,275 — % Commercial 171 102,818 0.17 % 269 95,159 0.28 % Marine 1,778 239,853 0.74 % 126 273,831 0.05 % Consumer 159 29,742 0.53 % 73 34,214 0.21 % All Other Loans 116 12,539 0.93 % 1 13,476 0.01 % Total $ 1,991 $ 1,460,884 0.14 % $ 443 $ 1,432,480 0.03 % Allocation of Allowance for Credit Losses on Loans (dollars in thousands) December 31, 2024 December 31, 2023 Allowance for Credit Losses Percent of Loans in Category to Total Loans Allowance for Credit Losses Percent of Loans in Category to Total Loans Construction and Farmland $ 2,387 6.5 % $ 772 5.8 % Residential Real Estate 2,318 24.8 % 4,725 24.5 % Commercial Real Estate 7,251 43.8 % 6,224 41.2 % Commercial 1,433 7.6 % 1,027 7.4 % Marine 1,279 14.4 % 1,153 17.3 % Consumer 238 2.1 % 198 2.9 % All Other Loans 121 0.8 % 394 0.9 % Total $ 15,027 100 % $ 14,493 100 % Deposits Total deposits were $1.58 billion and $1.51 billion at December 31, 2024 and 2023, respectively, which represents an increase of $68.8 million or 4.57% during 2024.
Analysis of Allowance for Credit Losses (dollars in thousands) Years Ended December 31, 2025 2024 Net charge-offs (recoveries) Average loans outstanding Net charge-offs (recoveries) to average loans outstanding Net charge-offs (recoveries) Average loans outstanding Net charge-offs (recoveries) to average loans outstanding Construction and Farmland $ (5 ) $ 84,528 (0.01 )% $ (8 ) $ 89,383 (0.01 )% Residential Real Estate (277 ) 354,568 (0.08 )% (70 ) 367,706 (0.02 )% Commercial Real Estate 2,771 669,204 0.41 % (155 ) 618,843 (0.03 )% Commercial 332 106,146 0.31 % 171 102,818 0.17 % Marine 580 199,327 0.29 % 1,778 239,853 0.74 % Consumer 94 26,028 0.36 % 159 29,742 0.53 % All Other Loans 92 14,385 0.64 % 116 12,539 0.93 % Total $ 3,587 $ 1,454,186 0.25 % $ 1,991 $ 1,460,884 0.14 % Allocation of Allowance for Credit Losses on Loans (dollars in thousands) December 31, 2025 December 31, 2024 Allowance for Credit Losses Percent of Loans in Category to Total Loans Allowance for Credit Losses Percent of Loans in Category to Total Loans Construction and Farmland $ 1,275 5.6 % $ 2,387 6.5 % Residential Real Estate 3,160 24.2 % 2,318 24.8 % Commercial Real Estate 8,163 47.5 % 7,251 43.8 % Commercial 1,312 7.7 % 1,433 7.6 % Marine 710 12.0 % 1,279 14.4 % Consumer 230 2.0 % 238 2.1 % All Other Loans 470 1.0 % 121 0.8 % Total $ 15,320 100 % $ 15,027 100 % 47 Deposits Total deposits were $1.61 billion and $1.58 billion at December 31, 2025 and 2024, respectively.
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 following table summarizes the Bank's regulatory capital and related ratios at December 31, 2025 and December 31, 2024: Analysis of Bank Capital (dollars in thousands) December 31, 2025 2024 Tier 1 Capital: Common stock $ 1,682 $ 1,682 Capital surplus 9,773 9,773 Retained earnings 211,730 155,016 Nonmortgage servicing assets (637 ) (326 ) Total Tier 1 capital $ 222,548 $ 166,145 Common equity tier 1 capital $ 222,548 $ 166,145 Tier 2 Capital: Allowable portion of allowance for credit losses and reserve for off-balance sheet commitments $ 15,128 $ 14,493 Total Tier 2 capital $ 15,128 $ 14,493 Total risk-based capital $ 237,676 $ 180,638 Risk weighted assets $ 1,530,835 $ 1,504,960 Capital Ratios: Common equity Tier 1 capital ratio 14.54 % 11.04 % Tier 1 risk-based capital ratio 14.54 % 11.04 % Total risk-based capital ratio 15.53 % 12.00 % Tier 1 leverage ratio 11.68 % 8.79 % Note 15 to the Consolidated Financial Statements provides additional discussion and analysis of regulatory capital requirements.
The Company also had unused lines of credit with financial institutions of $78.0 million at December 31, 2024 and 2023.
At December 31, 2025 and 2024, the Company had remaining credit availability in the amounts of $454.1 million and $254.3 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, 2025 and 2024.
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.
The effective tax rate is below the statutory rate of 21%, due primarily to the recognition of tax-exempt life insurance income, which also included death benefit proceeds during 2024. The effective tax rate is also impacted by 37 tax-exempt income on investment securities and loans, qualified rehabilitation credits and tax credits on qualified affordable housing project investments.
Unrealized gains or losses on available for sale securities are reported within shareholders’ equity, net of the related deferred tax effect, as accumulated other comprehensive income (loss). In conjunction with its capital offering completed in February of 2025, the Company executed on its strategy to restructure its investment securities portfolio.
Net unrealized loss on available for sale securities was $6.7 million at December 31, 2025 as compared to a net unrealized loss of $23.6 million at December 31, 2024. Unrealized gains or losses on available for sale securities are reported within shareholders’ equity, net of the related deferred tax effect, as accumulated other comprehensive income (loss).
These amounts represent 19.22% and 21.41% of total liabilities at December 31, 2024 and 2023, respectively. Securities provide a constant source of liquidity through paydowns and maturities. Also, the Company maintains short-term borrowing arrangements, namely federal funds lines of credit, with larger financial institutions as an additional source of liquidity.
Securities provide a constant source of liquidity through paydowns and maturities. Also, the Company maintains 50 short-term borrowing arrangements, namely federal funds lines of credit, with larger financial institutions as an additional source of liquidity. The Bank’s membership with the Federal Home Loan Bank of Atlanta also provides a source of borrowings with numerous rate and term structures.
Other operating income decreased primarily as a result of a decline in loan swap fee income recognized during 2024 compared to 2023. Loan swap agreements with initial notional balances of $4.1 million and $20.9 million were entered into during the years ended December 31, 2024 and 2023, respectively.
The decrease was primarily due to death benefit settlement gains of $907 thousand received during the year ended December 31, 2024. Other operating income increased primarily as a result of an increase in loan swap fee income recognized on agreements with initial notional balances totaling $21.6 million and $4.1 million during the years ended December 31, 2025 and 2024 respectively.
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%.
NM = Not Meaningful 31 Tax-Equivalent Net Interest Income The following table reconciles tax-equivalent net interest income, which is not a measurement under GAAP, to net interest income. Tax-equivalent net interest income (Non-GAAP) is calculated by adding the tax benefit on certain securities and loans, whose interest is tax-exempt, to total interest income then subtracting total interest expense.
The 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.
There was one real estate property that foreclosed and sold during 2025, compared to no transactions during 2024. 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 table also shows the ratios for the allowance for credit losses on loans as a percentage of nonperforming assets and nonperforming assets as a percentage of loans outstanding and other real estate owned. Loans are placed on non-accrual status when collection of principal and interest is doubtful, generally when a loan becomes 90 days past due.
Loans are placed on non-accrual status when collection of principal and interest is doubtful, generally when a loan becomes 90 days past due. There are three negative implications for earnings when a loan is placed on non-accrual status.
Two relationships totaling $908 thousand, or 45.91%, of the loans placed on nonaccrual were added due to delinquent payments and required an allowance for credit losses of $248 thousand based on management's evaluation of the underlying collateral values. The remaining loans added to nonaccrual status during 2024 primarily consisted of four marine loans totaling $1.8 million.
Four additional commercial relationships totaling $2.7 million were added to nonaccrual status during 2025 reflecting their delinquent payment status and required an allowance for credit losses of $467 thousand based on management's evaluation of the underlying collateral values.
Noninterest expenses for twelve months ended December 31, 2024 primarily reflect servicing and collections expenses. 37 The following table presents a summarized statement of operations for the wealth management business segment for the twelve months ended December 31, 2024 and 2023.
Noninterest expenses were down from 2024 due to decreases in loan servicing and collection expenses, which comprise the majority of total noninterest expenses for marine lending. The following table presents a summarized statement of income for the wealth management business segment for the twelve months ended December 31, 2025 and 2024.
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.
Loans 90 or more days past due were concentrated in the commercial real estate loan portfolios and reflected the increase in nonaccrual loans. 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.
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.
Accordingly, these loans are risk rated at a level of substandard or lower. At December 31, 2025, other potential problem loans totaled $1.6 million. All other loans were classified as pass, exhibiting acceptable history of profits, cash flow ability and liquidity.
Liquidity needs are met with cash on hand, deposits in banks, federal funds sold, unpledged securities classified as available for sale, and loans maturing within one year. At December 31, 2024 liquid assets totaled $335.9 million as compared to $367.7 million at December 31, 2023.
LIQUIDITY Liquidity management involves meeting the present and future financial obligations of the Company with the sale or maturity of assets or with the occurrence of additional liabilities. Liquidity needs are met with cash on hand, deposits in banks, federal funds sold, unpledged securities classified as available for sale, and loans maturing within one year.
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.
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 2025 and 2024 and Note 25 further discusses qualified affordable housing project investments.
The Company’s senior management monitors the liquidity position regularly and attempts to maintain a position which utilizes available funds most efficiently.
The Company’s senior management monitors the liquidity position regularly and attempts to maintain a position which utilizes available funds most efficiently. 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.
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%.
Maturity Distribution and Yields of Securities December 31, 2025 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 — % — % — % 4.83 % 4.83 % U.S. treasury securities 4.27 % — % — % — % 4.27 % Mortgage-backed securities — % 4.82 % 4.32 % 3.30 % 3.59 % Collateralized mortgage obligations — % 5.20 % — % 5.09 % 5.12 % Subordinated debt — % 7.95 % 5.53 % — % 5.91 % Total taxable 4.27 % 5.19 % 4.59 % 3.75 % 4.08 % Total 4.27 % 5.19 % 4.59 % 3.75 % 4.08 % (1) Yields on tax-exempt securities have been computed on a tax-equivalent basis using a federal tax rate of 21%. 41 Loan Portfolio The Company’s primary use of funds is supporting lending activities from which it derives the greatest amount of interest income.
December 31, (dollars in thousands) 2024 2023 $ Change % Change Net Interest Income $ — $ — $ — — % Gain on sales of loans — — — — % Other noninterest income 5,624 4,926 698 14.17 % Net Revenue 5,624 4,926 698 14.17 % Provision for credit losses — — — Noninterest expense 2,823 2,646 177 6.69 % Income before taxes 2,801 2,280 521 22.85 % Income tax expense 588 479 109 22.76 % Net Income $ 2,213 $ 1,801 $ 412 22.88 % Wealth Management's net revenues were up $698 thousand, or 14.17%, for the twelve months ended December 31, 2024 compared to the twelve months ended December 31, 2023, reflecting increases in both trust services and investment sales income.
December 31, (dollars in thousands) 2025 2024 $ Change % Change Net Interest Income $ — $ — $ — — % Other noninterest income 7,628 5,624 2,004 35.63 % Net Revenue 7,628 5,624 2,004 35.63 % Noninterest expense 3,267 2,823 444 15.73 % Income before taxes 4,361 2,801 1,560 55.69 % Income tax expense 916 588 328 55.78 % Net Income $ 3,445 $ 2,213 $ 1,232 55.67 % Wealth Management's net revenues increased $2.0 million, or 35.63%, for the twelve months ended December 31, 2025 compared to the twelve months ended December 31, 2024, reflecting increases in both trust services and investment sales income.
December 31, (dollars in thousands) 2024 2023 $ Change % Change Wealth management fees $ 5,624 $ 4,926 $ 698 14.17 % Service charges on deposit accounts 1,936 1,810 126 6.96 % Other service charges and fees 4,179 4,413 (234 ) (5.30 )% Gain on the sale of marine finance assets — 435 (435 ) NM Gain on the sale and disposal of bank premises and equipment 3,863 14 3,849 NM Gain on sale of loans 2,141 1,428 713 49.93 % Small business investment company income 1,357 385 972 252.47 % Bank owned life insurance income 1,981 713 1,268 177.84 % Other operating income 476 656 (180 ) (27.44 )% Total noninterest income $ 21,557 $ 14,780 $ 6,777 45.85 % NM - Not Meaningful Wealth management fees increased from 2023 to 2024.
December 31, (dollars in thousands) 2025 2024 $ Change % Change Wealth management fees $ 7,457 $ 5,624 $ 1,833 32.59 % Service charges on deposit accounts 2,141 1,936 205 10.59 % Other service charges and fees 4,192 4,179 13 0.31 % (Loss) gain on the sale and disposal of bank premises and equipment (19 ) 3,863 (3,882 ) NM (Loss) on sale of securities (12,425 ) — (12,425 ) NM Gain on sale of loans 3,375 2,141 1,234 57.64 % Small business investment company income 251 1,357 (1,106 ) (81.50 )% Bank owned life insurance income 1,099 1,981 (882 ) (44.52 )% Other operating income 812 476 336 70.59 % Total noninterest income $ 6,883 $ 21,557 $ (14,674 ) (68.07 )% NM - Not Meaningful Wealth management fees increased in 2025 compared to 2024.
These marine loans were either repossessed or charged off as of December 31, 2024. In addition, of the $5.6 million nonaccrual balance at December 31, 2023, payoffs totaling $4.6 million were received, $808 thousand was charged off, $99 thousand was transferred to repossessed assets, and two loans totaling $50 thousand remained on nonaccrual status at December 31, 2024.
In addition, of the $2.1 million nonaccrual balance at December 31, 2024, payoffs totaling $1.6 million were received, $89 thousand was charged off, and three loans totaling $316 thousand remained on nonaccrual status at December 31, 2025. Management evaluates the financial condition of borrowers in nonaccrual status and the value of any collateral on these loans.
The increase in marine loan charge-offs of $1.7 million during 2024 was attributable to six loans, which is not believed to be a systemic performance issue or trend. The allowance for credit losses as a percentage of loans was 1.02% and 0.99% at the end of 2024 and 2023, respectively.
Four marine loan relationships had charge-off totaling $580 thousand during 2025 compared to $1.8 million during 2024, which represented six marine relationships. Marine net charge-offs as a percentage to average marine loans outstanding was 0.29% and 0.74%, respectively. The allowance for credit losses as a percentage of loans was 1.04% and 1.02% at the end of 2025 and 2024, respectively.
The net interest spread for the twelve months ended December 31, 2024 was 2.17%, an increase of five basis points compared to 2.12% for the twelve months ended December 31, 2023. Net interest income and net interest margin may experience some decline due to deposit pricing pressure as interest rates change and ongoing competition for new deposits is experienced.
The net interest spread for the twelve months ended December 31, 2025 was 2.48%, an increase of 31 basis points compared to 2.17% for the twelve months ended December 31, 2024.
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.
No loans were modified during 2024. 44 Nonperforming assets and related ratios are detailed in the table below: December 31, 2025 2024 Nonaccrual loans $ 14,398 $ 2,072 Loans past due 90 days and accruing interest 60 — Other real estate owned and repossessed assets 135 514 Total nonperforming assets $ 14,593 $ 2,586 Allowance for credit losses on loans $ 15,320 $ 15,027 Gross loans $ 1,473,077 $ 1,467,049 Allowance for credit losses on loans to nonperforming assets 105 % 581 % Allowance for credit losses on loans to total loans 1.04 % 1.02 % Allowance for credit losses on loans to nonaccrual loans 106 % 725 % Nonaccrual loans to total loans 0.98 % 0.14 % Non-performing assets to period end loans, other real estate owned and repossessed assets 0.99 % 0.18 % There were $14.6 million in total non-performing assets at December 31, 2025.
Bank owned life insurance ("BOLI") fee income totaled $2.0 million for the year ended December 31, 2024 compared to $713 thousand for the year ended December 31, 2023.
The decrease during the current year period is mainly attributed to lower cash distributions received, based on the results of their performance and timing of distributions. Bank owned life insurance ("BOLI") fee income totaled $1.1 million for the year ended December 31, 2025 compared to $2.0 million for the year ended December 31, 2024.
Net charge-offs were $2.0 million for 2024 and $443 thousand for 2023. The year over year increase in net charge-offs was primarily due to the marine portfolio, which had net charge-offs of $1.8 million during 2024, partially offset by a higher level of recoveries during 2024 over 2023.
Recoveries were $559 thousand and $853 thousand for 2025 and 2024, respectively. Net charge-offs were $3.6 million for 2025 and $2.0 million for 2024. The year over year increase in net charge-offs was primarily due to one relationship in the commercial real estate loan portfolio.
This discussion should be read in conjunction with the Company’s Consolidated Financial Statements and the Notes to the Consolidated Financial Statements presented in Item 8, Financial Statements and Supplementary Data, of this Form 10-K. GENERAL The Company is a bank holding company which owns 100% of the stock of Bank of Clarke (the “Bank”).
This discussion should be read in conjunction with the Company’s Audited Consolidated Financial Statements and notes thereto presented in Item 8, Financial Statements and Supplementary Data, of this Form 10-K. Operating results for the year ended December 31, 2025 are not necessarily indicative of the results for any future period.
The Company anticipates that a pre-tax loss of approximately $12.6 million resulting from the sales of the investment securities will be recognized in the first quarter of 2025. 38 The table titled “Maturity Distribution and Yields of Securities” shows the maturity period and average yield for the different types of securities in the portfolio at December 31, 2024.
The table titled “Maturity Distribution and Yields of Securities” shows the maturity period and average yield for the different types of securities in the portfolio at December 31, 2025. The weighted average is calculated based on the relative amortized costs of the securities.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

147 edited+46 added−34 removed164 unchanged
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.
Biggest changeCredit quality information by class at December 31, 2025 was as follows: 77 December 31, 2025 Term Loan Amortized Cost Basis by Origination Year (in thousands) 2025 2024 2023 2022 2021 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total Mortgage real estate loans: Construction & Secured by Farmland Pass $ 17,680 $ 37,736 $ 6,684 $ 6,158 $ 3,089 $ 6,643 $ 1,144 $ 308 $ 79,442 Special Mention 1,788 655 — — — — — — 2,443 Classified — — 428 — — 23 — — 451 Total $ 19,468 $ 38,391 $ 7,112 $ 6,158 $ 3,089 $ 6,666 $ 1,144 $ 308 $ 82,336 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — HELOCs Pass $ — $ — $ — $ — $ — $ — $ 58,439 $ — $ 58,439 Special Mention — — — — — — 41 — 41 Classified — — — — — — 160 — 160 Total $ — $ — $ — $ — $ — $ — $ 58,640 $ — $ 58,640 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ 31 $ — $ 31 Residential First Lien - Investor Pass $ 19,774 $ 6,261 $ 10,174 $ 15,545 $ 23,908 $ 25,060 $ — $ 900 $ 101,622 Special Mention — — 685 — 3,025 925 — — 4,635 Classified — 952 — 98 — — — — 1,050 Total $ 19,774 $ 7,213 $ 10,859 $ 15,643 $ 26,933 $ 25,985 $ — $ 900 $ 107,307 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Residential First Lien - Owner Occupied Pass $ 13,144 $ 18,396 $ 47,588 $ 28,716 $ 21,399 $ 45,468 $ — $ 250 $ 174,961 Special Mention — 41 277 — — 2,784 — — 3,102 Classified — — — — — 744 — — 744 Total $ 13,144 $ 18,437 $ 47,865 $ 28,716 $ 21,399 $ 48,996 $ — $ 250 $ 178,807 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Residential Junior Liens Pass $ 1,763 $ 628 $ 1,547 $ 1,843 $ 2,541 $ 2,028 $ — $ 161 $ 10,511 Special Mention — — 149 — — 64 — — 213 Classified — — — — — — — — — Total $ 1,763 $ 628 $ 1,696 $ 1,843 $ 2,541 $ 2,092 $ — $ 161 $ 10,724 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Commercial - Owner Occupied Pass $ 36,319 $ 24,619 $ 46,689 $ 69,524 $ 25,728 $ 61,040 $ 3,046 $ 2,736 $ 269,701 Special Mention — 1,371 920 3,336 5,879 12,908 — — 24,414 Classified — 1,844 699 — 2,195 — — — 4,738 Total $ 36,319 $ 27,834 $ 48,308 $ 72,860 $ 33,802 $ 73,948 $ 3,046 $ 2,736 $ 298,853 Current period gross charge-offs $ — $ 468 $ 37 $ — $ 8 $ — $ — $ — $ 513 Commercial - Non-Owner Occupied & Multifamily Pass $ 68,609 $ 25,254 $ 53,637 $ 72,478 $ 48,985 $ 94,990 $ 7,909 $ 4,838 $ 376,700 Special Mention — 271 2,053 4,153 3,728 6,673 — — 16,878 Classified — — — 1,132 4,216 — — — 5,348 Total $ 68,609 $ 25,525 $ 55,690 $ 77,763 $ 56,929 $ 101,663 $ 7,909 $ 4,838 $ 398,926 Current period gross charge-offs $ 1,184 $ — $ — $ 257 $ 817 $ — $ — $ — $ 2,258 Commercial and industrial loans: SBA PPP loans Pass $ — $ — $ — $ — $ 4 $ — $ — $ — $ 4 Special Mention — — — — — — — — — Classified — — — — — — — — — Total $ — $ — $ — $ — $ 4 $ — $ — $ — $ 4 78 December 31, 2025 Term Loan Amortized Cost Basis by Origination Year (in thousands) 2025 2024 2023 2022 2021 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Other commercial and industrial loans Pass $ 23,186 $ 15,740 $ 6,112 $ 9,317 $ 4,531 $ 4,746 $ 41,305 $ 2,125 $ 107,062 Special Mention — 2,802 — — — 216 — 8 3,026 Classified 48 113 1,725 461 19 — 766 — 3,132 Total $ 23,234 $ 18,655 $ 7,837 $ 9,778 $ 4,550 $ 4,962 $ 42,071 $ 2,133 $ 113,220 Current period gross charge-offs $ — $ 96 $ 184 $ 85 $ — $ — $ 120 $ — $ 485 Marine loans Pass $ — $ — $ 60,223 $ 92,924 $ 22,191 $ 301 $ — $ — $ 175,639 Special Mention — — — — — — — — — Classified — — — — — — — — — Total $ — $ — $ 60,223 $ 92,924 $ 22,191 $ 301 $ — $ — $ 175,639 Current period gross charge-offs $ — $ — $ 314 $ 266 $ — $ — $ — $ — $ 580 Consumer loans Pass $ 2,237 $ 1,643 $ 1,072 $ 9,713 $ 4,665 $ 7,525 $ 1,870 $ — $ 28,725 Special Mention — — — — — — — — — Classified — — — — — — 17 — 17 Total $ 2,237 $ 1,643 $ 1,072 $ 9,713 $ 4,665 $ 7,525 $ 1,887 $ — $ 28,742 Current period gross charge-offs $ — $ 6 $ 30 $ 2 $ 6 $ 8 $ 88 $ — $ 140 Overdrafts Pass $ — $ — $ — $ — $ — $ — $ — $ — $ — Special Mention — — — — — — — — — Classified 318 — — — — — — — 318 Total $ 318 $ — $ — $ — $ — $ — $ — $ — $ 318 Current period gross charge-offs $ 139 $ — $ — $ — $ — $ — $ — $ — $ 139 Other loans Pass $ 4,250 $ — $ 40 $ 7,515 $ — $ 2,102 $ 39 $ — $ 13,946 Special Mention — — — — — — — — — Classified — — — — — — — — — Total $ 4,250 $ — $ 40 $ 7,515 $ — $ 2,102 $ 39 $ — $ 13,946 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Total by Risk Category Pass $ 186,962 $ 130,277 $ 233,766 $ 313,733 $ 157,041 $ 249,903 $ 113,752 $ 11,318 $ 1,396,752 Special Mention 1,788 5,140 4,084 7,489 12,632 23,570 41 8 54,752 Classified 366 2,909 2,852 1,691 6,430 767 943 — 15,958 Total $ 189,116 $ 138,326 $ 240,702 $ 322,913 $ 176,103 $ 274,240 $ 114,736 $ 11,326 $ 1,467,462 Total current period gross charge-offs $ 1,323 $ 570 $ 565 $ 610 $ 831 $ 8 $ 239 $ — $ 4,146 Credit quality information by class at December 31, 2024 was as follows: 79 December 31, 2024 Term Loans 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 80 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 NOTE 5.
The parent company's revenue and expenses are comprised primarily of interest expense associated with subordinated debt. The Company's segment structure reflects the financial information and reports used by our chief operating decision maker to make decisions regarding the business, including resource allocations and performance. Our Chief Executive Officer is the chief operating decision maker ("CODM").
The parent company's revenue and expenses are comprised primarily of interest expense associated with subordinated debt. 107 The Company's segment structure reflects the financial information and reports used by our chief operating decision maker to make decisions regarding the business, including resource allocations and performance. Our Chief Executive Officer is the chief operating decision maker ("CODM").
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.
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.
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.
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. 95 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 communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
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 ability of the Company’s debtors to honor their contracts is dependent upon the real estate and general economic conditions in these areas. 63 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.
Revenues consist primarily of net interest income related to investments in non-marine loans and securities and 99 outstanding deposits and borrowings, fees earned on deposit accounts and debit card interchange activity.
Revenues consist primarily of net interest income related to investments in non-marine loans and securities and outstanding deposits and borrowings, fees earned on deposit accounts and debit card interchange activity.
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.
The investment in these securities is recorded at cost and they are reported on the Company’s consolidated balance sheet as restricted investments. 62 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. 59 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. 64 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, 2024 and 2023.
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, 2025 and 2024.
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.
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 66 the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.
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.
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, 2025 these available lines totaled $ 78.0 million.
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.
The Company has elected to exclude accrued interest receivable from the amortized cost basis. Accrued interest totaled $ 4.6 million and $ 4.8 million at December 31, 2025 and 2024, and is included in the other assets line item in the Consolidated Balance Sheets. Interest income is accrued on the unpaid principal balance.
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.
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, 2025 and 2024, which consisted of FHLB advances.
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.
Additionally, at December 31, 2025, 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.
Allowance for Credit Losses – Collectively Evaluated Loans As further described in Notes 1 and 4 to the consolidated financial statements, the allowance for credit losses on loans (ACLL) is a valuation allowance that represents management’s best estimate of expected credit losses on loans measured at amortized cost considering available information, from internal and external sources, relevant to assessing collectability over the loans’ contractual terms.
Allowance for Credit Losses – Loans Collectively Evaluated for Credit Losses As further described in Notes 1 and 4 to the financial statements, the allowance for credit losses on loans (“ACLL”) is a valuation allowance that represents management’s best estimate of expected credit losses on loans measured at amortized cost considering available information, from internal and external sources, relevant to assessing collectability over the loans’ contractual terms.
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.
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. 101 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. 48 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. 52 The table below examines the EVE.
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.
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 2025 and 2024. NOTE 18.
The Bank utilizes the risk-based capital framework for its presentation of capital amounts and ratios. At December 31, 2024, and 2023, management believes the Bank met all capital adequacy requirements to which it was subject.
The Bank utilizes the risk-based capital framework for its presentation of capital amounts and ratios. At December 31, 2025, and 2024, management believes the Bank met all capital adequacy requirements to which it was subject.
The balance of the marine loan portfolio, which constitutes a significant portion of the Company's assets, revenues, and earnings, totaled $ 210.1 million at December 31, 2024. This balance will continue to decline as the loans are repaid. The wealth management segment offers both a trust department and investment services.
The balance of the marine loan portfolio, which constitutes a significant portion of the Company's assets, revenues, and earnings, totaled $ 175.6 million at December 31, 2025 and $ 210.1 million at December 31, 2024. This balance will continue to decline as the loans are repaid. The wealth management segment offers both a trust department and investment services.
Twelve Months Ended December 31, 2024 (in thousands) Hedged asset $ 132 Fair value derivative designated as hedging instrument 9 Total gain recognized in the consolidated statement of income within interest and fees on loans $ 141 The Company enters into interest rate swaps with certain qualifying commercial loan customers to meet their interest rate risk management needs.
Twelve Months Ended December 31, 2025 2024 (in thousands) Hedged asset $ 136 $ 132 Fair value derivative designated as hedging instrument 21 9 Total gain recognized in the consolidated statement of income within interest and fees on loans $ 157 $ 141 The Company enters into interest rate swaps with certain qualifying commercial loan customers to meet their interest rate risk management needs.
These lease agreements do not provide for residual value guarantees and have no restrictions or covenants that would impact dividends or require incurring additional financial obligations.
These lease agreements do not provide for residual value guarantee and have no restrictions or covenants that would impact dividends or require incurring additional financial obligations.
This amount is expected to be recognized over a weighted average period of two years . The Company's policy is to recognize forfeitures as they occur. NOTE 11. Employee Benefits The Company sponsors a 401(k) savings plan under which eligible employees may defer a portion of salary on a pretax basis, subject to certain IRS limits.
This amount is expected to be recognized over a weighted average period of 1.75 years. The Company's policy is to recognize forfeitures as they occur. 88 NOTE 11. Employee Benefits The Company sponsors a 401(k) savings plan under which eligible employees may defer a portion of salary on a pretax basis, subject to certain IRS limits.
Advertising The Company follows the policy of charging the costs of advertising to expense as incurred. 62 Reclassifications Certain reclassifications have been made to the 2023 financial statements to conform to reporting for 2024 . The results of the reclassifications are not considered material and had no effect on prior years' net income or shareholders' equity.
Advertising The Company follows the policy of charging the costs of advertising to expense as incurred. 67 Reclassifications Certain reclassifications have been made to the 2024 financial statements to conform to reporting for 2025 . The results of the reclassifications are not considered material and had no effect on prior years' net income or shareholders' equity.
With few exceptions, the Company is no longer subject to federal, state, or local income tax examinations for years prior to 2021.
With few exceptions, the Company is no longer subject to federal, state, or local income tax examinations for years prior to 2022.
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 .
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 $ 0 and $ 4 thousand at December 31, 2025 and 2024 , respectively.
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.
The executive supplemental income benefit expense, based on the present value of the retirement benefits, was $ 19 thousand in 2025 and $ 27 thousand in 2024. 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 $ 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.
Compensation expense was $ 1.2 million and $ 912 thousand during December 31, 2025 and 2024 , respectively. The total grant date fair value of restricted stock which vested was $ 1.1 million and $ 1.0 million for the years ended December 31, 2025 and 2024 , respectively.
At December 31, 2024 and 2023, the Bank's capital levels exceeded the minimum regulatory capital requirements plus the capital conservation buffer. NOTE 16. Restrictions On Dividends, Loans and Advance s Federal and state banking regulations place certain restrictions on dividends paid and loans or advances made by the Bank to the Company.
At December 31, 2025 and 2024, t he Bank's capital levels exceeded the minimum regulatory capital requirements plus the capital conservation buffer. NOTE 16. Restrictions On Dividends, Loans and Advance s Federal and state banking regulations place certain restrictions on dividends paid and loans or advances made by the Bank to the Company.
Other Service Charges and Fees The majority of the Company’s noninterest income is derived from short term contracts associated with services provided for other ancillary services such as ATM fees, brokerage commissions and loan servicing fees. The Company’s performance obligations on revenue generated from these ancillary services are generally satisfied immediately, when the transaction occurs, or by month-end.
Other Service Charges and Fees The majority of the Company’s noninterest income is derived from short term contracts associated with services provided for other ancillary services such as ATM fees, safe deposit box fees and loan servicing fees. The Company’s performance obligations on revenue generated from these ancillary services are generally satisfied immediately, when the transaction occurs, or by month-end.
Adjustments will be made to record the swap at fair value as either an other asset or other liability on the Consolidated Balance Sheets, with changes in fair value recognized in net loans.
Adjustments are made to record the swap at fair value as either an other asset or other liability on the Consolidated Balance Sheets, with changes in fair value recognized in net loans.
The carrying value of the fair value swap on the Consolidated Balance Sheets will also be adjusted through loan interest income, based on changes in the fair value attributable to changes in the hedged risk.
The carrying value of the fair value swap on the Consolidated Balance Sheets is also adjusted through loan interest income, based on changes in the fair value attributable to changes in the hedged risk.
Marine Lending The Bank’s marine loan portfolio is comprised of retail loans originated through August 2023. The Company ceased accepting new marine lending business and expects to hold the retained outstanding loans until they are ultimately repaid.
Marine Lending The Bank’s marine loan portfolio is comprised of retail loans originated through August 2023, at which time the Company ceased accepting new marine lending business. The Company expects to hold the retained outstanding loans until they are ultimately repaid.
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 does not typically enter into long-term revenue contracts with customers, and therefore, does not experience significant contract balances. As of December 31, 2025 and December 31, 2024 , the Company did not have any significant contract balances. 94 NOTE 20.
Also excluded from the table above are net servicing assets of $ 326 thousand and $ 153 thousand at December 31, 2024 and 2023 , respectively, which are recorded in other assets in the Consolidated Balance Sheets. NOTE 4.
Also excluded from the table above are net servicing assets of $ 637 thousand and $ 326 thousand at December 31, 2025 and 2024 , respectively, which are recorded in other assets in the Consolidated Balance Sheets. NOTE 4.
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.
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 $14.9 million of the total recorded ACLL of $15.3 million as of December 31, 2025.
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.
Contributions under the plan amounted to $ 2.4 million and $ 2.2 million in 2025 and 2024, respectively. 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.
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.
At December 31, 2025 and 2024 , the balance of the investments for qualified affordable housing projects was $ 977 thousand and $ 1.3 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, 2025 and 2024.
The following tables summarize the Company’s financial and nonfinancial assets that were measured at fair value on a nonrecurring basis at December 31, 2024 and 2023: Carrying value at December 31, 2024 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) Financial Assets: Collateral dependent individually evaluated loans $ 659 $ — $ — $ 659 Nonfinancial Assets: Repossessed assets 514 — — 514 Carrying value at December 31, 2023 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) Nonfinancial Assets: Reposessed assets $ 304 $ — $ — $ 304 90 The following table displays quantitative information about Level 3 Fair Value Measurements for certain financial assets measured at fair value on a nonrecurring basis at December 31, 2024 and 2023: Quantitative information about Level 3 Fair Value Measurements December 31, 2024 Valuation Technique(s) Unobservable Input Range Weighted Average (1) Assets: Collateral dependent individually evaluated loans Discounted value Selling cost and appraisal discount 16 % 16 % Repossessed assets Discounted appraised value Selling cost 10 % 10 % (1) Weighted based on the relative fair values of the specific items measured at fair value.
The following tables summarize the Company’s financial and nonfinancial assets that were measured at fair value on a nonrecurring basis at December 31, 2025 and 2024: 98 Carrying value at December 31, 2025 Balance as of Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs December 31, 2025 (Level 1) (Level 2) (Level 3) (in thousands) Financial Assets: Collateral dependent individually evaluated loans $ 2,256 $ — $ — $ 2,256 Nonfinancial Assets: Repossessed assets $ 135 — — $ 135 Carrying value at December 31, 2024 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) Financial Assets: Impaired loans $ 659 $ — $ — $ 659 Nonfinancial Assets: Reposessed assets $ 514 $ — $ — $ 514 The following table displays quantitative information about Level 3 Fair Value Measurements for certain financial assets measured at fair value on a nonrecurring basis at December 31, 2025 and 2024: Quantitative information about Level 3 Fair Value Measurements December 31, 2025 Valuation Technique(s) Unobservable Input Range Weighted Average (1) Assets: Collateral dependent individually evaluated loans Discounted value Selling cost and appraisal discount 6 % - 40 % 9 % Repossessed assets Offer value Selling cost 10 % 10 % 99 December 31, 2024 Valuation Technique(s) Unobservable Input Range Weighted Average (1) Assets: Collateral dependent individually evaluated loans Discounted value Selling cost and appraisal discount 16 % 16 % Repossessed assets Discounted appraised value Selling cost 10 % 10 % (1) Weighted based on the relative fair values of the specific items measured at fair value.
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.
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America.
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.
Total estimated credits to be received during 2025 are $ 275 thousand based on the most recent quarterly estimates received from the funds. Total tax credits and other tax benefits recognized during 2025 and 2024 were $ 275 thousand and $ 304 thousand, respectively. 105 NOTE 26.
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.
The Company’s five long-term lease agreements are 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.
For the year ended December 31, 2024, non-interest community banking revenue increased, in part, due to the sale of the Company's operating center and branch building in a sales-leaseback transaction, resulting in a realized gain of $ 3.9 million.
For the year ended December 31, 2024, non-interest community banking revenue included a realized pre-tax gain of $ 3.9 million due to the sale of the Company's operating center and branch building in a sales-leaseback transaction.
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.
The Company concluded that a credit loss does not exist in its securities portfolio at December 31, 2025 based on the fact that (1) changes in fair value were caused by non-credit-related factors, primarily fluctuations in interest rates, (2) securities with unrealized losses had generally high credit quality, (3) as of December 31, 2025, 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.
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.
Funds available for loans or advances by the Bank to the Company amounted to $ 23.8 million at December 31, 2025. 91 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.
Management exercised significant judgment when estimating the ACL on collectively evaluated loans. We identified the estimation of the collectively evaluated ACL as a critical audit matter as auditing the collectively evaluated ACL involved significant audit effort and judgment in evaluating management’s assessment of the inherently subjective estimates.
Management exercised significant judgment when estimating the ACLL on collectively evaluated loans. We identified the estimation of the collectively evaluated ACLL as a critical audit matter as auditing the collectively evaluated ACLL involved especially complex and subjective auditor judgment in evaluating management’s assessment of the inherently subjective estimates.
Qualified Affordable Housing Project Investments The Company invests in qualified affordable housing projects.
NOTE 25. Qualified Affordable Housing Project Investments The Company invests in qualified affordable housing projects.
Discount window credit is available for as long as 90 days, prepayable and renewable on a daily basis, priced relative to the Federal Open Market Committee's target range for the federal funds rate. The Company had $ 95.9 million in irrevocable letters of credit at December 31, 2024 with the FHLB to secure public deposits.
Discount window credit is available for as long as 90 days, prepayable and renewable on a daily basis, priced relative to the Federal Open Market Committee's target range for the federal funds rate. The Com pany had $ 85.5 million in irrevocable letters of credit at December 31, 2025 with the FHLB to secure public deposits.
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 .
Twelve Months Ended December 31, 2025 2024 Average number of common shares outstanding 5,178,488 3,553,919 Effect of dilutive common stock — — Average number of common shares outstanding used to calculate diluted earnings per share 5,178,488 3,553,919 There were no potentially dilutive securities outstanding in 2025 or 2024 .
Additionally, the Company’s mortgage-backed securities are entirely issued by either U.S. government agencies or U.S. government-sponsored enterprises. Collectively, these entities provide a guarantee, which is either explicitly or implicitly supported by the full faith and credit of the U.S. government, that investors in such mortgage-backed securities will receive timely principal and interest payments.
Collectively, these entities provide a guarantee, which is either explicitly or implicitly supported by the full faith and credit of the U.S. government, that investors in such mortgage-backed securities will receive timely principal and interest payments.
As of December 31, 2024 , Company had remaining credit availability in the amount of $ 254.3 million with the FHLB. This line may be utilized for short and/or long-term borrowing.
As of December 31, 2025 , Company had remaining credit availability in the amount of $ 454.1 million with the FHLB. This line may be utilized for short and/or long-term borrowing.
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.
Time deposits with balances of less than $250,000 included $ 30.0 million in brokered certificates of deposit at both December 31, 2025 and 2024.
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.
In 2025, the Company sold non-mortgage loans totaling $ 21.8 million and mortgage loans totaling $ 18.8 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 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.
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.
The following table represents the carrying value of the portfolio layer method hedged asset and the cumulative fair value hedging adjustment included in the carrying value of the hedged asset at December 31, 2024. 98 December 31, 2024 Carrying Amount of Hedged Asset Cumulative Amount of Fair Value Adjustment (in thousands) Loans receivable (1) $ 34,916 $ ( 84 ) (1) These amounts include the amortized cost basis of closed portfolios of fixed rate loans used to designate hedging relationships in which the hedged item is the stated amount of assets in the closed portfolio anticipated to be outstanding for the hedged period.
December 31, 2025 December 31, 2024 Carrying Amount of Hedged Asset Cumulative Amount of Fair Value Adjustment Carrying Amount of Hedged Asset Cumulative Amount of Fair Value Adjustment (in thousands) Loans receivable (1) $ 35,105 $ 105 $ 34,916 $ ( 84 ) (1) These amounts include the amortized cost basis of closed portfolios of fixed rate loans used to designate hedging relationships in which the hedged item is the stated amount of assets in the closed portfolio anticipated to be outstanding for the hedged period.
Contract Balances The Company’s noninterest revenue streams are largely based on transactional activity, or standard month-end revenue accruals such as asset management fees based on month-end market values. Consideration is often received immediately or shortly after the Company satisfies its performance obligation and revenue is recognized.
(2) Revenue from contracts with customers in scope of ASC 606. Contract Balances The Company’s noninterest revenue streams are largely based on transactional activity, or standard month-end revenue accruals such as asset management fees based on month-end market values. Consideration is often received immediately or shortly after the Company satisfies its performance obligation and revenue is recognized.
We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB.
The fair value measurement of real estate held in other real estate owned is assessed in the same manner as collateral-dependent loans described above. We believe that the fair value component in its valuation follows the provisions of GAAP .
The fair value measurement of real estate held in other real estate owned is assessed in the same manner as collateral-dependent loans described above. We believe that the fair value component in its valuation follows the provisions of GAAP . The Company held no other real estate owned at December 31, 2025 and December 31, 2024.
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 .
The total vest date fair value of restricted stock which vested was $ 1.2 million and $ 883 thousand for the years ended December 31, 2025 and 2024, respectively. Unrecognized compensation cost related to unvested restricted stock was $ 730 thousand at December 31, 2025 .
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.
The debt balance of $ 30.0 million is presented net of unamortized issuance costs of $ 421 thousand and $ 488 thousand at December 31, 2025 and 2024 , respectively. 84 NOTE 9. Income Taxes The Company files income tax returns with the United States of America, the Commonwealth of Virginia, West Virginia, Maryland, Florida, and North Carolina.
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.
At December 31, 2025 and 2024, the following financial instruments were outstanding whose contract amounts represent credit risk: December 31, 2025 December 31, 2024 (dollars in thousands) Commitments to extend credit $ 61,774 $ 32,793 Unfunded commitments under lines of credit 207,005 196,903 Commercial and standby letters of credit 4,073 2,602 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 , 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 .
At December 31, 2025 , the Bank’s retained earnings available for the payment of dividends to the Company was $ 28.4 million. Accordingly, $ 189.0 million of the Company’s equity in the net assets of the Bank was restricted at December 31, 2025 .
At December 31, 2024 , the Company had collateral valued at $ 98.7 million pledged at the Federal Reserve Bank of Richmond ("FRB") discount window, of which 75 %, or $ 74.0 million is available for short-term liquidity needs.
At December 31, 2025 , the Company had collateral valued at $ 84.2 million pledged at the Federal Reserve Bank of Richmond ("FRB") discount window, of which 75 %, or $ 63.2 million is available for short-term liquidity needs.
Due to the short duration of most customer contracts which generate these sources of noninterest income, no significant judgments must be made in the determination of the amount and timing of revenue recognized.
Typically, the duration of a contract does not extend beyond the services performed. Due to the short duration of most customer contracts which generate these sources of noninterest income, no significant judgments must be made in the determination of the amount and timing of revenue recognized.
Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Optional services such as real estate sales and tax return preparation services are also available to existing trust and asset management customers. The Company’s performance obligation for these transactional-based services is generally satisfied, and related revenue recognized, at a point in time (i.e., as incurred). Payment is received shortly after services are rendered.
The Company does not earn performance-based incentives on customer products sold. Optional services such as real estate sales and tax return preparation services are also available to existing trust and asset management customers. The Company’s performance obligation for these transactional-based services is generally satisfied, and related revenue recognized, at a point in time (i.e., as incurred).
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.
The following table presents the activity for restricted stock awards for the years ended December 31, 2025 and 2024: Twelve Months Ended December 31, 2025 2024 Shares Weighted Average Grant Date Fair Value Shares Weighted Average Grant Date Fair Value Nonvested, beginning of period 64,043 $ 32.02 56,914 $ 35.06 Granted 39,545 36.40 41,940 30.00 Vested ( 32,914 ) 33.09 ( 29,426 ) 34.40 Forfeited ( 2,198 ) 34.53 ( 5,385 ) 35.38 Nonvested, end of period 68,476 $ 33.96 64,043 $ 32.02 The Company recognizes compensation expense over the restricted period based on the fair value of the Company's stock on the grant date.
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.
AND SUBSIDIARY Consolidated Statements of Comprehensive Income Years Ended December 31, 2025 and 2024 (dollars in thousands) 2025 2024 Net income $ 8,214 $ 15,343 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 $( 2 ) and $( 2 ) for the years ended December 31, 2025 and 2024, respectively ( 8 ) ( 9 ) Unrealized gain (loss) on available for sale securities, net of reclassification adjustments, net of deferred income tax expense (benefit) of $ 3,558 and $( 166 ) for the years ended December 31, 2025 and 2024, respectively 13,388 ( 625 ) Total other comprehensive income (loss) 13,380 ( 634 ) Total comprehensive income $ 21,594 $ 14,709 See Notes to Consolidated Financial Statements 59 EAGLE FINANCIAL SERVICES, INC.
This long-term lease agreement resulted in the initial recognition of a right-of-use asset and lease liability of $ 5.5 million. Lease liabilities represent the Company’s obligation to make lease payments and are presented at each reporting date as the net present value of the remaining contractual cash flows.
The new lease replaced an expiring lease and resulted in the initial recognition of a right-of-use asset and lease liability of $ 773 thousand. Lease liabilities represent the Company’s obligation to make lease payments and are presented at each reporting date as the net present value of the remaining contractual cash flows.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.
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 following table presents the Bank’s actual capital amounts and ratios at December 31, 2025 and 2024: 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, 2025 Common Equity Tier 1 Capital to Risk Weighted Assets $ 222,548 14.54 % $ 68,888 4.50 % $ 99,505 6.50 % Total Capital to Risk Weighted Assets 237,676 15.53 % 122,468 8.00 % 153,084 10.00 % Tier 1 Capital to Risk Weighted Assets 222,548 14.54 % 91,851 6.00 % 122,468 8.00 % Tier 1 Capital to Average Assets 222,548 11.68 % 76,246 4.00 % 95,308 5.00 % 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 % 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.
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.
Bank Premises and Equipment, Net The major classes of bank premises and equipment and the total accumulated depreciation at December 31, 2025 and 2024 were as follows: December 31, 2025 2024 (in thousands) Land $ 6,119 $ 6,119 Buildings and improvements 14,662 13,671 Furniture and equipment 9,651 9,967 $ 30,432 $ 29,757 Less accumulated depreciation 15,526 15,418 Bank premises and equipment, net $ 14,906 $ 14,339 Depreciation expense on buildings and improvements was $ 372 thousand and $ 504 thousand for the years ended 2025 and 2024 , respectively.
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.
Payment is received shortly after services are rendered. 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.
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 net deferred tax asset at December 31, 2025 and 2024 consisted of the following components: December 31, 2025 2024 (in thousands) Deferred tax assets: Allowance for credit losses $ 3,299 $ 3,156 Reserve for unfunded commitments 70 106 Share-based compensation 341 306 Accrued postretirement benefits 23 21 Home equity origination costs 99 95 Nonaccrual interest 148 20 Lease liabilities 2,120 2,054 Credit carryforward 682 1,033 Securities available for sale 1,397 4,956 Total deferred tax assets $ 8,179 $ 11,747 Deferred tax liabilities: Property and equipment $ 805 $ 709 Right-of-use assets 2,032 1,988 Loan servicing rights 137 68 Total deferred tax liabilities $ 2,974 $ 2,765 Net deferred tax asset $ 5,205 $ 8,982 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.
As of December 31, 2024 , the amortized cost basis of the closed portfolio used in this hedging relationship was $ 506.4 million and the cumulative basis adjustment associated with this hedging relationship was $( 84 ) thousand. At December 31, 2024 , the amount of the designated hedged item was $ 35.0 million.
As of December 31, 2025 and 2024 , the amortized cost basis of the closed portfolio used in this hedging relationship was $ 473.3 million and $ 506.4 million, respectively, and the cumulative basis adjustment associated with this hedging relationship was $ 105 thousand and $( 84 ) thousand, respectively.
Lastly, the amendments in this ASU require an entity to disclose income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign and income tax expense (or benefit) from continuing operations disaggregated by federal, state, and foreign. This ASU is effective for annual periods beginning after December 15, 2024. Early adoption is permitted.
Lastly, the amendments in this ASU require an entity to disclose income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign and income tax expense (or benefit) from continuing operations disaggregated by federal, state, and foreign.
The credit risk involved in issuing letters of credit is essentially the same as that involved in granting loans to customers. The Bank holds collateral supporting these commitments if it is deemed necessary. At December 31, 2024 , $ 2.5 million of the o utstanding letters of credit were collateralized. The Bank has cash accounts in other commercial banks.
The credit risk involved in issuing letters of credit is essentially the same as that involved in granting loans to customers. The Bank holds collateral supporting these commitments if it is deemed necessary. Collateralized outstanding letters of credit totaled $ 3.9 million and $ 2.5 million at December 31, 2025 and 2024, respectively.
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.
No nonrecurring fair value adjustments were recorded on loans held for sale at December 31, 2025 and December 31, 2024.
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.
Right-of-use assets and lease liabilities are included in Other Assets and Other Liabilities, respectively, in the Consolidated Balance Sheets. 89 The following tables present information about the Company’s leases: (dollars in thousands) December 31, 2025 December 31, 2024 Lease liabilities $ 9,845 $ 9,779 Right-of-use assets $ 9,438 $ 9,645 Weighted average remaining lease term 12 years 12 years Weighted average discount rate 4.25 % 4.16 % Twelve Months Ended Lease Cost December 31, 2025 December 31, 2024 Operating lease cost $ 1,215 $ 528 Short-term lease cost 14 14 Total lease cost $ 1,229 $ 542 Cash paid for amounts included in the measurement of lease liabilities $ 1,068 $ 480 A maturity analysis of operating lease liabilities and reconciliation of the undiscounted cash flows to the total operating lease liabilities is as follows: (dollars in thousands) As of Lease payments due December 31, 2025 Twelve months ending December 31, 2026 $ 1,022 Twelve months ending December 31, 2027 1,035 Twelve months ending December 31, 2028 1,058 Twelve months ending December 31, 2029 1,083 Twelve months ending December 31, 2030 1,135 Thereafter 7,428 Total undiscounted cash flows $ 12,761 Discount ( 2,916 ) Lease liabilities $ 9,845 NOTE 14.

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