Q3 2025 Eagle Financial Services Inc Earnings Call

October 24, 2025

Operator: Financial Services Inc. Q3 earnings call. All lines have been placed on mute to prevent any background noise. I would now like to turn the call over to Nicholas Smith, EVP, Deputy CFO. Please go ahead.

Kathleen Chappell: Financial Services Inc. Q3 earnings call. All lines have been placed on mute to prevent any background noise. I would now like to turn the call over to Nicholas Smith, EVP, Deputy CFO. Please go ahead.

Operator: Financial Services, Inc. Q3 earnings call. All lines have been placed on mute to prevent any background noise. I would now like to turn the call over to Nick Smith, EVP Deputy CFO. Please go ahead.

All lines have been placed on mute to prevent any background noise.

I would now like to turn the call over to Nick Smith EVP Deputy CFO. Please go ahead.

Thank you.

Morning.

Thank you for joining us for our third quarter earnings Conference call.

Nicholas Smith: Thank you. Good morning. Thank you for joining us for our Q3 Earnings Conference Call. Before we begin, please note that the information provided during this call will contain forward-looking statements. Actual results or outcomes may differ materially from those expressed by those statements. I'd like to direct all listeners to read the cautionary note regarding forward-looking statements contained in our most recent annual report on Form 10-K filed with the SEC and in our earnings release, as well as the risk factors identified in the annual report and in our more recent periodic reports filed with the SEC. Relevant factors that could cause actual results to differ materially from any forward-looking statements are included in the earnings release and in our SEC filings. The company does not undertake to update any of the forward-looking statements made today.

Nick Smith: Thank you. Good morning. Thank you for joining us for our third quarter earnings conference call. Before we begin, please note that the information provided during this call will contain forward-looking statements. Actual results or outcomes may differ materially from those expressed by those statements. I would like to direct all listeners to read the cautionary note regarding forward-looking statements contained in our most recent annual report on Form 10-K filed with the SEC and in our earnings release, as well as the risk factors identified in the annual report and in our more recent periodic reports filed with the SEC. Relevant factors that could cause actual results to differ materially from any forward-looking statements are included in the earnings release and in our SEC filings. The company does not undertake to update any of the forward-looking statements made today.

Before we begin please note that the information provided during this call will contain forward looking statements actual results or outcomes may differ materially from those expressed by those statements.

I'd like to direct all listeners to read the cautionary note regarding forward looking statements contained in our most recent annual report on Form 10-K filed with the SEC and in our earnings release as well as the risk factors identified in the annual report and.

And in our more recent periodic reports filed with the SEC.

Relevant factors that could cause actual results to differ materially from any forward looking statements are included in the earnings release and in our SEC filings.

Company does not undertake to update any of the forward looking statements made today.

Copy of our earnings release, which contains non-GAAP financial measures is available on our website at investors Bank of Clark Top bank and.

Nick Smith: A copy of our earnings release, which contains non-GAAP financial measures, is available on our website at investors.bankofclarke.bank. Information regarding our use of the non-GAAP financial measures may be found in the body of the earnings release. A reconciliation to their most directly comparable GAAP financial measures is included at the end of the earnings release for your reference. This quarter, along with our earnings release, we published an updated investor presentation that has additional disclosures that we believe will be helpful. The presentation can be accessed on our investor relations website. Please also note that as we discuss our financials today, unless otherwise noted, all of the prior period comparisons will be with the second quarter of 2025. Joining us from management this morning, Brandon Loury, our Chief Executive Officer, Joe Syntrovich, our Chief Banking Officer, and Kate Chappell, our Chief Financial Officer.

Nicholas Smith: A copy of our earnings release, which contains non-GAAP financial measures, is available on our website at investors.bankofclarke.bank. Information regarding our use of the non-GAAP financial measures may be found in the body of the earnings release. A reconciliation to their most directly comparable GAAP financial measures is included at the end of the earnings release for your reference. This quarter, along with our earnings release, we published an updated investor presentation that has additional disclosures that we believe will be helpful. The presentation can be accessed on our investor relations website. Please also note that as we discuss our financials today, unless otherwise noted, all the prior period comparisons will be with the Q2 of 2025. Joining us for management this morning, Brandon Lorey, our Chief Executive Officer, Joe Zmitrovich, our Chief Banking Officer, and Kathleen Chappell, our Chief Financial Officer.

And information regarding our use of the non-GAAP financial measures maybe found in the body of the earnings release and a reconciliation to their most directly comparable GAAP financial measures is included at the end of the earnings release for your reference.

This quarter, along with our earnings release, we published an updated investor presentation that has additional disclosures that we believe will be helpful.

The presentation can be accessed on our Investor Relations website.

Please also note that as we discuss our financials today unless otherwise noted all of the prior period comparisons will be with the second quarter of 2025.

Joining us from management this morning, Brandon Lorey, our Chief Executive Officer, Joseph <unk>, Our Chief Banking Officer, and Kate Scheffel, Our Chief Financial Officer.

At this time I will turn the call over to Brandon Lorey Brendan.

Nick Smith: At this time, I will turn the call over to Brandon Loury. Brandon?

Nicholas Smith: At this time, I'll turn the call over to Brandon Lorey. Brandon.

Thank you Nick and thank you all for listening to the call today last night, we reported net income for the third quarter of $5 $6 million. The efforts of our team are evident in our financial results as we continue to improve our funding composition and continue to deliver solutions for our clients across our markets.

Brandon Lorey: Thank you, Nick. Thank you all for listening to the call today. Last night, we reported net income for Q3 of $5.6 million. The efforts of our team are evident in our financial results as we continue to improve our funding composition and continue to deliver solutions for our clients across our markets. I will take a minute to update you on credit. Credit quality showed improvement during Q3, with non-performing assets declining to $14.3 million or 0.74% of total assets, compared to $17.5 million or 0.86% of total assets of 30 June 2025. This reduction was primarily driven by the partial resolution of a large non-accrual loan, which resulted in a $4.8 million payment with a $1.1 million charge-off.

Brandon Loury: Thank you, Nick, and thank you all for listening to the call today. Last night, we reported net income for the third quarter of $5.6 million. The efforts of our team are evident in our financial results as we continue to improve our funding composition and continue to deliver solutions for our clients across our markets. I will take a minute to update you on credit. Credit quality showed improvement during the third quarter, with non-performing assets declining to $14.3 million, or 0.74% of total assets, compared to $17.5 million, or 0.86% of total assets as of June 30, 2023. This reduction was primarily driven by the partial resolution of a large non-accrual loan, which resulted in a $4.8 million payment with a $1.1 million charge-off. Offsetting this improvement were two new commercial real estate relationships, each approximately $1.8 million, added to the non-accrual status during the quarter.

I will take a minute to update you on credit.

Credit quality showed improvement during the third quarter with nonperforming assets declining to $14 3 million or <unk>.

74% of total assets compared to $17 5 million or <unk>, 86% of total assets of June 32025.

This reduction was primarily driven by the partial resolution of a large non accrual loan which resulted in a $4 $8 million payment with a $1 $1 million charge offs offsetting this improvement with two new commercial real estate relationships each approximately $1 8 million added to non accrual status during the quarter. Both are well collateralized based on recent appraised.

Brandon Lorey: Offsetting this improvement were two new commercial real estate relationships, each approximately $1.8 million added to non-accrual status during the quarter. Both are well collateralized based on recent appraisals. Work out efforts continue on two previously disclosed large relationships included in our NPAs. The first loan was a partially owner-occupied property whose owner had passed away unexpectedly and had an outstanding balance of $2.2 million at 30 September. The courts have assigned an executor and the bank has filed and been found in favor on summary judgment, allowing the bank to move forward with the foreclosure process in Q4. The second relationship, a multifamily portfolio in Washington, DC, now totals $5.5 million in exposure.

Brandon Loury: Both are well collateralized based on recent appraisals. Workout efforts continue on two previously disclosed large relationships included in our non-performing assets. The first loan was a partially owner-occupied property whose owner had passed away unexpectedly and had an outstanding balance of $2.2 million at 9/30. The courts have assigned an executor, and the bank has filed and been found in favor on summary judgment, allowing the bank to move forward with the foreclosure process in the fourth quarter. The second relationship, a multifamily portfolio in Washington, DC, now totals $5.5 million in exposure. As mentioned earlier, we received partial resolution on the largest property, which was sold by a short sale in Q3, creating a $1.1 million deficiency balance, which was then fully charged off. Remaining properties are under receivership and are actively being made ready for sale.

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Workout efforts continue on two previously disclosed large relationships included in our Npa's the.

The first one was a partially owner occupied properties as owner and passed away unexpectedly and had an outstanding balance of $2 2 million at 930. The courts have assigned an executive and the bank has filed had been found in favor on summary judgment, allowing the bank to move forward with the foreclosure process in the fourth quarter.

Second relationship our multifamily portfolio in Washington D. C. Now totals $5 $5 million in exposure as mentioned earlier, we received partial resolution of the largest property, which was sold by a short sale in Q3, creating a $1 $1 billion of inefficiency balance which was been fully charged off.

Brandon Lorey: As mentioned earlier, we received partial resolution on the largest property, which was sold by a short sale in Q3, creating a $1.1 million deficiency balance, which was fully charged off. Remaining properties are under receivership and are actively being made ready for sale. We do not anticipate having to make any significant additional write-downs on these properties. Overall, while NPAs remain elevated versus prior year levels, the quarter demonstrated meaningful progress in resolving issues and maintaining strong collateral positions. Looking ahead, we maintain a positive outlook on the credit environment and remain confident in the performance trajectory of Eagle Financial Services and the Bank of Clarke for the remainder of 2025. I'll let Kate walk you through the financial results with greater detail. Kate.

The remaining properties. These are under receivership and are actively being made ready for sale, we do not anticipate having to make any significant additional write downs on these properties.

Brandon Loury: We do not anticipate having to make any significant additional write-downs on these properties. Overall, while non-performing assets remain elevated versus prior year levels, the quarter demonstrated meaningful progress in resolving issues and maintaining strong collateral positions. Looking ahead, we maintain a positive outlook on the credit environment and remain confident in the performance trajectory of Eagle Financial Services and the Bank of Clarke for the remainder of 2023. I'll let Kate walk you through the financial results with greater detail. Kate?

Overall, while NPA has remained elevated versus prior year levels. The Cory demonstrated meaningful progress in resolving issues and maintaining strong collateral positions. Looking ahead, we maintain a positive outlook on the credit environment and remain confident in the performance trajectory of the Eagle Ford It services and the bank acquired for the remainder of 2025.

I'll, let Kate walk you through the financial results with greater detail Okay.

Thanks Brendan.

Seemingly reported net income of $5 $6 million or $1.

Kathleen Chappell: Thanks, Brandon. Last evening, we reported net income of $5.6 million, or $1.04 per diluted share. Net interest income for the period was $17.2 million, reflecting an increase of 9.6% linked quarter. Net interest margin for the quarter was 3.58%, improvement of 16 basis points when compared to a net interest margin of 3.42% linked quarter. Total deposits declined $111 million during the quarter, primarily due to continued distribution of proceeds from the customers that sold their businesses during Q2. This balance has decreased by $72.4 million, ending the quarter at $79.3 million. In addition, we allowed higher cost non-core funding sources to roll off as part of our funding strategy.

Kate Chappell: Thanks, Brandon. Last evening, we reported net income of $5.6 million, or $1.04 per diluted share. Net interest income for the period was $17.2 million, reflecting an increase of 9.6% linked quarter. Net interest margin for the quarter was 3.58%, an improvement of 16 basis points when compared to a net interest margin of 3.42% linked quarter. Total deposits declined $111 million during the quarter, primarily due to the continued distribution of proceeds from the customers who had sold their businesses during Q2. This balance has decreased to $72.4 million, ending the quarter at $79.3 million. In addition, we allowed higher-cost non-core funding sources to roll off as part of our funding strategy. Looking ahead to the fourth quarter, we expect our net interest margin to remain near 3.5%.

<unk> per diluted share net interest income for the period was $17 $2 million, reflecting an increase of nine 6% linked quarter net interest margin for the quarter was $3 five 8%.

Krishna 16 basis points, when compared to the net interest margin of 314% this quarter.

Total deposits declined $111 million during the quarter.

Early data continued distribution and proceeds from the customers that tilda business Q2.

This balances decreased by $72 4 million ending the quarter at $79 premium and.

In addition, we allowed higher cost non core funding sources to rollout.

Got it.

Looking ahead to the fourth quarter.

Winter.

That's our net interest margin to remain near three 5% noninterest income totaled $5 2 million up approximately 300000 from Q2, driven by continued strength in wealth management and trust services.

Kathleen Chappell: Looking ahead to Q4, we expect our net interest margin to remain near 3.5%. Non-interest income totaled $5.2 million, up approximately $300,000 from Q2, driven by continued strength in wealth management and trust services, totaling $1.8 million in non-interest income for Q3. Mortgage banking and SBA gain on sale activity also delivered an excellent performance during Q3, contributing $1 million in fee income to Q3's results. Gain on sale loans, however, that will likely be impacted in Q4 as the government shutdown has caused SBA loan settlements. We expect to resume fundings and sales loan operations in the last. Non-interest expense increased $945,000 to $14.3 million, primarily due to higher salaries, benefits, and incentive accrual as we continue to meet performance goals for the year.

Kate Chappell: Non-interest income totaled $5.2 million, up approximately $300,000 from Q2, driven by continued strength in wealth management and trust services, totaling $1.8 million in non-interest income for the quarter. Mortgage banking and SBA gain on sale activity also delivered an excellent performance during Q3, contributing $1 million in fee income to the quarter's results. Gain on sales loans held for sale will likely be impacted in the fourth quarter as the government shutdown has paused SBA loan settlement. We expect to resume funding and sales once operations normalize. Non-interest expense increased $945,000 to $14.3 million, primarily due to higher salaries, benefits, and incentive accrual as we continue to meet performance goals for the year. I will now let Joe speak about our loan portfolio.

The $1 8 million and noninterest income for the corner mortgage banking and SBA gain on sale activity also delivered an excellent performance during Q3.

$1 million in fee income to the partnership.

Gain on sales loans held for sale will likely be impacted in the fourth quarter as the government shutdown has passed SBA loan segment.

Back to resume funding and Salesforce operations.

Noninterest expense increased 945000 to $14 3 million, primarily due to higher salaries benefits and incentive accruals as we continue to meet performance closed for the year.

I will now I'll, let Joe speak about our loan portfolio.

Kathleen Chappell: I will now let Joe speak about our loan portfolio.

Thanks Kate.

The third quarter reflected strong momentum in lending activities. The loan portfolio expanded by 21 3 million driven by $32 $7 million in commercial loan growth, partially offset by $10 $5 million of runoff in the marine portfolio.

Joe Zmitrovich: Thank you, Kate. The third quarter reflected strong momentum in lending activity. The loan portfolio expanded by $21.3 million, driven by $32.7 million in commercial loan growth, partially offset by $10.5 million of runoff in the marine portfolio. Loan originations totaled approximately $90 million and the commercial pipeline expanded by $35 million since the end of Q2, highlighting continued demand and opportunities. While competition remains intense, our disciplined approach and relationship-driven strategy continue to differentiate us in the market. We also are actively monitoring the government shutdown, and we have implemented measures to support any potentially affected clients and remain confident in our ability to navigate these challenges. Looking ahead, we expect steady commercial loan growth through year-end and are well positioned to capitalize on targeted opportunities as they arise. I'll now turn it back to Brandon.

Joe Syntrovich: Thank you, Kate. The third quarter reflected strong momentum in lending activity. The loan portfolio expanded by $21.3 million, driven by $32.7 million in commercial loan growth, partially offset by $10.5 million of runoff in the marine portfolio. Loan originations totaled approximately $90 million, and the commercial pipeline expanded by $35 million since the end of Q2, highlighting continued demand and opportunities. While competition remains intense, our disciplined approach and relationship-driven strategy continue to differentiate us in the market. We also are actively monitoring the government shutdown, and we have implemented measures to support any potentially affected clients and remain confident in our ability to navigate these challenges. Looking ahead, we expect steady commercial loan growth through year-end and are well-positioned to capitalize on targeted opportunities as they arise. I will now turn it back to Brandon.

Loan originations totaled approximately $90 million and the commercial pipeline expanded by $35 million. Since the end of Q2 highlighted continued demand and opportunities while competition remains intense our disciplined approach and relationship driven strategy continues to differentiate us in the market.

We also are actively monitoring the government shutdown and we have implemented measures to support any potentially affected clients and remain confident in our ability to navigate these challenges.

Looking ahead, we expect steady commercial loan growth through year end and are well positioned to capitalize on targeted opportunities as they arise.

Turn it back to Brian. Thank you, Joe first off I'd like to congratulate our very own Nick Smith on his recent promotion to Deputy CFO. This advancement reflects our disciplined approach to succession planning and our commitment to building leadership depth that supports long term shareholder value.

Brandon Lorey: Thank you, Joe. First off, I'd like to congratulate our very own Nicholas Smith on his recent promotion to Deputy CFO. This advancement reflects our disciplined approach to succession planning and our commitment to building leadership depth that supports long-term shareholder value. The recent opening of our full-service McLean location in Q3 marks an important step in our growth strategy. This expansion positions us to capture new opportunities and strengthen our ability to deliver solutions to clients. We continue discussions with potential bank partners and acquisition targets that fit our community-focused model and strategic goals. Our M&A approach is disciplined. We pursue only transactions that enhance franchise value. At the same time, we remain a strong organic operator, driving growth through execution and relationship banking. We are very confident in the scalability of our platform and our ability to deliver accretive growth.

Brandon Loury: Thank you, Joe. First off, I'd like to congratulate our very own Nick Smith on his recent promotion to Deputy CFO. This advancement reflects our disciplined approach to succession planning and our commitment to building leadership depth that supports long-term shareholder value. The recent opening of our full-service McLean, Virginia location in the third quarter marks an important step in our growth strategy. This expansion positions us to capture new opportunities and strengthen our ability to deliver solutions to clients. We continue discussions with potential bank partners and acquisition targets that fit our community-focused model and strategic goals. Our M&A approach is disciplined. We pursue only transactions that enhance franchise value. At the same time, we remain a strong organic operator, driving growth through execution and relationship-driven lending. We are very confident in the scalability of our platform and our ability to deliver accretive growth.

The recent opening of our full service Mclean location in the third quarter marks an important step in our growth strategy.

This expansion positions us to capture new opportunities and strengthen our ability to deliver solutions to clients.

We continue discussions with potential bank partners and acquisition targets that fit our community focused model and strategic goals. Our M&A approach is disciplined we pursue only transactions that enhance franchise value.

At the same time, we remain a strong organic operator driving growth through execution and relationship banking, we are very confident in the scalability of our platform and our ability to deliver accretive growth.

Thank you all for joining today's call. We appreciate your continued support and are very excited about the opportunities ahead as we execute on our strategic plan.

Brandon Lorey: Thank you all for joining today's call. We appreciate your continued support and are very excited about the opportunities ahead as we execute on our strategic plan.

Brandon Loury: Thank you all for joining today's call. We appreciate your continued support and are very excited about the opportunities ahead as we execute on our strategic plan.

This concludes today's call. Thank you for participating you may now disconnect.

Joe Zmitrovich: This concludes today's call. Thank Thank you for participating. You may now disconnect.

Operator: This concludes today's call. Thank Thank you for participating. You may now disconnect.

Operator: This concludes today's call. Thank you for participating. You may now disconnect.

Q3 2025 Eagle Financial Services Inc Earnings Call

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