Speaker #1: Thank you for standing by. My name is Jordan, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Eagle Financial Services Inc. Q4 earnings call.
Speaker #1: All lines have been placed on mute to prevent any background noise. I'd now like to turn the call over to Nick Smith to begin the meeting.
Speaker #1: Please go ahead.
Nick Smith: Good morning, and thank you for joining us for our Q4 earnings conference call. Before we begin, please note that the information provided during this call contains forward-looking statements. Actual results may differ materially from those statements. Please refer to our most recent Form 10-K, our Q4 earnings release, and other filings with the SEC for a detailed discussion of risk factors.
Speaker #2: Good morning, and thank you for joining us for our fourth quarter earnings conference call. Before we begin, please note that the information provided during this call contains forward-looking statements.
Speaker #2: Actual results may differ materially from those statements. Please refer to our most recent form 10-K, our Q4 earnings release, and other filings with the SEC for a detailed discussion of risk factors.
Speaker #2: We do not assume any obligation to update any forward-looking statements as a result of new information, except as required by law. Also, during the call, we will discuss certain non-GAAP financial measures in reference to the company's performance.
Rachel Smith: We do not assume any obligation to update any forward-looking statements as a result of new information except as required by law. Also, during the call, we will discuss certain Non-GAAP financial measures in reference to the company's performance. You can see our reconciliation of these measures, and GAAP financial measures, in the appendix to our presentation, which can be found on our Investor Relations website. With us today are our CEO, Brandon Lorey, our CFO, Kate Chappell, and our Chief Banking Officer, Joe Zmitrovich. I will now turn the call over to Brandon. Thank you, Nick, and thank you all for joining us today. Our Q4 results reflect both the progress we've made throughout 2025 and the intentional way we executed our strategy. For the quarter, we reported net income of $4.3 million compared to $5.6 million in Q3.
We do not assume any obligation to update any forward-looking statements as a result of new information except as required by law. Also, during the call, we will discuss certain Non-GAAP financial measures in reference to the company's performance. You can see our reconciliation of these measures, and GAAP financial measures, in the appendix to our presentation, which can be found on our Investor Relations website. With us today are our CEO, Brandon Lorey, our CFO, Kate Chappell, and our Chief Banking Officer, Joe Zmitrovich. I will now turn the call over to Brandon.
Speaker #2: You can see our reconciliation of these measures and GAAP financial measures in the appendix to our presentation, which can be found on our investor relations website.
Speaker #2: With us today are our CEO, Brandon Laurie, our CFO, Kate Chappell, and our Chief Banking Officer, Joe Zentrovich. And we'll now turn the call over to
Speaker #2: Brandon: Thank you, Nick, and thank you all for
Brandon Lorey: Thank you, Nick, and thank you all for joining us today. Our Q4 results reflect both the progress we've made throughout 2025 and the intentional way we executed our strategy. For the quarter, we reported net income of $4.3 million compared to $5.6 million in Q3.
Speaker #3: Joining us today, our fourth quarter results reflect both the progress we've made throughout 2025 and the intentional way we executed our strategy. For the quarter, we reported net income of $4.3 million, compared to $5.6 million in the third quarter.
Speaker #3: The linked-quarter change was driven primarily by lower net interest income and higher salaries and benefits, which we anticipated as part of our continued investment in our people.
Rachel Smith: The linked quarter change was driven primarily by lower net interest income and higher salaries and benefits, which we anticipated as part of our continued investment in our people. Kate will walk through our income statement in greater detail later in the call. Credit quality remained stable. Non-performing assets ended the year at $14.6 million, or 0.77% of total assets, which compares to $14.3 million, or 0.74%, last quarter. While NPAs are higher than the prior year due to several large relationships moving to non-accrual that we have discussed in prior quarters, we remain confident in our collateral position and outlook. At the beginning of the year, following our successful capital raise, we set some ambitious goals.
The linked quarter change was driven primarily by lower net interest income and higher salaries and benefits, which we anticipated as part of our continued investment in our people. Kate will walk through our income statement in greater detail later in the call. Credit quality remained stable. Non-performing assets ended the year at $14.6 million, or 0.77% of total assets, which compares to $14.3 million, or 0.74%, last quarter. While NPAs are higher than the prior year due to several large relationships moving to non-accrual that we have discussed in prior quarters, we remain confident in our collateral position and outlook. At the beginning of the year, following our successful capital raise, we set some ambitious goals.
Speaker #3: Kate will walk through our income statement in greater detail later in the call. Credit quality remained stable. Non-performing assets ended the year at $14.6 million, or 0.77% of total assets, which compares to $14.3 million, or 0.74%, last quarter.
Speaker #3: While NPAs are higher than the prior year due to several large relationships moving to non-accrual that we have discussed in prior quarters, we remain confident in our collateral position and outlook.
Speaker #3: At the beginning of the year, following our successful capital raise, we set some ambitious goals. We wanted to build a more granular and relationship-driven loan portfolio, grow core deposits and fee income by showing up for our customers with our full suite of products, and expand markets where we knew we could make a meaningful difference.
Rachel Smith: We wanted to build a more granular and relationship-driven loan portfolio, grow core deposits and fee income by showing up for our customers with our full suite of products, and expanded markets where we knew we could make a meaningful difference. We accomplished these goals, and we did it together. I'm especially proud of how we achieved this. Despite expected headwinds from marine runoff, our commercial teams continued to deliver strong organic loan growth. Our Q3 momentum continued in Q4 with an additional $13.1 million in net loan growth driven by commercial real estate and C&I lending. This is clear evidence that our commercial engine is both resilient and scalable. As we wrap up 2025, I am genuinely proud of what our team accomplished this year. Our Q4 results put a fitting close on a year defined by focus and follow-through.
We wanted to build a more granular and relationship-driven loan portfolio, grow core deposits and fee income by showing up for our customers with our full suite of products, and expanded markets where we knew we could make a meaningful difference. We accomplished these goals, and we did it together. I'm especially proud of how we achieved this. Despite expected headwinds from marine runoff, our commercial teams continued to deliver strong organic loan growth. Our Q3 momentum continued in Q4 with an additional $13.1 million in net loan growth driven by commercial real estate and C&I lending. This is clear evidence that our commercial engine is both resilient and scalable. As we wrap up 2025, I am genuinely proud of what our team accomplished this year. Our Q4 results put a fitting close on a year defined by focus and follow-through.
Speaker #3: We accomplished these goals, and we did it together. I'm especially proud of how we achieved this. Despite expected headwinds from marine runoff, our commercial teams continued to deliver strong organic loan growth.
Speaker #3: Our third quarter momentum continued in the fourth quarter, with an additional $13.1 million in net loan growth, driven by commercial real estate and C&I lending.
Speaker #3: This is clear evidence that our commercial engine is both scalable. As we wrap up 2025, I am genuinely proud of what our team accomplished this year.
Speaker #3: Our fourth-quarter results put a fitting close on a year defined by focus and follow-through. We strengthened our balance sheet, kept asset quality on solid footing, and continued to perform at a level that compares favorably to many of our peers.
Rachel Smith: We strengthened our balance sheet, kept asset quality on solid footing, and continued to perform at a level that compares favorably to many of our peers. Now, I'll let Kate talk you through more of our Q4 results. Kate? Thanks, Brandon. Last night, we reported net income of $4.3 million, or $0.81 per diluted share, for Q4 of 2025. As Brandon mentioned, our profitability remained solid, with an annualized return on average assets of 0.91% and an annualized return on average equity of 9.18% for the quarter. Our efficiency ratio was 70.3% in Q4, compared to 64.1% in Q3. Our net interest income was $16.4 million in Q4, which was a 4.8% decrease from Q3 due to the expected outflow of excess cash as the customer worked through the disposition of proceeds from the sale of their business.
We strengthened our balance sheet, kept asset quality on solid footing, and continued to perform at a level that compares favorably to many of our peers. Now, I'll let Kate talk you through more of our Q4 results. Kate?
Speaker #3: Now I'll let Kate talk you through more of our fourth quarter results. Kate?
Kate Chappell: Thanks, Brandon. Last night, we reported net income of $4.3 million, or $0.81 per diluted share, for Q4 of 2025. As Brandon mentioned, our profitability remained solid, with an annualized return on average assets of 0.91% and an annualized return on average equity of 9.18% for the quarter. Our efficiency ratio was 70.3% in Q4, compared to 64.1% in Q3. Our net interest income was $16.4 million in Q4, which was a 4.8% decrease from Q3 due to the expected outflow of excess cash as the customer worked through the disposition of proceeds from the sale of their business.
Speaker #4: Thanks, Brandon. Last night, we reported net income of $4.3 million, or $0.81 per diluted share, for the fourth quarter of 2025. As Brandon mentioned, our profitability remained solid, with an annualized return on average assets of 0.91% and an annualized return on average equity of 9.18% for the quarter.
Speaker #4: Our efficiency ratio was 70.3% in the fourth quarter, compared to 64.1% in the third quarter. Our net interest income was $16.4 million, a 4.8% decrease from the third quarter.
Speaker #4: Due to the expected outflow of excess cash, as a customer worked through the disposition of proceeds from the sale of their business, our net interest margin increased to 3.61%, up from 3.58% in the third quarter, reflecting the continued improvement in earning asset yields and a better funding mix over the past year.
Rachel Smith: Our net interest margin increased to 3.61%, up from 3.58% in Q3, reflecting the continued improvement in earning asset yields and a better funding mix over the past year. Turning to non-interest income and expenses, non-interest income totaled $5.4 million in Q4, up from $5.2 million in Q3. Within fee income, we continued to see strong contributions from wealth management, where fees increased to $2.3 million, up 25% from Q3, driven partially by the recognition of account settlement fees. Looking ahead to 2026, we expect both wealth management fees and gain on sale revenue to remain generally consistent with 2025 levels. On the expense side, non-interest expense was $15.5 million, which represented an 8% increase compared to Q3. This quarter-over-quarter increase was driven primarily by higher salaries and employee benefits, reflecting increased headcount and incentive compensation tied to our performance.
Rachel Smith: Our net interest margin increased to 3.61%, up from 3.58% in Q3, reflecting the continued improvement in earning asset yields and a better funding mix over the past year. Turning to non-interest income and expenses, non-interest income totaled $5.4 million in Q4, up from $5.2 million in Q3. Within fee income, we continued to see strong contributions from wealth management, where fees increased to $2.3 million, up 25% from Q3, driven partially by the recognition of account settlement fees. Looking ahead to 2026, we expect both wealth management fees and gain on sale revenue to remain generally consistent with 2025 levels. On the expense side, non-interest expense was $15.5 million, which represented an 8% increase compared to Q3. This quarter-over-quarter increase was driven primarily by higher salaries and employee benefits, reflecting increased headcount and incentive compensation tied to our performance.
Speaker #4: Turning to non-interest income and expenses, non-interest income totaled $5.4 million in the fourth quarter, up from $5.2 million in the third quarter. Within fee income, we continued to see strong contributions from wealth management, where fees increased to $2.3 million, up 25% from the third quarter.
Speaker #4: Driven partially by the recognition of account settlement fees. Looking ahead to 2026, we expect both wealth management fees and gain on sale revenue to remain generally consistent with 2025 levels.
Speaker #4: On the expense side, non-interest expense was $15.5 million, which represented an 8% increase compared to the third quarter. The quarter-over-quarter increase was driven primarily by higher salaries and employee benefits, reflecting increased headcount and incentive performance.
Speaker #4: As I noted earlier, our efficiency ratio was 70% for the quarter. The increase from the third quarter primarily reflects the combination of lower net interest income and higher operating expenses, partially offset by higher fee income.
As I noted earlier, our efficiency ratio was 70% for the quarter. The increase from Q3 primarily reflects the combination of lower net interest income and higher operating expenses, partially offset by higher fee income. Looking forward to 2026, we anticipate the efficiency ratio to move slightly below 70% as spread income continues to improve and salaries and benefits expenses move to a more normalized level. I will now let Jo speak about the loan portfolio.
Rachel Smith: As I noted earlier, our efficiency ratio was 70% for the quarter. The increase from Q3 primarily reflects the combination of lower net interest income and higher operating expenses, partially offset by higher fee income. Looking forward to 2026, we anticipate the efficiency ratio to move slightly below 70% as spread income continues to improve and salaries and benefits expenses move to a more normalized level. I will now let Jo speak about the loan portfolio. Thank you, Kate. Q4 continued our strong momentum in lending activity. The loan portfolio expanded by $13.1 million, driven by $67 million in total originations and $18.5 million of growth in commercial loan categories. This was partially offset by a $10.3 million reduction in the marine portfolio. Q4 continued to demonstrate our disciplined lending execution as we experienced good activity across our commercial lines.
Speaker #4: Looking forward to 2026, we anticipate the efficiency ratio to move slightly below 70%, as spread income continues to improve and salaries and benefits expenses move to a more normalized level.
Speaker #4: I will now let Joe speak about the loan portfolio.
Joe Zmitrovich: Thank you, Kate. Q4 continued our strong momentum in lending activity. The loan portfolio expanded by $13.1 million, driven by $67 million in total originations and $18.5 million of growth in commercial loan categories. This was partially offset by a $10.3 million reduction in the marine portfolio. Q4 continued to demonstrate our disciplined lending execution as we experienced good activity across our commercial lines.
Speaker #1: Thank you, Kate. The fourth quarter continued our strong momentum in lending activity. The loan portfolio expanded by $13.1 million, driven by $67 million in total originations, and $18.5 million of growth in commercial loan categories.
Speaker #1: This was partially offset by a $10.3 million reduction in the marine portfolio. The fourth quarter continued to demonstrate our disciplined lending execution, as we experienced good activity across our commercial lines.
Speaker #1: Demand in all our markets remained steady, and our relationship-driven approach continues to set us apart as clients look for consistency, responsiveness, and a true long-term partner.
Demand in all our markets remained steady, and our relationship-driven approach continues to set us apart as clients look for consistency, responsiveness, and a true long-term partner. As we move into 2026, our loan pipeline is up over $100 million when compared to January of 2025. We are seeing solid opportunities not only in our established markets but also through new and expanding client relationships. We also expect continued growth from our commercial team in Maryland as they build momentum and expand their presence. Looking ahead, we expect commercial loan production to remain consistent with our strategy. We will stay focused on strengthening relationships, maintaining our credit discipline, and supporting quality growth. With the team we have in place, we feel well-positioned to continue delivering balanced, high-quality results. Brandon.
Rachel Smith: Demand in all our markets remained steady, and our relationship-driven approach continues to set us apart as clients look for consistency, responsiveness, and a true long-term partner. As we move into 2026, our loan pipeline is up over $100 million when compared to January of 2025. We are seeing solid opportunities not only in our established markets but also through new and expanding client relationships. We also expect continued growth from our commercial team in Maryland as they build momentum and expand their presence. Looking ahead, we expect commercial loan production to remain consistent with our strategy. We will stay focused on strengthening relationships, maintaining our credit discipline, and supporting quality growth. With the team we have in place, we feel well-positioned to continue delivering balanced, high-quality results. Brandon. Thanks, Jo. As we enter 2026, our foundation is strong.
Speaker #1: As we move into 2026, our loan pipeline is up over $100 million when compared to January of 2025. We are seeing solid opportunities, not only in our established markets, but also through new and expanding client relationships.
Speaker #1: We also expect continued growth from our commercial team, in Maryland, as they build momentum and expand their presence. Looking ahead, we expect commercial loan production to remain consistent with our strategy.
Speaker #1: We will stay focused on strengthening relationships, maintaining our credit discipline, and supporting quality growth. With the team we have in place, we feel well positioned to continue delivering balanced, high-quality results.
Speaker #1: Brandon.
Brandon Lorey: Thanks, Jo. As we enter 2026, our foundation is strong. We remain grounded in the values that have guided the Bank of Clarke for more than 140 years: leadership in our markets, outstanding service to our customers, commitment to community, adaptability as conditions change, and loyalty to one another and those we serve. I am grateful for the continued support of our shareholders and optimistic about what we will accomplish next for them, for our employees, and for the communities that we are proud to support. We continue to engage in conversations with potential bank partners that align with our community-focused model and long-term strategic objectives.
Speaker #2: Thanks, Joe. As we enter 2026, our foundation is strong. We remain grounded in the values that have guided the Bank of Clark for more than 140 years: leadership in our markets, outstanding service to our customers, commitment to community, adaptability as conditions change, and loyalty to one another and those we serve.
Rachel Smith: We remain grounded in the values that have guided the Bank of Clarke for more than 140 years: leadership in our markets, outstanding service to our customers, commitment to community, adaptability as conditions change, and loyalty to one another and those we serve. I am grateful for the continued support of our shareholders and optimistic about what we will accomplish next for them, for our employees, and for the communities that we are proud to support. We continue to engage in conversations with potential bank partners that align with our community-focused model and long-term strategic objectives. Our approach to mergers and acquisitions remains disciplined, and we will only pursue opportunities that clearly enhance the strength and value of our franchise. At the same time, we remain a strong, organic growth company. The progress we delivered this year reflects the effectiveness of our execution and our relationship-based approach to banking.
Speaker #2: I am grateful for the continued support of our shareholders and optimistic about what we will accomplish next for them. For our employees and for the communities that we are proud to support.
Speaker #2: We continue to engage in conversations with potential bank partners that align with our community-focused model and long-term strategic objectives. Our approach to mergers and acquisitions remains disciplined, and we will only pursue opportunities that clearly enhance the strength and value of our franchise.
Our approach to mergers and acquisitions remains disciplined, and we will only pursue opportunities that clearly enhance the strength and value of our franchise. At the same time, we remain a strong, organic growth company. The progress we delivered this year reflects the effectiveness of our execution and our relationship-based approach to banking. We believe our platform is well-positioned to scale, and we are confident in our ability to deliver meaningful and sustainable growth. Thank you all for joining today's call. We appreciate your continued support, and we are excited about the opportunities ahead as we continue to execute on our strategic plan. This concludes today's meeting. You may now disconnect.
Speaker #2: At the same time, we remain a strong organic growth company. The progress we delivered this year reflects the effectiveness of our execution and our relationship-based approach to banking.
Speaker #2: We believe our platform is well positioned to scale, and we are confident in our ability to deliver meaningful and sustainable growth. Thank you all for joining today's call.
Rachel Smith: We believe our platform is well-positioned to scale, and we are confident in our ability to deliver meaningful and sustainable growth. Thank you all for joining today's call. We appreciate your continued support, and we are excited about the opportunities ahead as we continue to execute on our strategic plan. This concludes today's meeting. You may now disconnect.
Speaker #2: We appreciate your continued support, and we are excited about the opportunities ahead as we continue to execute on our strategic plan.
