[10-Q] Eagle Financial Services Inc Quarterly Earnings Report
Eagle Financial Services, Inc. reported a strong second quarter operating performance with Q2 net income of $5.27 million, up from $3.19 million a year earlier, and improved net interest income of $15.70 million vs. $12.16 million. The balance sheet expanded: total assets climbed to $2.035 billion from $1.866 billion, deposits rose to $1.766 billion (up from $1.575 billion) and cash and cash equivalents increased to $396.0 million from $193.2 million.
For the six months ended June 30, 2025 the company recorded a $12.425 million net realized pre-tax loss on sales of available-for-sale securities during March repositioning, producing a six-month net loss of $1.704 million versus prior-year six-month income of $5.733 million. Management completed a public offering that generated $53.5 million net proceeds and increased shareholders' equity to $179.6 million from $119.0 million. The allowance for credit losses was $15.98 million and nonaccrual loans totaled $16.735 million at June 30, 2025.
Eagle Financial Services, Inc. ha riportato un solido secondo trimestre operativo con un utile netto del secondo trimestre di $5.27 milioni, rispetto a $3.19 milioni dell'anno precedente, e un miglioramento del margine d'interesse netto a $15.70 milioni rispetto a $12.16 milioni. Lo stato patrimoniale si è ampliato: le attività totali sono salite a $2.035 miliardi da $1.866 miliardi, i depositi sono aumentati a $1.766 miliardi (da $1.575 miliardi) e la liquidità e mezzi equivalenti sono cresciuti a $396.0 milioni da $193.2 milioni.
Per i sei mesi chiusi il 30 giugno 2025 la società ha registrato una perdita pre-tasse realizzata netta di $12.425 milioni sulla vendita di titoli disponibili per la vendita effettuata a marzo per riposizionamento, determinando una perdita netta semestrale di $1.704 milioni rispetto all'utile semestrale di $5.733 milioni dell'anno precedente. La direzione ha completato un'offerta pubblica che ha generato $53.5 milioni di proventi netti e ha portato il patrimonio netto a $179.6 milioni da $119.0 milioni. L'accantonamento per perdite su crediti era pari a $15.98 milioni e i prestiti non produttivi ammontavano a $16.735 milioni al 30 giugno 2025.
Eagle Financial Services, Inc. presentó un sólido desempeño operativo en el segundo trimestre con un beneficio neto del 2T de $5.27 millones, frente a $3.19 millones un año antes, y un aumento del margen de interés neto a $15.70 millones frente a $12.16 millones. El balance se amplió: los activos totales subieron a $2.035 mil millones desde $1.866 mil millones, los depósitos aumentaron a $1.766 mil millones (desde $1.575 mil millones) y el efectivo y equivalentes subieron a $396.0 millones desde $193.2 millones.
Para los seis meses terminados el 30 de junio de 2025, la compañía registró una pérdida realizada antes de impuestos neta de $12.425 millones por la venta de valores disponibles para la venta durante el reposicionamiento de marzo, resultando en una pérdida neta semestral de $1.704 millones frente al beneficio semestral de $5.733 millones del año anterior. La dirección completó una oferta pública que generó $53.5 millones de ingresos netos e incrementó el patrimonio de los accionistas a $179.6 millones desde $119.0 millones. La provisión para pérdidas crediticias era de $15.98 millones y los préstamos en mora sumaban $16.735 millones al 30 de junio de 2025.
Eagle Financial Services, Inc.는 2분기에 견조한 영업실적을 보고했습니다. 2분기 순이익 $5.27 million(약 527만 달러)으로 전년 동기 $3.19 million보다 증가했으며, 순이자수익도 $15.70 million으로 이전의 $12.16 million에서 개선되었습니다. 대차대조표는 확대되어 총자산이 $2.035 billion으로 $1.866 billion에서 증가했고, 예금은 $1.766 billion으로(이전 $1.575 billion) 증가했으며 현금 및 현금성자산은 $396.0 million으로 $193.2 million에서 늘어났습니다.
2025년 6월 30일로 종료되는 6개월 동안 회사는 3월 포지션 재조정 과정에서 매도한 매도가능증권으로 인해 세전 순실현손실 $12.425 million을 기록하여 6개월 누계로 순손실 $1.704 million을 기록(전년 동기에는 순이익 $5.733 million)했습니다. 경영진은 공모를 완료해 $53.5 million의 순수익을 확보했고 주주지분은 $119.0 million에서 $179.6 million으로 증가했습니다. 대손충당금은 $15.98 million이었고, 부실대출 잔액은 2025년 6월 30일 기준 $16.735 million입니다.
Eagle Financial Services, Inc. a annoncé de solides résultats opérationnels au deuxième trimestre avec un résultat net du T2 de $5.27 millions, contre $3.19 millions un an plus tôt, et une amélioration du produit net d'intérêts à $15.70 millions contre $12.16 millions. Le bilan s'est développé : l'actif total est passé à $2.035 milliards contre $1.866 milliards, les dépôts ont augmenté à $1.766 milliards (contre $1.575 milliards) et la trésorerie et équivalents de trésorerie ont crû à $396.0 millions contre $193.2 millions.
Pour les six mois clos le 30 juin 2025, la société a enregistré une perte réalisée nette avant impôts de $12.425 millions sur la vente de titres disponibles à la vente lors du repositionnement de mars, entraînant une perte nette semestrielle de $1.704 millions contre un résultat semestriel positif de $5.733 millions l'année précédente. La direction a réalisé une offre publique qui a généré $53.5 millions de produits nets et a porté les capitaux propres à $179.6 millions contre $119.0 millions. La provision pour pertes sur prêts s'élevait à $15.98 millions et les prêts non productifs totalisaient $16.735 millions au 30 juin 2025.
Eagle Financial Services, Inc. meldete ein starkes operatives Ergebnis im zweiten Quartal mit einem Quartalsnettoergebnis von $5.27 Millionen, gegenüber $3.19 Millionen ein Jahr zuvor, und einer verbesserten Nettozinsspanne von $15.70 Millionen gegenüber $12.16 Millionen. Die Bilanz wuchs: die Gesamtaktiva stiegen auf $2.035 Milliarden von $1.866 Milliarden, die Einlagen erhöhten sich auf $1.766 Milliarden (vorher $1.575 Milliarden) und Zahlungsmittel sowie Zahlungsmitteläquivalente verbesserten sich auf $396.0 Millionen von $193.2 Millionen.
Für die sechs Monate bis zum 30. Juni 2025 verzeichnete das Unternehmen einen netto realisierten Vorsteuerverlust von $12.425 Millionen aus dem Verkauf von als verfügbar zum Verkauf gehaltenen Wertpapieren im Rahmen der Neupositionierung im März, was zu einem Nettoverlust für das Halbjahr von $1.704 Millionen führte (im Vorjahr Halbjahresgewinn von $5.733 Millionen). Das Management schloss ein öffentliches Angebot ab, das $53.5 Millionen Nettomittelzufluss brachte und das Eigenkapital der Aktionäre auf $179.6 Millionen von $119.0 Millionen erhöhte. Die Risikovorsorge für Kreditverluste betrug $15.98 Millionen und notleidende Kredite beliefen sich zum 30. Juni 2025 auf $16.735 Millionen.
- Q2 net income of $5.27 million, up from $3.19 million year-over-year for the quarter
- Net interest income improvement: Q2 NII $15.698 million (Q2 2024: $12.156 million); six-month NII $29.034 million (2024: $24.571 million)
- Balance sheet growth: total assets increased to $2.035 billion from $1.866 billion
- Deposit inflows: total deposits rose to $1.766 billion from $1.575 billion, with a large increase in noninterest-bearing demand deposits
- Capital raise: public offering net proceeds of $53.5 million increased shareholders' equity to $179.648 million
- $12.425 million net realized pre-tax loss on sale of available-for-sale securities during six months, which produced a six-month net loss of $1.704 million
- Increase in nonaccrual loans to $16.735 million at June 30, 2025 from $2.072 million at December 31, 2024
- Higher provision for credit losses: $1.901 million for the six months ended June 30, 2025 vs. $656 thousand in the prior year period
- Dilution and share count increase: issued 1,796,875 shares in the public offering (outstanding shares rose to 5,376,346 as of August 8, 2025)
Insights
TL;DR: Q2 operating results improved materially, but six-month profitability was erased by a large, realized securities loss despite stronger NII and a successful capital raise.
Net interest income rose meaningfully year-over-year to $29.03 million for the six months, driven by higher yields on interest-earning balances and higher interest on deposits in banks, supporting stronger core banking performance. The March securities sales produced a net realized pre-tax loss of $12.425 million that moved six-month results to a $1.704 million loss. The public equity offering ($53.5 million net) materially strengthened regulatory capital and increased shares outstanding, restoring buffer for growth and liquidity. On an operating basis the bank shows strengthened deposit gathering and higher cash balances, which supports interest margin management.
TL;DR: Liquidity and capital improved, but the large realized securities loss and higher nonaccruals raise near-term credit and earnings risk.
The company increased cash and deposits substantially ($396.0M cash; deposits up ~12% to $1.766B), and shareholders' equity rose to $179.6M after the $53.5M offering, improving liquidity and capital ratios. Offsetting positives, the six-month period reflects a $12.425M realized securities loss and an increased provision for credit losses ($1.901M for six months), while nonaccrual loans expanded to $16.735M from $2.072M at year-end, signaling elevated credit monitoring needs. These items materially affected six-month profitability and merit continued surveillance.
Eagle Financial Services, Inc. ha riportato un solido secondo trimestre operativo con un utile netto del secondo trimestre di $5.27 milioni, rispetto a $3.19 milioni dell'anno precedente, e un miglioramento del margine d'interesse netto a $15.70 milioni rispetto a $12.16 milioni. Lo stato patrimoniale si è ampliato: le attività totali sono salite a $2.035 miliardi da $1.866 miliardi, i depositi sono aumentati a $1.766 miliardi (da $1.575 miliardi) e la liquidità e mezzi equivalenti sono cresciuti a $396.0 milioni da $193.2 milioni.
Per i sei mesi chiusi il 30 giugno 2025 la società ha registrato una perdita pre-tasse realizzata netta di $12.425 milioni sulla vendita di titoli disponibili per la vendita effettuata a marzo per riposizionamento, determinando una perdita netta semestrale di $1.704 milioni rispetto all'utile semestrale di $5.733 milioni dell'anno precedente. La direzione ha completato un'offerta pubblica che ha generato $53.5 milioni di proventi netti e ha portato il patrimonio netto a $179.6 milioni da $119.0 milioni. L'accantonamento per perdite su crediti era pari a $15.98 milioni e i prestiti non produttivi ammontavano a $16.735 milioni al 30 giugno 2025.
Eagle Financial Services, Inc. presentó un sólido desempeño operativo en el segundo trimestre con un beneficio neto del 2T de $5.27 millones, frente a $3.19 millones un año antes, y un aumento del margen de interés neto a $15.70 millones frente a $12.16 millones. El balance se amplió: los activos totales subieron a $2.035 mil millones desde $1.866 mil millones, los depósitos aumentaron a $1.766 mil millones (desde $1.575 mil millones) y el efectivo y equivalentes subieron a $396.0 millones desde $193.2 millones.
Para los seis meses terminados el 30 de junio de 2025, la compañía registró una pérdida realizada antes de impuestos neta de $12.425 millones por la venta de valores disponibles para la venta durante el reposicionamiento de marzo, resultando en una pérdida neta semestral de $1.704 millones frente al beneficio semestral de $5.733 millones del año anterior. La dirección completó una oferta pública que generó $53.5 millones de ingresos netos e incrementó el patrimonio de los accionistas a $179.6 millones desde $119.0 millones. La provisión para pérdidas crediticias era de $15.98 millones y los préstamos en mora sumaban $16.735 millones al 30 de junio de 2025.
Eagle Financial Services, Inc.는 2분기에 견조한 영업실적을 보고했습니다. 2분기 순이익 $5.27 million(약 527만 달러)으로 전년 동기 $3.19 million보다 증가했으며, 순이자수익도 $15.70 million으로 이전의 $12.16 million에서 개선되었습니다. 대차대조표는 확대되어 총자산이 $2.035 billion으로 $1.866 billion에서 증가했고, 예금은 $1.766 billion으로(이전 $1.575 billion) 증가했으며 현금 및 현금성자산은 $396.0 million으로 $193.2 million에서 늘어났습니다.
2025년 6월 30일로 종료되는 6개월 동안 회사는 3월 포지션 재조정 과정에서 매도한 매도가능증권으로 인해 세전 순실현손실 $12.425 million을 기록하여 6개월 누계로 순손실 $1.704 million을 기록(전년 동기에는 순이익 $5.733 million)했습니다. 경영진은 공모를 완료해 $53.5 million의 순수익을 확보했고 주주지분은 $119.0 million에서 $179.6 million으로 증가했습니다. 대손충당금은 $15.98 million이었고, 부실대출 잔액은 2025년 6월 30일 기준 $16.735 million입니다.
Eagle Financial Services, Inc. a annoncé de solides résultats opérationnels au deuxième trimestre avec un résultat net du T2 de $5.27 millions, contre $3.19 millions un an plus tôt, et une amélioration du produit net d'intérêts à $15.70 millions contre $12.16 millions. Le bilan s'est développé : l'actif total est passé à $2.035 milliards contre $1.866 milliards, les dépôts ont augmenté à $1.766 milliards (contre $1.575 milliards) et la trésorerie et équivalents de trésorerie ont crû à $396.0 millions contre $193.2 millions.
Pour les six mois clos le 30 juin 2025, la société a enregistré une perte réalisée nette avant impôts de $12.425 millions sur la vente de titres disponibles à la vente lors du repositionnement de mars, entraînant une perte nette semestrielle de $1.704 millions contre un résultat semestriel positif de $5.733 millions l'année précédente. La direction a réalisé une offre publique qui a généré $53.5 millions de produits nets et a porté les capitaux propres à $179.6 millions contre $119.0 millions. La provision pour pertes sur prêts s'élevait à $15.98 millions et les prêts non productifs totalisaient $16.735 millions au 30 juin 2025.
Eagle Financial Services, Inc. meldete ein starkes operatives Ergebnis im zweiten Quartal mit einem Quartalsnettoergebnis von $5.27 Millionen, gegenüber $3.19 Millionen ein Jahr zuvor, und einer verbesserten Nettozinsspanne von $15.70 Millionen gegenüber $12.16 Millionen. Die Bilanz wuchs: die Gesamtaktiva stiegen auf $2.035 Milliarden von $1.866 Milliarden, die Einlagen erhöhten sich auf $1.766 Milliarden (vorher $1.575 Milliarden) und Zahlungsmittel sowie Zahlungsmitteläquivalente verbesserten sich auf $396.0 Millionen von $193.2 Millionen.
Für die sechs Monate bis zum 30. Juni 2025 verzeichnete das Unternehmen einen netto realisierten Vorsteuerverlust von $12.425 Millionen aus dem Verkauf von als verfügbar zum Verkauf gehaltenen Wertpapieren im Rahmen der Neupositionierung im März, was zu einem Nettoverlust für das Halbjahr von $1.704 Millionen führte (im Vorjahr Halbjahresgewinn von $5.733 Millionen). Das Management schloss ein öffentliches Angebot ab, das $53.5 Millionen Nettomittelzufluss brachte und das Eigenkapital der Aktionäre auf $179.6 Millionen von $119.0 Millionen erhöhte. Die Risikovorsorge für Kreditverluste betrug $15.98 Millionen und notleidende Kredite beliefen sich zum 30. Juni 2025 auf $16.735 Millionen.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number:
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P.O. Box 391 |
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Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Date File required to be submitted pursuant to Rule 405 of Regulation S-T (232.405 of this Chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
The number of shares of the registrant’s Common Stock ($2.50 par value) outstanding as of August 8, 2025 was
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION |
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Item 1. |
Financial Statements: |
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Consolidated Balance Sheets at June 30, 2025 and December 31, 2024 |
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Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2025 and 2024 |
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Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2025 and 2024 |
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Consolidated Statements of Changes in Shareholders’ Equity for the Three and Six Months Ended June 30, 2025 and 2024 |
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Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2025 and 2024 |
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Notes to Consolidated Financial Statements |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
Quantitative and Qualitative Disclosures about Market Risk |
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Item 4. |
Controls and Procedures |
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PART II - OTHER INFORMATION |
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Item 1. |
Legal Proceedings |
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Item 1A. |
Risk Factors |
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Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
64 |
Item 3. |
Defaults Upon Senior Securities |
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Item 4. |
Mine Safety Disclosures |
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Item 5. |
Other Information |
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Item 6. |
Exhibits |
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
EAGLE FINANCIAL SERVICES, INC.
Consolidated Balance Sheets
(dollars in thousands, except per share amounts)
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June 30, 2025 |
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December 31, 2024 |
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(Unaudited) |
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Assets |
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Cash and due from banks |
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Interest-bearing deposits with other institutions |
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Federal funds sold |
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Total cash and cash equivalents |
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Securities available for sale, at fair value, amortized cost of $ |
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Restricted investments, at cost |
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Loans held for sale |
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Loans |
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Allowance for credit losses |
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Net Loans |
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Bank premises and equipment, net |
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Bank owned life insurance |
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Other assets |
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Total assets |
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Liabilities and Shareholders’ Equity |
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Liabilities |
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Deposits: |
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Noninterest bearing demand deposits |
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Savings and interest bearing demand deposits |
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Time deposits |
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Total deposits |
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Federal funds purchased |
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Federal Home Loan Bank advances, short-term |
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Federal Home Loan Bank advances, long-term |
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Subordinated debt, net of unamortized issuance costs |
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Other liabilities |
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Total liabilities |
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Commitments and contingencies |
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Shareholders’ Equity |
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Preferred stock, $ |
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Common stock, $ |
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Surplus |
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Retained earnings |
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Accumulated other comprehensive loss |
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Total shareholders’ equity |
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$ |
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Total liabilities and shareholders’ equity |
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$ |
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$ |
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See Notes to Consolidated Financial Statements
* Derived from the consolidated audited financial statements.
TABLE OF CONTENTS
EAGLE FINANCIAL SERVICES, INC.
Consolidated Statements of Operations (Unaudited)
(dollars in thousands, except per share amounts)
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 30, |
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2025 |
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2024 |
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2025 |
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2024 |
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Interest and Dividend Income |
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Interest and fees on loans |
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Interest and dividends on securities available for sale: |
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Taxable interest income |
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Interest income exempt from federal income taxes |
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|
|
|
||||
Dividends |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest on deposits in banks |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest on federal funds sold |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total interest and dividend income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Interest Expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest on deposits |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Interest on Federal Home Loan Bank advances |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest on subordinated debt |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total interest expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Net interest income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Provision for Credit Losses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net interest income after provision for credit losses |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Noninterest Income |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Wealth management fees |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Service charges on deposit accounts |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other service charges and fees |
|
|
|
|
|
|
|
|
|
|
|
|
||||
(Loss) on the sale of bank premises and equipment |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
(Loss) on the sale of securities |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Gain on sale of loans |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Small business investment company income |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Bank owned life insurance income |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other operating income |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total noninterest income (loss) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Noninterest Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Salaries and employee benefits |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Occupancy expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Equipment expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Advertising and marketing expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Stationery and supplies |
|
|
|
|
|
|
|
|
|
|
|
|
||||
ATM network fees |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loss on sale of repossessed assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
FDIC assessment |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Computer software expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Bank franchise tax |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Professional fees |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Data processing fees |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total noninterest expenses |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Income (loss) before income taxes |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Income Tax Expense (Benefit) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Net Income (Loss) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Earnings (Loss) Per Share |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income (loss) per common share, basic |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Net income (loss) per common share, diluted |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
See Notes to Consolidated Financial Statements
2
TABLE OF CONTENTS
EAGLE FINANCIAL SERVICES, INC.
Consolidated Statements of Comprehensive Income
(Unaudited)
(dollars in thousands)
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
June 30, |
|
|
June 30, |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
Net income (loss) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Other comprehensive (loss) income: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Unrealized (loss) gain on available for sale securities, net of reclassification adjustments, net of deferred income tax of $( |
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
||
Changes in benefit obligations and plan assets for post retirement benefit plans, net of reclassification adjustments, net of deferred income tax of $ |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
Total other comprehensive (loss) income |
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
||
Total comprehensive income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
See Notes to Consolidated Financial Statements
3
TABLE OF CONTENTS
EAGLE FINANCIAL SERVICES, INC.
Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)
(dollars in thousands, except per share amounts)
|
|
Common Stock |
|
|
Surplus |
|
|
Retained |
|
|
Accumulated |
|
|
Total |
|
|||||
December 31, 2023 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Cumulative effect adjustment for adopton of ASU 2023-02 |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Net income |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Other comprehensive (loss) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Vesting of restricted stock awards, stock incentive plan ( |
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Stock-based compensation expense |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Repurchase and retirement of common stock ( |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Dividends declared ($ |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
March 31, 2024 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Net income |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Other comprehensive income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Vesting of restricted stock awards, stock incentive plan ( |
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Stock-based compensation expense |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Repurchase and retirement of common stock ( |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Dividends declared ($ |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
June 30, 2024 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
December 31, 2024 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Net loss |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Other comprehensive income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Vesting of restricted stock awards, stock incentive plan ( |
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Stock-based compensation expense |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Issuance of common stock, public offering, net ( |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Repurchase and retirement of common stock ( |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Dividends declared ($ |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
March 31, 2025 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Net income |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Other comprehensive loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Vesting of restricted stock awards, stock incentive plan ( |
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Stock-based compensation expense |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Repurchase and retirement of common stock ( |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Dividends declared ($ |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
June 30, 2025 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
See Notes to Consolidated Financial Statements
4
TABLE OF CONTENTS
EAGLE FINANCIAL SERVICES, INC.
Consolidated Statements of Cash Flows (Unaudited)
(dollars in thousands)
|
|
Six Months Ended |
|
|||||
|
|
June 30, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Cash Flows from Operating Activities |
|
|
|
|
|
|
||
Net (loss) income |
|
$ |
( |
) |
|
$ |
|
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
||
Depreciation |
|
|
|
|
|
|
||
Amortization of other assets |
|
|
|
|
|
|
||
Origination of loans held for sale |
|
|
( |
) |
|
|
( |
) |
Proceeds from sale of loans held for sale |
|
|
|
|
|
|
||
Net (gain) on sales of loans |
|
|
( |
) |
|
|
( |
) |
Provision for credit losses on loans |
|
|
|
|
|
|
||
(Gain) on the sale of portfolio loans |
|
|
( |
) |
|
|
|
|
Loss on the sale and disposal of premises and equipment |
|
|
|
|
|
|
||
Loss on the sale of repossessed assets |
|
|
|
|
|
|
||
Loss on the sale of securities |
|
|
|
|
|
|
||
Amortization of subordinated debt issuance costs |
|
|
|
|
|
|
||
Stock-based compensation expense |
|
|
|
|
|
|
||
(Accretion) amortization of premiums and discounts on debt securities and loans, net |
|
|
( |
) |
|
|
|
|
Bank-owned life insurance income |
|
|
( |
) |
|
|
( |
) |
(Gain) on bank-owned life insurance settlement |
|
|
|
|
|
( |
) |
|
Changes in assets and liabilities: |
|
|
|
|
|
|
||
(Increase) in other assets |
|
|
( |
) |
|
|
( |
) |
(Decrease) increase in other liabilities |
|
|
( |
) |
|
|
|
|
Net cash provided by operating activities |
|
$ |
|
|
$ |
|
||
Cash Flows from Investing Activities |
|
|
|
|
|
|
||
Proceeds from maturities, calls, and principal payments of securities available for sale |
|
$ |
|
|
$ |
|
||
Proceeds from the sale of securities available for sale |
|
|
|
|
|
|
||
Purchases of securities available for sale |
|
|
( |
) |
|
|
|
|
Proceeds from the sale of restricted investments |
|
|
|
|
|
|
||
Purchases of restricted investments |
|
|
( |
) |
|
|
( |
) |
Proceeds of bank-owned life insurance settlement |
|
|
|
|
|
|
||
Purchases of bank premises and equipment |
|
|
( |
) |
|
|
( |
) |
Proceeds from the sale of bank premises and equipment |
|
|
|
|
|
|
||
Proceeds from the sale of repossessed assets |
|
|
|
|
|
|
||
Proceeds from the sale of portfolio loans |
|
|
|
|
|
|
||
Net decrease in loans |
|
|
|
|
|
|
||
Funding of capital commitments related to other investments |
|
|
( |
) |
|
|
( |
) |
Net cash provided by investing activities |
|
$ |
|
|
$ |
|
||
Cash Flows from Financing Activities |
|
|
|
|
|
|
||
Net increase (decrease) in noninterest bearing demand deposits, savings, and interest bearing demand deposits |
|
$ |
|
|
$ |
( |
) |
|
Net (decrease) increase in time deposits |
|
|
( |
) |
|
|
|
|
Net increase in federal funds purchased |
|
|
|
|
|
|
||
Repayments of short-term Federal Home Loan Bank advances |
|
|
( |
) |
|
|
( |
) |
Repayments of long-term Federal Home Loan Bank advances |
|
|
( |
) |
|
|
|
|
Net proceeds from issuance of common stock in public offering |
|
|
|
|
|
|
||
Repurchase and retirement of common stock |
|
|
( |
) |
|
|
( |
) |
Cash dividends paid |
|
|
( |
) |
|
|
( |
) |
Net cash provided by (used in) financing activities |
|
$ |
|
|
$ |
( |
) |
|
Increase (decrease) in cash and cash equivalents |
|
$ |
|
|
$ |
( |
) |
|
Cash and Cash Equivalents |
|
|
|
|
|
|
||
Beginning |
|
|
|
|
|
|
||
Ending |
|
$ |
|
|
$ |
|
||
Supplemental Disclosures of Cash Flow Information |
|
|
|
|
|
|
||
Cash payments for: |
|
|
|
|
|
|
||
Interest |
|
$ |
|
|
$ |
|
||
Income taxes |
|
$ |
|
|
$ |
|
||
Supplemental Schedule of Noncash Investing and Financing Activities: |
|
|
|
|
|
|
||
Unrealized gain (loss) on securities available for sale |
|
$ |
|
|
$ |
( |
) |
|
Minimum postretirement liability adjustment |
|
$ |
|
|
$ |
( |
) |
|
Repossessed assets acquired in settlement of loans |
|
$ |
|
|
$ |
|
||
Lease liabilities arising from right-of-use assets |
|
$ |
|
|
$ |
|
||
See Notes to Consolidated Financial Statements
5
TABLE OF CONTENTS
EAGLE FINANCIAL SERVICES, INC.
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2025
NOTE 1. General
The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP.
In the opinion of management, the accompanying financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position at June 30, 2025 and December 31, 2024, the results of operations and the changes in shareholders' equity for the three and six months ended June 30, 2025 and 2024, and cash flows for the six months ended June 30, 2025 and 2024. The results of operations for the three and six months ended June 30, 2025 are not necessarily indicative of the results to be expected for the full year. These financial statements should be read in conjunction with the Consolidated Financial Statements and related Notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 (the “2024 Form 10-K”).
Eagle Financial Services, Inc. (the "Company") owns
Certain amounts in the consolidated financial statements have been reclassified to conform to current year presentations. None of the reclassifications were of a material nature and they had no effect on prior year net income or shareholders' equity.
Application of the principles of GAAP and practices within the banking industry require management to make estimates, assumptions, and judgments that affect the amounts reported in the financial statements and accompanying notes. These estimates, assumptions, and judgments are based on information available as of the date of the financial statement; accordingly, as this information changes, the financial statements may reflect different estimates, assumptions, and judgments. Certain policies inherently rely more extensively on the use of estimates, assumptions, and judgments and as such may have a greater possibility of producing results that could be materially different than originally reported. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance of credit losses on loans.
The Company's significant accounting policies followed in preparation of the unaudited consolidated financial statements are disclosed in Note 1 of the Company's 2024 Form 10-K. There have been no significant changes to the application of significant accounting policies since December 31, 2024.
NOTE 2. Stock-Based Compensation Plan
On May 16, 2023, the Company’s shareholders approved the 2023 Stock Incentive Plan which allows key employees and directors to increase their personal financial interest in the Company. The 2023 plan permits the issuance of incentive stock options and non-qualified stock options and the award of common stock, restricted stock, and stock units. The plan authorizes the issuance of up to
The Company periodically grants restricted stock to its directors, executive officers and certain non-executive officers. Restricted stock provides grantees with rights to shares of common stock upon completion of a service period or achievement of Company performance measures. During the restricted period, all shares are considered outstanding and dividends are paid to the grantee. Outside directors are periodically granted restricted shares which vest over a period of
6
TABLE OF CONTENTS
granted restricted shares which vest over a
The following table presents restricted stock activity for the six months ended June 30, 2025 and 2024:
|
|
Six Months Ended |
|
|||||||||||||
|
|
June 30, |
|
|||||||||||||
|
|
2025 |
|
|
2024 |
|
||||||||||
|
|
Shares |
|
|
Weighted |
|
|
Shares |
|
|
Weighted |
|
||||
Nonvested, beginning of period |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Vested |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Forfeited |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Nonvested, end of period |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
NOTE 3. Earnings Per Common Share
Basic earnings per share represents income available to common shareholders divided by the weighted average number of common shares outstanding during the period. Nonvested restricted shares are included in the weighted average number of common shares used to compute basic earnings per share because of dividend participation and voting rights. Diluted earnings per share reflects additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income that would result from the assumed issuance. The number of potential common shares is determined using the treasury method.
The following table shows the weighted average number of shares used in computing earnings per share for the three and six months ended June 30, 2025 and 2024. During 2025 and 2024, there were
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
June 30, |
|
|
June 30, |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
Average number of common shares outstanding used to calculate basic and diluted earnings per share |
|
|
|
|
|
|
|
|
|
|
|
|
||||
7
TABLE OF CONTENTS
NOTE 4. Securities
Amortized costs and fair values of securities available for sale at June 30, 2025 and December 31, 2024 were as follows:
|
|
Amortized |
|
|
Gross |
|
|
Gross |
|
|
Fair Value |
|
||||
|
|
June 30, 2025 |
|
|||||||||||||
|
|
(in thousands) |
|
|||||||||||||
Obligations of U.S. government corporations and agencies |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
U.S. treasury securities |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Mortgage-backed securities |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Collateralized mortgage obligations |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Subordinated debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
|
|
December 31, 2024 |
|
|||||||||||||
|
|
(in thousands) |
|
|||||||||||||
Obligations of U.S. government corporations and agencies |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Mortgage-backed securities |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Obligations of states and political subdivisions |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Subordinated debt |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
The Company has elected to exclude accrued interest receivable, totaling $
In March 2025, balance sheet repositioning transactions were executed. The Bank sold available for sale securities with an amortized cost balance of $
The following table summarizes amounts related to the sale of available for sale securities:
|
|
For the Six Months Ended June 30, |
|
|
|
|
2025 |
|
|
|
|
(in thousands) |
|
|
Proceeds from sales |
|
$ |
|
|
|
|
|
|
|
Gross realized gains |
|
$ |
|
|
Gross realized losses |
|
|
( |
) |
Net realized losses on securities |
|
$ |
( |
) |
The amortized cost and estimated fair value of securities at June 30, 2025, by the earlier of contractual maturity or expected maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to prepay obligations with or without call or prepayment penalties.
8
TABLE OF CONTENTS
|
|
Amortized Cost |
|
|
Fair Value |
|
||
|
|
(in thousands) |
|
|||||
Due in one year or less |
|
$ |
|
|
$ |
|
||
Due after one year through five years |
|
|
|
|
|
|
||
Due after five years through ten years |
|
|
|
|
|
|
||
Due after ten years |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
The fair value and gross unrealized losses for securities available for sale, totaled by the length of time that individual securities have been in a continuous gross unrealized loss position, at June 30, 2025 and December 31, 2024 were as follows:
|
|
Less than 12 months |
|
|
12 months or more |
|
|
Total |
|
|||||||||||||||
|
|
Fair Value |
|
|
Gross |
|
|
Fair Value |
|
|
Gross |
|
|
Fair Value |
|
|
Gross |
|
||||||
|
|
June 30, 2025 |
|
|||||||||||||||||||||
|
|
(in thousands) |
|
|||||||||||||||||||||
Obligations of U.S. government corporations and agencies |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
U.S. treasury securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Mortgage-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Collateralized mortgage obligations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Subordinated debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
|
|
Less than 12 months |
|
|
12 months or more |
|
|
Total |
|
|||||||||||||||
|
|
Fair Value |
|
|
Gross |
|
|
Fair Value |
|
|
Gross |
|
|
Fair Value |
|
|
Gross |
|
||||||
|
|
December 31, 2024 |
|
|||||||||||||||||||||
|
|
(in thousands) |
|
|||||||||||||||||||||
Obligations of U.S. government corporations and agencies |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Mortgage-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Obligations of states and political subdivisions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Subordinated debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
The reference point for determining when securities are in an unrealized loss position is month end. As such, it is possible that a security's market value exceeded its amortized cost on other days during the past twelve-month period.
There were
9
TABLE OF CONTENTS
Securities having carrying values of $
The composition of restricted investments at June 30, 2025 and December 31, 2024 was as follows:
|
|
June 30, 2025 |
|
|
December 31, 2024 |
|
||
|
|
(in thousands) |
|
|||||
Federal Reserve Bank Stock |
|
$ |
|
|
$ |
|
||
Federal Home Loan Bank Stock |
|
|
|
|
|
|
||
Community Bankers’ Bank Stock |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
NOTE 5. Loans and Allowance for Credit Losses on Loans
The composition of loans at June 30, 2025 and December 31, 2024 was as follows:
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2025 |
|
|
2024 |
|
||
|
|
(in thousands) |
|
|||||
Mortgage real estate loans: |
|
|
|
|
|
|
||
Construction & Secured by Farmland |
|
$ |
|
|
$ |
|
||
HELOCs |
|
|
|
|
|
|
||
Residential First Lien - Investor |
|
|
|
|
|
|
||
Residential First Lien - Owner Occupied |
|
|
|
|
|
|
||
Residential Junior Liens |
|
|
|
|
|
|
||
Commercial - Owner Occupied |
|
|
|
|
|
|
||
Commercial - Non-Owner Occupied & Multifamily |
|
|
|
|
|
|
||
Commercial and industrial loans: |
|
|
|
|
|
|
||
SBA PPP loans |
|
|
|
|
|
|
||
Other commercial and industrial loans |
|
|
|
|
|
|
||
Marine loans |
|
|
|
|
|
|
||
Consumer loans |
|
|
|
|
|
|
||
Overdrafts |
|
|
|
|
|
|
||
Other loans |
|
|
|
|
|
|
||
Total loans |
|
$ |
|
|
$ |
|
||
Net deferred loan costs and premiums |
|
|
|
|
|
|
||
Allowance for credit losses |
|
|
( |
) |
|
|
( |
) |
|
|
$ |
|
|
$ |
|
||
At June 30, 2025, the Company was servicing $
10
TABLE OF CONTENTS
Changes in the allowance for credit losses on loans for the three and six months ended June 30, 2025 and 2024 and year-ended December 31, 2024 were as follows:
|
|
Three Months Ended |
|
|
Year Ended |
|
|
Six Months Ended |
|
|||||||||||
|
|
June 30, |
|
|
December 31, |
|
|
June 30, |
|
|||||||||||
|
|
2025 |
|
|
2024 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
|||||
|
|
(in thousands) |
|
|||||||||||||||||
Balance, beginning |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Provision for credit losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Recoveries added to the allowance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Credit losses charged to the allowance |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Balance, ending |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Past due loans by class at June 30, 2025 and December 31, 2024 were as follows:
|
|
June 30, 2025 |
|
|||||||||||||||||||||||||
|
|
(in thousands) |
|
|||||||||||||||||||||||||
|
|
30 - 59 |
|
|
60 - 89 |
|
|
90 or More |
|
|
Total Past |
|
|
Current |
|
|
Total Loans |
|
|
90 or More |
|
|||||||
Mortgage real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Construction & Secured by Farmland |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
||||
HELOCs |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
||||
Residential First Lien - Investor |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
||||
Residential First Lien - Owner Occupied |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Residential Junior Liens |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|||||
Commercial - Owner Occupied |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|||||
Commercial - Non-Owner Occupied & Multifamily |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|||||
Commercial and industrial loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
SBA PPP loans |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
||
Other commercial and industrial loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Marine loans |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
||||
Consumer loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Overdrafts |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
||
Other loans |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
11
TABLE OF CONTENTS
|
|
December 31, 2024 |
|
|||||||||||||||||||||||||
|
|
(in thousands) |
|
|||||||||||||||||||||||||
|
|
30 - 59 |
|
|
60 - 89 |
|
|
90 or More |
|
|
Total Past |
|
|
Current |
|
|
Total Loans |
|
|
90 or More |
|
|||||||
Mortgage real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Construction & Secured by Farmland |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
||
HELOCs |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
||||
Residential First Lien - Investor |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
||||
Residential First Lien - Owner Occupied |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|||||
Residential Junior Liens |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|||||
Commercial - Owner Occupied |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
||||
Commercial - Non-Owner Occupied & Multifamily |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
||
Commercial and industrial loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
SBA PPP loans |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
||
Other commercial and industrial loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
||||||
Marine loans |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
||
Consumer loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
||||||
Overdrafts |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
||
Other loans |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
||||||
Nonaccrual loans by class at June 30, 2025 and December 31, 2024 were as follows:
|
|
June 30, 2025 |
|
|
December 31, 2024 |
|
||||||||||||||||||
|
|
(in thousands) |
|
|
(in thousands) |
|
||||||||||||||||||
|
|
Nonaccruals with No Allowance for Credit Losses |
|
|
Nonaccrual with an Allowance for Credit Losses |
|
|
Nonaccrual |
|
|
Nonaccruals with No Allowance for Credit Losses |
|
|
Nonaccrual with an Allowance for Credit Losses |
|
|
Nonaccrual |
|
||||||
Mortgage real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Construction & Secured by Farmland |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
HELOCs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Residential First Lien - Investor |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Residential First Lien - Owner Occupied |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Residential Junior Liens |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Commercial - Owner Occupied |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Commercial - Non-Owner Occupied & Multifamily |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Commercial and industrial loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
SBA PPP loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other commercial and industrial loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Marine loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Consumer loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Overdrafts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
12
TABLE OF CONTENTS
The allowance for credit losses on loans by segment at June 30, 2025 and December 31, 2024 was as follows:
|
|
As of and For the Six Months Ended |
|
|||||||||||||||||||||||||||||||||
|
|
June 30, 2025 |
|
|||||||||||||||||||||||||||||||||
|
|
(in thousands) |
|
|||||||||||||||||||||||||||||||||
|
|
Construction |
|
|
Residential |
|
|
Commercial |
|
|
Commercial |
|
|
Marine |
|
|
Consumer |
|
|
All Other |
|
|
Unallocated |
|
|
Total |
|
|||||||||
Allowance for credit losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Beginning Balance |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||||||||
Charge-Offs |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
Recoveries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||||||
Provision |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||||
Ending balance |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||||||||
Ending balance: Individually evaluated for impairment |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|||
Ending balance: Collectively evaluated for impairment |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||||||||
Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Ending balance |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||||||||
Ending balance: Individually evaluated for impairment |
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||||||
Ending balance: Collectively evaluated for impairment |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||||||||
13
TABLE OF CONTENTS
|
|
As of and For the Year Ended |
|
|||||||||||||||||||||||||||||||||
|
|
December 31, 2024 |
|
|||||||||||||||||||||||||||||||||
|
|
(in thousands) |
|
|||||||||||||||||||||||||||||||||
|
|
Construction |
|
|
Residential |
|
|
Commercial |
|
|
Commercial |
|
|
Marine |
|
|
Consumer |
|
|
All Other |
|
|
Unallocated |
|
|
Total |
|
|||||||||
Allowance for credit losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Beginning Balance |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||||||||
Charge-Offs |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Recoveries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||||||
Provision |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
|
||||||
Ending balance |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||||||||
Ending balance: Individually evaluated for impairment |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||||||||
Ending balance: Collectively evaluated for impairment |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||||||||
Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Ending balance |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||||||||
Ending balance: Individually evaluated for impairment |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||||||||
Ending balance: Collectively evaluated for impairment |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||||||||
14
TABLE OF CONTENTS
The following table presents the amortized cost basis of collateral-dependent loans by loan portfolio segment:
|
|
June 30, 2025 |
|
|
December 31, 2024 |
|
||||||||||||||||||
|
|
(in thousands) |
|
|
(in thousands) |
|
||||||||||||||||||
(in thousands) |
|
Real Estate Collateral |
|
|
Other Collateral |
|
|
Total |
|
|
Real Estate Collateral |
|
|
Other Collateral |
|
|
Total |
|
||||||
Mortgage real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Construction & Secured by Farmland |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
HELOCs |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
||
Residential First Lien - Investor |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
||
Residential First Lien - Owner Occupied |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||
Residential Junior Liens |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Commercial - Owner Occupied |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||
Commercial - Non-Owner Occupied & Multifamily |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
||
Commercial and industrial loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
SBA PPP loans |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Other commercial and industrial loans |
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
||||
Marine loans |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Consumer loans |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||
Overdrafts |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Other loans |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
The Company did not identify any significant changes in the extent to which collateral secures its collateral dependent loans, whether in the form of general deterioration or from other factors during the period ended June 30, 2025.
The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually to classify the loans as to credit risk. This analysis is performed on a quarterly basis. The following table presents risk ratings by loan portfolio segment and origination year. Description of these ratings are as follows:
Pass |
|
Pass loans exhibit acceptable history of profits, cash flow ability and liquidity. Sufficient cash flow exists to service the loan. All obligations have been paid by the borrower in an as agreed manner. |
Special Mention |
|
Special mention loans exhibit negative trends and potential weakness that, if left uncorrected, may negatively affect the borrower’s ability to repay its obligations. Loan relationships with stale financial statements at their annual review will also cause a downgrade to special mention until current financials are received and upgrade is approved. The risk of default is not imminent and the borrower still demonstrates sufficient financial strength to service debt. |
Classified |
|
Classified loans include loans rated Substandard, Doubtful and Loss. |
|
|
• Substandard loans exhibit well defined weaknesses resulting in a higher probability of default. The borrowers exhibit adverse financial trends and a diminishing ability or willingness to service debt. |
|
|
• Doubtful loans exhibit all of the characteristics inherent in substandard loans; however given the severity of weaknesses, the collection of 100% of the principal is unlikely under current conditions. |
|
|
• Loss loans are considered uncollectible over a reasonable period of time and of such little value that its continuance as a bankable asset is not warranted.
|
Credit quality information by class at June 30, 2025 and gross charge-offs by year of origination for the six months ended June 30, 2025 was as follows:
15
TABLE OF CONTENTS
June 30, 2025 |
|
|
|
|
|||||||||||||||||||||||||||||||||
|
|
Term Loans 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 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
||||||||
Special Mention |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
||
Classified |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
||||||||
Current period gross charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
HELOCs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Pass |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
||
Special Mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
||
Classified |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
||
Total |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
||
Current period gross charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
||
Residential First Lien - Investor |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Pass |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
||||||||
Special Mention |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
||||
Classified |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
||||||||
Current period gross charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
Residential First Lien - Owner Occupied |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Pass |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
||||||||
Special Mention |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|||
Classified |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
||||||||
Current period gross charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
Residential Junior Liens |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Pass |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
||||||||
Special Mention |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|||
Classified |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
||||||||
Current period gross charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
Commercial - Owner Occupied |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Pass |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|||||||||
Special Mention |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
||||||
Classified |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
||
16
TABLE OF CONTENTS
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|||||||||
Current period gross charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
Commercial - Non-Owner Occupied & Multifamily |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Pass |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|||||||||
Special Mention |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|||||
Classified |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|||||||||
Current period gross charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
|||
Commercial and industrial loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
SBA PPP loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Pass |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
||
Special Mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Classified |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Total |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
||
Current period gross charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
Other commercial and industrial loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Pass |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|||||||||
Special Mention |
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
||||
Classified |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|||||||||
Current period gross charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
|||
Marine loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Pass |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
|||||
Special Mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Classified |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Total |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
|||||
Current period gross charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
||
Consumer loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Pass |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
||||||||
Special Mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Classified |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
||||||||
Current period gross charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
|||||
Overdrafts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Pass |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
Special Mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Classified |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
||
Current period gross charge-offs |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
||
Other loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Pass |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
||||||
Special Mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
17
TABLE OF CONTENTS
Classified |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Total |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
||||||
Current period gross charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
Total by Risk Category |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Pass |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|||||||||
Special Mention |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Classified |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|||||||||
Total current period gross charge-offs |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
|||||||
Credit quality information by class at December 31, 2024 and gross charge-offs by year of origination for the year ended December 31, 2024 was as follows:
18
TABLE OF CONTENTS
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 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||||||||
Special Mention |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Classified |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||||||||
Current period gross charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
HELOCs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Pass |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
Special Mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Classified |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
Current period gross charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
Residential First Lien - Investor |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Pass |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
||||||||
Special Mention |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|||||
Classified |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
||||||||
Current period gross charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Residential First Lien - Owner Occupied |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Pass |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
||||||||
Special Mention |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||||
Classified |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
||||||||
Current period gross charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Residential Junior Liens |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Pass |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
||||||||
Special Mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Classified |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
19
TABLE OF CONTENTS
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
||||||||
Current period gross charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Commercial - Owner Occupied |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Pass |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||||
Special Mention |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|||||
Classified |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||||
Current period gross charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Commercial - Non-Owner Occupied & Multifamily |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Pass |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||||
Special Mention |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|||||
Classified |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||||
Current period gross charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Commercial and industrial loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
SBA PPP loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Pass |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Special Mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Classified |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Current period gross charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Other commercial and industrial loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Pass |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||||
Special Mention |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
||||||
Classified |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||||
Current period gross charge-offs |
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||||
Marine loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Pass |
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|||||
Special Mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Classified |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total |
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|||||
Current period gross charge-offs |
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||||
20
TABLE OF CONTENTS
Consumer loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Pass |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||||
Special Mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Classified |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||||
Current period gross charge-offs |
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||||||
Overdrafts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Pass |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Special Mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Classified |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Total |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Current period gross charge-offs |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Other loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Pass |
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||||
Special Mention |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Classified |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total |
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||||
Current period gross charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Total by Risk Category |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Pass |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||||
Special Mention |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Classified |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
||||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||||
Total current period gross charge-offs |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||||||||
21
TABLE OF CONTENTS
Unfunded Commitments: The Company maintains a separate reserve for credit losses on unfunded commitments, which is included in Other Liabilities on the Consolidated Balance Sheet. The reserve for credit losses on off-balance-sheet credit exposures is adjusted as a provision for credit losses in the Consolidated Statement of Operations. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded, utilizing the same models and approaches for the Company's other loan portfolio segments, as these unfunded commitments share similar risk characteristics as its loan portfolio segments. The Company has identified the unfunded portion of certain lines of credit as unconditionally cancellable credit exposures, meaning the Company can cancel the unfunded commitment at any time. No credit loss estimate is reported for off-balance-sheet credit exposures that are unconditionally cancellable by the Company or for undrawn amounts under such arrangements that maybe drawn prior to the cancellation of the arrangement.
During the three and six months ended June 30, 2025, a reduction to the unfunded commitment reserve of $
Restructurings for Borrowers Experiencing Financial Difficulty: There were no loans to borrowers experiencing financial difficulty that had a payment default during the three and six months ended June 30, 2025 and 2024 and were modified in the twelve months prior to that default. Default is determined at 30 days or more past due, upon charge-off, or upon foreclosure. Modified loans in default are individually evaluated for the allowance of credit losses or if the modified loan is deemed uncollectible, the loan, or a portion of the loan, is written off and the allowance for credit losses is adjusted accordingly.
NOTE 6. Deposits
The composition of deposits at June 30, 2025 and December 31, 2024 was as follows:
|
|
June 30, 2025 |
|
|
December 31, 2024 |
|
||
|
|
(in thousands) |
|
|||||
Noninterest bearing demand deposits |
|
$ |
|
|
$ |
|
||
Savings and interest bearing demand deposits: |
|
|
|
|
|
|
||
NOW accounts |
|
$ |
|
|
$ |
|
||
Money market accounts |
|
|
|
|
|
|
||
Regular savings accounts |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
Time deposits: |
|
|
|
|
|
|
||
Balances of less than $250,000 |
|
$ |
|
|
$ |
|
||
Balances of $250,000 and more |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
|
|
$ |
|
|
$ |
|
||
NOTE 7. Leases
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. Cash flows are discounted at the Company’s incremental borrowing rate in effect at the commencement date of the lease. Right-of-use assets represent the Company’s right to use the underlying asset for the lease term and are calculated as the sum of the lease liability and if applicable, prepaid rent, initial direct costs and any incentives received from the lessor. Right-of-use assets and lease liabilities are included in Other Assets and Other Liabilities, respectively, in the Consolidated Balance Sheets. During the first quarter of 2025, the Company entered into a long-term lease
22
TABLE OF CONTENTS
with the intention of establishing a full-service branch in McLean, Viriginia and moving the Tysons loan production office into the new location. The new lease will replace an expiring lease and resulted in the initial recognition of a right-of-use asset and lease liability of $
The Company’s six 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. The lease agreements do not provide for a residual value guarantee and have no restrictions or covenants that would impact dividends or require incurring additional financial obligations.
The following tables present information about the Company’s leases:
(dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
June 30, 2025 |
|
|
December 31, 2024 |
|
|
|
|
|
|
|
||||
Lease liabilities |
|
$ |
|
|
$ |
|
|
|
|
|
|
|
||||
Right-of-use assets |
|
$ |
|
|
$ |
|
|
|
|
|
|
|
||||
Weighted average remaining lease term |
|
|
|
|
|
|
|
|
|
|
||||||
Weighted average discount rate |
|
|
% |
|
|
% |
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
Lease Cost |
|
June 30, 2025 |
|
|
June 30, 2024 |
|
|
June 30, 2025 |
|
|
June 30, 2024 |
|
||||
Operating lease cost |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Short-term lease cost |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total lease cost |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash paid for amounts included in the measurement of lease liabilities |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
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 |
|
June 30, 2025 |
|
|
2025, remainder |
|
$ |
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 |
|
|
|
|
Thereafter |
|
|
|
|
Total undiscounted cash flows |
|
$ |
|
|
Discount |
|
|
( |
) |
Lease liabilities |
|
$ |
|
|
NOTE 8. Fair Value Measurements
GAAP requires the Company to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. The fair value of assets and liabilities is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.
“Fair Value Measurements” defines fair value, establishes a framework for measuring fair value, establishes a three-level valuation hierarchy for disclosure of fair value measurement and enhances disclosure requirements for fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows:
23
TABLE OF CONTENTS
• |
|
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. |
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. Level 1 securities would include highly liquid government bonds, mortgage products and exchange traded equities. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, or discounted cash flow. Level 2 securities would include U.S. agency securities, mortgage-backed agency securities, obligations of states and political subdivisions and certain corporate, asset backed and other securities. In certain cases where there is limited activity or less transparency around inputs to the valuation, securities are classified within Level 3 of the valuation hierarchy.
Derivative instruments are recorded at fair value on a recurring basis. The Company utilizes derivative instruments as part of the management of interest rate risk to modify the re-pricing characteristics of certain portions of the Company’s interest-bearing assets and liabilities. The Company has contracted with a third-party vendor to provide valuations for derivatives using standard valuation techniques and therefore classifies such valuations as Level 2. The Company has considered counterparty credit risk in the valuation of its derivative assets and has considered its own credit risk in the valuation of its derivative liabilities.
24
TABLE OF CONTENTS
The following table presents balances of financial assets and liabilities measured at fair value on a recurring basis at June 30, 2025 and December 31, 2024:
|
|
|
|
|
Fair Value Measurements at |
|
||||||||||
|
|
|
|
|
June 30, 2025 |
|
||||||||||
|
|
|
|
|
Using |
|
||||||||||
|
|
Balance as of |
|
|
Quoted Prices |
|
|
Significant |
|
|
Significant |
|
||||
|
|
June 30, 2025 |
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Securities available for sale |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Obligations of U.S. government corporations and agencies |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
||
U.S. Treasury securities |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Mortgage-backed securities |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|||
Collateralized mortgage obligations |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Subordinated debt |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Derivative: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest rate swaps on loans |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Total assets at fair value |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest rate swaps on loans |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
||
Fair value swap |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Total liabilities at fair value |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
Fair Value Measurements at |
|
||||||||||
|
|
|
|
|
December 31, 2024 |
|
||||||||||
|
|
|
|
|
Using |
|
||||||||||
|
|
Balance as of |
|
|
Quoted Prices |
|
|
Significant |
|
|
Significant |
|
||||
|
|
December 31, 2024 |
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Securities available for sale |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Obligations of U.S. government corporations and agencies |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
||
Mortgage-backed securities |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Obligations of states and political subdivisions |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Subordinated debt |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Derivative: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest rate swaps on loans |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fair value swap |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Total assets at fair value |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest rate swaps on loans |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
||
Total liabilities at fair value |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
||
25
TABLE OF CONTENTS
Certain financial assets are measured at fair value on a nonrecurring basis in accordance with GAAP. Adjustments to the fair value of these assets usually result from the application of lower of cost or market accounting or write downs of individual assets.
The following describes the valuation techniques used by the Company to measure certain financial and nonfinancial assets recorded at fair value on a nonrecurring basis in the financial statements:
Loans Held for Sale: Loans held for sale are carried at the lower of cost or market value. These loans currently consist of one-to-four family residential loans originated for sale in the secondary market. Fair value is based on the price secondary markets are currently offering for similar loans using observable market data which is not materially different than cost due to the short duration between origination and sale (Level 2). The Company records any fair value adjustments on a nonrecurring basis.
Individually Evaluated Collateral-Dependent Loans: The estimated fair value of individually evaluated collateral-dependent loans is based on the value of the underlying collateral or the value of the underlying collateral, less estimated cost to sell, as appropriate. Collateral is generally real estate; however, collateral may include vehicles, marine vessels, equipment, inventory, accounts receivable, and/or other business assets. The value of real estate collateral is determined using a market valuation approach based on an appraisal conducted by an independent, licensed appraiser. The value of other assets may also be based on an appraisal, market quotations, aging schedules or other sources. Collateral-dependent individually evaluated loans are classified within Level 3 of the fair value hierarchy. Any fair value adjustments are recorded in the period incurred as a provision for credit losses on the Consolidated Statements of Operations. At June 30, 2025 collateral-dependent loans totaling $
Other Real Estate Owned: Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at the fair value of the property, less estimated selling costs, establishing a new costs basis. Any write-downs based on the asset’s fair value at the date of acquisition are charged to the allowance for credit losses. Costs of significant property improvements are capitalized, whereas costs relating to holding property are expensed. The portion of interest costs relating to development of real estate is capitalized. Valuations are periodically obtained by management, and any subsequent write-downs are recorded as a charge to operations, if necessary, to reduce the carrying value of a property to fair value less cost to sell. 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 follows the provisions of GAAP. The Company held
Repossessed Assets: Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at the fair value of the asset, less estimated selling costs, establishing a new costs basis. Any write-downs based on the asset’s fair value at the date of acquisition are charged to the allowance for credit losses. Costs of significant improvements are capitalized, whereas costs relating to holding assets are expensed. Valuations are periodically obtained by management, and any subsequent write-downs are recorded as a charge to operations, if necessary, to reduce the carrying value of an asset to fair value less cost to sell. The fair value measurement of repossessed assets is assessed in the same manner as collateral dependent loans described above. We believe that the fair value follows the provisions of GAAP. The Company held $
26
TABLE OF CONTENTS
The following table summarizes the Company's financial and nonfinancial assets that were measured at fair value on a nonrecurring basis at June 30, 2025 and December 31, 2024.
|
|
|
|
|
Carrying value at |
|
||||||||||
|
|
|
|
|
June 30, 2025 |
|
||||||||||
|
|
Balance as of |
|
|
Identical |
|
|
Observable |
|
|
Unobservable |
|
||||
|
|
June 30, 2025 |
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Financial Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Collateral-dependent loans |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Nonfinancial Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Repossessed assets |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
Carrying value at |
|
||||||||||
|
|
|
|
|
December 31, 2024 |
|
||||||||||
|
|
Balance as of |
|
|
Quoted Prices |
|
|
Significant |
|
|
Significant |
|
||||
|
|
December 31, 2024 |
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Financial Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Collateral-dependent loans |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Nonfinancial Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Repossessed assets |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
The following table displays quantitative information about Level 3 Fair Value Measurements for certain financial and nonfinancial assets measured at fair value on a nonrecurring basis for June 30, 2025 and December 31, 2024.
|
|
Quantitative information about Level 3 Fair Value Measurements |
||||||
|
|
June 30, 2025 |
||||||
|
|
Valuation Technique(s) |
|
Unobservable Input |
|
Range |
|
Weighted Average (1) |
Assets: |
|
|
|
|
|
|
|
|
Collateral dependent individually evaluated loans |
|
Discounted value |
|
Selling cost and appraisal discount |
|
|
||
Repossessed assets |
|
Discounted appraised value |
|
Selling cost |
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
|
||
Repossessed assets |
|
Discounted appraised value |
|
Selling cost |
|
|
||
(1) Weighted based on the relative fair value of the specific items measured at fair value.
27
TABLE OF CONTENTS
The carrying value and fair value of the Company’s financial instruments at June 30, 2025 and December 31, 2024 were as follows:
|
|
Fair Value Measurements at |
|
|||||||||||||||||
|
|
June 30, 2025 |
|
|||||||||||||||||
|
|
Using |
|
|||||||||||||||||
|
|
Carrying |
|
|
Quoted Prices |
|
|
Significant |
|
|
Significant |
|
|
Fair Value |
|
|||||
|
|
June 30, 2025 |
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
|
June 30, 2025 |
|
|||||
|
|
(in thousands) |
|
|||||||||||||||||
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash and short-term investments |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|||
Securities |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||
Restricted investments |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Loans held for sale |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||
Loans, net |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|||
Bank owned life insurance |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Accrued interest receivable |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Derivative assets |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Deposits |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||
Federal funds purchased |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|||
Federal Home Loan Bank advances, long-term |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Subordinated debt, net of unamortized issuance costs |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Accrued interest payable |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Derivative liabilities |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
28
TABLE OF CONTENTS
|
|
Fair Value Measurements at |
|
|||||||||||||||||
|
|
December 31, 2024 |
|
|||||||||||||||||
|
|
Using |
|
|||||||||||||||||
|
|
Carrying Value |
|
|
Quoted Prices |
|
|
Significant |
|
|
Significant |
|
|
Fair Value |
|
|||||
|
|
December 31, 2024 |
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
|
December 31, 2024 |
|
|||||
|
|
(in thousands) |
|
|||||||||||||||||
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash and short-term investments |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|||
Securities |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Restricted Investments |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Loans held for sale |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Loans, net |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|||
Bank owned life insurance |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Accrued interest receivable |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Derivative assets |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Deposits |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||
Federal Home Loan Bank advances, short-term |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Federal Home Loan Bank advances, long-term |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Subordinated debt, net of unamortized issuance costs |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Accrued interest payable |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Derivative liabilities |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
NOTE 9. Change in Accumulated Other Comprehensive Loss
Accumulated other comprehensive loss includes unrealized gains and losses on available for sale securities and changes in benefit obligations and plan assets for the post retirement benefit plan. Changes to accumulated other comprehensive loss are presented net of their tax effect as a component of equity. Reclassifications out of accumulated other comprehensive loss are recorded in the Consolidated Statements of Operations either as a gain or loss.
29
TABLE OF CONTENTS
Changes to accumulated other comprehensive loss by component are shown in the following table for the periods indicated:
|
|
Three Months Ended |
|
|||||||||||||||||||||
|
|
June 30, |
|
|||||||||||||||||||||
|
|
2025 |
|
|
2024 |
|
||||||||||||||||||
|
|
Unrealized |
|
|
Change in |
|
|
Total |
|
|
Unrealized |
|
|
Change in |
|
|
Total |
|
||||||
|
|
(dollars in thousands) |
|
|
(dollars in thousands) |
|
||||||||||||||||||
April 1 |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
Other comprehensive (loss) income before reclassifications |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
||||
Tax effect of current period changes |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||||
Current period changes net of taxes |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
||||
June 30 |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
|
|
Six Months Ended |
|
|||||||||||||||||||||
|
|
June 30, |
|
|||||||||||||||||||||
|
|
2025 |
|
|
2024 |
|
||||||||||||||||||
|
|
Unrealized |
|
|
Change in |
|
|
Total |
|
|
Unrealized |
|
|
Change in |
|
|
Total |
|
||||||
|
|
(dollars in thousands) |
|
|
(dollars in thousands) |
|
||||||||||||||||||
January 1 |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
Other comprehensive income (loss) before reclassifications |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|||
Reclassification of realized losses into earnings |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
||||
Tax effect of current period changes |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
||||
Current period changes net of taxes |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|||
June 30 |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
For the six months ended June 30, 2025, the reclassification out of accumulated other comprehensive loss represents the realized loss on the sale of available for sale securities, which appears as loss on the sale of securities in the Consolidated Statements of Operations. The tax benefit related to this reclassification was $
30
TABLE OF CONTENTS
NOTE 10. Other Real Estate Owned & Repossessed Assets
The following table is a summary of other real estate owned (“OREO”) and repossessed asset activity for the six months ended June 30, 2025 and 2024 and the year ended December 31, 2024:
|
|
Six Months Ended |
|
|
Year Ended |
|
|
Six Months Ended |
|
|||
|
|
June 30, |
|
|
December 31, |
|
|
June 30, |
|
|||
|
|
2025 |
|
|
2024 |
|
|
2024 |
|
|||
|
|
(in thousands) |
|
|||||||||
Balance, beginning |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Transfer from loans |
|
|
|
|
|
|
|
|
|
|||
Sales proceeds |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Loss on sales |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Valuation adjustments |
|
|
|
|
|
|
|
|
|
|||
Balance, ending |
|
$ |
|
|
$ |
|
|
$ |
|
|||
The balance at June 30, 2025 and December 31, 2024 represents repossessed marine vessels and at June 30, 2024, the balance represents repossessed assets including a marine vessel and commercial vehicles.
There was one loan collateralized by residential real estate with a balance of $
NOTE 11. Qualified Affordable Housing Project Investments
The Company invests in qualified affordable housing projects. The general purpose of these investments is to encourage and assist participants in investing in low-income residential rental properties located in the Commonwealth of Virginia, develop and implement strategies to maintain projects as low-income housing, provide tax credits and other tax benefits to investors, and to preserve and protect project assets.
At June 30, 2025 and December 31, 2024, the balance of the investment for qualified affordable housing projects was $
During the three months ended June 30, 2025 and June 30, 2024, the Company recognized amortization expense of $
Total estimated credits to be received during 2025 are $
NOTE 12. Recent Accounting Pronouncements and Other Authoritative Guidance
Pending Adoption
In December 2023, the Financial Accounting Standards Board ("FASB") issued ASU 2023-09, "Income Taxes (Topic 740), Improvements to Income Tax Disclosures." The amendments in this ASU require an entity to disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold, which is greater than five percent of the amount computed by multiplying pretax income by the entity's applicable statutory rate, on an annual
31
TABLE OF CONTENTS
basis. Additionally, the amendments in this ASU require an entity to disclose the amount of income taxes paid (net of refunds received) disaggregated by federal, state, and foreign taxes and the amount of income taxes paid (net of refunds received) disaggregated by individual jurisdictions that are equal to or greater than five percent of total income taxes paid (net of refunds received). 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 was effective for the Company on January 1, 2025 and will be presented in its annual financial statements on Form 10-K for the year ended December 31, 2025. The Company does not expect there to be a material impact on its consolidated financial statements.
Other accounting standards that have been issued by the FASB or other standards-setting bodies are not currently expected to have a material effect on the Company's financial position, results of operations or cash flows.
NOTE 13. Revenue Recognition
Substantially all of the Company's revenue from contracts with customers that is within the scope of ASC 606, "Revenue from Contracts with Customers" is reported within noninterest income. A limited amount of other in-scope items such as gains and losses on other real estate owned are recorded in noninterest expense. The recognition of interest income and certain sources of noninterest income (e.g. gains on securities transactions, bank owned life insurance income, etc.) are governed by other areas of U.S. GAAP. Significant revenue streams that are within the scope of ASC 606 and included in noninterest income are discussed in the following paragraphs.
Income from Fiduciary Activities
Trust asset management fee income is primarily comprised of fees earned from the management and administration of trusts and other customer assets. The Company’s performance obligation is generally satisfied over time and the resulting fees are recognized monthly, based upon the month-end market value of the assets under management and the applicable fee rate. Payment is generally received a few days after month end through a direct charge to customers’ accounts. The Company does not earn performance-based incentives. 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.
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. 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.
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. 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.
The Company earns interchange fees from credit cardholder transactions conducted through the Visa payment network. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized no less than monthly.
32
TABLE OF CONTENTS
Noninterest income (loss) disaggregated by major source, for the three and six months ended June 30, 2025 and 2024 consisted of the following:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Noninterest income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Wealth management fees (1): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Trust asset management fees |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Brokerage commissions |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Service charges on deposit accounts (1): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Overdrawn account fees |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Monthly and other service charges |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other service charges and fees: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interchange fees (1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
ATM fees (1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other charges and fees (2) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
(Loss) on the sale and disposal of bank premises and equipment (1) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
(Loss) on sale of securities |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Gain on sale of loans |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Small business investment company income |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Bank owned life insurance income |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other operating income (3) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total noninterest income (loss) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
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. The Company does not typically enter into long-term revenue contracts with customers, and therefore, does not experience significant contract balances. As of June 30, 2025 and December 31, 2024, the Company did not have any significant contract balances.
NOTE 14. Borrowings
On March 31, 2022, the Company entered into Subordinated Note Purchase Agreements with certain purchasers pursuant to which the Company issued and sold $
The Notes were structured to qualify as Tier 2 capital for regulatory capital purposes at the holding company and bear an initial interest rate of
33
TABLE OF CONTENTS
redeemable by the Company at its option, in whole or in part, on or after
The Company had $
NOTE 15. Derivatives
The Company uses derivative financial instruments primarily to manage risks to the Company associated with changing interest rates, and to assist customers with their risk management objectives. Derivative contracts that are not designated in a qualifying hedging relationships include customer accommodation loan swaps.
On August 15, 2024, the Company executed a 2-year,
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 as of June 30, 2025 and December 31, 2024.
|
|
June 30, 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) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|||
(1)
The following table summarizes the effect of the fair value hedging relationship recognized in the Consolidated Statements of Operations for the three and six months ended June 30, 2025.
|
|
Three Months Ended |
Six Months Ended |
|
||||
|
|
June 30, |
June 30, |
|
||||
|
|
2025 |
|
|
2025 |
|
||
|
|
(in thousands) |
|
|||||
Hedged asset |
|
$ |
|
|
$ |
|
||
Fair value derivative designated as hedging instrument |
|
|
|
|
|
|
||
Total gain recognized in the consolidated statement of operations within interest and fees on loans |
|
$ |
|
|
$ |
|
||
34
TABLE OF CONTENTS
The Company enters into interest rate swaps with certain qualifying commercial loan customers to meet their interest rate risk management needs. The Bank simultaneously enters into interest rate swaps with dealer counterparties, with identical notional amounts and offsetting terms. The net result of these interest rate swaps is that the customer pays a fixed rate of interest and the Company receives a floating rate. These back-to-back loan swaps are derivative financial instruments and are reported at fair value in “other assets” and “other liabilities” in the Consolidated Balance Sheets. Changes in the fair value of loan swaps are recorded in other noninterest income and sum to zero because of the offsetting terms of the swaps with borrowers and the swaps with dealer counterparties.
The following tables summarize key elements of the Company's derivative instruments at June 30, 2025 and December 31, 2024.
|
|
June 30, 2025 |
|
|||||||||
|
|
Notional Amount |
|
|
Assets |
|
|
Liabilities |
|
|||
|
|
(in thousands) |
|
|||||||||
Derivatives designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
|||
Fair value swap |
|
$ |
|
|
$ |
|
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Derivatives not designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
|||
Customer-related interest rate swap contracts: |
|
|
|
|
|
|
|
|
|
|||
Matched interest rate swaps with borrower |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Matched interest rate swaps with counterparty |
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||
|
|
December 31, 2024 |
|
|||||||||
|
|
Notional Amount |
|
|
Assets |
|
|
Liabilities |
|
|||
|
|
(in thousands) |
|
|||||||||
Derivatives designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
|||
Fair value swap |
|
$ |
|
|
$ |
|
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Derivatives not designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
|||
Customer-related interest rate swap contracts: |
|
|
|
|
|
|
|
|
|
|||
Matched interest rate swaps with borrower |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Matched interest rate swaps with counterparty |
|
|
|
|
|
|
|
|
|
|||
NOTE 16. Business Segments
The Company has three reportable operating segments: community banking, marine lending and wealth management.
The community banking segment offers a wide range of retail and community banking services in the form of loan and deposit products. 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. During the first quarter of 2025 the Company sold available for sale securities with an amortized cost of $
Revenue from marine lending operations consist primarily of net interest income related to commercial and consumer marine vessel loans originated through August 2023, at which time the Company ceased accepting new marine lending business. The balance of the marine loan portfolio, which constitutes a significant portion of the Company's assets, revenues, and earnings, totaled $
35
TABLE OF CONTENTS
The wealth management segment offers both a trust department and investment services. Trust department services include a full range of personal and retirement plan services, and investment services products include, among other products, annuities, IRA's, life insurance, fixed income investing, and full service or discount brokerage services. Non-deposit investment products are offered through a third-party service provider.
Financial information of the parent company is included in the "All Other" category. 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"). We evaluate performance and allocate resources based on the operating income of each operating segment. The CODM uses segment operating income in the annual budget process. The operating income of each operating segment includes the revenues of the segment less expenses that are directly related to those revenues. Operating overhead, shared costs and share-based compensation costs are included in Community Banking. As such, expenses may not be representative of the costs expected to be incurred if the specific business segments operated as stand-alone entities. The Company expects it will continue to evaluate its business segments and internal reporting structure, including the production of discrete financial information to the CODM.
The following tables provide income and asset information as of June 30, 2025 and December 31, 2024 and for three and six months ended June 30, 2025 and 2024, which are included within the Consolidated Balance Sheets and Consolidated Statements of Operations.
36
TABLE OF CONTENTS
|
|
Three Months Ended |
|
|||||||||||||||||||||
|
|
June 30, 2025 |
|
|||||||||||||||||||||
|
|
Community Banking |
|
|
Marine Lending |
|
|
Wealth Management |
|
|
All Other |
|
|
Eliminations |
|
|
Consolidated |
|
||||||
|
|
(in thousands) |
|
|||||||||||||||||||||
Interest Income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Interest Expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net Interest Income (Expense) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||||
Gain on sales of loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other noninterest income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net Revenue (Expense) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||||
Provision for (recovery of) credit losses |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Salaries and employee benefits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Occupancy expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Professional fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Data processing fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other noninterest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total Noninterest Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Income (loss) before taxes |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||||
Income tax expense (benefit) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||||
Net Income (Loss) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Capital expenditures |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
Three Months Ended |
|
|||||||||||||||||||||
|
|
June 30, 2024 |
|
|||||||||||||||||||||
|
|
Community Banking |
|
|
Marine Lending |
|
|
Wealth Management |
|
|
All Other |
|
|
Eliminations |
|
|
Consolidated |
|
||||||
|
|
(in thousands) |
|
|||||||||||||||||||||
Interest Income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Interest Expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net Interest Income (Expense) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||||
Gain on sales of loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other noninterest income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net Revenue (Expense) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||||
Provision for (recovery of) credit losses |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Salaries and employee benefits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Occupancy expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Professional fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Data processing fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other noninterest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total Noninterest Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Income (loss) before taxes |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||||
Income tax expense (benefit) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||||
Net Income (Loss) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
37
TABLE OF CONTENTS
Capital expenditures |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
38
TABLE OF CONTENTS
|
|
Six Months Ended |
|
|||||||||||||||||||||
|
|
June 30, 2025 |
|
|||||||||||||||||||||
|
|
Community Banking |
|
|
Marine Lending |
|
|
Wealth Management |
|
|
All Other |
|
|
Eliminations |
|
|
Consolidated |
|
||||||
|
|
(in thousands) |
|
|||||||||||||||||||||
Interest Income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Interest Expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net Interest Income (Expense) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||||
Gain on sales of loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
(Loss) on the sale of securities |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||||
Other noninterest income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net Revenue (Expense) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||||
Provision for (recovery of) credit losses |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Salaries and employee benefits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Occupancy expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Professional fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Data processing fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other noninterest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total Noninterest Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
(Loss) income before taxes |
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|||
Income tax (benefit) expense |
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|||
Net (Loss) Income |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Capital expenditures |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
Six Months Ended |
|
|||||||||||||||||||||
|
|
June 30, 2024 |
|
|||||||||||||||||||||
|
|
Community Banking |
|
|
Marine Lending |
|
|
Wealth Management |
|
|
All Other |
|
|
Eliminations |
|
|
Consolidated |
|
||||||
|
|
(in thousands) |
|
|||||||||||||||||||||
Interest Income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Interest Expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net Interest Income (Expense) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||||
Gain on sales of loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
(Loss) on the sale of securities |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Other noninterest income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net Revenue (Expense) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||||
Provision for credit losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Salaries and employee benefits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Occupancy expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Professional fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Data processing fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other noninterest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total Noninterest Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Income (loss) before taxes |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||||
Income tax expense (benefit) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||||
Net Income (Loss) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
39
TABLE OF CONTENTS
Other data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Capital expenditures |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
Community Banking |
|
|
Marine Lending |
|
|
Wealth Management |
|
|
All Other |
|
|
Eliminations |
|
|
Consolidated |
|
||||||
Total assets at June 30, 2025 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Total assets at December 31, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
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TABLE OF CONTENTS
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The purpose of this discussion is to focus on important factors affecting the Company’s financial condition, results of operations, liquidity and capital resources. This discussion should be read in conjunction with the Company’s Consolidated Financial Statements and the Notes to the Consolidated Financial Statements presented in Part I, Item 1, Financial Statements, of this Form 10-Q and Part II, Item 8, Financial Statements and Supplementary Data, of the 2024 Form 10-K.
GENERAL
Eagle Financial Services, Inc. is a bank holding company which owns 100% of the stock of Bank of Clarke (the “Bank” and, collectively with Eagle Financial Services, Inc., the “Company”, “we”, “us” or “our”). Accordingly, the results of operations for the Company are dependent upon the operations of the Bank. The Bank conducts a commercial banking business which consists of attracting deposits from the general public and investing those funds in commercial, consumer and real estate loans and municipal and U.S. government agency securities. The Bank’s deposits are insured by the Federal Deposit Insurance Corporation to the maximum extent permitted by law. At June 30, 2025, the Company had total assets of $2.04 billion, net loans of $1.42 billion, total deposits of $1.77 billion, and shareholders’ equity of $179.6 million. The Company’s net loss was $1.7 million for the six months ended June 30, 2025.
During the first quarter of 2025 the Company executed a balance sheet repositioning of its investment securities portfolio, selling available for sale securities with an amortized cost balance of $99.2 million resulting in a net realized pre-tax loss of $12.4 million and reinvesting $66.0 million into purchases of available for sale securities. Additionally, the Company completed an underwritten public offering of 1,796,875 shares of its common stock at a public offering price of $32.00 per share. Net proceeds from the offering were $53.5 million. These transactions are further described below.
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 its local, independent status.
OPERATING STRATEGY
The Bank is a locally managed financial institution as well as predominately locally owned. While the Company expanded its ownership to institutional investors though a public offering of its common stock in February 2025, its operating strategy remains the same. This operating strategy allows the Bank to be flexible and responsive in the products and services it offers and to further grow by lending funds to local residents and businesses at a competitive price that reflects the inherent risk of lending. The Bank strives to fund these loans through deposits gathered from local residents and businesses. The Bank prices its deposits by comparing alternative sources of funds and selecting the lowest cost available. When deposits are not adequate to fund asset growth, the Bank relies on borrowings, both short and long term. The Bank’s primary source of borrowed funds is the Federal Home Loan Bank of Atlanta which offers numerous terms and rate structures to the Bank.
As interest rates change, the Bank attempts to maintain its net interest margin by changing the price, terms, and mix of its financial assets and liabilities. The Bank also earns fees on services provided through its trust department, secondary market mortgage activities, BOLI, and deposit operations. The Bank also incurs noninterest expenses such as compensating employees, maintaining and acquiring fixed assets, and purchasing goods and services necessary to support its daily operations.
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The Bank has a marketing department which seeks to develop new business. This is accomplished through an ongoing calling program whereby account officers visit with existing and potential customers to discuss the products and services offered. The Bank utilizes traditional advertising such as television commercials, radio ads, newspaper ads, and billboards as well as electronic materials, emails, and social media posts.
LENDING POLICIES
Administration and supervision over the lending process is provided by the Bank’s Credit Administration Department. The principal risk associated with the Bank’s loan portfolio is the creditworthiness of its borrowers. In an effort to manage this risk, the Bank’s policy gives loan amount approval limits to individual loan officers based on their position and level of experience. Credit risk is increased or decreased, depending on the type of loan and prevailing economic conditions. In consideration of the different types of loans in the portfolio, the risk associated with real estate mortgage loans, commercial loans and consumer loans varies based on employment levels, consumer confidence, fluctuations in the value of real estate and other conditions that affect the ability of borrowers to repay debt.
The Company has written policies and procedures to help manage credit risk. The Company utilizes a loan review process that includes formulation of portfolio management strategy, guidelines for underwriting standards and risk assessment, procedures for ongoing identification and management of credit deterioration, and regular portfolio reviews to establish loss exposure and to ascertain compliance with the Company’s policies.
The Bank uses a tiered approach to approve credit requests consisting of individual lending authorities, joint approval of Co-Approval officers (Executive, Regional Credit Officer, Small Business Credit Officer), and a director loan committee. Lending limits for individuals are set by the Board of Directors and are determined by loan purpose, collateral type, and internal risk rating of the borrower. The highest individual authority (Executive) is assigned to the Bank’s President/ Chief Executive Officer, Chief Banking Officer and Chief Credit Officer (approval authority only). Two Executive officers may combine their authority to approve loan requests to borrowers with credit exposure up to $10.0 million on a secured basis and $6.0 million unsecured. Three Executive officers may combine to approve loan requests to borrowers with credit exposure up to $15.0 million on a secured basis and $9.0 million unsecured. Consumer Central Lenders are individual lenders who have been assigned to an Approval Category (A through F) based upon their level of experience and job function. Consumer Central Lenders can co-approve consumer, home equity lines of credit and home equity loan requests up to their stated authorities. Officers in Categories A through F have lesser authorities and with approval of an Executive officer may extend loans to borrowers with exposure of $5.0 million on a secured basis and $3.0 million unsecured. Officers in Categories A through F can also utilize the co-approval of the Regional and Small Business Credit Officers to extend loans with exposures up to $2.5 million and $1.5 million respectively on a secured basis, and up to $1 million and $750 thousand respectively on an unsecured basis. Loans exceeding $15.0 million and up to the Bank’s legal lending limit can be approved by the Risk Committee consisting of four directors (three directors constituting a quorum). The Director’s Loan Committee also reviews and approves changes to the Bank’s Loan Policy as presented by management.
The following sections discuss the major loan categories within the total loan portfolio:
One-to-Four-Family Residential Real Estate Lending
Residential lending activity may be generated by the Bank’s loan officer solicitations, referrals by real estate professionals, and existing or new bank customers. Loan applications are taken by a Bank loan officer. As part of the application process, information is gathered concerning income, employment and credit history of the applicant. The valuation of residential collateral is provided by independent fee appraisers who have been approved by the Bank’s Directors Loan Committee. In connection with residential real estate loans, the Bank requires title insurance, hazard insurance and, if applicable, flood insurance. In addition to traditional residential mortgage loans secured by a first or junior lien on the property, the Bank offers home equity lines of credit.
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Commercial Real Estate Lending
Commercial real estate loans are secured by various types of commercial real estate in the Bank’s market area, including multi-family residential buildings, commercial buildings and offices, small shopping centers and churches. Commercial real estate loan originations are obtained through broker referrals, direct solicitation of developers and continued business from customers. In its underwriting of commercial real estate, the Bank’s loan to original appraised value ratio is generally 80% or less. Commercial real estate lending entails significant additional risk as compared with residential mortgage lending. Commercial real estate loans typically involve larger loan balances concentrated with single borrowers or groups of related borrowers. Additionally, the repayment of loans secured by income producing properties is typically dependent on the successful operation of a business or a real estate project and thus may be subject, to a greater extent, to adverse conditions in the real estate market or the economy, in general. The Bank’s commercial real estate loan underwriting criteria require an examination of debt service coverage ratios, the borrower’s creditworthiness, prior credit history and reputation, and the Bank typically requires personal guarantees or endorsements of the borrowers’ principal owners.
Construction and Land Development Lending
The Bank makes local construction loans, primarily residential, and land acquisition and development loans. The construction loans are secured by residential houses under construction and the underlying land for which the loan was obtained. The average life of most construction loans is less than one year and the Bank offers both fixed and variable rate interest structures. The interest rate structure offered to customers depends on the total amount of these loans outstanding and the impact of the interest rate structure on the Bank’s overall interest rate risk. There are two characteristics of construction lending which impact its overall risk as compared to residential mortgage lending. First, there is more concentration risk due to the extension of a large loan balance through several lines of credit to a single developer or contractor. Second, there is more collateral risk due to the fact that loan funds are provided to the borrower based upon the estimated value of the collateral after completion. This could cause an inaccurate estimate of the amount needed to complete construction or an excessive loan-to-value ratio. To mitigate the risks associated with construction lending, the Bank generally limits loan amounts to 80% of the estimated appraised value of the finished construction project. The Bank also obtains a first lien on the property as security for its construction loans and typically requires personal guarantees from the borrower’s principal owners. Finally, the Bank performs inspections of the construction projects to ensure that the percentage of construction completed correlates with the amount of draws on the construction line of credit.
Commercial and Industrial Lending
Commercial business loans generally have more risk than residential mortgage loans, but have higher yields. To manage these risks, the Bank generally obtains appropriate collateral and personal guarantees from the borrower’s principal owners and monitors the financial condition of its business borrowers. Residential mortgage loans generally are made on the basis of the borrower’s ability to make repayment from employment and other income and are secured by real estate whose value tends to be readily ascertainable. In contrast, commercial business loans typically are made on the basis of the borrower’s ability to make repayment from cash flow from its business and are secured by business assets, such as commercial real estate, accounts receivable, equipment and inventory. As a result, the availability of funds for the repayment of commercial business loans is substantially dependent on the success of the business itself. Furthermore, the collateral for commercial business loans may depreciate over time and generally cannot be appraised with as much precision as residential real estate.
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Consumer Lending
The Bank offers various secured and unsecured consumer loans, which include personal installment loans, personal lines of credit, automobile loans, and credit card loans. The Bank originates its consumer loans within its geographic market area and these loans are generally made to customers with whom the Bank has an existing relationship. Consumer loans generally entail greater risk than residential mortgage loans, particularly in the case of consumer loans which are unsecured or secured by rapidly depreciable assets such as automobiles. In such cases, any repossessed collateral on a defaulted consumer loan may not provide an adequate source of repayment of the outstanding loan balance as a result of the greater likelihood of damage, loss or depreciation. Consumer loan collections are dependent on the borrower’s continuing financial stability, and thus are more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy. Furthermore, the application of various federal and state laws, including federal and state bankruptcy and insolvency laws, may limit the amount which can be recovered on such loans.
The underwriting standards employed by the Bank for consumer loans include a determination of the applicant’s payment history on other debts and an assessment of ability to meet existing obligations and payments on the proposed loan. The stability of the applicant’s monthly income may be determined by verification of gross monthly income from primary employment, and from any verifiable secondary income. Although creditworthiness of the applicant is the primary consideration, the underwriting process also includes an analysis of the value of the security in relation to the proposed loan amount.
Marine Lending
The Bank’s marine loan portfolio is comprised of retail marine vessel loans originated through August 2023, at which time the Company ceased accepting new marine lending business. At present, the Company expects to hold the retained outstanding loans until they are ultimately repaid. Retail loans were generally limited to premium manufacturers with established relationships with the Company which have a vested interest in the secondary market pricing of their respective brand due to the limited inventory available for resale. Consequently, while not contractually committed, manufacturers will often support secondary resale values which can have the effect of reducing losses from non-performing retail marine loans. Retail borrowers generally have very high credit scores, substantial down payments, substantial net worth, personal liquidity, and excess cash flow.
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TABLE OF CONTENTS
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The financial statements of the Company are prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The financial information contained within these statements is, to a significant extent, based on measurements of the financial effects of transactions and events that have already occurred. A variety of factors could affect the ultimate value that is obtained when earning income, recognizing an expense, recovering an asset or relieving a liability. In addition, GAAP itself may change from one previously acceptable method to another method. Although the economics of the transactions would be the same, the timing of events that would impact the transactions could change.
Allowance for Credit Losses on Loans
The Company establishes the allowance for credit losses through charges to earnings in the form of a provision for credit losses. Loan losses are charged against the allowance for credit losses for the difference between the carrying value of the loan and the estimated net realizable value or fair value of the collateral, if collateral dependent, when management believes that the collectability of the principal is unlikely. Subsequent recoveries, if any, are credited to the allowance. The allowance represents management’s current estimate of expected credit losses over the contractual term of loans held for investment, and is recorded at an amount that, in management’s judgment, reduces the recorded investment in loans to the net amount expected to be collected. Management’s judgment in determining the level of the allowance is based on evaluations of historical loan losses, current conditions and reasonable and supportable forecasts relevant to the collectability of loans. The measurement of the allowance for credit losses is based in part on forecasts of unemployment, inflation, as well as the consumer price index, and may also consider other factors, which we believe to be indicative of risk factors related to collectability. Management also assesses the risk of credit losses arising from changes in economic conditions; the nature and volume of the loan portfolio; the volume and severity of delinquencies and adversely classified loan balances; lending policy and procedures; credit administration and lending staff; loan review; concentrations of credit and the value of underlying collateral in determining the recorded balance of the allowance for credit losses. This evaluation is inherently subjective because it requires estimates that are susceptible to significant revision as more information becomes available. In evaluating the level of the allowance, we consider a range of possible assumptions and outcomes related to the various factors identified above. Refer to the 2024 Form 10-K for additional detail concerning the determination of the allowance for credit losses on loans.
NON-GAAP FINANCIAL MEASURES
This report refers to certain financial measures that are computed under a basis other than GAAP ("non-GAAP"). The Company uses certain non-GAAP financial measures, including tax-equivalent net interest income and efficiency ratio, to provide meaningful supplemental information regarding the Company's operational performance and to enhance investors' overall understanding of such financial performance. The methodology for determining these non-GAAP measures may differ among companies. Non-GAAP measures are supplemental and not a substitute for, or more important than, financial measures prepared in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures which may be presented by other companies.
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FORWARD LOOKING STATEMENTS
The Company makes forward looking statements in this report that are subject to risks and uncertainties. These forward looking statements include statements regarding our expectations, intentions or objectives concerning our profitability, liquidity, allowance for loan losses, interest rate sensitivity, market risk, growth strategy, and financial and other goals. The words “believes,” “expects,” “may,” “will,” “should,” "could," “projects,” “contemplates,” “anticipates,” “forecasts,” “intends,” or other similar words or terms are intended to identify forward looking statements. These forward looking statements are subject to significant uncertainties because they are based upon or are affected by factors including:
Because of these uncertainties, actual future results may be materially different from the results indicated by these forward looking statements. In addition, past results of operations do not necessarily indicate future results.
RESULTS OF OPERATIONS
Net Income (Loss)
Net income for the three months ended June 30, 2025, was $5.3 million compared to $3.2 million for the three months ended June 30, 2024 and, for the six months ended June 30, 2025 and 2024, net (loss) income was ($1.7 million) and $5.7 million,
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respectively. Earnings (loss) per share, basic and diluted, were $0.98 and $0.89 for the three months ended June 30, 2025 and 2024, respectively, and $(0.34) and $1.61 for the six months ended June 30, 2025 and 2024, respectively.
Return on average assets ("ROA") measures how efficiently the Company uses its assets to produce net income. Factors reflected within this efficiency include the Company’s asset mix, funding sources, pricing, fee generation, and cost control. The ROA of the Company, on an annualized basis, for the three months ended June 30, 2025 and 2024 was 1.09% and 0.72%, respectively. For the six months ended June 30, 2025 and 2024 annualized ROA was (0.18)% and 0.65%, respectively.
Return on average equity ("ROE") measures the utilization of shareholders’ equity in generating net income. This measurement is affected by the same factors as ROA with consideration to how much of the Company’s assets are funded by shareholders. The ROE of the Company, on an annualized basis, for the three months ended June 30, 2025 and 2024 was 11.93% and 11.89%, respectively, and for the six months ended June 30, 2025 and 2024 was (2.19)% and 10.71%, respectively.
The Company's operating results for the six months ended June 30, 2025 were significantly impacted by the recognized loss on the sale of available for sale securities as part of its balance sheet repositioning strategy completed in the first quarter of 2025. The sale resulted in a net of tax loss of $9.8 million, or $(1.97) per share, and reduced ROA and ROE, on an annualized basis, by 1.03% and 12.62%, respectively, for the six months ended June 30, 2025. The balance sheet repositioning resulted in an increase in interest and dividend income earned on the available for sale investment securities portfolio for three and six months ended June 30, 2025 of $362 thousand and $291 thousand, respectively, compared to the same periods in 2024.
Net Interest Income
Net interest income is our primary source of revenue, representing the difference between interest and fees earned on interest-earning assets and the interest paid on deposits and other interest-bearing liabilities. The level of net interest income is impacted primarily by variations in the volume and mix of these assets and liabilities, as well as changes in interest rates. Net interest income was $15.7 million and $12.2 million for the three months ended June 30, 2025 and 2024, respectively, an increase of $3.5 million, or 29.1%. Net interest income was $29.0 million and $24.6 million for the six months ended June 30, 2025 and 2024, respectively, which represents an increase of $4.4 million, or 18.2%. The year-over-year increases for both periods primarily reflects the impact of the balance sheet repositioning strategy, which raised capital and cash on hand and replaced lower-yielding investment securities with higher yielding securities. Declining average rates paid on interest-bearing deposits and maturities of FHLB advances also impacted net interest income.
The Company's net interest spread and net interest margin increased 19 basis points and 24 basis points, respectively, for the six months ended June 30, 2025 compared to six months ended June 30, 2024. For the three months ended June 30, 2025, the Company's net interest spread and net interest margin increased 43 basis points and 50 basis points, respectively, compared to the three months ended June 30, 2024.
Total interest and dividend income was $48.3 million and $43.7 million for the six months ended June 30, 2025 and 2024, respectively, which represents an increase of $4.6 million, or 10.71%. Total interest and dividend income for the three months ended June 30, 2025 and 2024 was $24.8 million and $21.7 million, respectively, which represents an increase of $3.1 million, or 14.15%. The increases in interest income during the 2025 periods were driven by increases in the average balance of the interest-earning assets, specifically federal funds sold and deposits in other banks, and increases in the average yield on securities driven by the newly restructured securities portfolio, mostly offset by a decline in the yield earned on federal funds sold and deposits in other banks. Average interest-earning assets increased $157.4 million, or 9.41%, during the six months ended June 30, 2025 compared to the six months ended June 30, 2024, while the average yield on earning assets increased by eight basis points over the same period, primarily reflecting a 104 basis point increase attributable to the securities portfolio offset by an 88 basis point decrease attributable to federal funds sold and interest-bearing deposits in other banks. For the three months ended June 30, 2025 the average balance of earning assets increased $166.7 million and the average yield increased 19 basis points compared to the three months ended June 30, 2024. The 19 basis point increase was largely comprised of a 175 basis point increase in the
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securities portfolio average yield and an 88 basis point decrease in the average yield on federal funds sold and interest-bearing deposits in other banks.
Total interest expense was $19.3 million and $19.1 million for the six months ended June 30, 2025 and 2024, respectively, which represents an increase of $213 thousand, or 1.12%. Total interest expense was $9.1 million and $9.6 million for the three months ended June 30, 2025 and 2024, respectively, which represents a decrease of $465 thousand, or 4.85%. Balance growth in higher paying deposit accounts partially offset by lower rates paid on these deposits and balance declines in FHLB advances were the main drivers for the change in interest expense during the six months ended June 30, 2025 compared to the same period in 2024. The $213 thousand increase in interest expense during the six months ended June 30, 2025 is comprised of a $1.8 million, or 12.24%, increase attributable primarily to time deposit accounts and a $1.6 million, or 47.19%, decrease attributable to FHLB advances. Time deposits contributed $1.6 million of the $1.8 million increase in deposit interest expense due to average balance increases of $39.1 million and $57.0 million on time deposits of $250,000 or more and time deposits of less than $250,000, respectively, and declines in the average rate paid of 27 basis points and 19 basis points, respectively. During the six months ended June 30, 2025 and 2024 the average balance of total interest-bearing deposits was $1.19 billion and $1.05 billion, respectively, and the average rate paid was 2.85% for both the six months ended June 30, 2025 and 2024. Competition for and rates paid on deposit accounts continues to be strong. The $1.6 million decrease in interest expense on FHLB advances was due to advance maturities during the six months ended June 30, 2025 reducing the average balance by $70.0 million compared to the 2024 prior year period. These matured advances were not replaced as the Company has reduced its reliance on wholesale borrowings since completing its capital raise during the first quarter of 2025.
The decrease in interest expense during the three months ended June 30, 2025 compared to the three months ended June 30, 2024 of $465 thousand is comprised of a $748 thousand, or 9.95%, increase attributable to deposit accounts and a decrease of $1.2 million, or 70.85%, attributable to FHLB advances. Higher-paying time deposits contributed $599 thousand of the increase in deposit interest expense reflecting an $89.8 million increase in average balance of time deposits, net of declines in the average rate paid of 39 basis points on time deposits of $250,000 or more and 35 basis points on time deposits of less than $250,000. The average rate paid on total interest-bearing deposits for the three months ended June 30, 2025 was 2.78% compared to 2.88% for the three months ended June 30, 2024. The decrease in interest expense on FHLB advances during the three months ended June 30, 2025 reflects lower borrowing levels as advances have not been replaced upon their maturity. The average balance of FHLB advances was $40.8 million and $145.1 million with an average rate of 4.90% and 4.74% during the three months ended June 30, 2025 and 2024, respectively.
The net interest margin was 3.20% and 2.96% for the six months ended June 30, 2025 and 2024, respectively, and 3.42% and 2.92% for the three months ended June 30, 2025 and 2024, respectively. The net interest margin is calculated on a tax-equivalent basis. Tax-equivalent net interest income (Non-GAAP) is calculated by adding the tax benefit on certain securities and loans, whose interest is tax-exempt, to total interest income then subtracting total interest expense. The tax rate used to calculate the tax benefit was 21% for 2025 and 2024.
Net interest margin has improved during the three and six months ended June 30, 2025 primarily due to the repositioning of the securities portfolio during the first quarter of 2025, retention of maturing time deposits at lower rates, and the reduction in FHLB advances. Ongoing margin pressures include deposit pricing, the Bank's continued strategy of originating mortgage loans for sale, and an increase in nonaccrual loans during the six months ended June 30, 2025.
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The following table shows interest income on earning assets and related average yields as well as interest expense on interest-bearing liabilities and related average rates paid for the three months ended June 30, 2025 and 2024 (dollars in thousands):
|
|
June 30, 2025 |
|
|
June 30, 2024 |
|
||||||||||||||||||
|
|
|
|
|
Interest |
|
|
Average |
|
|
|
|
|
Interest |
|
|
Average |
|
||||||
|
|
Average |
|
|
Income/ |
|
|
Yield/ |
|
|
Average |
|
|
Income/ |
|
|
Yield/ |
|
||||||
Assets: |
|
Balance |
|
|
Expense |
|
|
Rate (2) |
|
|
Balance |
|
|
Expense |
|
|
Rate (2) |
|
||||||
Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Taxable |
|
$ |
115,712 |
|
|
$ |
1,260 |
|
|
|
4.37 |
% |
|
$ |
137,588 |
|
|
$ |
893 |
|
|
|
2.61 |
% |
Tax-Exempt (1) |
|
|
— |
|
|
|
— |
|
|
|
— |
% |
|
|
492 |
|
|
|
5 |
|
|
|
4.13 |
% |
Total Securities |
|
$ |
115,712 |
|
|
$ |
1,260 |
|
|
|
4.37 |
% |
|
$ |
138,080 |
|
|
$ |
898 |
|
|
|
2.62 |
% |
Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Taxable |
|
|
1,419,117 |
|
|
|
20,309 |
|
|
|
5.74 |
% |
|
|
1,424,304 |
|
|
|
19,421 |
|
|
|
5.48 |
% |
Non-accrual |
|
|
16,337 |
|
|
|
— |
|
|
|
— |
% |
|
|
4,600 |
|
|
|
— |
|
|
|
— |
% |
Tax-Exempt (1) |
|
|
9,999 |
|
|
|
126 |
|
|
|
5.04 |
% |
|
|
10,603 |
|
|
|
132 |
|
|
|
5.01 |
% |
Total Loans |
|
$ |
1,445,453 |
|
|
$ |
20,435 |
|
|
|
5.67 |
% |
|
$ |
1,439,507 |
|
|
$ |
19,553 |
|
|
|
5.46 |
% |
Federal funds sold and interest-bearing deposits in other banks |
|
|
281,749 |
|
|
|
3,146 |
|
|
|
4.48 |
% |
|
|
98,672 |
|
|
|
1,316 |
|
|
|
5.36 |
% |
Total earning assets |
|
$ |
1,842,914 |
|
|
$ |
24,841 |
|
|
|
5.41 |
% |
|
$ |
1,676,259 |
|
|
$ |
21,767 |
|
|
|
5.22 |
% |
Allowance for credit losses |
|
|
(15,439 |
) |
|
|
|
|
|
|
|
|
(14,604 |
) |
|
|
|
|
|
|
||||
Total non-earning assets |
|
|
105,484 |
|
|
|
|
|
|
|
|
|
105,467 |
|
|
|
|
|
|
|
||||
Total assets |
|
$ |
1,932,959 |
|
|
|
|
|
|
|
|
$ |
1,767,122 |
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Liabilities and Shareholders' Equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Interest-bearing deposits: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
NOW accounts |
|
$ |
303,498 |
|
|
$ |
1,632 |
|
|
|
2.16 |
% |
|
$ |
258,965 |
|
|
$ |
1,538 |
|
|
|
2.39 |
% |
Money market accounts |
|
|
273,415 |
|
|
|
1,521 |
|
|
|
2.23 |
% |
|
|
261,557 |
|
|
|
1,463 |
|
|
|
2.25 |
% |
Savings accounts |
|
|
130,166 |
|
|
|
36 |
|
|
|
0.11 |
% |
|
|
136,370 |
|
|
|
39 |
|
|
|
0.12 |
% |
Time deposits: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
$250,000 and more |
|
|
174,030 |
|
|
|
1,911 |
|
|
|
4.41 |
% |
|
|
138,531 |
|
|
|
1,652 |
|
|
|
4.80 |
% |
Less than $250,000 |
|
|
310,108 |
|
|
|
3,163 |
|
|
|
4.09 |
% |
|
|
255,776 |
|
|
|
2,823 |
|
|
|
4.44 |
% |
Total interest-bearing deposits |
|
$ |
1,191,217 |
|
|
$ |
8,263 |
|
|
|
2.78 |
% |
|
$ |
1,051,199 |
|
|
$ |
7,515 |
|
|
|
2.88 |
% |
Federal funds purchased |
|
|
2 |
|
|
|
— |
|
|
NM |
|
|
|
15 |
|
|
|
— |
|
|
NM |
|
||
Federal Home Loan Bank advances |
|
|
40,824 |
|
|
|
499 |
|
|
|
4.90 |
% |
|
|
145,110 |
|
|
|
1,712 |
|
|
|
4.74 |
% |
Subordinated debt |
|
|
29,535 |
|
|
|
355 |
|
|
|
4.82 |
% |
|
|
29,467 |
|
|
|
355 |
|
|
|
4.84 |
% |
Total interest-bearing liabilities |
|
$ |
1,261,578 |
|
|
$ |
9,117 |
|
|
|
2.90 |
% |
|
$ |
1,225,791 |
|
|
$ |
9,582 |
|
|
|
3.14 |
% |
Noninterest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Demand deposits |
|
|
473,911 |
|
|
|
|
|
|
|
|
|
417,128 |
|
|
|
|
|
|
|
||||
Other Liabilities |
|
|
20,286 |
|
|
|
|
|
|
|
|
|
16,489 |
|
|
|
|
|
|
|
||||
Total liabilities |
|
$ |
1,755,775 |
|
|
|
|
|
|
|
|
$ |
1,659,408 |
|
|
|
|
|
|
|
||||
Shareholders' equity |
|
|
177,184 |
|
|
|
|
|
|
|
|
|
107,714 |
|
|
|
|
|
|
|
||||
Total liabilities and shareholders' equity |
|
$ |
1,932,959 |
|
|
|
|
|
|
|
|
$ |
1,767,122 |
|
|
|
|
|
|
|
||||
Net interest income |
|
|
|
|
$ |
15,724 |
|
|
|
|
|
|
|
|
$ |
12,185 |
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net interest spread |
|
|
|
|
|
|
|
|
2.51 |
% |
|
|
|
|
|
|
|
|
2.08 |
% |
||||
Interest expense as a percent of average earning assets |
|
|
|
|
|
|
|
|
1.98 |
% |
|
|
|
|
|
|
|
|
2.30 |
% |
||||
Net interest margin |
|
|
|
|
|
|
|
|
3.42 |
% |
|
|
|
|
|
|
|
|
2.92 |
% |
||||
NM - Not Meaningful
49
TABLE OF CONTENTS
The following table shows interest income on earning assets and related average yields as well as interest expense on interest-bearing liabilities and related average rates paid for the six months ended June 30, 2025 and 2024 (dollars in thousands):
|
|
June 30, 2025 |
|
|
June 30, 2024 |
|
||||||||||||||||||
|
|
|
|
|
Interest |
|
|
Average |
|
|
|
|
|
Interest |
|
|
Average |
|
||||||
|
|
Average |
|
|
Income/ |
|
|
Yield/ |
|
|
Average |
|
|
Income/ |
|
|
Yield/ |
|
||||||
Assets: |
|
Balance |
|
|
Expense |
|
|
Rate (2) |
|
|
Balance |
|
|
Expense |
|
|
Rate (2) |
|
||||||
Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Taxable |
|
$ |
116,535 |
|
|
$ |
2,104 |
|
|
|
3.64 |
% |
|
$ |
140,144 |
|
|
$ |
1,808 |
|
|
|
2.59 |
% |
Tax-Exempt (1) |
|
|
175 |
|
|
|
4 |
|
|
|
4.49 |
% |
|
|
496 |
|
|
|
10 |
|
|
|
4.10 |
% |
Total Securities |
|
$ |
116,710 |
|
|
$ |
2,108 |
|
|
|
3.64 |
% |
|
$ |
140,640 |
|
|
$ |
1,818 |
|
|
|
2.60 |
% |
Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Taxable |
|
|
1,430,666 |
|
|
|
40,180 |
|
|
|
5.66 |
% |
|
|
1,429,088 |
|
|
|
39,279 |
|
|
|
5.53 |
% |
Non-accrual |
|
|
10,182 |
|
|
|
— |
|
|
|
— |
% |
|
|
5,109 |
|
|
|
— |
|
|
|
— |
% |
Tax-Exempt (1) |
|
|
10,064 |
|
|
|
253 |
|
|
|
5.06 |
% |
|
|
10,654 |
|
|
|
265 |
|
|
|
5.00 |
% |
Total Loans |
|
$ |
1,450,912 |
|
|
$ |
40,433 |
|
|
|
5.62 |
% |
|
$ |
1,444,851 |
|
|
$ |
39,544 |
|
|
|
5.50 |
% |
Federal funds sold and interest-bearing deposits in other banks |
|
|
263,367 |
|
|
|
5,830 |
|
|
|
4.46 |
% |
|
|
88,054 |
|
|
|
2,337 |
|
|
|
5.34 |
% |
Total earning assets |
|
$ |
1,830,989 |
|
|
$ |
48,371 |
|
|
|
5.33 |
% |
|
$ |
1,673,545 |
|
|
$ |
43,699 |
|
|
|
5.25 |
% |
Allowance for credit losses |
|
|
(15,334 |
) |
|
|
|
|
|
|
|
|
(14,570 |
) |
|
|
|
|
|
|
||||
Total non-earning assets |
|
|
104,113 |
|
|
|
|
|
|
|
|
|
104,174 |
|
|
|
|
|
|
|
||||
Total assets |
|
$ |
1,919,768 |
|
|
|
|
|
|
|
|
$ |
1,763,149 |
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Liabilities and Shareholders' Equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Interest-bearing deposits: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
NOW accounts |
|
$ |
289,558 |
|
|
$ |
3,095 |
|
|
|
2.16 |
% |
|
$ |
257,623 |
|
|
$ |
3,035 |
|
|
|
2.37 |
% |
Money market accounts |
|
|
273,776 |
|
|
|
3,033 |
|
|
|
2.23 |
% |
|
|
262,656 |
|
|
|
2,876 |
|
|
|
2.20 |
% |
Savings accounts |
|
|
131,528 |
|
|
|
73 |
|
|
|
0.11 |
% |
|
|
137,554 |
|
|
|
80 |
|
|
|
0.12 |
% |
Time deposits: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
$250,000 and more |
|
|
180,006 |
|
|
|
4,026 |
|
|
|
4.51 |
% |
|
|
140,912 |
|
|
|
3,353 |
|
|
|
4.78 |
% |
Less than $250,000 |
|
|
310,799 |
|
|
|
6,540 |
|
|
|
4.24 |
% |
|
|
253,815 |
|
|
|
5,595 |
|
|
|
4.43 |
% |
Total interest-bearing deposits |
|
$ |
1,185,667 |
|
|
$ |
16,767 |
|
|
|
2.85 |
% |
|
$ |
1,052,560 |
|
|
$ |
14,939 |
|
|
|
2.85 |
% |
Federal funds purchased |
|
|
5 |
|
|
|
— |
|
|
NM |
|
|
|
13 |
|
|
|
— |
|
|
NM |
|
||
Federal Home Loan Bank advances |
|
|
75,497 |
|
|
|
1,807 |
|
|
|
4.83 |
% |
|
|
145,495 |
|
|
|
3,422 |
|
|
|
4.73 |
% |
Subordinated debt |
|
|
29,526 |
|
|
|
709 |
|
|
|
4.84 |
% |
|
|
29,459 |
|
|
|
709 |
|
|
|
4.84 |
% |
Total interest-bearing liabilities |
|
$ |
1,290,695 |
|
|
$ |
19,283 |
|
|
|
3.01 |
% |
|
$ |
1,227,527 |
|
|
$ |
19,070 |
|
|
|
3.12 |
% |
Noninterest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Demand deposits |
|
|
450,559 |
|
|
|
|
|
|
|
|
|
411,147 |
|
|
|
|
|
|
|
||||
Other Liabilities |
|
|
21,671 |
|
|
|
|
|
|
|
|
|
16,878 |
|
|
|
|
|
|
|
||||
Total liabilities |
|
$ |
1,762,925 |
|
|
|
|
|
|
|
|
$ |
1,655,552 |
|
|
|
|
|
|
|
||||
Shareholders' equity |
|
|
156,843 |
|
|
|
|
|
|
|
|
|
107,597 |
|
|
|
|
|
|
|
||||
Total liabilities and shareholders' equity |
|
$ |
1,919,768 |
|
|
|
|
|
|
|
|
$ |
1,763,149 |
|
|
|
|
|
|
|
||||
Net interest income |
|
|
|
|
$ |
29,088 |
|
|
|
|
|
|
|
|
$ |
24,629 |
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net interest spread |
|
|
|
|
|
|
|
|
2.32 |
% |
|
|
|
|
|
|
|
|
2.13 |
% |
||||
Interest expense as a percent of average earning assets |
|
|
|
|
|
|
|
|
2.12 |
% |
|
|
|
|
|
|
|
|
2.29 |
% |
||||
Net interest margin |
|
|
|
|
|
|
|
|
3.20 |
% |
|
|
|
|
|
|
|
|
2.96 |
% |
||||
NM - Not Meaningful
50
TABLE OF CONTENTS
The following table reconciles tax-equivalent net interest income, which is not a measurement under GAAP, to net interest income.
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
June 30, |
|
|
June 30, |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
|
|
(in thousands) |
|
|
(in thousands) |
|
||||||||||
GAAP Financial Measurements: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest Income - Loans |
|
$ |
20,409 |
|
|
$ |
19,525 |
|
|
$ |
40,380 |
|
|
$ |
39,488 |
|
Interest Income - Securities and Other Interest-Earnings Assets |
|
|
4,406 |
|
|
|
2,213 |
|
|
|
7,937 |
|
|
|
4,153 |
|
Interest Expense - Deposits |
|
|
8,263 |
|
|
|
7,515 |
|
|
|
16,767 |
|
|
|
14,939 |
|
Interest Expense - Other Borrowings |
|
|
854 |
|
|
|
2,067 |
|
|
|
2,516 |
|
|
|
4,131 |
|
Total Net Interest Income |
|
$ |
15,698 |
|
|
$ |
12,156 |
|
|
$ |
29,034 |
|
|
$ |
24,571 |
|
Non-GAAP Financial Measurements: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Add: Tax Benefit on Tax-Exempt Interest Income - Loans (1) |
|
$ |
26 |
|
|
$ |
28 |
|
|
$ |
53 |
|
|
$ |
56 |
|
Add: Tax Benefit on Tax-Exempt Interest Income - Securities (1) |
|
|
— |
|
|
|
1 |
|
|
|
1 |
|
|
|
2 |
|
Total Tax Benefit on Tax-Exempt Interest Income |
|
$ |
26 |
|
|
$ |
29 |
|
|
$ |
54 |
|
|
$ |
58 |
|
Tax-Equivalent Net Interest Income |
|
$ |
15,724 |
|
|
$ |
12,185 |
|
|
$ |
29,088 |
|
|
$ |
24,629 |
|
The tax-equivalent yield on earning assets was 5.33% for the six months ended June 30, 2025 compared to 5.25% for the six months ended June 30, 2024, an increase of eight basis points during the current year period. The tax-equivalent yield on securities increased 104 basis points for the six months ended June 30, 2025, compared to the six months ended June 30, 2024. The tax equivalent yield on loans increased 12 basis points from 5.50% for the six months ended June 30, 2024 to 5.62% for the same time period in 2025. For the three months ended June 30, 2025 and 2024, the tax-equivalent yield on earning assets was 5.41% and 5.22%, respectively, an increase of 19 basis points in the current year period. The tax-equivalent yields on securities and loans also increased during the three month period in 2025 compared to 2024 by 175 basis points and 21 basis points, respectively.
The increase in the tax-equivalent yield on earning assets for the three and six months ended June 30, 2025 reflects the impact of the balance sheet repositioning transactions, which replaced lower-yielding investment securities with higher yielding securities, higher yielding loan originations, and increased average balances of federal funds sold and interest-bearing deposits in other banks, which were bolstered by the impact of the proceeds received from the public offering and increased deposit balances.
The average rate on interest-bearing liabilities decreased 11 basis points to 3.01% from 3.12% for the six months ended June 30, 2025 compared to the corresponding 2024 period and decreased 24 basis points to 2.90% for the three months ended June 30, 2025 compared to 3.14% for the three months ended June 30, 2024. The average rate on interest-bearing deposits remained the same at 2.85% for the six months ended June 30, 2025 and 2024 and decreased ten basis points to 2.78% during the three months ended June 30, 2025 compared to 2.88% during the three months ended June 30, 2024, reflecting declining rates on higher paying time deposits. The average rate on FHLB advances increased 16 basis points from 4.74% and increased 10 basis points from 4.73% for the three and six months ended June 30, 2024, respectively, to 4.90% and 4.83% for the three and six months ended June 30, 2025. The increases in the average rate on FHLB advances were due to the maturity of lower cost advances during the first and early-second quarter of 2025, compared to the remaining outstanding advance of $40.0 million at June 30, 2025 with a rate of 4.83%. The Company's reliance on wholesale borrowings has lessened since completing its capital raise in February 2025 and therefore, maturing advances were not replaced with new advances.
51
TABLE OF CONTENTS
Provision for Credit Losses
The provision for credit losses is based upon management’s estimate of the amount required to maintain an adequate allowance for credit losses. The Company's calculation of the provision for credit losses consists of changes in the allowance for credit losses on loans and the reserve for unfunded loan commitments. The allowance for credit losses on loans represents management’s current estimate of expected credit losses over the contractual term of loans held for investment, and is recorded at an amount that, in management’s judgment, reduces the recorded investment in loans to the net amount expected to be collected. Management’s judgment in determining the level of the allowance is based on evaluations of historical loan losses, current conditions and reasonable and supportable forecasts relevant to the collectability of loans. This evaluation is inherently subjective because it requires estimates that are susceptible to significant revision as more information becomes available. The amount of provision for credit losses on loans is affected by several factors including the growth rate of loans, net charge-offs (recoveries), and the estimated amount of expected losses within the loan portfolio.
The provision for credit losses for the six months ended June 30, 2025 and 2024 was $1.9 million and $656 thousand, respectively. The provision for credit losses for the three months ended June 30, 2025 and 2024 was $668 thousand and $181 thousand, respectively. The provision for credit losses for the six months ended June 30, 2025 resulted largely from a $3.1 million provision against the commercial real estate portfolio due to charge-offs of $971 thousand and specific reserves of $1.1 million, reflecting one individually evaluated relationship of four loans totaling $11.5 million. Additional specific reserves of $381 thousand represent five commercial and industrial loan relationships with loan balances totaling $1.2 million. Partially offsetting these increases were recoveries and decreases in loan balances.
Noninterest Income
Total noninterest income (loss) was $4.9 million and $4.3 million for the three months ended June 30, 2025 and 2024, respectively and for the six months ended June 30, 2025 and 2024 was $(3.6) million and $7.8 million, respectively. Management reviews the activities which generate noninterest income on an ongoing basis. The following table provides the components of noninterest income for the three and six months ended June 30, 2025 and 2024, which are included within the respective Consolidated Statements of Operations headings. Variances that the Company believes require explanation are discussed below the table.
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||||||||||||||||||
|
|
June 30, |
|
|
June 30, |
|
||||||||||||||||||||||||||
(dollars in thousands) |
|
2025 |
|
|
2024 |
|
|
$ Change |
|
|
% Change |
|
|
2025 |
|
|
2024 |
|
|
$ Change |
|
|
% Change |
|
||||||||
Wealth management fees |
|
$ |
1,650 |
|
|
$ |
1,273 |
|
|
$ |
377 |
|
|
|
30 |
% |
|
$ |
3,331 |
|
|
$ |
2,729 |
|
|
$ |
602 |
|
|
|
22 |
% |
Service charges on deposit accounts |
|
|
517 |
|
|
|
456 |
|
|
|
61 |
|
|
|
13 |
% |
|
|
1,009 |
|
|
|
910 |
|
|
|
99 |
|
|
|
11 |
% |
Other service charges and fees |
|
|
1,060 |
|
|
|
1,164 |
|
|
|
(104 |
) |
|
|
(9 |
)% |
|
|
2,032 |
|
|
|
2,133 |
|
|
|
(101 |
) |
|
|
(5 |
)% |
(Loss) on sale of securities |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
NM |
|
|
|
(12,425 |
) |
|
|
— |
|
|
|
(12,425 |
) |
|
NM |
|
||
(Loss) on disposal of bank premises and equipment |
|
|
— |
|
|
|
(11 |
) |
|
|
11 |
|
|
NM |
|
|
|
(16 |
) |
|
|
(11 |
) |
|
|
(5 |
) |
|
|
45 |
% |
|
Gain on sale of loans |
|
|
1,104 |
|
|
|
492 |
|
|
|
612 |
|
|
|
124 |
% |
|
|
1,533 |
|
|
|
653 |
|
|
|
880 |
|
|
|
135 |
% |
Small business investment company income |
|
|
133 |
|
|
|
259 |
|
|
|
(126 |
) |
|
|
(49 |
)% |
|
|
153 |
|
|
|
385 |
|
|
|
(232 |
) |
|
|
(60 |
)% |
Bank owned life insurance income |
|
|
278 |
|
|
|
269 |
|
|
|
9 |
|
|
|
3 |
% |
|
|
551 |
|
|
|
537 |
|
|
|
14 |
|
|
|
3 |
% |
Other operating income |
|
|
175 |
|
|
|
403 |
|
|
|
(228 |
) |
|
|
(57 |
)% |
|
|
195 |
|
|
|
449 |
|
|
|
(254 |
) |
|
|
(57 |
)% |
Total noninterest income (loss) |
|
$ |
4,917 |
|
|
$ |
4,305 |
|
|
$ |
612 |
|
|
|
14 |
% |
|
$ |
(3,637 |
) |
|
$ |
7,785 |
|
|
$ |
(11,422 |
) |
|
|
(147 |
)% |
NM - Not Meaningful
Wealth management fee income increased from 2024 to 2025. 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 which has increased over
52
TABLE OF CONTENTS
the 2024 year period. Additionally, per transaction fees for estates and other services have also contributed to the year over year increase in revenue.
Other service charges and fees decreased primarily due to a higher level of collection fees experienced during the three and six months ended June 30, 2024 compared to three and six months ended June 30, 2025.
The Company executed balance sheet repositioning transactions within its investment securities portfolio during March 2025. The sale of $99.2 million of available for sale debt securities, with a fair value of $86.8 million, resulted in a net pre-tax loss of $12.4 million during the six months ended June 30, 2025. Management utilized the proceeds from the public offering capital raise completed in February 2025 to enable the balance sheet repositioning.
Gain on sale of loans increased during the three and six months ended June 30, 2025 when compared to the same period in 2024. The Company sold $50.8 million in mortgage loans on the secondary market, consisting of $32.0 million of loans originated for sale and a pool of $18.8 million residential mortgage loans held for investment, and $9.9 million SBA commercial loans during the six months ended June 30, 2025. This compares to loan sales consisting of $25.5 million in mortgage loans and $2.6 million SBA commercial loans during the six months ended June 30, 2024. Loan sales resulted in gains of $1.5 million and $653 thousand during the six months ended June 30, 2025 and 2024, respectively. Gain on loan sales during the three months ended June 30, 2025 and 2024 was $1.1 million and $492 thousand, respectively, reflecting sales of $17.1 million mortgage loans and $8.4 million SBA commercial loans. The Company intends to continue originating mortgage loans for sale, whereas the mortgage portfolio sale was completed early in the 2025 quarter, at par, and ahead of the Company's public offering in order to bolster on-balance sheet liquidity.
Income from holdings in small business investment companies decreased $126 thousand and $232 thousand the three and six months ended June 30, 2025, respectively, compared to the same period in 2024. The decreases during the current year period can be mainly attributed to lower cash distributions received, based on the results of their performance and timing of distributions.
Other operating income decreased for the three and six months ended June 30, 2025 due to the receipt of a BOLI settlement, which resulted in a gain of $254 thousand during the three and six months ended June 30, 2024.
53
TABLE OF CONTENTS
Noninterest Expenses
Total noninterest expenses increased $889 thousand, or 7.11%, for the three months ended June 30, 2025 and $1.1 million, or 4.42%, for the six months ended June 30, 2025 compared to the same periods in 2024. The following table presents the components of noninterest expense for the three and six months ended June 30, 2025 and 2024, which are included within the respective Consolidated Statements of Operations headings. Variances that the Company believes require explanation are discussed below the table.
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||||||||||||||||||
|
|
June 30, |
|
|
June 30, |
|
||||||||||||||||||||||||||
(dollars in thousands) |
|
2025 |
|
|
2024 |
|
|
$ Change |
|
|
% Change |
|
|
2025 |
|
|
2024 |
|
|
$ Change |
|
|
% Change |
|
||||||||
Salaries and employee benefits |
|
$ |
7,845 |
|
|
$ |
7,353 |
|
|
$ |
492 |
|
|
|
7 |
% |
|
$ |
15,024 |
|
|
$ |
14,538 |
|
|
$ |
486 |
|
|
|
3 |
% |
Occupancy expenses |
|
|
598 |
|
|
|
470 |
|
|
|
128 |
|
|
|
27 |
% |
|
|
1,260 |
|
|
|
1,039 |
|
|
|
221 |
|
|
|
21 |
% |
Equipment expenses |
|
|
401 |
|
|
|
401 |
|
|
|
— |
|
|
|
— |
% |
|
|
824 |
|
|
|
774 |
|
|
|
50 |
|
|
|
6 |
% |
Advertising and marketing expenses |
|
|
152 |
|
|
|
245 |
|
|
|
(93 |
) |
|
|
(38 |
)% |
|
|
335 |
|
|
|
482 |
|
|
|
(147 |
) |
|
|
(30 |
)% |
Stationary and supplies |
|
|
35 |
|
|
|
32 |
|
|
|
3 |
|
|
|
9 |
% |
|
|
77 |
|
|
|
56 |
|
|
|
21 |
|
|
|
38 |
% |
ATM network fees |
|
|
332 |
|
|
|
373 |
|
|
|
(41 |
) |
|
|
(11 |
)% |
|
|
694 |
|
|
|
753 |
|
|
|
(59 |
) |
|
|
(8 |
)% |
Loss on sale of repossessed assets |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
NM |
|
|
|
133 |
|
|
|
— |
|
|
|
133 |
|
|
NM |
|
||
FDIC assessment |
|
|
254 |
|
|
|
351 |
|
|
|
(97 |
) |
|
|
(28 |
)% |
|
|
576 |
|
|
|
760 |
|
|
|
(184 |
) |
|
|
(24 |
)% |
Computer software expense |
|
|
325 |
|
|
|
221 |
|
|
|
104 |
|
|
|
47 |
% |
|
|
607 |
|
|
|
454 |
|
|
|
153 |
|
|
|
34 |
% |
Bank franchise tax |
|
|
381 |
|
|
|
338 |
|
|
|
43 |
|
|
|
13 |
% |
|
|
748 |
|
|
|
669 |
|
|
|
79 |
|
|
|
12 |
% |
Professional fees |
|
|
641 |
|
|
|
511 |
|
|
|
130 |
|
|
|
25 |
% |
|
|
1,204 |
|
|
|
1,017 |
|
|
|
187 |
|
|
|
18 |
% |
Data processing fees |
|
|
633 |
|
|
|
558 |
|
|
|
75 |
|
|
|
13 |
% |
|
|
1,183 |
|
|
|
1,123 |
|
|
|
60 |
|
|
|
5 |
% |
Other operating expenses |
|
|
1,802 |
|
|
|
1,657 |
|
|
|
145 |
|
|
|
9 |
% |
|
|
3,323 |
|
|
|
3,222 |
|
|
|
101 |
|
|
|
3 |
% |
Total noninterest expenses |
|
$ |
13,399 |
|
|
$ |
12,510 |
|
|
$ |
889 |
|
|
|
7 |
% |
|
$ |
25,988 |
|
|
$ |
24,887 |
|
|
$ |
1,101 |
|
|
|
4 |
% |
NM - Not Meaningful
Salaries and employee benefits increased during the three and six months ended June 30, 2025 over 2024, reflecting increases in salaries, commission and employee insurance expense, partially offset by a decrease in the annual incentive plan expense. The Company's number of full-time equivalent employees ("FTE's") has increased from 244 at June 30, 2024 to 245 at June 30, 2025.
Occupancy expenses increased during the three and six months ended June 30, 2025 largely due to the impact of the sales-leaseback transaction of the Company's operating center and branch building in December 2024. Rental expense, net of building depreciation increased $137 thousand and $250 thousand, during the three and six months ended June 30, 2025, respectively, compared to the 2024 periods. The increase in rental expense also reflects a new long-term lease executed during the first quarter of 2025 as the Company is moving its current loan production office and establishing a full-service branch in McLean, Viriginia.
Advertising and marketing expenses decreased during the three and six months ended June 30, 2025 compared to the same periods in 2024, reflecting fewer advertising campaigns and a marketing bonus credit related to the Bank's credit card provider relationship.
Three repossessed marine vessels were sold during the first quarter of 2025, resulting in the recognition of a $133 thousand loss during the six months ended June 30, 2025. There were no sales of repossessed assets during the three months ended June 30, 2025 or the three and six months ended June 30, 2024.
FDIC assessment expense, which is based in part on asset size and capital levels, decreased during the three and six months ended June 30, 2025 over 2024. The decrease in FDIC assessment reflects an improvement in the capital and financial ratio portion of the assessment rate, due to the capital raise completed in early 2025.
54
TABLE OF CONTENTS
Computer software expenses increased during the three and six months ended June 30, 2025 as the Company continues to invest in technology to enhance systems security and drive operational efficiencies.
Professional fees increased during the three and six months ended June 30, 2025 compared to the same periods in 2024 primarily due to legal fees related to loan matters and outside recruitment services.
Other operating expenses increased by $145 thousand, or 8.75%, and $101 thousand, or 3.13%, during the three and six months ended June 30, 2025 compared to the three and six months ended June 30, 2024, largely reflecting a higher level of fraudulent activity related to customer accounts and higher expenses related to volume based costs and loan collection costs.
The efficiency ratio of the Company was 64.91% and 77.00% for the three months ended June 30, 2025 and 2024, respectively. The efficiency ratio of the Company was 68.23% and 77.36% for the six months ended June 30, 2025 and 2024, respectively. The improvement in the efficiency ratio during 2025 reflects an increase in net interest and noninterest income. The efficiency ratio is not a measurement under GAAP. It is calculated by dividing noninterest expense by the sum of tax equivalent net interest income and noninterest income (loss). The Company adjusts for non-recurring items such as gains and losses on the investment portfolio and other gains/losses from OREO, repossessed assets, disposals of bank premises and equipment, etc. The tax rate utilized is 21%. The Company calculates and reviews this ratio as a means of evaluating operational efficiency.
The calculation of the efficiency ratio for the three and six months ended June 30, 2025 and 2024 was as follows:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
June 30, |
|
|
June 30, |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
|
|
(in thousands) |
|
|
(in thousands) |
|
||||||||||
Summary of Operating Results: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Noninterest expenses (GAAP) |
|
$ |
13,399 |
|
|
$ |
12,510 |
|
|
$ |
25,988 |
|
|
$ |
24,887 |
|
Less: Loss on sale of repossessed assets |
|
|
— |
|
|
|
— |
|
|
|
133 |
|
|
|
— |
|
Adjusted noninterest expenses (Non-GAAP) |
|
$ |
13,399 |
|
|
$ |
12,510 |
|
|
$ |
25,855 |
|
|
$ |
24,887 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net interest income |
|
|
15,698 |
|
|
|
12,156 |
|
|
|
29,034 |
|
|
|
24,571 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Noninterest income (loss) (GAAP) |
|
|
4,917 |
|
|
|
4,305 |
|
|
|
(3,637 |
) |
|
|
7,785 |
|
Less: (Loss) on the sale and disposal of premises and equipment |
|
|
— |
|
|
|
(11 |
) |
|
|
(16 |
) |
|
|
(11 |
) |
Less: (Loss) on the sale of securities |
|
|
— |
|
|
|
— |
|
|
|
(12,425 |
) |
|
|
— |
|
Less: Income from life insurance proceeds |
|
|
— |
|
|
|
254 |
|
|
|
— |
|
|
|
254 |
|
Adjusted noninterest income (Non-GAAP) |
|
$ |
4,917 |
|
|
$ |
4,062 |
|
|
$ |
8,804 |
|
|
$ |
7,542 |
|
Tax equivalent adjustment (1) |
|
|
26 |
|
|
|
29 |
|
|
|
54 |
|
|
|
58 |
|
Total net interest income and noninterest income, adjusted (Non-GAAP) |
|
$ |
20,641 |
|
|
$ |
16,247 |
|
|
$ |
37,892 |
|
|
$ |
32,171 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Efficiency ratio |
|
|
64.91 |
% |
|
|
77.00 |
% |
|
|
68.23 |
% |
|
|
77.36 |
% |
Income Taxes
Income tax expense of $1.3 million and $585 thousand was recognized during the three months ended June 30, 2025 and 2024, respectively. For the six months ended June 30, 2025 an income tax benefit of $788 thousand was recognized compared to income tax expense of $1.1 million during the six months ended June 30, 2024. The effective tax rate was 19.52% and 15.52% for the three months ended June 30, 2025 and 2024, respectively. The effective tax (benefit) rate for six months ended June 30, 2025 and 2024 was (31.62%) and 15.85%, respectively. The year over year comparisons include tax-exempt income on
55
TABLE OF CONTENTS
investment securities and loans, BOLI income, income tax credits on qualified affordable housing project investments, and qualified rehabilitation credits. Additionally, during the six months ended June 30, 2025, the effective tax (benefit) rate was also impacted by the balance sheet repositioning transactions. Qualified affordable housing project investments are discussed in Note 11 to the Consolidated Financial Statements.
Business Segments
The Company has three reportable operating segments: community banking, marine lending and wealth management. See Note 16 to the Consolidated Financial Statements.
The following table presents a summarized statement of operations for the community banking business segment for the three and six months ended June 30, 2025 and 2024:
|
|
For the Three Months Ended June 30, |
|
|
For the Six Months Ended June 30, |
|
||||||||||||||||||||||||||
(dollars in thousands) |
|
2025 |
|
|
2024 |
|
|
$ Change |
|
|
% Change |
|
|
2025 |
|
|
2024 |
|
|
$ Change |
|
|
% Change |
|
||||||||
Net Interest Income |
|
$ |
14,434 |
|
|
$ |
10,743 |
|
|
$ |
3,691 |
|
|
|
34 |
% |
|
$ |
26,614 |
|
|
$ |
21,490 |
|
|
$ |
5,124 |
|
|
|
24 |
% |
Gain on sales of loans |
|
|
1,104 |
|
|
|
492 |
|
|
|
612 |
|
|
|
124 |
% |
|
|
1,533 |
|
|
|
653 |
|
|
|
880 |
|
|
|
135 |
% |
(Loss) on the sale of securities |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
NM |
|
|
|
(12,425 |
) |
|
|
— |
|
|
|
(12,425 |
) |
|
NM |
|
||
Other noninterest income |
|
|
2,120 |
|
|
|
2,540 |
|
|
|
(420 |
) |
|
|
(17 |
)% |
|
|
3,838 |
|
|
|
4,403 |
|
|
|
(565 |
) |
|
|
(13 |
)% |
Net Revenue |
|
|
17,658 |
|
|
|
13,775 |
|
|
|
3,883 |
|
|
|
28 |
% |
|
|
19,560 |
|
|
|
26,546 |
|
|
|
(6,986 |
) |
|
|
(26 |
)% |
Provision for credit losses |
|
|
794 |
|
|
|
207 |
|
|
|
587 |
|
|
|
284 |
% |
|
|
2,171 |
|
|
|
293 |
|
|
|
1,878 |
|
|
|
641 |
% |
Noninterest expense |
|
|
12,339 |
|
|
|
11,605 |
|
|
|
734 |
|
|
|
6 |
% |
|
|
24,051 |
|
|
|
22,979 |
|
|
|
1,072 |
|
|
|
5 |
% |
Income (Loss) before taxes |
|
|
4,525 |
|
|
|
1,963 |
|
|
|
2,562 |
|
|
|
131 |
% |
|
|
(6,662 |
) |
|
|
3,274 |
|
|
|
(9,936 |
) |
|
|
(303 |
)% |
Income tax expense (benefit) |
|
|
855 |
|
|
|
205 |
|
|
|
650 |
|
|
|
316 |
% |
|
|
(1,651 |
) |
|
|
321 |
|
|
|
(1,972 |
) |
|
|
(614 |
)% |
Net Income (Loss) |
|
$ |
3,670 |
|
|
$ |
1,758 |
|
|
$ |
1,912 |
|
|
|
109 |
% |
|
$ |
(5,011 |
) |
|
$ |
2,953 |
|
|
$ |
(7,964 |
) |
|
|
(270 |
)% |
Net interest income increased during the three and six months ended June 30, 2025 compared to the three and six months ended June 30, 2024 primarily due to income earned on: i) non-marine loans; ii) the investment securities portfolio, which was restructured in the first quarter of 2025 to sell and replace lower yielding investments with higher yielding securities; iii) higher levels of earning deposit balances in other other banks; and iv) reduction in borrowings expense as FHLB advances have matured. These increases were partially offset by an increase in interest-bearing deposit expense due to growth in average balances. Higher levels of interest-earning deposits balances in other banks reflects proceeds received from the capital raise and sales of available for sale securities completed during the first quarter of 2025, as well as increases in customer deposit balances.
Provision for credit losses increased primarily due to charge-offs totaling $971 thousand and a specific reserve of $1.1 million related to a $11.5 million commercial real estate loan relationship, partially offset by recoveries and decreases in loan balances.
Loss on the sale of securities resulted from the Company's execution of balance sheet repositioning transactions within its investment securities portfolio in March 2025. Available for sale debt securities totaling $99.2 million, with a fair value of $86.8 million, were sold resulting in a net pre-tax loss of $12.4 million.
The decrease in income tax expense during the six months ended June 30, 2025 was directly related to the recognized loss on the sale of securities.
56
TABLE OF CONTENTS
The following table presents a summarized statement of operations for the marine lending segment for the three and six months ended June 30, 2025 and 2024:
|
|
For the Three Months Ended June 30, |
|
|
For the Six Months Ended June 30, |
|
||||||||||||||||||||||||||
(dollars in thousands) |
|
2025 |
|
|
2024 |
|
|
$ Change |
|
|
% Change |
|
|
2025 |
|
|
2024 |
|
|
$ Change |
|
|
% Change |
|
||||||||
Net Interest Income |
|
$ |
1,619 |
|
|
$ |
1,768 |
|
|
$ |
(149 |
) |
|
|
(8 |
)% |
|
$ |
3,129 |
|
|
$ |
3,790 |
|
|
$ |
(661 |
) |
|
|
(17 |
)% |
Net Revenue |
|
|
1,619 |
|
|
|
1,768 |
|
|
|
(149 |
) |
|
|
(8 |
)% |
|
|
3,129 |
|
|
|
3,790 |
|
|
|
(661 |
) |
|
|
(17 |
)% |
(Recovery of) provision for credit losses |
|
|
(126 |
) |
|
|
(26 |
) |
|
|
(100 |
) |
|
|
385 |
% |
|
|
(270 |
) |
|
|
363 |
|
|
|
(633 |
) |
|
|
(174 |
)% |
Noninterest expense |
|
|
126 |
|
|
|
135 |
|
|
|
(9 |
) |
|
|
(7 |
)% |
|
|
230 |
|
|
|
353 |
|
|
|
(123 |
) |
|
|
(35 |
)% |
Income before taxes |
|
|
1,619 |
|
|
|
1,659 |
|
|
|
(40 |
) |
|
|
(2 |
)% |
|
|
3,169 |
|
|
|
3,074 |
|
|
|
95 |
|
|
|
3 |
% |
Income tax expense |
|
|
339 |
|
|
|
349 |
|
|
|
(10 |
) |
|
|
(3 |
)% |
|
|
665 |
|
|
|
646 |
|
|
|
19 |
|
|
|
3 |
% |
Net Income |
|
$ |
1,280 |
|
|
$ |
1,310 |
|
|
$ |
(30 |
) |
|
|
(2 |
)% |
|
$ |
2,504 |
|
|
$ |
2,428 |
|
|
$ |
76 |
|
|
|
3 |
% |
Marine Lending net revenues declined $149 thousand and $661 thousand for the three and six months ended June 30, 2025 compared to the corresponding periods in 2024. This was due to pay downs in the portfolio, which are not being replaced with new loan originations. The marine loan portfolio totaled $196.4 million and $236.9 million at June 30, 2025 and June 30, 2024, respectively.
Provision for credit losses declined reflecting declining loan balances, net of charge-off activity.
The following table presents a summarized statement of operations for the wealth management segment for the three and six months ended June 30, 2025 and 2024:
|
|
For the Three Months Ended June 30, |
|
|
For the Six Months Ended June 30, |
|
||||||||||||||||||||||||||
(dollars in thousands) |
|
2025 |
|
|
2024 |
|
|
$ Change |
|
|
% Change |
|
|
2025 |
|
|
2024 |
|
|
$ Change |
|
|
% Change |
|
||||||||
Other noninterest income |
|
|
1,693 |
|
|
|
1,273 |
|
|
|
420 |
|
|
|
33 |
% |
|
$ |
3,417 |
|
|
$ |
2,729 |
|
|
$ |
688 |
|
|
|
25 |
% |
Net Revenue |
|
|
1,693 |
|
|
|
1,273 |
|
|
|
420 |
|
|
|
33 |
% |
|
|
3,417 |
|
|
|
2,729 |
|
|
|
688 |
|
|
|
25 |
% |
Provision for credit losses |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Noninterest expense |
|
|
776 |
|
|
|
675 |
|
|
|
101 |
|
|
|
15 |
% |
|
|
1,459 |
|
|
|
1,347 |
|
|
|
112 |
|
|
|
8 |
% |
Income before taxes |
|
|
917 |
|
|
|
598 |
|
|
|
319 |
|
|
|
53 |
% |
|
|
1,958 |
|
|
|
1,382 |
|
|
|
576 |
|
|
|
42 |
% |
Income tax expense |
|
|
192 |
|
|
|
125 |
|
|
|
67 |
|
|
|
54 |
% |
|
|
411 |
|
|
|
290 |
|
|
|
121 |
|
|
|
42 |
% |
Net Income |
|
$ |
725 |
|
|
$ |
473 |
|
|
$ |
252 |
|
|
|
53 |
% |
|
$ |
1,547 |
|
|
$ |
1,092 |
|
|
$ |
455 |
|
|
|
42 |
% |
Net revenue increased during the three and six months ended June 30, 2025 over the 2024 periods due to increases in trust services income reflecting fees earned on a higher level of assets under management and estate settlements and increases in investment sales revenue.
FINANCIAL CONDITION
Two significant events impacting the Company's financial condition occurred during the first quarter of 2025. On February 13, 2025, the Company completed an underwritten public offering of 1,796,875 shares of its common stock at a public offering price of $32.00 per share. The net proceeds from the offering were $53.5 million. During March 2025, the Company executed
57
TABLE OF CONTENTS
balance sheet repositioning transactions within its investment securities portfolio. The execution of these events was to support continued organic growth and capital generation. These are further described in their corresponding paragraphs below.
Securities
Total securities available for sale were $120.9 million at June 30, 2025, compared to $121.3 million at December 31, 2024. This represents a decrease of $423 thousand, or 0.35%. The Company purchased $91.2 million of securities during the six months ended June 30, 2025. The Company had total maturities, calls, and principal repayments of $6.9 million and sales of $99.2 million during the six months ended June 30, 2025. Note 4 to the Consolidated Financial Statements provides additional details about the Company’s securities portfolio at June 30, 2025 and December 31, 2024. The Company had a net unrealized loss on available for sale securities of $9.2 million at June 30, 2025 as compared to a net unrealized loss of $23.6 million at December 31, 2024. Unrealized gains or losses on available for sale securities are reported within shareholders’ equity, net of the related deferred tax effect, as accumulated other comprehensive income (loss).
During March 2025, balance sheet repositioning transactions were comprised of sales of available for sale debt securities with an amortized cost balance of $99.2 million (fair value of $86.8 million) and a weighted average yield of 1.72%, with proceeds reinvested into purchases of $66.0 million of available for sale debt securities with a weighted average yield of 4.72%. The total sales of $99.2 million represented 68.48% of December 31, 2024 securities balance. The majority of these repositioning sales and purchases consisted of mortgage-backed securities. The sale of debt securities resulted in a net pre-tax realized loss of $12.4 million (after-tax of $9.8 million) that was recognized in the first quarter of 2025. In addition to the repositioning transactions, the Company purchased U.S. Treasury notes totaling $9.9 million prior to the repositioning to maintain pledging levels throughout the repositioning period and has also made subsequent purchases.
The primary cause of the unrealized losses at June 30, 2025 and December 31, 2024 was changes in market interest rates, rather than other market conditions or credit concerns of the issuers over the time between purchase and measurement periods. Since the losses can be primarily attributed to changes in market interest rates and conditions and not expected cash flows or an issuer’s financial condition and management does not intend to sell and it is likely that management will not be required to sell the securities prior to their anticipated recovery, the Company concluded a credit loss did not exist.
Loan Portfolio
The Company’s primary use of funds is supporting lending activities from which it derives the greatest amount of interest income. Gross loans were $1.44 billion and $1.47 billion at June 30, 2025 and December 31, 2024, respectively. This represents a decrease of $28.4 million, or 1.94%, during the six months ended June 30, 2025. The ratio of gross loans to deposits decreased during the six months ended June 30, 2025 from 93.14% at December 31, 2024 to 81.44% at June 30, 2025 reflecting the decrease in gross loans, compounded by a 12.15% increase in deposits during the same time period.
The loan portfolio consists primarily of loans for owner-occupied single-family dwellings and loans secured by commercial real estate. Note 5 to the Consolidated Financial Statements provides the composition of the loan portfolio at June 30, 2025 and December 31, 2024. During the six months ended June 30, 2025, through the normal course of business, $60.7 million in loans were sold, consisting primarily of mortgage loans. Included in total loans sold was a pool of residential mortgage loans totaling $18.8 million, which was sold at par. This pool was sold in January 2025, ahead of the Company's public offering, to bolster on-balance sheet liquidity. Loan sales resulted in net gains of $1.5 million during the six months ended June 30, 2025. Loan sales, paydowns within the marine portfolio, and significant payoffs of commercial and industrial loans related to the sales of two customers' businesses caused the balance of gross loans to experience a net decline, while being partially offset by modest loans originations, primarily secured by real estate.
Residential real estate loans, consisting of first liens, junior liens and home equity loans, were $346.4 million, or 24.08%, and $361.8 million, or 24.66%, of total loans at June 30, 2025 and December 31, 2024, respectively. The decrease of $15.4 million, or 4.26%, is primarily due to the portfolio loan sale.
58
TABLE OF CONTENTS
Commercial real estate loans (including multifamily loans) were $661.7 million, or 45.99%, and $639.9 million, or 43.62%, of total loans at June 30, 2025 and December 31, 2024, respectively, representing an increase of $21.7 million, or 3.40%, during the six months ended June 30, 2025. Owner occupied commercial real estate loans experienced a $16.6 million increase during the six months ended June 30, 2025 due to a large construction loan being converted to permanent financing, and non-owner occupied and multifamily commercial real estate loans increased $5.1 million during the same period.
Construction and secured by farmland loans totaled $76.1 million at June 30, 2025 compared to $95.2 million at December 31, 2024, a decrease of $19.1 million, or 20.11%. The majority of this decrease was a large construction loan which converted to permanent financing in the owner-occupied commercial real estate pool.
Marine loans were $196.4 million, or 13.65%, and $210.1 million, or 14.32%, of total loans at June 30, 2025 and December 31, 2024, respectively, representing a decrease of $13.7 million, or 6.50%. The decline in marine loans reflects paydowns and payoffs only as the Company is no longer accepting new marine business. At present, the Company expects to hold the retained outstanding loans until they are ultimately repaid.
Allowance for Credit Losses on Loans
The purpose of, and the methods for, measuring the allowance for credit losses on loans are discussed in Note 1 to the Consolidated Financial Statements in the 2024 Form 10-K. Note 5 to the Consolidated Financial Statements shows the activity within the allowance for credit losses on loans during the three and six months ended June 30, 2025 and 2024 and the year ended December 31, 2024. Charged-off loans were $1.4 million and $877 thousand for the six months ended June 30, 2025 and 2024, respectively. Of the total charge-offs during the six months ended June 30, 2025, $971 thousand, or 68.82%, was due to one commercial real estate relationship totaling $11.5 million. Recoveries were $361 thousand and $609 thousand for the six months ended June 30, 2025 and 2024, respectively. This resulted in net charge-offs of $1.1 million and $268 thousand for the six months ended June 30, 2025 and 2024, respectively. The annualized ratio of net charge-offs to average loans was 0.15% and 0.04% for the six months ended June 30, 2025 and 2024, respectively. The allowance for credit losses on loans as a percentage of loans was 1.11% at June 30, 2025 and 1.02% at December 31, 2024. The increase as compared to December 31, 2024 was mainly attributable to net loan charge-offs and specific reserves during the three months ended June 30, 2025.
Management believes that the allowance for credit losses on loans is currently adequate to absorb the current expected losses in the loan portfolio.
Credit Risk, Nonperforming Assets and Other Assets
The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually to classify the loans as to credit risk on a quarterly basis. Loans risk rated as special mention, which exhibit negative trends and potential weaknesses, including stale financial information, totaled $51.0 million at June 30, 2025 compared to $50.1 million at December 31, 2024. Loans risk rated as classified, include substandard, doubtful, and loss loans, totaled $19.1 million and $4.5 million at June 30, 2025 and December 31, 2024, respectively. All other loans were classified as pass, exhibiting acceptable history of profits, cash flow ability and liquidity. The increase in classified loans of $14.6 million was primarily due to two large commercial real estate relationships being placed on nonaccrual status during the first quarter of 2025, including a $2.2 million owner-occupied relationship and an $11.5 million non-owner occupied relationship. Additionally, in the second quarter of 2025, a $400 thousand commercial and industrial loan secured by business assets was placed on nonaccural status.
Nonperforming assets consist of nonaccrual loans, repossessed assets, OREO (foreclosed properties), and loans past due 90 days or more and still accruing as detailed in the table below.
59
TABLE OF CONTENTS
|
|
June 30, 2025 |
|
|
December 31, 2024 |
|
||
Nonaccrual loans |
|
$ |
16,735 |
|
|
$ |
2,072 |
|
Loans past due 90 days or more and accruing interest |
|
|
593 |
|
|
|
— |
|
Other real estate owned and repossessed assets |
|
|
186 |
|
|
|
514 |
|
Total nonperforming assets |
|
$ |
17,514 |
|
|
$ |
2,586 |
|
|
|
|
|
|
|
|
||
Allowance for credit losses on loans |
|
$ |
15,979 |
|
|
$ |
15,027 |
|
|
|
|
|
|
|
|
||
Gross loans |
|
$ |
1,438,632 |
|
|
$ |
1,467,049 |
|
|
|
|
|
|
|
|
||
Allowance for credit losses on loans to nonperforming assets |
|
|
91 |
% |
|
|
581 |
% |
|
|
|
|
|
|
|
||
Allowance for credit losses on loans to total loans |
|
|
1.11 |
% |
|
|
1.02 |
% |
|
|
|
|
|
|
|
||
Allowance for credit losses on loans to nonaccrual loans |
|
|
95 |
% |
|
|
725 |
% |
|
|
|
|
|
|
|
||
Nonaccrual loans to total loans |
|
|
1.16 |
% |
|
|
0.14 |
% |
|
|
|
|
|
|
|
||
Non-performing assets to period end loans, other real estate owned and repossessed assets |
|
|
1.22 |
% |
|
|
0.18 |
% |
Nonperforming assets increased by $14.9 million during the six months ended June 30, 2025. Nonaccrual loans were $16.7 million and $2.1 million at June 30, 2025 and December 31, 2024, respectively. There was $186 thousand in OREO and repossessed assets at June 30, 2025 and $514 thousand at December 31, 2024. Loans past due 90 days or more and still accruing at June 30, 2025 totaled $593 thousand and $0 at December 31, 2024. The percentage of nonperforming assets to loans, OREO and repossessed assets was 1.22% at June 30, 2025 and 0.18% at December 31, 2024.
Total past due loans, as disclosed in Note 5 to the Consolidated Financial Statements, increased to $22.3 million at June 30, 2025 compared to $4.5 million at December 31, 2024. The $17.7 million increase in past due loans primarily reflects loans secured by real estate. One non-owner occupied commercial real estate relationship accounts for $11.5 million of the total increase, comprised of four residential multifamily income producing properties. The largest of the four properties had a corresponding loan balance of $5.9 million. This property was offered for sale on July 8, 2025, for $5.7 million with the Bank agreeing to a short sale of $4.8 million, thereby creating a deficiency balance of $1.1 million after consideration of past due taxes and other costs. Although the property owner has entered into an agreement to pay back the deficiency balance and collateralized the note with the remaining three properties and two additional properties, the Bank has allocated a specific reserve for the full amount of the deficiency balance.
During the six months ended June 30, 2025, nonaccrual loans increased by $14.6 million and totaled $16.7 million at June 30, 2025 compared to $2.1 million at December 31, 2024. The increase was primarily due to an $11.5 million non-owner occupied commercial real estate relationship secured by multi-family housing units, which has a specific reserve of $1.1 million (described previously) and a $2.2 million owner-occupied commercial real estate relationship, which is fully collateralized. Management evaluates the financial condition of borrowers and the value of any collateral on nonaccrual loans. The results of these evaluations are used to estimate the amount of losses which may be realized on the disposition of these nonaccrual loans and are reflected in the allowance for credit losses on loans. At June 30, 2025 there were specific reserves of $1.5 million required including $1.1 million for one non-owner occupied commercial real estate relationship and $381 thousand allocated on four commercial business loan relationships due to a potential deficiency in collateral value, compared to $248 thousand at December 31, 2024.
Loans are placed on nonaccrual 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. 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
60
TABLE OF CONTENTS
as a loss. Second, accruals of interest are discontinued until it becomes certain that both principal and interest can be repaid. Finally, there may be actual losses to principal that require additional provisions for credit losses to be charged against earnings.
For real estate loans, upon foreclosure, the balance of the loan is transferred to OREO and carried at the fair value of the property based on current appraisals and other current market trends, less estimated selling costs. If a write down of the OREO property is necessary at the time of foreclosure, the amount is charged-off to the allowance for credit losses. A review of the recorded property value is performed in conjunction with normal quarterly reviews, and if market conditions indicate that the recorded value exceeds the fair value, additional write downs of the property value are charged directly to operations.
Deposits
Total deposits were $1.77 billion and $1.58 billion at June 30, 2025 and December 31, 2024, respectively. This represents an increase of $191.4 million or 12.15% during the six months ended June 30, 2025. The majority of this increase was due to large deposits in non-interest bearing accounts totaling $151.7 million received during the second quarter 2025 primarily related to sales proceeds of two customers' businesses. Note 6 to the Consolidated Financial Statements provides the composition of total deposits at June 30, 2025 and December 31, 2024. The total increase in deposits was primarily in non-core accounts, which increased $142.4 million while core accounts increased $48.9 million. During the six months ended June 30, 2025, noninterest demand deposits experienced an increase of $168.4 million, while savings and interest bearing demand deposits increased $49.0 million. Total time deposits decreased $26.1 million during the six months ended June 30, 2025 reflecting decreases of $8.6 million for time deposits with balances less than $250,000 and $17.4 million in time deposits with balances $250,000 and more. Marketing efforts, including rate specials, have been utilized to maintain maturing accounts and to acquire new time deposit accounts. Core deposits, consisting of checking accounts, NOW accounts, money market accounts, regular savings accounts and time deposits less than $250,000, totaled $1.35 billion, or 76.32% of total deposits at June 30, 2025 compared to $1.30 billion, or 82.49%, of total deposits at December 31, 2024. At June 30, 2025 core deposits also excluded the $151.7 million balance related to the business sales proceeds mentioned previously. At June 30, 2025, over 75% of deposits were fully FDIC insured.
CAPITAL RESOURCES
The Bank continues to be a well capitalized financial institution. Total shareholders’ equity at June 30, 2025 was $179.6 million, reflecting a percentage of total assets of 8.83%, as compared to $119.0 million and 6.38% at December 31, 2024. The $60.7 million increase in shareholders’ equity was primarily due to net proceeds of $53.5 million received from the completion of an underwritten public offering of 1,796,875 shares of its common stock at a public offering price of $32.00 per share. An additional increase of $11.3 million is due to a decrease in unrealized losses on the securities available for sale portfolio largely reflecting the impact of the balance sheet repositioning. These increases in shareholders' equity were partially offset by a net operating loss of $1.7 million and $2.8 million in dividends declared for the six months ended June 30, 2025. The Company's net operating loss of $1.7 million was directly impacted by the balance sheet repositioning for which a loss on the sale of securities of $12.4 million was recognized. During the six months ended June 30, 2025 and 2024, the Company declared dividends of $0.62 and $0.60 per share, respectively. The Company has a Dividend Investment Plan that allows shareholders to reinvest dividends in Company stock.
At June 30, 2025, the Bank met all capital adequacy requirements and had regulatory capital ratios in excess of the levels established for well-capitalized institutions. The Bank monitors these ratios on a quarterly basis and has several strategies, including without limitation the issuance of common stock, to ensure that these ratios remain above regulatory minimums. The Bank's capital amounts and ratios are presented using the Federal Reserve's risk-based capital framework.
Effective January 1, 2015, the Federal Reserve issued final risk-based capital rules to align with the Basel III regulatory capital framework and meet certain requirements of the Dodd-Frank Act. The 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
61
TABLE OF CONTENTS
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. In addition, a capital conservation buffer requirement of 2.5% was effective January 1, 2019. The capital conservation buffer is designed to absorb losses during periods of economic stress. Banking institutions with any ratio (excluding the leverage ratio) above the minimum but below the conservation buffer will face constraints on dividends, equity repurchases, and compensation based on the amount of the shortfall. 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.
At June 30, 2025 and December 31, 2024, the Bank's capital ratios were as follows: Common equity Tier 1 capital was 14.14% and 11.04%, respectively, Tier 1 risk-based capital was 14.14% and 11.04%, respectively, Total risk-based capital was 15.20% and 12.00%, respectively, and Tier 1 leverage was 10.92% and 8.79%, respectively. The increase in the Bank's capital ratios was due to the completion of the Company's public offering in February 2025.
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.
On March 31, 2022, the Company entered into Subordinated Note Purchase Agreements with certain purchasers pursuant to which the Company issued and sold $30.0 million in aggregate principal amount of its 4.50% Fixed-to-Floating Rate Subordinated Notes due April 1, 2032. See Note 13 to the Consolidated Financial Statements included in this Form 10-Q, for discussion of subordinated debt.
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. At June 30, 2025, liquid assets totaled $535.9 million as compared to $335.9 million at December 31, 2024. These amounts represented 28.88% and 19.22% of total liabilities at June 30, 2025 and December 31, 2024, respectively. The increase during the first half of 2025 reflects the increased cash on hand from the net proceeds of the capital raise and higher levels of deposits. The Company generally attempts to minimize liquidity demand by primarily utilizing core deposits to fund asset growth. 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. The Bank’s membership with the Federal Home Loan Bank of Atlanta provides a source of borrowings with numerous rate and term structures. 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
There have been no material changes in off-balance sheet arrangements and contractual obligations as reported in the 2024 Form 10-K.
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TABLE OF CONTENTS
Item 3. Quantitative and Qualitative Disclosures about Market Risk
There have been no material changes in Quantitative and Qualitative Disclosures about Market Risk as reported in the 2024 Form 10-K.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
The Company, under the supervision and with the participation of management, including the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of its disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective as of June 30, 2025 to ensure that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and that such information is accumulated and communicated to the Company’s management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Internal Control over Financial Reporting
Management is also responsible for establishing and maintaining adequate internal control over the Company’s financial reporting (as defined in Rule 13a-15(f) promulgated under the Securities Exchange Act of 1934, as amended). The Company is currently using the 2013 COSO Framework.
There were no changes in the Company’s internal control over financial reporting during the Company’s three months ended June 30, 2025 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
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TABLE OF CONTENTS
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There are no material pending legal proceedings to which the Company is a party or of which the property of the Company is subject.
Item 1A. Risk Factors
There were no material changes to the Company’s risk factors as disclosed in its Annual Report on Form 10-K for the year ended December 31, 2024.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table details the Company's purchases of its common stock during the second quarter of 2025 pursuant to its Stock Repurchase Program ("the Program"). On June 18, 2025, the Board of Directors of the Company re-authorized the purchase of up to 150,000 shares for repurchase under the Program. The Program expires on June 30, 2026.
|
|
Issuer Purchases of Equity Securities |
|
|||||||||||||
|
|
Total Number |
|
|
Average Price |
|
|
Total Number |
|
|
Maximum |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
140,774 |
|
|||
April 1 - April 30, 2025 |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
|
140,774 |
|
May 1 - May 31, 2025 |
|
|
291 |
|
|
|
30.15 |
|
|
|
291 |
|
|
|
140,483 |
|
June 1 - June 30, 2025 |
|
|
1,141 |
|
|
|
36.25 |
|
|
|
1,432 |
|
|
|
139,342 |
|
|
|
|
1,432 |
|
|
$ |
35.01 |
|
|
|
1,432 |
|
|
|
139,342 |
|
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
Item 5. Other Information
During the fiscal quarter ended June 30, 2025, none of our directors or officers (as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934)
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Item 6. Exhibits
The following exhibits are filed with this Form 10-Q or incorporated by reference to previous filings. This list includes the exhibit index:
31.1 |
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Certification by Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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31.2 |
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Certification by Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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32.1 |
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Certification by Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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101 |
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The following materials from the Eagle Financial Services, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2025 formatted in Inline Extensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income (iv) Consolidated Statements of Changes in Shareholders' Equity, (v) Consolidated Statements of Cash Flows and (vi) notes to Consolidated Financial Statements. |
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104 |
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The cover page from the Eagle Financial Services, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2025 formatted in Inline XBRL (included with Exhibit 101). |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized, this 13th day of August, 2025.
Eagle Financial Services, Inc.
By: |
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/S/ BRANDON C. LOREY |
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Brandon C. Lorey President and Chief Executive Officer |
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By: |
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/S/ KATHLEEN J. CHAPPELL |
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Kathleen J. Chappell Executive Vice President, Chief Financial Officer |
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FAQ
What did Eagle Financial (EFSI) report for Q2 2025 net income?
Why did EFSI record a six-month net loss in 2025?
How much capital did EFSI raise in the public offering and how did equity change?
What are EFSI's liquidity and deposit levels as of June 30, 2025?
What is the allowance for credit losses and nonaccrual loans at June 30, 2025?
