EAGLE FINANCIAL SERVICES, INC. ANNOUNCES 2026 SECOND QUARTER FINANCIAL RESULTS AND QUARTERLY DIVIDEND

BERRYVILLE, Va., July 23, 2026 /PRNewswire/ -- Eagle Financial Services, Inc. (NASDAQ: EFSI) (the "Company"), the holding company for Bank of Clarke, announced its second quarter 2026 results. Also, on July 23, 2026, the Board of Directors announced a quarterly common stock cash dividend of $0.31 per common share, payable on August 14, 2026, to shareholders of record on August 3, 2026. The following table presents selected financial performance highlights for the periods indicated:

Additional key highlights for the second quarter of 2026 are as follows:

• Net loans increased by $39.5 million or 2.74%.
• Net interest margin increased from 3.63% for the quarter ended March 31, 2026 to 3.86% for the quarter ended June 30, 2026. Net interest spread increased from 2.80% for the quarter ended March 31, 2026 to 3.01% for the quarter ended June 30, 2026.

Brandon Lorey, President and CEO, stated, "Our second quarter results reflect continued progress in the core operating performance of the franchise. Meaningful loan growth, improved net interest income, and a net interest margin of 3.86% demonstrate the benefits of the strategic balance sheet actions taken over the last two years and the disciplined execution of our team. While earnings for the quarter were impacted by a higher provision for credit losses, the underlying performance of the organization remained solid, and we continue to believe our strong capital, liquidity, and balance sheet position us well to support our customers, communities, and shareholders."

Summary

Total net income for the quarters ended June 30, 2026 and March 31, 2026 was $5.0 million and $3.7 million, respectively. Net income was $5.3 million for the quarter ended June 30, 2025. During the second quarter of 2026, the Company sold its membership interest in Bearing Insurance Group, LLC (Bearing) to an unaffiliated third party. A pre-tax gain on the sale in the amount of $3.5 million was recognized in the gain on sale of other assets in the consolidated statements of operations during the second quarter of 2026. Excluding the tax effected impact of the gain, adjusted net income for the quarter ended June 30, 2026, was $2.2 million. This is a non-GAAP financial measure. Please refer to the "Reconciliation of GAAP to Non-GAAP Performance Highlights" table for additional information. 

For the quarter ending June 30, 2026, adjusted net income decreased $1.5 million or 40.5% from the quarter ended March 31, 2026 and decreased $3.0 million or 57.7% from the quarter ended June 30, 2025. The declines in both periods were primarily driven by a higher provision for credit losses during the quarter ended June 30, 2026. Additional details regarding these changes are provided below.

Interest Income

Total loan interest income was $21.7 million and $20.7 million for the quarters ended June 30, 2026 and March 31, 2026, respectively. Total loan interest income was $20.4 million for the quarter ended June 30, 2025. Total loan interest income increased $1.0 million or 5.0% from the quarter ended March 31, 2026 to the quarter ended June 30, 2026. Average loans increased by $43.9 million or 3.0% from the quarter ended March 31, 2026 to the quarter ended June 30, 2026. Average loans increased $55.4 million or 3.8% between the quarter ended June 30, 2026 and June 30, 2025. The tax equivalent yield on average loans for the quarter ended June 30, 2026 was 5.82%, an increase of five basis points from the 5.77% average yield for the quarter ended March 31, 2026. The tax equivalent yield on average loans increased 15 basis points from the 5.67% average yield for the quarter ended June 30, 2025. Overall, the increase in loan interest income was mainly due to loan growth. 

Interest and dividend income from the investment portfolio was $1.3 million for the quarters ended June 30, 2026 and March 31, 2026. Interest and dividend income from the investment portfolio was also $1.3 million for the quarter ended June 30, 2025. The tax equivalent yield on average investments for the quarter ended June 30, 2026 was 4.34%, with no change from the quarter ended March 31, 2026 and down three basis points from 4.37% for the quarter ended June 30, 2025. The slight decrease in yield compared with the quarter ended June 30, 2025 reflects normal portfolio activity, including modest securities paydowns and purchases, and was not indicative of a significant change in investment portfolio performance.

Interest Expense

Total interest expense was $7.4 million and $7.9 million for the three months ended June 30, 2026 and March 31, 2026, respectively, and $9.1 million for three months ended June 30, 2025. The decrease in interest expense between the quarter ended March 31, 2026 and the quarter ended June 30, 2026 was mainly due to lower interest expense on Federal Home Loan Bank of Atlanta ("FHLB") advances. The average balance of FHLB advances decreased $28.4 million from the quarter ended March 31, 2026 to the quarter ended June 30, 2026. All FHLB advances were paid off in March. The decrease in interest expense between the quarter ended June 30, 2025 and the quarter ended June 30, 2026 was largely due to a $1.2 million decrease in interest expense on deposits. The average balance of interest-bearing deposits decreased by $46.3 million during the period, while the average yield paid on these deposits declined by 31 basis points. The decrease was primarily driven by a reduction in higher-cost time deposits. The decrease was also attributable to lower interest expense on FHLB advances by $499 thousand for the same comparative periods. The average balance of FHLB advances decreased $40.8 million from the quarter ended June 30, 2025 to the same period in 2026.

Net Interest Income

Net interest income for the quarter ended June 30, 2026 was $16.9 million reflecting an increase of $1.1 million or 6.7% from the quarter ended March 31, 2026 and an increase of $1.3 million or 8.1% from the quarter ended June 30, 2025. Net interest income was $15.9 million and $15.7 million, respectively, for the quarters ended March 31, 2026 and June 30, 2025.

The net interest margin was 3.86% for the quarter ended June 30, 2026. For the quarters ended March 31, 2026 and June 30, 2025, the net interest margin was 3.63% and 3.42%, respectively. The increase in the net interest margin from March 31, 2026 and June 30, 2025 can primarily be attributed to two main factors. FHLB advances paid off in the first quarter of 2026 and there was no FHLB interest expense in the second quarter of 2026. In addition, the run off of higher interest bearing non core deposits during the periods had a positive impact to the net interest margin. The net interest spread increased to 3.01% for the quarter ended June 30, 2026 from 2.80% for the quarter ended March 31, 2026 and from 2.51% from the quarter ended June 30, 2025.

The Company's net interest margin is not a measurement under accounting principles generally accepted in the United States, but it is a common measure used by the financial services industry to determine how profitable earning assets are funded. The Company's net interest margin is calculated by dividing tax equivalent net interest income by total average earning assets. Tax equivalent net interest income is calculated by grossing up interest income for the amounts that are non-taxable (i.e., municipal income) then subtracting interest expense. The tax rate utilized is 21%. This is a non-GAAP financial measure. Please refer to the "Reconciliation of Tax-Equivalent Net Interest Income" table for additional information.

Noninterest Income and Expense

Total noninterest income was $8.6 million and $4.9 million for the quarters ended June 30, 2026 and March 31, 2026 respectively. Total noninterest income was $4.9 million for the quarter ended June 30, 2025.

Total noninterest income increased in the second quarter of 2026 compared to the first quarter of 2026, primarily due to a gain on the sale of other assets. During the quarter, the Company sold its membership interest in Bearing to an unaffiliated third party and recognized a pre-tax gain of $3.5 million, which was recorded in gain on sale of other assets.

Noninterest income, as adjusted to exclude the one-time effect of the gain on the sale, was $5.1 million for the quarter ended June 30, 2026. This adjusted amount is a non-GAAP financial measure. See the "Reconciliation of GAAP to Non-GAAP Performance Highlights" table for additional information.

Compared to both the first quarter of 2026 and the second quarter of 2025, adjusted noninterest income increased primarily due to higher wealth management fee income. Assets under management increased from $544 million at June 30, 2025 to $599 million at June 30, 2026. The second quarter of 2026 benefited from elevated transaction-based revenues related to estates and other client services. The increase was partially offset by lower sales volume of loans held for sale, primarily within the Small Business Administration ("SBA") portfolio.

Noninterest expense increased $1.3 million, or 9.3%, to $15.5 million for the quarter ended June 30, 2026 from $14.2 million for the quarter ended March 31, 2026 and increased $2.1 million or 15.9% compared to the quarter ended June 30, 2026.

Total noninterest expense increased in the second quarter of 2026 compared to the first quarter of 2026, primarily due to higher salaries and benefits expense. The increase was largely attributable to higher incentive compensation accruals as performance metrics reached payout levels during the quarter, as well as increased loan production incentive accruals associated with loan growth. In addition, annual merit increases and compensation adjustments, which were implemented at the end of the first quarter and became effective in the second quarter, contributed to the increase.

Total noninterest expense increased in the second quarter of 2026 compared to the second quarter of 2025, primarily due to higher salaries and employee benefits expense and increased other operating expenses. In addition to the higher incentive compensation accruals discussed above, salaries and employee benefits expense increased as a result of growth in the Company's workforce, with full-time equivalent ("FTE") employees increasing from 245 to 259 during the period. Other operating expenses increased largely due to higher contributions toward charitable activities, primarily driven by the Bank's matching of donations from a very successful "Give with BOC" campaign as well as elevated loan collection costs associated with a single multifamily relationship included in the nonaccrual loan balance discussed below.

Asset Quality and Provision for Credit Losses

Nonperforming assets consist of nonaccrual loans, loans 90 days or more past due and still accruing, other real estate owned (foreclosed properties), and repossessed assets. Nonperforming assets increased by $1.7 million between March 31, 2026 and June 30, 2026. This increase was due to the addition of one $3.6 million multifamily loan to nonaccrual status which was partially offset by the $1.6 million partial write-down to an already existing multi-family relationship. Based on a recent valuation, the Bank has specifically allocated $525 thousand to this new nonaccrual loan. Nonperforming assets decreased slightly as of June 30, 2026 in comparison to June 30, 2025 mainly due to one large loan being paid off during the period. The collateral for this loan (multifamily real estate) was offered for sale on July 8, 2025, for $5.7 million with the Bank agreeing to a short sale of $4.8 million. This decrease was partially offset by four relationships in excess of $1 million being placed in nonaccrual status during the same period.

The majority of all nonaccrual loans are secured by real estate and management evaluates the financial condition of these borrowers and the value of any collateral on these 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. Specific reserves on nonaccrual loans totaled $3.1 million, $2.1 million and $1.5 million as of June 30, 2026, March 31, 2026 and June 30, 2025, respectively. The increase in the specific reserve as of June 30, 2026 was due to the $525 thousand specific allocation for the recently added nonaccrual multifamily loan discussed above as well as an increase in an existing nonaccrual loan allocation as collateral was liquidated.

Net charge-offs totaled $2.2 million for the quarter ended June 30, 2026, compared to net recoveries of $34 thousand for the linked quarter and net charge-offs of $159 thousand for the second quarter of 2025. The majority of second quarter 2026 charge-offs related to a $1.6 million partial write-down of a single multifamily relationship to the fair value of the underlying collateral, net of estimated selling costs. The remaining charge-offs were attributable to five smaller relationships. The charge-offs reflect the Company's continued efforts to proactively identify and address credit deterioration while maintaining appropriate collateral-based valuations within the loan portfolio.

The allowance for credit losses as a percentage of total loans was 1.22% at June 30, 2026, compared to 1.19% at March 31, 2026 and 1.11% at June 30, 2025. The increase from the linked quarter primarily reflected changes in historical loss factors, most notably within the marine and non-owner-occupied commercial real estate portfolios, as well as higher qualitative factor adjustments in certain portfolios, including commercial and industrial and construction and farmland loans, associated with loan growth and credit quality trends. There were also increased specific reserves during this period. Compared to June 30, 2025, the increase in the allowance ratio was driven primarily by higher specific reserves resulting from updated collateral valuations. The Company's allowance level continues to reflect management's assessment of the credit risk inherent in the loan portfolio and its commitment to maintaining appropriate reserve coverage.

The provision for credit losses on loans reflects management's ongoing assessment of the adequacy of the allowance for credit losses and the credit risk inherent in the loan portfolio. The Company recorded a provision for credit losses on loans of $3.2 million for the quarter ended June 30, 2026, compared to $2.0 million for the quarter ended March 31, 2026 and $856 thousand for the quarter ended June 30, 2025. The increase in provision compared to both periods was primarily driven by changes in certain historical loss factors, increases in qualitative factor adjustments, and higher specific reserves, as discussed above. Continued loan growth also contributed to the higher provision levels. The provision reflects management's disciplined approach to reserve methodology and its commitment to maintaining a strong allowance for credit losses that appropriately reflects portfolio growth, current economic conditions, and identified credit risks.

Management's judgment in determining the level of the allowance is based on evaluations of the collectability of loans while taking into consideration such factors as trends in delinquencies and charge-offs, changes in the nature and volume of the loan portfolio, current economic conditions that may affect a borrower's ability to repay and the value of collateral, overall portfolio quality and review of specific potential losses. The Company is committed to maintaining an allowance at a level that adequately reflects expected credit losses over the life of the loan portfolio.

Balance Sheet

Total consolidated assets were $1.85 billion at June 30, 2026, an increase of $9.0 million, or 0.5%, from $1.84 billion at March 31, 2026. Compared to June 30, 2025, total consolidated assets were down from $2.04 billion. The linked-quarter increase was driven primarily by growth in the loan portfolio, reflecting continued customer demand, and was partially offset by a reduction in cash and cash equivalents as excess liquidity was deployed to support loan growth. The year-over-year decrease in total assets was primarily attributable to the runoff of non-core deposits, which resulted in a corresponding decline in cash and cash equivalents. Despite the reduction in total assets from the prior-year period, the Company continued to maintain a strong balance sheet while strategically deploying capital into higher-yielding earning assets.

Total net loans increased $39.5 million, or 2.7%, to $1.48 billion at June 30, 2026 from $1.44 billion at March 31, 2026, driven by growth across several key lending categories, including construction, commercial real estate, and commercial and industrial loans. Compared to June 30, 2025, total net loans increased $58.4 million, or 4.1%, from $1.42 billion, reflecting continued success in generating new lending opportunities and serving the credit needs of the Company's markets. Year-over-year growth was concentrated in the same core lending segments that contributed to the linked-quarter increase, demonstrating the strength and consistency of the Company's loan production efforts. 

Total deposits were $1.60 billion at June 30, 2026, an increase of $3.7 million, or 0.2%, from March 31, 2026. Total deposits were $1.77 billion at June 30, 2025. The modest linked-quarter increase reflects the continued stability of the Company's deposit base. The year-over-year decrease was primarily attributable to the temporary nature of unusually large noninterest-bearing deposit balances received during the second quarter of 2025. Specifically, noninterest-bearing deposits increased by approximately $151.7 million during that period, largely due to business sale proceeds from two customers. As anticipated, the majority of these funds had exited the Bank by the end of 2025. Excluding the impact of these temporary balances, the Company's deposit base has remained relatively stable and continues to provide a solid source of funding for loan growth and other balance sheet initiatives.

Core deposit change for the quarter and twelve months ended June 30, 2026 was an increase of $102 thousand and a decrease of $13.7 million, respectively. Core deposits consist of checking accounts, NOW accounts, money market accounts, regular savings accounts and time deposits less than $250 thousand.

Liquidity

The objective of the Company's liquidity management is to ensure the continuous availability of funds to satisfy the credit needs of our customers and the demands of our depositors, creditors and investors. Uninsured deposits represent an estimate of amounts above the Federal Deposit Insurance Corporation ("FDIC") insurance coverage limit of $250,000. As of June 30, 2026, the Company's uninsured deposits were approximately $217.3 million or 13.6% of total deposits.

The Company's liquid assets, which include cash and due from banks, interest-bearing deposits at other banks, loans with a maturity less than one year and nonpledged securities available for sale, were $345.3 million and borrowing availability was $618.6 million as of June 30, 2026, which in total exceed uninsured deposits, excluding intercompany cash holdings and secured municipal deposits, by $746.6 million. Liquid assets decreased by $83.9 million during the second quarter of 2026 due mainly to loan growth. In addition to deposits, the Company utilizes short-term and long-term borrowings as sources of funds. Short-term borrowings from the Federal Reserve Bank and the FHLB as well as federal funds purchased from Community Bankers Bank may be used to fund the Company's day-to-day operations. Long-term borrowings include FHLB advances as well as subordinated debt. Total outstanding borrowings decreased to $29.6 million at June 30, 2026 from $69.7 million at June 30, 2025. The decrease was primarily due to the paydown of outstanding FHLB advances. Borrowings remained stable from March 31, 2026 to June 30, 2026. 

Additional sources of liquidity available to the Company include cash flows from operations, loan payments and payoffs, deposit growth, maturities, calls and sales of securities and the issuance of brokered certificates of deposit.  

Capital and Dividends

On July 23, 2026, the Board of Directors announced a quarterly common stock cash dividend of $0.31 per common share, payable on August 14 2026, to shareholders of record on August 3, 2026. The Board of Directors of the Company regularly reviews the amount of cash dividends per share and the resulting dividend payout ratio in light of changes in economic conditions, current and future capital requirements, and expected future earnings.  

Total consolidated equity increased $14.3 million to $193.9 million at June 30, 2026 compared to June 30, 2025 and increased $3.6 million compared to March 31, 2026. The increases are primarily due to increased retained earnings from net income.

The Company's securities available for sale are fixed income debt securities and their unrealized loss position is a result of increased market interest rates since they were purchased. The Company expects to recover its investments in debt securities through scheduled payments of principal and interest. The accumulated other comprehensive loss related to the Company's securities available for sale increased to $6.1 million at June 30, 2026 compared to $6.0 million at March 31, 2026 and decreased from $7.3 million at June 30, 2025.

As of June 30, 2026, the most recent notification from the FDIC categorized the Bank of Clarke as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized under regulations applicable at June 30, 2026, Bank of Clarke was required to maintain minimum total risk-based, Tier 1 risk-based, CET1 risk-based and Tier 1 leverage ratios. In addition to the regulatory risk-based capital requirements, Bank of Clarke must maintain a capital conservation buffer of additional capital of 2.5 percent of risk-weighted assets as required by the Basel III capital rules. The Bank of Clarke exceeded these ratios at June 30, 2026.

Explanation of Non-GAAP Financial Measures  

This release contains financial information determined by methods other than in accordance with GAAP. Management believes that the supplemental Non-GAAP information provides a better comparison of period-to-period operating performance and the impact of non-recurring transactions on the Bank's results. Additionally, the Company believes this information is utilized by regulators and market analysts to evaluate a company's results and financial condition and therefore, such information is useful to investors. These disclosures should not be viewed as a substitute for or more important than financial results in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures which may be presented by other companies.

Second Quarter 2026 Earnings Release Conference Call and Webcast

Eagle Financial Services' Chief Executive Officer, Brandon Lorey, and Chief Financial Officer, Kate Chappell, will hold a listen-only conference call and webcast to discuss second quarter results on Friday, July 24, 2026, at 10 a.m. eastern time. Those wishing to listen to the conference call should call the applicable number below and reference the Conference ID below.

USA / International – (Toll) - +1.646.968.2525
USA – (Toll-Free) +1.888.596.4144
Canada – (Toronto) +1.647.495.7514
Canada – (Toll-Free) +1.888.596.4144
Conference ID – 4519726 and press #

A replay of the call and webcast will be accessible at investors.bankofclarke.bank. Webcast URL: https://events.q4inc.com/attendee/682653491 

Cautionary Note Regarding Forward-Looking Statements

Certain information contained in this discussion may include "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements relate to the Company's future operations and are generally identified by phrases such as "the Company expects," "the Company believes" or words of similar import. Although the Company believes that its expectations with respect to the forward-looking statements are based upon reliable assumptions within the bounds of its knowledge of its business and operations, there can be no assurance that actual results, performance or achievements of the Company will not differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements speak only as of the date of this release. The Company undertakes no obligation to update or revise any forward-looking statement, except as required by law.

Factors that could have a material adverse effect on the operations and future prospects of the Company include, but are not limited to: changes in interest rates and general economic conditions; the legislative and regulatory climate; monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and Federal Reserve; the quality or composition of the Company's loan or investment portfolios; the Company's ability to successfully resolve non-performing assets; demand for loan products; liquidity and deposit flows; competition; demand for financial services in the Company's market area; acquisitions and dispositions; the Company's ability to keep pace with new technologies; a failure in or breach of the Company's operational or security systems or infrastructure, or those of third-party vendors or other service providers, including as a result of cyberattacks; the Company's capital and liquidity; changes in tax and accounting rules, principles, policies and guidelines; and other factors included in the Company's Annual Report on Form 10-K for the year ended December 31, 2025 and other filings with the Securities and Exchange Commission.

SOURCE Eagle Financial Services, Inc.