Eagle Financial Services (NASDAQ:EFSI) executives highlighted steady credit quality, continued commercial loan growth and a more expense-heavy quarter during the company’s fourth-quarter earnings call, while reiterating a focus on relationship-driven banking and disciplined balance sheet management heading into 2026.
Fourth-quarter profitability and key drivers
CEO Brandon Lorey said the company’s fourth-quarter results reflected “the progress we’ve made throughout 2025 and the intentional way we executed our strategy.” Eagle Financial Services reported net income of $4.3 million for the quarter, down from $5.6 million in the third quarter. Lorey attributed the linked-quarter change primarily to lower net interest income and higher salaries and benefits, which he said were anticipated as part of continued investment in staff.
Net interest income declines, margin edges higher
Chappell reported net interest income of $16.4 million, a 4.8% decrease from the third quarter. She said the decline was driven by “the expected outflow of excess cash as the customer worked through the disposition of proceeds from the sale of their business.”
Despite the decline in net interest income, net interest margin improved slightly to 3.61% from 3.58% in the third quarter. Chappell said the increase reflected continued improvement in earning-asset yields and a better funding mix over the past year.
Fee income improves; expenses rise on staffing and incentives
Non-interest income increased to $5.4 million from $5.2 million in the third quarter. Chappell pointed to wealth management as a notable contributor, with fees rising to $2.3 million, up 25% from the third quarter. She said the increase was partially driven by the recognition of account settlement fees. Looking ahead, Chappell said the company expects both wealth management fees and gain-on-sale revenue to remain generally consistent with 2025 levels.
Non-interest expense rose 8% sequentially to $15.5 million. Chappell said the increase was driven primarily by higher salaries and employee benefits, reflecting increased headcount and incentive compensation tied to performance. She said the higher efficiency ratio in the quarter was mainly due to the combination of lower net interest income and higher operating expenses, partially offset by stronger fee income.
For 2026, Chappell said Eagle Financial Services anticipates the efficiency ratio will move slightly below 70% as spread income continues to improve and salaries and benefits normalize.
Loan growth led by commercial categories; marine runoff continues
Management emphasized ongoing momentum in commercial lending. Lorey said the company produced an additional $13.1 million in net loan growth in the fourth quarter, driven by commercial real estate and C&I lending, and described the performance as evidence the “commercial engine is both resilient and scalable.” He also referenced “expected headwinds from marine runoff,” noting that commercial teams continued to deliver organic growth despite those pressures.
Chief Banking Officer Joe Zmitrovich provided additional detail, stating the loan portfolio expanded by $13.1 million, driven by $67 million in total originations and $18.5 million of growth in commercial loan categories. He said that was partially offset by a $10.3 million reduction in the marine portfolio.
Zmitrovich said demand across the company’s markets remained steady and that the bank’s relationship-driven approach continued to resonate with clients. He also said the loan pipeline entering 2026 was up over $100 million compared with January 2025, with opportunities in established markets and through new and expanding client relationships. He noted the company expects continued growth from its commercial team in Maryland as they “build momentum and expand their presence.”
Asset quality and strategy: stable credit, disciplined M&A, organic growth focus
Lorey said credit quality remained stable, with non-performing assets ending the year at $14.6 million, or 0.77% of total assets, compared with $14.3 million, or 0.74% in the prior quarter. He noted NPAs were higher than the prior year due to “several large relationships moving to non-accrual” that the company has discussed in prior quarters, but said management remained confident in its collateral position and outlook.
On strategy, Lorey recapped goals set at the beginning of the year following a capital raise, including building a more granular and relationship-driven loan portfolio, growing core deposits and fee income by bringing a full suite of products to customers, and expanding markets. He said the company accomplished those goals in 2025.
Looking ahead, Lorey said the company continues to hold conversations with potential bank partners aligned with its community-focused model and long-term objectives, while emphasizing a disciplined approach. “We’ll only pursue opportunities that clearly enhance the strength and value of our franchise,” he said. At the same time, he described Eagle Financial Services as “a strong organic growth company” with a platform positioned to scale.
- Q4 net income: $4.3 million ($0.81 per diluted share)
- Net interest income: $16.4 million, down 4.8% from Q3
- Net interest margin: 3.61%, up from 3.58%
- Non-interest income: $5.4 million, up from $5.2 million
- Wealth management fees: $2.3 million, up 25% from Q3
- Non-interest expense: $15.5 million, up 8% from Q3
- Non-performing assets: $14.6 million (0.77% of total assets)
- Net loan growth: $13.1 million in Q4
About Eagle Financial Services (NASDAQ:EFSI)
Eagle Financial Services, Inc (NASDAQ: EFSI) is the bank holding company for Eagle National Bank, a community-oriented financial institution headquartered in Fredericksburg, Virginia. The company offers a broad range of retail and commercial banking solutions, focusing on personalized service for individuals, small businesses, and nonprofit organizations. Through its subsidiary, Eagle National Bank, it maintains a commitment to local decision-making and relationship-driven service.
Eagle Financial Services provides deposit products including checking and savings accounts, money market funds, certificates of deposit, and individual retirement accounts.
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