Eagle Financial Extends Net Interest Margin Expansion

The Tip Desk · October 22, 2026 · 4 min read

Net interest margin reached 3.95% in the third quarter as the holding company for Bank of Clarke posted $17.6 million of net interest income and announced a merger with John Marshall Bancorp.

Eagle Financial Services, Inc. (EFSI), the holding company for Bank of Clarke, expanded its net interest margin a second consecutive quarter, to 3.95% for the three months ended September 30, 2026, from 3.86% in the prior quarter.

The 9 basis-point lift followed a 23 basis-point expansion in the second quarter. The company said the improvement versus both the linked quarter and a year earlier was primarily attributable to higher average yields on loans. Net interest spread widened to 3.09% from 3.01%.

Net interest income rose $659 thousand, or 3.9%, to $17.6 million from $17.0 million in the second quarter. Average loans increased $13.6 million, or 0.9%, from the prior quarter, and the tax-equivalent yield on average loans rose 14 basis points. Total loan interest income was $22.7 million. Versus a year earlier, average loans were up $66.3 million, or 4.6%, and the tax-equivalent yield on average loans was up 28 basis points.

Total interest expense was $7.6 million. The company said the modest increase from the second quarter was primarily attributable to higher interest expense on deposits. Compared with the year-ago quarter, interest expense decreased $1.1 million, driven by a $651 thousand reduction in deposit interest expense and a $494 thousand decrease in interest on Federal Home Loan Bank advances. Average interest-bearing deposit balances fell $10.3 million year over year and the average rate paid on those deposits declined 20 basis points, primarily from runoff of higher-cost time deposits. Average FHLB advances declined $40.0 million versus a year earlier after payoff of outstanding advances.

Net loans increased $32.4 million, or 2.2%, to $1.51 billion at September 30, 2026, after a $39.5 million, or 2.74%, increase in the prior quarter. Year-over-year net loans rose $68.3 million, or 4.7%, from $1.45 billion. The company said growth was concentrated in commercial real estate, residential real estate and commercial and industrial loans. Total deposits were $1.62 billion, up $21.3 million, or 1.3%, including a $15.8 million increase in brokered certificates of deposit. Core deposits rose $1.4 million for the quarter.

GAAP net income was $4.75 million, or $0.88 a share, versus $5.02 million, or $0.93 a share, in the second quarter. Adjusted net income excluding merger expenses and the prior-quarter Bearing gain was $5.0 million, up $2.8 million, or 125.4%, from $2.2 million in the second quarter, and down $564 thousand, or 10.1%, from $5.6 million a year earlier. The company said the increase from the second quarter was primarily driven by a lower provision for credit losses.

The provision for credit losses on loans fell to $1.3 million from $3.2 million in the prior quarter, on lower qualitative-factor requirements and lower net charge-offs. Net charge-offs were $1.0 million, down from $2.2 million in the linked quarter, as the quarter lacked the large relationship-specific write-offs seen then. Nonaccrual loans were $15.6 million at September 30, 2026. Total nonperforming assets were $16.0 million. The allowance for credit losses on loans was $18.5 million, or 1.21% of total loans. Specific reserves on nonaccrual loans were $3.4 million.

Noninterest income was $5.3 million, down $3.3 million, or 38.3%, from $8.6 million in the prior quarter after a $3.5 million pre-tax gain on the sale of Bearing Insurance Group in the second quarter. Versus $5.2 million a year earlier, noninterest income was up $131 thousand, or 2.5%. Gain on sale of loans held for sale was $1.26 million, up $609 thousand, or 94.3%, from $646 thousand in the prior quarter, on higher SBA loan-sale volume. Wealth management fees were $1.74 million.

Noninterest expense was $16.1 million, up $596 thousand, or 3.8%, from $15.5 million in the prior quarter, including $342 thousand of merger-related expenses tied to the announced John Marshall Bancorp combination. Excluding those expenses, noninterest expense was $15.8 million. Salaries and employee benefits were $9.63 million, on higher loan-sale commissions, incentive-compensation accruals, and loan-production incentives.

The company entered a definitive merger agreement with John Marshall during the third quarter. President and CEO Brandon Lorey said the third quarter combined strong execution with the proposed combination. The board declared a quarterly common dividend of $0.31 a share, unchanged from the prior two quarters.