Executive Summary

EFSI delivered record Q2 net income of $5.27M and $0.98 EPS, driven by a 44 bps NIM expansion to 3.42% and 17.7% sequential growth in net interest income (NII) to $15.7M .
Results modestly beat Wall Street: EPS $0.98 vs $0.815 consensus and revenue $19.95M vs $19.39M consensus; beats were supported by higher securities yields post-portfolio repositioning, lower FHLB interest expense, and stronger gain-on-sale income . Estimates marked with asterisk are from S&P Global.*
Funding mix improved: deposits rose $152.7M in Q2 (majority from two customers’ business-sale proceeds), enabling $25M FHLB paydown; borrowings fell to $69.7M .
Asset quality remains the key watch item: NPAs stayed elevated at 0.86% of assets, driven by two Q1 nonaccrual relationships (~$13.7M exposure); management added specific reserves and expects no further significant write-downs on three DC multifamily properties .

What Went Well and What Went Wrong

What Went Well
- Margin and NII: NIM expanded 44 bps q/q to 3.42% on higher securities and loan yields and lower borrowing costs; NII rose 17.7% q/q to $15.7M .
- Efficiency: Efficiency ratio improved to 64.91% from 72.20% in Q1, reflecting stronger core revenue and cost discipline .
- Management execution: CEO highlighted “record net income of $5.3 million and EPS of $0.98” and credited “post-capital raise execution” and “strategic repositioning of the securities portfolio” for NIM expansion and 1.09% ROA .
What Went Wrong
- Asset quality: NPAs increased to $17.5M (0.86% of assets) vs $3.3M a year ago, driven by two large credits moved to nonaccrual in Q1; specific reserves on nonaccruals rose to $1.5M .
- Expense pressure: Noninterest expense rose 6.4% q/q to $13.4M, mainly salaries/benefits as FTEs increased to 245 from 233 .
- Deposit durability uncertainty: $151.7M of the $152.7M Q2 deposit increase came from two customers’ business sales; management is unsure how much will remain, which could affect liquidity/mix and NIM if they exit .

Financial Results

Consolidated trend and operating metrics

Metric	Q2 2024	Q4 2024	Q1 2025	Q2 2025
Net Interest Income ($M)	$12.16	$13.50	$13.34	$15.70
Noninterest Income ($M)	$4.31	$8.52	$(8.55)	$4.92
Total Revenue (NII + Noninterest) ($M)	$16.46	$22.02	$4.78	$20.62
Diluted EPS ($)	$0.89	$1.74	$(1.53)	$0.98
Net Interest Margin (%)	2.92%	3.03%	2.98%	3.42%
Efficiency Ratio (%)	77.00%	74.58%	72.20%	64.91%
Provision for Credit Losses – Total ($M)	$0.18	$0.35	$1.23	$0.67
Net Income ($M)	$3.19	$6.19	$(6.97)	$5.27

Consensus vs actual (S&P Global for estimates)

Metric	Q2 2025 Estimate	Q2 2025 Actual
EPS ($)	0.815*	0.98
Revenue ($M)	19.389*	19.947*

Values with asterisk (*) retrieved from S&P Global.

Additional operating disclosures (Q2 2025 vs Q1 2025 and YoY)
- Securities yield rose to 4.37% (from 2.93% in Q1) after Q1 portfolio repositioning; loan tax-equivalent yield increased to 5.67% from 5.57% .
- Total interest expense declined to $9.12M from $10.17M q/q on FHLB paydown (one $25M advance in April) .
- Gain on sale of loans: $1.10M (vs $0.43M in Q1; $0.49M in Q2’24), driven by higher SBA sales ($8.4M sold vs $2.0M in Q1) .
Segment breakdown: Not applicable; the company does not report operating segments in its quarterly press release/8-K.
KPIs

KPI (units)	Q2 2024	Q1 2025	Q2 2025
Total Deposits ($B)	$1.489	$1.614	$1.767
Net Loans ($B)	$1.434	$1.437	$1.423
Loan-to-Deposit Ratio (%)	97.34%	89.99%	81.44%
NPAs / Assets (%)	0.18%	0.86%	0.86%
ACL / Total Loans (%)	1.04%	1.05%	1.11%
Net Charge-offs ($M)	$(0.25)	$0.89	$0.16
Uninsured Deposits ($M)	—	$189.8 (Q1)	$195.5
Borrowings Outstanding ($M)	$174.8 (Q2’24 vs Q2’25 note)	$94.5	$69.7

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Quarterly Dividend ($/sh)	Q3 2025 payable Aug 15, 2025	$0.31 (Q1 2025)	$0.31	Maintained
Revenue / EPS / NIM / OpEx	2025	Not provided	Not provided	—

No formal financial guidance was provided beyond the dividend policy in the 8-K/press release .

Earnings Call Themes & Trends

Note: We searched for the Q2 2025 earnings call transcript but none was available in the document set; the 8-K provided call logistics only . Themes below reflect disclosed commentary in quarterly materials.

Topic	Previous Mentions (Q4 2024, Q1 2025)	Current Period (Q2 2025)	Trend
Balance sheet repositioning	Q4: Sale-leaseback gain; NIM 3.03%; Q1: $99.2M low-yield securities sold; reinvest at ~4.7%; Q1 NIM 2.98%	Securities yield 4.37% (+144 bps q/q); NIM 3.42%	Positive: benefit materializing in NIM
Funding mix and liquidity	Q4: Deposits +$29.2M; borrowings down $50M; Q1: core deposits +$42.2M; borrowings down $55M	Deposits +$152.7M (mostly two clients’ proceeds); FHLB -$25M; borrowings $69.7M	Positive near-term; durability risk flagged
Asset quality	Q4: low NPAs; Q1: two large nonaccrual relationships; NPAs 0.86%	NPAs 0.86%; DC multifamily short-sale plan; specific reserves increased	Stabilizing with active resolution
Noninterest income	Q4: higher gains; Q1: SBIC/gains lower; negative GAAP due to security loss	Gain on sale of loans improved (SBA); total noninterest income $4.92M	Rebound from Q1
Technology/AI	—	Board adds AI expert K. Shyamsunder (June)	Strategically investing in tech/AI governance
Capital	Q4: well-capitalized; Q1: $53.5M equity raise	Well-capitalized; AOCI improved YoY; equity +$68.5M YoY	Strengthened capital base

Management Commentary

CEO Brandon Lorey: “We are very pleased to report record net income of $5.3 million and earnings per share of $0.98… The full-quarter impact of post-capital raise execution, along with the strategic repositioning of the securities portfolio, contributed to a 44-basis point expansion in net interest margin and an annualized return on assets of 1.09%.”
On funding mix: “The continued transition from higher-cost borrowings to lower-cost deposits is strengthening our funding profile and positioning us for long-term balance sheet efficiency.”
Strategic board addition: “His expertise in Artificial Intelligence… will be especially crucial,” said CEO Brandon Lorey on adding Karthik Shyamsunder to the Board .

Q&A Highlights

We searched for the Q2 2025 earnings call transcript; none was available in our document set. The company provided call logistics and indicated a replay would be on the investor website, but the transcript itself was not found in the system . As such, Q&A themes and any guidance clarifications cannot be verified from a transcript at this time.

Estimates Context

EPS: $0.98 actual vs $0.815 consensus; beat driven by NIM expansion, lower FHLB interest expense, and stronger gains on loan sales (particularly SBA) . EPS consensus count: 2 estimates*
Revenue: $19.95M actual vs $19.39M consensus; modest beat as higher securities yield and loan yields offset loan balance contraction; company-reported NII $15.70M and noninterest income $4.92M . Revenue consensus count: 2 estimates*

Values with asterisk (*) retrieved from S&P Global.

Key Takeaways for Investors

Margin recovery story intact: securities repositioning and funding mix shifts are expanding NIM and lifting core profitability; NIM at 3.42% is a notable pivot from Q1 .
Capital and liquidity strength: post-raise equity, reduced borrowings, and significant liquidity (liquid assets $535.9M, borrowing availability $499.1M) support resilience and optionality .
Watch asset quality: NPAs remain elevated due to two relationships; management is actively resolving (short sale/receivership) and built specific reserves; further material write-downs on the three DC properties are not anticipated .
Deposit durability is a swing factor: large noninterest-bearing inflows from two business sales boosted deposits and LDR; retention of these balances will influence future NIM and funding costs .
Noninterest income lever: SBA and mortgage gain-on-sale volumes improved; maintaining SBA execution could underpin fee revenue diversity .
Dividend maintained at $0.31; with improved profitability and capital, payout remains supported, though management remains disciplined .
Near-term stock catalysts: continued NIM expansion, clarity on problem credit resolutions, and evidence of retention of recent deposit inflows should be positive; loss of transient deposits or new credit issues would be headwinds .

Footnotes and clarifications:

Q2 provision for credit losses totals $0.668M on the income statement, while provision for credit losses on loans was $0.856M; the difference reflects other elements of credit provisioning .
Non-GAAP metrics (NIM tax-equivalent, efficiency ratio, adjusted income) follow company-defined methodologies detailed in reconciliations .

Sources: EFSI Q2 2025 8-K with exhibits and press release , Q2 2025 press release , Q1 2025 press release , Q4 2024 press release , Board appointment PR (June 25, 2025) .

Estimates: Values retrieved from S&P Global.*

EAGLE FINANCIAL SERVICES INC (EFSI)·Q2 2025 Earnings Summary