EAGLE FINANCIAL SERVICES INC Income Taxes Disclosure
NOTE 9. Income Taxes
The Company files income tax returns with the United States of America, the Commonwealth of Virginia, West Virginia, Maryland, Florida, and North Carolina. With few exceptions, the Company is no longer subject to federal, state, or local income tax examinations for years prior to 2022.
The net deferred tax asset at December 31, 2025 and 2024 consisted of the following components:
|
|
December 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
|
|
(in thousands) |
|
|||||
Deferred tax assets: |
|
|
|
|
|
|
||
Allowance for credit losses |
|
$ |
3,299 |
|
|
$ |
3,156 |
|
Reserve for unfunded commitments |
|
|
70 |
|
|
|
106 |
|
Share-based compensation |
|
|
341 |
|
|
|
306 |
|
Accrued postretirement benefits |
|
|
23 |
|
|
|
21 |
|
Home equity origination costs |
|
|
99 |
|
|
|
95 |
|
Nonaccrual interest |
|
|
148 |
|
|
|
20 |
|
Lease liabilities |
|
|
2,120 |
|
|
|
2,054 |
|
Credit carryforward |
|
|
682 |
|
|
|
1,033 |
|
Securities available for sale |
|
|
1,397 |
|
|
|
4,956 |
|
Total deferred tax assets |
|
$ |
8,179 |
|
|
$ |
11,747 |
|
Deferred tax liabilities: |
|
|
|
|
|
|
||
Property and equipment |
|
$ |
805 |
|
|
$ |
709 |
|
Right-of-use assets |
|
|
2,032 |
|
|
|
1,988 |
|
Loan servicing rights |
|
|
137 |
|
|
|
68 |
|
Total deferred tax liabilities |
|
$ |
2,974 |
|
|
$ |
2,765 |
|
Net deferred tax asset |
|
$ |
5,205 |
|
|
$ |
8,982 |
|
The Company has not recorded a valuation allowance for deferred tax assets because management believes that it is more likely than not that they will be ultimately realized.
Pretax income from continuing operations was as follows for the year ended December 31, 2025:
|
|
December 31, |
|
|
|
|
2025 |
|
|
|
|
(in thousands) |
|
|
Domestic |
|
$ |
9,925 |
|
Foreign |
|
|
— |
|
Total |
|
$ |
9,925 |
|
Income tax expense from continuing operations for the years ended December 31, 2025 and 2024 consisted of the following components:
|
|
December 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
|
|
(in thousands) |
|
|||||
Current tax expense |
|
|
|
|
|
|
||
Federal |
|
$ |
1,313 |
|
|
$ |
2,824 |
|
State |
|
|
|
|
|
|
||
Maryland |
|
|
121 |
|
|
|
127 |
|
Other States |
|
|
56 |
|
|
|
7 |
|
Foreign1 |
|
|
— |
|
|
|
|
|
Deferred tax accrual (benefit) |
|
|
|
|
|
|
||
Federal |
|
|
298 |
|
|
|
600 |
|
State |
|
|
|
|
|
|
||
Maryland |
|
|
(52 |
) |
|
|
— |
|
Other States |
|
|
(25 |
) |
|
|
— |
|
Foreign1 |
|
|
— |
|
|
|
|
|
Total |
|
$ |
1,711 |
|
|
$ |
3,558 |
|
The following tables reconcile income tax expense to the statutory federal corporate income tax amount, which was calculated by applying the federal corporate income tax rate to pre-tax income for the years ended December 31, 2025 and 2024:
|
|
2025 |
|
|||||
|
|
Amount |
|
|
Percent |
|
||
|
|
(dollars in thousands) |
|
|||||
|
$ |
2,084 |
|
|
|
21.0 |
% |
|
Effect of: |
|
|
|
|
|
|
||
State income taxes, net of federal effect 1 |
|
|
(22 |
) |
|
|
-0.22 |
% |
Foreign tax effects |
|
|
— |
|
|
|
0.00 |
% |
Tax credits: |
|
|
|
|
|
|
||
Qualified affordable housing projects |
|
|
10 |
|
|
|
0.10 |
% |
Rehabilitation programs |
|
|
(27 |
) |
|
|
-0.28 |
% |
Nontaxable or nondeductible items: |
|
|
|
|
|
|
||
Tax-exempt interest income |
|
|
(77 |
) |
|
|
-0.78 |
% |
Officer insurance income |
|
|
(234 |
) |
|
|
-2.36 |
% |
Other, net |
|
|
(23 |
) |
|
|
-0.23 |
% |
Effective tax rate |
|
$ |
1,711 |
|
|
|
17.23 |
% |
|
|
|
|
December 31, |
|
|
|
|
|
|
(in thousands) |
|
|
Federal statutory income tax |
|
|
|
$ |
3,969 |
|
Effect of: |
|
|
|
|
|
|
Tax-exempt interest income |
|
|
|
|
(78 |
) |
Officer insurance income |
|
|
|
|
(404 |
) |
Net tax credits |
|
|
|
|
(53 |
) |
Other, net |
|
|
|
|
124 |
|
Total |
|
|
|
$ |
3,558 |
|
The effective tax rates were 17.23% and 18.82% for the years ended December 31, 2025 and 2024, respectively, which were impacted by the recognition of tax-exempt life insurance income, tax-exempt interest income, qualified rehabilitation credits, and affordable housing credits. Qualified affordable housing project investments are further discussed in Note 25 to the Consolidated Financial Statements.
Income taxes paid during the year ended December 31, 2025 were as follows:
|
|
December 31, |
|
|
|
|
2025 |
|
|
|
|
(in thousands) |
|
|
Federal |
|
$ |
1,853 |
|
State and Local: |
|
|
|
|
Maryland |
|
|
131 |
|
Other |
|
|
30 |
|
Total |
|
$ |
2,014 |
|
Income taxes paid during the year ended December 31, 2024 totaled $80 thousand.
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 16, 2026 | Showing above |
| 2024 | Mar 31, 2025 | |
| 2023 | Mar 29, 2024 | |
| 2022 | Mar 29, 2023 | |
| 2021 | Mar 30, 2022 | |
| 2020 | Mar 30, 2021 | |
| 2019 | Mar 13, 2020 | |
| 2018 | Mar 15, 2019 | |
| 2017 | Mar 15, 2018 | |
| 2016 | Mar 29, 2017 | |
| 2015 | Mar 29, 2016 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.