DALLAS, TX -- December 15th, 2022 -- Eagle Financial Services, Inc (OTCQX:EFSI): Stonegate Capital Partners updates coverage on Eagle Financial Services, Inc (OTCQX:EFSI). The full report can be accessed by clicking on the following link: https://stonegateinc.com/reports/EFSI_22Q3.pdf
Eagle Financial Services, Inc. (the “Company”) is a bank holding company which owns 100% of the stock of Bank of Clarke County (the “Bank”). The Bank offers a wide range of retail and commercial banking services, including demand, savings, and time deposits and consumer and commercial loans. The Bank also offers both a trust department and investment services. The Bank has 13 full-service branches, two loan production offices, and one drive-through only facility. The Bank serves Northern Virginia and the Shenandoah Valley area, with branches located in Clarke County, Fredrick County VA, Loudon County, Fairfax County, Frederick County MD, and the Towns of Leesburg, Purcellville, and Warrenton, and the City of Winchester.
- Proven record of sustained profitability – Over the past five years, Eagle Financial has consistently shown increasing net income and EPS growth. From 2016 to 2021, net income and EPS have grown at a CAGR of 11.4% and 12.1%, respectively. Additionally, total assets grew at a CAGR of 13.2%, and its loan portfolio also grew at a CAGR 13.7% for the same period. Significant investments in people and technology, along with market expansion and more diversified revenue sources are the primary drivers of this performance.
- Located in diversified markets with growth – The Bank’s performance is tied to its primary market area in Northern Virginia and the Shenandoah Valley. The Bank has a solid market position in the counties it serves. Additionally, the market areas possess excellent demographics, as evidenced by its population numbers, median household income, and median home values. Furthermore, there are nearby expansion opportunities for the Bank in Fairfax County, VA, and Washington, DC.
- Experienced management team with high levels of ownership – Eagle Financial’s management team has decades of experience, ranging from community banks to larger banking operations. Additionally, management’s interest is tied to shareholders with insider ownership at ~ 13%.
- The Company is well capitalized – At the end of 3Q22, tier 1 risk-based capital ratio was 9.35%. Additionally, its total risk-based capital ratio was 10.98% and its tier 1 leverage ratio was 8.09% as of 3Q22. The Company has historically maintained solid capital ratios and has grown consolidated equity at a 6.8% CAGR from 2016 to 2021. Furthermore, the Company has $35.9M in cash as of 3Q22. The notes qualify for tier 2 capital. Net proceeds are for general corporate purposes, including a capital contribution to support continued organic growth.
- Valuation – We use a P/TBV to help frame valuation of Eagle Financial. Using a P/TBV range of 1.2x to 1.4x, with a mid-point of 1.3x, we arrive at a valuation range of $$34.30 to $40.01 with a mid-point of $37.15. See page 6 for further details.
Stonegate Capital Partners is a Dallas-based corporate advisory firm dedicated to serving the specialized needs of small-cap public companies. Since our inception, our mission has been to find innovative, undervalued public companies for our network of leading institutional investors who seek high-quality investment opportunities.