[Introduction](index=3&type=section&id=Introduction) [Forward Looking Statements](index=3&type=section&id=Forward%20Looking%20Statements) The presentation contains forward-looking statements subject to uncertainties and risks that could materially affect actual results - The presentation contains forward-looking statements, which are subject to significant uncertainty and may differ materially from actual future operations and results[5](index=5&type=chunk) - Key risks include the impact of the interest rate environment on business activity, declines in credit quality, prolonged downturns in the real estate market, liquidity management, funding profile, competition, and monetary/fiscal policies[6](index=6&type=chunk) [Contact Information](index=4&type=section&id=Contact%20Information) This section provides contact details for further company information - For further information, contact Eric Newell at P 240-497-1796 or E enewell@eaglebankcorp.com[7](index=7&type=chunk) [Company Profile & Strategy](index=5&type=section&id=Company%20Profile%20%26%20Strategy) [Attractive Washington DC Footprint](index=5&type=section&id=Attractive%20Washington%20DC%20Footprint) The company operates within the robust and diverse Washington DC metro area, a market with a strong economy and high household incomes - The Washington DC metro area boasts a robust and diverse economy, supported by public and private sectors, globally recognized educational institutions, a thriving private sector with technology innovation, and a strong tourism base[12](index=12&type=chunk) - Household income in EagleBank's markets is **significantly above** the national and Mid-Atlantic states' averages[13](index=13&type=chunk) - EagleBank is one of the largest community banks headquartered in the Washington DC metro area, ranking **3rd by deposits** in the DC MSA for banks with less than $100 billion in assets[14](index=14&type=chunk) [Eagle at a Glance](index=7&type=section&id=Eagle%20at%20a%20Glance) This section presents key financial and corporate metrics for EagleBank as of June 30, 2025 Eagle at a Glance | Metric | Value (as of June 30, 2025) | | :-------------------------- | :-------------------------- | | Total Assets | $10.6 billion | | Total Loans | $7.7 billion | | Total Deposits | $9.1 billion | | Tangible Common Equity | $1.2 billion | | Shares Outstanding | 30,364,983 | | Market Capitalization | $650 million (July 22, 2025) | | Tangible Book Value per Share | $39.03 | | Institutional Ownership | 80% | [Core Strengths Supporting Long-Term Performance](index=9&type=section&id=Core%20Strengths%20Supporting%20Long-Term%20Performance) The company's long-term performance is supported by strong capital, a disciplined cost structure, robust liquidity, and a desirable geography - **Best-in-Class Capital Levels**: **CET1 Ratio = 14.01%** (top quartile for banks >$10B assets), **TCE / TA = 11.18%**, **ACL / Gross Loans = 2.38%**, and **ACL / Performing Office Loans = 11.54%**[24](index=24&type=chunk)[28](index=28&type=chunk) - **Disciplined Cost Structure**: **Operating Noninterest Expense / Average Assets = 1.45%**, **Operating Efficiency Ratio = 58.6%**; The company operates a branch-light, efficient model[25](index=25&type=chunk)[28](index=28&type=chunk) - **Strong Liquidity and Funding Position**: **$4.8 billion** in combined on-balance sheet liquidity and available borrowing capacity, significantly exceeding **$2.3 billion** in uninsured deposits (**200% coverage ratio**); Uninsured deposits represent **25% of total deposits** with a weighted average relationship of over 8 years[26](index=26&type=chunk)[28](index=28&type=chunk) - **Capitalizing on Desirable Geography**: The DMV area offers a robust and diverse economy (education, healthcare, technology, defense) and a population with high household incomes, contributing to a significant deposit base[27](index=27&type=chunk)[28](index=28&type=chunk) [Strategic Initiatives to Enhance Profitability](index=11&type=section&id=Strategic%20Initiatives%20to%20Enhance%20Profitability) The company is pursuing profitability enhancement through deposit growth, funding diversification, and operational excellence initiatives - **Grow & Diversify Deposits & Funding**: Expand C&I team, build Treasury sales behaviors to deepen deposit relationships and grow fee income, evaluate strategies to reduce CRE concentration, seek deposit-rich sectors, and leverage existing branch network for customer acquisition[34](index=34&type=chunk)[35](index=35&type=chunk) - **Operational Excellence**: Continue investments in operational capabilities and human talent to strengthen efficiency and scalability, drive effective expense management to achieve positive operating leverage, and maintain an exceptional client and employee experience[34](index=34&type=chunk)[35](index=35&type=chunk) - **Key Levers to Improve Return on Average Assets**: Grow and deepen relationship deposits to reduce high-cost wholesale and non-core funding, maintain pricing discipline on loan originations for revenue growth, and continue operating efficiency focus for positive operating leverage[35](index=35&type=chunk) [Financial Highlights & Outlook](index=15&type=section&id=Financial%20Highlights%20%26%20Outlook) [Performance Measures](index=15&type=section&id=Performance%20Measures) Key performance metrics for Q2 2025 reflect a net loss, an improved efficiency ratio, and increased tangible common equity Performance Measures | Metric (Quarter Ended) | 2024Q2 | 2024Q3 | 2024Q4 | 2025Q1 | 2025Q2 | | :--------------------- | :----- | :----- | :----- | :----- | :----- | | Operating Return on Average Tangible Common Equity | 7.22% | 7.04% | 4.94% | 0.55% | -22.35% | | Operating Efficiency Ratio | 61.5% | 59.5% | 58.6% | 55.4% | 55.2% | | Operating Return on Average Assets | 0.70% | 0.66% | 0.48% | 0.06% | -2.33% | | Tangible Common Equity/Tangible Assets | 11.18% | 11.02% | 11.00% | 10.86% | 10.35% | - **Operating Return on Average Tangible Common Equity** declined significantly to **-22.35%** in 2025Q2 from 0.55% in 2025Q1[46](index=46&type=chunk) - **Operating Efficiency Ratio** improved to **55.2%** in 2025Q2 from 61.5% in 2024Q2[48](index=48&type=chunk) [Net Interest Income & Margin](index=17&type=section&id=Net%20Interest%20Income%20%26%20Margin) Net interest income and margin improved in Q2 2025, driven primarily by a decrease in interest expense Net Interest Income & Margin | Metric (Quarter Ended) | 2024Q2 | 2024Q3 | 2024Q4 | 2025Q1 | 2025Q2 | | :--------------------- | :----- | :----- | :----- | :----- | :----- | | Net Interest Income (millions) | $71.4 | $71.8 | $70.8 | $65.6 | $67.8 | | Net Interest Margin (NIM) | 2.40% | 2.37% | 2.37% | 2.28% | 2.29% | - Net interest income increased by **$2.2 million** quarter-over-quarter[61](index=61&type=chunk) - Interest expense decreased by **$4.6 million**, driven by lower average short-term borrowings and reduced costs on savings and money market accounts[61](index=61&type=chunk) - Net interest margin (NIM) increased to **2.37%** for Q2 2025, up from 2.28% in the prior quarter[61](index=61&type=chunk) [Net Income - Summary](index=19&type=section&id=Net%20Income%20-%20Summary) The company reported a significant net loss in Q2 2025, driven by a large provision for credit losses Net Income Summary | Metric (Quarter Ended) | 2025Q1 | 2025Q2 | | :--------------------- | :----- | :----- | | Net Income (thousands) | $1,675 | $(69,775) | - Net interest income increased **$2.2 million**, driven by reduced costs on savings and money market accounts and lower average short-term borrowings[66](index=66&type=chunk) - **Provision for Credit Losses (PCL)** increased significantly to **$138.2 million** in Q2 2025 from $26.3 million in Q1 2025, primarily due to higher office-related reserves and expected exit strategies; Net charge-offs totaled **$83.9 million**, up from $11.2 million[67](index=67&type=chunk) - Noninterest income decreased **$1.8 million**, mainly due to a **$1.9 million loss** on a trade to reposition the investment portfolio[68](index=68&type=chunk) - Noninterest expense decreased **$2 million**, associated with decreased legal, accounting, and professional fees[69](index=69&type=chunk)[70](index=70&type=chunk) [2025 Outlook](index=21&type=section&id=2025%20Outlook) The company has revised its 2025 outlook, adjusting expectations for deposits, loans, margins, income, expenses, and tax rate 2025 Outlook | Key Driver | 2Q 2025 Actual | Prior 2025 Outlook | Current 2025 Outlook | | :------------------ | :------------- | :----------------- | :------------------- | | **Balance Sheet** | | | | | Average deposits | $10,226 million | 1-4% increase | 4-6% increase | | Average loans | $7,942 million | 2-5% increase | Flat | | Average earning assets | $11,487 million | Flat | 5-7% decrease | | **Income Statement**| | | | | Net interest margin | 2.37% | 2.40% - 2.65% | 2.35% - 2.50% | | Noninterest income | $6.4 million | 35 - 40% growth | 40 - 45% growth | | Noninterest expense | $43.5 million | 3-5% growth | 5.5-7.5% growth | | Period effective tax rate | 36.1% | 15-17% | 37-47% | - The outlook for average deposits has improved, while average loans and earning assets are expected to perform less favorably than previously anticipated[73](index=73&type=chunk) - The company anticipates higher growth in noninterest income and noninterest expense, along with a significantly higher effective tax rate[73](index=73&type=chunk) [Funding & Liquidity](index=23&type=section&id=Funding%20%26%20Liquidity) [Deposit Mix and Trend](index=23&type=section&id=Deposit%20Mix%20and%20Trend) Total deposits grew year-over-year, with a mix shift towards CDs and a slight decrease in overall deposit cost in Q2 2025 - Total Period End Deposits increased **$852 million** Year-over-Year[75](index=75&type=chunk) Deposit Mix (Q2 2025) | Deposit Type (Q2 2025) | Percentage of Total | | :--------------------- | :------------------ | | CDs | 38% | | Savings & money market | 38% | | Interest bearing transaction | 10% | | Noninterest bearing | 17% | Cost of Funds | Cost Metric (Quarter Ended) | 2024Q2 | 2024Q3 | 2024Q4 | 2025Q1 | 2025Q2 | | :-------------------------- | :----- | :----- | :----- | :----- | :----- | | Total Deposit Cost | 3.35% | 3.40% | 3.28% | 3.17% | 3.05% | | Borrowings | 5.75% | 5.46% | 5.28% | 5.07% | 5.03% | | Total IBL Cost | 4.47% | 4.45% | 4.20% | 4.07% | 3.86% | [Funding & Liquidity Summary](index=25&type=section&id=Funding%20%26%20Liquidity%20Summary) The company maintains a robust liquidity position, with ample coverage for uninsured deposits and a significant reduction in short-term borrowings - Available liquidity of **$4.8 billion** covers uninsured deposits of **$2.3 billion** by more than **200%**[81](index=81&type=chunk) - Average deposits increased **$342.8 million** for the quarter, primarily due to an increase in time deposit accounts[84](index=84&type=chunk) - Other short-term borrowings decreased by **89.8%** from the prior quarter-end to **$50.0 million** at June 30, 2025, driven by the paydown of FHLB borrowings, funded by cash and core deposit growth[85](index=85&type=chunk) - Ample access to liquidity from FHLB, FRB Discount Window, cash, and unencumbered securities totals over **$4.8 billion**[86](index=86&type=chunk) [Loan Portfolio Overview](index=33&type=section&id=Loan%20Portfolio%20Overview) [Loan Mix and Trend](index=33&type=section&id=Loan%20Mix%20and%20Trend) The loan portfolio saw a slight decrease in Q2 2025, with CRE remaining the largest segment and a decline in overall loan yield Loan Mix (Q2 2025) | Loan Type (Q2 2025) | Percentage of Total Loans | | :------------------ | :------------------------ | | Income producing CRE (excluding office) | 38% | | Owner-Occupied CRE | 16% | | Construction - comm & residential | 16% | | Commercial | 15% | | Office | 11% | | Construction C&I (owner-occupied) | 1% | Loan Trend | Metric (Quarter Ended) | 2024Q2 | 2024Q3 | 2024Q4 | 2025Q1 | 2025Q2 | | :--------------------- | :----- | :----- | :----- | :----- | :----- | | Total Loans (millions) | $8,001 | $7,970 | $7,934 | $7,943 | $7,719 | | Overall Loan Yield | 6.91% | 6.93% | 6.63% | 6.45% | 6.31% | [Loan Type and Classification](index=35&type=section&id=Loan%20Type%20and%20Classification) The loan portfolio is detailed by type and classification, highlighting an increase in substandard CRE loans as of June 30, 2025 Loan Portfolio by Type (6/30/2025) | Loan Type (6/30/2025) | Balance ($ in millions) | % of Total | | :-------------------- | :---------------------- | :--------- | | Income-producing - CRE (Total) | $3,769 | 49% | | Commercial | $1,208 | 16% | | Owner-occupied - commercial real estate | $1,366 | 18% | | Construction - commercial and residential | $1,212 | 16% | | Construction - C&I (owner-occupied) | $70 | 1% | | Real estate mortgage - residential | $46 | 1% | | Consumer & home equity | $52 | 1% | | **Total** | **$7,722** | **100%** | Income Producing CRE by Type (6/30/2025) | Income Producing CRE by Type (6/30/2025) | Balance ($ in millions) | % of Loans | | :--------------------------------------- | :---------------------- | :--------- | | Office & Office Condo | $821 | 11% | | Multifamily | $836 | 11% | | Retail | $311 | 4% | | Hotel/Motel | $395 | 5% | | Mixed Use | $325 | 4% | | Industrial | $169 | 2% | | Single/1-4 Family & Res. Condo | $82 | 1% | | Other | $830 | 11% | | **Total** | **$3,769** | **49%** | - Substandard loans in CRE increased by **$189.4 million** quarter-over-quarter, while C&I substandard loans decreased by **$5.5 million**; **64%** of substandard loans were current at 6/30/25[122](index=122&type=chunk) [Detailed Loan Portfolio Analysis](index=27&type=section&id=Detailed%20Loan%20Portfolio%20Analysis) [Office Loan Portfolio](index=27&type=section&id=Office%20Loan%20Portfolio) The office loan portfolio decreased year-over-year and is detailed by class, classification, ACL coverage, and maturity - Income Producing Office Holdings declined **$68 million** Year-over-Year[92](index=92&type=chunk) CRE Office Portfolio (6/30/2025) | Class Type (6/30/2025) | Balance ($ in millions) | of Loans | Avg. Size ($ in millions) | Criticized and Classified % | | :--------------------- | :---------------------- | :--------- | :------------------------ | :-------------------------- | | Owner Occupied Office | $144.2 | 88 | $1.6 | 1% | | Income Producing Office | $821.2 | 68 | $12.1 | 28% | | **Total CRE Office** | **$965.4** | **156** | **$6.2** | **29%** | - Performing Office ACL coverage is **11.54%**[103](index=103&type=chunk) - Limited exposure to Class B central business district office[103](index=103&type=chunk) [Office Loan Portfolio Detail](index=27&type=section&id=Office%20Loan%20Portfolio%20Detail) Income Producing Office Detail (6/30/2025) | Income Producing Office (6/30/2025) | Balance ($ in millions) | of Loans | Avg. Size ($ in millions) | Criticized and Classified % | In Central Business District of DC % | | :---------------------------------- | :---------------------- | :--------- | :------------------------ | :-------------------------- | :----------------------------------- | | Class A | $372.2 | 15 | $24.8 | 11% | 6.0% | | Class B | $417.9 | 36 | $11.6 | 16% | 4.9% | | Class C | $7.7 | 5 | $1.5 | 0% | 0.0% | | Office Condo and Other | $23.4 | 12 | $2.0 | 1% | 0.0% | | **Total Income Producing Office** | **$821.2** | **68** | **$12.1** | **28%** | **10.9%** | - EagleBank's **Excess CET1 + ACL / Inc Producing Office Loans is 73%**, which is lower than some peers but still provides significant coverage[96](index=96&type=chunk) [Income Producing Office Loan Maturity](index=29&type=section&id=Income%20Producing%20Office%20Loan%20Maturity) Income Producing Office Loan Maturity | Maturity Year | Balance ($ millions) | % of Inc Producing Office | Cumulative % | Weighted LTV | Weighted DSCR | | :------------ | :------------------- | :------------------------ | :----------- | :----------- | :------------ | | 2025 | $76.3 | 9.3% | 9.3% | 65 | 1.0 | | 2026 | $305.2 | 37.2% | 46.4% | 71 | 1.6 | | 2027 | $171.0 | 20.8% | 67.3% | 55 | 1.4 | | 2028+ | $268.8 | 32.7% | 100.0% | 73 | 1.6 | | **Total** | **$821.2** | **100.0%** | | **68** | **1.5** | [Multifamily Loan Portfolio](index=31&type=section&id=Multifamily%20Loan%20Portfolio) The multifamily loan portfolio is detailed by key metrics, risk classification, and geographic concentration Multifamily Portfolio Metrics (6/30/2025) | Metric (6/30/2025) | Value | | :----------------- | :---- | | Total CRE Balance | $836.4 million | | of Loans | 43 | | Avg Size | $19.5 million | | Median Size | $11.6 million | | Pass % | 83% | | Criticized % | 17% | | Non-Accrual % | 2% | | Weighted LTV | 63 | | Weighted DSCR | 1.0 | Multifamily Portfolio Geography | Geography | % of Inc Producing Multi-Family | | :-------- | :------------------------------ | | Maryland | 23% | | Virginia | 24% | | DC | 47% | | Other US | 6% | [Asset Quality](index=37&type=section&id=Asset%20Quality) [Asset Quality Metrics](index=37&type=section&id=Asset%20Quality%20Metrics) Asset quality metrics for Q2 2025 show a significant increase in credit loss provisions and charge-offs, alongside an improved NPA ratio Asset Quality Trends | Metric (Quarter Ended) | 2024Q2 | 2024Q3 | 2024Q4 | 2025Q1 | 2025Q2 | | :--------------------- | :----- | :----- | :----- | :----- | :----- | | Provision for Credit Losses (thousands) | $8,959 | $10,094 | $12,132 | $26,255 | $138,159 | | NCO / Average Loans | 0.11% | 0.26% | 0.48% | 0.57% | 4.22% | | Allowance for Credit Losses/Loans HFI | 1.33% | 1.40% | 1.44% | 1.63% | 2.38% | | NPAs / Assets | 2.16% | 1.90% | 1.79% | 1.22% | 0.88% | - **Provision for Credit Losses (PCL)** surged to **$138.2 million** in Q2 2025, a substantial increase from previous quarters[126](index=126&type=chunk) - **Net Charge-Offs (NCO) / Average Loans** increased significantly to **4.22%** in Q2 2025[127](index=127&type=chunk) - **Non-Performing Assets (NPAs) / Assets** decreased to **0.88%** in Q2 2025, indicating an improvement in the non-performing asset ratio[130](index=130&type=chunk) [Nonaccrual Loans](index=41&type=section&id=Nonaccrual%20Loans) Nonaccrual loans increased in Q2 2025, with details on new additions and progress on credit resolution efforts Nonaccrual Loan Detail (6/30/2025) | Nonaccrual Loan (6/30/2025) | Balance ($000s) | % Total NPLs | New in 2Q 2025 | | :-------------------------- | :-------------- | :----------- | :------------- | | Office - Washington DC | $39,489 | 17.4% | Yes | | Data Center - Fairfax | $33,610 | 14.8% | Yes | | Land - Washington DC | $27,377 | 12.1% | Yes | | Office - Montgomery | $14,700 | 6.5% | Yes | | Multifamily - Washington DC | $13,789 | 6.1% | Yes | | All Other Nonaccrual Loans | $47,998 | 21.2% | | | **Total Nonaccrual Loans** | **$226,420** | **100.0%** | | - Credit resolution highlights include **$60.0 million** of loans returning to accrual status and **$38.9 million** transferred to held-for-sale, with a signed LOI for one property expected to close in Q3[143](index=143&type=chunk)[144](index=144&type=chunk) [Classified and Criticized Loans Summary](index=45&type=section&id=Classified%20and%20Criticized%20Loans%20Summary) This section summarizes classified and criticized loans as of June 30, 2025, detailing large exposures by risk rating Classified and Criticized Loans | Risk Rating | of Loans | Average Balance ($000s) | Median Size ($000s) | Loans Over $10M | Balance Over $10M ($000s) | % of Total Over $10M | | :------------------ | :--------- | :---------------------- | :------------------ | :---------------- | :------------------------ | :--------------------- | | Special Mention Loans | 33 | $173,311 | $1,826 | | $107,266 | 62% | | Substandard Loans | 131 | $702,128 | $880 | | $502,922 | 72% | | **Grand Total** | **164** | **$875,439** | **$806** | **22** | **$610,187** | | - The summary provides detailed information for 5 Special Mention loans over $10 million and 17 Substandard loans over $10 million, including their LTV, DSCR, and accrual status[146](index=146&type=chunk) [Investment Portfolio](index=57&type=section&id=Investment%20Portfolio) The investment portfolio composition, yield, and strategic management for liquidity and reinvestment are detailed Securities Portfolio Summary | Securities Classification | % of Portfolio at Book | Book Yield | Reprice Term (years) | | :------------------------ | :--------------------- | :--------- | :------------------- | | Securities AFS | 57% | 1.78% | 3.7 | | Securities HTM | 43% | 2.05% | 6.3 | | **Total Securities** | **100%** | **1.90%** | **1.8** | Investment Portfolio Mix | Investment Type | % of Portfolio | | :-------------- | :------------- | | Agency MBS | 57% | | Agency Debenture | 24% | | Agency CMBS | 7% | | Municipal | 6% | | Corporate | 6% | | US Treasury | 0% | - The portfolio is positioned to manage liquidity and pledging needs, with projected cash flow of **$216 million** for the remainder of 2025[178](index=178&type=chunk) - Sold **$30 million** par value securities yielding **0.95%** and reinvested the proceeds at **5.33%** during the quarter[178](index=178&type=chunk) [Capital & Shareholder Value](index=13&type=section&id=Capital%20%26%20Shareholder%20Value) [Capital Levels vs. Peers](index=13&type=section&id=Capital%20Levels%20vs.%20Peers) The company maintains strong capital ratios, providing superior coverage compared to its peer group - Capital ratios are high relative to peers[44](index=44&type=chunk) - Excess CET1 (over 9%) plus reserves provides a superior level of coverage when measured against peers[44](index=44&type=chunk) Capital Ratios vs. Peers | Metric (EGBN vs. Peers) | EGBN (6/30/2025) | Peer Range (3/31/2025) | | :---------------------- | :--------------- | :--------------------- | | CET1 Ratio | 14.0% | 10.1% - 17.0% | | Excess CET1 + ACL / Total Loans | 8.4% | 1.8% - 10.4% | | Tangible Common Equity / Tangible Assets | 11.2% | 7.8% - 11.9% | [Tangible Book Value Per Share](index=59&type=section&id=Tangible%20Book%20Value%20Per%20Share) Tangible Book Value Per Share decreased slightly in Q2 2025, with a positive long-term compound annual growth rate TBVPS Trend | Metric (Quarter Ended) | 2025Q1 | 2025Q2 | | :--------------------- | :----- | :----- | | Tangible Book Value Per Share | $40.99 | $39.03 | - TBVPS decreased by **$1.96** from $40.99 in Q1 2025 to **$39.03** in Q2 2025, primarily influenced by net income and AOCI[183](index=183&type=chunk) - Tangible Book Value Per Share has a **2.0% CAGR** from 2020 to 2025[184](index=184&type=chunk) [Appendix](index=39&type=section&id=Appendix) [Non-GAAP Reconciliation (unaudited)](index=67&type=section&id=Non-GAAP%20Reconciliation%20(unaudited)) This section provides detailed reconciliations of non-GAAP financial measures to their comparable GAAP equivalents Tangible Common Equity Reconciliation | Metric ($ in thousands, except per share data) | 2024 Q2 | 2024 Q3 | 2024 Q4 | 2025 Q1 | 2025 Q2 | | :------------------------------------------- | :----------- | :----------- | :----------- | :----------- | :----------- | | Common shareholders' equity | $1,169,459 | $1,225,424 | $1,226,061 | $1,244,891 | $1,185,067 | | Less: Intangible assets | (129) | (21) | (16) | (11) | (9) | | **Tangible common equity** | **$1,169,330** | **$1,225,403** | **$1,226,045** | **$1,244,880** | **$1,185,058** | | Total assets | $11,302,023 | $11,285,052 | $11,129,508 | $11,317,361 | $10,601,331 | | Less: Intangible assets | (129) | (21) | (16) | (11) | (9) | | **Tangible assets** | **$11,301,894** | **$11,285,031** | **$11,129,492** | **$11,317,350** | **$10,601,322** | | **Tangible common equity ratio** | **10.35%** | **10.86%** | **11.02%** | **11.00%** | **11.18%** | | Book value per share | $38.75 | $40.61 | $40.60 | $40.99 | $39.03 | | Less: Intangible book value | (0.01) | - | (0.01) | - | - | | **Tangible book value per share** | **$38.74** | **$40.61** | **$40.59** | **$40.99** | **$39.03** | | Shares outstanding | 30,180,482 | 30,173,200 | 30,202,003 | 30,368,843 | 30,364,983 | Operating Net Income Reconciliation | Metric ($ in thousands) | 2024 Q2 | 2024 Q3 | 2024 Q4 | 2025 Q1 | 2025 Q2 | | :------------------------------------------- | :----------- | :----------- | :----------- | :----------- | :----------- | | Net (loss) Income | ($83,802) | $21,815 | $15,290 | $1,675 | ($69,775) | | Add back of goodwill impairment | $104,168 | 50 | 50 | 50 | 50 | | **Operating net income** | **$20,366** | **$21,815** | **$15,290** | **$1,675** | **($69,775)** | | Operating return on avg. tangible common equity | 7.04% | 7.22% | 4.94% | 0.55% | -22.35% | | Operating return on avg. assets | 0.66% | 0.70% | 0.48% | 0.06% | -2.33% | | Operating return on avg. common equity | 6.46% | 7.22% | 4.94% | 0.55% | -22.35% | Operating Efficiency Ratio Reconciliation | Metric ($ in thousands) | 2024 Q2 | 2024 Q3 | 2024 Q4 | 2025 Q1 | 2025 Q2 | | :------------------------------------------- | :----------- | :----------- | :----------- | :----------- | :----------- | | Operating Revenue | $76,685 | $78,794 | $74,861 | $73,856 | $74,190 | | Operating Noninterest expense | $42,323 | $43,614 | $44,532 | $45,451 | $43,470 | | **Operating Efficiency ratio** | **55.2%** | **55.4%** | **59.5%** | **61.5%** | **58.6%** |

Core Viewpoint - Eagle Bancorp reported a significant net loss of $69.8 million for Q2 2025, primarily due to a substantial increase in provision expense, reflecting ongoing challenges in its loan portfolio and strategic risk remediation efforts [2][5][6]. Financial Performance - The company experienced a net loss of $69.8 million or $2.30 per share in Q2 2025, compared to a net income of $1.7 million or $0.06 per share in Q1 2025, marking a $71.5 million decrease in net income [2][19]. - Net interest income increased by $2.1 million to $67.8 million, while noninterest income decreased by $1.8 million to $6.4 million [2][10]. - Noninterest expenses decreased by $2.0 million to $43.5 million, primarily due to reduced legal and professional fees [10]. Asset Quality - The allowance for credit losses (ACL) rose to 2.38% of total loans, up from 1.63% in the previous quarter, indicating a proactive approach to managing credit risk [6][16]. - Nonperforming assets increased by $26.0 million to $228.9 million, representing 2.16% of total assets, compared to 1.79% in the prior quarter [16][25]. - Net charge-offs for the quarter were $83.9 million, significantly higher than $11.2 million in Q1 2025 [16][25]. Capital Position - The common equity tier one capital ratio stood at 14.0%, with a tangible common equity ratio exceeding 10%, indicating a strong capital position [6][16]. - Total shareholders' equity decreased by 4.8% to $1.2 billion, primarily due to quarterly losses [16][21]. Strategic Initiatives - The company is focused on resolving challenged loans and addressing valuation pressures in its office portfolio as part of its strategic plan [4][5]. - A cash dividend of $0.165 per share was declared, payable on August 29, 2025, reflecting ongoing commitment to shareholder returns despite current challenges [6][9].

Core Viewpoint - Eagle Bancorp, Inc. will host a teleconference on July 24, 2025, to discuss its second quarter 2025 financial results, which will be released on July 23, 2025 [1] Group 1: Teleconference Details - The teleconference will feature CEO Susan Riel and CFO Eric Newell discussing the earnings [1] - Interested parties must register to participate, receiving a dial-in number and unique PIN [2] - The call will also be available via live webcast on the company's website, with a replay accessible until August 7, 2025 [2] Group 2: Company Overview - Eagle Bancorp, Inc. is the holding company for EagleBank, which began operations in 1998 [4] - The bank is headquartered in Bethesda, Maryland, and operates 12 offices in Suburban Maryland, Washington, D.C., and Northern Virginia [4] - EagleBank focuses on building relationships with businesses, professionals, and individuals in its marketplace [4]

Core Viewpoint - Rosen Law Firm is investigating potential securities claims on behalf of shareholders of Eagle Bancorp, Inc. due to allegations of materially misleading business information issued by the company [1]. Group 1: Legal Action and Investor Rights - Shareholders who purchased Eagle Bancorp securities may be entitled to compensation through a class action lawsuit without any out-of-pocket fees, facilitated by a contingency fee arrangement [2]. - The Rosen Law Firm is preparing a class action to seek recovery of investor losses related to Eagle Bancorp [2]. Group 2: Financial Performance and Market Reaction - Eagle Bancorp filed a current report on Form 8-K on April 23, 2025, announcing its Q1 2025 results, which indicated a significant miss on both earnings per share (EPS) and revenue compared to forecasts [3]. - Following the disappointing Q1 results, Eagle Bancorp's stock price experienced an 11.3% decline on April 24, 2025 [3]. Group 3: Rosen Law Firm's Credentials - The Rosen Law Firm has a strong track record in securities class actions, having achieved the largest securities class action settlement against a Chinese company at the time and being ranked No. 1 for the number of settlements in 2017 [4]. - The firm has recovered hundreds of millions of dollars for investors, securing over $438 million in 2019 alone [4].

Core Viewpoint - Rosen Law Firm is investigating potential securities claims on behalf of shareholders of Eagle Bancorp, Inc. due to allegations of materially misleading business information issued by the company [1]. Group 1: Investigation and Class Action - Shareholders of Eagle Bancorp may be entitled to compensation through a class action lawsuit without any out-of-pocket fees, as the Rosen Law Firm prepares to seek recovery of investor losses [2]. - Investors can join the prospective class action by submitting a form or contacting the law firm directly for more information [2]. Group 2: Financial Performance and Market Reaction - Eagle Bancorp's Q1 2025 results, announced on April 23, 2025, showed a significant miss on both earnings per share (EPS) and revenue compared to forecasts, leading to an 11.3% drop in stock price on April 24, 2025 [3]. Group 3: Rosen Law Firm's Credentials - The Rosen Law Firm has a strong track record in securities class actions, having achieved the largest securities class action settlement against a Chinese company at the time and being ranked No. 1 for the number of settlements in 2017 [4]. - The firm has recovered hundreds of millions of dollars for investors, securing over $438 million in 2019 alone, and has consistently been recognized for its success in this field [4].

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) Provides a comprehensive overview of the company's financial performance and position for the first quarter of 2025, including detailed financial statements and management's analysis [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) For Q1 2025, Eagle Bancorp reported a net income of $1.7 million, a significant improvement from a net loss of $0.3 million in the prior-year period, with total assets increasing to $11.3 billion and deposits growing to $9.3 billion Consolidated Balance Sheet Highlights (Unaudited) | (in thousands) | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $11,317,361 | $11,129,508 | | Loans held for investment, net | $7,813,837 | $7,820,498 | | Total Deposits | $9,277,268 | $9,131,078 | | Total Liabilities | $10,072,470 | $9,903,447 | | Total Shareholders' Equity | $1,244,891 | $1,226,061 | Consolidated Statement of Operations Highlights (Unaudited) | (in thousands, except per share data) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net Interest Income | $65,649 | $74,698 | | Provision for Credit Losses | $26,255 | $35,175 | | Noninterest Income | $8,207 | $3,589 | | Noninterest Expense | $45,451 | $39,997 | | Net Income (Loss) | $1,675 | $(338) | | Diluted Earnings (Loss) Per Share | $0.06 | $(0.01) | [Note 1 – Summary of Significant Accounting Policies](index=8&type=section&id=Note%201%20%E2%80%93%20Summary%20of%20Significant%20Accounting%20Policies) The company's accounting policies conform to GAAP, with the Allowance for Credit Losses (ACL) estimated using a CECL model incorporating an 18-month forecast and four economic variables across three scenarios - The company's CECL model for estimating the Allowance for Credit Losses (ACL) uses a forecast period of **18 months**[49](index=49&type=chunk) - The cash flow model incorporates four economic variables: national unemployment, Commercial Real Estate (CRE) Price Index, House Price Index, and Gross Domestic Product (GDP), using a weighted approach of three economic scenarios (baseline, upside, downside)[49](index=49&type=chunk) [Note 3 – Investment Securities](index=14&type=section&id=Note%203%20%E2%80%93%20Investment%20Securities) As of March 31, 2025, the investment portfolio comprised $1.21 billion in AFS and $924.5 million in HTM securities, holding significant unrealized losses primarily due to market interest rate changes Investment Securities Summary (March 31, 2025) | Security Category | Amortized Cost (in thousands) | Estimated Fair Value (in thousands) | | :--- | :--- | :--- | | **Available-for-Sale (AFS)** | $1,330,077 | $1,214,237 | | **Held-to-Maturity (HTM), net** | $924,473 | $820,530 | - As of March 31, 2025, the AFS portfolio had gross unrealized losses of **$115.9 million**, and the HTM portfolio had gross unrecognized losses of **$105.2 million**[73](index=73&type=chunk)[77](index=77&type=chunk) - The allowance for credit losses on AFS securities was **zero**, while the allowance for HTM securities was **$1.28 million** as of March 31, 2025[79](index=79&type=chunk) [Note 4 – Loans and Allowance for Credit Losses](index=18&type=section&id=Note%204%20%E2%80%93%20Loans%20and%20Allowance%20for%20Credit%20Losses) The total loan portfolio was $7.94 billion as of March 31, 2025, with a significant concentration in commercial real estate, and the ACL increased to $129.5 million driven by provisions and net charge-offs Loan Portfolio Composition | Loan Category | March 31, 2025 (in thousands) | % of Total | | :--- | :--- | :--- | | Income producing - commercial real estate | $3,967,124 | 49% | | Owner occupied - commercial real estate | $1,403,668 | 18% | | Construction - commercial and residential | $1,210,788 | 15% | | Commercial | $1,178,343 | 15% | | Other | $183,083 | 3% | | **Total Loans** | **$7,943,306** | **100%** | Allowance for Credit Losses (ACL) Activity - Q1 2025 | (in thousands) | Amount | | :--- | :--- | | Balance at beginning of year | $114,390 | | Net loans charged-off | $(11,230) | | Provision for credit losses | $26,309 | | **Ending balance** | **$129,469** | - Nonaccrual loans totaled **$200.4 million** as of March 31, 2025, down from **$208.7 million** as of December 31, 2024[108](index=108&type=chunk) - During Q1 2025, the company modified loans for borrowers experiencing financial difficulty with an amortized cost basis of **$83.0 million**[114](index=114&type=chunk) [Note 7 – Deposits](index=30&type=section&id=Note%207%20%E2%80%93%20Deposits) Total deposits increased to $9.28 billion as of March 31, 2025, driven by time deposit growth, with brokered deposits remaining a significant funding source at 41% of the total Deposit Composition | (in thousands) | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Noninterest-bearing demand | $1,607,826 | $1,544,403 | | Interest-bearing transaction | $926,722 | $1,211,791 | | Savings and money market | $3,558,919 | $3,599,221 | | Time deposits | $3,183,801 | $2,775,663 | | **Total Deposits** | **$9,277,268** | **$9,131,078** | - As of March 31, 2025, total brokered deposits were **$3.8 billion**, representing **41%** of total deposits[139](index=139&type=chunk) [Note 8 – Borrowings](index=32&type=section&id=Note%208%20%E2%80%93%20Borrowings) Total borrowings were approximately $598.5 million as of March 31, 2025, primarily FHLB advances and senior notes, while the company maintained significant available liquidity of approximately $4.2 billion Borrowings Summary (March 31, 2025) | Borrowing Source | Net Outstanding (in thousands) | Available Capacity (in thousands) | | :--- | :--- | :--- | | FHLB | $490,000 | $1,070,435 | | FRB Discount Window | $0 | $1,806,205 | | Senior notes | $76,181 | $0 | | **Total** | **$566,181** | **$2,876,640** | - The Company has total additional undrawn borrowing capacity of approximately **$4.2 billion**, which includes unencumbered securities available to be pledged[141](index=141&type=chunk) [Note 13 - Legal Contingencies](index=40&type=section&id=Note%2013%20-%20Legal%20Contingencies) The company is cooperating with an ongoing U.S. Attorney's Office investigation concerning anti-money laundering controls from 2011-2017 and cannot estimate potential losses - The Company is under an ongoing investigation by the U.S. Attorney's Office regarding its anti-money laundering controls from approximately **2011 to 2017**[172](index=172&type=chunk) - Due to the inherent uncertainty, the Company cannot estimate the potential losses, if any, resulting from this investigation[172](index=172&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=41&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) MD&A attributes Q1 2025 net income to lower credit loss provisions and higher noninterest income, offsetting declining net interest income and increased expenses, while maintaining strong capital and liquidity [Results of Operations](index=44&type=section&id=Results%20of%20Operations) Net income for Q1 2025 improved to $1.7 million due to decreased provision for credit losses and increased noninterest income, despite a decline in net interest income and higher noninterest expenses - Net interest income decreased by **12%** to **$65.6 million** in Q1 2025 from **$74.7 million** in Q1 2024, primarily due to lower yields on loans and higher average deposit balances with lower rates[194](index=194&type=chunk)[203](index=203&type=chunk) - The provision for credit losses was **$26.3 million** in Q1 2025, a decrease from **$35.2 million** in Q1 2024[196](index=196&type=chunk) - Noninterest income increased **129%** to **$8.2 million**, primarily driven by a **$3.6 million** increase in income from bank-owned life insurance (BOLI) following a new **$200 million** investment[195](index=195&type=chunk)[220](index=220&type=chunk) - Noninterest expense rose **14%** to **$45.5 million**, largely due to a **$2.5 million (40%)** increase in FDIC insurance expense[197](index=197&type=chunk)[221](index=221&type=chunk) [Balance Sheet Analysis](index=49&type=section&id=Balance%20Sheet%20Analysis) Total assets grew 2% to $11.3 billion, primarily from a BOLI investment, with the loan portfolio stable at $7.94 billion, heavily concentrated in commercial real estate, and deposits increasing to $9.3 billion - Total assets increased by **2%** to **$11.3 billion**, primarily driven by the purchase of additional BOLI coverage[228](index=228&type=chunk) - The loan portfolio has a high concentration in real estate, with commercial real estate and construction loans making up **83%** of the portfolio as of March 31, 2025[238](index=238&type=chunk) - Income producing CRE loans collateralized by office properties comprised **$847.7 million**, or **10.7%** of total loans, as of March 31, 2025[242](index=242&type=chunk) - Total deposits increased **2%** to **$9.3 billion**, driven by a **$408.1 million** increase in time deposits[231](index=231&type=chunk)[278](index=278&type=chunk) [Allowance for Credit Losses](index=53&type=section&id=Allowance%20for%20Credit%20Losses) The ACL on loans increased to $129.5 million, or 1.63% of total loans, driven by a $26.3 million provision and $11.2 million in net charge-offs, improving the ACL to nonperforming loans ratio to 65% ACL Ratios | Metric | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | ACL for loans (in millions) | $129.5 | $114.4 | | ACL as % of total loans | 1.63% | 1.44% | | ACL as % of nonperforming loans | 65% | 55% | - Net charge-offs for Q1 2025 were **$11.2 million**, which included **$11.0 million** from three CRE office lending relationships[253](index=253&type=chunk) - The ACL attributable to performing office properties as a percentage of total loans increased to **5.78%** from **3.81%** at year-end, indicating increased reserves for this segment[257](index=257&type=chunk) [Nonperforming Assets](index=54&type=section&id=Nonperforming%20Assets) Total nonperforming assets decreased to $202.9 million, or 1.79% of total assets, primarily due to a reduction in nonperforming loans from charge-offs on CRE loans Nonperforming Assets Summary | (in thousands) | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Nonperforming loans | $200,441 | $208,706 | | Other real estate owned (OREO) | $2,459 | $2,743 | | **Total nonperforming assets** | **$202,900** | **$211,449** | | Ratio of NPLs to total loans | 2.52% | 2.63% | | Ratio of NPAs to total assets | 1.79% | 1.90% | - The decrease in nonperforming loans was primarily due to charge-offs on CRE loans during the quarter[262](index=262&type=chunk) [Liquidity Management](index=58&type=section&id=LIQUIDITY%20MANAGEMENT) The company maintains a strong liquidity position with $5.6 billion in available secondary liquidity and $4.2 billion in total aggregate borrowing capacity, deemed adequate for funding needs Secondary Sources of Liquidity (March 31, 2025) | Source | In Use (in thousands) | Available (in thousands) | | :--- | :--- | :--- | | Unsecured brokered deposits | $1,077,776 | $1,266,390 | | FHLB secured borrowings | $490,000 | $1,070,435 | | FRB Discount window | $0 | $1,806,205 | | Unpledged assets (for collateral) | $0 | $1,292,908 | | **Total (selected)** | **$1,567,776** | **$5,435,938** | - Total aggregate borrowing capacity as of March 31, 2025 was **$4.2 billion**[301](index=301&type=chunk) [Capital Resources and Adequacy](index=60&type=section&id=CAPITAL%20RESOURCES%20AND%20ADEQUACY) The company's capital levels significantly exceed regulatory requirements, with a CET1 ratio of 14.61% and a total risk-based capital ratio of 15.86%, despite a concentration in construction and development loans Company Capital Ratios (March 31, 2025) | Ratio | Actual | Minimum Required (w/ buffer) | | :--- | :--- | :--- | | CET1 capital ratio | 14.61% | 7.00% | | Tier 1 capital ratio | 14.61% | 8.50% | | Total risk-based capital ratio | 15.86% | 10.50% | | Tier 1 leverage ratio | 11.11% | 4.00% | - The company's construction, land, and land development loans represent **119.61%** of consolidated risk-based capital, exceeding the **100%** regulatory guidance threshold for potential concentration risk[309](index=309&type=chunk) - A regular quarterly cash dividend of **$0.165 per share** was announced on April 23, 2025[316](index=316&type=chunk) [Asset/Liability Management](index=62&type=section&id=Asset%2FLiability%20Management) The company actively manages interest rate risk, positioned as asset-sensitive, with a +100 basis point rate shock modeled to increase net interest income by 0.8% over 12 months Interest Rate Shock Analysis on Net Interest Income (12-Month) | Change in Rates (bps) | % Change in NII | | :--- | :--- | | +400 | 3.4% | | +200 | 1.7% | | +100 | 0.8% | | -100 | (0.7)% | | -200 | (1.4)% | - The re-pricing duration of the loan portfolio was **10 months** as of March 31, 2025, with **62.8%** of loans having variable or adjustable rates[323](index=323&type=chunk) - The duration of the investment portfolio decreased to **4.1 years** from **4.2 years** at year-end 2024[325](index=325&type=chunk) [Controls and Procedures](index=66&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting during Q1 2025 - Management concluded that disclosure controls and procedures were effective as of March 31, 2025[350](index=350&type=chunk) - No material changes to internal control over financial reporting occurred in Q1 2025[351](index=351&type=chunk) [PART II. OTHER INFORMATION](index=67&type=section&id=PART%20II.%20OTHER%20INFORMATION) Presents additional disclosures, including specific risk factors related to the company's geographic concentration and potential impacts from economic and policy changes [Risk Factors](index=67&type=section&id=Item%201A.%20Risk%20Factors) The company highlights risks from its concentration in the Washington, D.C. metropolitan area, including potential adverse impacts from federal government spending changes, and notes risks from U.S. trade policy shifts - A key risk is the potential adverse impact from changes in federal government spending or workforce size in the Washington, D.C. area, which could harm the local economy and the commercial real estate market[355](index=355&type=chunk)[356](index=356&type=chunk) - The company notes that a decline in federal government spending or a shutdown could have a ripple effect, adversely affecting asset quality, capital, and liquidity[357](index=357&type=chunk) - Changes in U.S. trade policies and practices, such as new tariffs, are identified as a risk that could disrupt the economy and adversely affect the company's business and financial results[359](index=359&type=chunk)[361](index=361&type=chunk)

Core Insights - Eagle Bancorp, Inc. is under investigation for potential violations of federal securities laws and unlawful business practices [1] - In Q1 2025, Eagle reported a significant decline in net income to $1.7 million, down from $15.3 million in the previous quarter, primarily due to increased provision expenses and decreased net interest income [2] - Following the financial results announcement, Eagle's stock price dropped by 11.37%, closing at $18.78 per share [2] Financial Performance - Q1 2025 net income: $1.7 million ($0.06 per diluted share) compared to $15.3 million ($0.50 per diluted share) in Q4 2024 [2] - The decrease in net income was attributed to a $14.1 million increase in provision expense, a $5.1 million decline in net interest income, and a $0.9 million rise in noninterest expenses [2] - Valuation risk in the office portfolio was highlighted as a primary concern driving the provision for credit losses [2] Legal Investigation - Bragar Eagel & Squire, P.C. is investigating claims on behalf of Eagle stockholders regarding potential legal violations [1] - The law firm encourages affected stockholders to reach out for more information or to participate in the investigation [3]

Core Viewpoint - Eagle Bancorp, Inc. is under investigation for potential violations of federal securities laws and unlawful business practices, following a significant decline in its financial performance in Q1 2025 [1][3]. Financial Performance - For Q1 2025, Eagle reported a net income of $1.7 million, or $0.06 per diluted share, a substantial decrease from $15.3 million, or $0.50 per diluted share in the previous quarter, marking a decline of $13.6 million [3]. - The decrease in net income was attributed to a $14.1 million increase in provision expense, a $5.1 million decline in net interest income, and a $0.9 million increase in noninterest expenses [3]. - The company's share price fell by $2.41, from $21.19 on April 23, 2025, to $18.78 on April 24, 2025, following the release of its financial results [3]. Investigation Details - The law firm Kirby McInerney LLP is leading the investigation into Eagle Bancorp, focusing on potential claims related to securities law violations and other unlawful practices [1][4]. - Shareholders who purchased or acquired Eagle securities are encouraged to contact the law firm for more information regarding their rights and interests [4]. Company Background - Kirby McInerney LLP is a New York-based plaintiffs' law firm specializing in securities, antitrust, whistleblower, and consumer litigation, with a history of achieving significant recoveries for shareholders [6].

Financial Data and Key Metrics Changes - The company reported net income of $1.7 million for the quarter, a significant decline from $15.3 million in the prior quarter, resulting in earnings per diluted share of $0.06 compared to $0.50 previously [7][29] - The pretax income decreased by $17.3 million to $2.4 million in the first quarter, driven by a higher provision for credit losses, a decline in net interest income, and increased noninterest expenses [29][30] - The allowance for credit losses increased to $129.5 million, representing coverage of total loans at 1.63%, up 19 basis points from the prior quarter [21][31] Business Line Data and Key Metrics Changes - Commercial lending grew by $109.1 million or 4.3% from December 31, 2024, reflecting the impact of new additions to the Commercial & Industrial (C&I) team [11] - Deposits increased by $146.2 million in the first quarter, primarily through time deposits in digital and branch channels, enhancing the bank's liquidity [12][32] - Noninterest income rose to $8.2 million for the first quarter, compared to $4.1 million in the prior quarter, largely due to a $200 million separate account BOLI transaction [36] Market Data and Key Metrics Changes - The company noted modest exposure to government contracting and GSA-linked assets, which reduces sensitivity to changes in federal budget spending [13] - The DC economy is diversified beyond the federal government, including educational institutions, a growing technology sector, and tourism, supporting long-term stability [14] Company Strategy and Development Direction - The company is focused on preserving capital flexibility, improving portfolio quality, and managing through volatility while maintaining long-term franchise value [17][28] - There is an emphasis on exploring asset disposition strategies for office loans to address evolving valuation risks [15][16] - The company aims to deepen relationship-based deposits and drive operational excellence despite challenges in asset quality and valuation pressures [41][42] Management's Comments on Operating Environment and Future Outlook - Management acknowledged sustained pressure on office property valuations and the need for adequate reserves to absorb potential losses [15][17] - The outlook for net interest margin (NIM) is being adjusted downward due to higher funding costs, but there is optimism for improvement as funding costs decrease [35][60] - The company remains confident in its ability to execute strategic priorities and maintain a resilient capital base [18][40] Other Important Information - The company reported a tangible common equity ratio of 11% at quarter-end, with 75% of total deposits insured, reflecting a stable funding base [31][32] - The average deposits grew by $381.6 million from a year ago during the first quarter of 2024 [32] Q&A Session Summary Question: Insights on Office Portfolio Reserve Drivers - Management explained that the reserve build was driven by updated assumptions regarding probability of default and loss given default based on recent appraisals, leading to a $14.3 million increase in the allowance for credit losses related to the office portfolio [46][48] Question: Impact of Government Contracting on Credit - Management noted that the government contracting portfolio is modest, with ongoing communication with clients to assess potential impacts from federal budget changes [55][56] Question: NIM Expansion Assumptions - Management indicated that the forecast for NIM does not include Fed rate cuts and is driven by a new pricing structure for third-party payment processing and redeployment of funds into higher-earning assets [57][60] Question: Office Portfolio Appraisal Updates - Management confirmed that appraisals for the office portfolio are conducted proactively, with updates provided as necessary [100][102] Question: Growth in C&I Portfolio - Management expressed optimism about the growth in the C&I pipeline, attributing it to new team members and increased activity [104][105]

Financial Data and Key Metrics Changes - The company reported net income of $1,700,000 for the quarter, reflecting continued earnings pressure compared to $15,300,000 in the prior quarter [5][18] - Pre-tax income declined by $17,300,000 to $2,400,000 in the first quarter, driven by a higher provision for credit losses, a decline in net interest income, and increased non-interest expenses [18] - The allowance for credit losses increased to $129,500,000, representing coverage of total loans at 1.63%, up 19 basis points from the prior quarter [13][19] - Net interest income before provision totaled $65,600,000, decreasing from $70,800,000 in the prior quarter due to lower average interest-bearing cash balances and lower rates on loans [21] - The tangible common equity ratio decreased by two basis points to 11% at quarter end, while book value per share increased by $0.39 to $40.99 [20] Business Line Data and Key Metrics Changes - The commercial lending platform saw loans grow by $109,100,000 or 4.3% over the previous quarter [7] - Deposits grew by $146,200,000, largely through time deposits in digital and branch channels, enhancing the bank's liquidity strength [8] - Non-interest income increased to $8,200,000 for the first quarter, compared to $4,100,000 in the prior quarter, primarily driven by a separate account BOLI transaction [24] Market Data and Key Metrics Changes - The DC economy is diversified beyond the federal government, including educational institutions, a growing technology sector, and tourism, which supports long-term stability [9] - The company has modest exposure to government contracting and GSA-linked assets, reducing sensitivity to changes in federal budget spending [8] Company Strategy and Development Direction - The company is focused on preserving capital flexibility, improving portfolio quality, and managing through volatility while maintaining long-term franchise value [11][27] - There is an emphasis on executing a disciplined strategy to enhance franchise value and position the company as a leading community bank in the Greater Washington DC Metro Area [7][9] - The company plans to explore asset disposition strategies for office loans to address evolving valuation risks [10] Management's Comments on Operating Environment and Future Outlook - Management acknowledges sustained pressure on office property valuations and the need for adequate reserves in light of market uncertainties [10][11] - The company remains optimistic about the long-term strength of the Washington DC region despite current challenges [10] - Management is actively reassessing capital allocation priorities, including shareholder return strategies, to align with forward-looking earnings [11] Other Important Information - The company has a strong capital position, with Tier one leverage increasing by 37 basis points to 11.11% [19] - Average deposits have grown by $381,600,000 from a year ago, reflecting a stable funding base [20] - The company is seeing a robust pipeline in its C and I lending, indicating potential growth in that area [76] Q&A Session Summary Question: Can you provide more details on the reserve build related to the office portfolio? - The reserve increase was driven by updated assumptions regarding probability of default and loss given default, resulting in a $14,300,000 increase to the allowance for credit losses related to the performing office portfolio [34][36] Question: What is the outlook for the C and I portfolio growth? - All indications point to an increase in the C and I portfolio growth, supported by new team members and a robust pipeline [75][78] Question: How sensitive is the margin guidance to potential Fed rate cuts? - The forecast does not include changes to Fed rate cuts, and the company is relatively neutral to interest rate movements due to its loan book structure [42][43]