Eagle Bancorp(EGBN) - 2025 Q2 - Quarterly Results

Introduction Forward Looking Statements 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] - 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] Contact Information 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] Company Profile & Strategy Attractive Washington DC Footprint 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] - Household income in EagleBank's markets is significantly above the national and Mid-Atlantic states' averages[13] - 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] Eagle at a Glance 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 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][28] - Disciplined Cost Structure: Operating Noninterest Expense / Average Assets = 1.45%, Operating Efficiency Ratio = 58.6%; The company operates a branch-light, efficient model[25][28] - 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][28] - 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][28] Strategic Initiatives to Enhance Profitability 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][35] - 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][35] - 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] Financial Highlights & Outlook Performance Measures 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] - Operating Efficiency Ratio improved to 55.2% in 2025Q2 from 61.5% in 2024Q2[48] Net Interest Income & Margin 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] - Interest expense decreased by $4.6 million, driven by lower average short-term borrowings and reduced costs on savings and money market accounts[61] - Net interest margin (NIM) increased to 2.37% for Q2 2025, up from 2.28% in the prior quarter[61] Net Income - Summary 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] - 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] - Noninterest income decreased $1.8 million, mainly due to a $1.9 million loss on a trade to reposition the investment portfolio[68] - Noninterest expense decreased $2 million, associated with decreased legal, accounting, and professional fees[69][70] 2025 Outlook 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] - The company anticipates higher growth in noninterest income and noninterest expense, along with a significantly higher effective tax rate[73] Funding & Liquidity Deposit Mix and Trend 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] 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 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] - Average deposits increased $342.8 million for the quarter, primarily due to an increase in time deposit accounts[84] - 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] - Ample access to liquidity from FHLB, FRB Discount Window, cash, and unencumbered securities totals over $4.8 billion[86] Loan Portfolio Overview Loan Mix and Trend 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 | $7,719 | | Overall Loan Yield | 6.91% | 6.93% | 6.63% | 6.45% | 6.31% | Loan Type and Classification The loan portfolio is detailed by type and classification, highlighting an increase in substandard CRE loans as of June 30, 2025 Loan Portfolio by Type (6/30/2025) | Loan Type (6/30/2025) | Balance ($ 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] Detailed Loan Portfolio Analysis Office Loan Portfolio The office loan portfolio decreased year-over-year and is detailed by class, classification, ACL coverage, and maturity - Income Producing Office Holdings declined $68 million Year-over-Year[92] CRE Office Portfolio (6/30/2025) | Class Type (6/30/2025) | Balance ($ 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 | $6.2 | 29% | - Performing Office ACL coverage is 11.54%[103] - Limited exposure to Class B central business district office[103] Office Loan Portfolio Detail Income Producing Office Detail (6/30/2025) | Income Producing Office (6/30/2025) | Balance ($ 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 | $12.1 | 28% | 10.9% | - EagleBank's Excess CET1 + ACL / Inc Producing Office Loans is 73%, which is lower than some peers but still provides significant coverage[96] Income Producing Office Loan Maturity Income Producing Office Loan Maturity | Maturity Year | Balance ($ 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 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 Asset Quality Metrics 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] - Net Charge-Offs (NCO) / Average Loans increased significantly to 4.22% in Q2 2025[127] - Non-Performing Assets (NPAs) / Assets decreased to 0.88% in Q2 2025, indicating an improvement in the non-performing asset ratio[130] Nonaccrual Loans 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][144] Classified and Criticized Loans Summary 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] Investment Portfolio 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] - Sold $30 million par value securities yielding 0.95% and reinvested the proceeds at 5.33% during the quarter[178] Capital & Shareholder Value Capital Levels vs. Peers The company maintains strong capital ratios, providing superior coverage compared to its peer group - Capital ratios are high relative to peers[44] - Excess CET1 (over 9%) plus reserves provides a superior level of coverage when measured against peers[44] 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 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 $39.03 in Q2 2025, primarily influenced by net income and AOCI[183] - Tangible Book Value Per Share has a 2.0% CAGR from 2020 to 2025[184] Appendix Non-GAAP Reconciliation (unaudited) This section provides detailed reconciliations of non-GAAP financial measures to their comparable GAAP equivalents Tangible Common Equity Reconciliation | Metric ($ 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% |