[10-Q] Eagle Bancorp Inc Quarterly Earnings Report
Filing Impact
Filing Sentiment
Form Type
10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
For the Quarterly Period Ended June 30, 2025
OR
For the transition period from _________ to _________
Commission File Number 0-25923
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||
| (Address of principal executive offices) | (Zip Code) | |||||||
(301 ) 986-1800
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Securities Registered Pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered | ||||||||||||
The | ||||||||||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☒
Non-accelerated filer ☐ Smaller Reporting Company ☐
Emerging Growth Company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of August 1, 2025, the registrant had 30,368,985 shares of Common Stock outstanding.
EAGLE BANCORP, INC.
TABLE OF CONTENTS
Page | ||||||||
| PART I. | FINANCIAL INFORMATION | |||||||
Item 1. | Financial Statements | 3 | ||||||
Consolidated Balance Sheets as of June 30, 2025 and December 31, 2024 (unaudited) | 3 | |||||||
Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2025 and 2024 (unaudited) | 4 | |||||||
Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2025 and 2024 (unaudited) | 5 | |||||||
Consolidated Statements of Changes in Shareholders' Equity for the Three and Six Months Ended June 30, 2025 and 2024 (unaudited) | 7 | |||||||
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2025 and 2024 (unaudited) | 8 | |||||||
| Notes to Consolidated Financial Statements | 9 | |||||||
Note 1 – Summary of Significant Accounting Policies | 9 | |||||||
Note 2 – Cash and Due from Banks | 15 | |||||||
Note 3 – Investment Securities | 15 | |||||||
Note 4 – Loans and Allowance for Credit Losses | 19 | |||||||
Note 5 – Leases | 30 | |||||||
Note 6 – Derivatives and Hedging Activities | 31 | |||||||
Note 7 – Deposits | 34 | |||||||
Note 8 – Borrowings | 35 | |||||||
Note 9 – Net Income (Loss) per Common Share | 36 | |||||||
Note 10 – Other Comprehensive Income (Loss) | 37 | |||||||
Note 11 – Fair Value Measurements | 39 | |||||||
Note 12 – Segment Reporting | 44 | |||||||
Note 13 – Legal Contingencies | 44 | |||||||
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 45 | ||||||
General | 45 | |||||||
Critical Accounting Policies and Estimates | 46 | |||||||
Results of Operations | 47 | |||||||
Balance Sheet Analysis | 54 | |||||||
Commitments and Contractual Obligations | 63 | |||||||
Liquidity Management | 64 | |||||||
Capital Resources and Adequacy | 65 | |||||||
Asset/Liability Management and Quantitative and Qualitative Disclosures about Market Risk | 67 | |||||||
Use of Non-GAAP Financial Measures | 70 | |||||||
Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 71 | ||||||
Item 4. | Controls and Procedures | 71 | ||||||
PART II. | OTHER INFORMATION | |||||||
Item 1. | Legal Proceedings | 72 | ||||||
Item 1A. | Risk Factors | 72 | ||||||
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 72 | ||||||
Item 3. | Defaults Upon Senior Securities | 72 | ||||||
Item 4. | Mine Safety Disclosures | 72 | ||||||
Item 5. | Other Information | 72 | ||||||
Item 6. | Exhibits | 73 | ||||||
SIGNATURES | 74 | |||||||
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 2
Table of Contents
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
EAGLE BANCORP, INC.
Consolidated Balance Sheets (Unaudited)
(dollars in thousands, except share and per share data)
| As of | ||||||||||||||
| June 30, 2025 | December 31, 2024 | |||||||||||||
| Assets | ||||||||||||||
| Cash and due from banks | $ | $ | ||||||||||||
| Federal funds sold | ||||||||||||||
| Interest-bearing deposits with banks and other short-term investments | ||||||||||||||
Investment securities available-for-sale (amortized cost of $ | ||||||||||||||
Investment securities held-to-maturity, net of allowance for credit losses of $ | ||||||||||||||
| Federal Reserve and Federal Home Loan Bank stock | ||||||||||||||
| Loans held for sale | ||||||||||||||
| Loans held for investment, at amortized cost | ||||||||||||||
| Less: Allowance for credit losses | ( | ( | ||||||||||||
| Loans held for investment, net of allowance | ||||||||||||||
| Premises and equipment, net | ||||||||||||||
| Right-of-use assets - operating leases | ||||||||||||||
| Deferred income taxes | ||||||||||||||
| Bank-owned life insurance | ||||||||||||||
| Intangible assets, net | ||||||||||||||
| Other real estate owned | ||||||||||||||
| Other assets | ||||||||||||||
| Total Assets | $ | $ | ||||||||||||
| Liabilities and Shareholders’ Equity | ||||||||||||||
| Liabilities | ||||||||||||||
| Deposits: | ||||||||||||||
| Noninterest-bearing demand | $ | $ | ||||||||||||
| Interest-bearing transaction | ||||||||||||||
| Savings and money market | ||||||||||||||
| Time deposits | ||||||||||||||
| Total deposits | ||||||||||||||
| Customer repurchase agreements | ||||||||||||||
| Other short-term borrowings | ||||||||||||||
| Long-term borrowings | ||||||||||||||
| Operating lease liabilities | ||||||||||||||
| Reserve for unfunded commitments | ||||||||||||||
| Other liabilities | ||||||||||||||
| Total Liabilities | ||||||||||||||
| Shareholders’ Equity | ||||||||||||||
Common stock, par value | ||||||||||||||
| Additional paid-in capital | ||||||||||||||
| Retained earnings | ||||||||||||||
| Accumulated other comprehensive income (loss) | ( | ( | ||||||||||||
| Total Shareholders’ Equity | ||||||||||||||
| Total Liabilities and Shareholders’ Equity | $ | $ | ||||||||||||
See Notes to Consolidated Financial Statements.
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 3
Table of Contents
EAGLE BANCORP, INC.
Consolidated Statements of Operations (Unaudited)
(dollars in thousands, except per share data)
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Interest Income | |||||||||||||||||||||||
| Interest and fees on loans | $ | $ | $ | $ | |||||||||||||||||||
| Interest and dividends on investment securities | |||||||||||||||||||||||
| Interest on balances with other banks and short-term investments | |||||||||||||||||||||||
| Interest on federal funds sold | |||||||||||||||||||||||
| Total interest income | |||||||||||||||||||||||
| Interest Expense | |||||||||||||||||||||||
| Interest on deposits | |||||||||||||||||||||||
| Interest on customer repurchase agreements | |||||||||||||||||||||||
| Interest on other short-term borrowings | |||||||||||||||||||||||
| Interest on long-term borrowings | |||||||||||||||||||||||
| Total interest expense | |||||||||||||||||||||||
| Net Interest Income | |||||||||||||||||||||||
| Provision for (Reversal of) Credit Losses | |||||||||||||||||||||||
| Provision for (Reversal of) Credit Losses for Unfunded Commitments | |||||||||||||||||||||||
| Net Interest Income (Loss) After Provision for (Reversal of) Credit Losses | ( | ( | |||||||||||||||||||||
| Noninterest Income | |||||||||||||||||||||||
| Service charges on deposits | |||||||||||||||||||||||
| Gain on sale of loans | |||||||||||||||||||||||
| Net gain (loss) on sale of investment securities | ( | ( | |||||||||||||||||||||
| Increase in the cash surrender value of bank-owned life insurance | |||||||||||||||||||||||
| Other income | |||||||||||||||||||||||
| Total noninterest income | |||||||||||||||||||||||
| Noninterest Expense | |||||||||||||||||||||||
| Salaries and employee benefits | |||||||||||||||||||||||
| Premises and equipment expenses | |||||||||||||||||||||||
| Marketing and advertising | |||||||||||||||||||||||
| Data processing | |||||||||||||||||||||||
| Legal, accounting and professional fees | |||||||||||||||||||||||
| FDIC insurance | |||||||||||||||||||||||
| Goodwill impairment | |||||||||||||||||||||||
| Other expenses | |||||||||||||||||||||||
| Total noninterest expense | |||||||||||||||||||||||
| Income (Loss) Before Income Tax Expense | ( | ( | ( | ( | |||||||||||||||||||
| Income Tax Expense | ( | ( | |||||||||||||||||||||
| Net Income (Loss) | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Earnings (Loss) Per Common Share | |||||||||||||||||||||||
| Basic | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Diluted | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
See Notes to Consolidated Financial Statements.
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 4
Table of Contents
EAGLE BANCORP, INC.
Consolidated Statements of Comprehensive Income (Loss) (Unaudited)
(dollars in thousands)
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Net Income (Loss) | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Other comprehensive income (loss), net of tax: | |||||||||||||||||||||||
| Unrealized gain (loss) on securities available-for-sale | ( | ||||||||||||||||||||||
Reclassification adjustment for net (gain) loss included in net income (loss) | ( | ( | |||||||||||||||||||||
| Total unrealized gain (loss) on investment securities available-for-sale | ( | ||||||||||||||||||||||
| Amortization of unrealized loss on securities transferred to held-to-maturity | |||||||||||||||||||||||
| Unrealized gain (loss) on derivatives | ( | ( | ( | ||||||||||||||||||||
| Other comprehensive income (loss) | |||||||||||||||||||||||
| Comprehensive Income (Loss) | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
See Notes to Consolidated Financial Statements.
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 5
Table of Contents
EAGLE BANCORP, INC.
Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)
(dollars in thousands, except share data)
| Common | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Total Shareholders’ Equity | |||||||||||||||||||||||||||||||
| Shares | Amount | ||||||||||||||||||||||||||||||||||
Balance as of April 1, 2025 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||
| Net Income (Loss) | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
| Other comprehensive income, net of tax | — | — | — | — | |||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | |||||||||||||||||||||||||||||||
| Issuance of common stock under share-based compensation arrangements | ( | — | — | — | — | ||||||||||||||||||||||||||||||
| Issuance of common stock related to employee stock purchase plan | — | — | — | ||||||||||||||||||||||||||||||||
Cash dividends declared ($ | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
Balance as of June 30, 2025 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||
Balance as of April 1, 2024 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||
| Net Income (Loss) | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
| Other comprehensive income, net of tax | — | — | — | — | |||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | |||||||||||||||||||||||||||||||
| Issuance of common stock under share-based compensation arrangements | ( | — | — | — | — | ||||||||||||||||||||||||||||||
| Issuance of common stock related to employee stock purchase plan | — | — | — | ||||||||||||||||||||||||||||||||
Cash dividends declared ($ | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
Balance as of June 30, 2024 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||
See Notes to Consolidated Financial Statements.
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 6
Table of Contents
EAGLE BANCORP, INC.
Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)
(dollars in thousands, except share data)
| Common | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Total Shareholders’ Equity | |||||||||||||||||||||||||||||||
| Shares | Amount | ||||||||||||||||||||||||||||||||||
Balance as of January 1, 2025 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||
| Net Income (Loss) | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
| Other comprehensive income, net of tax | — | — | — | — | |||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | |||||||||||||||||||||||||||||||
| Issuance of common stock under share-based compensation arrangements | ( | — | — | ||||||||||||||||||||||||||||||||
| Issuance of common stock related to employee stock purchase plan | — | — | — | ||||||||||||||||||||||||||||||||
Cash dividends declared ( $ | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
Balance as of June 30, 2025 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||
Balance as of January 1, 2024 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||
| Net Income (Loss) | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
| Other comprehensive income, net of tax | — | — | — | — | |||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | |||||||||||||||||||||||||||||||
| Issuance of common stock under share-based compensation arrangements | ( | — | — | ||||||||||||||||||||||||||||||||
| Issuance of common stock related to employee stock purchase plan | — | — | — | ||||||||||||||||||||||||||||||||
Cash dividends declared ($ | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
Balance as of June 30, 2024 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||
See Notes to Consolidated Financial Statements.
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 7
Table of Contents
EAGLE BANCORP, INC.
Consolidated Statements of Cash Flows (Unaudited)
(dollars in thousands)
| For the Six Months Ended June 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| Cash Flows From Operating Activities: | |||||||||||
| Net Income (loss) | $ | ( | $ | ( | |||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Provision for credit losses | |||||||||||
| (Reversal of) provision for unfunded commitments | |||||||||||
| Goodwill impairment | |||||||||||
| Depreciation and amortization | |||||||||||
| Gains on sale of loans | ( | ||||||||||
| Loss on mortgage servicing rights | ( | ||||||||||
| Securities premium amortization (discount accretion), net | |||||||||||
| Net gain on sale of other real estate owned | ( | ||||||||||
| Net increase in cash surrender value of bank owned life insurance | ( | ( | |||||||||
| Net (gain) loss on sale of investment securities | ( | ||||||||||
| Stock-based compensation expense | |||||||||||
| Decrease (increase) in other assets | ( | ||||||||||
| Increase (decrease) in other liabilities | ( | ( | |||||||||
| Net cash provided by operating activities | |||||||||||
| Cash Flows From Investing Activities: | |||||||||||
| Purchases of available-for-sale investment securities | ( | ||||||||||
| Proceeds from maturities of available-for-sale securities | |||||||||||
| Proceeds from sale/call of available-for-sale securities | |||||||||||
| Proceeds from maturities of held-to-maturity securities | |||||||||||
| Proceeds from call of held-to-maturity securities | |||||||||||
| Purchases of Federal Reserve stock | ( | ( | |||||||||
| Proceeds from (purchases of) of Federal Home Loan Bank stock | ( | ||||||||||
| Proceeds from sale of mortgage servicing rights | |||||||||||
| Net change in loans | ( | ||||||||||
| (Purchase) redemption of bank owned life insurance | ( | ||||||||||
| Proceeds from sale of other real estate owned | |||||||||||
| Purchase of premises and equipment | ( | ( | |||||||||
| Net cash (used in) provided by investing activities | |||||||||||
| Cash Flows From Financing Activities: | |||||||||||
| Increase (decrease) in deposits | ( | ( | |||||||||
| (Decrease) increase in customer repurchase agreements | ( | ||||||||||
| Increase in short-term borrowings | ( | ||||||||||
| Net proceeds from long-term borrowings | ( | ||||||||||
| Proceeds from employee stock purchase plan | |||||||||||
| Cash dividends paid | ( | ( | |||||||||
| Net cash provided by (used in) financing activities | ( | ( | |||||||||
| Net Increase (Decrease) in Cash and Cash Equivalents | ( | ( | |||||||||
| Cash and Cash Equivalents at Beginning of Period | |||||||||||
| Cash and Cash Equivalents at End of Period | $ | $ | |||||||||
| Supplemental Cash Flows Information: | |||||||||||
| Interest paid | $ | $ | |||||||||
| Income taxes paid | |||||||||||
| Supplemental Non-Cash Disclosures: | |||||||||||
| Initial recognition of operating lease right-of-use assets | $ | $ | |||||||||
| Transfer of loans held for investment to loans held for sale | |||||||||||
| Transfers from loans to other real estate owned | |||||||||||
See Notes to Consolidated Financial Statements.
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 8
Table of Contents Notes to Consolidated Financial Statements | Note 1 – Summary of Significant Accounting Policies
EAGLE BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 – Summary of Significant Accounting Policies
Nature of Operations
Eagle Bancorp, Inc. (the "Parent") and its subsidiaries (together with the Parent, the "Company"), through EagleBank (the "Bank"), conduct a full service community banking business, primarily in Northern Virginia, Suburban Maryland and Washington, D.C. The primary financial services offered by the Bank include real estate, commercial and consumer lending, as well as traditional deposit services. The Bank is also active in the origination of small business loans. The guaranteed portion of small business loans, guaranteed by the Small Business Administration ("SBA"), is typically sold to third party investors in a transaction apart from the loan’s origination.
The Bank offers its products and services through twelve banking offices, four lending centers and various digital capabilities, including PC and smartphone-enabled banking services. Landroval Municipal Finance, Inc., a subsidiary of the Bank, focuses on lending to municipalities by buying debt on the public market as well as direct purchase issuance.
Principles of Consolidation and Basis of Presentation
The Consolidated Financial Statements include the accounts of Eagle Bancorp, Inc. and its subsidiaries with all significant intercompany transactions eliminated. EagleBank, a Maryland chartered commercial bank, is the Parent's principal subsidiary.
The accounting and reporting policies of the Company conform to generally accepted accounting principles in the United States of America ("GAAP") and to general practices in the banking industry. The Consolidated Financial Statements and accompanying notes of the Company included herein are unaudited. The Consolidated Financial Statements reflect all adjustments, consisting of normal recurring adjustments, that in the opinion of management are necessary to present fairly the results for the periods presented. Certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). In addition to the accounting policies described below, the Company applies the accounting policies contained in "Note 1 – Summary of Significant Accounting Policies" to the Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2024 ("2024 Form 10-K"). Certain reclassifications have been made to 2024 amounts previously reported to conform to the 2025 presentation. Reclassifications had no effect on net income (loss) or shareholders' equity. These statements should be read in conjunction with the audited Consolidated Financial Statements and related notes included in the Company's Annual Report on 2024 Form 10-K.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and accompanying notes. Actual results may differ from those estimates and such differences could be material to the consolidated financial statements. The allowance for credit losses ("ACL") is a material estimate that is particularly susceptible to significant variance in the near-term.
Investment Securities
The Company recognizes acquired securities on the trade date. Investment securities comprise debt securities, which are classified depending on the Company's intent and ability to hold the securities to maturity. Debt securities are classified as available-for-sale ("AFS") when management may have the intent to sell them prior to maturity. Debt securities are classified as held-to-maturity ("HTM") and carried at amortized cost when management has the positive intent and ability to hold them to maturity.
AFS securities are acquired as part of the Company’s asset/liability management strategy and may be sold in response to changes in interest rates, current market conditions, loan demand, changes in prepayment risk and other factors. AFS securities are carried at fair value, with unrealized gains or losses, other than impairment losses, being reported as accumulated other comprehensive income (loss), a separate component of shareholders’ equity, net of deferred income tax. Realized gains and losses, using the specific identification method, are included as a separate component of noninterest income in the Consolidated Statements of Operations.
Premiums and discounts on investment securities are amortized/accreted to the earlier of call or maturity based on expected lives, which are adjusted based on prepayment assumptions and call optionality.
Transfers of Investment Securities from Available-for-Sale to Held-to-Maturity
Transfers of debt securities into the HTM category from the AFS category are made at amortized cost, net of unrealized gain or loss reported in accumulated other comprehensive income (loss) at the date of transfer. The unrealized holding gain or loss at
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 9
Table of Contents Notes to Consolidated Financial Statements | Note 1 – Summary of Significant Accounting Policies
the date of transfer is retained in other comprehensive income (loss) and in the carrying value of the HTM securities. Such amounts are amortized over the remaining life of the security. There were no transfers during the periods presented.
The Company does not intend to sell the HTM investments, and it is more likely than not that the Company will not have to sell the securities before recovery of its amortized cost basis, which may be at maturity.
Loans
The Company classifies loans in its portfolio as either held for investment ("HFI"), when management has the intent and ability to hold the loans for the foreseeable future or until maturity or payoff, or held for sale ("HFS"). HFS loans are reported at the lower of cost or fair value on the Consolidated Balance Sheets. HFI loans are stated at the principal amount outstanding, net of unamortized deferred costs and fees. Interest income on loans is recognized at the contractual rate on the principal amounts outstanding. It is the Company’s policy to discontinue the accrual of interest when circumstances indicate that collection is doubtful. Loan origination fees, net of direct loan origination costs, and commitment fees are deferred and amortized on the interest method over the term of the loan.
Past due loans are placed on nonaccrual status when the contractual payment of principal or interest has become 90 days past due or there is a clear indication that the borrower's cash flow may not be sufficient to meet payments as they become due, even when the loan is currently performing. A loan may remain on accrual status if it is in the process of collection and is well secured. When a loan is placed on nonaccrual status, all previously accrued and unpaid interest is reversed through interest income. Interest income is subsequently recognized on a cash basis as long as the remaining book balance of the asset is deemed to be collectible. If collectability is questionable, then cash payments are applied to principal. A loan is placed back on accrual status when both principal and interest are current and it is probable that we will be able to collect all amounts due (both principal and interest) according to the terms of the loan agreement.
Allowance for Credit Losses
The table below presents a breakdown of the current provision for credit losses included in our Consolidated Statements of Operations.
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||||||||||||
| (dollars in thousands) | 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||
| Provision for (reversal of) credit losses - loans | $ | $ | $ | $ | ||||||||||||||||||||||
| Provision for (reversal of) credit losses - HTM debt securities | ( | ( | ||||||||||||||||||||||||
| Total Provision for credit losses | $ | $ | $ | $ | ||||||||||||||||||||||
Allowance for Credit Losses - Loans
The ACL - Loans is an estimate of the expected credit losses in the HFI loans portfolio. The Company's ACL on its loan portfolio is deducted from the amortized cost basis of loans to present the net amount expected to be collected on the loans. Loans, or portions thereof, are charged off against the allowance when they are deemed uncollectible. Expected recoveries are recorded to the extent they do not exceed the aggregate of amounts previously charged-off and expected to be charged-off.
The ACL - Loans is measured on a collective pool basis when similar risk characteristics are present. Reserves on loans that do not share similar risk characteristics are evaluated on an individual basis. Nonaccrual loans are specifically reviewed for loss potential and when deemed appropriate are assigned a reserve based on an individual evaluation. The remainder of the portfolio, representing all loans not evaluated individually for impairment, is pooled into portfolio segments by call report codes and a loan-level probability of default ("PD") / Loss Given Default ("LGD") cash flow method is applied using an exposure at default ("EAD") model. These historical loss rates are then modified to incorporate our reasonable and supportable forecast of future losses at the portfolio segment level, as well as any necessary qualitative adjustments.
The Company uses regression analysis of historical internal and peer data provided by a third-party provider (as Company loss data is insufficient) to determine suitable credit loss drivers to utilize when modeling lifetime PD and LGD. This analysis also determines how expected PD will be impacted by different forecasted levels of the loss drivers. A similar process is employed to calculate a reserve assigned to off-balance sheet commitments, specifically unfunded loan commitments and letters of credit, and any needed reserve is recorded in reserve for unfunded commitments ("RUC") on the Consolidated Balance Sheets. For periods beyond which we are able to develop reasonable and supportable forecasts, we revert to the historical loss rate on a straight-line basis over a twelve-month period.
For each of the loan segments listed below, the Company generates cash flow projections at the instrument level wherein payment expectations are adjusted for estimated prepayment speeds, PD rates and LGD rates. The modeling of expected prepayment speeds is based on historical internal data. EAD is based on each instrument's underlying amortization schedule in order to estimate the bank's expected credit loss exposure at the time of the borrower's potential default.
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 10
Table of Contents Notes to Consolidated Financial Statements | Note 1 – Summary of Significant Accounting Policies
Portfolio segments are used to pool loans with similar risk characteristics and align with our methodology for measuring current expected credit losses ("CECL"). A summary of our primary portfolio segments is as follows:
Commercial. The commercial loan portfolio comprises lines of credit and term loans for working capital, equipment and other business assets across a variety of industries. These loans are used for general corporate purposes including financing working capital, internal growth and acquisitions; and are generally secured by accounts receivable, inventory, equipment and other assets of our clients’ businesses.
Income producing – commercial real estate. Income producing commercial real estate loans comprise permanent and bridge financing provided to professional real estate owners/managers of commercial and residential real estate projects and properties who generally have a demonstrated record of past success with similar properties. Collateral properties include apartment buildings, office buildings, hotels, mixed-use buildings, retail, data centers, warehouses, and shopping centers. The primary source of repayment on these loans is generally expected to come from lease or operation of the real property collateral. Income producing commercial real estate loans are impacted by fluctuations in collateral values, as well as rental demand and rates.
Owner occupied – commercial real estate. The owner occupied commercial real estate portfolio comprises permanent financing provided to operating companies and their related entities for the purchase or refinance of real property wherein their business operates. Collateral properties include industrial property, office buildings, religious facilities, mixed-use property, healthcare and educational facilities.
Real Estate Mortgage – Residential. Real estate mortgage residential loans comprise consumer mortgages for the purpose of purchasing or refinancing first lien real estate loans secured by primary-residence, second-home and rental residential real property.
Construction – commercial and residential. The construction commercial and residential loan portfolio comprises loans made to builders and developers of commercial and residential property, for renovation, new construction and development projects. Collateral properties include apartment buildings, mixed-use properties, residential condominiums, single unit and 1-4 unit residential properties and office buildings. The primary source of repayment on these loans is expected to come from the sale, permanent financing or lease of the real property collateral. Construction loans are impacted by fluctuations in collateral values and the ability of the borrower or ultimate purchaser to obtain permanent financing.
Construction – commercial and industrial ("C&I") (owner occupied). The construction C&I (owner occupied) portfolio comprises loans to operating companies and their related entities for new construction or renovation of the real or leased property in which they operate. Generally, these loans contain provisions for conversion to an owner occupied commercial real estate loan or to a commercial loan after completion of construction. Collateral properties include industrial, healthcare, religious facilities, restaurants and office buildings.
Home Equity. The home equity portfolio comprises consumer lines of credit and loans secured by subordinate liens on residential real property.
Other Consumer. The other consumer portfolio comprises consumer loans not secured by real property, including personal lines of credit and loans, overdraft lines and vehicle loans. This category also includes other loan items such as overdrawn deposit accounts as well as loans and loan payments in process.
The ACL also includes a qualitative adjustment for inherent risks not reflected in the historical quantitative analysis associated with the reasonable and supportable forecast. Relevant factors include, but are not limited to, concentrations of credit risk, appraisal risk from volatility in the market, changes in underwriting standards, experience and depth of lending staff and trends in delinquencies. While our methodology in establishing the reserve for credit losses attributes portions of the ACL and RUC to the commercial and consumer portfolio segments, the entire ACL and RUC is available to absorb credit losses expected in the total loan portfolio and total amount of unfunded credit commitments, respectively. Our model may reflect assumptions by management that are not covered by the qualitative and environmental factors, and we reevaluate all of its factors quarterly.
The company uses four economic variables in its cash flow model: national unemployment, Commercial Real Estate ("CRE") Price Index, House Price Index and Gross Domestic Product ("GDP"), which are incorporated by utilizing a Loss Driver Analysis approach that factors in historical losses, including during the Great Recession, of regional peer banks and the Bank. The updated model incorporates a weighting of three economic scenarios; baseline, upside and downside. The scenarios cover the four economic forecast variables, with each segment of the portfolio linked to two of these variables, depending on the segment. The loss driver analysis is spread over a reasonable and supportable period of 18 months and reverts back to a historical loss rate over twelve months on a straight-line basis over the loan's remaining maturity. Management leverages economic projections from reputable and independent third parties to inform its loss driver forecasts over the forecast period.
We have several pass credit grades that are assigned to loans based on varying levels of risk, ranging from loans that are secured by cash or marketable securities, to watch list loans that have all the characteristics of an acceptable credit risk but warrant more than the normal level of monitoring. Special mention loans are those that are currently protected by the sound
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 11
Table of Contents Notes to Consolidated Financial Statements | Note 1 – Summary of Significant Accounting Policies
worth and paying capacity of the borrower, but that are potentially weak and constitute an additional credit risk. These loans have the potential to deteriorate to a substandard grade due to the existence of financial or administrative deficiencies. Substandard loans have a well-defined weakness or weaknesses that jeopardizes the liquidation of the debt. They are characterized by the distinct possibility that we will sustain some loss if the deficiencies are not corrected. Some substandard loans are inadequately protected by the sound worth and paying capacity of the borrower and of the collateral pledged and may be considered impaired. Substandard loans can be accruing or can be on nonaccrual depending on the circumstances of the individual loans. Loans graded as doubtful have all the weaknesses inherent in substandard loans with the added characteristics that the weaknesses make collection in full highly questionable and improbable. The possibility of loss is extremely high. All doubtful loans are accounted for on a nonaccrual basis. Classified loans is the aggregation of loans graded substandard and doubtful.
The methodology used in the estimation of the ACL, which is performed at least quarterly, is designed to be dynamic and responsive to changes in portfolio credit quality and forecasted economic conditions. Changes are reflected in the pool-basis allowance and individually assessed loans as the collectability of classified loans is evaluated with new information. As our portfolio has matured, historical loss ratios have been closely monitored. The review of the appropriateness of the allowance is performed by executive management and presented to management committees and the Audit Committee of the Board of Directors ("Board"). The committees' reports to the Board are part of the Board's review on a quarterly basis of our consolidated financial statements.
When management determines that foreclosure is probable, and for certain collateral-dependent loans where foreclosure is not considered probable, expected credit losses are based on the estimated fair value of the collateral adjusted for selling costs, when appropriate. A loan is considered collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate. The contractual term excludes expected extensions, renewals and modifications unless management has a reasonable expectation that a borrower will experience financial difficulty. We do not measure an ACL on accrued interest receivable balances because these balances are written off in a timely manner as a reduction to interest income when loans are placed on nonaccrual status.
Collateral Dependent Financial Assets
For collateral dependent loans for which the Company has determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and the Company expects repayment of the financial asset to be provided substantially through the sale of the collateral, the ACL is measured based on the difference between the fair value of the collateral and the amortized cost basis of the asset as of the measurement date. When repayment is expected to be from the operation of the collateral, expected credit losses are calculated as the amount by which the amortized cost basis of the financial asset exceeds the net present value ("NPV") from the operation of the collateral. When repayment is expected to be from the sale of the collateral, expected credit losses are calculated as the amount by which the amortized cost basis of the financial asset exceeds the fair value of the underlying collateral less estimated cost to sell. The ACL may be zero if the fair value of the collateral at the measurement date exceeds the amortized cost basis of the financial asset.
Loan Modifications to Borrowers in Financial Difficulty
The Company evaluates loan restructurings to determine if we have a loan modification and whether it results in a new loan or the continuation of the existing loan. Loan modifications to borrowers experiencing financial difficulty that result in a direct change in the timing or amount of contractual cash flows include situations where there are principal forgiveness, interest rate reductions, other-than-insignificant payment delays, term extensions, and combinations of the listed modifications.
A loan that is considered a modified loan may be subject to an individually-evaluated loan analysis if the commitment is $500 thousand or greater; otherwise, the restructured loan remains in the appropriate segment in the ACL model and associated provisions are adjusted based on changes in the discounted cash flows resulting from the modification of the restructured loan. Management strives to identify borrowers in financial difficulty early and work with them to modify their loan to more affordable terms before their loan reaches nonaccrual status, foreclosure or repossession of the collateral to minimize economic loss to the Company.
Allowance for Credit Losses - AFS Securities
For AFS debt securities in an unrealized loss position, the Company first assesses whether it intends to sell, or it is more likely than not that it will be required to sell, the security before recovery of its amortized cost basis. If either criteria is met, the security’s amortized cost basis is written down to fair value through income. For AFS debt securities that do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security is
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 12
Table of Contents Notes to Consolidated Financial Statements | Note 1 – Summary of Significant Accounting Policies
compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an ACL is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an ACL is recognized in other comprehensive income, as a non-credit-related impairment.
The entire amount of an impairment loss is recognized in earnings (loss) only when: (1) the Company intends to sell the security; or (2) it is more likely than not that the Company will have to sell the security before recovery of its amortized cost basis; or (3) the Company does not expect to recover the entire amortized cost basis of the security. In all other situations, only the portion of the impairment loss representing the credit loss must be recognized in earnings (loss), with the remaining portion being recognized in other comprehensive income (loss), net of deferred taxes. Changes in the ACL are recorded as a provision for (or reversal of) credit losses. Losses are charged against the allowance when management believes the uncollectibility of an AFS security is confirmed or when either of the criteria regarding intent or requirement to sell is met.
We have made a policy election to exclude accrued interest from the amortized cost basis of AFS debt securities and report accrued interest separately in accrued interest and other assets in the Consolidated Balance Sheets. AFS debt securities are placed on nonaccrual status when we no longer expect to receive all contractual amounts due, which is generally at 90 days past due. Accrued interest receivable is reversed against interest income when a security is placed on nonaccrual status. Accordingly, we do not recognize an allowance for credit loss against accrued interest receivable.
Allowance for Credit Losses - HTM Securities
The Company separately evaluates its HTM investment securities for any credit losses. The Company pools like securities and calculates expected credit losses through an estimate based on a security's credit rating, which is recognized as part of the ACL for HTM securities and included in the balance of HTM securities on the Consolidated Balance Sheets. If the Company determines that a security indicates evidence of deteriorated credit quality, the security is individually evaluated and a discounted cash flow analysis may be performed and compared to the amortized cost basis.
Loan Commitments and Allowance for Credit Losses on Off-Balance Sheet Credit Exposures
Financial instruments include off-balance sheet credit instruments such as commitments to make loans and commercial letters of credit issued to meet customer financing needs. The Company's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for off-balance sheet loan commitments is represented by the contractual amount of those instruments. Such financial instruments are recorded when they are funded.
The Company records a RUC on off-balance sheet credit exposures through a charge to provision for credit loss expense in the Company's Consolidated Statements of Operations. The RUC on off-balance sheet credit exposures is estimated by loan segment at each balance sheet date under the current expected credit loss model using the same methodologies as portfolio loans, taking into consideration the likelihood that funding will occur and is included in the RUC on the Company’s Consolidated Balance Sheets.
Segment Reporting
New Authoritative Accounting Guidance
Accounting Standards Pending Adoption
ASU No. 2023-06, "Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative" ("ASU 2023-06") incorporates into the Accounting Standards Codification (ASC or Codification) several U.S. Securities and Exchange Commission ("SEC") disclosure requirements under Regulations S-K and S-X. The amendments in the ASU are intended to clarify or improve disclosure and presentation requirements of a variety of Codification Topics, allow users to more easily compare entities subject to the SEC’s existing disclosures with those entities that were not previously subject to the requirements, and align the requirements in the Codification with the SEC’s regulations. These requirements are similar to, but require additional information than, generally accepted accounting principles. These new updates modify the disclosure or presentation requirements of a variety of Topics in the Codification. Entities should apply the amendments in ASU 2023-06 prospectively. For entities subject to the SEC’s existing disclosure requirements and for entities that have to file or provide financial statements with or to the SEC for the purpose of selling or issuing securities that do not have contractual limits on transfer, the effective date for each amendment will be the date on which the SEC removes that related disclosure from its rules. As a result, the effective date will be different for each individual disclosure based on the effective date of the SEC’s deletion of the related disclosure. Early adoption is prohibited. For all other entities, the effective date will be two years later. Early adoption is permitted for these entities, but not before the provisions of the ASU become effective for entities subject to SEC’s regulation. The effective dates of the amendments are predicated on the SEC removing its related disclosure requirements from its regulations. However, if by June 30, 2027, the SEC has not removed the related
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 13
Table of Contents Notes to Consolidated Financial Statements | Note 1 – Summary of Significant Accounting Policies
disclosure from its regulations, the amendments will be removed from the Codification and not become effective for any entity. We are currently in the process of evaluating this guidance.
ASU No. 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures" ("ASU 2023-09"). The ASU requires additional income tax disclosures around effective tax rates and cash income taxes paid. ASU 2023-09 is effective for public business entities for annual periods beginning after December 15, 2024. The new disclosure requirements around effective tax rates and cash income taxes paid only applies to year-end. There is no material impact to the interim disclosures.
ASU No. 2024-01, "Compensation—Stock Compensation (Topic 718): Scope Application of Profits Interest and Similar Awards" ("ASU 2024-01") clarifies how an entity determines whether a profits interest or similar award (hereafter a "profits interest award") is accounted for either (1) as a share-based payment arrangement, and therefore, within the scope of ASC 718 or (2) not a share-based payment arrangement and therefore within the scope of other guidance. ASU 2024-01 also improves the clarity and operation of the guidance in ASC 718-10-15-3. The guidance in ASU 2024-01 applies to all entities that issue profits interest awards as compensation to employees or non-employees in exchange for goods or services. For public business entities, the amendments are effective for annual periods beginning after December 15, 2024, and interim periods within those annual periods. For all other entities, the amendments are effective for annual periods beginning after December 15, 2025, and interim periods within those annual periods. Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance. If an entity adopts the amendments in an interim period, it should adopt them as of the beginning of the annual period that includes that interim period. The amendments should be applied (i) retrospectively to all prior periods presented in the financial statements or (ii) prospectively to profits interest and similar awards granted or modified on or after the date at which the entity first applies the amendments. If the amendments are applied prospectively, an entity is required to disclose the nature of and reason for the change in accounting principle. We have determined that the Company has not issued profits interests within the scope of this ASU.
ASU No. 2024-02, "Codification Improvements—Amendments to Remove References to the Concepts Statements" ("ASU 2024-02") amends the Accounting Standard Codification (“Codification”) by removing references to various concepts statements. In most instances, the references are extraneous and not required to understand or apply the guidance. In other instances, the references were used in prior statements to provide guidance in certain topical areas. As stated in paragraph 105-10-05-3 of the Codification, FASB Concepts Statements are non-authoritative. These amendments will simplify the Codification which will further draw a distinction between authoritative and non-authoritative literature. The amendments are effective for public business entities for fiscal years beginning after December 15, 2024. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2025. Early application of the amendments is permitted for all entities, for any fiscal year or interim period for which financial statements have not yet been issued (or made available for issuance). If an entity adopts the amendments in an interim period, it must adopt them as of the beginning of the fiscal year that includes that interim period. An entity should apply the amendments using one of the following transition methods: (1) prospectively to all new transactions recognized on or after the date that the entity first applies the amendments, or (2) retrospectively to the beginning of the earliest comparative period presented in which the amendments were first applied. We have removed all references to the Concepts Statements in our public filings.
ASU No. 2024-03, "Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40); Disaggregation of Income Statement Expenses" ("ASU 2024-03") which requires disaggregated disclosure of income statement expenses for public business entities. The ASU does not change the expense captions an entity presents on the face of the income statement; rather, it requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements at interim and annual reporting periods. ASU 2024-03 adds to ASC 220-40, requiring public business entities to disaggregate within the financial statement footnotes, in a tabular presentation, each relevant expense caption on the face of the income statement that includes any of the following natural expenses: (1) purchases of inventory, (2) employee compensation, (3) depreciation, (4) intangible asset amortization, and (5) depreciation, depletion, and amortization recognized as part of oil- and gas-producing activities or other types of depletion expenses. The tabular disclosure would also include certain other expenses, when applicable. ASU 2024-03 does not change or remove existing expense disclosure requirements; however, it may affect where that information appears in the footnotes to the financial statements. The amendments in this update are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The amendments in this update should be applied either (1) prospectively to financial statements issued for reporting periods after the effective date of this Update or (2) retrospectively to any or all prior periods presented in the financial statements. The company will expand its disclosures in the annual reporting period beginning after December 15, 2026 and interim reporting periods after to include disaggregated information related to the expenses required by the standard.
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 14
Table of Contents Notes to Consolidated Financial Statements | Note 2 – Cash and Due from Banks
Note 2 – Cash and Due from Banks
For the six months ended June 30, 2025 and 2024, the Bank maintained average daily balances at the Federal Reserve Bank of Richmond ("Federal Reserve Bank") of $1.4 billion and $1.7 billion, respectively, on which interest is paid.
Additionally, the Bank maintains interest-bearing balances with the Federal Home Loan Bank of Atlanta ("FHLB") and noninterest-bearing balances with domestic correspondent banks to cover associated costs for services they provide to the Bank.
Note 3 – Investment Securities
The table below summarizes the Company's investment in AFS securities by major security type.
As of June 30, 2025 | ||||||||||||||||||||||||||||||||
| (dollars in thousands) | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Allowance for Credit Losses | Estimated Fair Value | |||||||||||||||||||||||||||
| U.S. agency securities | $ | $ | $ | ( | $ | $ | ||||||||||||||||||||||||||
| Residential mortgage-backed securities | ( | |||||||||||||||||||||||||||||||
| Commercial mortgage-backed securities | ( | |||||||||||||||||||||||||||||||
| Municipal bonds | ( | |||||||||||||||||||||||||||||||
| Corporate bonds | ( | |||||||||||||||||||||||||||||||
| Total available-for-sale securities | $ | $ | $ | ( | $ | $ | ||||||||||||||||||||||||||
As of December 31, 2024 | ||||||||||||||||||||||||||||||||
| U.S. treasury bonds | $ | $ | $ | ( | $ | $ | ||||||||||||||||||||||||||
| U.S. agency securities | ( | |||||||||||||||||||||||||||||||
| Residential mortgage-backed securities | ( | |||||||||||||||||||||||||||||||
| Commercial mortgage-backed securities | ( | |||||||||||||||||||||||||||||||
| Municipal bonds | ( | |||||||||||||||||||||||||||||||
| Corporate bonds | ( | ( | ||||||||||||||||||||||||||||||
| Total available-for-sale securities | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||
The table below summarizes the Company's investment in HTM securities by major security type.
As of June 30, 2025 | ||||||||||||||||||||||||||
| (dollars in thousands) | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | ||||||||||||||||||||||
| Residential mortgage-backed securities | $ | $ | $ | ( | $ | |||||||||||||||||||||
| Commercial mortgage-backed securities | ( | |||||||||||||||||||||||||
| Municipal bonds | ( | |||||||||||||||||||||||||
| Corporate bonds | ( | |||||||||||||||||||||||||
| Total | $ | $ | ( | $ | ||||||||||||||||||||||
| Less: allowance for credit losses | ( | |||||||||||||||||||||||||
| Total held-to-maturity securities, net of ACL | $ | |||||||||||||||||||||||||
As of December 31, 2024 | ||||||||||||||||||||||||||
| Residential mortgage-backed securities | $ | $ | $ | ( | $ | |||||||||||||||||||||
| Commercial mortgage-backed securities | ( | |||||||||||||||||||||||||
| Municipal bonds | ( | |||||||||||||||||||||||||
| Corporate bonds | ( | |||||||||||||||||||||||||
| Total | $ | $ | ( | $ | ||||||||||||||||||||||
| Less: allowance for credit losses | ( | |||||||||||||||||||||||||
| Total held-to-maturity securities, net of ACL | $ | |||||||||||||||||||||||||
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 15
Table of Contents Notes to Consolidated Financial Statements | Note 3 – Investment Securities
In addition, as of June 30, 2025 and December 31, 2024, the Company held $30.6 million and $51.8 million in non-marketable equity securities, respectively, in a combination of Federal Reserve System ("Federal Reserve Board", "Federal Reserve" or "FRB") and FHLB stocks, which are required to be held for regulatory purposes. These securities cannot be disposed of other than through redemption by the issuer and, if redeemed, would be redeemed at the original cost. The securities are carried at cost, classified as restricted securities, and periodically evaluated for impairment based on ultimate recovery of par value.
As of June 30, 2025 and December 31, 2024, the Company had $41.6 million and $44.8 million, respectively, of unamortized unrealized losses outstanding following the transfer of investment securities from AFS to HTM in 2022. These unrealized losses are included in accumulated other comprehensive loss and are amortized through interest income as a yield adjustment over the remaining term of the securities.
Accrued interest receivable on investment securities totaled $6.2 million and $6.6 million as of June 30, 2025 and December 31, 2024, respectively. The accrued interest on investment securities is excluded from the amortized cost of the securities and is reported in in the Consolidated Balance Sheets.
The table below summarizes, by length of time, the Company's AFS securities that have been in a continuous unrealized loss position and HTM securities that have been in a continuous unrecognized loss position.
| Less than 12 Months | 12 Months or Greater | Total | ||||||||||||||||||||||||||||||||||||||||||
| (dollars in thousands) | Number of Securities | Estimated Fair Value | Unrealized Losses | Estimated Fair Value | Unrealized Losses | Estimated Fair Value | Unrealized Losses | |||||||||||||||||||||||||||||||||||||
As of June 30, 2025 | ||||||||||||||||||||||||||||||||||||||||||||
| Investment securities available-for-sale: | ||||||||||||||||||||||||||||||||||||||||||||
| U.S. agency securities | $ | $ | $ | $ | ( | $ | $ | ( | ||||||||||||||||||||||||||||||||||||
| Residential mortgage-backed securities | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||
| Commercial mortgage-backed securities | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||
| Municipal bonds | ( | ( | ||||||||||||||||||||||||||||||||||||||||||
| Corporate bonds | ( | ( | ||||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | ( | $ | $ | ( | $ | $ | ( | |||||||||||||||||||||||||||||||||||
| Investment securities held-to-maturity: | ||||||||||||||||||||||||||||||||||||||||||||
| Residential mortgage-backed securities | $ | $ | $ | $ | ( | $ | $ | ( | ||||||||||||||||||||||||||||||||||||
| Commercial mortgage-backed securities | ( | ( | ||||||||||||||||||||||||||||||||||||||||||
| Municipal bonds | ( | ( | ||||||||||||||||||||||||||||||||||||||||||
| Corporate bonds | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | ( | $ | $ | ( | $ | $ | ( | |||||||||||||||||||||||||||||||||||
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 16
Table of Contents Notes to Consolidated Financial Statements | Note 3 – Investment Securities
| Less than 12 Months | 12 Months or Greater | Total | ||||||||||||||||||||||||||||||||||||||||||
| (dollars in thousands) | Number of Securities | Estimated Fair Value | Unrealized Losses | Estimated Fair Value | Unrealized Losses | Estimated Fair Value | Unrealized Losses | |||||||||||||||||||||||||||||||||||||
As of December 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||
| Investment securities available-for-sale: | ||||||||||||||||||||||||||||||||||||||||||||
| U.S. treasury bonds | $ | $ | $ | $ | ( | $ | $ | ( | ||||||||||||||||||||||||||||||||||||
| U.S. agency securities | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||
| Residential mortgage-backed securities | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||
| Commercial mortgage-backed securities | ( | ( | ||||||||||||||||||||||||||||||||||||||||||
| Municipal bonds | ( | ( | ||||||||||||||||||||||||||||||||||||||||||
| Corporate bonds | ( | ( | ||||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | ( | $ | $ | ( | $ | $ | ( | |||||||||||||||||||||||||||||||||||
| Investment securities held-to-maturity: | ||||||||||||||||||||||||||||||||||||||||||||
| Residential mortgage-backed securities | $ | $ | $ | $ | ( | $ | $ | ( | ||||||||||||||||||||||||||||||||||||
| Commercial mortgage-backed securities | ( | ( | ||||||||||||||||||||||||||||||||||||||||||
| Municipal bonds | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||
| Corporate bonds | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | ( | $ | $ | ( | $ | $ | ( | |||||||||||||||||||||||||||||||||||
As of June 30, 2025, unrealized losses were generally attributable to changes in market interest rates and interest spread relationships subsequent to the dates the securities were originally purchased, and were considered to be temporary, and not due to credit quality concerns on the investment securities. The fair values of these securities are expected to recover as the securities approach their respective maturity dates. The Company does not intend to sell and it is likely that it will not be required to sell the securities prior to their anticipated recovery.
The Company measures its AFS and HTM securities portfolios for current expected credit losses as part of its ACL analysis. For further information on provision for credit losses on AFS and HTM securities, see the Allowance for Credit Losses discussion in "Note 1 – Summary of Significant Accounting Policies". As of June 30, 2025 and December 31, 2024, the Company had an allowance for credit losses outstanding of zero and $22 thousand, respectively, on its AFS securities and $1.2 million and $1.3 million, respectively, on its HTM securities, each of which primarily comprise allowances for corporate bonds.
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 17
Table of Contents Notes to Consolidated Financial Statements | Note 3 – Investment Securities
The table below summarizes the Company's investment in AFS securities and HTM securities by contractual maturity. Expected maturities for mortgage-backed securities ("MBS") will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
As of June 30, 2025 | ||||||||||||||
| (dollars in thousands) | Amortized Cost | Estimated Fair Value | ||||||||||||
| Investment securities available-for-sale: | ||||||||||||||
| Within one year | $ | $ | ||||||||||||
| One to five years | ||||||||||||||
| Five to ten years | ||||||||||||||
| Beyond ten years | ||||||||||||||
| Residential mortgage-backed securities | ||||||||||||||
| Commercial mortgage-backed securities | ||||||||||||||
| Less: allowance for credit losses | — | |||||||||||||
| Total investment securities available-for-sale | ||||||||||||||
| Investment securities held-to-maturity: | ||||||||||||||
| Within one year | ||||||||||||||
| One to five years | ||||||||||||||
| Five to ten years | ||||||||||||||
| Beyond ten years | ||||||||||||||
| Residential mortgage-backed securities: | ||||||||||||||
| Commercial mortgage-backed securities | ||||||||||||||
| Less: allowance for credit losses | ( | — | ||||||||||||
| Total investment securities held-to-maturity | ||||||||||||||
| Total | $ | $ | ||||||||||||
The table below displays information about the sales and calls of our investment securities.
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||||||||||||
| (dollars in thousands) | 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||
| Proceeds from sales and calls | $ | $ | $ | $ | ||||||||||||||||||||||
| Gross realized gains from sales and calls | ||||||||||||||||||||||||||
| Gross realized losses from sales and calls | ||||||||||||||||||||||||||
As of June 30, 2025 and December 31, 2024, the book value of securities pledged as collateral for certain government deposits, securities sold under agreements to repurchase and certain lines of credit with correspondent banks was $620.6 million and $369.1 million, respectively, which were well in excess of required amounts in order to operationally provide significant reserve amounts for new business.
As of June 30, 2025 and December 31, 2024, there were no
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 18
Table of Contents Notes to Consolidated Financial Statements | Note 4 – Loans and Allowance for Credit Losses
Note 4 – Loans and Allowance for Credit Losses
The Bank makes loans to customers primarily in the Washington, D.C. metropolitan area and surrounding communities. A substantial portion of the Bank’s loan portfolio consists of loans to businesses secured by real estate and other business assets.
The table below presents HFI Loans, net of unamortized net deferred fees, summarized by portfolio segment.
| As of | ||||||||||||||||||||||||||
| June 30, 2025 | December 31, 2024 | |||||||||||||||||||||||||
| (dollars in thousands) | Amount | % | Amount | % | ||||||||||||||||||||||
| Commercial | $ | % | $ | % | ||||||||||||||||||||||
| PPP loans | % | % | ||||||||||||||||||||||||
| Income producing - commercial real estate | % | % | ||||||||||||||||||||||||
| Owner occupied - commercial real estate | % | % | ||||||||||||||||||||||||
| Real estate mortgage - residential | % | % | ||||||||||||||||||||||||
| Construction - commercial and residential | % | % | ||||||||||||||||||||||||
| Construction - C&I (owner occupied) | % | % | ||||||||||||||||||||||||
| Home equity | % | % | ||||||||||||||||||||||||
| Other consumer | % | % | ||||||||||||||||||||||||
| Total loans | % | % | ||||||||||||||||||||||||
| Less: allowance for credit losses | ( | ( | ||||||||||||||||||||||||
Net loans (1) | $ | $ | ||||||||||||||||||||||||
(1)Excludes accrued interest receivable of $37.8 million and $42.9 million as of June 30, 2025 and December 31, 2024, respectively, which were recorded in other assets on the Consolidated Balance Sheets.
Unamortized net deferred fees and costs were $18.4 million and $18.8 million as of June 30, 2025 and December 31, 2024, respectively.
During the six months ended June 30, 2025, certain loans were reclassified from HFI to HFS loans with the mark-to-market value of $37.6 million as reported on the Consolidated Balance Sheets.
As of June 30, 2025 and December 31, 2024, the Bank serviced $77.5 million and $63.7 million, respectively, of SBA loans and other loan participations, which are not reflected as loan balances on the Consolidated Balance Sheets. During the year ended December 31, 2024, the Company sold the remaining servicing rights to all FHA loans.
Real estate loans are secured primarily by duly recorded first deeds of trust or mortgages. In some cases, the Bank may accept a recorded junior trust position. In general, borrowers will have a proven ability to build, lease, manage and/or sell a commercial or residential project and demonstrate satisfactory financial condition. Additionally, an equity contribution toward the project is customarily required.
Construction loans require that the financial condition and experience of the general contractor and major subcontractors be satisfactory to the Bank. Guaranteed, fixed price contracts are required whenever appropriate, along with payment and performance bonds or completion bonds for larger scale projects.
Loans intended for residential land acquisition, lot development and construction are made on the premise that the land: 1) is or will be developed for building sites for residential structures; and 2) will ultimately be utilized for construction or improvement of residential zoned real properties, including the creation of housing. Residential development and construction loans will finance projects such as single family subdivisions, planned unit developments, townhouses and condominiums. Residential land acquisition, development and construction ("ADC") loans generally are underwritten with a maximum term of 36 months, including extensions approved at origination.
Commercial land acquisition and construction loans are secured by real property where loan funds will be used to acquire land and to construct or improve appropriately zoned real property for the creation of income producing or owner-occupied commercial properties. Borrowers are generally required to put equity into each project at levels determined by the appropriate approval authority. Commercial land acquisition and construction loans generally are underwritten with a maximum term of 24 months.
Substantially all construction draw requests must be presented in writing on American Institute of Architects documents and certified either by the contractor, the borrower and/or the borrower’s architect. Each draw request shall also include the borrower’s soft cost breakdown certified by the borrower or their Chief Financial Officer. Prior to an advance, the Bank or its contractor inspects the project to determine that the work has been completed, to justify the draw requisition.
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 19
Table of Contents Notes to Consolidated Financial Statements | Note 4 – Loans and Allowance for Credit Losses
Commercial permanent loans are generally secured by improved real property which is generating income in the normal course of operation. Debt service coverage, assuming stabilized occupancy, must be satisfactory to support a permanent loan. The debt service coverage ratio ("DSCR") is ordinarily at least 1.15 to 1.0. As part of the underwriting process, DSCRs are stress tested assuming a 200 basis point increase in interest rates from their current levels. Commercial permanent loans generally are underwritten with a term not greater than 10 years or the remaining useful life of the property, whichever is less. The preferred term is between to seven years , with amortization to a maximum of 25 years.
The Company’s loan portfolio includes ADC real estate loans including both investment and owner occupied projects. ADC loans amounted to $1.7 billion as of June 30, 2025. A portion of the ADC portfolio, both speculative and non-speculative, includes loan-funded interest reserves at origination. ADC loans that provide for the use of interest reserves represent approximately 55 % of the outstanding ADC loan portfolio as of June 30, 2025. The decision to establish a loan-funded interest reserve is made upon origination of the ADC loan and is based upon a number of factors considered during underwriting of the credit including: (1) the feasibility of the project; (2) the experience of the sponsor; (3) the creditworthiness of the borrower and guarantors; (4) borrower equity contribution; and (5) the level of collateral protection. When appropriate, an interest reserve provides an effective means of addressing the cash flow characteristics of a properly underwritten ADC loan. The Company does not significantly utilize interest reserves in other loan products.
The Company recognizes that one of the risks inherent in the use of interest reserves is the potential masking of underlying problems with the project and/or the borrower’s ability to repay the loan. In order to mitigate this inherent risk, the Company employs a series of reporting and monitoring mechanisms on all ADC loans, whether or not an interest reserve is provided, including: (1) construction and development timelines which are monitored on an ongoing basis which track the progress of a given project to the timeline projected at origination; (2) a construction loan administration department independent of the lending function; (3) third party independent construction loan inspection reports; (4) monthly interest reserve monitoring reports detailing the balance of the interest reserves approved at origination and the days of interest carry represented by the reserve balances as compared to the then current anticipated time to completion and/or sale of speculative projects; and (5) quarterly commercial real estate construction meetings among senior Company management, which includes monitoring of current and projected real estate market conditions. If a project has not performed as expected, it is not the customary practice of the Company to increase loan funded interest reserves.
The table below details activity in the ACL by portfolio segment. PPP loans are excluded from these tables since they do not carry an allowance for credit loss, as these loans are fully guaranteed as to principal and interest by the SBA, whose guarantee is backed by the full faith and credit of the U.S. Government. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 20
Table of Contents Notes to Consolidated Financial Statements | Note 4 – Loans and Allowance for Credit Losses
| (dollars in thousands) | Commercial | Income Producing - Commercial Real Estate | Owner Occupied - Commercial Real Estate | Real Estate Mortgage - Residential | Construction -Commercial and Residential | Construction - C&I (Owner Occupied) | Home Equity | Other Consumer | Total | ||||||||||||||||||||||||||||||||||||||||||||
| For the Three Months Ended June 30, 2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Allowance for credit losses: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at beginning of year | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
| Loans charged-off | ( | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||
| Recoveries of loans previously charged-off | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loans (charged-off) and recovered | ( | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||
| Provision for (reversal of) credit losses | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Ending balance | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
| For the Three Months Ended June 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Allowance for credit losses: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at beginning of year | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
| Loans charged-off | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
| Recoveries of loans previously charged-off | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loans (charged-off) and recovered | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
| Provision for (reversal of) credit losses | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Ending balance | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
| For the Six Months Ended June 30, 2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Allowance for credit losses: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at beginning of year | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
| Loans charged-off | ( | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||
| Recoveries of loans previously charged-off | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loans (charged-off) and recovered | ( | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||
| Provision for (reversal of) credit losses | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Ending balance | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
| For the Six Months Ended June 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Allowance for credit losses: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at beginning of year | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
| Loans charged-off | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||
| Recoveries of loans previously charged-off | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loans (charged-off) and recovered | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||
| Provision for (reversal of) credit losses | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Ending balance | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 21
Table of Contents Notes to Consolidated Financial Statements | Note 4 – Loans and Allowance for Credit Losses
The table below presents the amortized cost basis of collateral-dependent HFI loans by portfolio segment.
| As of | ||||||||||||||||||||||||||
| June 30, 2025 | December 31, 2024 | |||||||||||||||||||||||||
| (dollars in thousands) | Business/Other Assets | Real Estate | Business/Other Assets | Real Estate | ||||||||||||||||||||||
| Commercial | $ | $ | $ | $ | ||||||||||||||||||||||
| Income-producing-commercial real estate | ||||||||||||||||||||||||||
| Owner occupied - commercial real estate | ||||||||||||||||||||||||||
| Real estate mortgage- residential | ||||||||||||||||||||||||||
| Construction - commercial and residential | ||||||||||||||||||||||||||
| Home equity | ||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||||||||||||
Credit Quality Indicators
The Company uses several credit quality indicators to manage credit risk in an ongoing manner. The Company’s primary credit quality indicator is an internal credit risk rating system that categorizes loans into pass, special mention or classified categories. Credit risk ratings are applied individually to those classes of loans that have significant or unique credit characteristics that benefit from a case-by-case evaluation. These are typically loans to businesses or individuals in the classes which comprise the commercial portfolio segment. Groups of loans that are underwritten and structured using standardized criteria and characteristics, such as statistical models (e.g., credit scoring or payment performance), are typically risk rated and monitored collectively. These are typically loans to individuals in the classes which comprise the consumer portfolio segment.
The following are the definitions of the Company’s credit quality indicators:
| Pass: | Loans in all classes that comprise the commercial and consumer portfolio segments that are not adversely rated, are contractually current as to principal and interest and are otherwise in compliance with the contractual terms of the loan agreement. Management believes that there is a low likelihood of loss related to those loans that are considered pass. | ||||
| Special Mention: | Loans in the classes that comprise the commercial portfolio segment that have potential weaknesses that deserve management’s close attention. If not addressed, these potential weaknesses may result in deterioration of the repayment prospects for the loan. The special mention credit quality indicator is not used for classes of loans that comprise the consumer portfolio segment. Management believes that there is a moderate likelihood of some loss related to those loans that are considered special mention. | ||||
Classified (a) Substandard – Loans inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the company will sustain some loss if the deficiencies are not corrected. Loss potential, while existing in the aggregate amount of substandard loans, does not have to exist in individual loans classified substandard. | |||||
Classified (b) Doubtful – Loans that have all the weaknesses inherent in a loan classified substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. The possibility of loss is extremely high, but because of certain important and reasonably specific pending factors, which may work to the advantage and strengthening of the assets, its classification as an estimated loss is deferred until its more exact status may be determined. | |||||
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 22
Table of Contents Notes to Consolidated Financial Statements | Note 4 – Loans and Allowance for Credit Losses
The Company's credit quality indicators are generally updated annually, however, credits rated "Special Mention" or below are reviewed more frequently. The table below presents the amortized cost basis of HFI loans by risk category, class and year of origination, along with any charge-offs that were recorded in the applicable loan segment, if applicable.
| (dollars in thousands) | Prior | 2021 | 2022 | 2023 | 2024 | 2025 | Revolving Loans Amort. Cost Basis | Revolving Loans Convert. to Term | Total | |||||||||||||||||||||||||||||||||||||||||||||||
As of June 30, 2025 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| YTD gross charge-offs | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| PPP loans: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income producing - commercial real estate: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| YTD gross charge-offs | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Owner occupied - commercial real estate: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| YTD gross charge-offs | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Real estate mortgage - residential: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Construction - commercial and residential: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Special Mention | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| YTD gross charge-offs | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Construction - C&I (owner occupied): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Home equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other consumer | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| YTD gross charge-offs | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total Recorded Investment | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Total YTD gross charge-offs | $ | ( | $ | ( | $ | $ | $ | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||||||||
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 23
Table of Contents Notes to Consolidated Financial Statements | Note 4 – Loans and Allowance for Credit Losses
| (dollars in thousands) | Prior | 2020 | 2021 | 2022 | 2023 | 2024 | Revolving Loans Amort. Cost Basis | Revolving Loans Convert. to Term | Total | |||||||||||||||||||||||||||||||||||||||||||||||
As of December 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| YTD gross charge-offs | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| PPP loans: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income producing - commercial real estate: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| YTD gross charge-offs | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Owner occupied - commercial real estate: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| YTD gross charge-offs | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Real estate mortgage - residential: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Construction - commercial and residential: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| YTD gross charge-offs | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Construction - C&I (owner occupied): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Home equity: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other consumer: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| YTD gross charge-offs | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total Recorded Investment | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Total YTD gross charge-offs | $ | ( | $ | ( | $ | $ | $ | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||||||||
Nonaccrual and Past Due Loans
Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Loans are placed on nonaccrual status when, in management’s opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory provisions. Loans may be placed on nonaccrual status whether or not such loans are considered past due. Interest income is subsequently recognized only to the extent cash payments are received in excess of principal due. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 24
Table of Contents Notes to Consolidated Financial Statements | Note 4 – Loans and Allowance for Credit Losses
The table below presents, by portfolio segment, information related to the amortized cost basis of nonaccrual HFI loans.
| As of | ||||||||||||||||||||||||||||||||||||||
| June 30, 2025 | December 31, 2024 | |||||||||||||||||||||||||||||||||||||
| (dollars in thousands) | Nonaccrual with No Allowance for Credit Loss | Nonaccrual with an Allowance for Credit Losses | Total Nonaccrual Loans | Nonaccrual with No Allowance for Credit Loss | Nonaccrual with an Allowance for Credit Losses | Total Nonaccrual Loans | ||||||||||||||||||||||||||||||||
| Commercial | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Income producing - commercial real estate | ||||||||||||||||||||||||||||||||||||||
| Owner occupied - commercial real estate | ||||||||||||||||||||||||||||||||||||||
| Real estate mortgage - residential | ||||||||||||||||||||||||||||||||||||||
| Construction- commercial and residential | ||||||||||||||||||||||||||||||||||||||
| Home equity | ||||||||||||||||||||||||||||||||||||||
Total (1) | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
(1)Gross coupon interest income of $10.2 million, and $2.9 million would have been recorded for the six months ended June 30, 2025 and 2024 respectively, if nonaccrual loans shown above had been current and in accordance with their original terms, while interest actually recorded on such loans were $6.7 million, and none for the six months ended June 30, 2025 and 2024, respectively. See "Note 1 – Summary of Significant Accounting Policies" to the Consolidated Financial Statements for a description of the Company’s policy for placing loans on nonaccrual status.
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 25
Table of Contents Notes to Consolidated Financial Statements | Note 4 – Loans and Allowance for Credit Losses
The table below presents, by portfolio segment, an aging analysis and the recorded investments in HFI loans past due.
| (dollars in thousands) | Loans 30-59 Days Past Due | Loans 60-89 Days Past Due | Loans 90 Days or More Past Due | Total Past Due Loans | Current Loans | Nonaccrual Loans | Total Recorded Investment in Loans | |||||||||||||||||||||||||||||||||||||
As of June 30, 2025 | ||||||||||||||||||||||||||||||||||||||||||||
| Commercial | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||
| PPP loans | ||||||||||||||||||||||||||||||||||||||||||||
| Income producing - commercial real estate | ||||||||||||||||||||||||||||||||||||||||||||
| Owner occupied - commercial real estate | ||||||||||||||||||||||||||||||||||||||||||||
| Real estate mortgage – residential | ||||||||||||||||||||||||||||||||||||||||||||
| Construction - commercial and residential | ||||||||||||||||||||||||||||||||||||||||||||
| Construction - C&I (owner occupied) | ||||||||||||||||||||||||||||||||||||||||||||
| Home equity | ||||||||||||||||||||||||||||||||||||||||||||
| Other consumer | ||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||
As of December 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||
| Commercial | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||
| PPP loans | ||||||||||||||||||||||||||||||||||||||||||||
| Income producing - commercial real estate | ||||||||||||||||||||||||||||||||||||||||||||
| Owner occupied - commercial real estate | ||||||||||||||||||||||||||||||||||||||||||||
| Real estate mortgage – residential | ||||||||||||||||||||||||||||||||||||||||||||
| Construction - commercial and residential | ||||||||||||||||||||||||||||||||||||||||||||
| Construction - C&I (owner occupied) | ||||||||||||||||||||||||||||||||||||||||||||
| Home equity | ||||||||||||||||||||||||||||||||||||||||||||
| Other consumer | ||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||
Loan Modifications for Borrowers Experiencing Financial Difficulty
The Company evaluates all loan modifications according to the accounting guidance to determine if the modification results in a new loan or a continuation of the existing loan. Loan modifications to borrowers experiencing financial difficulties that result in a direct change in the timing or amount of contractual cash flows include situations where there is principal forgiveness, interest rate reductions, other-than-insignificant payment delays, term extensions, and combinations of the listed modifications. Modifications with terms not as favorable to the Company as the terms for comparable loans to other customers with similar collection risk who are not refinancing or restructuring a loan with the Company and which have a direct impact on cash flows are considered modified loans to borrowers experiencing financial difficulty.
The Company may offer various types of modifications when restructuring a loan. Commercial and industrial loans modified in a loan restructuring often involve temporary interest-only payments, term extensions, and converting revolving credit lines to term loans. Additional collateral, a co-borrower, or a guarantor is often requested.
Commercial mortgage and construction loans modified in a loan restructuring often involve reducing the interest rate for the remaining term of the loan, extending the maturity date at an interest rate lower than the current market rate for new debt with similar risk, or substituting or adding a new borrower or guarantor. Construction loans modified in a loan restructuring may also involve extending the interest-only payment period.
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 26
Table of Contents Notes to Consolidated Financial Statements | Note 4 – Loans and Allowance for Credit Losses
Loans modified in a loan restructuring for the Company may have the financial effect of increasing the specific allowance associated with the loan. An allowance for consumer and commercial loans that have been modified in a loan restructuring is measured based on the present value of expected future cash flows discounted at the loan's effective interest rate, the loan's observable market price, or the estimated fair value of the collateral, less any selling costs, if the loan is collateral dependent. Management exercises significant judgment in developing these estimates.
Commercial and consumer loans modified in a loan restructuring are closely monitored for delinquency as an early indicator of possible future default. If loans modified in a loan restructuring subsequently default, the Company evaluates the loan for possible further loss. The allowance may be increased, adjustments may be made in the allocation of the allowance, or partial charge-offs may be taken to further write-down the carrying value of the loan.
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 27
Table of Contents Notes to Consolidated Financial Statements | Note 4 – Loans and Allowance for Credit Losses
The table below presents the amortized cost basis and the financial effect of HFI loans modified for borrowers experiencing financial difficulty.
| (dollars in thousands) | Term Extension | Combination - Term Extension and Principal Payment Delay | Combination - Principal Payment Delay and Interest Rate Reduction | Combination - Term Extension, Principal Payment Delay and Interest Rate Reduction | Total | Percentage of Total Loan Type | Weighted Average Term and Principal Payment Extension (1) | Weighted Average Interest Rate Reduction (2) | ||||||||||||||||||||||||||||||||||||||||||
| For the Three Months Ended June 30, 2025 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial | $ | $ | $ | $ | $ | % | % | |||||||||||||||||||||||||||||||||||||||||||
| Income producing - commercial real estate | % | % | ||||||||||||||||||||||||||||||||||||||||||||||||
| Owner occupied - commercial real estate | % | % | ||||||||||||||||||||||||||||||||||||||||||||||||
| Real estate mortgage - residential | % | % | ||||||||||||||||||||||||||||||||||||||||||||||||
| Construction - commercial and residential | % | % | ||||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||
| For the Three Months Ended June 30, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial | $ | $ | $ | $ | $ | % | % | |||||||||||||||||||||||||||||||||||||||||||
| Income producing - commercial real estate | % | % | ||||||||||||||||||||||||||||||||||||||||||||||||
| Owner occupied - commercial real estate | % | % | ||||||||||||||||||||||||||||||||||||||||||||||||
| Construction - commercial and residential | % | % | ||||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||
| For the Six Months Ended June 30, 2025 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial | $ | $ | $ | $ | $ | % | % | |||||||||||||||||||||||||||||||||||||||||||
| Income producing - commercial real estate | % | % | ||||||||||||||||||||||||||||||||||||||||||||||||
| Owner occupied - commercial real estate | % | % | ||||||||||||||||||||||||||||||||||||||||||||||||
| Real estate mortgage - residential | % | % | ||||||||||||||||||||||||||||||||||||||||||||||||
| Construction - commercial and residential | % | % | ||||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||
| For the Six Months Ended June 30, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial | $ | $ | $ | $ | $ | % | % | |||||||||||||||||||||||||||||||||||||||||||
| Income producing - commercial real estate | % | % | ||||||||||||||||||||||||||||||||||||||||||||||||
| Owner occupied - commercial real estate | % | % | ||||||||||||||||||||||||||||||||||||||||||||||||
| Construction - commercial and residential | % | % | ||||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||
(1)For loans that received multiple modifications during the year, weighted average term and principal payment extensions were calculated based on the aggregate impact of the extensions received during the period.
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 28
Table of Contents Notes to Consolidated Financial Statements | Note 4 – Loans and Allowance for Credit Losses
(2)The weighted average is calculated based on the total amortized cost of loans, at the year-end, that received interest rate reduction modifications during the year.
The table below presents the performance of HFI loans modified during the prior twelve months for borrowers experiencing financial difficulty.
June 30, 2025 | ||||||||||||||||||||||||||
| Payment Status (Amortized Cost Basis) | ||||||||||||||||||||||||||
| (dollars in thousands) | Current | 30-89 Days Past Due | 90 Days or More Past Due | Nonaccrual | ||||||||||||||||||||||
| Commercial | $ | $ | $ | $ | ||||||||||||||||||||||
| Income producing - commercial real estate | ||||||||||||||||||||||||||
| Owner occupied - commercial real estate | ||||||||||||||||||||||||||
| Real estate mortgage - residential | ||||||||||||||||||||||||||
| Construction - commercial and residential | ||||||||||||||||||||||||||
| Construction - C&I (owner occupied) | ||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||||||||||||
June 30, 2024 | ||||||||||||||||||||||||||
| Payment Status (Amortized Cost Basis) | ||||||||||||||||||||||||||
| (dollars in thousands) | Current | 30-89 Days Past Due | 90 Days or More Past Due | Nonaccrual | ||||||||||||||||||||||
| Commercial | $ | $ | $ | $ | ||||||||||||||||||||||
| Income producing - commercial real estate | ||||||||||||||||||||||||||
| Owner occupied - commercial real estate | ||||||||||||||||||||||||||
| Construction - commercial and residential | ||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||||||||||||
The Company monitors loan payments on performing and nonperforming loans on an on-going basis to determine if a loan is considered to have a payment default. To determine the existence of a payment default, the Company analyzes the economic conditions that exist for each borrower and their ability to generate positive cash flow during a given loan's term.
The table below presents the amortized cost basis of HFI loans that were experiencing payment default and were modified in the twelve months prior to that default for borrowers experiencing financial difficulty.
June 30, 2025 | ||||||||||||||||||||
| Amortized Cost Basis | ||||||||||||||||||||
| (dollars in thousands) | Term Extension | Combination - Term Extension and Principal Payment Delay | Combination - Term Extension, Principal Payment Delay and Interest Rate Reduction | |||||||||||||||||
| Commercial | $ | $ | $ | |||||||||||||||||
| Income producing - commercial real estate | ||||||||||||||||||||
| Real estate mortgages - residential | ||||||||||||||||||||
| Construction - commercial and residential | ||||||||||||||||||||
| Total | $ | $ | $ | |||||||||||||||||
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 29
Table of Contents Notes to Consolidated Financial Statements | Note 4 – Loans and Allowance for Credit Losses
June 30, 2024 | ||||||||||||||||||||
| Amortized Cost Basis | ||||||||||||||||||||
| (dollars in thousands) | Term Extension | Combination - Term Extension and Principal Payment Delay | Combination - Term Extension, Principal Payment Delay and Interest Rate Reduction | |||||||||||||||||
| Commercial | $ | $ | $ | |||||||||||||||||
| Income producing - commercial real estate | ||||||||||||||||||||
| Owner occupied - commercial real estate | ||||||||||||||||||||
| Total | $ | $ | $ | |||||||||||||||||
The Company individually evaluates nonaccrual loans when performing its CECL estimate to calculate the ACL. Additionally, the Company utilizes historical internal and third-party service provider sourced loss data in the determination of its PD/LGD rates applied in the calculation of its CECL estimate. Upon determination that a modified loan (or a portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is charged off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the ACL is adjusted by the same amount.
Note 5 – Leases
The Company accounts for leases in accordance with ASC Topic 842. A lease is defined as a contract that conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. Substantially all of the leases in which the Company is the lessee comprise real estate for branch offices, ATM locations and corporate office space. Substantially all of our leases are classified as operating leases and are included in operating lease right-of-use ("ROU") assets and operating lease liabilities in the Consolidated Balance Sheet.
ROU assets represent our right to use an underlying asset for the lease term and operating lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and operating lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. In determining the present value of the lease payments, we use the implicit lease rate if available. If the implicit lease rate is not available, we use the incremental borrowing rate at commencement date. The incremental borrowing rate is the rate of interest that we would have to pay to borrow on a collateralized basis over a similar term in an amount equal to the lease payments in a similar economic environment.
As of June 30, 2025 and December 31, 2024, the Company had $31.2 million and $18.5 million of operating lease ROU assets respectively, and $37.3 million and $23.8 million of operating lease liabilities respectively, on the Company’s Consolidated Balance Sheets. The Company elects not to recognize ROU assets and operating lease liabilities arising from short-term leases, leases with initial terms of twelve months or less or equipment leases (deemed immaterial) on the Consolidated Balance Sheet.
The leases contain options to extend or terminate the lease, which are recognized as part of the ROU assets and lease liabilities when an economic benefit to exercise the option exists and there is a 90 % probability that the Company will exercise the option. If these criteria are not met, the options are not included in our ROU assets and operating lease liabilities.
As of June 30, 2025, our leases do not contain material residual value guarantees or impose restrictions or covenants related to dividends or the Company’s ability to incur additional financial obligations.
On January 1, 2025, the Company commenced a new lease for its future headquarters at 7500 Old Georgetown Road in downtown Bethesda, MD. The lease expires on July 31, 2037.
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 30
Table of Contents Notes to Consolidated Financial Statements | Note 5 – Leases
The tables below present lease costs and other lease information.
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||||||||||||
| (dollars in thousands) | 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||
| Lease cost: | ||||||||||||||||||||||||||
| Operating lease cost (cost resulting from lease payments) | $ | $ | $ | $ | ||||||||||||||||||||||
| Variable lease cost (cost excluded from lease payments) | ||||||||||||||||||||||||||
| Sublease income | ( | ( | ||||||||||||||||||||||||
| Net lease cost | $ | $ | $ | $ | ||||||||||||||||||||||
| Operating lease - operating cash flows (fixed payments) | $ | $ | $ | $ | ||||||||||||||||||||||
| As of | ||||||||||||||
| (dollars in thousands) | June 30, 2025 | December 31, 2024 | ||||||||||||
| Right-of-use assets - operating leases | $ | $ | ||||||||||||
| Operating lease liabilities | $ | $ | ||||||||||||
| Weighted average lease term - operating leases (in years) | ||||||||||||||
| Weighted average discount rate - operating leases | % | % | ||||||||||||
The table below presents the future minimum payments for operating leases with initial or remaining terms of one year or more.
| (dollars in thousands) | As of June 30, 2025 | |||||||
| Twelve months ended: | ||||||||
| June 30, 2026 | $ | |||||||
| June 30, 2027 | ||||||||
| June 30, 2028 | ||||||||
| June 30, 2029 | ||||||||
| June 30, 2030 | ||||||||
| Thereafter | ||||||||
| Total future minimum lease payments | ||||||||
| Amounts representing interest | ( | |||||||
| Present value of net future minimum lease payments | $ | |||||||
Note 6 – Derivatives and Hedging Activities
The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity and credit risk primarily by managing the amount, sources and duration of its assets and liabilities and the use of derivative financial instruments.
Fair Value Hedges of Interest Rate Risk
The Company during the quarter ended June 30, 2025 utilized interest rate swaps, accounted for as fair value hedges, to protect itself against adverse fluctuations in interest rates in fixed-rate available-for-sale securities. These swaps consisted of pay-fixed, receive-floating interest rate swaps used to hedge the designated benchmark interest rate. Assuming the hedging relationship qualifies as highly effective, adjustments will be made to record the hedging instrument at fair value on the balance sheet, with changes in fair value recognized in other comprehensive income (loss). Changes in fair value of the hedged item attributable to changes in the hedged risk will be reclassified out of other comprehensive income (loss) through interest income each period to offset changes in fair value of the hedging instrument, which are also recognized in interest income.
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 31
Table of Contents Notes to Consolidated Financial Statements | Note 6 – Derivatives and Hedging Activities
Cash Flow Hedges of Interest Rate Risk
The Company historically utilized interest rate swaptions, accounted for as cash flow hedges, to protect itself against adverse fluctuations in interest rates on a forecasted issuance of debt. During the year ended December 31, 2024, the Company terminated its interest rate swaption contracts and discontinued the associated hedging relationship. The unamortized amount in accumulated other comprehensive income (loss) related to those swaption contracts was reclassified as a reduction to interest expense.
Interest Rate Products
Interest rate derivatives not designated as hedges are not speculative and result from a service the Company provides to certain customers. The Company executes interest rate caps and swaps with commercial banking customers to facilitate their respective risk management strategies. Those interest rate swaps are simultaneously hedged by offsetting derivatives that the Company executes with a third party, such that the Company minimizes its net risk exposure resulting from such transactions. As the interest rate derivatives associated with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the customer derivatives and the offsetting derivatives are recognized directly in earnings (loss).
The Company entered into credit risk participation agreements ("RPAs") with institutional counterparties, under which the Company assumes its pro-rata share of the credit exposure associated with a borrower’s performance related to interest rate derivative contracts in exchange for a fee. The fair value of RPAs is calculated by determining the total expected asset or liability exposure of the derivatives to the borrowers and applying the borrowers’ credit spread to that exposure. Total expected exposure incorporates both the current and potential future exposure of the derivatives, derived from using observable inputs, such as yield curves and volatilities.
Credit Risk Related Contingent Features
The Company has agreements with each of its derivative counterparties that contain a provision where if the Company defaults on any of its indebtedness, then the Company could also be declared in default on its derivative obligations.
The Company is exposed to credit risk in the event of nonperformance by the interest rate derivative counterparty. The Company minimizes this risk by entering into derivative contracts with only large, stable financial institutions, and the Company has not experienced, and does not expect, any losses from counterparty nonperformance on the interest rate derivatives. The Company monitors counterparty risk in accordance with the provisions of ASC 815, "Derivatives and Hedging". In addition, the interest rate derivative agreements contain language outlining collateral-pledging requirements for each counterparty. As of June 30, 2025, the Company had posted $1.7 million of cash collateral with other financial institutions and held $11.9 million of cash collateral on behalf of other financial institutions.
The interest rate derivative agreements detail: 1) that collateral be posted when the market value exceeds certain threshold limits associated with the secured party's exposure; 2) if the Company defaults on any of its indebtedness (including default where repayment of the indebtedness has not been accelerated by the lender), then the Company could also be declared in default on its derivative obligations; and 3) if the Company fails to maintain its status as a well-capitalized institution then the counterparty could terminate the derivative positions and the Company would be required to settle its obligations under the agreements.
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 32
Table of Contents Notes to Consolidated Financial Statements | Note 6 – Derivatives and Hedging Activities
The table below identifies the balance sheet category and fair value of the Company’s derivative instruments. The Company has a minimum collateral posting threshold with its derivative counterparty. If the Company had breached any provisions under the agreement as of June 30, 2025, it could have been required to settle its obligations under the agreement at the termination value.
| As of | ||||||||||||||||||||||||||||||||||||||
| June 30, 2025 | December 31, 2024 | |||||||||||||||||||||||||||||||||||||
| (dollars in thousands) | Notional Amount | Fair Value | Balance Sheet Category | Notional Amount | Fair Value | Balance Sheet Category | ||||||||||||||||||||||||||||||||
| Derivatives in an asset position: | ||||||||||||||||||||||||||||||||||||||
| Derivatives designated as hedging instruments: | ||||||||||||||||||||||||||||||||||||||
| Interest rate product | $ | $ | Other Assets | $ | $ | Other Assets | ||||||||||||||||||||||||||||||||
| Derivatives not designated as hedging instruments: | ||||||||||||||||||||||||||||||||||||||
| Interest rate product | Other Assets | Other Assets | ||||||||||||||||||||||||||||||||||||
| Credit risk participation agreements | Other Liabilities | Other Liabilities | ||||||||||||||||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||||||||||||||
| Total derivatives in an asset position | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||
| Derivatives in a liability position: | ||||||||||||||||||||||||||||||||||||||
| Derivatives not designated as hedging instruments: | ||||||||||||||||||||||||||||||||||||||
| Interest rate product | $ | $ | Other Liabilities | $ | $ | Other Liabilities | ||||||||||||||||||||||||||||||||
The table below presents the effect of the Company’s derivative financial instruments on the Consolidated Statements of Operations.
| Effect of Derivatives Not Designated as Hedging Instruments on the Consolidated Statements of Operations | ||||||||||||||||||||||||||||||||
| (dollars in thousands) | Location of Gain or (Loss) Recognized in Income on Derivative | Amount of Gain or (Loss) Recognized in Income on Derivatives | ||||||||||||||||||||||||||||||
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||||||||
| Derivatives Not Designated as Hedging Instruments under ASC 815-20: | ||||||||||||||||||||||||||||||||
| Interest rate products | Other income / (expense) | $ | $ | $ | $ | |||||||||||||||||||||||||||
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 33
Table of Contents Notes to Consolidated Financial Statements | Note 7 – Deposits
Note 7 – Deposits
The table below presents the Bank’s deposit composition.
| As of | ||||||||||||||
| (dollars in thousands) | June 30, 2025 | December 31, 2024 | ||||||||||||
| Noninterest-bearing demand | $ | $ | ||||||||||||
| Interest-bearing transaction | ||||||||||||||
| Savings and money market | ||||||||||||||
| Time deposits | ||||||||||||||
| Total | $ | $ | ||||||||||||
The table below represents the remaining maturity of time deposits.
| As of | ||||||||||||||
| (dollars in thousands) | June 30, 2025 | December 31, 2024 | ||||||||||||
| 2025 | $ | $ | ||||||||||||
| 2026 | ||||||||||||||
| 2027 | ||||||||||||||
| 2028 | ||||||||||||||
| 2029 | ||||||||||||||
| Thereafter | ||||||||||||||
| Total | $ | $ | ||||||||||||
The table below represents the time deposit accounts in excess of $250 thousand.
| As of | ||||||||||||||
| (dollars in thousands) | June 30, 2025 | December 31, 2024 | ||||||||||||
| Three months or less | $ | $ | ||||||||||||
| More than three months through six months | ||||||||||||||
| More than six months through twelve months | ||||||||||||||
| Over twelve months | ||||||||||||||
| Total | $ | $ | ||||||||||||
As of June 30, 2025, total brokered deposits were $3.5 billion, or 38 % of total deposits, compared to $4.0 billion, or 44 %, as of December 31, 2024.
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 34
Table of Contents Notes to Consolidated Financial Statements | Note 8 – Borrowings
Note 8 – Borrowings
The table below summarizes the Company’s borrowings, which include repurchase agreements with the Company’s customers and borrowings.
| (dollars in thousands) | Borrowings - Principal | Unamortized Deferred Issuance Costs | Net Borrowings Outstanding | Available Capacity (1) | Maturity Dates | Interest Rates (2) | ||||||||||||||||||||||||||||||||
As of June 30, 2025 | ||||||||||||||||||||||||||||||||||||||
| Customer repurchase agreements | $ | $ | — | $ | $ | — | N/A | % | ||||||||||||||||||||||||||||||
| Short-term borrowings: | ||||||||||||||||||||||||||||||||||||||
| Secured borrowings: | ||||||||||||||||||||||||||||||||||||||
| FHLB | — | July 11, 2025 | % | |||||||||||||||||||||||||||||||||||
| FRB: | ||||||||||||||||||||||||||||||||||||||
| Discount window | — | — | — | N/A | N/A | |||||||||||||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||||||||||||||
| Long-term borrowings: | ||||||||||||||||||||||||||||||||||||||
Senior notes | ( | — | September 30, 2029 | % | ||||||||||||||||||||||||||||||||||
| Total borrowings | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||
As of December 31, 2024 | ||||||||||||||||||||||||||||||||||||||
| Customer repurchase agreements | $ | $ | — | $ | $ | — | N/A | % | ||||||||||||||||||||||||||||||
| Short-term borrowings: | ||||||||||||||||||||||||||||||||||||||
| Secured borrowings: | ||||||||||||||||||||||||||||||||||||||
| FHLB | — | Various | ||||||||||||||||||||||||||||||||||||
| FRB: | ||||||||||||||||||||||||||||||||||||||
| Discount window | — | — | — | N/A | N/A | |||||||||||||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||||||||||||||
| Long-term borrowings: | ||||||||||||||||||||||||||||||||||||||
Senior notes | ( | — | September 30, 2029 | |||||||||||||||||||||||||||||||||||
| Total borrowings | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||
(1)Available capacity on the Company's borrowings arrangements with the FHLB and the FRB comprise pledged collateral that has not been borrowed against. As of June 30, 2025, the Company had total additional undrawn borrowing capacity of approximately $3.4 billion, comprising unencumbered securities available to be pledged of approximately $0.3 billion and undrawn financing on pledged assets of $3.1 billion.
(2)Represent the weighted average interest rate on customer repurchase agreements, borrowings outstanding and the coupon interest rate on the subordinated notes, which approximates the effective interest rate.
The Company’s repurchase agreements operate on a rolling basis and do not contain contractual maturity dates. The contractual maturity dates on FHLB secured borrowings represent the maturity dates of current advances and are not evidence of a termination date on the line.
There are no prepayment penalties nor unused commitment fees on any of the Company’s borrowing arrangements.
Senior Notes
On September 30, 2024, the Company closed a private placement of its 10.00 % senior unsecured debt totaling $77.7 million maturing on September 30, 2029 (the "2029 Senior Notes" or "Original Notes"). As of June 30, 2025, the carrying value of these 2029 Senior Notes was $76.3 million which reflected $1.4 million in unamortized deferred financing costs that are being amortized over the life of the 2029 Senior Notes.
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 35
Table of Contents Notes to Consolidated Financial Statements | Note 9 – Net Income (Loss) per Common Share
Note 9 – Net Income (Loss) per Common Share
The table below displays the calculation of net income (loss) per common share.
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||||||||||||
| (dollars and shares in thousands, except per share data) | 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||
| Basic: | ||||||||||||||||||||||||||
| Net income (loss) | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
| Average common shares outstanding | ||||||||||||||||||||||||||
| Basic net income (loss) per common share | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
| Diluted: | ||||||||||||||||||||||||||
| Net income (loss) | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
| Average common shares outstanding | ||||||||||||||||||||||||||
| Average common shares outstanding-diluted | ||||||||||||||||||||||||||
Diluted net income (loss) per common share (1) | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
| Anti-dilutive shares | ||||||||||||||||||||||||||
(1) For periods ended with a net loss, anti-dilutive financial instruments have been excluded from the calculation of GAAP diluted earnings per share.
Basic net income (loss) per share is computed by dividing income (loss) available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted net income (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the net income (loss) of the Company. The computation of diluted per share does not assume conversion or exercise of securities that would have an anti-dilutive effect on net income (loss) per share.
Securities issued by the Company that could potentially dilute net income (loss) per share in future periods include stock options and restricted stock. To calculate diluted net income (loss) per share, the Company utilizes the Treasury Stock method which results in only an incremental number of shares added to shares outstanding during the period.
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 36
Table of Contents Notes to Consolidated Financial Statements | Note 10 – Other Comprehensive Income (Loss)
Note 10 – Other Comprehensive Income (Loss)
The table below presents the components of other comprehensive income (loss).
| (dollars in thousands) | Before Tax | Tax Effect | Net of Tax | |||||||||||||||||
| For the Three Months Ended June 30, 2025 | ||||||||||||||||||||
| Net unrealized gain (loss) on securities available-for-sale | $ | $ | ( | $ | ||||||||||||||||
Reclassification adjustment for net gain (loss) included in net income (loss) | ( | |||||||||||||||||||
| Total unrealized gain (loss) on securities available-for-sale | ( | |||||||||||||||||||
| Amortization of unrealized gain (loss) on securities transferred to held-to-maturity | ( | |||||||||||||||||||
| Net unrealized gain (loss) on derivatives | ( | ( | ||||||||||||||||||
| Other comprehensive income (loss) | $ | $ | ( | $ | ||||||||||||||||
| For the Three Months Ended June 30, 2024 | ||||||||||||||||||||
| Net unrealized gain (loss) on securities available-for-sale | $ | $ | ( | $ | ||||||||||||||||
Reclassification adjustment for net gain (loss) included in net income (loss) | ( | ( | ||||||||||||||||||
| Total unrealized gain (loss) on securities available-for-sale | ( | |||||||||||||||||||
| Amortization of unrealized gain (loss) on securities transferred to held-to-maturity | ( | |||||||||||||||||||
| Net unrealized gain (loss) on derivatives | ( | ( | ||||||||||||||||||
| Total unrealized gain (loss) on derivatives | ( | ( | ||||||||||||||||||
| Other comprehensive income (loss) | $ | $ | ( | $ | ||||||||||||||||
| For the Six Months Ended June 30, 2025 | ||||||||||||||||||||
| Net unrealized gain (loss) on securities available-for-sale | $ | $ | ( | $ | ||||||||||||||||
Reclassification adjustment for net gain (loss) included in net income (loss) | ( | |||||||||||||||||||
| Total unrealized gain (loss) on securities available-for-sale | ( | |||||||||||||||||||
| Amortization of unrealized gain (loss) on securities transferred to held-to-maturity | ( | |||||||||||||||||||
Net unrealized gain (loss) on derivatives | ( | ( | ||||||||||||||||||
| Other comprehensive income (loss) | $ | $ | ( | $ | ||||||||||||||||
| For the Six Months Ended June 30, 2024 | ||||||||||||||||||||
| Net unrealized gain (loss) on securities available-for-sale | $ | ( | $ | $ | ( | |||||||||||||||
Reclassification adjustment for net gain (loss) included in net income (loss) | ( | ( | ||||||||||||||||||
| Total unrealized gain (loss) on securities available-for-sale | ( | ( | ||||||||||||||||||
| Amortization of unrealized gain (loss) on securities transferred to held-to-maturity | ( | |||||||||||||||||||
Net unrealized gain (loss) on derivatives | ( | |||||||||||||||||||
| Other comprehensive income (loss) | $ | $ | ( | $ | ||||||||||||||||
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 37
Table of Contents Notes to Consolidated Financial Statements | Note 10 – Other Comprehensive Income (Loss)
The table below presents the changes in each component of accumulated other comprehensive income (loss), net of tax.
| (dollars in thousands) | Available-for-Sale Securities | Held-to-Maturity Securities | Derivatives | Accumulated Other Comprehensive Income (Loss) | ||||||||||||||||||||||
| For the Three Months Ended June 30, 2025 | ||||||||||||||||||||||||||
| Balance at beginning of period | $ | ( | $ | ( | $ | $ | ( | |||||||||||||||||||
| Other comprehensive income (loss) before reclassifications | ( | |||||||||||||||||||||||||
| Amortization of unrealized loss on securities transferred to held-to-maturity | ||||||||||||||||||||||||||
Amounts reclassified from accumulated other comprehensive income (loss) | ||||||||||||||||||||||||||
| Net other comprehensive income (loss) during period | ( | |||||||||||||||||||||||||
| Balance at end of period | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
| For the Three Months Ended June 30, 2024 | ||||||||||||||||||||||||||
| Balance at beginning of period | $ | ( | $ | ( | $ | $ | ( | |||||||||||||||||||
| Other comprehensive income (loss) before reclassifications | ( | |||||||||||||||||||||||||
| Amortization of unrealized loss on securities transferred to held-to-maturity | ||||||||||||||||||||||||||
Amounts reclassified from accumulated other comprehensive income (loss) | ( | ( | ||||||||||||||||||||||||
| Net other comprehensive income (loss) during period | ( | |||||||||||||||||||||||||
| Balance at end of period | $ | ( | $ | ( | $ | $ | ( | |||||||||||||||||||
| For the Six Months Ended June 30, 2025 | ||||||||||||||||||||||||||
| Balance at beginning of period | $ | ( | $ | ( | $ | $ | ( | |||||||||||||||||||
| Other comprehensive income (loss) before reclassifications | ( | |||||||||||||||||||||||||
| Amortization of unrealized loss on securities transferred to held-to-maturity | ||||||||||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive income (loss) | ||||||||||||||||||||||||||
| Net other comprehensive income (loss) during period | ( | |||||||||||||||||||||||||
| Balance at end of period | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
| For the Six Months Ended June 30, 2024 | ||||||||||||||||||||||||||
| Balance at beginning of period | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
| Other comprehensive income (loss) before reclassifications | ( | ( | ||||||||||||||||||||||||
| Amortization of unrealized loss on securities transferred to held-to-maturity | ||||||||||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive income (loss) | ( | ( | ||||||||||||||||||||||||
| Net other comprehensive income (loss) during period | ( | |||||||||||||||||||||||||
| Balance at end of period | $ | ( | $ | ( | $ | $ | ( | |||||||||||||||||||
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 38
Table of Contents Notes to Consolidated Financial Statements | Note 10 – Other Comprehensive Income (Loss)
The table below presents the amounts reclassified out of each component of accumulated other comprehensive income (loss).
| Amount Reclassified from Accumulated Other Comprehensive Income (Loss) | Affected Line Item in the Statement Where Net Income (Loss) is Presented | |||||||||||||||||||||||||||||||
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||||||||||||||||||
| (dollars in thousands) | 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||||||||
| Realized gain (loss) on sale of investment securities | $ | ( | $ | $ | ( | $ | Net gain (loss) on sale of investment securities | |||||||||||||||||||||||||
| Income tax benefit (expense) | ( | ( | Income tax expense | |||||||||||||||||||||||||||||
| Total | $ | ( | $ | $ | ( | $ | Net Income (Loss) | |||||||||||||||||||||||||
Note 11 – Fair Value Measurements
The fair value of an asset or liability is the price that would be received to sell that asset or paid to transfer that liability in an orderly transaction occurring in the principal market (or most advantageous market in the absence of a principal market) for such asset or liability. In estimating fair value, the Company utilizes valuation techniques that are consistent with the market approach, the income approach and/or the cost approach. Such valuation techniques are consistently applied. Inputs to valuation techniques include the assumptions that market participants would use in pricing an asset or liability. ASC 820, "Fair Value Measurements and Disclosures", establishes a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:
Level 1 Quoted prices in active exchange markets for identical assets or liabilities.
Level 2 Observable inputs other than Level 1 including quoted prices for similar assets or liabilities, quoted prices in less active markets or other observable inputs that can be corroborated by observable market data; also includes derivative contracts whose value is determined using a pricing model with observable market inputs or inputs that can be derived principally from or corroborated by observable market data. This category generally includes certain U.S. Government and agency securities, corporate debt securities, and derivative instruments.
Level 3 Unobservable inputs supported by little or no market activity for financial instruments whose value is determined using pricing models, discounted cash flow methodologies or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation; also includes observable inputs for single dealer nonbinding quotes not corroborated by observable market data. This category generally includes certain private equity investments, retained interests from securitizations and certain collateralized debt obligations.
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 39
Table of Contents Notes to Consolidated Financial Statements | Note 11 – Fair Value Measurements
Assets and Liabilities Recorded at Fair Value on a Recurring Basis
The table below presents the recorded amount of assets and liabilities measured at fair value on a recurring basis.
| (dollars in thousands) | Quoted Prices (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | Total (Fair Value) | ||||||||||||||||||||||
As of June 30, 2025 | ||||||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||
| Investment securities available-for-sale: | ||||||||||||||||||||||||||
| U.S. agency securities | $ | $ | $ | $ | ||||||||||||||||||||||
| Residential mortgage-backed securities | ||||||||||||||||||||||||||
| Commercial mortgage-backed securities | ||||||||||||||||||||||||||
| Municipal bonds | ||||||||||||||||||||||||||
| Corporate bonds | ||||||||||||||||||||||||||
| Loans held for sale | ||||||||||||||||||||||||||
| Interest rate product | ||||||||||||||||||||||||||
| Total assets measured at fair value on a recurring basis as of June 30, 2025 | $ | $ | $ | $ | ||||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||||||||
| Interest rate product | $ | $ | $ | $ | ||||||||||||||||||||||
| Total liabilities measured at fair value on a recurring basis as of June 30, 2025 | $ | $ | $ | $ | ||||||||||||||||||||||
As of December 31, 2024 | ||||||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||
| Investment securities available-for-sale: | ||||||||||||||||||||||||||
| U.S. treasury bonds | $ | $ | $ | $ | ||||||||||||||||||||||
| U.S. agency securities | ||||||||||||||||||||||||||
| Residential mortgage-backed securities | ||||||||||||||||||||||||||
| Commercial mortgage-backed securities | ||||||||||||||||||||||||||
| Municipal bonds | ||||||||||||||||||||||||||
| Corporate bonds | ||||||||||||||||||||||||||
| Interest rate product | ||||||||||||||||||||||||||
| Total assets measured at fair value on a recurring basis as of December 31, 2024 | $ | $ | $ | $ | ||||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||||||||
| Interest rate product | $ | $ | $ | $ | ||||||||||||||||||||||
| Total liabilities measured at fair value on a recurring basis as of December 31, 2024 | $ | $ | $ | $ | ||||||||||||||||||||||
Investment securities available-for-sale: AFS securities are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair value is measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level 2 securities includes certain U.S. treasury bonds, U.S. agency debt securities, MBS issued by Government Sponsored Entities and municipal bonds. Securities classified as Level 3 include securities in less liquid markets, for which the carrying amounts approximate the fair value.
Credit risk participation agreements: The Company enters into RPAs with institutional counterparties, under which the Company assumes its pro-rata share of the credit exposure associated with a borrower’s performance related to interest rate derivative contracts. The fair value of RPAs is calculated by determining the total expected asset or liability exposure of the derivatives to the borrowers and applying the borrowers’ credit spread to that exposure. Total expected exposure incorporates
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 40
Table of Contents Notes to Consolidated Financial Statements | Note 11 – Fair Value Measurements
both the current and potential future exposure of the derivatives, derived from using observable inputs, such as yield curves and volatilities. Accordingly, RPAs fall within Level 2.
Interest rate derivatives: The Company entered into an interest rate derivative agreement with an institutional counterparty, under which the Company will receive cash if and when market rates exceed the derivatives' strike rate. The fair value of the derivative is calculated by determining the total expected asset or liability exposure of the derivatives. Total expected exposure incorporates both the current and potential future exposure of the derivative, derived from using observable inputs, such as yield curves and volatilities. Accordingly, the derivative falls within Level 2.
Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis
The Company measures certain assets at fair value on a nonrecurring basis and the following is a general description of the methods used to value such assets.
Loans: The fair value of individually assessed loans is estimated using one of several methods, including the collateral value, market value of similar debt, enterprise value, liquidation value and discounted cash flows. Those individually assessed loans not requiring a specific allowance represent loans for which the fair value of expected repayments or collateral exceed the recorded investment in such loans. As of June 30, 2025, substantially all of the Company’s individually evaluated loans were evaluated based upon the fair value of the collateral. In accordance with ASC Topic 820, individually evaluated loans where an allowance is established based on the fair value of collateral, i.e., those that are collateral dependent, require classification in the fair value hierarchy. When the fair value of the collateral is based on an observable market price or a current appraised value, the Company records the loan as nonrecurring Level 2. When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Company records the loan as nonrecurring Level 3.
Other real estate owned ("OREO"): OREO is initially recorded at fair value less estimated selling costs. Fair value is based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the collateral, which the Company classifies as a Level 3 valuation.
The table below presents assets measured at fair value on a nonrecurring basis. There were no liabilities measured at fair value on a non-recurring basis as of June 30, 2025 and December 31, 2024.
| (dollars in thousands) | Quoted Prices (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | Total (Fair Value) | ||||||||||||||||||||||
As of June 30, 2025 | ||||||||||||||||||||||||||
| Individually assessed loans: | ||||||||||||||||||||||||||
| Commercial | $ | $ | $ | $ | ||||||||||||||||||||||
| Income producing - commercial real estate | ||||||||||||||||||||||||||
| Owner occupied - commercial real estate | ||||||||||||||||||||||||||
| Real estate mortgage - residential | ||||||||||||||||||||||||||
| Construction - commercial and residential | ||||||||||||||||||||||||||
| Consumer | ||||||||||||||||||||||||||
| Other real estate owned | ||||||||||||||||||||||||||
| Total assets measured at fair value on a nonrecurring basis as of June 30, 2025 | $ | $ | $ | $ | ||||||||||||||||||||||
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 41
Table of Contents Notes to Consolidated Financial Statements | Note 11 – Fair Value Measurements
| (dollars in thousands) | Quoted Prices (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | Total (Fair Value) | ||||||||||||||||||||||
As of December 31, 2024 | ||||||||||||||||||||||||||
| Individually assessed loans: | ||||||||||||||||||||||||||
| Commercial | $ | $ | $ | $ | ||||||||||||||||||||||
| Income producing - commercial real estate | ||||||||||||||||||||||||||
| Owner occupied - commercial real estate | ||||||||||||||||||||||||||
| Construction - commercial and residential | ||||||||||||||||||||||||||
| Other real estate owned | ||||||||||||||||||||||||||
| Total assets measured at fair value on a nonrecurring basis as of December 31, 2024 | $ | $ | $ | $ | ||||||||||||||||||||||
As shown in the table above, certain assets are measured at fair value on a nonrecurring basis in accordance with GAAP. Adjustments to the fair value of these assets usually result from the application of lower-of-cost-or-fair value accounting or write-downs of individual assets after they are evaluated for impairment. The primary assets accounted for at fair value on a nonrecurring basis are related to collateral-dependent loans that are individually assessed and other real estate owned. For the collateral-dependent loans and other real estate owned, the Company measures the fair value utilizing a market valuation approach, based on an appraisal conducted by an independent, licensed appraiser. Management may discount the value from the appraisal in determining the fair value if, based on its understanding of the market conditions, the collateral had been impaired below the appraised value (Level 3). For loans that are not collateral dependent, the Company uses an income approach, specifically, the discounted cash flow method. The continuing payments are discounted over the expected life at the loan’s original contract rate and include adjustments for risk of default.
Fair Value of Financial Instruments
The Company discloses fair value information about financial instruments for which it is practicable to estimate the value, whether or not such financial instruments are recognized on the balance sheet. Fair value is the amount at which a financial instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation, and is best evidenced by quoted market price, if one exists.
Quoted market prices, if available, are shown as estimates of fair value. Because no quoted market prices exist for a portion of the Company’s financial instruments, the fair value of such instruments has been derived based on management’s assumptions with respect to future economic conditions, the amount and timing of future cash flows and estimated discount rates. Different assumptions could significantly affect these estimates. Accordingly, the net realizable value could be materially different from the estimates presented below. In addition, the estimates are only indicative of individual financial instrument values, including in certain cases, the Company's estimation of exit pricing, and should not be considered an indication of the fair value of the Company taken as a whole.
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 42
Table of Contents Notes to Consolidated Financial Statements | Note 11 – Fair Value Measurements
The table below presents the estimated fair values of the Company’s financial instruments.
| Fair Value Measurements | ||||||||||||||||||||||||||||||||
| (dollars in thousands) | Carrying Value | Fair Value | Quoted Prices (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Other Unobservable Inputs (Level 3) | |||||||||||||||||||||||||||
As of June 30, 2025 | ||||||||||||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||||||||
| Cash and due from banks | $ | $ | $ | $ | — | $ | — | |||||||||||||||||||||||||
| Federal funds sold | — | — | ||||||||||||||||||||||||||||||
| Interest-bearing deposits with other banks | — | — | ||||||||||||||||||||||||||||||
| Investment securities available-for-sale | — | — | ||||||||||||||||||||||||||||||
| Investment securities held-to-maturity | — | — | ||||||||||||||||||||||||||||||
| Federal Reserve and Federal Home Loan Bank stock | N/A | — | — | — | ||||||||||||||||||||||||||||
| Loans held for sale | — | — | ||||||||||||||||||||||||||||||
| Loans held for investment | — | — | ||||||||||||||||||||||||||||||
| Bank owned life insurance | — | — | ||||||||||||||||||||||||||||||
| Annuity investment | — | — | ||||||||||||||||||||||||||||||
| Interest rate product | — | — | ||||||||||||||||||||||||||||||
| Accrued interest receivable | — | — | ||||||||||||||||||||||||||||||
| Liabilities | ||||||||||||||||||||||||||||||||
| Noninterest-bearing deposits | — | — | ||||||||||||||||||||||||||||||
| Interest-bearing deposits | — | — | ||||||||||||||||||||||||||||||
| Time deposits | — | — | ||||||||||||||||||||||||||||||
| Customer repurchase agreements | — | — | ||||||||||||||||||||||||||||||
| Other short-term borrowings | — | — | ||||||||||||||||||||||||||||||
| Long-term borrowings | — | — | ||||||||||||||||||||||||||||||
| Interest rate product | — | — | ||||||||||||||||||||||||||||||
| Accrued interest payable | — | — | ||||||||||||||||||||||||||||||
As of December 31, 2024 | ||||||||||||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||||||||
| Cash and due from banks | $ | $ | $ | $ | — | $ | — | |||||||||||||||||||||||||
| Federal funds sold | — | — | ||||||||||||||||||||||||||||||
| Interest-bearing deposits with other banks | — | — | ||||||||||||||||||||||||||||||
| Investment securities available-for-sale | — | — | ||||||||||||||||||||||||||||||
| Investment securities held-to-maturity | — | — | ||||||||||||||||||||||||||||||
| Federal Reserve and Federal Home Loan Bank stock | N/A | — | — | — | ||||||||||||||||||||||||||||
| Loans held for investment | — | — | ||||||||||||||||||||||||||||||
| Bank owned life insurance | — | — | ||||||||||||||||||||||||||||||
| Annuity investment | — | — | ||||||||||||||||||||||||||||||
| Interest rate product | — | — | ||||||||||||||||||||||||||||||
| Accrued interest receivable | — | — | ||||||||||||||||||||||||||||||
| Liabilities | ||||||||||||||||||||||||||||||||
| Noninterest-bearing deposits | — | — | ||||||||||||||||||||||||||||||
| Interest-bearing deposits | — | — | ||||||||||||||||||||||||||||||
| Time deposits | — | — | ||||||||||||||||||||||||||||||
| Customer repurchase agreements | — | — | ||||||||||||||||||||||||||||||
| Other short-term borrowings | — | — | ||||||||||||||||||||||||||||||
| Long-term borrowings | — | — | ||||||||||||||||||||||||||||||
| Interest rate product | — | — | ||||||||||||||||||||||||||||||
| Accrued interest payable | — | — | ||||||||||||||||||||||||||||||
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 43
Table of Contents Notes to Consolidated Financial Statements | Note 12 – Segment Reporting
Note 12 – Segment Reporting
The Company has one reporting unit, one operating segment and, consequently, a single reportable segment. The Chief Executive Officer, who is the Company’s chief operating decision maker ("CODM"), monitors revenue streams and other information provided about the company’s products and services offered, primarily banking operations. The information provided to the CODM is presented on an aggregated entity-level basis, which is consistent with the accompanying Consolidated Financial Statements presented in this Form 10-Q. The CODM evaluates the financial performance of the Company’s business by evaluating revenue streams, significant expenses, and budget to actual results in assessing operating results and in allocating resources, but profitability is only determined at the entity level. The CODM uses revenue streams to evaluate product pricing and significant expenses to assess performance and evaluate return on assets. The CODM uses consolidated net income to benchmark the company against its competitors. The benchmarking analysis coupled with monitoring of budget to actual results are used in assessing performance and allocating resources. Interest income and fees on loans, investments, and deposits provide the majority of revenues in the Company's operation. Interest expense, provisions for credit losses, and payroll provide the significant expenses in the Company's operations. All of the Company's income and expenses are included in the accompanying Consolidated Financial Statements presented in this Form 10-Q. All of the Company’s operations are domestic.
Note 13 – Legal Contingencies
From time to time, the Company and its subsidiaries are involved in various legal proceedings incidental to their business in the ordinary course, including matters in which damages in various amounts are claimed, as well as regulatory and governmental investigations and inquiries that could result in penalties, fines or other sanctions against the Company. Based on information currently available, the Company does not believe that the liabilities (if any) resulting from such matters will have a material effect on the financial position of the Company. However, considering inherent uncertainties involved in such matters, ongoing legal expenses or an adverse outcome in one or more of these matters could materially and adversely affect the Company's financial condition, results of operations or cash flows in any particular reporting period, as well as its reputation.
Under ASC 450, the Company accrues for a loss contingency when the loss is probable and reasonably estimable. The Company discloses the matter if a material loss is at least reasonably possible. Under ASC 450, a loss contingency is "reasonably possible" if "the chance of the future event or events occurring is more than remote but less than likely", and a loss contingency is "remote" if "the chance of the future event or events occurring is slight."
The Company is cooperating with an ongoing investigation by the U.S. Attorney’s Office for the Middle District of Pennsylvania into, among other things, the Company’s anti-money laundering controls between approximately 2011 and 2017 and the Company’s relationship with a former customer who pleaded guilty to a charge of bank fraud in 2020. Due to the inherent uncertainty in predicting the outcome of a pending investigation, we are unable to estimate reasonably possible losses, if any, resulting from this matter.
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 44
Table of Contents Management's Discussion and Analysis
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ("MD&A")
The following discussion provides information about the results of operations, financial condition, liquidity, and capital resources of Eagle Bancorp, Inc. and its subsidiaries (collectively, the "Company") as of the dates and periods indicated. The Company’s primary subsidiary is EagleBank (the "Bank"), and the Company’s other direct and indirect active subsidiaries are Bethesda Leasing, LLC, Eagle Insurance Services, LLC and Landroval Municipal Finance, Inc.
This discussion and analysis should be read in conjunction with the unaudited Consolidated Financial Statements and Notes thereto, appearing elsewhere in this report and MD&A in the Company's Annual Report on Form 10-K for the year ended December 31, 2024 ("2024 Form 10-K").
Caution About Forward-Looking Statements. This report contains forward-looking statements. These forward-looking statements represent plans, estimates, objectives, goals, guidelines, expectations, intentions, projections and statements of our beliefs concerning future events, business plans, objectives, expected operating results and the assumptions upon which those statements are based. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements and are typically identified with words such as "may," "will," "can," "anticipates," "believes," "expects," "plans," "strategies," "outlook," "estimates," "potential," "assume," "probable," "possible," "continue," "should," "could," "would," "strive," "seeks," "deem," "projections," "forecast," "consider," "indicative," "uncertainty," "likely," "unlikely," "likelihood," "unknown," "attributable," "depends," "intends," "generally," "feel," "typically," "judgment," "subjective" and similar words or phrases.
For details on factors that could affect these expectations, see the risk factors and other cautionary language included in the Company's 2024 Form 10-K, and in other periodic and current reports filed by the Company with the Securities and Exchange Commission ("SEC"), including the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2025. These forward-looking statements are based largely on our expectations and are subject to a number of known and unknown risks and uncertainties that are subject to change based on factors which are, in many instances, beyond our control. Actual results, performance or achievements could differ materially from those contemplated, expressed or implied by the forward-looking statements. The Company's past results are not necessarily indicative of future performance, and nothing contained herein is meant to or should be considered and treated as earnings guidance of future quarters' performance projections. All information is as of the date of this report. Any forward-looking statements made by or on behalf of the Company speak only as to the date they are made. Except to the extent required by applicable law or regulation, the Company undertakes no obligation to revise or update publicly any forward-looking statement for any reason.
General
The Company is a growth-oriented, one-bank holding company headquartered in Bethesda, Maryland. The Company provides general commercial and consumer banking services through the Bank, its wholly owned banking subsidiary, a Maryland chartered bank which is a member of the Federal Reserve System ("Federal Reserve Board", "Federal Reserve" or "FRB").
The Company was organized in October 1997 to be the holding company for the Bank. The Bank was organized in 1998 as an independent, community-oriented, full service banking alternative to the super regional financial institutions that dominate the Company’s primary market area. The Company’s philosophy is to provide superior, personalized service to its customers. The Company focuses on relationship banking, providing each customer with a number of services and becoming familiar with and addressing customer needs in a proactive, personalized fashion. The Bank currently has a total of twelve branch offices (three in Suburban Maryland, three in Washington, D.C. and six in Northern Virginia), a principal corporate office, four lending centers and one operations center.
The Bank offers a broad range of commercial banking services to its business and professional clients, as well as full-service consumer banking services to individuals living and/or working primarily in the Bank's market area. The Bank emphasizes providing commercial banking services to sole proprietors, small and medium-sized businesses, non-profit organizations and associations, and investors living and working in and near the primary service area. These services include the usual deposit functions of commercial banks, including business and personal checking accounts, Negotiable Order of Withdrawal ("NOW") accounts, money market and savings accounts, business, construction, and commercial loans, consumer loans, and cash management services. The Bank is also active in the origination of Small Business Administration ("SBA") loans. The Bank generally sells the guaranteed portion of the SBA loans in a transaction apart from the loan origination generating noninterest income from the gains on sale, as well as servicing income on the portion participated.
Up until the second half of 2024, the Company originated multifamily Federal Housing Administration ("FHA") loans through the Department of Housing and Urban Development's Multifamily Accelerated Program. The Company securitized these loans through the Government National Mortgage Association ("Ginnie Mae") MBS I program and sold the resulting securities in the open market to authorized dealers in the normal course of business and periodically bundled and sold the servicing rights.
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 45
Table of Contents Management's Discussion and Analysis | General
During the year ended December 31, 2024, the Company sold the remaining servicing rights to all multifamily FHA loans. However, the Company maintains its licenses to operate in this business and is evaluating options for future activity.
Bethesda Leasing, LLC, a subsidiary of the Bank, holds title to and manages other real estate owned ("OREO") assets. Landroval Municipal Finance, Inc., a subsidiary of the Bank, focuses on lending to municipalities by buying debt on the public market as well as direct purchase issuance.
Critical Accounting Policies and Estimates
The Company's Consolidated Financial Statements are prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP") and follow general practices within the banking industry. Application of these principles requires management to make estimates, assumptions, and judgments that affect the amounts reported in the financial statements and accompanying notes. These estimates, assumptions and judgments are based on information available as of the date of the Consolidated Financial Statements; accordingly, as this information changes, the Consolidated Financial Statements could reflect different estimates, assumptions, and judgments. Certain policies inherently have a greater reliance on the use of estimates, assumptions and judgments and, as such, have a greater possibility of producing results that could be materially different than originally reported. Estimates, assumptions, and judgments are necessary when assets and liabilities are required to be recorded at fair value, when a decline in the value of an asset not carried on the financial statements at fair value warrants an impairment write-down or a valuation reserve to be established, or when an asset or liability needs to be recorded contingent upon a future event. Carrying assets and liabilities at fair value inherently results in more financial statement volatility. The Company applies the accounting policies contained in "Note 1 – Summary of Significant Accounting Policies" to the Consolidated Financial Statements included in the Company's Annual Report on 2024 Form 10-K and "Note 1 – Summary of Significant Accounting Policies" to the Consolidated Financial Statements included in this report. There have been no significant changes to the Company's accounting policies as disclosed in the Company's Annual Report on 2024 Form 10-K.
Allowance for Credit Losses and Provision for Unfunded Commitments
A consequence of lending activities is that we incur credit losses, so we record an allowance for credit losses ("ACL") with respect to loan receivables and a reserve for unfunded commitments ("RUC") as estimates of those losses. The amount of the ACL on loans is based on management's assessment of current expected credit losses ("CECL") in the portfolio.
The amount of such losses will vary depending upon the risk characteristics of the loan portfolio as affected by economic conditions such as changes in interest rates, the financial performance of borrowers and regional unemployment rates, which management estimates by using a national forecast and estimating a regional adjustment based on historical differences between the two.
Management has significant discretion in making the judgments inherent in the determination of the provisions for credit loss, ACL and the RUC. Our determination of these amounts requires significant reliance on estimates and significant judgment as to the amount and timing of expected future cash flows on loans, significant reliance on historical loss rates on homogenous portfolios, consideration of our quantitative and qualitative evaluation of economic factors and the reliance on our reasonable and supportable forecasts.
We estimate the ACL on loans using a quantitative model that uses a probability of default ("PD") / Loss Given Default ("LGD") cash flow method with an exposure at default ("EAD") model to estimate expected credit losses for our loan segments. The modeling of expected prepayment speeds is based on historical internal data and adjustments to account for loan-specific risk characteristics after pooling our loan portfolio based on similar risk characteristics.
The Company uses regression analysis of historical internal and peer data provided by a third-party service provider (as Company loss data is insufficient) to determine suitable loss drivers to utilize when modeling lifetime PD and LGD. This analysis also determines how expected PD will react to forecasted levels of the loss drivers. During the prior year, management enhanced the cash flow model to incorporate three additional macroeconomic variables. The four economic variables selected, national unemployment (original variable used), Commercial Real Estate ("CRE") Price Index, House Price Index and Gross Domestic Product ("GDP"), are incorporated by utilizing a Loss Driver Analysis approach that factors in historical losses, including during the Great Recession, of regional peer banks and the Bank. The updated model incorporates a weighting of three economic scenarios; baseline, upside and downside. The scenarios cover the four economic forecast variables, with each segment of the portfolio linked to two of these variables, depending on the segment. The loss driver analysis is spread over a reasonable and supportable period of 18 months and reverts back to a historical loss rate over twelve months on a straight-line basis over the loan's remaining maturity. Management leverages economic projections from reputable and independent third parties to inform its loss driver forecasts over the forecast period.
Loans that have evidence of credit deterioration are excluded from the loan segments subject to the quantitative model described above and are individually assessed.
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 46
Table of Contents Management's Discussion and Analysis | Critical Accounting Policies and Estimates
The RUC represents the expected credit losses on off-balance sheet commitments such as unfunded commitments to extend credit and standby letters of credit. The RUC is determined by estimating future draws and applying the expected loss rates on those draws.
The ACL also includes an amount for inherent risks not reflected in the historical analyses. Relevant factors reflected in the qualitative component of the reserve include, but are not limited to, concentrations of credit risk, appraisal risk from volatility in the market, changes in underwriting standards, experience and depth of lending staff and trends in delinquencies.
Management has developed an analytical process to monitor the adequacy of the ACL. Our methodology for determining our ACL was developed utilizing, among other factors, the guidance from federal banking regulatory agencies and relevant available information from internal and external sources and relating to past events, current conditions and reasonable and supportable forecasts. The process is being continually enhanced and refined based on periodic reviews. Material changes to these and other relevant factors may result in greater volatility to the reserve for credit losses, and therefore, greater volatility to our reported earnings. See "Note 1 – Summary of Significant Accounting Policies", "Note 3 – Investment Securities" and "Note 4 – Loans and Allowance for Credit Losses" to the Consolidated Financial Statements, and the “Provision for Credit Losses” and "Allowance for Credit Losses" sections below for more information on the provision for credit losses and ACL for the loan portfolio.
Results of Operations
Summary of Consolidated Statements of Operations
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||
| 2025 | 2024 | Change | 2025 | 2024 | Change | ||||||||||||||||||||||||||||||
| Net Interest Income | $ | 67,776 | $ | 71,353 | $ | (3,577) | $ | 133,425 | $ | 146,051 | $ | (12,626) | |||||||||||||||||||||||
| Provision for (Reversal of) Credit Losses | 138,159 | 8,959 | 129,200 | 164,414 | 44,134 | 120,280 | |||||||||||||||||||||||||||||
| Provision for (Reversal of) Credit Losses for Unfunded Commitments | 1,759 | 608 | 1,151 | 1,462 | 1,064 | 398 | |||||||||||||||||||||||||||||
| Net Interest Income After Provision for (Reversal of) Credit Losses | (72,142) | 61,786 | (133,928) | (32,451) | 100,853 | (133,304) | |||||||||||||||||||||||||||||
| Noninterest income | 6,414 | 5,332 | 1,082 | 14,621 | 8,921 | 5,700 | |||||||||||||||||||||||||||||
| Noninterest expense | 43,470 | 146,491 | (103,021) | 88,921 | 186,488 | (97,567) | |||||||||||||||||||||||||||||
| Income (Loss) Before Income Tax Expense | (109,198) | (79,373) | (29,825) | (106,751) | (76,714) | (30,037) | |||||||||||||||||||||||||||||
| Income Tax Expense | (39,423) | 4,429 | (43,852) | (38,651) | 7,426 | (46,077) | |||||||||||||||||||||||||||||
| Net Income (Loss) | $ | (69,775) | $ | (83,802) | $ | 14,027 | $ | (68,100) | $ | (84,140) | $ | 16,040 | |||||||||||||||||||||||
See respective subsections below for the primary drivers of change and further discussion on net interest income, provision for credit losses, noninterest income, noninterest expenses, and income tax expenses.
The efficiency ratio, which measures the ratio of noninterest expense to total net revenue (the sum of net interest income and noninterest income), was 58.6% and 60.1%, respectively, for three and six months ended June 30, 2025 compared to 191.0% and 120.3% for the same periods in 2024. The improvement over the 2024 efficiency ratios was primarily driven by the recognition of goodwill impairment of $104.2 million during the second quarter of 2024.
Loans, which generally have higher yields than securities and other earning assets, represented 69% and 66% of average earning assets for six months ended June 30, 2025 and 2024, respectively. For six months ended June 30, 2025, as compared to the same period in 2024, average loans, excluding loans held for sale, decreased by $58 million, or 1%, driven by payoffs and paydowns that outpaced originations and advances.
Average investment securities for six months ended June 30, 2025 were 19.1% of average earning assets compared to 20.6% for the same period in 2024. The combination of federal funds sold and interest-bearing deposits with other banks represented 12.0% and 13.7% of average earning assets for six months ended June 30, 2025 and 2024, respectively.
Net interest margin, which measures the difference between interest income and interest expense as a percentage of earning assets, was 2.37% and 2.33% for the three and six months ended June 30, 2025 compared to 2.40% and 2.42% for the same periods in 2024, a decrease of 3 and 9 basis points, respectively. For further information on the components and drivers of these changes, see the "Net Interest Income and Net Interest Margin" section below.
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 47
Table of Contents Management's Discussion and Analysis | Results of Operations |
The ratio of common equity to total assets increased to 11.18% as of June 30, 2025, compared to 11.02% as of December 31, 2024. For three and six months ended June 30, 2025, the return on average assets ("ROAA") was (2.33)% and (1.14)%, respectively, as compared to (2.73)% and (1.35)% for the same periods in 2024. Total shareholders’ equity was $1.19 billion as of June 30, 2025 as compared to $1.23 billion as of December 31, 2024, a decrease of 3%, driven by losses in the second quarter of 2025. The return on average common equity ("ROACE") for three and six months ended June 30, 2025 was (22.35)% and (11.01)% respectively, as compared to (26.67)% and (13.25)% for the same periods in 2024.
Net Interest Income and Net Interest Margin
Net interest income is the difference between interest income on earning assets and the cost of funds supporting those assets. Earning assets are composed primarily of loans, investment securities and interest-bearing deposits with other banks and other short term investments. The cost of funds represents interest expense on deposits, customer repurchase agreements and other borrowings, which consist primarily of federal funds purchased, advances from secured financing arrangements, including the Federal Home Loan Bank of Atlanta ("FHLB") and Discount Window, and senior notes. Noninterest-bearing deposits and capital are other components representing funding sources. Changes in the volume and mix of assets and funding sources, along with the changes in yields earned and rates paid, determine changes in net interest income.
Net interest income for the three months ended June 30, 2025 was $67.8 million compared to $71.4 million for the same period in 2024. The 5% decrease for the three months ended June 30, 2025 as compared to the three months ended June 30, 2024 was primarily due to an increase in average deposits ($8.3 billion compared to $7.2 billion, respectively,) offset by a decrease in average deposit rates (3.80% compared to 4.31%, respectively,) a decrease in the level of other short term borrowings ($245.3 million compared to $1.7 billion, respectively) and a decrease in the interest rate paid on other short-term borrowings (3.86% compared to 5.07%, respectively.) Additionally, average loan balances ($7.9 billion compared to $8.0 billion, respectively) and yields (6.31% compared to 6.91%, respectively) were lower.
Net interest margin had a decrease of 3 basis points to 2.37% for the three months ended June 30, 2025 from 2.40% for the three months ended June 30, 2024. This decrease reflects the decrease in deposits and related cost of funds and the decrease in the yield on loans. The cost of funds on interest-bearing liabilities had a decrease of 44 basis points from 3.61% for the three months ended June 30, 2024 to 3.17% for the three months ended June 30, 2025, while the yield on interest-earning assets had an decrease of 42 basis points from 5.71% for the three months ended June 30, 2024 to 5.29% for the three months ended June 30, 2025.
Net interest income for the six months ended June 30, 2025 was $133.4 million compared to $146.1 million for the same period in 2024. The 9% decrease for the six months ended June 30, 2025 as compared to the six months ended June 30, 2024 was primarily due to an increase in average deposits ($8.2 billion compared to $7.3 billion, respectively,) offset by a decrease in average deposit rates (3.86% compared to 4.30%, respectively,) a decrease in the level of other short term borrowings ($446 million compared to $1.7 billion, respectively) and a decrease in the interest rate paid on other short-term borrowings (4.87% compared to 4.90%, respectively.) Additionally, average loan balances ($7.9 billion compared to $8.0 billion, respectively) and yields (6.38% compared to 6.93%, respectively) were lower.
Net interest margin had a decrease of 9 basis points to 2.33% for the six months ended June 30, 2025 from 2.42% for the six months ended June 30, 2024. This decrease reflects a decrease in the yield on loans, partially offset by the decreased cost of funds for deposits. The cost of funds on interest-bearing liabilities decreased by 34 basis points from 3.60% for the six months ended June 30, 2024 to 3.26% for the six months ended June 30, 2025, while the yield on interest-earning assets had a decrease of 37 basis points from 5.71% for the six months ended June 30, 2024 to 5.34% for the six months ended June 30, 2025.
Average loans held for investment were $7.9 billion for the six months ended June 30, 2025, compared to $8.0 billion for the same period in 2024. Average investment securities were $2.2 billion for the six months ended June 30, 2025, compared to $2.5 billion for the same period in 2024. Average interest-bearing deposits with other banks and other short term investments were $1.4 billion for the six months ended June 30, 2025 compared to $1.6 billion for the same period in 2024. Interest income on loans, the largest component of interest income on earning assets, had a yield of 6.38% for the six months ended June 30, 2025, compared to 6.93% for the same period in 2024, a decrease of 55 basis points.
Average interest-bearing deposits increased to $8.2 billion for the six months ended June 30, 2025 from $7.3 billion for the six months ended June 30, 2024, while average noninterest-bearing demand deposit decreased to $1.9 billion for the six months ended June 30, 2025 from $2.1 billion for the six months ended June 30, 2024.
Average borrowings had a decrease from $1.7 billion for the six months ended June 30, 2024 to $521.8 million for the six months ended June 30, 2025. Refer to the "Deposits and Other Borrowings" section below for further discussion of deposits and borrowings.
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 48
Table of Contents Management's Discussion and Analysis | Results of Operations | Net Interest Income and Net Interest Margin
The tables below present the average balances and rates of the major categories of the Company's assets and liabilities. Included in the tables are measurements of interest rate spread and margin. Interest rate spread is the difference (expressed as a percentage) between the interest rate earned on earning assets less the interest rate paid on interest-bearing liabilities. While the interest rate spread provides a quick comparison of earnings rates versus cost of funds, management believes that margin, together with net interest income, provides a better measurement of performance. The net interest margin (as compared to net interest spread) includes the effect of noninterest-bearing sources in its calculation. Net interest margin is net interest income expressed as a percentage of average earning assets.
Eagle Bancorp, Inc.
Consolidated Average Balances, Interest Yields And Rates (Unaudited)
(dollars in thousands)
| For the Three Months Ended June 30, | |||||||||||||||||||||||||||||||||||
2025 | 2024 | ||||||||||||||||||||||||||||||||||
| Average Balance | Interest | Average Yield / Rate | Average Balance | Interest | Average Yield / Rate | ||||||||||||||||||||||||||||||
| Assets | |||||||||||||||||||||||||||||||||||
| Interest earning assets: | |||||||||||||||||||||||||||||||||||
| Interest-bearing deposits with other banks and other short-term investments | $ | 1,375,782 | $ | 14,749 | 4.30 | % | $ | 1,455,007 | $ | 19,568 | 5.41 | % | |||||||||||||||||||||||
| Loans held for sale | 15,418 | 284 | 7.39 | % | 8,045 | 100 | 5.00 | % | |||||||||||||||||||||||||||
Loans (1) (2) | 7,942,333 | 124,939 | 6.31 | % | 8,003,206 | 137,516 | 6.91 | % | |||||||||||||||||||||||||||
Investment securities available-for-sale (2) | 1,233,206 | 6,491 | 2.11 | % | 1,478,856 | 7,048 | 1.92 | % | |||||||||||||||||||||||||||
| Investment securities held-to-maturity | 918,083 | 4,945 | 2.16 | % | 995,274 | 5,357 | 2.16 | % | |||||||||||||||||||||||||||
| Federal funds sold | 2,184 | 24 | 4.41 | % | 13,058 | 142 | 4.37 | % | |||||||||||||||||||||||||||
| Total interest earning assets | 11,487,006 | 151,432 | 5.29 | % | 11,953,446 | 169,731 | 5.71 | % | |||||||||||||||||||||||||||
| Noninterest earning assets | 635,125 | 510,725 | |||||||||||||||||||||||||||||||||
| Less: allowance for credit losses | 133,036 | 102,671 | |||||||||||||||||||||||||||||||||
| Total noninterest earning assets | 502,089 | 408,054 | |||||||||||||||||||||||||||||||||
| Total assets | $ | 11,989,095 | $ | 12,361,500 | |||||||||||||||||||||||||||||||
| Liabilities and Shareholders’ Equity | |||||||||||||||||||||||||||||||||||
| Interest-bearing liabilities: | |||||||||||||||||||||||||||||||||||
| Interest-bearing transaction | $ | 1,489,056 | $ | 9,982 | 2.69 | % | $ | 1,636,795 | $ | 16,100 | 3.96 | % | |||||||||||||||||||||||
| Savings and money market | 3,461,918 | 29,634 | 3.43 | % | 3,321,001 | 33,451 | 4.05 | % | |||||||||||||||||||||||||||
| Time deposits | 3,367,907 | 39,296 | 4.68 | % | 2,215,693 | 27,295 | 4.95 | % | |||||||||||||||||||||||||||
| Total interest-bearing deposits | 8,318,881 | 78,912 | 3.80 | % | 7,173,489 | 76,846 | 4.31 | % | |||||||||||||||||||||||||||
| Customer repurchase agreements and federal funds purchased | 34,387 | 250 | 2.92 | % | 38,599 | 330 | 3.44 | % | |||||||||||||||||||||||||||
| Derivative collateral liability | 12,710 | 118 | 3.72 | % | — | — | — | % | |||||||||||||||||||||||||||
| Other short-term borrowings | 245,291 | 2,360 | 3.86 | % | 1,682,684 | 21,202 | 5.07 | % | |||||||||||||||||||||||||||
| Long-term borrowings | 76,236 | 2,016 | 10.61 | % | — | — | — | % | |||||||||||||||||||||||||||
| Total interest-bearing liabilities | 8,687,505 | 83,656 | 3.86 | % | 8,894,772 | 98,378 | 4.45 | % | |||||||||||||||||||||||||||
| Noninterest-bearing liabilities: | |||||||||||||||||||||||||||||||||||
| Noninterest-bearing demand | 1,907,214 | 2,051,777 | |||||||||||||||||||||||||||||||||
| Other liabilities | 142,124 | 151,324 | |||||||||||||||||||||||||||||||||
| Total noninterest-bearing liabilities | 2,049,338 | 2,203,101 | |||||||||||||||||||||||||||||||||
| Shareholders’ equity | 1,252,252 | 1,263,627 | |||||||||||||||||||||||||||||||||
| Total Liabilities and Shareholders’ Equity | $ | 11,989,095 | $ | 12,361,500 | |||||||||||||||||||||||||||||||
| Net interest income | $ | 67,776 | $ | 71,353 | |||||||||||||||||||||||||||||||
| Net interest spread | 1.43 | % | 1.26 | % | |||||||||||||||||||||||||||||||
| Net interest margin | 2.37 | % | 2.40 | % | |||||||||||||||||||||||||||||||
| Cost of funds | 3.17 | % | 3.61 | % | |||||||||||||||||||||||||||||||
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 49
Table of Contents Management's Discussion and Analysis | Results of Operations | Net Interest Income and Net Interest Margin
Eagle Bancorp, Inc.
Consolidated Average Balances, Interest Yields And Rates (Unaudited)
(dollars in thousands)
| For the Six Months Ended June 30, | |||||||||||||||||||||||||||||||||||
2025 | 2024 | ||||||||||||||||||||||||||||||||||
| Average Balance | Interest | Average Yield / Rate | Average Balance | Interest | Average Yield / Rate | ||||||||||||||||||||||||||||||
| Assets | |||||||||||||||||||||||||||||||||||
| Interest earning assets: | |||||||||||||||||||||||||||||||||||
| Interest-bearing deposits with other banks and other short-term investments | $ | 1,378,565 | $ | 30,563 | 4.47 | % | $ | 1,648,389 | $ | 44,430 | 5.42 | % | |||||||||||||||||||||||
| Loans held for sale | 7,836 | 284 | 7.31 | % | 4,023 | 100 | 5.00 | % | |||||||||||||||||||||||||||
Loans (1) (2) | 7,938,038 | 251,075 | 6.38 | % | 7,996,074 | 275,510 | 6.93 | % | |||||||||||||||||||||||||||
Investment securities available-for-sale (2) | 1,277,335 | 13,349 | 2.11 | % | 1,497,680 | 14,295 | 1.92 | % | |||||||||||||||||||||||||||
| Investment securities held-to-maturity | 925,938 | 9,999 | 2.18 | % | 1,003,253 | 10,790 | 2.16 | % | |||||||||||||||||||||||||||
| Federal funds sold | 2,325 | 51 | 4.42 | % | 10,054 | 208 | 4.16 | % | |||||||||||||||||||||||||||
| Total interest earning assets | 11,530,037 | 305,321 | 5.34 | % | 12,159,473 | 345,333 | 5.71 | % | |||||||||||||||||||||||||||
| Noninterest earning assets | 616,889 | 509,855 | |||||||||||||||||||||||||||||||||
| Less: allowance for credit losses | 125,837 | 96,343 | |||||||||||||||||||||||||||||||||
| Total noninterest earning assets | $ | 491,052 | 413,512 | ||||||||||||||||||||||||||||||||
| Total assets | $ | 12,021,089 | $ | 12,572,985 | |||||||||||||||||||||||||||||||
| Liabilities and Shareholders’ Equity | |||||||||||||||||||||||||||||||||||
| Interest-bearing liabilities: | |||||||||||||||||||||||||||||||||||
| Interest-bearing transaction | $ | 1,429,165 | $ | 19,890 | 2.81 | % | $ | 1,735,144 | $ | 32,930 | 3.82 | % | |||||||||||||||||||||||
| Savings and money market | 3,571,459 | 62,023 | 3.50 | % | 3,372,195 | 69,381 | 4.14 | % | |||||||||||||||||||||||||||
| Time deposits | 3,160,661 | 74,210 | 4.73 | % | 2,201,506 | 53,918 | 4.93 | % | |||||||||||||||||||||||||||
| Total interest-bearing deposits | 8,161,285 | 156,123 | 3.86 | % | 7,308,845 | 156,229 | 4.30 | % | |||||||||||||||||||||||||||
| Customer repurchase agreements and federal funds purchased | 35,473 | 510 | 2.90 | % | 37,341 | 645 | 3.47 | % | |||||||||||||||||||||||||||
| Derivative collateral liability | 16,268 | 468 | 5.80 | % | — | — | — | % | |||||||||||||||||||||||||||
| Other short-term borrowings | 445,580 | 10,754 | 4.87 | % | 1,739,773 | 42,408 | 4.90 | % | |||||||||||||||||||||||||||
| Long-term borrowings | 76,191 | 4,041 | 10.70 | % | — | — | — | % | |||||||||||||||||||||||||||
| Total interest-bearing liabilities | 8,734,797 | 171,896 | 3.97 | % | 9,085,959 | 199,282 | 4.41 | % | |||||||||||||||||||||||||||
| Noninterest-bearing liabilities: | |||||||||||||||||||||||||||||||||||
| Noninterest-bearing demand | 1,894,327 | 2,054,618 | |||||||||||||||||||||||||||||||||
| Other liabilities | 144,410 | 155,767 | |||||||||||||||||||||||||||||||||
| Total noninterest-bearing liabilities | 2,038,737 | 2,210,385 | |||||||||||||||||||||||||||||||||
| Shareholders’ equity | 1,247,555 | 1,276,641 | |||||||||||||||||||||||||||||||||
| Total Liabilities and Shareholders’ Equity | $ | 12,021,089 | $ | 12,572,985 | |||||||||||||||||||||||||||||||
| Net interest income | $ | 133,425 | $ | 146,051 | |||||||||||||||||||||||||||||||
| Net interest spread | 1.37 | % | 1.30 | % | |||||||||||||||||||||||||||||||
| Net interest margin | 2.33 | % | 2.42 | % | |||||||||||||||||||||||||||||||
| Cost of funds | 3.26 | % | 3.60 | % | |||||||||||||||||||||||||||||||
(1)Loans placed on nonaccrual status are included in average balances. Net loan fees and late charges included in interest income on loans totaled $3.6 million and $7.4 million for the three and six months ended 2025, respectively, and $4.8 million and $9.1 million for the three and six months ended 2024, respectively.
(2)Interest and fees on loans and investments exclude tax equivalent adjustments.
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 50
Table of Contents Management's Discussion and Analysis | Results of Operations | Net Interest Income and Net Interest Margin
Rate/Volume Analysis of Net Interest Income
The rate/volume table below presents the composition of the change in net interest income for the period indicated, as allocated between the change in net interest income due to changes in the volume of average earning assets and interest-bearing liabilities, and the changes in net interest income due to changes in interest rates.
Three Months Ended June 30, 2025 Compared with Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 Compared with Six Months Ended June 30, 2024 | |||||||||||||||||||||||||||||||||||||
| (dollars in thousands) | Change Due to Volume | Change Due to Rate | Total Increase (Decrease) | Change Due to Volume | Change Due to Rate | Total Increase (Decrease) | ||||||||||||||||||||||||||||||||
| Interest earned on: | ||||||||||||||||||||||||||||||||||||||
| Interest-bearing deposits with other banks and other short-term investments | $ | (1,065) | $ | (3,754) | $ | (4,819) | $ | (7,273) | $ | (6,594) | $ | (13,867) | ||||||||||||||||||||||||||
| Loans held for sale | 92 | 92 | 184 | 95 | 89 | 184 | ||||||||||||||||||||||||||||||||
| Loans | (1,046) | (11,531) | (12,577) | (2,000) | (22,435) | (24,435) | ||||||||||||||||||||||||||||||||
| Investment securities available-for sale | (1,171) | 614 | (557) | (2,103) | 1,157 | (946) | ||||||||||||||||||||||||||||||||
| Investment securities held-to-maturity | (415) | 3 | (412) | (832) | 41 | (791) | ||||||||||||||||||||||||||||||||
| Federal funds sold | (118) | — | (118) | (160) | 3 | (157) | ||||||||||||||||||||||||||||||||
| Total interest income | (3,723) | (14,576) | (18,299) | (12,273) | (27,739) | (40,012) | ||||||||||||||||||||||||||||||||
| Interest paid on: | ||||||||||||||||||||||||||||||||||||||
| Interest-bearing transaction | (1,453) | (4,665) | (6,118) | (5,807) | (7,233) | (13,040) | ||||||||||||||||||||||||||||||||
| Savings and money market | 1,419 | (5,236) | (3,817) | 4,100 | (11,458) | (7,358) | ||||||||||||||||||||||||||||||||
| Time deposits | 14,194 | (2,193) | 12,001 | 23,491 | (3,199) | 20,292 | ||||||||||||||||||||||||||||||||
Derivative Collateral Liability | 118 | — | 118 | 468 | — | 468 | ||||||||||||||||||||||||||||||||
| Customer repurchase agreements | (36) | (44) | (80) | (32) | (103) | (135) | ||||||||||||||||||||||||||||||||
| Other short-term borrowings | (18,135) | (707) | (18,842) | (31,645) | (9) | (31,654) | ||||||||||||||||||||||||||||||||
| Long-term borrowings | 1,130 | 886 | 2,016 | 2,259 | 1,782 | 4,041 | ||||||||||||||||||||||||||||||||
| Total interest expense | (2,763) | (11,959) | (14,722) | (7,166) | (20,220) | (27,386) | ||||||||||||||||||||||||||||||||
| Net interest income | $ | (960) | $ | (2,617) | $ | (3,577) | $ | (5,107) | $ | (7,519) | $ | (12,626) | ||||||||||||||||||||||||||
Provision for Credit Losses
The provision for credit losses represents the amount of expense charged to current earnings to record the ACL on loans and the ACL on HTM investment securities. The amount of the ACL on loans is based on management's assessment of current expected credit losses in the portfolio. Those factors include historical losses based on internal and peer data, economic conditions and trends, the value and adequacy of collateral, volume and mix of the portfolio, performance of the portfolio, and internal loan processes of the Company.
Refer to the discussion under "Critical Accounting Policies and Estimates" above and in "Note 1 – Summary of Significant Accounting Policies" to the Consolidated Financial Statements for an overview of the methodology management employs on a quarterly basis to assess the adequacy of the allowance and the provisions charged to expense. Also, refer to the table in the "Allowance for Credit Losses" section which reflects activity in the ACL.
The provision for credit losses on loans for the second quarter of 2025 was $138.2 million and there were $83.9 million of net charge offs in the ACL compared to $8.9 million and $2.3 million, respectively, for the second quarter of 2024.
The provision for credit losses on loans for the first half of 2025 was $164.5 million and there were $95.1 million of net charge offs in the ACL compared to $44.1 million and $23.7 million, respectively, for the first half of 2024. Net charge-offs of $95.1 million during the first half of 2025 represented 2.40% of average loans held for investment on an annualized basis, an increase from net charge-offs of $23.7 million during same period in 2024, which represented 0.59% of average loans held for investment on an annualized basis.
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 51
Table of Contents Management's Discussion and Analysis | Results of Operations | Provision for Credit Losses
The change in the provision for credit losses on the loan portfolio for the three and six months ended June 30, 2025 was primarily attributable to the replenishment of the reserve following net charge-offs of $95.1 million and an increase in the qualitative overlay.
Charge-offs during the first half of 2025 were driven by elevated losses in the office and land loan portfolios, including a data center loan with underlying office exposure, as well as charge-offs related to assisted senior living and life sciences office properties. The increase in charge-offs was primarily driven by continued market deterioration and the receipt of new information regarding collateral valuations and borrower performance, particularly within the office sector. During the second quarter of 2025, we updated our strategy for resolving criticized and classified loans with the goal of accelerating dispositions. In furtherance of this strategy, we obtained updated valuations on the underlying collateral for certain loans that resulted in significant charge offs related to actual and expected dispositions.
The increase in the CRE office overlay relates to updated assumptions associated with the PD and LGD rates, as well as downward risk ratings migration as further discussed in the "Allowance for Credit Losses" section below.
The provision for credit losses for the held-to-maturity securities portfolio was recorded primarily on several corporate bonds. During the three and six months ended June 30, 2025, there was a reversal of provision for credit losses of $46 thousand and $99 thousand, respectively, for the held-to-maturity securities portfolios, compared to a provision expense of $55 thousand and $56 thousand, respectively, for the three and six months ended June 30, 2024.
The provision for credit losses for unfunded commitments is presented separately on the Consolidated Statements of Operations. This provision considers the probability that unfunded commitments will fund, among other factors. There was a provision expense of $1.8 million and $1.5 million, respectively, for the three and six months ended June 30, 2025, compared to $608 thousand and $1.1 million, respectively, for the three and six months ended June 30, 2024, primarily due to higher unfunded commitments in our commercial and industrial portfolio during the current period.
Noninterest Income
Noninterest income includes service charges on deposits, gain/(loss) on sale of investment securities, income from BOLI and other income. The table below summarizes the comparative noninterest income.
| For the Three Months Ended June 30, | |||||||||||||||||||||||
| (dollars in thousands) | 2025 | 2024 | Dollar Change | ||||||||||||||||||||
| Service charges on deposits | $ | 1,771 | $ | 1,653 | $ | 118 | |||||||||||||||||
| Gain on sale of loans | — | 37 | (37) | ||||||||||||||||||||
| Net gain (loss) on sale of investment securities | (1,854) | 3 | (1,857) | ||||||||||||||||||||
| Increase in the cash surrender value of bank-owned life insurance | 5,161 | 709 | 4,452 | ||||||||||||||||||||
| Other income | 1,336 | 2,930 | (1,594) | ||||||||||||||||||||
| Total | $ | 6,414 | $ | 5,332 | $ | 1,082 | |||||||||||||||||
| For the Six Months Ended June 30, | |||||||||||||||||||||||
| (dollars in thousands) | 2025 | 2024 | Dollar Change | ||||||||||||||||||||
| Service charges on deposits | $ | 3,514 | $ | 3,352 | $ | 162 | |||||||||||||||||
| Gain on sale of loans | — | 37 | (37) | ||||||||||||||||||||
| Net gain (loss) on sale of investment securities | (1,850) | 7 | (1,857) | ||||||||||||||||||||
| Increase in the cash surrender value of bank-owned life insurance | 9,443 | 1,412 | 8,031 | ||||||||||||||||||||
| Other income | 3,514 | 4,113 | (599) | ||||||||||||||||||||
| Total | $ | 14,621 | $ | 8,921 | $ | 5,700 | |||||||||||||||||
The increase in total noninterest income in the second quarter of 2025 compared to the second quarter of 2024 was primarily driven by continued non-interest income from a new BOLI investment of $200 million made in the first quarter of 2025, partially offset by $1.9 million loss on the sale of investment securities during the second quarter of 2025 and a reduction in other income primarily due to lower gains from the sale of mortgage servicing rights compared to 2024.
The increase in total noninterest income in the first half of 2025 as compared to the first half of 2024 was primarily driven by a new BOLI investment of $200 million in the first half of 2025, partially offset by $1.9 million loss on the sale of investment securities during the first half of 2025.
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 52
Table of Contents Management's Discussion and Analysis | Results of Operations | Noninterest Expense
Noninterest Expense
Total noninterest expense includes salaries and employee benefits, premises and equipment expenses, marketing and advertising, data processing, legal, accounting and professional fees, FDIC insurance assessments and other expenses. The table below summarizes the comparative noninterest expense.
| For the Three Months Ended June 30, | ||||||||||||||||||||||||||
| (dollars in thousands) | 2025 | 2024 | Dollar Change | Percent Change | ||||||||||||||||||||||
| Salaries and employee benefits | $ | 21,940 | $ | 21,770 | $ | 170 | 1 | % | ||||||||||||||||||
| Premises and equipment expenses | 3,019 | 2,894 | 125 | 4 | % | |||||||||||||||||||||
| Marketing and advertising | 1,144 | 1,662 | (518) | (31) | % | |||||||||||||||||||||
| Data processing | 4,293 | 3,495 | 798 | 23 | % | |||||||||||||||||||||
| Legal, accounting and professional fees | 1,550 | 2,705 | (1,155) | (43) | % | |||||||||||||||||||||
| FDIC insurance | 8,077 | 5,917 | 2,160 | 37 | % | |||||||||||||||||||||
| Goodwill impairment | — | 104,168 | (104,168) | (100) | % | |||||||||||||||||||||
| Other expenses | 3,447 | 3,880 | (433) | (11) | % | |||||||||||||||||||||
| Total | $ | 43,470 | $ | 146,491 | $ | (103,021) | (70) | % | ||||||||||||||||||
| For the Six Months Ended June 30, | ||||||||||||||||||||||||||
| (dollars in thousands) | 2025 | 2024 | Dollar Change | Percent Change | ||||||||||||||||||||||
| Salaries and employee benefits | $ | 43,908 | $ | 43,496 | $ | 412 | 1 | % | ||||||||||||||||||
| Premises and equipment expenses | 6,222 | 5,953 | 269 | 5 | % | |||||||||||||||||||||
| Marketing and advertising | 2,515 | 2,521 | (6) | — | % | |||||||||||||||||||||
| Data processing | 8,271 | 6,788 | 1,483 | 22 | % | |||||||||||||||||||||
| Legal, accounting and professional fees | 4,672 | 5,212 | (540) | (10) | % | |||||||||||||||||||||
| FDIC insurance | 17,039 | 12,329 | 4,710 | 38 | % | |||||||||||||||||||||
| Goodwill impairment | — | 104,168 | (104,168) | (100) | % | |||||||||||||||||||||
| Other expenses | 6,294 | 6,021 | 273 | 5 | % | |||||||||||||||||||||
| Total | $ | 88,921 | $ | 186,488 | $ | (97,567) | (52) | % | ||||||||||||||||||
The decrease in total noninterest expense in the second quarter of 2025, as compared to the second quarter of 2024, was primarily due to the $104.2 million goodwill impairment recorded in the second quarter of 2024 and a $1.2 million decrease in legal, accounting and professional fees in the current period, offset by $2.2 million higher FDIC deposit insurance assessments. The decrease in total noninterest expense in the first half of 2025 as compared to the first half of 2024 was primarily due to the $104.2 million 2024 goodwill impairment, partially offset by $4.7 million higher FDIC deposit insurance assessments and $1.5 million higher data processing costs during the first half of 2025.
The major components of other expenses include regulatory assessment fees, director compensation, real estate taxes, and insurance expenses.
As a percentage of average assets, total noninterest expense (annualized) was 1.45% and 1.48% for the three and six months ended June 30, 2025 as compared to 4.8% and 3.0% for the same period in 2024. These decreases for the three and six months ended June 30, 2025 as compared to the same period 2024 were primarily due to no goodwill impairment during the current period, partially offset by an increase in FDIC deposit insurance assessments.
Income Tax Expense
For the three and six months ended June 30, 2025, income tax benefit was $39.4 million and $38.7 million, respectively, compared to income tax expense of $4.4 million and $7.4 million for the three and six months ended June 30, 2024, respectively. The decrease in the income tax expense comparing to prior year was primarily due to a decrease in the pre-tax income during the first half of 2025, and the 2024 goodwill impairment that was not deductible for tax purposes.
The effective tax rate for the three and six months ended June 30, 2025 was 36.1% and 36.2%, respectively. The effective tax rate for the first half of 2025 varies from the 21% statutory rate primarily due to the tax benefit from the low-income housing tax credit equity investment, tax-exempt interest income and tax-exempt income from the increase in the cash surrender value of BOLI.
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 53
Table of Contents Management's Discussion and Analysis | Balance Sheet Analysis
Balance Sheet Analysis
Overview
Total assets as of June 30, 2025 were $10.6 billion as compared to $11.1 billion as of December 31, 2024, a 5% decrease. The decrease in total assets from December 31, 2024 to June 30, 2025 was primarily driven by a decrease of $379.8 million in interest-bearing deposits with banks and other short-term investments (from $619.0 million as of December 31, 2024 to $239.2 million as of June 30, 2025) which was a result of the Bank’s efforts to manage its liquidity position in a manner that has less of an adverse effect on its net interest margin during the current period.
Total loans held for investment at amortized cost basis, the largest component of assets, were approximately $7.7 billion as of June 30, 2025, as compared to $7.9 billion as of December 31, 2024. There was $37.6 million in loans held for sale as of June 30, 2025 and none as of December 31, 2024. Refer to the "Loan Portfolio" section below for further discussion on loans.
Investment securities, at amortized cost net of the allowance for credit losses, were $2.2 billion as of June 30, 2025 as compared to $2.3 billion as of December 31, 2024, an 8% decrease, primarily driven by sales, maturities and paydowns of investment securities. The Bank does not plan to reinvest these proceeds back into the investment securities portfolio at this time.
In terms of funding, total deposits as of June 30, 2025 were $9.12 billion as compared to $9.13 billion as of December 31, 2024, a decrease of 0.1%. Total borrowed funds (excluding customer repurchase agreements) were $126.3 million and $566.1 million as of June 30, 2025 and December 31, 2024, respectively. The components and drivers of the change are discussed in the "Deposits and Other Borrowings" section below.
Total shareholders’ equity as of June 30, 2025 was $1.19 billion as compared to $1.23 billion as of December 31, 2024, a 3% decrease. The decrease in shareholders’ equity in 2025 was primarily from the net loss from operations of $68.1 million, and payment of cash dividends of $10.0 million. The ratio of common equity to total assets was 11.18% as of June 30, 2025 as compared to 11.02% as of December 31, 2024. Book value per share was $39.03 as of June 30, 2025, a 3.87% decrease from $40.60 as of December 31, 2024.
In addition, the tangible common equity ratio was 11.18% as of June 30, 2025, compared to 11.02% as of December 31, 2024. Tangible book value per share was $39.03 as of June 30, 2025, a 3.84% decrease from $40.59 as of December 31, 2024. Refer to the "Use of Non-GAAP Financial Measures" section for additional detail and a reconciliation of GAAP to non-GAAP financial measures.
In order to be considered well-capitalized, the Bank must have a CET1 risk-based capital ratio of 6.5%, a Tier 1 risk-based ratio of 8.0%, a total risk-based capital ratio of 10.0% and a leverage ratio of 5.0%. The Company and the Bank exceed all these requirements and satisfy the capital conservation buffer of 2.5% of CET1 capital. Failure to maintain the required capital conservation buffer would limit the ability of the Company and the Bank to pay dividends, repurchase shares or pay discretionary bonuses.
The Company's capital ratios remain substantially in excess of regulatory minimums and buffer requirements. The total risk based capital ratio was 15.27% as of June 30, 2025, as compared to 15.86% as of December 31, 2024. The common equity tier one capital ("CET1") risk based capital ratio was 14.01% as of June 30, 2025, as compared to 14.63% as of December 31, 2024. The tier 1 risk based capital ratio was 14.01% as of June 30, 2025, as compared to 14.63% as of December 31, 2024. The tier 1 leverage ratio was 10.63% as of June 30, 2025, as compared to 10.74% as of December 31, 2024.
Loan Portfolio
In its lending activities, the Company seeks to develop and expand relationships with clients whose businesses and individual banking needs will grow with the Bank. We believe superior customer service, local decision making and accelerated turnaround time from application to closing have been significant factors in growing the loan portfolio and meeting the lending needs in the markets served, while maintaining sound asset quality.
Loans outstanding were $7.7 billion as of June 30, 2025, as compared to $7.9 billion as of December 31, 2024, a decrease of $213.2 million or 2.7%. The loan portfolio mix continues to evolve as the Bank has experienced a reduction in commercial loans and owner-occupied construction loans, offset by increases in owner-occupied commercial real estate loans and fundings of ongoing construction projects for commercial and residential properties. Market rates year to date in 2025 for our new loan originations on average have been fairly consistent with the market rates at the end of 2024, since short-term interest rates remained unchanged in the first half of 2025. We continue to see opportunities for growth in the commercial lending market in our focused sectors; our processes for evaluating these opportunities are designed to ensure they are subject to reasonable underwriting standards, including appropriate collateral and cash flow necessary to support debt service. Following origination, we continue to monitor our borrowers' business plans and assess primary and alternative sources for loan repayment and, if necessary, obtain collateral to mitigate credit loss in the event of default.
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 54
Table of Contents Management's Discussion and Analysis | Balance Sheet Analysis | Loan Portfolio
The Bank has a large portion of its loan portfolio related to real estate, with 83% consisting of commercial real estate and real estate construction loans as of June 30, 2025. Non-owner occupied commercial real estate represented 64% of the loan portfolio while the remaining 19% is represented by the "owner occupied - commercial real estate" and "construction - C&I (owner occupied)" loans.
The table below presents loans, net of amortized deferred fees and costs by major category.
| As of | ||||||||||||||||||||||||||
June 30, 2025 | December 31, 2024 | |||||||||||||||||||||||||
| (dollars in thousands) | Amount | % | Amount | % | ||||||||||||||||||||||
| Commercial | $ | 1,207,512 | 15 | % | $ | 1,183,341 | 15 | % | ||||||||||||||||||
| PPP loans | 164 | — | % | 287 | — | % | ||||||||||||||||||||
| Income producing - commercial real estate | 3,768,884 | 48 | % | 4,064,846 | 51 | % | ||||||||||||||||||||
| Owner occupied - commercial real estate | 1,365,901 | 18 | % | 1,269,669 | 16 | % | ||||||||||||||||||||
| Real estate mortgage - residential | 45,921 | 1 | % | 50,535 | 1 | % | ||||||||||||||||||||
| Construction - commercial and residential | 1,211,728 | 16 | % | 1,210,763 | 15 | % | ||||||||||||||||||||
| Construction - C&I (owner occupied) | 69,554 | 1 | % | 103,259 | 1 | % | ||||||||||||||||||||
| Home equity | 49,224 | 1 | % | 51,130 | 1 | % | ||||||||||||||||||||
| Other consumer | 2,776 | — | % | 1,058 | — | % | ||||||||||||||||||||
| Total loans | 7,721,664 | 100 | % | 7,934,888 | 100 | % | ||||||||||||||||||||
| Less: allowance for credit losses | (183,796) | (114,390) | ||||||||||||||||||||||||
Loans, net(1) | $ | 7,537,868 | $ | 7,820,498 | ||||||||||||||||||||||
(1)Excludes accrued interest receivable of $37.8 million and $42.9 million as of June 30, 2025 and December 31, 2024, respectively, which is recorded in other assets.
As noted above, a significant portion of the loan portfolio consists of commercial, construction and commercial real estate loans, primarily made in the Washington, D.C. metropolitan area and is secured by real estate or other collateral in that market. While our basic market is the Washington, D.C. metropolitan area, the Bank has made loans outside that market where the borrower or its key decision makers have a meaningful relationship with the Bank and generally operate in or are based in our market. Although all of these loans are made to a diversified pool of unrelated borrowers across numerous businesses, adverse developments in the real estate market could continue to have an adverse impact on this portfolio of loans and the Company’s earnings and financial position. Management believes that the commercial real estate concentration risk is mitigated by diversification among the types and characteristics of real estate collateral properties, sound underwriting practices and ongoing portfolio monitoring and market analysis.
The Company's concentration in the Washington, D.C. metro area includes "Washington's Maryland Suburbs," which comprises Frederick, Prince George's and Montgomery counties, and "Northern Virginia," which comprises Alexandria, Arlington, Falls Church, Fairfax, Loudoun and Prince William counties. As of June 30, 2025, 30.2%, 27.5%, 22.0%, 6.8%, and 13.5% of the loan portfolio, as a percentage of total amortized cost, was concentrated in Washington D.C., Washington's Maryland Suburbs, Northern Virginia, other counties in Maryland and other locations in the United States, respectively. As of December 31, 2024, 31.3%, 27.4%, 23.9%, 5.8% and 11.6% of the loan portfolio, as a percentage of total amortized cost, was concentrated in Washington D.C., Washington's Maryland Suburbs, Northern Virginia, other counties in Maryland and other locations in the United States, respectively.
As part of its lending strategy, the Company maintains a substantial portfolio of CRE loans, with $6.3 billion and $6.5 billion, or 81.2% and 81.5% of total loans, of amortized cost outstanding as of June 30, 2025 and December 31, 2024, respectively. Management meets regularly in order to monitor its existing CRE loan portfolio and to evaluate the pipeline for CRE loan investment. Income producing CRE loans collateralized by office properties comprised approximately $819.8 million and $862.2 million, or 10.6% and 10.9% of total loans, as of June 30, 2025 and December 31, 2024, respectively.
Office loans within Washington D.C., Washington's Maryland Suburbs and Northern Virginia were $766.5 million and $795.0 million, or 9.9% and 10.0% of total loans, as of June 30, 2025 and December 31, 2024, respectively. As a percentage of total principal balance of income producing - CRE office loans, 37.8%, 34.6%, 12.7%, and 14.9% were located in Washington's Maryland Suburbs, Northern Virginia, the central business district of Washington D.C., and Washington, D.C. (outside the central business district,) respectively, as of June 30, 2025.
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 55
Table of Contents Management's Discussion and Analysis | Balance Sheet Analysis | Loan Portfolio
The table below summarizes the Company's income producing - commercial real estate loans, at principal, by collateral location and type.
As of June 30, 2025 | Maryland | Virginia | ||||||||||||||||||||||||||||||||||||||||||||||||
| (dollars in thousands) | Washington, D.C. | Washington, D.C. Suburbs | Other | Northern Virginia | Other | Other | Total | Percent of Total | ||||||||||||||||||||||||||||||||||||||||||
| Collateral Type: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Hotel & motel | $ | 136,308 | $ | 75,290 | $ | 101,500 | $ | 60,618 | $ | — | $ | 21,152 | $ | 394,868 | 10 | % | ||||||||||||||||||||||||||||||||||
| Industrial | 862 | 71,886 | 39,973 | 36,605 | 19,410 | — | 168,736 | 4 | % | |||||||||||||||||||||||||||||||||||||||||
| Mixed use | 201,894 | 42,908 | 3,371 | 50,700 | 20,755 | 4,930 | 324,558 | 9 | % | |||||||||||||||||||||||||||||||||||||||||
| Multifamily | 393,887 | 192,028 | 308 | 117,583 | 84,485 | 48,108 | 836,399 | 22 | % | |||||||||||||||||||||||||||||||||||||||||
| Office | 226,683 | 306,016 | 4,204 | 235,128 | 49,176 | — | 821,207 | 22 | % | |||||||||||||||||||||||||||||||||||||||||
| Retail | 68,732 | 64,230 | 59,889 | 73,458 | 64,703 | 1,276 | 332,288 | 9 | % | |||||||||||||||||||||||||||||||||||||||||
| Single / 1-4 Family & Res. Condo | 64,430 | 2,050 | 2,069 | 7,954 | 6,395 | 4,017 | 86,915 | 2 | % | |||||||||||||||||||||||||||||||||||||||||
| Other | 184,190 | 171,152 | 28,221 | 383,905 | 8,233 | 35,674 | 811,375 | 22 | % | |||||||||||||||||||||||||||||||||||||||||
| Total | $ | 1,276,986 | $ | 925,560 | $ | 239,535 | $ | 965,951 | $ | 253,157 | $ | 115,157 | $ | 3,776,346 | 100 | % | ||||||||||||||||||||||||||||||||||
| Percent of total | 34% | 25% | 6% | 26% | 6% | 3% | 100% | |||||||||||||||||||||||||||||||||||||||||||
| Percent of Principal by Loan Size: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Less than $1 million | 2 | % | 2 | % | 2 | % | 1 | % | 2 | % | 2 | % | ||||||||||||||||||||||||||||||||||||||
| $1 million to $5 million | 10 | % | 10 | % | 21 | % | 7 | % | 9 | % | 14 | % | ||||||||||||||||||||||||||||||||||||||
| $5 million to $10 million | 6 | % | 7 | % | 21 | % | 5 | % | 13 | % | 32 | % | ||||||||||||||||||||||||||||||||||||||
| $10 million to $25 million | 19 | % | 13 | % | 25 | % | 37 | % | 40 | % | 20 | % | ||||||||||||||||||||||||||||||||||||||
| $25 million to $50 million | 46 | % | 27 | % | 31 | % | 43 | % | 36 | % | 32 | % | ||||||||||||||||||||||||||||||||||||||
| Greater than $50 million | 17 | % | 41 | % | — | % | 7 | % | — | % | — | % | ||||||||||||||||||||||||||||||||||||||
| Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||||||||||||||||||||||||||||||||
As of June 30, 2025 and December 31, 2024, $270.3 million and $287.0 million, respectively, of principal of CRE loans collateralized by office properties were criticized or classified.
The Company is exploring ways to optimize its balance sheet to reduce the Company’s commercial real estate loan concentration, including ways to reduce exposure to short- and intermediate-term valuation risks for its office loans. There is no assurance that the Company will decide to seek to implement, or ultimately implement, any balance sheet optimization strategy, and any strategy the Company decides to pursue may not be successful. In addition, future decisions the Company makes in connection with its balance sheet optimization efforts could continue to result in elevated credit costs and could also have a material impact on our financial condition and results of operations in the period or periods any relevant decisions are made or strategies implemented.
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 56
Table of Contents Management's Discussion and Analysis | Balance Sheet Analysis | Loan Maturity
Loan Maturity
The table below sets forth the time to contractual maturity of the loan portfolio. Loans are shown in the period based on final contractual maturity. Demand loans, having no contractual maturity, and overdrafts are reported as due in one year or less.
As of June 30, 2025 | ||||||||||||||||||||||||||||||||
| (dollars in thousands) | Total | One Year or Less | Over One Year to Five Years | Over Five Years to Fifteen Years | Over Fifteen Years | |||||||||||||||||||||||||||
| Commercial | $ | 1,207,513 | $ | 444,460 | $ | 615,999 | $ | 144,186 | $ | 2,868 | ||||||||||||||||||||||
| PPP loans | 164 | 164 | — | — | — | |||||||||||||||||||||||||||
Income producing - commercial real estate (1) | 3,768,883 | 1,644,013 | 1,887,111 | 237,759 | — | |||||||||||||||||||||||||||
| Owner occupied - commercial real estate | 1,365,901 | 243,131 | 500,930 | 347,088 | 274,752 | |||||||||||||||||||||||||||
| Real estate mortgage - residential | 45,921 | 13,320 | 23,681 | 355 | 8,565 | |||||||||||||||||||||||||||
| Construction - commercial and residential | 1,211,728 | 859,286 | 319,243 | 3,596 | 29,603 | |||||||||||||||||||||||||||
| Construction - C&I (owner occupied) | 69,554 | 700 | 25,577 | 8,811 | 34,466 | |||||||||||||||||||||||||||
| Home equity | 49,224 | 2,159 | 224 | 1,525 | 45,316 | |||||||||||||||||||||||||||
| Other consumer | 2,776 | 1,028 | 214 | 15 | 1,519 | |||||||||||||||||||||||||||
| Total loans | $ | 7,721,664 | $ | 3,208,261 | $ | 3,372,979 | $ | 743,335 | $ | 397,089 | ||||||||||||||||||||||
| Loans with: | ||||||||||||||||||||||||||||||||
| Predetermined fixed interest rate | $ | 2,655,650 | $ | 797,784 | $ | 1,425,556 | $ | 368,098 | $ | 64,212 | ||||||||||||||||||||||
| Floating or adjustable interest rate | 5,066,014 | 2,410,477 | 1,947,423 | 375,237 | 332,877 | |||||||||||||||||||||||||||
| Total loans | $ | 7,721,664 | $ | 3,208,261 | $ | 3,372,979 | $ | 743,335 | $ | 397,089 | ||||||||||||||||||||||
(1)Income producing CRE office loans with total principal of $821.2 million and multifamily loans with total principal of $836.4 million as of June 30, 2025 are included within income producing - commercial real estate. The charts below represent their maturities schedules.
Allowance for Credit Losses
The ACL is an estimate based on many factors which reflect management’s assessment of the risk in the loan portfolio. Those factors include economic conditions and trends, the value and adequacy of collateral, volume and mix of the portfolio, performance of the portfolio and internal loan processes of the Company and Bank. A full discussion of the accounting for ACL is contained in "Note 1 – Summary of Significant Accounting Policies" to the Consolidated Financial Statements and activity in the ACL is contained in "Note 4 – Loans and Allowance for Credit Losses" to the Consolidated Financial Statements. Also, refer to "Critical Accounting Policies and Estimates" above for further discussion of the methodology which management employs to maintain an adequate ACL, as well as "Provision for Credit Losses" above for a discussion of the Company's calculation of the provision for credit losses during the six months ended June 30, 2025 and 2024.
The ACL for loans as of June 30, 2025 was $183.8 million, which reflected an increase of $69.4 million from $114.4 million as of December 31, 2024. The ACL represented 2.38% of total loans as of June 30, 2025 as compared to 1.44% as of December 31, 2024. As of June 30, 2025, the allowance represented 81.17% of nonperforming loans as compared to 55% as of
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 57
Table of Contents Management's Discussion and Analysis | Balance Sheet Analysis | Allowance for Credit Losses
December 31, 2024. The increase in the ACL for loans during the current period was primarily due to increased reserves for the Bank's CRE office overlay. The overlay increased as charge-offs taken during the current period, and negative risk ratings migrations within the CRE office portfolio, were incorporated into the calculation. Negative risk ratings migrations within the CRE office portfolio were primarily a result of continued market deterioration. In addition, the ACL on individually assessed loans also increased as updated valuation information was received, primarily on loans that migrated to nonperforming status during the current period.
As part of its comprehensive loan review process, the Bank’s Risk Committee evaluates loans which are past due 30 days or more. The Committee makes an assessment of the conditions and circumstances surrounding delinquent and potential problem loans. The Bank’s loan policy requires that loans be placed on nonaccrual if they are 90 days past due or if their collection is deemed to be doubtful, unless they are well secured and in the process of collection. The Credit Administration department analyzes the status of development and construction projects, including sales activities and utilization of interest reserves in order to assess potential increased levels of risk which may require additional reserves.
The Company believes it has taken a prudent posture with respect to risk rating its loan portfolio. As of June 30, 2025 and December 31, 2024, loans rated special mention had an amortized cost of $173.3 million and $244.8 million, respectively, and loans rated substandard had an amortized cost of $702.1 million and $426.4 million, respectively. The increase in substandard loans was primarily attributable to additions in CRE loans, particularly in income producing - commercial real estate. As of June 30, 2025, 100% and 64% of special mention and substandard loans, respectively, were current. Based upon their status as potential problem loans, loans risk rated special mention or substandard receive heightened scrutiny and ongoing intensive risk management. Additionally, the Company's loan loss allowance methodology incorporates increased reserve factors for certain loans considered potential problem loans as compared to the general portfolio.
Management, being aware of the risks facing CRE, is intent on maintaining strong portfolio management and a strong risk rating process. The Bank provides analysis of credit requests and the management of problem credits. The Bank has developed and implemented analytical procedures for evaluating credit requests, has refined the Company’s risk rating system and has adopted enhanced monitoring of the loan portfolio and the adequacy of the ACL, in particular on its CRE and construction loans (including those collateralized by office properties). These analyses include stress testing. Additionally, fair value assessments of loans acquired are included in our analytical procedures. The loan portfolio analysis process is ongoing and proactive to support the Company's objective of maintaining a portfolio of quality credits and quickly identifying weaknesses before they become more severe.
As of June 30, 2025 and December 31, 2024, the Company's performing office coverage ratio, which calculates the ACL attributable to loans collateralized by performing office properties as a percentage of total loans, was 11.54% and 3.81%, respectively.
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 58
Table of Contents Management's Discussion and Analysis | Balance Sheet Analysis | Allowance for Credit Losses
The table below presents activity in the allowance for credit losses.
| Six Months Ended June 30, | ||||||||||||||
| (dollars in thousands) | 2025 | 2024 | ||||||||||||
| Balance at beginning of period | $ | 114,390 | $ | 85,940 | ||||||||||
| Charge-offs: | ||||||||||||||
| Commercial | (968) | (2,587) | ||||||||||||
| Income producing - commercial real estate | (74,195) | (21,329) | ||||||||||||
| Owner occupied - commercial real estate | (9,797) | — | ||||||||||||
| Construction - commercial and residential | (10,703) | (129) | ||||||||||||
| Other consumer | (35) | (70) | ||||||||||||
| Total charge-offs | (95,698) | (24,115) | ||||||||||||
| Recoveries: | ||||||||||||||
| Commercial | 215 | 166 | ||||||||||||
| Income producing - commercial real estate | 329 | 185 | ||||||||||||
| Owner occupied - commercial real estate | 47 | 47 | ||||||||||||
| Total recoveries | 591 | 398 | ||||||||||||
| Net charge-offs | (95,107) | (23,717) | ||||||||||||
| Provision for credit losses - loans | 164,513 | 44,078 | ||||||||||||
| Balance at end of period | $ | 183,796 | $ | 106,301 | ||||||||||
| Annualized ratio of net charge-offs to average loans outstanding during the period | 2.40 | % | 0.59 | % | ||||||||||
The table below displays the allocation of the ACL by loan category and the percentage of allowance in each category. The allocation of the allowance as of June 30, 2025 includes the allowance for credit losses of $28.5 million against individually assessed loans of $227.0 million, as compared to allowance for credit losses of $17.1 million against individually assessed loans of $208.7 million as of December 31, 2024. The allocation of the allowance to each category is not necessarily indicative of future losses or charge-offs and does not restrict the usage of the allowance to absorb losses in any category.
| As of | ||||||||||||||||||||||||||||||||||||||
June 30, 2025 | December 31, 2024 | |||||||||||||||||||||||||||||||||||||
| (dollars in thousands) | Amount | % of Total ACL | % of Total Loans | Amount | % of Total ACL | % of Total Loans | ||||||||||||||||||||||||||||||||
| Commercial | $ | 28,955 | 16 | % | 15 | % | $ | 19,390 | 17 | % | 15 | % | ||||||||||||||||||||||||||
| Income producing - commercial real estate | 94,205 | 51 | % | 48 | % | 55,185 | 48 | % | 51 | % | ||||||||||||||||||||||||||||
| Owner occupied - commercial real estate | 27,183 | 15 | % | 18 | % | 22,654 | 19 | % | 16 | % | ||||||||||||||||||||||||||||
| Real estate mortgage - residential | 813 | — | % | 1 | % | 610 | 1 | % | 1 | % | ||||||||||||||||||||||||||||
| Construction - commercial and residential | 25,990 | 14 | % | 16 | % | 14,585 | 13 | % | 15 | % | ||||||||||||||||||||||||||||
| Construction - C&I (owner occupied) | 5,570 | 3 | % | 1 | % | 1,282 | 1 | % | 1 | % | ||||||||||||||||||||||||||||
| Home equity | 1,031 | 1 | % | 1 | % | 653 | 1 | % | 1 | % | ||||||||||||||||||||||||||||
| Other consumer | 49 | — | % | — | % | 31 | — | % | — | % | ||||||||||||||||||||||||||||
| Total | $ | 183,796 | 100 | % | 98 | % | $ | 114,390 | 100 | % | 100 | % | ||||||||||||||||||||||||||
Nonperforming Assets
The Company’s level of nonperforming assets, which is comprised of the amortized cost of loans delinquent 90 days or more, and nonaccrual loans, which includes the nonperforming portion of loan modifications, and the carrying value of other real estate owned ("OREO"), totaled $228.9 million as of June 30, 2025, representing 2.16% of total assets, as compared to $211.4 million as of December 31, 2024, representing 1.90% of total assets. The increase is primarily due to the changes in nonperforming loans discussed below.
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 59
Table of Contents Management's Discussion and Analysis | Balance Sheet Analysis | Nonperforming Assets
The Company had no accruing loans that were 90 days or more past due as of June 30, 2025 and December 31, 2024. Management prioritizes remaining attentive to early signs of deterioration in borrowers’ financial conditions and to taking action designed to mitigate risk. The Company places loans on nonaccrual status if it deems collection to be doubtful. The Company believes, based on its loan portfolio risk analysis that its ACL at 2.38% of total loans as of June 30, 2025, is adequate to absorb expected credit losses within the loan portfolio at that date.
Total nonperforming loans had an amortized cost of $226.4 million as of June 30, 2025, representing 2.93% of total loans, compared to $208.7 million as of December 31, 2024, representing 2.63% of total loans. This increase was primarily driven by additions in office and land property categories within nonperforming loans.
The CECL standard allows for institutions to evaluate individual loans in the event that the asset does not share similar risk characteristics with its original segmentation. This can occur due to credit deterioration, increased collateral dependency or other factors leading to impairment. In particular, the Company individually evaluates loans on nonaccrual, though it may individually evaluate other loans or groups of loans as well if it determines they no longer share similar risk with their assigned segment. Reserves on individually assessed loans are determined by one of two methods: the fair value of collateral or the discounted cash flow. Fair value of collateral is used for loans determined to be collateral dependent, and the fair value represents the net realizable value of the collateral, adjusted for sales costs, commissions, senior liens, etc. Discounted cash flow is used on loans that are not collateral dependent where structural concessions have been made and continuing payments are expected. The continuing payments are discounted over the expected life at the loan’s original contract rate and include adjustments for risk of default.
Nonperforming assets include loans that the Company considers to be individually assessed. Individually assessed loans are defined as those as to which we believe it is probable that we will not collect all amounts due according to the contractual terms of the loan agreement. Loans that do not share risk characteristics consistent with similar loans are evaluated on an individual basis. For collateral dependent financial assets where the Company has determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and the Company expects repayment of the financial asset to be provided substantially through the sale of the collateral, the ACL is measured based on the difference between the fair value of the collateral and the amortized cost basis of the asset as of the measurement date. When repayment is expected to be from the operation of the collateral, expected credit losses are calculated as the amount by which the amortized cost basis of the financial asset exceeds the NPV from the operation of the collateral. When repayment is expected to be from the sale of the collateral, expected credit losses are calculated as the amount by which the amortized cost basis of the financial asset exceeds the fair value of the underlying collateral less estimated cost to sell. The ACL may be zero if the fair value of the collateral at the measurement date exceeds the amortized cost basis of the financial asset. Generally, all appraisals associated with individually assessed loans are updated on a not less than annual basis.
The Company evaluates all loan modifications according to the accounting guidance to determine if the modification results in a new loan or a continuation of the existing loan. Loan modifications to borrowers experiencing financial difficulties that result in a direct change in the timing or amount of contractual cash flows include situations where there is principal forgiveness, interest rate reductions, other-than-insignificant payment delays, term extensions, and combinations of the listed modifications. Modifications with terms not as favorable to the Company as the terms for comparable loans to other customers with similar collection risk who are not refinancing or restructuring a loan with the Company and which have a direct impact on cash flows are considered modified loans to borrowers experiencing financial difficulty. A loan that is considered a modified loan may be evaluated for disclosure if the commitment is $500 thousand or greater. Management strives to identify borrowers in financial difficulty early and work with them to modify their loan to more affordable terms before their loan reaches nonaccrual status, foreclosure or repossession of the collateral to minimize economic loss to the Company.
Commercial and consumer loans modified are closely monitored for delinquency as an early indicator of possible future default. If loans modified in a loan restructuring subsequently default, the Company evaluates the loan for possible further impairment. The allowance may be increased, adjustments may be made in the allocation of the allowance, or partial charge-offs may be taken to further write-down the carrying value of the loan.
During the six months ended June 30, 2025, the Bank modified 24 loans with a total amortized cost of $200.1 million as of June 30, 2025 (2.6% of the loan portfolio). These loans received extended loan terms of between approximately 3 to 36 months.
As of June 30, 2025, the payment status of ten loans modified in the preceding twelve months, totaling $279.7 million of amortized cost basis, included one loan with an amortized cost basis of $5.7 million which was 30 to 89 days past due, and the other nine loans with a total amortized cost basis of $79.5 million which were on nonaccrual status. As of June 30, 2025, additional loans that were modified in the preceding twelve months which were performing under their modified terms totaled $194.5 million of amortized cost basis.
Management, from time-to-time and in the ordinary course of business, implements renewals, modifications, extensions and/or changes in terms of loans to borrowers who have the ability to repay on reasonable market-based terms, as circumstances may warrant, and therefore, such modifications are not considered to be loan restructurings to a borrower experiencing financial
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 60
Table of Contents Management's Discussion and Analysis | Balance Sheet Analysis | Nonperforming Assets
difficulty, as the accommodation of a borrower's request does not rise to the level of a concession if the modified transaction is at market rates and terms and/or the borrower is not experiencing financial difficulty. For example: (1) adverse weather conditions may create a short term cash flow issue for an otherwise profitable retail business which suggests a temporary interest only period on an amortizing loan; (2) there may be delays in absorption on a real estate project which reasonably suggests extension of the loan maturity at market terms; or (3) there may be maturing loans to borrowers with demonstrated repayment ability who are not in a position at the time of maturity to obtain alternate long-term financing.
Included in nonperforming assets as of June 30, 2025 is OREO of $2.5 million, consisting of five foreclosed properties, compared to OREO of $2.7 million, consisting of five foreclosed properties as of December 31, 2024. OREO properties are carried at the lower of cost or at fair value less estimated costs to sell.
It is the Company's policy to generally obtain third party appraisals prior to foreclosure and to obtain updated third party appraisals on OREO properties generally not less frequently than annually. Generally, the Company would obtain updated appraisals or evaluations where it has reason to believe, based upon market indications (such as comparable sales, a scenario in which the Company is considering legitimate offers below carrying value, broker indications and similar factors), that the current appraisal does not accurately reflect current value. There were two OREO sales in six months ended June 30, 2025 and two in six months ended June 30, 2024, generating proceeds of $772 thousand and $656 thousand, respectively.
The table below presents the amounts of nonperforming assets, including loans at amortized cost and OREO at the lower of cost or fair value less estimated costs to sell.
| As of | ||||||||||||||
| (dollars in thousands) | June 30, 2025 | December 31, 2024 | ||||||||||||
| Nonaccrual Loans: | ||||||||||||||
| Commercial | $ | 3,436 | $ | 2,048 | ||||||||||
| Income producing - commercial real estate | 179,597 | 168,454 | ||||||||||||
| Owner occupied - commercial real estate | 17,523 | 37,744 | ||||||||||||
| Real estate mortgage - residential | 5,869 | 157 | ||||||||||||
| Construction - commercial and residential | 19,488 | — | ||||||||||||
| Home equity | 507 | 303 | ||||||||||||
| Total nonperforming loans | 226,420 | 208,706 | ||||||||||||
| Other real estate owned | 2,459 | 2,743 | ||||||||||||
| Total nonperforming assets | $ | 228,879 | $ | 211,449 | ||||||||||
| Coverage ratio, allowance for credit losses to total nonperforming loans | 81 | % | 55 | % | ||||||||||
| Ratio of nonperforming loans to total loans | 2.93 | % | 2.63 | % | ||||||||||
| Ratio of nonperforming assets to total assets | 2.16 | % | 1.90 | % | ||||||||||
Significant variation in the amount of nonperforming loans may occur from period to period because the amount of nonperforming loans depends largely on the condition of a relatively small number of individual credits and borrowers relative to the total loan portfolio.
As of June 30, 2025, there were $702.1 million of substandard loans. Based upon their status as potential problem loans, loans risk rated special mention or substandard receive heightened scrutiny and ongoing intensive risk management. Additionally, the Company's loan loss allowance methodology incorporates increased reserve factors for certain loans considered potential problem loans as compared to the general portfolio.
Other Earning Assets
As part of its employee benefits and financing strategies, the Company has invested in Bank-Owned Life Insurance ("BOLI") policies. BOLI serves as a tax-efficient asset designed to offset the cost of employee benefit obligations. The Company views BOLI as a long-term investment to help fund future benefit expenses.
As of June 30, 2025, the cash surrender value of BOLI totaled $325.2 million, compared to $115.8 million as of December 31, 2024. The increase reflects earnings on the policies as well as additional BOLI purchased through premium payments made in the first half of 2025.
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 61
Table of Contents Management's Discussion and Analysis | Balance Sheet Analysis | Deposits and Other Borrowings
Deposits and Other Borrowings
The principal sources of funds for the Bank are core deposits, consisting of demand deposits, money market accounts, Negotiable Order of Withdrawal ("NOW") accounts, savings accounts, and certificates of deposits. The deposit base includes transaction accounts, time and savings accounts and accounts which customers use for cash management and which provide the Bank with a source of fee income and cross-marketing opportunities, as well as an attractive source of lower cost funds. To meet funding needs during periods of high loan demand and seasonal variations in core deposits, the Bank regularly utilizes alternative funding sources such as secured borrowings from the FHLB, federal funds purchased lines of credit from correspondent banks and brokered deposits.
The table below presents the Bank’s deposit composition by balance and percentage.
| As of | ||||||||||||||||||||||||||
June 30, 2025 | December 31, 2024 | |||||||||||||||||||||||||
| (dollars in thousands) | Balance | Percentage | Balance | Percentage | ||||||||||||||||||||||
| Noninterest-bearing demand | $ | 1,532,132 | 17 | % | $ | 1,544,403 | 17 | % | ||||||||||||||||||
| Interest-bearing transaction | 895,604 | 10 | % | 1,211,791 | 13 | % | ||||||||||||||||||||
| Savings and money market | 3,267,630 | 36 | % | 3,599,221 | 39 | % | ||||||||||||||||||||
| Time deposits | 3,424,241 | 37 | % | 2,775,663 | 31 | % | ||||||||||||||||||||
| Total | $ | 9,119,607 | 100 | % | $ | 9,131,078 | 100 | % | ||||||||||||||||||
For the six months ended June 30, 2025, deposits remained relatively flat overall however the mix changed when compared to December 31, 2024. These deposit changes were the result of growth in time deposits from the company's digital acquisition channel partially offsetting a decrease in interest-bearing transaction and savings and money market accounts.
No single depositor represented more than 10% of total deposits as of June 30, 2025. The ten largest depositors not associated with brokered pass-through relationships represented approximately 16% of total deposits in the aggregate as of June 30, 2025. The Company maintains a significant deposit relationship with a third-party payments processor, whose business results in deposit inflows and outflows on an ongoing basis, which contributes to variations in period end compared to average deposit balances.
The Bank accepts brokered time deposits generally in denominations of less than $250 thousand from brokerage networks, including IntraFi Network, LLC ("IntraFi"). The Bank participates in IntraFi's CDARS and the ICS programs, which provide for reciprocal ("two-way") transactions among banks for the purpose of maximizing FDIC insurance. ICS also allows for the sale of deposits into the IntraFi Network ("One-Way Sale") which provides FDIC insurance for the depositor without reciprocal deposits returned to the Bank. Deposits sold through the IntraFi One-Way Sale process are not included in the Bank’s deposit totals. The sale of ICS deposits allows the Bank to moderate the fluctuation of deposit balances. As of June 30, 2025, the Bank sold de minimis deposits through the IntraFi One-Way Sale network. The total of reciprocal deposits as of June 30, 2025 was $1.3 billion (14% of total deposits) as compared to $1.4 billion (16% of total deposits) as of December 31, 2024. These sources are believed by the Company to represent a reliable and cost efficient alternative funding source for the Bank, but there can be no assurance that they will continue to be adequate or appropriate to meet our liquidity needs. The Bank also is able to obtain one way CDARS deposits and participates in IntraFi’s Insured Network Deposit Program ("IND"). The Bank had $618.4 million and $894.7 million of IND brokered deposits as of June 30, 2025 and December 31, 2024, respectively. However, to the extent that the condition or reputation of the Company or Bank deteriorates, or to the extent that there are significant changes in market interest rates which the Company and Bank do not elect to match, or if aggregate funding available to banks changes due to changes in the marketplace, we may experience an outflow of brokered deposits or difficulty with obtaining them in the future. In that event, we would be required to obtain alternate sources for funding, which may increase our cost of funds and negatively impact our net interest margin.
We have used brokered deposits and intend to continue to use brokered deposits as one of our funding sources to support future growth. As of June 30, 2025, total brokered deposits were $3.5 billion, or 38% of total deposits, compared to $4.0 billion, or 44% as of December 31, 2024. These brokered deposits were comprised of savings, money market and other interest-bearing transaction accounts of $2.1 billion and $2.7 billion, and time deposits of $1.2 billion and $1.3 billion as of June 30, 2025 and December 31, 2024, respectively. The Company uses the Call Report definitions for regulatory reporting by the Bank to classify its deposits as brokered deposits. As of June 30, 2025 and December 31, 2024, total deposits included estimated totals of $2.3 billion and $2.2 billion of uninsured deposits, which represented 25% and 24% of total deposits, respectively.
The Company has offered a sweep account, or "customer repurchase agreement," allowing qualifying businesses to earn interest on short-term excess funds, which are not suited for either a certificate of deposit or a money market account. The balances in these accounts were $23.4 million as of June 30, 2025 compared to $33.2 million as of December 31, 2024. Customer
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 62
Table of Contents Management's Discussion and Analysis | Balance Sheet Analysis | Deposits and Other Borrowings
repurchase agreements are not deposits and are not insured by the FDIC, but are collateralized by U.S. agency securities and/or U.S. agency-backed MBS.
The Company had no outstanding balances under its federal funds lines of credit provided by correspondent banks (which are unsecured) as of June 30, 2025 and December 31, 2024.
As of June 30, 2025 and December 31, 2024, the Company had outstanding FHLB advances of $50.0 million and $490 million, respectively. Outstanding FHLB advances are secured by collateral consisting of specifically pledged marketable investment securities, a blanket lien on qualifying loans in the Bank’s commercial mortgage, residential mortgage and home equity loan portfolios.
On September 30, 2024, the Company closed a private placement of its 10.00% senior unsecured debt totaling $77.7 million maturing on September 30, 2029 (the "2029 Senior Notes" or "Original Notes"). As of June 30, 2025, the carrying value of these 2029 Senior Notes was $76.3 million which reflected $1.4 million in unamortized deferred financing costs that are being amortized over the life of the 2029 Senior Notes.
In connection with the issuance of the 2029 Senior Notes, the Company also entered into a registration rights agreement dated September 30, 2024 with the purchasers of the 2029 Senior Notes ("Registration Rights Agreement"). Pursuant to the Registration Rights Agreement, the Company filed an exchange offer registration statement with the SEC to exchange the Senior Notes for substantially identical notes registered under the Securities Act ("Exchange Notes"). The terms of the Exchange Notes are identical to the terms of the Original Notes, except that the transfer restrictions and registration rights applicable to the Original Notes do not apply to the Exchange Notes. The Company completed the exchange offer on January 16, 2025.
Commitments and Contractual Obligations
The table below displays the loan commitments outstanding and lines and letters of credit.
| As of | ||||||||||||||
| (dollars in thousands) | June 30, 2025 | December 31, 2024 | ||||||||||||
| Unfunded loan commitments | $ | 1,391,648 | $ | 1,318,133 | ||||||||||
| Unfunded lines of credit | 88,857 | 88,305 | ||||||||||||
| Letters of credit | 60,223 | 69,051 | ||||||||||||
| Total | $ | 1,540,728 | $ | 1,475,489 | ||||||||||
Various commitments to extend credit are made in the normal course of banking business. Letters of credit are also issued for the benefit of customers. These commitments are subject to loan underwriting standards and geographic boundaries consistent with the Company’s loans outstanding.
Unfunded loan commitments are agreements whereby the Bank has made a commitment to lend to a customer as long as there is satisfaction of the terms or conditions established in the contract and the borrower has accepted the commitment in writing. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee before the commitment period is extended. In many instances, borrowers are required to meet performance milestones in order to draw on a commitment as is the case in construction loans, or to have a required level of collateral in order to draw on a commitment as is the case in asset based lending credit facilities. Collateral obtained varies and may include certificates of deposit, accounts receivable, inventory, property and equipment, residential and CRE. Since commitments may expire without being drawn, the total commitment amount does not necessarily represent future cash requirements.
Unfunded lines of credit are agreements to lend to a customer as long as there is no violation of the terms or conditions established in the contract. Lines of credit generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since lines of credit may expire without being drawn, the total unfunded line of credit amount does not necessarily represent future cash requirements.
Letters of credit include standby and commercial letters of credit. Standby letters of credit are conditional commitments issued by the Bank to guarantee the performance by the Bank's customer to a third party. Standby letters of credit generally become payable upon the failure of the customer to perform according to the terms of the underlying contract with the third party. Standby letters of credit are generally not drawn. Commercial letters of credit are issued specifically to facilitate commerce and typically result in the commitment being drawn when the underlying transaction is consummated between the customer and a third party. The contractual amount of these letters of credit represents the maximum potential future payments guaranteed by the Bank. The Bank has recourse against the customer for any amount it is required to pay to a third party under a letter of credit, and holds cash and or other collateral on those standby letters of credit for which collateral is deemed necessary.
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 63
Table of Contents Management's Discussion and Analysis | Liquidity Management
Liquidity Management
Liquidity is a measure of the Company’s and Bank’s ability to meet loan demand and to satisfy depositor withdrawal requirements in an orderly manner. The Bank’s primary sources of liquidity consist of cash and cash balances due from correspondent banks, excess reserves at the Federal Reserve, loan repayments, federal funds sold and other short-term investments, maturities and sales of investment securities, income from operations and new core deposits into the Bank. Approximately 57% of the Company's investment portfolio of debt securities is held in an available-for-sale status which allows for flexibility to generate cash from sales as needed to meet ongoing loan demand. These securities can also be utilized as pledged assets that provide secondary liquidity through the form of additional available borrowings. These sources of liquidity are considered primary and are supplemented by the ability of the Company and Bank to borrow funds or issue brokered deposits, which are termed secondary sources of liquidity. Investment securities that are classified as held-to-maturity can also be used as collateral to pledge against additional borrowings.
The table below summarizes the Company's secondary sources of liquidity in use and available.
| (dollars in thousands) | Secondary Sources of Liquidity in Use | Secondary Sources of Remaining Liquidity Available | ||||||||||||
As of June 30, 2025 | ||||||||||||||
Unsecured brokered deposits (1) | $ | 892,664 | $ | 1,180,754 | ||||||||||
| FHLB secured borrowings | 50,000 | 1,363,585 | ||||||||||||
| FRB: | ||||||||||||||
| Discount window secured borrowings | — | 1,754,682 | ||||||||||||
| Federal funds lines | — | 145,000 | ||||||||||||
| Customer repurchase agreements | 23,442 | — | ||||||||||||
Unpledged assets: (2) | ||||||||||||||
| Interest-bearing deposits with banks | — | 12,947 | ||||||||||||
| Investment securities | — | 270,511 | ||||||||||||
| Total | $ | 966,106 | $ | 4,727,479 | ||||||||||
(1)The available liquidity from the unsecured brokered deposits represents unsecured funds under one-way CDARS, ICS, and other brokered deposits that would require then current market rates and be dependent on the availability of funds in those networks.
(2)Unpledged assets are comprised of unencumbered assets that could be liquidated or used as collateral to obtain additional liquidity through debt financing.
The funding mix has continued to change throughout the six months ended June 30, 2025. Deposits were $9.12 billion and $9.13 billion as of June 30, 2025 and December 31, 2024, respectively. The slight decrease of $11.5 million and funding mix change was primarily attributable to a $316.2 million reduction in interest-bearing transaction accounts and $331.6 million reduction in savings and money market accounts, offset by a $648.6 million increase in interest-bearing time deposits. The growth in interest-bearing deposits was driven by the increase in time deposits through the digital acquisition channel during the six months ended June 30, 2025, as discussed in "Deposits and Other Borrowings" above. Short-term borrowings were $50.0 million and $490.0 million as of June 30, 2025 and December 31, 2024.
Additionally, the Bank can purchase up to $145.0 million in federal funds on an unsecured basis from its correspondents, against which there were no amounts outstanding as of June 30, 2025 and can borrow unsecured funds under one-way CDARS and ICS brokered deposits in the amount of $1.1 billion, against which there was $97 million outstanding as of June 30, 2025. As of June 30, 2025, the Bank also has custodial agreements with various broker-dealers through IntraFi's IND program which provided $618.0 million of brokered deposits.
As of June 30, 2025, the Bank was also eligible to draw advances from the FHLB up to $1.4 billion based on assets pledged as collateral to the FHLB, against which the Bank borrowed $50.0 million as of June 30, 2025.
The Bank may enter into repurchase agreements as well as obtain additional borrowing capabilities from certain broker-dealers provided adequate collateral exists to secure these lending relationships. The Bank also has a back-up borrowing facility through the Discount Window at the Federal Reserve Bank of Richmond ("Federal Reserve Bank"). This facility, which can be used to borrow up to $1.8 billion, is collateralized with specific loan assets and investment securities identified to the Federal Reserve Bank. It is anticipated that, except for periodic testing, this facility would be utilized for contingency funding only. There can be no assurance, however, that these alternative sources of liquidity will continue to be available or will be sufficient to meet our ongoing liquidity needs.
In total, the Bank's aggregate borrowing capacity as of June 30, 2025 was $3.4 billion, which consists of $1.4 billion and $1.8 billion additional aggregate capacity to borrow from the FHLB and the Federal Reserve's Discount Window, respectively, on
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 64
Table of Contents Management's Discussion and Analysis | Liquidity Management
existing pledged assets. The Bank's aggregate borrowing capacity also includes unencumbered securities totaling approximately $0.3 billion available for pledging to the FHLB or Federal Reserve for additional borrowing capacity.
The loss of deposits, including through disintermediation, is one of the primary risks to liquidity. Disintermediation occurs most commonly when rates rise and depositors withdraw deposits seeking higher rates in alternative savings and investment sources than the Bank may offer. The Bank makes competitive deposit interest rate comparisons weekly and makes adjustments from time to time to ensure its interest rate offerings are competitive.
There is, however, a risk that the cost of funds will increase significantly as the Bank competes for deposits or that some deposits would be lost if rates were to increase and the Bank elected not to remain competitive with its deposit rates. Under those conditions, the Bank believes that it is well positioned to use other sources of funds such as FHLB borrowings, brokered deposits, repurchase agreements and correspondent bank lines of credit to offset a decline in deposits in the short run, but the use of such sources may negatively impact net interest margin and earnings. The continuing elevated cost of funding has negatively impacted our net interest margin.
There can be no assurance that the mix of sources of funds available to us at any particular time in the future will be adequate to meet our future liquidity needs. However, the market for customer and brokered deposits is highly competitive and the risk of disintermediation is high, particularly in a high interest rate environment. Most of our noninterest-bearing deposits are operating deposits or compensating balances that are held in connection with lending relationships. The potential outflow of such deposits is a risk unless competitive rates of interest are paid, which could significantly and negatively impact the Bank’s interest expense and net interest margin, as the transfer of some noninterest-bearing deposits to interest-bearing deposits did in 2025. Over the long-term, an adjustment in assets and change in business emphasis could compensate for a potential loss of deposits. The Bank also maintains a marketable investment portfolio to provide flexibility in the event of significant liquidity needs. The Asset Liability Committee ("ALCO") has adopted policy guidelines, which emphasize the importance of core deposits, adequate asset liquidity and a contingency funding plan.
The Company believes it maintains sufficient primary and secondary sources of liquidity to fund its operations. As of June 30, 2025, primary sources of liquidity were $1.5 billion comprising interest-bearing deposits with other banks and other short-term investments and AFS securities. Secondary sources of liquidity as of June 30, 2025 were $4.7 billion, which include the FHLB unused availability, other insured brokered deposit sweep programs, unpledged securities, Fed funds lines, and the FRB Discount Window. As of June 30, 2025, under the Bank’s liquidity formula, it had $6.2 billion of primary and secondary liquidity sources. Management believes the amount is adequate to meet current and projected funding needs.
Capital Resources and Adequacy
The assessment of capital adequacy depends on a number of factors such as asset quality and mix, liquidity, earnings performance, changing competitive conditions and economic forces, stress testing, regulatory measures and policy, as well as the overall level of growth and complexity of the balance sheet. The adequacy of the Company’s current and future capital needs is monitored by management on an ongoing basis. Management seeks to maintain a capital structure that will assure an adequate level of capital to support anticipated asset growth and to absorb potential losses.
The federal banking regulators have issued guidance for those institutions, which are deemed to have concentrations in commercial real estate lending. Pursuant to the supervisory criteria contained in the guidance for identifying institutions with a potential commercial real estate concentration risk, institutions which have total reported loans for construction, land development and other land acquisitions which represent 100% or more of an institution’s total risk-based capital; or total commercial real estate loans representing 300% or more of the institution’s total risk-based capital; or the institution’s commercial real estate loan portfolio has increased 50% or more during the prior 36 months are identified as having potential commercial real estate concentration risk. Institutions which are deemed to have concentrations in commercial real estate lending are expected to employ heightened levels of risk management with respect to their commercial real estate portfolios and may be required to hold higher levels of capital. The Company, like many community banks, has commercial real estate loans, and the Company has experienced growth in its commercial real estate portfolio in recent years. Although growth in that segment over the past 36 months at 12.9% did not exceed the 50% threshold laid out in the regulatory guidance, we expect the heightened supervisory expectations to continue to apply to us given the federal banking regulators’ general focus on commercial real estate exposures at banks.
As of June 30, 2025, the Company continued to exceed the construction, land development, and other land acquisitions regulatory concentration threshold, and we continue to monitor our concentration in commercial real estate lending and remain in compliance with the guidance issued by the federal banking regulators. Construction, land and land development loans represent 115.8% of total capital. Management has extensive experience in commercial real estate lending, and has implemented and continues to maintain heightened risk management procedures and strong underwriting criteria with respect to its commercial real estate portfolio.
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 65
Table of Contents Management's Discussion and Analysis | Capital Resources and Adequacy
Loan monitoring practices include but are not limited to periodic stress testing analysis to evaluate changes to cash flows, owing to interest rate increases and declines in net operating income. Nevertheless, as our commercial real estate concentration fluctuates each quarter, we may be required to maintain higher levels of capital as a result of our commercial real estate concentrations, which could require us to obtain additional capital and may adversely affect shareholder returns. The Company seeks to manage the risks relating to commercial real estate and its capital adequacy through the development and implementation of its Capital Policy and Capital Plan, the preparation of pro-forma projections including stress testing and the development of internal minimum targets for regulatory capital ratios that are subject to approval by the Board and in excess of well capitalized ratios.
The Company and the Bank are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and prompt corrective action regulations involve quantitative measures of assets, liabilities and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators about components, risk weightings and other factors and the regulators can lower classifications in certain cases. Failure to meet various capital requirements can initiate regulatory action that could have a direct material effect on the financial statements.
As of June 30, 2025, the capital position of the Company and its wholly owned subsidiary, the Bank, continue to exceed regulatory requirements and well-capitalized guidelines. The primary indicators relied on by bank regulators in measuring the capital position are four ratios as follows: Tier 1 risk-based capital ratio, Total risk-based capital ratio, the Leverage ratio and the CET1 ratio. Tier 1 capital consists of common and qualifying preferred shareholders’ equity less goodwill and other intangibles. Total risk-based capital consists of Tier 1 capital and the qualifying portion of the ACL. Risk-based capital ratios are calculated with reference to risk-weighted assets, which are prescribed by regulation. The measure of Tier 1 capital to average assets for the prior quarter is often referred to as the leverage ratio. The CET1 ratio is the Tier 1 capital ratio but excluding preferred stock.
The Prompt Corrective Action ("PCA") regulations provide five categories, including well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized; however, these terms are not used to represent overall financial condition. If a bank is adequately capitalized, regulatory approval is required to, among other things, accept, renew or roll-over brokered deposits. If a bank is undercapitalized, capital distributions and growth and expansion are limited, and plans for capital restoration are required. If a bank is not well-capitalized, interest rate restrictions apply.
The FRB and the FDIC have adopted the Basel III Rules implementing the Basel Committee on Banking Supervision's capital guidelines for U.S. banks. Under the Basel III Rules, the Company and Bank are required to maintain a CET1 ratio of 4.5% and a capital conservation buffer of 2.5% of risk-weighted assets, effectively resulting in a minimum CET1 ratio of 7.0%; a minimum ratio of Tier 1 capital to risk-weighted assets of 6.0%, or 8.5% with the fully phased in capital conservation buffer; a minimum total capital to risk-weighted assets ratio of 10.5% with the fully phased-in capital conservation buffer; and a minimum leverage ratio of 4.0%. The Basel III Rules also increased risk weights for certain assets and off-balance-sheet exposures. As of June 30, 2025, the Company and the Bank exceeded all these thresholds.
The Company announced a regular quarterly cash dividend on July 23, 2025 of $0.165 per share to shareholders of record on August 8, 2025, to be paid on August 29, 2025.
The ability of the Company to continue to grow is dependent on its earnings and those of the Bank, the ability to obtain additional funds for contribution to the Bank’s capital, through additional borrowings, through the sale of additional common stock or preferred stock or through the issuance of additional qualifying capital instruments, such as subordinated debt. The capital levels required to be maintained by the Company and Bank may be impacted as a result of the Bank’s concentrations in commercial real estate loans.
The Company’s capital ratios were all well in excess of requirements established by the Federal Reserve Board and the Bank’s capital ratios were in excess of those required to be classified as a "well capitalized" institution under the PCA provisions of the Federal Deposit Insurance Act.
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 66
Table of Contents Management's Discussion and Analysis | Capital Resources and Adequacy
The table below presents the actual capital amounts and ratios for the Company and Bank.
| Company | Bank | Minimum Required For Capital Adequacy Purposes (1) | To Be Well Capitalized Under Prompt Corrective Action Regulations (2) | |||||||||||||||||||||||||||||||||||
| (dollars in thousands) | Actual Amount | Ratio | Actual Amount | Ratio | ||||||||||||||||||||||||||||||||||
| As of June 30, 2025 | ||||||||||||||||||||||||||||||||||||||
| CET1 capital (to risk weighted assets) | $ | 1,293,315 | 14.01 | % | $ | 1,305,995 | 14.23 | % | 7.00 | % | 6.50 | % | ||||||||||||||||||||||||||
| Total capital (to risk weighted assets) | 1,409,552 | 15.27 | % | 1,421,579 | 15.49 | % | 10.50 | % | 10.00 | % | ||||||||||||||||||||||||||||
| Tier 1 capital (to risk weighted assets) | 1,293,315 | 14.01 | % | 1,305,995 | 14.23 | % | 8.50 | % | 8.00 | % | ||||||||||||||||||||||||||||
| Tier 1 capital (to average assets) | 1,293,315 | 10.63 | % | 1,305,995 | 10.78 | % | 4.00 | % | 5.00 | % | ||||||||||||||||||||||||||||
| As of December 31, 2024 | ||||||||||||||||||||||||||||||||||||||
| CET1 capital (to risk weighted assets) | $ | 1,369,643 | 14.63 | % | $ | 1,373,857 | 14.76 | % | 7.00 | % | 6.50 | % | ||||||||||||||||||||||||||
| Total capital (to risk weighted assets) | 1,484,420 | 15.86 | % | 1,488,635 | 16.00 | % | 10.50 | % | 10.00 | % | ||||||||||||||||||||||||||||
| Tier 1 capital (to risk weighted assets) | 1,369,643 | 14.63 | % | 1,373,857 | 14.76 | % | 8.50 | % | 8.00 | % | ||||||||||||||||||||||||||||
| Tier 1 capital (to average assets) | 1,369,643 | 10.74 | % | 1,373,857 | 10.82 | % | 4.00 | % | 5.00 | % | ||||||||||||||||||||||||||||
(1)The risk-based ratios reflect the minimum requirement plus the capital conservation buffer of 2.50%.
(2)Applies to the Bank only.
Federal bank and holding company regulations, as well as Maryland law, impose certain restrictions on capital distributions, including dividend payments and share repurchases by the Bank, as well as restricting extensions of credit and transfers of assets between the Bank and the Company.
Asset/Liability Management and Quantitative and Qualitative Disclosures about Market Risk
A fundamental risk in banking is exposure to market risk, specifically interest rate risk, since a bank’s earnings are largely dependent on net interest income. The Bank’s ALCO formulates and monitors the management of interest rate risk through policies and guidelines established by it and overseen by the Audit Committee and the full Board of Directors and through review of detailed reports discussed quarterly. In its consideration of risk limits, the ALCO considers the impact on earnings and capital, the level and direction of interest rates, liquidity, local economic conditions, outside threats and other factors. Banking is generally a business of managing the maturity and repricing mismatch inherent in its asset and liability cash flows to provide stable net interest income growth consistent with the Company’s profit objectives.
The Company, through its ALCO and ongoing financial management practices, monitors the interest rate environment in which it operates and adjusts the rates and maturities of its assets and liabilities to remain competitive and to achieve its overall financial objectives subject to established risk limits.
The loan portfolio decreased 2.7% during the first half of 2025. The re-pricing duration on the loan portfolio was 10 months as of June 30, 2025 and 11 months as of December 31, 2024, with fixed-rate loans amounting to 34.4% and 38.1% of total loans as of June 30, 2025 and December 31, 2024, respectively. Variable and adjustable rate loans comprised 65.6% and 61.9% of total loans as of June 30, 2025 and December 31, 2024, respectively. Variable rate loans are generally indexed to the Secured Overnight Funding Rate ("SOFR") or the Wall Street Journal prime interest rate, while adjustable rate loans are indexed primarily to the five year U.S. Treasury interest rate.
The cash flows from the investment portfolio currently have not been reinvested in the investment portfolio. As of June 30, 2025, the amortized cost less allowance of the investment portfolio decreased by $179.5 million, or 7.6%, as compared to the balance as of December 31, 2024.
Based on amortized cost basis, the percentage mix of municipal securities was 5.7% and 5.5% of total investments as of June 30, 2025 and December 31, 2024, respectively. The portion of the portfolio invested in MBS was 65% and 62% as of June 30, 2025 and December 31, 2024, respectively. The portion of the portfolio invested in U.S. agency investments was 24% as of June 30, 2025 and 25% as of December 31, 2024. Corporate bonds made up 6% and 6% of total investments as of June 30,
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 67
Table of Contents Management's Discussion and Analysis | Asset/Liability Management and Quantitative and Qualitative Disclosures about Market Risk
2025 and December 31, 2024, respectively. U.S. treasury bonds were 0% and 1% of total investments as of June 30, 2025 and December 31, 2024, respectively. The duration of the investment portfolio decreased to 4.1 years as of June 30, 2025 from 4.2 years as of December 31, 2024.
As of June 30, 2025, $69.2 million of corporate bonds were subordinated debt from other financial institutions. Corporate bonds generally, and subordinated debt in particular, pose credit risk such that if any of these issuers were to enter bankruptcy or insolvency proceedings, we could experience losses that may be material to operating results and our financial condition. We may also experience increases in provisions for credit losses, adversely affecting our earnings, if the creditworthiness of the issuers declines, whether due to idiosyncratic factors, economic conditions generally or other unforeseen factors or events.
The Company has credit Risk Participation Agreements ("RPAs") with institutional counterparties, under which the Company assumes its pro-rata share of the credit exposure associated with a borrower’s performance related to interest rate derivative contracts. The fair value of RPAs is calculated by determining the total expected asset or liability exposure of the derivatives to the borrowers and applying the borrowers’ credit spread to that exposure. Total expected exposure incorporates both the current and potential future exposure of the derivatives, derived from using observable inputs, such as yield curves and volatilities. These derivatives are not designated as hedges, are not speculative and have an asset position with a notional value of $49.5 million as of June 30, 2025. The changes in fair value for these contracts are recognized directly in earnings.
The duration of the deposit portfolio increased to 16 months as of June 30, 2025 from 11 months as of December 31, 2024. This increase is attributable to a shift in deposit mix, and modeling assumption updates. The Company experienced a total deposit decrease of $11.5 million for the six months ended June 30, 2025 as compared to a total loan decrease of $213.2 million for the same period. The funding mix changed throughout the six months ended June 30, 2025. The slight decrease in deposits was primarily attributable to a $316.2 million decrease in interest-bearing transaction accounts and a $331.6 million decrease in Savings and money market accounts, mostly offset by a $648.6 million increase in time deposits. Refer to the "Deposits and Other Borrowings" section above for further discussion of deposits and borrowings.
The net unrealized loss before income tax on the AFS securities portfolio was $100.7 million and $141.5 million as of June 30, 2025 and December 31, 2024, respectively. As of June 30, 2025, the net unrealized loss position represented 7.92% of the investment portfolio's book value.
Management relies on the use of models in order to measure the expected future impact on interest income of various interest rate environments, as described above. Through its modeling, the Company makes certain estimates that may vary from actual results. There can be no assurance that the Company will be able to successfully achieve its optimal asset liability mix, given competitive pressures, customer preferences and the inability to forecast future interest rates and movements with complete accuracy.
Our rate risk modeling showed very modest net interest margin expansion in an increased interest rate environment while showing modest net interest margin compression in a declining interest rate environment. The model's prediction in a rising rate environment is the result of increases in both interest income on variable and adjustable rate loans and interest expense on its deposit liabilities, based on our funding needs, market conditions and certain contractual obligations but with no changes in the mix of assets or liabilities or the spreads we are able to earn. The opposite is true in a falling interest rate environment as decreases in both interest income on variable and adjustable rate loans and interest expense on deposit liabilities drive modest margin compression. The model also assumes a stable interest rate environment after the programmed changes in the yields, which assumes repricing of assets and liabilities as scheduled in a stable environment, which may be quite different than real world conditions.
A portion of the of the Company's variable and adjustable rate loans may contain interest rate floors and may provide asset yield protection in a low-interest rate environment; however, they are also expected to delay the impact of increases to market rates on interest income until such floors have been exceeded. In the first six months ended June 30, 2025, interest rate floors have not been relevant in the current interest rate environment since most variable rate loans are well above their floor rate. The weighted average rate of the Company's variable rate loans had a decrease of approximately 400 basis points from December 31, 2024 to June 30, 2025.
As of June 30, 2025, the Company had a portfolio of $2.9 billion of variable and adjustable rate loans that were subject to interest rate floors with a weighted average rate of 7.20%, which was a 4 bps decrease from December 31, 2024. As of June 30, 2025, only $122.1 million or 1.58% of loans held by the Company were earning interest at their floor rate, as compared to $123.6 million or 1.56% as of December 31, 2024.
The Company employs an earnings simulation model (immediate parallel shifts along the yield curve) on a quarterly basis to monitor its interest rate sensitivity and risk and to model its balance sheet cash flows and the related statement of operations effects in different interest rate scenarios. The model utilizes current balance sheet data and attributes and is adjusted for assumptions as to investment maturities (including prepayments), loan prepayments, interest rates, and deposit decay rates. Further discussion of the limitations of this analysis are listed below and in the risk factors and other cautionary language
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 68
Table of Contents Management's Discussion and Analysis | Asset/Liability Management and Quantitative and Qualitative Disclosures about Market Risk
included in the Company's Annual Report on 2024 Form 10-K, and in other periodic and current reports filed by the Company with the SEC, including the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2025. The data is then subjected to a "shock test" which assumes a simultaneous change in interest rates up 100, 200, 300 and 400 basis points or down 100, 200, 300 and 400 basis points, along the entire yield curve, but not below zero. The results are analyzed as to the impact on net interest income over the next twelve and twenty-four month periods and the economic value of equity.
For the analysis presented below, as of June 30, 2025, the simulation assumes a 100 basis point change in interest rates on interest-bearing deposits for each 100 basis point change in market interest rates in a decreasing interest rate shock scenario with a floor of 0 basis points and assumes a 100 basis point change in interest rates on interest-bearing deposits for each 100 basis point change in market interest rates in an increasing interest rate shock scenario. The Bank does have deposits with contractual rate terms that mean these deposits will change 100 basis points for every 100 basis points change in market rates. Thus, the overall measure of the correlation between deposit costs and market rate changes is modeled at 100%. The Company utilized the same assumptions for its analysis as of December 31, 2024.
Because competitive market behavior does not necessarily track the trend of interest rates but at times moves ahead of financial market influences, the change in the cost of liabilities may be different than anticipated by the interest rate risk model. If this were to occur, the effects of a rising or declining interest rate environment may not be in accordance with management’s expectations.
As quantified in the table below, the Company’s analysis as of June 30, 2025 shows a moderate effect on net interest income over the next 12 months, as well as a moderate effect on the economic value of equity when interest rates are shocked down 100, 200, 300 and 400 basis points and up 100, 200, 300 and 400 basis points. This moderate impact is due substantially to the significant level of variable rate and repriceable assets and liabilities and related shorter relative durations. As of June 30, 2025, the repricing duration of (a) the investment portfolio was 4.1 years, (b) the loan portfolio 0.8 years, (c) the interest-bearing deposit portfolio was 0.7 years, and (d) the borrowed funds portfolio was 2.1 years.
The table below displays the result of the simulation analysis on the asset and liability balances as of June 30, 2025.
| Change in interest rates (basis points) | Percentage change in 12-month net interest income | Percentage change in economic value of equity | ||||||||||||
| +400 | 13.3% | (5.4)% | ||||||||||||
| +300 | 10.0% | (4.1)% | ||||||||||||
| +200 | 6.7% | (2.7)% | ||||||||||||
| +100 | 3.4% | (1.2)% | ||||||||||||
| — | — | — | ||||||||||||
| (100) | (4.0)% | 1.6% | ||||||||||||
| (200) | (7.5)% | 2.1% | ||||||||||||
| (300) | (12.6)% | 0.3% | ||||||||||||
| (400) | (17.7)% | (6.8)% | ||||||||||||
The results of the simulation are within the relevant policy limits adopted by the Company for percentage change in net interest income. For net interest income, the Company has adopted a policy limit of -10% for a 100 basis point change, -12% for a 200 basis point change, -18% for a 300 basis point change and -24% for a 400 basis point change. For the economic value of equity, the Company has adopted a policy limit of -12% for a 100 basis point change, -15% for a 200 basis point change, -25% for a 300 basis point change and -30% for a 400 basis point change.
The decrease in 12-month net interest income of 4.0% given a 100 basis point decrease in market interest rates as of June 30, 2025 compares to 0.1% for the same period in 2024.
As part of the Company’s ongoing enhancement of the simulation analysis, the Company has been making updates to its model to incorporate, among other things, improvements to certain assumptions, as well as assumptions related to deposits. The difference in the results of the simulation analysis between the second quarter of 2025 and the first quarter of 2025 is attributable to these model updates.
Certain shortcomings are inherent in the method of analysis presented in the foregoing table. For example, although certain assets and liabilities may have similar maturities or repricing periods, they may react in different degrees to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. Additionally, certain assets, such as adjustable-rate mortgage loans, have features that limit changes in interest rates on a short-term basis and over the life of the loan. Further, in the event of a change in interest rates, prepayment and early withdrawal levels could deviate significantly from those assumed in calculating the tables. Finally, the ability of many borrowers to service their debt may decrease in the event of a significant interest rate increase.
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 69
Table of Contents Management's Discussion and Analysis | Asset/Liability Management and Quantitative and Qualitative Disclosures about Market Risk
While an instantaneous parallel shift in interest rates was used in this analysis to provide an estimate of exposure under these scenarios, we believe that a non-immediate parallel shifts in interest rates would have a more modest impact. Further, the earnings simulation model does not take into account factors such as future balance sheet growth, changes in product mix, changes in yield curve relationships, the various rate indexes do not move in parallel (e.g. SOFR, Fed Funds), hedging activities we might take and changing product spreads that could mitigate or exacerbate any potential beneficial or adverse impact of changes in interest rates.
Another key factor to consider is the behavior of our deposit portfolio. The projected impact on net interest income in the table above assumes no change in deposit portfolio size or mix from the baseline forecast in alternative rate environments. In higher rate scenarios, any customer activity resulting in the replacement of low-cost or noninterest-bearing deposits with higher cost deposits or market-based funding would reduce the assumed benefit of those deposits. The projected impact on net interest income in the table above also assumes a static non-maturity deposit beta which may not be an accurate predictor of actual deposit rate changes realized in scenarios of smaller and/or non-parallel interest rate movements.
Each of the above analyses may not, on its own, be an accurate indicator of how our net interest income will be affected by current and future changes in interest rates. Income associated with interest-earning assets and costs associated with interest-bearing liabilities may not be affected uniformly by changes in interest rates. In addition, the magnitude and duration of changes in interest rates may have a significant impact on net interest income. In addition, certain assets, such as adjustable-rate mortgage loans, have features (generally referred to as interest rate caps and floors) that limit changes in interest rates. Prepayment and early withdrawal levels also could deviate significantly from those assumed in calculating the maturity of certain instruments. ALCO reviews each of the above interest rate sensitivity analyses along with several different interest rate scenarios as part of its responsibility to provide a satisfactory, consistent level of profitability within the framework of established liquidity, loan, investment, borrowing and capital policies.
Use of Non-GAAP Financial Measures
Management uses non-GAAP measures because they provide information to investors about the underlying operational performance and trends of the Company. Additionally, the Company considers non-GAAP measures based on tangible equity important to shareholders because tangible equity is a measure that is consistent with the calculation of capital for bank regulatory purposes, which excludes intangible assets from the calculation of risk based ratios, and as such is useful for investors, regulators, management and others to evaluate capital adequacy and to compare against other financial institutions. These disclosures should not be considered in isolation or as a substitute for results determined in accordance with GAAP and are not necessarily comparable to non-GAAP performance measures which may be presented by other bank holding companies. Management compensates for these limitations by providing detailed reconciliations between GAAP information and the non-GAAP financial measures.
The table below reconciles the GAAP financial measures to the associated non-GAAP financial measures.
| As of | ||||||||||||||
| (dollars in thousands except per share data) | June 30, 2025 | December 31, 2024 | ||||||||||||
| Tangible common equity: | ||||||||||||||
| Common shareholders’ equity | $ | 1,185,067 | $ | 1,226,061 | ||||||||||
| Less: Intangible assets | (9) | (16) | ||||||||||||
| Tangible common equity (Non-GAAP) | $ | 1,185,058 | $ | 1,226,045 | ||||||||||
| Tangible common equity ratio: | ||||||||||||||
| Total assets | $ | 10,601,331 | $ | 11,129,508 | ||||||||||
| Less: Intangible assets | (9) | (16) | ||||||||||||
| Tangible assets | $ | 10,601,322 | $ | 11,129,492 | ||||||||||
| Tangible common equity ratio (Non-GAAP) | 11.18 | % | 11.02 | % | ||||||||||
| Tangible book value per share calculations: | ||||||||||||||
| Book value per common share | $ | 39.03 | $ | 40.60 | ||||||||||
| Less: Intangible book value per common share | — | (0.01) | ||||||||||||
| Tangible book value per common share (Non-GAAP) | $ | 39.03 | $ | 40.59 | ||||||||||
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 70
Table of Contents Quantitative and Qualitative Disclosures about Market Risk
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Please refer to Item 2 of this report, "Management's Discussion and Analysis of Financial Condition and Results of Operations", under the caption "Asset/Liability Management and Quantitative and Qualitative Disclosures about Market Risk".
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of disclosure controls and procedures. The Company's management, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, evaluated, as of the last day of the period covered by this report, the effectiveness of the design and operation of the Company's disclosure controls and procedures, as defined in Rule 13a-15(e) under the Exchange Act. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company's disclosure controls and procedures as of June 30, 2025 were effective to provide reasonable assurance that information required to be disclosed in the reports we file and submit under the Exchange Act is recorded, processed, summarized and reported as and when required and that it is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in internal control over financial reporting. There were no changes in our internal control over financial reporting as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) that occurred during the second quarter of 2025 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 71
Table of Contents Other Information
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Refer to "Note 13 – Legal Contingencies" of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.
ITEM 1A. RISK FACTORS
We are subject to various risks and uncertainties, including those described in Part I, Item 1A, "Risk Factors" in our Annual Report on 2024 Form 10-K, and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2025, which could adversely affect our business, financial performance and results of operations. There have been no material changes to our risk factors from those risks included in our Annual Report on 2024 Form 10-K and Quarterly Report on Form 10-Q for the quarter ended March 31, 2025.
ITEM 2. - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.
ITEM 5. OTHER INFORMATION
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 72
Table of Contents
ITEM 6. EXHIBITS
| 4.1 | Indenture dated as of September 30, 2024 between Eagle Bancorp, Inc., as issuer, and Wilmington Trust, National Association, as trustee(1) | ||||||||||
| 4.2 | Form of 10.00% Senior Notes due 2029 (included in Exhibit 4.1). | ||||||||||
31.1 | Certification of Susan G. Riel | ||||||||||
31.2 | Certification of Eric R. Newell | ||||||||||
32.1 | Certification of Susan G. Riel | ||||||||||
32.2 | Certification of Eric R. Newell | ||||||||||
| 101 | Interactive data files pursuant to Rule 405 of Regulation S-T: | ||||||||||
(i) Consolidated Balance Sheets as of June 30, 2025 and December 31, 2024 | |||||||||||
(ii) Consolidated Statements of Operations for the three and six months ended June 30, 2025 and 2024 | |||||||||||
(iii) Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2025 and 2024 | |||||||||||
(iv) Consolidated Statements of Changes in Shareholders' Equity for the three and six months ended June 30, 2025 and 2024 | |||||||||||
(v) Consolidated Statements of Cash Flows for the three and six months ended June 30, 2025 and 2024 | |||||||||||
| (vi) Notes to Consolidated Financial Statements | |||||||||||
| 104 | The cover page of this Quarterly Report on Form 10-Q, formatted in Inline XBRL | ||||||||||
(1) Incorporated by reference to Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q filed on November 7, 2024.
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 73
Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| EAGLE BANCORP, INC. | |||||||||||
| August 7, 2025 | by: | /s/ Susan G. Riel | |||||||||
| Susan G. Riel, Chair, President and CEO | |||||||||||
| August 7, 2025 | by: | /s/ Eric R. Newell | |||||||||
| Eric R. Newell, Senior Executive Vice President and Chief Financial Officer of the Company (Principal Financial and Accounting Officer) | |||||||||||
Eagle Bancorp, Inc Second Quarter 2025 Form 10-Q 74
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