EAGLE BANCORP INC

Overview

This section discusses our condensed consolidated balance sheets and should be read together with our consolidated financial statements and the accompanying notes.

(1)Consists of cash and due from banks, interest-bearing deposits with banks, and other short-term investments.

(2)Consists of available-for-sale securities at fair value and held-to-maturity securities, net of allowance for credit losses.

(3)Consists of Federal Reserve and Federal Home Loan Bank stock, premises and equipment, right-of-use assets, other real estate owned, and other assets.

(4)Consists of operating lease liabilities, reserve for unfunded commitments and other liabilities.

See respective subsections below for the primary drivers of change and further discussion on investment securities, loans, allowance for credit losses, other earning asset, deposits and other borrowings.

The decrease in total assets as of December 31, 2025 from December 31, 2024 was primarily due to declines in securities and loans balances from sales, maturities/liquidations and paydowns. This decrease in total assets was partially offset by additional BOLI investment during the year.

Investment securities, net of the allowance for credit losses, were $1.8 billion as of December 31, 2025 as compared to $2.2 billion as of December 31, 2024, a 17% decrease, primarily driven by maturities and paydowns on both AFS and HTM securities, and sales of AFS securities. The Bank does not currently plan to reinvest these proceeds back into the investment securities portfolio. Refer to the "Investment Securities and Short-Term Investments" section below for further discussion on investment securities.

Loans held for investment ("HFI") decreased by $654.4 million (from $7.9 billion as of December 31, 2024 to $7.3 billion as of December 31, 2025) while HFS loans increased by $90.7 million. Refer to the "Loan Portfolio", "Loan Maturity" and other loans-related sections below for further discussion on loans.

Total shareholders’ equity as of December 31, 2025 was $1.13 billion as compared to $1.23 billion as of December 31, 2024, a 8% decrease. The decrease in shareholders’ equity in 2025 was primarily due to net loss from operations of $138.1 million, and payment of cash dividends of $15.3 million, offset by $52.3 million in other comprehensive income. The ratio of common equity to total assets was 10.78% as of December 31, 2025 as compared to 11.02% as of December 31, 2024. Book value per share was $37.26 as of December 31, 2025, a 8.23% decrease from $40.60 as of December 31, 2024.

In order to be considered well-capitalized, the Bank must have a common equity tier one capital ("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 exceeded all these requirements and satisfy the capital conservation buffer of 2.5% of CET1 capital as of December 31, 2025. 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 14.33% as of December 31, 2025, as compared to 15.86% as of December 31, 2024. The CET1 risk based capital ratio was 13.07% as of December 31, 2025, as compared to 14.63% as of December 31, 2024. The tier 1 risk based capital ratio was 13.07% as of December 31, 2025, as compared to 14.63% as of December 31, 2024. The tier 1 leverage ratio was 9.72% as of December 31, 2025, as compared to 10.74% as of December 31, 2024. Refer to "Capital Resources and Adequacy" section below for further discussion on our capital.

Investment Securities and Short-Term Investments

This section and "Note 3 – Investment Securities" to the Consolidated Financial Statements provide additional information regarding the Company’s investment securities categorized as "available-for-sale" or AFS and as "held-to-maturity" or HTM. The Company classifies its investment securities as either AFS or HTM. The AFS classification requires that investment securities be recorded at fair value with any difference between the fair value and amortized cost (the purchase price adjusted by any discount accretion or premium amortization) reported as a component of shareholders’ equity (accumulated other comprehensive income (loss)), net of deferred income taxes, while securities classified as HTM are recorded and presented at their amortized cost.

The tables below provide information regarding the composition of the investment securities portfolio at the dates indicated. As of December 31, 2025, the investment portfolio balances for both AFS securities at fair value and HTM securities at amortized cost basis decreased as compared to December 31, 2024, and the composition of the portfolios changed, as displayed in the tables below.

As of December 31, 2025, the AFS investment portfolio decreased by 23% and HTM investment portfolio decreased by 9%, as compared to December 31, 2024, primarily driven by maturities and paydowns on both AFS and HTM securities, and sales of AFS securities. The investment portfolio is managed to achieve goals related to liquidity, income, interest rate risk management and to provide collateral for repurchase agreements and borrowings from the FHLB and FRB discount window.

The Company had a net unrealized loss in AFS securities of $78.6 million with a deferred tax asset of $19.3 million as of December 31, 2025, as compared to a net unrealized loss in AFS securities of $141.5 million with a deferred tax asset of $34.8 million as of December 31, 2024 driven by lower market interest rates and securities approaching maturity.

As of December 31, 2025 and 2024, the Company had $38.5 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.

As of December 31, 2025, there was no single issuer of securities owned by the Company with a book or fair value exceeding 10% of the Company’s shareholders’ equity, other than the U.S. Government, U.S. agencies and U.S. Government-sponsored enterprises.

As of December 31, 2025, $66.5 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 following tables provide information, on an amortized cost basis, for AFS and HTM portfolios regarding the expected maturity and weighted-average yield of the investment portfolio as of December 31, 2025. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Yields on tax exempt securities have not been calculated on a tax equivalent basis.

Interest-bearing deposits with banks and other short-term investments primarily consist of liquid assets held at the Federal Reserve to meet general liquidity needs of the Company. Interest-bearing deposits with banks and other short-term investments were $684.0 million as of December 31, 2025, as compared to $619.0 million as of December 31, 2024, an increase of $65.0 million or 10%, primarily due to an increase in deposits at the Federal Reserve.

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 are significant factors in growing the loan portfolio and meeting the lending needs in the markets served, while maintaining sound asset quality.

Loans held for investment were $7.3 billion as of December 31, 2025, as compared to $7.9 billion as of December 31, 2024, a decrease of $654.4 million or 8.2%. During the year ended December 31, 2025, certain loans, primarily income producing commercial real estate loans, were reclassified from HFI to HFS loans. This reclassification resulted in net charge-offs of $132.3 million in order to bring the loans to the lower of cost or fair value of $201.4 million at the time of transfer. During the twelve months ended December 31, 2025, seven HFS loans were sold, resulting in a loss of $4.7 million. There were $90.7 million in loans held for sale as of December 31, 2025 and none as of December 31, 2024.

The loan portfolio mix continues to evolve as the Bank has experienced a reduction in income producing commercial real estate loans and owner-occupied construction loans, offset by increases in commercial and owner-occupied commercial real estate loans. These shifts reflect our strategic focus on reshaping the portfolio toward relationship-driven commercial lending and asset classes aligned with our long-term risk-adjusted return objectives.

Market rates in 2025 for our new loan originations on average have been fairly consistent with the market rates at the end of 2024, even though short-term interest rates decreased. In 2025 the Federal Reserve adjusted short-term interest rates downwards three times for a total decrease of 75 basis points. We continue to see opportunities for growth in the commercial lending market and our processes for evaluating these opportunities are designed to ensure they are subject to reasonable underwriting standards, including appropriate 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 or additional collateral to mitigate credit loss in the event of default.

The Bank has a large portion of its loan portfolio related to real estate, with 80% consisting of commercial real estate and real estate construction loans as of December 31, 2025. Non-owner occupied commercial real estate and commercial and residential construction represented 57% of the loan portfolio while the remaining 23% 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.

(1)Excludes accrued interest receivable of $35.9 million and $42.9 million as of December 31, 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 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.

The chart below displays our loan portfolio, as a percentage of total amortized cost, by geographic concentration.

As part of its lending strategy, the Company maintains a substantial portfolio of CRE loans, with $5.7 billion and $6.5 billion, or 78.3% and 81.5% of total loans, of amortized cost outstanding as of December 31, 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 $576.1 million and $862.2 million, or 7.9% and 10.9% of total loans, as of December 31, 2025 and December 31, 2024, respectively.

Office loans within Washington, D.C., Washington's Maryland Suburbs and Northern Virginia were $545.8 million and $795.0 million, or 7.5% and 10.0% of total loans, as of December 31, 2025 and December 31, 2024, respectively.

The chart below displays the geographic concentration of income producing - CRE office loans in our loan portfolio, as percentage of total principal balance.

The table below summarizes the Company's income producing - commercial real estate loans, at principal balance, by collateral location and type.

(1)Primarily includes commercial real estate loans with land, storage, and healthcare collateral.

As of December 31, 2025 and December 31, 2024, $107.9 million and $287.0 million, respectively, of principal of CRE loans collateralized by office properties were criticized or classified.

The table below displays income producing - commercial real estate loans, at principal, that are criticized or classified by collateral type.

The Company has executed balance sheet optimization actions to reduce commercial real estate loan concentration, including actions to reduce exposure to short- and intermediate-term valuation risk in the office portfolio. These steps reflect our strategic focus on improving portfolio resilience and risk-adjusted returns. While we remain disciplined in evaluating additional opportunities to further address concentration and valuation risk, future decisions or actions, if made or taken, could continue to result in elevated credit costs and may materially impact our results in the periods in which such decisions or actions are made or executed. There can be no assurance that any additional initiatives will be undertaken or, if pursued or undertaken, will achieve their intended results.

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 (1) 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 (2) total commercial real estate loans representing 300% or more of the institution’s total risk-based capital and 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.

As of December 31, 2025, non-owner occupied commercial real estate loans (including construction, land and land development loans) represented 336.6% of consolidated risk based capital. Even though we saw a decline in that segment over the past 36 months of 9.1% compared to the threshold laid out in the regulatory guidance of 50% growth, we continue to 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. Construction, land and land development loans represented 92.1% of consolidated risk based capital. Management has extensive experience in commercial real estate lending and has implemented and continues to maintain risk management procedures and underwriting criteria with respect to its commercial real estate portfolio designed to address the risks inherent in that asset class. 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, we may be required to maintain higher levels of capital as a result of our commercial real estate concentrations, which could require us to raise additional capital, increasing our funding costs or diluting our shareholders, or take other action to retain capital, adversely affecting 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 of Directors (the "Board") and in excess of well capitalized ratio requirements.

The Company monitors industry and collateral concentrations to avoid loan exposures to a large group of similar industries or similar collateral. An industry for this purpose is defined as a group of businesses that are engaged in similar activities and have similar economic characteristics that would cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions.

Certain directors and executive officers have had loan transactions with the Company. Such loans were made in the ordinary course of the Company’s lending business; were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable loans with third parties; and, in the opinion of management, did not involve more than the normal risk of collectability or present other unfavorable features. Refer to "Note 4 – Loans and Allowance for Credit Losses" to the Consolidated Financial Statements for further detail regarding related party loans.

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.

(1)Income producing CRE office loans with total principal of $577.1 million and multifamily loans with total principal of $924.7 million as of December 31, 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 years ended December 31, 2025 and 2024.

The ACL for loans as of December 31, 2025 was $159.6 million, which reflected a increase of $45.2 million from $114.4 million as of December 31, 2024, reflecting a provision for credit losses of $293.4 million and $248.2 million in net charge-offs during the year ended December 31, 2025. Net charge-offs of $248.2 million during the year ended December 31, 2025 represented 3.22% of average loans held for investment, an increase from net charge-offs of $38.6 million during same period in 2024, which represented 0.48% of average loans held for investment. The ACL represented 2.19% of total loans as of December 31, 2025 as compared to 1.44% as of December 31, 2024.

Management believes the ACL as of December 31, 2025 remains adequate to absorb estimated losses inherent in the portfolio following the loss recognition on high-risk loans concentrated in the commercial real estate office segment. The losses recognized in 2025 were primarily due to updated valuations on the underlying collateral for certain loans and the incorporation of new information about borrower performance. The updated valuations obtained during the year reflected the rapidly changing commercial real estate market in the D.C. metro area, in many cases showing substantial declines. This resulted in higher provisioning and an elevated rate of charge-offs during the year. As of December 31, 2025, the allowance represented 149% of nonperforming loans as compared to 55% as of December 31, 2024. The increase in the ACL for loans at December 31, 2025 compared to December 31, 2024, was primarily due to increased reserves related to the Bank's CRE office overlay. The overlay increased as charge-offs taken during the current period and negative risk rating migration within the CRE office portfolio were incorporated into the calculation. Negative risk rating migration within the CRE office portfolio during 2025 was primarily a result of continued market deterioration and the incorporation of new information about borrower performance. In addition, the ACL on individually assessed loans modestly 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.

As the loan portfolio and ACL review processes continue to evolve there may be changes to elements of the allowance and this may have an effect on the overall level of the allowance maintained. Management conducted sensitivity analysis on the CECL model by using Moody's upside and downside scenarios across the forecast period.

As of December 31, 2025 and 2024, the Company had $106.9 million and $208.7 million, respectively, of loans classified as nonperforming. Please refer to "Note 1 – Summary of Significant Accounting Policies" to the Consolidated Financial Statements under the caption "Loans" for a discussion of the Company’s policy regarding individual evaluation of loans to record a provision for expected credit losses. Please refer to the "Nonperforming Assets" section for a discussion of problem and potential problem assets.

As of December 31, 2025 and 2024, loans rated special mention had an amortized cost of $268.9 million and $244.8 million, respectively, and loans rated substandard had an amortized cost of $514.5 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 weaknesses in borrower performance were identified during our credit monitoring processes.

As of December 31, 2025, 99% and 79% of special mention and substandard loans, respectively, were current, with the remainder either 30 or more days past due or nonperforming. Based upon their status as potential problem loans, loans risk rated special mention or substandard receive heightened scrutiny. Additionally, the Company's credit loss allowance methodology incorporates increased reserve factors for office loans considered potential problem loans as compared to the general portfolio.

Management recognizes the risks inherent in the CRE portfolio and remains focused on maintaining disciplined portfolio management and a robust risk rating process. The Bank has implemented enhanced analytical procedures for evaluating credit requests, refined its risk rating framework, and strengthened ongoing monitoring of the loan portfolio and the adequacy of the ACL, particularly for CRE and construction loans, including those secured by office properties. These efforts include the use of stress testing analyses. 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.

Portfolio management and the risk rating process are core parts of the Company’s credit risk management, including for commercial real estate loans. The Bank conducts 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 commercial real estate and construction loans (including those collateralized by office properties). These analyses include stress testing. 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.

The table below presents activity in the allowance for credit losses.

The allocation of the allowance as of December 31, 2025 includes the allowance for credit losses of $19.6 million against individually assessed loans of $106.9 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. In addition, 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 12.89% and 3.81% as of December 31, 2025 and 2024, respectively. 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. The Company has updated its allocation methodology to better reflect the ACL attributable to loan categories and collateral types. Conforming changes have been made to prior period amounts. These reclassifications had no effect on net income (loss) or shareholders' equity. The table below displays the allocation of the ACL by loan category and the percentage of allowance in each category.

The table below displays the allocation of the ACL specific to income producing - commercial real estate loans by collateral type.

Nonperforming Assets

The Company’s nonperforming assets are comprised of the amortized cost of loans delinquent 90 days or more, and nonaccrual HFI loans, which includes the nonperforming portion of loan modifications, and the carrying value of other real estate owned ("OREO"). Nonperforming assets totaled $109.0 million as of December 31, 2025, representing 1.04% of total assets, as compared to $211.4 million as of December 31, 2024, representing 1.90% of total assets. The decrease was primarily due to charge offs of nonaccrual loans, including on loans transferred to HFS, and changes in nonperforming loans discussed below. As of December 31, 2025, nonaccrual HFS loans totaling $90.7 million were excluded from nonperforming assets since they are carried at the lower of cost or fair value and are not reflected in credit metrics.

The Company had no accruing loans that were 90 days or more past due as of December 31, 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 2.19% of total loans as of December 31, 2025, is adequate to absorb expected credit losses within the loan portfolio at that date.

Total nonperforming loans had an amortized cost of $106.9 million as of December 31, 2025, representing 1.47% of total loans, compared to $208.7 million as of December 31, 2024, representing 2.63% of total loans. This decrease was primarily driven by the reduction of nonperforming loans in the income producing - commercial real estate category.

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 status, 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, collateral valuations associated with individually assessed loans are updated on not less than an annual basis. As part of our credit risk management process, we periodically reassess the value of collateral supporting commercial real estate loans, particularly in periods of market volatility. Normally, we obtain updated valuations when borrower performance suggests that repayment may become dependent on the underlying real estate and we determine that existing collateral values may not reflect current market conditions. This approach focuses on loans where cash flow coverage has deteriorated and where guarantor support appears uncertain or insufficient. In some cases when a loan is downgraded late in a quarter, a new valuation may not be obtained until the following quarter.

In evaluating whether a new valuation is warranted, we consider a range of factors, including trends in local property markets, changes in capitalization rates and lease terms, the availability and terms of financing for comparable properties, and observable shifts in supply-demand dynamics. We also assess property-specific factors such as deferred maintenance or improvements, zoning or regulatory changes, environmental matters, and other conditions that may materially influence value. Passage of time alone does not drive our valuation decisions; rather, we apply a judgment-based framework informed by current market data and asset-specific analysis.

The objectives of this process are to have our collateral estimates reflect current market conditions and to support timely and appropriate credit loss recognition as conditions evolve.

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 may 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 year ended December 31, 2025, the Bank modified 40 loans with a total amortized cost of $277.6 million as of December 31, 2025 (3.8% of the loan portfolio). These loans received extended loan terms of between approximately 4 to 36 months.

As of December 31, 2025, the payment status of 40 loans that were modified in the preceding twelve months, included 32 loans with a total amortized cost basis $232.0 million which were performing under their modified terms, 3 loans with a total amortized cost basis of $14.0 million which were 30-89 days past due and 5 loans with a total amortized cost basis of $31.6 million which were on nonaccrual status .

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 and are 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 December 31, 2025 was OREO of $2.1 million, consisting of three 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 obtains 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 six OREO sales in the year ended December 31, 2025 and two in the year ended December 31, 2024, generating proceeds of $14.9 million 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.

(1)Excludes nonaccrual HFS loans totaling $90.7 million and zero as of December 31, 2025 and December 31, 2024, respectively.

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 December 31, 2025, there were $514.5 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 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 December 31, 2025, the cash surrender value of BOLI totaled $335.2 million, compared to $115.8 million as of December 31, 2024. The increase reflects an additional BOLI investment of $200 million made in the first quarter of 2025 through premium payments as well as earnings on the policies during 2025.

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 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 utilizes alternative funding sources such as brokered deposits, secured borrowings from the FHLB, and federal funds purchased lines of credit from correspondent banks.

The table below presents the Bank’s deposit composition by balance and percentage.

No single depositor represented more than 10% of total deposits as of December 31, 2025. The ten largest depositors not associated with brokered pass-through relationships represented approximately 18% of total deposits as of December 31, 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 balances compared to average deposit balances.

Average total deposits for the year ended December 31, 2025 were $10.2 billion, as compared to $9.5 billion for the same period in 2024, a 7% increase.

Time deposits were $3.0 billion as of December 31, 2025, which was 33% of deposits. This was an increase from $2.8 billion as of December 31, 2024, which was 31% of deposits. The increase in time deposits was primarily driven by growth in the Company's digital acquisition channel.

The table below summarizes time deposits in excess of $250 thousand by maturity.

Time deposits with balances of $250 thousand or more represented 16% and 19% of total deposits as of December 31, 2025 and 2024, respectively. See "Note 9 – Deposits" to the Consolidated Financial Statements for additional information regarding the maturities of time deposits and the Average Balances Table in the "Net Interest Income and Net Interest Margin" section for the average rates paid on interest-bearing deposits.

The Bank offers brokered time deposits generally in denominations of less than $250 thousand from brokerage networks. The Bank participates in CDARS and the ICS programs within IntraFi Network, LLC ("IntraFi"), which provide for reciprocal ("two-way") transactions among banks to maximize 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 December 31, 2025, the Bank sold de minimis deposits through the IntraFi One-Way Sale network. The total of reciprocal deposits as of December 31, 2025 was $1.7 billion (19% 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 receive one way CDARS deposits and participates in IntraFi’s Insured Network Deposit Program ("IND"). The Bank had $385.7 million and $894.7 million of IND brokered deposits as of December 31, 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. As of December 31, 2025, total brokered deposits were $3.3 billion, or 36% 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 $2.4 billion and $2.7 billion, and time deposits of $0.8 billion and $1.3 billion as of December 31, 2025 and 2024, respectively. The Company uses the Call Report definitions for regulatory reporting by the Bank to classify its deposits as brokered deposits. As of December 31, 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 decrease in noninterest bearing demand deposits was offset by the increase in time deposits during the year ended December 31, 2025, due to continued elevated interest rates in 2025. Average noninterest bearing deposits over total deposits for years ended December 31, 2025 and December 31, 2024 were 19% and 21%, respectively. The Bank also offers business NOW accounts and business savings accounts to accommodate those customers who may have excess short term cash to deploy in interest earning assets.

The Company used to offer a sweep account, or "customer repurchase agreement," allowing qualifying businesses to earn interest on short-term excess funds, which were not suited for either a certificate of deposit or a money market account. The Company discontinued this product offering in November 2025. The balances in these accounts were zero as of December 31, 2025 compared to $33.2 million as of December 31, 2024.

The Bank raises and renews time deposits through its branch network, for its public funds customers, and through brokered networks to meet the needs of its community of savers and as part of its interest rate risk management and liquidity planning.

The tables below summarize the Company's borrowings and activities on borrowings.

(1)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.

(1)The average daily balance and maximum month-end balance are calculated on the principal balance on the borrowings.

Outstanding short-term advances and borrowings are part of the overall asset liability strategy to support loan growth.

The Company had no outstanding balances under its federal funds lines of credit provided by correspondent banks (which are unsecured) as of December 31, 2025 and 2024.

As of December 31, 2025, the Company had no outstanding balances in FHLB advances, compared to $490.0 million as of December 31, 2024. 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 December 31, 2025 and 2024, the carrying value of these 2029 Senior Notes were $76.4 million and $76.1 million, respectively, which reflected $1.2 million and $1.6 million, respectively, 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 Company has various financial obligations, including contractual obligations and commitments that may require future cash payments. The table below shows details on these fixed and determinable obligations.

(1)Excludes accrued interest payable as of December 31, 2025.

(2)Borrowed funds represent long-term borrowings.

(3)The Bank has outstanding obligations under its current core data processing contract that expires in June 2029.

(4)The Bank has the option of terminating the George Mason University ("George Mason") agreement at the end of contract year 15 (effective June 30, 2030). Should the Bank elect to exercise its right to terminate the George Mason contract, its contractual obligation would decrease by $3.6 million for the option period (years 16-20).

(5)Low Income Housing Tax Credits ("LIHTC") expected payments for unfunded affordable housing commitments.

The Company is party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers and to reduce its own exposure to fluctuations in interest rates. These financial instruments include commitments to extend credit and standby letters of credit. They involve, to varying degrees, elements of credit risk in excess of the amount recognized in the balance sheets. The contract or notional amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments.

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. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. 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. As of December 31, 2025, approximately 69% of the dollar amount of standby letters of credit was collateralized.

The table below displays loan commitments outstanding and lines and letters of credit.

Unfunded loan commitments increased by $164.2 million in 2025 compared to 2024, primarily due to new commercial and industrial loans commitments during the year as the Bank advanced its strategic goals.

The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. See "Note 18 – Financial Instruments with Off-Balance Sheet Risk" to the Consolidated Financial Statements for a summary list of loan commitments as of December 31, 2025 and 2024.

In connection with deposit guarantees, the Bank collateralizes certain public funds using qualified investment securities.

With the exception of these off-balance sheet arrangements, the Company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, capital expenditures or capital resources, that is material to investors.