EAGLE BANCORP INC

Summary of Consolidated Statements of Operations

This section discusses our condensed consolidated results of operations and should be read together with our consolidated financial statements and the accompanying notes.

The increase in net income for the three months ended March 31, 2026, compared to the three months ended March 31, 2025, was primarily due to lower provision for credit losses during three months ended March 31, 2026. 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.

When the impact of the provision is excluded, pre-provision net revenue ("PPNR"), a non-GAAP measure, was relatively flat at $27.7 million for the three months ended March 31, 2026, as compared to $28.4 million for the three months ended March 31, 2025. Refer to the "Use of Non-GAAP Financial Measures" section for additional detail and a reconciliation of GAAP to non-GAAP financial measures.

The efficiency ratio, which measures the ratio of noninterest expense to total net revenue (the sum of net interest income and noninterest income), was 63.79% for the three months ended March 31, 2026 compared to 61.54% for the three months ended March 31, 2025.

Net interest margin, which measures net interest income as a percentage of earning assets, was 2.47% for the three months ended March 31, 2026, an increase compared to 2.28% for the three months ended March 31, 2025. For further information on the components and drivers of these changes, see the "Net Interest Income and Net Interest Margin" section below.

Loans, which generally have higher yields than securities and other earning assets, represented 68.0% and 68.2% of average earning assets for three months ended March 31, 2026 and 2025, respectively. Refer to the "Loan Portfolio" below for further discussion on loans.

Average investment securities for the three months ended March 31, 2026 were 17.6% of average earning assets compared to 19.4% for the three months ended March 31, 2025. Interest-bearing deposits with other banks represented 14.4% and 12.5% of average earning assets for three months ended March 31, 2026 and 2025, respectively.

The ratio of common equity to total assets increased to 11.51% as of March 31, 2026, compared to 10.78% as of December 31, 2025. For the three months ended March 31, 2026, the return on average assets ("ROAA") was 0.54%, compared to 0.06% for the three months ended March 31, 2025. Total shareholders’ equity was $1.15 billion as of March 31, 2026, compared to $1.13 billion as of December 31, 2025, an increase of 1%. The return (loss) on average common equity for three months ended March 31, 2026 was 5.20%, compared to 0.55% for the three months ended March 31, 2025.

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.

The table below presents 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)

(1)Loans placed on nonaccrual status are included in average balances. Net loan fees and late charges included in interest income on loans totaled $3.9 million and $3.8 million for the three months ended March 31, 2026 and 2025, respectively.

(2)Interest and fees on loans and investments exclude tax equivalent adjustments.

Net interest income decreased in the first quarter of 2026 compared to the first quarter of 2025, primarily due to a larger decrease in interest-earning assets compared to interest-bearing liabilities. Additionally, average loan yields and interest bearing deposits with other banks and short term investments yields were lower in first quarter of 2026 compared to the first quarter of 2025, partially offset by lower rates on interest-bearing liabilities.

Net interest margin was 2.47% for the three months ended March 31, 2026, an increase compared to 2.28% for the three months ended March 31, 2025. The cost of funds on interest-bearing liabilities decreased by 51 basis points from 3.35% for the first quarter of 2025 to 2.84% for the first quarter of 2026, while the yield on interest-earning assets had a decrease of 24 basis points from 5.36% for the first quarter of 2025 to 5.12% for the first quarter of 2026.

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.

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.

The table below presents a breakdown of the current provision for credit losses included in our Consolidated Statements of Operations.

The change in the provision for credit losses on the loan portfolio for the three months ended March 31, 2026 was primarily attributable to a decrease in the qualitative reserve for CRE office loans ("office overlay"), partially offset by updated quantitative assumptions used to calculate our current expected credit losses.

Net charge-offs of $25.9 million during the three months ended March 31, 2026 represented 1.47% of average loans held for investment on an annualized basis, an increase from net charge-offs of $11.2 million in the three months ended March 31, 2025, which represented 0.57% of average loans held for investment on an annualized basis.

During 2025, we began executing on a revised strategy for resolving criticized and classified loans with the goal of accelerating dispositions and reducing asset quality risk. In furtherance of this strategy, we continue to obtain updated valuations on the underlying collateral for certain loans and incorporate new information about borrower performance. These updated valuations reflect the rapidly changing commercial real estate market in the D.C. metro area. To mitigate future valuation risk, certain loans were transferred to loans held-for-sale ("HFS") in the three months ended March 31, 2026, which resulted in charge-offs of $11.6 million to record those loans at their fair value at the time of transfer. We believe our actions during the current period reflect a disciplined approach to credit risk management that incorporates updated market and borrower data into our loss estimates.

The office overlay decreased in the three months ended March 31, 2026 relative to the three months ended March 31, 2025, impacted by updated assumptions associated with the PD and LGD rates as well as the migration of one sizable relationship to nonaccrual status that is now individually evaluated for a specific reserve. The office overlay for the three months ended March 31, 2026 reflects management’s assessment of continued uncertainty in the CRE office sector, as well as potential lag effects from interest-rate sensitivity, valuation declines, and refinancing risk. Management continues to monitor trends, including occupancy, capitalization rates, and market liquidity, across key metropolitan areas and may adjust qualitative reserves further as these factors evolve.

The ACL coverage ratio remains within management’s target range and reflects the current asset quality profile, though further provision expense may be required if collateral values or borrower performance deteriorate.

The provision for credit losses for the held-to-maturity securities portfolio was recorded primarily on several corporate bonds. During the three months ended March 31, 2026, there was a reversal of provision for credit losses of $124 thousand for the held-to-maturity securities portfolio, compared to a reversal of provision expense of $54 thousand for the year ended three months ended March 31, 2025.

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 reversal of provision of $1.8 million for the year ended three months ended March 31, 2026, compared to a reversal of provision of $297 thousand for the year ended three months ended March 31, 2025, primarily due to a reduction in unfunded loan balances during the current period.

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.

Noninterest Income

Noninterest income includes service charges on deposits, gain/(loss) on sale of investment securities and loans, income from Bank-Owned Life Insurance ("BOLI") and other income. The table below summarizes the comparative noninterest income.

The increase in total noninterest income in the first quarter of 2026 as compared to the first quarter of 2025 was primarily due to higher gains on the sale of HFS loans and increases in the cash surrender value of BOLI.

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.

The increase in total noninterest expense for the first quarter of 2026 as compared to the first quarter of 2025 was primarily due to $2.9 million in valuation adjustment on the remaining HFS portfolio, which are reflected in other expenses in the table above.

The major components of other expenses include regulatory assessment fees, director compensation, real estate taxes, and insurance expenses. Additionally, when applicable, other expenses also include valuation adjustments and any disposition costs related to HFS loans.

As a percentage of average assets, total noninterest expense (annualized) was 1.79% for the first quarter of 2026 as compared to 1.52% in the first quarter of 2025.

Income Tax Expense

For the three months ended March 31, 2026, income tax expense was $1.3 million, compared to $772 thousand for the three months ended March 31, 2025. The increase in income tax expense was primarily due to an increase in the pre-tax income during the first quarter of 2026.

The effective tax rate for the three months ended March 31, 2026 was 8.35%. The effective tax rate represents the percentage of income tax expense against the pre-tax income in the three months ended March 31, 2026. The effective tax rate for the three months ended March 31, 2026 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.