Eagle Bancorp, Inc. (EGBN) Earnings

Management highlights

Good morning, and thank you for joining us today. We are pleased to begin 2026 on track with near-term strategic priorities, generating capital through earnings, diversifying balance sheet. First quarter reflected meaningful progress: returned to profitability, expanded net interest margin, strong C&I growth. Realistic about repositioning, pace of legacy exposures resolve and scheduled payoffs faster than generating new earning assets creates near-term pressure on net interest income. Continue to reduce reliance on higher-cost broker deposits, refinancing funding base. Active resolution of problem credits producing elevated charge-offs but willing to absorb near-term earnings impact for cleaner balance sheet. Tangible progress on asset quality this quarter, reducing criticized and classified loans, resolving non-performing exposures, strengthening portfolio health. Committed to transparency in disclosures.

Guidance

2026 forecast substantially unchanged from last quarter. Expect full-year NIM in the 2.6 to 2.8% range, non-interest income growth of 15 to 25%, non-interest expense flat to down 4% when adjusting for notable items. Average deposits, loans, and earning assets expected to decline year over year, reflecting intentional balance sheet repositioning rather than operating pressure. Support expanding pre-provision net revenue in 2026 despite smaller average balance sheet.

Segment performance

In the first quarter, CRE concentration ratio declined to 295% (below 300% threshold), ADC concentration ratio was 76%. Criticized and Classified assets balances decreased by 79.9 million in the quarter to 794.1 million at March 31, representing 67.3% of Tier 1 capital at quarter end, down from 74.6% at year end. Net income was $14.7 million, or $0.48 per diluted share. Net interest income declined $4.6 million to $63.7 million, net interest margin expanded nine basis points to 2.47%. Pre-provision net revenue was $27.7 million, an improvement of $7 million from prior quarter. Non-interest expense declined $21.1 million to $48.7 million. Non-interest income was $12.7 million. Net charge-offs totaled $26 million. Core deposits grew $240 million year over year while broker deposits reduced by $921 million.

Risks & headwinds

Inflow activity of 159.9 million of downgrades in first quarter, elevated relative to prior quarters. Non-performing loans increased to 128.8 million. Asymmetry in pace of legacy exposures resolve and new earning assets generation creates near-term pressure. FDIC insurance expense volatility.

Analyst Q&A

• Q: Hey, good morning, everyone. Just wanted to start off on the level of criticized here. You know, obviously good to see that continue to fall with some help from the loan sales, but just curious if you could speak a little more to the new inflows and to criticize, Eric and I hit on that a little bit, but, you know, is that a, you know, pace that you'd expect slows from here or how are you thinking about the trajectory as you move through the year?

  A: Hey, Justin, this is Ryan. I think the, you know, forecasting, forecasting what that is is tough to do. Our portfolio management practices, touch on these loans each and every quarter. We shouldn't see many surprises in that process because we touch it so frequently. But it is expected to continue some migration in there. Ultimately, though, just to build off of that, Justin, our goal and commitment in my practice My prepared commentary is that criticized classified will continue to come down on an absolute level, as well as relative to loans and Tier 1 capital. So we're going to make some, we're expected, based on what we see today and what we believe, that we're going to make some meaningful progress by year end. Right. And Justin, to build on that, it's important for us to note that the regulatory definition of criticized and classified loans does not require loss content. The potential weakness or well-defined weakness that would define those roles don't necessarily have loss content in them. And that's part of the story we've been telling for several quarters, as you've seen the composition of that list fall away from office.

• Q: Hi. Thanks for taking the questions. I wanted to follow up. on this credit quality discussion. Good to see that criticized classified down, and it sounds like you're expecting a continued decline through this year. Does this commentary also apply to the non-accrual loans that we saw increase in the quarter?

  A: I would say yes, generally. What you're seeing in non-accrual loans is really the result of us working through some of the loans that have been identified as special mention and substandard. So to me, the way I look at it, the barometer of what could come is really looking at the total portfolio of criticized and classified. As that portfolio continues to decline, which we expect will occur throughout the year, incidents or the likelihood of some of those loans flowing into non-accrual or charge drop will also fall. So I think you're going to see some improvement in non-performing as well as that entire portfolio gets worked through.

• Q: Thanks. I had a question about just the size of the balance sheet. It looks like in your outlook slide, deposits, loans, average earning assets are coming in below your original range. And part of that just as you kind of clean up and push loans off the board or push ones in high-cost deposits off the portfolio. But we haven't changed the guidance. So do you feel like there's – I assume that the range or your full-year range will fall as we move through the year, or is there any reason to think that you'll catch back up to where you originally thought the balance sheet would be?

  A: Well, there's a couple things going on. Averages obviously are informing NII, but when you think about it from a period end perspective, our expectation is that CRE will continue to see some decline in the second quarter, but our expectation is that when you compare year end 25 to year end 26 for the CRE portfolio, it will be flat. So that's informing the the forecast in terms of average balances for loans, just because you're seeing a pretty material reduction in the first half for CRE. But we do expect that to come back up in the back half of 2026. In terms of C&I, you know, that level of growth, I think it was approximately 5% linked quarter growth on the loan side. You know, so on an annualized basis, that's 20%. I would expect that to actually be a little bit lower when you compare the growth, when you compare year end to year end for CNI. And that is one of the reasons why when you look at the forecast, we're actually on the higher end of our loan growth target because of the contribution that CNI contributed relative to our initial expectations in the first quarter. Yeah. Great. I'll touch on another thing on the forecast. One of the reasons why we didn't touch the NIM range was because the forward curve at March 31 has largely priced out the two rate hikes or reductions, pardon me, that were expected at year end. And so that, given our balance sheet and the interest rate risk stance at the moment, is actually beneficial to us. And then also important to note that we do believe that there will be growth in average cash in the second and third quarter. We have a third party payment processor that doesn't really impact our quarter ends but does impact our averages because the balances are here for seven to 10 days. And the first quarter is a lower level of seasonal activity for that third-party payment processor. When you put all that together, that's one of the reasons why we maintained the forecast from the last quarter. Yeah, that makes sense. Okay, awesome. Thank you. And then maybe just back to the credit piece, can we talk about the three new inflows in the classifieds that we saw this quarter that you talked about in your prepared remarks. And can you talk about maybe why those credits weren't originally identified when you did your full portfolio evaluation a couple of quarters ago? And so if you've seen deterioration in those three since then, so then the question is, would you be seeing more for the rest of the year? And so what are you looking for in your portfolio to kind of ensure that we've got everything that could be at risk within classifieds, criticized. Like, do you have any big appraisals that are coming up, maturities, and some credits that you may be worried about that it's good for us to know about? A: So, Catherine, starting with the maturity aspect of that, you look at our criticized classified list, there's a number of loans on there that mature this year, some within a very close proximity to where we are today. We've been engaged with those customers for a long time. many months in figuring out what the next step for that particular asset is. The risk rating is obviously taking into account historical performance, but also forward-looking what the expectations are as part of the considerations and landing where we do. Pardon me. On the inflow into the criticized and classified, the The new entrants are really based on new information, not historic information, right? So the multifamily asset that Eric spoke to, new appraisal came in and informed that the performance of the property continues to suffer from tenant credit issues, as Eric said. That, frankly, on a month-over-month basis continues to get better, and we're continuously engaged with that particular customer. On the hospitality asset, that's a A recent trend where coupled with the world, the secondary and tertiary repayment sources on that particular situation, coupled with the decline in occupancy for hospitality overall in our market, created a greater challenge, a well-defined weakness by the regulatory definition. I'll again make the comment that the loss content does not need to be present in those critical and criticized and classified situations. So the point I'm trying to make, I guess, is more idiosyncratic to each individual relationship drove the risk rating downgrades on those particular transactions, not something more systemic.

• Q: Good morning. Good morning. Good morning. Maybe just following up on your comments there, Ryan, with regard to the couple of new inflows, you had the Hotel Motel in Arlington and the Prince George's County apartment building as well. Those matured here in the last couple of weeks. Just kind of curious, you know, did you give them extensions or kind of how to, you know, what's kind of the expectation there in terms of where you're going with those credits?

  A: Yeah, we had hoped, obviously, before the maturity date to have a longer-term plan in place. We didn't. arrive at that. So we did put short-term extensions in place in both of those situations, which have already been booked. It's just, you know, obviously the data says of 331. So the current maturity is actually out into the future a bit. And we continue to work with each of those clients for a longer-term solution.

• Q: Good morning. Good morning. I wanted to ask about the sort of granularity point that Ryan was just making. Is that going to work in your favor in terms of inflows possibly being less because of the smaller size loans as you continue to work through the book? Short answer is yes. And can that drive the reserve behavior from here? And I guess my question is, is there a I know there's a scenario where reserves could go back up, but I know you've built this reserve over many quarters, so the decline was no surprise yesterday. Just curious on if the reserves should continue to come in and that we'll see you, obviously, have provision expense less than charge-offs for a while.

  A: Yeah. I would say that if you look at the first quarter provision expense as well as charge-off, that's a decent run rate for our expectation for the remainder of the year for each quarter. So when you put all that together, it does show a reduction in the reserve coverage to loans by the end of the year. Are we going to get to a peer level on that metric by year end? No. But I do expect that the coverage of ACL to loans will be lower at year end 26th than where we started the year.

• Q: Good morning. Good morning. I wanted to ask about the FDIC expense. Is that going to be lumpy in terms of how it comes off in future quarters? With this quarter, any indication of kind of where it could go in the near term?

  A: There's really two drivers to our FDIC insurance expense. You have our overall asset quality metrics, and then you have the structural liquidity improvement. So we're getting a lot of benefit, and we have been getting a lot of benefit over the last year on the improvement of structural liquidity. Look back over the last two years, our net non-core funding dependency ratio in 2023 was 30-ish percent. now we're well below I think we're like 12 to 15 percent and so that has been as meaningfully contributed to a reduction in the FDIC insurance expense and you know as we continue to reduce the criticizing classified and also the FDIC insurance calculation looks at modifications they call it underperforming assets in the call report but modifications so as that activity lessons on our balance sheet going forward, that will have a very positive contribution to FDIC premium expense. I estimate if you look at where we're at on an annual basis run rate, when we're normalized on AQ, we're probably going to be about half of where we're at right now. In terms of timing, I would, you know, you're always going to have a lag because that premium is based off of filings, you know, that are a quarter behind. But, you know, I would expect you're going to see some improvement here in the back half of 26 and definitely into 2027.