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DATE

Thursday, April 23, 2026 at 10 a.m. ET

CALL PARTICIPANTS

  • President and Chief Executive Officer — Susan G. Riel
  • Chief Financial Officer — Eric R. Newell
  • Chief Lending Officer, Commercial Real Estate — Ryan A. Riel

TAKEAWAYS

  • Net Income -- $14.7 million, or $0.48 per diluted share, up from a loss of $2.4 million in the previous quarter, attributed to asset quality improvements.
  • Net Interest Income -- $63.7 million, down $4.6 million sequentially, driven by lower average cash, accelerated CRE loan payoffs, offset partially by a decline in brokered deposit costs, and two fewer days in the quarter.
  • Net Interest Margin (NIM) -- Increased nine basis points to 2.47%, reflecting an improved funding mix and reduced wholesale funding usage.
  • Pre-Provision Net Revenue -- $27.7 million, up $7 million from the prior quarter as noninterest expense fell following the absence of prior legal and loan disposition charges.
  • Noninterest Expense -- $48.7 million, down $21.1 million, with no repeat of the $14.7 million loan disposition and $10 million legal provision present last quarter.
  • Noninterest Income -- $12.7 million, supported by $3.6 million in loan sale gains versus a $1.1 million loss previously.
  • Allowance for Credit Losses (ACL) -- $147.2 million, representing 2.12% of total loans, and $60 million specifically reserved for the office portfolio.
  • Net Charge-Offs -- $26 million, up $13.7 million, with $11.6 million relating to loans moved to held-for-sale status.
  • Provision for Credit Losses -- $13.4 million, a decline of $2.1 million, with higher quarter-end nonperforming loans at $128.8 million, 1.86% of total loans.
  • Criticized and Classified Loan Balances -- $794.1 million, down $79.9 million, equaling 67.3% of Tier 1 capital (down from 74.6%), with peak exposure at 90% as of September 30 of last year.
  • CRE Concentration Ratio -- 295%, below the regulatory 300% threshold, and ADC concentration ratio at 76%, following payoffs and resolutions.
  • Core Deposits -- Grew by $240 million year over year despite intentional balance sheet contraction; period-end deposits down $542 million, of which $413 million was a deliberate brokered deposit reduction.
  • Liquidity -- Available liquidity stands at $4.3 billion, maintaining close to two times coverage of uninsured deposits.
  • Capital Position -- Tangible common equity to tangible assets at 11.51%, Tier 1 leverage at 10.63%, and CET1 at 13.8%; tangible book value per share up $0.30 to $37.56.
  • Held-for-Sale Loans -- Portfolio down to $55.7 million, with $55.2 million already under contract for sale.
  • C&I Loan Growth -- Approximately 5% increase sequentially; C&I deposits grew $200 million year over year, and 28% in the C&I line of business.
  • 2026 Guidance -- Full-year NIM expected at 2.6%-2.8%; noninterest income expected to grow 15%-25%; noninterest expense projected flat to down 4%, with average deposits, loans, and earning assets set to decline due to intentional repositioning.

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RISKS

  • Nonperforming loans increased by $21.9 million to $128.8 million, now totaling 1.86% of total loans, driven partly by office-related credits.
  • Continued elevated inflows into criticized and classified loans, with $159.9 million downgraded this quarter, significantly impacted by a multifamily project, a hotel, and a C&I relationship.
  • Net charge-offs totaled $26 million in the quarter, an increase of $13.7 million. This was primarily driven by $11.6 million associated with loans moved to held for sale as part of targeted resolution efforts. These actions reflect disciplined, relationship-by-relationship strategies to resolve legacy exposures where outcomes are assessed individually to optimize value. In many cases, proactively resolving these credits is expected to position the company for stronger long-term results compared to extended workout scenarios.
  • Management stated, "The pace at which legacy exposures resolve and scheduled payoffs occur is faster than the pace at which we can prudently generate new earning assets. That asymmetry creates near-term pressure on net interest income and a smaller earning asset base."

SUMMARY

Management reported that Eagle Bancorp (EGBN 2.72%) returned to profitability and made further progress reducing high-risk commercial real estate and land development concentrations. Several key metrics improved, but asset resolution efforts led to a notable increase in nonperforming loans and charge-offs. Management reaffirmed 2026 guidance metrics, indicating continued intentional reduction in certain balance sheet categories and an emphasis on strengthening the funding mix and operational discipline.

  • Proceeds from loan sales contributed to $3.6 million in gains, adding positive momentum to noninterest income in contrast to prior losses.
  • Management confirmed that $55.2 million of $55.7 million in held-for-sale loans are under contract, signaling continued risk mitigation progress for legacy exposures.
  • The company attributed sequential C&I loan growth and 28% year-over-year C&I deposit increases to execution of strategic rebalancing away from CRE concentration.
  • FDIC insurance expense is expected to fall significantly in the second half of 2026, assuming further improvements in asset quality and deposit mix, with normalized annual premiums estimated to be half the 2025 level.

INDUSTRY GLOSSARY

  • CRE Concentration Ratio: Measures the ratio of commercial real estate loans to total risk-based capital (plus reserves); tracks regulatory risk exposure levels.
  • ADC: Acquisition, development, and construction loans, a loan type focused on financing land acquisition and real estate development projects.
  • Criticized/Classified Loans: Regulatory categories for loans showing signs of credit weakness, encompassing "special mention," "substandard," and "doubtful" credits but not necessarily incurring loss content.
  • Held-for-Sale Loans: Loans categorized as intended for sale rather than held for investment, often used as part of active portfolio risk mitigation and resolution strategies.

Full Conference Call Transcript

Eric Newell: Good morning. This is Eric Newell, Chief Financial Officer of Eagle Bancorp, Inc. Before we begin the presentation, I would like to remind everyone that some of the comments made during this call are forward-looking statements. We cannot make any promises about future performance and caution you not to place undue reliance on these forward-looking statements. Our Form 10-Ks for the fiscal year 2025 and current reports on Form 8-K, including the earnings presentation slides, identify important factors that could cause the company's actual results to differ materially from any forward-looking statements made this morning, which speak only as of today.

Eagle Bancorp, Inc. does not undertake to update any forward-looking statements as a result of new information, future events, or developments unless required by law. This morning's commentary will also include non-GAAP financial information. The earnings release, which is posted in the Investor Relations section of our website and filed with the SEC, contains reconciliations of this information to the most directly comparable GAAP information. Our periodic reports are available from the company online at our website, or on the SEC's website. With me today is our President and CEO, Susan Riel, and our Chief Lending Officer for Commercial Real Estate, Ryan Riel. I will now turn it over to Susan. Thank you.

Susan Riel: Good morning, and thank you for joining us today. We are pleased to begin 2026 on track with our near-term strategic priorities: generating capital through earnings, diversifying the balance sheet across both assets and funding, and executing on the repositioning work we have been discussing with you over the past several quarters. The first quarter reflected meaningful progress on several fronts. We returned to profitability, expanded net interest margin, and delivered strong C&I growth, a direct result of the deliberate investments we have made across the franchise and the disciplined execution of our commercial team. At the same time, we are realistic about where we are in this repositioning.

The pace at which legacy exposures resolve and scheduled payoffs occur is faster than the pace at which we can prudently generate new earning assets. That asymmetry creates near-term pressure on net interest income and a smaller earning asset base as we work toward a higher-quality balance sheet. We are not shrinking the balance sheet because deposits are leaving us. In fact, core deposits have grown $240 million year over year. We are making strategic choices on both sides of the balance sheet that we believe position us for stronger, more sustainable, and more durable earnings. We continued to reduce reliance on higher-cost brokered deposits, refining the quality of our funding base.

In parallel, our active resolution of problem credits is producing elevated charge-offs, a deliberate trade-off we are willing to make because we would rather absorb the near-term earnings impact and emerge with a cleaner balance sheet than carry these exposures for an extended time. The deliberate actions we took throughout 2025 are producing measurable improvement, a trajectory Eric will walk through in detail. We have a plan designed to deliver materially stronger pre-provision net revenue as the funding mix improves, as disciplined loan growth returns to CRE, and as the asset quality work I mentioned continues to reduce the impact from nonaccrual and resolution activity, and we are executing against it.

With that, I will turn the call over to Eric to walk through the quarter in more detail.

Eric Newell: Thank you, Susan. Before I walk through the specifics, I want to step back and acknowledge the tangible progress we have made on asset quality this quarter. This quarter, we reported net income of $14.7 million, or $0.48 per diluted share, a meaningful swing from the $2.4 million loss we reported last quarter, and that improvement reflects the hard work underway across the portfolio. Reducing criticized and classified loans, resolving nonperforming exposures, and strengthening the overall health of the portfolio remain the top operational priorities for this management team. Based upon investor feedback, and consistent with our commitment to transparency, we continued to expand our disclosures to give investors a better picture of portfolio dynamics—both the progress and the challenges.

That transparency is something we take seriously, and it shapes how we will walk through this quarter's activity today. With that as context, let me walk you through what we saw in the first quarter. I will start with our concentration metrics. The first quarter saw continued reductions in our CRE and ADC concentrations, as expected payoffs, resolutions, and the completion of construction projects drove meaningful progress to reduce overall concentration risk to the bank. Our CRE concentration ratio, which measures CRE loans to total risk-based capital and reserves, declined to 295% at March 31, moving below the 300% threshold. Our ADC concentration ratio came in at 76%.

Turning to criticized and classified assets, when combining substandard, special mention, and all held-for-sale loans, balances declined by $79.9 million in the quarter to $794.1 million at March 31, compared to $874 million at year-end. As a percentage of Tier 1 capital, that represents 67.3% at quarter-end, down from 74.6% at year-end and down meaningfully from the peak of 90% we saw at September 30 of last year. The directional trend is clear, and we are committed to continuing it. Slide 16 of the investor deck provides additional detail on the composition of that portfolio.

On slide 17, we have added a portfolio walk to help illustrate the various inflows and outflows in the criticized and classified book during the quarter. I want to be direct about the inflow activity. $159.9 million of downgrades occurred in the first quarter, which is elevated relative to the $89.3 million we saw in 2025. However, this materially improved from the $445 million inflow we experienced in 2025. Let me briefly touch upon the primary drivers of the inflow. Three relationships accounted for the majority of the downgrade activity. The first is a multifamily project in Maryland experiencing pressured net operating income due to tenant credit issues and releasing costs.

The property has been reappraised and is not considered collateral dependent. The second is a hotel relationship downgraded upon receipt of 2025 financials reflecting lower occupancy. We are updating the appraisal and working with the borrower on a remediation path. The third is a single secured C&I relationship moved to special mention. We currently do not expect any loss. Taken together, these are discrete situations, and we believe they are not indicative of broader portfolio weakness. What they do reflect is our portfolio management process working as intended.

Loans migrating into criticized and classified are predominantly coming from our lowest pass risk rating category—relationships we have actively been monitoring through our criticized asset committee with upgrade and downgrade triggers and remediation strategies updated each quarter. Turning to the held-for-sale portfolio, we continue to make meaningful progress in the quarter. The portfolio ended at $55.7 million, down from $90.7 million at year-end. Slide 18 of the investor deck walks through the inflows and outflows during the quarter. We transferred three relationships from held for investment during the quarter to facilitate the sale of a fourth held-for-sale relationship, a deliberate action consistent with our strategy of resolving exposures in a manner that minimizes loss.

Importantly, of the $55.7 million remaining in held for sale at quarter-end, $55.2 million is already under contract to be sold. While we made progress on total criticized and classified loans during the quarter, nonperforming loans increased to $128.8 million at March 31, up $21.9 million from the prior quarter, representing 1.86% of total loans. Slide 25 of our investor deck walks through the linked-quarter inflows and outflows. Loans on nonaccrual undergo specific reserve analysis, and those determined to be collateral dependent carry specific reserves in the ACL. The provision for loan losses in the quarter reflects the incremental reserves required for those exposures.

Provision for credit losses totaled $13.4 million in the first quarter, a decline of $2.1 million from the prior quarter. Our allowance for credit losses ended the quarter at $147.2 million, or 2.12% of total loans. Within that total, we carry $60 million of reserves specifically against our income-producing office portfolio. Net charge-offs totaled $26 million in the quarter, an increase of $13.7 million. This was primarily driven by $11.6 million associated with loans moved to held for sale as part of our targeted resolution efforts. These actions reflect disciplined, relationship-by-relationship strategies to resolve legacy exposures where outcomes are assessed individually to optimize value.

In many cases, we believe proactively resolving these credits positions us for stronger long-term results compared to extended workout scenarios. Early-stage delinquency is often the leading indicator of future credit migration, and the $31.9 million decline in 30- to 89-day past due balances is a constructive signal about the forward pipeline. We are encouraged by the trajectory. At the same time, the increase in nonperforming loans is a reminder that this work is not finished. We are not treating it as such. Resolving these exposures, maintaining our reserve discipline, and continuing to improve the overall health of the portfolio remain our highest priorities. Turning to earnings.

The improvement in profitability this quarter is in many ways a direct function of the asset quality work I just walked through. The discipline around resolving exposures, managing expenses tied to loan dispositions, and repositioning our funding mix is showing up on the earnings line. With that as context, let me walk through the drivers. Net interest income declined $4.6 million to $63.7 million, primarily reflecting accelerated CRE loan payoffs and lower average cash balances, partially offset by reduced interest expense from the continued reduction of higher-cost brokered deposits. Two fewer days in the quarter also contributed. NIM expanded 9 basis points to 2.47%, driven by an improved funding mix as wholesale funding usage declined.

We estimate approximately 3 basis points of NIM pressure from loans moving to nonaccrual and the associated interest reversals. Pre-provision net revenue was $27.7 million, an improvement of $7 million from the prior quarter. The improvement was driven by lower noninterest expense, which declined $21.1 million to $48.7 million, reflecting the absence of two notable items from the fourth quarter: $14.7 million of expenses related to loan dispositions and a $10 million legal provision tied to the probable and estimable resolution of a previously disclosed government investigation. Noninterest income increased modestly to $12.7 million, supported by $3.6 million of gains on loan sales compared to a $1.1 million loss in the prior quarter. Our capital position remains strong and industry-leading.

Tangible common equity to tangible assets was 11.51%. Tier 1 leverage was 10.63%, and CET1 was 13.8%. Tangible book value per share increased $0.30 to $37.56 as earnings contributed to capital. On funding, period-end deposits declined $542 million from December 31, of which $413 million reflected the intentional reduction of brokered deposits. Year over year, we reduced brokered deposits by $921 million while growing core deposits by $240 million, reflecting coordinated execution across all our deposit teams. Available liquidity stands at $4.3 billion, and we maintain close to two times coverage of uninsured deposits. Turning briefly to the outlook.

Our 2026 forecast is substantially unchanged from what we shared last quarter, and slide 11 of our investor deck provides the detail. We continue to expect full-year NIM in the 2.6% to 2.8% range, noninterest income growth of 15% to 25%, and noninterest expense flat to down 4% when adjusting for the notable items I mentioned. Average deposits, loans, and earning assets are still expected to decline year over year, reflecting intentional balance sheet repositioning rather than operating pressure. Altogether, these trends support our confidence in expanding pre-provision net revenue in 2026 despite a smaller average balance sheet. I will turn it over to Susan for final comments ahead of Q&A.

Susan Riel: Thank you, Eric. Before we move to questions, I want to leave you with a few final thoughts. The first quarter demonstrated that our strategy is working. Asset quality is improving, our funding mix is strengthening, and the earnings profile is beginning to reflect the repositioning work of the past year and the true value of our franchise. We still have more to do, and we are not losing sight of that. But the direction is clear, and the discipline across this organization is real. What gives me the greatest confidence in the path ahead is the strength and depth of the team executing against it.

Our priorities are well established: continuing to reduce criticized and classified balances, transforming our funding mix toward core deposit relationships, pursuing disciplined loan growth, and expanding pre-provision net revenue over the course of 2026. These priorities and the capabilities we have built across credit, finance, lines of business, and our risk and control functions are the foundation for the next chapter of Eagle Bancorp, Inc.'s story. This franchise has exceptional talent, a distinctive market position, and the institutional strength to continue delivering against these objectives through the leadership transition ahead and well beyond it. Before we conclude, I want to thank our employees for their continued dedication and professionalism.

Their commitment has been instrumental in navigating a challenging period and positioning the company for the future. Thank you again for your time and for your continued interest in Eagle Bancorp, Inc. We will now open the call for questions.

Operator: Thank you. As a reminder, to ask a question, press star 11 on your telephone and wait for your name to be announced. To remove yourself, press star 11 again. Our first question comes from the line of Justin Crowley with Piper Sandler. Please proceed.

Justin Crowley: Good morning, everyone. I just wanted to start off on the level of criticized here. It is good to see that continue to fall with some help from the loan sales. Could you speak a little more to the new inflows into criticized? Is that a pace that you would expect slows from here, or how are you thinking about the trajectory as you move through the year?

Ryan Riel: Hey, Justin. Forecasting what that is tough to do. Our portfolio management practices touch on these loans each and every quarter. We should not see many surprises in that process because we touch it so frequently, but it is expected to continue to see some migration in there.

Eric Newell: Ultimately, just to build off of that, Justin, our goal and commitment from my prepared commentary is that criticized and classified will continue to come down on an absolute level as well as relative to loans and Tier 1 capital. Based on what we see today and what we believe, we expect to make meaningful progress by year-end.

Ryan Riel: And, Justin, to build on that, it is important 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 ratings does not necessarily have loss content in them. That is part of the story we have been telling for several quarters. You have seen the composition of that list fall away from office.

Justin Crowley: Okay. Got it. In terms of further loan sales, with what is remaining in held for sale and anything that could get added from here, are we at a point where future disposals are largely coming outside of the office portfolio? How would you set expectations there in terms of what you are looking to ring-fence?

Ryan Riel: We are looking at each and every case on a one-off basis. We are evaluating it, management comes to a decision as to what the best path forward is, and we use the tools at our discretion. The anticipation is that tactic will continue to be used as we determine it is the best path to reach the best possible outcome and maximize shareholder value.

Justin Crowley: Okay. That is fair. One last one on the office reserve, which you took down in the quarter. Can you talk through a little more on some of the factors that get you comfortable in that decision, in part considering the increase in nonaccruals, with a lot of that being office driven?

Eric Newell: The biggest driver of the decline in ACL quarter over quarter related to office actually comes from the approximately $37 million reduction of substandard loans that are a big driver of that pool. That is the main driver of that decline. We assess the overall methodology that we apply qualitatively as well as quantitatively to the entire process, but particularly with office. We believe that the $60 million that is associated with the total office portfolio in the ACL is appropriate at March 31.

Justin Crowley: Great. I will leave it there. Thanks for taking the question.

Operator: Our next question comes from David Chiaverini with Jefferies. Please proceed.

David Chiaverini: Hi, thanks for taking the questions. I wanted to follow up on the credit quality discussion. It is good to see that criticized and classified are down, and it sounds like you are expecting a continued decline through this year. Does this commentary also apply to the nonaccrual loans that we saw increase in the quarter?

Eric Newell: I would say yes, generally. What you are seeing in nonaccrual loans is really the result of us working through some of the loans that have been identified as special mention and substandard. 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, the incidence or the likelihood of some of those loans flowing into nonaccrual or charge-off will also fall. I think you are going to see some improvement in nonperforming as well, as that entire portfolio gets worked through.

David Chiaverini: Great. Thanks for that. On the held-for-sale portfolio and the sales that you have under contract, it looks like on slide 18 there is a valuation of about $3 million. Are you selling loans in line with what you originally thought? And, at what percent of par on average are you selling loans?

Eric Newell: I will answer the first part of that, and maybe Ryan can touch on the second part. When you look at the totality of what we put into held for sale through this cycle, which is really over the last three to four quarters, we have pretty much hit the mark. Yes, we had some losses that we recognized in the fourth quarter, but we had gains in the first quarter. When you net all that together, we feel comfortable with the process we have been undergoing to transfer those loans into held for sale.

I would remind everyone that when it comes to office, we are generally using broker opinions of value because that is more forward-looking and reflective of the conversations we have been having with market participants with those notes. Ryan, if you want to touch on the second one—on the question of relative to par, where is the landing spot?

Ryan Riel: It is a hard one to answer, and it has been a significant drop from par on the office side. If you go back and look through the last several quarters, you will see those numbers, and the second and third quarters of 2025 were where the majority of those challenges showed through the financial statements. We have not compiled the data of where we are relative to the original unpaid principal balance, but it is a substantial decrease because the office market has had a substantial valuation decrease.

David Chiaverini: Just building off of that a little bit, when you look at the office portfolio and the cycle to date, what has the loss content been?

Eric Newell: For the office portfolio, we have been probably between 45% and 50% when you think about loss content as a function of loss given default and probability of default.

David Chiaverini: Got it. And then, as a percentage of carrying value with the reserves netting against that, it is significantly higher, is my assumption. Would you say that is fair?

Ryan Riel: That is what Eric's comments address. The reduction to the carrying value netted us, for that portfolio, right about at a new par, if you will.

David Chiaverini: Correct. Very helpful. Thank you.

Operator: Thank you. Our next question comes from the line of Catherine Mealor with KBW. Please proceed.

Catherine Mealor: Thanks. I had a question about the size of the balance sheet. It looks like in your outlook slide, deposits, loans, and average earning assets are coming in below your original range, in part as you clean up and push loans and high-cost deposits off the portfolio. But you have not changed the guidance. Do you feel like the full-year range will fall as we move through the year, or is there any reason to think that you will catch back up to where you originally thought the balance sheet would be?

Eric Newell: There are a couple of things going on. Averages are informing NII. From a period-end perspective, our expectation is that CRE will continue to see some decline in the quarter, but when you compare year-end 2025 to year-end 2026 for the CRE portfolio, we expect it to be flat. That informs the forecast in terms of average balances for loans because you are seeing a material reduction in the first half for CRE, and we expect that to come back up in the back half of 2026. In terms of C&I, we saw approximately 5% linked-quarter growth on the loan side, so on an annualized basis that is about 20%.

I would expect that to be a little bit lower when you compare year-end to year-end for C&I. That is one of the reasons why, when you look at the forecast, we are actually on the higher end of our loan growth target because of the contribution that C&I delivered relative to our initial expectations in the first quarter. One more thing on the forecast: we did not change the NIM range because the forward curve at March 31 has largely priced out the two rate reductions that were expected at year-end. Given our balance sheet and interest rate risk stance at the moment, that is beneficial to us.

Also, we believe there will be growth in average cash in the second and third quarter. We have a third-party payment processor that does not really impact our quarter-ends but does impact our averages because the balances are here for seven to ten days, and the first quarter is a lower level of seasonal activity for them.

Catherine Mealor: That makes sense. Thank you. Back to the credit piece—can we talk about the three new inflows into classified that you saw this quarter and mentioned in your prepared remarks? Why were those credits not originally identified when you did your full portfolio evaluation a couple quarters ago? Have you seen deterioration in those three since then, and could we be seeing more for the rest of the year? What are you looking for in your portfolio to ensure that you have captured everything that could be at risk within criticized/classified—any big appraisals coming up or maturities?

Ryan Riel: Starting with maturities, if you look at our criticized/classified list, there are a number of loans on there that mature this year, some within close proximity to where we are today. We have been engaged with those customers for many months and figuring out the next step for that particular asset. The risk rating takes into account historical performance but is also forward-looking. On the inflow into criticized and classified, the new entrants are based on new information, not historic information.

For the multifamily asset that Eric spoke to, a new appraisal came in and informed that performance continues to suffer from tenant credit issues, which, frankly, on a month-over-month basis continues to get better, and we are continuously engaged with that borrower. For the hospitality asset, recent trends, coupled with secondary and tertiary repayment sources and a decline in hospitality overall in our market, created a well-defined weakness by the regulatory definition. Again, loss content does not need to be present in criticized and classified assets. The point is that idiosyncratic factors in each individual relationship drove the risk rating downgrades, not something more systemic.

Operator: Thank you. Our next question comes from the line of Analyst with Raymond James. Please proceed.

Analyst: Good morning. Maybe following up on your comments there, Ryan, regarding the couple of new inflows—you have the hotel/motel in Arlington and the Prince George's County apartment building. Those matured in the last couple of weeks. Did you give them extensions, and what is the expectation there in terms of where you are going with those credits?

Ryan Riel: We had hoped, before the maturity date, to have a longer-term plan in place. We did not arrive at that, so we put short-term extensions in place in both situations, which have already been booked. The data is as of 03/31, 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.

Analyst: Got it. In terms of the overall Washington, D.C. market—there are different submarkets with issues—but stepping back, what is your overall sense of activity, especially for multifamily, in terms of renting out properties and where things are going?

Ryan Riel: The multifamily market as a whole in the region—across Maryland, D.C., and Virginia—from a rent growth and vacancy perspective is lessening. We are more equating with national averages where, historically, we had exceeded them as a region. That is not necessarily true in each individual submarket, but as a whole it has lessened. Absorption has slowed, and new supply has also slowed even more dramatically, which is a rebalancing mechanism for supply and demand. Additionally, valuations have maintained at higher-than-national averages. Cap rates are in the high 5s where national averages are in the low 6s.

Overall, I would describe it as cautious optimism in the multifamily market—not without challenges and the need for owners and lenders to work through them—but overall, it is still a good and stable multifamily market in our nation's capital.

Analyst: And a similar question on the office side—my sense is there has been better lease-up activity in some markets. What are you seeing for office activity now? Are the green shoots still there, or have they moderated from a few months ago?

Ryan Riel: In the office market, trophy assets in our region continue to perform really well with record-setting rents announced regularly. Trophy and A are really working. On the B and C side, it is still a struggle. Tenant demand is not there. There is a lot of supply being pulled off the market through conversions and other tactics by owners, so it continues to be a challenge in the central business districts. More suburban, community-amenity properties—medical, neighborhood uses—have more demand and greater occupancy, and therefore better cash flow. There is more health in that space.

In those more suburban spaces, often there are secondary and tertiary sources of repayment tied to those loans, so it is not just the office valuation as a payment source.

Analyst: Going back to the criticized/classified funnel—you mentioned a fair amount was related to updated data, like annual financials. Was there a greater update this quarter than other quarters, or do you expect a similar pace for updated financials and a similar funnel in the second quarter?

Ryan Riel: It is a point-in-time issue. The loans we are talking about are not high in quantity; it is the lumpiness of our portfolio that drives the dollars. If you track our top 25 loan list as CRE balances decline, a number of loans have reached full payoff, which has been the most significant portion of our decline in CRE balances—either refinances or sale of the underlying assets. We do not anticipate this level of inflow every quarter, but we will continue to monitor our portfolio and enhance our portfolio management practices.

Eric Newell: Building off of that, it is important to reiterate the commitment that the team has to reduce the overall criticized and classified on an absolute basis by year-end. We are going to continue to show progress in future quarters as well.

Analyst: Alright. I appreciate all the color here. Thank you very much.

Operator: Our last question comes from the line of Christopher Marinac with Brean Capital LLC. Proceed.

Christopher Marinac: Good morning. I wanted to ask about the 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-sized loans as you continue to work through the book? And can that drive the reserve behavior from here? I know there is a scenario where reserves could go back up, but you have built this reserve over many quarters, so the decline was no surprise. Should provision continue to come in and be less than charge-offs for a while?

Eric Newell: If you look at the first-quarter provision expense as well as charge-offs, that is a decent run-rate for our expectation for the remainder of the year for each quarter. When you add 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 2026 than where we started the year.

Christopher Marinac: Thank you for that. Going back to the C&I evolution—will we see C&I deposits grow year over year as we get further along? I know there was some seasonality in Q1 as the slides implied. How should we think about that a few quarters out?

Ryan Riel: If you look back a year from now to March, C&I deposits have grown by a couple hundred million dollars. I do not think the first quarter is indicative of any trend. The C&I pipeline continues to be robust. We continue to mandate primary relationships with the transactions that we bring in. What you will see differently on the production and deposit side is the CRE pipeline, which is now building, will begin to be executed. To Eric's earlier point, we will stabilize balances through the first half and look to grow from our June 30 numbers toward the end of the year on both sides of the balance sheet.

Eric Newell: On slide 29 of our deck, we have added disclosure about the C&I portfolio—both loans and deposits. You can see that we had 28% growth of deposits in the C&I line of business year over year. If you look at it from a dollars perspective, C&I more than funded itself dollar for dollar in 2025. I asked Evelyn if she could do it again in 2026, and we will see how she can deliver on that. Joking aside, our expectation is that you cannot fund that line of business dollar for dollar year in and year out, which informs some of the percentage growth that you see.

It is evidence of execution of the strategic plan—remixing the loan side to have more balance between C&I and CRE, which lends itself to operating account growth, relationship growth, reduction of brokered deposits, better cost of funds, higher NIM, higher pre-provision net revenue, and better ROA.

Christopher Marinac: Thank you, Eric. Last question on the FDIC expense. Is that going to be lumpy in terms of how it comes off in future quarters? Was this quarter any indication of where it could go in the near term?

Eric Newell: There are two drivers to our FDIC insurance expense: our overall asset quality metrics and structural liquidity improvement. We are getting a lot of benefit—and have been over the last year—from the improvement of structural liquidity. Looking back over the last two years, our net noncore funding dependency ratio in 2023 was around 30%, and now we are well below 12% to 15%. That has meaningfully contributed to a reduction in the FDIC insurance expense. As we continue to reduce the criticized and classified, and as the FDIC insurance calculation (which looks at modifications under assets in the call report) lessens on our balance sheet going forward, that will have a very positive contribution to FDIC premium expense.

I estimate, on a normalized AQ basis, we will probably be about half of where we are at right now on an annual run-rate basis. In terms of timing, there is always a lag because the premium is based off filings that are a quarter behind, but I would expect improvement in the back half of 2026 and definitely into 2027.

Christopher Marinac: And half is still using the March case that we just saw?

Eric Newell: I would take our full-year 2025 number and use that as the basis.

Christopher Marinac: Great. Thanks for clarifying that, and thank you all for the information this morning.

Operator: Thank you. Ladies and gentlemen, this will conclude the Q&A session. I will pass it back to the President and CEO, Susan Riel, for closing remarks.

Susan Riel: I want to thank all of you for your participation and your questions today, and we look forward to talking to you again next quarter. Have a great day.

Operator: Thank you. This concludes our conference. Thank you for participating, and you may now disconnect.