Executive Summary

Q2 2025 delivered a net loss of $69.8M (-$2.30 diluted EPS) driven by a $138.2M provision for credit losses, while core PPNR improved to $30.7M and NIM expanded to 2.37% as funding costs declined .
Asset quality costs/metrics spiked: ACL/loans rose to 2.38% (from 1.63%), performing office coverage to 11.54%, NPAs/Assets climbed to 2.16%, and annualized NCOs reached 4.22% amid accelerated office loan remediation actions .
Management updated 2025 guidance (lower NIM and loan growth, higher noninterest income/expense growth and tax rate) and is evaluating a near-term dividend reduction/suspension to preserve flexibility during the credit resolution phase .
Versus S&P Global consensus, EPS missed materially (actual -$2.30 vs $0.51 estimate) and revenue disappointed; limited estimate coverage (2–3 estimates) accentuates volatility in reported “revenue” definitions for banks.*
Stock-reaction catalysts: outsized provision/NCOs, reserve build and criticized/classified loan migration; potential dividend action; modest NIM improvement path amid deposit repricing tailwinds .

What Went Well and What Went Wrong

What Went Well

NIM expanded 9 bps QoQ to 2.37% and net interest income increased by $2.1M QoQ as deposit/borrowing costs fell; “pre-provision net revenue increased $2.3 million…The increase in net interest income and lower non-interest expenses contributed…” .
Liquidity and funding robust: $4.8B available liquidity vs $2.3B uninsured deposits (>200% coverage), insured deposits at 75% of total; management emphasized strong loss absorption capacity and capital (CET1 14.01%, TCE 11.18%) .
Credit resolution progress: largest non-accrual office loan restructured into A/B note with A returned to accrual; LOIs on held-for-sale assets and targeted case-by-case exits underpin forward normalization strategy .

What Went Wrong

Provision for credit losses surged to $138.2M (vs $26.3M prior quarter), with NPAs rising to $228.9M; annualized NCOs jumped to 4.22% on accelerated office/land actions .
Criticized/classified loans increased to $875.4M, including idiosyncratic multifamily downgrades tied to affordable housing constraints and DC landlord remedies, heightening investor concern near-term .
End-period deposits declined $157.7M QoQ and total loans fell 2.8% QoQ, reflecting brokered/savings outflows and CRE paydowns despite C&I momentum; BV/share fell to $39.03 (-4.8% QoQ) .

Financial Results

Metric	Q4 2024	Q1 2025	Q2 2025
Net Interest Income ($USD Millions)	70.794	65.649	67.776
Noninterest Income ($USD Millions)	4.067	8.207	6.414
Provision for Credit Losses ($USD Millions)	12.132	26.255	138.159
Net (Loss) Income ($USD Millions)	15.290	1.675	(69.775)
Diluted EPS ($)	$0.50	$0.06	$(2.30)
Pre-Provision Net Revenue ($USD Millions)	30.329	28.405	30.720
Net Interest Margin (%)	2.29%	2.28%	2.37%

Segment/portfolio mix (period-end balances):

Loans ($USD Millions)	Q4 2024	Q1 2025	Q2 2025
Commercial	1,183.341	1,178.343	1,207.512
Income-Producing CRE	4,064.846	3,967.124	3,768.884
Owner-Occupied CRE	1,269.669	1,403.668	1,365.901
Construction (Comm/res)	1,210.763	1,210.788	1,211.728
Total Loans	7,934.888	7,943.306	7,721.664

Key KPIs:

KPI	Q4 2024	Q1 2025	Q2 2025
Deposits (period-end, $USD Billions)	$9.131	$9.277	$9.120
Uninsured Deposits ($USD Billions)	~$2.3	~$2.3	~$2.3
Liquidity Available ($USD Billions)	$4.6	$4.8	$4.8
CET1 (%)	14.63%	14.61%	14.01%
TCE Ratio (%)	11.02%	11.00%	11.18%
ACL / Loans (%)	1.44%	1.63%	2.38%
NPAs / Assets (%)	1.90%	1.79%	2.16%
Net Charge-offs (Annualized) / Avg Loans (%)	0.48%	0.57%	4.22%
Book Value per Share ($)	$40.60	$40.99	$39.03

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Net Interest Margin	FY 2025	2.40%–2.65%	2.35%–2.50%	Lowered
Noninterest Income Growth	FY 2025	35%–40%	40%–45%	Raised
Noninterest Expense Growth	FY 2025	3%–5%	5.5%–7.5%	Raised
Average Deposits Growth	FY 2025	1%–4%	4%–6%	Raised
Average Loans Growth	FY 2025	2%–5%	Flat	Lowered
Average Earning Assets	FY 2025	Flat	5%–7% decrease	Lowered
Period Effective Tax Rate	FY 2025	15%–17% (earlier view)	37%–47% (updated for loss)	Raised
Dividend Policy	Near term	$0.165 declared	Evaluating reduction/suspension	Under review

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 2024, Q1 2025)	Current Period (Q2 2025)	Trend
Office portfolio risk/remediation	New appraisal drove $74.9M office loan to nonaccrual; specific reserves; qualitative overlay emphasized	Accelerated actions (A/B restructure, HFS transfers, LOI executed); office overlay and specific reserves increased; expectation of improved provisioning trajectory into 2026	Actively resolving; larger near-term costs, plan to normalize by 2026
Deposit/funding mix	BTFP paid off; insured deposits ~76%; strategy to reduce wholesale/brokered funding	Insured deposits 75%, brokered down; core deposits up; available liquidity $4.8B vs $2.3B uninsured	Funding improved; liquidity strong
NIM outlook & sensitivity	NIM guide adjusted down; repricing/investment cash flows to support spread	NIM 2.37% QoQ; modest improvement expected with deposit repricing and lower borrowings; neutral to rate cuts	Modest improvement bias
Multifamily classification	Limited downgrades; idiosyncratic issues; DC eviction moratorium impact	Inflow of $129M multifamily to criticized/classified; characterized as idiosyncratic, not systemic; strong cap rates (<6%)	Watchful but contained
FDIC insurance expense	Elevated; potential relief as criticized/nonaccrual decline	Near-term run-rate ~$9M/quarter; meaningful decline expected upon asset quality normalization	Relief later as portfolio improves
Capital return/dividend	Dividend declared; capital strong; evaluating capital allocation	Considering near-term dividend reduction/suspension given loss/credit resolution needs	Likely more conservative near term
Bulk loan sale considerations	Tools on the table (A/B, sales); case-by-case cost-benefit	Case-by-case; strategic patience to optimize exit pricing; 2026 provision normalization target	Selective actions continue
C&I growth	Team build-out; pipeline robust; loan payoffs in CRE redeploy to C&I	>2/3 originations C&I; relationship deposits and treasury fees expected to build	Diversifying mix toward C&I

Management Commentary

“Our core profitability improvement this quarter, evident in the growth of pre-provision net revenue…expansion of core deposits, and reduced reliance on wholesale and brokered funding, reflects our disciplined execution of our strategic plan.” — Susan G. Riel, CEO .
“This quarter’s credit costs reflect decisive actions we are taking to address risk in our loan portfolio…necessary steps in our objective to drive long-term value creation for shareholders.” — Susan G. Riel, CEO .
“Credit loss reserve coverage rose to 2.38% of total loans…Performing office coverage…11.54%…Our capital position remains strong, with CET1 at 14.0% and TCE ratio exceeding 10%.” — Eric R. Newell, CFO .
“We maintain more than 2x coverage of uninsured deposits…PPNR increased…Net interest income rose…lower deposit and borrowing costs…” — Eric R. Newell, CFO .
“We believe the degree of inflow going forward is not going to be nearly to the same degree that it was in this past quarter.” — Ryan Riel, Chief Lending Officer (CRE), on NPAs cadence .

Q&A Highlights

Credit cycle and magnitude: Management frames Q2 as accelerated remediation, expecting similar net charge-offs in Q3 but with reserve actions mitigating incremental income statement impact; cycle-to-date office charge-offs ~$113M and office reserves ~$109.5M .
Asset sale pricing: Weighted average discount on active exits ~40% vs original balances including prior charge-offs; validates cautious approach to maximizing recoveries .
Deposit costs/NIM sensitivity: Digital deposits raised ~4.4%; significant rollovers from “5-handle” rates expected to reduce costs in H2; interest rate risk managed near neutral, limited NII sensitivity to Fed cuts .
FDIC insurance trajectory: Near-term quarterly run-rate ~ $9M; meaningful relief expected as criticized/nonaccrual decline over time .
Bulk sale vs strategic patience: Case-by-case exits to optimize loss minimization; target provision normalization around 2026 with some reserve release potential .

Estimates Context

Metric	Q2 2024	Q1 2025	Q2 2025
Primary EPS Consensus Mean ($)	0.425*	0.53*	0.51*
Primary EPS Actual ($)	0.67*	0.06*	-2.30*
Revenue Consensus Mean ($USD Millions)	78.15*	71.93*	73.29*
Revenue Actual ($USD Millions)	67.12*	47.90*	-65.73*
Revenue – # of Estimates	2*	2*	2*
Primary EPS – # of Estimates	2*	2*	3*
Target Price Consensus Mean ($)	19.88*	19.88*	19.88*
Target Price – # of Estimates	4*	4*	4*

Values retrieved from S&P Global.*
Implications: EPS materially missed Q2 2025 consensus (-$2.30 vs $0.51), with “revenue” significantly below estimates; limited estimate depth (2–3 contributors) and potentially non-standard “revenue” definitions for banks suggest anchoring investor comparisons on NII/PPNR and GAAP-reported lines .

Key Takeaways for Investors

Credit resolution accelerated: outsized Q2 provision/NCOs reflect proactive office/land exits; management expects similar NCOs near-term but aims to normalize provisioning by 2026 .
Reserves/Capital robust: ACL/loans 2.38%, office performing coverage 11.54%, CET1 14.01% provide loss absorption capacity as remediation continues .
Core profitability intact: PPNR improved and NIM expanded QoQ; deposit repricing and lower borrowings should aid NIM modestly into H2 2025 .
Funding strength: liquidity $4.8B vs $2.3B uninsured (>200% coverage) and insured deposits at 75% underpin stability during resolution .
Dividend watch: declared $0.165 but management evaluating near-term reduction/suspension to preserve flexibility; a cut would be a near-term stock overhang/risk .
Mix shift underway: C&I origination momentum and treasury management fees expected to build, offsetting CRE paydowns and aiding deposit mix/cost of funds .
Trading setup: near-term volatility tied to Q3 credit costs, dividend action, and NPAs cadence; medium-term thesis hinges on normalized credit costs, sustained NIM improvement, and C&I-led growth.

Appendix: Additional Data Points

Asset quality bridge: Nonperforming loan inflows of $222.8M (office/land/data center/life sciences); outflows of $182.8M (charge-offs, HFS moves, restructures) .
Period-end movements: Loans down 2.8% QoQ; deposits down 1.7% QoQ; other short-term borrowings reduced to $50M (−89.8% QoQ) via paydown of FHLB borrowings .
Efficiency ratio: 58.6% vs 61.5% QoQ; operating efficiency ratio consistent with prior commentary .
Book value per share: $39.03 (−4.8% QoQ) due to quarterly loss, partially offset by AFS portfolio valuation improvements .

EAGLE BANCORP INC (EGBN)·Q2 2025 Earnings Summary