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EB

EAGLE BANCORP INC (EGBN)·Q3 2025 Earnings Summary

Executive Summary

  • Reported net loss of $67.5M ($2.22 diluted EPS) for Q3 2025, an improvement from Q2’s $69.8M loss, driven by a lower provision for credit losses ($113.2M vs $138.2M), despite higher net charge-offs and lower noninterest income .
  • Net interest margin expanded 6 bps to 2.43%, aided by reduced nonaccrual balances and lower funding costs; pre-provision net revenue was $28.8M (and $32.3M adjusted excluding $3.6M loan-sale losses), showing underlying core strength .
  • Liquidity and funding remain strong: available liquidity of ~$5.3B vs ~$2.3B uninsured deposits (>230% coverage); insured deposits rose to $7.2B (75.6% of total) .
  • Management executed an independent credit review covering ~85% of the commercial book and a supplemental internal review of pass-rated CRE; reserves and valuation actions were reinforced, with expectations that credit costs will not materially degrade book value going forward .

What Went Well and What Went Wrong

What Went Well

  • Net interest margin improved to 2.43% from 2.37%, with net interest income up slightly QoQ, as lower funding costs outpaced lower loan yields; management expects portfolio cash flows to be redeployed into higher-yielding assets over time .
  • Deposit quality and liquidity strengthened: insured deposits increased to $7.2B (75.6% of total); available liquidity and borrowing capacity reached ~$5.3B, covering uninsured deposits by >230% .
  • C&I franchise momentum: total C&I loans rose $105M QoQ and average C&I deposits grew 8.6% ($134M), reflecting relationship growth and retention; “our brand, service model, and people are earning and deepening trust” .

What Went Wrong

  • Elevated credit costs: provision for credit losses was $113.2M, with net charge-offs of $140.8M (annualized NCOs of 7.36%); criticized loans rose to $958.5M, even as nonperforming assets fell to $133.3M .
  • Noninterest income declined to $2.5M, including a $3.6M loss on sale of two loans and a $2.0M loss on investment securities, executed to reposition the investment portfolio and reduce higher-cost funding .
  • Leadership transition risk: the Chief Credit Officer notified of his voluntary resignation effective December 31, 2025; interim seasoned leaders appointed to ensure continuity in credit risk management .

Financial Results

Headline metrics vs prior periods (company-reported actuals)

MetricQ3 2024Q2 2025Q3 2025
Diluted EPS ($)$0.72 $(2.30) $(2.22)
Operating Revenue (Net Interest Income + Noninterest Income) ($MM)$78.79 $74.19 $70.65
Net Interest Income ($MM)$71.84 $67.78 $68.16
Net Interest Margin (%)2.37% 2.37% 2.43%
Pre-Provision Net Revenue (PPNR) ($MM)$35.18 $30.72 $28.76

S&P Global consensus vs actual (SPGI “Revenue” includes provision for credit losses)

MetricConsensus (Q3 2025)*Actual (Q3 2025)
Primary EPS Consensus Mean ($)$(0.79)*$(2.22)
Revenue Consensus Mean ($)$68.76MM*$(42.52)MM (Net Interest Income after Provision $(45.02)MM + Noninterest Income $2.50MM)
Primary EPS – # of Estimates4*—
Revenue – # of Estimates3*—
Target Price Consensus Mean ($)$19.88*$19.88*

Values retrieved from S&P Global.*

Interpretation: EPS missed by ~$1.43 and SPGI-defined revenue missed sharply as analysts did not anticipate the magnitude of provisions embedded in SPGI’s revenue construct .

Asset quality KPIs

KPIQ3 2024Q2 2025Q3 2025
Allowance for Credit Losses (ACL) / Total Loans (%)1.40% 2.38% 2.14%
Nonperforming Assets ($MM)$137.11 $228.88 $133.33
NPAs / Total Assets (%)1.22% 2.16% 1.23%
Net Charge-offs ($MM)$5.30 $83.88 $140.81
NCOs (Annualized) / Avg Total Loans (%)0.26% 4.22% 7.36%

Loan mix (Period-end balances)

CategoryQ3 2024 ($MM)Q2 2025 ($MM)Q3 2025 ($MM)
Commercial$1,154.35 $1,207.51 $1,217.81
Income-producing CRE$4,155.12 $3,768.88 $3,453.03
Owner-occupied CRE$1,276.24 $1,365.90 $1,494.71
Construction (Comm + Resi)$1,174.59 $1,211.73 $1,010.37
Total Loans$7,970.27 $7,721.66 $7,304.68

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Average Deposits GrowthFY 2025+4–6% growth (raised from +1–4% in Q2) 1–3% decrease (Q3 deck) Lowered
Average Loans GrowthFY 2025Flat (revised from +2–5% growth in Q2) 1–3% decrease (Q3 deck) Lowered
Net Interest MarginFY 2025“Modest improvement” (neutral IRR stance) 2.35%–2.50% (Q3 deck) Quantified; modest
Net Interest MarginFY 2026—2.50%–2.70% (Q3 deck) New
Noninterest Income GrowthFY 2025—+27–32% (Q3 deck) New
Noninterest Expense GrowthFY 2025—+1–3% (Q3 deck) New
Effective Tax RateFY 202537–47% (Q2 update) ~20% “period effective tax rate” (Q3 deck) Lowered
Dividend per ShareQ3 2025Evaluating reduction/suspension (Q2 commentary) $0.01 declared Lowered/implemented

Note: Q3 deck provides ranges and directional updates; Q2 call refined 2025 averages and tax rate.

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 2025)Previous Mentions (Q2 2025)Current Period (Q3 2025)Trend
Office CRE resolutionProvision increase; overlay raised; insured deposits stabilized Proactive resolution; large provision; overlay at 11.54%; HFS actions and LOIs; expected better Q3 than Q2 Independent review (~85% of commercial book); supplemental internal CRE review; substantial charge-offs; reserves validated Moving through cycle; validation strengthens confidence
Multifamily stressLimited commentaryCriticized inflows idiosyncratic; affordable housing and DC policies pressure NOI; valuations intact Stress framed as temporary cash flow issue; NOI at/above underwritten; DSCR pressured by rates; DC Bad Debt elevated; council action noted Monitoring; structural risk low vs office
Liquidity & uninsured depositsLiquidity ~$4.8B; insured deposit mix ~74.7% Liquidity ~$4.8B; >200% coverage of uninsured Liquidity ~$5.3B; >230% coverage; insured deposits 75.6% Improving coverage
NIM and funding costsNIM 2.28%; mix shift to interest-bearing deposits NIM 2.37% expanding; lower borrowings & deposit costs NIM 2.43%; further funding cost relief; brokered deposits reduced; redeployment plan Gradual improvement
FDIC assessmentsElevatedExpected to peak then decline as asset quality normalizes Declined QoQ; run-rate still high; normalization to help Opex Moderating over time
Capital returnDividend $0.165 in Q1/Q2 Evaluating reduction/suspension Dividend cut to $0.01 Conserving capital
Management changes——CCO resignation; interim leaders appointed Transition risk managed

Management Commentary

  • “We continued to execute our strategy to resolve asset quality challenges… Following an independent review… we took actions to reduce valuation risk in the office portfolio.” – Susan G. Riel (CEO) .
  • “Our available liquidity of $5.5 billion covers uninsured deposits of $2.3 billion by more than 230%.” – Earnings deck .
  • “Adjusted PP&R… $32.3 million, a sequential increase, reflecting the underlying strength of our core operating franchise.” – Eric Newell (CFO) .
  • “We believe that… provisions will be manageable and earnings will improve [in 2026].” – Susan G. Riel (CEO) .

Q&A Highlights

  • Dispositions of HFS loans: Carrying values now set at the low end of broker valuation ranges, including disposition costs, to avoid additional losses seen in two Q3 note sales; material action expected in Q4 2025 .
  • Reserve adequacy: Independent loan review (Moody’s baseline/stress) validated management’s view; ~88% of baseline loss potential already absorbed via charge-offs and overlays; expectation that book value won’t be degraded by credit going forward .
  • Multifamily: NOI performance at/above underwritten levels; DSCR pressure viewed as rate-related and temporary; DC bad debt issues noted with legislative action underway .
  • Government contractors: No meaningful stress observed despite shutdown; line utilization down ~30% vs earlier in year, suggesting stable cash flows .
  • Strategic optionality: Board remains focused on actions that increase shareholder value; M&A optionality acknowledged but priority is executing the plan (C&I growth, funding profile, PP&R) .

Estimates Context

  • EPS: Q3 2025 diluted EPS came in at $(2.22) vs S&P Global consensus of $(0.79)* – a significant miss driven by heavy provisions .
  • Revenue (SPGI-defined, includes provisions): Q3 2025 at $(42.5)MM vs $68.8MM consensus* – a severe miss as analysts did not embed the magnitude/timing of credit costs in the period .
  • Estimate coverage: EPS (# est.) = 4*; Revenue (# est.) = 3*; Target price consensus = $19.88*.

Values retrieved from S&P Global.*

Implication: Street models likely need to reduce near-term EPS/“revenue” (SPGI construct) while recognizing improving NIM and deposit mix; PP&R trend ex-loan sale losses supports medium-term normalization .

Key Takeaways for Investors

  • Credit clean-up advancing: independent and internal reviews plus sizeable charge-offs and overlays suggest bulk of office-related losses are recognized; management expects limited further book value impact from credit .
  • Core earnings resilient: NIM expansion, lower funding costs, and C&I-led growth underpin PP&R stability; adjusted PP&R increased sequentially despite market-driven losses on asset sales .
  • Strong liquidity and deposit quality: insured deposits at 75.6% and >230% uninsured coverage mitigate funding/contagion risk; brokered deposits and FHLB borrowings reduced .
  • Guidance reset more conservative for 2025 averages (deposits/loans down), with a clearer NIM range and lower expected tax rate; sets the stage for 2026 NIM improvement .
  • Dividend reduced to $0.01 reflects prudent capital preservation during credit resolution; revisit potential capital return as earnings normalize .
  • Near-term trading: headline misses vs consensus (EPS, SPGI-defined revenue) can pressure sentiment; watch for Q4 asset sales closing and stabilization in criticized balances as catalysts .
  • Medium-term thesis: improving funding mix, NIM tailwinds, expense moderation (FDIC premium normalization) and validated reserve framework support earnings normalization through 2026 .
Notes on SPGI “Revenue”: For banks, S&P Global often defines quarterly “revenue” as Net Interest Income after Provision for Credit Losses plus Noninterest Income, which can be negative when provisions exceed NII; company “Operating revenue” (NII + noninterest income) was $70.65MM in Q3 2025 **[1050441_0001050441-25-000122_erq3-2025xearningsreleas.htm:11]**.