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Item 2. Management’s Discussion and Analysis

2025-05-08 compared with 2024-11-07 · 410 added, 674 removed, 440 unchanged (71% of the section changed)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ("MD&A")

The following discussion provides information about the results of operations, financial condition, liquidity, and capital resources of Eagle Bancorp, Inc.

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The Company’s primary subsidiary is EagleBank (the "Bank"), and the Company’s other direct and indirect active subsidiaries are Bethesda Leasing, LLC, Eagle Insurance Services, LLC and Landroval Municipal Finance, Inc.

This discussion and analysis should be read in conjunction with the unaudited Consolidated Financial Statements and Notes thereto, appearing elsewhere in this report and the Management Discussion and Analysis in the Company's Annual Report on Form 10-K for the year ended December 31, 2023.

This discussion and analysis should be read in conjunction with the unaudited Consolidated Financial Statements and Notes thereto, appearing elsewhere in this report and MD&A in the Company's Annual Report on Form 10-K for the year ended December 31, 2024.

Caution About Forward-Looking Statements .

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These forward-looking statements represent plans, estimates, objectives, goals, guidelines, expectations, intentions, projections and statements of our beliefs concerning future events, business plans, objectives, expected operating results and the assumptions upon which those statements are based.

Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements and are typically identified with words such as "may," "will," "can," "anticipates," "believes," "expects," "plans," "outlook," "estimates," "potential," "assume," "probable," "possible," "continue," "should," "could," "would," "strive," "seeks," "deem," "projections," "forecast," "consider," "indicative," "uncertainty," "likely," "unlikely," "likelihood," "unknown," "attributable," "depends," "intends," "generally," "feel," "typically," "judgment," "subjective" and similar words or phrases.

Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements and are typically identified with words such as "may," "will," "can," "anticipates," "believes," "expects," "plans," "strategies," "outlook," "estimates," "potential," "assume," "probable," "possible," "continue," "should," "could," "would," "strive," "seeks," "deem," "projections," "forecast," "consider," "indicative," "uncertainty," "likely," "unlikely," "likelihood," "unknown," "attributable," "depends," "intends," "generally," "feel," "typically," "judgment," "subjective" and similar words or phrases.

For details on factors that could affect these expectations, see the risk factors contained in this report and the risk factors and other cautionary language included in the Company's Annual Report on Form 10-K for the year ended December 31, 2024, and in other periodic and current reports filed by the Company with the Securities and Exchange Commission ("SEC").

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Except to the extent required by applicable law or regulation, the Company undertakes no obligation to revise or update publicly any forward-looking statement for any reason.

The Company is a growth-oriented, one-bank holding company headquartered in Bethesda, Maryland, which is currently celebrating twenty-five years of successful operations.

The Company is a growth-oriented, one-bank holding company headquartered in Bethesda, Maryland.

The Company provides general commercial and consumer banking services through the Bank, its wholly owned banking subsidiary, a Maryland chartered bank which is a member of the Federal Reserve System ("Federal Reserve Board," "Federal Reserve" or "FRB").

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The Company focuses on relationship banking, providing each customer with a number of services and becoming familiar with and addressing customer needs in a proactive, personalized fashion.

The Bank currently has a total of twelve branch offices, including six in Suburban Maryland, three in Northern Virginia, and three in Washington, D.C.

The Bank also operates four lending offices, with two in Suburban Maryland, one in Northern Virginia, and one in Washington, D.C.

The Bank currently has a total of twelve branch offices (six in Suburban Maryland, three in Washington, D.C.

and three in Northern Virginia), a principal corporate office, four lending centers (two are co-located with branches and one co-located in the principal corporate office) and one operations center.

The Bank offers a broad range of commercial banking services to its business and professional clients, as well as full-service consumer banking services to individuals living and/or working primarily in the Bank's market area.

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The Bank generally sells the guaranteed portion of the SBA loans in a transaction apart from the loan origination generating noninterest income from the gains on sale, as well as servicing income on the portion participated.

The Company originates multifamily Federal Housing Administration ("FHA") loans through the Department of Housing and Urban Development's Multifamily Accelerated Program ("MAP").

The Company securitizes these loans through the Government National Mortgage Association ("Ginnie Mae") MBS I program and shortly thereafter sells the resulting securities in the open market to authorized dealers in the normal course of business, and periodically bundles and sells the servicing rights.

Up until the second half of 2024, the Company originated multifamily Federal Housing Administration ("FHA") loans through the Department of Housing and Urban Development's Multifamily Accelerated Program.

The Company securitized these loans through the Government National Mortgage Association ("Ginnie Mae") MBS I program and sold the resulting securities in the open market to authorized dealers in the normal course of business and periodically bundled and sold the servicing rights.

During the year ended December 31, 2024, the Company sold the remaining servicing rights to all multifamily FHA loans.

However, the Company maintains its licenses to operate in this business and is evaluating options for future activity.

Bethesda Leasing, LLC, a subsidiary of the Bank, holds title to and manages other real estate owned ("OREO") assets.

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The Company applies the accounting policies contained in Note 1 to Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2024 and Note 1 to the Consolidated Financial Statements included in this report.

There have been no significant changes to the Company's accounting policies as disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2023 except as indicated in "Accounting Standards Adopted in 2024" in Note 1 to the Consolidated Financial Statements in this report.

Allowance for Credit Losses on Loans and Reserve for Unfunded Commitments

A consequence of lending activities is that we may incur credit losses, so we record an allowance for credit losses ("ACL") with respect to loan receivables and a reserve for unfunded commitments ("RUC") as estimates of those losses.

There have been no significant changes to the Company's accounting policies as disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2024.

Allowance for Credit Losses and Provision for Unfunded Commitments

A consequence of lending activities is that we incur credit losses, so we record an allowance for credit losses ("ACL") with respect to loan receivables and a reserve for unfunded commitments (“RUC”) as estimates of those losses.

The amount of the ACL on loans is based on management's assessment of current expected credit losses ("CECL") in the portfolio.

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Our determination of these amounts requires significant reliance on estimates and significant judgment as to the amount and timing of expected future cash flows on loans, significant reliance on historical loss rates on homogenous portfolios, consideration of our quantitative and qualitative evaluation of economic factors and the reliance on our reasonable and supportable forecasts.

We estimate the ACL on loans using a quantitative model that uses a probability of default ("PD") / loss given default ("LGD") cash flow method with an exposure at default ("EAD") model to estimate expected credit losses for its loan segments.

The modeling of expected prepayment speeds is based on historical internal data and adjustments to account for loan-specific risk characteristics after pooling our loan portfolio based on similar risk characteristics.

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This analysis also determines how expected PD will react to forecasted levels of the loss drivers.

During the three months ended March 31, 2024, management enhanced the cash flow model to incorporate three additional macroeconomic variables.

During the prior year, management enhanced the cash flow model to incorporate three additional macroeconomic variables.

The four economic variables selected, national unemployment (original variable used), Commercial Real Estate ("CRE") Price Index, House Price Index and Gross Domestic Product ("GDP"), are incorporated by utilizing a Loss Driver Analysis approach that factors in historical losses, including during the Great Recession, of regional peer banks and the Bank.

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Management leverages economic projections from reputable and independent third parties to inform its loss driver forecasts over the forecast period.

Loans that have evidence of credit deterioration are excluded from the loan segments subject to the quantitative model above and are individually assessed.

Loans that have evidence of credit deterioration are excluded from the loan segments subject to the quantitative model described above and are individually assessed.

The RUC represents the expected credit losses on off-balance sheet commitments such as unfunded commitments to extend credit and standby letters of credit.

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The ACL also includes an amount for inherent risks not reflected in the historical analyses.

Relevant factors include, but are not limited to, concentrations of credit risk, changes in underwriting standards, experience and depth of lending staff and trends in delinquencies.

While our methodology in establishing the reserve for credit losses attributes portions of the ACL and RUC to the commercial and consumer portfolio segments, the entire ACL and RUC is available to absorb credit losses expected in the total loan portfolio and total amount of unfunded credit commitments, respectively.

Our model may reflect assumptions by management that are not covered by the qualitative and environmental factors, and we reevaluate all of its factors quarterly.

Relevant factors reflected in the qualitative component of the reserve include, but are not limited to, concentrations of credit risk, appraisal risk from volatility in the market, changes in underwriting standards, experience and depth of lending staff and trends in delinquencies.

Management has developed an analytical process to monitor the adequacy of the ACL.

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Material changes to these and other relevant factors may result in greater volatility to the reserve for credit losses, and therefore, greater volatility to our reported earnings.

For example, the effects of the COVID-19 pandemic and related hybrid or fully remote working environment has negatively impacted the performance outlook in the central business district office CRE segment of our loan portfolio, which informed our CECL economic forecast and continued to adversely impact our loss reserve as of September 30, 2024.

Refer to the "Provision for Credit Losses" and "Allowance for Credit Losses" of Management's Discussion and Analysis of Financial Condition and Results of Operations for more information on the provision for credit losses and ACL for the loan portfolio.

Goodwill represents the excess of the cost of an acquisition over the fair value of the net assets acquired.

Goodwill is subject to impairment testing, which must be conducted at least annually or upon the occurrence of a triggering event.

Various factors, such as the Company’s results of operations, the trading price of the Company’s common stock relative to the book value per share, macroeconomic conditions and conditions in the banking sector, inform whether a triggering event for an interim goodwill impairment test has occurred.

Goodwill is recorded and evaluated for impairment at its reporting unit, the Company.

The Company's policy is to test goodwill for impairment annually as of December 31, or on an interim basis if an event triggering an impairment assessment is determined to have occurred.

Testing of goodwill impairment comprises a two-step process.

First, the Company performs a qualitative assessment to evaluate relevant events or circumstances to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

If the Company determines that it is more likely than not that an impairment has occurred, it proceeds to the quantitative impairment test, whereby it calculates the fair value of the reporting unit and compares it with its carrying amount, including goodwill.

In its performance of impairment testing, the Company has the unconditional option to proceed directly to the quantitative impairment test, bypassing the qualitative assessment.

If the carrying amount of the reporting unit exceeds the fair value, the amount by which the carrying amount exceeds fair value, up to the carrying value of goodwill, is recorded through earnings as an impairment charge.

If the results of the qualitative assessment indicate that it is not more likely than not that an impairment has occurred, or if the quantitative impairment test results in a fair value of the reporting unit that is greater than the carrying amount, then no impairment charge is recorded.

During the second quarter ended June 30, 2024, Management determined that a triggering event had occurred as a result of the share price trading under book value for more than four quarters due to changes in macroeconomic conditions and market volatility in the financial markets and the banking industry due to the impact from rising interest rates which resulted in fluctuations of the Company's stock price with a sustained decrease.

As a result of the triggering event, the Company engaged a third-party service provider to assist Management with the determination of the fair value of the Company in the second quarter of 2024.

The resulting calculations indicated that the fair value did not exceed the carrying amount of the Company's only reporting unit as of May 31, 2024 which resulted in a determination that goodwill had become fully impaired.

The goodwill impairment charge of $104.2 million reduced fully the carrying value of the Company's goodwill as of May 31, 2024.

The impaired goodwill is primarily related to the acquisition of the Virginia Heritage Bank in October 2014.

The impairment charge did not impact our cash flows, liquidity ratios, core operating performance, or regulatory capital ratios.

The method employed to determine the fair value of the reporting unit was a combination of a risk-weighted income and market valuation methodologies, comprised of the discounted cash flow method, the guideline public company method and the guideline transaction method.

Significant judgment is necessary in the determination of the fair value of a reporting unit.

The income valuation methodology requires an estimation of future cash flows, considering the after-tax results of operations, the extent and timing of credit losses, and appropriate discount and growth rates.

Actual future cash flows may differ from forecasted results based on the assumptions used.

In performing the discounted cash flow analysis, the Company utilized multi-year cash projections that rely on internal forecasts of loan and deposit growth, bond mix, financing composition, market pricing of securities, credit performance, forward interest rates, future returns driven by net interest margin, fee generation and expense incurrence, industry and economic trends, and other relevant considerations.

The long-term growth rate used in the calculation of fair value was derived from published projections of the inflation rate and GDP, along with Management estimates.

The discount rate was calculated as the cost of equity capital using the modified capital asset pricing model, which includes variables including the risk-free interest rate, beta, equity risk premium, size premium, and company-specific risk premium.

The market approach considers a combination of price to tangible book value and price to earnings, adjusted based on companies similar to the reporting unit and adjusted for selected multiples, along with a control premium based on a review of transactions in the banking industry in order to calculate the indicated value of the Company's equity on a control, marketable basis.

RESULTS OF OPERATIONS

Earnings Summary

Three Months Ended September 30, 2024 vs.

Three Months Ended September 30, 2023

Net income for the three months ended September 30, 2024 was $21.8 million as compared to net income of $27.4 million for the same period in 2023, a $5.6 million decrease.

This decrease was primarily due to an increase in provision for credit losses of $4.5 million and an increase in noninterest expense of $6.0 million, partially offset by a reduction of income tax expense of $2.3 million.

The increase in the provision was due to an updated scoring of qualitative factors and an increase in the provision attributable to the reserve on the performing CRE office portfolio.

The increase in noninterest expense was due to higher FDIC insurance fees.

The reduction in income tax expense was due to lower pre-tax income period over period.

Total revenue (i.e.

net interest income plus noninterest income) was $78.8 million for the three months ended September 30, 2024 as compared to $77.1 million for the same period in 2023.

The most significant portion of revenue is net interest income, which was $71.8 million for the three months ended September 30, 2024, compared to $70.7 million for the same period in 2023, and was the primary driver for higher total revenue period over period.

Refer to the "Net Interest Income and Net Interest Margin" section below for additional details.

When the impact of the provision is excluded, pre-provision net revenue ("PPNR"), a non-GAAP measure, was $35.2 million for the three months ended September 30, 2024, as compared to $39.4 million for the same period in 2023.

The $4.2 million decrease was primarily due to an increase in noninterest expenses driven by higher FDIC insurance fees, partially offset by higher net interest income as discussed in the "Net Interest Income and Net Interest Margin" below.

Refer to the "Use of Non-GAAP Financial Measures" section for additional detail and a reconciliation of GAAP to non-GAAP financial measures.

The net interest margin, which measures the difference between interest income and interest expense (i.e.

net interest income) as a percentage of earning assets, was 2.37% for the three months ended September 30, 2024 and 2.43% for the same period in 2023.

The drivers of the change are detailed in the "Net Interest Income and Net Interest Margin" section below.

Total noninterest income for the three months ended September 30, 2024 increased to $7.0 million from $6.3 million for the same period in 2023, a 9.5% increase.

For further information on the components and drivers of these changes, see the "Noninterest Income" section below.

Noninterest expense totaled $43.6 million for the three months ended September 30, 2024, as compared to $37.6 million for same period in 2023, a $6.0 million increase.

The increase in noninterest expense was primarily due to higher FDIC insurance fees.

Additional details on other noninterest expenses are provided in "Noninterest Expense" section below.

The efficiency ratio was 55.4% for the three months ended September 30, 2024, as compared to 48.8% for the same period in 2023.

The adverse change in the efficiency ratio was primarily driven by an increase in noninterest expenses due to higher FDIC insurance fees.

For the three months ended September 30, 2024 and 2023, the Company had average assets of $12.4 billion and $11.9 billion, respectively, the increase in which was primarily attributable to an increase in average interest-bearing deposits with other banks and other short-term investments over the comparative period.

For the three months ended September 30, 2024 and 2023, the Company had average common equity of $1.2 billion and $1.2 billion, respectively.

For the three months ended September 30, 2024 and 2023, the Company had average tangible common equity, a non-GAAP measure, of $1.2 billion and $1.1 billion, respectively.

Refer to the "Use of Non-GAAP Financial Measures" section for additional detail and a reconciliation of GAAP to non-GAAP financial measures.

For the three months ended September 30, 2024, the Company reported an annualized return on average assets ("ROAA") of 0.7%, as compared to 0.9% for the same period in 2023.

The annualized return on average common equity ("ROACE") for the three months ended September 30, 2024 was 7.2% as compared to 8.8% for the same period in 2023.

The annualized return on average tangible common equity ("ROATCE") for the three months ended September 30, 2024 was 7.2% as compared to 9.6% for the same period in 2023.

The adverse change in returns was primarily attributable to the reduction in net income.

Refer to the "Use of Non-GAAP Financial Measures" section for additional detail and a reconciliation of GAAP to non-GAAP financial measures.

See Notes 1, 3 and 4 to the Consolidated Financial Statements, the “Provision for Credit Losses” and "Allowance for Credit Losses" sections below for more information on the provision for credit losses and ACL for the loan portfolio.

RESULTS OF OPERATIONS

Earnings Summary

Nine Months Ended September 30, 2024 vs.

Nine Months Ended September 30, 2023

Net loss for the nine months ended September 30, 2024 was $62.3 million, as compared to net income of $80.3 million for the same period in 2023, a decrease of $142.6 million.

This decrease was primarily attributable to the recognition of goodwill impairment of $104.2 million in the second quarter of 2024 and an increase in provision for credit losses of $37.2 million, partially offset by a reduction of income tax expenses of $10.0 million.

For more information on the drivers and the components of these changes, see the "Provision for Credit Losses" and "Income Tax Expenses" sections below.

When the impact of the provision and goodwill impairment are excluded, operating pre-provision net revenue ("PPNR"), a non-GAAP measure, was $107.8 million for the nine months ended September 30, 2024, as compared to $120.0 million for the same period in 2023.

The $12.2 million decrease was primarily due to an increase in noninterest expenses driven by higher FDIC insurance fees.

Refer to the "Use of Non-GAAP Financial Measures" section for additional detail and a reconciliation of GAAP to non-GAAP financial measures.

Total revenue (i.e.

net interest income plus noninterest income) was $233.8 million for the nine months ended September 30, 2024, as compared to $236.2 million for the same period in 2023.

The net interest margin, which measures the difference between interest income and interest expense (i.e.

net interest income) as a percentage of earning assets, was 2.40% for the nine months ended September 30, 2024 and 2.56% for the same period in 2023.

The drivers of the change are detailed in the "Net Interest Income and Net Interest Margin" section below.

Total noninterest income for the nine months ended September 30, 2024 decreased to $15.9 million from $18.6 million for the same period in 2023, a 14.9% decrease.

For further information on the components and drivers of these changes, see the "Noninterest Income" section below.

The efficiency ratio, inclusive of the goodwill impairment charge, was 98.43% for the nine months ended September 30, 2024 as compared to 49.19% for the same period in 2023.

Excluding the goodwill impairment charge, the operating efficiency ratio (non-GAAP) was 53.87%.

Refer to the "Use of Non-GAAP Financial Measures" section for additional detail and a reconciliation of GAAP to non-GAAP financial measures.

For the nine months ended September 30, 2024 and 2023, the Company had average assets of $12.5 billion and $11.8 billion, respectively, the increase in which was primarily attributable to an increase in average interest-bearing deposits with other banks and other short-term investments over the comparative period.

For the nine months ended September 30, 2024 and 2023, the Company had average common equity of $1.3 billion and $1.2 billion, respectively.

For the nine months ended September 30, 2024 and 2023, the Company had average tangible common equity, a non-GAAP measure, of $1.2 billion and $1.1 billion, respectively.

Refer to the "Use of Non-GAAP Financial Measures" section for additional detail and a reconciliation of GAAP to non-GAAP financial measures.

For the nine months ended September 30, 2024, the Company reported an annualized ROAA, inclusive of the goodwill impairment charge, of (0.67)%, as compared to 0.91% for the same period in 2023.

The annualized ROACE for the nine months ended September 30, 2024 was (6.65)% as compared to 8.66% for the same period in 2023.

The annualized ROATCE, a non-GAAP measure, for the nine months ended September 30, 2024 was (7.0)% as compared to 9.45% for the same period in 2023.

The adverse change in returns was primarily attributable to the recognition of goodwill impairment of $104.2 million in 2024.

Excluding the goodwill impairment charge, operating annualized ROAA (non-GAAP) in 2024 was 0.45%, operating annualized return on common equity (non-GAAP) was 4.47%, and operating annualized return on tangible common equity (non-GAAP) was 4.72%.

Refer to the "Use of Non-GAAP Financial Measures" section for additional detail and a reconciliation of GAAP to non-GAAP financial measures.

Three Months Ended March 31, 2025 Compared with Three Months Ended March 31, 2024

Net income for the three months ended March 31, 2025 was $1.7 million, as compared to net loss of $0.3 million, for the same period in 2024.

This increase was primarily attributable to lower provision for credit losses and higher noninterest income, partially offset by lower net interest income and higher noninterest expense during the current period.

See the discussion below for more information on these drivers and the components of these changes.

Net interest income decreased to $65.6 million for three months ended March 31, 2025 compared to $74.7 million for the three months ended March 31, 2024.

The net interest margin, which measures the difference between interest income and interest expense as a percentage of earning assets, was 2.28% for three months ended March 31, 2025 and 2.43% for three months ended March 31, 2024, a decrease of 15 basis points.

For further information on the components and drivers of these changes, see the "Net Interest Income and Net Interest Margin" section below.

Total noninterest income in three months ended March 31, 2025 was $8.2 million, as compared to $3.6 million in three months ended March 31, 2024, a 129% increase, primarily driven by higher income from bank owned life insurance (“BOLI”) during the current period.

See "Other Earnings Assets" section below for further discussion on BOLI.

The provision for credit losses in the three months ended March 31, 2025 was $26.3 million as compared to $35.2 million in three months ended March 31, 2024.

For information on the components and drivers of these changes see "Provision for Credit Losses" section below.

Noninterest expenses in three months ended March 31, 2025 totaled $45.5 million, as compared to $40.0 million for the same period in 2024, a 14% increase.

The increase was primarily attributable to higher FDIC insurance assessments during the current period.

Additional details on these expenses and other noninterest expenses are provided in "Noninterest Expense" section below.

The efficiency ratio, which measures the ratio of noninterest expense to total net revenue (the sum of net interest income and non-interest income), was 61.54% for three months ended March 31, 2025 as compared to 51.09% for same period in 2024.

In terms of the average asset composition or mix, loans, which generally have higher yields than securities and other earning assets, represented 68% and 65% of average earning assets for three months ended March 31, 2025 and 2024, respectively.

For three months ended March 31, 2025, as compared to same period in 2024, average loans, excluding loans held for sale, decreased by $55.2 million, or 1%, driven by payoffs and paydowns that outpaced originations and advances.

Average investment securities for three months ended March 31, 2025 were 19% of average earning assets compared to 20% for same period in 2024.

The combination of federal funds sold and interest bearing deposits with other banks represented 12% and 15% of average earning assets for three months ended March 31, 2025 and 2024, respectively.

The ratio of common equity to total assets was relatively flat at 11.00% as of March 31, 2025, compared to 11.02% as of December 31, 2024.

For three months ended March 31, 2025, the return on average assets (“ROAA”) was 0.06%, as compared to (0.01)% for same period in 2024.

Total shareholders’ equity was $1.24 billion as of March 31, 2025 as compared to $1.23 billion as of December 31, 2024, an increase of 2%.

The return on average common equity (“ROACE”) for three months ended March 31, 2025 was 0.55% as compared to (0.11)% for same period in 2024.

Net Interest Income and Net Interest Margin

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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 includes 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 the Federal Reserve's Bank Term Funding Program ("BTFP") and Discount Window, and subordinated notes.

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.

Net interest income was $71.8 million for the three months ended September 30, 2024, as compared to $70.7 million for the same period in 2023.

Net interest income increased for the three months ended September 30, 2024 primarily due to an increase in average loan balances ($8.0 billion compared to $7.8 billion) and yields increased from 6.73% to 6.93%.

Additionally, average balances for interest bearing deposits with other banks increased from $1.1 billion to $1.6 billion.

These increases were offset by higher average balances in total interest bearing deposits from $6.7 billion to $7.4 billion.

The net interest margin decreased by 6 basis points in the three months ended September 30, 2024, as compared to the three months ended September 30, 2023, (from 2.43% to 2.37%).

The yield on earning assets increased by 19 basis points (from 5.54% to 5.73%) while cost of funds increased 30 basis points (from 3.39% to 3.69%).

Average loans were $8.0 billion for the three months ended September 30, 2024 compared to $7.8 billion for the same period in 2023.

Additionally, average short-term borrowings were unchanged at $1.6 billion for the three months ended September 30, 2024 compared to the three months ended September 30, 2023.

Overall yields on interest earning assets moved higher during the three months ended September 30, 2024 as compared to the same period in 2023, as variable rate loans adjusted upwards.

Additionally, rates on interest bearing liabilities moved higher during the three months ended September 30, 2024 as compared to the same period in 2023, as funding costs increased.

Net interest income was $217.9 million for the nine months ended September 30, 2024, as compared to $217.6 million for the same period in 2023.

Net interest income increased for the nine months ended September 30, 2024 primarily due to higher average loan balances ($8.0 billion compared to $7.8 billion) and yields (6.93% compared to 6.58%) as compared to September 30, 2023.

This was partially offset by increases in average deposit rates (4.32% compared to 4.03%), increases in interest bearing deposits ($7.3 billion vs $6.0 billion) and increases in other borrowing rates (4.94% compared to 4.83%) for the nine months ended September 30, 2024 as compared to the same period in 2023.

The net interest margin decreased by 16 basis points in the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023 (from 2.56% to 2.40%).

The yield on earning assets increased by 33 basis points (from 5.39% to 5.72%) while cost of funds increased 55 basis points (from 3.08% to 3.63%).

Overall yields on interest earning assets moved higher during the nine months ended September 30, 2024 as compared to the same period in 2023, as variable rate loans adjusted upwards.

Additionally, rates on interest bearing liabilities moved higher during the nine months ended September 30, 2024 as compared to the same period in 2023, as funding costs increased due to a combination of interest rates and mix of funding sources utilized.

Average loans increased to $8.0 billion for the nine months ended September 30, 2024 compared to $7.8 billion for the same period in 2023.

Average interest bearing deposits increased to $7.3 billion for the nine months ended September 30, 2024 from $6.0 billion for the nine months ended September 30, 2023, while average noninterest bearing demand deposits decreased to $2.0 billion for the nine months ended September 30, 2024 from $2.8 billion for the nine months ended September 30, 2023.

Additionally, average short-term borrowings remained unchanged at $1.7 billion for the nine months ended September 30, 2024 and 2023.

The tables below present the average balances and rates of the major categories of the Company's assets and liabilities for the three and nine months ended September 30, 2024 and 2023.

Included in the tables are measurements of interest rate spread and margin.

Net interest income for the three months ended March 31, 2025 was $65.6 million compared to $74.7 million for the same period in 2024.

The 12% decrease for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024 was primarily due to increases in average deposits ($8.0 billion compared to $7.4 billion, respectively) offset by decreases in average deposit rates (3.91% compared to 4.29%, respectively), and by a decrease in the level of other short term borrowings ($682.2 million compared to $1.8 billion, respectively) partially offset by an increase in the interest rate paid on other short-term borrowings (5.19% compared to 4.75%, respectively).

Additionally, average loan balances ($7.9 billion compared to $8.0 billion, respectively) and yields (6.45% compared to 6.95%, respectively) were slightly lower.

Net interest margin decreased by 15 basis points to 2.28% in three months ended March 31, 2025 from 2.43% in three months ended March 31, 2024.

The decrease reflects the increase in deposits and related cost of funds and the decrease in the yield on loans.

The cost of funds on interest-bearing liabilities decreased 23 basis points from 3.58% in three months ended March 31, 2024 to 3.35% in three months ended March 31, 2025, while the yield on interest-earning assets decreased by 35 basis points from 5.71% in three months ended March 31, 2024 to 5.36% in three months ended March 31, 2025.

Average loans held for investment were $7.9 billion for the three months ended March 31, 2025, compared to $8.0 billion for the same period in 2024.

Average investment securities were $2.3 billion for the three months ended March 31, 2025, compared to $2.5 billion for the same period in 2024.

Average interest-bearing deposits with other banks and other short term investments were $1.4 billion for three months ended March 31, 2025 compared to $1.8 billion for the same period in 2024.

Interest income on loans, the largest component of interest income on earning assets, had a yield of 6.45% in three months ended March 31, 2025, compared to 6.95% in same period in 2024, a decrease of 50 basis points.

Average interest-bearing deposits increased from $7.4 billion in the three months ended March 31, 2024 to $8.0 billion in the three months ended March 31, 2025, while average noninterest bearing demand deposits decreased to $1.9 billion for the three months ended March 31, 2025 from $2.1 billion for the three months ended March 31, 2024.

Average borrowings decreased from $1.8 billion in the three months ended March 31, 2024 to $0.8 billion in the three months ended March 31, 2025.

Refer to the "Deposits and Other Borrowings" section below for further discussion of deposits and borrowings.

The table below presents the average balances and rates of the major categories of the Company's assets and liabilities for the three months ended March 31, 2025 and 2024.

Included in the table 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.

5 unchanged sentences

(dollars in thousands)

Three Months Ended September 30,

Three Months Ended March 31,

Balance Interest Average

Yield/Rate Average

Balance Interest Average

2 unchanged sentences

Loans held for sale 169 — — % — — — %

4,936 1 0.08 % — — — %

Loans (1) (2)

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Investment securities held-to-maturity 933,880 5,055 2.20 % 1,011,231 5,433 2.16 %

974,366 5,242 2.14 % 1,047,515 5,606 2.12 %

Federal funds sold 5,410 27 2.02 % 7,051 66 3.76 %

Total interest earning assets $ 11,640,162 $ 153,878 5.36 % $ 12,365,497 $ 175,602 5.71 %

Total noninterest earning assets 397,006 489,683

Noninterest earning assets 596,585 508,987

allowance for credit losses 118,557 90,014

7 unchanged sentences

Total interest bearing deposits 8,001,937 77,211 3.91 % 7,444,201 79,383 4.29 %

Customer repurchase agreements 38,045 332 3.47 % 36,082 311 3.42 %

Customer repurchase agreements and federal funds purchased 36,572 260 2.88 % 36,084 315 3.51 %

Other short-term borrowings

Long-term borrowings 824 — — % — — — %

Total interest bearing liabilities 9,083,484 101,970 4.47 % 8,344,038 90,430 4.30 %

Noninterest bearing liabilities:

Noninterest bearing demand 1,915,666 2,248,782

Other liabilities 160,272 114,923

Total noninterest bearing liabilities 2,075,938 2,363,705

Shareholders' Equity 1,201,477 1,235,162

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 12,360,899 $ 11,942,905

Net interest income $ 71,843 $ 70,719

Net interest spread 1.26 % 1.24 %

Net interest margin 2.37 % 2.43 %

Cost of funds 3.69 % 3.39 %

(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 $4.1 million for the three months ended September 30, 2024 and 2023, respectively.

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

Eagle Bancorp, Inc.

Consolidated Average Balances, Interest Yields and Rates (Unaudited)

(dollars in thousands)

Nine Months Ended September 30,

Balance Interest Average

Yield/Rate Average

Balance Interest Average

Interest earning assets:

Interest bearing deposits with other banks and other short-term investments $ 1,624,575 $ 65,726 5.40 % $ 905,414 $ 34,070 5.03 %

Loans held for sale (1)

682,222 8,733 5.19 % 1,796,863 21,206 4.75 %

Loans (1) (2)

8,006,298 415,345 6.93 % 7,766,212 382,043 6.58 %

Investment securities available for sale (2)

1,491,608 21,631 1.94 % 1,613,257 24,463 2.03 %

Investment securities held-to-maturity ( 2)

993,553 16,032 2.16 % 1,067,628 17,055 2.14 %

Federal funds sold 10,037 311 4.14 % 9,392 202 2.88 %

Total interest earning assets 12,130,400 519,146 5.72 % 11,363,523 457,906 5.39 %

Total noninterest earning assets 471,966 492,069

allowance for credit losses (100,592) (77,342)

Total noninterest earning assets 371,374 414,727

TOTAL ASSETS $ 12,501,774 $ 11,778,250

LIABILITIES AND SHAREHOLDERS’ EQUITY

Interest bearing liabilities:

Interest bearing transaction $ 1,708,797 $ 47,526 3.72 % $ 1,173,823 $ 29,533 3.36 %

Savings and money market 3,332,552 104,277 4.18 % 3,135,300 96,990 4.14 %

Time deposits 2,307,756 85,616 4.96 % 1,642,805 52,782 4.30 %

Total interest bearing deposits 7,349,105 237,419 4.32 % 5,951,928 179,305 4.03 %

Customer repurchase agreements 37,578 977 3.47 % 38,473 946 3.29 %

Other short-term borrowings 1,698,170 62,856 4.94 % 1,665,293 60,101 4.83 %

Long-term borrowings 76,146 2,025 10.79 % — — — %

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(1) Loans placed on nonaccrual status are included in average balances.

Net loan fees and late charges included in interest income on loans totaled $12.9 million and $12.0 million for the nine months ended September 30, 2024 and 2023, respectively.

Net loan fees and late charges included in interest income on loans totaled $3.8 million and $5.1 million, for the three months ended March 31, 2025, and 2024, respectively.

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

Rate/Volume Analysis of Net Interest Income

The rate/volume tables below present 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.

Three Months Ended September 30, 2024 compared with the Three Months Ended September 30, 2023

(dollars in thousands) Change Due to Volume

Change Due to Rate

Total Increase (Decrease)

Interest earned on

Loans $ 3,926 $ 3,636 $ 7,562

Loans held for sale 1 — 1

Investment securities available-for-sale (391) (399) (790)

Investment securities held-to-maturity (391) 27 (364)

Interest bearing bank deposits 6,014 215 6,229

Federal funds sold 23 3 26

Total interest income 9,182 3,482 12,664

Interest paid on

Interest bearing transaction 2,115 (304) 1,811

Savings and money market 1,481 560 2,041

Time deposits 4,156 2,253 6,409

Customer repurchase agreements 17 4 21

Other borrowings 69 1,189 1,258

Total interest expense 7,838 3,702 11,540

Net interest income $ 1,344 $ (220) $ 1,124

Nine Months Ended September 30, 2024 compared with the Nine Months Ended September 30, 2023

(dollars in thousands) Change Due to Volume

Change Due to Rate

Total Increase (Decrease)

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.

Three Months Ended March 31, 2025 Compared with

Three Months Ended March 31, 2024

(dollars in thousands) Change

Volume Change

Interest earned on:

Loans $ (954) $ (10,904) $ (11,858)

Loans held for sale 122 (94) 28

Investment securities available-for sale (930) 541 (389)

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Customer repurchase agreements 4 (59) (55)

Other borrowings 1,187 1,568 2,755

Other short-term borrowings (12,201) 765 (11,436)

Long-term borrowings 92 896 988

Total interest expense $ (4,359) $ (8,316) $ (12,675)

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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 available-for-sale and held-to-maturity investment securities.

The amount of the ACL on loans is based on management's assessment of CECL in the portfolio.

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 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.

Refer to the discussion under "Critical Accounting Policies and Estimates" in Management's Discussion and Analysis of Financial Condition and Results of Operations above and in Note 1 to the Consolidated Financial Statements in "Item 1 - Financial Information" for an overview of the methodology management employs on a quarterly basis to assess the adequacy of the ACL and the provisions charged to expense.

Also, refer to the table in the "Allowance for Credit Losses" section in Management's Discussion and Analysis of Financial Condition and Results of Operations, which reflects activity in the ACL.

During the three months ended September 30, 2024, the Company recorded a provision for credit losses of $10.9 million on its loan portfolio and incurred $5.3 million in net charge-offs to its ACL.

The provision for credit losses on loans for the same period in 2023 was $5.6 million and there were $340 thousand of net charge-offs in its ACL.

During the nine months ended September 30, 2024, the Company recorded a provision for credit losses of $54.9 million and net charge-offs of $29.0 million on its loan portfolio.

The provision for credit losses on loans for the same period in 2023 was $15.8 million and there were $6.9 million of net charge-offs in its ACL.

The change in provision for credit losses during the three and nine months ended September 30, 2024, was primarily attributable to the following factors:

1) changes in the qualitative component of the model relating to CRE office properties;

2) enhancements to the quantitative model during Q1 to include additional economic factors;

and, 3) specific reserves on individually evaluated non-performing loans.

Additionally, the change in provision for credit losses during the nine months ended September 30, 2024, was also impacted by the partial charge off of a CRE office relationship after an updated valuation was received in the first quarter 2024.

Refer to the discussion under “Critical Accounting Policies and Estimates” above and in Note 1 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.

The provision for credit losses on loans for the three months ended March 31, 2025 was $26.3 million and there were $11.2 million of net charge offs in its ACL compared to $35.2 million and $21.4 million respectively, during the same period in 2024.

The change in the provision for credit losses on the loan portfolio for the three months ended March 31, 2025 was primarily attributable to the replenishment of the reserve following net charge-offs of $11.2 million, as mentioned above, and an increase in the qualitative overlay.

The increase in the overlay relates to updated assumptions associated with the probability of default and probability of loss associated with commercial real estate office loans.

For a discussion of the adverse effects changes in government spending and the size of the federal workforce have had on our loan portfolio and provision for credit losses, and the associated risks of future increases in our provision for credit losses from these or further such changes, see "Item 1A.

Risk Factors" below.

The provision for credit losses for the held-to-maturity securities portfolio was recorded primarily on several corporate bonds.

During the three months ended September 30, 2024 and 2023, there was a reversal of provision for credit losses of $775 thousand and a provision expense of $1 thousand, respectively, for the held-to-maturity securities portfolios.

During the nine months ended September 30, 2024 and 2023, there was a reversal of provision for credit losses of $719 thousand and a provision expense of $1.2 million, respectively, for the held-to-maturity securities portfolios.

There was no provision for credit losses on the available-for-sale securities portfolio for the three and nine months ended September 30, 2024 and 2023.

The provision for unfunded commitments is presented separately on the Consolidated Statements of Operations.

This provision considers the probability that unfunded commitments will fund.

During the three months ended September 30, 2024 and 2023, a reversal of provision of $1.6 million and $839 thousand, respectively, were recorded for unfunded commitments.

During the nine months ended September 30, 2024 and 2023, a provision reversal of $529 thousand and provision expense of $327 thousand, respectively, were recorded for unfunded commitments.

During the three months ended March 31, 2025, there was a reversal of provision for credit losses of $54 thousand for the held-to-maturity securities portfolios, compared to a provision expense of $1 thousand for the three months ended March 31, 2024.

The provision for credit losses for unfunded commitments is presented separately on the Statement of Operations.

This provision considers the probability that unfunded commitments will fund among other factors.

There was a reversal of $297 thousand in three months ended March 31, 2025, compared to a provision expense of $456 thousand in three months ended March 31, 2024, primarily due to lower unfunded commitments in our construction portfolio during the current period.

Noninterest Income

Noninterest income includes service charges on deposits, gain on sale of loans, gains and losses on sale of investment securities, income from bank owned life insurance ("BOLI") and other income.

The following table summarizes the comparative noninterest income for the three and nine months ended September 30, 2024 and 2023:

Three Months Ended September 30,

(dollars in thousands) 2024 2023 Dollar Change Percent Change

Service charges on deposits $ 1,747 $ 1,631 $ 116 7 %

Gain (loss) on sale of loans 20 (5) 25 (500) %

Net gain on sale of investment securities

3 5 (2) (40) %

Increase in the cash surrender value of bank-owned life insurance 731 669 62 9 %

Other income 4,450 4,047 403 10 %

Total $ 6,951 $ 6,347 $ 604 10 %

Nine Months Ended September 30,

Noninterest income includes service charges on deposits, gain on sale of investment securities, income from BOLI and other income.

The following table summarizes the comparative noninterest income for the three months ended March 31, 2025 and 2024:

Three Months Ended March 31,

(dollars in thousands) 2025 2024 Dollar Change Percent Change

Service charges on deposits $ 1,743 $ 1,699 $ 44 3 %

Gain on sale of loans

57 395 (338) (86) %

Net gain (loss) on sale of investment securities 10 (14) 24 (171) %

Net loss on sale of investment securities 4 4 — — %

Increase in the cash surrender value of bank-owned life insurance 4,282 703 3,579 509 %

1 unchanged sentence

Total $ 8,207 $ 3,589 $ 4,618 129 %

Total noninterest income for the three months ended September 30, 2024 increased to $7.0 million from $6.3 million for the three months ended September 30, 2023.

The increase was primarily driven by gains on the sale of mortgage servicing rights and higher swap fee income.

Total noninterest income for the nine months ended September 30, 2024 decreased to $15.9 million from $18.6 million for the nine months ended September 30, 2023.

The decrease was primarily based on the prior year period nonrecurring items including income from Small Business Investment Companies ("SBIC") fund and swap fees.

Total noninterest income for the three months ended March 31, 2025 was $8.2 million as compared to $3.6 million for the three months ended March 31, 2024.

This 129% increase was primarily driven by a new BOLI investment of $200 million in the quarter ended March 31, 2025.

Noninterest Expense

Total noninterest expense includes salaries and employee benefits, premises and equipment expenses, marketing and advertising, data processing, legal, accounting and professional, Federal Deposit Insurance Corporation ("FDIC") insurance assessments, and other expenses.

The following table summarizes the comparative noninterest expense for the three and nine months ended September 30, 2024 and 2023:

Three Months Ended September 30,

(dollars in thousands) 2024 2023 Dollar Change

Percent Change

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 following table summarizes the comparative noninterest expense for the three months ended March 31, 2025 and 2024:

Three Months Ended March 31,

(dollars in thousands) 2025 2024 Dollar Change Percent Change

Salaries and employee benefits $ 21,968 $ 21,726 $ 242 1 %

6 unchanged sentences

Total $ 45,451 $ 39,997 $ 5,454 14 %

Nine Months Ended September 30,

(dollars in thousands)

2024 2023 Dollar Change

Percent Change

Salaries and employee benefits $ 65,171 $ 67,680 $ (2,509) (4) %

Premises and equipment expenses 8,747 9,639 (892) (9) %

Marketing and advertising 4,109 2,288 1,821 80 %

Data processing 10,223 9,647 576 6 %

Legal, accounting and professional fees 8,645 8,065 580 7 %

FDIC insurance 19,728 7,409 12,319 166 %

Goodwill impairment 104,168 — 104,168 — %

Other expenses 9,311 11,467 (2,156) (19) %

$ 230,102 $ 116,195 $ 113,907 98 %

Total noninterest expense was $43.6 million for the three months ended September 30, 2024, as compared to $37.6 million for the three months ended September 30, 2023, a 15.9% increase.

The increase for the three months ended September 30, 2024 was primarily due to increases in FDIC deposit insurance assessments.

Total noninterest expense was $230.1 million for the nine months ended September 30, 2024, as compared to $116.2 million for the nine months ended September 30, 2023, a 98.0% increase.

The increase for the nine months ended September 30, 2024 was primarily due to the goodwill impairment charge of $104.2 million to reduce fully the carrying value of the Company's goodwill.

Refer to the "Critical Accounting Policies" section for additional details.

Excluding the goodwill impairment charge, total operating noninterest expense (non-GAAP) was $125.9 million for the nine months ended September 30, 2024.

Refer to the "Use of Non-GAAP Financial Measures" section for additional details and a reconciliation of GAAP to non-GAAP financial measures.

Salaries and employee benefits were $21.7 million and $21.5 million, respectively, for the three months ended September 30, 2024 and September 30, 2023.

Salaries and employee benefits were $65.2 million and $67.7 million, respectively, for the nine months ended September 30, 2024 and September 30, 2023.

The decrease in salaries and employee benefits over the comparative nine months ended September 30, 2024 and 2023 was primarily due to reduced incentive accruals, payroll taxes and healthcare costs.

FDIC insurance expense was $7.4 million for the three months ended September 30, 2024 compared to $3.3 million, for the same period in 2023, a 121% increase.

FDIC insurance expense was $19.7 million for the nine months ended September 30, 2024 compared to $7.4 million, for the same period in 2023, a 166% increase.

The increase in FDIC insurance expense over the comparative three and nine months ended September 30, 2024 and 2023 was primarily due to increases in FDIC deposit insurance assessments.

Marketing expenses were $1.6 million and $0.8 million, respectively, for the three months ended September 30, 2024 and September 30, 2023, an 107% increase.

Marketing expenses were $4.1 million and $2.3 million, respectively, for the nine months ended September 30, 2024 and September 30, 2023, an 80% increase.

The increase in marketing expenses over the comparative three and nine months ended September 30, 2024 and 2023 was primarily due to higher marketing expenses related to our digital banking channel.

Legal, accounting and professional fees were $3.4 million and $8.6 million for the three and nine months ended September 30, 2024, respectively, compared to $2.2 million and $8.1 million for the three and nine months ended September 30, 2023, respectively, an increase of $1.2 million and an increase of $0.5 million for the comparative periods, respectively.

The major components of other expenses include franchise taxes, director compensation and insurance expense.

Other expenses decreased to $3.3 million from $3.5 million, or 6.6%, for the three months ended September 30, 2024, compared to the same three month period in 2023.

For the nine month period ended September 30, 2024 other expenses decreased to $9.3 million from $11.5 million, or 19.1%, for the same period in 2023.

The decrease in other expenses over the comparative nine months ended September 30, 2024 and 2023 was primarily due to a reduction in director fees.

The efficiency ratio, which measures the ratio of noninterest expense to total revenue, was 55.35% and 98.43% for the three months and nine months ended September 30, 2024, respectively as compared to 48.83% and 49.19% for the same periods in 2023.

The adverse change in the efficiency ratio for the nine months ended September 30, 2024 was primarily driven by the recognition of goodwill impairment of $104.2 million.

Excluding the goodwill impairment charge, the operating efficiency ratio (non-GAAP) was 53.87% for the nine months ended September 30, 2024.

Refer to the "Use of Non-GAAP Financial Measures" section for additional detail and a reconciliation of GAAP to non-GAAP financial measures.

As a percentage of average assets, total noninterest expense (annualized) was 1.40% for the three months ended September 30, 2024 as compared to 1.25% for the same period in 2023.

As a percentage of average assets, total noninterest expense (annualized) was 2.46% for the nine months ended September 30, 2024, as compared to 1.32% for the same period in 2023.

Excluding the goodwill impairment charge, total operating noninterest expense (non-GAAP) (annualized) as a percentage of average assets was 1.35% for the nine months ended September 30, 2024.

Refer to the "Use of Non-GAAP Financial Measures" section for additional detail and a reconciliation of GAAP to non-GAAP financial measures.

Total noninterest expense was $45.5 million for the three months ended March 31, 2025, as compared to $40.0 million for the three months ended March 31, 2024.

This 14% increase was primarily due to higher FDIC deposit insurance assessments during the current period.

FDIC insurance expense was $9.0 million for the three months ended March 31, 2025 as compared to $6.4 million for same period in 2024, an increase of $2.5 million, or 40%.

The major components of other expenses include regulatory assessment fees, director compensation, real estate taxes, and insurance expenses.

Other expenses were $2.8 million for three months ended March 31, 2025 as compared to $2.1 million for same period in 2024, an increase of 33%.

The increase in three months ended March 31, 2025, as compared to 2024, was primarily due to an increase in real estate taxes.

The efficiency ratio, which measures the ratio of noninterest expense to total net revenue, was 61.54% for the three months ended March 31, 2025 as compared to 51.09% for the same period in 2024.

This increase in the efficiency ratio was primarily driven by higher FDIC insurance, as discussed above, and a decrease in net interest income .

As a percentage of average assets, total noninterest expense (annualized) was 1.52% for the three months ended March 31, 2025 as compared to 1.26% for the same period in 2024.

The increase for the three months ended March 31, 2025 as compared to the same period 2024 was primarily due to a decrease in average interest earning assets and an increase in FDIC assessment.

Income Tax Expense

For the three and nine months ended September 30, 2024 the tax provision was $4.9 million and $12.3 million, respectively, compared to $7.2 million and $22.3 million for the three and nine months ended September 30, 2023.

The decrease in the tax provision over the comparative three and nine months ended September 30, 2024 and 2023 was primarily due to decreases in pre-tax income period over period.

The change in the effective tax rate over the comparative three and nine months ended September 30, 2024 and 2023 was primarily driven by the impairment of the goodwill which is not deductible for tax purposes.

The Inflation Reduction Act of 2022 was signed into law by President Biden on August 16, 2022 and made significant changes to the U.S.

tax law, including the introduction of a corporate alternative minimum tax of 15% of the “adjusted financial statement income” of certain domestic corporations as well as a 1% excise tax on the fair market value of stock repurchases by certain domestic corporations, effective for tax years beginning in 2023.

Effective January 1, 2023, the Company became subject to the tax laws under the Inflation Reduction Act.

The Company has not experienced and currently does not expect the tax-related provisions of the Inflation Reduction Act to have a material impact on our financial results.

FINANCIAL CONDITION

Total assets were $11.3 billion and $11.7 billion at September 30, 2024 and December 31, 2023, respectively.

The decrease in total assets of $0.4 billion, or 3.3%, from December 31, 2023 to September 30, 2024 was primarily due to decreases in investment securities and interest-bearing deposits with other banks, and the impairment charge of goodwill related to a 2014 acquisition.

The largest component of assets, total loans with an amortized cost basis of $8.0 billion at September 30, 2024, remained relatively flat compared to the balance at December 31, 2023.

Income tax expense was $772 thousand for the three months ended March 31, 2025 as compared to $3.0 million for the three months ended March 31, 2024.

The decrease in the income tax provisions was primarily driven by a decrease in the pre-tax income, and lower tax expense related to the vesting of stock-based compensation.

The effective tax rate for the three months ended March 31, 2025 was 31.5%.

The effective tax rate for the first three months of 2025 varies from the 21% statutory rate primarily due to the tax expense related to the excess initial fair values of stock awards that were expensed compared to the fair market value at vesting, net with the tax benefit of tax-exempt interest income and tax-exempt income from the increase in the cash surrender value of BOLI.

BALANCE SHEET ANALYSIS

Total assets as of March 31, 2025 were $11.3 billion as compared to $11.1 billion as of December 31, 2024, a 2% increase.

The increase in total assets from December 31, 2024 to March 31, 2025 was primarily driven by an increase in BOLI asset due to additional insurance coverage purchased in the current period.

See "Other Earnings Assets" section below for further discussion on BOLI.

Total loans held for investment at amortized cost basis, the largest component of assets, were approximately $7.94 billion as of March 31, 2025, and remained relatively flat as compared to $7.93 billion as of December 31, 2024.

There was $15.3 million in loans held for sale as of March 31, 2025 and none as of December 31, 2024.

Refer to the "Loan Portfolio" section below for further discussion on loans.

Investment securities, at amortized cost net of the ACL, totaled $2.5 billion at September 30, 2024 as compared to $2.7 billion at December 31, 2023, a decrease of $172.1 million, or 6.4%, that was primarily driven by the pay down of principal on mortgage-backed securities ("MBS") and calls of securities.

At September 30, 2024 and December 31, 2023, investment securities available-for-sale had an amortized cost of $1.6 billion and $1.7 billion, respectively, and a fair value of $1.4 billion and $1.5 billion, respectively.

Additionally, September 30, 2024 and December 31, 2023, investment securities held-to-maturity had an amortized cost of $961.9 million (net of ACL of $1.2 million) and $1.0 billion (net of ACL of $2.0 million), respectively, and an estimated fair value of $868.4 million and $901.6 million, respectively.

In terms of funding, total deposits at September 30, 2024 were $8.5 billion, down from $8.8 billion at December 31, 2023, a decline of 3.0%.

Total borrowings (excluding customer repurchase agreements) were $1.3 billion and $1.4 billion at September 30, 2024 and December 31, 2023, respectively.

Investment securities, at amortized cost net of the allowance for credit losses, were $2.25 billion as of March 31, 2025 as compared to $2.35 billion as of December 31, 2024, a $93.0 million or 4% decrease.

This decrease was primarily driven by maturities and paydowns of investment securities.

In terms of funding, total deposits as of March 31, 2025 were $9.3 billion as compared to $9.1 billion as of December 31, 2024, an increase of 2%.

Total borrowed funds (excluding customer repurchase agreements) were $566.2 million and $566.1 million as of March 31, 2025 and December 31, 2024, respectively.

The components and drivers of the change are discussed in the "Deposits and Other Borrowings" section below.

Total shareholders' equity declined to $1.2 billion as of September 30, 2024 from $1.3 billion as of December 31, 2023.

The Company's capital ratios remain substantially in excess of regulatory minimum and buffer requirements.

Regulatory ratios based on risk-weighted assets experienced minor fluctuations of less than 5% from December 31, 2023 to September 30, 2024.

The total risk based capital ratio was 15.51% at September 30, 2024, as compared to 14.79% at December 31, 2023.

The common equity tier 1 capital ("CET1") risk based capital ratio was 14.30% at September 30, 2024, as compared to 13.90% at December 31, 2023.

The tier 1 risk based capital ratio was 14.30% at September 30, 2024, as compared to 13.90% at December 31, 2023.

The tier 1 leverage ratio was 10.77% at September 30, 2024, as compared to 10.73% at December 31, 2023.

The ratio of common equity to total assets was 10.86% at September 30, 2024, as compared to 10.92% at December 31, 2023 as common equity levels declined 3.8% over the nine months ended September 30, 2024.

Book value per share was $40.61 at September 30, 2024, a 4.6% decrease over $42.58 at December 31, 2023.

These declines were primarily due to the goodwill impairment charge of $104.2 million.

In addition, the tangible common equity ratio was 10.86% at September 30, 2024, as compared to 10.12% at December 31, 2023.

Tangible book value per share was $40.61 at September 30, 2024, a 3.9% increase from $39.08 at December 31, 2023.

Total shareholders’ equity as of March 31, 2025 was $1.24 billion as compared to $1.23 billion as of December 31, 2024, a 2% increase.

The increase in shareholders’ equity in 2025 was primarily from the net income from operations, partially offset by payment of cash dividends.

The ratio of common equity to total assets was 11.00% as of March 31, 2025 as compared to 11.02% as of December 31, 2024.

Book value per share was $40.99 as of March 31, 2025, a 1.0% increase over $40.60 as of December 31, 2024.

In addition, the tangible common equity ratio was 11.00% as of March 31, 2025, compared to 11.02% as of December 31, 2024.

Tangible book value per share was $40.99 as of March 31, 2025, a 1.0% increase from $40.59 as of December 31, 2024.

Refer to the "Use of Non-GAAP Financial Measures" section for additional detail and a reconciliation of GAAP to non-GAAP financial measures.

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Failure to maintain the required capital conservation buffer would limit the ability of the Company and the Bank to pay dividends, repurchase shares or pay discretionary bonuses.

The Company's capital ratios remain substantially in excess of regulatory minimums and buffer requirements.

The total risk based capital ratio was 15.86% as of March 31, 2025 and December 31, 2024.

The common equity tier one capital ("CET1") risk based capital ratio was 14.61% as of March 31, 2025, as compared to 14.63% as of December 31, 2024.

The tier 1 risk based capital ratio was 14.61% as of March 31, 2025, as compared to 14.63% as of December 31, 2024.

The tier 1 leverage ratio was 11.11% as of March 31, 2025, as compared to 10.74% as of December 31, 2024.

Loan Portfolio

In its lending activities, the Company seeks to develop and expand relationships with clients whose businesses and individual banking needs will grow with the Bank.

Superior customer service, local decision making, and accelerated turnaround time from application to closing have been significant factors in growing the loan portfolio and meeting the lending needs in the markets served, while maintaining sound asset quality.

Loans outstanding were $8.0 billion at September 30, 2024, an increase of $1.6 million, from the balance at December 31, 2023.

The loan portfolio is relatively flat in the nine months ended September 30, 2024, driven by increased fundings of ongoing construction projects for commercial and residential properties, offset by a reduction in commercial loans.

Market rates year to date in 2024 for our new loan originations on average have been consistent with the market rates at the end of 2023, reflecting that the Federal Reserve did not increase or decrease short-term interest rates until mid-September 2024.

We continue to see opportunities for growth in the commercial real estate market in our focused sectors;

We believe superior customer service, local decision making and accelerated turnaround time from application to closing have been significant factors in growing the loan portfolio and meeting the lending needs in the markets served, while maintaining sound asset quality.

Loans outstanding were $7.94 billion as of March 31, 2025, as compared to $7.93 billion as of December 31, 2024, an increase of $8.4 million or 0.1%.

The loan portfolio mix continues to evolve as the Bank has experienced a reduction in commercial loans and owner-occupied construction loans, offset by increases in owner-occupied commercial real estate loans and fundings of ongoing construction projects for commercial and residential properties.

Market rates year to date in 2025 for our new loan originations on average have been fairly consistent with the market rates at the end of 2024, since short-term interest rates remained unchanged in the first quarter of 2025.

We continue to see opportunities for growth in the commercial lending market in our focused sectors;

our processes for evaluating these opportunities are designed to ensure they are subject to reasonable underwriting standards, including appropriate collateral and cash flow necessary to support debt service.

Following origination, we continue to monitor our borrowers' business plans and identify primary and alternative sources for loan repayment and, if necessary, obtain collateral to mitigate credit loss in the event of default.

Loans, net of amortized deferred fees and costs, at September 30, 2024 and December 31, 2023 by major category are summarized below.

September 30, 2024 December 31, 2023

(dollars in thousands, except amounts in the footnote) Amount % Amount %

Following origination, we continue to monitor our borrowers' business plans and assess primary and alternative sources for loan repayment and, if necessary, obtain collateral to mitigate credit loss in the event of default.

The Bank has a large portion of its loan portfolio related to real estate, with 83% consisting of commercial real estate and real estate construction loans as of March 31, 2025.

Non-owner occupied commercial real estate represented 64% of the loan portfolio while the remaining 19% is represented by the "owner occupied-commercial real estate" and "construction–C&I (owner occupied)" loans.

Loans, net of amortized deferred fees and costs, as of March 31, 2025 and December 31, 2024 by major category are summarized below.

March 31, 2025

December 31, 2024

(dollars in thousands) Amount % Amount %

Commercial $ 1,178,343 15 % $ 1,183,341 15 %

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$ 7,813,837 $ 7,820,498

(1) Excludes accrued interest receivable of $43.4 million and $45.3 million at September 30, 2024 and December 31, 2023, respectively, which is recorded in other assets.

(1) Excludes accrued interest receivable of $41.9 million and $42.9 million as of March 31, 2025 and December 31, 2024, respectively, which is recorded in other assets.

As noted above, a significant portion of the loan portfolio consists of commercial, construction and commercial real estate loans, primarily made in the Washington, D.C.

metropolitan area and is secured by real estate or other collateral in that market.

While our basic market area is the Washington, D.C.

metropolitan area, the Bank has made loans outside that market where the borrower is an existing customer and the nature and quality of such loans was consistent with the Bank’s lending policies.

Although all of these loans are made to a diversified pool of unrelated borrowers across numerous businesses, adverse developments in the real estate market could continue to have an adverse impact on this portfolio of loans and the Company’s income and financial position.

Management believes that the CRE concentration risk is mitigated by diversification among the types and characteristics of real estate collateral properties, sound underwriting practices and ongoing portfolio monitoring and market analysis.

While our basic market is the Washington, D.C.

metropolitan area, the Bank has made loans outside that market where the borrower or its key decision makers have a meaningful relationship with the Bank and generally operate in or are based in our market.

Management believes that the commercial real estate concentration risk is mitigated by diversification among the types and characteristics of real estate collateral properties, sound underwriting practices and ongoing portfolio monitoring and market analysis.

The Company's concentration in the Washington, D.C.

metro area, includes "Washington's Maryland Suburbs," which comprise Frederick, Prince George's and Montgomery counties and "Northern Virginia," which comprises Alexandria, Arlington, Falls Church, Fairfax, Loudoun and Prince William counties.

At September 30, 2024, 30.9%, 27.4%, 24.5%, 5.4% and 11.8% of the loan portfolio, as a percentage of total amortized cost, was concentrated in Washington D.C., Washington's Maryland Suburbs, Northern Virginia, other counties in Maryland and other locations in the United States, respectively.

At December 31, 2023, 31.5%, 26.4%, 25.1%, 5.5% and 11.5% of the loan portfolio, as a percentage of total amortized cost, was concentrated in Washington D.C., Washington's Maryland Suburbs, Northern Virginia, other counties in Maryland and other locations in the United States, respectively.

As of March 31, 2025, 31.1%, 26.9%, 23.1%, 6.1%, and 12.8% of the loan portfolio, as a percentage of total amortized cost, was concentrated in Washington D.C., Washington's Maryland Suburbs, Northern Virginia, other counties in Maryland and other locations in the United States, respectively.

As of December 31, 2024, 31.3%, 27.4%, 23.9%, 5.8% and 11.6% of the loan portfolio, as a percentage of total amortized cost, was concentrated in Washington D.C., Washington's Maryland Suburbs, Northern Virginia, other counties in Maryland and other locations in the United States, respectively.

While we remain cautious with regard to CRE market conditions, principally office, the strength of the Washington D.C.

metro area in certain sectors, particularly multi-family CRE and the housing market, continue to drive premiums for well-located properties.

As part of its lending strategy, the Company maintains a substantial portfolio of CRE loans, with $6.5 billion and $6.1 billion, or 81.7% and 77.0% of total loans, of amortized cost outstanding at September 30, 2024 and December 31, 2023, respectively.

metro area in certain sectors, particularly multi-family commercial real estate and the housing market, continue to drive premiums for well-located properties.

As part of its lending strategy, the Company maintains a substantial portfolio of CRE loans, with $6.5 billion and $6.5 billion, or 81.8% and 81.5% of total loans, of amortized cost outstanding as of March 31, 2025 and December 31, 2024, respectively.

Management meets regularly in order to monitor its existing CRE loan portfolio and to evaluate the pipeline for CRE loan investment.

Income producing CRE loans collateralized by office properties comprised approximately $864.0 million and $949.0 million, or 10.8% and 11.9% of total loans, at September 30, 2024 and December 31, 2023, respectively.

Office loans within Washington D.C., Washington's Maryland Suburbs and Northern Virginia were $796.5 million and $879.0 million, or 10.0% and 11.0% of total loans, at September 30, 2024 and December 31, 2023, respectively.

As a percentage of total amortized cost of income producing - CRE office loans, 38.1%, 29.0%, 15.0%, 10.1% were located in Washington's Maryland Suburbs, Northern Virginia, the central business district of Washington D.C.

and Washington, D.C (outside the central business district), respectively, at September 30, 2024.

The following table summarizes the Company's income producing - commercial real estate loans, at principal, at September 30, 2024:

At September 30, 2024

Maryland Virginia

(dollars in thousands) Washington D.C.

Washington Suburbs Other Northern Virginia Other Other Total Percent of Total

Income producing CRE loans collateralized by office properties comprised approximately $847.7 million and $862.2 million, or 10.7% and 10.9% of total loans, as of March 31, 2025 and December 31, 2024, respectively.

Office loans within Washington D.C., Washington's Maryland Suburbs and Northern Virginia were $792.9 million and $795.0 million, or 10.0% and 10.0% of total loans, as of March 31, 2025 and December 31, 2024, respectively.

As a percentage of total principal balance of income producing - CRE office loans, 39.0%, 35.4%, 15.1%, and 10.5% were located in Washington's Maryland Suburbs, Northern Virginia, the central business district of Washington D.C., and Washington, D.C.

(outside the central business district,) respectively, as of March 31, 2025.

The following table summarizes the Company's income producing - commercial real estate loans, at principal, by collateral location and type, as of March 31, 2025:

(dollars in thousands)

Washington D.C.

Washington Suburbs

Northern Virginia

Percent of Total

Collateral Type:

Hotel & motel

Industrial 881 78,870 40,567 19,439 11,932 — 151,689 4 %

Mixed use 260,330 45,950 371 54,643 25,723 4,970 391,987 9 %

Multifamily 395,123 224,830 315 120,408 84,954 48,204 873,834 21 %

Office 217,341 329,312 4,288 251,174 63,368 — 865,483 21 %

Retail 79,224 99,131 61,209 74,504 99,391 1,523 414,982 10 %

$136,937 $75,367 $101,822 $60,223 $— $21,348 $ 395,697 11%

868 72,053 40,169 36,311 19,549 — 168,950 5%

280,673 43,185 371 54,335 25,647 4,954 409,165 10%

394,167 192,170 310 117,593 84,666 48,137 837,043 21%

217,505 327,144 4,229 249,765 50,625 — 849,268 21%

78,207 95,840 60,324 73,820 64,883 1,282 374,356 9%

Single / 1-4 Family & Res.

Condo 69,432 2,610 2,130 13,451 6,492 4,056 98,171 2 %

Other 190,641 184,304 36,094 519,811 8,629 46,451 985,930 24 %

Total $ 1,350,119 $ 1,045,523 $ 227,897 $ 1,113,653 $ 300,489 $ 126,946 $ 4,164,627 100 %

66,583 2,087 2,088 10,032 6,427 4,029 91,246 2%

179,710 175,491 28,280 418,377 8,366 38,899 849,123 21%

$1,354,650 $983,337 $237,593 $1,020,456 $260,163 $118,649 $3,974,848 100%

Percent of total

34% 25% 6% 26% 6% 3% 100%

Percent of Principal by Loan Size:

Less than $1 million

2 % 2 % 2 % 1 % 2 % 2 %

$1 million to $5 million

9 % 10 % 21 % 8 % 11 % 16 %

$5 million to $10 million

7 % 7 % 21 % 5 % 13 % 31 %

$10 million to $25 million

20 % 13 % 25 % 37 % 39 % 20 %

$25 million to $50 million

46 % 29 % 31 % 37 % 35 % 31 %

Greater than $50 million

Total 100 % 100 % 100 % 100 % 100 % 100 %

At September 30, 2024, $332.7 million of principal of loans collateralized by office properties were criticized or classified.

At September 30, 2024, the Company had no concentrations of loans with any one borrower in any one industry exceeding 10% of its total loan portfolio.

An industry for this purpose is defined as a group of businesses that are engaged in similar activities and have similar economic characteristics that would cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions.

The following table sets forth the time to the final contractual maturity of the loan portfolio as of September 30, 2024:

September 30, 2024

16 % 39 % — % 12 % — % — %

100 % 100 % 100 % 100 % 100 % 100 %

As of March 31, 2025 and December 31, 2024, $302.0 million and $287.0 million, respectively, of principal of CRE loans collateralized by office properties were criticized or classified.

The Company is exploring ways to optimize its balance sheet to reduce the Company’s commercial real estate loan concentration, including ways to reduce exposure to short- and intermediate-term valuation risks for its office loans.

There is no assurance that the Company will decide to seek to implement, or ultimately implement, any balance sheet optimization strategy, and any strategy the Company decides to pursue may not be successful.

In addition, future decisions the Company makes in connection with its balance sheet optimization efforts could result in higher credit costs and could also have a material impact

on our financial condition and results of operations in the period or periods any relevant decisions are made or strategies implemented.

Loan Maturity

The following table sets forth the time to contractual maturity of the loan portfolio as of March 31, 2025.

Loans are shown in the period based on final contractual maturity.

Demand loans, having no contractual maturity, and overdrafts are reported as due in one year or less.

March 31, 2025

(dollars in thousands) Total One Year or Less (1)

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Total loans $ 7,943,306 $ 3,175,047 $ 3,668,426 $ 706,168 $ 393,665

(1) Demand loans, having no contractual maturity, and overdrafts are reported as due in one year or less.

(2) Income producing CRE office loans, which had total principal of $865.5 million at September 30, 2024 and are included within income producing - commercial real estate, had principal of $278.5 million, $579.7 million, $6.7 million, and $0.6 million aggregated with one year or less, over one year to five years, over five years to fifteen years, and over fifteen years remaining until contractual maturity, respectively.

Approximately $208.5 million and $328.9 million of income producing CRE office loans as of September 30, 2024 were due to mature within three months and 18 months, respectively.

(1) Income producing CRE office loans with total principal of $849.3 million and multifamily loans with total principal of $837.0 million as of March 31, 2025 are included within income producing - commercial real estate.

The charts below represent their maturities schedules.

Allowance for Credit Losses

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A full discussion of the accounting for ACL is contained in Note 1 to the Consolidated Financial Statements and activity in the ACL is contained in Note 4 to the Consolidated Financial Statements.

Also, please refer to the discussion under the caption "Provision for Credit Losses" for a discussion of the Company's calculation of the provision for credit losses during the nine months ended September 30, 2024 and 2023.

The ACL for loans at September 30, 2024 at $111.9 million, reflected a $25.9 million increase from December 31, 2023 when it was $85.9 million, reflecting a provision for credit losses of $54.9 million and $29.0 million in net charge-offs during the nine months ended September 30, 2024.

Net charge-offs, on an annualized basis, represented 0.48% of average loans for the nine months ended September 30, 2024, an increase from net charge-offs of $6.9 million during the nine months ended September 30, 2023, which represented 0.12% of average loans on an annualized basis.

Net charge-offs during the nine months ended September 30, 2024 included $20.1 million of charge offs on one CRE office lending relationship.

At September 30, 2024, the ACL for loans represented 1.40% of total loans outstanding, as compared to 1.08% at December 31, 2023.

The ACL represented 83% of nonperforming loans at September 30, 2024, as compared to 131% at December 31, 2023.

Refer to the "Provision for Credit Losses" section of Management's Discussion and Analysis of Financial Condition and Results of Operations for more information on the provision for credit losses.

Also, refer to “Critical Accounting Policies and Estimates” above for further discussion of the methodology which management employs to maintain an adequate ACL, as well as the discussion under the caption “Provision for Credit Losses” above for a discussion of the Company's calculation of the provision for credit losses during the three months ended March 31, 2025 and 2024.

The ACL for loans as of March 31, 2025 was $129.5 million, which reflected a $15.1 million increase from $114.4 million as of December 31, 2024, reflecting a provision for credit losses of $26.3 million and $11.2 million in net charge-offs during the three months ended March 31, 2025.

Net charge-offs of $11.2 million during three months ended March 31, 2025 represented 0.57% of average loans held for investment, a decrease from net charge-offs of $21.4 million during same period in 2024, which represented 1.07% of average loans held for investment.

Net charge-offs during the three months ended March 31, 2025, included $11.0 million of charge offs on three CRE office lending relationships.

The ACL represented 1.63% of total loans as of March 31, 2025 as compared to 1.44% as of December 31, 2024.

As of March 31, 2025, the allowance represented 65% of nonperforming loans as compared to 55% as of December 31, 2024.

As part of its comprehensive loan review process, the Bank’s Risk Committee evaluates loans which are past due 30 days or more.

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The Company believes it has taken a prudent posture with respect to risk rating its loan portfolio.

As of September 30, 2024 and December 31, 2023, loans rated special mention had an amortized cost of $365.0 million and $207.1 million, respectively, and loans rated substandard had an amortized cost of $391.3 million and $335.8 million, respectively.

The increases in special mention loans were primarily attributable to additions in CRE loans, particularly in income producing - commercial real estate and commercial loans.

The increases in substandard loans were primarily attributable to additions in CRE loans, particularly in commercial construction loans.

At September 30, 2024, 100% and 59% of special mention and substandard loans, respectively, were current.

As of March 31, 2025 and December 31, 2024, loans rated special mention had an amortized cost of $272.9 million and $244.8 million, respectively, and loans rated substandard had an amortized cost of $501.6 million and $426.4 million, respectively.

The increase in special mention loans was primarily attributable to additions in C&I loans and income producing - commercial real estate and commercial loans.

The increases in substandard loans were primarily attributable to additions in CRE loans, particularly in income producing - commercial real estate and owner-occupied - commercial real estate loans.

As of March 31, 2025, 100% and 51% of special mention and substandard loans, respectively, were current.

Based upon their status as potential problem loans, loans risk rated special mention or substandard receive heightened scrutiny and ongoing intensive risk management.

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The loan portfolio analysis process is ongoing and proactive to support the Company's objective of maintaining a portfolio of quality credits and quickly identifying weaknesses before they become more severe.

At September 30, 2024 and December 31, 2023, the Company's performing office coverage ratio, which calculates the ACL attributable to loans collateralized by performing office properties as a percentage of total loans, was 4.55% and 1.91%, respectively.

The following table sets forth activity in the ACL for the periods indicated.

Nine Months Ended September 30,

As of March 31, 2025 and December 31, 2024, the Company's performing office coverage ratio, which calculates the ACL attributable to loans collateralized by performing office properties as a percentage of total loans, was 5.78% and 3.81%, respectively.

The following table sets forth activity in the allowance for credit losses:

Three Months Ended March 31,

(dollars in thousands) 2025

Balance at beginning of period

$ 114,390 $ 85,940

Commercial (270) (496)

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Commercial 53 115

Income producing - commercial real estate 185 —

Owner occupied - commercial real estate 23 24

Construction - commercial and residential — 34

Other consumer — 6

Total recoveries 76 139

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Balance at end of period

Annualized ratio of net charge-offs during the period to average loans outstanding during the period 0.48 % 0.12 %

The following table reflects the allocation of the ACL at the dates indicated.

The allocation of the allowance at September 30, 2024 includes ACL of $5.4 million against individually assessed loans of $134.4 million, as compared to ACL of $0.6 million against individually assessed loans of $66.1 million at December 31, 2023.

The allocation of the allowance to each category is not necessarily indicative of future losses or charge-offs and does not restrict the use of the allowance to absorb losses in any category.

September 30, 2024 December 31, 2023

$ 129,469 $ 99,684

Annualized ratio of net charge-offs to average loans outstanding during the period

0.57 % 1.07 %

The following table reflects the allocation of the ACL as of March 31, 2025 and December 31, 2024 by loan category and the percentage of allowance in each category.

The allocation of the allowance as of March 31, 2025 includes allowance for credit losses of $16.9 million against individually assessed loans of $201.0 million, as compared to allowance for credit losses of $17.1 million against individually assessed loans of $208.7 million as of December 31, 2024.

The allocation of the allowance to each category is not necessarily indicative of future losses or charge-offs and does not restrict the usage of the allowance to absorb losses in any category.

March 31, 2025

December 31, 2024

(dollars in thousands) Amount % of Total ACL % of Total Loans Amount % of Total ACL % of Total Loans

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Other consumer 33 — % — % 31 — % — %

Total allowance $ 111,867 100 % 100 % $ 85,940 100 % 100 %

Total $ 129,469 100 % 100 % $ 114,390 100 % 100 %

Nonperforming Assets

The Company's level of nonperforming assets, which comprise the amortized cost of loans delinquent 90 days or more and nonaccrual loans, which includes the nonperforming portion of loan modifications, and the carrying value of OREO, totaled $137.1 million at September 30, 2024 representing 1.22% of total assets, as compared to $66.6 million of nonperforming assets, or 0.57% of total assets, at December 31, 2023.

The Company had no accruing loans which were 90 days or more past due at September 30, 2024.

Management prioritizes remaining attention to early signs of deterioration in borrowers’ financial conditions and to taking action designed to mitigate risk.

The Company’s level of nonperforming assets, which is comprised of the amortized cost of loans delinquent 90 days or more, and nonaccrual loans, which includes the nonperforming portion of loan modifications, and the carrying value of other real estate owned ("OREO") totaled $202.9 million as of March 31, 2025, representing 1.79% of total assets, as compared to $211.4 million as of December 31, 2024, representing 1.90% of total assets.

The decrease is primarily due to the changes in nonperforming loans discussed below.

The Company had no accruing loans that were 90 days or more past due as of March 31, 2025 and December 31, 2024.

Management prioritizes remaining attentive to early signs of deterioration in borrowers’ financial conditions and to taking action designed to mitigate risk.

The Company places loans on nonaccrual status if it deems collection to be doubtful.

The Company believes it is diligent in placing loans on nonaccrual status and believes, based on its loan portfolio risk analysis, that its ACL, at 1.40% of total loans at September 30, 2024, is adequate to absorb expected credit losses within the loan portfolio at that date.

Total nonperforming loans had an amortized cost of $134.4 million at September 30, 2024, representing 1.69% of total loans, compared to $65.5 million at December 31, 2023, representing 0.82% of total loans.

The increase was primarily from the addition of two income-producing commercial real estate loans and one owner-occupied commercial real estate loan to non-accruing status following a partial charge-off on the combined balances in the nine months ended September 30, 2024.

The Company believes, based on its loan portfolio risk analysis that its ACL at 1.63% of total loans as of March 31, 2025, is adequate to absorb expected credit losses within the loan portfolio at that date.

Total nonperforming loans had an amortized cost of $200.4 million as of March 31, 2025, representing 2.52% of total loans, compared to $208.7 million as of December 31, 2024, representing 2.63% of total loans.

The decrease was primarily from the charge offs on two income-producing commercial real estate loans and one owner-occupied commercial real estate loan.

The CECL standard allows for institutions to evaluate individual loans in the event that the asset does not share similar risk characteristics with its original segmentation.

This can occur due to credit deterioration, increased collateral dependency or other factors leading to impairment.

In particular, the Company individually evaluates loans on nonaccrual and those identified as loan modifications to borrowers experiencing financial difficulties, though it may individually evaluate other loans or groups of loans as well if it determines they no longer share similar risk with their assigned segment.

In particular, the Company individually evaluates loans on nonaccrual, though it may individually evaluate other loans or groups of loans as well if it determines they no longer share similar risk with their assigned segment.

Reserves on individually assessed loans are determined by one of two methods:

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Nonperforming assets include loans that the Company considers to be individually assessed.

Individually assessed loans are defined as those as to which we believe it is probable that we will not collect all amounts due according to the contractual terms of the loan agreement, as well as those loans whose terms have been modified in a loan restructuring to a borrower experiencing financial difficulties that has not shown a period of performance as required under applicable accounting standards.

Loans that do not share risk characteristics are evaluated on an individual basis.

Individually assessed loans are defined as those as to which we believe it is probable that we will not collect all amounts due according to the contractual terms of the loan agreement.

Loans that do not share risk characteristics consistent with similar loans are evaluated on an individual basis.

For collateral dependent financial assets where the Company has determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and the Company expects repayment of the financial asset to be provided substantially through the sale of the collateral, the ACL is measured based on the difference between the fair value of the collateral and the amortized cost basis of the asset as of the measurement date.

When repayment is expected to be from the operation of the collateral, expected credit losses are calculated as the amount by which the amortized cost basis of the financial asset exceeds the net present value ("NPV") from the operation of the collateral.

When repayment is expected to be from the sale of the collateral, expected credit losses are calculated as the amount by which the amortized cost basis of the financial asset exceeds the fair value of the underlying collateral less estimated cost to sell.

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Generally, all appraisals associated with individually assessed loans are updated on a not less than annual basis.

The Company evaluates loan modifications according to the accounting guidance for loan modifications to determine if the modification results in a new loan or a continuation of the existing loan.

Loan modifications to borrowers experiencing financial difficulty that result in a direct change in the timing or amount of contractual cash flows include situations where there is principal forgiveness, interest rate reductions, other-than-insignificant payment delays, term extensions, and combinations of the listed modifications.

A loan that is considered a modified loan may be subject to an individually-evaluated loan analysis if the commitment is $500 thousand or greater;

otherwise, the restructured loan remains in the appropriate segment in the ACL model and associated provisions are adjusted based on changes in the discounted cash flows resulting from the modification of the restructured loan.

The Company evaluates all loan modifications according to the accounting guidance to determine if the modification results in a new loan or a continuation of the existing loan.

Loan modifications to borrowers experiencing financial difficulties that result in a direct change in the timing or amount of contractual cash flows include situations where there is principal forgiveness, interest rate reductions, other-than-insignificant payment delays, term extensions, and combinations of the listed modifications.

Modifications with terms not as favorable to the Company as the terms for comparable loans to other customers with similar collection risk who are not refinancing or restructuring a loan with the Company and which have a direct impact on cash flows are considered modified loans to borrowers experiencing financial difficulty.

A loan that is considered a modified loan may be evaluated for disclosure if the commitment is $500 thousand or greater.

Management strives to identify borrowers in financial difficulty early and work with them to modify their loan to more affordable terms before their loan reaches nonaccrual status, foreclosure or repossession of the collateral to minimize economic loss to the Company.

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The allowance may be increased, adjustments may be made in the allocation of the allowance, or partial charge-offs may be taken to further write-down the carrying value of the loan.

During the nine months ended September 30, 2024, the Bank modified 33 loans with a total amortized cost of $278.7 million at September 30, 2024 (3.5% of the loan portfolio).

These loans received extended loan terms of between approximately 1 to 36 months.

Loans modified in the preceding twelve months totaled $304.7 million, of which approximately $15.7 million are loans 30-89 days past due and $57.6 million are on nonaccrual status.

All other loans are performing under their modified terms.

Alternatively, management, from time-to-time and in the ordinary course of business, implements renewals, modifications, extensions and/or changes in terms of loans to borrowers who have the ability to repay on reasonable market-based terms, as circumstances may warrant, and therefore, such modifications are not considered to be loan restructurings to a borrower experiencing financial difficulty, as the accommodation of a borrower's request does not rise to the level of a concession if the modified transaction is at market rates and terms and/or the borrower is not experiencing financial difficulty.

(1) adverse weather conditions may create a short term cash flow issue for an otherwise profitable retail business which suggests a temporary interest only period on an amortizing loan;

During the three months ended March 31, 2025, the Bank modified 7 loans with a total amortized cost of $83.0 million as of March 31, 2025 (1.0% of the loan portfolio).

These loans received extended loan terms of between approximately seven to twenty-one months.

As of March 31, 2025, the payment status of four loans modified in the preceding twelve months, totaling $95.0 million of amortized cost basis, included two loans with an amortized cost basis of $10.6 million which were 30 to 89 days past due, and the other two loans with a total amortized cost basis of $84.4 million which were on nonaccrual status.

As of March 31, 2025, additional loans that were modified in the preceding twelve months which were performing under their modified terms totaled $228.9 million of amortized cost basis.

Management, from time-to-time and in the ordinary course of business, implements renewals, modifications, extensions and/or changes in terms of loans to borrowers who have the ability to repay on reasonable market-based terms, as circumstances may warrant, and therefore, such modifications are not considered to be loan restructurings to a borrower experiencing financial difficulty, as the accommodation of a borrower's request does not rise to the level of a concession if the modified transaction is at market rates and terms and/or the borrower is not experiencing financial difficulty.

(1) adverse weather conditions may create a short term cash flow issue for an otherwise profitable retail business which suggests a

temporary interest only period on an amortizing loan;

(2) there may be delays in absorption on a real estate project which reasonably suggests extension of the loan maturity at market terms;

or (3) there may be maturing loans to borrowers with demonstrated repayment ability who are not in a position at the time of maturity to obtain alternate long-term financing.

Included in nonperforming assets was OREO of $2.7 million, comprising four foreclosed properties, at September 30, 2024 and $1.1 million, comprising three foreclosed properties, at December 31, 2023.

OREO properties are carried at the lower of cost or fair value less estimated costs to sell.

It is the Company's policy to obtain third party appraisals prior to foreclosure, and to obtain updated third party appraisals on OREO properties generally not less frequently than annually.

Generally, the Company would obtain updated appraisals or evaluations on OREO properties where it has reason to believe, based upon market indications (such as:

comparable sales, a scenario in which the Company is considering legitimate offers below carrying value, broker indications and similar factors), that the current appraisal does not accurately reflect current value.

Two OREO properties were sold during the nine months ended September 30, 2024 and one OREO property was sold during the nine months ended September 30, 2023, generating proceeds of $656 thousand and $609 thousand, respectively.

There were no sales of OREO properties during the three months ended September 30, 2024 and 2023.

The following table shows the amounts of nonperforming assets, including loans at amortized cost and OREO at the lower of cost or fair value less estimated costs to sell:

(dollars in thousands) September 30, 2024 December 31, 2023

Included in nonperforming assets as of March 31, 2025 is OREO of $2.5 million, consisting of five foreclosed properties, compared to OREO of $2.7 million, consisting of five foreclosed properties as of December 31, 2024.

OREO properties are carried at the lower of cost or at fair value less estimated costs to sell.

It is the Company's policy to generally obtain third party appraisals prior to foreclosure and to obtain updated third party appraisals on OREO properties generally not less frequently than annually.

Generally, the Company would obtain updated appraisals or evaluations where it has reason to believe, based upon market indications (such as comparable sales, a scenario in which the Company is considering legitimate offers below carrying value, broker indications and similar factors), that the current appraisal does not accurately reflect current value.

There were two OREO sales in three months ended March 31, 2025 and two in three months ended March 31, 2024, generating proceeds of $772 thousand and $656 thousand, respectively.

The following table shows the amounts of nonperforming assets, including loans at amortized cost and OREO at the lower of cost or fair value less estimated costs to sell, at the dates indicated:

(dollars in thousands) March 31, 2025 December 31, 2024

Nonaccrual Loans:

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Real estate mortgage - residential 144 157

Construction - commercial and residential — 525

Home equity 298 303

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Significant variation in the amount of nonperforming loans may occur from period to period because the amount of nonperforming loans depends largely on the condition of a relatively small number of individual credits and borrowers relative to the total loan portfolio.

At September 30, 2024, there were $391.3 million of substandard loans.

Substandard loans are considered potential or actual problem loans due to known information about possible or actual credit problems which causes management to be uncertain as to the ability of the borrowers to comply with the present loan repayment terms, which may in the future result in the reclassification to the past due, nonaccrual or restructured loan categories, as appropriate.

Based upon their status as potential or actual problem loans, these loans receive heightened scrutiny and ongoing intensive risk management.

As of March 31, 2025, there were $501.6 million of substandard loans.

Based upon their status as potential problem loans, loans risk rated special mention or substandard receive heightened scrutiny and ongoing intensive risk management.

Additionally, the Company's loan loss allowance methodology incorporates increased reserve factors for certain loans considered potential problem loans as compared to the general portfolio.

Other Earning Assets

As part of its employee benefits and financing strategies, the Company has invested in Bank-Owned Life Insurance ("BOLI") policies.

BOLI serves as a tax-efficient asset designed to offset the cost of employee benefit obligations.

The Company views BOLI as a long-term investment to help fund future benefit expenses.

As of March 31, 2025, the cash surrender value of BOLI totaled $320.1 million, compared to $115.8 million as of December 31, 2024.

The increase reflects earnings on the policies as well as additional BOLI purchased through premium payments made in the first quarter of 2025.

Deposits and Other Borrowings

The principal sources of funds for the Bank are core deposits, consisting of demand deposits, money market accounts, Negotiable Order of Withdrawal ("NOW") accounts, savings accounts, and certificates of deposits.

The deposit base includes transaction accounts, time and savings accounts, and accounts that customers use for cash management and which provide the Bank with a source of fee income and cross-marketing opportunities, as well as an attractive source of lower cost funds.

To meet funding needs during periods of high loan demand and seasonal variations in core deposits, the Bank regularly utilizes alternative funding sources such as secured borrowings from the FHLB, federal funds purchased lines of credit from correspondent banks and brokered deposits from regional and national brokerage firms.

Additionally, the Bank participated in the BTFP established by the Federal Reserve in March 2023.

The Federal Reserve announced in January 2024 that the BTFP would stop originating new loans on March 11, 2024, as scheduled.

The Federal Reserve also modified the terms of the program so that the interest rate for new loans would be no lower than the interest rate on reserve balances in effect on the day the loan is made.

In January 2024, prior to these announcements by the Federal Reserve, the Company borrowed an additional $500.0 million through the BTFP and refinanced $500.0 million under the program, each at an interest rate of 4.76% and a maturity date in January 2025.

The following table summarizes the Company's deposits at September 30, 2024 and December 31, 2023:

September 30, 2024 December 31, 2023

The deposit base includes transaction accounts, time and savings accounts and accounts which customers use for cash management and which provide the Bank with a source of fee income and cross-marketing opportunities, as well as an attractive source of lower cost funds.

March 31, 2025

December 31, 2024

Balance Percentage

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$ 9,277,268 100 % $ 9,131,078 100 %

For the nine months ended September 30, 2024, total deposits decreased by $267.2 million as compared to December 31, 2023.

The decrease was primarily attributable to a $669.3 million decrease in noninterest bearing demand deposits, partially offset by a $493.4 million increase in time deposits.

These deposit changes were the result of a decline in deposits from a third party payment processor related to the fluctuations in deposit levels resulting from its business, as well as declines in some public and brokered fundings, partially offset by growth in time deposits from the company's digital acquisition channel.

No single depositor represented more than 10% of total deposits as of September 30, 2024.

The ten largest depositors not associated with brokered pass-through relationships represented approximately 17% of total deposits in the aggregate as of September 30, 2024.

For the three months ended March 31, 2025, deposits were $9.3 billion as compared to $9.1 billion as of December 31, 2024, an increase of 2%.

The increase was primarily attributable to a $408.1 million increase in interest bearing time deposits, partially offset by a $285.1 million reduction in interest bearing transaction deposits.

These deposit changes were the result of growth in time deposits from the company's digital acquisition channel.

Noninterest bearing deposits increased $63.4 million or 4% to $1.6 billion as of March 31, 2025 as compared to $1.5 billion as of December 31, 2024, while interest bearing deposits decreased by $325.4 million, or 7%.

Within interest bearing deposits, money market and savings accounts collectively amounted to $3.56 billion as of March 31, 2025, or 38% of total deposits, as compared to $3.60 billion, or 39% of total deposits, as of December 31, 2024, a decrease of $40.3 million, or 1%.

No single depositor represented more than 10% of total deposits as of March 31, 2025.

The ten largest depositors not associated with brokered pass-through relationships represented approximately 18% of total deposits in the aggregate as of March 31, 2025.

The Company maintains a significant deposit relationship with a third-party payments processor, whose business results in deposit inflows and outflows on an ongoing basis, which contributes to variations in period end compared to average deposit balances.

From time to time, when appropriate in order to fund strong loan demand or account for increased deposit outflow, the Bank accepts brokered time deposits, generally in denominations of less than $250 thousand, from a regional brokerage firm and other national brokerage networks, including IntraFi Network, LLC ("IntraFi").

Additionally, the Bank participates in the Certificates of Deposit Account Registry Service ("CDARS") and the Insured Cash Sweep product ("ICS"), which provide for reciprocal ("two-way") transactions among banks facilitated by IntraFi for the purpose of maximizing FDIC insurance.

The total of reciprocal deposits at September 30, 2024 was $1.4 billion (16% of total deposits) as compared to $1.7 billion (19% of total deposits) at December 31, 2023.

The Bank accepts brokered time deposits, generally in denominations of less than $250 thousand, from a regional brokerage firm and other national brokerage networks, including IntraFi Network, LLC ("IntraFi").

Additionally, the Bank participates in the CDARS and the ICS products, which provide for reciprocal (“two-way”) transactions among banks facilitated by IntraFi for the purpose of maximizing FDIC insurance.

ICS also allows for the sale of deposits into the IntraFi Network (“One-Way Sale”) which provides FDIC insurance for the depositor without reciprocal deposits returned to the Bank.

Deposits sold through the IntraFi One-Way Sale process are not included in the Bank’s deposit totals.

The sale of ICS deposits allows the Bank to moderate the fluctuation of deposit balances.

As of March 31, 2025, the Bank sold de minimis deposits through the IntraFi One-Way Sale network.

The total of reciprocal deposits as of March 31, 2025 was $1.2 billion (13% of total deposits) as compared to $1.4 billion (16% of total deposits) as of December 31, 2024.

These sources are believed by the Company to represent a reliable and cost efficient alternative funding source for the Bank, but there can be no assurance that they will continue to be adequate or appropriate to meet our liquidity needs.

The Bank also is able to obtain one way CDARS deposits and participates in IntraFi’s Insured Network Deposit Program, (“IND”).

The Bank had $763.9 million and $786.5 million of IND brokered deposits as of September 30, 2024 and December 31, 2023, respectively.

However, to the extent that the condition or reputation of the Company or Bank deteriorates, to the extent that there are significant changes in market interest rates which the Company and Bank do not elect to match, or if aggregate funding available to banks changes due to changes in the marketplace, we may experience an outflow of brokered deposits or difficulty in obtaining them in the future.

The Bank had $872.1 million and $894.7 million of IND brokered deposits as of March 31, 2025 and December 31, 2024, respectively.

However, to the extent that the condition or reputation of the Company or Bank deteriorates, or to the extent that there are significant changes in market interest rates which the Company and Bank do not elect to match, or if aggregate funding available to banks changes due to changes in the marketplace, we may experience an outflow of brokered deposits or difficulty with obtaining them in the future.

In that event we would be required to obtain alternate sources for funding, which may increase our cost of funds and negatively impact our net interest margin.

We have used brokered deposits and intend to continue to use brokered deposits as one of our funding sources to support future growth.

At September 30, 2024, total brokered deposits were $3.6 billion, or 42.5% of total deposits, of which $1.4 billion were attributable to the CDARS and ICS two-way accounts.

Total brokered deposits were comprised of $1.3 billion, $0.9 billion, and $1.4 billion of time deposits, savings and money market accounts and interest-bearing transaction accounts, respectively, at September 30, 2024.

At December 31, 2023, total brokered deposits (excluding the CDARS and ICS two-way) were $2.5 billion, or 28.8% of total deposits, and comprised $1.5 billion, $961.5 million, and $108.2 million of time deposits, savings and money market accounts, and interest-bearing transaction accounts, respectively.

At September 30, 2024 and December 31, 2023, total deposits included estimated totals of $2.2 billion and $2.8 billion of uninsured deposits, which represented 25.5% and 31.4% of total deposits, respectively.

The decrease in the percentage of the Bank's deposits that are uninsured was in part due to customers' increased use of the products facilitated by IntraFi that enable customers to maximize FDIC deposit insurance coverage for their deposits.

As of March 31, 2025, total brokered deposits were $3.8 billion, or 41.4% of total deposits, compared to $4.0 billion, or 44% as of December 31, 2024, These brokered deposits were comprised of savings, money market and other interest-bearing transaction accounts of $2.3 billion and $2.7 billion, and time deposits of $1.4 billion and $1.3 billion as of March 31, 2025 and December 31, 2024, respectively.

The Company uses the Call Report definitions for regulatory reporting by the Bank to classify its deposits as brokered deposits.

As of March 31, 2025 and December 31, 2024, total deposits included estimated totals of $2.4 billion and $2.2 billion of uninsured deposits, which represented 25% and 24% of total deposits, respectively.

As an enhancement to the basic noninterest bearing demand deposit account, the Company offers a sweep account, or “customer repurchase agreement,” allowing qualifying businesses to earn interest on short-term excess funds, which are not suited for either a certificate of deposit or a money market account.

The balances in these accounts were $32.0 million at September 30, 2024 compared to $30.6 million at December 31, 2023.

The balances in these accounts were $32.4 million as of March 31, 2025 compared to $33.2 million as of December 31, 2024.

Customer repurchase agreements are not deposits and are not insured by the FDIC, but are collateralized by U.S.

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agency backed MBS.

These accounts are particularly suitable to businesses with significant fluctuation in the levels of cash flows.

Attorney and title company escrow accounts are examples of accounts which can benefit from this product, as are customers who may require collateral for deposits in excess of FDIC insurance limits but do not qualify for other pledging arrangements.

This program requires the Company to maintain a sufficient investment securities level to accommodate the fluctuations in balances which may occur in these accounts.

The Company had no outstanding balances under its federal funds lines of credit provided by correspondent banks (which are unsecured) at September 30, 2024 and December 31, 2023.

At September 30, 2024, the Company had $240.0 million in FHLB secured borrowings outstanding compared to none at December 31, 2023.

Outstanding FHLB advances are secured by collateral consisting of specifically pledged marketable investment securities and a blanket lien on qualifying loans in the Bank's commercial mortgage, residential mortgage and home equity loan portfolios.

Additionally, at September 30, 2024 and December 31, 2023, the Company had $1.0 billion and $1.3 billion of outstanding borrowings under the BTFP.

Outstanding BTFP advances are secured by collateral consisting of specifically pledged qualifying investment securities.

Outstanding short-term advances and borrowings are part of the overall asset liability strategy to support loan growth.

The subordinated notes outstanding at December 31, 2023 comprised the Company's August 5, 2014 issuance of $70.0 million of subordinated notes, which matured and were repaid in September 2024.

On September 30, 2024, the Company closed a private placement of its 10.00% senior unsecured debt totaling $77.7 million maturing on September 30, 2029 (the "2029 Senior Notes").

At September 30, 2024, the carrying value of these 2029 Senior Notes was $75.8 million.

which reflected $1.9 million in deferred financing costs that are being amortized over the life of the 2029 Senior Notes.

The Company had no outstanding balances under its federal funds lines of credit provided by correspondent banks (which are unsecured) as of March 31, 2025 and December 31, 2024.

As of March 31, 2025 and December 31, 2024, the Company had outstanding balances of $490.0 million of FHLB advances.

Outstanding FHLB advances are secured by collateral consisting of specifically pledged marketable investment securities, a blanket lien on qualifying loans in the Bank’s commercial mortgage, residential mortgage and home equity loan portfolios.

On September 30, 2024, the Company closed a private placement of its 10.00% senior unsecured debt totaling $77.7 million maturing on September 30, 2029 (the "2029 Senior Notes" or "Original Notes").

As of March 31, 2025, the carrying value of these 2029 Senior Notes was $76.2 million which reflected $1.5 million in unamortized deferred financing costs that are being amortized over the life of the 2029 Senior Notes.

In connection with the issuance of the 2029 Senior Notes, the Company also entered into a registration rights agreement dated September 30, 2024 with the purchasers of the 2029 Senior Notes (the “Registration Rights Agreement”).

Pursuant to the Registration Rights Agreement, the Company is planning to file an exchange offer registration statement with the SEC to exchange the Senior Notes for substantially identical notes registered under the Securities Act.

Pursuant to the Registration Rights Agreement, the Company filed an exchange offer registration statement with the SEC to exchange the Senior Notes for substantially identical notes registered under the Securities Act (the "Exchange Notes").

The terms of the Exchange Notes are identical to the terms of the Original Notes, except that the transfer restrictions and registration rights applicable to the Original Notes do not apply to the Exchange Notes.

The Company completed the exchange offer on January 16, 2025.

Commitments and Contractual Obligations

Loan commitments outstanding and lines and letters of credit were as follows:

(dollars in thousands) September 30, 2024 December 31, 2023

Loan commitments outstanding and lines and letters of credit as of March 31, 2025 and December 31, 2024 were as follows:

(dollars in thousands) March 31, 2025

December 31, 2024

Unfunded loan commitments $ 1,248,554 $ 1,318,133

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Liquidity is a measure of the Company’s and Bank’s ability to meet loan demand and to satisfy depositor withdrawal requirements in an orderly manner.

The Bank's primary sources of liquidity consist of cash and cash balances due from correspondent banks, excess reserves at the Federal Reserve, loan repayments, federal funds sold and other short-term investments, maturities and sales of investment securities, income from operations and new core deposits into the Bank.

Approximately 60% of the Company's investment portfolio of debt securities is held in an available-for-sale status which allows for flexibility, subject to holdings held as collateral for customer repurchase agreements and public funds, to generate cash from sales as needed to meet ongoing loan demand.

As of September 30, 2024, the unrealized losses recorded on the available-for-sale securities were acting as a deterrent to any sale of those securities to raise liquidity.

However, these securities can be utilized as pledged assets that provide secondary liquidity through the form of additional available borrowings.

The Bank’s primary sources of liquidity consist of cash and cash balances due from correspondent banks, excess reserves at the Federal Reserve, loan repayments, federal funds sold and other short-term

investments, maturities and sales of investment securities, income from operations and new core deposits into the Bank.

Approximately 57% of the Company's investment portfolio of debt securities is held in an available-for-sale status which allows for flexibility to generate cash from sales as needed to meet ongoing loan demand.

These securities can also be utilized as pledged assets that provide secondary liquidity through the form of additional available borrowings.

Investment securities that are classified as held-to-maturity can also be used as collateral to pledge against additional borrowings.

The Company's primary sources of liquidity are supplemented by the ability of the Company and Bank to borrow funds or issue brokered deposits, which are termed secondary sources of liquidity and which are substantial.

The following table summarizes the Company's secondary sources of liquidity in use and available at September 30, 2024:

(dollars in thousands, except amount in the footnotes) Secondary Sources of Liquidity in Use Secondary Sources of Liquidity Remaining Available

September 30, 2024:

These sources of liquidity are considered primary and are supplemented by the ability of the Company and Bank to borrow funds or issue brokered deposits, which are termed secondary sources of liquidity.

The following table summarizes the Company's secondary sources of liquidity in use and available as of March 31, 2025:

(dollars in thousands)

Secondary Sources of Liquidity in Use

Secondary Sources of Remaining Liquidity Available

Unsecured brokered deposits (1)

1 unchanged sentence

FHLB secured borrowings

BTFP secured borrowings 1,000,000 —

490,000 1,070,435

Discount window secured borrowings

1 unchanged sentence

Customer repurchase agreements

Raymond James repurchase agreement — 18,604

Unpledged assets:

Interest-bearing deposits with banks N/A 25,833

Investment securities N/A 892,856

Total $ 2,198,450 $ 6,055,237

Interest-bearing deposits with banks

Investment securities

$ 1,600,133 $ 5,580,938

(1) The available liquidity from the unsecured brokered deposits represents unsecured funds under one-way CDARS and ICS brokered deposits that would require then current market rates and be dependent on the availability of funds in those networks.

(2) Comprise unencumbered assets that could be liquidated or used as collateral to obtain additional liquidity through debt financing.

The funding mix has continued to change throughout the nine months ended September 30, 2024.

Deposits were $8.5 billion and $8.8 billion at September 30, 2024 and December 31, 2023, respectively.

The decrease in deposits was primarily attributable to a $669.3 million decrease in noninterest bearing demand deposits, partially offset by a $493.4 million increase in time deposits.

Borrowings at quarter-end were $1.3 billion and $1.4 billion at September 30, 2024 and December 31, 2023, respectively.

The net decrease in borrowings was attributable to a decrease in net fundings on the Company's secured borrowings and subordinated notes that matured and were repaid in September 2024, partially offset by issuance of the 2029 Senior Notes.

Refer to the "Deposits and Other Borrowings" section above for further discussion.

The Bank can purchase up to $145.0 million in federal funds on an unsecured basis from its correspondents, against which there were no amounts outstanding at September 30, 2024 and December 31, 2023.

The Bank can borrow unsecured funds under one-way CDARS and ICS brokered deposits up to $1.9 billion, against which there was $926.4 million outstanding at September 30, 2024.

The Bank also has custodial agreements with various broker-dealers through IntraFi's IND program which provided $763.9 million of brokered deposits at September 30, 2024.

At September 30, 2024, the Bank was eligible to draw on advances from the FHLB up to $1.4 billion based on assets pledged as collateral to the FHLB, against which the Bank borrowed $240.0 million as of September 30, 2024.

The Bank had no FHLB borrowings outstanding at December 31, 2023.

The Bank posted additional collateral to the FHLB during the nine months ended September 30, 2024 and during the year ended December 31, 2023 to increase its eligibility for advances to meet its ongoing liquidity needs and expects to continue to utilize this source of funding in the future.

In March 2023, the Federal Reserve Board announced that it would make available additional funding to eligible depository institutions through the creation of the BTFP.

The BTFP provided eligible depository institutions, including the Bank, an additional source of liquidity.

Subsequent to its initiation, the Federal Reserve also modified the terms of the program so that the interest rate for new loans would be no lower than the interest rate on reserve balances in effect on the day the loan is made.

In January 2024, the Company borrowed an additional $500.0 million through the BTFP and refinanced $500.0 million under the program at an interest rate of 4.76% and a maturity in January 2025.

The Federal Reserve discontinued the origination of new loans on March 11, 2024, as scheduled.

At September 30, 2024, the Bank had $1.0 billion of BTFP borrowings outstanding.

This alternative source of liquidity is being utilized for balance sheet optimization.

The Bank has a back-up borrowing facility through the Discount Window at the Federal Reserve.

This facility, which can be used to borrow up to $1.8 billion, is collateralized with specific assets identified to the Federal Reserve.

During the third quarter, additional collateral in the form of acceptable loans was pledged to the Discount Window increasing available contingent capacity.

(2) Unpledged assets are comprised of unencumbered assets that could be liquidated or used as collateral to obtain additional liquidity through debt financing.

The funding mix has continued to change throughout the three months ended March 31, 2025.

Deposits were $9.3 billion and $9.1 billion as of March 31, 2025 and December 31, 2024, respectively.

The increase was primarily attributable to a $408.1 million increase in interest bearing time deposits, and a $63.4 million increase in noninterest bearing deposits, offset by a $285.1 million reduction in interest-bearing transaction accounts and a $40.3 million reduction in savings and money market accounts.

The growth in interest bearing deposits was driven by the increase in time deposits through the digital acquisition channel during the three months ended March 31, 2025, as discussed in "Deposits and Other Borrowings" above.

Short-term borrowings were $490.0 million as of March 31, 2025 and December 31, 2024.

Additionally, the Bank can purchase up to $145.0 million in federal funds on an unsecured basis from its correspondents, against which there were no amounts outstanding as of March 31, 2025 and can borrow unsecured funds under one-way CDARS and ICS brokered deposits in the amount of $1.1 billion, against which there was $82 million outstanding as of March 31, 2025.

As of March 31, 2025, the Bank also has custodial agreements with various broker-dealers through IntraFi's IND program which provided $812.0 million of brokered deposits.

As of March 31, 2025, the Bank was also eligible to draw advances from the FHLB up to $1.6 billion based on assets pledged as collateral to the FHLB, against which the Bank borrowed $490.0 million as of March 31, 2025.

The Bank may enter into repurchase agreements as well as obtain additional borrowing capabilities from the FHLB provided adequate collateral exists to secure these lending relationships.

The Bank also has a back-up borrowing facility through the Discount Window at the Federal Reserve Bank of Richmond (“Federal Reserve Bank”).

This facility, which can be used to borrow up to $1.8 billion, is collateralized with specific loan assets identified to the Federal Reserve Bank.

It is anticipated that, except for periodic testing, this facility would be utilized for contingency funding only.

There can be no assurance, however, that these alternative sources of liquidity will continue to be available or will be sufficient to meet our ongoing liquidity needs.

In total, the Bank's aggregate borrowing capacity at September 30, 2024 was $3.9 billion, which consists of $1.2 billion and $1.8 billion of additional aggregate capacity to borrow from the FHLB and the Federal Reserve's Discount Window, respectively, on assets that have been pledged;

along with $18.6 million of aggregate capacity to borrow on a pledge security through a repurchase agreement with Raymond James.

The Bank also has unencumbered securities totaling approximately $892.9 million available for pledging to the FHLB or the Federal Reserve for additional borrowing capacity.

The loss of deposits through disintermediation is one of the greater risks to liquidity.

In total, the Bank's aggregate borrowing capacity as of March 31, 2025 was $4.2 billion, which consists of $1.1 billion and $1.8 billion additional aggregate capacity to borrow from the FHLB and the Federal Reserve's Discount Window,

respectively, on existing pledged assets.

The Bank's aggregate borrowing capacity also includes unencumbered securities totaling approximately $1.3 billion available for pledging to the FHLB or Federal Reserve for additional borrowing capacity.

The loss of deposits, including through disintermediation, is one of the primary risks to liquidity.

Disintermediation occurs most commonly when rates rise and depositors withdraw deposits seeking higher rates in alternative savings and investment sources than the Bank may offer.

The Bank makes competitive deposit interest rate comparisons weekly and makes adjustments from time to time to ensure its interest rate offerings are competitive.

There is, however, a risk that the cost of funds will increase significantly as the Bank competes for deposits or that some deposits would be lost if rates were to continue to increase and the Bank elected not to remain competitive with its deposit rates.

There is, however, a risk that the cost of funds will increase significantly as the Bank competes for deposits or that some deposits would be lost if rates were to increase and the Bank elected not to remain competitive with its deposit rates.

Under those conditions, the Bank believes that it is well positioned to use other sources of funds such as FHLB borrowings, brokered deposits, repurchase agreements and correspondent banks’ lines of credit to offset a decline in deposits in the short run, but the use of such sources may negatively impact our net interest margin and our earnings.

The continuing elevated cost of funding negatively impacted our net interest margin.

Late in the third quarter of 2024, the Federal Reserve decreased interest rates by 50 basis points, having minimal impact on net interest margin in the quarter.

The continuing elevated cost of funding has negatively impacted our net interest margin.

There can be no assurance that the mix of sources of funds available to us at any particular time in the future will be adequate to meet our future liquidity needs.

Furthermore, the market for customer and brokered deposits is highly competitive and the risk of disintermediation is high, particularly in a rising or high interest rate environment.

However, the market for customer and brokered deposits is highly competitive and the risk of disintermediation is high, particularly in a high interest rate environment.

Most of our noninterest bearing deposits are operating deposits or compensating balances that are held in connection with lending relationships.

4 unchanged sentences

The Company believes it maintains sufficient primary and secondary sources of liquidity to fund its operations.

During the first nine months ended September 30, 2024, average short term liquidity, comprising interest bearing deposits with other banks and other short-term investments and investment securities available-for-sale, was $3.1 billion, which is above the Bank's average needs.

Secondary sources of liquidity available at September 30, 2024 were $6.1 billion, which include the FHLB, other insured brokered deposit sweep programs, unpledged securities, Fed funds lines, and the FRB Discount Window.

At September 30, 2024, the Company held total securities available to be pledged with an estimated fair value of $892.9 million.

At September 30, 2024, under the Bank’s liquidity formula, it had $6.5 billion of primary and secondary liquidity sources.

During the three months ended March 31, 2025, average short term liquidity was $2.8 billion comprising interest bearing deposits with other banks and other short-term investments and AFS securities, which is above the Bank's average needs.

Secondary sources of liquidity as of March 31, 2025 were $5.6 billion, which include the FHLB, other insured brokered deposit sweep programs, unpledged securities, Fed funds lines, and the FRB Discount Window.

As of March 31, 2025, the Company held total securities available to be pledged with an estimated fair value of $1.3 billion.

As of March 31, 2025, under the Bank’s liquidity formula, it had $6.5 billion of primary and secondary liquidity sources.

Management believes the amount is adequate to meet current and projected funding needs.

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Pursuant to the supervisory criteria contained in the guidance for identifying institutions with a potential commercial real estate concentration risk, institutions which have total reported loans for construction, land development and other land acquisitions which represent 100% or more of an institution’s total risk-based capital;

or (2) total commercial real estate loans representing 300% or more of the institution's total risk-based capital and the institution's commercial real estate loan portfolio has increased 50% or more during the prior 36 months are identified as having potential commercial real estate concentration risk.

or total commercial real estate loans representing 300% or more of the institution’s total risk-based capital;

or the institution’s commercial real estate loan portfolio has increased 50% or more during the prior 36 months are identified as having potential commercial real estate concentration risk.

Institutions which are deemed to have concentrations in commercial real estate lending are expected to employ heightened levels of risk management with respect to their commercial real estate portfolios and may be required to hold higher levels of capital.

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Although growth in that segment over the past 36 months at 19.7% did not exceed the 50% threshold laid out in the regulatory guidance, we expect the heightened supervisory expectations to continue to apply to us given the federal banking regulators’ general focus on commercial real estate exposures at banks.

At September 30, 2024, we did exceed the construction, land development, and other land acquisitions regulatory concentration threshold, and we continue to monitor our concentration in commercial real estate lending and remain in compliance with the guidance issued by the federal banking regulators.

Construction, land and land development loans represent 124% of total risk based capital.

Management has extensive experience in commercial real estate lending, and has implemented and continues to maintain heightened risk management procedures and strong underwriting criteria with respect to its commercial real estate portfolio.

As of March 31, 2025, the Company continued to exceed the construction, land development, and other land acquisitions regulatory concentration threshold, and we continue to monitor our concentration in commercial real estate lending and remain in compliance with the guidance issued by the federal banking regulators.

Construction, land and land development loans represent 119.61% of consolidated risk based capital.

Management has extensive experience in commercial real estate

lending, and has implemented and continues to maintain heightened risk management procedures and strong underwriting criteria with respect to its commercial real estate portfolio.

Loan monitoring practices include but are not limited to periodic stress testing analysis to evaluate changes to cash flows, owing to interest rate increases and declines in net operating income.

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The Company and the Bank are subject to regulatory capital requirements administered by federal banking agencies.

Capital adequacy and prompt corrective action regulations involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices.

Capital adequacy guidelines and prompt corrective action regulations involve quantitative measures of assets, liabilities and certain off-balance-sheet items calculated under regulatory accounting practices.

Capital amounts and classifications are also subject to qualitative judgments by regulators about components, risk weightings and other factors and the regulators can lower classifications in certain cases.

Failure to meet various capital requirements can initiate regulatory action that could have a direct material effect on the financial statements.

At September 30, 2024, the capital position of the Company and its wholly owned subsidiary, the Bank, continue to exceed regulatory requirements and well-capitalized guidelines.

As of March 31, 2025, the capital position of the Company and its wholly owned subsidiary, the Bank, continue to exceed regulatory requirements and well-capitalized guidelines.

The primary indicators relied on by bank regulators in measuring the capital position are four ratios as follows:

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Tier 1 capital consists of common and qualifying preferred shareholders’ equity less goodwill and other intangibles.

Total risk-based capital consists of Tier 1 capital, plus qualifying subordinated debt and the qualifying portion of the ACL.

Total risk-based capital consists of Tier 1 capital and the qualifying portion of the ACL.

Risk-based capital ratios are calculated with reference to risk-weighted assets, which are prescribed by regulation.

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The CET1 ratio is the Tier 1 capital ratio but excluding preferred stock.

The prompt corrective action regulations provide five categories, including well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition.

If a bank is only adequately capitalized, regulatory approval is required to, among other things, accept, renew or roll-over brokered deposits.

The Prompt Corrective Action ("PCA") regulations provide five categories, including well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized;

however, these terms are not used to represent overall financial condition.

If a bank is adequately capitalized, regulatory approval is required to, among other things, accept, renew or roll-over brokered deposits.

If a bank is undercapitalized, capital distributions and growth and expansion are limited, and plans for capital restoration are required.

The FRB and the FDIC have adopted rules (the "Basel III Rules") implementing the Basel Committee on Banking Supervision's capital guidelines for U.S.

If a bank is not well-capitalized, interest rate restrictions apply.

The FRB and the FDIC have adopted the Basel III Rules implementing the Basel Committee on Banking Supervision's capital guidelines for U.S.

Under the Basel III Rules, the Company and Bank are required to maintain a CET1 ratio of 4.5% and a capital conservation buffer of 2.5% of risk-weighted assets, effectively resulting in a minimum CET1 ratio of 7.0%;

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The Basel III Rules also increased risk weights for certain assets and off-balance-sheet exposures.

At September 30, 2024, the Company and the Bank meet all these requirements.

The Company announced a regular quarterly cash dividend on September 30, 2024 of $0.165 per share to shareholders of record on October 21, 2024 and it was paid on October 31, 2024.

The ability of the Company to continue to grow is dependent on its results of operations and those of the Bank, the ability to obtain additional funds for contribution to the Bank’s capital, through additional borrowings, through the sale of additional common stock or preferred stock or through the issuance of additional qualifying capital instruments, such as subordinated debt.

As of March 31, 2025, the Company and the Bank exceeded all these thresholds.

The Company announced a regular quarterly cash dividend on April 23, 2025 of $0.165 per share to shareholders of record on May 5, 2025, to be paid on May 16, 2025.

The ability of the Company to continue to grow is dependent on its earnings and those of the Bank, the ability to obtain additional funds for contribution to the Bank’s capital, through additional borrowings, through the sale of additional common stock or preferred stock or through the issuance of additional qualifying capital instruments, such as subordinated debt.

The capital levels required to be maintained by the Company and Bank may be impacted as a result of the Bank’s concentrations in commercial real estate loans.

The capital amounts and ratios for the Company and Bank as of September 30, 2024 and December 31, 2023 are presented in the table below.

Company Bank Minimum Required Basel III To Be Well-Capitalized Under Prompt Corrective Action Regulations (1)

Actual Actual

(dollars in thousands) Amount Ratio Amount Ratio

September 30, 2024

The Company’s capital ratios were all well in excess of requirements established by the Federal Reserve Board and the Bank’s capital ratios were in excess of those required to be classified as a “well capitalized” institution under the PCA provisions of the Federal Deposit Insurance Act.

The actual capital amounts and ratios for the Company and Bank as of March 31, 2025 and 2024 are presented in the table below:

Company Bank Minimum Required

Adequacy Purposes (1)

Corrective Action

Regulations (2)

(dollars in thousands) Actual

Amount Ratio Actual

As of March 31, 2025

CET1 capital (to risk weighted assets) $ 1,365,819 14.61 % $ 1,369,643 14.81 % 7.00 % 6.50 %

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Tier 1 capital (to average assets) 1,365,819 11.11 % 1,335,967 11.24 % 4.00 % 5.00 %

December 31, 2023

As of December 31, 2024

CET1 capital (to risk weighted assets) $ 1,369,643 14.63 % $ 1,373,857 14.76 % 7.00 % 6.50 %

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Tier 1 capital (to average assets) 1,369,643 10.74 % 1,373,857 10.82 % 4.00 % 5.00 %

(1) Applies to the Bank only.

Bank and holding company regulations, as well as Maryland law, impose certain restrictions on dividend payments by the Bank, as well as restricting extensions of credit and transfers of assets between the Bank and the Company.

In December 2018, federal banking regulators issued a final rule that provides an optional three-year phase-in period for the adverse regulatory capital effects of adopting the CECL methodology pursuant to new accounting guidance for the recognition of credit losses on certain financial instruments, effective January 1, 2020.

In March 2020, the federal banking regulators issued an interim final rule that provides banking organizations with an alternative option to temporarily delay for two years the estimated impact of the adoption of the CECL methodology on regulatory capital, followed by the three-year phase-in period.

The cumulative amount that is not recognized in regulatory capital will be phased in at 25 percent per year beginning January 1, 2022.

We have elected to adopt the option provided by the March 2020 interim final rule.

(1) The risk-based ratios reflect the minimum requirement plus the capital conservation buffer of 2.50%.

(2) Applies to Bank only

Federal bank and holding company regulations, as well as Maryland law, impose certain restrictions on capital distributions, including dividend payments and share repurchases by the Bank, as well as restricting extensions of credit and transfers of assets between the Bank and the Company.

Asset/Liability Management and Quantitative and Qualitative Disclosures about Market Risk

A fundamental risk in banking is exposure to market risk, or interest rate risk, since a bank's earnings is largely dependent on net interest income.

A fundamental risk in banking is exposure to market risk, specifically interest rate risk, since a bank’s earnings are largely dependent on net interest income.

The Bank’s ALCO formulates and monitors the management of interest rate risk through policies and guidelines established by it and overseen by the Audit Committee and the full Board of Directors and through review of detailed reports discussed quarterly.

In its consideration of risk limits, the ALCO considers the impact on earnings and capital, the level and direction of interest rates, liquidity, local economic conditions, outside threats and other factors.

Banking is generally a business of managing the maturity and repricing mismatch inherent in its asset and liability cash flows to provide net interest income growth consistent with the Company's profit objectives.

During the nine months ended September 30, 2024, the Company was able to produce a net interest margin of 2.40% as compared to 2.56% during the same period in 2023 and continues to manage its overall interest rate risk position.

Banking is generally a business of managing the maturity and repricing mismatch inherent in its asset and liability cash flows to provide stable net interest income growth consistent with the Company’s profit objectives.

The Company, through its ALCO and ongoing financial management practices, monitors the interest rate environment in which it operates and adjusts the rates and maturities of its assets and liabilities to remain competitive and to achieve its overall financial objectives subject to established risk limits.

The loan portfolio remained relatively flat in the first nine months of 2024.

The re-pricing duration of the loan portfolio was 12 months at September 30, 2024 and December 31, 2023, with fixed rate loans amounting to 40% of total loans at September 30, 2024 and 38% at December 31, 2023.

Variable and adjustable rate loans comprised 60% of total loans at September 30, 2024 and 62% at December 31, 2023.

The loan portfolio remained relatively flat during the first quarter of 2025.

The re-pricing duration on the loan portfolio was 10 months as of March 31, 2025 and 11 months as of December 31, 2024, with fixed-rate loans amounting to 37.2% and 38.1% of total loans as of March 31, 2025 and December 31, 2024, respectively.

Variable and adjustable rate loans comprised 62.8% and 61.9% of total loans as of March 31, 2025 and December 31, 2024, respectively.

Variable rate loans are generally indexed to the Secured Overnight Funding Rate ("SOFR") or the Wall Street Journal prime interest rate, while adjustable rate loans are indexed primarily to the five year U.S.

Treasury interest rate.

In the current and expected future interest rate environment, the Company has maintained its investment portfolio to manage the balance between yield and risk in its portfolio of MBS.

Further, the Company has been principally collecting cash flows from the investment portfolio to provide liquidity.

At September 30, 2024, the amortized cost less allowance of the investment portfolio decreased by $172.1 million, or 6.4%, as compared to the balance at December 31, 2023.

Based on amortized cost, the percentage mix of municipal securities was 5% of total investments at September 30, 2024 and December 31, 2023.

The portion of the portfolio invested in MBS was 60% at September 30, 2024 and December 31, 2023.

The cash flows from the investment portfolio currently have not been reinvested in the investment portfolio.

As of March 31, 2025, the amortized cost less allowance of the investment portfolio decreased by $67.3 million, or 3.1%, as compared to the balance as of December 31, 2024.

Based on amortized cost basis, the percentage mix of municipal securities was 5.7% and 5.5% of total investments as of March 31, 2025 and December 31, 2024, respectively.

The portion of the portfolio invested in MBS was 63% and 62% as of March 31, 2025 and December 31, 2024, respectively.

The portion of the portfolio invested in U.S.

agency investments was 27% at September 30, 2024 and December 31, 2023.

Corporate bonds made up 5% of total investments at September 30, 2024 and December 31, 2023.

treasury bonds were 2% of total investments at September 30, 2024 and December 31, 2023.

The duration of the investment portfolio decreased to 4 years at September 30, 2024 from 4.4 years at December 31, 2023.

At September 30, 2024, $80.3 million of corporate bonds were subordinated debt from other financial institutions.

agency investments was 25% as of March 31, 2025 and 25% as of December 31, 2024.

Corporate bonds made up 6% and 6% of total investments as of March 31, 2025 and December 31, 2024, respectively.

treasury bonds were 0% and 1% of total investments as of March 31, 2025 and December 31, 2024, respectively.

The duration of the investment portfolio decreased to 4.1 years as of March 31, 2025 from 4.2 years as of December 31, 2024.

As of March 31, 2025, $79.3 million of corporate bonds were subordinated debt from other financial institutions.

Corporate bonds generally, and subordinated debt in particular, pose credit risk such that if any of these issuers were to enter bankruptcy or insolvency proceedings, we could experience losses that may be material to operating results and our financial condition.

We may also experience increases in provisions for credit losses, adversely affecting our net income, if the creditworthiness of the issuers declines, whether due to idiosyncratic factors, economic conditions generally or other unforeseen factors or events.

We may also experience increases in provisions for credit losses, adversely affecting our earnings, if the creditworthiness of the issuers declines, whether due to idiosyncratic factors, economic conditions generally or other unforeseen factors or events.

The Company has credit Risk Participation Agreements ("RPAs") with institutional counterparties, under which the Company assumes its pro-rata share of the credit exposure associated with a borrower’s performance related to interest rate derivative contracts.

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Total expected exposure incorporates both the current and potential future exposure of the derivatives, derived from using observable inputs, such as yield curves and volatilities.

These derivatives are not designated as hedges, are not speculative and have an asset position with a notional value of $49.5 million as of September 30, 2024.

These derivatives are not designated as hedges, are not speculative and have an asset position with a notional value of $49.5 million as of March 31, 2025.

The changes in fair value for these contracts are recognized directly in earnings.

The duration of the total deposit portfolio decreased, measuring 22 months at September 30, 2024 and 28 months at December 31, 2023.

The Company experienced a total deposit decrease of $267.2 million for the nine months ended September 30, 2024 as compared to a total loan increase of $1.6 million for the same period.

The funding mix has continued to change in the nine months ended September 30, 2024.

The decrease in deposits was primarily attributable to a $669.3 million decrease in noninterest bearing demand deposits, partially offset by a $493.4 million increase in time deposits.

During the nine months ended September 30, 2024, the Company’s cost of interest bearing deposits increased by 13 basis points across its interest-bearing deposits, which comprise 81.2% of its total deposits at September 30, 2024.

The net unrealized loss before income tax on the investment securities available-for-sale portfolio was $117.0 million and $162.0 million at September 30, 2024 and December 31, 2023, respectively.

At September 30, 2024, the net unrealized loss position represented 7.55% of the investment portfolio's book value.

The duration of the deposit portfolio increased to 12 months as of March 31, 2025 from 11 months as of December 31, 2024.

This increase is attributable to a shift in deposit mix, and modeling assumption updates.

The Company experienced a total deposit increase of $146.2 million for the three months ended March 31, 2025 as compared to a total loan increase of $8.4 million for the same period.

The funding mix changed throughout the three months ended March 31, 2025.

Deposits were $9.3 billion and $9.1 billion as of March 31, 2025 and December 31, 2024, respectively.

The increase in deposits was primarily attributable to a $408.1 million increase in time deposits, offset by a $285.1 million decrease in interest bearing transaction accounts.

Refer to the "Deposits and Other Borrowings" section above for further discussion of deposits and borrowings.

The net unrealized loss before income tax on the AFS securities portfolio was $115.9 million and $141.5 million as of March 31, 2025 and December 31, 2024, respectively.

As of March 31, 2025, the net unrealized loss position represented 8.71% of the investment portfolio's book value.

Management relies on the use of models in order to measure the expected future impact on interest income of various interest rate environments, as described above.

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There can be no assurance that the Company will be able to successfully achieve its optimal asset liability mix, given competitive pressures, customer preferences and the inability to forecast future interest rates and movements with complete accuracy.

Market rates have been stable in the first nine months of 2024 since (i) the last short-term interest rate increase from the Federal Reserve was instituted in July 2023, and (ii) during the nine months ended September 2024, the Federal Reserve instituted only one adjustment to interest rates at the end of September 2024, as a decrease of 50 basis points, amid changes in the economic outlook indicating that inflation is moderating and the labor market is weakening.

The decrease in interest rates was the first decrease since early 2020 which was a period of economic upheaval due to the Covid pandemic.

While yields on interest-earning assets remain at increased levels, including the impact of the reset of variable and adjustable rate loans, as scheduled, our cost of funds on interest-bearing liabilities has also increased in connection with increased utilization of interest-bearing deposits and borrowings and increasing rates on those financing sources.

As a result, the net interest margin has declined slightly, as compared to the two previous quarters.

Our rate risk modeling showed very modest net interest margin expansion in an interest rate environment at increased interest rate levels while showing modest net interest margin compression in a declining interest rate environment.

Our rate risk modeling showed very modest net interest margin expansion in an increased interest rate environment while showing modest net interest margin compression in a declining interest rate environment.

The model's prediction in a rising rate environment is the result of increases in both interest income on variable and adjustable rate loans and interest expense on its deposit liabilities, based on our funding needs, market conditions and certain contractual obligations but with no changes in the mix of assets or liabilities or the spreads we are able to earn.

The opposite is true in a falling interest rate environment as decreases in both interest income on variable and adjustable rate loans and interest expense on deposit liabilities drive modest margin compression.

The model also assumes a stable interest rate environment after the programmed changes in the yields, which assumes repricing of assets and liabilities as scheduled in a stable interest rate environment, which may be quite different than real world conditions.

Interest rate floors on certain of the Company's variable and adjustable rate loans may provide asset yield protection in a low-interest rate environment;

The model also assumes a stable interest rate environment after the programmed changes in the yields, which assumes repricing of assets and liabilities as scheduled in a stable environment, which may be quite different than real world conditions.

A portion of the of the Company's variable and adjustable rate loans may contain interest rate floors and may provide asset yield protection in a low-interest rate environment;

however, they are also expected to delay the impact of increases to market rates on interest income until such floors have been exceeded.

In the first nine months of 2024, interest rate floors have not been relevant in the current interest rate environment since most variable rate loans are well above their floor rate.

Nevertheless, the most recent interest rate cut of 50 basis points instituted by the Federal Reserve at the end of September 2024, is a sign of changes in the economic outlook which may result in additional adjustments to interest rates as the economic outlook continues to evolve.

At September 30, 2024, the Company had a portfolio of $4.8 billion of variable and adjustable rate loans that were subject to interest rate floors with a weighted average rate of 7.48%, which was a 34 bps increase from December 31, 2023.

At September 30, 2024, $187.8 million, or 2.36%, of loans held by the Company were earning interest at their floor rate.

The Company employs an earnings simulation model (immediate parallel shifts along the yield curve) on a quarterly basis to monitor its interest rate sensitivity and risk and to model its balance sheet cash flows and the related income statement effects in different interest rate scenarios.

In the first three months ended March 31, 2025, interest rate floors have not been relevant in the current interest rate environment since most variable rate loans are well above their floor rate.

The weighted average rate of the Company's variable rate loans decreased by approximately 7 basis poin ts from December 31, 2024 to March 31, 2025.

As of March 31, 2025, the Company had a portfolio of $3.0 billion of variable and adjustable rate loans that were subject to interest rate floors with a weighted average rate of 7.18%, which was a 6 bps decrease from December 31, 2024.

As of March 31, 2025, only $134.7 million or 1.69% of loans held by the Company were earning interest at their floor rate, as compared to $123.6 million or 1.56% as of December 31, 2024.

The Company employs an earnings simulation model (immediate parallel shifts along the yield curve) on a quarterly basis to monitor its interest rate sensitivity and risk and to model its balance sheet cash flows and the related statement of operations effects in different interest rate scenarios.

The model utilizes current balance sheet data and attributes and is adjusted for assumptions as to investment maturities (including prepayments), loan prepayments, interest rates, deposit decay rates, and the level of noninterest income and noninterest expense.

Further discussion of the limitations of this analysis are listed below and in the risk factors and other cautionary language included in the Company's Annual Report on Form 10-K for the year ended December 31, 2024, and in other periodic and current reports filed by the Company with the SEC.

The data is then subjected to a "shock test" which assumes a simultaneous change in interest rates up 100, 200, 300, and 400 basis points or down 100, 200, and 300 basis points, along the entire yield curve, but not below zero.

The results are analyzed as to the impact on net interest income, earnings and the market equity over the next twelve and twenty-four month periods from September 30, 2024.

The data is then

subjected to a “shock test” which assumes a simultaneous change in interest rates up 100, 200, 300 and 400 basis points or down 100, 200, 300 and 400 basis points, along the entire yield curve, but not below zero.

The results are analyzed as to the impact on net interest income, net income and the market equity over the next twelve and twenty-four month periods from March 31, 2025.

In addition to analysis of simultaneous changes in interest rates along the yield curve, an analysis of changes based on interest rate “ramps” is also performed.

Such analysis represents the impact of a more gradual change in interest rates, as well as yield curve shape changes.

For the analysis presented below, at September 30, 2024, the simulation assumes a 100 basis point change in interest rates on interest bearing deposits for each 100 basis point change in market interest rates in a decreasing interest rate shock scenario with a floor of 10 basis points and assumes a 100 basis point change in interest rates on interest bearing deposits for each 100 basis point change in market interest rates in an increasing interest rate shock scenario.

The Bank does have deposits with contractual terms which means these deposits will change 100 basis points for every 100 basis points change in market rates.

For the analysis presented below, as of March 31, 2025, the simulation assumes a 100 basis point change in interest rates on interest bearing deposits for each 100 basis point change in market interest rates in a decreasing interest rate shock scenario with a floor of 10 basis points and assumes a 100 basis point change in interest rates on interest bearing deposits for each 100 basis point change in market interest rates in an increasing interest rate shock scenario.

The Bank does have deposits with contractual rate terms which means these deposits will change 100 basis points for every 100 basis points change in market rates.

Thus, the overall measure of the correlation between deposit costs and market rate changes is modeled at 100%.

The Company utilized the same assumptions for its analysis at December 31, 2023.

The Company utilized the same assumptions for its analysis as of December 31, 2024.

Because competitive market behavior does not necessarily track the trend of interest rates but at times moves ahead of financial market influences, the change in the cost of liabilities may be different than anticipated by the interest rate risk model.

If this were to occur, the effects of a rising or declining interest rate environment may not be in accordance with management’s expectations.

As quantified in the table below, the Company's analysis at September 30, 2024 shows a moderate effect on net interest income (over the next 12 months) as well as the effect on the economic value of equity when interest rates are shocked down 100, 200, and 300 basis points and up 100, 200, 300, and 400 basis points.

As quantified in the table below, the Company’s analysis as of March 31, 2025 shows a moderate effect on net interest income over the next 12 months, as well as a moderate effect on the economic value of equity when interest rates are shocked down 100, 200, 300 and 400 basis points and up 100, 200, 300 and 400 basis points.

This moderate impact is due substantially to the significant level of variable rate and repriceable assets and liabilities and related shorter relative durations.

At September 30, 2024, the repricing duration of the (a) investment portfolio was 4.0 years, (b) loan portfolio was 1.0 year, (c) interest bearing deposit portfolio was 1.3 years, and (d) the borrowed funds portfolio was 0.3 years.

The following table reflects the result of simulation analysis on the September 30, 2024 asset and liabilities balances:

As of March 31, 2025, the repricing duration of (a) the investment portfolio was 4.1 years, (b) the loan portfolio 0.9 years, (c) the interest bearing deposit portfolio was 0.3 years, and (d) the borrowed funds portfolio was 0.5 years.

The following table reflects the result of the simulation analysis on the March 31, 2025 asset and liability balances:

Change in interest

rates (basis points) Percentage change in net

interest income Percentage change in

net income Percentage change in

market value of portfolio

rates (basis points) Percentage change in 12-month net interest income

Percentage change in economic value of equity

+400 3.4% (11.1)%

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(300) (4.0)% 7.4%

(400) (11.8)% (1.7)%

The results of the simulation are within the relevant policy limits adopted by the Company for percentage change in net interest income.

For net interest income, the Company has adopted a policy limit of -10% for a 100 basis point change, -12% for a 200 basis point change, -18% for a 300 basis point change and -24% for a 400 basis point change.

For the market value of equity, the Company has adopted a policy limit of -12% for a 100 basis point change, -15% for a 200 basis point change, -25% for a 300 basis point change, and -30% for a 400 basis point change.

The impact on net interest income and net income of (1.4)% and (3.3)%, respectively, given a 100 basis point decrease in market interest rates at September 30, 2024 compares to increases of 0.9% and 2.0%, respectively, for the same period in 2023, and reflects in large measure the beta factor discussion above.

The analysis at the end of the first nine months of 2024 compared to the first nine months of 2023, showed that in an environment of increasing rates the continued increase in income is dependent on rate increases, which are passed through to borrowers basis point for basis point, as opposed to the prior year where our model suggested rising rates would not be fully passed on to depositors.

The changes in net interest income, net income and the economic value of equity in higher interest rate shock scenarios at September 30, 2024 are not believed to be excessive.

For the economic value of equity, the Company has adopted a policy limit of -12% for a 100 basis point change, -15% for a 200 basis point change, -25% for a 300 basis point change and -30% for a 400 basis point change.

The decrease in 12-month net interest income and net income of (0.7)% and (1.6)%, respectively, given a 100 basis point decrease in market interest rates as of March 31, 2025 compares to 0.1% and 0.2%, respectively, for the same period in 2024.

The analysis at the end of the first quarter of 2025 showed that in an environment of increasing rates, income increases.

This is a change from the end of 2024, which showed a decrease in income due to an increase in rates.

The primary drivers of this change are an increase in time deposits and not reinvesting cash flows from the investment portfolio which had resulted in the shortening of the overall asset duration.

The changes in net interest income, net income and the economic value of equity in higher interest rate shock scenarios as of March 31, 2025 are not believed to be excessive and are within policy limits.

Certain shortcomings are inherent in the method of analysis presented in the foregoing table.

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Use of Non-GAAP Financial Measures

The information set forth below contains certain financial information determined by methods other than in accordance with GAAP.

These non-GAAP financial measures are "tangible common equity," "tangible book value per common share," "tangible common equity ratio," "average tangible common equity," "annualized return on average tangible common equity," "operating annualized return on average tangible common equity," "efficiency ratio," "operating efficiency ratio," "operating noninterest expense," "operating revenue," "pre-provision net revenue," "operating pre-provision net revenue," "operating net income," and "operating earnings per share (diluted)." The Company considers these non-GAAP measurements useful for investors, regulators, management and others to evaluate capital adequacy and to compare against other financial institutions.

Management uses these non-GAAP measures in its analysis of our performance because it believes these measures are used as a measure of our performance by investors.

The Company calculates the tangible common equity ratio by excluding the balance of intangible assets from common shareholders' equity, or tangible common equity, and dividing by tangible assets.

The Company calculates tangible book value per common share by dividing tangible common equity by common shares outstanding, as compared to book value per common share, which the Company calculates by dividing common shareholders' equity by common shares outstanding.

The Company calculates the ROATCE by dividing net income available to common shareholders by average tangible common equity which is calculated by excluding the average balance of intangible assets from the average common shareholders' equity.

The Company calculates operating ROATCE by dividing operating net income available to common shareholders by average tangible common equity which is calculated by excluding the average balance of intangible assets from the average common shareholders' equity.

The Company considers this information important to shareholders as tangible equity is a measure that is consistent with the calculation of capital for bank regulatory purposes, which excludes intangible assets from the calculation of risk based ratios, and as such is useful for investors, regulators, management and others to evaluate capital adequacy and to compare against other financial institutions.

The Company calculates the efficiency ratio by dividing noninterest expense by the sum of net interest income and noninterest income.

The operating efficiency ratio is calculated by first subtracting from noninterest expense the one-time goodwill impairment of $104.2 million recorded in the second quarter of 2024, as applicable, and then by dividing the operating noninterest expense by the sum of net interest income and noninterest income.

The efficiency ratio and the operating efficiency ratio measures a bank's overhead as a percentage of its revenue.

The Company believes that reporting the non-GAAP efficiency ratio and the non-GAAP operating efficiency ratio more closely measures its effectiveness of controlling operational activities.

Operating noninterest expense is a non-GAAP financial measure derived from GAAP based amounts.

The Company calculates operating noninterest expense by subtracting from noninterest expense the one-time goodwill impairment of $104.2 million recorded in the second quarter of 2024, as applicable.

During the three months ended June 30, 2024, Management determined that a triggering event had occurred as a result of the Company's sustained decrease in the Company’s stock price.

Management performed an interim quantitative impairment test, resulting in the impairment charge on its only reporting unit as of May 31, 2024 and determined that goodwill had become fully impaired, which resulted in an impairment charge of $104.2 million to reduce fully the carrying value of the Company's goodwill.

The Company considers the adjusted metric information that is important to shareholders because the impairment charge was a one-time event that occurred during the second quarter of

The operating noninterest expense allows investors to better compare the Company's performance against historical periods.

The Company calculates pre-provision net revenue by subtracting noninterest expense from the sum of net interest income and noninterest income.

The operating pre-provision net revenue is calculated by first subtracting from noninterest expense the one-time goodwill impairment of $104.2 million recorded in the second quarter of 2024, as applicable, and then by subtracting the operating noninterest expense from the sum of net interest income and noninterest income.

The Company considers this information important to shareholders because it illustrates revenue excluding the impact of provisions and reversals to the ACL on loans.

Management uses non-GAAP measures because they provide information to investors about the underlying operational performance and trends of the Company.

Additionally, the Company considers non-GAAP measures based on tangible equity important to shareholders because tangible equity is a measure that is consistent with the calculation of capital for bank regulatory purposes, which excludes intangible assets from the calculation of risk based ratios, and as such is useful for investors, regulators, management and others to evaluate capital adequacy and to compare against other financial institutions.

These disclosures should not be considered in isolation or as a substitute for results determined in accordance with GAAP and are not necessarily comparable to non-GAAP performance measures which may be presented by other bank holding companies.

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The following tables reconcile the GAAP financial measures to the associated non-GAAP financial measures:

(dollars in thousands except per share data) September 30, 2024 December 31, 2023

(dollars in thousands except per share data) March 31, 2025 December 31, 2024

Tangible common equity

Common shareholders’ equity $ 1,244,891 $ 1,226,061

Intangible assets (11) (16)

Tangible common equity $ 1,225,403 $ 1,169,358

Book value per common share $ 40.61 $ 42.58

Intangible book value per common share — (3.50)

Tangible book value per common share $ 40.61 $ 39.08

Tangible common equity (Non-GAAP) $ 1,244,880 $ 1,226,045

Tangible common equity ratio

Total assets $ 11,317,361 $ 11,129,508

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Tangible assets $ 11,317,350 $ 11,129,492

Tangible common equity ratio 10.86 % 10.12 %

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands) 2024

2023 2024 2023

Average common shareholders' equity $ 1,201,477 $ 1,235,162 $ 1,251,404 $ 1,240,574

Average intangible assets (24) (104,639) (67,941) (104,366)

Average tangible common equity $ 1,201,453 $ 1,130,523 $ 1,183,463 $ 1,136,208

Net income (loss) available to common shareholders $ 21,815 $ 27,383 $ (62,325) $ 80,309

Average tangible common equity 1,201,453 1,130,523 1,183,463 1,136,208

Annualized return on average tangible common equity 7.22 % 9.61 % (7.03) % 9.45 %

Net income (loss) $ 21,815 $ 27,383 $ (62,325) $ 80,309

Add back of goodwill impairment — — 104,168 —

Operating net income (Non-GAAP) $ 21,815 $ 27,383 $ 41,843 $ 80,309

Operating annualized return on average tangible common equity (Non-GAAP) 7.22 % 9.61 % 4.72 % 9.45 %

Three Months Ended September 30,

Nine Months Ended September 30,

2023 2024 2023

Net interest income $ 71,843 $ 70,719 $ 217,894 $ 217,554

Noninterest income 6,951 6,347 15,872 18,642

Operating revenue 78,794 77,066 233,766 236,196

Noninterest expense 43,614 37,633 230,102 116,195

Exclude goodwill impairment — — (104,168) —

Operating noninterest expense (Non-GAAP) 43,614 37,633 125,934 116,195

Efficiency ratio 55.35 % 48.83 % 98.43 % 49.19 %

Operating efficiency ratio (Non-GAAP) 55.35 % 48.83 % 53.87 % 49.19 %

Net interest income $ 71,843 $ 70,719 $ 217,894 $ 217,554

Noninterest income 6,951 6,347 15,872 18,642

Operating revenue 78,794 77,066 233,766 236,196

Noninterest expense 43,614 37,633 230,102 116,195

Pre-provision net revenue 35,180 39,433 3,664 120,001

Add back of goodwill impairment — — 104,168 —

Operating pre-provision net revenue (Non-GAAP) $ 35,180 $ 39,433 $ 107,832 $ 120,001

Operating net (loss) income and operating (loss) earnings per share (diluted) are non-GAAP financial measures derived from GAAP based amounts.

The Company calculates operating net (loss) income by excluding from net (loss) income the one-time goodwill impairment of $104.2 million recorded in the second quarter of 2024, as applicable.

During the three months ended June 30, 2024, Management determined that a triggering event had occurred as a result of the share price trading under book value for more than four quarters.

Management performed an interim quantitative impairment test as of May 31, 2024, and determined that goodwill had become fully impaired, resulting in the impairment charge on its only reporting unit, of $104.2 million to reduce fully the carrying value of the Company's goodwill.

The Company calculates operating (loss) earnings per share (diluted) by dividing net (loss) income, excluding the one-time goodwill impairment of $104.2 million recorded in the second quarter of 2024, as applicable, by the weighted average shares outstanding (diluted) for the three and nine months ended September 30, 2024, as applicable.

The Company considers this information important to shareholders because operating net (loss) income and operating (loss) earnings per share (diluted) provides investors insight into how Company earnings changed exclusive of the impairment charge to allow investors to better compare the Company's performance against historical periods.

The table below provides a reconciliation of operating net (loss) income and operating (loss) earnings per share (diluted) to the nearest GAAP measure.

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands) 2024

2023 2024 2023

Net (loss) income $ 21,815 $ 27,383 $ (62,325) $ 80,309

Add back of goodwill impairment — — 104,168 —

Operating net income (Non-GAAP) $ 21,815 $ 27,383 $ 41,843 $ 80,309

(Loss) earnings per share (diluted) (1)

$ 0.72 $ 0.91 $ (2.07) $ 2.63

Add back of goodwill impairment per share (diluted) — — 3.46 —

Operating earnings per share (diluted) (Non-GAAP)

$ 0.72 $ 0.91 $ 1.39 $ 2.63

(1) For periods ended with a net loss, anti-dilutive financial instruments have been excluded from the calculation of earnings per share (diluted).

Operating earnings per share (diluted) calculations include the impact of outstanding equity-based awards for all periods.

Tangible common equity ratio (Non-GAAP) 11.00 % 11.02 %

Tangible book value per share calculations

Book value per common share $ 40.99 $ 40.60

Intangible book value per common share — (0.01)

Tangible book value per common share (Non-GAAP) $ 40.99 $ 40.59

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis