Pre-provision net revenue was $27.7 million, up $7 million from the prior quarter. Newell said the improvement was driven largely by a $21.1 million decline in non-interest expense to $48.7 million, reflecting the absence of two fourth-quarter items: $14.7 million of expenses related to loan dispositions and a $10 million legal provision tied to the “probable and estimable resolution of a previously disclosed government investigation.” Non-interest income increased modestly to $12.7 million, supported by $3.6 million of gains on loan sales versus a $1.1 million loss in the prior quarter.
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Management repeatedly emphasized that asset quality remains a top operational priority. “Reducing criticized and classified loans, resolving non-performing exposures, and strengthening the overall health of the portfolio remain the top operational priorities for this management team,” Newell said.
On concentration metrics, Newell said the first quarter saw continued reductions in CRE and acquisition, development and construction (ADC) concentrations as expected payoffs, resolutions, and construction completions reduced concentration risk. The CRE concentration ratio declined to 295% at March 31, moving below the 300% threshold, while the ADC concentration ratio was 76%.
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Criticized and classified assets (including substandard, special mention, and held-for-sale loans) declined by $79.9 million during the quarter to $794.1 million at March 31, compared with $874 million at year-end. As a percentage of Tier 1 capital, Newell said the balance represented 67.3% at quarter end, down from 74.6% at year-end and down from a peak of 90% as of Sept. 30, 2025.
However, inflows into criticized and classified were elevated. Newell said downgrades totaled $159.9 million in the first quarter, higher than $89.3 million in the fourth quarter of 2025, though below the $445 million inflow in the third quarter of 2025. He attributed most of the quarter’s downgrades to three relationships:
A Maryland multifamily project facing pressured net operating income due to tenant credit issues and re-leasing costs; Newell said the property has been reappraised and is not considered collateral dependent.
A hotel relationship downgraded after 2025 financials showed lower occupancy; Newell said the company is updating the appraisal and working with the borrower on remediation.
A single secured C&I relationship moved to special mention, where management said it does not currently expect a loss.
Chief Lending Officer for Commercial Real Estate Ryan Riel said forecasting the pace of future inflows is “tough to do,” but reiterated the company’s commitment to reducing criticized and classified balances “on an absolute level as well as relative to loans and Tier 1 capital,” with expectations for “meaningful progress by year-end.” He and management also stressed that the regulatory definition of criticized and classified does not necessarily imply loss content.
Non-performing loans increased to $128.8 million at March 31, up $21.9 million from the prior quarter, representing 1.86% of total loans. Newell said the provision for credit losses totaled $13.4 million, down $2.1 million from the prior quarter. The allowance for credit losses ended the quarter at $147.2 million, or 2.12% of total loans, including $60 million of reserves specifically against the income-producing office portfolio.
Net charge-offs rose to $26 million, up $13.7 million, driven primarily by $11.6 million associated with loans moved to held for sale as part of targeted resolution efforts. Newell described the approach as “disciplined, relationship-by-relationship strategies to resolve legacy exposures,” adding that management often prefers to absorb near-term earnings impact rather than extend workouts.
Early-stage delinquency improved, with Newell noting a $31.9 million decline in 30- to 89-day past due balances, which he called a “constructive signal” for the forward pipeline.
Newell said the held-for-sale portfolio ended the quarter at $55.7 million, down from $90.7 million at year-end. He added that the company transferred three relationships from held for investment during the quarter to facilitate the sale of a fourth held-for-sale relationship, which he described as consistent with the strategy of resolving exposures while minimizing loss.
Importantly, Newell said that of the $55.7 million held for sale at quarter end, $55.2 million was already under contract to be sold.
In response to analyst questions about sale pricing, Ryan Riel said office loan dispositions have involved a “significant” drop from par due to substantial valuation declines in the office market. He added that, on the office portfolio cycle-to-date, the “loss content” experienced has been “probably between 45% and 50%,” referencing probability of default and loss given default. Newell also noted that for office valuations the bank generally uses broker opinions of value, which he characterized as more forward-looking and reflective of market participant conversations.
Susan Riel emphasized that balance sheet contraction is not being driven by deposit outflows. “We are not shrinking the balance sheet because deposits are leaving us,” she said, noting core deposits grew $240 million year-over-year.
Newell said period-end deposits declined $542 million from Dec. 31, including an intentional $413 million reduction of broker deposits. Year-over-year, he said broker deposits were reduced by $921 million while core deposits grew $240 million. Available liquidity stood at $4.3 billion, and Newell said the bank maintains close to two times coverage of uninsured deposits.
On capital, Newell said tangible common equity to tangible assets was 11.51%, Tier 1 leverage was 10.63%, and CET1 was 13.8%. Tangible book value per share increased $0.30 to $37.56.
Newell said the company’s 2026 forecast was “substantially unchanged” from last quarter. The company continues to expect full-year net interest margin of 2.6% to 2.8%, non-interest income growth of 15% to 25%, and non-interest expense flat to down 4% when adjusting for notable items. Newell said average deposits, loans, and earning assets are still expected to decline year-over-year due to intentional repositioning.
During Q&A, Newell said the company’s decision to keep the NIM range unchanged reflected, in part, a forward curve at March 31 that had “largely priced out” previously expected rate reductions, which he said was beneficial given the bank’s interest rate risk position. He also cited expected growth in average cash balances in the second and third quarter tied to seasonal activity from a third-party payment processor that affects averages but not quarter-end balances.
On balance sheet trends, Newell said management expects CRE balances to continue declining in the second quarter, but to be flat when comparing year-end 2025 to year-end 2026, with stabilization in the first half and growth in the back half of the year. He also said the pace of first-quarter C&I growth was likely to be lower on a year-end to year-end basis, though he pointed to strong pipeline activity and an emphasis on “primary relationships.”
Closing the prepared remarks, Susan Riel said the quarter showed the strategy is working, while acknowledging more work remains. She reiterated priorities including reducing criticized and classified balances, shifting funding toward core deposits, pursuing disciplined loan growth, and expanding pre-provision net revenue through 2026.
Eagle Bancorp, Inc is the bank holding company for EagleBank, a commercial bank headquartered in Bethesda, Maryland. Since its founding in 1998, the company has focused on serving businesses and consumers in the Washington, DC metropolitan area. EagleBank operates a network of full-service branches and commercial banking centers, providing personalized financial solutions to corporate, nonprofit, real estate and individual clients.
The company’s product portfolio includes commercial real estate lending, construction and land development financing, small business administration (SBA) loans, commercial and industrial credit facilities, and residential mortgage loans.
The article “Eagle Bancorp Q1 Earnings Call Highlights” was originally published by MarketBeat.
