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Special mention and substandard loans totaled $783.4 millionat year-end, down $175.1 millionfrom the prior quarter. That represented 10.6%of total loans at year-end versus 13.1%at September 30.

Provision for credit losses declined sharply, falling $97.7 millionfrom the third quarter to $15.5 millionin the fourth quarter. The allowance for credit losses ended the quarter at $159.6 million, or 2.19%of total loans. Newell said $73 millionof reserves were associated with income-producing office loans, representing 13%of $577.1 millionoutstanding at year-end.

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Net charge-offs totaled $12.3 million, down $128.6 millionfrom the third quarter. Loans 30 to 89 days past due rose to $50 millionat December 31, up $20.8 millionfrom the prior quarter, which management attributed primarily to a participation loan that was in the process of being renewed and was booked for closure shortly after year-end.

Loan sales and held-for-sale activity drive expenses

Newell said the company had $90.7 millionof loans held for sale at December 31, a decline of $45.9 millionfrom the prior period. That amount included $8.4 millionof mark-to-market adjustments based on updated valuations informed by proposed or under-contract dispositions. Eagle sold $77.9 millionof loans during the quarter and recognized a $1.1 millionloss on those sales.

In response to analyst questions on timing and valuation, Newell said approximately two-thirdsof the held-for-sale portfolio was "under contract or negotiating to contract" and scheduled for resolution and disposition in the first quarter, though some could extend into the second quarter. He added that additional moves into held-for-sale remain possible on a case-by-case basis, though he said the company does not expect activity at the same pace as in 2025.

The company also reported progress with other real estate owned: a land loan transferred to OREO in the third quarter was sold during the fourth quarter with a $900,000gain.

Funding mix shifts toward core deposits; capital metrics remain "strong"

Newell said net interest income increased slightly, rising $144,000to $68.3 million, as declining deposit and borrowing costs outpaced a modest reduction in earning-asset income. Net interest margin declined five basis pointsto 2.38%, which management attributed primarily to a mix shift between loans and cash, partially offset by improved time deposit costs from reduced brokered time deposit usage.

Non-interest income increased to $12.2 millionfrom $2.5 millionthe prior quarter, driven primarily by losses that did not recur and "other income" related to SBIC investments and the OREO sale gain, according to Newell. Non-interest expense rose $17.9 millionto $59.8 million, reflecting the held-for-sale disposition costs and valuation adjustments.

On capital, Newell said Eagle's ratios remained strong:

• Tangible common equity to tangible assets:10.87%

• Tier 1 leverage ratio:10.17%

• CET1:13.83%

Tangible book value per share increased $0.59to $37.59as earnings added to capital. Management also emphasized funding resilience, noting $4.7 billionin available liquidity and "2x coverage of uninsured deposits." During 2025, the company reduced brokered deposits by $602 millionwhile increasing core deposits by $692 million, and Newell said further progress is expected in 2026.

In the Q&A, Newell said brokered deposits excluding "two-way deposits" totaled $1.56 billionat year-end with a weighted rate of 4%. He said $715 millionof that was brokered CDs, and management's goal is to reduce many of those CDs "down to close to zero" through 2026.

2026 outlook: margin expansion expected despite smaller average balance sheet

Looking ahead, Newell said the company expects average deposits, loans, and earning assets to decline year over year in 2026 as part of deliberate balance sheet repositioning and continued runoff of brokered funding. Despite that, management forecast a "meaningful expansion" in net interest margin to a range of 2.6% to 2.8%, driven largely by lower reliance on higher-cost brokered deposits.

Additional items in the company's 2026 forecast discussed on the call included:

• Non-interest income:expected to increase approximately 15% to 25%

• Non-interest expense:expected to range from flat to down 4%, reflecting normalization after elevated fourth-quarter 2025 expense levels that management said are not expected to recur

Riel said the company's focus is shifting from remediation to execution, while noting the company is "not yet where we want to be in terms of bottom-line performance." On capital actions such as buybacks or dividend changes, management said it plans to remain prudent and would want to see multiple quarters of favorable trend and a lower level of criticized/classified loans before considering changes to its approach.

About Eagle Bancorp (NASDAQ:EGBN)

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 Q4 Earnings Call Highlights " was originally published by MarketBeat.