UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

☒    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2024

OR

☐    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to _________

Commission File Number 0-25923

Eagle Bancorp, Inc.

(Exact name of registrant as specified in its charter)

Maryland	52-2061461
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
7830 Old Georgetown Road, Third Floor, Bethesda, Maryland	20814
(Address of principal executive offices)	(Zip Code)

(301) 986-1800

(Registrant's telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Securities Registered Pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, $0.01 par value	EGBN	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

    Large accelerated filer ☒    Accelerated filer ☐

    Non-accelerated filer ☐    Smaller Reporting Company ☐

        Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 1, 2024, the registrant had 30,177,326 shares of Common Stock outstanding.

EAGLE BANCORP, INC.

TABLE OF CONTENTS

PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements	3
	Consolidated Balance Sheets at June 30, 2024 and December 31, 2023 (unaudited)	3
	Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2024 and 2023 (unaudited)	4
	Consolidated Statements of Comprehensive (Loss) Income for the Three and Six Months Ended June 30, 2024 and 2023 (unaudited)	5
	Consolidated Statements of Changes in Shareholders' Equity for the Three and Six Months Ended June 30, 2024 and 2023 (unaudited)	7
	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2024 and 2023 (unaudited)	8
	Notes to Consolidated Financial Statements	10
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	38
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	73
Item 4.	Controls and Procedures	73
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	74
Item 1A.	Risk Factors	74
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	74
Item 3.	Defaults Upon Senior Securities	74
Item 4.	Mine Safety Disclosures	74
Item 5.	Other Information	74
Item 6.	Exhibits	75
Signatures		76

2

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

EAGLE BANCORP, INC.

Consolidated Balance Sheets (Unaudited)

(dollars in thousands, except share and per share data)

	June 30, 2024		December 31, 2023
Assets
Cash and due from banks	$	10,803	$	9,047
Federal funds sold	5,802		3,740
Interest-bearing deposits with banks and other short-term investments	526,228		709,897
Investment securities available-for-sale (amortized cost of $1,584,435 and $1,668,316, respectively, and allowance for credit losses of $17 and $17, respectively).	1,420,618		1,506,388
Investment securities held-to-maturity, net of allowance for credit losses of $2,012 and $1,956, respectively (fair value of $856,275 and $901,582, respectively)	982,955		1,015,737
Federal Reserve and Federal Home Loan Bank stock	54,274		25,748
Loans:
Loans held for sale, at lower of cost or fair value	5,000		—
Loans held for investment, at amortized cost	8,001,739		7,968,695
Less: allowance for credit losses	(106,301)		(85,940)
Loans held for investment, net of allowance	7,895,438		7,882,755
Total Loans	7,900,438		7,882,755
Premises and equipment, net	8,788		10,189
Right-of-use assets - operating leases	16,250		19,129
Deferred income taxes	86,236		86,620
Bank-owned life insurance	114,333		112,921
Goodwill and other intangible assets, net	129		104,925
Other real estate owned	773		1,108
Other assets	174,396		176,334
Total Assets	$	11,302,023	$	11,664,538
Liabilities and Shareholders' Equity
Liabilities
Deposits:
Noninterest-bearing demand	$	1,693,955	$	2,279,081
Interest-bearing transaction	1,123,980		997,448
Savings and money market	3,165,314		3,314,043
Time	2,284,099		2,217,467
Total deposits	8,267,348		8,808,039
Customer repurchase agreements	39,220		30,587
Borrowings	1,659,979		1,369,918
Operating lease liabilities	20,016		23,238
Reserve for unfunded commitments	6,653		5,590
Other liabilities	139,348		152,883
Total Liabilities	10,132,564		10,390,255
Shareholders' Equity
Common stock, par value $0.01 per share; shares authorized 100,000,000, shares issued and outstanding 30,180,482 and 29,925,612, respectively	297		296
Additional paid-in capital	380,142		374,888
Retained earnings	949,863		1,061,456
Accumulated other comprehensive loss	(160,843)		(162,357)
Total Shareholders' Equity	1,169,459		1,274,283
Total Liabilities and Shareholders' Equity	$	11,302,023	$	11,664,538

See Notes to Consolidated Financial Statements.

3

EAGLE BANCORP, INC.

Consolidated Statements of Operations (Unaudited)

(dollars in thousands, except per share data)

	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Interest Income
Interest and fees on loans	$	137,616	$	128,993	$	275,610	$	249,843
Interest and dividends on investment securities	12,405		14,241		25,085		27,786
Interest on balances with other banks and short-term investments	19,568		13,229		44,430		19,003
Interest on federal funds sold	142		47		208		125
Total interest income	169,731		156,510		345,333		296,757
Interest Expense
Interest on deposits	76,846		59,422		156,229		108,376
Interest on customer repurchase agreements	330		333		645		635
Interest on borrowings	21,202		24,944		42,408		40,911
Total interest expense	98,378		84,699		199,282		149,922
Net Interest Income	71,353		71,811		146,051		146,835
Provision for Credit Losses	8,959		5,238		44,134		11,402
Provision for Credit Losses for Unfunded Commitments	608		318		1,064		1,166
Net Interest Income After Provision for Credit Losses	61,786		66,255		100,853		134,267
Noninterest Income
Service charges on deposits	1,653		1,626		3,352		3,136
Gain on sale of loans	37		95		37		400
Net gain (loss) on sale of investment securities	3		2		7		(19)
Increase in the cash surrender value of bank-owned life insurance	709		648		1,412		1,303
Other income	2,930		6,224		4,113		7,475
Total noninterest income	5,332		8,595		8,921		12,295
Noninterest Expense
Salaries and employee benefits	21,770		21,957		43,496		46,131
Premises and equipment expenses	2,894		3,227		5,953		6,544
Marketing and advertising	1,662		884		2,521		1,520
Data processing	3,495		3,354		6,788		6,453
Legal, accounting and professional fees	2,705		2,649		5,212		5,903
FDIC insurance	5,917		2,581		12,329		4,067
Goodwill impairment	104,168		—		104,168		—
Other expenses	3,880		3,326		6,021		7,944
Total noninterest expense	146,491		37,978		186,488		78,562
(Loss) Income Before Income Tax Expense	(79,373)		36,872		(76,714)		68,000
Income Tax Expense	4,429		8,180		7,426		15,074
Net (Loss) Income	$	(83,802)	$	28,692	$	(84,140)	$	52,926
(Loss) Earnings Per Common Share
Basic	$	(2.78)	$	0.94	$	(2.79)	$	1.72
Diluted	$	(2.78)	$	0.94	$	(2.79)	$	1.72

See Notes to Consolidated Financial Statements.

4

EAGLE BANCORP, INC.

Consolidated Statements of Comprehensive (Loss) Income (Unaudited)

(dollars in thousands)

	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Net (Loss) Income	$	(83,802)	$	28,692	$	(84,140)	$	52,926
Other Comprehensive (Loss) Income, Net of Tax:
Unrealized gain (loss) on securities available-for-sale	3,629		(12,074)		(1,437)		5,862
Reclassification adjustment for (gain) loss included in net income	(2)		(2)		(6)		14
Total unrealized gain (loss) on investment securities available-for-sale	3,627		(12,076)		(1,443)		5,876
Amortization of unrealized loss on securities transferred to held-to-maturity	1,322		1,403		2,707		2,044
Total unrealized gain on investment securities held-to-maturity	1,322		1,403		2,707		2,044
Unrealized (loss) gain on derivatives	(24)		—		250		—
Total unrealized (loss) gain on derivatives	(24)		—		250		—
Other comprehensive income (loss)	4,925		(10,673)		1,514		7,920
Comprehensive (Loss) Income	$	(78,877)	$	18,019	$	(82,626)	$	60,846

See Notes to Consolidated Financial Statements.

5

EAGLE BANCORP, INC.

Consolidated Statements of Changes in Shareholders' Equity (Unaudited)

(dollars in thousands except share and per share data)

								Accumulated Other Comprehensive Income (Loss)
	Common			Additional Paid-in Capital		Retained Earnings				Shareholders' Equity
	Shares	Amount
Balance April 1, 2024	30,185,732	$	297	$	377,334	$	1,047,550	$	(165,768)	$	1,259,413
Net Income	—	—		—		(83,802)		—		(83,802)
Other comprehensive loss, net of tax	—	—		—		—		4,925		4,925
Stock-based compensation expense	—	—		2,664		—		—		2,664
Vesting of time-based stock awards issued at date of grant, net of shares withheld for payroll taxes	(11,371)	—		—		—		—		—
Time-based stock awards granted	—	—		—		—		—		—
Issuance of common stock related to employee stock purchase plan	6,121	—		144		—		—		144
Cash dividends declared ($0.45 per share)	—	—		—		(13,885)		—		(13,885)
Balance June 30, 2024	30,180,482	$	297	$	380,142	$	949,863	$	(160,843)	$	1,169,459
Balance April 1, 2023	31,111,647	$	308	$	397,012	$	1,025,552	$	(180,914)	$	1,241,958
Net Income	—	—		—		28,692		—		28,692
Other comprehensive loss, net of tax	—	—		—		—		(10,673)		(10,673)
Stock-based compensation expense	—	—		2,736		—		—		2,736
Issuance of common stock related to options exercised, net of shares withheld for payroll taxes	—	—		—		—		—		—
Vesting of time-based stock awards issued at date of grant, net of shares withheld for payroll taxes	(6,960)	—		—		—		—		—
Time-based stock awards granted	2,008	—		—		—		—		—
Issuance of common stock related to employee stock purchase plan	5,387	—		179		—		—		179
Cash dividends declared ($0.45 per share)	—	—		—		(13,465)		—		(13,465)
Common stock repurchased	(1,200,000)	(12)		(29,649)		—		—		(29,661)
Balance June 30, 2023	29,912,082	$	296	$	370,278	$	1,040,779	$	(191,587)	$	1,219,766

See Notes to Consolidated Financial Statements.

6

EAGLE BANCORP, INC.

Consolidated Statements of Changes in Shareholders' Equity - Continued (Unaudited)

(dollars in thousands except share and per share data)

								Accumulated Other Comprehensive Income (Loss)
	Common			Additional Paid-in Capital		Retained Earnings				Shareholders' Equity
	Shares	Amount
Balance January 1, 2024	29,925,612	$	296	$	374,888	$	1,061,456	$	(162,357)	$	1,274,283
Net Loss	—	—		—		(84,140)		—		(84,140)
Other comprehensive income, net of tax	—	—		—		—		1,514		1,514
Stock-based compensation expense	—	—		5,032		—		—		5,032
Vesting of time-based stock awards issued at date of grant, net of shares withheld for payroll taxes	(42,920)	1		(1)		—		—		—
Vesting of performance-based stock awards, net of shares withheld for payroll taxes	12,013	—		—		—		—		—
Time-based stock awards granted	275,896	—		—		—		—		—
Issuance of common stock related to employee stock purchase plan	9,881	—		223		—		—		223
Cash dividends declared ($0.90 per share)	—	—		—		(27,453)		—		(27,453)
Balance June 30, 2024	30,180,482	$	297	$	380,142	$	949,863	$	(160,843)	$	1,169,459
Balance January 1, 2023	31,346,903	$	310	$	412,303	$	1,015,215	$	(199,507)	$	1,228,321
Net Income	—	—		—		52,926		—		52,926
Other comprehensive loss, net of tax	—	—		—		—		7,920		7,920
Stock-based compensation expense	—	—		5,684		—		—		5,684
Vesting of time-based stock awards issued at date of grant, net of shares withheld for payroll taxes	(44,064)	2		(2)		—		—		—
Vesting of performance-based stock awards, net of shares withheld for payroll taxes	27,296	—		—		—		—		—
Time-based stock awards granted	173,542	—		—		—		—		—
Issuance of common stock related to employee stock purchase plan	8,405	—		314		—		—		314
Cash dividends declared ($0.90 per share)	—	—		—		(27,362)		—		(27,362)
Common stock repurchased	(1,600,000)	(16)		(48,021)		—		—		(48,037)
Balance June 30, 2023	29,912,082	$	296	$	370,278	$	1,040,779	$	(191,587)	$	1,219,766

See Notes to Consolidated Financial Statements.

7

EAGLE BANCORP, INC.

Consolidated Statements of Cash Flows (Unaudited)

(dollars in thousands)

	Six Months Ended June 30,
	2024		2023
Cash Flows From Operating Activities:
Net (Loss) Income	$	(84,140)	$	52,926
Adjustments to reconcile Net (Loss) Income to net cash provided by operating activities:
Provision for credit losses	44,134		11,402
Provision for credit losses for unfunded commitments	1,064		1,166
Goodwill impairment	104,168		—
Depreciation and amortization	1,492		1,778
Gain on sale of loans	(37)		(400)
(Gain) loss on mortgage servicing rights	(1,335)		70
Securities premium amortization, net	2,798		3,272
Origination of loans held for sale	—		(29,690)
Proceeds from sale of loans held for sale	—		36,824
Net gain on sale of other real estate owned	—		(134)
(Gain) loss on sale of investment securities	(7)		19
Net increase in cash surrender value of BOLI	(1,412)		(1,303)
Stock-based compensation expense	5,032		5,684
Decrease (increase) in other assets	283		(15,623)
Increase (decrease) in other liabilities	(13,947)		25,558
Net Cash Provided by Operating Activities	58,093		91,549
Cash Flows From Investing Activities:
Investment securities available-for-sale:
Proceeds from maturities	55,386		60,999
Proceeds from sale/call	27,000		8,303
Investment securities held-to-maturity:
Proceeds from maturities	34,783		39,006
Proceeds from call	102		341
Purchase of Federal Reserve stock	(142)		(158)
Redemption (purchase) of Federal Home Loan Bank stock	(28,384)		19,026
Proceeds from sale of mortgage servicing rights	3,618
Net increase in loans	(62,045)		(137,661)
Redemption of BOLI	—		736
Proceeds from sale of OREO	656		609
Net change in premises and equipment	(30)		(221)
Net Cash Provided by (Used in) Investing Activities	30,944		(9,020)
Cash Flows From Financing Activities:
Decrease in deposits	(540,691)		(995,055)
Increase in customer repurchase agreements	8,633		1,917
Proceeds from borrowings	2,650,000		5,683,000
Repayment of borrowings	(2,360,000)		(4,821,242)
Proceeds from employee stock purchase plan	223		314
Common stock repurchased	—		(48,037)
Cash dividends paid	(27,053)		(27,362)
Net Cash Used in Financing Activities	(268,888)		(206,465)
Net Decrease in Cash and Cash Equivalents	(179,851)		(123,936)
Cash and Cash Equivalents at Beginning of Period	722,684		311,854
Cash and Cash Equivalents at End of Period	$	542,833	$	187,918

See Notes to Consolidated Financial Statements.

8

EAGLE BANCORP, INC.

Consolidated Statements of Cash Flows - Continued (Unaudited)

(dollars in thousands)

	Six Months Ended June 30,
	2024		2023
Supplemental Cash Flows Information:
Interest paid	$	180,999	$	164,083
Income taxes paid	$	—	$	9,930
Non-Cash Investing Activities:
Transfer from loans to loans held for sale	$	5,000	$	—
Transfers from loans to other real estate owned	$	400	$	—

See Notes to Consolidated Financial Statements.

9

EAGLE BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Summary of Significant Accounting Policies

Principles of Consolidation and Basis of Presentation

The Consolidated Financial Statements include the accounts of Eagle Bancorp, Inc. (the "Parent") and its subsidiaries (together with the Parent, the "Company"), with all significant intercompany transactions eliminated. EagleBank (the "Bank"), a Maryland chartered commercial bank, is the Parent's principal subsidiary.

The accounting and reporting policies of the Company conform to generally accepted accounting principles in the United States of America ("GAAP") and to general practices in the banking industry. The Consolidated Financial Statements and accompanying notes of the Company included herein are unaudited. The Consolidated Balance Sheet as of December 31, 2023 was derived from the audited Consolidated Balance Sheet as of that date. The Consolidated Financial Statements reflect all adjustments, consisting of normal recurring adjustments, that in the opinion of management are necessary to present fairly the results for the periods presented. Certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). In addition to the accounting policies described below, 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, 2023. Certain reclassifications have been made to 2023 amounts previously reported to conform to the 2024 presentation. Reclassifications had no effect on net income or shareholders' equity. These statements should be read in conjunction with the audited Consolidated Financial Statements and related notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2023.

Nature of Operations

The Company, through the Bank, conducts a full service community banking business, primarily in Northern Virginia, Suburban Maryland, and Washington, D.C. The primary financial services offered by the Bank include real estate, commercial and consumer lending, as well as traditional deposit and repurchase agreement products. The Bank is also active in the origination of small business loans, and the origination, securitization and sale of multifamily Federal Housing Administration ("FHA") loans. The guaranteed portion of small business loans, guaranteed by the Small Business Administration ("SBA"), is typically sold to third party investors in a transaction apart from the loan's origination.

The Bank offers its products and services through twelve banking offices, four lending centers and various digital capabilities, including remote deposit services and mobile banking services. Eagle Insurance Services, LLC, a subsidiary of the Bank that previously offered access to insurance products and services through a referral program with a third party insurance broker, continues to receive fee income in connection with such program. Landroval Municipal Finance, Inc., a subsidiary of the Bank, focuses on lending to municipalities by buying debt on the public market as well as direct purchase issuance. In April 2024, the Company closed a branch following the lease's expiration.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates and such differences could be material to the consolidated financial statements.

Investment Securities

The Company recognizes acquired securities on the trade date. Investment securities comprise debt securities, which are classified depending on the Company's intent and ability to hold the securities to maturity. Debt securities are classified as available-for-sale ("AFS") when management may have the intent to sell them prior to maturity. Debt securities are classified as held-to-maturity ("HTM") and carried at amortized cost when management has the positive intent and ability to hold them to maturity.

AFS Securities are acquired as part of the Company's asset/liability management strategy and may be sold in response to changes in interest rates, current market conditions, loan demand, changes in prepayment risk and other factors. AFS Securities are carried at fair value, with unrealized gains or losses, other than impairment losses, being reported as accumulated other comprehensive income/(loss), a separate component of shareholders' equity, net of deferred income tax. Realized gains

10

and losses, using the specific identification method, are included as a separate component of noninterest income in the Consolidated Statements of Operations.

Premiums and discounts on investment securities are amortized or accreted to the earlier of call or maturity based on expected lives, which include prepayment adjustments and call optionality.

Transfers of Investment Securities from Available-for-Sale to Held-to-Maturity

Transfers of debt securities into the HTM category from the AFS category are made at amortized cost, net of unrealized gain or loss reported in accumulated other comprehensive income (loss) at the date of transfer. The unrealized holding gain or loss at the date of transfer is retained in other comprehensive income and in the carrying value of the HTM securities. Such amounts are amortized over the remaining life of the security.

The Company does not intend to sell the HTM investments, and it is more likely than not that the Company will not have to sell the securities before recovery of its amortized cost basis, which may be at maturity.

Loans

The Company classifies loans in its portfolio as either held for investment (“HFI”) or held for sale (“HFS”) HFS loans are reported at the lower of cost or fair value on the Consolidated Balance Sheets. HFI loans are stated at the principal amount outstanding, net of unamortized deferred costs and fees. Interest income on loans is recognized at the contractual rate on the principal amounts outstanding. Loan origination fees, net of direct loan origination costs, and commitment fees are deferred and amortized on the interest method over the term of the loan.

Past due loans are placed on nonaccrual status when there is a clear indication that the borrower's cash flow may not be sufficient to meet payments as they become due. Generally, this conclusion is reached when a loan is 90 days past due. When a loan is placed on nonaccrual status, all previously accrued and unpaid interest is reversed through interest income. Interest income is subsequently recognized on a cash basis as long as the remaining book balance of the asset is deemed to be collectible. If collectability is questionable, then cash payments are applied to principal. A loan is placed back on accrual status when both principal and interest are current and it is probable that we will be able to collect all amounts due (both principal and interest) according to the terms of the loan agreement.

Allowance for Credit Losses

The following table presents a breakdown of the provision for credit losses included in our Consolidated Statements of Operations for the applicable periods (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
(dollars in thousands)	2024		2023		2024		2023
Provision for credit losses - loans	$	8,904	$	5,250	$	44,078	$	10,158
Provision for credit losses - HTM debt securities	55		2		56		1,244
Provision for credit losses - AFS debt securities	—		(14)		—		—
Total	$	8,959	$	5,238	$	44,134	$	11,402

11

Allowance for Credit Losses - Loans

The allowance for credit losses ("ACL") - loans is an estimate of the expected credit losses in the HFI loans portfolio. The Company's ACL on the loan portfolio is deducted from the amortized cost basis of loans to present the net amount expected to be collected on the loans. Loans, or portions thereof, are charged off against the allowance when they are deemed uncollectible. Expected recoveries are recorded to the extent they do not exceed the aggregate of amounts previously charged-off and expected to be charged-off.

Reserves on loans that do not share risk characteristics are evaluated on an individual basis. Nonaccrual loans are specifically reviewed for loss potential and when deemed appropriate are assigned a reserve based on an individual evaluation. The remainder of the portfolio, representing all loans not evaluated individually for impairment, is segregated by call report codes, and a loan-level probability of default ("PD") / loss given default ("LGD") cash flow method is applied using an exposure at default ("EAD") model. These historical loss rates are then modified to incorporate our reasonable and supportable forecast of future losses at the portfolio segment level, as well as any necessary qualitative adjustments.

The Company uses regression analysis of historical internal and peer data provided by a third-party service provider (as Company loss data is insufficient) to determine suitable credit loss drivers to utilize when modeling lifetime PD and LGD. This analysis also determines how expected PD will be impacted by different forecasted levels of the loss drivers.

A similar process is employed to calculate a reserve assigned to off-balance sheet commitments, specifically unfunded loan commitments and letters of credit, and any needed reserve is recorded in reserve for unfunded commitments ("RUC") on the Consolidated Balance Sheets. For periods beyond which we are able to develop reasonable and supportable forecasts, we revert to the historical loss rate on a straight-line basis over a twelve-month period.

For each of these loan segments, the Company generates cash flow projections at the instrument level wherein payment expectations are adjusted for estimated prepayment speeds, PD rates, and LGD rates. The modeling of expected prepayment speeds is based on historical internal data. EAD is based on each instrument's underlying amortization schedule in order to estimate the bank's expected credit loss exposure at the time of the borrower's potential default.

The ACL also includes an amount for inherent risks not reflected in the historical quantitative analysis associated with the reasonable and supportable forecast. 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.

During the first quarter of 2024, management enhanced the cash flow model to incorporate three macroeconomic variables in addition to national unemployment. The four economic variables selected, national unemployment, which was the 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. The updated model incorporates a weighting of three economic scenarios; baseline, upside and downside. The scenarios cover the four economic forecast variables, with each segment of the portfolio linked to two of these variables, depending on the segment. The loss driver analysis is spread over a reasonable and supportable period of 18 months and reverts back to a historical loss rate over twelve months on a straight-line basis over the loan's remaining maturity. Management leverages economic projections from reputable and independent third parties to inform its loss driver forecasts over the forecast period.

While our methodology in establishing the ACL attributes portions of the ACL and RUC to the separate loan pools or 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. Portfolio segments are used to pool loans with similar risk characteristics and align with our methodology for measuring current expected credit losses ("CECL").

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A summary of our primary portfolio segments is as follows:

Commercial. The commercial loan portfolio comprises lines of credit and term loans for working capital, equipment, and other business assets across a variety of industries. These loans are used for general corporate purposes including financing working capital, internal growth, and acquisitions; and are generally secured by accounts receivable, inventory, equipment and other assets of our clients' businesses.

Income producing - commercial real estate. Income producing commercial real estate loans comprise permanent and bridge financing provided to professional real estate owners/managers of commercial and residential real estate projects and properties who generally have a demonstrated record of past success with similar properties. Collateral properties include apartment buildings, office buildings, hotels, mixed-use buildings, retail, data centers, warehouse, and shopping centers. The primary source of repayment on these loans is generally expected to come from lease or operation of the real property collateral. Income producing commercial real estate loans are impacted by fluctuation in collateral values, as well as rental demand and rates.

Owner occupied – commercial real estate. The owner occupied commercial real estate portfolio comprises permanent financing provided to operating companies and their related entities for the purchase or refinance of real property wherein their business operates. Collateral properties include industrial property, office buildings, religious facilities, mixed-use property, health care and educational facilities.

Real estate mortgage – residential. Real estate mortgage residential loans comprise consumer mortgages for the purpose of purchasing or refinancing first lien real estate loans secured by primary-residence, second-home, and rental residential real property.

Construction – commercial and residential. The construction commercial and residential loan portfolio comprises loans made to builders and developers of commercial and residential property, for both renovation, new construction, and development projects. Collateral properties include apartment buildings, mixed use property, residential condominiums, single and 1-4 residential property, and office buildings. The primary source of repayment on these loans is expected to come from the sale, permanent financing, or lease of the real property collateral. Construction loans are impacted by fluctuations in collateral values and the ability of the borrower or ultimate purchaser to obtain permanent financing.

Construction – commercial and industrial ("C&I") (owner occupied). The construction C&I (owner occupied) portfolio comprises loans to operating companies and their related entities for new construction or renovation of the real or leased property in which they operate. Generally these loans contain provisions for conversion to an owner occupied commercial real estate loan or to a commercial loan after completion of construction. Collateral properties include industrial, healthcare, religious facilities, restaurants, and office buildings.

Home equity. The home equity portfolio comprises consumer lines of credit and loans secured by subordinate liens on residential real property.

Other consumer. The other consumer portfolio comprises consumer purpose loans not secured by real property, including personal lines of credit and loans, overdraft lines, and vehicle loans. This category also includes other loan items such as overdrawn deposit accounts as well as loans and loan payments in process.

We have several pass credit grades that are assigned to loans based on varying levels of risk, ranging from credits that are secured by cash or marketable securities, to watch credits which have all the characteristics of an acceptable credit risk but warrant more than the normal level of monitoring. Special mention loans are those that are currently protected by the sound net worth and paying capacity of the borrower, but that are potentially weak and constitute an additional credit risk. These loans have the potential to deteriorate to a substandard grade due to the existence of financial or administrative deficiencies. Substandard loans have a well-defined weakness or weaknesses that jeopardizes the liquidation of the debt. They are characterized by the distinct possibility that we will sustain some loss if the deficiencies are not corrected. Some substandard loans are inadequately protected by the sound net worth and paying capacity of the borrower and of the collateral pledged and may be considered impaired. Substandard loans can be accruing or can be on nonaccrual depending on the circumstances of the individual loans.

Loans classified as doubtful have all the weaknesses inherent in substandard loans with the added characteristics that the weaknesses make collection in full highly questionable and improbable. The possibility of loss is extremely high. All doubtful loans are on nonaccrual.

Classified loans represent the sum of loans graded substandard and doubtful.

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The methodology used in the estimation of the allowance, which is performed at least quarterly, is designed to be dynamic and responsive to changes in portfolio credit quality and forecasted economic conditions. Changes are reflected in the pool-basis allowance and individually assessed loans as the collectability of classified loans is evaluated with new information. As our portfolio has matured, historical loss ratios have been closely monitored. The review of the appropriateness of the allowance is performed by executive management and presented to management committees and the Audit Committee of the Board of Directors (the "Board"). The committees' reports to the Board are part of the Board review on a quarterly basis of our consolidated financial statements.

When management determines that foreclosure is probable, and for certain collateral-dependent loans where foreclosure is not considered probable, expected credit losses are based on the estimated fair value of the collateral adjusted for selling costs, when appropriate. A loan is considered collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral.

Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate. The contractual term excludes expected extensions, renewals and modifications unless management has a reasonable expectation that a borrower will result in financial difficulty.

We do not measure an ACL on accrued interest receivable balances because these balances are written off in a timely manner as a reduction to interest income when loans are placed on nonaccrual status.

Collateral Dependent Financial Assets

Loans that do not share risk characteristics 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. The ACL may be zero if the fair value of the collateral at the measurement date exceeds the amortized cost basis of the financial asset.

Loan Modifications to Borrowers in Financial Difficulty

The Company evaluates loan restructurings to determine if we have a loan modification and whether it results in a new loan or the 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 are 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.

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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Allowance for Credit Losses - AFS Securities

For AFS debt securities in an unrealized loss position, the Company first assesses whether it intends to sell, or it is more likely than not that it will be required to sell, the security before recovery of its amortized cost basis. If either criterion is met, the security’s amortized cost basis is written down to fair value through income. For AFS debt securities that do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security is compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an ACL is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an ACL is recognized in other comprehensive income, as a non-credit-related impairment.

The entire amount of an impairment loss is recognized in earnings only when: (1) the Company intends to sell the security; (2) it is more likely than not that the Company will have to sell the security before recovery of its amortized cost basis; or (3) the Company does not expect to recover the entire amortized cost basis of the security. In all other situations, only the portion of the impairment loss representing the credit loss must be recognized in earnings, with the remaining portion being recognized in other comprehensive income, net of deferred taxes.

Changes in the ACL are recorded as a provision for or reversal of credit losses. Losses are charged against the allowance when management believes the uncollectibility of an AFS security is confirmed or when either of the criteria regarding intent or requirement to sell is met.

We have made a policy election to exclude accrued interest from the amortized cost basis of AFS debt securities and report accrued interest separately in accrued interest and other assets in the Consolidated Balance Sheets. AFS debt securities are placed on nonaccrual status when we no longer expect to receive all contractual amounts due, which is generally at 90 days past due. Accrued interest receivable is reversed against interest income when a security is placed on nonaccrual status. Accordingly, we do not recognize an allowance for credit loss against accrued interest receivable.

Allowance for Credit Losses - HTM Securities

The Company separately evaluates its HTM investment securities for any credit losses. The Company pools like securities and calculates expected credit losses through an estimate based on a security's credit rating, which is recognized as part of the ACL for HTM securities and included in the balance of HTM securities on the Consolidated Balance Sheets. If the Company determines that a security indicates evidence of deteriorated credit quality, the security is individually evaluated and a discounted cash flow analysis may be performed and compared to the amortized cost basis.

Loan Commitments and Allowance for Credit Losses on Off-Balance Sheet Credit Exposures

Financial instruments include off-balance sheet credit instruments such as commitments to make loans and commercial letters of credit issued to meet customer financing needs. The Company's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for off-balance sheet loan commitments is represented by the contractual amount of those instruments. Such financial instruments are recorded when they are funded.

The Company records a RUC on off-balance sheet credit exposures through a charge to provision for credit loss expense in the Company's Consolidated Statement of Operations.

The RUC on off-balance sheet credit exposures is estimated by loan segment at each balance sheet date under the current expected credit loss model using the same methodologies as portfolio loans, taking into consideration the likelihood that funding will occur, and is included in the RUC on the Company's Consolidated Balance Sheets.

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Goodwill Assessment

Goodwill represents the excess of the cost of an acquisition over the fair value of the net identifiable assets acquired. Goodwill is deemed to have an indefinite useful life and as such is not subject to amortization, and instead 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.

Goodwill is subject to impairment testing at the reporting unit level, which must be conducted at least annually, as well as when events or changes in circumstances indicate the assets might be impaired and/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.

The Company has determined that it has a single reporting unit. If the fair value of the reporting unit exceeds the book value, no write-down of recorded goodwill is required. If the fair value of the reporting unit is less than book value, an expense may be required to write-down the related goodwill to the proper carrying value. Any impairment would be recorded through a reduction of goodwill or other intangible asset and an offsetting charge to noninterest expense.

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 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. During the past twelve months ended June 30, 2024, changes in macroeconomic conditions, market volatility due to rising interest rates 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. 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.

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New Authoritative Accounting Guidance

Accounting Standards Pending Adoption

ASU No. 2023-06, "Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative" ("ASU 2023-06") incorporates into the Accounting Standards Codification ("ASC" or "Codification") several SEC disclosure requirements under Regulations S-K and S-X. The amendments in the ASU are intended to clarify or improve disclosure and presentation requirements of a variety of Codification Topics, allow users to more easily compare entities subject to the SEC's existing disclosures with those entities that were not previously subject to the requirements, and align the requirements in the Codification with the SEC’s regulations. These requirements are similar to, but require more information than, generally accepted accounting principles. The new updates modify the disclosure or presentation requirements of a variety of Topics in the Codification. Entities should apply the amendments in ASU 2023-06 prospectively. For entities subject to the SEC's existing disclosure requirements and for entities that have to file or provide financial statements with or to the SEC for the purpose of selling or issuing securities that do not have contractual limits on transfer, the effective date for each amendment will be the date on which the SEC removes that related disclosure from its rules. As a result, the effective date will be different for each individual disclosure based on the effective date of the SEC's deletion of the related disclosure. Early adoption is prohibited. For all other entities, the effective date will be two years later. Early adoption is permitted for these entities, but not before the provisions of the ASU become effective for entities subject to SEC's regulation. The effective dates of the amendments are predicated on the SEC removing its related disclosure requirements from its regulations. However, if by June 30, 2027, the SEC has not removed the related disclosure from its regulations, the amendments will be removed from the Codification and not become effective for any entity. We are currently in the process of evaluating this guidance.

ASU No. 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures" ("ASU 2023-09"). The ASU requires additional income tax disclosures around effective tax rates and cash income taxes paid. ASU 2023-09 is effective for public business entities for annual periods beginning after December 15, 2024 and interim periods within those fiscal years. The impact of ASU 2023-09 should be applied prospectively. We are currently in the process of evaluating this guidance.

ASU No. 2024-01, "Compensation—Stock Compensation (Topic 718): Scope Application of Profits Interest and Similar Awards" ("ASU 2024-01") clarifies how an entity determines whether a profits interest or similar award (hereafter a "profits interest award") is accounted for either (1) as a share-based payment arrangement, and therefore, within the scope of ASC 718 or (2) not a share-based payment arrangement and therefore within the scope of other guidance. ASU 2024-01 also improves the clarity and operation of the guidance in ASC 718-10-15-3. The guidance in ASU 2024-01 applies to all entities that issue profits interest awards as compensation to employees or non employees in exchange for goods or services. For public business entities, the amendments are effective for annual periods beginning after December 15, 2024, and interim periods within those annual periods. For all other entities, the amendments are effective for annual periods beginning after December 15, 2025, and interim periods within those annual periods. Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance. If an entity adopts the amendments in an interim period, it should adopt them as of the beginning of the annual period that includes that interim period. The amendments should be applied (i) retrospectively to all prior periods presented in the financial statements or (ii) prospectively to profits interest and similar awards granted or modified on or after the date at which the entity first applies the amendments. If the amendments are applied prospectively, an entity is required to disclose the nature of and reason for the change in accounting principle. We are currently in the process of evaluating this guidance.

ASU No. 2024-02, "Codification Improvements—Amendments to Remove References to the Concepts Statements" ("ASU 2024-02") amends the Accounting Standard Codification (“Codification”) by removing references to various concepts statements. In most instances, the references are extraneous and not required to understand or apply the guidance. In other instances, the references were used in prior statements to provide guidance in certain topical areas. As stated in paragraph 105-10-05-3 of the Codification, FASB Concepts Statements are non authoritative. These amendments will simplify the Codification which will further draw a distinction between authoritative and non authoritative literature. The amendments are effective for public business entities for fiscal years beginning after December 15, 2024. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2025. Early application of the amendments is permitted for all entities, for any fiscal year or interim period for which financial statements have not yet been issued (or made available for issuance). If an entity adopts the amendments in an interim period, it must adopt them as of the beginning of the fiscal year that includes that interim period. An entity should apply the amendments using one of the following transition methods: (i) prospectively to all new transactions recognized on or after the date that the entity first applies the amendments, or (ii) retrospectively to the beginning of the earliest comparative period presented in which the amendments were first applied. We are currently in the process of evaluating this guidance.

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Accounting Standards Adopted in 2024:

ASU No. 2023-07,"Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures." ("ASU 2023-07") requires filers to disclose significant segment expenses, an amount and description for other segment items, the title and position of the entity’s chief operating decision maker ("CODM") and an explanation of how the CODM uses the reported measures of profit or loss to assess segment performance, and, on an interim basis, certain segment related disclosures that previously were required only on an annual basis. ASU 2023-07 also clarifies that entities with a single reportable segment are subject to both new and existing segment reporting requirements and that an entity is permitted to disclose multiple measures of segment profit or loss, provided that certain criteria are met. ASU 2023-07 is effective for the Company for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. Since early adoption is permitted, the Company adopted the guidance prescribed under ASU 2023-07 effective January 1, 2024. Adoption of this guidance did not have a material impact on our consolidated financial statements for fiscal year 2024.

Note 2. Cash and Due from Banks

For the six months ended June 30, 2024 and 2023, the Bank maintained an average daily balance at the Federal Reserve Bank of $1.7 billion and $0.9 billion, respectively, on which interest is paid.

Additionally, the Bank maintains interest-bearing balances with the Federal Home Loan Bank of Atlanta ("FHLB") and noninterest-bearing balances with domestic correspondent banks to cover associated costs for services they provide to the Bank.

Note 3. Investment Securities

The amortized cost and estimated fair value of the Company's AFS and HTM securities are summarized as follows:

(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Estimated Fair Value
June 30, 2024
Investment securities available-for-sale:
U.S. treasury bonds	$	49,944	$	—	$	(1,223)	$	—	$	48,721
U.S. agency securities	696,652		—		(55,685)		—		640,967
Residential mortgage-backed securities	773,275		30		(101,099)		—		672,206
Commercial mortgage-backed securities	53,868		—		(5,021)		—		48,847
Municipal bonds	8,696		—		(514)		—		8,182
Corporate bonds	2,000		—		(288)		(17)		1,695
Total available-for-sale securities	$	1,584,435	$	30	$	(163,830)	$	(17)	$	1,420,618

(dollars in thousands)	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Estimated Fair Value
June 30, 2024
Investment securities held-to-maturity:
Residential mortgage-backed securities	$	638,039	$	—	$	(89,274)	$	548,765
Commercial mortgage-backed securities	89,674		—		(13,058)		76,616
Municipal bonds	124,895		—		(11,259)		113,636
Corporate bonds	132,359		—		(15,101)		117,258
Total	$	984,967	$	—	$	(128,692)	$	856,275
Allowance for credit losses	(2,012)
Total held-to-maturity securities, net of ACL	$	982,955

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(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Estimated Fair Value
December 31, 2023
Investment securities available-for-sale:
U.S. treasury bonds	$	49,894	$	—	$	(1,993)	$	—	$	47,901
U.S. agency securities	729,090		—		(57,693)		—		671,397
Residential mortgage-backed securities	823,992		45		(96,684)		—		727,353
Commercial mortgage-backed securities	54,557		—		(4,993)		—		49,564
Municipal bonds	8,783		—		(293)		—		8,490
Corporate bonds	2,000		—		(300)		(17)		1,683
Total available-for-sale securities	$	1,668,316	$	45	$	(161,956)	$	(17)	$	1,506,388

(dollars in thousands)	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Estimated Fair Value
December 31, 2023
Investment securities held-to-maturity:
Residential mortgage-backed securities	$	670,043	$	—	$	(79,980)	$	590,063
Commercial mortgage-backed securities	90,227		—		(12,867)		77,360
Municipal bonds	125,114		5		(8,540)		116,579
Corporate bonds	132,309		—		(14,729)		117,580
Total	$	1,017,693	$	5	$	(116,116)	$	901,582
Allowance for credit losses	(1,956)
Total held-to-maturity securities, net of ACL	$	1,015,737

At June 30, 2024 and December 31, 2023, the Company held $54.3 million and $25.7 million, respectively, of equity securities in a combination of Federal Reserve System ("Federal Reserve Board," "Federal Reserve" or "FRB") and FHLB stocks, which are required to be held for regulatory purposes. These securities cannot be disposed of other than through redemption by the issuer and, if redeemed, would be redeemed at the original cost.

At June 30, 2024 and December 31, 2023, the Company had $48.2 million and $51.7 million, respectively, of unamortized unrealized losses outstanding following the transfer of investment securities from AFS to HTM in 2022. These unrealized losses are included in accumulated other comprehensive loss and are amortized through interest income as a yield adjustment over the remaining term of the securities.

Accrued interest receivable on investment securities totaled $7.3 million and $7.6 million at June 30, 2024 and December 31, 2023, respectively. The accrued interest receivable is excluded from the amortized cost of the securities and is reported in other assets in the Consolidated Balance Sheets.

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The following tables summarize AFS and HTM securities in an unrealized loss position by length of time:

		Less Than 12 Months				12 Months or Greater				Total
(dollars in thousands)	Number of Securities	Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses
June 30, 2024
Investment securities available-for-sale:
U.S. treasury bonds	2	$	—	$	—	$	48,721	$	(1,223)	$	48,721	$	(1,223)
U. S. agency securities	76	2,747		—		638,220		(55,685)		640,967		(55,685)
Residential mortgage-backed securities	151	9,560		(112)		662,646		(100,987)		672,206		(101,099)
Commercial mortgage-backed securities	13	—		—		48,847		(5,021)		48,847		(5,021)
Municipal bonds	1	—		—		8,182		(514)		8,182		(514)
Corporate bonds	1	—		—		1,695		(288)		1,695		(288)
Total	244	$	12,307	$	(112)	$	1,408,311	$	(163,718)	$	1,420,618	$	(163,830)

		Less Than 12 Months				12 Months or Greater				Total
(dollars in thousands)	Number of Securities	Estimated Fair Value		Unrecognized Losses		Estimated Fair Value		Unrecognized Losses		Estimated Fair Value		Unrecognized Losses
June 30, 2024
Investment securities held-to-maturity:
Residential mortgage-backed securities	142	$	—	$	—	$	548,765	$	(89,274)	$	548,765	$	(89,274)
Commercial mortgage-backed securities	16	—		—		76,616		(13,058)		76,616		(13,058)
Municipal bonds	42	3,433		(99)		110,203		(11,160)		113,636		(11,259)
Corporate bonds	30	—		—		105,210		(15,101)		105,210		(15,101)
Total	230	$	3,433	$	(99)	$	840,794	$	(128,593)	$	844,227	$	(128,692)

		Less Than 12 Months				12 Months or Greater				Total
(dollars in thousands)	Number of Securities	Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses
December 31, 2023
Investment securities available-for-sale:
U.S. treasury bonds	2	$	—	$	—	$	47,901	$	(1,993)	$	47,901	$	(1,993)
U. S. agency securities	78	3,084		(4)		668,313		(57,689)		671,397		(57,693)
Residential mortgage-backed securities	149	—		—		718,042		(96,684)		718,042		(96,684)
Commercial mortgage-backed securities	13	—		—		49,564		(4,993)		49,564		(4,993)
Municipal bonds	1	—		—		8,490		(293)		8,490		(293)
Corporate bonds	1	—		—		1,683		(300)		1,683		(300)
Total	244	$	3,084	$	(4)	$	1,493,993	$	(161,952)	$	1,497,077	$	(161,956)

20

		Less Than 12 Months				12 Months or Greater				Total
(dollars in thousands)	Number of Securities	Estimated Fair Value		Unrecognized Losses		Estimated Fair Value		Unrecognized Losses		Estimated Fair Value		Unrecognized Losses
December 31, 2023
Investment securities held-to-maturity:
Residential mortgage-backed securities	142	$	—	$	—	$	590,063	$	(79,980)	$	590,063	$	(79,980)
Commercial mortgage-backed securities	16	—		—		77,360		(12,867)		77,360		(12,867)
Municipal bonds	40	—		—		113,031		(8,540)		113,031		(8,540)
Corporate bonds	30	—		—		105,523		(14,729)		105,523		(14,729)
Total	228	$	—	$	—	$	885,977	$	(116,116)	$	885,977	$	(116,116)

Unrealized losses at June 30, 2024 were generally attributable to changes in market interest rates and interest spread relationships subsequent to the dates the securities were originally purchased and were considered to be temporary, and not due to credit quality concerns on the investment securities. The fair values of these securities are expected to recover as the securities approach their respective maturity dates. The Company does not intend to sell and it is likely that it will not be required to sell the securities prior to their anticipated recovery.

The Company measures its AFS and HTM security portfolios for current expected credit losses as part of its ACL analysis. During the three months ended June 30, 2024 and 2023, the provision for credit losses for the HTM securities portfolio was $55 thousand and $2 thousand, respectively. During the six months ended June 30, 2024 and 2023, the provision for credit losses for the HTM securities portfolio was $56 thousand and $1.2 million, respectively. There was no provision for credit losses on the AFS securities portfolio for the three and six months ended June 30, 2024. During the three and six months ended June 30, 2023, the Company recorded a provision reversal of 14 thousand and a provision of $0, respectively. At June 30, 2024 and December 31, 2023, the Company had a total allowance of $17 thousand on its AFS securities and $2.0 million on its HTM securities, each of which primarily comprise allowances for corporate bonds.

21

The following table summarizes the Company's investment in AFS securities and HTM securities by contractual maturity. Expected maturities for mortgage-backed securities ("MBS") will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	June 30, 2024
(dollars in thousands)	Amortized Cost		Estimated Fair Value
Investment securities available-for-sale:
Within one year	$	188,270	$	183,757
One to five years	436,685		401,318
Five to ten years	112,249		97,283
Beyond ten years	20,088		17,224
Residential mortgage-backed securities	773,275		672,206
Commercial mortgage-backed securities	53,868		48,847
Less: allowance for credit losses	—		(17)
Total investment securities available-for-sale	1,584,435		1,420,618
Investment securities held-to-maturity:
Within one year	4,259		4,251
One to five years	61,728		59,329
Five to ten years	122,637		106,494
Beyond ten years	68,630		60,820
Residential mortgage-backed securities:	638,039		548,765
Commercial mortgage-backed securities	89,674		76,616
Less: allowance for credit losses	(2,012)		—
Total investment securities held-to-maturity	982,955		856,275
Total	$	2,567,390	$	2,276,893

For the three and six months ended June 30, 2024, gross realized gains on calls of investment securities were $3 thousand and $7 thousand, respectively. For the three and six months ended June 30, 2023, gross realized gains on calls of investment securities were $2 thousand and $7 thousand, respectively.

There were no gross realized losses on sales or calls of investment securities during the three and six months ended June 30, 2024, nor during the three months ended June 30, 2023. During the six months ended June 30, 2023, there were $26 thousand of gross realized losses on sales or calls of investment securities.

Gross sales and call proceeds were $50 thousand and $27.1 million for the three and six months ended June 30, 2024, respectively, and $273 thousand and $8.6 million for the same periods in 2023.

The book value of securities pledged as collateral for certain government deposits, securities sold under agreements to repurchase, and certain lines of credit with correspondent banks at June 30, 2024 and December 31, 2023 was $2.2 billion and $2.1 billion, respectively. These balances were well in excess of required amounts in order to operationally provide significant reserve amounts for new business. As of June 30, 2024 and December 31, 2023, there were no holdings of securities of any one issuer, other than the U.S. Government and U.S. agency securities, that exceeded ten percent of shareholders' equity.

22

Note 4. Loans and Allowance for Credit Losses

The Bank makes loans to customers primarily in the Washington, D.C. metropolitan area and surrounding communities. A substantial portion of the Bank's loan portfolio consists of loans to businesses secured by real estate and other business assets.

HFI Loans, net of unamortized deferred fees and costs, at June 30, 2024 and December 31, 2023 are summarized by portfolio segment as follows:

	June 30, 2024				December 31, 2023
(dollars in thousands, except amounts in the footnote)	Amount		%		Amount		%
Commercial	$	1,238,261	15	%	$	1,473,766	18	%
PPP loans	407		—	%	528		—	%
Income-producing - commercial real estate	4,217,525		53	%	4,094,614		51	%
Owner-occupied - commercial real estate	1,263,714		16	%	1,172,239		15	%
Real estate mortgage - residential	61,338		1	%	73,396		1	%
Construction - commercial and residential	1,063,764		13	%	969,766		12	%
Construction - C&I (owner-occupied)	99,526		1	%	132,021		2	%
Home equity	52,773		1	%	51,964		1	%
Other consumer	4,431		—	%	401		—	%
Total loans	8,001,739		100	%	7,968,695		100	%
Less: allowance for credit losses	(106,301)				(85,940)
Net loans (1)	$	7,895,438			$	7,882,755

(1)Excludes accrued interest receivable of $46.8 million and $45.3 million at June 30, 2024 and December 31, 2023, respectively, which were recorded in other assets on the Consolidated Balance Sheets.

Unamortized net deferred costs amounted to $21.9 million and $27.0 million at June 30, 2024 and December 31, 2023, respectively.

As of June 30, 2024 and December 31, 2023, the Bank serviced $150.9 million and $328.0 million, respectively, of multifamily FHA loans, SBA loans and other loan participations that are not reflected as loan balances on the Consolidated Balance Sheets. During the six months ended June 30, 2024, the Company sold the servicing rights to all FHA loans.

Real estate loans are secured primarily by duly recorded first deeds of trust or mortgages. In some cases, the Bank may accept a recorded junior trust position. In general, borrowers will have a proven ability to build, lease, manage and/or sell a commercial or residential project and demonstrate satisfactory financial condition. Additionally, an equity contribution toward the project is customarily required.

Construction loans require that the financial condition and experience of the general contractor and major subcontractors be satisfactory to the Bank. Guaranteed, fixed-price contracts are required whenever appropriate, along with payment and performance bonds or completion bonds for larger scale projects.

Loans intended for residential land acquisition, lot development and construction are made on the premise that the land: 1) is or will be developed for building sites for residential structures, and 2) will ultimately be utilized for construction or improvement of residential zoned real properties, including the creation of housing. Residential development and construction loans will finance projects such as single family subdivisions, planned unit developments, townhouses, and condominiums. Residential land acquisition, development and construction loans generally are underwritten with a maximum term of 36 months, including extensions approved at origination.

Commercial land acquisition and construction loans are secured by real property where loan funds will be used to acquire land and to construct or improve appropriately zoned real property for the creation of income producing or owner occupied commercial properties. Borrowers are generally required to put equity into each project at levels determined by the appropriate approval authority. Commercial land acquisition and construction loans generally are underwritten with a maximum term of 24 months.

Substantially all construction draw requests must be presented in writing on American Institute of Architects documents and certified either by the contractor, the borrower and/or the borrower's architect. Each draw request shall also include the borrower's soft cost breakdown certified by the borrower or their agent. Prior to an advance, the Bank or its contractor inspects the project to determine that the work has been completed, to justify the draw requisition.

Commercial permanent loans are generally secured by improved real property that is generating income in the normal course of operation. Debt service coverage, assuming stabilized occupancy, must be satisfactory to support a permanent loan. The debt service coverage ratio is ordinarily at least 1.15 to 1.0. As part of the underwriting process, debt service coverage ratios are stress tested assuming a 200 basis point increase in interest rates from their current levels.

Commercial permanent loans generally are underwritten with a term not greater than 10 years or the remaining useful life of the property, whichever is lower. The preferred term is between 5 to 7 years, with amortization to a maximum of 25 years.

The Company's loan portfolio includes acquisition, development and construction ("ADC") real estate loans including both investment and owner-occupied projects. ADC loans amounted to $1.7 billion at June 30, 2024. A portion of the ADC portfolio, both speculative and non-speculative, includes loan-funded interest reserves at origination. ADC loans that provide for the use of interest reserves represent approximately 62.8% of the outstanding ADC loan portfolio at June 30, 2024. The decision to establish a loan-funded interest reserve is made upon origination of the ADC loan and is based upon a number of factors considered during underwriting of the credit, including: (1) the feasibility of the project; (2) the experience of the sponsor; (3) the creditworthiness of the borrower and guarantors; (4) the borrower equity contribution; and (5) the level of collateral protection. When appropriate, an interest reserve provides a means of addressing the cash flow characteristics of a properly underwritten ADC loan. The Company does not significantly utilize interest reserves in other loan products. The Company recognizes that one of the risks inherent in the use of interest reserves is the potential masking of underlying problems with the project and/or the borrower's ability to repay the loan. In order to mitigate these inherent risks, the Company employs a series of reporting and monitoring mechanisms on all ADC loans, whether or not an interest reserve is provided, including: (1) construction and development timelines that are monitored on an ongoing basis and track the progress of a given project to the timeline projected at origination; (2) a construction loan administration department independent of the lending function; (3) third party independent construction loan inspection reports; (4) monthly interest reserve monitoring reports detailing the balance of the interest reserves approved at origination and the days of interest carry represented by the reserve balances as compared to the then current anticipated time to completion and/or sale of speculative projects; and (5) quarterly commercial real estate construction meetings among senior Company management, which include monitoring of current and projected real estate market conditions. If a project has not performed as expected, it is not the customary practice of the Company to increase loan funded interest reserves.

The following table details activity in the ACL by portfolio segment for the three and six months ended June 30, 2024 and 2023. PPP loans are excluded from these tables since they do not carry an allowance for credit loss, as these loans are fully guaranteed as to principal and interest by the SBA, whose guarantee is backed by the full faith and credit of the U.S. Government. Allocation of a portion of the allowance to one category of loans does not restrict the use of the allowance to absorb losses in other categories.

(dollars in thousands)	Commercial		Income-Producing Commercial Real Estate		Owner-Occupied -Commercial Real Estate		Real Estate Mortgage Residential		Construction - Commercial and Residential		Construction - C&I (Owner-Occupied)		Home Equity		Other Consumer		Total
Three Months Ended June 30, 2024
Allowance for credit losses:
Balance at beginning of period	$	23,682	$	45,937	$	13,537	$	893	$	13,058	$	1,929	$	618	$	30	99,684
Loans charged-off	(2,091)		(386)		—		—		—		—		—		(69)		(2,546)
Recoveries of loans previously charged-off	50		185		24		—		—		—		—		—		259
Net loans (charged-off) recovered	(2,041)		(201)		24		—		—		—		—		(69)		(2,287)
Provision for (reversal of) credit losses	(630)		7,515		2,080		(143)		452		(498)		59		69		8,904
Ending balance	21,011		53,251		15,641		750		13,510		1,431		677		30		106,301
Six Months Ended June 30, 2024
Allowance for credit losses:
Balance at beginning of period	$	17,824	$	40,050	$	14,333	$	861	$	10,198	$	1,992	$	657	$	25	$	85,940
Loans charged-off	(2,587)		(21,329)		—		—		(129)		—		—		(70)		(24,115)
Recoveries of loans previously charged-off	166		185		47		—		—		—		—		—		398
Net loans (charged-off) recovered	(2,421)		(21,144)		47		—		(129)		—		—		(70)		(23,717)
Provision for (reversal of) credit losses	5,608		34,345		1,261		(111)		3,441		(561)		20		75		44,078
Ending balance	$	21,011	$	53,251	$	15,641	$	750	$	13,510	$	1,431	$	677	$	30	$	106,301
Three Months Ended June 30, 2023
Allowance for credit losses:
Balance at beginning of period	$	15,775	$	38,140	$	12,457	$	1,002	$	8,741	$	1,642	$	593	$	27	$	78,377
Loans charged-off	(492)		(5,306)		—		—		—		—		—		—		(5,798)
Recoveries of loans previously charged-off	156		—		8		—		34		—		—		2		200
Net loans (charged-off) recovered	(336)		(5,306)		8		—		34		—		—		2		(5,598)
Provision for (reversal of) credit losses	(65)		5,652		340		(191)		(757)		272		2		(3)		5,250
Ending balance	$	15,374	$	38,486	$	12,805	$	811	$	8,018	$	1,914	$	595	$	26	$	78,029
Six Months Ended June 30, 2023
Allowance for credit losses:
Balance at beginning of period	$	15,655	$	35,688	$	12,702	$	969	$	7,195	$	1,606	$	555	$	74	$	74,444
Loans charged-off	(1,360)		(5,306)		—		—		(136)		—		—		(50)		(6,852)
Recoveries of loans previously charged-off	232		—		8		—		34		—		—		5		279
Net loans (charged-off) recovered	(1,128)		(5,306)		8		—		(102)		—		—		(45)		(6,573)
Provision for (reversal of) credit losses	847		8,104		95		(158)		925		308		40		(3)		10,158
Ending balance	$	15,374	$	38,486	$	12,805	$	811	$	8,018	$	1,914	$	595	$	26	$	78,029

The following table presents the amortized cost basis of collateral-dependent HFI loans by class of loans as of June 30, 2024 and December 31, 2023:

	June 30, 2024				December 31, 2023
	Business/Other				Business/Other
(dollars in thousands)	Assets		Real Estate		Assets		Real Estate
Commercial	$	1,110	$	1,658	$	1,674	$	1,240
Income-producing - commercial real estate	878		71,279		1,754		39,172
Owner-occupied - commercial real estate	—		19,797		—		19,836
Real estate mortgage - residential	—		1,693		—		1,692
Construction - commercial and residential	—		2,063		—		525
Home equity	—		266		—		242
Total	$	1,988	$	96,756	$	3,428	$	62,707

Credit Quality Indicators

The Company uses several credit quality indicators to manage credit risk in an ongoing manner. The Company's primary credit quality indicators inform an internal credit risk rating system that categorizes loans into pass, watch, special mention, or classified categories. Credit risk ratings are applied individually to those classes of loans that have significant or unique credit characteristics that benefit from a case-by-case evaluation. These are typically loans to businesses or individuals in the classes that comprise the commercial portfolio segment. Groups of loans that are underwritten and structured using standardized criteria and characteristics, such as statistical models (e.g., credit scoring or payment performance), are typically risk rated and monitored collectively. These are typically loans to individuals in the classes that comprise the consumer portfolio segment.

The following are the definitions of the Company's credit quality indicators:

Pass:	Loans in all classes that comprise the commercial and consumer portfolio segments that are not adversely rated, are contractually current as to principal and interest, and are otherwise in compliance with the contractual terms of the loan agreement. Management believes that there is a low likelihood of loss related to those loans that are considered pass.
Special Mention:	Loans in the classes that comprise the commercial portfolio segment that have potential weaknesses that deserve management's close attention. If not addressed, these potential weaknesses may result in deterioration of the repayment prospects for the loan. The special mention credit quality indicator is not used for classes of loans that comprise the consumer portfolio segment. Management believes that there is a moderate likelihood of some loss related to those loans that are considered special mention.
Classified:	Classified (a) Substandard – Loans inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the company will sustain some loss if the deficiencies are not corrected. Loss potential, while existing in the aggregate amount of substandard loans, does not have to exist in individual loans classified substandard.
	Classified (b) Doubtful – Loans that have all the weaknesses inherent in a loan classified substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. The possibility of loss is extremely high, but because of certain important and reasonably specific pending factors, which may work to the advantage and strengthening of the assets, its classification as an estimated loss is deferred until its more exact status may be determined.

The Company's credit quality indicators are generally updated annually, however, credits rated "Special Mention" or below are reviewed more frequently. Based on the most recent analysis performed, the amortized cost basis of HFI loans by risk category, class and year of origination, along with any charge-offs that were recorded in the applicable loan segment, if applicable, were as follows:

(dollars in thousands)	Prior		2020		2021		2022		2023		2024		Revolving Loans Amort. Cost Basis		Revolving Loans Convert. to Term		Total
June 30, 2024
Commercial
Pass	$	160,126	$	32,016	$	149,826	$	125,551	$	163,260	$	67,459	$	470,263	$	6,572	$	1,175,073
Special Mention	8,183		—		—		—		—		—		4,124		60		12,367
Substandard	1,097		8,697		2,010		272		—		—		30,772		7,973		50,821
Total	169,406		40,713		151,836		125,823		163,260		67,459		505,159		14,605		1,238,261
YTD gross charge-offs	(687)		—		—		(29)		—		—		(1,871)		—		(2,587)
PPP loans
Pass	—		—		407		—		—		—		—		—		407
Income producing - commercial real estate
Pass	1,395,943		310,508		600,932		809,691		306,896		74,544		232,229		28,215		3,758,958
Special Mention	242,105		—		—		—		—		—		—		—		242,105
Substandard	205,986				—		—		—		—		10,476		—		216,462
Total	1,844,034		310,508		600,932		809,691		306,896		74,544		242,705		28,215		4,217,525
YTD gross charge-offs	(20,943)		(386)		—		—		—		—		—		—		(21,329)
Owner occupied - commercial real estate
Pass	645,982		34,129		222,166		48,087		136,767		26,577		664		—		1,114,372
Special Mention	53,434		—		—		—		—		—		—		—		53,434
Substandard	94,651		1,257		—		—		—		—		—		—		95,908
Total	794,067		35,386		222,166		48,087		136,767		26,577		664		—		1,263,714
Real estate mortgage - residential
Pass	22,811		2,458		14,389		14,107		5,880		—		—		—		59,645
Substandard	1,693		—		—		—		—		—		—		—		1,693
Total	24,504		2,458		14,389		14,107		5,880		—		—		—		61,338
Construction - commercial and residential
Pass	27,083		10,464		223,690		515,365		119,831		5,107		123,395		711		1,025,646
Substandard	6,202		29,854		—		2,062		—		—		—		—		38,118
Total	33,285		40,318		223,690		517,427		119,831		5,107		123,395		711		1,063,764
YTD gross charge-offs	(129)		—		—		—		—		—		—		—		(129)
Construction - C&I (owner occupied)
Pass	6,951		50,230		—		33,258		8,236		—		851		—		99,526
Home equity
Pass	1,556		72		185		117		—		—		50,001		544		52,475
Substandard	66		—		232		—		—		—		—		—		298
Total	1,622		72		417		117		—		—		50,001		544		52,773
Other consumer
Pass	2		—		—		—		—		69		4,349		—		4,420
Substandard	—		—		—		—		—		—		11		—		11
Total	2		—		—		—		—		69		4,360		—		4,431
YTD gross charge-offs	(34)		—		—		—		—		—		(35)		(1)		(70)
Total recorded investment	$	2,873,871	$	479,685	$	1,213,837	$	1,548,510	$	740,870	$	173,756	$	927,135	$	44,075	$	8,001,739
Total YTD gross charge-offs	$	(21,793)	$	(386)	$	—	$	(29)	$	—	$	—	$	(1,906)	$	(1)	$	(24,115)
(dollars in thousands)	Prior		2019		2020		2021		2022		2023		Revolving Loans Amort. Cost Basis		Revolving Loans Convert. to Term		Total
December 31, 2023
Commercial
Pass	$	157,563	$	48,524	$	39,133	$	194,555	$	149,320	$	191,889	$	623,684	$	5,207	$	1,409,875
Special Mention	1,415		—		—		—		—		—		2,259		—		3,674
Substandard	13,797		58		10,337		1,509		222		—		33,670		624		60,217
Total	172,775		48,582		49,470		196,064		149,542		191,889		659,613		5,831		1,473,766
YTD gross charge-offs	(885)		—		—		—		—		—		—		(1,135)		(2,020)
PPP loans
Pass	—		—		—		528		—		—		—		—		528
Income producing - commercial real estate
Pass	1,257,937		326,999		328,743		517,957		732,291		327,126		263,317		1,845		3,756,215
Special Mention	84,585		44,424		6,740		—		—		—		—		—		135,749
Substandard	139,961		62,689		—		—		—		—		—		—		202,650
Total	1,482,483		434,112		335,483		517,957		732,291		327,126		263,317		1,845		4,094,614
YTD gross charge-offs	(11,817)		—		—		—		—		—		—		—		(11,817)
Owner occupied - commercial real estate
Pass	534,525		103,034		35,385		202,776		41,907		125,934		673		55		1,044,289
Special Mention	54,288		13,348		—		—		—		—		—		—		67,636
Substandard	37,167		—		1,274		—		—		—		—		21,873		60,314
Total	625,980		116,382		36,659		202,776		41,907		125,934		673		21,928		1,172,239
Real estate mortgage - residential
Pass	22,877		7,545		2,186		15,967		14,756		5,895		—		—		69,226
Substandard	4,170		—		—		—		—		—		—		—		4,170
Total	27,047		7,545		2,186		15,967		14,756		5,895		—		—		73,396
Construction - commercial and residential
Pass	30,619		3,440		45,739		251,038		419,393		87,400		124,013		—		961,642
Substandard	8,124		—		—		—		—		—		—		—		8,124
Total	38,743		3,440		45,739		251,038		419,393		87,400		124,013		—		969,766
YTD Gross Charge-offs	(136)		(5,500)		—		—		—		—		—		—		(5,636)
Construction - C&I (owner occupied)
Pass	18,551		4,265		56,361		618		33,237		12,619		6,370		—		132,021
Home equity
Pass	1,590		—		87		151		118		—		49,035		643		51,624
Substandard	—		36		—		—		—		—		62		242		340
Total	1,590		36		87		151		118		—		49,097		885		51,964
Other consumer
Pass	1		—		—		—		46		—		354		—		401
Total	1		—		—		—		46		—		354		—		401
YTD gross charge-offs	(50)		—		—		—		—		—		—		—		(50)
Total recorded investment	$	2,367,170	$	614,362	$	525,985	$	1,185,099	$	1,391,290	$	750,863	$	1,103,437	$	30,489	$	7,968,695
Total YTD gross charge-offs	$	(12,888)	$	(5,500)	$	—	$	—	$	—	$	—	$	—	$	(1,135)	$	(19,523)

Nonaccrual and Past Due Loans

Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Loans are placed on nonaccrual status when, in management’s opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory provisions. Loans may be placed on nonaccrual status regardless of whether or not such loans are considered past due. Interest income is subsequently recognized only to the extent cash payments are received in excess of principal due. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

The following table presents, by portfolio segment, the nonaccrual HFI loans on amortized cost basis as of June 30, 2024 and December 31, 2023:

(dollars in thousands, except amounts in footnotes)	Nonaccrual with No Allowance for Credit Losses		Nonaccrual with an Allowance for Credit Losses		Total Nonaccrual Loans
June 30, 2024
Commercial	$	1,426	$	525	$	1,951
Income producing - commercial real estate	1,463		65,694		67,157
Owner occupied - commercial real estate	19,795		—		19,795
Real estate mortgage - residential	1,693		230		1,923
Construction - commercial and residential	2,062		—		2,062
Home equity	265		—		265
Total (1)	$	26,704	$	66,449	$	93,153
December 31, 2023
Commercial	$	1,002	$	1,047	$	2,049
Income producing - commercial real estate	40,926		—		40,926
Owner occupied - commercial real estate	19,836		—		19,836
Real estate mortgage - residential	—		1,946		1,946
Construction - commercial and residential	—		525		525
Home equity	242		—		242
Total (1)	$	62,006	$	3,518	$	65,524

(1)Gross coupon interest income of approximately $2.9 million and $1.1 million would have been recorded for the six months ended June 30, 2024 and 2023, respectively, if nonaccrual loans shown above had been current and in accordance with their original terms, while no coupon interest income was actually recorded on such loans for the six months ended June 30, 2024 and 2023, respectively.

The table presents, by portfolio segment, an aging analysis and the recorded investments in HFI loans past due, on an amortized cost basis as of June 30, 2024 and December 31, 2023:

(dollars in thousands)	Loans 30-59 Days Past Due		Loans 60-89 Days Past Due		Loans 90 Days or More Past Due		Total Past Due Loans		Current Loans		Nonaccrual Loans		Total Recorded Investment in Loans
June 30, 2024
Commercial	$	6,078	$	861	$	—	$	6,939	$	1,229,371	$	1,951	$	1,238,261
PPP loans	—		—		—		—		407		—		407
Income producing - commercial real estate	1,203		—		—		1,203		4,149,165		67,157		4,217,525
Owner occupied - commercial real estate	266		—		—		266		1,243,653		19,795		1,263,714
Real estate mortgage - residential	—		—		—		—		59,415		1,923		61,338
Construction - commercial and residential	—		—		—		—		1,061,702		2,062		1,063,764
Construction - C&I (owner occupied)	—		—		—		—		99,526		—		99,526
Home equity	—		—		—		—		52,508		265		52,773
Other consumer	—		12		—		12		4,419		—		4,431
Total	$	7,547	$	873	$	—	$	8,420	$	7,900,166	$	93,153	$	8,001,739
(dollars in thousands)	Loans 30-59 Days Past Due		Loans 60-89 Days Past Due		Loans 90 Days or More Past Due		Total Past Due Loans		Current Loans		Nonaccrual Loans		Total Recorded Investment in Loans
December 31, 2023
Commercial	$	985	$	7,048	$	—	$	8,033	$	1,463,684	$	2,049	$	1,473,766
PPP loans	—		—		—		—		528		—		528
Income producing - commercial real estate	—		—		—		—		4,053,688		40,926		4,094,614
Owner occupied - commercial real estate	1,274		—		—		1,274		1,151,129		19,836		1,172,239
Real estate mortgage – residential	2,089		—		—		2,089		69,361		1,946		73,396
Construction - commercial and residential	2,056		—		—		2,056		967,185		525		969,766
Construction - C&I (owner occupied)	—		—		—		—		132,021		—		132,021
Home equity	197		—		—		197		51,525		242		51,964
Other consumer	—		—		—		—		401		—		401
Total	$	6,601	$	7,048	$	—	$	13,649	$	7,889,522	$	65,524	$	7,968,695

Loan Modifications for Borrowers Experiencing Financial Difficulty

The Company evaluates all loan restructurings according to the accounting guidance for loan modifications to determine if the restructuring 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. Therefore, the disclosures related to loan restructurings are for modifications which have a direct impact on cash flows.

The Company may offer various types of modifications when restructuring a loan. Commercial and industrial loans modified in a loan restructuring often involve temporary interest-only payments, term extensions, and converting revolving credit lines to term loans. Additional collateral, a co-borrower, or a guarantor is often requested.

Commercial mortgage and construction loans modified in a loan restructuring often involve reducing the interest rate for the remaining term of the loan, extending the maturity date at an interest rate lower than the current market rate for new debt with similar risk, or substituting or adding a new borrower or guarantor. Construction loans modified in a loan restructuring may also involve extending the interest-only payment period.

Loans modified in a loan restructuring for the Company may have the financial effect of increasing the specific allowance associated with the loan. An allowance for consumer and commercial loans that have been modified in a loan restructuring is measured based on the present value of expected future cash flows discounted at the loan's effective interest rate, the loan's observable market price, or the estimated fair value of the collateral, less any selling costs, if the loan is collateral dependent. Management exercises significant judgment in developing these estimates.

Commercial and consumer loans modified in a loan restructuring are closely monitored for delinquency as an early indicator of possible future default. If loans modified in a loan restructuring subsequently default, the Company evaluates the loan for possible further loss. 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.

The following tables present the amortized cost basis as of June 30, 2024 and 2023 and the financial effect of HFI loans modified to borrowers experiencing financial difficulty during the three and six months ended June 30, 2024 and 2023:

	June 30, 2024
(dollars in thousands)	Term Extension		Combination - Term Extension and Principal Payment Delay				Combination - Interest Rate Reduction and Principal Payment Delay		Combination - Term Extension, Principal Payment Delay and Interest Rate Reduction		Total		Percentage of Total Loan Type	Weighted Average Term and Principal Payment Extension	Weighted Average Interest Rate Reduction
Three months ended June 30, 2024
Commercial	$	36,303	$	—			$	7,896	$	—	$	44,199	3.6%	6 months	1.63%
Income producing - commercial real estate	—		83,368				—		3,510		86,878		2.9%	4 months	3.59%
Owner occupied - commercial real estate	876		—				—		—		876		0.1%	12 months	—%
Construction - commercial and residential	—		11,012				—		—		11,012		1.0%	9 months	—%
Total	$	37,179	$	94,380			$	7,896	$	3,510	$	142,965
Six months ended June 30, 2024:
Commercial	$	36,303	$	—			7,896		$	—	$	44,199	3.6%	8 months	1.63%
Income producing - commercial real estate	—		119,252				—		3,510		122,762		2.9%	4 months	3.59%
Owner occupied - commercial real estate	876		—				—		—		876		0.1%	12 months	—%
Construction - commercial and residential	—		11,012				—		—		11,012		1.0%	9 months	—%
Total	$	37,179	$	130,264			$	7,896	$	3,510	$	178,849
	June 30, 2023
(dollars in thousands)	Term Extension		Combination - Term Extension and Principal Payment Delay				Combination - Interest Rate Reduction and Principal Payment Delay		Combination - Term Extension, Principal Payment Delay and Interest Rate Reduction		Total		Percentage of Total Loan Type	Weighted Average Term and Principal Payment Extension	Weighted Average Interest Rate Reduction
Three months ended June 30, 2023
Commercial	$	30,833	$	—	$	—	$	—	$	—	$	30,833	2.2%	3 months	—%
Income producing - commercial real estate	—		55,603				—		74,026		129,629		3.2%	3 months	2.90%
Owner occupied - commercial real estate	—		19,170				—		—		19,170		1.7%	3 months	—%
Construction - commercial and residential	6,971		—				—		—		6,971		0.8%	6 months	—%
Total	$	37,804	$	74,773			$	—	$	74,026	$	186,603
Six months ended June 30, 2023:
Commercial	$	30,833	$	—			$	—	$	—	$	30,833	2.2%	5 months	—%
Income producing - commercial real estate	7,184		57,823				—		74,026		139,033		3.4%	5 months	2.90%
Owner occupied - commercial real estate	—		19,170				—		—		19,170		1.7%	6 months	—%
Construction - commercial and residential	6,971		—				—		—		6,971		0.8%	6 months	—%
Total	$	44,988	$	76,993			$	—	$	74,026	$	196,007

The following table presents the performance of HFI loans modified during the prior twelve months to borrowers experiencing financial difficulty:

	June 30, 2024
	Payment Status (Amortized Cost Basis)
(dollars in thousands)	Current		30-89 Days Past Due		Nonaccrual
Commercial	$	48,981	$	3,447	$	—
Income producing - commercial real estate	120,954		—		47,234
Owner occupied - commercial real estate	876		—		19,130
Real estate mortgage - residential	—		—		—
Construction - commercial and residential	11,012		—		—
Total	$	181,823	$	3,447	$	66,364

The Company monitors loan payments on performing and nonperforming loans on an on-going basis to determine if a loan is considered to have a payment default. To determine the existence of a payment default, the Company analyzes the economic conditions that exist for each borrower and their ability to generate positive cash flow during a given loan's term.

The following table presents the amortized cost basis of HFI loans that were experiencing payment default at June 30, 2024 and were modified in the twelve months prior to that default to borrowers experiencing financial difficulty:

	June 30, 2024
	Amortized Cost Basis
(dollars in thousands)	Term Extension		Combination - Term Extension and Principal Payment Delay		Combination - Term Extension, Principal Payment Delay and Interest Rate Reduction
Commercial	$	3,447	$	—	$	—
Income producing - commercial real estate	—		47,234		—
Owner occupied - commercial real estate	—		19,130		—
Construction - commercial and residential	—		—		—
Total	$	3,447	$	66,364	$	—

The Company individually evaluates nonaccrual loans when performing its CECL estimate to calculate the ACL. Additionally, the Company utilizes historical internal and third-party service provider sourced loss data in the determination of its PD/LGD rates applied in the calculation of its CECL estimate. Upon determination that a modified loan (or a portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is charged off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the ACL is adjusted by the same amount.

Note 5. Leases

The Company accounts for leases in accordance with ASC Topic 842. A lease is defined as a contract that conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. Substantially all of the leases in which the Company is the lessee comprise real estate property for branch offices, ATM locations, and corporate office space. Substantially all of our leases are classified as operating leases, and are included in operating lease right-of-use ("ROU") assets and operating lease liabilities in the Consolidated Balance Sheets.

As of June 30, 2024 and December 31, 2023, the Company had $16.3 million and $19.1 million of operating lease ROU assets, respectively, and $20.0 million and $23.2 million of operating lease liabilities, respectively, on the Company's Consolidated Balance Sheets. The Company elects not to recognize ROU assets and lease liabilities arising from short-term leases, leases with initial terms of twelve months or less, or equipment leases (deemed immaterial) on the Consolidated Balance Sheets.

The leases contain options to extend or terminate the lease, which are recognized as part of the ROU assets and lease liabilities when an economic benefit to exercise the option exists and there is a 90% probability that the Company will exercise the option. If these criteria are not met, the options are not included in ROU assets and lease liabilities.

As of June 30, 2024, the Company's leases do not contain material residual value guarantees or impose restrictions or covenants related to dividends or its ability to incur additional financial obligations. During the six months ended June 30, 2024, the Company did not enter into new leases nor renew or extend any leases. The Company had two leases expire during that period.

23

The following table presents lease costs and other lease information.

	Three Months Ended								Six Months Ended
(dollars in thousands)	June 30, 2024				June 30, 2023				June 30, 2024		June 30, 2023
Lease cost
Operating lease cost (cost resulting from lease payments)	$	1,565			$	1,667			$	3,166	$	3,383
Variable lease cost (cost excluded from lease payments)	237				253				478		509
Sublease income	(10)				(29)				(40)		(59)
Net lease cost	$	1,792			$	1,891			$	3,604	$	3,833
Operating lease - operating cash flows (fixed payments)	$	1,731			$	1,814			$	3,509	$	3,673
(dollars in thousands)	June 30, 2024				December 31, 2023
Right-of-use assets - operating leases	$	16,250			$	19,129
Operating lease liabilities	$	20,016			$	23,238
Weighted average lease term - operating leases	4.71			yrs	4.93			yrs
Weighted average discount rate - operating leases	2.67		%		2.78		%

Future minimum payments for operating leases with initial or remaining terms of more than one year as of June 30, 2024 were as follows:

(dollars in thousands)
Twelve months ended:
June 30, 2025	$	6,796
June 30, 2026	4,276
June 30, 2027	2,832
June 30, 2028	2,278
June 30, 2029	1,981
Thereafter	2,844
Total future minimum lease payments	21,007
Amounts representing interest	(991)
Present value of net future minimum lease payments	$	20,016

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Note 6. Goodwill and Intangibles

Intangible assets are included in the Consolidated Balance Sheets as a separate line item, net of accumulated amortization and consist of the following items:

(dollars in thousands)	Gross Intangible Assets		Additions		Accumulated Amortization		Impairment		Net Intangible Assets
June 30, 2024:
Goodwill	$	104,168	$	—	$	—	$	(104,168)	$	—
Excess servicing (1)	37		—		(11)		—		26
Non-compete agreements	720		—		(617)		—		103
Total	$	104,925	$	—	$	(628)	$	(104,168)	$	129
December 31, 2023:
Goodwill	$	104,168	$	—	$	—	$	—	$	104,168
Excess servicing (1)	65		—		(28)		—		37
Non-compete agreements	—		1,234		(514)		—		720
Total	$	104,233	$	1,234	$	(542)	$	—	$	104,925

(1)The Company recognizes a servicing asset for the computed value of servicing fees on the sale of multifamily FHA loans and the sale of the guaranteed portion of SBA loans. Assumptions related to loan terms and amortization are made to arrive at the initial recorded values.

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. During the past twelve months ended June 30, 2024, changes in macroeconomic conditions and market volatility resulting from rising interest rates resulted in a 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 goodwill is primarily related to the acquisition of the Virginia Heritage Bank in October 2014. The impairment charge did not impact our cash, liquidity ratios, core operating performance, or regulatory capital ratios.

Note 7. Derivatives

The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its assets and liabilities through the use of derivative financial instruments.

Cash Flow Hedges of Interest Rate Risk

The Company historically utilized interest rate swaptions, accounted for as cash flow hedges, to protect itself against adverse fluctuations in interest rates on a forecasted issuance of debt. During the six months ended June 30, 2024, the Company terminated its interest rate swaption contracts. The Company expects to reclassify $89 thousand out of accumulated other comprehensive loss over the succeeding twelve months as a reduction of interest expense.

Interest Rate Products

Interest rate derivatives not designated as hedges are not speculative and result from a service the Company provides to certain customers. The Company executes interest rate caps and swaps with commercial banking customers to facilitate their respective risk management strategies. Those interest rate swaps are simultaneously hedged by offsetting derivatives that the Company executes with a third party, such that the Company minimizes its net market risk exposure resulting from such transactions. As the interest rate derivatives associated with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the customer derivatives and the offsetting derivatives are recognized directly in earnings.

25

The Company entered into 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 in exchange for a fee. The fair value of RPAs is calculated by determining the total expected asset or liability exposure of the derivatives to the borrowers and applying the borrowers' credit spread to that exposure. 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.

Credit-Risk-Related Contingent Features

The Company has agreements with each of its derivative counterparties that contain a provision where if the Company defaults on any of its indebtedness, then the Company could also be declared in default on its derivative obligations.

The Company is exposed to credit risk in the event of nonperformance by the interest rate derivative counterparty. The Company minimizes this risk by entering into derivative contracts with only large, stable financial institutions, and the Company has not experienced, and does not expect, any losses from counterparty nonperformance on the interest rate derivatives. The Company monitors counterparty risk in accordance with the provisions of ASC Topic 815, "Derivatives and Hedging." In addition, the interest rate derivative agreements contain language outlining collateral-pledging requirements for each counterparty.

The interest rate derivative agreements detail: 1) that collateral be posted when the market value exceeds certain threshold limits associated with the secured party's exposure; 2) if the Company defaults on any of its indebtedness (including default where repayment of the indebtedness has not been accelerated by the lender), then the Company could also be declared in default on its derivative obligations; 3) if the Company fails to maintain its status as a well-capitalized institution then the counterparty could terminate the derivative positions and the Company would be required to settle its obligations under the agreements.

The table below identifies the balance sheet category and fair value of the Company's derivative instruments as of June 30, 2024 and December 31, 2023. The Company has a minimum collateral posting threshold with its derivative counterparty. If the Company had breached any provisions under the agreement at June 30, 2024, it could have been required to settle its obligations under the agreement at the termination value.

	June 30, 2024					December 31, 2023
(dollars in thousands)	Notional Amount		Fair Value		Balance Sheet Category	Notional Amount		Fair Value		Balance Sheet Category
Derivatives in an asset position:
Derivatives designated as hedging instruments:
Interest rate product	$	—	$	—	Other assets	$	300,000	$	374	Other assets
Derivatives not designated as hedging instruments:
Interest rate product	691,105		34,770		Other assets	651,429		30,288		Other assets
Credit risk participation agreements	49,480		—		Other liabilities	49,480		3		Other liabilities
Total	740,585		34,770			700,909		30,291
Total derivatives in an asset position:	$	740,585	$	34,770		$	1,000,909	$	30,665
Derivatives in a liability position:
Derivatives not designated as hedging instruments:
Interest rate product	$	691,105	$	33,633	Other liabilities	$	654,757	$	30,555	Other liabilities

26

The table below presents the effect of the Company's derivative financial instruments on the Consolidated Statements of Operations for the three and six months ended June 30, 2024 and 2023:

The Effect of Derivatives Not Designated as Hedging Instruments on the Consolidated Statements of Operations
		Amount of Gain (Loss) Recognized in Income on Derivatives
	Location of Gain (Loss) Recognized in Income on Derivatives	Three Months Ended June 30,				Six Months Ended June 30,
(dollars in thousands)		2024		2023		2024		2023
Interest rate products	Other income / (other expense)	$	239	$	1,058	$	478	$	708
Mortgage banking derivatives	Gain on sale of loans	—		(29)		—		(93)
Total		$	239	$	1,029	$	478	$	615

Note 8. Deposits

The following table provides information regarding the Bank’s deposit composition at June 30, 2024 and December 31, 2023:

(dollars in thousands)	June 30, 2024		December 31, 2023
Noninterest-bearing demand	$	1,693,955	$	2,279,081
Interest-bearing transaction	1,123,980		997,448
Savings and money market	3,165,314		3,314,043
Time deposits	2,284,099		2,217,467
Total	$	8,267,348	$	8,808,039

The remaining maturity of time deposits at June 30, 2024 and December 31, 2023 were as follows:

(dollars in thousands)	June 30, 2024		December 31, 2023
2024	$	956,207	1,445,395
2025	1,015,534		576,379
2026	294,744		180,384
2027	5,807		5,482
2028	10,060		9,827
2029	1,747		—
Total	$	2,284,099	$	2,217,467

As of June 30, 2024 and December 31, 2023, time deposit accounts in excess of $250 thousand were as follows:

(dollars in thousands)	June 30, 2024		December 31, 2023
Three months or less	$	347,313	$	119,880
More than three months through six months	171,658		318,353
More than six months through twelve months	425,680		368,103
Over twelve months	688,362		726,758
Total	$	1,633,013	$	1,533,094

At June 30, 2024, total brokered deposits were $3.9 billion or 46.9% of total deposits, of which $1.5 billion were attributable to the Certificates of Deposit Account Registry Service ("CDARS") and Insured Cash Sweep ("ICS") two-way accounts. At December 31, 2023, total brokered deposits (excluding the CDARS and ICS two-way) were $2.5 billion, or 28.8% of total deposits.

27

Note 9. Borrowings

The following table summarizes the Company’s borrowings, which include repurchase agreements with the Company’s customers and borrowings, at June 30, 2024 and December 31, 2023:

(dollars in thousands)	Borrowings - Principal		Unamortized Deferred Issuance Costs		Net Borrowings Outstanding		Available Capacity (1)		Maturity Dates	Interest Rates (2)
June 30, 2024:
Customer repurchase agreements	$	39,220	$	—	$	39,220	$	—	N/A	3.31%
Secured borrowings:
FHLB	590,000		—		590,000		1,318,817		September 25, 2024	5.38%
FRB:
BTFP	1,000,000		—		1,000,000		—		January 15, 2025	4.76%
Discount window	—		—		—		1,935,019		N/A	N/A
Raymond James repurchase agreement	—		—		—		17,893		N/A	N/A
Subordinated notes	70,000		(21)		69,979		—		September 1, 2024	5.75%
Total borrowings	$	1,699,220	$	(21)	$	1,699,199	$	3,271,729
December 31, 2023:
Customer repurchase agreements	$	30,587	$	—	$	30,587	$	—	N/A	3.42%
Secured borrowings:
FHLB	—		—		—		1,271,846		N/A	N/A
FRB:
BTFP	1,300,000		—		1,300,000		598,870		March 22, 2024	4.53%
Discount window	—		—		—		601,504		N/A	N/A
Raymond James repurchase agreement	—		—		—		17,993		N/A	N/A
Subordinated notes	70,000		(82)		69,918		—		September 1, 2024	5.75%
Total borrowings	$	1,400,587	$	(82)	$	1,400,505	$	2,490,213

(1)Available capacity on the Company's borrowing arrangements with the FHLB, the FRB and the Raymond James repurchase line comprise pledged collateral that has not been borrowed against. At June 30, 2024, the Company had total additional undrawn borrowing capacity of approximately $3.4 billion, comprising unencumbered securities available to be pledged of approximately $151.2 million and undrawn financing on pledged assets of $3.3 billion.

(2)Represent the weighted average interest rate on customer repurchase agreements and the borrowings outstanding and the coupon interest rate on the subordinated notes, which approximates the effective interest rate.

The Company’s repurchase agreements operate on a rolling basis and do not contain contractual maturity dates. The contractual maturity dates on FHLB secured borrowings represent the maturity dates of current advances and are not evidence of a termination date on the line.

There are no prepayment penalties nor unused commitment fees on any of the Company’s borrowing arrangements.

Bank Term Funding Program ("BTFP")

On March 12, 2023, the FRB, Department of Treasury and the Federal Deposit Insurance Corporation ("FDIC") issued a joint statement outlining actions they had taken to protect the U.S. economy by strengthening public confidence in the banking system as a result of and in response to recently announced bank closures. Among other actions, the Federal Reserve Board announced that it would make available additional funding to eligible depository institutions through the creation of a new BTFP. The BTFP provides eligible depository institutions, including the Company's subsidiary bank, the Bank, an additional source of liquidity.

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Borrowings are funded based on a percentage of the principal of eligible collateral posted, as defined within the terms of the program. Interest is payable at a fixed rate over the term of the borrowing and there are no prepayment penalties. 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, the Company borrowed an additional $500.0 million through the BTFP and refinanced $500.0 million under the program, both at an interest rate of 4.76% that mature in January 2025.

Subordinated Notes

On August 5, 2014, the Company completed the sale of $70.0 million of its 5.75% subordinated notes, due September 1, 2024 (the "2024 Notes"). The net proceeds were approximately $68.8 million which included $1.2 million in deferred financing costs, which are being amortized over the life of the 2024 Notes. The 2024 Notes were offered to the public at par and qualify as Tier 2 capital for regulatory purposes to the fullest extent permitted under the Basel III Rule capital requirements, and were fully phased out of regulatory capital as of December 31, 2023 as they approached maturity.

Since the subordinated notes are due September 1, 2024, the Company is considering various options to finance the upcoming maturity of the subordinated debt, and the Company may seek to issue new subordinated notes or other debt securities to replace those that are maturing, or fund the maturity through other means. Given prevailing interest rates, any new debt securities to refinance the subordinated notes are expected to have a higher interest rate than the subordinated notes.

Note 10. Net Income (Loss) per Common Share

The calculation of net income per common share for the three and six months ended June 30, 2024 and 2023 was as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
(dollars and shares in thousands, except per share data)	2024		2023		2024		2023
Basic:
Net (loss) income	$	(83,802)	$	28,692	$	(84,140)	$	52,926
Average common shares outstanding	30,186		30,455		30,127		30,780
Basic net (loss) income per common share	$	(2.78)	$	0.94	$	(2.79)	$	1.72
Diluted:
Net (loss) income	$	(83,802)	$	28,692	$	(84,140)	$	52,926
Average common shares outstanding	30,186		30,455		30,127		30,780
Adjustment for common share equivalents	—		50		—		52
Average common shares outstanding-diluted	30,186		30,505		30,127		30,832
Diluted net (loss) income per common share (1)	$	(2.78)	$	0.94	$	(2.79)	$	1.72
Anti-dilutive shares	48		3		54		3

(1) For periods ended with a net loss, anti-dilutive financial instruments have been excluded from the calculation of GAAP diluted EPS.

Basic net (loss) income per share is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted net (loss) income per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the net income (loss) of the Company. The computation of diluted per share does not assume conversion or exercise of securities that would have an anti-dilutive effect on net income (loss) per share.

Securities issued by the Company that could potentially dilute net income (loss) per share in future periods include stock options and restricted stock. To calculate diluted net income (loss) per share, the Company utilizes the Treasury Stock method which results in only an incremental number of shares added to shares outstanding during the period.

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Note 11. Other Comprehensive (Loss) Income

The following table presents the components of other comprehensive (loss) income for the three and six months ended June 30, 2024 and 2023.

(dollars in thousands)	Before Tax		Tax Effect		Net of Tax
Three Months Ended June 30, 2024
Net unrealized gain on securities available-for-sale	$	4,812	$	(1,183)	$	3,629
Less: Reclassification adjustment for net gain included in net income	(3)		1		(2)
Total unrealized gain on investment securities available-for-sale	4,809		(1,182)		3,627
Amortization of unrealized loss on securities transferred to held-to-maturity	1,725		(403)		1,322
Net unrealized loss on derivatives	(32)		8		(24)
Other comprehensive income	$	6,502	$	(1,577)	$	4,925
Three Months Ended June 30, 2023
Net unrealized loss on securities available-for-sale	$	(15,959)	$	3,885	$	(12,074)
Less: Reclassification adjustment for net gain included in net income	(2)		—		(2)
Total unrealized loss on investment securities available-for-sale	(15,961)		3,885		(12,076)
Amortization of unrealized loss on securities transferred to held-to-maturity	1,831		(428)		1,403
Other comprehensive loss	$	(14,130)	$	3,457	$	(10,673)
Six Months Ended June 30, 2024
Net unrealized loss on securities available-for-sale	$	(1,881)	$	444	$	(1,437)
Less: Reclassification adjustment for net gain included in net income	(7)		1		(6)
Total unrealized loss on investment securities available-for-sale	(1,888)		445		(1,443)
Amortization of unrealized loss on securities transferred to held-to-maturity	3,456		(749)		2,707
Net unrealized gain on derivatives	331		(81)		250
Other comprehensive income	$	1,899	$	(385)	$	1,514
Six Months Ended June 30, 2023
Net unrealized gain on securities available-for-sale	$	8,080	$	(2,218)	$	5,862
Less: Reclassification adjustment for net loss included in net income	19		(5)		14
Total unrealized gain on investment securities available-for-sale	8,099		(2,223)		5,876
Amortization of unrealized loss on securities transferred to held-to-maturity	3,814		(1,770)		2,044
Other comprehensive income	$	11,913	$	(3,993)	$	7,920

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The following table presents the changes in each component of accumulated other comprehensive income (loss), net of tax, for the three and six months ended June 30, 2024 and 2023.

(dollars in thousands)	Securities Available-For-Sale		Securities Held-to-Maturity		Derivatives		Accumulated Other Comprehensive Income (Loss)
Three Months Ended June 30, 2024
Balance at beginning of period	$	(127,316)	$	(38,544)	$	92	$	(165,768)
Other comprehensive income (loss) before reclassifications	3,629		—		(24)		3,605
Amounts reclassified from accumulated other comprehensive income (loss)	(2)		—		—		(2)
Amortization of unrealized loss on securities transferred to held-to-maturity	—		1,322		—		1,322
Net other comprehensive income (loss) during period	3,627		1,322		(24)		4,925
Balance at end of period	$	(123,689)	$	(37,222)	$	68	$	(160,843)
Three Months Ended June 30, 2023
Balance at beginning of period	$	(136,821)	$	(44,093)	$	—	$	(180,914)
Other comprehensive loss before reclassifications	(12,074)		—		—		(12,074)
Amounts reclassified from accumulated other comprehensive income (loss)	(2)		—		—		(2)
Amortization of unrealized loss on securities transferred to held-to-maturity	—		1,403		—		1,403
Net other comprehensive (loss) income during period	(12,076)		1,403		—		(10,673)
Balance at end of period	$	(148,897)	$	(42,690)	$	—	$	(191,587)
Six Months Ended June 30, 2024
Balance at beginning of period	$	(122,246)	$	(39,929)	$	(182)	$	(162,357)
Other comprehensive (loss) income before reclassifications	(1,437)		—		250		(1,187)
Amounts reclassified from accumulated other comprehensive income (loss)	(6)		—		—		(6)
Amortization of unrealized loss on securities transferred to held-to-maturity	—		2,707		—		2,707
Net other comprehensive (loss) income during period	(1,443)		2,707		250		1,514
Balance at end of period	$	(123,689)	$	(37,222)	$	68	$	(160,843)
Six Months Ended June 30, 2023
Balance at beginning of period	$	(154,773)	$	(44,734)	$	—	$	(199,507)
Other comprehensive income before reclassifications	5,862		—		—		5,862
Amounts reclassified from accumulated other comprehensive income	14		—		—		14
Amortization of unrealized loss on securities transferred to held-to-maturity	—		2,044		—		2,044
Net other comprehensive income during period	5,876		2,044		—		7,920
Balance at end of period	$	(148,897)	$	(42,690)	$	—	$	(191,587)

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The following table presents the amounts reclassified out of each component of accumulated other comprehensive income (loss) for the three and six months ended June 30, 2024 and 2023.

Details about Accumulated Other Comprehensive Income (Loss) Components	Amount Reclassified from Accumulated Other Comprehensive Income (Loss)
	Three Months Ended June 30,				Affected Line Item in Consolidated Statements of Income
(dollars in thousands)	2024		2023
Realized gain (loss) on sale of investment securities	$	3	$	2	Net gain (loss) on sale of investment securities
Income tax benefit (expense)	(1)		—		Income tax expense
Total reclassifications for the periods	$	2	$	2
Details about Accumulated Other Comprehensive Income (Loss) Components	Amount Reclassified from Accumulated Other Comprehensive Income (Loss)
	Six Months Ended June 30,				Affected Line Item in Consolidated Statements of Operations
(dollars in thousands)	2024		2023
Realized gain (loss) on sale of investment securities	$	7	$	(19)	Net gain (loss) on sale of investment securities
Income tax benefit (expense)	(1)		5		Income tax expense
Total reclassifications for the periods	$	6	$	(14)

Note 12. Fair Value Measurements

The fair value of an asset or liability is the price that would be received to sell that asset or paid to transfer that liability in an orderly transaction occurring in the principal market (or most advantageous market in the absence of a principal market) for such asset or liability. In estimating fair value, the Company utilizes valuation techniques that are consistent with the market approach, the income approach and/or the cost approach. Such valuation techniques are consistently applied. Inputs to valuation techniques include the assumptions that market participants would use in pricing an asset or liability. ASC Topic 820, "Fair Value Measurements and Disclosures," establishes a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:

Level 1    Quoted prices in active exchange markets for identical assets or liabilities; also includes certain U.S. treasury and other U.S. Government and agency securities actively traded in over-the-counter markets.

Level 2    Observable inputs other than Level 1 including quoted prices for similar assets or liabilities, quoted prices in less active markets, or other observable inputs that can be corroborated by observable market data; also includes derivative contracts whose value is determined using a pricing model with observable market inputs or inputs that can be derived principally from or corroborated by observable market data. This category generally includes certain U.S. Government and agency securities, corporate debt securities, derivative instruments, and residential mortgage loans held for sale.

Level 3    Unobservable inputs supported by little or no market activity for financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation; also includes observable inputs for single dealer nonbinding quotes not corroborated by observable market data. This category generally includes certain private equity investments, retained interests from securitizations, and certain collateralized debt obligations.

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Assets and Liabilities Recorded at Fair Value on a Recurring Basis

The tables below present the recorded amount of assets and liabilities measured at fair value on a recurring basis as of June 30, 2024 and December 31, 2023.

(dollars in thousands)	Quoted Prices (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)		Total Fair Value
June 30, 2024
Assets:
Investment securities available-for-sale:
U.S treasury bonds	$	—	$	48,721	$	—	$	48,721
U. S. agency securities	—		640,967		—		640,967
Residential mortgage-backed securities	—		672,206		—		672,206
Commercial mortgage-backed securities	—		48,847		—		48,847
Municipal bonds	—		8,182		—		8,182
Corporate bonds	—		1,695		—		1,695
Loans held for sale	—		5,000		—		5,000
Interest rate product	—		34,770		—		34,770
Total assets measured at fair value on a recurring basis	$	—	$	1,460,388	$	—	$	1,460,388
Liabilities:
Interest rate product	$	—	$	33,633	$	—	$	33,633
Total liabilities measured at fair value on a recurring basis	$	—	$	33,633	$	—	$	33,633
December 31, 2023
Assets:
Investment securities available-for-sale:
U.S. treasury bonds	$	—	$	47,901	$	—	$	47,901
U. S. agency securities	—		671,397		—		671,397
Residential mortgage-backed securities	—		727,353		—		727,353
Commercial mortgage-backed securities	—		49,564		—		49,564
Municipal bonds	—		8,490		—		8,490
Corporate bonds	—		1,683		—		1,683
Interest rate product	—		30,662		—		30,662
Credit risk participation agreements	—		3		—		3
Total assets measured at fair value on a recurring basis	$	—	$	1,537,053	$	—	$	1,537,053
Liabilities:
Interest rate product	$	—	$	30,555	$	—	$	30,555
Total liabilities measured at fair value on a recurring basis	$	—	$	30,555	$	—	$	30,555

Investment securities available-for-sale: AFS securities are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair value is measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security's credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level 1 securities include certain U.S. treasury bonds, U.S. Government and agency securities that actively traded in over-the-counter markets. Level 2 securities includes certain U.S. treasury bonds, U.S. agency debt securities, MBS issued by Government Sponsored Entities and municipal bonds. Securities classified as Level 3 include securities in less liquid markets, for which the carrying amounts approximate the fair value.

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Credit risk participation agreements: The Company enters into 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. The fair value of RPAs is calculated by determining the total expected asset or liability exposure of the derivatives to the borrowers and applying the borrowers' credit spread to that exposure. 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. Accordingly, RPAs fall within Level 2.

Interest rate derivatives: The Company entered into an interest rate derivative agreement with an institutional counterparty, under which the Company will receive cash if and when market rates exceed the derivatives strike rate. The fair value of the derivative is calculated by determining the total expected asset or liability exposure of the derivative. Total expected exposure incorporates both the current and potential future exposure of the derivative, derived from using observable inputs, such as yield curves and volatilities. Accordingly, the derivative falls within Level 2.

Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis

The Company measures certain assets at fair value on a nonrecurring basis, and the following is a general description of the methods used to value such assets.

Loans: The fair value of individually assessed loans is estimated using one of several methods, including the collateral value, market value of similar debt, enterprise value, liquidation value and discounted cash flows. Those individually assessed loans not requiring a specific allowance represent loans for which the fair value of expected repayments or collateral exceed the recorded investment in such loans. At June 30, 2024, substantially all of the Company's individually evaluated loans were evaluated based upon the fair value of the collateral. In accordance with ASC Topic 820, individually evaluated loans where an allowance is established based on the fair value of collateral, i.e. those that are collateral dependent, require classification in the fair value hierarchy. When the fair value of the collateral is based on an observable market price or a current appraised value, the Company records the loan as nonrecurring Level 2. When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Company records the loan as nonrecurring Level 3.

Other real estate owned ("OREO"): OREO is initially recorded at fair value less estimated selling costs. Fair value is based upon independent market prices, appraised values of the collateral or management's estimation of the value of the collateral, which the Company classifies as a Level 3 valuation.

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Assets measured at fair value on a nonrecurring basis are included in the table below:

(dollars in thousands)	Quoted Prices (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)		Total Fair Value
June 30, 2024
Individually assessed loans:
Commercial	$	—	$	—	$	2,540	$	2,540
Income producing - commercial real estate	—		—		70,209		70,209
Owner occupied - commercial real estate	—		—		19,834		19,834
Real estate mortgage - residential	—		—		1,698		1,698
Consumer	—		—		2,072		2,072
Home equity	—		—		265		265
Other real estate owned	—		—		773		773
Total assets measured at fair value on a nonrecurring basis as of June 30, 2024	$	—	$	—	$	97,391	$	97,391
December 31, 2023
Individually assessed loans:
Commercial	$	—	$	—	$	2,475	$	2,475
Income producing - commercial real estate	—		—		41,038		41,038
Owner occupied - commercial real estate	—		—		19,880		19,880
Real estate mortgage - residential	—		—		1,638		1,638
Consumer	—		—		396		396
Home equity	—		—		242		242
Other real estate owned	—		—		1,108		1,108
Total assets measured at fair value on a nonrecurring basis as of December 31, 2023	$	—	$	—	$	66,777	$	66,777

Fair Value of Financial Instruments

The Company discloses fair value information about financial instruments for which it is practicable to estimate the value, whether or not such financial instruments are recognized on the balance sheet. Fair value is the amount at which a financial instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation, and is best evidenced by quoted market price, if one exists.

Quoted market prices, if available, are shown as estimates of fair value. Because no quoted market prices exist for a portion of the Company's financial instruments, the fair value of such instruments has been derived based on management's assumptions with respect to future economic conditions, the amount and timing of future cash flows and estimated discount rates. Different assumptions could significantly affect these estimates. Accordingly, the net realizable value could be materially different from the estimates presented below. In addition, the estimates are only indicative of individual financial instrument values, including in certain cases, the Company's estimation of exit pricing, and should not be considered an indication of the fair value of the Company taken as a whole.

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The estimated fair value of the Company's financial instruments at June 30, 2024 and December 31, 2023 are as follows:

					Fair Value Measurements
(dollars in thousands)	Carrying Value		Fair Value		Quoted Prices (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)
June 30, 2024
Assets
Cash and due from banks	$	10,803	$	10,803	$	10,803	$	—	$	—
Federal funds sold	5,802		5,802		—		5,802		—
Interest-bearing deposits with other banks	526,228		526,228		—		526,228		—
Investment securities available-for-sale	1,420,618		1,420,618		—		1,420,618		—
Investment securities held-to-maturity	982,955		856,275		—		856,275		—
Federal Reserve and Federal Home Loan Bank stock	54,274		N/A		—		—		—
Loans held for sale	5,000		5,000		—		5,000		—
Loans	8,001,739		7,632,721		—		—		7,632,721
Bank owned life insurance	114,333		114,333		—		114,333		—
Annuity investment	12,695		12,695		—		12,695		—
Interest rate product	34,770		34,770		—		34,770		—
Accrued interest receivable	54,140		54,140		54,140		—		—
Liabilities
Noninterest-bearing deposits	$	1,693,955	$	1,693,955	$	—	$	1,693,955	$	—
Interest-bearing deposits	4,289,294		4,289,294		—		4,289,294		—
Time deposits	2,284,099		2,278,976		—		2,278,976		—
Customer repurchase agreements	39,220		39,220		—		39,220		—
Borrowings	1,659,979		1,659,595		—		1,659,595		—
Interest rate product	33,633		33,633		—		33,633		—
Accrued interest payable	38,237		38,237		38,237		—		—
December 31, 2023
Assets
Cash and due from banks	$	9,047	$	9,047	$	9,047	$	—	$	—
Federal funds sold	3,740		3,740		—		3,740		—
Interest-bearing deposits with other banks	709,897		709,897		—		709,897		—
Investment securities available-for-sale	1,506,388		1,506,388		—		1,506,388		—
Investment securities held-to-maturity	1,015,737		901,582		—		901,582		—
Federal Reserve and Federal Home Loan Bank stock	25,748		N/A		—		—		—
Loans	7,968,695		7,720,241		—		—		7,720,241
Bank owned life insurance	112,921		112,921		—		112,921		—
Annuity investment	13,112		13,112		—		13,112		—
Credit risk participation agreements	3		3		—		3		—
Interest rate product	30,662		30,662		—		30,662		—
Accrued interest receivable	53,337		53,337		53,337		—		—
Liabilities
Noninterest-bearing deposits	$	2,279,081	$	2,279,081	$	—	$	2,279,081	$	—
Interest-bearing deposits	4,311,491		4,311,491		—		4,311,491		—
Time deposits	2,217,467		2,217,795		—		2,217,795		—
Customer repurchase agreements	30,587		30,587		—		30,587		—
Borrowings	1,369,918		1,368,621		—		1,368,621		—
Interest rate product	30,555		30,555		—		30,555		—
Accrued interest payable	57,395		57,395		57,395		—		—

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Note 13. Legal Contingencies

From time to time, the Company and its subsidiaries are involved in various legal proceedings incidental to their business in the ordinary course, including matters in which damages in various amounts are claimed, as well as regulatory and governmental investigations and inquiries that could result in penalties, fines or other sanctions against the Company. Based on information currently available, the Company does not believe that the liabilities (if any) resulting from such matters will have a material effect on the financial position of the Company. However, considering inherent uncertainties involved in such matters, ongoing legal expenses or an adverse outcome in one or more of these matters could materially and adversely affect the Company's financial condition, results of operations or cash flows in any particular reporting period, as well as its reputation.

Under ASC 450, the Company accrues for a loss contingency when the loss is probable and reasonably estimable. The Company discloses the matter if a material loss is at least reasonably possible. Under ASC 450, a loss contingency is “reasonably possible” if “the chance of the future event or events occurring is more than remote but less than likely”, and a loss contingency is “remote” if “the chance of the future event or events occurring is slight.”

The Company is cooperating with an ongoing investigation by the U.S. Attorney’s Office for the Middle District of Pennsylvania into, among other things, the Company’s anti-money laundering controls between approximately 2011 and 2017 and the Company’s relationship with a former customer who pleaded guilty to a charge of bank fraud in 2020. Due to the inherent uncertainty in predicting the outcome of a pending investigation, we are unable to estimate reasonably possible losses, if any, resulting from this matter.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion provides information about the results of operations, financial condition, liquidity, and capital resources of Eagle Bancorp, Inc. and its subsidiaries (collectively, the "Company") as of the dates and periods indicated. 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.

Caution About Forward Looking Statements. This report contains forward looking statements. 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.

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, 2023, and in other periodic and current reports filed by the Company with the Securities and Exchange Commission ("SEC"). These forward looking statements are based largely on our expectations and are subject to a number of known and unknown risks and uncertainties that are subject to change based on factors which are, in many instances, beyond our control. Actual results, performance or achievements could differ materially from those contemplated, expressed or implied by the forward looking statements. The Company's past results are not necessarily indicative of future performance, and nothing contained herein is meant to or should be considered and treated as earnings guidance of future quarters' performance projections. All information is as of the date of this report. Any forward-looking statements made by or on behalf of the Company speak only as to the date they are made. 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.

GENERAL

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 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").

The Company was organized in October 1997, to be the holding company for the Bank. The Bank was organized in 1998 as an independent, community oriented, full service banking alternative to the super regional financial institutions that dominate the Company's primary market area. The Company's philosophy is to provide superior, personalized service to its customers. 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 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. The Bank emphasizes providing commercial banking services to sole proprietors, small and medium-sized businesses, non-profit organizations and associations, and investors living and working in and near the primary service area. These services include the usual deposit functions of commercial banks, including business and personal checking accounts, "NOW" accounts and money market and savings accounts, business, construction, and commercial loans, consumer loans, and cash management services. The Bank is also active in the origination of Small Business Administration ("SBA") loans.

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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. Bethesda Leasing, LLC, a subsidiary of the Bank, holds title to and manages other real estate owned ("OREO") assets. Landroval Municipal Finance, Inc., a subsidiary of the Bank, focuses on lending to municipalities by buying debt on the public market as well as direct purchase issuance.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The Company's Consolidated Financial Statements are prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP") and follow general practices within the banking industry. Application of these principles requires management to make estimates, assumptions, and judgments that affect the amounts reported in the financial statements and accompanying notes. These estimates, assumptions and judgments are based on information available as of the date of the Consolidated Financial Statements; accordingly, as this information changes, the Consolidated Financial Statements could reflect different estimates, assumptions, and judgments. Certain policies inherently have a greater reliance on the use of estimates, assumptions and judgments and, as such, have a greater possibility of producing results that could be materially different than originally reported. Estimates, assumptions, and judgments are necessary when assets and liabilities are required to be recorded at fair value, when a decline in the value of an asset not carried on the financial statements at fair value warrants an impairment write-down or a valuation reserve to be established, or when an asset or liability needs to be recorded contingent upon a future event. Carrying assets and liabilities at fair value inherently results in more financial statement volatility. 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, 2023 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. The amount of the ACL on loans is based on management's assessment of current expected credit losses ("CECL") in the portfolio. The amount of such losses will vary depending upon the risk characteristics of the loan portfolio as affected by economic conditions such as changes in interest rates, the financial performance of borrowers and regional unemployment rates, which management estimates by using a national forecast and estimating a regional adjustment based on historical differences between the two.

Management has significant discretion in making the judgments inherent in the determination of the provisions for credit loss, ACL and the RUC. 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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The Company uses regression analysis of historical internal and peer data provided by a third-party service provider (as Company loss data is insufficient) to determine suitable loss drivers to utilize when modeling lifetime PD and LGD. 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. 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. The updated model incorporates a weighting of three economic scenarios; baseline, upside and downside. The scenarios cover the four economic forecast variables, with each segment of the portfolio linked to two of these variables, depending on the segment. The loss driver analysis is spread over a reasonable and supportable period of 18 months and reverts back to a historical loss rate over twelve months on a straight-line basis over the loan's remaining maturity. 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.

The RUC represents the expected credit losses on off-balance sheet commitments such as unfunded commitments to extend credit and standby letters of credit. The RUC is determined by estimating future draws and applying the expected loss rates on those draws.

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.

Management has developed an analytical process to monitor the adequacy of the ACL. Our methodology for determining our ACL was developed utilizing, among other factors, the guidance from federal banking regulatory agencies and relevant available information from internal and external sources and relating to past events, current conditions and reasonable and supportable forecasts. The process is being continually enhanced and refined based on periodic reviews. 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 June 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

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.

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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. During the past twelve months ended June 30, 2024, changes in macroeconomic conditions, market volatility due to rising interest rates 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. 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 June 30, 2024 vs. Three Months Ended June 30, 2023

Net loss for the three months June 30, 2024 was $83.8 million as compared to net income of $28.7 million for the same period in 2023, a $112.5 million decrease. Operating net income (non-GAAP), adjusted to exclude the impact of the goodwill impairment charge, for the three months June 30, 2024 was $20.4 million, a $8.3 million decrease. Refer to the "Use of Non-GAAP Financial Measures" section for additional detail and a reconciliation of GAAP to non-GAAP financial measures.

The decrease in net income of $112.5 million for the three months ended June 30, 2024 relative to the same period in 2023 was primarily due to the recognition of goodwill impairment of $104.2 million. Other factors contributing to the decline in net income were an increase in provision for credit losses of $3.7 million and a decrease in noninterest income of $3.3 million, partially offset by a reduction of income tax expense of $3.8 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 operating noninterest expense (non-GAAP) was due to higher FDIC insurance fees, and the decrease in noninterest income was attributable to several one time items in the same period in 2023. The reduction in income tax expense was due to lower pre-tax income period over period. 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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Total revenue (i.e. net interest income plus noninterest income) was $76.7 million for the three months ended June 30, 2024 as compared to $80.4 million for the same period in 2023. The most significant portion of revenue is net interest income, which was $71.4 million for the three months ended June 30, 2024, compared to $71.8 million for the same period in 2023. The primary driver for lower total revenue was lower noninterest income, which decreased $3.3 million from the same period last year.

When the impact of the provision and goodwill impairment are excluded, pre-provision net revenue ("PPNR"), a non-GAAP measure, was $34.4 million for the three months ended June 30, 2024, as compared to $42.4 million for the same period in 2023. The $8.1 million decrease was primarily due to lower noninterest income and higher noninterest expenses, primarily FDIC insurance. 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 2.40% for the three months ended June 30, 2024 and 2.49% 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 June 30, 2024 decreased to $5.3 million from $8.6 million for the same period in 2023, a 38.0% decrease. Noninterest income decreased primarily due to lower other income. Other income for the three months ended June 30, 2024 decreased to $2.9 million from $6.2 million for the same period in 2023, a 52.9% decrease primarily based on the prior year period including several one time items. For further information on the components and drivers of these changes, see the "Noninterest Income" section below.

Noninterest expense totaled $146.5 million for the three months ended June 30, 2024, as compared to $38.0 million for same period in 2023, a $108.5 million increase. The increase in noninterest expense was primarily due to the recognition of goodwill impairment of $104.2 million. Excluding the goodwill impairment charge, operating noninterest expense (non-GAAP) was $42.3 million. The $4.3 million increase in operating noninterest expense (non-GAAP) was primarily due to higher FDIC insurance fees. Additional details on other noninterest expenses are provided in "Noninterest Expense" section below. Refer to the "Use of Non-GAAP Financial Measures" section for additional detail and a reconciliation of GAAP to non-GAAP financial measures.

Income tax expenses were $4.4 million for the three months ended June 30, 2024, a reduction of 45.9%, compared to the same period in 2023. The components and drivers of the change are discussed in the "Income Tax Expense" section below.

The efficiency ratio was 191.0% for the three months ended June 30, 2024, as compared to 47.2% for the same period in 2023. The adverse change in the efficiency ratio was primarily driven by the recognition of goodwill impairment of $104.2 million. Excluding the goodwill impairment charge, operating efficiency ratio (non-GAAP) was 55.2%. 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 June 30, 2024 and 2023, the Company had average assets of $12.4 billion and $12.0 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 June 30, 2024 and 2023, the Company had average common equity of $1.3 billion and $1.2 billion, respectively. For the three months ended June 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 June 30, 2024, the Company reported an annualized return on average assets ("ROAA") of (2.7)%, as compared to 0.96% for the same period in 2023. The annualized return on average common equity ("ROACE") for the three months ended June 30, 2024 was (26.7)% as compared to 9.2% for the same period in 2023. The annualized return on average tangible common equity ("ROATCE") for the three months ended June 30, 2024 was (29.0)% as compared to 10.1% for the same period in 2023. The adverse change in returns was primarily attributable to the recognition of goodwill impairment. Excluding the goodwill impairment charge, operating annualized ROAA (non-GAAP) was 0.7%, operating annualized return on common equity (non-GAAP) was 6.5%, and operating annualized return on tangible common equity (non-GAAP) was 7.0%. 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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RESULTS OF OPERATIONS

Earnings Summary

Six Months Ended June 30, 2024 vs. Six Months Ended June 30, 2023

Net loss for the six months ended June 30, 2024 was $84.1 million, as compared to net income of $52.9 million for the same period in 2023, a decrease of $137.0 million, or 259.0%.

The decrease of $137.0 million to net loss for the six months ended June 30, 2024 from net income for the same period in 2023 was primarily attributable to the recognition of goodwill impairment of $104.2 million and an increase in provision for credit losses of $32.7 million, partially offset by a reduction of income tax expenses of $7.6 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 $72.7 million for the six months ended June 30, 2024, as compared to $80.6 million for the same period in 2023. The $7.9 million decrease was primarily due to lower noninterest income and higher noninterest expenses, primarily FDIC insurance. 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 $155.0 million for the six months ended June 30, 2024, as compared to $159.1 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 2.42% for the six months ended June 30, 2024 and 2.63% 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 six months ended June 30, 2024 decreased to $8.9 million from $12.3 million for the same period in 2023, a 27.4% decrease. Noninterest income decreased primarily due to lower other income. Other income for the six months ended June 30, 2024 decreased to $4.1 million from $7.5 million for the same period in 2023, a 45.0% decrease primarily due to several one time items in the prior year. For further information on the components and drivers of these changes, see the "Noninterest Income" section below.

The efficiency ratio was 120.34% for the six months ended June 30, 2024 as compared to 49.37% for the same period in 2023. Excluding the goodwill impairment charge, the operating efficiency ratio (non-GAAP) was 53.12%. 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 six months ended June 30, 2024 and 2023, the Company had average assets of $12.6 billion and $11.7 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 six months ended June 30, 2024 and 2023, the Company had average common equity of $1.3 billion and $1.2 billion, respectively. For the six months ended June 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 six months ended June 30, 2024, the Company reported an annualized ROAA of (1.35)%, as compared to 0.91% for the same period in 2023. The annualized ROACE for the six months ended June 30, 2024 was (13.25)% as compared to 8.58% for the same period in 2023. The annualized ROATCE, a non-GAAP measure, for the six months ended June 30, 2024 was (14.4)% as compared to 9.37% 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 0.32%, operating annualized return on common equity (non-GAAP) was 3.15%, and operating annualized return on tangible common equity (non-GAAP) was 3.43%. 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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Net Interest Income and Net Interest Margin

Net interest income is the difference between interest income on earning assets and the cost of funds supporting those assets. 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. 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 $71.4 million for the three months ended June 30, 2024, as compared to $71.8 million for the same period in 2023. Net interest income decreased for the three months ended June 30, 2024 primarily due to increases in average deposit rates (4.31% compared to 4.00%), increases in interest bearing deposits ($7.2 billion vs $6.0 billion), increases in other borrowing rates (5.07% compared to 4.85%). This was partially offset by higher average loan balances ($8.0 billion compared to $7.8 billion) and yields (6.91% compared to 6.64%) as compared to June 30, 2023.

The net interest margin decreased by 9 basis points in the three months ended June 30, 2024, as compared to the three months ended June 30, 2023, (from 2.49% to 2.40%). The yield on earning assets increased by 27 basis points (from 5.44% to 5.71%) while cost of funds increased 41 basis points (from 3.20% to 3.61%). Average loans were $8.0 billion for the three months ended June 30, 2024 compared to $7.8 billion for the same period in 2023. Additionally, average borrowings decreased from $2.1 billion in the three months ended June 30, 2023 to $1.7 billion in the three months ended June 30, 2024. Overall yields on interest earning assets moved higher during the three months ended June 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 June 30, 2024 as compared to the same period in 2023, as funding costs increased.

Net interest income was $146.1 million for the six months ended June 30, 2024, as compared to $146.8 million for the same period in 2023. Net interest income decreased for the six months ended June 30, 2024 primarily due to increases in average deposit rates (4.30% compared to 3.89%), increases in interest bearing deposits ($7.3 billion vs $5.6 billion), increases in other borrowing rates (4.90% compared to 4.87%). This was partially offset by higher average loan balances ($8.0 billion compared to $7.8 billion) and yields (6.93% compared to 6.50%) as compared to June 30, 2023.

The net interest margin decreased by 21 basis points in the six months ended June 30, 2024 as compared to the six months ended June 30, 2023 (from 2.63% to 2.42%). The yield on earning assets increased by 40 basis points (from 5.31% to 5.71%) while cost of funds increased 68 basis points (from 2.92% to 3.60%). Overall yields on interest earning assets moved higher during the six months ended June 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 six months ended June 30, 2024 as compared to the same period in 2023, as funding costs increased.

Average loans increased to $8.0 billion for the six months ended June 30, 2024 compared to $7.8 billion for the same period in 2023. Average interest bearing deposits increased to $7.3 billion for the six months ended June 30, 2024 from $5.6 billion for the six months ended June 30, 2023, while average noninterest bearing demand deposits decreased to $2.1 billion for the six months ended June 30, 2024 from $3.0 billion for the six months ended June 30, 2023. Additionally, average borrowings remained steady at $1.7 billion for the six months ended June 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 six months ended June 30, 2024 and 2023. Included in the tables 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. While the interest rate spread provides a quick comparison of earnings rates versus cost of funds, management believes that margin, together with net interest income, provides a better measurement of performance. The net interest margin (as compared to net interest spread) includes the effect of noninterest bearing sources in its calculation. Net interest margin is net interest income expressed as a percentage of average earning assets.

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Eagle Bancorp, Inc.

Consolidated Average Balances, Interest Yields And Rates (Unaudited)

(dollars in thousands)

	Three Months Ended June 30,
	2024						2023
	Average Balance		Interest		Average Yield/Rate		Average Balance		Interest		Average Yield/Rate
ASSETS
Interest earning assets:
Interest bearing deposits with other banks and other short-term investments	$	1,455,007	$	19,568	5.41	%	$	1,053,961	$	13,229	5.03	%
Loans held for sale (1)	8,045		100		5.00	%	813		13		6.40	%
Loans (1) (2)	8,003,206		137,516		6.91	%	7,790,555		128,980		6.64	%
Investment securities available-for-sale (2)	1,478,856		7,048		1.92	%	1,626,330		8,526		2.10	%
Investment securities held-to-maturity (2)	995,274		5,357		2.16	%	1,068,755		5,715		2.14	%
Federal funds sold	13,058		142		4.37	%	5,636		47		3.34	%
Total interest earning assets	11,953,446		169,731		5.71	%	11,546,050		156,510		5.44	%
Total noninterest earning assets	510,725						492,426
Less: allowance for credit losses	(102,671)						(78,365)
Total noninterest earning assets	408,054						414,061
TOTAL ASSETS	$	12,361,500					$	11,960,111
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing liabilities:
Interest bearing transaction	$	1,636,795	$	16,100	3.96	%	$	1,312,710	$	10,640	3.25	%
Savings and money market	3,321,001		33,451		4.05	%	2,967,678		30,861		4.17	%
Time deposits	2,215,693		27,295		4.95	%	1,675,690		17,921		4.29	%
Total interest bearing deposits	7,173,489		76,846		4.31	%	5,956,078		59,422		4.00	%
Customer repurchase agreements	38,599		330		3.44	%	41,105		333		3.25	%
Borrowings	1,682,684		21,202		5.07	%	2,061,402		24,944		4.85	%
Total interest bearing liabilities	8,894,772		98,378		4.45	%	8,058,585		84,699		4.22	%
Noninterest bearing liabilities:
Noninterest bearing demand	2,051,777						2,558,860
Other liabilities	151,324						97,019
Total noninterest bearing liabilities	2,203,101						2,655,879
Shareholders' Equity	1,263,627						1,245,647
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	12,361,500					$	11,960,111
Net interest income			$	71,353					$	71,811
Net interest spread					1.26	%					1.22	%
Net interest margin					2.40	%					2.49	%
Cost of funds					3.61	%					3.20	%

(1)Loans placed on nonaccrual status are included in average balances. Net loan fees and late charges included in interest income on loans totaled $4.8 million and $4.2 million for the three months ended June 30, 2024 and 2023, respectively.

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

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Eagle Bancorp, Inc.

Consolidated Average Balances, Interest Yields And Rates (Unaudited)

(dollars in thousands)

	Six Months Ended June 30,
	2024						2023
	Average Balance		Interest		Average Yield/Rate		Average Balance		Interest		Average Yield/Rate
ASSETS
Interest earning assets:
Interest bearing deposits with other banks and other short-term investments	$	1,648,389	$	44,430	5.42	%	$	791,691	$	19,003	4.84	%
Loans held for sale (1)	4,023		100		5.00	%	2,444		73		5.97	%
Loans (1) (2)	7,996,074		275,510		6.93	%	7,751,506		249,770		6.50	%
Investment securities available for sale (2)	1,497,680		14,295		1.92	%	1,643,200		16,337		2.00	%
Investment securities held-to-maturity (2)	1,003,253		10,790		2.16	%	1,077,851		11,449		2.14	%
Federal funds sold	10,054		208		4.16	%	10,238		125		2.46	%
Total interest earning assets	12,159,473		345,333		5.71	%	11,276,930		296,757		5.31	%
Total noninterest earning assets	509,855						494,146
Less: allowance for credit losses	(96,343)						(76,518)
Total noninterest earning assets	413,512						417,628
TOTAL ASSETS	$	12,572,985					$	11,694,558
LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest bearing liabilities:
Interest bearing transaction	$	1,735,144	$	32,930	3.82	%	$	1,096,436	$	16,748	3.08	%
Savings and money market	3,372,195		69,381		4.14	%	3,146,251		64,135		4.11	%
Time deposits	2,201,506		53,918		4.93	%	1,378,609		27,493		4.02	%
Total interest bearing deposits	7,308,845		156,229		4.30	%	5,621,296		108,376		3.89	%
Customer repurchase agreements	37,341		645		3.47	%	39,689		635		3.23	%
Borrowings	1,739,773		42,408		4.90	%	1,693,349		40,911		4.87	%
Total interest bearing liabilities	9,085,959		199,282		4.41	%	7,354,334		149,922		4.11	%
Noninterest bearing liabilities:
Noninterest bearing demand	2,054,618						3,002,630
Other liabilities	155,767						94,269
Total noninterest bearing liabilities	2,210,385						3,096,899
Shareholders’ Equity	1,276,641						1,243,325
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	12,572,985					$	11,694,558
Net interest income			$	146,051					$	146,835
Net interest spread					1.30	%					1.20	%
Net interest margin					2.42	%					2.63	%
Cost of funds					3.60	%					2.92	%

(1)Loans placed on nonaccrual status are included in average balances. Net loan fees and late charges included in interest income on loans totaled $9.1 million and $7.9 million for the six months ended June 30, 2024 and 2023, respectively.

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

46

Rate/Volume Analysis of Net Interest Income

The rate/volume tables 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 June 30, 2024 Compared With The Three Months Ended June 30, 2023
(dollars in thousands)	Change Due to Volume		Change Due to Rate		Total Increase (Decrease)
Interest earned on
Loans	$	3,521	$	5,015	$	8,536
Loans held for sale	116		(29)		87
Investment securities available-for-sale	(773)		(705)		(1,478)
Investment securities held-to-maturity	(393)		35		(358)
Interest bearing bank deposits	5,034		1,305		6,339
Federal funds sold	62		33		95
Total interest income	7,567		5,654		13,221
Interest paid on
Interest bearing transaction	2,627		2,833		5,460
Savings and money market	3,674		(1,084)		2,590
Time deposits	5,775		3,599		9,374
Customer repurchase agreements	(20)		17		(3)
Other borrowings	(4,546)		804		(3,742)
Total interest expense	7,510		6,169		13,679
Net interest income	$	57	$	(515)	$	(458)

	Six Months Ended June 30, 2024 Compared With The Six Months Ended June 30, 2023
(dollars in thousands)	Change Due to Volume		Change Due to Rate		Total Increase (Decrease)
Interest earned on
Loans	$	7,881	$	17,859	$	25,740
Loans held for sale	47		(20)		27
Investment securities available-for-sale	(1,447)		(595)		(2,042)
Investment securities held-to-maturity	(792)		133		(659)
Interest bearing bank deposits	20,563		4,864		25,427
Federal funds sold	(2)		85		83
Total interest income	26,250		22,326		48,576
Interest paid on
Interest bearing transaction	9,756		6,426		16,182
Savings and money market	4,606		640		5,246
Time deposits	16,411		10,014		26,425
Customer repurchase agreements	(38)		48		10
Other borrowings	1,112		385		1,497
Total interest expense	31,847		17,513		49,360
Net interest income	$	(5,597)	$	4,813	$	(784)

47

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. 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 June 30, 2024, the Company recorded a provision for credit losses of $8.9 million on its loan portfolio and incurred $2.3 million in net charge-offs to its ACL. The provision for credit losses on loans for the same period in 2023 was $5.3 million and there were $5.6 million of net charge-offs in its ACL. During the six months ended June 30, 2024, the Company recorded a provision for credit losses of $44.1 million and net charge-offs of $23.7 million on its loan portfolio. The provision for credit losses on loans for the same period in 2023 was $10.2 million and there were $6.6 million of net charge-offs in its ACL

The change in provision for credit losses during the six months ended June 30, 2024, was primarily attributable to an updated valuation for a CRE office property collateralizing a lending relationship with two loans outstanding, the total of which was partially charged off in the first quarter 2024. Additionally, the increase in the provision was driven by adjustments to the qualitative components of the CECL model owing to the high inflationary environment and uncertainty in the macroeconomic outlook and the related changes in economic growth and the broader economy, changes in the qualitative and economic component of the model associated with CRE office properties, as well as the increases in total loans.

The provision for credit losses for the held-to-maturity securities portfolio was recorded primarily on several corporate bonds. During the three months ended June 30, 2024 and 2023, the provision for credit losses for the held-to-maturity securities portfolio was of $55 thousand and $2 thousand, respectively. During the six months ended June 30, 2024 and 2023, the provision for credit losses for the held-to-maturity securities portfolio was $56 thousand and $1.2 million, respectively. There was no provision for credit losses on the available-for-sale securities portfolio for the three and six months ended June 30, 2024. During the three and six months ended June 30, 2023, provisions of $0 and $14 thousand, respectively.

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 June 30, 2024 and 2023, provisions of $608 thousand and $318 thousand, respectively, were incurred for unfunded commitments. During the six months ended June 30, 2024 and 2023, provisions of $1.1 million and $1.2 million, respectively, were incurred for unfunded commitments.

48

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 six months ended June 30, 2024 and 2023:

	Three Months Ended June 30,
(dollars in thousands)	2024		2023		Dollar Change		Percent Change
Service charges on deposits	$	1,653	$	1,626	$	27	2	%
Gain on sale of loans	37		95		(58)		(61)	%
Net gain (loss) on sale of investment securities	3		2		1		50	%
Increase in the cash surrender value of bank-owned life insurance	709		648		61		9	%
Other income	2,930		6,224		(3,294)		(53)	%
Total	$	5,332	$	8,595	$	(3,263)	(38)	%

	Six Months Ended June 30,
(dollars in thousands)	2024		2023		Dollar Change		Percent Change
Service charges on deposits	$	3,352	$	3,136	$	216	7	%
Gain on sale of loans	37		400		(363)		(91)	%
Net gain (loss) on sale of investment securities	7		(19)		26		(137)	%
Increase in the cash surrender value of bank-owned life insurance	1,412		1,303		109		8	%
Other income	4,113		7,475		(3,362)		(45)	%
Total	$	8,921	$	12,295	$	(3,374)	(27)	%

Total noninterest income for the three and six months ended June 30, 2024 decreased to $5.3 million and $8.9 million from $8.6 million and $12.3 million for the three and six months ended June 30, 2023. The decrease was primarily based on the prior year period nonrecurring items including income from SBIC fund and swap fees.

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 six months ended June 30, 2024 and 2023:

	Three Months Ended June 30,
(dollars in thousands)	2024		2023		Dollar Change		Percent Change
Salaries and employee benefits	$	21,770	$	21,957	$	(187)	(1)	%
Premises and equipment expenses	2,894		3,227		(333)		(10)	%
Marketing and advertising	1,662		884		778		88	%
Data processing	3,495		3,354		141		4	%
Legal, accounting and professional fees	2,705		2,649		56		2	%
FDIC insurance	5,917		2,581		3,336		129	%
Goodwill impairment	104,168		—		104,168		—	%
Other expenses	3,880		3,326		554		17	%
Total	$	146,491	$	37,978	$	108,513	286	%

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	Six Months Ended June 30,
(dollars in thousands)	2024		2023		Dollar Change		Percent Change
Salaries and employee benefits	$	43,496	$	46,131	$	(2,635)	(6)	%
Premises and equipment expenses	5,953		6,544		(591)		(9)	%
Marketing and advertising	2,521		1,520		1,001		66	%
Data processing	6,788		6,453		335		5	%
Legal, accounting and professional fees	5,212		5,903		(691)		(12)	%
FDIC insurance	12,329		4,067		8,262		203	%
Goodwill impairment	104,168		—		104,168		—	%
Other expenses	6,021		7,944		(1,923)		(24)	%
Total	$	186,488	$	78,562	$	107,926	137	%

Total noninterest expense was $146.5 million for the three months ended June 30, 2024, as compared to $38.0 million for the three months ended June 30, 2023, a 285.7% increase. Total noninterest expense was $186.5 million for the six months ended June 30, 2024, as compared to $78.6 million for the six months ended June 30, 2023, a 137.4% increase. The increase for three and six months ended June 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 $42.3 million and $82.3 million for the three months and six months ended June 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 $21.8 million and $22.0 million, respectively, for the three months ended June 30, 2024 and June 30, 2023. Salaries and employee benefits were $43.5 million and $46.1 million, respectively, for the six months ended June 30, 2024 and June 30, 2023. The decrease in salaries and employee benefits over the comparative six months ended June 30, 2024 and 2023 was primarily due to reduced headcount and reduced incentive accruals and related taxes.

FDIC insurance expense was $5.9 million for the three months ended June 30, 2024 compared to $2.6 million, for the same period in 2023, a 129% increase. FDIC insurance expense was $12.3 million for the six months ended June 30, 2024 compared to $4.1 million, for the same period in 2023, a 203% increase. The increase in FDIC insurance expense over the comparative three and six months ended June 30, 2024 and 2023 was primarily due to increases in FDIC deposit insurance assessments.

Marketing expenses were $1.7 million and $0.9 million, respectively, for the three months ended June 30, 2024 and June 30, 2023, an 88% increase. Marketing expenses were $2.5 million and $1.5 million, respectively, for the six months ended June 30, 2024 and June 30, 2023, a 66% increase. The increase in marketing expenses over the comparative three and six months ended June 30, 2024 and 2023 was primarily due to higher marketing expenses related to our digital banking channel.

Legal, accounting and professional fees were $2.7 million and $5.2 million for the three and six months ended June 30, 2024, respectively, compared to $2.6 million and $5.9 million for the three and six months ended June 30, 2023, respectively, an increase of $56 thousand and a decrease of $0.7 million for the comparative periods, respectively.

The major components of other expenses include franchise taxes, director compensation and insurance expense. Other expenses increased to $3.9 million from $3.3 million, or 16.7%, for the three months ended June 30, 2024, compared to the same three month period in 2023. The increase in other expenses over the comparative three months was primarily due to two nonrecurring expenses ($325 thousand legal settlement and a $200 thousand non-loan charge-off). For the six month period ended June 30, 2024 other expenses decreased to $6.0 million from $7.9 million, or 24.2%, for the same period in 2023. The decrease in other expenses over the comparative six months ended June 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 191.03% and 120.34% for the three months and six months ended June 30, 2024, respectively as compared to 47.23% and 49.37% for the same periods in 2023. The adverse change in the efficiency ratio 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 55.19% and 53.12% for the three and six months ended June 30, 2024, respectively. Refer to the "Use of Non-GAAP Financial Measures" section for additional detail and a reconciliation of GAAP to non-GAAP financial measures.

50

As a percentage of average assets, total noninterest expense (annualized) was 4.77% for the three months ended June 30, 2024 as compared to 1.27% for the same period in 2023. As a percentage of average assets, total noninterest expense (annualized) was 2.98% for the six months ended June 30, 2024, as compared to 1.35% 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 1.38% and 1.32% for the three and six months ended June 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.

Income Tax Expense

For the three and six months ended June 30, 2024 the tax provision was $4.4 million and $7.4 million, respectively, compared to $8.2 million and $15.1 million for the three and six months ended June 30, 2023. The decrease in the tax provision over the comparative three and six months ended June 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 six months ended June 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

Summary

Total assets were $11.3 billion and $11.7 billion at June 30, 2024 and December 31, 2023, respectively. The decrease in total assets of $362.5 million, or 3.1%, from December 31, 2023 to June 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, had an amortized cost basis of $8.0 billion at June 30, 2024, a 0.4% increase from the balance at December 31, 2023. The change in loans was a combination of increases in CRE, both owner occupied and income producing, partially offset by a reduction in commercial loans.

Investment securities, at amortized cost net of the ACL, totaled $2.6 billion at June 30, 2024 as compared to $2.7 billion at December 31, 2023, a decrease of $116.7 million, or 4.3%, that was primarily driven by the pay down of principal on mortgage-backed securities ("MBS") and calls of securities. At June 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, June 30, 2024 and December 31, 2023, investment securities held-to-maturity had an amortized cost (net of ACL of $2.0 million) of $1.0 billion and an estimated fair value of $856.3 million and $901.6 million, respectively.

In terms of funding, total deposits at June 30, 2024 were $8.3 billion, down from $8.8 billion at December 31, 2023, a decline of 6.1%. Total borrowings (excluding customer repurchase agreements) were $1.7 billion and $1.4 billion at June 30, 2024 and December 31, 2023, respectively. The decrease in deposits was primarily attributable to 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 funding.

Total shareholders' equity declined to $1.2 billion as of June 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 1% from December 31, 2023 to June 30, 2024. The total risk based capital ratio was 15.07% at June 30, 2024, as compared to 14.79% at December 31, 2023. The common equity tier 1 capital ("CET1") risk based capital ratio was 13.92% at June 30, 2024, as compared to 13.90% at December 31, 2023. The tier 1 risk based capital ratio was 13.92% at June 30, 2024, as compared to 13.90% at December 31, 2023. The tier 1 leverage ratio was 10.58% at June 30, 2024, as compared to 10.73% at December 31, 2023.

51

The ratio of common equity to total assets was 10.35% at June 30, 2024, as compared to 10.92% at December 31, 2023 as common equity levels declined 8.2% over the six months ended June 30, 2024. Book value per share was $38.75 at June 30, 2024, a 9.0% 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 10.35% at June 30, 2024, as compared to 10.12% at December 31, 2023. Tangible book value per share was $38.74 at June 30, 2024, a 0.9% decrease from $39.08 at December 31, 2023. Refer to the "Use of Non-GAAP Financial Measures" section for additional detail and a reconciliation of GAAP to non-GAAP financial measures.

In order to be considered well-capitalized, the Bank must have a CET1 risk based capital ratio of 6.5%, a Tier 1 risk-based ratio of 8.0%, a total risk-based capital ratio of 10.0% and a leverage ratio of 5.0%. The Company and the Bank exceed all these requirements and satisfy the capital conservation buffer of 2.5% of CET1 capital. 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.

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 June 30, 2024, an increase of $33.0 million, or 0.4%, from the balance at December 31, 2023. The loan portfolio has continued to grow in the six months ended June 30, 2024, driven by increased fundings of income producing CRE and ongoing construction projects for commercial and residential properties, partially offset by a reduction in commercial loans. Market rates in 2024 for our new loan originations remained consistent with the market rates at the end of 2023, reflecting that the Federal Reserve has not raised short-term interest rates in 2024. We continue to see opportunities for growth in the commercial real estate 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 June 30, 2024 and December 31, 2023 by major category are summarized below.

	June 30, 2024				December 31, 2023
(dollars in thousands, except amounts in the footnote)	Amount		%		Amount		%
Commercial	$	1,238,261	15	%	$	1,473,766	18	%
PPP loans	407		—	%	528		—	%
Income producing - commercial real estate	4,217,525		53	%	4,094,614		51	%
Owner occupied - commercial real estate	1,263,714		16	%	1,172,239		15	%
Real estate mortgage - residential	61,338		1	%	73,396		1	%
Construction - commercial and residential	1,063,764		13	%	969,766		12	%
Construction - C&I (owner occupied)	99,526		1	%	132,021		2	%
Home equity	52,773		1	%	51,964		1	%
Other consumer	4,431		—	%	401		—	%
Total loans	8,001,739		100	%	7,968,695		100	%
Less: allowance for credit losses	(106,301)				(85,940)
Loans, net (1)	$	7,895,438			$	7,882,755

(1)Excludes accrued interest receivable of $46.8 million and $45.3 million at June 30, 2024 and December 31, 2023, respectively, which is recorded in other assets.

52

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. Although these loans are made to a diversified pool of unrelated borrowers across numerous businesses, adverse developments in the Washington, D.C. metropolitan 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 area is the Washington, D.C. metropolitan area, the Bank has made loans outside that market area where the applicant is an existing customer and the nature and quality of such loans was consistent with the Bank’s lending policies.

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 June 30, 2024, 31.1%, 27.6%, 24.5%, 5.4% and 11.4% 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. 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 $6.4 billion and $6.1 billion, or 80.5% and 77.0% of total loans, of amortized cost outstanding at June 30, 2024 and December 31, 2023, respectively. Management meets regularly in order to monitor its existing CRE loan portfolio and to evaluate the pipeline for CRE loan investment. The Company has remained focused on monitoring sectors that have had a lasting impact from the ramifications of the COVID-19 pandemic, particularly income producing CRE loans collateralized by office properties, which comprised approximately $887.4 million and $949.0 million, or 11.1% and 11.9% of total loans, at June 30, 2024 and December 31, 2023, respectively. Office loans within Washington D.C., Washington's Maryland Suburbs and Northern Virginia were $818.2 million and $879.0 million, or 10.2% and 11.0% of total loans, at June 30, 2024 and December 31, 2023, respectively. As a percentage of total income producing - CRE office loans, 37.9%, 30.6% and 23.9% were located in Washington's Maryland Suburbs, Northern Virginia, and Washington, D.C., respectively, at June 30, 2024.

53

The following table summarizes the Company's income producing - commercial real estate loans, at principal, at June 30, 2024. Additionally, we present the three most recent quarters' data for percent of principal by loan size and geographical concentration a comparative analysis :

At June 30, 2024				Maryland						Virginia
(dollars in thousands)	Washington D.C.			Washington Suburbs			Other			Northern Virginia			Other			Other			Total			Percent of Total
Collateral Type:
Hotel & motel	$	137,750		$	80,579		$	83,175		$	60,223		$	—		$	21,936		$	383,663		9	%
Industrial	5,825			81,281			40,733			19,578			12,071			983			160,471			4	%
Mixed use	265,272			47,185			371			54,609			25,758			5,377			398,572			9	%
Multifamily	389,042			250,929			318			120,246			84,850			47,838			893,223			21	%
Office	211,660			336,115			4,536			271,685			63,369			—			887,365			21	%
Retail	81,300			99,537			61,613			79,103			99,615			1,927			423,095			10	%
Single / 1-4 Family & Res. Condo	73,238			2,648			2,498			14,302			6,524			4,068			103,278			3	%
Other	185,312			188,563			40,295			522,269			8,166			33,011			977,616			23	%
Total	$	1,349,399		$	1,086,837		$	233,539		$	1,142,015		$	300,353		$	115,140		$	4,227,283		100	%
Percent of total	31		%	26		%	6		%	27		%	7		%	3		%	100		%
Percent of Principal by Loan Size:
Less than $1 million	2		%	1		%	4		%	3		%	2		%	2		%
$1 million to $5 million	10		%	10		%	19		%	7		%	8		%	15		%
$5 million to $10 million	7		%	8		%	28		%	5		%	12		%	39		%
$10 million to $25 million	18		%	17		%	30		%	31		%	28		%	12		%
$25 million to $50 million	51		%	26		%	19		%	37		%	26		%	32		%
Greater than $50 million	12		%	38		%	—		%	17		%	24		%	—		%
Total	100		%	100		%	100		%	100		%	100		%	100		%
At March 30, 2024
Percent of Principal by Loan Size
Less than $1 million	2		%	2		%	3		%	2		%	2		%	3		%
$1 million to $5 million	9		%	10		%	15		%	7		%	8		%	16		%
$5 million to $10 million	8		%	7		%	32		%	6		%	10		%	35		%
$10 million to $25 million	16		%	19		%	31		%	34		%	29		%	13		%
$25 million to $50 million	52		%	23		%	19		%	32		%	27		%	33		%
Greater than $50 million	13		%	39		%	—		%	19		%	24		%	—		%
Total	100		%	100		%	100		%	100		%	100		%	100		%
At December 31, 2023
Percent of Principal by Loan Size
Less than $1 million	2		%	2		%	3		%	2		%	2		%	3		%
$1 million to $5 million	10		%	9		%	18		%	8		%	9		%	18		%
$5 million to $10 million	8		%	6		%	30		%	6		%	11		%	29		%
$10 million to $25 million	17		%	22		%	30		%	37		%	21		%	15		%
$25 million to $50 million	51		%	22		%	19		%	29		%	30		%	35		%
Greater than $50 million	12		%	39		%	—		%	18		%	27		%	—		%
Total	100		%	100		%	100		%	100		%	100		%	100		%

54

At June 30, 2024, $247.5 million of principal of loans collateralized by office properties were criticized or classified.

At June 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 June 30, 2024:

	June 30, 2024
(dollars in thousands)	Total		One Year or Less (1)		Over One Year to Five Years		Over Five Years to Fifteen Years		Over Fifteen Years
Commercial	$	1,238,261	$	369,563	$	708,893	$	156,148	$	3,657
PPP loans	407		—		407		—		—
Income producing - commercial real estate (2)	4,217,525		1,671,591		2,223,824		322,110		—
Owner occupied - commercial real estate	1,263,714		221,318		489,611		341,336		211,449
Real estate mortgage - residential	61,338		13,434		37,861		472		9,571
Construction - commercial and residential	1,063,764		321,763		709,087		3,060		29,854
Construction - C&I (owner occupied)	99,526		27,729		3,564		9,563		58,670
Home equity	52,773		1,652		1,987		946		48,188
Other consumer	4,431		4,214		—		—		217
Total loans	$	8,001,739	$	2,631,264	$	4,175,234	$	833,635	$	361,606
Loans with:
Predetermined fixed interest rate	$	3,127,123	$	1,007,493	$	1,612,565	$	432,751	$	74,314
Floating or adjustable interest rate	4,874,616		1,623,771		2,562,669		400,884		287,292
Total loans	$	8,001,739	$	2,631,264	$	4,175,234	$	833,635	$	361,606

(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 $887.4 million at June 30, 2024 and are included within income producing - commercial real estate, had principal of $297.9 million, $574.1 million, $15.2 million, and $0.2 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 $126.4 million and $361.1 million of income producing CRE office loans as of June 30, 2024 were due to mature within three months and 18 months, respectively.

Allowance for Credit Losses

The ACL is an estimate based on many factors which reflect management’s assessment of the risk in the loan portfolio. Those factors include 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 and Bank. 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 six months ended June 30, 2024 and 2023.

The ACL for loans at June 30, 2024 at $106.3 million, reflected a $20.4 million increase from December 31, 2023 when it was $85.9 million, reflecting a provision for credit losses of $44.1 million and $23.7 million in net charge-offs during the six months ended June 30, 2024. Net charge-offs, on an annualized basis, represented 0.59% of average loans for the six months ended June 30, 2024, an increase from net charge-offs of $6.6 million during the six months ended June 30, 2023, which represented 0.17% of average loans, excluding loans held for sale, on an annualized basis. Net charge-offs during the six months ended June 30, 2024 included $20.1 million of charge offs on one CRE office lending relationship. At June 30, 2024, the ACL for loans represented 1.33% of total loans outstanding, as compared to 1.08% at December 31, 2023. The ACL represented 114% of nonperforming loans at June 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.

55

As part of its comprehensive loan review process, the Bank’s Risk Committee evaluates loans which are past due 30 days or more. The Committee makes an assessment of the conditions and circumstances surrounding delinquent and potential problem loans. The Bank’s loan policy requires that loans be placed on nonaccrual if they are 90 days past due or if their collection is deemed to be doubtful, unless they are well secured and in the process of collection. The Credit Administration department analyzes the status of development and construction projects, including sales activities and utilization of interest reserves in order to assess potential increased levels of risk which may require additional reserves.

The Company believes it has taken a prudent posture with respect to risk rating its loan portfolio. As of June 30, 2024 and December 31, 2023, loans rated special mention had an amortized cost of $307.9 million and $207.1 million, respectively, and loans rated substandard had an amortized cost of $403.3 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 construction loans, and commercial loans. The increases in substandard loans were primarily attributable to additions in CRE loans, particularly in owner occupied - commercial real estate loan and commercial construction loans. At June 30, 2024, 100% and 74% 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. 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.

Management, being aware of the loan growth experienced by the Bank and the risks facing CRE, is intent on maintaining strong portfolio management and a strong risk rating process. The Bank provides analysis of credit requests and the management of problem credits. The Bank has developed and implemented analytical procedures for evaluating credit requests, has refined the Company’s risk rating system and has adopted enhanced monitoring of the loan portfolio and the adequacy of the ACL, in particular on its CRE and construction loans (including those collateralized by office properties). These analyses include stress testing. Additionally, fair value assessments of loans acquired are included in our analytical procedures. 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 June 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 4.05% and 1.91%, respectively.

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

	Six Months Ended June 30,
(dollars in thousands)	2024			2023
Balance at beginning of period	$	85,940		$	74,444
Charge-offs:
Commercial	(2,587)			(1,360)
Income producing - commercial real estate	(21,329)			(5,306)
Construction - commercial and residential	(129)			(136)
Other consumer	(70)			(50)
Total charge-offs	(24,115)			(6,852)
Recoveries:
Commercial	166			232
Income producing - commercial real estate	185			—
Owner occupied - commercial real estate	47			8
Construction - commercial and residential	—			34
Other consumer	—			5
Total recoveries	398			279
Net charge-offs	(23,717)			(6,573)
Provision for credit losses - loans	44,078			10,158
Balance at end of period	$	106,301		$	78,029
Annualized ratio of net charge-offs during the period to average loans outstanding during the period	0.59		%	0.17		%

56

The following table reflects the allocation of the ACL at the dates indicated. The allocation of the allowance at June 30, 2024 includes ACL of $2.3 million against individually assessed loans of $98.1 million, as compared to ACL of $641 thousand 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.

	June 30, 2024						December 31, 2023
(dollars in thousands)	Amount		% of Total ACL		% of Total Loans		Amount		% of Total ACL		% of Total Loans
Commercial	$	21,011	20	%	15	%	$	17,824	21	%	18	%
Income producing - commercial real estate	53,251		50	%	53	%	40,050		47	%	51	%
Owner occupied - commercial real estate	15,641		14	%	16	%	14,333		16	%	15	%
Real estate mortgage - residential	750		1	%	1	%	861		1	%	1	%
Construction - commercial and residential	13,510		13	%	13	%	10,198		12	%	12	%
Construction - C&I (owner-occupied)	1,431		1	%	1	%	1,992		2	%	2	%
Home equity	677		1	%	1	%	657		1	%	1	%
Other consumer	30		—	%	—	%	25		—	%	—	%
Total allowance	$	106,301	100	%	100	%	$	85,940	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 $98.9 million at June 30, 2024 representing 0.88% of total assets, as compared to $66.6 million of nonperforming assets, or 0.57% of total assets, at December 31, 2023. The increase is primarily due to the increase in nonperforming loans discussed below.

The Company had no accruing loans 90 days or more past due at June 30, 2024 or December 31, 2023. Management prioritizes remaining attention 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 1.33% of total loans at June 30, 2024, is adequate to absorb expected credit losses within the loan portfolio at that date.

Total nonperforming loans had an amortized cost of $98.2 million at June 30, 2024, representing 1.23% 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 to non-accruing status following a partial charge-off on the combined balances in the six months ended June 30, 2024.

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. Reserves on individually assessed loans are determined by one of two methods: the fair value of collateral or the discounted cash flow. Fair value of collateral is used for loans determined to be collateral dependent, and the fair value represents the net realizable value of the collateral, adjusted for sales costs, commissions, senior liens, etc. Discounted cash flow is used on loans that are not collateral dependent where structural concessions have been made and continuing payments are expected. The continuing payments are discounted over the expected life at the loan’s original contract rate and include adjustments for risk of default.

57

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. 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. The ACL may be zero if the fair value of the collateral at the measurement date exceeds the amortized cost basis of the financial asset. 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. 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.

Commercial and consumer loans modified are closely monitored for delinquency as an early indicator of possible future default. If loans modified in a loan restructuring subsequently default, the Company evaluates the loan for possible further impairment. 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 six months ended June 30, 2024, the Bank modified 26 loans with a total amortized cost of $178.8 million at June 30, 2024 (2.2% of the loan portfolio). These loans received extended loan terms of between approximately one to 12 months.

Loans modified in the preceding twelve months totaled $251.6 million, of which approximately $3.4 million are loans 30-89 days past due and $66.4 million are on non-accrual 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. For example: (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 $773 thousand, comprising four foreclosed properties, at June 30, 2024 and $1.1 million, comprising two foreclosed properties, at December 31, 2023. OREO properties are carried at the lower of cost or fair value less estimated costs to sell.

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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 six months ended June 30, 2024 and one OREO property was sold during the three and six months ended June 30, 2023, generating proceeds of $656 thousand and $609 thousand, respectively. There were no sales of OREO property during the three months ended June 30, 2024.

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)	June 30, 2024			December 31, 2023
Nonaccrual Loans:
Commercial	$	1,951		$	2,049
Income producing - commercial real estate(1)	72,157			40,926
Owner occupied - commercial real estate	19,795			19,836
Real estate mortgage - residential	1,923			1,946
Construction - commercial and residential	2,062			525
Home equity	265			242
Total nonperforming loans	98,153			65,524
Other real estate owned	773			1,108
Total nonperforming assets	$	98,926		$	66,632
Coverage ratio, allowance for credit losses to total nonperforming loans	108		%	131		%
Ratio of nonperforming loans to total loans	1.23		%	0.82		%
Ratio of nonperforming assets to total assets	0.88		%	0.57		%

(1)Includes loans held for sale of $5 million that were on nonaccrual status at June 30, 2024.

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 June 30, 2024, there were $403.3 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.

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 has 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.

59

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

	June 30, 2024				December 31, 2023
	Balance		Percentage		Balance		Percentage
Noninterest-bearing demand	$	1,693,955	20	%	$	2,279,081	26	%
Interest-bearing transaction	1,123,980		14	%	997,448		11	%
Savings and money market	3,165,314		38	%	3,314,043		38	%
Time deposits	2,284,099		28	%	2,217,467		25	%
Total	$	8,267,348	100	%	$	8,808,039	100	%

For the six months ended June 30, 2024, total deposits decreased by $540.7 million as compared to December 31, 2023. The decrease was primarily attributable to a $585.1 million decrease in noninterest bearing demand deposits and a reduction in savings and money market accounts of $148.7 million, which was partially offset by a $126.5 million increase in interest bearing transaction 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.

No single depositor represented more than 10% of total deposits as of June 30, 2024. The ten largest depositors not associated with brokered pass-through relationships represented approximately 16% of total deposits in the aggregate as of June 30, 2024. 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 June 30, 2024 was $1.5 billion (17.6% of total deposits) as compared to $1.6 billion (17.7% of total deposits) at December 31, 2023. 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 $714.2 million and $786.5 million of IND brokered deposits as of June 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. 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 June 30, 2024, total brokered deposits were $3.9 billion, or 46.9% of total deposits, of which $1.5 billion were attributable to the CDARS and ICS two-way accounts. Total brokered deposits comprised $1.5 billion, $1.5 billion, and $865.0 million of time deposits, savings and money market accounts and interest-bearing transaction accounts, respectively, at June 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 June 30, 2024 and December 31, 2023, total deposits included estimated totals of $2.3 billion and $2.8 billion of uninsured deposits, which represented 27.5% 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.

60

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 $39.2 million at June 30, 2024 compared to $30.6 million at December 31, 2023. Customer repurchase agreements are not deposits and are not insured by the FDIC, but are collateralized by U.S. agency securities and/or U.S. 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 June 30, 2024 and December 31, 2023.

At June 30, 2024, the Company had $590.0 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 June 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 June 30, 2024 and December 31, 2023 comprised the Company's August 5, 2014 issuance of $70.0 million of subordinated notes, due September 1, 2024. The Company is considering various options to finance the upcoming maturity of the subordinated debt, and the Company may seek to issue new subordinated notes or other debt securities to replace those that are maturing, or fund the maturity through other means. Given prevailing interest rates, any new debt securities to refinance the subordinated notes are expected to have a higher interest rate than the subordinated notes.

Commitments and Contractual Obligations

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

(dollars in thousands)	June 30, 2024		December 31, 2023
Unfunded loan commitments	$	1,805,922	$	1,981,334
Unfunded lines of credit	96,650		98,614
Letters of credit	77,620		87,146
Total	$	1,980,192	$	2,167,094

Various commitments to extend credit are made in the normal course of banking business. Letters of credit are also issued for the benefit of customers. These commitments are subject to loan underwriting standards and geographic boundaries consistent with the Company’s loans outstanding.

Unfunded loan commitments are agreements whereby the Bank has made a commitment to lend to a customer as long as there is satisfaction of the terms or conditions established in the contract and the borrower has accepted the commitment in writing. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee before the commitment period is extended. In many instances, borrowers are required to meet performance milestones in order to draw on a commitment as is the case in construction loans, or to have a required level of collateral in order to draw on a commitment as is the case in asset based lending credit facilities. Collateral obtained varies and may include certificates of deposit, accounts receivable, inventory, property and equipment, residential and CRE. Since commitments may expire without being drawn, the total commitment amount does not necessarily represent future cash requirements.

Unfunded lines of credit are agreements to lend to a customer as long as there is no violation of the terms or conditions established in the contract. Lines of credit generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since lines of credit may expire without being drawn, the total unfunded line of credit amount does not necessarily represent future cash requirements.

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Letters of credit include standby and commercial letters of credit. Standby letters of credit are conditional commitments issued by the Bank to guarantee the performance by the Bank's customer to a third party. Standby letters of credit generally become payable upon the failure of the customer to perform according to the terms of the underlying contract with the third party. Standby letters of credit are generally not drawn. Commercial letters of credit are issued specifically to facilitate commerce and typically result in the commitment being drawn when the underlying transaction is consummated between the customer and a third party. The contractual amount of these letters of credit represents the maximum potential future payments guaranteed by the Bank. The Bank has recourse against the customer for any amount it is required to pay to a third party under a letter of credit, and holds cash and or other collateral on those standby letters of credit for which collateral is deemed necessary.

Liquidity Management

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 59% 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 June 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 are 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 June 30, 2024:

(dollars in thousands, except amount in the footnotes)	Secondary Sources of Liquidity in Use		Secondary Sources of Liquidity Remaining Available
June 30, 2024:
Unsecured brokered deposits (1)	$	886,325	$	1,914,684
FHLB secured borrowings	590,000		1,318,817
FRB:
BTFP secured borrowings	1,000,000		—
Discount window secured borrowings	—		1,935,019
Federal funds lines	—		145,000
Customer repurchase agreements	39,220		—
Raymond James repurchase agreement	—		17,893
Unpledged assets: (2)
Interest-bearing deposits with banks	N/A		35,355
Investment securities	N/A		151,249
Total	$	2,515,545	$	5,518,017

(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.

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The funding mix has continued to change throughout the six months ended June 30, 2024. Deposits were $8.3 billion and $8.8 billion at June 30, 2024 and December 31, 2023, respectively. The decrease in deposits was primarily attributable to a $585.1 million decrease in noninterest bearing demand deposits and a reduction in savings and money market accounts of $148.7 million, partially offset by a $126.5 million increase in interest bearing transaction deposits. These funding mix 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. Borrowings at quarter-end were $1.7 billion and $1.4 billion at June 30, 2024 and December 31, 2023, respectively. The increase in borrowings was attributable to net fundings on the Company's secured borrowings.

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 June 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 $886.3 million outstanding at June 30, 2024. The Bank also has custodial agreements with various broker-dealers through IntraFi's IND program which provided $714.2 million of brokered deposits at June 30, 2024.

At June 30, 2024, the Bank was eligible to draw on advances from the FHLB up to $1.9 billion based on assets pledged as collateral to the FHLB, against which the Bank borrowed $590.0 million as of June 30, 2024. The Bank had no FHLB borrowings outstanding at December 31, 2023. The Bank posted additional collateral to the FHLB during the six months ended June 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 June 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 $1.9 billion, is collateralized with specific assets identified to the Federal Reserve. During the second quarter, additional collateral in the form of acceptable loans was pledged to the Discount Window increasing available contingent capacity. 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 June 30, 2024 was $3.4 billion, which consists of $1.3 billion and $1.9 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 $17.9 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 $151.2 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. 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.

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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. 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 mix of sources used in the second quarter of 2024 negatively impacted our net interest margin and earnings, as is expected in an economic environment with continued elevated rates. 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. However, 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. Most of our noninterest bearing deposits are operating deposits or compensating balances that are held in connection with lending relationships. The potential outflow of such deposits is a risk unless we pay a more competitive rate of interest on them, which could significantly and negatively impact the Bank’s interest expense and net interest margin, as the transfer of some noninterest-bearing deposits to interest-bearing deposits did in 2023. Over the long-term, an adjustment in assets and change in business emphasis could compensate for a potential loss of deposits. The Bank also maintains a marketable investment portfolio to provide flexibility in the event of significant liquidity needs. The Asset Liability Committee ("ALCO") has adopted policy guidelines, which emphasize the importance of core deposits, adequate asset liquidity and a contingency funding plan.

The Company believes it maintains sufficient primary and secondary sources of liquidity to fund its operations. During the first six months ended June 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 June 30, 2024 were $5.5 billion, which include the FHLB, other insured brokered deposit sweep programs, unpledged securities, Fed funds lines, and the FRB Discount Window. At June 30, 2024, the Company held total securities available to be pledged with an estimated fair value of $151.2 million. At June 30, 2024, under the Bank’s liquidity formula, it had $6.6 billion of primary and secondary liquidity sources. Management believes the amount is adequate to meet current and projected funding needs.

Capital Resources and Adequacy

The assessment of capital adequacy depends on a number of factors such as asset quality and mix, liquidity, earnings performance, changing competitive conditions and economic forces, stress testing, regulatory measures and policy, as well as the overall level of growth and complexity of the balance sheet. The adequacy of the Company's current and future capital needs is monitored by management on an ongoing basis. Management seeks to maintain a capital structure that will assure an adequate level of capital to support anticipated asset growth and to absorb potential losses.

The federal banking regulators have issued guidance for those institutions which are deemed to have concentrations in commercial real estate lending. Pursuant to the supervisory criteria contained in the guidance for identifying institutions with a potential commercial real estate concentration risk, institutions which have (1) 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. 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. The Company, like many community banks, has commercial real estate loans, and the Company has experienced growth in its commercial real estate portfolio in recent years. Although growth in that segment over the past 36 months at 21% 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 June 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 121% 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.

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. Nevertheless, as our commercial real estate concentration fluctuates each quarter, we may be required to maintain higher levels of capital as a result of our commercial real

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estate concentrations, which could require us to obtain additional capital, and may adversely affect shareholder returns. The Company seeks to manage the risks relating to commercial real estate and its capital adequacy through the development and implementation of its Capital Policy and Capital Plan, the preparation of pro-forma projections including stress testing and the development of internal minimum targets for regulatory capital ratios that are subject to approval by the Board and in excess of well capitalized ratios.

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 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 June 30, 2024, 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: Tier 1 risk-based capital ratio, Total risk-based capital ratio, the Leverage ratio and the CET1 ratio. 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. Risk-based capital ratios are calculated with reference to risk-weighted assets, which are prescribed by regulation. The measure of Tier 1 capital to average assets for the prior quarter is often referred to as the leverage ratio. 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. 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. banks. 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%; a minimum ratio of Tier 1 capital to risk-weighted assets of 6.0%, or 8.5% with the fully phased in capital conservation buffer; a minimum total capital to risk-weighted assets ratio of 10.5% with the fully phased-in capital conservation buffer; and a minimum leverage ratio of 4.0%. The Basel III Rules also increased risk weights for certain assets and off-balance-sheet exposures. At June 30, 2024, the Company and the Bank meet all these requirements.

The Company announced a regular quarterly cash dividend on June 28, 2024 of $0.45 per share to shareholders of record on July 20, 2024 and it was paid on July 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. 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.

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The capital amounts and ratios for the Company and Bank as of June 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
June 30, 2024
CET1 capital (to risk weighted assets)	$	1,332,436	13.92	%	$	1,327,510	13.95	%	7.00	%	6.50	%
Total capital (to risk weighted assets)	$	1,442,316	15.07	%	$	1,437,389	15.11	%	10.50	%	10.00	%
Tier 1 capital (to risk weighted assets)	$	1,332,436	13.92	%	$	1,327,510	13.95	%	8.50	%	8.00	%
Tier 1 capital (to average assets)	$	1,332,436	10.58	%	$	1,327,510	10.59	%	4.00	%	5.00	%
December 31, 2023
CET1 capital (to risk weighted assets)	$	1,335,967	13.90	%	$	1,330,001	13.92	%	7.00	%	6.50	%
Total capital (to risk weighted assets)	$	1,421,347	14.79	%	1,415,381		14.81	%	10.50	%	10.00	%
Tier 1 capital (to risk weighted assets)	$	1,335,967	13.90	%	1,330,001		13.92	%	8.50	%	8.00	%
Tier 1 capital (to average assets)	$	1,335,967	10.73	%	1,330,001		10.72	%	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.

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. 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 six months ended June 30, 2024, the Company was able to produce a net interest margin of 2.42% as compared to 2.63% during the same period in 2023 and continues to manage its overall interest rate risk position.

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 increased during the first six months of 2024. The re-pricing duration of the loan portfolio was 11 and 12 months at June 30, 2024 and December 31, 2023, respectively, with fixed rate loans amounting to 39% of total loans at June 30, 2024 and 38% at December 31, 2023. Variable and adjustable rate loans comprised 61% of total loans at June 30, 2024 and 62% at December 31, 2023. 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.

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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 June 30, 2024, the amortized cost less allowance of the investment portfolio decreased by $116.6 million, or 4.3%, 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 June 30, 2024 and December 31, 2023. The portion of the portfolio invested in MBS was 61% at June 30, 2024 and December 31, 2023. The portion of the portfolio invested in U.S. agency investments was 27% at June 30, 2024 and December 31, 2023. Corporate bonds made up 5% of total investments at June 30, 2024 and December 31, 2023. U.S. treasury bonds were 2% of total investments at June 30, 2024 and December 31, 2023. The duration of the investment portfolio decreased to 4.2 years at June 30, 2024 from 4.4 years at December 31, 2023.

At June 30, 2024, $80.3 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.

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. The fair value of RPAs is calculated by determining the total expected asset or liability exposure of the derivatives to the borrowers and applying the borrowers’ credit spread to that exposure. 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 June 30, 2024. The changes in fair value for these contracts are recognized directly in earnings.

The duration of the total deposit portfolio decreased as rates rose, measuring 25 months at June 30, 2024 and 28 months at December 31, 2023. The Company experienced a total deposit decrease of $540.7 million for the six months ended June 30, 2024 as compared to a total loan increase of $33.0 million for the same period. The funding mix has continued to change in the six months ended June 30, 2024. The decrease in deposits was primarily attributable to a $585.1 million decrease in noninterest bearing demand deposits and a reduction in savings and money market accounts of $148.7 million, partially offset by a $193.2 million increase in interest bearing transaction deposits. These funding mix 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. During the six months ended June 30, 2024, the Company’s cost of interest bearing deposits increased by 22 basis points across its interest-bearing deposits, which comprise 79.5% of its total deposits at June 30, 2024.

The net unrealized loss before income tax on the investment securities available-for-sale portfolio was $163.8 million and $162.0 million at June 30, 2024 and December 31, 2023, respectively. At June 30, 2024, the net unrealized loss position represented 10.34% 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. Through its modeling, the Company makes certain estimates that may vary from actual results. 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 stabilized as the last short-term interest rate increase from the Federal Reserve was instituted in July 2023. While yields on interest-earning assets have increased, 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.

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Our rate risk modeling showed very modest net interest margin expansion in an increasing rate environment; however, the model's prediction 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 model also assumes a stable interest rate environment after the programmed rate change, allowing assets and liabilities to reprice at their schedule in a stable 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; however, they are also expected to delay the impact of increases to market rates on interest income until such floors have been exceeded, though this is not relevant for the current rate environment with most variable rate loans well above their floor rate. At June 30, 2024, the Company had a portfolio of $4.9 billion of variable and adjustable rate loans that were subject to interest rate floors with a weighted average rate of 7.83%, which was a 1 bps increase from December 31, 2023. At June 30, 2024, only $187.8 million of loans held by the Company were earning interest at their floor rate, and the majority of those are expected to reset at rates higher than their floor at their next rate reset date.

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. 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, 2023, 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 June 30, 2024. 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 June 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. 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.

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 June 30, 2024 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, and 300 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 June 30, 2024, the repricing duration of the (a) investment portfolio was 4.2 years, (b) loan portfolio was 0.9 years, (c) interest bearing deposit portfolio was 1.2 years, and (d) the borrowed funds portfolio was 0.3 years.

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The following table reflects the result of simulation analysis on the June 30, 2024 asset and liabilities 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 equity
+	400	0.1%	0.9%	(7.9)%
+	300	0.2%	0.9%	(5.7)%
+	200	0.2%	0.8%	(3.4)%
+	100	0.2%	0.7%	(1.4)%
	—	—	—	—
-	100	1.0%	2.4%	1.0%
-	200	2.4%	5.7%	0.4%
-	300	3.9%	9.4%	(2.7)%

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 improvement in net interest income and net income of 1% and 2.4%, respectively, given a 100 basis point decrease in market interest rates at June 30, 2024 compares to declines of 2.7% and 5.3%, 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 six months of 2024 compared to the first six 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 June 30, 2024 are not believed to be excessive.

Certain shortcomings are inherent in the method of analysis presented in the foregoing table. For example, although certain assets and liabilities may have similar maturities or repricing periods, they may react in different degrees to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. Additionally, certain assets, such as adjustable-rate mortgage loans, have features that limit changes in interest rates on a short-term basis and over the life of the loan. Further, in the event of a change in interest rates, prepayment and early withdrawal levels could deviate significantly from those assumed in calculating the tables. Finally, the ability of many borrowers to service their debt may decrease in the event of a significant interest rate increase.

While an instantaneous parallel shift in interest rates was used in this analysis to provide an estimate of exposure under these scenarios, we believe that a non-immediate parallel shifts in interest rates would have a more modest impact. Further, the earnings simulation model does not take into account factors such as future balance sheet growth, changes in product mix, changes in yield curve relationships, the various rate indexes do not move in parallel (e.g. SOFR, Fed Funds), hedging activities we might take and changing product spreads that could mitigate any potential beneficial or adverse impact of changes in interest rates.

Another key factor to consider is the behavior of our deposit portfolio in the baseline forecast and in alternate interest rate scenarios set out in the table above is a key assumption in our projected estimates of net interest income. The projected impact on net interest income in the table above assumes no change in deposit portfolio size or mix from the baseline forecast in alternative rate environments. In higher rate scenarios, any customer activity resulting in the replacement of low-cost or noninterest-bearing deposits with higher-yielding deposits or market-based funding would reduce the assumed benefit of those deposits. The projected impact on net interest income in the table above also assumes a "through-the-cycle" non-maturity deposit beta which may not be an accurate predictor of actual deposit rate changes realized in scenarios of smaller and/or non-parallel interest rate movements.

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Each of the above analyses may not, on its own, be an accurate indicator of how our net interest income will be affected by changes in interest rates. Income associated with interest-earning assets and costs associated with interest-bearing liabilities may not be affected uniformly by changes in interest rates. In addition, the magnitude and duration of changes in interest rates may have a significant impact on net interest income. For example, although certain assets and liabilities may have similar maturities or periods of repricing, they may react to different degrees to changes in market interest rates. Interest rates on certain types of assets and liabilities fluctuate in advance of changes in general market rates, while interest rates on other types may lag behind changes in general market rates. In addition, certain assets, such as adjustable-rate mortgage loans, have features (generally referred to as interest rate caps and floors) that limit changes in interest rates. Prepayment and early withdrawal levels also could deviate significantly from those assumed in calculating the maturity of certain instruments. The ability of many borrowers to service their debts also may decrease during periods of rising interest rates. ALCO reviews each of the above interest rate sensitivity analyses along with several different interest rate scenarios as part of its responsibility to provide a satisfactory, consistent level of profitability within the framework of established liquidity, loan, investment, borrowing and capital policies.

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," "efficiency ratio," "operating efficiency ratio," "operating net income," "operating annualized return on average tangible common equity," "operating noninterest expense," "operating 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.

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. 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 2024. The operating noninterest expense allows investors to better compare the Company's performance against historical periods.

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, 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.

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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, 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.

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. Management compensates for these limitations by providing detailed reconciliations between GAAP information and the non-GAAP financial measures.

The following tables reconcile the GAAP financial measures to the associated non-GAAP financial measures:

(dollars in thousands except per share data)	June 30, 2024			December 31, 2023
Common shareholders' equity	$	1,169,459		$	1,274,283
Less: Intangible assets	(129)			(104,925)
Tangible common equity	$	1,169,330		$	1,169,358
Book value per common share	$	38.75		$	42.58
Less: Intangible book value per common share	(0.01)			(3.50)
Tangible book value per common share	$	38.74		$	39.08
Total assets	$	11,302,023		$	11,664,538
Less: Intangible assets	(129)			(104,925)
Tangible assets	$	11,301,894		$	11,559,613
Tangible common equity ratio	10.35		%	10.12		%

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	Three Months Ended June 30,						Six Months Ended June 30,
(dollars in thousands)	2024			2023			2024			2023
Average common shareholders' equity	$	1,263,627		$	1,245,647		$	1,276,641		$	1,243,325
Less: Average intangible assets	(99,827)			(104,224)			(102,272)			(104,227)
Average tangible common equity	$	1,163,800		$	1,141,423		$	1,174,369		$	1,139,098
Net (loss) income available to common shareholders	$	(83,802)		$	28,692		$	(84,140)		$	52,926
Average tangible common equity	1,163,800			1,141,423			1,174,369			1,139,098
Annualized return on average tangible common equity	(28.96)		%	10.08		%	(14.41)		%	9.37		%
Net (loss) income	$	(83,802)		$	28,692		$	(84,140)		$	52,926
Add back of goodwill impairment	104,168			—			104,168			—
Operating net income (Non-GAAP)	$	20,366		$	28,692		$	20,028		$	52,926
Operating annualized return on average tangible common equity (Non-GAAP)	7.04		%	10.08		%	3.43		%	9.37		%
	Three Months Ended June 30,						Six Months Ended June 30,
	2024			2023			2024			2023
Net interest income	$	71,353		$	71,811		$	146,051		$	146,835
Noninterest income	5,332			8,595			8,921			12,295
Operating revenue	76,685			80,406			154,972			159,130
Noninterest expense	146,491			37,978			186,488			78,562
Exclude goodwill impairment	(104,168)			—			(104,168)			—
Operating noninterest expense (Non-GAAP)	42,323			37,978			82,320			78,562
Efficiency ratio	191.03		%	47.23		%	120.34		%	49.37		%
Operating efficiency ratio (Non-GAAP)	55.19		%	47.23		%	53.12		%	49.37		%
Net interest income	$	71,353		$	71,811		$	146,051		$	146,835
Noninterest income	5,332			8,595			8,921			12,295
Operating revenue	76,685			80,406			154,972			159,130
Noninterest expense	146,491			37,978			186,488			78,562
Pre-provision net revenue	(69,806)			42,428			(31,516)			80,568
Add back of goodwill impairment	104,168			—			104,168			—
Operating pre-provision net revenue (Non-GAAP)	$	34,362		$	42,428		$	72,652		$	80,568

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. 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 by the weighted average shares outstanding (diluted) for the three and six months ended June 30, 2024. 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.

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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 June 30,				Six Months Ended June 30,
(dollars in thousands)	2024		2023		2024		2023
Net (loss) income	$	(83,802)	$	28,692	$	(84,140)	$	52,926
Add back of goodwill impairment	104,168		—		104,168		—
Operating net income (Non-GAAP)	$	20,366	$	28,692	$	20,028	$	52,926
(Loss) earnings per share (diluted) (1)	$	(2.78)	$	0.94	$	(2.79)	$	1.72
Add back of goodwill impairment per share (diluted)	3.45		—		3.46		—
Operating earnings per share (diluted) (Non-GAAP)	$	0.67	$	0.94	$	0.67	$	1.72

(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.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Please refer to Item 2 of this report, "Management's Discussion and Analysis of Financial Condition and Results of Operations," under the caption "Asset/Liability Management and Quantitative and Qualitative Disclosure about Market Risk."

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures. The Company's management, under the supervision and with the participation of the Chief Executive Officer, Executive Chairman and Chief Financial Officer, evaluated, as of the last day of the period covered by this report, the effectiveness of the design and operation of the Company's disclosure controls and procedures, as defined in Rule 13a-15(e) under the Exchange Act. Based on that evaluation, the Chief Executive Officer, Executive Chairman and the Chief Financial Officer concluded that the Company's disclosure controls and procedures as of June 30, 2024 were effective to provide reasonable assurance that information required to be disclosed in the reports we file and submit under the Exchange Act is recorded, processed, summarized and reported as and when required and that it is accumulated and communicated to our management, including the Chief Executive Officer, Executive Chairman and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in internal control over financial reporting. There were no changes in our internal control over financial reporting as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) that occurred during the second quarter of 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Refer to "Note 13. Legal Contingencies" of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.

ITEM 1A. RISK FACTORS

We are subject to various risks and uncertainties, including those described in Part I, Item 1A, "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2023, which could adversely affect our business, financial performance and results of operations. There have been no material changes to our risk factors from those risks included in our Annual Report on Form 10-K.

ITEM 2. - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS

31.1	Certification of Susan G. Riel
31.2	Certification of Eric R. Newell
31.3	Certification of Norman R. Pozez
32.1	Certification of Susan G. Riel
32.2	Certification of Eric R. Newell
32.3	Certification of Norman R. Pozez
101	Interactive data files pursuant to Rule 405 of Regulation S-T:
	(i)    Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023
	(ii)   Consolidated Statement of Operations for the three and six months ended June 30, 2024 and 2023
	(iii)  Consolidated Statement of Comprehensive (Loss) Income for the three and six months ended June 30, 2024 and 2023
	(iv)  Consolidated Statement of Changes in Shareholders' Equity for the three and six months ended June 30, 2024 and 2023
	(v)   Consolidated Statement of Cash Flows for the six months ended June 30, 2024 and 2023
	(vi)  Notes to the Consolidated Financial Statements
104	The cover page of this Quarterly Report on Form 10-Q, formatted in Inline XBRL

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		EAGLE BANCORP, INC.
Date:	August 8, 2024	By:	/s/ Susan G. Riel
			Susan G. Riel, President and Chief Executive Officer of the Company
Date:	August 8, 2024	By:	/s/ Eric R. Newell
			Eric R. Newell, Executive Vice President and Chief Financial Officer of the Company

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