EGBN 10-K & 10-Q changes, risk factors and insider trading

Our business and results of operations may be adversely affected by the financial markets, fiscal, monetary, and regulatory policies and economic conditions. These factors could have a material adverse effect on our earnings, net interest margin, financial condition, rate of growth, liquidity levels,liquidity, and stock price.

General economic, political, social and health conditions affect financial markets, and therefore, our business. Fiscal and monetary policies have a direct and indirect impact on the level and volatility of interest rates, liquiditymarket of financial markets,liquidity, the availability and cost of capital,capital and credit, and market conditions of financing. For example, recently,in recent years, interest rates have beenvaried elevatedsubstantially due to central banks’ effortsresponses to managechanging inflationmacroeconomic through monetary policy.conditions.

We may also experience continued and long-term negative impacts to our commercial credit exposure and an increase in credit losses within those industries, such as commercial real estate, that may be impacted by changes in consumer preferences or office occupancy rates. A large portion of our loan portfolio is related to real estate, with 83%80% consisting of commercial real estate and real estate construction secured by commercial real estate. As a result of actual or expected credit losses, we may downgrade loans, increase our allowance for loancredit losses and write down or charge off credit relationships,loans, any of which would negatively impact our results of operations. In addition, market upheavalsconditions are likely to continue to affect the value of real estate and commercial assets. As a result, in the event of foreclosure, it is possible that we will be unable to sell the foreclosed property at a price that will allow us to recoup a significant portion of the delinquent loan.

A significant number of our commercial real estate loans are secured by office properties. TheAlthough there has been some momentum on return to office, the impact of the COVID-19 pandemic is still being felt due to the significant changes in working arrangements that have impacted and could continue to impact the performance of some of the office properties within our commercial real estate portfolio. Hybrid work arrangements, flexible work schedules, open workplaces and teleconferencing have become increasingly common. These practices enable businesses to reduce their office space requirements. This, in turn, has resulted in a supply and demand imbalance especially in office properties. A continuation of the movement towards these practices over time could continue to further erode the overall demand for office space and, in turn, place continued downward pressure on occupancy, rental rates and property valuations, each of which could have an adverse effect on our borrowers, the office properties securing their loans, and our ability to collect the amounts owed to us.

Our calculation of our ACL relies on estimates and assumptions, resulting in the risk that our calculated ACL may not cover actual future credit losses, which could result in an adverse effect on our business, financial conditionbusiness and results of operations.

We use a credit reserving methodology known as the CECL methodology. The provision for credit losses represents management’s estimate of expected credit losses on our portfolio and is recorded in the ACL on our loan portfolio. Management utilizes a variety of inputs in the calculation of its estimate, including 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 our internal loan processes. OurHistorical loss data we use offrom a third-party service provider provided historical loss data in the calculation of our CECL provision may not approximate our own historical loss data.experience.

Additionally, the conditioncredit quality of our loan portfolio’sportfolio credit quality is factoredfactors into the calculation of our CECL estimate. Our ability to accurately forecast and react to future losses may be impaired by significant uncertainties which could result in loan losses and other exposures which couldthat exceed our allowance. Furthermore, ifIf the models, estimates and assumptions we use to establish reserves or the judgments we make in extending credit to our borrowers prove inaccurate in predicting future events, the resultwe may also beexperience losses in excess of our CECL provision. As economic conditions change, we may have to increase our allowance, which could adversely affect our results of operations, earningsoperations and financial condition.

We are subject to operational risks in connection with our employees and our technology that may adversely impact our business.us.

RiskOperational to our operationsrisk is inherent in our business. We rely on business processes and branch activity that largely depend on people and technology, including access to information technology systems as well as information, applications, payment systems and other services provided by third parties. Operational risks that may have an adverse effect on our operations, include (i) risks related to our work productivity; (ii) increased spending on our business continuity efforts; (iii) increased strain on certain risk management practices, including, but not limited to, the effectiveness and accuracy of our models, given the potential lack of data inputs and comparable precedent; (iv) risks related to the effectiveness of our anti-money laundering and other compliance programs; (v) increased cybersecurity risk due to, among other things, the increased connectivity of third parties and electronic devices to our systems, hybrid work arrangements and new technologies, such as artificial intelligence; (vi) risks related to our efforts to provideproviding banking services through digital channels; and (vii) operational disruptions at our third-party service providers. Increased cyber risks in this context may include greater phishing, malware and other cybersecurity attacks, vulnerability to disruptions of our information technology infrastructure and telecommunications systems for remote operations, increased risk of unauthorized dissemination of confidential information, limited ability to restore the systems in the event of a systems failure or interruption, greater risk of a security breach resulting in destruction or misuse of sensitive, confidential, personal or proprietary information and potential impairment of our ability to perform critical functions, including wiring funds, all of which could expose us to risks of data or financial loss, litigationlitigation, reputational damage and liability and could seriously disrupt our operations and the operations of any impacted customers.

Timely access to liquidity is essential to our business, and being able to meet obligations as they come due and pay deposits when they are withdrawn is critical to ongoing operations. If we are unable to meet our payment obligations on a daily basis, we may be subject to being placed into receivership, regardless of our capital levels. Our primary sources of liquidity consist of cash and cash balances due from correspondent banks, excess reserves at the Federal Reserve, loan repayments, federal funds soldrepayments and other short-term investments, maturities and monetization of investment securities, cash provided by operating activities and new core deposits into the Bank. Our ability to obtain or liquidate these primary sources of liquidity may be impacted by adverse economic conditions resulting from dynamic, complex, and other foreseen and unforeseen inter-related factors and events in the economic environment. If we were to rely on sales proceeds from the sale of investment securities within our portfolio in order to satisfy our obligations, we may be adversely impacted by our ability to transact and settle such sales. Sales of investment securities in an unrealized loss position would negatively affect our earnings and regulatory capital. In addition, in order to monetize our “"held-to-maturity”" securities, we expect to rely on pledging those securities for secured funding, and our liquidity may be impaired if we are unable to timely pledge those or any other securities due to a lack of available funding, operational impediments or otherwise. Our industry is susceptible to the negative impact of limited access to short-term and/or long-term sources of funds, which could result in a liquidity shortfall and/or impact our liquidity coverage ratio andthat could have an adverse effect on our operations, financial condition and earnings.

Our liquidity could be adversely affected by any inability to access the debt or equity capital markets, liquidity or volatility in those capital markets, the decrease in value of eligible collateral or increased collateral requirements (including as a result of credit concerns for short-term borrowing), changes to our relationships with our funding providers based on real or perceived changes in our risk profile, prolonged federal government shutdowns or changes in regulations. Additionally, our liquidity may be negatively impacted by the unwillingness or inability of the Federal Reserve to actextend ascredit lenderthrough ofthe lastdiscount resort.window.

Our ability to raise additional financing depends on conditions in the capital markets, economic conditions and a number of other factors, including investor perceptions regarding the banking industry, market conditions and governmental activities and on our financial condition and performance. Accordingly, weWe may be unable to raise additional financing if needed or on acceptable terms.

We compete with banks and other financial services companies for deposits. If our competitors raise the rates they pay on deposits our funding costs may increase, either because we raise our rates to avoid losing deposits or because we lose deposits, and must rely on more expensive sources of funding. Checking and savings account balances and other forms of customer deposits may decrease when customers perceive other investment opportunities, such as stocks, bonds, or money market mutual funds, as providing a better risk/return trade-off. When customers move money out of bank deposits and into other investments, we may lose a relatively low-cost source of funds, increasing our funding costs and negatively affecting our business, liquidity, funding mix, results of operations or financial condition. Adverse changes in the real estate market in our market area could also have an adverse effect on our cost of funds and net interest margin, as we have a significant amount of noninterest bearingnoninterest-bearing deposits related to real estate sales and development.

During 2023 and 2024, as a result of increasing interest rates, we experienced a reduction in noninterest bearing deposits and increase in interest-bearing deposits, which increased our interest expense and had a negative impact on our results of operations. Such activity, if it were to occur again in the future, may have a further negative impact on our financial condition and our results of operations. Brokered deposits or other sources of financing, such as FHLB borrowings and repurchase agreements have historically been, and may in the future be, available only at higher financing costs. Generally, these alternative sources of financing may not be as stable as other types of deposits, or may be associated with higher levels of risk. An inability to maintain or replace customer and brokered deposits as they mature could negatively affect our liquidity, which could significantly reduce our future growth or materially adversely affect our business and our results of operations. If brokered deposits become more difficult to access, we may have to seek alternative funding sources, including accessing borrowings or selling loans or investment securities, in order to continue to fund our growth. There can be no assurance that brokered deposits will be available, or if available, sufficient to support our growth. The migration from one financing source to another financing source may negatively impact our ability to execute investment transactions.business. The lack of availability of sufficient brokered deposits may have a material adverse effect on our business, financial condition and results of operations.

AtAs of December 31, 2024,2025, we had approximately $2.2$2.3 billion of deposits, or 24%25% of our total deposits, in excess of the maximum FDIC insurance coverage limits. Deposits make up a significant source of financing for our investment strategyoperations and fundinginvestment for our operations.strategy. Customers who have uninsured deposits with us could present a heightened risk of withdrawal. Additionally, clients could elect to use other non-deposit funding products, such as repurchase agreements, that may require us to pay higher interest and to provide securities as collateral for our repurchase obligation. If a significant portion of our deposits were withdrawn, as happened in 2023, and could happen again, we may need to rely more heavily on more expensive borrowings and other sources of funding to fund our business and meet withdrawal demands, adversely affecting our net interest margin. The occurrence of any of these events could materially and adversely affect our business, liquidity, funding mix, results of operations or financial condition.

If we are unable to continue funding our assets through customer deposits or access capital markets on favorable terms or if we suffer an increase in our borrowing costs or otherwise fail to manage our liquidity effectively, our liquidity, net interest margin, financial results and condition may be materially adversely affected. In order to maintain appropriate levels of liquidity, we may need to, or be required to raise additional capital through the issuance of common stock, which could dilute the ownership of existing stockholders, or reduce or even eliminate our common stock dividend to preserve capitalcapital. orFor example, the quarterly cash dividend amount was reduced to raise$0.01 additionalin capital.the fourth quarter of 2025 to preserve capital as the Company addresses asset quality matters.

Our inability to comply with capital and other regulatory requirements would have an adverse impact on our business, financial condition and results of operations.operations Thisand mayour result in an inabilityability to providereturn returnscapital to our shareholders.

The banking industry is highly regulated and supervised under federal and state laws and regulations that are intended primarily for the protection of depositors, customers, the public, the banking industry as a whole or the FDIC deposit insurance fund (“DIF”"DIF."). The Company and Bank are subject to regulation and supervision by the Federal Reserve and the FDIC, as well as our state regulator. We are subject to U.S. regulatory capital rules, and banking regulators have broad authority to determine whether we are operating in a safe and sound manner, including with respect to liquidity risk management and asset quality. We may need to raise additional financing in the future to provide sufficient funding to meet regulatory requirements, supervisory expectations or business needs. In conjunction with any changes to our capital, weWe must meet certain regulatory capital requirements and maintain sufficient liquidity, including to maintain our status as a well-capitalized institution. Additionally, regulatory capital requirements could increase from current levels, which could require us to raise additional capital or change the size or composition of our balance sheet. If we fail to maintain capital to meet regulatory requirements, our regulators may place restrictions on our activities or impose penalties, which would adversely affect our liquidity, business, financial condition and results of operations. In addition, the need to meet supervisory expectations regarding capital planning, asset quality and liquidity risk management, among other areas, exposes us to risks relating to ratings downgrades, ongoing heightened supervisory scrutiny, expenses associated with remediation activities and enforcement actions.

Our ability to fund our operations, to continue growinggrow and to return capital to our shareholders depends in part on our ability to maintain regulatory capital levels above minimum requirements plus buffers. If earnings do not meet our current estimates, if we incur unanticipated losses or expenses, if we grow faster than expected or if our capital position and capital planning do not meet supervisory expectations, we may need to obtain additional capital sooner than expected or we may be required to reduce our level of assets or reduce or suspend dividends or stock repurchases (if restarted) or refrain from pursuing growth opportunities we may otherwise consider attractive. Under those circumstances net income and our growth prospects may be adversely affected.

Our investment securities portfolio is classified as either “"available-for-sale”" securities, which are marked to market on a recurring basis and recorded at fair value with unrealized gains or losses reported in accumulated other comprehensive income (loss), or “"held-to-maturity”" securities, which are recorded at amortized cost less any associated ACL. In pricing the AFS securities portfolio, aA variety of factors beyond our control may significantly influence the fair values of theseAFS securities. These factors include, but are not limited to, market conditions, instability in the credit markets, rating agency downgrades of the securities, lack of market pricing of the securities, defaults of the issuers of the securities and issuer impairments. Conditions within the market or with the security may result in unrealized losses that may have a negative impact on our financial condition. If such losses were realized in a sales transaction,transaction of AFS securities, that may have a negative impact on our results of operations and our regulatory capital ratios.

Our investment securities portfolio as a whole is exposed to credit risk associated with rating agency downgrades and defaults or impairments of the issuers of those securities. We measure expected credit losses on our investment securities portfolio through our CECL estimate. Increases to the provision for credit losses would have a negative impact on our results of operations and regulatory capital ratios. Additionally, an insufficient CECL provision may result in additional losses that would also have an adverse impact on our results of operations. The investment securities portfolio’s performance, including the existence of unrealized and unrecognized losses in the portfolio, also may create reputationalother riskrisks for us, particularly in conjunction with the conditions of the banking industry generally, that could result in deposit outflows or reduced access to funding, or negatively impact our ability to attract and retain prospective customers.

Reputation risk, or the riskRisk to our business, liquidity, funding mix, earnings and financial capitalcondition from negative public opinion, adverse publicity or negative information is inherent in our business and has increased substantially due to the instant access and instantaneous transmission and communication of information, which may include misinformation, including regarding actual or alleged conduct related to any number of activities or circumstances by the Bank, our directors, our officers, our employees and/or third parties. Our reputation may be harmed by our actual or perceived practices and disclosures and those of our customers and third parties. The speed and pervasiveness with which information can be disseminated through digital channels, in particular social media, could magnify risks relating to negative publicity.

RisksOur relatedability to attract and retain customers is highly dependent upon the perceptions of current and prospective borrowers and deposit holders and other external perceptions of our products, services, trustworthiness, business practices, workplace culture, compliance practices or our financial health. Negative and adverse perceptions regarding our reputation and the banking industry’s reputation havecould also increased duelead to increased volatilitydifficulties in the business environmentgenerating and challengingmaintaining economic conditions,customers as awell resultas ofin fiscalfinancing their needs, and monetarydifficulties policies,maintaining bankingappropriate industryliquidity stresseslevels and suddenfunding events whether within our control or not.requirements. For example, in March 2023, SVB and Signature Bank, which had elevated concentrations of uninsured deposits, experienced large deposit outflows, resulting in the institutions being placed into FDIC receiverships. The collapse of these banking institutions sparked a panic that resulted in many banks, including us, experiencing deposit outflows and changes in deposit composition. In addition, the rapid dissemination of negative information through social media, in part, is believed to have accelerated the collapse of SVB. SVB suffered a level of deposit withdrawals within a time period not previously experienced by a bank. We could also be subject to rapid deposit withdrawals or other outflows as a result of negative social media posts or other negative publicity.

Negative public opinion or damage to our brand could also result from actual or alleged conduct in any number of activities or circumstances, including lending practices, regulatory compliance (including compliance with anti-money laundering statutes and regulations), security breaches or other cybersecurity incidents (including the use and protection of customer data), corporate governance, resolution of conflicts of interest and ethical issues, sales and marketing and from actions taken by regulators or other persons in response to such conduct. Such conduct could fall short of our customers' and the public's heightened expectations of financial institutions with rigorous privacy, data protection, data security and compliance practices, and could further harm our reputation. In addition, there has been an increased focus by investors and other stakeholders on topics related to corporate policies and approaches regarding environmental, socialsustainability and governance and diversity, equity and inclusionother issues. Due to divergent stakeholder views on these matters, we are at increased risk that any action, or lack thereof, concerning these matters will be perceived negatively by some stakeholders, which could negatively affect our business and reputation and heighten the risk of litigation.

Negative perceptions regarding our ability to maintain the security of our technology systems and protect customer data or our compliance programs, could lead to decreases in the levels of deposits that customers and potential customers choose to maintain with us or significantly increase the costs of attracting and retaining customers. We also face an increased risk of litigation,litigation and governmental and regulatory scrutinyaction and/or actions governmental authorities may takescrutiny in response to those conditions.

If we do not respond appropriately to the current economic environment, or if customers or other stakeholders do not perceive our response to be adequate, we could suffer damage to our reputation and our brand, which could materially adversely affect our business. All these factors may erode consumer and investor confidence levels, and/or increased volatility of financial markets, could impact and/or adversely affect our reputation and the banking industry’s reputation which could harm our operations, including our liquidity, competitive position and business prospects.

We have grown in the past several years through organic growth. We intend to seek further growth in the level of our loans and deposits within our existing footprint in the Washington, D.C. metropolitan area. We cannot provide any assurance that we will be able to grow at acceptable risk levels and upon acceptable terms, or at all. Our ability to generate loan portfolio growth has been and may continue to be negatively impacted based on our ability to source deposit funding and lending opportunities, the adverse economic effects due to the levels of interest rates and inflation, banking industry stresses and the heightened competition in the Bank’s market area. Even if economic conditions continue to improve in future quarters, there can be no assurance that we will be able to increase our total net loans in the short-term or long-term.

We may not be able to achieve meaningful growth in asset levels, loans or earnings in future years. Moreover, asif our asset size,size and loan portfolio were to increase, it may become more difficult to maintain the levels of performance and earnings achieved and to continue to grow in the future. Additionally, it may become more difficult to maintain or achieve improvements in our expense levels and efficiency ratio. We may not be able to achieve or maintain the relatively low levels of nonperforming assets that we have generally experienced prior to 2024. The inability to maintain or achieve growth of income orincome, assets or deposits and increases in improvements of operating expenses or nonperforming assets may have an adverse impact on our results of operations, financial condition and the value of the common stock.

Management reviews and updates our systems of internal control and disclosure controls and procedures, as well as corporate governance policies and procedures, from time to time. Any system of controls is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the system are met. Any failure or circumvention of our controls and procedures or failure to comply with regulations relatedon tointernal controls and procedures could have a material adverse effect on our business, financial condition and results of operations.

The FRB's prior approval is required to acquire all or substantially all of the assets of any bank or savings association, to acquire direct or indirect ownership or control of more than 5% of any class of voting securities of any bank or savings association or to merge or consolidate with any other bank holding company or savings and loan holding company. The BHC Act and other federal law enumerates the factors the FRB must consider when reviewing the merger of bank holding companies, the acquisition of banks or the acquisition of voting securities of a bank or bank holding company. These factors include the competitive effects of the proposal in the relevant geographic markets; the financial and managerial resources and future prospects of the companies and banks involved in the transaction; the effect of the transaction on the financial stability of the United States; the organizations' compliance with anti-money laundering laws and regulations; the convenience and needs of the communities to be served; and the records of performance under the CRA of the insured depository institutions involved in the transaction. Such regulatory approvals may not be granted on terms that are acceptable to us, or at all. We may also be required to sell branches as a condition to receiving regulatoryof approval, a condition which may not be acceptable to us or, if acceptable to us, may reduce the benefit of any acquisition.

A substantial portion of our loans are secured by commercial real estate in the Washington, D.C. metropolitan area and substantially all of our loans are to borrowers in that area. We also have a significant amount of real estate construction loans and land related loans for commercial developments. At December 31, 2024, 85% of our loans were secured or partially secured by real estate, primarily commercial real estate. Of these loans, $1.3 billion, or 16% of portfolio loans, were land, land development and construction loans. An additional $1.2 billion, or 15% of portfolio loans, were commercial and industrial loans, which are generally not secured by real estate. At December 31, 2024, $871 million, or 11% of the total loan portfolio, comprised commercial real estate loans collateralized by office properties. The performance and repayment of these loans often depends on the successful operation of a business or the sale or development of the underlying property and, as a result, is more likely to be adversely affected by adverse conditions in the real estate market or the economy in general. While we believe that our loan portfolio is well diversified in terms of borrowers and industries, these concentrations expose us to the risk that adverse developments in the real estate market or in the general economic conditions in the Washington, D.C. metropolitan area, and in particular the area’s office property market, could increase the levels of nonperforming loans, which could have an adverse impact on our provision for credit losses, loan charge-offs and overall loan demand. In that event, we would likely experience higher losses or lower earnings. Additionally, if, for any reason, economic conditions in our market area deteriorate, commercial real estate values, in particular for offices, decline further, or there is significant volatility or weakness in the economy or any significant sector of the area’s economy, our ability to develop our business relationships may be diminished, the quality and collectability of our loans may be adversely affected, the value of collateral may decline and loan demand may be reduced.

While no single depositor represented more than 10% of total deposits atas of December 31, 2024,2025, our ten largest depositors not associated with brokered pass-through relationships represented approximately 23%18% of total deposits. This high concentration of depositors presents a risk to our liquidity if one or more of these depositors decides to change its relationship with us and to withdraw all or a significant portion of its deposits. If such an event occurs, we may need to seek out alternative sources of funding that may not be on the same terms as the deposits being replaced, including at potentially higher rates, which could negatively impact our net interest margin and have a material adverse effect on our business, financial condition, results of operations and growth prospects. If we are unable to source alternative sources of funding at attractive rates or at all, we could be required to sell or otherwise monetize securities from our investment securities portfolio, which could have similar adverse consequences.

Our liquidity, funding mix, competitive position, business, results of operations and financial condition depend to a great extent on our net interest margin, i.e., the difference between the interest yields we receive on loans, securities and other interest bearinginterest-bearing assets and the interest rates we pay on interest bearinginterest-bearing deposits and other liabilities. Net interest margin is affected by changes in market interest rates, because different types of assets and liabilities may react differently, and at different times, to market interest rate changes. When interest bearinginterest-bearing liabilities mature or re-price more quickly than interest earning assets in a period, an increase in market rates of interest could reduce net interest income, possibly materially. Similarly, when interest earning assets mature or re-price more quickly than interest bearinginterest-bearing liabilities, falling interest rates could reduce net interest income, possibly materially. Fluctuations in interest rates have a direct impact on our credit spreads and the cost of our funding. Changes in our credit spreads and funding costs are market driven and may be influenced by market perceptions of our creditworthiness, including changes in our credit ratings or changes in broader financial market and macroeconomic conditions. Changes to interest rates, our credit spreads and funding costs occur continuously and may be unpredictable and highly volatile. Developments affecting other banking institutions or the banking sector generally can also have a significant effect on our funding costs. We may also experience net interest margin compression as a result of offering higher than expected deposit rates in order to attract and maintain deposits.

These rates are highly sensitive to many factors beyond our control, including competition, general economic conditions and monetary and fiscal policies of various governmental and regulatory authorities, including the FRB. We attempt to manage our risk from changes in market interest rates by adjusting the rates, maturity, re-pricing, and balances of the different types of interest earning assets and interest bearinginterest-bearing liabilities, but interest rate risk management techniques are not exact. As a result, a rapid increase or decrease in interest rates could have an adverse effect on our net interest margin and results of operations. Refer to "Item 7a. Quantitative and Qualitative Disclosures About Market Risk " for further discussion on our asset/liability management.

Fluctuations in inflation rates may also have a number of adverse effects on the Bank and the Company.us. For example, material increases in inflation rates would likely result in an increase in personnel and other operational costs and an increase in salary and wage expenses, which comprise the Bank’s most significant non-interest expense category. Long periods of high inflation also result in higher interest rates, which will increase the Bank’s deposit costs and overall cost of funds. Higher interest rates will also reduce the value of the Bank’s investment portfolio holdings, and if such reductions are significant, they may materially limit our ability to meet future liquidity shortfalls by selling investments without realizing substantial losses. Higher interest rates can also adversely affect the creditworthiness of the Bank’s borrowers, and the commercial real estate loan portfolio is particularly sensitive to a higher interest rate environment. These and other indirect impacts of inflation on the Bank and the Company could significantly adversely affect the Bank's and the Company'sour earnings and capital in both the short term and long term.

The Bank has developed and aims to continue to develop new customer relationships. Going forward, shoulddue to competitive pressures increase,pressures, we are subject to the risk that we may not be able to retain the loans and deposits produced by these new relationships. There can be no assurance that our relationship banking model will enable us to keep a significant percentage of new relationships or continue to develop new relationships, that we would be able to maintain appropriate levels in the pricing, margins and asset quality or that we will be able to continue to grow.

Our customers and businesses in the Washington, D.C. metropolitan area in general have been and may continue to be adversely impacted as a result of changes in government spending or the size of the federal workforce and may also be adversely affected by a government shutdown.

The Washington, D.C. metropolitan area is characterized by a significant number of businesses that are federal government contractors or subcontractors, or which depend on such businesses for a significant portion of their revenues. While the Company does not have a significant level of loans to federal government contractors or their subcontractors, which as of December 31, 2024 was $251.9 million, or 3.2% of our loan portfolio, the impact of a shutdown of federal government operations, a decline in federal government spending or workforce, a reallocation of government spending to different industries or different areas of the country or a delay in payments to such contractors, whether as a result of a government shutdown or otherwise, could have a ripple effect and adversely affect our results of operations and financial condition, including asset quality, financial capital and liquidity levels.

ClimateClimate-related changerisks or government action and societal responses to climateclimate-related changerisks could adversely affect our results of operations.

Climate change can increase theThe likelihood of the occurrence and severity of natural disasters has been increasing, as has the prevalence and canseverity also result in longer-term shifts in climate patterns such asof extreme heat, sea level rise, more frequent and prolonged drought, stronger and more frequent storms and other instances of extreme weather. Such significant climatenatural change effectsdisasters may negatively impact the Company’s geographic markets, disrupting the operations of the Company, our customers or third parties on which we rely. Damages to real estate underlying mortgage loans or real estate collateral, declines in economic conditions in geographic markets in which the Company’s customers operate and increased premiums for and reduced availability of insurance may impact our customers’ ability to repay loans or maintain deposits due to climateclimate-related change effects,risks, which could increase our delinquency rates and average credit loss.

Moreover, as the effects of climate change continue to create a level of concern for the state of the global environment, companiesCompanies are facing increasing scrutiny from customers, regulators,regulators and other governmental authorities, investors and other stakeholders related to their environmental, social and governance (“"ESG”") practices and disclosure. New government regulations could result in more stringent forms of ESG oversight and reporting and diligence and disclosure requirements. Increased ESG related compliance costs, in turn, could result in increases to our overall operational costs. Conversely, there has been increasing anti-ESG sentiment in the U.S., which has led and is likely to continue to lead to new anti-ESG policies and legislative and regulatory requirements discouraging or preventing ESG-related initiatives. As a result, we may face heightened and potentially conflicting regulatory and legal requirements, as well as reputational scrutiny. Failure to adapt to or comply with regulatory requirements or investor or stakeholder expectations and standards, including with respect to the Company’s involvement in certain industries or projects associated with causing or exacerbating climate change, may negatively affect the Company’s reputation and commercial relationships, which could adversely affect our business.

In light of macroeconomic factors, human capital management risks are an important component of the Company’s assessment of risk and its enterprise risk management system. Our ability to retain and grow loans, deposits and fee income depends upon the business generation capabilities, reputation and relationship management skills of our bankers. If we are unable to recruit successful bankers, or lose the services of any of our bankers to a new or existing competitor or otherwise, we may be unable to establish and retain valuable relationships and some of our customers or potential customers could choose to use the services of a competitor instead Moreover, the Company relies significantly on the expertise and experience of our executive officers and senior management, whose skills, years of industry experience and relationships with customers may be difficult for the Company to replace. TheOur President and Chief Executive Officer, Susan Riel, has announced her intention to retire effective as of a date to be mutually agreed between her and the Board of Directors, no later than December 31, 2026. Ms. Riel’s departure or the loss of service of one or more of theseour other key personnel could reduce the Company’s ability to successfully implement its long-term business strategy, our business could suffer and the value of the Company’s common stock could be materially adversely affected. LeadershipOther leadership changes may occur from time to time and the Company cannot predict whether significant resignations will occur or whether the Company will be able to recruit additional qualified personnel.personnel and suitable successors. There can be no assurance that the Company can adequately prepare for these risks prior to their occurrence or that they will not have a material impact on our financial condition and results of operations.

Our ability to pay a cash dividend on our common stock, to repurchase shares of our common stock or to pay interest on our debt will dependdepends largely upon the ability of the Bank, the Company’s principal operating business,Bank to declare and pay dividends to the Company. Payment of distributions on our securities will also depend upon the Bank’s earnings, financial condition and need for funds, as well as laws, regulations and governmental policies applicable to the Company and the Bank, which limit the amount of distributions that may be made. In addition to the minimum CET1, Tier 1, leverage ratio and total capital ratios, the Company and the Bank each must maintain a capital conservation buffer consisting of additional CET1 capital greater than 2.5% of risk-weighted assets above the required minimum risk-based capital levels in order to avoid limitations on paying dividends and repurchasing shares. The payment of dividends in any period and the adoption or implementation of a share repurchase program do not mean that the Company will continue to pay dividends at the current level, or at all, or that it will repurchase any shares of common stock. Refer to “"Regulation”" under Item 1 and to “"Market for Common Stock”" under Item 5 for additional information.

With certain limited exceptions, federal regulations prohibit a person or company or a group of persons deemed to be “"acting in concert”" from, directly or indirectly, acquiring more than 10% (5% if the acquirer is a bank holding company) of any class of the Company’s voting stock or obtaining the ability to control in any manner the election of a majority of its directors or otherwise direct the management or policies of the Company without prior notice or application to and the approval of the Federal Reserve. There are comparable prior approval requirements for changes in control under Maryland law. Also, the Maryland General Corporation Law, as amended,Law contains several provisions that may make it more difficult for a third party to acquire control of the Company without the approval of its Board and may make it more difficult or expensive for a third party to acquire a majority of its outstanding common stock.

Litigation and regulatory actions, possibly including enforcement actions, could subject us to significant fines, penalties, judgments or other requirements resulting in increased expenses or restrictions on our business activities.

In the normal course of our business, we are named as a defendant in various legal actions arising in connection with our current and/or prior business activities or public disclosures. Legal actions could include claims for substantial compensatory or punitive damages or claims for indeterminate amounts of damages. Further, we may be subject to regulatory enforcement actions. We are also continually the subject of exams, subpoenas, requests for information, reviews, investigations and proceedings (both formal and informal) by various government agencies and other bodies regarding our current and/or prior business activities. Additionally, from time to time we receive demand letters from shareholders, and such letters may lead to these shareholders filing claims or derivative suits against us if our engagement with such shareholders ends in a failure to successfully negotiate a settlement. Any such legal or regulatory actions or investigations may subject us to substantial compensatory or punitive damages, significant fines, penalties, obligations to change our business practices, required changes in our senior officers or other requirements resulting in increased expenses, diminished income and damage to our business. Our involvement in any such matters, whether tangential or otherwise, and even if the matters are ultimately determined in our favor, could also cause significant harm to our reputation and divert management attention from the operation of our business. Further, any settlement, regulatory order or agreement, informal enforcement action or adverse judgment in connection with any formal or informal proceeding or investigation by government agencies may result in adverse audit findings or additional litigation, investigations or proceedings as other parties, including other litigants and/or government agencies begin independent reviews of the same activities. As a result, the outcome of legal and regulatory actions could have a material adverse effect on our business, results of operations, financial condition and stock price, including in any particular reporting period.

The following discussion provides information about the results of operations, financial condition, liquidity, asset quality, and capital resources of the Company as of and for the dates and periods indicated. The Company’s primary subsidiary is 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.

Caution About Forward Looking Statements. This report contains forward looking statements.statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. 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. 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.

•Changing bank regulatory conditions, policies or programs, whether arising as new legislation or regulatory initiatives, that could lead to restrictions on activities of banks generally, or our subsidiary bank in particular, more restrictive regulatory capital requirements, increased costs, including deposit insurance premiums, regulation or prohibition of certain income producing activities or changes in the secondary market for loans and other products;

•Political uncertainty in the United StatesStates, changes in government spending and itsworkforce and their effects on the economy of the Washington, D.C. metropolitan area;

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. The Company was organized in October 1997 and 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, which 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 (six in Suburban Maryland, three in Washington, D.C. and three in Northern Virginia), a principal corporate office, four lending centers (two are co-located with branches and one co-located in the principal corporate office) and one operations center. Refer to the Business Section above, which describes in detail the various banking services offered.

General economic, political, social and health conditions affect financial markets, and therefore, our business. AsAlthough the economy experienced higher levels of inflation in the recent past, interest rates increased in 2023, however asthe inflationary pressure continued to subside during 20242025 subsided,and the Federal Reserve decreased interest rates three times for a total of 10075 basis points. Fiscal and monetary policies have a direct and indirect impact on the level and volatility of interest rates, liquidity of financial markets, the availability and cost of capital, and market conditions of financing. Actual real U.S. GDP growth for 2024 was 3.1%, compared to 3.3% growth in 2023, as the economy continues to grow despite continuing to experience the effects of inflationary pressures and higher interest rates which were raised in 2022 and 2023. Unemployment slightly increased through 2024 as the U.S. unemployment rate ended the year at 4.0%, up from 3.7% at the end of 2023.

Longer-term U.S. interest rates slightly increased in 2024,2025, with the ten year U.S. Treasury rate averaging 4.21%4.29% in 20242025 as compared to 3.96%4.21% in 2023.2024. The yield curve steepened in 20242025 as short-term rates decreased due to Federal Reserve rate cuts while long-term rates increased compared to 2023.2024.

We believe the Company’s primary market, the Washington, D.C. metropolitan area, continues to exhibit resilience relative to other parts of the country despite the volatility in the current economic environment. The Washington, D.C. metropolitan area maintains a diverse economy which includes the public sector, a large healthcare component, substantial business services and a highly educated work force. The private sector, in particular, the Leisure and Hospitality sector has seen some recovery in recent years following the adverse effects of the pandemic. The multi-family commercial real estate leasing sector, notwithstanding increased supply of units in the Bank’s market area, has held up relatively well, particularly for well-located close-in projects. While commercial real estate ("CRE") office properties continue to experience challenges,challenges and we recognized losses in that sector in 2025, the Company has remained focused on monitoring this sector and working with borrowers in order to mitigate further credit losses within our loan portfolio. Overall, we believe commercial real estate values have generally decreased and we continue to be cautious of the cap rates at which such assets are trading, resulting in conservative valuations.

TheAs of December 31, 2025, the Company hashad total assets of approximately $10.5 billion, total loans held for investment of $7.3 billion and total deposits of $9.1 billion. We have remained cognizant of the financialvolatility resourcesin toour meet,industry, capital markets and remainsinterest committedrate to meeting, the credit needs of its community.markets. Loan balances increaseddecreased in the CRE segments in 20242025 which,while combinedwe withsaw the higher levels of interest rates, resultedincreases in our commercial and owner-occupied commercial real estate loans portfolio. Additionally, we experienced changes in our liquidityfunding mix as increases in interest-bearing deposits offset a decrease in non-interest bearingnoninterest-bearing deposits. The yield on earning assets continued to increasedecreased in 2024.2025. During the year ended December 31, 2024,2025, the yield on earning assets increaseddecreased by 2034 basis points (from 5.45%5.65% to 5.65%5.31%) while cost of funds increaseddecreased 42 basis points (from 3.17%3.59% to 3.59%3.17%) which resulted in a decrease of 16 basis points in the net interest margin..

The Company’s capital position remained strong in 20242025 as a result of its strong retained earnings position, despite the impact of the goodwillincreased impairmentloan onprovision 2024and resulting 2025 net loss. AsThe Company paid a result of the Company’s strong capital position, we were able to continue our quarterly dividend in 2024.each Thequarter of 2025; however, the quarterly cash dividend amount was recalibratedreduced to $0.165$0.01 in the thirdfourth quarter of 20242025 to reflectpreserve capital as the company’sCompany growthaddresses plans.asset quality matters.

The Company believes its strategy of remaining growth-oriented, retaining talented staff and maintaining focus on seeking quality lending and deposit relationships haswill proveninure successful.to the benefit of the organization's success. Additionally, the Company believes this strategy of relationship building has fostered future growth opportunities, as the Company’s reputation in the marketplace remains strong.

The Company’sCompany'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, assumptionsassumptions, 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, assumptionsassumptions, and judgments. Certain policies, including those identified below for the year ended December 31, 2024, inherentlypolicies 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, assumptionsassumptions, 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 establishedestablished, 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.

Allowance for Credit Losses and Provision for Unfunded Commitments A consequence of lending activities is that we may incur credit losses, so we record an allowance for credit losses (the "ACL") with respect to loan receivables and a reserve for unfunded commitments (“the "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.

Management has significant discretion in making the judgments inherent in the determination of the provisions for credit loss, the 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.

The Company uses regression analysis of historical internal and peer data provided by a third-party service provider (as Company loss data alone 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.

The following discussion is intended to assist in understanding the financial condition and results of operations of the Company as of and for the year ended December 31, 2024.2025. The information contained in this section should be read together with the December 31, 20242025 audited Consolidated Financial Statements and the accompanying Notes included in "Item 88. Financial Statements Andand Supplementary Data" of this Form 10-K.

Management uses non-GAAP measures because they provide information to investors about the underlying operational performance and trends of the Company. Additionally, certain non-GAAP measures are monitored by regulators. 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 followingtable tablesbelow reconcilereconciles the GAAP financial measures to the associated non-GAAP financial measures:measures.

The netNet interest margin, which measures the difference betweennet interest income and interest expense as a percentage of earning assets, was flat at 2.37% for 2024the andyear 2.53%ended December 31, 2025 compared to 2.37% for 2023,the asame decreaseperiod ofin 162024. basisFor points.further Theinformation on the components and drivers of thethese changechanges, are detailed insee the "Net Interest Income and Net Interest Margin" section below.

In terms of the average asset composition or mix, loans,Loans, which generally have higher yields than securities and other earning assets, represented 66%68% and 68%66% of average earning assets for 2024years ended December 31, 2025 and 2023,2024, respectively. For 2024, as comparedRefer to 2023,the average"Loan loans,Portfolio" excluding loans heldbelow for sale,further increaseddiscussion byon $181.8 million, or 2%, driven by originations and advances that outpaced payoffs and paydowns.loans.

Average investment securities for 2024year ended December 31, 2025 were 20%18.3% of average earning assets compared to 23%20.2% for 2023.the Thesame combinationperiod ofin federal2024. funds sold and interest bearingInterest-bearing deposits with other banks represented 14%14.0% and 9%14.1% of average earning assets for 2024years ended December 31, 2025 and 2023,2024, respectively. Refer to the "Investment Securities and Short-Term Investments" section below for further discussion on investment securities.

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 bearinginterest-bearing deposits with other banks and other short term investments. The cost of funds represents interest expense on deposits, customer repurchase agreements and other borrowings, which consist primarily of federal funds purchased, advances from secured financing arrangements, including the Federal Home Loan Bank of Atlanta ("FHLB") and Discount Window, and senior notes. Noninterest bearingNoninterest-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.

The table below presents the average balances and rates of the major categories of the Company's assets and liabilities for the years ended December 31, 2024, 2023 and 2022.liabilities. Included in the tabletables 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 bearinginterest-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 bearingnoninterest-bearing sources in its calculation. Net interest margin is net interest income expressed as a percentage of average earning assets.

(1)Loans placed on nonaccrual status are included in average balances. Net loan fees and late charges included in interest income on loans totaled $17.2$15.1 million, $16.7$17.2 million and $15.3$16.7 million,million for the years ended December2025, 31, 2024, 20232024 and 2022,2023, respectively.

The Company uses regression analysis of historical internal and peer data provided by a third-party service provider (as Company loss data alone 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 2024, management enhanced the cash flow model to incorporate 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.

The ACL also includes an amount for inherent risks not reflected in the historical analyses. Relevant factors reflected in the qualitative component of the reserve include, but are not limited to, concentrations of credit risk, appraisal risk from volatility in the market, changes in underwriting standards, experience and depth of lending and credit staff and trends in delinquencies. Additionally, the ACL includes a qualitative reserve for CRE office loans (the "office overlay"), which reflects management’s assessment of continued uncertainty in that sector as well as potential lag effects from interest-rate sensitivity, valuation declines, and refinancing risk. Management continues to monitor trends, including occupancy, capitalization rates, and market liquidity, across key metropolitan areas and may adjust qualitative reserves further as these factors evolve.

The increasechange into net income for the three and six months ended MarchJune 31,30, 2026,2026 compared to net loss in the three and six months ended MarchJune 31,30, 2025, was primarily due to lower provision for credit losseslosses, partially offset by the corresponding tax impact, during the three and six months ended MarchJune 31,30, 2026. See respective subsections below for the primary drivers of change and further discussion on net interest income, provision for credit losses, noninterest income, noninterest expenses, and income tax expenses.

When the impact of the provision is excluded, pre-provision net revenue ("PPNR"), a non-GAAP measure, was relatively flat at $27.7$29.1 million for the three months ended MarchJune 31,30, 2026, as compared to $28.4$30.7 million for the threesame period in 2025. PPNR was $56.7 million for the six months ended MarchJune 31,30, 2026, as compared to $59.1 million for the same period in 2025. Refer to the "Use of Non-GAAP Financial Measures" section for additional detail and a reconciliation of GAAP to non-GAAP financial measures.

The efficiency ratio, which measures the ratio of noninterest expense to total net revenue (the sum of net interest income and noninterest income), was 63.79%60.22% and 62.05%, respectively, for the three and six months ended MarchJune 31,30, 2026 compared to 61.54%58.59% and 60.06% for the three and six months ended MarchJune 31,30, 2025.

Net interest margin, which measures net interest income as a percentage of earning assets, was 2.47%2.52% and 2.49% for the three and six months ended MarchJune 31,30, 2026, an increase compared to 2.28%2.37% and 2.33%, respectively, for the three and six months ended MarchJune 31,30, 2025. For further information on the components and drivers of these changes, see the "Net Interest Income and Net Interest Margin" section below.

Loans, which generally have higher yields than securities and other earning assets, represented 68.0%68.7% and 68.2%68.8% of average earning assets for threesix months ended MarchJune 31,30, 2026 and 2025, respectively. Refer to the "Loan Portfolio" below for further discussion on loans.

Average investment securities for the threesix months ended MarchJune 31,30, 2026 werewas 17.6%17.8% of average earning assets compared to 19.4%19.1% for the threesix months ended MarchJune 31,30, 2025. Interest-bearing deposits with other banks represented 14.4%13.59% and 12.5%12.04% of average earning assets for threesix months ended MarchJune 31,30, 2026 and 2025, respectively.

The ratio of common equity to total assets increased to 11.51%11.91% as of MarchJune 31,30, 2026, compared to 10.78% as of December 31, 2025. For the three and six months ended MarchJune 31,30, 2026, the return on average assets ("ROAA") waswere 0.54%,0.26% and 0.40%, respectively, compared to 0.06%(2.33)% and (1.14)% for the threeperiods months ended March 31,in 2025. Total shareholders’ equity was $1.15 billion as of MarchJune 31,30, 2026, compared to $1.13 billion as of December 31, 2025, an increase of 1%.2%. The return (loss) on average common equity for three and six months ended MarchJune 31,30, 2026 was 5.20%,2.41% and 3.79%, respectively, compared to 0.55%(22.35)% and (11.01)% for the threesame monthsperiods ended March 31,in 2025.

(1)Loans placed on nonaccrual status are included in average balances. Net loan fees and late charges included in interest income on loans totaled $3.9 million and $3.8$7.8 million for the three and six months ended MarchJune 31,30, 20262026, respectively, and $3.6 million and $7.4 million for the three and six months ended June 30, 2025, respectively.

Net interest income decreased in the firstthree quarterand ofsix months ended June 30, 2026 compared to the firstthree quarterand ofsix months ended June 30, 2025, primarily due to a larger decrease in interest-earning assets compared to interest-bearing liabilities. Additionally, average loan yields and yields on interest bearing deposits with other banks and short term investments yields were lower in firstthe quarterthree ofand six months ended June 30, 2026 compared to the firstthree quarterand ofsix months ended June 30, 2025, partially offset by lower rates on interest-bearing liabilities.

Net interest margin was 2.47%2.52% for the three months ended MarchJune 31,30, 2026, an increase compared to 2.28%2.37% for the three months ended MarchJune 31,30, 2025. The cost of funds on interest-bearing liabilities decreased by 5138 basis points from 3.35%3.17% for the firstsecond quarter of 2025 to 2.84%2.79% for the firstsecond quarter of 2026, while the yield on interest-earning assets had a decrease of 2418 basis points from 5.36%5.29% for the firstsecond quarter of 2025 to 5.12%5.11% for the firstsecond quarter of 2026.

The change in the provision for credit losses on the loan portfolio for the three and six months ended MarchJune 31,30, 2026 was primarily attributable to lower reserve build for individually assessed loans, a decline in loan balances year over year and a decrease in the qualitative reserve for CRE office loans ("office overlay"), partially offset by updated quantitative assumptions used to calculate our current expected credit losses.overlay.

Net charge-offs of $25.9$73.9 million during the threesix months ended MarchJune 31,30, 2026 represented 1.47%2.13% of average loans held for investment on an annualized basis, ana increasedecrease from net charge-offs of $11.2$95.1 million in the threesix months ended MarchJune 31,30, 2025, which represented 0.57%2.40% of average loans held for investment on an annualized basis.

During 2025, we began executing on a revised strategy for resolving criticized and classified loans with the goal of accelerating dispositions and reducing asset quality risk. In furtherance of this strategy, we continue to obtain updated valuations on the underlying collateral for certain loans and incorporate new information about borrower performance. These updated valuations reflect the rapidly changing commercial real estate market in the D.C. metro area. ToDuring mitigatethe futuresix valuationmonths risk,ended June 30, 2026, certain loans were transferred to loans held-for-sale ("HFS") in the three months ended March 31, 2026, which,which resulted in charge-offs of $11.6$36.7 million to record those loans at their fair value at the time of transfer. The estimated fair value reflected current market participant pricing, including discounts associated with the loans’ credit quality, collateral values, market liquidity and the anticipated timing and structure of the disposition. We believe our actions during the current period reflect a disciplined approach to credit risk management that incorporates updated market and borrower data into our loss estimates.

The office overlay decreased in the threesix months ended MarchJune 31,30, 2026 relative to the threesix months ended MarchJune 31,30, 2025, impacted by updated assumptions associated with the PD and LGD rates as well as the migration of one sizable relationship to nonaccrual status that is now individually evaluated for a specific reserve. The office overlay for the threesix months ended MarchJune 31,30, 2026 reflects management’s assessment of continued uncertainty in the CRE office sector, as well as potential lag effects from interest-rate sensitivity, valuation declines, and refinancing risk. Management continues to monitor trends, including occupancy, capitalization rates, and market liquidity, across key metropolitan areas and may adjust qualitative reserves further as these factors evolve.

TheManagement believes the current ACL coverageis ratio remains within management’s target rangeadequate and properly reflects the current asset quality profile, though further provision expense may be required if collateral values or borrower performance deteriorate.

The provision for credit losses for the held-to-maturity securities portfolio was recorded primarily on several corporate bonds. During the three and six months ended MarchJune 31,30, 2026, there was a reversal of provision for credit losses of $124$452 thousand and $576 thousand, respectively, for the held-to-maturity securities portfolio, compared to a reversal of provision expense of $54$46 thousand and $99 thousand, respectively, for the yearthree endedand threesix months ended MarchJune 31,30, 2025.

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. There was a reversalprovision expense of provision$8.0 ofthousand $1.8 million for the year ended three months ended March 31, 2026, compared toand a reversal of provision of $297$1.8 thousandmillion, respectively, for the yearthree endedand threesix months ended MarchJune 31,30, 2026, compared to a provision expense of $1.8 million and a provision expense of $1.5 million, respectively, for the three and six months ended June 30, 2025, primarily due to a reduction in unfunded loan balances during the current period.

The increase in total noninterest income in the firstsecond quarter of 2026 as compared to the firstsecond quarter of 2025 was primarily due to higher gains on the sale of HFS loans and increasesnet ingains theon cash surrender valuecalls of BOLI.certain investment securities.

The modest increase in total noninterest expense for the firstsecond quarter of 2026 as compared to the firstsecond quarter of 2025 was primarily due to $2.9higher millionlegal, accounting and professional fees and an increase in valuationsalaries adjustmentand onemployee thebenefits, remainingpartially HFSoffset portfolio,by whichlower areFDIC reflectedinsurance in other expenses in the table above.expense.

As a percentage of average assets, total noninterest expense (annualized) was 1.79%1.68% and 1.74%, respectively for the firstthree quarterand ofsix months ended June 30, 2026 as compared to 1.52%1.45% and 1.48%, respectively, in the firstthree quarterand ofsix months ended June 30, 2025.

For the three and six months ended MarchJune 31,30, 2026, income tax expense was $1.3$707 thousand and $2.0 million, respectively, compared to $772income thousandtax benefit of $39.4 million and $38.7 million, respectively, for the three and six months ended MarchJune 31,30, 2025. The increase in income tax expense was primarily due to anthe increasechange infrom a loss to income position from the pre-taxthree incomeand duringsix months ended June 30, 2025 to the firstthree quarterand ofsix months ended June 30, 2026.

The effective tax rate for the three and six months ended MarchJune 31,30, 2026 was 8.35%.9.27% and 8.65%, respectively. The effective tax rate represents the percentage of income tax expense against the pre-tax income in the three and six months ended MarchJune 31,30, 2026. The effective tax rate for the threefirst monthshalf ended March 31,of 2026 varies from the 21% statutory rate primarily due to the tax benefit from the low-income housing tax credit equity investment, tax-exempt interest income and tax-exempt income from the increase in the cash surrender value of BOLI.

The decrease in total assets as of MarchJune 31,30, 2026 from December 31, 2025 was primarily due to lower cash balances and declines in securities and loans balances from sales, maturities and paydowns.

Investment securities, net of the allowance for credit losses, were $1.77$1.72 billion as of MarchJune 31,30, 2026 as compared to $1.83 billion as of December 31, 2025, a 3%6% decrease, primarily driven by maturitiesmaturities, calls and paydowns on both AFS and HTM securities. Cash flows from the securities portfolio are expected to be managed flexibly, including selective paydowns of brokered funding, while allowing for limited and opportunistic reinvestment in the securities portfolio.

Loans held for investment ("HFI") decreased by $341.9$658.0 million (from $7.3 billion as of December 31, 2025 to $6.9$6.6 billion as of MarchJune 31,30, 2026) while HFS loans decreased by $34.9$41.0 million. Refer to the "Loan Portfolio", "Loan Maturity" and other loans-related sections below for further discussion on loans.

Total shareholders’ equity as of MarchJune 31,30, 2026 was $1.15 billion as compared to $1.13 billion as of December 31, 2025, a 1%2% increase. The increase in shareholders’ equity was primarily due to net income of $14.7$21.6 million, offset by cash dividends of $0.3$0.6 million, and $0.9$4.3 million in other comprehensive loss. The ratio of common equity to total assets was 11.51%11.91% as of MarchJune 31,30, 2026 as compared to 10.78% as of December 31, 2025. Book value per share was $37.56$37.73 as of MarchJune 31,30, 2026, a 0.81%1.26% increase from $37.26 as of December 31, 2025.

In order to be considered well-capitalized, the Bank must have a common equity tier one capital ("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 exceeded all these requirements and satisfy the capital conservation buffer of 2.5% of CET1 capital as of MarchJune 31,30, 2026. Failure to maintain the required capital conservation buffer would limit the ability of the Company and the Bank to pay dividends, repurchase shares or pay discretionary bonuses.

The Company's capital ratios remain substantially in excess of regulatory minimums and buffer requirements. The total risk based capital ratio was 15.05%15.84% as of MarchJune 31,30, 2026, as compared to 14.33% as of December 31, 2025. The CET1 risk based capital ratio was 13.80%14.58% as of MarchJune 31,30, 2026, as compared to 13.07% as of December 31, 2025. The tier 1 risk based capital ratio was 13.80%14.58% as of MarchJune 31,30, 2026, as compared to 13.07% as of December 31, 2025. The tier 1 leverage ratio was 10.63%11.22% as of MarchJune 31,30, 2026, as compared to 9.72% as of December 31, 2025. Refer to "Capital Resources and Adequacy" section below for further discussion on our capital.

Loans held for investment were $6.9$6.6 billion as of MarchJune 31,30, 2026, as compared to $7.3 billion as of December 31, 2025, a decrease of $341.9$658.0 million or 4.7%.9.0%. During the period ended MarchJune 31,30, 2026, certain loans, primarily income producing commercial real estate loans, were reclassified from HFI to HFS loans. This reclassification resulted in net charge-offs of $11.6$36.7 million in order to bring the loans to the lower of cost or fair value of $111.8$238.5 million at the time of transfer. During the first quarterhalf of 2026, eight18 HFS loans were sold, resulting in a gain of $3.6$5.8 million. There were $55.7$49.7 million in HFS loans held for sale as of MarchJune 31,30, 2026, compared to $90.7 million as of December 31, 2025.

The Bank has a large portion of its loan portfolio related to real estate, with 78%76% consisting of commercial real estate and real estate construction loans as of MarchJune 31,30, 2026. Non-owner occupied commercial real estate and commercial and residential construction represented 53%49% of the loan portfolio while the remaining 25%27% is represented by the "owner occupied - commercial real estate" and "construction - C&I (owner occupied)" loans.

(1)Excludes accrued interest receivable of $33.3$30.8 million and $35.9 million as of MarchJune 31,30, 2026 and December 31, 2025, respectively, which is recorded in other assets.

As part of its lending strategy, the Company maintains a substantial portfolio of CRE loans, with $5.3$4.9 billion and $5.7 billion, or 76.3%73.6% and 78.3% of total loans, of amortized cost outstanding as of MarchJune 31,30, 2026 and December 31, 2025, respectively. Management meets regularly in order to monitor its existing CRE loan portfolio and to evaluate the pipeline for CRE loan investment. Income producing CRE loans collateralized by office properties comprised approximately $573.5$533.2 million and $576.1 million, or 8.3%8.1% and 7.9% of total loans, as of MarchJune 31,30, 2026 and December 31, 2025, respectively.

Office loans within Washington, D.C., Washington's Maryland Suburbs and Northern Virginia were $543.5$503.4 million and $545.8 million, or 7.8%7.6% and 7.5% of total loans, as of MarchJune 31,30, 2026 and December 31, 2025, respectively.

As of MarchJune 31,30, 2026 and December 31, 2025, $94.8$77.1 million and $107.9 million, respectively, of principal of CRE loans collateralized by office properties were criticized or classified.

(1)Income producing CRE office loans with total principal of $574.3$533.9 million and multifamily loans with total principal of $762.0$692.8 million as of MarchJune 31,30, 2026 are included within income producing - commercial real estate. The charts below represent their maturities schedules.

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 – Summary of Significant Accounting Policies" to the Consolidated Financial Statements and activity in the ACL is contained in "Note 4 – Loans and Allowance for Credit Losses" to the Consolidated Financial Statements. Also, refer to "Critical Accounting Policies and Estimates" above for further discussion of the methodology which management employs to maintain an adequate ACL, as well as "Provision for Credit Losses" above for a discussion of the Company's calculation of the provision for credit losses during the threesix months ended MarchJune 31,30, 2026 and 2025.

The ACL for loans as of MarchJune 31,30, 2026 was $147.2$121.1 million, which reflected a decrease of $12.4$38.5 million from $159.6 million as of December 31, 2025. The ACL represented 2.12%1.83% of total loans as of MarchJune 31,30, 2026 as compared to 2.19% as of December 31, 2025.

Management believes the ACL as of MarchJune 31,30, 2026 remains adequate to absorb estimated losses inherent in the portfolio following the loss recognition on high-risk loans concentrated in the commercial real estate office segment. The losses recognized in the first quarterhalf of 2026 were primarily due to the transfer of certain loans to HFSHFS, loss mitigation activities and the incorporation of new information about borrower performance. As of MarchJune 31,30, 2026, the allowance represented 114%109% of nonperforming loans as compared to 149% as of December 31, 2025. The decrease in the ACL for loans at MarchJune 31,30, 2026 compared to December 31, 2025, was primarily due to charge-offs of previously reserved amounts and a decrease in the office overlay and charge-offs of previously reserved amounts,overlay, partially offset by updated assumptions in the CECL model calculation.

As part of its comprehensive loan review process, the Bank’s Risk Committee evaluates loans whichthat 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.

As of MarchJune 31,30, 2026 and December 31, 2025, the Company had $128.8$111.1 million and $106.9 million, respectively, of loans classified as nonperforming. Please refer to the "Nonperforming Assets" section for a discussion of problem and potential problem assets. Refer to "Note 1 – Summary of Significant Accounting Policies" to the Consolidated Financial Statements under the caption "Loans" for a discussion of the Company’s policy regarding individual evaluation of loans to record a provision for expected credit losses.

As of MarchJune 31,30, 2026 and December 31, 2025, loans rated special mention had an amortized cost of $290.8$274.2 million and $268.9 million, respectively, and loans rated substandard had an amortized cost of $447.6$459.8 million and $514.5 million, respectively. The decrease in substandard loans was primarily attributable to transfer of certain loans to HFS, as previously discussed.discussed, and the payoff in full of certain loans, partially offset by additional downgrades. These downgrades were substantially from loans previously rated watch or special mention.

As of MarchJune 31,30, 2026, 99%100% and 69%66% of special mention and substandard loans, respectively, were current, with the remainder either 30 or more days past due or nonperforming. Based upon their status as potential problem loans, loans risk rated special mention or substandard receive heightened scrutiny. Additionally, the Company's credit loss allowance methodology incorporates increased reserve factors for office loans considered potential problem loans as compared to the general portfolio.

The allocation of the allowance as of MarchJune 31,30, 2026 includes the allowance for credit losses of $38.4$18.5 million against individually assessed loans of $128.8$111.1 million, as compared to allowance for credit losses of $19.6 million against individually assessed loans of $106.9 million as of December 31, 2025. In addition, 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 7.39%7.22% and 12.89% as of MarchJune 31,30, 2026 and December 31, 2025, respectively. The allocation of the allowance to each category is not necessarily indicative of future losses or charge-offs and does not restrict the usage of the allowance to absorb losses in any category. The Company has updated its allocation methodology to better reflect the ACL attributable to loan categories and collateral types. Conforming changes have been made to prior period amounts. These reclassifications had no effect on net income (loss) or shareholders' equity.

The Company’s nonperforming assets are comprised of the amortized cost of nonaccrual HFI loans, which includes the nonperforming portion of loan modifications, and the carrying value of other real estate owned ("OREO"). Nonperforming assets totaled $130.8$113.1 million as of MarchJune 31,30, 2026, representing 1.31%1.17% of total assets, as compared to $109.0 million as of December 31, 2025, representing 1.04% of total assets. The increase was primarily due to the migration of one previously substandard-rated CRE office relationshiprelationships to nonaccrual status during the quarter, along with other credit facilities in the C&I and construction - commercial & residential categories,status, partly offset by charge offs of nonaccrual loans as well as by loans transferred to HFS. As of MarchJune 31,30, 2026, nonaccrual HFS loans totaling $55.2$25.6 million were excluded from nonperforming assets since they are carried at the lower of cost or fair value and are not reflected in credit metrics.

Total nonperforming loans had an amortized cost of $128.8$111.1 million as of MarchJune 31,30, 2026, representing 1.86%1.68% of total loans, compared to $106.9 million as of December 31, 2025, representing 1.47% of total loans. The Company had no accruing loans that were 90 days or more past due as of MarchJune 31,30, 2026 and December 31, 2025. Management prioritizes remaining attentive to early signs of deterioration in borrowers’ financial conditions and to taking action designed to mitigate risk. The Company places loans on nonaccrual status if it deems collection to be doubtful.

Under the CECL standard, loans that no longer share similar risk characteristics with their assigned segment—due to credit deterioration, increased collateral dependency, or other factors—are evaluated on an individual basis. The Company individually assesses all nonaccrual loans and may also individually evaluate other loans or groups of loans when it is probable that not all contractual amounts will be collected. Expected credit losses on individually assessed loans are measured using either the fair value of collateral or discounted cash flow methods. For collateral-dependent loans, including those for which foreclosure is probable or repayment is expected substantially through the sale or operation of the collateral, the ACL is based on the difference between the asset’s amortized cost basis and the net realizable value of the collateral, adjusted for estimated selling costs, commissions, senior liens, and other factors; the ACL may be zero when collateral value exceeds amortized cost. For loans that are not collateral dependent but have experienced structural concessions and are expected to continue making payments, expected credit losses are measured using discounted cash flows over the expected life of the loan at the original contractual interest rate, with adjustments for default risk. Based on management’s analysis of portfolio risk, the Company believes its ACL, which totaled 2.12%1.83% of total loans as of MarchJune 31,30, 2026, is adequate to absorb expected credit losses at that date.

In evaluating whether a new valuation is warranted, we consider a range of factors, including trends in local property markets, changes in capitalization rates and lease terms, the availability and terms of financing for comparable properties, and observable shifts in supply-demand dynamics. We also assess property-specific factors such as deferred maintenance or improvements, current lease and tenant information, zoning or regulatory changes, environmental matters, and other conditions that may materially influence value. Passage of time alone does not drive our valuation decisions; rather, we apply a judgment-based framework informed by current market data and asset-specific analysis.

During the threesix months ended MarchJune 31,30, 2026, the Bank modified 927 loans with a total amortized cost of $82.2$70.0 million as of MarchJune 31,30, 2026 (1.2%1.1% of the loan portfolio). These loans received extended loan terms of between approximately 3 to 2432 months.

As of MarchJune 31,30, 2026, the payment status of 2835 loans that were modified in the preceding twelve months, included 2119 loans with a total amortized cost basis $189.6$115.9 million whichthat were performing under their modified terms, 2 loan with a total amortized cost basis of $7.2 million which was 30-89 days past dueterms and 515 loans with a total amortized cost basis of $18.8$26.9 million whichthat were on nonaccrual status.

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 and are 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

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.