Earnings call transcript: Eagle Bancorp Q3 2025 misses revenue forecast, stock drops

Eagle Bancorp Inc. reported a net loss of $67.5 million for the third quarter of 2025, or $2.22 per share, exceeding analysts’ expectations of a $0.31 loss per share. However, the company fell short on revenue, reporting $70.65 million against a forecast of $76.66 million. Following the earnings release, Eagle Bancorp’s stock fell 10.99% to $18 in after-hours trading, reflecting investor concerns over the revenue miss.

Key Takeaways

• Eagle Bancorp reported a larger-than-expected EPS loss but surpassed EPS forecasts.
• Revenue of $70.65 million missed expectations by 7.84%.
• Stock dropped 10.99% in after-hours trading due to revenue concerns.
• The company highlighted growth in C&I loans and deposits.

Company Performance

Eagle Bancorp faced a challenging third quarter, marked by a net loss of $67.5 million. Despite surpassing EPS forecasts, the revenue miss weighed heavily on investor sentiment. The company’s focus on C&I loan growth showed positive results, with loans increasing by $105 million. However, ongoing challenges in the real estate markets and valuation stresses in office buildings continue to pose risks.

Financial Highlights

• Revenue: $70.65 million, down from the forecast of $76.66 million.
• Earnings per share: -$2.22, better than the forecast of -$0.31.
• Net interest income: $68.2 million, an increase of $383,000.
• Net interest margin: Expanded by 6 basis points to 2.43%.

Earnings vs. Forecast

Eagle Bancorp’s actual EPS of -$0.22 exceeded the forecast of -$0.31, representing a surprise of 29.03%. However, the revenue fell short by 7.84%, contributing to the stock’s decline. This performance contrasts with previous quarters where revenue met or exceeded expectations.

Market Reaction

Following the earnings announcement, Eagle Bancorp’s stock fell 10.99% to $18 in after-hours trading. This decline reflects investor concerns over the revenue miss and its potential impact on future growth. Trading at $17.25, the stock sits 44% below its 52-week high of $30.94, with analyst price targets ranging from $18 to $27.25. InvestingPro subscribers have access to additional technical indicators, valuation metrics, and exclusive ProTips that could help navigate this challenging period for the stock.

Outlook & Guidance

Looking ahead, Eagle Bancorp expects growth in net interest income in 2026 and manageable provisions. The company is targeting an investment portfolio of 12-15% of assets and anticipates stable non-interest expenses. Despite current challenges, the management remains optimistic about long-term sustainable value creation.

Executive Commentary

CEO Susan Riel stated, "We are nearing the end of elevated losses from decreased asset values," highlighting the company’s strategy to build long-term value. Riel also emphasized the importance of working with local counterparties for better execution.

Risks and Challenges

• Continued valuation stress in the office real estate market.
• Potential losses identified in the commercial loan portfolio.
• Economic uncertainties affecting government contracting portfolios.
• Pressure on revenue growth due to market conditions.

Q&A

During the earnings call, analysts questioned the impact of multifamily market challenges and the potential decline in criticized and classified loans in 2026. Management expressed confidence in their credit risk management and expects these issues to be temporary.

Eagle Bancorp’s third-quarter results highlight a mixed performance with a significant revenue miss overshadowing an EPS beat. The company remains focused on strategic growth initiatives amidst ongoing market challenges.

Full transcript - Eagle Bancorp Inc (EGBN) Q3 2025:

Conference Operator: Today, and thank you for standing by. Welcome to the Eagle Bancorp, Inc. Third Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker’s presentation, there will be a question and answer session. To ask a question during the session, you’ll need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To start your question, please press star one one again. Please be advised that today’s conference is being recorded. I would now like to turn the conference over to your speaker for today, Eric Newell, Chief Financial Officer of Eagle Bancorp, Inc. Please go ahead.

Eric Newell, Chief Financial Officer, Eagle Bancorp, Inc.: Thank you and good morning. Before we begin the presentation, I’d like to remind everyone that some of the comments made during this call are forward-looking statements. We cannot make any promises about future performance and caution you not to place undue reliance on these forward-looking statements. Our Form 10-K for the fiscal year 2024, Form 10-Qs for the first and second quarter, and current reports on Form 8-K, including the earnings presentation slides, identify important factors that could cause the company’s actual results to differ materially from any forward-looking statements made this morning, which speak only as of today. Eagle Bancorp, Inc. does not undertake to update any forward-looking statements as a result of new information, future events, or developments unless required by law. This morning’s commentary will also include non-GAAP financial information.

The earnings release, which is posted in the Investor Relations section of our website and filed with the SEC, contains reconciliations of this information to the most directly comparable GAAP information. Our periodic reports are available from the company, online at our website, or on the SEC’s website. With me today is our Chair, President and CEO, Susan Riel, Chief Lending Officer for Commercial Real Estate, Ryan Riel, and our Chief Credit Officer, Kevin Geoghegan. I’ll now turn it over to Susan.

Susan Riel, Chair, President and CEO, Eagle Bancorp, Inc.: Thank you, Eric. Good morning and thank you for joining us. The third quarter reflected continued progress in addressing asset quality issues and positioning the bank for sustainable profitability. While our results remain below our long-term expectations, we are confident that we are nearing the end of elevated losses from decreased asset values. On credit, we’ve balanced appropriate urgency that is driven by our near-term view of the office market outlook with an approach that remains methodical and deliberate. We are directly addressing persistent valuation stress of office buildings. We believe that working directly with counterparties that have local knowledge leads to better execution. It is disciplined work, but it is the right path to long-term stability. Specifically, we moved $121 million of criticized office loans to held-for-sale status in the quarter and are working with buyers to sell these assets.

Importantly, in the quarter, we also took deliberate steps to reinforce confidence in our asset valuations and reserve levels. First, we engaged with a nationally recognized loan review firm to conduct an independent credit evaluation of our CRE and commercial and industrial (C&I) portfolios. Additionally, we performed our own supplemental internal review of all CRE exposures of $5 million and above. We’ll provide more detail on both initiatives later in our remarks, but I’m pleased to report that the findings from both outcomes support the adequacy of our current provisioning. Our core commercial and deposit franchises continue to improve. C&I loans increased by $105 million, representing the majority of our loan originations for the quarter. Average C&I deposits grew 8.6% or $134.2 million for the second quarter. This momentum reflects relationship growth, client retention, and new account activity.

These are clear signs that our brand, our service model, and our people are earning and deepening trust in the marketplace. Because our decisions are made locally by bankers who know their clients and communities, we are able to respond quickly, tailor the structure for each loan, and deliver a level of service larger institutions simply cannot replicate. We see opportunities to extend that same relationship-driven approach across all our client segments. We’re executing on our strategic plan, addressing potential credit issues, diversifying the balance sheet, improving margins, and aligning resources to protect and grow franchise value. These actions are positioning us to further improve funding quality, reduce wholesale funding reliance, and drive toward a lower cost of deposits. Our pre-provision net revenue is believed to improve with time.

Our priorities are straightforward: complete the credit cleanup, deepen core relationships, and deliver improved earnings performance, which should drive improved share value for shareholders. The fundamentals of this company are sound. Our strategy is working, and we are focused on building long-term sustainable value. I’ll now turn it to Kevin, who will talk more about credit.

Kevin Geoghegan, Chief Credit Officer, Eagle Bancorp, Inc.: Thank you, Susan. As discussed over the prior two quarters, we continue to take a disciplined approach to resolving loan challenges. Total criticized and classified office loans have declined for two consecutive quarters, from a peak of $302 million at the end of March 31 to $113.1 million at September 30. During the quarter, we moved $121 million of loans to held-for-sale status. These loans are in different stages of disposition with potential buyers, and we expect to complete sales on a portion of them by the end of the year. Results for the quarter include a $113.2 million provision for credit losses, primarily related to the office portfolio. Our office overlay continues to be robust at $60.3 million, or 10.4% of the performing office balance. Another $24.7 million is associated with individually evaluated loans and the model’s quantitative component. Our reserve methodology incorporates those losses from evaluation impairments directly.

Among performing office loans, those rated substandard carry a reserve of 44.5% and special mention carry a reserve of 22.2%. All pass-rated office loans greater than $5 million were reviewed in this quarter, resulting in just one loan migrating into special mention. Our allowance for credit losses ended the quarter at $156.2 million, or 2.14% of total loans. That’s down 24 basis points from the prior quarter, reflecting a decrease in criticized and classified office loan balances. At the end of the second quarter, non-performing loans were $226.4 million. At September 30, they declined to $118.6 million, down $108 million from the prior quarter, reflecting transfers to held-for-sale status, charge-offs, and loan payoffs. You can see more detail on slide 23 in our investor deck. Non-performing assets were 1.23% of total assets, an improvement of 93 basis points from last quarter.

We also transferred one $12.6 million land loan to OREO. Loans 30 to 89 days past due totaled $29 million at September 30, down from $35 million last quarter. Finally, total criticized and classified loans rose to $958 million from $875 million last quarter. Within that total, office declined $198 million, while multifamily, including mixed-use, predominantly residential, increased by $204 million. The increase in criticized and classified multifamily loans largely reflects the impact of higher interest rates on debt service coverage rather than any meaningful deterioration in the underlying property performance. Net operating income levels remain at or above underwritten expectations across most of the portfolio. There continues to be some pressure within the affordable housing segment, though it represents a relatively small share of the downgrades this quarter.

As we indicated last quarter, we do not believe multifamily loans are affected by the same structural or valuation issues present in the office portfolio. The relative strength of multifamily continues to support stable collateral values, and we believe this pressure is largely limited to near-term income rather than asset impairment. We will continue to be vigilantly monitoring these portfolios. Eric?

Eric Newell, Chief Financial Officer, Eagle Bancorp, Inc.: Thanks, Kevin. We reported a net loss of $67.5 million, or $2.22 per share, compared with a $69.8 million loss, or $2.30 per share last quarter. In the second quarter, we outlined a more proactive approach to accelerate the resolution of problem loans. This quarter’s actions were deliberate as we addressed valuation risk. Even with this quarter’s credit-related losses, our capital position remains strong. Tangible common equity to tangible assets is 10.39%. Tier 1 leverage ratio declined modestly to 10.4% and CET1 to 13.58%. Tangible book value per share decreased $2.03 to $37, reflecting the impact of credit cleanup rather than core earnings erosion. Continued deposit growth and an increasing proportion of insured balances reflect the depth and durability of our funding base. With $5.3 billion in available liquidity, we maintain more than 2.3 times coverage of uninsured deposits, positioning us exceptionally well.

Our teams have reduced broker deposits $534 million year to date, and we expect continued progress in the fourth quarter. The improvement reflects coordinated efforts among our C&I teams, branch network, and the digital platform. From an earnings standpoint, pre-provision net revenue was $28.8 million, down from the prior quarter. Adjusting for $3.6 million in losses from loan sales, PP&R was $32.3 million, a sequential increase, reflecting the underlying strength of our core operating franchise. Net interest income grew to $68.2 million, up $383,000, as the decline in deposit and borrowing costs outpaced a modest reduction in income on earning assets. NIM expanded six basis points to 2.43%, primarily driven by a reduction in interest earning assets associated with a decline in non-accrual loan balances in the CRE loan portfolio.

Non-interest income totaled $2.5 million compared to $6.4 million last quarter, primarily due to $3.6 million in loan loss sales and a $2 million loss on sale of investments with proceeds used to reduce higher cost funding. We expect steady contributions from BOLI and a growing fee income as treasury management sales expand. Non-interest expense declined $1.6 million to $41.9 million, reflecting lower FDIC assessments and disciplined cost management. We remain focused on maintaining efficiency while supporting strategic priorities. We recognize that investors want certainty that credit risk is fully understood and adequately reserved. That’s why in the third quarter, we engaged a highly experienced, nationally recognized third-party loan review firm to complete an independent credit review of our commercial portfolio. The goal was to provide us an independent perspective to quantify potential future losses under both baseline and stressed economic scenarios.

The review was conducted separately from our internal risk rating control process and included over 400 individual loans representing 84.9% of the commercial loan book, or about $7.4 billion. It assessed potential losses over a 30-month horizon, a six-month near-term view, plus an additional 24 months based on Moody’s baseline and stress scenarios. Each loan was evaluated for collateral liquidation value, cost to carry and dispose, and borrower and guarantor liquidity to determine potential shortfalls. Utilizing Moody’s baseline stress scenario, the independent loan review analysis concluded total potential commercial loan losses of $257 million as of July 31, the date of their review. Importantly, where the independent firm identified potential loss contracts, it was in credits we had already flagged internally. Their conclusions validated our own view of the portfolio. This was confirmation, not discovery.

Utilizing the Moody’s S4 downside stress scenario, where there’s only a 4% probability the economy performs worse than the baseline, potential losses increased by $113 million to $370 million. Between July 31, the date of the independent loan review, and quarter end, we charged off $140.8 million and continue to hold $60.3 million in our qualitative office overlay and $24.7 million in individually evaluated reserves. Together, that totals $225.8 million, which represents approximately 88% of the total potential losses identified in the baseline scenario. The independent review assumed liquidation scenarios for consistency across institutions. Our reserve process, by contrast, reflects workout strategies that have historically resulted in better recoveries. That’s a methodological distinction, not a difference in recognizing risk. Also, during the quarter, we performed a supplemental internal review of all CRE loans greater than $5 million, covering 137 loans totaling $2.9 billion.

Following this review, there were five downgrades of $158.2 million to special mention and three downgrades of $110.8 million to substandard. Together, these reviews give us a data-driven view of potential losses. They reaffirm our belief that we are adequately reserved and the bulk of loss recognition is behind us. With that foundation in place, let me turn to how these actions position us for improved performance heading into 2026. On slide 11 of the investor deck, we presented our forecast for the full year of 2026. We expect net interest income to grow despite a smaller balance sheet, driven by mixed improvements and lower funding costs. As Kevin noted, the total reserve coverage to loans declines primarily due to a reduction in the office qualitative overlay. Our qualitative overlay captures a rolling 12 months of valuation loss experience. As that period rolls off, it will naturally reduce the overlay.

All pass-rated office loans were reviewed this quarter to ensure current information and support our internal ratings framework. Looking ahead, we anticipate that loan growth in 2026 will continue to be concentrated in C&I, and we’re pursuing that measured growth with a strong focus on disciplined credit standards. We’re nearing our target investment portfolio range of 12% to 15% of assets, at which point we’ll begin reinvesting cash flows to optimize earnings without compromising liquidity. Non-interest expenses are expected to remain well controlled. FDIC costs are expected to peak over the next several quarters and then decline as asset quality and liquidity metrics continue to improve, trends we’ve already seen reflected in lower premiums in the last two quarters. Finally, as mentioned last quarter, our capital return philosophy has shifted in line with performance and priorities.

The dividend reduction to $0.01 per share was a proactive step to preserve capital flexibility, not a response to capital adequacy concerns. As earnings normalize and credit stabilizes, we’ll reassess the most effective forms of capital return. I’ll now turn it over to Susan for a wrap-up.

Susan Riel, Chair, President and CEO, Eagle Bancorp, Inc.: Thanks, Eric. This was a pivotal quarter for Eagle Bancorp. We’ve made significant progress on the credit front, controlling valuation risk head-on, completing an independent portfolio review, and validating that our reserves are adequate. At the same time, we’re seeing tangible positive outcomes across our commercial and deposit franchises. As we look ahead, we believe that in 2026, provisions will be manageable and earnings will improve, and our focus on sustainable profitability will come through in our results. Lastly, before we turn to Q&A, we wanted to announce the voluntary resignation of our Chief Credit Officer, Kevin Geoghegan, who will be moving back to Chicago effective December 31. We have hired two seasoned veterans, William Parotti, Jr. and Daniel Callahan, to serve as interim Chief Credit Officer and Deputy Chief Credit Officer, respectively, until a permanent replacement can be hired.

Bill spent the bulk of his career at Frost Bank in Texas and Dan at Commerce Bank in Missouri. Collectively, their leadership and very deep experience will facilitate the bank’s continued focus on enhancing our overall credit risk management. Kevin was instrumental in both helping shape and implementing our credit strategies, working tirelessly with the team to both proactively deal with the bank’s problem loans and improve our credit risk management governance and practices. We thank Kevin for his contributions and wish him well. Before we conclude, I want to express my sincere appreciation to our employees. Your dedication and professionalism make all the difference. With that, we’ll now open the line up for questions.

Conference Operator: Thank you. As a reminder, if you would like to ask a question, please press star one one on your telephone. You will then hear an automated message advising your hand is raised. We also ask that you wait for your name and company to be announced before proceeding with your question. One moment while we compile the Q&A roster. Our first question today comes from the line of Justin Crowley of Piper Sandler. Your line is open.

Eric Newell, Chief Financial Officer, Eagle Bancorp, Inc.: Hey, good morning, everyone. Hi, Justin.

Hi, Justin.

Obviously, a lot of steps taken this quarter. You had some of the losses on the sale of those two loans, but after all the charge-offs and marks you’ve taken, moving credits into held-for-sale, and I know you had the independent review, which sounded pretty thorough, can you talk even a bit more on just what gets you so comfortable or comfortable when it comes time to close these transactions, that further losses won’t be there or at least hopefully not too significant?

Ryan Riel, Chief Lending Officer for Commercial Real Estate, Eagle Bancorp, Inc.: Thanks, Justin. This is Ryan Riel. I’d like to point out that in those two situations, the note sales or the property dispositions that we executed in the third quarter, the carrying value of those going into the third quarter was based on LOIs that ended up being traded down prior to execution of the transaction. In response to that, what we’ve implemented in our process to determine the carrying value of the loans in HFS and, you know, just carrying values in general is, you know, we’re getting brokers’ opinion, which in our opinion is a better valuation tool than appraisals in this marketplace. Brokers’ opinions give ranges of values.

We’ve placed the carrying value at the bottom of that range in each case, along with consideration given to cost of disposition in an effort to make sure that situation that played out in those two examples does not happen again.

Eric Newell, Chief Financial Officer, Eagle Bancorp, Inc.: Okay. As far as timing, I imagine the sooner the better, but obviously, pricing is part of the conversation. Can you get any more specific on the timeline here for getting these assets off the balance sheet and maybe what a portion means?

Ryan Riel, Chief Lending Officer for Commercial Real Estate, Eagle Bancorp, Inc.: It’s hard to do that holistically. In each and every one of these cases, as Eric mentioned in his commentary, we are evaluating the circumstances of each individual asset in and of themselves and looking for that highest and best outcome, obviously, for the bank and for our shareholders. In many of these cases, we have ongoing discussions. In many of these cases, those discussions are far enough along that we can confidently say that disposition will occur during the fourth quarter of 2025. I don’t want to, you know, I’m a little bit superstitious. I don’t want to jinx myself and put too fine a point on that, but there will be material action taken in that category during the fourth quarter.

Eric Newell, Chief Financial Officer, Eagle Bancorp, Inc.: Okay, that’s helpful. I know last quarter you gave us a loose idea of where charge-offs could perhaps come in this quarter. Obviously, things changed and could maybe change more, but at the moment, where do you think those could come in that next quarter, and where does that leave things as we get into 2026?

Justin, this is Eric. I think what I would say about that, in terms of next quarter and 2026, we’re just not seeing early activity that would cause us to believe that there’s continued impact on book value from credit. In terms of charge-offs, I don’t want to give you an estimate on that, but I just don’t believe charge-off activity in the quarter will have a meaningful impact on provision expense like it has in the last two quarters.

The idea would be, you’d be more than comfortable with the reserve taking those hits and not having to replace those losses through the provision?

Based on what we know right now, yes. Where our confidence comes from is the two activities I talked about in the prepared comments: the independent loan review, which looked at 87% or 88% of the book, as well as that supplemental internal review that looked at almost $3 billion of pass-rated CRE loans.

Okay. With that pickup in total criticized balances, obviously, despite the charge-offs taken on office, multifamily was again a driver after a similar trend last quarter. I know potential losses if taken should be far less severe, but just wondering if you could spend just a little more time on that and provide any further detail on metrics just to help us get more comfortable with what we’re seeing play out there.

Ryan Riel, Chief Lending Officer for Commercial Real Estate, Eagle Bancorp, Inc.: Sure. Justin, this is Ryan again. I’d like to point out that the transaction volume in our marketplace from a multifamily perspective has sustained at prices that still represent cap rates that are sub 6%. That is consistent with valuations that we underwrote to. I’d also like to point out that if you look at, you know, slide 25 specifically and you focus on the special mention and substandard categories, where you’re seeing debt service coverage be challenged, many of those loans, the actual performance of the property is at or above our underwritten level. So the NOI is coming out at or above our expectation that was set at origination. The debt service coverage ratio that you see reflected is somewhat stressed based on the interest rate environment that we’re in today.

If you took that same NOI and compared it with where the permanent market is, you would get a better outcome in those debt service coverage ratios, a materially better outcome, frankly, because there’s a, you know, somewhere between 150 and 250 basis point gap depending on which permanent provider you look at.

Eric Newell, Chief Financial Officer, Eagle Bancorp, Inc.: Okay. You pointed out on slide 25, but, somewhat related, there was a large $56 million special use loan in Montgomery that fell into special mention in the quarter. Can you just talk a little about what that credit is, what the collateral looks like, just anything you could share?

Ryan Riel, Chief Lending Officer for Commercial Real Estate, Eagle Bancorp, Inc.: Yeah. That particular loan is a special use loan. It’s actually a self-storage property in Montgomery County. The performance of that property has been impaired by, you know, higher than expected operating expenses, which are being disputed. The primary driver there is real estate taxes. They’re being disputed by that customer, and I’ve seen a material drop over the last several quarters of that. It’s an ongoing dispute that they’re working there. Again, the top line performance of that property is at or above where we underwrote.

Eric Newell, Chief Financial Officer, Eagle Bancorp, Inc.: Okay. Got it. Very helpful. I will leave it there. Thanks so much for the time this morning.

Ryan Riel, Chief Lending Officer for Commercial Real Estate, Eagle Bancorp, Inc.: Thanks, Justin.

Conference Operator: Thank you. One moment for the next question. The next question will be coming from the line of Christopher Marinac of Janney Montgomery Scott. Your line is open.

Eric Newell, Chief Financial Officer, Eagle Bancorp, Inc.: Hey, thanks. Good morning. I just wanted to go through briefly the government contract business that you have and, you know, how that appears at this time. Is there any kind of volatility to expect with the shutdown that’s ongoing?

Yeah. Chris, this is Eric. We haven’t seen much of any concerns in the government contracting space because of the government shutdown. As a reminder, the bias of our portfolios is in defense and security, you know, and we looked at line of credit usage relative to earlier this year. It’s actually down 30%. That would be an early indicator of cash flow challenges of clients. We’re not seeing that, but our relationship managers keep a constant flow of communication to understand anything that we might need to respond to.

Ryan Riel, Chief Lending Officer for Commercial Real Estate, Eagle Bancorp, Inc.: That’s right. Obviously, Chris, the risk in that portfolio does increase as the shutdown looms. Tomorrow would meet the first full paycheck of government workers not being met, and we’re hopeful, and some of the indications are that the shutdown, albeit prolonged at this point, will be reaching conclusion hopefully in the coming time.

Eric Newell, Chief Financial Officer, Eagle Bancorp, Inc.: All right. Great, thanks for that. Just to go back to the main credit issues from the held-for-sale that you now have, is the timing on that going to be the next quarter? Can you just walk through how, or maybe what the risk is that you have an additional write-off as those are finally disposed?

Ryan Riel, Chief Lending Officer for Commercial Real Estate, Eagle Bancorp, Inc.: I think I’ll point back to the comments I made to Justin, that we’ve enhanced our process based on the experience we had in the third quarter with the two note dispositions that we went through. We are basing our carrying value at the lower end of the range of values that we’ve determined through third-party work. I’m going to feel very confident, based on conversations with market participants and potential buyers, that our carrying value is better than where we’ll do in many instances.

Eric Newell, Chief Financial Officer, Eagle Bancorp, Inc.: Great. I guess the last one for me just has to do with kind of the inflow in future quarters. Do you have visibility about how the inflow may be, the same or different in Q4 and Q1? I guess part of that question is just sort of, you know, the ongoing maturity wall that you have in the portfolio. I presume that was addressed by the deeper dive that you just did.

Kevin Geoghegan, Chief Credit Officer, Eagle Bancorp, Inc.: Chris Sitzkaven, just a clarification, did you mean the inflow into held-for-sale or the inflow into criticized classified?

Eric Newell, Chief Financial Officer, Eagle Bancorp, Inc.: Really criticized and classified.

Kevin Geoghegan, Chief Credit Officer, Eagle Bancorp, Inc.: Yeah, I just wanted to make sure that was the purpose of doing the additional review, to get as much current information as we could on the entire portfolio so that, you know, in our parlance there wouldn’t be surprises. I think that inflow, that migration will slow down dramatically.

Eric Newell, Chief Financial Officer, Eagle Bancorp, Inc.: Yeah. I would build on that. This is Eric, that, you know, our expectation is that you’re going to see criticized classified decline into 2026.

Great. Thank you for taking all of our questions this morning.

Ryan Riel, Chief Lending Officer for Commercial Real Estate, Eagle Bancorp, Inc.: Thanks, Chris.

Conference Operator: Thank you. One moment for the next question. The next question is coming from the line of Brett Steiner of IBIS Capital Advisors. Please go ahead.

Hi, guys. Can you hear me?

Eric Newell, Chief Financial Officer, Eagle Bancorp, Inc.: Yep. Hi, Brett.

Hey, guys. I’m just trying to understand. You talked about a temporary cash flow issue in the multifamily space versus a long-term impairment. I’m trying to understand the difference between the two, and how do we square that?

Ryan Riel, Chief Lending Officer for Commercial Real Estate, Eagle Bancorp, Inc.: Okay. The comments that I made before were the NOI, or underwritten NOI, as compared to the actual performance of many of these properties, is at or below. Our underwritten NOI is at or below the actual performance. The performance is better, in many instances, than we expected. The debt service driven by the floating interest rate structure that is on many of those loans is higher than anticipated and putting stress on that ratio. Additionally, there are some challenges, as we mentioned in our comments, in the affordable housing space that, specifically within the District of Columbia, has put pressure on the performance. The bad debt expense in Washington, DC, unfortunately, is well above the national average. The DC Council’s passed a rental act recently that will help alleviate some of that over time, and that’s primarily where we see the short-term pressure and long-term relief.

Doesn’t that higher debt service and the pressure that you talked about affect asset values?

It certainly can, yes.

How do you think of that as just a temporary cash flow issue versus a valuation impairment?

Because the cash flow will improve over time, and therefore the valuation will improve over time.

Based on a refinance or some other issue?

Based on the passage of time and improved performance.

Okay. I’ll follow up offline on that. Any other comments on Kevin’s departure? I know that, about a year ago, that seemed to be a big catalyst for a cleanup.

Kevin Geoghegan, Chief Credit Officer, Eagle Bancorp, Inc.: Brett, this is Kevin. Thanks for the question. As Susan talked about, I voluntarily resigned. I’m proud of, very proud of, what I was able to contribute to the enhanced credit risk management processes and policies here. I also want to take a second and just thank my colleagues, as well. They all know who they are, as they continue to manage through our asset quality challenges.

Susan Riel, Chair, President and CEO, Eagle Bancorp, Inc.: I would also add to that that with Kevin Geoghegan’s resignation and our desire to be deliberate in our process of finding a replacement and not miss a beat in continuing the strong credit risk management processes that we have put in place, we decided to hire William Parotti, Jr. and Daniel Callahan on an interim basis so that we would have the time, the appropriate amount of time to seek a permanent replacement for Kevin.

Okay. Great. Thanks, guys. Only one other thought. As you go into 4Q, if you’re at sort of peak marks and you don’t think at this point you’ll need to be adding to reserves or charge-offs will eat through and then you’ll have to rebuild into the provision, I assume that you’ll be accreting capital in the fourth quarter?

Eric Newell, Chief Financial Officer, Eagle Bancorp, Inc.: Yeah. I would direct my, Brett. This is Eric, Brett. I would reaffirm what I said earlier on the call in terms of the independent loan review as well as that supplemental loan review. It’s really helping validate management’s view of credit, and my earlier comment that I don’t believe at this time that book value will continue to be degraded by credit.

Okay. That’s a yes? PP&R should exceed provision?

What I’m saying is that I believe that the credit costs will not be degrading book value.

Okay. All right. Best of luck. Thanks so much, guys, for taking the questions.

Thanks.

Conference Operator: Thank you. One moment for the next question. The next question is coming from the line of Catherine Mealor of KBW. Your line is open.

Catherine Mealor, Analyst, KBW: Thanks. Good morning.

Eric Newell, Chief Financial Officer, Eagle Bancorp, Inc.: Hi, Catherine.

Catherine Mealor, Analyst, KBW: Hi, Catherine. Maybe just one follow-up on credit. You’ve kind of touched on this, but I’m going to just ask a little bit more directly. As you did the independent loan review and the external loan review, what did you see as you did those reviews that was not really maybe captured before in how you were categorizing some of these properties? It just seemed surprising to me, the big increase into special mention and then a few into substandard, particularly on the multifamily piece. I’m curious, you know, what changed and what specifically you saw within that loan review that made you feel like it was now more appropriate to categorize the loans that way?

Kevin Geoghegan, Chief Credit Officer, Eagle Bancorp, Inc.: Catherine, thanks. That review was really putting all the current information that we had on every single loan in our lap at one point. We do reviews annually on all these properties, all of our loans, but this was a, you know, all at one time to make sure we really understood the depth of the portfolio. With that current information, we saw some segments of deterioration, and we took according steps.

Catherine Mealor, Analyst, KBW: Got it. Okay. As we think about it, one part that I found really helpful that you brought out is the one on the movement in the office books that kind of shows you almost where we are in the cycle, from where we started and the losses and write-downs and transfers out of the office book. It feels like from the office book, we’re really kind of far through the cycle and working through those issues. The multifamily piece feels like we’re a little bit more early. Is there any way you can articulate what you think the ultimate losses or write-downs in multifamily may be relative to what we’re seeing in this office book?

Ryan Riel, Chief Lending Officer for Commercial Real Estate, Eagle Bancorp, Inc.: Catherine, this is Ryan. I don’t think they’re comparable at all, right? The structural issues in the office market in the Washington, DC region are significant, and you see that in our performance over the last several quarters. The structural issues just don’t exist in the multifamily segment. If you look at transaction volume, it’s a bit down, but investors are still very interested in Washington, DC, well-located, high-quality, Washington, DC region multifamily product. Some of the jurisdictional issues that I referenced are presenting some headwinds for the segment. We’re facing those head-on.

We have good quality sponsorship in those situations, and some of the other issues that are shown on slide 25, the special mention and substandard category, are simply transactions that the interaction of the net operating income and the debt service coverage based on the interest rate structure that’s in place in many of those, presents a challenge that’s below policy levels, sometimes below one-to-one. In those situations, and in all of those situations, we have structural enhancements that allow us to qualify those as, you know, potential weaknesses, not well-defined weaknesses, while we work to restructure. We’re in active discussions to restructure. As you know, in the office category, when we went into restructure conversations or workout conversations, the value of that collateral had diminished substantially. That is just not the case in the multifamily properties.

Catherine Mealor, Analyst, KBW: Got it. Understood. Great. Thank you.

Conference Operator: Thank you. One moment for the next question. The next question will be coming from the line of Nick Grant of North Reef Capital. Your line is open. One moment. Our next question will come from the line of Nick Grant of North Reef Capital. Please go ahead.

Eric Newell, Chief Financial Officer, Eagle Bancorp, Inc.: Hey, guys. Can you hear me?

Yeah, we got you. Hey, Nick.

Hi, Nick.

All right. I wasn’t on mute, so I don’t know what the IT issue was, but thanks for taking the question. First off, I just want to applaud the proactive measures to work through credit. When I step back, this $37 tangible book feels much more reflective of the identified risk across your loan exposures, reduces future credit migration. Susan, in your opening remarks, I did hear improving franchise value is a focus. I’d really agree with that. Given industry activity on the M&A front, increasing activity, like we should see more deals here, how do you feel about the franchise upstream optionality as a way to increase shareholder value? Yeah. I can start with that, and Susan can finish.

I think from our perspective, we’re focused on the strategic plan and building shareholder value through the diversification efforts in C&I, improving our funding profile, and focused on improving pre-provision net revenue, which should drive enhanced or improved ROA and ROTC.

Susan Riel, Chair, President and CEO, Eagle Bancorp, Inc.: As you know, Nick, the board will focus on anything that adds value to our shareholders and will consider whatever other options come our way.

Eric Newell, Chief Financial Officer, Eagle Bancorp, Inc.: Understood. Thanks, guys.

Conference Operator: Thank you. One moment for the next question. We have a follow-up question coming from Justin Crowley of Piper Sandler. Please go ahead.

Eric Newell, Chief Financial Officer, Eagle Bancorp, Inc.: Hey, I just wanted to hop back in and ask one quick one outside of credit. Just thinking about what’ll help out the margin, looking forward here. You know, you get better yields in C&I, but do you have any detail on how much in fixed loan repricings and adjustable that’ll reset maybe through the end of the next year? Not sure if you can give some color on the magnitude and the yield pickup and, you know, I guess maybe excluding anything that’s set to hopefully move off the balance sheet.

Yeah. I don’t have that information in front of me, Justin, so I don’t want to make assumptions for you there. In terms of just, you know, more broadly with the NIM expectation, I think you have the similar phenomenon of investment portfolio rolling off, whether it’s rolling back into investment portfolio if we’re getting close to that 12% to 15% with higher yields or the cash flows off the portfolio going into loans. That’s going to be helpful on the asset side. On the liability side, it’s the continued expectation in the fourth quarter as well as 2026 that we’re going to be paying down the wholesale funding, brokered funding, which should be helpful in terms of cost of funds as well. About 40% of our loan book is fixed, but it’s a short loan book.

You know, as Ryan has said in various calls, a lot of our lending is value-add. We’re not the permanent financing takeout. When you look at the average book, it’s probably three to four years.

Okay, got it. I appreciate the follow-up.

Thanks, Justin.

Conference Operator: Thank you. That does conclude today’s Q&A session. I would like to turn the call over to President and CEO Susan Riel for closing remarks. Please go ahead.

Susan Riel, Chair, President and CEO, Eagle Bancorp, Inc.: Okay. Thank you for your participation and questions during this call, and we look forward to speaking to you again next quarter. Thank you.

Conference Operator: Thank you all for joining. You can now disconnect.

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