Eagle Bancorp, Inc. (EGBN) Q3 2026 Earnings Call Transcript

Operator: Good day, and thank you for standing by. Welcome to the Eagle Bancorp third quarter 2026 Earnings Conference Call. At this time, participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw a question, please press star 1 again. Also, please be reminded that today's conference is being recorded. I would now like to turn the call over to Eric Newell, Chief Financial Officer of Eagle Bancorp. Please go ahead.

Eric Newell: Good morning. Before we begin the presentation, I would like to remind everyone that some of the comments made during this call are forward looking statements. We cannot make any promises or representations about future performance and caution you not to place undue reliance on these forward looking statements. Our Form 10-K, our Form 10-Qs for the fiscal year 2025, and current reports on Form 8-Ks 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 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 on our website, and is 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 on our website or on the SEC's website. With me today is our President and CEO, Stephen R. Curley; our Chief Lending Officers, Evelyn Lee and Ryan A. Riel, for C&I and commercial real estate, respectively. I will now turn it over to Steve.

Stephen R. Curley: Good morning, and thank you for joining us. We had a strong third quarter. Earnings exceeded expectations, Net interest margin expanded for the third consecutive quarter, and asset quality trends continued to improve. And we further reduced our reliance on brokered funding. At the same time, we continue to invest in the people and capabilities that will drive the next phase of growth at Eagle. Those investments are reflected in our expense base, but we are already beginning to see the results in terms of strong business development activity. As we enter the fourth quarter, we are encouraged by the activity we are seeing across the franchise and we expect pre provision net revenue to increase from third quarter levels. I spent the first 100 days reviewing the business and meeting with employees, clients, shareholders, regulators, and members of our community. That work has reinforced for me the resilience of the Eagle Bank franchise and the significant opportunity in front of us. As well as the priorities we need to focus on. I have described those priorities in 3 parts. Normalize our credit profile, stabilize the balance sheet and funding profile, and continue building a stronger, business capable of driving sustainable growth and improve shareholder returns. The third quarter showed meaningful progress against those priorities. Criticized and classified loans declined by 111 million this quarter and are down $448 million or 41% from a year ago. New criticized and classified inflows fell 74% from the second quarter and brokered deposits declined by $348 million Loan balances declined again this quarter, but at a materially slower pace than in recent quarters. As the runoff moderates, and the investments we have made in our banking teams take hold, our focus is increasingly shifting from stabilizing the balance sheet to generating disciplined growth. Not every asset quality measure showed improvement, Nonperforming assets increased. Driven primarily by 1 previously identified multifamily relationship. Even in this case, I see progress. The bank made the difficult decision to act decisively on a maturing asset of a good customer to protect the bank's economic interest. When I step back from the individual metrics, I see a company well positioned with less credit risk, a strong capital base, and a renewed capacity to grow. Our job now is to convert that progress into stronger returns for our shareholders. Now let me begin with credit. As I mentioned last quarter, I visited our significant problem credits, and each has a specific resolution strategy clear accountability, and active oversight. We evaluate each loan based on its individual circumstances and the path we believe will produce the best economic outcome for the bank. In practical terms, that generally means 1 of 3 paths. The borrower can remargin. They can refinance with another lender. Or we can take the asset back and liquidate it. Our objective is to identify the path that maximizes recovery and execute against it with discipline and urgency. The circumstances differ by credit, and that is why the individual resolution strategy matters. Where additional time improves the bank's economic outcome, we will structure our resolution strategy accordingly. Where a borrower cannot execute we will act decisively. At the portfolio level, our focus is to continue reducing elevated credit risk, limit new problem loan migration, and maintain the loss absorption capacity needed to support disciplined growth. We will measure that progress through criticized and classified assets relative to Tier 1 capital plus our allowance, as well as new levels of inflows of criticized and classified assets. We have made substantial progress Criticized and classified asset levels remain elevated, but they continue to decline and new inflows fell sharply this quarter. I see more of the same in the fourth quarter. The second phase is stabilizing the balance sheet and funding is a big part of that. Not all deposits are created equal. Wholesale, funding gives us liquidity, but it is expensive and transactional. Rate sensitive deposits can play an important role as we grow, particularly in the near term. But over time, the most valuable funding is core relationship deposits that come with broad durable client relationships. You may see us use higher cost rate sensitive deposits to support growth along the way. But the longer term objective is clear. Deepen existing relationships and build a larger base of core relationship deposits. We took another meaningful step in that direction this quarter, by further reducing our reliance on brokered funding. The other balance sheet consideration is capital. As risk has declined, and as capital has continued to build, we have greater flexibility in how we ultimately deploy that capital. In the short run, continued improvement in our credit profile is critical. But we do not need every credit metric to reach its ultimate destination before we begin thinking about the appropriate use of that capital. Growth will be 1 use and over time, capital return can be another. We are not at the point of taking capital actions today, but our objective is not to accumulate capital indefinitely. We intend to deploy capital where it can be produce attractive risk adjusted returns and when appropriate, return excess capital to shareholders. The third priority is building a higher performing franchise. Eagle has experienced bankers established customer relationships, a strong presence in attractive markets, and infrastructure capable of supporting more business. Our opportunity is to generate greater returns from that franchise. That means improving branch productivity, growing relationship deposits, deepening treasury management and fee based relationships, and holding ourselves accountable for the returns on our investment We are also expanding our ability to generate new business. We have added experienced bankers and leaders across the commercial banking, commercial real estate, and other areas where we see attractive opportunities. We are encouraged by the early activity we are seeing from those investments. Ultimately, better operating performance means converting activity into sustained revenue growth while maintaining discipline around expense, credit, and pricing. With that, I will turn the call over to Eric to review the quarter.

Eric Newell: Thank you, Steve. We reported third quarter net income of $24.2 million or $0.79 per diluted share, compared with $6.9 million or $0.23 per diluted share in the second quarter. The increase primarily reflects an $18.6 million reduction in provision expense along with a $5.3 million income tax benefit related to a state tax refund. Pre provision net revenue was $23.8 million, I will come back to the drivers of that result and importantly, how we see the earnings trajectory developing from here. On our last call, we said we expected provision expense and charge offs to be lower in the second half of 2026, and the third quarter reflected that. Provision expense declined to $2.8 million from $21.4 million in the second quarter, Net charge offs were $4.2 million or 25 basis points annualized down from $47.9 million and that included a $3.4 million recovery. This quarter also marks 1 year we completed the independent review of our loan portfolio. it is useful to put the credit trends in that context. We ended the third quarter of 2025 with $1.1 billion of criticized and classified loans representing approximately 90% of Tier 1 capital. Those balances have declined each quarter since. At September 30, criticized and classified loans, held for sale, totaled $648.4 million or 54% of Tier 1 capital. Slide 14 in the investor deck shows the full trend. The improvement is also increasingly evident in migration. Inflows into criticized and classified loans declined to $55.7 million down 74% from the second quarter and more than 87% from the $445 million we reported a year ago. This was the lowest level since last year's loan review with no concentration in any single asset class. We are also seeing credits move the other direction. During the quarter, $40.7 million of loans were upgraded to pass from criticized and classified, special mention balances declined 29% to $195.1 million and watch balances are now down more than 50% from their peak. 30 to 89 day past dues also improved significantly. Declining from $44.1 million at June 30 to just $0.4 million. At September 30. Held for sale balances declined to $13.5 million from $49.7 million with no new transfers during the quarter. While we do not expect to pursue loan sales as actively as we have over the past year, It remains 1 of the tools we may deploy when it is the fastest and cheapest way to exit a problem loan. Against that broader improvement, nonperforming assets increased $52.9 million to $166 million or 1.75% of total assets. The increase was primarily attributable to the $56 million Maryland affordable multifamily relationship that Steve referenced earlier. And accounts for 76% of the nonperforming inflows this quarter. While the increase in nonperforming assets is meaningful, the broader indicators continue to improve. Including criticized and classified balances, inflows, upgrades, and past dues. Taken together, we believe these measures show that the bank's credit risk profile continues to trend lower. The allowance for credit losses ended the quarter at $128 million or 1.84% of loans, relatively flat from the prior quarter. In the office, coverage on performing loans declined to 4.86% from 7.22%, reflecting the reduction in our qualitative overlay as the income producing office portfolio declined and the credit quality of what remains improved. Turning to operating performance. Over the past year, we significantly repositioned the balance sheet reducing higher risk exposures and improving portfolio composition. That process resulted in a smaller balance sheet, but it is also put us in a stronger position to begin growing again. Net interest margin expanded 8 basis points to 2.6% marking the third consecutive quarterly increase. While our cost of funds declined to 2.75%. Net interest income was $61.3 million, which was down $1 million as the benefit from margin expansion was more than offset by the smaller average earning asset base. The reduction in earning assets reflects, in part, the deliberate repositioning of our loan portfolio. We entered the year intending to reduce CRE exposure improve the mix between CRE and C&I, and work down higher risk assets. More than half the loans that paid off were criticized or classified, The trade off has been a smaller earning asset base in the near term but a stronger and better balanced portfolio from which to grow. Noninterest income was $9.6 million, down $1.2 million from the second quarter. We had no loan sale gains this quarter, as compared to the $2.3 million recognized in the second quarter. And was partially offset by a $1.1 million increase in swap fee income. Noninterest expense increased $3.1 million to $47.1 million salaries and benefits increased $4.9 million, including $1.5 million of accelerated awards, $1.5 million of compensation tied to new hires, and $1.3 million of annual incentives. This was partially offset by a $2.1 million decline in FDIC insurance expense. Pre provision net revenue was $23.8 million compared to $29.1 million last quarter. The linked quarter PPNR comparison reflects several factors. We benefited from continued margin expansion and stronger swap activity while a smaller balance sheet, the absence of second quarter loan sale gains and several expense items reduced PPNR. We also continue to absorb the cost of new talent Steve discussed earlier, ahead of its full revenue contribution. Importantly, approximately $2.8 million of the quarter's expense increase is not expected to remain in the fourth quarter run rate. In C&I, loan balances were relatively stable during the quarter, while deposits grew $101.5 million or 5.9%. Individual relationships can create linked quarter volatility, particularly among larger commercial customers. But C&I loans are up 20% year over year. That broader momentum remains positive reflects the investments that we have made the commercial franchise since late 2024. Core deposits increased $197 million during this quarter, while brokered deposits declined $348 million And as a result, total deposits declined $151 million, reflecting the continued reduction in brokered funding. In CRE, balances declined by $148 million as payoff activity continued while credit quality across the portfolio strengthened. The deposit funding ratio remained at 35% compared with 29% a year ago. We have several multifamily maturities in the fourth quarter, where we have been actively working with borrowers. We expect a combination of principal curtailments and extensions that should reduce our exposure while allowing us to retain performing earning assets and client relationships. Total loans held for investment declined 0.9% to $6.6 billion That headline decline reflects continued CRE payoff activity but does not fully capture what we are seeing in new business activity. Pipeline activity has strengthened, particularly in commercial real estate, and we expect that momentum to support measured net loan growth beginning in the fourth quarter. Capital continues to build. CET1 increased to 14.99% tangible common equity increased to 12.24%, and Tier 1 leverage increased to 12.08%. Tangible book value per share rose to $38 and has grown each quarter this year Turning to our outlook on slide 9. For the first time, we provided both a fourth quarter outlook and an initial view of 2027. We are doing so because we believe we now have greater visibility into the trajectory of the business following the balance sheet repositioning of the past year. The outlook does not include assumptions for future provision expense, charge offs, loan sales, or other credit related items. Which will depend on economic conditions and portfolio performance. Looking ahead, we expect average loans and deposits to grow in the fourth quarter and continue growing in 2027. Combined with the expense dynamics I have discussed, the production capacity we have added, we expect PPNR to increase from the third quarter levels in the fourth quarter. We believe that represents an important step towards converting the investments we have made and the balance sheet capacity we have created into stronger operating performance. With that, I will turn the call back over to Steve.

Stephen R. Curley: Thank you, Eric. Before we move to questions, let me close with where we are headed. 1 of my priorities since arriving has been making sure we have the leadership and talent to execute against the opportunities we see across Eagle. Today, we announced the appointment of Corey Munoz as our chief people officer. Strengthening our leadership around talent, development, culture, and accountability. We have also added experienced bankers tasked with bringing in new business and growing deposits and loans. In Baltimore, we have added Lynn Sanders as our market executive, and Richard Yasky as a senior C&I relationship manager. Both have deep roots in Baltimore, and extensive commercial banking experience. Their addition reflects our commitment to building a larger presence in Baltimore and extending the strength of our Maryland franchise. In commercial real estate, we have added Matthew, Nader, and Cesar Gamilla. Both bringing substantial market experience and additional capabilities to our CRE platform. These additions complement the strong talent we already have at Eagle. We have been very encouraged by our ability to attract accomplished bankers from larger competitors across middle market nonprofit, dealer finance, commercial real estate. We think that says something important about the opportunity people see at Eagle. More importantly, we are beginning to see the activity we expected from those investments. And expect that momentum to continue through the fourth quarter and well into 2027. That reflects an important transition for Eagle. Risk reduction remains a priority but we are increasingly positioned to focus on growth and operating performance. After my first 100 days, I am in increasingly confident in what Eagle can become. We have a valuable franchise and an attractive market, significant capital, experienced bankers, and a stronger foundation on which we can build a premier community banking franchise that importantly generates strong returns for our shareholders. With that, operator, we would be happy to take your questions.

Operator: Thank you. As a reminder, if you would like to ask a question, please press 1-1 on your telephone. You will then hear the automated message advising your hand is raised. We also ask that you please wait for your name and company to be announced before proceeding with your question. Our first question will be coming from the line of Justin Crowley of Piper Sandler. Please go ahead.

Justin Crowley: Hey. Good morning, everyone.

Stephen R. Curley: Good morning.

Justin Crowley: Just wanted to start on the large multifamily loan. I am just curious if you could provide a little more detail on that property. I know we talked about it a little before. Just what ultimate resolution could look like and then just how you think you are protected from any future loss on that 1.

Stephen R. Curley: So thanks for the question, Justin. We have been working on this credit for some time. We have disclosed this in prior quarters. At this point, we are not going to go into the nitty gritty detail of, each and every play. But the action we did take, this quarter, protected the economic interest of the bank, and, we believe will maximize the ultimate outcome. On this asset. I think we thought that this might restructure because there is a subordinate lien on the property. But in the end, that well capitalized person decided not to support it. So now we are taking the action we need to protect our interest.

Justin Crowley: Okay. And there are specific reserves on this loan? Currently?

Eric Newell: Yes, Justin. There is.

Justin Crowley: Okay. And then I guess just looking at the broader multifamily book, do you have how much of that by chance, represents exposure to affordable housing like this loan?

Stephen R. Curley: The affordable housing book is really contained materially in this loan. At this point, the balance of our multifamily property is predominantly market rate housing.

Justin Crowley: Okay. Got it. And then, Eric, you gave some detail on the watch list how that continued to come down with actually some upgrades, similar to what you--the update you gave last quarter. Do you have any color on what exactly bucketed quarter over quarter and, and how that gets you thinking about just the level of criticized as we get into the end of the year, and then through 2027?

Eric Newell: Yeah. Obviously, when we are looking at something for a potential upgrade, we are looking at it through the underlying performance of the credit. So in these cases, likely that net operating income is improving therefore, that service. They are able to better service their debt. And so we are getting more. Better coverage there. In terms of criticized, classified, we work very closely with the special assets team as well as Ryan's team to look at asset by asset basis on what the expectation of disposition and the timing of that And so, you know, we have a good sense of where we think we are gonna land at the end of the year. And, you know, that will be much improved from what we are reporting here at 9/30. that is helpful.

Justin Crowley: Then just thinking a little longer term on capital management. And you kind of touched on this, Steve, and specifically buybacks. And I know getting criticized down further is the goal before that maybe becomes more realistic conversation. But is there any way to put a finer point on that just in terms of, you know, broadly what level you think opens that up as a possibility?

Eric Newell: Yeah. The way it is Eric. The way Justin and I look at it is comparing ourselves, you know, with criticized, classified to Tier 1 and ACL. And when you look at our peers, you know, there is a little bit more wood to chop. I mean, I am not necessarily suggesting we have to get right exactly to our peer level, but we need to get closer there. Before we have a more substantive conversation with our board about potential capital deployment actions that we could take.

Stephen R. Curley: I feel like we are making good progress on chopping that wood, though. And so I think, you know, if you saw criticized and classified in the--you know, I would feel good if they got to kind of a number in the threes. I think we start to think about that a little bit more carefully. And I do not think that is too far away.

Justin Crowley: Okay, great. And then just 1 last 1. You know, some of the new hires on the commercial side, including the expansion into Baltimore, was just wondering if you could talk a bit more about those initiatives and if we should expect more to come there and just how you are thinking about any future, either geographic or product line expansion?

Evelyn Lee: Thanks, Justin. This is Evelyn, and, Ryan can chime in as well because the hires have been both in C&I and in CRE. On the Baltimore side, yes, I think you will see that team continue to grow. it is really well anchored with, Lynn and Richard. But the plan is to grow that team over time. And then I think what I would highlight, and I think Ryan would echo this, is just that the hires that we are making are very thoughtful and strategic. We are not going out and the target blanket target to hire x number. it is really the folks that we know and trust in this market and know can produce the returns that Eric was describing. I do not know, Ryan, if you would add to that.

Ryan A. Riel: Just echoing that the new hires are anticipated to provide quick and substantial returns, to the bank and our shareholders. On the commercial real estate side, lines of business, we have always done a broad range of things for our customers. As those needs arose, these efforts will be more specific to some of those same tactics, with some intentionality around that line of business.

Stephen R. Curley: And let me just kind of come a little bit over the top on that 1. So bank's assets peaked, in the fourth quarter of 23 at almost $11.7 billion, and they have steadily declined for 11 quarters. To where we are today about $9.5 billion. So that is a 19% decline in assets And so it is hard to grow a franchise with declining PPNR. So to me, normally, I want expensed to chase revenue. Not revenue to chase expense. But in this particular case, you know, we really needed to jump start the production franchise, and so we decided to make some upfront investments. But I want you guys to know I am keenly focused on expenses and our efficiency ratio. But in this case, we had some really excellent opportunities to bring on some high quality producers that can contribute immediately. I felt like to get the franchise moving forward and getting PPNR growth going in the right direction, it was worth making that upfront investment.

Justin Crowley: Great. I appreciate all that color. I will leave it there. Thanks so much.

Operator: Thank you. 1 moment for the next question. Our next question will be coming from the line of David Bishop of Hovde Group. Please go ahead.

Analyst: Yeah. Good morning. Maybe sticking on that topic, I am just curious, you know, as you have the hires within the Greater Baltimore region. Just curious. I do not know if there is a way to size up. Do you think the opportunity is? You know, we are talking about hundreds of millions, maybe getting up to a billions in loans over time as you build out that, you know, that team? And you are looking to sort of penetrate maybe some of the more affluent, you know, counties around there, like Howard County, Anne Arundel, Carroll? Just curious. How you are thinking about expansion within the region.

Stephen R. Curley: I am gonna have Evelyn talk a little bit, but you know, we also. Even as I kind of spend some money to jump start it, you know, we need PPNR to grow. We are gonna invest, you know, at the pace we can grow our earnings. But we see a huge opportunity in Baltimore.

Evelyn Lee: And I think And Evelyn has a lot of time in the market, so I am gonna turn it over to her. Yeah. So, I mean, 1 of the things that has worked well with Baltimore is we had really nice traction there before we hired the team. So we have a handful of, you know, really nice, well heeled influential clients in that market. That are the result of calling efforts that were already ongoing. And so the timing really just felt right to bring a team in and serve that market from Baltimore. And then, you know, going back to the comments that Steve made, it is a fantastic market. it is important to Maryland. We are important to Maryland, so those things just seem to jibe. And we obviously have a business plan with growth targets, etcetera, and that team is aware of those and working towards them.

Analyst: Got it. Then, you know, Steve, you spoke in the preamble about, you sort of the expectations to renew loan growth, and the outlook for CRE is growing there. Just curious, now just given all the hot headlines, you would think there would be no growth out there. But where are you seeing the opportunities to grow in the CRE front on a segment geographic perspective?

Stephen R. Curley: You know, so I am gonna turn that to Ryan in a second. But, you know, it is not sectors that drive opportunity. it is loan officers that find good opportunities. And, you know, what I love about our approach is that we hired 2 strong managers into that team, and we have a strong team. And so it is. We are not targeting this or that. What we are doing is we are having salespeople go out, make calls, and find good opportunities, and we are making credit decisions based on the specific characteristics of that opportunity. So you know, there are some areas that are a little bit better than others, but what I love is that we have outbound calling officers hunting down good opportunities, and we are making underwriting decisions based on the specifics of those assets.

Analyst: Now, from a general perspective--

Operator: I will--go ahead, Ryan.

Ryan A. Riel: I think it is important to note as we did in the prior comments that the relationships we have maintained in the commercial real estate space have remained throughout this cleanup period. For our balance sheet. So those customers have not been inactive in the market, and now we are back to participating with the activities that they have. From a pipeline perspective, we are seeing opportunities in for sale residential. We are seeing opportunities in industrial and retail. In some new multifamily. there is some conversions from office to multifamily happening. Downtown. So it is a pretty diverse pipeline, both in asset type and geography within our region.

Analyst: Got it. Then 1 final question sort of looking back to credit quality. Know, you guys are pretty through the, I guess, the state of, you know, the balloon through the python, so to speak, with the office. But, you know, as you look at potential loss content on the multifamily segment, is there a way to sort of scale that relative to what you have seen in the market relative to office? Is it you know, 10%, 20%? Just curious how you think eventual loss content could play out. Thanks.

Eric Newell: Yes. I mean, way I look at it is that we had $130 million of resolution of criticized and classified this quarter with a $4 million charge off. So that is about a 3% relationship. And I think that gives you a proxy. You can anchor from that. But it gives you a proxy of how much improved that resolution is on multifamily from an office perspective where we were seeing a weighted average loss rate of approaching 50%.

Ryan A. Riel: Yeah. I think the dislocation in the market in office in our region was far more substantial than what we are seeing in multifamily to date and even in a higher interest rate environment going forward as values are likely to become more pressured. The loss content is nothing, not anywhere close to what we experience in the office market.

Stephen R. Curley: When I look at multifamily, you know, because we go through this every week, you know, our criticized and classified loans. And you know, to me, we have engaged with the borrowers for months. You know, and we have been pretty clear in our signaling. We have strong senior positions in these properties. So I think, you know, what is happening is the borrowers, you know, they have equity. Significant equity left in the property, and they are doing the rational thing, they are going to either remargin the property and bring the debt load down so it can cash flow, or they are going to refinance the loan with a nonbank and, you know, non-banks are willing to kind of lend on an IO basis. So I think we are seeing borrowers do the rational thing, and so I feel like the loss content is going to be a quite a bit different. And then in the cases where they do not do 1 and 2, you know, we will liquidate and foreclose and liquidate. And I will tell you there is plenty of willing buyers that want to buy a brand new property that is well built, that has occupancy, and well into the 90s. And so from my perspective, it is an entirely different story than the office situation where you had you know, no cash flow to the property at all, no revenue to the property. In this case, there is plenty of revenue. it is just a matter of getting the debt load sized appropriately. And I think, actually, there is a lot of people looking at this as an opportunity to buy trophy properties in good markets. If they can get their hands on it. So I am not seeing this at all like office.

Analyst: Got it. Appreciate the color. Thank you.

Operator: 1 moment, please, for the next question. Our next question will be coming from the line Steve Moss of Raymond James. Please go ahead.

Stephen Moss: Maybe just following up on credit here. Just kind of curious how you guys are thinking about provision expense going forward. Does the reserve kind of stabilize here in maybe there is not as much to add? I am just kind of curious on the. On your thought process there.

Eric Newell: The way I look at it, Steve, this is Eric. I look at where our criticized and classified assets are today. And if we were to get to our peer level, you know, call that 20% of capital in Tier 1 that gets us to, that is approximately $275 million. And so we are far away from that. However, when we look at we have visibility as to where we expect we are gonna go this quarter. And if there was any loss content, we would have already put that into the reserve based on that visibility. And if you just look again at that relationship I put together on answering David's question about the losses that we experienced relative to the amount of paydown or resolution that we had for criticized and classified of $130 million at around 3.5%. So if you even double or triple that, and you take that number and compare it to the remaining amount of dollars left over to get us to the peer median of criticized and classified that number is below the provision and charge off that we have experienced year-to-date in 2020. So kind of summing all of that up, I just expect you know, I do not wanna give a range just yet, and I could probably do more.a better, or I will put a range of January when we have spent more time on this. Because we are going through the budgeting process right now. But I think in summary, if I would just look at what we have experienced year to date on provision and charge offs. And model something that is lower next year for the full year.

Stephen Moss: Right. Okay. Great. I appreciate all that color there. And then, you know, just in terms of, you know, going back towards business development here, You know, Steve, you all highlighted the hires here with regard to lenders. Last quarter, you did indicate the thought of maybe working on some deposit verticals. Just curious, any updated thoughts there? And kind of is that something maybe we see with fourth quarter results?

Stephen R. Curley: Yeah. You know, honestly, we are working on some. You know, the thing is, recruit people, and then they have to accept. Right? We are working pretty diligently to bring in some talented treasury management and deposit-gathering business development folks. And so I think, you know, I think we will have success You will see some of that in the fourth quarter. And I am getting close to putting kind of the final touches on kind of my, you know, kind of what I would think is the first national business opportunity. But we need to fine tune it and find the right leader for it, and that is something else I think you will see, you know, early next year. As you get to the end of the year and you look for really strong people, you know, they have actually. They are pretty close to their bonus. And so some of those people, I think, are more likely to come over in the first quarter of next year.

Stephen Moss: Okay, great. Appreciate that color there, and thank you for all the color on this call. I will step back.

Operator: Thank you. 1 moment, please, for the next question. Our next question is coming from the line of Will Jones of KBW Please go ahead.

Analyst: Yeah. Hey, guys. Thanks. Good morning.

Stephen R. Curley: Morning. So I wanted to go back to something you mentioned a little bit earlier in the call just around the capital discussion. You mentioned maybe a point in time you get a little more constructive is when criticized, classifieds have a 3-handle on them. Maybe that kind of feels like the bogey. But you also mentioned that you do not think it is far away. And, Eric, I feel like you made some comments around that too. Could you just give us what line of sight you do have into seeing a further reduction in criticized? Like, would it be crazy if we looked 2 quarters down the road and we are kind of there? Just. What kind of line of sight or visibility could you give us into that? You know, that kinda comes in ways as you work through the loans. You know, I feel really good about the fourth quarter. Can you go past the fourth quarter? It could. You know, then you have got a few different loans and the maturities are pushed out a little bit. You know? But I think you know, to me, you know, I think something you know, with a 3-handle somewhere around the end of the second quarter is where I would like to be.

Eric Newell: And just as a clarification, when Steve says 3-handle, you are talking about not percent. You are talking about dollars. Yes. Yeah. Hundreds of millions. Yeah. Yeah. Yep. Just to clarify that. Yeah.

Analyst: Okay. Thanks for clarifying. Yeah. Thanks for clarifying that. Sorry. Yeah.

Stephen R. Curley: So, you know, where we are today, if you saw us with you know, something around $400 million criticized and classified, I think that would be that would be pretty good performance. Yeah. Okay.

Analyst: that is helpful. Appreciate that. And Eric, maybe 1 for you just on the guide, the outlook. You it implies that we are kind of at the bottom here in terms of balance sheet shrinkage. The guide next quarter does imply, know, a somewhat meaningful ramp in terms of average earning asset base. Could you just walk us through how the balance sheet is going to evolve over the next 90 days, kind of arrive at this earning asset base, just what the path is to see the growth kind of materialize here?

Eric Newell: Yeah. I mean, it is the investments that we made in talent and seeing some of the production come out there. Pipeline for CRE has been growing for the last several quarters. So I think that those efforts will result in net growth in CRE. it is expected to result in net growth in CRE in the fourth quarter. And then we also had some you know, cash flows off the investment portfolio that we reinvested into loans, which had pretty good risk adjusted returns. And you saw that the residential real estate that is in our earnings release that was not originated by us, that was purchased by us. And, you know, that took an asset that was earning us 2% and is now earning us 6%, and we purchased those at par So, we feel pretty good about that, and we might do a little bit more of that in the fourth quarter as well. Yeah.

Analyst: Okay. that is great color. Helpful there. And then last thing for me, maybe more high level, Steve, this is you and my first call together. You alluded to your confidence there in your prepared remarks. So I guess just wanted to ask, you know, if you just take an assessment, confidence level on day 1 when you joined Eagle, You spent a few months with the bank to where your confidence level sits today Could you just walk through that evolution, you know, and where you see the Eagle turnaround story going? You have had a little time to look under the hood, kick the tires, and think about a go forward strategy? How has your confidence level kind of changed, evolved, and grown from day 1 to where you are today.

Stephen R. Curley: You know, frankly, the more information you get, the better decisions you can make, the more you feel like you are in control of your situation. And so I feel you know, much better, you know, did not feel bad coming in, but now that I have kind of peeked under the hood, I feel much better. You know, when I first started, you know, I really was focused on asset quality and, you know, digging in on the criticized and classified loans. The deeper I have gotten in that, the more comfortable I am with our situation. And the quality of our workout staff, which I think is superior. You know? And so more recently, I have started to worry more about asset growth. You know, it flip-flops. You know, I went from being worried about asset quality first, and then asset growth second. And now I am absolutely more focused on asset growth and deposit growth than asset quality. Not that they are not both still important. I am highly focused on asset quality. And resolution of our troubled loans. But, you know, I have really shifted to a market facing role and spending more time with producers to make sure we can grow deposits, we can grow loans, grow revenue, and drive a higher PPNR. Yeah. Okay. that is great feedback. I appreciate you sharing that with us. Thanks for the questions. Honestly, I feel great, though. I feel really good about the future of Eagle Bank. Yeah. Excellent. Well, that is great to hear. Thank you.

Operator: 1 moment, please, for the next question. Next question is coming from the line of Christopher Marinac of Brean Capital. Please go ahead.

Christopher Marinac: Hey. Thanks. Good morning. I wanted to ask about stress testing and commercial real estate and really anywhere else, and how much of that is already embedded in the special mention and substandard numbers at September 30?

Ryan A. Riel: Yeah, Christopher. Our team has been looking at higher interest rates for the last several quarters. We have looked at I think, 80 to 90% of the balances, we have added 25%, 50, and 100 basis points of interest rate to look at what could happen to debt service coverage. Any credit that approaches a debt service coverage of 1.0 or in an limited cases goes below 1.0, when you look at any of those credits. close to 100% of them are watch special mention or substandard. So none of them were in the past category, which makes us feel very comfortable that we have a ringfenced any of the potential credits that could have some challenges with higher interest rates?

Stephen R. Curley: And I also just wanna say, you know, we did not see an increase in watch credits. And that process has gotten fine tuned where we really do have a much better early warning system. And so you know, to me, you know, the first signs of issues would be appearing and watching in that number was flat for the quarter and actually improved a bit. So, you know, we are testing. We are stressing things. We are watching things carefully for actual results.

Christopher Marinac: Good. Thank you for sharing that. And then, just a follow-up on deposits for Evelyn. I know we have had seasonality and both sort of the negative side in Q2 and the positive side in Q3 for C&I, deposits. what is happening in terms of net new accounts in the C&I channel? And what is the momentum that you see in the next year that could really sort of meaningfully impact those deposits?

Evelyn Lee: Yeah. Thanks, Christopher. I mean, you mentioned there is a couple of things going on inside the C&I deposit book. So we have got some really nice large depositors that, you know, may or may not be seasonal. So they may have large deposit inflows or outflows based on project timing. Or, suit resolution. that is kind of 1 layer that can change, like, linked quarter to a linked quarter. You have got general seasonality and what I will call the more granular back book. The third quarter tends to be a pretty good quarter for that back book. Fourth quarter, it tends to be down with bonuses and distributions and things of that nature. But overall, if you look at the seasoning of the new relationships that we brought in 2025 were very pleased with that. Those contributed to, in round numbers, about $50 million of new deposits in 2026. Again, those are 25 relationships bringing in seasoning deposits in 2026, and then that trajectory on new primary relationships that we are bringing in is still stable from prior year. And then with some of the investments that we made in talent, we expect that to you know, at least be stable or pick up. But linked quarter to linked quarter can know, I think I like the idea of looking back sort of like a trailing 12-period, and you will continue to see those core relationship deposits grow. But on a quarter by quarter, we could be impacted by some of those other dynamics I mentioned.

Christopher Marinac: Got it. And the mix of the deposits should continue to change too. It may be modest quarter to quarter, but just generally speaking, we should see that mix evolve. In terms of you know, DDA versus money market? Are you going back to like brokered versus core? Sorry. What mix are you referencing? Well, it is it is really the C&I business as percentage of the whole franchise that your component is getting bigger over time.

Evelyn Lee: It has. Yes. Ryan and I would be happy to be in a competition for who can gather the most deposits. That would be a win situation. Well, we are happy to be here because we are in that competition. Yeah. Yeah.

Stephen R. Curley: I would say this though. I do expect our business banking franchise to start to pick up next year. What I would like to see is Evelyn grow very strongly in her mix not to change because we have the branches and the business banking team doing a little bit more of the heavy lifting. But, no, I think Evelyn's got great momentum and is making you know, is recruiting heavily for some supplemental people to her team.

Christopher Marinac: Brett. Well, thank you all for your, input, and, thanks for all the disclosure heading into today. Thanks, Christopher. Thanks, Christopher.

Operator: Thank you. 1 moment, please, for the next question. Our next question is coming from the line of David Chiaverini of Jefferies. Please go ahead.

David Chiaverini: Hi, thanks for taking the questions. And maybe just following up on that, last line of questioning, on the C&I side, but more on the loan side of it. So you mentioned about, you know, CRE pipelines are strong. Can you talk about the C&I loan pipeline here for the fourth quarter? And particularly, I am curious about how we should think about the loan mix as this turnaround matures? Between C&I and CRE.

Evelyn Lee: Yeah. I think in Eric's prepared comments, you mentioned the significant strengthening of the CRE pipeline. Because they have been focused on asset quality. The strength of the C&I pipeline really built actively in the beginning of 25 and has stayed sort of like stable slash growing, but it is absolutely still strong. So I do not think it was mentioned as growing in the same way that CREs is, but still certainly in a very good position. In terms of the mix, I mean, maybe I will let Steve talk about what he is thinking in terms of the ideal mix there.

Stephen R. Curley: I think in the long run, you know, from a loan growth, you like to see 40% from Evelyn, 40% from Ryan, and 20% So c and I, 40%; CRE, 40%; and 20% from business banking in the branches or some other asset generation strategies, but that is kind of how I am thinking about it. The 2 work courses are going to be our C&I and our CRE. And we are starting from a low base. But, you know, we would really like to see the business banking group, you know, start to take a little bit bigger role in this.

David Chiaverini: Thanks for that. And then a question on the guidance for 2027, particularly on the net interest margin, what could get the NIM, for next year to the high end versus the low end of the range of 2.70% to 3.05%? What are some of the puts and takes there?

Eric Newell: Yeah. I am looking at this you know, we are going through the budgeting process as you see. So admittedly, the range is a little wide, and we will tighten that up as we finish that budgeting process. Here in the fourth quarter. But looking at that, you know, there is a couple of things. First off, the we are using a forward curve as of 9/30. So you. I believe there is 3 interest rate hikes in the priced in: 1 in October and 2 earlier this year or early next year. And that has an impact on NII and NIM. And then it is remixing of the investment portfolio, so reinvesting some cash flows there. Which we have not done. Since I have been here. We just started dabbling on that a little bit. Here in the fourth quarter. And then it is also loan composition in terms of yeah. there is about $350 million of roll off of the investment portfolio next year that we will be able to that is earning us currently 2%, and we will be able to be at higher yields next year. And then it is the loan composition of what we are putting on next year in terms of spread, and also the interest rate environment. Helpful. Thank you. The 1 dynamic that I would, you know, like to leave with you as well is on the funding side, know, we are at around 11% of brokered deposits when we file our call report here in a couple weeks or by. At the end of the month. And, you know, that is a tool that we are gonna continue. We are gonna use brokers in some way We have had the benefit of reducing that brokered for the last several years, frankly, but. And earnest during this year, and that had some nice benefits on the cost of funds. I just do not anticipate that we are gonna get those headwinds in 2027. it is gonna be a bit more on the asset side that will be driving NIM expansion. Yeah. Good color. Thank you.

Operator: Thank you. This does conclude today's Q and A session. I would now like to turn the call over to the President and CEO, Steve Curley. Please go ahead.

Stephen R. Curley: Well, Great. Thanks, guys, for all calling in. We are really pleased with your interest in our company, and we look forward to coming back in the fourth quarter and delivering similarly good news, like we did this quarter. Thank you.

Operator: Thank you all for joining today. You may now disconnect.