Q2 2025 Eagle Bancorp Inc Earnings Call

July 24, 2025

We 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 will need to press star one one on your telephone you will then hear an automated message advising you your hand is right.

Kevin Geoghegan: And then one last question on the C&I business and the kind of evolution there with Evelyn's group is the commitments progress bigger than the on balance sheet number and will we see a catch up in C&I balances the next couple quarters? Yeah, Chris, if I'm understanding the question appropriately, the question is, does the outstanding loan balance really reflect the full onboarding of new relationships and others or, you know, not showing some of those balances because the commitments are unfunded. Am I getting that question right? That's correct. So yes, there are always in that line of business, as you know, you know, unfunded commitments that go through and are part of it meant some companies, you know, come in with a line of credit that goes unused for the life of that relationship.

To withdraw your question. Please press star one again, please be advised that today's conference is being recorded I would now like to hand, the conference over to your first speaker today, Eric Newell Chief Financial Officer of Eric Bancorp. Please go ahead.

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.

Current market environment is uncertain and 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 2020 for Form 10-Q for the quarter ended March 31, 25, and current reports on form 8-K, including the earnings presentation slides identify risk factors that could cause the company's actual results to differ materially from any forward looking statements made this morning.

Christopher Marinac: So there is some portion of production that is not reflected in the outstanding balances. I would say that the majority, you know, probably in the 60% or so range is outstanding or will be funded due to, you know, owner occupied construction. Okay, and there's store deposit flows that could happen over time that still is ahead of you with those new relationships. Yep. Okay, great.

Which speak only as of today.

<unk> Bank Corp, does not undertake any.

Speaker Change: Eagle Bancorp does not undertake to update any forward looking statements as a result of new information or future events or developments unless required by law.

Christopher Marinac: Thank you so much for taking my question. Thanks Chris.

Speaker Change: Mornings commentary will include non-GAAP financial financial information to 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.

Justin Crowley: Our next question comes from Justin Crowley with Piper Sandler.

Justin Crowley: Justin, go ahead with your question. Hey, sorry, I think I might have gotten booted out a little earlier. Just a couple follow ups quickly. For the, just back to the credit piece just quickly here for the assets that are being sold or where you're close to the finish line on those transactions, you know, what does pricing look like on those deals? You know, what sort of haircuts are you taking with those sales? Yeah, cycle the date, Justin, the weighted average discount that we're taking is 40, approximately 40%. Okay, and that's off of original loan value and taking into account just prior write downs on those assets.

Speaker Change: 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, Brian Rayle.

Speaker Change: Keith Credit Officer, Kevin I'll turn it over to Susan.

Susan Riel: Thank you Eric Good morning, everyone as I mentioned in our first quarter earnings call, we anticipated taking a proactive approach to the resolution of challenged office loans and to addressing related valuation pressures, our second quarter results reflect the expected outcome of that approach.

Kevin Geoghegan: Am I thinking about that the right way? Yeah, that would be original loan balance and any associated subsequent charge-offs. And Justin, did you hear my commentary about cycle the day char drops before you may have been booted? Yes, yes, that's easy. Got that. I appreciate it.

Susan Riel: While the financial impact is significant we believe these actions were prudent and necessary given our belief that the changes affecting the office sector are long term and structural.

Susan Riel: At the same time, we are making tangible progress towards meeting our objection objectives.

Susan Riel: Outlined in our strategic plan, we are seeing steady growth from RBS C&I team and the shift in our portfolio mix towards C&I is underway importantly, we are beginning to see the results of our targeted relationship deposit efforts with core deposit growth contributing to a REIT.

Kevin Geoghegan: We expect only modest changes. I mean, we really manage that, that our interest rate risk position in a neutral fashion. So we're not expecting any material changes on NII in terms of any interest rate movements from the Fed. Okay, got it.

Susan Riel: <unk> in our wholesale funding reliance.

Susan Riel: While the second quarter performance is disappointing these steps are deliberate and designed to.

Susan Riel: Two more quickly normalized provision expenses in the future. The provision this quarter reflects not only continued market deterioration, but also our receipt of new valuation data on office properties.

Justin Crowley: I will leave it there. Thanks so much.

Susan Riel: As a result, we are reserving for substandard performing office loans at 31, 2% with the total coverage ratio of the office portfolio at 11, 5%.

Catherine Mealor: Our next question comes from Catherine Mealor with KBW. Catherine, go ahead with your question. Catherine.

Susan Riel: Much of the provisioning this quarter is tied to specific exit strategies. For example, we restructured our largest nonaccrual office loan into an a b note continuing payment performance allowed us to return the a portion of this loan to accrual status.

Catherine Mealor: Sorry, I was muted. Thanks for letting me jump back on. Um, one other question was just on, is there any, have you considered or would you consider any kind of bulk loan sale? Um, just to try to kind of clear this, some of these problem credits off kind of all at once. You've got a lot of capital. So depending on I don't know how big is it would require a capital raise, but just how do you kind of weigh a transaction like that, especially given that we saw a pretty successful one with Atlantic earlier this month, although I know the components of your two portfolios.

Kevin: We also made progress on other resolution strategies to nonaccrual office loans were moved to held for sale and we've executed a letter of intent on one of those we expect that sale to close in the third quarter I'll now turn it to Kevin who will talk more about our credit <unk>.

Kevin Geoghegan: Catherine, good question. We have many different types of levers, as you know, to pull. But we, as my prepared comments point to, we look at them on a case-by-case basis and make the best evaluation for the exit that's good for our shareholders and good for the portfolio. Just adding on to that, Catherine, I mean, you know, the exit pricing, if you're doing an active exit, that pricing has a cost to it. And, you know, in building off of Kevin's comments, there are situations where it's better for us to have some strategic patience. And I'm not talking a long time here, but some strategic patience to maximize what we believe is the exit that helps reduce losses.

Kevin: <unk>. Thank you Susan as noted in the first quarter, we are continuing to take a proactive and disciplined approach to our workout strategies.

Kevin: <unk> for the quarter were impacted by a $138 million provision for credit losses.

Kevin: Of this total $45 4 million is related to an increase in our office overlay, which is a qualitative reserve.

Kevin: Now there are $11 1 million.

Associated with individually evaluated loans and as a quantitative component of the model.

Kevin: As we continue to recognize valuation impairments are established reserve methodology takes into account those losses.

While the second quarter performance is disappointing. These steps are deliberate and designed to two more quickly normalized provision expenses in the future. The provision this quarter reflects not only continued market deterioration, but also our receipt of new valuation data on office property.

Kevin: Performing office loans rated substandard.

Kevin: And special mentioned 31, 2% and 15, 6% of their balances in the reserve respectively.

Eric Newell: But but to commentary prepared commentary, you know, we're really looking to find ourselves in a more normalized provision expense level in 2026. And what I mean by normalized, I'm, I'm estimating around 50 basis points on average alone. So there'll be a little bit of a reserve release in 2026, based on our expectations, what we know right now. But but that's what we're thinking about for 2026. So that would necessitate resolution of some of these challenged office loans here in the next two quarters.

Kevin: Nearly $70 million of the provision was attributable to the exit strategies related to loans held for sale are expected sale opportunities.

As a result, we are reserving for substandard performing office loans at 31, 2% with the total coverage ratio of the office portfolio.

Kevin: The allowance for credit losses increased to 183 million.

Seven 5%.

Much of the provisioning this quarter is tied to specific exit strategies. For example, we have restructured our largest nonaccrual office flown into an a b note continuing payment performance allowed us to return to a portion of this loan to accrual status.

Kevin: Representing coverage of total loans at 238%, increasing 75 bps from the prior quarter.

Kevin: The ACL coverage ratio to performing office loans increased to 11 five 4% at the end of Q2 25 up from $5 78 in the prior quarter.

Catherine Mealor: Great, very helpful. Thank you guys.

We also made progress on other resolution strategies to nonaccrual office loans were moved to head held for sale and we've executed a letter of intent on one of those we expect that sale to close in the third quarter I'll now turn it to Kevin who will talk more about our credit.

Operator: This concludes the question and answer session.

Susan Riel: I would now like to turn it back to Susan Riel for closing remarks. So thank you for your questions, and thank you for being with us today, and we look forward to speaking to you again next quarter. Have a great day.

Kevin: Nonperforming loans were $226 4 million at 630, a net increase of $26 million for the quarter.

Kevin: On slide 22 of our earnings release deck, we provide a walk in bridge of non accrual loans for March 31.

Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Kevin: Thank you Susan as noted in the first quarter, we are continuing to take a proactive and disciplined approach to our workout strategies.

Kevin: June 30.

Kevin: Outflows of non accrual loans include the office loan that had an AB restructuring during the quarter, resulting in an a note moving from nonaccrual to accruing pass.

Kevin: <unk> for the quarter were impacted by a $138 million provision for credit losses.

Kevin: Of this total $45 $4 million is related to an increase in our office overlay, which is a qualitative reserve.

Kevin: A non accruing senior housing loan was approved for short sale and closed and we did not finance that takeout.

Kevin: There were $11 $1 million associated with individually evaluated loans and it's a quantitative component of the model.

Kevin: Finally, $10 $5 million is attributable to a disposition of a nonperforming land loan.

Kevin: Inflows to non accrual include 54 million $54 $2 million of office property $41 million of land properties.

Kevin: As we continue to recognize valuation impairments are established reserve methodology takes into account those losses.

Kevin: Performing office loans rated substandard.

Kevin: $33 $6 million related to a data center, which includes an office component at a $9 $1 million life Sciences office property.

Kevin: And special mentioned.

Kevin: One, 2% and 15, 6% of their balances in the reserve respectively.

Kevin: All loans to come into non accrual has specific reserves. If we have determined that there is a loss content associated with them.

Kevin: Nearly $70 million of the provision was attributable to the exit strategies related to loans held for sale are expected sale opportunities.

Kevin: Nonperforming assets to total assets were two 6%.

Kevin: The allowance for credit losses increased to $183 million representing.

Kevin: An increase of 37 bps from the prior quarter.

Kevin: Representing coverage of total loans at two 3%, increasing 75 bps from the prior quarter.

Kevin: Net charge offs totaled $83 $9 million in the second quarter.

Kevin: Loans 30 to 89 days past due were $34 7 million at June 30, decreasing from $83 million at March 31.

Kevin: The ACL coverage ratio to performing office flows increased to 11 five 4% at the end of Q2 25 up from $5 78 in the prior quarter.

Kevin: Total criticized and classified loans at June 30 totaled $875 4 million, increasing from $774 9 million.

Kevin: Nonperforming loans were $226 4 million at 630, a net increase of $26 million for the quarter.

Kevin: The increase was driven by the migration into newly classified loans of $129 million of multifamily loans.

Kevin: On slide 22 of our earnings release deck, we provide a walk in bridge of non accrual loans for March 31.

Kevin: $30 million of land loans.

Kevin: And offset by a $90 million reduction in office loan and collateral exposure.

Kevin: June 30.

Kevin: Outflows of non accrual loans include the office loan that had a restructuring during the quarter, resulting in an a note moving from non accrual to accruing pass.

Kevin: Most of these multifamily loans have naturally occurring are mandated affordable components that showed strength due to governmental mandates that inhibit effective landlord remedies, which resulted in lower operating income.

Kevin: A non accruing senior housing loan was approved for short sale and closed and we did not finance that takeout finally, $10 $5 million is attributable to a disposition of our <unk>.

Kevin: We believe this inflow is idiosyncratic rather than systemic and not indicative of future loss content.

Kevin: Nonperforming land loan.

Kevin: We do not reflect the same they do not reflect the same structural or valuation issues present in the office portfolio.

Kevin: Inflows to non accrual include 54 million $54 $2 million of office property $41 million of land properties $33 $6 million related to a data center, which includes an office component at a $9 $1 million life Sciences.

Kevin: Importantly, the loan portfolio remains well diversified by industry.

Kevin: And geography within the DMV and we believe this diversification combined with our strong credit underwriting and portfolio management provide us with.

Kevin: Office property.

Kevin: Loans that come into non accrual has specific reserves. If we have determined that there is a loss content associated with them.

Kevin: <unk> position us well to manage through the current environment.

Kevin: Yes.

Kevin: Nonperforming assets to total assets were $2 one 6%.

Kevin: Our more proactive approach for dealing with problem loans is designed to hasten the resolution of these credits in a more timely fashion. This will allow the bank to minimize losses and achieve our desired results of moving to a more normalized credit provisioning environment than <unk>.

Kevin: An increase of 37 bps from the prior quarter.

Kevin: Net charge offs totaled $83 $9 million in the second quarter loans 30 to 89 days past due were $34 7 million at June 30th decreasing from $83 million at March 31.

Kevin: <unk> earnings and shareholder returns.

Kevin: Each problem loan however is different and the tradeoff between minimizing loss and quickly resolving the problem loan is something we evaluate on a case by case basis.

Kevin: Total criticized and classified loans at June 30 totaled.

Kevin: <unk> totaled $875 4 million, increasing from $774 9 million.

Kevin: These business judgments.

Kevin: The increase was driven by the migration into newly classified loans of $129 million of multifamily loans.

Kevin: Informed by a myriad of market ended up borrower dynamics are constantly evolving.

Kevin: That said the bank is fully aware and fully appreciates the minimizing of uncertainty regarding the overall loss content in our office portfolio itself.

Kevin: $30 million of land loans.

Kevin: Offset by a $90 million reduction in office loan and collateral exposure.

Kevin: A risk to franchise value.

Kevin: This is part of the overall consideration when we evaluate the best course of action for each problem credit.

Kevin: With a reserve coverage on office portfolio growing and more problem credits being resolved.

Kevin: We believe this inflow is idiosyncratic rather than systemic and not indicative of future loss content.

Kevin: The resolution of the remaining problem credits should have less of an impact on earnings over time.

Kevin: Although not possible to predict with any degree of certainty. We believe third quarter will be better than the second quarter and are hopeful to return to a more normalized provisioning environment in <unk> of 'twenty six Eric.

Kevin: We do not reflect the sales they do not reflect the same structural or valuation issues present in the office portfolio.

Kevin: Importantly, the loan portfolio remains well diversified by industry.

Kevin: And geography within the DMV.

Eric Newell: Thanks, Kevin.

Eric Newell: Our second quarter results reflect the impact of credit reserve building and loan resolution efforts, resulting in a net loss for the quarter totaling $69 8 million or $2 30 per share.

Kevin: We believe this diversification combined with our strong credit underwriting and portfolio management provide us with.

Kevin: Well position us well to manage through the current environment.

Eric Newell: This compares to the prior quarter's net income of $1 7 million or <unk> <unk> per diluted share.

Eric Newell: Eagle Bank continues to operate safely and soundly from a position of financial strength. There continues to be extensive loss absorption capacity on the balance sheet to address any reasonably foreseeable lost content, our valuation risks posed by our office portfolio.

Eric Newell: Even with this quarter's credit related losses, our capital position remains strong tier one leverage ratio decreased 48 basis points to 10, six 3% our common equity tier one ratio decreased 60 basis points to 14, 1% and notably our tangible common equity ratio increased 18 basis.

That maximizes earnings and shareholder returns.

Kevin: Each problem loan however is different and the tradeoff between minimizing loss and quickly resolving the problem loan is something we evaluate on a case by case basis.

Kevin: These business judgments.

Kevin: Informed by a myriad of market end up borrower dynamics are constantly evolving.

Eric Newell: Since 211, 18% at quarter end, which was supported by stronger investment portfolio valuations.

Kevin: That said the bank is fully aware fully appreciates the minimizing of uncertainty regarding the overall loss content in our office portfolio itself.

Eric Newell: Our book value per share decreased to $1 96 to $39 <unk>.

Eric Newell: Deposit growth at a high level of insured deposits underscore the strength and stability of our funding base with $4 8 billion of available liquidity, we maintain more than two times coverage of uninsured deposits, reflecting a well positioned balance sheet.

Kevin: Our risk to franchise value.

Kevin: This is part of the overall consideration when we evaluate the best course of action for each problem credit.

Kevin: With a reserve coverage on office portfolio growing and more problem credits being resolved.

Eric Newell: Average deposits have grown by 1 billion since the second quarter of 2024.

Kevin: Resolution of the remaining problem credits should have less of an impact on earnings over time.

Eric Newell: During the quarter there were meaningful positive developments in our core performance metrics pre provision net revenue increased $2 3 million to $30 7 million in the second quarter.

Eric Newell: The increase in net interest income and lower noninterest expenses contributed to their pre provision net revenue increase this growth underscores the stability of our core earnings even with elevated provisioning.

Kevin: Thanks, Kevin.

Kevin: Our second quarter results reflect the impact of credit reserve building and loan resolution efforts, resulting in a net loss for the quarter totaling $69 8 million or $2 36 per share.

Eric Newell: Net interest income rose to $67 8 million, which benefited from a combination of lower deposit and borrowing costs.

Eric Newell: A reduction in short term borrowings and an additional day in the quarter.

Kevin: This compares to the prior quarter as net income of $1 7 million or six cents per diluted share.

Eric Newell: These benefits helped offset pressure from lower loan yields and a shift towards time deposits.

Kevin: The bank continues to operate safely and soundly from a position of financial strength. There continues to be extensive loss absorption capacity on our balance sheet to address any reasonably foreseeable lost contact our valuation risks posed by our office portfolio.

Eric Newell: And in addition to improvements in funding costs, we continue to see positive movement in our funding profile.

Eric Newell: Pay down at <unk> borrowings by 440 million to $50 million at June 30.

Eric Newell: Additionally, we've reduced noncore brokered deposits by $461 7 million, an increase core deposits by $304 1 million over the same period.

Kevin: Even with this quarter's credit related losses, our capital position remains strong tier one leverage ratio decreased 48 basis points to 10, six 3% our common equity tier one ratio decreased 60 basis points to 14, 1% and notably our tangible common equity ratio increased 18 basis points to <unk>.

Eric Newell: These changes reflect a deliberate effort to strengthen and diversify our funding base and reduced reliance on wholesale funding consistent with our strategy.

The decline in interest bearing cash balances this quarter. It was a strategic decision aimed at optimizing our net interest margin by.

Kevin: 18% at quarter end, which was supported by stronger industrial portfolio valuations, our book value per share decreased to $1 96 to $39 three.

Eric Newell: By intentionally reducing excess on balance sheet liquidity and paying down short term borrowings we were able to improve NIM.

Eric Newell: This is consistent with our broader effort to manage the balance sheet dynamically, while supporting long term margin expansion.

Kevin: Deposit growth at a high level of insured deposits underscore the strength and stability of our funding base with $4 8 billion of available liquidity, we maintain more than two times coverage of uninsured deposits, reflecting a well positioned balance sheet.

Eric Newell: Yes.

Eric Newell: Our focus on expanding C&I lending continues to gain traction demonstrating the resiliency and strength of our commercial banking franchise.

Eric Newell: Quarter over two thirds of our loan originations were C&I loans building on the successes of the first quarter in advancing our strategic objective to diversify the loan portfolio.

Kevin: Average deposits have grown by $1 billion since the second quarter of 2024.

Kevin: During the quarter there were meaningful positive developments in our core performance metrics pre provision net revenue increased $2 3 million to $30 7 million in the second quarter.

Eric Newell: NIM expanded nine basis points from the first quarter of 237%, primarily driven by the Paydown of average borrowings and reduced funding costs on money market accounts and other borrowings with.

Kevin: The increase in net interest income and lower noninterest expenses contributed to their pre provision net revenue increase this growth underscores the stability of our core earnings even with elevated provisioning.

Eric Newell: With improved deposit pricing lower average borrowings and upward repricing of investment portfolio cash flows. We expect we continue to expect NIM to improve modestly through the balance of 2025.

Kevin: Net interest income rose to $67 8 million, which benefited from a combination of lower deposit and borrowing costs.

Eric Newell: Noninterest income was $6 4 million for the second quarter of 2025 compared to $8 2 million in the prior quarter. The sequential decline was primarily the result of a $1 9 million loss from our repositioning trades executed through enhanced long term yields in the investment portfolio we remain.

Kevin: A reduction in short term borrowings and an additional day in the quarter.

Kevin: These benefits helped offset pressure from lower loan yields and a shift towards time deposits.

Kevin: And in addition to improvements in funding costs, we continue to see positive movement in our funding profile.

Eric Newell: Confident in our noninterest income forecast underpinned by stable bully contribution and our expectation of fee generating activities from growth in our Treasury management sales.

Kevin: Paid down at HIV borrowings by 440 million to $50 million at June 30.

Eric Newell: Noninterest expense decreased by 2 million to $43 5 million from the previous quarter. This improvement was attributed to lower legal accounting and professional fees. We continue to maintain tight control of expenses, while making targeted investments to support our strategic objectives.

Kevin: Additionally, we've reduced noncore brokered deposits by $461 7 million, an increase core deposits by $304 1 million over the same period.

Kevin: These changes reflect a deliberate effort to strengthen and diversify our funding base and reduced reliance on wholesale funding consistent with our strategy.

Eric Newell: We've updated our view on full year 2025 on slide 11 average, earning asset growth has been adjusted to reflect our second quarter strategic decision to manage our excess cash.

Kevin: The decline in interest bearing cash balances this quarter. It was a strategic decision aimed at optimizing our net interest margin by essentially reducing excess on balance sheet liquidity and paying down short term borrowings we are able to improve NIM.

Eric Newell: We've revised our average loan growth outlook from 2% to 5% growth to flat, primarily due to higher than expected CRE payoffs earlier in the year.

Kevin: This is consistent with our broader effort to manage the balance sheet dynamically, while supporting long term margin expansion.

Eric Newell: While our C&I teams have driven solid loan growth in CRE payoffs have prompted us to reassess overall loan growth expectations.

Kevin: Our focus on expanding C&I lending continues to gain traction demonstrating the resiliency and strength of our commercial banking franchise in the second quarter over two thirds of our loan originations were C&I loans building on the successes of the first quarter in advancing our strategic objective to diversify the loan portfolio.

Eric Newell: Importantly, this revision is not a result of market weakness or reduced demand, but rather aligns with our strategic objective to lower CRE concentration.

Eric Newell: We've raised our average deposit growth guidance from 1% to 4% growth to six 4% to 6% growth, reflecting stronger than anticipated growth in digital deposits.

Kevin: NIM expanded nine basis points from the first quarter of 237%, primarily driven by the Paydown of average borrowings and reduced funding costs on money market accounts and other borrowings.

Eric Newell: And finally, we've adjusted the annual tax rates reflect expectations associated with the loss this quarter.

Eric Newell: Updated range as reflected in the deck at 37% to 47%, reflecting tax planning actions that we've taken earlier in the year.

Kevin: With improved deposit pricing lower average borrowings and upward repricing of investment portfolio cash flows. We expect we continue to expect NIM to improve modestly through the balance of 2025.

Eric Newell: Yes.

Eric Newell: Our capital return philosophy is shifting in tandem with current performance and strategic priorities we.

Kevin: Noninterest income was $6 4 million for our second quarter 2025, compared to $8 2 million in the prior quarter. The sequential decline was primarily the result of a $1 9 million loss from our repositioning trades executed through enhanced long term yields in the investment portfolio we remain.

Eric Newell: We declared a dividend this quarter. However, we are evaluating a near term reduction of our suspension and expect to take this action and expect to take this action that appropriately considers current performance and outlook. This.

Eric Newell: This potential action is not motivated by any concerns we have regarding loss.

Kevin: Confident in our noninterest income forecast underpinned by stable bully contribution and our expectation of fee generating activities from growth in our Treasury management sales.

Eric Newell: Absorption capacity, which remains strong, but as deliberate choice to preserve flexibility as we work through the remainder of our asset quality resolution strategies and positioning the bank for long term value creation.

Kevin: Noninterest expense decreased by 2 million to $43 5 million from the previous quarter. This improvement was attributed to lower legal accounting and professional fees. We continue to maintain tight control of expenses, while making targeted investments to support our strategic objectives.

Eric Newell: Earnings normalized we will reevaluate the most effective forms of capital return.

Eric Newell: I'll turn it over Susan for a short wrap up thanks.

Susan Riel: Thanks, Eric we are pleased to see positive momentum towards achieving our strategic priorities growing and diversifying our franchise deepening relationship based deposits and driving operational excellence what continues to distinguish Eagle bank is our deep connection to the communities we serve.

Kevin: We've updated our view on full year 2025 on slide 11 average, earning asset growth has been adjusted to reflect our second quarter strategic decision to manage our excess cash.

Kevin: We've revised our average loan growth outlook from 2% to 5% growth to flat, primarily due to higher than expected CRE payoffs earlier in the year.

Eric Newell: <unk> and our relationship first culture.

Eric Newell: In an evolving market like the DMV staying close to our clients and our community remains a core strength that supports our resilience and relevant.

Kevin: While our C&I teams have driven solid loan growth in CRE payoffs have prompted us to reassess overall loan growth expectations.

Eric Newell: Before we conclude I want to express my sincere appreciation to our employees and customers your dedication and professionalism make all the difference with that we will now open things up for questions.

Kevin: Importantly, this revision is not a result of market weakness or reduced demand, but rather aligns with our strategic objective to lower CRE concentration.

Kevin: We've raised our average deposit growth guidance from 1% to 4% growth to six 4% to 6% growth, reflecting stronger than anticipated growth in digital deposits.

Eric Newell: Thank you at this time, we will conduct a question and answer session. As a reminder to ask a question you will need to press star one one on your telephone and wait for your name to be announced with.

Kevin: And finally, we've adjusted the annual tax rates reflect expectations associated with the loss this quarter.

Kevin: Updated range as reflected in the deck at 37% to 47%, reflecting tax planning actions that we've taken earlier in the year.

Eric Newell: Withdraw your question. Please press star one again, please standby, while we compile our Q&A roster.

Kevin: Yes.

Kevin: Our capital return philosophy is shifting in tandem with current performance and strategic priorities, we declared a dividend. This quarter. However, we are evaluating a near term reduction of our suspension and expect to take this action and expect to take this action appropriately considers current performance and outlook.

Speaker Change: Our first question comes from Justin Crowley with Piper Sandler Justin go ahead with your question.

Justin Crowley: Hey, good morning.

Justin Crowley: Wanted to start out on credit and I appreciate all the detail in the prepared remarks.

Kevin: This potential action is not motivated by any concerns we have regarding loss.

Justin Crowley: What the reserve builds and charge offs in the quarter can you just sort of help frame for us how you think about what inning, we're in as far as providing for potential loss as you look to move some of these assets off the balance sheet I know in the past, it's been more of as loans near maturity and the new appraisals come in.

Kevin: Absorption capacity, which remains strong, but as deliberate choice to preserve flexibility as we work through the remainder of our asset quality resolution strategies and positioning the bank for long term value creation at.

Kevin: Nice earnings normalize we will reevaluate the most effective forms of capital return.

Justin Crowley: That's when we would tend to see the credit cost filter through so curious the scope of the actions taken this quarter in terms of.

Susan: I'll turn it over to Susan for a short wrap up thanks.

Susan: Thanks, Eric we are pleased to see positive momentum towards achieving our strategic priorities growing and diversifying our franchise deepening relationship based deposits and driving operational excellence what continues to distinguish Eagle bank is our deep connection to the communities we serve.

Justin Crowley: The extent to which you looked at it in the outer years.

Justin Crowley: The office portfolio in other areas.

Speaker Change: Yes, Justin Thanks for the question, while I'm, a baseball fan I'm not sure I'm going to put us in any inning, but really to point you back to the remarks that we believe that net charge offs in the next quarter will be similar to this quarter end.

Susan: <unk> and our relationship first culture.

Justin Crowley: But because of our reserve.

Susan: In an evolving market like the DMV staying close to our clients and our community remains a core strength that supports our resilience and relevance.

Speaker Change: Actions in provisioning.

Speaker Change: We don't see a bigger impact of more severe impact to the income statement.

Speaker Change: And just as just to build off of that thinking through the cycle.

Susan: Before we conclude I want to express my sincere appreciation to our employees and customers your dedication and professionalism make all the difference with that we will now open things up for questions.

Speaker Change: For in terms of office.

Speaker Change: And office related collateral.

Speaker Change: And what I define as the cycle is starting June 30 of 2023, we've charged off $113 million today.

Susan: Thank you at this time, we will conduct a question and answer session. As a reminder to ask a question you will need to press star one one on your telephone and wait for your name to be announced with.

Speaker Change: At June 30, we had total reserves for office of $109 5 billion.

Speaker Change: And that reserve would include the office overlay as well as in the quantitative aspect of the reserve and any individually evaluated loans.

Susan: Or withdraw your question. Please press star one one again, please standby, while we compile our Q&A roster.

Speaker Change: And I would build on that too and point to the maturity comment that you made Justin and say that there is.

Speaker Change: Our first question comes from Justin Crowley with Piper Sandler Justin go ahead with your question.

Speaker Change: More than half of the 26 maturities are being dealt with and the numbers that youre seeing now.

Justin Crowley: Hey, good morning.

Justin Crowley: Wanted to start out on credit and I appreciate all the detail in the prepared remarks.

Speaker Change: Standby for our next question.

Speaker Change: What the reserve builds and charge offs in the quarter can you just sort of help frame for us how you think about what inning, we're in as far as providing for potential loss as you know.

Speaker Change: Our next question comes from Catherine Mealor with K B W. Katherine go ahead with your question.

Catherine Mealor: Thanks, Good morning.

Speaker Change: Hi, Catherine.

Speaker Change: To move some of these assets off the balance sheet I know in the past it's been more of his lines near maturity and the new appraisals come in.

I guess my.

Speaker Change: Follow up to that is.

Speaker Change: The inflows to NPA for really large this quarter and so just kind of curious as you are.

Speaker Change: That's when we tend to see the credit cost up there through so curious the scope of the actions taken this quarter in terms of the.

Speaker Change: I think what we're all trying to figure out right now.

Speaker Change: Extent to which you looked out in the outer years.

Speaker Change: Are we at the peak right and that was kind of a maturity question that was just asked and so.

Speaker Change: The office portfolio in other areas.

Speaker Change: Yes, Justin Thanks for the question well I am a baseball fan I am not sure I'm going to put us in any inning, but really to point you back to the remarks that we believe that net charge offs in the next quarter will be similar to this quarter end.

Speaker Change: Yes.

Speaker Change: How can we kind of think about the cadence of working your classified assets.

Speaker Change: Bucket is really large and so.

Speaker Change: What should our expectations be for kind of the cadence for how we kind of work through that and.

Speaker Change: But because of our reserve.

Speaker Change: The pace at which we could potentially see that bucket move into NPL and can it be.

Speaker Change: Actions in provisioning.

Speaker Change: See a bigger impact of more severe impact to the income statement.

Speaker Change: Similar to the level that we saw this quarter or do you feel like this was.

Speaker Change: And Justin just to build off of that picking through the cycle.

Speaker Change: Accelerated.

Speaker Change: Outside of some kind of dramatically this quarter.

Speaker Change: For in terms of office.

Speaker Change: Yes, Kathryn good question.

Speaker Change: And office related collateral.

Speaker Change: Right now we believe the degree of inflow.

Speaker Change: And what are the financial cycle is starting June 30 of 2023, we've charged off $113 million to date.

Speaker Change: Going forward is not going to be nearly to the same degree that it was in this past quarter.

Speaker Change: At June 30, we had total reserves for office of $109 5 billion.

Speaker Change: Okay.

Speaker Change: And.

Speaker Change: And that reserve would include the office overlay as well as in the quantitative aspect of their reserves and any individually evaluated loans.

Speaker Change: And as we look at the classified asset ratio.

Speaker Change: Is there a level where that gets where theyre become kind of regulatory restrictions in terms of what was already kind of cut the dividend, but any kind of additional kind of regulatory restrictions are we still in a range where.

Speaker Change: And I would build on that too and point to the maturity comment that you made Justin and say that there is.

Speaker Change: More than half of the 26 maturities are being dealt with and the numbers that youre seeing now.

Speaker Change: We can kind of kind of work through it.

Speaker Change: Yes, Catherine I would just say that building on Kevin's comment, we're very diligent and deliberate in working that.

Speaker Change: Criticized and classified.

Speaker Change: Standby for our next question.

Speaker Change: Down there is obviously, a large inflow this quarter and kind.

Speaker Change: Our next question comes from Catherine Mealor with <unk> W. Katherine go ahead with your question.

Speaker Change: And can characterize that inflow, but our expectation is that youre going to see that.

Catherine Mealor: Thanks, Good morning.

Justin Crowley: Hi, Catherine.

Speaker Change: Total portfolio a decline towards the back half of the year and into 2026.

Justin Crowley: I guess my follow up to that is.

Justin Crowley: The inflows to Npls were really large this quarter and so just kind of curious as you're okay.

Speaker Change: So as you see it you believe this is your peak and classifieds and criticized at 11% today.

Justin Crowley: I mean, I think what we're all trying to figure out right now.

Speaker Change: Based on the information that we know today.

Justin Crowley: Are we at the peak right and that was kind of the maturity question too that that was just asked and so.

Speaker Change: We do believe that where we are close to the peak okay. Okay great.

Justin Crowley: Yes.

Justin Crowley: How can we kind of think about the cadence of working your classified assets.

Speaker Change: Maybe just a follow up on.

Speaker Change: On the margin either.

Speaker Change: Goodbye.

Justin Crowley: Bucket is really large and so what should our expectations be for kind of the <unk>.

Speaker Change: Or you think deposit costs, Ken can go near term.

Speaker Change: And kind of with or without pets, and I'm curious with your deposit growth where those costs are coming in today.

Justin Crowley: Cadence for how we kind of work through that and.

Justin Crowley: The pace at which we could potentially see that bucket and move into NPL.

Speaker Change: Yes.

Speaker Change: <unk> been really successful in <unk>.

Justin Crowley: Similar to the level that we saw this quarter or do you feel like this was <unk>.

Speaker Change: All of our lines of businesses and growing deposits in the first half of the year.

Justin Crowley: The accelerated.

Justin Crowley: Outsized in some kind of dramatically this quarter. Thanks.

Speaker Change: More price sensitive deposits would be in our digital channel. We've had some great success I would say that were.

Speaker Change: Yes, Kathryn good question right.

Speaker Change: Right now we believe the degree of inflow.

Speaker Change: Going forward is not going to be nearly to the same degree that it was in this past quarter.

Speaker Change: Raising that probably a four 4%.

Speaker Change: As where we're raising deposits importantly, though there is a large.

Speaker Change: Okay.

Speaker Change: And.

Speaker Change: And as we will get the classified asset ratio.

Speaker Change: A portion of that portfolio that we've raised last year that had a five handle on it.

Speaker Change: Is there a level where that get where they're become kind of regulatory restrictions in terms of what we've already kind of cut the dividend, but any kind of additional kind of regulatory restrictions or are we still in a range where you know.

Speaker Change: That's rolling over the summer so it should positively impact the third quarter deposit costs.

Speaker Change: We've had some really good <unk>.

Speaker Change: <unk> and our renewal rates there.

Speaker Change: We can kind of kind of work through it.

Speaker Change: Yes, Catherine I would just say that building on Kevin's comment, we're very diligent and deliberate in working that.

Speaker Change: That should be helpful. In our cost of funds in terms of deposits in the third and fourth quarter.

Speaker Change: And I would also build on.

Speaker Change: Criticized and classified.

Speaker Change: Down there is obviously, a large inflow this quarter and Kevin could characterize that inflow, but our expectation is that youre going to see that.

Speaker Change: Some prepared commentary about the C&I team and the growth there.

Speaker Change: Taking the back half of the year I mean, we start to see some good growth in the second quarter with C&I deposits relationship deposits and that we're expecting that that will continue to build in the back half of this year and into 2026 and those deposits are.

Speaker Change: Total portfolio a decline towards the back half of the year and into 2026.

Speaker Change: So as you see it you believe this is your peak and classifieds and criticized and 11% today do you think.

Speaker Change: Not.

Speaker Change: Not price sensitive like the digital channel and that would be accretive to our cost of funds.

Speaker Change: Based on the information that we know today.

Speaker Change: You believe that where we are close to the peak okay. Okay great.

Speaker Change: Also within iron additional treasury.

Speaker Change: Noninterest income, yes, absolutely that treasury management aspect of the in terms of fee income is going to be helpful to us in the back half of the year as well.

Speaker Change: Maybe just a follow up on <unk>.

Speaker Change: On the margin either.

Speaker Change: Can you talk about where you think deposit costs, Ken Ken go near term.

Speaker Change: Okay, great. Thank you.

Speaker Change: You kind of with or without putting I'm curious with your deposit growth where those costs are coming in today.

Speaker Change: Our next question comes from Christopher Merrimack.

Christopher Merrimack: With Janney Montgomery Scott.

Speaker Change: Mr. <unk> go ahead with your question.

Speaker Change: We've been really successful.

Speaker Change: Thanks, Good morning, I appreciate you hosting us all and for all the disclosures I wanted to ask about some of the new multifamily.

Speaker Change: And all of our lines of businesses and growing deposits in the first half of the year.

Speaker Change: The more price sensitive deposits would be in our digital channel.

Speaker Change: Projects that have hit the criticized and classified list with the slide presentation is there anything happening there or does that portend future losses, or how should we think through those new problems.

Speaker Change: Had some great success I would say that were.

Speaker Change: Raising that.

Speaker Change: Yeah.

Speaker Change: One 4%.

Speaker Change: As where we're raising deposits importantly, though.

Speaker Change: Yes, Christopher Thanks, Thats a good question, we don't see it as systemic.

Speaker Change: There is a large.

Speaker Change: Sure.

Speaker Change: Idiosyncratic.

Speaker Change: A portion of that portfolio that we raised last year.

Speaker Change: A bit of it is tied to.

Speaker Change: The comments that I made earlier about.

Speaker Change: Five handle on it.

Speaker Change: Rolling over the summer so it should positively impact.

Speaker Change: Affordable housing, but in terms of how the DMV is performing in terms of multifamily.

Speaker Change: Third quarter deposit costs, and we've had some really good successes in that renewal rates, there and that should be helpful. In our cost of funds in terms of deposits in the third and fourth quarter.

Speaker Change: It's actually at one rents are increasing one 1%.

Speaker Change: Versus the national average of 1% so.

Speaker Change: Rents continue to increase and our vacancy is still better than the average were at seven 7% in the DMV versus eight point.

Speaker Change: And I would also build on.

Speaker Change: Some prepared commentary about the C&I team and the growth there I think in the back half of the year I mean, we start to see some good growth in the second quarter with C&I deposits relationship deposits and that we're expecting that that will continue to build in the back half of this year and into 2026 and those.

Speaker Change: Two in.

Speaker Change: And the national scope.

Speaker Change: And Chris I would I would layer in to that valuations in the multifamily sector across the D. C region remains sub six at <unk>.

Speaker Change: Sub 6% cap rates.

Speaker Change: So we don't have the same anywhere close to the same valuation risk thats in the office Submarkets.

Speaker Change: Deposits are not.

Speaker Change: <unk>.

Speaker Change: Not price sensitive like the digital channel and that would be accretive to our cost of funds.

Speaker Change: Okay, Great and then as the process of when you have to evict the tenant so anything unique to your market and the DMV versus other major cities in the country.

Speaker Change: Also with layering in additional treasury.

Speaker Change: Noninterest income, yes, absolutely that treasury management aspect of that in terms of fee income is going to be helpful to us in the back half of the year as well.

Speaker Change: I think all cities all jurisdictions have their own.

Speaker Change: Unique requirements the district of Columbia does have some some more strenuous. There's there's data that shows that the bad debt in DC is at about $200 per unit right now and the National average is somewhere in the $800 range. So it's a more significant issue.

Speaker Change: Okay, great. Thank you.

Speaker Change: Our next question comes from Christopher Merrimack.

Chris: With Janney Montgomery Scott Chris.

Speaker Change: Christopher go ahead with your question.

Christopher: Thanks, Good morning, I appreciate you hosting us all and for all the disclosures I wanted to ask about some of the new multifamily projects.

Speaker Change: D C Council is addressing that time.

Christopher: Projects that have hit the criticized and classified list with the slide presentation is there anything happening there or does that portend future losses, or how should we think through those new problems.

Speaker Change: Time will help us get through.

Speaker Change: And in these loans they are structural elements in these loans that simply don't exist in the office closures that will help us get through to that better time.

Speaker Change: Yes, Christopher Thanks, Thats a good question, we don't see it as systemic.

Speaker Change: Okay, great. Thank you for that color.

Catherine Mealor: And then a question for Eric just about the FDIC insurance my sense is that that May go up.

Christopher: Idiosyncratic.

Christopher: Bit of it is tied to.

Christopher: The comments that I made earlier about.

Catherine Mealor: Next few quarters, and then eventually work itself down and become a meaningful relief over time.

Christopher: Affordable housing.

Christopher: But in terms of how the DMV is performing in terms of multifamily.

Catherine Mealor: Is that movement.

Catherine Mealor: Significant the next few quarters or is it still sort of a smaller addition to the run rate of overall overhead.

Christopher: It's actually at one rents are increasing one 1%.

Catherine Mealor: I think for the remainder of 2025 I would point you to the first quarter run rate.

Christopher: Versus the national average of 1% so.

Christopher: Our rents continue to increase and our vacancy is still better than the average were at seven 7% in the DMV versus eight point.

Catherine Mealor: The $9 million I think that that's probably a better indicator of where we'll be on a quarterly basis for the remainder of 'twenty five.

Speaker Change: But the point that you're making on as we normalize.

Christopher: <unk>.

Christopher: The national scope.

Catherine Mealor: Credit.

Christopher: Alright, and Chris I would I would layer in to that valuations in the multifamily sector across the D. C region remains sub six sub 6% cap rates. So.

Catherine Mealor: There is a material benefit.

Catherine Mealor: Two.

Catherine Mealor: US on reduced premiums for FDIC insurance.

Catherine Mealor: So that.

Christopher: So we don't have the same anywhere close to the same valuation risk thats in the office Submarket.

Catherine Mealor: That will be a meaningful contributor to reduce expenses.

Catherine Mealor: And a lot of that's driven by.

Christopher: Okay, Great and then as the process of one.

Catherine Mealor: What flipped FDIC calculus looks at it in terms of underperforming assets, but thats here.

Christopher: You have to evict the tenant so anything unique to your market and the DMV versus other major cities in the country.

Catherine Mealor: Our criticized classified and nonaccrual.

Catherine Mealor: So as we worked through those that that number will come down.

Christopher: I think all cities all jurisdictions have their own.

Catherine Mealor: Meaningfully.

Christopher: Unique requirements the district of Columbia does have some some more strenuous. There's there's data that shows that the bad debt in D. C is at about $2200 per unit.

Catherine Mealor: So if we were to look out six to nine months prospectively. If you can get movement on those numbers and you could have been.

Catherine Mealor: The fee relief and then that will continue the changes portfolio gets further and further down on problems.

Christopher: Right now and the National average is somewhere in the $800 range. So it's a more significant issue.

Catherine Mealor: Yes.

Catherine Mealor: I would I would characterize our current run rate as more than double.

Christopher: The D C Council is addressing that.

Christopher: Time will help us get through.

Catherine Mealor: Our normalized level.

Christopher: And in these loans they are structural elements in these loans that simply don't exist in the office that will help us get through to that better time.

Catherine Mealor: And then one last question on the C&I business in that kind of evolution there with everyone's group is.

Catherine Mealor: Commitments progress bigger than the on balance sheet number and when we see a catch up in C&I balances in the next couple of quarters.

Speaker Change: Okay, great. Thank you for that color.

Speaker Change: And then a question for Eric just about the FDIC insurance my sense is that that May go up.

Speaker Change: Yeah, Chris if I'm understanding the question appropriately. The question is does the outstanding loan balance really reflect the full onboarding of new relationships and others or.

Speaker Change: Next few quarters, and then eventually work itself down and become a meaningful for leaf overtime.

Speaker Change: Is that movement.

Speaker Change: Significant the next few quarters or is it still sort of a smaller addition to the run rate of the overall overhead.

Speaker Change: We're not showing some of those out those balances because of the commitments are unfunded am I getting that question right.

Speaker Change: I think for the remainder of 2025 I would point you to the first quarter run rate.

Speaker Change: Correct, yes.

Speaker Change: So yes, there are always in that line of business as you know.

Speaker Change: The $9 million I think that that's probably a better indicator of where we'll be on a quarterly basis for the remainder of 'twenty five.

Speaker Change: Unfunded commitments that go through and are part of it some companies.

Speaker Change: Come in with a line of credit that goes unused for the life of that relationship. So there is some portion of production that is not reflected in the outstanding balances.

Speaker Change: But the point that you're making on as we normalize.

Speaker Change: Credit.

Speaker Change: There is a material benefit.

Speaker Change: <unk>.

Speaker Change: I would say that the majority probably in the 60% or so range is outstanding or will be funded due to owner occupied construction as an example.

Speaker Change: US on reduced premiums for FDIC insurance.

Speaker Change: So that.

Speaker Change: That will be a meaningful contributor to reduce expenses.

Speaker Change: And a lot of that's driven by.

Speaker Change: Okay.

Speaker Change: And their store deposit flows that could happen over time. That's still is ahead of you what those new relationships.

Speaker Change: What flipped FDIC calculus looks at it in terms of underperforming assets, but thats here.

Speaker Change: Absolutely.

Speaker Change: Our criticized classified and nonaccrual.

Speaker Change: Yes.

Speaker Change: Okay, great. Thank you so much for taking my questions.

Speaker Change: So as we worked through those that that number will come down.

Speaker Change: Thanks, Chris.

Speaker Change: Meaningfully.

Speaker Change: Our next question comes from Justin Crowley with Piper Sandler Justin go ahead with your question.

Speaker Change: So if we were to look out six or nine months prospectively. If you can get movement on those numbers and you could have begun.

Speaker Change: Hey, sorry, I think I might do it a little earlier.

Speaker Change: <unk> begun to see relief and then that will continue the changes portfolio gets further and further down on <unk>.

Speaker Change: Just a couple of follow ups quickly.

Speaker Change: Problems.

Speaker Change: For the.

Speaker Change: Yes.

Speaker Change: Just back to the credit piece just quickly here for the assets that are being sold are or where you are close to the finish line on those transactions what does pricing look like on those deals what sort of haircut to you're taking with those sales.

Speaker Change: I would I would characterize our current run rate.

Speaker Change: As more than double.

Speaker Change: A normalized level.

Speaker Change: And then one last question on the C&I business in that kind of evolution there.

Speaker Change: Cycle to date, just in the weighted average.

Speaker Change: <unk> group is.

Speaker Change: The commitments progress bigger than beyond balance sheet number and when we see a catch up in C&I balances. The next couple of quarters.

Speaker Change: Discount that we're taking is 40 approximately 40%.

Speaker Change: Okay, and Thats off of original loan value and taking into account just prior write downs on those assets that might thinking about that the right way.

Speaker Change: That would be original loan balance and any associated subsequent charge offs.

Speaker Change: We're not showing some of those out those balances because of the commitments are unfunded am I getting that question right.

Speaker Change: And Justin did you hear my commentary about cycle to date charge offs before you may have.

Speaker Change: Good.

Speaker Change: Correct.

Speaker Change: Yes, yes, that's the only comment that I appreciate that.

Speaker Change: Yes. So yes, there are always in that line of business as you know.

Speaker Change: Yes.

Speaker Change: That's helpful. And then just one quick one last one.

Speaker Change: Unfunded commitments that go through and are part of it some companies.

Speaker Change: Just noncredit related can.

Speaker Change: Can you just as far as the updated margin guide.

Speaker Change: Come in with a line of credit that goes unused for the life of that relationship. So there is some portion of production that is not reflected in the outstanding balances.

Speaker Change: You provided and you talked through some of the drivers there, but whats the sensitivity to rate cuts. There I think previously your guidance just assumes a flat rate environment, but just wondering how cuts.

Speaker Change: I would say that the majority.

Speaker Change: Cuts out of the fed might impact to that guide.

Speaker Change: And the 60% or so range is outstanding or will be funded due to owner occupied construction as an example.

Speaker Change: We expect only modest changes.

Speaker Change: Really manage that that our interest rate risk position in the neutral fashion.

Speaker Change: Okay and their store deposit flows that could happen over time that still lies ahead of you.

Speaker Change: Not expecting any material changes in NII in terms of.

Speaker Change: Those new relationships.

Speaker Change: Any.

Speaker Change: Absolutely.

Speaker Change: Interest rate movements from our side.

Speaker Change: Yes.

Speaker Change: Okay, great. Thank you so much for taking my questions.

Justin Crowley: Thanks, Chris.

Speaker Change: Okay got it I will leave it there thanks so much.

Speaker Change: Our next question comes from Justin Crowley with Piper Sandler Justin go ahead with your question.

Speaker Change: Our next question.

Catherine Mealor: Comes from Catherine Mealor with K BW Katherine go ahead with your question.

Justin Crowley: Hey, sorry, I think I might do it a little earlier.

Speaker Change: Just a couple of follow ups quickly.

Justin Crowley: For the.

Justin Crowley: Just back to the credit piece just quickly here for the assets that are being sold are or where you are close to finish line on those transactions what does pricing look like on those deals what sort of haircut taken with those sales.

Catherine Mealor: Catherine.

Speaker Change: I'm, sorry with needed thanks for letting me jump back on.

Speaker Change: One other question with just on is there.

Speaker Change: Have you considered or would you consider any kind of bulk loan sale.

Justin Crowley: Cycle to date, Justin the weighted average.

Speaker Change: Just to try to kind of clear this.

Speaker Change: From credits off kind of all at once and you have got a lot of capital so depending on I don't know how big is that it would require a capital raise but just how do you kind of way.

Justin Crowley: Discount that we're taking is 40 approximately 40%.

Justin Crowley: Okay, and Thats off of original loan value in and taking into account just prior write downs on those assets that might thinking about that the right way.

Speaker Change: A transaction like that especially given that we saw a pretty successful one with Atlantic Union earlier. This month, although I know the components of your two portfolios are very different.

Justin Crowley: Yes that would be original loan balance.

Justin Crowley: Eddie associated subsequent charge offs.

Speaker Change: Yes, Kathryn good question, we have many different types of levers as you know.

Catherine Mealor: And Justin did you hear my commentary about cycle to date charge offs before you may have been included.

Speaker Change: Paul but.

Speaker Change: But we as my prepared comments.

Justin Crowley: Yes, yes, absolutely got that I appreciate that.

Speaker Change: Two we look at them on a case by case basis.

Justin Crowley: That's helpful. And then just one quick one last one.

Speaker Change: And make the best evaluation for the exit it's good for our shareholders and good for the portfolio.

Justin Crowley: This non credit related.

Justin Crowley: Can you just as far as the updated margin guide.

Justin Crowley: That you provided in your talk through some of the drivers there, but whats the sensitivity to rate cuts. There I think previously your guidance just assumes a flat rate environment, but just wondering how cuts.

Kathryn: Just adding onto that Kathryn.

Speaker Change: The exit pricing, if youre doing a an active exit at pricing as a cost to it.

Justin Crowley: Cuts out of the fed might impact that guide.

Speaker Change: Yes.

Speaker Change: Building off of Kevin's comments, there are situations, where it's better for us to have.

Justin Crowley: We expect only modest changes.

Justin Crowley: Really manage that that our interest rate risk position in the neutral fashion.

Speaker Change: Some strategic patience from.

Speaker Change: I'm not talking a long time here, but some strategic patience.

Justin Crowley: Not expecting any material changes in NII in terms of.

Speaker Change: To maximize what we believe is the exit.

Justin Crowley: Any.

Speaker Change: That helps.

Justin Crowley: Interest rate movements from our side.

Speaker Change: Reduced losses, but tech telecom commentary prepared commentary, we're really looking to.

Speaker Change: Okay got it I will leave it there thanks so much.

Speaker Change: Find ourselves in a more normalized.

Speaker Change: Our next question.

Speaker Change: Provision expense level in 2026, and what I mean by normalize.

Speaker Change: Comes from Catherine Mealor with K BW Katherine go ahead with your question.

Speaker Change: I am estimating around 50 basis points on average loans.

Speaker Change: There'll be a little bit of a reserve release in 2026 based on our expectations, what we know right now.

Speaker Change: Catherine.

Speaker Change: I'm sorry with me to thank you for letting me jump back on.

Speaker Change: But that's.

Speaker Change: What we're thinking about for 2026.

Speaker Change: One other question with just on is there.

Speaker Change: That would necessitate resolution of some of these challenged office loans here in the next few quarters.

Speaker Change: Have you considered or would you consider any kind of bulk loan sale.

Speaker Change: Just to try to kind of clear this.

Speaker Change: Great very helpful. Thank you guys.

Speaker Change: Some credits off kind of all at once and you got a lot of capital still depending on I don't know how big is that he was with Macquarie capital raise but just how do you kind of way.

Speaker Change: This concludes the question and answer session I would now like to turn it back to Susan Riel for closing remarks.

Speaker Change: Yes.

Susan Riel: Thank you for your questions and thank you for being with US today, and we look forward.

Susan Riel: Thank you to you again next quarter.

Susan Riel: Have a great day.

Speaker Change: Yes, Kathryn good question, we have many different types of levers as you know.

Susan Riel: Thank you for your participation in today's conference. This does conclude the program you may now disconnect.

Speaker Change: Paul.

Speaker Change: But we as my prepared comments.

Speaker Change: Two we look at them on a case by case basis.

Speaker Change: And make the best evaluation for the exit it's good for our shareholders and good for the portfolio.

Kathryn: Just adding onto that Kathryn.

Kathryn: Pricing, if youre doing an active exit at pricing as a cost to it.

Kathryn: Right.

Speaker Change: Building off of Kevin's comments, there are situations, where it's better for us to have some strategic patience from.

Speaker Change: I'm not talking a long time here, but some strategic patience.

Speaker Change: To maximize what we believe is the exit.

Speaker Change: That helps.

Speaker Change: Reduced losses, but protect tariff commentary prepared commentary, we're really looking to.

Speaker Change: Find ourselves in a more normalized provision.

Speaker Change: Provision expense level in 2026, and what I mean by normalize.

Speaker Change: I am estimating around 50 basis points on average loans.

Speaker Change: There'll be a little bit of a reserve release in 2026 based on our expectations, what we know right now.

Speaker Change: But but that's what we're thinking about for 2026 so.

Speaker Change: That would necessitate resolution of some of these challenged office loans here in the next few quarters.

Speaker Change: Okay, great very helpful. Thank you guys.

Speaker Change: Okay.

Speaker Change: This concludes the question and answer session I would now like to turn it back to Susan Riel for closing remarks.

Susan Riel: Thank you for your questions and thank you for being with US today, and we look forward.

Speaker Change: Speaking to you again next quarter.

Speaker Change: Have a great day.

Speaker Change: Thank you for your participation in today's conference. This does conclude the program you may now disconnect.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].

Q2 2025 Eagle Bancorp Inc Earnings Call

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