Eagle Bancorp Q4 2024 Earnings Report

Eagle Bancorp EPS Results

• Actual EPS: $0.50
• Consensus EPS: $0.51
• Beat/Miss: Missed by -$0.01
• One Year Ago EPS: N/A

Eagle Bancorp Revenue Results

• Actual Revenue: N/A
• Expected Revenue: $74.67 million
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Eagle Bancorp Announcement Details

• Quarter: Q4 2024
• Date: 1/22/2025
• Time: After Market Closes
• Conference Call Date: Thursday, January 23, 2025
• Conference Call Time: 10:00AM ET

Eagle Bancorp (NASDAQ:EGBN) operates as the bank holding company for EagleBank that provides commercial and consumer banking services primarily in the United States. The company also offers various commercial and consumer lending products comprising commercial loans for working capital, equipment purchases, real estate lines of credit, and government contract financing; asset based lending and accounts receivable financing; construction and commercial real estate loans; business equipment financing; consumer home equity lines of credit, personal lines of credit, and term loans; consumer installment loans, such as auto and personal loans; personal credit cards; and residential mortgage loans. In addition, it provides online and mobile banking services; checking and saving accounts; and other deposit services, including cash management services, business sweep accounts, lock boxes, remote deposit captures, account reconciliation services, merchant card services, safety deposit boxes, and automated clearing house origination, as well as after-hours depositories and ATM services. Further, the company offers insurance products and services through a referral program; and treasury management services. The company serves sole proprietors, small and medium-sized businesses, partnerships, corporations, and non-profit organizations and associations, as well as investors. Eagle Bancorp, Inc. was incorporated in 1997 and is headquartered in Bethesda, Maryland.

Eagle Bancorp Q4 2024 Earnings Call Transcript

Presentation

[Operator]

Good day, and thank you for standing by. Welcome to the Eagle Bancorp, Inc. 4th Quarter and Year End 2024 Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session.

[Operator]

Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Eric Newell, Chief Financial Officer of Eagle Bancorp. Please go ahead.

[Eric Newell, Executive VP & CFO at Eagle Bancorp]

Good morning. This is Eric Newell, Chief Financial Officer of Eagle Bancorp. Before we begin the presentation, I would like to remind everyone that some of the comments made during our call today are forward looking statements. We cannot make any promises about future performance and caution you not to place undue reliance on these forward looking statements. Our Form 10 ks for the 2023 fiscal year and current reports on Form 8 ks, including the earnings presentation slides identify risk factors that could cause the company's actual results to differ materially from those reflected in any forward looking statements made this morning, which speak only as of today.

[Eric Newell, Executive VP & CFO at Eagle Bancorp]

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. This morning's commentary will include non GAAP financial information. The earnings release, which is posted in the Investor Relations section of our website and filed with the SEC, contains reconciliations of this information to the most directly comparable GAAP information. Our periodic reports are available from the company online at our website or on the SEC's website. With me today is our President and CEO, Susan Riel Kevin Geagan and Jan Williams.

[Eric Newell, Executive VP & CFO at Eagle Bancorp]

I'd like to now turn it over to Susan.

[Susan Riel, President and CEO at Eagle Bancorp]

Thank you, Eric. Good morning, everyone. Last night, we reported net income of $15,300,000 for the quarter. This result reflects our proactive approach to navigating valuation risk, particularly through an increased provision for credit losses. As part of the effort, we moved a $74,900,000 office loan to non accrual status due to a new appraisal.

[Susan Riel, President and CEO at Eagle Bancorp]

This loan continues to make contractual payments and the property's improving fundamentals gives us cautious optimism as we manage through this challenging environment. Our team remains focused on executing a disciplined strategy that positions Eagle Bank and our clients for long term success even amid evolving market dynamics. The enhanced loan disclosures introduced last quarter reflect our commitment to transparency, helping stakeholders better understand the risk we see and how we are addressing them. Looking back on 2024, we made significant progress toward building a foundation for sustainable growth. We strengthened our C and I team to deepen relationships and grow deposits and fee income, key components of our profitability strategy.

[Susan Riel, President and CEO at Eagle Bancorp]

4th quarter deposit growth of $590,200,000 allowed us to fully repay $1,000,000,000 in bank term funding program debt, a testament to our strength the strength of our balance sheet and liquidity management. As we look ahead, our geographic presence in the DMV, our role as a top local commercial lender and our deeply rooted relationship first values create a strong competitive advantage. These qualities enable us to adapt to change and deliver solutions that build trust and long term value for our clients. The entire team is energized by the progress we've made and the opportunities ahead. With the groundwork laid in 2024, we are confident in our ability to execute on our strategic goals and deliver results for our shareholders.

[Susan Riel, President and CEO at Eagle Bancorp]

With that, I will turn things over to Jan.

[Janice Williams, Executive Vice President at Eagle Bancorp]

Thank you, Susan. Our asset quality metrics were impacted by the migration of an office loan from special mention to non accrual substandard in the 4th quarter. While the office loan matured in December, because of our extension to September 2025, a new appraisal was obtained. The new appraisal showed a 44% decline in value since the date of the last appraisal in May of 2022. The borrower is cash flowing and continues to be current on payments.

[Janice Williams, Executive Vice President at Eagle Bancorp]

There are indications of improvement in the market. We've seen increases in leasing activity and positive net absorption in the Q4 of 2024. Cash flow from properties and transactions are occurring at higher valuations than recent appraisals. At the same time, appraisals remain inherently backward looking and are heavily dependent on historical comparables. So an appraisal today may not fully capture current market trends.

[Janice Williams, Executive Vice President at Eagle Bancorp]

As more market transactions occur, we would anticipate less volatility in appraisals. Given individually evaluated the loan and took a charge off of $9,000,000 more than 2 thirds of which was already contained in the reserve. The loan was placed on non accrual. We believe the loan remains adequately reserved at this time. The balance of the loan is $74,900,000 Since late 2020, we've been sweeping cash flow and building reserves for build out on new leases and payment reserves.

[Janice Williams, Executive Vice President at Eagle Bancorp]

We continue to sweep excess cash flow and continue building additional reserves. Details about the loan are included on Page 23 24 of our earnings deck. Net charge offs totaled $9,500,000 in the 4th quarter, resulting in 2024 charge offs of $38,600,000 or 48 basis points. During the quarter, we upgraded 2 separate office loans that were previously special mention and substandard to pass. For one of those loans, we worked with the borrower to secure a 3 year extension with 3 principal curtailments putting the bank in a better position and allowing the borrowers to continue exploring redevelopment of the property to multifamily.

[Janice Williams, Executive Vice President at Eagle Bancorp]

On the other, we received a curtailment that resulted in a reduced loan to value of less than 70%. We also saw an upgrade in the quarter of a $46,300,000 hotel loan from special mention to pass rated with improved operations. A multifamily loan of $30,000,000 was upgraded from substandard to pass as a result of additional cash reserves sufficient to support a preplanned HUD exit. 2 C and I loans totaling $26,500,000 were upgraded from substandard to special mention due to direct assignment of contract proceeds more than sufficient to repay the debt. Other downgrades in addition to the office loan of $74,900,000 in the quarter included a $36,800,000 owner occupied industrial commercial real estate property.

[Janice Williams, Executive Vice President at Eagle Bancorp]

Substandard loans increased $35,100,000 during the 4th quarter to end at 426 $400,000 Special mention decreased $120,200,000 during the quarter to end at $244,800,000 This represents overall positive migration of our criticized and classified loans for the Q4. We note in our disclosure on Page 20 of our earnings presentation that 69% of our classified and criticized loans are performing following the migration of the aforementioned office loan to non accrual during the Q4. Nonperforming loans were $208,700,000 at December 31, an increase of $74,300,000 from September 30, driven by the office loan. Nonperforming assets to total assets were 1.9%, an increase of 68 basis points from the prior quarter. Loans 30 to 89 days past due were $22,000,000 at December 31, decreasing from $56,300,000 at September 30.

[Janice Williams, Executive Vice President at Eagle Bancorp]

Eric?

[Eric Newell, Executive VP & CFO at Eagle Bancorp]

Thanks, Jan. We reported net income for the quarter totaling $15,300,000 or $0.50 per diluted share. This compares to the prior quarter of $21,800,000 or $0.72 per diluted share. Pretax income declined $6,900,000 to $19,800,000 in the 4th quarter. The decline in net interest income, higher provision for credit losses, lower fee income and higher non interest expenses contributed to the pretax decline.

[Eric Newell, Executive VP & CFO at Eagle Bancorp]

Taxes were largely unchanged from the 4th quarter despite lower pretax income due to return to provision adjustment and uncertain tax benefit, representing $2,200,000 of tax expense in the quarter. This was partially offset by a $1,700,000 tax benefit from an investment tax credit purchased during the quarter. Our capital position remains strong. Tier 1 leverage ratio decreased 3 basis points to 10.74 percent as average assets increased slightly more than Tier 1 capital quarter over quarter. Common Equity Tier 1 ratio increased 33 basis points to 14.63%.

[Eric Newell, Executive VP & CFO at Eagle Bancorp]

Tangible Common Equity ratio increased 16 basis points to 11.02% at quarterend. Book value per share decreased $0.01 to $40.60 per share as unrealized losses increased due to higher market rates at December 31 compared to the prior quarterend. On balance sheet and contingent liquidity also remained strong. Average deposits have grown $585,100,000 from a year ago at December 31, 2023. A significant amount of this annual growth was achieved through our digital channel.

[Eric Newell, Executive VP & CFO at Eagle Bancorp]

Our one way brokered deposits increased $234,000,000 from the comparable 2023 period end due to contractual non maturity brokered funding relationships. We reduced brokered CDs throughout the year and expect to resize our contractual non maturity brokered relationships in 2025. Growth in deposits in the second half of twenty twenty four facilitated our ability to fully pay off early our $1,000,000,000 of bank term funding program borrowings that were outstanding at September 30. Insured deposits totaled 76% of our total deposits. At the end of the quarter, available liquidity from the Federal Home Loan Bank, Federal Reserve discount window, cash and unencumbered securities totaled $4,600,000,000 Net interest income before provision totaled $70,800,000 in the 4th quarter, decreasing from $71,800,000 in the 3rd quarter.

[Eric Newell, Executive VP & CFO at Eagle Bancorp]

Net interest income declined because of $369,000 reversal from interest income due to the migration to non accrual of the previously discussed office loan. NIM declined 8 basis points from the Q3 to 2.29%. Generally, we saw interest income and interest expense decline proportionately to one another. The shift in mix of average earning assets with a higher proportion of interest earning deposits was the largest contributor to the decline in NIM. Of the $162,600,000 of funded loan originations in the quarter, we had a weighted average rate of 7.68%.

[Eric Newell, Executive VP & CFO at Eagle Bancorp]

This compares to $91,200,000 of funded loan originations at a weighted average rate of 7.11% in the 3rd quarter. Management has reduced rates paid on non maturity deposits due to declining interest rates. Following the decisions by the FOMC to ease the policy rate by 25 basis points each in November December, we reduced rates on for non maturity deposits by a cumulative 50 basis points. This follows our actions taken to reduce non maturity deposit rates from the FOMC easing earlier in the fall. Non interest income decreased as the 3rd quarter items such as the sale of MSRs, income from SBIC investments as well as income from back to back swap transactions did not reoccur in the Q4.

[Eric Newell, Executive VP & CFO at Eagle Bancorp]

In early January, management added to its bank owned life insurance policies, which will increase the run rate of cash surrender value growth and related income starting in the Q1. Non interest expense totaled $44,500,000 increasing from $43,600,000 in the prior previous quarter. Salaries and benefits increased due to a true up on severance for departing employee and higher compensation expense due to forfeitures of share based compensation in the 3rd quarter, which did not repeat in the 4th quarter. Marketing and advertising declined because of lower spend on our digital channel. Legal, accounting and professional expenses declined and were offset by higher FDIC expenses.

[Eric Newell, Executive VP & CFO at Eagle Bancorp]

In our quarterly investor deck release along with earnings, we updated our view on 2025. Our thoughts on period end growth of loans next year remain between 2% 8%, though the slide shows average growth. Earning asset growth is flat as we continue to take cash flows from our investment portfolio and reinvest in loans. With our budgeting process completed, management has a more precise view of the net interest margin. As noted last quarter, there is an expected benefit from this repositioning of the investment portfolio and loan mix that is expected to enhance spread.

[Eric Newell, Executive VP & CFO at Eagle Bancorp]

Growing relationship deposits and reducing and optimizing the use of wholesale funding are also expected to contribute to spread. I'll turn it over to Kevin to discuss our ACL.

[Kevin P. Geoghegan, Executive Vice President at Eagle Bancorp]

Thank you, Eric. As Jane mentioned, net charge offs increased $4,200,000 from the Q3 to $9,500,000 We will continue to evaluate the sufficiency of our qualitative reserves to address market uncertainties. However, we currently expect that any future reserve increases will stem from specific reserves for individually assessed loans. Should there be a significant shift in economic expectations not accounted for in our qualitative reserves, that would be reflected in the inputs we use to inform our model and that could result in increases in reserves. Last quarter, we mentioned the future reserve build, if any, would be driven by specific reserves from individually evaluated loans.

[Kevin P. Geoghegan, Executive Vice President at Eagle Bancorp]

This is in fact the driver of the allowance for credit losses during the quarter. In addition to specific reserves associated with the office loan discussed previously, we increased our specific reserves for an assisted living relationship, which is number 3 on our non accrual loan listing on Page 23 of our investor deck. The allowance for credit losses increased to $114,000,000 at twelvethirty one, representing coverage of total loans at 1.44%, an increase of 4 bps from the prior quarter. The ACL coverage to performing office loans totals 3.81% at twelvethirty 1, down from 4.55% at ninethirty due to the reserves associated with the office loan following it into the individually evaluated specific reserves. Finally, we continue to believe that our reserves are adequate.

[Kevin P. Geoghegan, Executive Vice President at Eagle Bancorp]

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

[Susan Riel, President and CEO at Eagle Bancorp]

Thanks, Kevin. The team completed foundational actions last year to support our strategic goals, growing and diversifying, building relationship deposits and focusing on operational excellence. While it will take time to reach our operational goals, we are beginning to see early successes that will drive results. At the same time, we remain focused on addressing asset quality concerns and mitigating valuation risk as office loans approach maturity. As a community focused bank, we take pride in being deeply connected to the communities we serve.

[Susan Riel, President and CEO at Eagle Bancorp]

This commitment sets us apart and positions Eagle Bank to thrive amid evolving market dynamics in the DMV. In closing, I want to thank our dedicated employees. Your hard work makes Eagle Bank a success and ensures we continue to deliver value to our customers and stakeholders. With that, we will now open things up for questions.

[Operator]

And our first question comes from Justin Crowley with Piper Sandler. Your line is open.

[Justin Crowley, Research Analyst at Piper Sandler Companies]

Hey, good morning, everyone.

[Justin Crowley, Research Analyst at Piper Sandler Companies]

Just wanted

[Justin Crowley, Research Analyst at Piper Sandler Companies]

to hit on the office loan that got downgraded in the quarter. Obviously, reappraisal volatility has been an issue overall, but maybe thought some of these Class A buildings, particularly in areas like Montgomery County were a bit more insulated from that risk. Does this situation change at all, how you're thinking about that sort of risk as you look across the portfolio outside of what's in DC Central Business District, and especially as we move through the year and get closer to some of these larger loans with 2026 maturities?

[Janice Williams, Executive Vice President at Eagle Bancorp]

Yes. I think we are and have been focused on all office, whether suburban or Central Business District, the severity of the decline in appraised values is much more in the Central Business District and is ameliorated to a certain extent in the suburbs. That said, different appraisers have different perspectives on appropriate cap rates, leasing rates, discount rates. It's for me personally, I was surprised to see a discount rate of 11% in a Class A suburban market with increased leasing activity. On the other hand, we can see that overall the time to stabilization has been reduced to the current leasing activity.

[Janice Williams, Executive Vice President at Eagle Bancorp]

Looking at this particular property, have a stabilized value of about $110,000,000 So that's in 2027. So I think you're going to see changes as the pace of leasing increases or decreases in this particular class of building. I have cautious optimism that we are going to be in a position to continue. If you took a look at there's one other similar property that you may have bought of that's an office property of similar size that is also in Montgomery County and that is on our top 25 list that we provided in our deck. That's number 2 on that list.

[Janice Williams, Executive Vice President at Eagle Bancorp]

And that particular property was appraised in February of 2023. And compared to the May of 2022 appraisal on the property that we just placed into nonperforming status, There was a 44% drop in valuation on the appraisal from May 22 until January of 2025. If you kind of extrapolate it from there and this would just be a ballpark swag and took 44% decline in appraised value on the office property that comes up for reappraisal in 2026, you'd be looking at a potential $3,000,000 charge off. So I don't think it's a staggering number. You may have different discounts that you're looking at and you may feel the different cap rate supply and that's a matter of judgment.

[Janice Williams, Executive Vice President at Eagle Bancorp]

I think we're on top of these and continuing to work with borrowers. One of the things that really helped us on the property that became nonperforming was the fact that we had been sweeping cash flow for a significant period of time and that assisted us both in the collateral valuation and also in the ability to continue forward and fund any TI work that is necessary in connection with value add leasing. So I know there is, TI work in progress right now on a particular new lease. I have cautious optimism on that front. Did that answer your question?

[Justin Crowley, Research Analyst at Piper Sandler Companies]

Yes. No, that's helpful. And just for I guess just a little further detail, you had noted just some of the improving fundamentals on that property that moved to non accrual this quarter. Can you unpack that just a little more just in terms of what the leasing activity has looked like or occupancy levels and maybe how that squares with the other loan that's currently on special mention that you had called out?

[Janice Williams, Executive Vice President at Eagle Bancorp]

Well, I can tell you that the leasing activity has been fairly consistent over the last couple of years and that it's managed to sustain occupancy in a difficult market. But it's ticked up right now. And what we're seeing are reductions in concessions in addition to a more rapid lease up period to get to stabilization. I think you've at one point, maybe 2 years ago, in the summer, we were looking at $180 a foot TI allowances and not an eyebrow was raised at that. Now we're down around $95 a foot.

[Janice Williams, Executive Vice President at Eagle Bancorp]

So I think effective gross rents are increasing and we are also seeing more activity both in this property and in very similar proximate properties. So I have optimism on that.

[Justin Crowley, Research Analyst at Piper Sandler Companies]

Okay. Got it. And then I guess somewhat relatedly, with the new administration in place now, there have been some headlines in recent days describing the potential for some large scale sales of federal government office space and canceling of leases, etcetera, which would of course likely take some time to play out. But are you able to provide any detail on direct exposure to government office? And then I know it's early, but just any preliminary thoughts on the impact moves out of the GSA could potentially have on your book?

[Janice Williams, Executive Vice President at Eagle Bancorp]

We have very little exposure to GSA. I think those properties that had large GSA leases were for the most part in the CMBS market. Those are bigger properties. And at the time, I think GSA lease was thought to be as good as you could get on leasing. That certainly has changed.

[Janice Williams, Executive Vice President at Eagle Bancorp]

At least the chatter around it has changed at this point. I do think it pulls 2 ways. It appears the administration believes that the private sector can provide occupancy to the government less expensively than the government is providing it to itself and do a better job. I don't think it's a huge surprise that this administration would want to privatize that activity. So I would expect they would be trying to sell some properties, some in this area, some across the country.

[Janice Williams, Executive Vice President at Eagle Bancorp]

I do think that means there's going to be more leasing as a result of the concurrent directive for federal employees to go back to the office. There has to be some place for them to go. So there could be for properties that have significant floor plates available that are in the B+a- area that might be something that could see an uptick with the federal government leasing. I do think the properties that they're contemplating selling appear to be B minus, C plus properties. And it will take a significant period, I think, for those properties to be rehabbed and brought back to the market.

[Janice Williams, Executive Vice President at Eagle Bancorp]

Just one person's thoughts on it.

[Justin Crowley, Research Analyst at Piper Sandler Companies]

Okay. That's helpful. And then shifting gears a little, there's obviously a larger end market competitor who's involved in a merger transaction right now. To what extent has it already created some opportunity for you folks? Or how do you think any dislocation could play out from your standpoint, whether that's new business or opportunity to add talent?

[Eric Newell, Executive VP & CFO at Eagle Bancorp]

Susan, you want to take that?

[Susan Riel, President and CEO at Eagle Bancorp]

We think it will bring opportunities for us. So we'll be

[Susan Riel, President and CEO at Eagle Bancorp]

the

[Susan Riel, President and CEO at Eagle Bancorp]

largest community banker in this area. And we think that will mean opportunities for us. Of course, there'll be opportunities with people and there are some shared customers that we already have with them. So we're looking at it as a positive for us. Eric, you want to add anything?

[Eric Newell, Executive VP & CFO at Eagle Bancorp]

Yes. There's a team that has mobilized to analyze where we share customers that there's opportunities for us to get greater market or a great wallet share of that shared customer. We think that there will be opportunities around milestones in that transaction when there's a legal close, when there's a conversion and we hope to be able to share our value proposition and deepen the relationships that we share customers with them as well as acquire new customers.

[Justin Crowley, Research Analyst at Piper Sandler Companies]

Okay, great. I appreciate the time this morning. Thank you.

[Operator]

Thank you. Our next question comes from Catherine Mealor with KBW. Your line is open.

[Catherine Mealor, Managing Director at Keefe, Bruyette & Woods (KBW)]

Thanks. Good morning.

[Janice Williams, Executive Vice President at Eagle Bancorp]

Good morning, Catherine.

[Eric Newell, Executive VP & CFO at Eagle Bancorp]

Good morning.

[Catherine Mealor, Managing Director at Keefe, Bruyette & Woods (KBW)]

Maybe just one back on credit. As we think about your outlook for the reserve and I know it's kind of hard to put a range on reserve bills and the charge offs, but as you sit here today and you think about your potential exposure, would you expect to continue to see reserve builds throughout the course of 2025 or do you think we're at a better place today? It certainly was good to see less inflows of standard and special mission credits, which makes me feel like maybe we're at a peak in our allowance. Just curious your thoughts on that. Thank you.

[Eric Newell, Executive VP & CFO at Eagle Bancorp]

Yes. In our budgeting process, we do not currently anticipate any reserve build beyond what Kevin's comments talked about in the sense that if there's an idiosyncratic issue with a credit that requires us to individually evaluate that loan, there could be noise there. But we feel that the office overlay that is a qualitative approach that we're addressing concerns as we see it for office. We feel that that is adequate at this point. I believe last call, I put a range out on credit costs.

[Eric Newell, Executive VP & CFO at Eagle Bancorp]

I think it was 25 to 50 basis points for 2025 and we continue to expect that to be the range.

[Catherine Mealor, Managing Director at Keefe, Bruyette & Woods (KBW)]

And that's provisioning versus charge offs? Or I guess maybe they're kind of in the same range?

[Eric Newell, Executive VP & CFO at Eagle Bancorp]

Without the Right. Yes. I look at it as kind of the same thing because without a reserve build, you're going in and out.

[Catherine Mealor, Managing Director at Keefe, Bruyette & Woods (KBW)]

Yes, makes sense.

[Eric Newell, Executive VP & CFO at Eagle Bancorp]

Okay, great. Thinking about what we achieved in 2024, actually even the last 18 months ending December 31, 24, I think at June 30, our reserve was approximately 100 basis points to loans and now we're at 144 basis points to loans. We've achieved a lot of build over that 18 months. And based on the information that we have today, we believe that that is adequate.

[Catherine Mealor, Managing Director at Keefe, Bruyette & Woods (KBW)]

Okay, great. And then on the outlook for the balance sheet, there's a big build in the balance sheet from the excess liquidity and deposit growth this quarter. And so I thought it was interesting that your guide for average earning assets was flat. I would think maybe you might see a little bit of decline as we just kind of put some of that excess liquidity to work, but still we're coming from such a larger average earning asset base at the end of the year. Just curious your thoughts on that as we kind of think about excess liquidity kind of into the bond book and into loan growth?

[Eric Newell, Executive VP & CFO at Eagle Bancorp]

We're not currently expecting any growth in the bond portfolio. And in fact, our goal is to get the percentage of the bond portfolio to assets into the teens. I think Charles was saying around 15% and we're above that. And that is one of the reasons why in our budgeting process, you can see that there was an improvement in our outlook on NIM for 2025 versus what we previously had disclosed in last quarter. You have about $385,000,000 of cash flows that are currently earning us around 2% that are expected to go into the loan portfolio or even cash in this case.

[Eric Newell, Executive VP & CFO at Eagle Bancorp]

I mean, that's not really what our goal is. We want to go into the loan portfolio, which materially contributes to an increase in spread. The comment about the average balance sheet, it is true that we had some excess cash on throughout the Q4, we do have expectations that that would be utilized better utilized into the loan portfolio as well in 2025.

[Catherine Mealor, Managing Director at Keefe, Bruyette & Woods (KBW)]

And I noticed that you've made a couple of new hires in the C and I line of business. Any commentary there and just thoughts on your loan growth, how much of that's coming in C and I versus CRE?

[Susan Riel, President and CEO at Eagle Bancorp]

We're already seeing positive results from the changes that we've made in the C and I area with bringing Evelyn Lee in as the head of the C and I group. And with the strategic hires that we have made so far, we're seeing increased activity in that area in a very, very positive way.

[Eric Newell, Executive VP & CFO at Eagle Bancorp]

In terms of growth, Catherine, yes, our CRE team is seeing payoffs in the multifamily space particularly. We saw some in the 4th quarter. I think we're expecting more in the Q1. And I believe Ryan made a comment about some expected payoffs in the Q2 as well. And what that will allow us to do is we can opt to depending on the pipelines, we can opt to work on any types of activity that CRE team might be seeing and then also use some of that capacity to in terms of cash flows coming back to us and redeploy that in our C and I portfolio.

[Susan Riel, President and CEO at Eagle Bancorp]

Right. We're really looking at our CRE concentration coming down too as a result of that, those payoffs.

[Eric Newell, Executive VP & CFO at Eagle Bancorp]

Which is a big focus of ours is reducing CRE concentration ratio.

[Catherine Mealor, Managing Director at Keefe, Bruyette & Woods (KBW)]

Yes, for sure. Okay, great. Thank you very much. Appreciate it.

[Susan Riel, President and CEO at Eagle Bancorp]

Thanks, Catherine.

[Operator]

Thank you. I'm showing no further questions at this time. I would now like to turn it back to President and CEO, Susan Riehl, for closing remarks.

[Susan Riel, President and CEO at Eagle Bancorp]

Okay. I'd like to thank everyone for your questions and for you taking the time to join us today. We look forward to speaking with you again next quarter. Have a great day.

[Operator]

This concludes today's conference call. Thank you for participating. You may now disconnect.

Participants

Executives

• Eric Newell, Executive VP & CFO
• Susan Riel, President and CEO
• Janice Williams, Executive Vice President
• Kevin P. Geoghegan, Executive Vice President

Analysts

• Justin Crowley, Research Analyst at Piper Sandler Companies
• Catherine Mealor, Managing Director at Keefe, Bruyette & Woods (KBW)