이글 뱅코프(EGBN) 2026년 3분기 실적 발표 콘퍼런스 콜: 신용 동향 개선 속에 NIM 확대

핵심 요약

• 이글 뱅코프(Eagle Bancorp)는 2026년 3분기 순이익이 2,420만 달러(희석 주당순이익 0.79달러)로, 2분기의 690만 달러(주당 0.23달러)에서 증가했다고 발표했습니다. 이러한 증가세는 주로 대손충당금 비용 감소와 530만 달러 규모의 주 세금 환급 혜택이 반영된 결과입니다.
• 순이자마진(NIM)은 8bp 확장된 2.60%를 기록하며 3분기 연속 상승세를 이어갔습니다. 그럼에도 불구하고 평균 이자수익자산 기반이 축소됨에 따라 순이자이익은 100만 달러 감소한 6,130만 달러를 기록했습니다.
• 신용 지표는 전반적으로 개선되었습니다. 요주의 및 고정이하 여신은 분기 동안 1억 1,100만 달러 감소한 6억 4,840만 달러를 기록해 전년 동기 대비 4억 4,800만 달러(41%) 감소했습니다. 신규 부실 유입액은 전분기 대비 74% 급감한 5,570만 달러를 기록했습니다.
• 부실자산(NPA)은 5,290만 달러 증가한 1억 6,600만 달러(총자산의 1.75%)를 기록했는데, 이는 주로 이전에 파악된 5,600만 달러 규모의 메릴랜드 저소득층 다가구 주택 관련 익스포저 때문이었습니다.
• 핵심 예금은 1억 9,700만 달러 증가한 반면 중개 예금은 3억 4,800만 달러 감소했습니다. 이글 뱅코프가 도매 자금 조달을 지속적으로 줄임에 따라 총예금은 1억 5,100만 달러 감소했습니다.
• 경영진은 평균 대출과 예금이 2026년 4분기 및 2027년 내내 성장할 것으로 예상하고 있습니다. 또한 4분기 대손충당금 적립 전 순이익(PPNR)이 3분기의 2,380만 달러에서 개선될 것으로 전망했습니다.

핵심 재무 데이터

사업 및 영업 실적

이글 뱅코프는 고위험 익스포저에서 벗어나 재무상태표를 지속적으로 재편했습니다. 상환된 대출의 절반 이상이 요주의 또는 고정이하 여신으로, 단기적인 재무상태표 축소의 원인이 되었으나 포트폴리오 구성을 개선했습니다.

상업 및 공업(C&I) 대출 잔액은 전분기 대비 비교적 안정적이었으며 전년 동기 대비 20% 증가했습니다. C&I 예금은 분기 동안 1억 150만 달러(5.9%) 증가했습니다. 경영진은 2025년에 추가된 고객 관계가 2026년에 약 5,000만 달러의 신규 예금으로 이어졌다고 밝혔습니다.

상업용 부동산(CRE) 잔액은 상환 활동이 지속되면서 1억 4,800만 달러 감소했습니다. 경영진은 해당 지역 전체에 걸쳐 분양형 주거시설, 산업용, 리테일, 신규 다가구 주택, 오피스-다가구 주택 전환 기회 등이 포함되어 CRE 파이프라인이 강화되었다고 설명했습니다.

회사는 볼티모어 지역에서 입지를 확대하고 있으며 상업 및 CRE 전문 은행원을 추가로 채용했습니다. 경영진은 총자산이 2023년 4분기 약 117억 달러에서 약 95억 달러로 약 19% 감소한 후, 이러한 투자를 통해 자산과 매출 성장을 재개하는 것을 목표로 한다고 밝혔습니다.

경영진 가이던스

경영진은 견조한 CRE 실적, C&I 활동, 주거용 부동산 대출의 선별적 매입에 힘입어 2026년 4분기부터 제한적인 순대출 성장이 시작될 것으로 예상하고 있습니다. 평균 대출 및 예금은 4분기에 성장하고 2027년에도 성장을 이어갈 것으로 전망됩니다.

4분기 대손충당금 적립 전 순이익(PPNR)은 3분기의 2,380만 달러보다 증가할 것으로 예상됩니다. 경영진은 3분기 비용 증가분 중 약 280만 달러는 4분기 런레이트에 반영되지 않을 것이라고 덧붙였습니다.

2027년의 경우 회사는 초기 순이자마진(NIM) 전망치 범위를 2.77%~3.05%로 제시했습니다. 경영진은 예산 수립 프로세스가 진행되는 동안 이 범위는 예비적인 수준이라고 말했습니다. 잠재적 요인으로는 현재 약 2% 수익률을 내는 약 3억 5,000만 달러의 증권 재투자, 대출 포트폴리오 구성, 시장 금리, 자산 측면의 금리 재설정 등이 있습니다.

이 전망에는 향후 대손충당금 비용, 상각, 대출 매각 및 기타 신용 관련 항목에 대한 가정이 제외되어 있는데, 이는 해당 결과가 경제 여건 및 포트폴리오 실적에 따라 달라지기 때문입니다. 경영진은 2027년 전체 충당금 및 상각액이 2026년에 기록한 수준보다 낮을 것으로 예상했지만, 구체적인 범위는 제시하지 않았습니다.

리스크 및 모니터링 항목

5,600만 달러 규모의 메릴랜드 저소득층 다가구 주택 관련 익스포저로 인해 부실자산이 실질적으로 증가했습니다. 해당 대출에는 개별 충당금이 설정되어 있으며, 경영진은 이글 뱅코프가 경제적 이익을 보호하고 회수를 극대화하기 위한 조치를 취하고 있다고 밝혔습니다.

요주의 및 고정이하 여신이 감소하고는 있지만, 6억 4,840만 달러의 잔액은 여전히 기본자본(Tier 1)의 54% 수준으로 높은 편입니다. 경영진은 본격적인 자본 환원 논의를 진행하기 위한 전제 조건으로 신용 위험의 추가적인 정상화를 꼽았습니다.

단기 이익은 재무상태표 규모, 예금 금리 책정, 대출 감소, 신용 문제 해결, 최근 채용 인력의 매출 기여 시점 등에 계속 영향을 받습니다. C&I 예금 역시 프로젝트 타이밍, 법적 합의금, 상여금, 고객 배당 등으로 인해 변동될 수 있습니다.

애널리스트 Q&A 하이라이트

• 자본 배치: 경영진은 현재 자본 관련 조치를 취하지 않고 있습니다. 스티븐 커리(Stephen Curley) CEO는 요주의 및 고정이하 여신 잔액이 약 4억 달러 수준에 도달하는 것이 의미 있는 진전이 될 것이라고 말했으며, 2분기 말을 공식 가이던스가 아닌 내부 목표로 언급했습니다.
• 다가구 주택 신용: 경영진은 다가구 주택 익스포저를 오피스 익스포저와 대조했습니다. 3분기에 해결된 약 1억 3,000만 달러 규모의 요주의 및 고정이하 여신에서 약 400만 달러의 상각이 발생한 반면, 가중평균 오피스 손실률은 50%에 육박했습니다. 경영진은 다가구 주택 차주들이 일반적으로 지분을 유지하고 있어 추가 자금 납입, 리파이낸싱 또는 자산 매각이 가능하다고 설명했습니다.
• CRE 스트레스 테스트: 은행은 25, 50, 100bp의 금리 인상을 가정하여 CRE 잔액의 약 80%~90%를 검토했습니다. 부채상환배율(DSCR)이 1.0배에 근접하거나 하회하는 여신은 거의 대부분 이미 관찰, 요주의 또는 고정이하로 분류되어 있었습니다.
• 성장 포트폴리오 구성: 경영진의 장기적 프레임워크는 성장의 약 40%를 C&I, 40%를 CRE, 20%를 비즈니스 뱅킹, 지점 또는 기타 자산 창출 전략에서 달성하는 것을 목표로 합니다.
• 자금 조달 전략: 중개 예금은 계속 자금 조달 수단으로 활용될 것으로 예상되지만, 경영진은 2027년에 중개 자금 줄이기를 통한 동일한 수준의 조달비용 감소 호재를 기대하지는 않고 있습니다. 따라서 향후 마진 확대는 자산 측면에 더 크게 의존할 것으로 예상됩니다.

실적 발표 컨퍼런스 콜 전문

전체 실적 발표 컨퍼런스 콜 녹취록

경영진 발표

Operator

Good day and thank you for standing by. Welcome to the Eagle Bancorp Third Quarter 2026 Earnings Conference Call. The call is being recorded. [Operator Instructions] I would now like to turn the call over to Eric Newell, Chief Financial Officer of Eagle Bancorp. Please go ahead.

Eric Newell

Good morning. Before we begin the presentation, I would like to remind everyone that some of the comments made during this call are forward-looking statements. We cannot make any promises or representations about future performance and caution you not to place undue reliance on these forward-looking statements. Our Form 10-K for the fiscal year 2025 and current reports on Form 8-K, including the earnings presentation slides, identify important factors that could cause the company's actual results to differ materially from any forward-looking statements made this morning, which speak only as of today. Eagle Bancorp does not undertake to update any forward-looking statements as a result of new information, future events, or developments unless required by law. This morning's commentary will also include non-GAAP financial information. The earnings release, which is posted in the investor relations section on our website and is filed with the SEC, contains reconciliations of this information to the most directly comparable GAAP information. Our periodic reports are available from the company online on our website or on the SEC's website. With me today is our President and CEO, Steve Curley, our Chief Lending Officers, Evelyn Lee and Ryan Reel for CNI and Commercial Real Estate respectively.

I'll now turn it over to Steve.

Stephen Curley

Good morning and thank you for joining us. We had a strong third quarter. Earnings exceeded expectations, the net interest margin expanded for the third consecutive quarter, and asset quality trends continued to improve, and we further reduced our reliance on brokered funding. At the same time, we continue to invest in the people and capabilities that will drive the next phase of growth at EGLE. Those investments are reflected in our expense base, but we are already beginning to see the results in terms of strong business development activity. As we enter the fourth quarter, we're encouraged by the activity we're seeing across the franchise, and we expect Pre-Provision Net Revenue to increase from third quarter levels. I spent the first 100 days reviewing the business and meeting with employees, clients, shareholders, regulators, and members of our community. That work has reinforced for me the resilience of the Eagle Bank franchise and the significant opportunity in front of us, as well as the priorities we need to focus on.

I've described those priorities in three parts. Normalize our credit profile, stabilize the balance sheet and funding profile, and continue building a stronger business capable of driving sustainable growth and improved shareholder returns. The third quarter showed meaningful progress against those priorities. Criticized and Classified Loans declined by $111 million this quarter and are down $448 million, or 41% from a year ago. New criticized and classified inflows fell 74% from the second quarter, and broker deposits declined by $348 million. Loan balances declined again this quarter, but at a materially slower pace than in recent quarters. As the runoff moderates and the investments we've made in our banking teams take hold, our focus is increasingly shifting from stabilizing the balance sheet to generating disciplined growth. Not every asset quality measure showed improvement.

Non-performing assets increased, driven primarily by one previously identified multifamily relationship. Even in this case, I see progress. The bank made the difficult decision to act decisively on a maturing asset of a good customer to protect the bank's economic interest. When I step back from the individual metrics, I see a company well positioned with less credit risk, a strong capital base, and a renewed capacity to grow. Our job now is to convert that progress into stronger returns for our shareholders. Let me begin with credit. As I mentioned last quarter, I visited our significant problem credits, and each has a specific resolution strategy, accountability and active oversight. We evaluate each loan based on its individual circumstances and the path we believe will produce the best economic outcome for the bank.

In practical terms, that generally means one of three paths. The borrower can re-margin, they can refinance with another lender, or we can take the asset back and liquidate. Our objective is to identify the path that maximizes recovery and execute against it with discipline and urgency. The circumstances differ by credit, and that's why the individual resolution strategy matters. Where additional time improves the bank's economic outcome, we'll structure our resolution strategy accordingly. Where a bank's economic outcome is higher, borrower cannot execute will act decisively. At the portfolio level, our focus is to continue reducing elevated credit risk, limit new problem loan migration, and maintain the loss absorption capacity needed to support disciplined growth.

We will measure that progress through criticized and classified assets relative to Tier 1 capital plus our Allowance for Credit Losses, as well as new levels of inflows of criticized and classified assets. We've made substantial progress. Criticized and classified asset levels remain elevated, but they continued to decline, and new inflows fell sharply this quarter. I see more of the same in the fourth quarter. The second phase is stabilizing the balance sheet, and funding is a big part of that. Not all deposits are created equal. Wholesale funding gives us liquidity, but it's expensive and transactional. Rate-sensitive deposits can play an important role as we grow, particularly in the near term, but over time, the most valuable funding is core relationship deposits that come with broad, durable client relationships.

You may see us use higher cost rate sensitive deposits to support growth along the way, but the longer term objective is clear. Deepen existing relationships and build a larger base of core relationship deposits. We took another meaningful step in that direction this quarter by further reducing our reliance on brokered funding. The other balance sheet consideration is capital. As risk has declined and as capital has continued to build, we have greater flexibility in how we ultimately deploy that capital. In the short run, continued improvement in our credit profile is critical. But we don't need every credit metric to reach its ultimate destination before we begin thinking about the appropriate Growth will be one use, and over time capital return can be another.

We're not at the point of taking capital actions today, but our objective is not to accumulate capital indefinitely. We intend to deploy capital where it can be produced attractive risk-adjusted returns and when appropriate return excess capital to shareholders. The third priority is building a higher performing franchise. Eagle has experienced bankers, established customer relationships, a strong presence in attractive markets, and infrastructure capable of supporting more business. Our opportunity is to generate greater returns from that franchise. That means improving branch productivity, growing relationship deposits, deepening treasury management and fee-based relationships, and holding ourselves accountable for the returns on our investment. We're also expanding our ability to generate new business. Added experienced bankers and leaders across the commercial banking, Commercial Real Estate, and other areas where we see attractive opportunities.

We are encouraged by the early activity we're seeing from those investments. Ultimately, better operating performance means converting activity into sustained revenue growth while maintaining discipline around expense, credit, and pricing. With that, I'll turn the call over to Eric to review the quarter.

Eric Newell

Thank you, Steve. We reported third quarter net income of $24.2 million, or $0.79 per diluted share, compared with $6.9 million, or $0.23 per diluted share in the second quarter. The increase primarily reflects an $18.6 million reduction in provision expense, along with a $5.3 million income tax benefit related to a state tax refund. Pre-Provision Net Revenue was $23.8 million. I'll come back to the drivers of that result and importantly, how we see the earnings trajectory developing from here. On our last call, we said we expected provision expense and charge-offs to be lower in the second half of 2026, and the third quarter reflected that. Provision expense declined to $2.8 million from $21.4 million in the second quarter. Net charge-offs were $4.2 million, or 25 basis points annualized, down from $47.9 million, and that included a $3.4 million recovery.

This quarter also marks one year since we completed the independent review of our loan portfolio, so it's useful to put the credit trends in that context. We ended the third quarter of 2025 with $1.1 billion of Criticized and Classified Loans representing approximately 90% of Tier 1 capital. Balances have declined each quarter since. At September 30, criticized and classified loans including held for sale totaled $648.4 million or 54% of Tier 1 Capital. Slide 14 in the investor deck shows the full trend. The improvement is also increasingly evident in migration. Inflows into criticized and classified loans declined to $55.7 million, down 74% from the second quarter and more than 87% from the $445 million we reported one year ago. This was the lowest level since last year's loan review with no concentration in any single asset class. We're also seeing credits move the other direction.

During the quarter, $40.7 million of loans were upgraded to pass from Criticized and Classified. Special Mention balances declined 29% to $195.1 million. And Watch balances are now down more than 50% from their peak. 30 to 89 day past dues also increased significantly, declining from $44.1 million at June 30 to just $400,000 at September 30. Held-for-sale balances declined to $13.5 million from $49.7 million with no new transfers during the quarter. While we don't expect to pursue loan sales as actively as we have over the past year, it remains one of the tools we may deploy when it's the fastest and cheapest way to exit a problem loan. Against that broader improvement, non-performing assets increased $52.9 million to $166 million, or 1.75% of total assets. The increase was primarily attributable to the $56 million Maryland affordable multifamily relationship that Steve referenced earlier, and accounts for 76% of the non-performing inflows this quarter.

While the increase in non-performing assets is meaningful, the broader indicators continue to improve, including criticizing classified balances, inflows, upgrades, and past dues. Taken together, we believe these measures show that the bank's credit risk profile continues to trend lower. The Allowance for Credit Losses ended the quarter at $120.8 million, or 1.84% of loans, relatively flat from the prior quarter. In office, coverage on performing loans declined to 4.86% from 7.22%, reflecting the reduction in our qualitative overlay as the income-producing office portfolio declined and the credit quality of what remains improved. Turning to operating performance. Over the past year, we've significantly repositioned the balance sheet by reducing higher risk exposures and improving portfolio composition. That process resulted in a smaller balance sheet, but it's also put us in a stronger position to begin growing again. Net Interest Margin expanded 8 basis points to 2.6%, marking the third consecutive quarterly increase, while our cost of funds declined to 2.75%.

Net interest income was $61.3 million, which was down $1 million, as the benefit from margin expansion was more than offset by the smaller average earning asset base. The reduction in earning assets reflects, in part, the deliberate repositioning of our loan portfolio. We entered the year intending to reduce CRE exposure, improve the mix between CRE and CNI, and work down higher risk assets. More than half the loans that paid off were criticized or classified. The trade-off has been a smaller earning asset base in the near term, but a stronger and better balanced portfolio from which to grow. Non-interest income was $9.6 million, down $1.2 million from the second quarter. We had no loan sale gains this quarter as compared to the $2.3 million recognized in the second quarter and was partially offset by $1.1 million increase in swap fee income.

Non-interest expense increased $3.1 million to $47.1 million. Salaries and benefits increased $4.9 million, including $1.5 million of accelerated awards, $1.5 million of compensation tied to new hires, and $1.3 million of annual incentives. This is partially offset by $2.1 million decline in FDIC insurance expense. Pre-Provision Net Revenue was $23.8 million compared to $29.1 million last quarter. The linked quarter PPNR comparison reflects several factors. Eagle Bancorp benefited from continued margin expansion and stronger swap activity, while the smaller balance sheet, the absence of second quarter loan sale gains, and several expense items reduced PPNR. We also continue to absorb the cost of new talent Steve discussed earlier, ahead of its full revenue contribution. Importantly, approximately $2.8 million of the quarter's expense increase is not expected to remain in the fourth quarter run rate.

In CNI, loan balances were relatively stable during the quarter, while deposits grew $101.5 million or 5.9%. Individual relationships can create liquidity volatility, particularly among larger commercial customers, but CNI loans are up 20% year over year. That broader momentum remains positive and reflects the investments that we've made in the commercial franchise since late 2024. Core deposits increased $197 million during this quarter, while brokered deposits declined $348 million. And as a result, total deposits declined $151 million, reflecting the continued reduction in brokered funding. In CRE, balances declined by $148 million as payoff activity continued, while credit quality across the portfolio strengthened. The deposit funding ratio remained at 35% compared with 29% one year ago.

We have several multifamily maturities in the fourth quarter where we've been actively working with borrowers. We expect a combination of principal curtailments and extensions that should reduce our exposure while allowing us to retain performing earning assets and client relationships. Total loans held for investment declined 0.9% to $6.6 billion. That headline decline reflects continued CRE payoff activity, but doesn't fully capture what we're seeing in new business activity. Pipeline activity has strengthened, particularly in Commercial Real Estate, and we expect that momentum to support measured net loan growth beginning in the fourth quarter. Capital continues to build. CET1 increased to 14.99%, tangible common equity increased to 12.24%, and Tier 1 leverage increased to 12.08%. Tangible book value per share rose to $38 and has grown each quarter this year. Turning to our outlook on Slide 9.

For the first time we provided both a fourth quarter outlook and an initial view of 2027. We're doing so because we believe we now have greater visibility into the trajectory of the business following the balance sheet repositioning of the past year. The outlook doesn't include assumptions for future provision expense, charge-offs, loan sales, or other credit related items, which will depend on economic conditions and portfolio performance. Looking ahead, we expect average loans and deposits to grow in the fourth quarter and continue growing in 2027. Combined with the expense dynamics I've discussed and the production capacity we've added, we expect PPNR to increase from the third quarter levels in the fourth quarter. We believe that represents an important step towards converting the investments we've made and the balance sheet capacity we've created into stronger operating performance.

Stephen Curley

With that, I'll turn the call back over to Steve. Thank you, Eric. Before we move to questions, let me close with where we're headed. One of my priorities since arriving has been making sure we have the leadership and talent to execute against the opportunities we see across EGLE. Today we announced the appointment of Corey Munoz as our Chief People Officer, strengthening our leadership around talent, development, culture, and accountability. We've also added experienced bankers tasked with bringing in new to business and growing deposits and loans. In Baltimore, we've added Lynn Sanders as our market executive and Richard Yoskey as a senior CNI relationship manager. Both have deep roots in Baltimore and extensive commercial banking experience.

Their addition reflects our commitment to building a larger presence in Baltimore and extending the strength of our Maryland franchise. In Commercial Real Estate, we've added Matt Nader and Cessus Gamia, both bringing substantial market experience and additional capabilities to our CRE platform. These additions complement the strong talent we already have at Eagle. We've been very encouraged by our ability to attract accomplished bankers from larger competitors across middle market, nonprofit, dealer finance, and Commercial Real Estate. We think that says something important about the opportunity people see at Eagle. More importantly, we're beginning to see the activity we expected from those investments and expect that momentum to continue through the fourth quarter and well into 2027. That reflects an important transition for EGLE.

Risk reduction remains a priority, but we're increasingly positioned to focus on growth and operating performance. After my first 100 days, I'm increasingly confident in what EGLE can become. We have a valuable franchise and an attractive market, significant capital, experienced bankers, and a stronger foundation on which we can build a premier community banking franchise that importantly generate with that operator, we'd be happy to take your questions.

Operator

[Operator Instructions] Our first question will be coming from the line of Justin Crowley of Piper Sandler. Please go ahead.

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Justin Crowley

Hey, good morning everyone. Good morning. I just wanted to start on the LORIS multifamily loan. I was just curious if you could provide a little more detail on that property. I know we talked about it a little before, just what ultimate resolution could look like and then just how you think you're protected from any future loss on that one.

Stephen Curley

So thanks for the question, Justin. We have been working on this credit for some time. We've disclosed this in prior quarters. At this point, we're not going to go into the nitty-gritty detail of each and every play, but the action we did take this quarter protects the economic interest of the bank, and we believe will maximize the ultimate outcome on this asset. Yes, I think we thought that this might restructure, you know, because there's a subordinate lien on the property, but in the end, that well-capitalized person decided not to support it. So now we're just taking the action we need to protect our interest.

Justin Crowley

Okay, and there are specific reserves on this loan currently?

Eric Newell

Yes, Justin, there is.

Justin Crowley

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

Eric Newell

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

Justin Crowley

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

Eric Newell

Yeah, I'm obviously when we're looking at something for potential upgrade, we're looking at through the underlying performance of the credit. So, in these cases, it's likely that the net operating income is improving. So, therefore, that service they're able to better service their debt. And so we're getting better coverage there. In terms of criticized classified, you know, we work very closely with the special assets team as well as Ryan's team, to look at, on an asset by asset basis, what the expectation, the disposition, and the timing of that. And so, you know, we have a good sense of where we think we're going to land at the end of the year. And that will be much more improved from what we're reporting here at 930.

Justin Crowley

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

Eric Newell

Yes, the way that, it's Eric, the way Justin and I look at it is comparing ourselves, you know, is classified to Tier 1 and ACL. And when you look at our peers, you know, there's a little bit more wood to chop. Um, you know, I'm not necessarily suggesting we have to get right exactly to our peer level, but we need to get closer there before we have a more substantive conversation with our board about potential capital deployment actions that we could take.

Stephen Curley

Yeah, I feel like we're making good progress chopping that wood though. And so I think, you know, if you saw class of five and kind of the You know, I'd feel good if they got to kind of a number in the threes. I think maybe we start to think about that a little bit more carefully. And I don't think that's too far away.

Justin Crowley

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

Evelyn Lee

Thanks, Justin. This is Evelyn, and Ryan can chime in as well, because the hires have been both in CNI and in CRE. On the Baltimore side, yes, I think you'll see that team continue to grow. It's really well anchored with Lynn and Richard, but the plan is to grow that team over time. And then, I think what I'd highlight, and I think Ryan would echo this, is just the hires that we're making are very thoughtful and strategic. We're not going out and with a blanket target to hire X number. It's really the folks that we know and trust in this market and know can produce the returns that Eric was describing. So I don't know, Ryan, if you'd add to that.

Unknown Speaker

Just echoing that.

Stephen Curley

The new hires are anticipated to provide quick and substantial returns to the bank and are on the Commercial Real Estate side to lines of business, we've always done a broad range of things for our customers. As those needs arose, these efforts will be more specific to some of those same tactics with some intentionality around that line of business. Let me just kind of come a little bit over the top on that one. The bank's assets peaked in the fourth quarter of 2023 at almost $11.7 billion, and they've steadily declined for 11 quarters to where we are today, about $9.5 billion. So that's a 19% decline in assets. And so it's hard to grow a franchise with declining PPNR. So to me, you know, normally I want expense to chase revenue, not revenue to chase expense. But in this particular case, we really needed to jump start the production franchise.

And so we decided to make some upfront investments. But I want you guys to know I'm keenly focused on expenses and our efficiency ratio. But in this case, we had some really excellent opportunities to bring on some high quality producers that we can that can contribute immediately. And I felt like to get the franchise moving forward and getting PPNR growth going in the right direction, it was worth making that upfront investment.

Justin Crowley

Great. I appreciate all that, Collin. I'll leave it there. Thanks so much.

Operator

[Operator Instructions] Our next question will be coming from the line of David Bishop of Hardy Group. Please go ahead.

David Bishop

Yes, good morning. Maybe sticking on that topic, I'm just curious, you know, as you have the hires within the greater Baltimore region, you know, just curious, I don't know if there's a way to size up, do you think the opportunity is? You know, we talk about hundreds of millions, maybe getting up to a billions in loans over time as you build out that, you know, that team and you're looking to sort to penetrate maybe some of the more affluent, you know, counties around here, like Howard County, Anne Arundel, Carroll, just curious how you're thinking about expansion within the region.

Stephen Curley

I'm going to have Evelyn talk a little bit, but you know, we also, even as I kind of spend some money to jumpstart it, you know, we need PPNR to grow. So we're going to invest, you know, at the pace we can grow our earnings, but we see a huge opportunity in Baltimore, and I think Evelyn has spent a lot of time in the market, so I'm going to turn it over to her.

Evelyn Lee

Has worked well with Baltimore is we had really nice traction there before we hired the team. We have a handful of really nice, well-heeled, influential clients in that market that are the result of calling efforts that were already ongoing. And so the timing really just felt right to bring a team in and serve that market from Baltimore. And then going back to the comments that Steve made, it is a fantastic market. It's important to Maryland. We are important to Maryland, so those things just seem to jive. And we obviously have a business plan with growth targets, et cetera, and that team is aware of those and working towards them.

David Bishop

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

Stephen Curley

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

Unknown Speaker

From a general perspective, I think go ahead, Ryan. Yes, I think it's important to note, as we did in the prior that the relationships we've maintained in the Commercial Real Estate space have remained throughout this cleanup period for our balance sheet. So those customers have not been inactive in the market, and now we're back to participating with the activities that they have. From a pipeline perspective, we're seeing opportunities in for sale residential, we're seeing opportunities in industrial and retail, in some new multifamily, there's some conversions from office to multifamily happening downtown, so it's a pretty diverse pipeline, both in asset type and geography within our region.

David Bishop

Got it. Then one final question, sort of looking back to credit quality, you know, you guys are pretty through the, I guess, the, you know, the balloon. Through the pipeline so to speak with office but you know as you look at potential loss content on you know the multi-family segment is there a way to sort of scale that relative to what you've seen in the market relative to office is it you know 10, 20 percent just curious how you think eventual loss content could play out thanks.

Eric Newell

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

Unknown Speaker

Yes, I think the dislocation in the market in office in our region was far more substantial than what we've seen.

Stephen Curley

We're seeing in multifamily to date and even in a higher interest rate environment going forward as values are likely to become more pressured. The loss content is not anywhere close to what we experienced in the office market. Yes, when I look at multifamily, you know, because we go through this every week, you know, are criticized and classified loans. And, you know, to me, we've engaged with the borrowers for months, you know, and we've been pretty clear in our signaling. We have strong senior positions in these properties. So I think, you know, what's happening is the borrowers, you know, they have equity, significant equity left in the property, and they're doing the rational thing. They're going to either re-margin the property and bring the debt load down so it can cash flow, or they're going to refinance the loan with a non-bank.

And, you know, non-banks, you know, are willing to kind of lend on an IO basis. So I think we're seeing borrowers do the rational thing. And so I feel like the loss content is going to be quite a bit different. In the cases where they don't do 1 and 2, you know, we'll liquidate and foreclose and liquidate. And I will tell you, there's plenty of willing buyers that want to buy a brand-new property that's well built, that has occupancy well into the 90s. And so from my perspective, it's an entirely different story than the office situation where you had no cash flow to the property at all, no revenue to the property. In this case, there's plenty of revenue. It's just a matter of getting the debt load sized appropriately.

And so I think actually there's a lot of people looking at this as an opportunity to buy trophy properties and good markets if they can get their hands on it. So I'm not seeing this at all like office.

Operator

Got it. Appreciate the color. Thank you. [Operator Instructions] Our next question will be coming from the line of Steve Moss of Raymond James. Please go ahead.

Stephen Moss

Good morning. Maybe just following up on credit here, you know, just kind of curious how you guys are thinking about provision expense going forward. You know, does the reserve kind of stabilize here and maybe there's not as much to add? I'm just kind of curious on your thought process there.

Eric Newell

The way I look at it, Steve, this is Eric. I look at where our criticizing classified assets are today. And if we were to get to our peer level, level, you know, call that 20% of capital and Tier 1, that gets us to that's approximately $275 million. And so we're far away from that. However, when we look at the we have visibility as to where we expect we're going to go this quarter. And if there was any lost content, we would have already put that into the reserve based on that visibility. And if you just look again that relationship I put together on answering Dave's question about that. The losses that we experienced relative to the amount of pay down or resolution that we had for criticizing classified by $130 million as around 3.5%.

So, if you, if you even double or triple that, and you take that number and compare it to the remaining amount of dollars left over, to get us to the peer median of criticized and classified, that number is below the provision and charge off that we've experienced year to date in 2020. Kind of summing all of that up, I just expect, I don't want to give a range just yet, I could probably do more, or a better, or I'll put a range out in January when we have spent more time on this because we're going through the budgeting process right now. But I think in summary, I would just look at what we've experienced year to date on provision and charge-offs and and model something that's lower next year for the full year.

Stephen Moss

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

Stephen Curley

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

Stephen Moss

Okay, great. Appreciate that color there and thank you for all the color on this call. I'll step back.

Operator

[Operator Instructions] Our next question is coming from the line of Will Jones of KBW. Please go ahead.

William Jones

Hey guys, thanks. Good morning. Steve, I wanted to go back to some you mentioned a little bit earlier in the call, just around the capital discussion. You mentioned maybe a point in time you get a little more constructive is when criticized classifies have a 3% handle on them. Maybe that kind of feels like the bogey, but you also mentioned that you don't think it's far away. And Eric, I feel like you made some comments around that. Good morning. that too could you just you know give us what line of sight you do have and into you know further reduction in criticized collateral like would it be crazy if we looked two quarters down the road and and we're kind of there just what kind of line of sight or visibility could you give us into that.

Stephen Curley

You know, that kind of comes in waves as you work through the loans. You know, I feel really good about the fourth quarter. Can you go past the fourth quarter? You know, then you've got a few different loans and the maturities are out, pushed out a little bit. You know, but I think, you know, to me, you know, I think something with a three-handle somewhere around the end of the second quarter is where I'd like to be.

Eric Newell

And just as a clarification, when Steve says three handle, you're talking about not percent, you're talking about dollars. Yes. Hundreds of millions, yeah, yeah, just.

Stephen Curley

To clarify that. Yes, okay. Thanks for clarifying. Sorry. Yes. So, you know, where we are today, if you saw us with, you know, something around $400 million criticized and classified, I think that'd be that'd be pretty good performance.

Eric Newell

Yes, okay. Thanks for clarifying that.

William Jones

Yes, okay. That's helpful. I appreciate that. And Eric, maybe one for you just on the guide, the outlook. It implies that we're kind of at the bottom here in terms of balance sheet shrinkage. So the guide next quarter does imply a somewhat meaningful ramp in terms of average earning asset base. Could you just walk us through how the balance sheet kind of evolves over the next 90 days to kind of arrive at this earning asset base, just what the path is to see the growth kind of materialize here?

Eric Newell

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

William Jones

Quarter as well. Yes, okay. That's great, Kyle. Helpful there. And then, honestly, for me, maybe more high level, see if this is you and I's first call together. Yes. You alluded to kind of your confidence there and your prepared remarks. So I guess I just want to ask, you know, if you just take an assessment, confidence level on day 1 when you joined Eagle, you spent a few months with the bank, to where your confidence level sits today, could you just walk through that evolution, you know, and where you see the Eagle transition? Turnaround story going? You've had a little time to look under the hood, kick the tires, and think about a go-forward strategy. Just how has your confidence level, you know, kind of change evolved and grown from day 1 to where you are today?

Stephen Curley

You know, frankly, the more information you get, the better decisions you can make, the more you feel like you're in control of your situation. And so I feel, you know, much better, you know, I didn't feel bad coming in, but now that I've kind of peaked under the hood, I feel much better. When I first started, I really was focused on asset quality and digging in on the criticized and classified loans. The deeper I've gotten in that, the more comfortable I am with our situation and the quality of our workout staff, which I think is superior. And so more recently, I've started to worry more about asset growth. It's flip-flops. I went from being worried about asset quality first and then asset growth second, and now I am absolutely more focused on asset growth and deposit growth than asset quality. Not that they're not both still important.

I'm highly focused on asset quality and resolution of our troubled loans. But, you know, I've really shifted to a market-facing role and spending more time with the producers to make sure we can grow deposits, we can grow loans, grow revenues, and drive a higher PPNR. Got questions? Honestly, I feel great, though. I feel really, really good about the future of Eagle Bank.

William Jones

Yes, okay. That's great feedback. I appreciate you sharing that with us. Thanks for the questions. Excellent. Well, that's great to hear.

Operator

[Operator Instructions] Our next question is coming from the line of Christopher Marinac of Breen Capital. Please go ahead.

Christopher Marinac

Hey, thanks. Good morning. I wanted to ask about stress testing in Commercial Real Estate and really anywhere else and how much of that is already embedded in the special mention and substandard numbers at September 30.

Eric Newell

Yes, Chris, our team has been looking at higher interest rates for the last several quarters. We've looked at, I think it's 80% to 90% of the balances. We've added 25, 50, and 100 basis points of interest rates to look at what could happen to debt service coverage. Any credit that approaches a debt service coverage of 1 or in some limited cases goes below 1, when you look at any of those credits, close to 100% of them are watch, special mention, mentioned our substandard. So none of them were in the past category, which makes us feel very comfortable that we have ring-fenced any of the potential credits that could challenges with higher interest rates.

Stephen Curley

And I also just want to say, you know, we didn't see an increase in watch credits, and that process has gotten fine-tuned where we really do have a much better early warning system. And so to me, the first signs of issues would be appearing in watch. And that number was flat for the quarter and actually improved a bit. So we're testing, we're stressing things, and we're watching things carefully.

Christopher Marinac

For actual results. Good, thank you for sharing that. And then just to follow up on deposits for Evelyn, you know, I know we've had seasonality and both sort of the negative side in Q2 and the positive side in Q3 for CNI deposits. What's happening in terms of net new accounts in the CNI channel and kind of what's the momentum that you see in the next year that could really sort of meaningfully impact those deposits?

Evelyn Lee

Yes, thanks Christopher. I mean you mentioned there's a couple of things going on inside the CNI deposit book. So, we've got some really nice large depositors that, you know, may or may not be seasonal. So, they may have large deposit inflows or outflows based on project timing or suit resolution. So, that's kind of one layer that can change, like a quarter to a linked quarter. You've got general seasonality and what I'll call the more granular back book. Third quarter tends to be a pretty good quarter for that back book. Fourth quarter it tends to be down with bonuses and distributions and things of that nature.

But overall, if you look at the seasoning of the new relationships that we brought in in 2025, we're very pleased with that. Those contributed to, in round numbers, about $50 million of new deposits in 2026. So, again, those are 25 relationships bringing in seasoning deposits in 26, and then that trajectory on new primary relationships that we're bringing in is still stable from prior year, and then with some of the investments that we made in We expect that to, you know, at least be stable or pick up. But linked quarter to linked quarter can, you know, I, I think I like the idea of looking back sort of like a trailing 12 period and you'll continue to see those core relationship deposits grow, but on a quarter by quarter we could be impacted by some of those other dynamics I mentioned.

Christopher Marinac

Got it. And the mix of the deposit should continue to change too. It may be modest quarter to quarter, but just generally speaking, we should see that mix evolve.

Evelyn Lee

In terms of, you know, DDA versus money market, are you going back to like broker versus, or sorry, what mix are you referencing?

Christopher Marinac

Well, it's really the CNI business as a percentage of the whole franchise that your component is getting bigger over time.

Stephen Curley

It has, yes. Ryan and I would be happy to be in a competition for who can gather the most deposits. That would be a win-win situation. Well, we're happy to be here because we are in that competition. Yes. Yeah, I would say this, though. I do expect our business banking franchise to start to pick up next year. So what I'd like to see is Evelyn grow very strongly in her mix not to change, because we have the branches and the business banking team doing a little bit more of the heavy lifting. But, no, I think Evelyn's got great momentum and is making, you know, is recruiting heavily for some supplemental people to her team.

Christopher Marinac

Great. Well, thank you all for your input, and thanks for all the disclosure heading into today. Thanks, Chris.

Operator

[Operator Instructions] Our next question is coming from the line of David Chiaverni of Jefferies. Please go ahead.

Unknown Speaker

Hi, thanks for taking the questions. And maybe just following up on that last line of questioning on the CNI side, but more on the loan side of it. So you mentioned about CRE pipelines are strong. Can you talk about the CNI loan pipeline here for the fourth quarter and particularly I'm curious about how we should think about the loan mix as this turnaround matures between CNI and CRE.

Evelyn Lee

Yes, I think in Eric's prepared comments you mentioned the significant strengthening of the CRE pipeline because they've been focused on asset quality. The strength of the CNI pipeline really built actively in the beginning of 2025 and has stayed sort of like stable slash growing, but it's absolutely still strong. So, I don't think it was mentioned as growing, growing in the same way that CRE is, but it's still certainly in a very good position. In terms of the mix, I mean, maybe I'll let Steve talk about what he's thinking in terms of the ideal mix there. I think in the long run, you know, from a long.

Stephen Curley

Growth, you like to see 40% from CNI, 40% from CRE, and 20%. So CNI 40, CRE 40, and 20% from business banking in the branches or some other asset generation strategies, but that's kind of how I'm thinking it. The two workhorses are going to be our CNI and our CRE, but you're going to and we are starting from a low base, but we'd really like to see the business banking group start to take a little bit bigger role in this.

Unknown Speaker

Thanks for that. And then a question on the guidance for 2027, particularly on the Net Interest Margin. What could get the NIM for next year to the high end versus the low end of the range of 277 to 305? What are some of the puts and takes there?

Eric Newell

Yes, and looking at this, you know, we're going through the budgeting process, so admittedly a little wide and we'll tighten that up as we finish that budgeting process here in the fourth quarter. But looking at that, you know, there's a couple of things. First off, we're using a forward curve as of 930. So I believe there's three rate hikes in the price in 1 in October and 2 earlier this year, or early next year, and that has an impact on NII and NIM, and then it's remixing of the investment portfolio. So reinvesting some cash flows there, which we haven't done since I've been here. We just started dabbling on that a little bit here in the fourth quarter. And then it's also a loan composition in terms of, Yes, there's about $350 million of roll-off of the investment portfolio next year that we'll be able to, that's earning us currently 2%, and we'll be able to put that in higher yields next year.

And then it's the loan composition of what we're putting on next year in terms of spread, and also that the interest rate environment. Very helpful. Thank you. One dynamic that I would like to leave with you as well is on the funding side, we're at around 11% of broker deposits when we file our call report here in a couple weeks or at the end of the month. And that's a tool that we're going to continue, we're going to use brokers in some way. Had the benefit of reducing that broker for the last several years frankly but in earnest during this year and that's had some nice benefits on the cost of funds I just don't anticipate that we're going to get that those or tailwinds in 2027. So it's going to be a bit more positive. The asset side that will be driving NIM expansion.

Unknown Speaker

Good color. Thank you. Thank you.

Operator

This does conclude today's Q&A session. I would now like to turn the call over to the President and CEO Steve Curley, please go ahead.

Stephen Curley

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

Operator

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

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