Eagle Bancorp signals manageable provisions and improved earnings for 2026 as credit clean-up progresses

Earnings Call Insights: Eagle Bancorp, Inc. (EGBN) Q3 2025

MANAGEMENT VIEW

* Susan Riel, Chair, President & CEO, stated the third quarter reflected “continued progress in addressing asset quality issues and positioning the bank for sustainable profitability,” noting, “we are confident that we are nearing the end of elevated losses from decreased asset values.” She highlighted the move of $121 million of criticized office loans to held for sale and engagement with a nationally recognized loan review firm for an independent evaluation of the CRE and C&I portfolios. Riel said, “the findings from both outcomes support the adequacy of our current provisioning.”
* Riel emphasized improvements in the commercial and deposit franchises, citing a $105 million increase in C&I loans and 8.6% growth in average C&I deposits. She stated, “These are clear signs that our brand, our service model and our people are earning and deepening trust in the marketplace.”
* Riel outlined strategic priorities: “complete the credit cleanup, deepen core relationships and deliver improved earnings performance, which should drive improved share value for shareholders.”
* Kevin Geoghegan, EVP, reported total criticized and classified office loans declined for two consecutive quarters, stating, “from a peak of $302 million at the end of March 31 to $113.1 million at September 30.” He detailed a $113.2 million provision for credit losses and described the allowance for credit losses at $156.2 million or 2.14% of total loans, down 24 basis points from the prior quarter.
* Geoghegan explained the increase in criticized and classified multifamily loans, attributing it to “the impact of higher interest rates on debt service coverage rather than any meaningful deterioration in the underlying property performance.”
* Eric Newell, CFO, stated, “We reported a net loss of $67.5 million or $2.22 per share compared with a $69.8 million loss or $2.30 per share last quarter.” He noted tangible common equity to tangible assets is 10.39% and highlighted $5.3 billion in available liquidity with “more than 2.3x coverage of uninsured deposits.” Newell also reported pre-provision net revenue of $28.8 million, and that net interest income grew to $68.2 million.
* Riel announced the voluntary resignation of Chief Credit Officer Kevin Geoghegan, effective December 31, and the hiring of William Perotti, Jr. and Daniel Callahan as interim credit officers.

OUTLOOK

* Management expects net interest income to grow in 2026 “despite a smaller balance sheet, driven by mix improvements and lower funding costs.” Loan growth in 2026 is anticipated to remain concentrated in C&I with “a strong focus on disciplined credit standards.”
* Riel said, “we believe that in 2026, provisions will be manageable and earnings will improve and our focus on sustainable profitability will come through in our results.”
* FDIC costs are expected to peak over the next several quarters and then decline as asset quality and liquidity metrics improve, with noninterest expenses remaining well controlled.
* The company will reassess capital return strategies as earnings normalize and credit stabilizes, following a proactive dividend reduction to $0.01 per share.

FINANCIAL RESULTS

* Net loss for the quarter was $67.5 million or $2.22 per share, compared to a $69.8 million loss or $2.30 per share last quarter.
* Tangible book value per share decreased $2.03 to $37.
* Pre-provision net revenue was $28.8 million, and net interest income increased to $68.2 million.
* Noninterest income totaled $2.5 million, impacted by $3.6 million in loan loss sales and a $2 million loss on sale of investments.
* Noninterest expense declined $1.6 million to $41.9 million.
* Allowance for credit losses ended the quarter at $156.2 million or 2.14% of total loans.

Q&A

* Justin Crowley, Piper Sandler: Asked about confidence in closing transactions for held-for-sale assets and risk of further losses. Ryan Riel, SEVP, explained, “we’re getting brokers’ opinion, which in our opinion, is a better valuation tool than appraisals in this marketplace.” Carrying values are set at the bottom of the broker range to avoid repeat losses.
* Crowley asked about timing for asset sales. Riel said, “we can confidently say that disposition will occur during the fourth quarter of 2025...there will be material action taken in that category during the fourth quarter.”
* Crowley questioned charge-off expectations. Newell responded, “I just don’t believe charge-off activity in the quarter will have a meaningful impact on provision expense like it has in the last 2 quarters.”
* Crowley inquired about multifamily loan stress. Riel noted, “the actual performance of the property is at or above our underwritten levels,” with stress coming from the interest rate environment.
* Christopher Marinac, Janney Montgomery Scott: Asked about government contract business. Newell replied, “we haven’t seen much of any concerns in the government contracting space because of the government shutdown.” Marinac also asked about criticized/classified loan inflows, and Geoghegan said, “that migration will slow down dramatically.”
* Brett Scheiner, Ibis Capital Advisors: Queried about temporary vs. long-term issues in multifamily. Riel explained, “the cash flow will improve over time, and therefore, the valuation will improve over time.” Scheiner also asked about capital accretion in Q4; Newell said, “I don’t believe at this time that book value will continue to be degraded by credit.”
* Catherine Mealor, KBW: Questioned the rationale for loan downgrades in the reviews. Geoghegan said, “we saw some segments of deterioration, and we took according steps.” Mealor also asked about multifamily loss expectations. Riel responded, “I don’t think they’re comparable at all,” distinguishing office from multifamily issues.
* Nick Grant, North Reef Capital: Asked about M&A and franchise value. Riel stated, “the Board will focus on anything that adds value to our shareholders, and we'll consider whatever other options come our way.”
* Crowley followed up on margin drivers. Newell indicated, “About 40% of our loan book is fixed, but it’s a short loan book...average book, it’s probably 3 to 4 years.”

SENTIMENT ANALYSIS

* Analysts were focused on credit risk, asset sale timing, and reserve adequacy, with a slightly positive tone as management emphasized transparency and progress. Crowley and Marinac pressed for assurance on asset disposition and reserve sufficiency.
* Management maintained a confident tone in both prepared remarks and Q&A, stressing validation by independent reviews and reiterating that “the bulk of loss recognition is behind us.” Statements like “we are confident that we are nearing the end of elevated losses” and “we believe that...earnings will improve” reinforced this.
* Compared to the previous quarter, management’s tone shifted from cautious to more resolute, with increased confidence supported by independent validation and tangible credit clean-up progress. Analyst sentiment was less skeptical, reflecting growing acceptance of management’s reassurances.

QUARTER-OVER-QUARTER COMPARISON

* Guidance language shifted from cautious normalization expectations to a more confident outlook for manageable provisions and improved earnings in 2026.
* Strategic focus continues on credit resolution, deposit growth, and C&I loan expansion, but the current quarter emphasized validation from independent and internal reviews.
* Analysts in both quarters stressed asset quality and reserve adequacy, but current quarter questions reflected more optimism about stabilization.
* Key metric changes include a decline in criticized/classified office loans, net loss reduction, and improved net interest income and pre-provision net revenue.
* Management confidence improved, bolstered by third-party validation and reduced uncertainty over asset quality.
* Analysts’ tone moved from cautious to slightly positive as credit risk appears more contained.

RISKS AND CONCERNS

* Management identified continued valuation stress in the office portfolio and increased criticized/classified multifamily loans due to higher interest rates impacting debt service.
* Steps to mitigate risk included moving office loans to held for sale, engaging a third-party loan review, and conducting a supplemental internal review of CRE exposures above $5 million.
* Analyst concerns centered on the timing and adequacy of asset dispositions, sufficiency of reserves, and potential for further charge-offs, especially in multifamily.

FINAL TAKEAWAY

Eagle Bancorp’s third quarter marked significant progress in addressing asset quality, with independent and internal reviews affirming reserve adequacy and deliberate steps to dispose of problem office loans. Management expects manageable provisions and improved earnings in 2026, emphasizing core franchise strength and sustainable profitability. Recent leadership changes in credit risk management are aimed at maintaining momentum in credit clean-up while the bank continues to deepen commercial relationships and improve funding quality.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/egbn/earnings/transcripts]

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