Good day and thank you for standing by. Welcome to the Eagle Bancorp Inc. Third Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. Please be advised, today's conference is being recorded. I would like to hand the conference over to your speaker today, Eric Newell, Chief Financial Officer of Eagle Bancorp Inc. Please go ahead.

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 this call 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-K for the 2023 fiscal year and current reports on Form 8-K include the earnings presentation slides, which identify risk factors that could cause the company's actual results to differ materially from those projected in 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 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, our retiring Chief Credit Officer, Jan Williams, and our incoming Chief Credit Officer, Kevin Geoghagen. I would now like to turn it over to Susan.

Thank you, Eric. Good morning, everyone. Throughout 2024, we've taken foundational steps that will better position us to achieve our strategic objectives. In the quarters to come, our focus is on growing the bank, proactively managing our asset quality, improving our net income and profitability, and diversifying both our loan and deposit books. We've positioned the senior team over the last year to provide the leadership needed to support our goals. With the latest addition of Evelyn Lee, joining us as the Chief Lending Officer for our commercial line of business, I am confident we have the necessary leaders in place to succeed in our strategic goals. I am excited about Evelyn's leadership and the over 25 years of experience she brings to Eagle Bank. Our work this year will be fundamental to future growth in loans and deposits, and I am confident in our strategy and approach. We repaid our $70 million maturing subordinated debt at the start of September. Subsequently, we raised $77.7 million of unsecured senior debt, replacing the capital that matured earlier in the month. The raise demonstrates the confidence investors have in our vision and in the future of our company. The issuance received full participation from executive management and the board, collectively investing $3.9 million, or about 5% of the total issuance. At the same time, we announced a recalibrated dividend strategy, positioning our dividend payout ratio to better support the company's future growth plans. This will also contribute to our goal of reducing our CRE concentration ratio. Our actions this year have reduced uncertainties about Eagle, which better positions us for the future. We've taken steps to address our balance sheet and capital. We have built our reserves for credit losses and substantially enhanced our income-producing CRE disclosures. The senior leadership team has undergone a notable change, and I am confident will provide the leadership needed for the execution of our strategy. Our digital channel momentum showed results during the quarter. We've designed our digital strategy to be a flexible tool to reduce the use of wholesale funding as our relationship-based deposit strategies take hold, which takes time. As I mentioned earlier, another step our team has taken this year is to enhance our income-producing CRE disclosure and give users of our financial statements more details about our loan book. Before turning it over to Jan to talk more about our enhanced disclosure, I want to welcome Kevin Geoghagen to the team. Kevin joined Eagle in early September. Kevin and Jan have been working very closely together to ensure a seamless transition as Jan approaches her announced retirement. Jan's contributions over the last 20 years have been fundamental to the strong success we've seen with our asset quality over the life of Eagle Bank, and I am excited for her to spend more time with her family and on achieving her personal goals as she enters her next chapter. With that, I will turn things over to Jan.

Thank you, Susan, and good morning, everyone. First, I'd like to direct your attention to our earnings presentation deck. Earlier this year, we added disclosure specific to our office portfolio. We've again substantially enhanced our disclosure on our income-producing commercial real estate. For our office portfolio, we've added more disclosure on slides 27 and 28, which includes the stratification of size of the office buildings in our portfolio. The Federal Reserve recently published a study indicating loss rates nearly seven times greater for office properties at 500,000 square feet as compared to those of 50,000 square feet. We also added more details about our Washington, D.C., and Central Business District office exposure. It's worth mentioning we have only four Central Business District office loans, one of which was marked to market and was the source of the first quarter charge-off. The other three properties are pass-rated and current as to payment. We've added details on our multifamily portfolio on pages 19 and 29. On pages 24 through 26, you can see detail on non-accrual loans, larger special mention and substandard loans, and our top 25 loans. On our non-accrual loans, you will see three offices in the population, all of which are non-accrual not due to payment default but because of appraisal valuation. In each case, the receipt of a new appraisal resulted in an associated charge-off and each of the loans being placed on non-accrual despite being current as to payment. Finally, slides 30 to 33 provide further detail on our credit culture, history of asset quality, and other portfolio characteristics. To summarize, while our office portfolio has been the source of some uncertainty over the last year, through this cycle, we've simply not yet seen payment performance issues in the office portfolio. Valuation risks have driven our charge-off activity from our office portfolio, and that risk is largest in the Central Business District where we have only four loans, three of which are pass-rated and one of which has already been written down. Our total exposure is $132.8 million in the Central Business District. Our Northern Virginia and Maryland office exposure has not seen the same degree of valuation challenges to date. We are not seeing any material shift in the performance of our multifamily portfolio. Growth in net operating income, primarily as a result of rent increases in multifamily properties, has to date compensated for increases in debt service due to higher interest rates. We believe this trend will continue as a housing shortfall continues to exist in our footprint. Net charge-offs moderated this quarter as compared to earlier in 2024, with net charge-offs totaling $5.3 million this quarter. Year-to-date charge-offs are $29 million or 48 basis points when annualized. Substandard loans declined $17 million during the third quarter, ending at $391.3 million. Special mention increased $57 million during the quarter, ending at $365 million. We note in our disclosure on page 21 of our earnings presentation that 91% of classified and criticized loans are performing. In our second quarter earnings call, I indicated three projects drove the increase in criticized loans, two of which were assisted living properties. One of those assisted living properties was moved to non-accrual at September 30th with a carrying value of $17.9 million after a charge-off of $3.8 million during the quarter based on an updated appraisal. We also have a specific reserve set aside for this credit totaling $2.5 million. The other two loans placed into non-accrual status at September 30th were unrelated land loans, one in Tyson's Corner, Virginia, with a principal balance of $16.4 million, and one at the end of the Dulles Metro line in Northern Virginia, with a principal balance of $10.5 million. Both loans are supported by current appraisals and neither evidences an impairment. Nonperforming loans were $134.4 million at September 30th, an increase from $98.2 million at June 30th, inclusive of the three loans I just mentioned. NPAs were $137.1 million, which was a 122 basis points to total assets, an increase of 8 basis points from the prior quarter. Loans 30 to 89 days past due were $56.3 million at September 30th, increasing from $8.4 million at June 30th. Of the increase in 30 to 89 day past dues, two relationships totaling $39 million have become current subsequent to the end of the quarter, while the remaining $8.9 million included one loan on which we have received a pay down of $1 million in early October as a condition of extension.

Thank you, Jan. We reported net income for the quarter totaling $21.8 million or $0.72 per diluted share. This compares to the prior quarter GAAP loss of $83.8 million after recording a $104.2 million impairment in the value of goodwill. Excluding the goodwill impairment, operating net income last quarter totaled $20.4 million or $0.67 per share. Third quarter operating earnings improved $1.4 million attributed to a positive variance related to the change in the provision for unfunded commitments, higher fee income, and a modest increase in net interest income. This was offset by an increase in the provision for credit expense and non-interest expense. The operating trend is relatively stable from the second quarter and materially improved from the first quarter. Our capital position remains strong. Tier 1 leverage capital increased 36 basis points to 10.9%. Common equity Tier 1 capital increased 62 basis points to 14.5%. Tangible common equity increased 51 basis points to 10.86%. Book value per share increased $1.86 to $40.61 per share, representing an annualized 19% growth rate from the prior quarter. On balance sheet and contingent liquidity also remain strong. Average deposits have grown $398 million from a year ago at September 30, 2023. Our one-way broker deposits, representing non-relationship deposits, have declined by $182 million from the comparable 2023 period end and is the result of growth of non-wholesale deposits. Insured deposits total 74% of our total deposits. At quarter end, available liquidity from the Federal Home Loan Bank, Federal Reserve discount window, cash, and unencumbered securities totaled over $4.5 billion. I'll pause here and let Kevin talk about reserves for credit losses.

Thanks, Eric. As Jan mentioned, net charge loss increased $3 million from the second quarter to $5.3 million. While we continue to assess the adequacy of our qualitative reserves to account for market uncertainty, it is more likely the future reserve bill, if any, would be driven by specific reserves from individually evaluated loans. A change in economic estimates from our Moody's inputs to the quantitative regression model may also increase reserves in the event there is a significant shift in economic expectations that we did not consider in our qualitative reserves. We continue to add specific reserves to non-accrual office loans as our policy is to reappraise annually. While valuation risk in the office portfolio remains, as interest rates ease, we believe the valuation uncertainty will normalize. The allowance for credit losses increased to $112 million at September 30th, representing coverage to help for investment loans to 1.4%, increasing 7 basis points from the prior quarter. The ACL coverage to performing office loans increased to 4.55% at September 30th, increasing from 4.05% at June 30th, and 1.91% at December 31st.

Thank you, Kevin. Operating pre-provisioned net revenue increased to $35.2 million from $34.4 million in the prior period. The driver of the increase was higher non-interest income from swap and loan fees, and to a lesser degree, an increase in net interest income. Net interest income before provision totaled $71.8 million in the third quarter, increasing from $71.4 million in the second quarter. NIM in the second quarter was 2.37%, declining 3 basis points from the second quarter. Driving the decline was certificate of deposit growth in our digital channel. Worth mentioning, in August, we reduced rates paid on non-maturity deposits due to declining interest rates in the summer. Following the decision by the FOMC to ease the policy rate by 50 basis points in September, we reduced rates again for non-maturity deposits by an additional 50 basis points throughout September. We have $2 billion of loans tied to 30-day or overnight SOFR, and $500 million of loans tied to prime. Operating non-interest expense totaled $43.6 million, increasing from $42.3 million in the previous quarter, adjusted to exclude goodwill impairment in the second quarter. The $1.3 million increase is attributed to higher FDIC expenses. In our quarterly investor deck released along with our earnings, we added a preliminary view on 2025. Our thoughts on period-end growth of loans next year is between 2% and 8%, though the slide shows average loan growth. Earning asset growth is flat as we continue to take cash flows from our investment portfolio and reinvest in loans. There is an expected benefit from this repositioning of the investment portfolio and the loan mix, which will enhance the spread. Mix will be critical as well for funding. Growing non-interest bearing deposits and reducing the use of wholesale funding should also contribute to spread. Of the $91.2 million of funded loan originations in the quarter, we had a weighted average rate of 7.11%. This compares to $178 million of funded loan originations at a weighted average rate of 8% in the second quarter. I'll turn it over to Susan for a short wrap-up.

Thanks, Eric. The team is planning on a future that will allow us to scale our franchise and continue to be the best community bank in the Washington, D.C. metro area. Eagle Bank's deep-rooted relationships within the region, combined with the expertise of our relationship managers, continue to develop tailored solutions that resonate with both our current and future clients. As a community-focused bank, we are committed to local decision-making, building long-term customer trust, and supporting the economic growth of the D.C. market. We believe this sets us apart and positions Eagle Bank to benefit significantly from the evolving market dynamics. We are cautiously optimistic regarding how falling interest rates may improve valuation risk that we've discussed over the last year and a half. Nevertheless, with over 25 years of experience in this market, we have the expertise to support clients navigating the challenges of relatively higher interest rates. In closing, I would like to extend a heartfelt thank you to our employees, whose hard work every day makes Eagle a success. With that, we will now open things up for questions.

Thank you. Our first question comes from Justin Crowley with Piper Sandler. Your line is open.

Hey, good morning, everyone.

Morning Justin.

Just to start on credit here and appreciate all the added disclosure on the deck. I wanted to see if you could detail just a little further to pick up the non-performers, specifically the assisted living area. I know some of the migration there we've discussed before, so I guess just what you're seeing in that area looking forward with payment defaults being more of a driver with these credits.

Yeah, Justin, I think I can give you a quick run-through on where we are with the current non-performers. We have the one CBD office property that we had discussed in the last two quarters. That's about $28 million. We have an assisted living facility in Charles County, Maryland. That's $19.2 million. We have office in Arlington at $19.1 million, office in Northern Virginia at $18.5. Then the newer loans added this quarter, an assisted living facility in Montgomery County, Maryland, very well-located new facility. It had been current and performing at June 30th. I believe there are some issues with achieving stabilization at this property, and the sponsor, I think, is looking at some kind of a negotiation in terms of a lesser payment, a cram down, really. That remains to be seen, but we've already marked the property down based on the current appraisal and added an additional reserve for that. I would say the ground lease land in Fairfax in Tyson's Corner is actually a great piece of property, but again, the sponsors are looking for some reduction in the amount owed on that. Very unlikely to happen. That's a property that should be readily saleable at a number significantly in excess of our carrying amount. And then the land that, the final one at $10.5 million, is land that's at the end of the Dulles Metro. It is zoned for multifamily. It's with a ground lease. There are various issues amongst the fee owner, the adjoining landowner, and the ground lease holder that is resulting in litigation. Don't know how long it'll take for that to be resolved. If and when, we'll have a better idea. Right now, there's an injunction against the property, so we have moved it into non-performing status. It is protected by a loan to value, but that's an evolving situation. Did that answer your question?

Yeah, that's helpful detail. I guess just on office, more broadly, it was nice to see some stability there. Just as we look ahead to ‘25, a lighter year for maturities before we get to ‘26, just curious, any commentary or early work you're doing in those buckets in terms of what you're seeing with appraisals and then just what you're seeing with occupancy rates?

There is still a lot of volatility in the appraisal area. I think it's because they're all driven by hindsight, and you're looking at what properties sold for in the last year. Most of what you're going to find is distressed sales or foreclosures, and those are what I believe to be the lowest possible values they could be using for calculating valuation on newer properties. When I look at what's been foreclosed on in our market, and I think this is probably true across the country, the large loans in the central business district are the ones that are seeing the biggest drop in valuation. There's a very limited number of buyers for those properties, very limited financing for anyone who is a buyer on those properties. We're starting to see some green shoots of activity in the market, but I think that the volatility in appraisals, while it should be improving, will take a while to shake out there. We are seeing very stable occupancy in the properties that we have that are going out the next 18 months in terms of lease roll or maturities. I think we haven't really seen degradation in terms of the suburban office market, in terms of occupancy levels. We're actually seeing some activity out there. We really only have minimal in terms of life sciences projects, which I know have been having issues lately, but we haven't skipped a beat in terms of the office portfolio as a whole. I think one of the reasons is the proximity on the life sciences side to Fort Detrick and NIH that the 270 corridor has. So there really haven't been weaknesses that we've experienced. I think the four loans that we have in the central business district, one's a trophy property, that's our largest loan. It's about $48 million. That loan is long-term leased to a New York-based international law firm. Not expecting a blip on that one. The build-out is almost finished on it, and they should be moving in shortly, and rent payments will commence, so a lot of confidence in that property. The trophy market is extremely tight, so no change in pricing on that either. So, I'm cautious, but I'm optimistic that with a couple of more drops in interest rates, we should start to see some decent valuations done on these properties as we start to see market trades happen.

Okay, that's helpful. Maybe it's more of a modeling question, but just on the reserve, I think it's been talked about before, maybe a 135, 140 reserve level. And so, being at the high end of that now, I know it wasn't in the outlook slide for 2025, but just any preliminary thoughts on either go-forward charge-off expectations or provisioning assumptions, and what kind of allowance level that gets you looking out to next year?

Yeah, in terms of the allowance, I think we kind of talked about our thinking there in terms of any additional build. In terms of credit, I think the range that we're willing to talk about for 2025 is between 25 and 50 basis points on average loans. However, I think that's a wide range, but you need to take into context all the comments that Jan just mentioned and what we're seeing right now for information that's available to us on that. But that's the way we're looking at it for next year for charge-offs.

Okay, awesome. I appreciate that. I will leave it there. I appreciate you taking the questions.

Thanks, Justin.

One moment for our next question. Our next question comes from Catherine Mealor with KBW. Your line is open.

Thanks. Good morning.

Good morning, Catherine.

Thank you for all this additional disclosure. It's very helpful. If I look at slide 26 that shows your top 25 loans, which I think is really cool to see. One thing that you talk about in your slide deck, and you've mentioned before that the biggest thing that's bringing some of your properties to NPL is not necessarily payment default, but it's the maturity and then the need to get an updated appraisal. And so, if I look at that slide, it looks like really only kind of your largest loans kind of two credits that we might be worried about into next quarter. One is the office loan that's about $85 million that matures in December, and then the data center loan that matures in December, both are criticized. I know it's preliminary and that will happen in the fourth quarter, but any kind of preliminary thoughts on those two as we kind of think about the migration that we could see next quarter? Thanks.

Thank you, Catherine. We do have some maturities coming up in the next six months, but not a lot. One of the larger office properties is located in Montgomery County, Bethesda. I don't anticipate any issues with that appraisal since the occupancy and debt service coverage are strong. We have set aside all of the cash flow from the past year and a half, building up about $6 million to $7 million in reserves for new tenant build-outs in case of rollover. Additionally, we have a payment reserve of about $2.5 million, which puts us in a solid position even if we lose a tenant or two. The Bethesda market is performing well for these Class A properties, so I’m not overly concerned. Regarding Tyson's, the data center you mentioned, I have some worries because negotiations with Amazon are ongoing. It's difficult to predict Amazon's actions concerning data centers as they frequently change their approach between renting and buying.

Great, very helpful. Thank you for that. And then maybe turning over to the margin. Can you talk a little bit about what you've seen on deposit costs so far this quarter? I mean, your deposit costs have been so high, and so I would think that you would have a pretty high beta on the way down. So just curious what you've seen so far with the first 50 basis points of cuts and what you would expect from a beta over the next couple of quarters? Thanks.

Yeah, as I mentioned in my prepared commentary, we reduced non-maturity deposits collectively, or cumulatively, I should say. 65 basis points late in the third quarter, 15 basis points in August, and another 50 basis points in September. Haven't seen any preliminary customer behavior that would be concerning. There's been some statement cycles, which to me, or at least my history, that's important. That's when the customer often realizes that rates are falling on their account. But we don't anticipate any issue or concerns there. In terms of your comment about beta going forward, I would say it's not going to be 100%, but I think it could be pretty high for our customer deposits. And then in terms of wholesale, while it's less wholesale now than before, we're going to continue to use the tools that we have, one of which is the digital channel, into next year. That will help us reduce the use of wholesale, which has that higher beta money. And then while digital isn't immediately accretive to our cost of funds, there is a level of complacency that the customer in that channel does demonstrate. We've seen a little of that already, even though we've been doing it for only 10 months. So I think we're going to learn a lot more here in the fourth quarter and the first quarter on testing that complacency of that customer. So I think that if you ask me this question next quarter, I could probably give you a little bit more of an informed view on the betas in the digital channel for Eagle. But my experience at other institutions that I've had experience with this channel is that beta can sometimes be close to 60%, 60% to 70%.

Okay, super helpful. And then maybe my last question is just on the dividend reduction that you announced earlier this quarter. Can you just kind of give us some commentary on what drove that decision? And then as we think about your commercial real estate to capital ratio, you mean you've got a ton of capital, if we just look at capital standalone, but obviously an elevated theory to capital ratio. And so I know the plan is to reduce that, but just kind of curious if there are – there's a level that you hope to be to by the next couple of quarters, maybe by the end of 2025, or just kind of what your target is for that and how that might impact growth over the next year. Thanks.

In terms of CRE, our strategic plan is focused on – and thinking strategically, we think 24 to 36 months out. Our goal is to get the CRE concentration ratio closer to the FDIC guideline. But that does not mean that we're not serving our CRE customer. We have expertise in CRE. Eagle is known for CRE in our market. We're not turning our back on the CRE customer. We're serving our clients. That being said, the dividend, which – the recalibration of the dividend, which seemed like a natural time to consider that given the refinancing of the subordinated debt and the senior debt, I think the dividend helps us grow the numerator of that. No, but do not – I'm not great at math. You would think I'm not. The CFO is saying that. Sorry, we're all laughing at Eric right here. But it grows the capital out much greater by holding onto $32 million of additional capital so that the CRE concentration ratio does get close to that guideline. I think there's another nuance here, so capital is the denominator. And on the numerator side, in talking with Jan and Ryan Riel, who's our Chief Lending Officer on CRE, there's about $400 million that the two of them believe could – is kind of primed to go find permanent financing somewhere else. We're not a perm CRE financing institution. We're more of a bridge lender. And so we're not going to be doing the deals that you would get in a pension fund or a life co or debt, or we're not going to compete against financing from Ginnie Mae. So we estimate that there could be about $400 million that if rates continue to fall, these folks are using extensions to kind of wait to get lower rates before locking in. And we think that could be quite helpful with reducing the CRE concentration ratio. So one of the goals that we'll have, if we have the benefit of that happening, to prop up earning assets would be C&I. And so Susan has spoken throughout this year about our initiative to grow C&I and bringing Evelyn in on the leadership team and her 25 years of experience in this market is certainly helpful in that strategy. And, yes, organic growth in C&I will take some time. And we're certainly – we see a lot of activity coming through our management loan committee, but I think there will be other opportunities that we could take in the intermediate steps to also keep our earning assets flat and not show a decline in earning assets and have that be in the C&I bucket. I hope I answered your question.

Yes, you did. It was all very helpful. Thank you very much.

Christopher Marinac: Thanks. Good morning. Eric, if we dug into the expense guide for 2025, do you already have the FDIC costs in that run rate? And I was just thinking about a scenario where you would go above the expense guide and if that would be primarily just because you were more successful on new hires? And if that was a fair scenario?

So in the 2025 view of expenses, FDIC is flat from 2024. And then I believe that we will not see any increases of expenses, material increases of expenses away from where our outlook is showing due to team build-out. I think that there's enough capacity for us to build out teams and take on new team members and new relationship managers when we want them on our team. And that's not going to materially alter our expense approach.

Got it. And then with Evelyn joining and as she and her team get ramped up next year, what's the, I guess, outlook, not just for C&I business, but also kind of related deposits? And does that give you some relief on funding costs in the 2025 guide?

C&I deposit generation and growth, as we all know, is a long sales cycle. I don't want to speak for Evelyn, but I think that there's certainly opportunities with our current customers. How do we deepen our relationship with our current C&I customers, providing them treasury management products that might be useful to them that they're not using. So I think that that certainly is a shorter sales cycle. And I think as Evelyn starts to familiarize herself with a team and finds talent that could be accretive to the existing team and gets the team focused on sales outreach and efforts and being out in the community, those efforts will eventually help drive deposit growth. And a lot of words to say, I don't think we're going to see a material increase in C&I deposit growth in the next quarter or so, because that takes some time. But I do believe that in the long term that that is definitely an important part of our strategy in improving the quality of our deposits, and it will absolutely be accretive to our cost of funds, because it will allow us to reduce the use of wholesale funding, and it will also allow us to have less of a digital strategy presence in our deposits, because the deposits that Evelyn and her team, as well as Ryan and his team, and also our small business and our branch channels, consumer channels, those are all relationship deposits that will really build the franchise value that we have here, and we want to continue to build on.

The only thing I would add to that is over this last year, we have spent some time developing our treasury management focus. So we've increased some of the products there and the staffing there, so that will help Evelyn hit the ground running on gathering those deposits and those fees from that kind of a service.

Great. Thank you both for the feedback on that. And just, I guess, a relatively quick question for Jan and or Kevin. Do the maturities in 2024 have anything remaining that are going to be dealt with in the fourth quarter, or is most of those already taken care of and the real focus is on ‘25 and ‘26?

I believe you're right that the main focus will be on 2026. 2025 has a relatively low amount of maturities. In the balance for 2024, we have included loans that have already matured and are not performing. These loans are past their due date, but there won’t be any events that would lead to an extension. They will remain until they are either sold or repaid. Therefore, the actual number is lower than it appears. Eric, I think you have the details on the maturities for 2024.

Yeah, on the 2024, but I think you answered Chris's question, that in 2024 there's not any valuation risk there.

Well, there's always some, but I think overall it's pretty small in terms of volume going for the balance of this year and even into next year it's a pretty small number.

Yeah.

Got it. Is there any, I guess, risk in terms of working in advance on those ‘26 maturities or is it really just a function of assessing the lost content possible and having the reserve appropriate?

I think there is early intervention action that we've taken going out that far. Typically that involves a cash flow sweep or a pay down if we're in a position and the buyer is in a position to come up with a principal reduction. We probably would not enter into an extension until the time of maturity, but we would put into effect credit enhancements before the maturity date.

Chris, I will add, maybe I've told you this prior, when I talk with institutional investors about the office reserve, often times the number 10% comes up. And the reason that we don't believe 10% is appropriate for Eagle is given the limited and now you can see the actual exposure we have to the central business district. We have limited exposure to central business district office loans and when you look at the issuers that have those 10% reserves, they have much more exposure to the larger office loans in the central business district. And one of the disclosures that's additive to our deck on slide 27 in the bottom right-hand corner is the stratification of our office portfolio by square footage. And in that you can see we only have one office property that has 500,000 square feet or greater. I believe in Jan's prepared comments, although I don't know if she said it this time, we spend so much time together talking about credit. She's talked in the past about the loss rate for something that's 500,000 square feet is seven times greater than that of 50,000 square feet, and that's not Eagle saying that, that's the Federal Reserve, I think it was Kansas City did a study earlier this year. So we've spent a lot of time, Jan, myself, and frankly the whole entire management team including Susan, we spent a lot of time talking about the reserves that we have for office and that 4.55 we feel is adequate at September 30th given the information we have. And you'll note in our prepared comments from Kevin, we believe that if there is any additional reserve build, it's going to be more idiosyncratic and related to individually evaluated loans versus an overall qualitative reserve for office and continuing to build.

I think that's true and when you look at the portfolio as we sort of postmortem anywhere we've had losses in the office portfolio, nothing of $20 million or less, no loan of $20 million or less, has had any kind of a loss. So I think what the Fed has pointed out has held true for us that the smaller deals have a much less risk of loss. Typically you're going to see personal guarantees on those smaller loans so you have a lot more leverage in negotiating.

Great. Thank you all for your feedback and again thanks for the disclosure of the slides. It was really, really helpful.

Thanks, Chris.

And I'm not showing any further questions at this time. I'd like to turn the call back over to President and CEO, Susan Riel for any closing remarks.

I just want to take the time to thank you for your time today and for your questions. And we look forward to speaking to you again next quarter. Have a great day.

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.