Eagle Bancorp's Q4 2024: Navigating Office Loan Risks and Deposit Strategies Amid Contradictory Signals

Financial Performance and Liquidity:
- Eagle Bancorp reported net income of $15.3 million for Q4 2024, down from $21.8 million in Q3, with a pretax income decline of $6.9 million to $19.8 million.
- The decline was due to lower net interest income, higher provision for credit losses, reduced fee income, and increased noninterest expenses.
- The company's liquidity position remained strong, with average deposits increasing by $585.1 million from December 31, 2023.

Asset Quality and Charge-offs:
- Net charge-offs totaled $9.5 million in Q4, up from $5.3 million in Q3, resulting in a 2024 charge-off rate of 48 basis points.
- This increase was partly due to a $9 million charge-off of an office loan, reflecting a 44% decline in its appraisal value since May 2022.
- The loan was moved to nonaccrual status, and the bank believes it remains adequately reserved.

Deposit and Loan Growth:
- Deposits grew by $590.2 million in Q4, allowing the bank to repay $1 billion in bank term funding program debt.
- Loans totaled $162.6 million in funded loan originations for the quarter, with a weighted average rate of 7.68%.
- The growth in deposits and loan originations was supported by strategic hires in the C&I line of business and efforts to reduce CRE concentration.

Capital Position and Credit Reserves:
- Eagle Bancorp's Tier 1 leverage ratio decreased by 3 basis points to 10.74%, while the Common Equity Tier 1 ratio increased by 33 basis points to 14.63%.
- The allowance for credit losses increased to $114 million or 1.44% of total loans, primarily driven by specific reserves for individually evaluated loans, particularly an assisted living relationship and the aforementioned office loan.