Brett Steiner

Brett Steiner sought to understand the distinction between temporary cash flow issues and long-term impairment in the multifamily space, and whether higher debt service affects asset values. He also asked for additional comments on Chief Credit Officer Kevin Geoghegan's departure and whether the bank expects to accrete capital in Q4, assuming peak marks and no need for further reserve additions.

Answer

Ryan Riel, SEVP and Chief Lending Officer of Commercial Real Estate, explained that multifamily properties' net operating income (NOI) is often at or above expectations, but floating interest rates stress debt service coverage. He cited challenges in affordable housing in Washington, D.C., due to high bad debt expense, but expects long-term relief from new rental acts. He confirmed that higher debt service can affect asset values but believes cash flow and valuation will improve over time. Kevin Geoghegan, Chief Credit Officer, confirmed his voluntary resignation, expressing pride in his contributions to credit risk management. Susan Riel, Chair, President, and CEO, added that interim Chief Credit Officers, William Parotti, Jr. and Daniel Callahan, were hired to ensure continuity during the search for a permanent replacement. Eric Newell, CFO, reaffirmed that based on recent loan reviews, he believes book value will not continue to be degraded by credit costs.

Brett Steiner of IBIS Capital Advisors sought clarification on EagleBank's distinction between temporary cash flow issues and long-term valuation impairment in the multifamily sector, and inquired about the implications of Kevin Geoghegan's departure. He also asked about the expectation for capital accretion in Q4.

Answer

Ryan Riel, SEVP and Chief Lending Officer of Commercial Real Estate, explained that multifamily properties' Net Operating Income (NOI) often meets or exceeds expectations, but floating interest rates stress debt service coverage. He attributed temporary cash flow issues to this and high bad debt expense in D.C. affordable housing, expecting long-term relief from new D.C. Council rental acts, which would improve valuations over time. Kevin Geoghegan, Chief Credit Officer, confirmed his voluntary resignation, expressing pride in his contributions. Susan Riel, Chair, President and CEO, noted the hiring of interim Chief Credit Officers, William Parotti, Jr. and Daniel Callahan, to ensure continuity. Eric Newell, CFO, reaffirmed that recent loan reviews validate management's credit view and that book value is not expected to be degraded by credit costs in Q4.