管理層發言
Good day, and thank you for standing by. Welcome to Inc. Second Quarter 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press *1 on your telephone. You will then hear an automated message advising that your hand is raised. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker, Eric Newell, Chief Financial Officer of Eagle Bancorp. 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 the 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-Ks for the fiscal year 2025 and current reports on Form 8-Ks, 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 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 on our website or on the SEC's website. With me today is our new president and CEO, Stephen R. Curley; our chief lending officers, Ryan A. Riel and Evelyn Lee for commercial real estate and commercial and industrial, respectively. I would now like to turn it over to Steve.
Thank you, Eric, and good morning, everyone. Before I start the quarter, let me say how honored I am to join Eagle as its new president and CEO. This is a franchise built over decades through strong client relationships, deep community ties, and an exceptional and seasoned team of bankers. While I have only been with Eagle for three weeks, I spent that time meeting and talking with employees, customers, and shareholders, while conducting an intensive review of the business. Those conversations have reinforced what attracted me to Eagle in the first place: a strong franchise, talented people, and significant potential. My immediate priorities are clear: maintain disciplined execution, preserve our culture, and make decisions grounded in a thorough understanding of our franchise, our markets, and our best opportunities. Investors are looking for results, not promises. You will judge us by what we do, not what we say, and that is exactly how we intend to earn your confidence. With that, let me turn to the four priorities receiving my greatest attention. First is asset quality. The issues within the portfolio have been identified, are well understood, and are being actively managed. Addressing them transparently is essential. It builds confidence in our financial reporting and gives investors greater clarity into the strength of the franchise. Our objective here is simple: maximize recoveries and minimize loss. We will continue to take a disciplined asset-by-asset approach to problem credits, reducing uncertainty around our future credit performance. Consistency will be key to strengthening investor confidence. To support that effort, we are recruiting a new chief credit officer, an important leadership role that will help shape the future of our credit organization. In the meantime, we have benefited from the experience and guidance of William L. Perotti and Daniel Callahan, who have been working closely with the bank since last fall. The team has made meaningful progress over the last 18 months, and I see additional opportunities to strengthen credit oversight, portfolio management, and risk discipline. We are also beginning the search for our next chief human resources officer following a planned retirement. As I look at the organization, it is critical we strengthen our bench. We need to bring in new expertise where appropriate while also developing and advancing the strong team already in place. At the same time, we will continue to invest in technology, processes, and capabilities that can help us better serve customers. Our second priority is improving our funding profile and deposit base. Too often, banks start by growing loans and then figuring out how to fund them. We will take the opposite approach: build relationship-based core deposits and create the capacity to support disciplined loan growth. We are not managing the bank with the objective of shrinking. Our objective is to build a stronger funding franchise, improve asset quality, and position Eagle to deliver responsible growth. The sequencing matters. But growth remains part of this bank's future. We operate in one of the most attractive banking markets in the country. The Washington Metropolitan Region offers significant opportunities to deepen customer relationships, generate core operating deposits, and support high-quality lending activity. We are going to make the most of our position in Washington and win new customers and grow a valuable deposit franchise. Our third priority is improving operating performance. That means generating stronger returns from the investments we make across the organization. An important part of that effort is expanding our business banking capabilities and increasing branch productivity. While our branches successfully serve our long-term customer relationships, they have the potential to be an engine for core deposit and business banking growth. We will remain disciplined on expenses while continuing to invest where we see attractive long-term returns. The fourth area receiving my attention is capital. One of the strengths of this franchise is its capital position, and I recognize that capital allocation is an important topic for shareholders and investors. As part of my broader review of the bank, I am evaluating our capital framework, including how we think about capital levels, capital flexibility, and the best ways to create long-term shareholder value. While it is too early to discuss specific capital targets or potential capital actions, we are approaching this topic thoughtfully and deliberately. Capital is a strategic asset and we want to ensure we are deploying it in a manner that supports both the safety and soundness of the bank as well as the long-term interests of our shareholders. As we make progress in asset quality, funding, operating performance, and our capital framework, our longer-term strategic direction will come into sharper focus. Eagle already has a strategy and we have been executing against it. My responsibility is to build on that work, evaluate where we are making progress, identify areas where we can improve, and determine where adjustments may enhance our ability to create long-term value. Over the coming months, I will continue to learn the organization, the market, and the opportunities available to us. In the meantime, I am going to focus on execution. As we demonstrate progress, we will provide additional perspective on our long-term priorities, our capital objectives, and our vision for creating sustainable shareholder value. I am optimistic about the future. We have a strong franchise, a dedicated team here at Eagle, a valuable market position, and clear priorities. I look forward to updating you on our progress. With that, I will turn it back over to Eric to review the quarter.
Thank you, Steve. During the quarter, we reported net income of $6.9 million or $0.23 per diluted share, compared to $14.7 million in the previous quarter. The decline primarily reflects elevated provision expense, a smaller interest-earning asset base, and continued resolutions associated with addressing problem assets and strengthening the overall health of the balance sheet. We believe that the issues within the portfolio are identified, understood, and are actively being managed. Our approach continues to be straightforward: recognize problems early, reserve adequately, pursue resolution, and maximize recovery. With that context, let me walk through the second-quarter asset quality trends, and I will begin with our concentration metrics. The second quarter saw continued reductions in both our commercial real estate and ADC concentrations, as expected payoffs, asset resolutions, and completion of construction projects contributed to further reduction in concentration risk. Our CRE concentration ratio, which measures CRE loans as a percentage of total risk-based capital and reserves, declined to 268% at quarter end from 295% the prior quarter, moving further below the 300% threshold. Our ADC concentration ratio ended the quarter at 66%. Turning to criticized and classified assets, combining substandard, special mention, and held-for-sale loan balances declined by approximately $34.5 million during the quarter to $759.6 million at June 30, compared to $794.1 million at March 31. As shown on Slide 16 of our investor deck, criticized and classified balances have now declined more than 30% from their peak in the third quarter of 2025. As a percentage of tier one capital and ACL, criticized and classified assets declined to 58.1% at quarter end, compared to 65.7% at year-end 2025. During the quarter, we experienced approximately $260 million of downgrade activity. Of this total, $102 million relates to multifamily loans, of which three loans represent all of the downgrade activity. Of that, $35 million has paid off after quarter end. The two remaining loans representing $64 million are undergoing activities with no future losses anticipated. Turning to held-for-sale loans: at quarter end, held-for-sale balances totaled $49.7 million and, importantly, that entire balance is currently under contract or has sold since quarter end. During the quarter, we transferred $155 million into held for sale and had $162 million of sales resulting in gains on sale of loans totaling $2.3 million. As criticized and classified balances improved during the quarter, so did nonperforming loans, declining to $111.1 million or 1.68% of total loans. Our focus remains on the broader trend, and we continue to expect criticized and classified loans to decline from current levels and remain meaningfully below where they stood at year-end 2025. We are starting to see some upgrades from the watch category, and that category has fallen 50% from its peak and gives us confidence that inflows into criticized and classified will fall in subsequent quarters. Provision for credit losses totaled $21.4 million during the quarter. While elevated, the provision reflects our continued effort to proactively address problem assets and maintain appropriate reserve coverage as credits migrate through the risk-rating process. The entire provision expense can be attributed to disposition activities that took place during the quarter. The allowance for credit losses ended the quarter at $121.1 million or 1.83% of total loans. Included within that balance is approximately $40 million of reserves allocated specifically to our income-producing office portfolio, reflecting our continued conservative approach to reserving for that sector. Net charge-offs were $47.9 million during the quarter, and of that, $18.5 million were charge-offs for loans being transferred from held for investment to held for sale. Thirty-to-89-day past-due balances increased by $26.1 million to $44.1 million during the quarter. As of today's earnings call, one loan with a balance of $35.4 million was subsequently paid off in full. As a result, we do not view the quarter-end balance as indicative of a broader deterioration in delinquency trends. Turning to operating performance: despite further balance-sheet reduction and elevated credit costs, the franchise continued to generate positive earnings, improved pre-provision net revenue, and capital growth during the quarter. We continue to be encouraged by the momentum in commercial and industrial, where strategic talent acquisition along with the bank's strong reputation for service and execution is yielding a strong pipeline of opportunities for primary new relationships. C&I loans are up 24% year over year. Production is well diversified, and credit quality in that portfolio remains strong. Importantly, the strength of our relationship-focused model is also evident in CRE. Despite a $1.7 billion reduction in CRE loans year over year, deposits associated with the portfolio declined by only $152 million, demonstrating the durability of our core deposit franchise. As a result, the CRE portfolio deposit funding ratio improved to 36%, up from 27% a year ago, reflecting the success of our relationship-focused strategy and the significant progress we have made in improving the portfolio's funding profile. Net interest income declined $1.3 million to $62.4 million, primarily reflecting continued commercial real estate payoffs and the resulting reduction in average earning assets, partially offset by improvement in our funding mix. Pre-provision net revenue was $29.1 million, an improvement of $1.4 million from the prior quarter. The increase was driven by lower noninterest expense, which declined $4.7 million to $44 million, primarily due to lower FDIC insurance expense driven by improved risk and performance metrics, as well as reduced expenses related to loan dispositions. Altogether, these factors produced an efficiency ratio of 60.2% compared to 63.8% in the prior quarter. As we previously discussed, one of our objectives is to improve earnings power of the bank. While we are not where we want to be, we are making measurable progress. Year to date, pre-provision net revenue to average assets was approximately 109 basis points, an improvement from 2025 and a step toward our intermediate target of roughly 150 basis points. Pivoting to funding: period-end deposits declined $106.4 million from the prior quarter, driven primarily by lower savings, money market, and brokered time deposits. However, the overall funding profile continued to improve as broker deposits declined $301.5 million, reflecting our ongoing strategy to reduce higher-cost wholesale funding and replace it with more stable relationship-based deposits. Noninterest-bearing deposits increased to $1.56 billion or 5.2% from the prior quarter, contributing positively to both funding costs and net interest margin. While total core deposits declined during the quarter, driven in part by C&I where deposits were incrementally lower on a linked-quarter basis, the portfolio continues to show strong trends as we onboard new relationships. From a profitability perspective, that improvement was reflected in net interest margin, which expanded 5 basis points to 2.52%. The expansion was primarily driven by the funding optimization that included less reliance on brokered time deposits, which helped mitigate the impact of lower average cash balances, CRE paydowns, and increased borrowing costs. There is roughly a two-basis-point adverse impact on NIM due to the sale of the loan with COVID-deferred interest that was not collected on. Turning briefly to our forecast for 2026, which you can find on slide 11 in our investor deck, there are revisions to the outlook for average deposits, average loans, and average earning assets. These revisions predominantly reflect the actual reductions that occurred in the first half and do not reflect continued declines in the second half of 2026. We have also narrowed our net interest margin outlook to 2.0% to 2.7% compared to our prior range, reflecting greater visibility into the earning asset mix and deployment opportunities. In addition, we have improved our noninterest expense outlook to a decline of 7% to 11% year over year compared to our previous expectation, and that is primarily driven by lower FDIC insurance expense. We continue to expect noninterest income growth of 15% to 25% for the year. As I indicated on our last call in response to a question about provision and charge-off levels, I had determined that the first-quarter provision and charge-off levels are a reasonable run rate for the remainder of 2026. While the second-quarter run rate is higher, I stand by the original statement, indicating our expectation of lower levels in the second half of 2026. With that, I will turn the call back over to Steve for some closing remarks before opening up the line for questions.
Thank you, Eric. Before we move to questions, let me make a couple of final comments. Since joining Eagle, I have spent significant time reviewing the portfolio alongside our credit and special assets teams. Together with our director of special assets, I have personally visited almost all of our special mention and substandard relationships greater than $7 million, as well as several of our larger watch relationships. These visits have reinforced my belief that we understand the challenges within the portfolio, have realistic plans to address them, and are taking appropriate action to drive resolution. What I found was not a portfolio full of surprises; I found a portfolio with known issues, active resolution plans, and teams focused on executing against them. Asset quality remains my foremost area of focus. I do not believe there is a substitute for getting into the field: seeing the properties firsthand, meeting borrowers, and working alongside the teams responsible for resolving the problem credits. I am encouraged by what I have seen so far at Eagle. We have a strong franchise, very talented people, an attractive market position, and a clear set of priorities. One of the things that attracted me to Eagle was its focus on relationship banking and exceptional client service. After spending the last several weeks meeting with employees, customers, shareholders, and members of the community, Eagle's reputation is very well deserved. What attracted me to the organization before I joined has been reinforced by what I have experienced since arriving. The relationships-first culture is real; it is evident in how our teams serve customers, how they support one another, and how they approach long-term relationships within our community. That is what makes Eagle special; it is one of the reasons I am so excited about the opportunity ahead. My objective is not to create a different Eagle Bank; it is to build a stronger Eagle Bank. Thanks for your time and for your continued interest in our company. And with that, I will turn it over to the operator, and we are happy to take some questions.
分析師問答
Thank you. Ladies and gentlemen, as a reminder, to ask a question at this time you will need to press *1 and wait for your name to be announced. Please stand by while we compile the Q&A roster. Our first question is coming from the line of Justin Crowley with Piper Sandler. Your line is now open.
Hey. Good morning. Justin Crowley here and welcome, Steve. Good to be with you and everyone on the call today. I was wondering if we could start by providing a little more detail on the makeup of the charge-offs in the quarter. It looks like the majority of that came outside of the office portfolio and that appears to be on one loan, that one DC loan that is on nonaccrual. Beyond that, I'm curious if you could give more detail on the other types of credits taking marks and what loss severity looks like.
Yeah. Justin, I can start with that. The majority of charge-offs in the quarter related to the disposition strategies that we deployed. In our deck there is a walk of the held-for-sale loans: we transferred roughly $155 or $156 million that was transferred in, and we had strategies in place for those assets that were transferred in. When we transfer from held for investment to held for sale, that results in that charge-off. There is one other charge-off related to one of the loans that is currently nonaccrual as we continue to work through that disposition strategy as well.
Okay. But is that, like, multifamily, or what is driving that? If I saw the chart correctly, it looks like the held-for-sale additions in office were kind of flat. So I'm wondering what else might be in there.
Justin, the loan Eric was commenting on was an office loan.
Okay. Got it. And then, Eric, any thoughts on the trajectory of charge-offs beyond the balance of this year? As we get beyond 2026, is getting back to somewhere closer to 50 basis points what you would call normalized? Is that fair? And if so, how long does it take to revert back to that kind of level?
When I look at where we are at June 30 for the criticized and classified portfolio, I called this out in my prepared commentary. There is the watch category, which is the lowest pass category; that category has come down by 50% from its peak. We are also seeing some of the criticized and classified accounts have positive trends and might upgrade, which could cause that total criticized and classified portfolio to come down. From my perspective, as that total portfolio continues to decline toward year-end and even into 2027, you could potentially see nonaccruals and charge-offs. But as the overall portfolio declines, so will the charge-offs and so will the nonaccrual loans. It is not linear, but as the overall portfolio gets smaller, the incidence of charge-offs should decline.
That is helpful. Maybe shifting over to loan growth: I think previously you talked about material reduction in CRE through the first half of the year and then a return to growth in the back half. Is that still how you are thinking about things?
We are confident that we can stabilize balances through the back half of the year. We have already engaged with clients; they are looking out six to nine months to get back into production mode. Stabilizing will happen. Growth is probably not going to happen in the second half of this year.
Okay. So that is going to be a function of ramping production and does not necessarily mean that additional moves into held for sale are going to necessarily slow?
I think the held-for-sale tool is a mechanism for disposition of underperforming assets; it is certainly a tool we will continue to use. My expectation, absent inflow during this quarter, is that most of that portfolio has subsequently sold or is under contract to sell, so that could potentially be at a zero balance at September 30.
Importantly, Justin, year to date through June 30, we have seen just under $400 million of multifamily credits pay off in full that were in watch, criticized, or classified categories. Many of those assets do not contain loss content and the market has absorbed the principal balances.
Justin, one other thing I just want to say, just to make sure we are answering your question.
We are going to arrest the decline in the balance sheet in the back half of the year, and we will return to a growth footing in 2027.
Okay. Got it. One last bigger-picture question: as you continue down this process and learn more about these workout strategies, any early thoughts on potential changes to the strategy you are thinking about at this stage?
Honestly, coming in I reviewed statistics, portfolios, and reports and talked to board members about asset quality. But when you arrive, what is in the report and what you see with your eyes can be slightly different. That's why I visited almost every substandard and special relationship I could get to. To me, the past feels materially different than the future because as you drive up to an asset you either think it's manageable or you get a pit in your stomach. I saw a lot of assets that felt pretty good. Working through them with the special assets team, there was a very clear plan on each asset and what we are going to do: what it will take to upgrade it, what the borrower needs to do, and if the borrower does not take that action, what our response will be. I felt pretty good after getting out in the field and looking at the loans and underlying properties.
Great. I'll leave it there. Thank you so much, guys.
Thanks, Justin.
Our next question is coming from the line of David Chiaverini with Jefferies. Your line is now open.
Hi, thanks for taking the questions. Maybe following up on the last point: Steve, only three weeks at the bank, but where do you see the most immediate opportunity during the turnaround at Eagle Bank? What is the lowest-hanging fruit you will be focused on?
I really think the immediate priority is arresting the decline in the balance sheet. I've never seen a bank shrink to greatness. There is a coiled spring here with people ready to move forward and produce, but you have to get through the asset-quality issues first and make sure you have a strong balance sheet and the capital to grow. Everyone's confident in that and I feel really good about the production franchise. I spent a lot of time on asset quality, but I now look forward to going on sales calls. The biggest opportunity is getting the production machine moving: C&I is building a fantastic business and there's an immediate opportunity to start booking real estate loans again with a disciplined credit approach. We're below 300% but 250–260% is not where we want to be either. I feel good about commercial real estate and moving forward with discipline. There's also significant opportunity with the branch network for calling efforts and building business banking. Right now I'm going to focus on what we do well and improving on that. Once we have momentum in the franchise, we'll look at new things.
Thanks. That is a good segue into my follow-up on C&I loan growth. Very strong, up 24% year over year. Can you talk about the outlook here, areas or verticals showing the most strength within C&I, and the hiring pipeline?
Sure. I've been at Eagle for just under 24 months, and one thing I can say with certainty is we benefit from a great franchise here. We have a strategy that includes ramping the production machine and adding some excellent new talent in the market. We have fantastic bankers who are well known in the DMV, which has afforded us opportunities to bring in new primary relationships—that is the growth strategy. Going forward, normalized growth for us will probably look like high single digits to low double digits. I'm really pleased with the momentum we've built. I'm also pleased with the cross-sell on the deposit side: our business bankers go out after the loan, book loans, and cross-sell treasury management as part of their sales process, which reflects a more sophisticated approach than many community banks. Growth is diversified across sectors; we aren't looking to concentrate growth in a particular industry segment. We want the book to grow in a balanced way.
Very helpful. Thank you.
Thank you.
Our next question is coming from the line of Catherine Mealor with KBW. Your line is now open.
Thanks. Good morning. I wanted to ask about the reserve. Looking at the balance between charge-offs and reserve release over the past couple of quarters, it appears reserve release has been about 50% of charge-offs. Is that coincidence, or how should we be modeling the pace of reserve release relative to the level of charge-offs? Provision is the hardest thing to model, so I'm curious about your thinking about how those two play off each other and perhaps provision levels in the back half of the year.
Catherine, I would point back to my comment from the first quarter when I was asked about the pace of provision and charge-offs. I indicated that the first quarter provides a good proxy for what you could see for the full year. While this quarter is a little higher, our expectation is that provision expense and charge-offs will be lower in the back half. You should expect some reserve coverage release at year-end, but I don't believe it will be at the same pace you saw in the first half. Some of the coverage reduction this quarter related to a charge-off on an individually evaluated loan where reserves were sitting at March 31. We received additional information from the client about how we would resolve and restructure that, and that resulted in charging off the specific reserve on that loan. So I don't think you'll see a much more meaningful coverage reduction than you saw in the first half.
Catherine, I want to emphasize we will always have a fully funded reserve that appropriately reflects the risk in our loan portfolio. Last year we had to catch up quite a bit, but we are always going to have a fully funded ACL that reflects the risks in our portfolio and you will be able to rely on that number.
Okay. Great. And on deposit cost: there's a narrative about higher deposit cost and competition. Looking at your deposit costs, you appear to be among the higher-cost peers. As you improve deposit mix, do you see opportunity to continue to lower deposit cost, or are rates so competitive that you will remain stable at these levels?
I do think there's opportunity. There's an elasticity effect; institutions with very low deposit cost given their composition can experience pressure, but since we are already a higher cost payer, I think we have more opportunity to reduce our costs more than some peers. We've been demonstrating progress in the first half of the year, and I expect continued NIM expansion in the back half as that activity continues.
Great. Thank you. Welcome, Steve. Looking forward to working with you.
Thank you.
Our next question is coming from the line of Steve Moss with Raymond James. Your line is now open.
Good morning. Morning, Steve. Morning, Ryan. Steve, welcome aboard. You started your introductory comments on deposits and, thinking about your background at Western Alliance, I'm curious if you are considering adding deposit-rich verticals here at Eagle.
Honestly, I thought about that. At Western Alliance we grew a lot organically from about $6 billion to near $100 billion, largely through deposit initiatives. Coming here, I want to lean into what we're already good at, but I'm confident we can identify new opportunities to grow loans and deposits and build new businesses. I want to fortify the franchise first. I will wake up every morning focused on low-cost granular deposits. That's the most accretive thing a CEO can do: manage funding profile, deposit mix, cost, and cross-sell into customers to generate treasury fees. I don't know exactly what businesses we'll build yet, but I am confident we'll find deposit-focused opportunities and drive down deposit costs.
Appreciate that color. Next, several criticized and classified loans mature this quarter. The largest special mention and largest substandard loans are maturing this quarter. What are your expectations around resolution or potential extensions—specifically the $56 million apartment in Prince George's County and the storage facility in Montgomery?
As part of our standard operating procedure, we engage on maturities six to nine months in advance. Where there are challenges with an asset, we are actively engaged and have active resolution plans for each of the loans. For those two specific loans, our expectation is the multifamily loan in Prince George's County will be restructured on a longer-term basis, resulting in an improved risk profile. The expectation on the self-storage facility in Montgomery County is that it will be paid off in full by the end of the year.
Okay, great. A number of other additions on the list were apartments, mixed-use, and condo properties—many in D.C. Is there any common theme with regard to those properties?
Two-thirds of the inflow of roughly $216 million is comprised of four assets. One of them, the $34.5 million Eric mentioned in his prepared remarks, paid off subsequent to quarter end. We are in active discussions on two other multifamily properties that we believe will result in upgrades in the near term, and the other asset is on an ongoing resolution plan with a maturity that is farther out.
On C&I loan growth: continuing very strong growth. What are you seeing for origination yields, what is the typical average loan size these days, and how often are you the lead versus participating?
As I mentioned earlier, going forward you can anticipate C&I growth in the high single digits to low double digits. The production strategy is heavily focused on new primary relationships. We do some participations and small clubs, but production is dominated by new primary relationships or small clubs where we have significant deposits. A metric we watch is treasury management revenue, which is growing nicely and indicative of new account openings and primary relationships. Typical relationship exposure in C&I is somewhere between $5 million and $10 million, and new production tends to be in the $7 million to $20 million range for new relationships—serving true commercial and lower middle-market clients.
I want to reinforce that discipline: the company since last year has been cognizant of loan size and has been selling down larger loans rather than keeping whole amounts. Loan-size discipline and concentration management are being actively managed. Some payoffs are $60 million or $70 million, and it takes several loans to replace those balances; that takes time to build production capacity, but I prefer multiple smaller loans rather than one very large loan.
Where are new origination yields for the book these days?
Most origination activity is between 25 to 75 basis points over SOFR. That generally puts us in the mid-200 basis point range on yield, which reflects the appropriate yield for the risk we are taking and supports the strategy of high single-digit to low double-digit growth.
I appreciate all the color today. Thank you very much.
Our next question is coming from the line of Christopher Marinac with Green Capital. Your line is now open.
Hey. Good morning. Wanted to ask about C&I deposits and how new inflows are occurring and the level of new account openings in C&I that may not yet be visible on slides.
I've been pleased with new primary relationship additions. That shows up in the 14% year-over-year growth in deposits. We have a handful of clients with seasonality—for example, charter schools receive funding at certain times of year—and some firms have timing variability like class-action law firms, so you see some quarter-to-quarter variability. Treasury management revenue growth is climbing and is a metric that indicates new account openings and primary relationships. Overall trends are positive.
Are you incenting the team to bring in new deposits? Is there a behavioral shift that we will see the balance realize over time?
We are definitely incenting the team on new deposits. The percentage growth over the last four quarters reflects the benefits of that incentive plan. It is an important part of the incentive structure.
Incentives and leadership direction both matter. Fifty percent is leadership and direction and fifty percent is incentives—what you say must be backed up by actions. I will wake up every day thinking about deposits and that will permeate through the culture. People need time to learn the new behaviors, and when they do, they should be rewarded. You'll hear more about this and the change is well underway.
One other point: we can grow new primary relationships, but if relationships are leaving, that can offset growth. I have been very pleased with client retention. The team has done a good job on retention and maintenance of the franchise while driving new relationships.
To add on the incentive topic, we've implemented an incentive plan that covers the entire branch network and our business bankers, and it is enhanced for deposit generation. Over time you will see the results of that behavior change.
One last asset-quality question: would foreclosures be something you would do more of, and would that accelerate further credit risk recognition?
I'm not afraid of foreclosures. Sometimes foreclosure is the most expedient or appropriate action in a very distressed situation and sometimes a note sale is better. If foreclosure is what is required to resolve an asset, that is what we'll do. Often, the foreclosure process will encourage a borrower to take appropriate action to protect their asset as well.
Great. Thanks again, Steve, and thank you everyone for hosting us this morning.
I am showing no further questions in the Q&A queue at this time. I will now turn the call back over to the company's president and CEO, Mr. Curley, for any closing comments.
I just want to thank everybody for your participation and questions during the call. I'm proud to be here at Eagle and very much looking forward to the future. We look forward to connecting with you again next quarter. Thank you.
This concludes today's conference call. Thank you for your participation. You may now disconnect.