Eagle Bancorp (NASDAQ:EGBN) Q2 2021 Earnings Call

0:00 Chief Financial Officer, Charles Livingston Thank you, Michelle. Good morning. This is Charles Levingston, 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 may be considered forward-looking statements.

0:46 While our growth and performance over the past quarter has been positive, we cannot make any promises about future performance, and it is our policy not to establish with the markets any formal guidance with respect to our earnings. None of the forward-looking statements made during this call should be interpreted as our providing formal guidance. Our Form 10-K for the 2020 fiscal year, our quarterly reports on Form 10-Q, and current reports on Form 8-K identify certain factors that could cause the company's actual results to differ materially from those projected in any forward-looking statements made this morning. Eagle Bancorp does not undertake to update any forward-looking statements as a result of Thank you for joining us.

1:56 This morning, Susan Riel, the President and CEO of Eagle Bank Corp., will start us off with a high-level overview. Then, Jan Williams, our Chief Credit Officer, will discuss her thoughts on loans and credit quality matters. Then, I'll return to discuss our financials in more detail. At the end, all three of us will be available to take questions. I would now like to turn it over to our President and CEO, Susan Riel. Thank you, Charles. Good morning, everyone, and welcome to our earnings call for the second quarter of 2021. I'm pleased to report another great quarter for the bank. Similar to last quarter, earnings again are at record levels. Equity has risen to an all-time high. Asset quality remains high with favorable credit trends. And efficiency remains a strength.

2:45 A key difference from last quarter is that there was an increase in total loans, excluding loans held for sale and PPP loans. It was a modest increase of almost $60 million, but it breaks the downward trend. Focusing on earnings first, earnings for the quarter were $48 million, or $1.50 per share. This was a 1.68% return on average assets and a 16.25% return on average tangible common equities. The larger items impacting earnings this quarter included $4.7 million of accelerated interest income from the sale of PPP loans and $4.6 million reversal from the allowance for credit losses on loans and reserves for unfunded commitments.

3:41 Earnings over the last four quarters, which includes the third quarter of 2020 when the nation was still locked down, totaled $171.7 million, or $5.35 per diluted share. These earnings continue to build our common equity, which at the end of the quarter was $1.3 billion, or 11.92% of assets. Turning to asset quality, at the end of the quarter, NPAs were 50 basis points of assets, and for the quarter, annualized net charge-offs with 30 basis points of average loans. These asset quality ratios combined with an improved economic outlook nationally and locally informed our decision to make a second conservative reversal from our allowance for credit losses and reserve for unfunded commitments.

4:41 With a reversal of $4.6 million for the quarter, The total reversal for the first half of 2021 was 7.4 million. After the reversal, our reserves were 1.32% of loans, excluding PPP loans. In terms of operating efficiency, we continue to be a leader with an efficiency ratio of 37.1% for the quarter. We are always prudent in our approach to expense management. For example, this quarter we closed our Roslyn, Virginia branch as it had an expiring lease and our customers can be served from other northern Virginia branches. The combined annual pre-tax cost savings and rental expense will be about $263,000 and there was no write-off of leasehold improvements as these had been fully amortized upon the expiration of the lease.

5:44 We are also pleased that all of the employees working at the branch have filled or will be filling positions within the company. Additionally, given the bank's robust capital levels, we requested and received board and regulatory approval to redeem $150 million of subordinated debt issued in 2016. Charles will have more details on this later. Before discussing loans, I would like to once again mention the contributions of the residential mortgage and FHA teams. Our residential mortgage team had another great quarter with locked loans of $248 million and a gain on sale of mortgage loans of $3.5 million. Even with mortgage volume off slightly from last quarter, We expect the residential mortgage division will continue to contribute meaningfully to the bottom line. Our FHA team also did well generating trade premiums of $2.6 million that are included in non-interest income. The revenue stream from the FHA division is not smooth from quarter to quarter. Comparatively, the FHA division has larger transactions and less volumes. and the Mortgage Division, which has smaller transactions and higher value.

7:13 In regard to loans, last quarter on this earnings call, I said Eagle Bank intends to more assertively pursue loan opportunities. This past quarter, our funding for new loan originations and advances increased, while payoffs and paydowns decreased. As a result, loans excluding loans held for sale and PPP loans increased by $60 million. Jane will talk in more detail about this later. While still talking about loans, during the quarter we made a decision to sell $170 million of our PPP loans, which generated nearly $4.7 million in accelerated net deferred fees and costs into interest income. The sale was to a well-regarded firm with significant expertise in the ongoing servicing and processing associated with PPP loans. Additionally, just below $160 million in loans were forgiven during the second quarter.

8:22 The PPP loans retained, totaling $238 million, were those that had already started the forgiveness process on our platform or those that we decided to retain for customer service reasons. The sale of the PPP loans and with the remaining loans moving through the forgiveness process will enable us to free up personnel to focus on originating new business and to continue to provide a high level of service to our clients. In regards to our market, we serve a strong and robust market Anchored by the federal government and government contracting, a growing technology presence which includes Amazon's HQ2, many substantial domestic and international firms, several large hospital systems, and a long list of universities.

9:20 Our home market continues to see companies open. Hotels are doing more business. Tourists have returned and many of the restaurants are full. Internally, Eagle Bank, which has been operating remotely where possible since the beginning of the pandemic, will have its workforce return in a hybrid environment on September 13. We also have a legal update. We are pleased to have initiated discussions with Commission staff about a potential resolution or settlement regarding the Commission's investigations. which we first disclosed in July 2019. We hope to resolve the Commission's investigation as it relates to the company within the next few months. This would be a welcome development for Eagle Bank and its shareholders.

10:13 In addition, we are also pleased to have initiated discussions with the staff of the Federal Reserve Board about a potential resolution or settlement regarding the Federal Reserve Board's investigations. We also hope to resolve the Federal Reserve Board's investigation as it relates to the company in a timely manner. We also disclosed in yesterday's press release that our CFO, Charles Lovingston, received a Wells Notice in connection with the ongoing SEC investigation. Charles made a submission to the SEC in response to the Wells Notice and is cooperating with the SEC's investigation. Charles is continuing to serve in his capacity as CFO.

11:02 While we can't comment on the allegations against Charles, I want to stress that in making the decision to have Charles continue to serve as CFO, the Board evaluated the circumstances, considered a number of factors, and consulted with members of management and external advisors, including our independent auditors. The board's top priority is, as it always has been, to act in the best interest of the company and the company's stockholders. And we and the board remain confident in the company's disclosure controls, accuracy of its financial reporting, and the professionalism of the company's finance function and personnel.

11:49 We work closely with other members of the company's management, the company's disclosure controls committee, and other advisors and consultants to ensure that the company maintains strong internal controls over financial reporting. Given that the investigation is ongoing, we obviously cannot speculate or comment further on these developments at this time, nor are we able to speculate or comment on former employees and directors' Potential Interactions with the SEC. Accordingly, we cannot answer any questions about the investigation during our Q&A.

12:36 Before turning it over to Jan, I would like to reiterate that we remain focused on building stockholder value. Book value rose to $40.87 per share, up 11% from a year ago. and Tangible Book was $37.58 per share, up 12% from a year ago. We also increased the quarterly dividend to 35 cents per share. This is up from 25 cents from the prior quarter and 22 cents the quarter before that. Based on recent stock prices for Eagle, a dividend of 35 cents per share increased puts our dividend yield more in line with our peers.

13:24 I would like to thank all of our employees for their hard work and their commitment to support our clients. Additionally, we remain committed to a culture of respect, diversity, and inclusion in both the workplace and the communities we serve. With that, I would like to turn the speaking duties over to Jan Williams Our chief credit officer. Thank you, Susan, and good morning, everyone. First, I'd like to speak to the modest uptick in loan balances exclusive of PPP and loans held for sale that Susan mentioned earlier. As credit has improved and with a large portion of PPP loans sold or moving through the forgiveness stage, we're able to focus more of our efforts on quality opportunities we see in the market. in particular were focused on opportunities that offer good risk-adjusted returns. Having said that, the pricing of loans continues to be a factor in our appetite for new loans.

14:26 Of course, there's always going to be a time lag between identifying and securing lending commitments and ultimately loan funding. Some of the uptick in loans may also be related to the timing on fundings for new loans originated in the past several quarters. Booked and funded loan originations last quarter were on the lower side. However, we did have a few large loans with significant funding this quarter. One of the larger loans was an $80 million multifamily financing for the Montgomery County Housing Opportunities Commission in economically strong Bethesda, Maryland. As a community bank, we're very pleased to be able to offer support for these local efforts to bring affordable housing opportunities to our community.

15:21 We also funded $26 million for the redevelopment of another very well-located property in northwest Washington, D.C. during the quarter. In regards to the reversal of the $4.6 million from the allowance for credit losses and reserves for unfunded commitments, the reversal primarily resulted from the improved outlook for the economy and employment forecast, as well as improvement in loan portfolio credit metrics. The unemployment rate for the Washington area, which was 5.8% in February, fell to 4.9% in May, At period end June 30, loans 30 to 89 days past due fell to $3.9 million, the lowest level we have seen in more than a dozen years. With the reversal, the allowance for credit losses to total loans, excluding PPP loans, was 1.32%, down 15 basis points from the prior quarter end.

16:27 Even with our lower allowance for credit losses, Our coverage ratio was stable with coverage of non-performing loans at 187%, which remains in the 180 to 200% range where it's been for the last six quarters. At quarter end, NPAs to assets were 50 basis points, down one basis point from the prior quarter end. In dollars, NPAs were $54.5 million. The decline in NPAs was primarily from payoffs of nonperforming loans, a return to accrual status for some loans which exhibited sustained performance, and charge-offs.

17:17 Net charge-offs for the quarter were $5.6 million. The largest charge-off was a partial charge-off related to a note sale secured by a smaller suburban office property at $3.5 million. The new sale closed in early July. The other charge-offs consisted of a partial charge-off of one other CRE loan, now fully resolved, a few smaller C&I loans, principally in the restaurant industry, and one small SBA credit. With that, I'd like to turn it over to Charles Levenson, our Chief Financial Officer. Thank you, Jan. Net income for the second quarter of 2021 and second quarter of 2020 reflects operations in two very distinctly different environments, as the current quarter contains a reversal from the allowance for credit losses and accelerated income from the PPP loan sale, whereas in the second quarter of 2020, we were still building those COVID-19 reserves.

18:18 In the earnings release, to adjust for the impact of the PPP sale, we added the table for net interest margin, which backs out the $4.7 million of accelerated net fees and costs from net interest income, and we also carried the adjusted net interest income down into the PPNR table. While adjusted PPNR for the second quarter of 2021 declined in comparison to the second quarter of 2020, it was little change from the prior quarter end. On a late quarter basis, The net interest income, absent the PPP sale, was down $2.7 million from the prior quarter. This primarily reflects the decline in margins to $2.88 on an adjusted basis, down from $2.3 million the prior two quarters. Non-interest income was up $338,000 from the prior quarter.

19:07 While mortgage gains on sales were down on a linked quarter basis, FHA trade premiums of $2.6 million more than made up for the difference. Non-interest expenses were down $1.3 million from the prior quarter. Most of the decline was in salaries and expenses and FDIC fees, offset by increases in legal and professional fees. Overall, adjusted PPNR, absent the PPP accelerated income, was down $1 million from the prior quarter. This quarter, deposit inflows finally abated, and deposits at quarter end were $9 billion, down $180 million from the prior quarter. This resulted in the reduction of excess liquidity as we continue to slowly and prudently build the investment portfolio.

19:55 Investment securities at the end of the second quarter were $1.7 billion, up $311 million from the prior quarter end. Investments this quarter, like last quarter, were primarily 20-year, 2% agency mortgage-backed securities and callable agency bonds. Additionally, while it doesn't show up in the investments, this quarter we invested $300 million in a reverse repurchase agreement with a well-regarded nationally known investment bank to get some additional earnings on our cash. Also, higher-cost CDs continue to run off. In the second quarter of 2021, CDs with a total balance of $200 million and a weighted average rate of 1.21% matured. These CDs had a weighted average term of 16 months at issuance.

20:44 Overall, our cost of funds in the first quarter of 2021 decreased to 37 basis points, down from 42 basis points in the prior quarter. Going forward, our cost of funds will be positively impacted by the redemption of $150 million of our 2016 subordinated debt on August 1st, which is our first opportunity to call the debt. The debt had a rate of 5% in the second quarter, which translates into pre-tax cost savings of $7.5 million on an annual basis and $1.9 million on a quarterly basis. This redemption, however, will accelerate about $1.3 million in deferred costs, so the impact in the third quarter will be minimal. To fund the repayment, we made a dividend of $100 million from the bank to the Bancorp early in the third quarter. Thank you, Charles.

22:05 As we move into the second half of 2021, we will continue our efforts to deliver positive operating and performance results, and we will continue to strive to serve both our investors and our community to the best of our ability. But before we open up for questions, I would like to say that the bank posted its second consecutive quarter of record earnings. NPAs are 50 basis points on assets Loans past due 30 to 89 days are under $4 million. Common equity is almost 12% of assets. Total risk-based capital is almost 18%.

22:50 We just raised the dividend, and we got approval to redeem $150 million in sub-debt. The bank is doing well. We'll now open up the call for your questions. Thank you. As a reminder, to ask a question, you'll need to press star 1 on your telephone. To withdraw your question, please press the pound key. Our first question comes from the line of Casey Whitman with Piper Sandler. Your line is open. Please go ahead. Hey, good morning. Morning. Hi, Casey. I'm wondering maybe if you could start with just a PPP-related question. Following the sale of the portion of the PPP and accelerated fees, How much is remaining in the PPP processing fees that have yet to be realized on that remaining $238 million balance? And also, like, what's your best guess for the timing of forgiveness for the remaining balance?

23:47 Yeah, I'll take that one, Casey. Left on the balance sheet, then we've got about $3 million or so, a little less than $3 million in net deferred fees on the PPP process. Portfolio, we've got $238 million left. In terms of timing, you know, your deck is as good as mine. They've been moving along at a pretty good clip. I imagine there are going to be some stragglers at the end if they've waited this long. They may have, you know, their own challenges in gathering that information, but, you know, I would expect over the next couple of quarters we'll see a meaningful decline in those PPP loans, but Time will tell the tale. Helpful. Thank you. And nice to see the loan growth this quarter.

24:36 You mentioned some of the pressure on the yields, but do you have the numbers around where new production was coming on this quarter versus last, maybe? Yeah. So, yeah, as you can see, obviously the On an adjusted basis, our yield for the quarter on total loans is just above 450 at a 452. New production is coming on weighted average coupons, right, so ignoring the impact of the deferred fees and costs, right around just below 4% or so on a weighted average basis is where we were coming in in the second quarter. So obviously that's going to, you know, if that trend continues, we'll create a little bit of a drag. on the asset side of the balance sheet.

25:26 Understood. Last question, I'll let someone else jump on, but just on capital, you've raised your dividend a number of times recently. Just how are you guys ultimately thinking about the right level with, as you mentioned, your yield kind of now more in line with peers? Is there sort of a target payout ratio range we should think about, or how do you think about the level? Yeah, obviously we do hold a significant amount of capital. I think the rock and hard place of it for us is really that ADC CRE concentration number. If you stack us up against a larger peer group, a peer to have larger capital, but we want to be mindful of those ADC and CRE concentration limitations.

26:12 So that is somewhat of a gating factor. But we're going to, you know, be judicious about and prudent about that capital management. We want to make sure that we're being good stewards of the capital that we're holding and return it to our shareholders where appropriate. Understood. And do you have that ADC capital level now or should we wait for the call for it? Yeah, I would wait for the call report to have it finalized, but it's going to be slightly improved from the prior quarter is my expectation. All right, thanks. Thanks for the call. Thanks, Stacey. Thanks. Thank you. And our next question comes from the line of David Bishop with Seaport Research Partners. Your line is open. Please go ahead.

26:57 Thank you. Hey, good morning, guys. How are you? Good. Good morning, David. Susan, I think you mentioned in the earnings narrative the opportunity to originate loans for larger commercial projects. Just curious, has your appetite increased to do larger deals here just given the strength of capital or maybe pullback in competition or just the quality or tenor of loans you're seeing in the market? Maybe some commentary in terms of the outlook for average loan size, how you see that playing out. I think our appetite has definitely increased, but we also are seeing that in the market. And as you know, the market is tight. The pricing is tight, and there's a lot of competition.

27:45 So we are out there, and our teams are aggressively pursuing deals, and we've had a good deal of success recently. I would agree with that. I would also say that the larger opportunities that are coming through – We seem to have an incredible amount of equity in them. I think there's still a lot of money sitting around looking for a place to deploy, so the credit metrics on these larger deals has been especially strong. On the other hand, the pricing is pretty darn tight on them, so it's a balancing act. Just curious if you have any commentary what the loan pipeline looks currently relative to last quarter.

28:38 I'm sorry? The loan pipeline? We have unprofitable commitments of just under $2 billion currently. It's slightly elevated from where we were last quarter, which was closer to $1.9 billion, I believe. Got it. And then, Charles, maybe from a credit perspective, obviously the number is moving in the right direction here. But, you know, when you get to a point, maybe look at the future where we start to see the positive loan growth. Just curious if you can give us a sense where you think you see the ACL moving back to. Just update us what the day one ratio was and maybe what you'd be reserving new loan growth at.

29:25 Right, our day one calculation was right about 110 basis points, I believe. And, you know, obviously here we are sitting at 128 basis points, 132 when you exclude PPP. So if we assume that day one is a normal environment, right, every environment is a little different, then there's a little bit more room to drift down if we can get back there. Got it. And then I appreciate the commentary on the securities. If you do continue to see some excess liquidity in the market that doesn't funnel into loans, you see that ratio of investments to assets creeping up again.

30:11 I think it's about 12 or 13% currently. Right. Yeah. It's certainly likely, right? That's the place to go if you can't get to the loans. So... Again, we want to be, I'll use the word judicious again about it, but that's the answer today, absent the loan growth. Got it. And then I think you had mentioned the runoff from the CD book this quarter. Any updates in terms of repricing opportunities that might lie ahead third and fourth quarter? Right, yeah, so those CDs that I mentioned, $200 million came off with a weighted average rate of 121 basis points, 16 months in term.

31:00 We had some of that replaced, repriced, I think it was about $85 million repriced at about 12 basis points with a weighted average maturity of 12 months. So you are seeing, obviously, those funding costs continue to grind down as those CDs I think there's a little more opportunity for that. You can see the weighted average rate that we have for time deposits that we have in the press releases, 136 basis points, so there's still some room to drift down there if those continue to reprice. We also did bring down just slightly our deposit pricing on our rate sheet just by a couple of basis points.

31:48 but we continue to look for opportunities to improve funding costs. Again, the $150 million in sub-debt that's going to be called on August 1 will have a significant impact both from a liquidity standpoint, right, if you think every $100 million or so of excess liquidity means about, you know, three basis points on the balance sheet and the absolute cost associated with that too, right, that 5%. Do you have a schedule of CD maturities? in the third quarter and fourth, just the dollar amounts and maybe rates?

32:49 Not offhand. Not offhand. I do have that. I do have that in my notes, so I'm not sure it's something that we're publishing. Got it. Okay. I'll jump off the line and let someone else ask some questions. Thanks. Thank you. And our next question comes from the line of Catherine Millar with KVW. Your line is open. Please go ahead. Thanks. Good morning. Morning, Catherine. Maybe just a follow-up on the deposit and kind of excess liquidity conversation. Would you expect from here for deposits, Thank you so much for joining us.

33:59 can still achieve some narrow spreads on some of that liquidity when we find it at the right price. So I see them being relatively flat at this point. Okay. That's helpful. How about on loan growth? Can you talk a little – I know you answered a question on this earlier, but as the pipeline continues to improve, what kind of level of – I would say, Catherine, that we've – really do have a renewed appetite and are being more aggressive in going out into the marketplace and looking at different types of loans.

35:10 We have looked much more favorably upon certain types of construction lending. I think that number will be increasing in the future based on what we've seen so far. were not averse to it at this point in time and feel like the economy is in a much better spot than it was two and a half years ago. Charles? Yeah. Again, pricing is a challenge. We've clearly got plenty of liquidity to deploy. We don't want to compromise on credit. So the question in that Venn diagram, as I channel our president of commercial banking, is that – What are we willing to do on the pricing front?

35:59 So that's the gating factor there. Deal flow seems to be pretty good as we hear it. There's opportunities out there. It's just there's a lot of money chasing, you know, fewer deals. Yeah. Okay. And maybe one last one just on the buyback. You increased your dividend significantly this quarter, which was great to see. Pause on the buyback. Would you expect to be more active in the buyback in the back half of the year? You know, we're going to continue to evaluate that. You know, we certainly want to make sure that we are buying at a reasonable price, and obviously there's You want to rely on the metrics, right? There clearly is a little bit of a sticker shock from where we initially put that share repurchase plan in place.

37:03 But we want to rely on the metrics and look for a reasonable way to repurchase shares and do what's best for the shareholder, be it any more changes to the dividend or repurchase them. of additional shares. Something we'll continue to look at. Great. Thanks so much. Thank you. And our next question comes from the line of Brody Preston with Stephen Inc. Your line is open. Please go ahead. Hey, good morning, everyone. Good morning, everyone. Hey Charles, I just wanted to follow up on the loan portfolio. Could you just give us a reminder what percent of loans are floating rate and what percent of the floating rate bucket is currently at floor levels?

37:55 Yeah, so we have about I think excluding PPP, you're talking about close to 60%, just under 60% is variable rate. You know, that's You know, that's about, you know, $4 billion or so, and just under $3 billion have floors on them, about $2.8 billion. Okay, and do you know of those, excuse me, of those floors, what amount is currently at their floor levels? It is a significant portion. If you give me a second, I will give you that answer. If you want to ask another question, I can get to it.

38:40 Yeah, that would be great. I'll ask Jan a question. Jan, there's been a couple articles in the Commercial Observer lately about increased vacancies at some office buildings in D.C., and so I just wanted to ask. I think there was a small... I think there's a lot of uncertainty out there with what's going to happen in the office market longer term. In the near term, We don't really have – we have one office project that was substantial rehab, new construction that is in D.C.

39:40 that is in lease up and has been seeing increased activity lately. Everything else that we have on the office side in D.C. has really been income producing, so we haven't had any – Significant blip in performance and the leases roll over a fairly long period of time. So, you know, there's probably, if there's going to be an impact, it's not going to be immediate. Maybe three years or so as lease rollover starts hitting. But I think that... We're in a pretty comfortable loan-to-values, and we do stress-cast our income producing CRE for significant declines in operating income, increases in cap rates, et cetera. So it's an area where we're treading lightly, but we think leases in place do offer a buffer and a period of time to work through things. That said, there are a number of repositioning projects that are really more in close-in suburbs than they are in D.C. proper, but that's certainly something we're starting to see here as you see in other areas of the country.

41:04 Okay, great. Thank you for that. And, Perotti, just to get back to you, so it looks like of the 40% or so of the portfolio that Okay, great. Thank you for that. My last question, Susan, I appreciate the update that you gave on the investigations, both on the call and in the release, and I hear you loud and clear. But this was the first time you gave a little bit of a timeline, I guess, on a potential resolution. And so feel free to give me the stiff arm on this question if you need to, but I do feel compelled to ask what Thank you very much for taking my questions. I appreciate it. Thanks, Brody.

42:26 Thank you. And our next question comes from the line of Christopher Merrimack with Janie Montgomery. Scott, your line is open. Please go ahead. Thank you. Good morning. Jan, just wanted to drill down a little bit more on credit quality. Just curious on kind of trends that we might see coming soon on sort of special mentions, substandard loans, and kind of how you think risk grades will play out in the next few quarters. Well, I do think we're going to be – Seeing the loans that we automatically shifted onto the watch list because of deferrals start to come off because at the end of next quarter, substantially all of the deferrals would have been completed. So as we see these loans having sustained performance under contractual terms, we'll be pulling them off of the list. As far as special mention and substandard go, Given the state of the portfolio right now and the level of past dues that we had that are really microscopic, I'm not seeing, knock on wood, and don't let this be a prediction, but I'm not seeing anything currently that would give me reason to think that we were going to have increases in classified loans.

43:55 Okay, great. And then just a follow-up has to do with that sort of pre-sold construction within the book and how often are you seeing, you know, homes or other properties kind of pre-sold on the front end and is that still a kind of high characteristic in the greater D.C. market? Okay, this is on the residential side? Yeah, I think primarily residential. Well, the residential market here is fire hot I have never seen it like this before. People are definitely in inventory shortage. Things are moving a lot faster. We've had a number of our builders who've come in, and because the level of their pre-sales is so high, and we have them kind of locked into a one, two spec situation and a limited number of pre-sales, Now they're really looking to increase the size of that availability because of the number of pre-sales. And the prices continue to increase.

45:04 I think, you know, it's tough to say for sure, but the 10-year seems to be amazingly low. So I'm thinking that... I don't see an end in sight for this right now. Charles is a better predictor of the 10-year than I am. Right. Yeah, I mean, obviously there seems to be a very high correlation with how that team attracts and the kind of activity we see in a registered sports operation. And clearly with the dips that we've had over the last couple of weeks, we think that may drive another strong, you know, A couple of periods for them.

45:53 Okay, great. Thank you for that, Tyler. And then just a final question, Stephen, back to you. On these legal matters that you disclosed, should we expect to see an update in the 10-Q in a few weeks, or will it take longer than that to provide any incremental information on the matters at be? We really can't tell at this point. You know, if something happens, obviously, we will update. But we can't predict that at this time. And then is there any visibility on a legal extent from here? Would it be presumably higher this next quarter, or is it too early to say? Yeah, I think it's a little too early to say.

46:38 I mean, clearly, as As we approach a revolution on these matters, the legal activity is going to increase. So, you know, that's something to be mindful of as you're thinking about it. Sure. Okay. Thank you very much. We appreciate it. Thank you. Thank you. And our next question comes from the line of David Bishop with Seaport Research Partners. Your line is open. Please go ahead. Yeah, hey, just had a quick follow-up, Susan, in terms I think you mentioned in the preamble. get an opportunity to participate, I think, with the MoCo affordable housing program with a larger credit. I know up here in Howard County, that's a real issue in terms of housing affordability. Are you seeing opportunity to maybe export that or take advantage of that drumbeat and maybe some of the other DMV counties around here surrounding MoCo in Northern Virginia? Just curious if there's maybe some other opportunities to participate with some of the county governments to and affordable housing initiatives that are being pushed.

47:44 We're constantly looking at that as a possibility. So there are opportunities and our people are out there in dealing and looking to bring those on board. And in terms of, you know, loan yield, loan that, just curious, any sort of pricing and and yield discussion you can provide on those types of opportunities. Thanks, that's all I have. Well, I can't really give you pricing information on a specific credit. Is there in general, there's a lot of price competition for strong deals and I think we're seeing that and we just try to make sure that we're in the mix with the correct risk adjusted pricing and move forward with increasing the size of the portfolio at acceptable rate levels.

48:45 Right, and as I think Charles said before, or Jan, we're not compromising on credit. Pricing is tough, but we're holding tight on our credit requirements. Another factor I threw in there is, you know, obviously with all the liquidity that both we as an institution and a lot of our competitors have, both size and as both Susan and Jan said, support matter as transactions and those deals get pretty competitive when they're large like that with healthy sponsors. I understand. I appreciate that. It is great work. It's a great type of lending and we do enjoy being involved in our community and working with our constituencies to really Thank you, and I'm showing no further questions at this time, and I would like to turn the conference back over to CEO Susan Riel for her closing remarks.

49:59 Just want to say in closing, we appreciate your questions and all of you taking the time to join us on the call. We hope everyone is enjoying the summer, and we look forward to speaking to you again in a few months. Have a great day. This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day.