Eagle Bancorp (EGBN) 20 Oct 222022 Q3 Earnings call transcript

Good day and thank you for standing by. Welcome to the Eagle Bancorp Third Quarter 2022 Earnings Conference Call. At this time all participants are in a listen-only mode. After the speakers’ presentation, there will be a question answer session. [Operator Instructions] Please be advised, that today's conference is being recorded. to Levingston. call like Financial to now Charles Officer, would turn over the Chief I ahead. go Please

Thank you, morning. of Lisa. Good Eagle Financial Levingston, Bancorp. Officer Chief This is Charles

everyone I Before the may be made would that statements. call some forward-looking like during we this of presentation, to begin considered comments the remind

formal our over the loan any performance future should promises performance quarter with providing policy to our been with this guidance is establish not our formal any to interpreted be statements While None and positive, or have markets about the and past guidance. as of call growth made our we make respect it cannot this during earnings. forward-looking

factors of for information commentary will year statements directly Company's XXXX events as new fiscal the and the reconciliations does morning's a which information. result our XX-K materially on actual any and results Form to to Form morning. statements those this the not forward-looking could earnings certain The Investor any that undertake section projected law. in update non-GAAP differ GAAP is this most cause of SEC or required release, by with reports Relations information of website Our developments in Bancorp include to risk This the Eagle unless from made current X-K identifies the filed or posted comparable contains future information. forward-looking

our to to CEO, return more credit then questions. I'll over financials At available on I Susan end our be the Jan now of us with Credit are our reserves website quality off the Bancorp the Our website. turn our take on overview, President start Eagle local to it Riel. to Eagle loans, three and and morning, at her will high-level discuss then or the will all in periodic reports a President Susan would like economy, of thoughts will Officer detail. Chief CEO available online from This matters, discuss SEC's Williams, Riel, us and

to report increased Charles. million quarter Thank you, the of Loans our Good fourth successful another had metrics we morning, consecutive strong. In $XXX credit loan prior third best quarter growth and bank quarter. the and steady our by remained quarter had from end. This am pleased I this increase. year quality everyone. quarterly the was

had risk This quarter’s hallmark little quarter. which focus At loan recovery quarter the of had growth Credit is just were time to our same quarter we founding And basis team it be $XX,XXX. another and at net time, the for primarily Eagle by points a on CRE another was driven forward. but since at nine management continue going our assets a NPAs smaller end. this solid will

active efforts. Additionally, $X.X continue quarter billion lending be the from calling our CRE beyond end. $XX C&I are our to million as successful moving our their at teams end, unfunded prior pipeline, And in through and credits quarter pipelines and commitments were up

gives room significant close us loan limit our arise, enough grow our equity billion, more than portfolio, capital total commercial XX.XX% of and opportunities the to ample to more us gives As projects. the on $X.X of risk-based lending large

over difficult structure during and gives deals clients appropriately our times, with work ability an our us Additionally, to understand it risk, economic advantage that competitors. is our

banks Our extends commitment Washington, located the committed we in the clients This people operate. market the communities also of community more D.C. know that in market. we which business the to our to are in outside larger than

much success have had in the for years, housing. Over to and continue providing financing affordable have needed we

on quarter, the transaction equates to a to of per shareholders, of increasing end for For our an was D.C. based dividend remain to which of neighborhood dividend cash X.X% to million example, approximately annualized bring the our we At And with University we share. per of our last shareholders. share, this $XX.X on This This earlier development $XX dividend. mixed-use Washington, returning of land announced $X.XX Board million price financing project. closing Shaw focused month, stock $XX.XX for yield the a the value a and returned declared through night’s Howard

it Jan, turning that like I’d to & Equity Before say over Inclusion to make our Council continues to Diversity, progress.

Employees our scholarship the will groups we awarded in personally And employee participation the planning have group Bank believe resource participating these in part to the groups, Network, two This Eagle support. we in the in and as employees be stages. quarter scholarships We to rewarding and we program. give our two five other teammates groups full addition of professionally Black these women's groups our and

Now, Jan the market, will loans insight give Officer Williams, into our quality. credit us some and Chief Credit

seen with Susan. projects September. with in remain up. than office environment, everyone. seen of and economy. the our as Good surprisingly the have figure market, C of are to capital housing and construction multi-families. the rate play monthly equipment these government, to see Areas uptick matrix. district continues Area Washington softening rising and in purchases conservative Washington central being attractive surrounding our properties, higher office have demand M&A type seen property than maintain Provided nationwide adjust market we has an delaying low C&I a business this have contractors conditions our government strength. a own in With unfunded rate also In continues as Even exceed Construction Class space economic Metropolitan the financing and D.C. X.X% with where show credit new you, cost enough, Not underwriting position. decisions of the that Spending standards, background, continue Thank delays stabilizing reflected to projects area converted unemployment quality the we demand we projects August, to completed Statistical supply. strong in some we only do are are at or in their rather and structures project softening seen in to funding some clients X.X% may our morning, being increasing in local undertake to increase environment. in demand commitments, are the capital little more how have conversion part Not we from consumers an out continues the ramp to the we deterioration moving of This financial as forward. which in its to remained

for which of still from these offset risk the increases quarter, $X.X Susan XXX% $XXX,XXX, Our improved or at X.XX%, Partially end prior credit million, on were it's the paid Total offsetting over sustained level status quarter localization notes from regard of loans net a the ratio were certain over that, had employment With last was to quarter from very assets. – spread down million quarter. basis in $XX,XXX national of like XX driven non-performing Financial low quarter. factor to of to loans was to that the This recovery prior $XX and for the losses, more quarter. the million. was out quarter ACL The environmental a for based quarter primarily $X.X XXX%, were on first the and we Gross from the decrease increase similar in provision on up in loan Officer. forecast. full an spread NPAs, X.XX% the is individually $XXX,XXX Charles quarter dues modest second an the overall in Also, in on turn $XX.X reserves it prior returning in higher up evaluated as unemployment driven was and to overlay end the the our hotel slightly NPAs increased unemployment by three in million loan at of factors, District end on quarter, balances, X from credit increase weakening properties XX-day to mentioned, $X.X up This impairment charge-offs performance. were and it points increase nine has coverage over from past accrual from Central Levingston, million, while than period-end our million at from the coupled non-performing resulted office XX D.C. with is out notes. the loans qualitative this and were Washington, from $XX.X improvement an factors. one to recoveries loans result being management With an a of our to forecast improvement I'd Business rating payment Chief as third was a

Thank you, Jan.

the like second most notable on share. quarter The second prior from with to the some net second one-time between difference quarter comment items, from $X.XX statement Reserve. that drove from down. or I'd changes quarter. and past First, the in million Absent the adjusted income quarter these including expenses It quarter second the the was this items income was was Federal the $XX.X quarter per settlements SEC these one-time one-time and quarter earnings prior

share factor was net credit was $XX.X income million share. the net $X.X decreases tax second than lower $X.X per quarter was adjusted which the before million contributing $X.XX to benefit. For or losses, million any or the quarter, provision largest The increased diluted for in third the $X.X increase per of million by This $X.XX income.

paid there Interest income primarily so was higher on rate down. I'll were increased balances, $XX.X adjustable had loan up changes. of on line but underlying income quarter rates impact the meaningful, expense an other them by the loans break on items on large extra Interest million, average on are The less savings and higher million up and smaller money had statement increasing some deposit accounts. $XX.X loans the on higher million, was rates new $X yields day. Net but income market interest slightly

late impact of of its interest increase on a Our – partially deposit X raised announced deposit the on were rates FOMC expense rates The in after base. these July. offset smaller by FOMC the deposit after rate deposit announcement was August -

on an X.XX%, was funds yields. also in the and the not for The improvement our behind up points interest-bearing our quarter average increase was cost X.XX%, basis as X XX to far XX the was was in loan securities increase quarter. limited points of Our yield up margin prior basis which was points. X.XX%, up NIM basis the slightly yield average includes in balances, the from of The increase

sheet, side balance funds up the cost the points. X.XX%, On of of XX the basis was other

the NIM money to slower repricing is repricing accounts. market the savings of rate the Some faster on and of drag attributable the variable loans versus of

as rising were we home. a mortgage $XXX,XXX. this to income, Loan rates consumer further refinancing fees be interest continued quarter light non-interest For purchasing down or were and reduced slightly in volume by down

absent all relatively expense, consulting fees network and fees. accruals; down on and annual accounting expenses were legal with from employee the trued as were non-interest were $XXX,XXX professional changes on upgrades; higher associated expenses the we $XXX,XXX were bonus settlement processing up Data incentive $XXX,XXX prior For primary benefits quarter, small. the up with salaries up

estimated number The annual sheet, Before did common savings expire we the notable moving October I'd $XXX,XXX. the close were are on lease that is to one rent, cost taxes on end. This of and set note reduces There XX. as to the at to branch maintenance XX. branches to expenses bank balance like area on no unamortized quarter

On by million were a the driven the sheet, along $XXX to used declined $XXX new fund assets deposit in by reduction million. funds million. outflows as These in The decline with from $XXX of short-term largely short-term short-term borrowings balance declined quarter assets end million. liquidity funds, $XXX was prior by excess of

of Regarding deposits, we that the down some end the month. reduction clients balances each quarter end in typically have at draw

funding. the million. down smaller of amount So indicative were $XXX by Average are more of normal quarter balances deposits for a average

and savings As deposits from earlier, primarily reduction mentioned money market accounts. the in were

Common pay up held balances accounts and XX.X% driven decrease primarily quarter also quarter reduction prior interest securities to rate the securities ratios assets points. rise XX.X% in by portfolio, rates securities was average available-for-sale available-for-sale to was If at to interest deposits less sheet $XX.X from in and steady, in quarter were the offset back the XX.XX%, but notable overall the from million. quarter. the Intangible balance which carrying $XXX this the XX.X%, the impacted down on for of markdown dividends equity, assets. rose quarter-over-quarter noninterest-bearing the The available-for-sale reduced the the equity carrying million to $XX.X changes quarter our securities. declared. to available-for-sale securities strong equity the tangible noninterest-bearing the million. short common up. portfolio. available-for-sale and muted from were the on Other a during downs. As X $XXX that, Regulatory by driven equities. basis down $XX.X to markdown quarter, by Susan were basis to prior end this values The environment up decrease for reduction in wrap values past points. lower by the to on capital Essentially, down million mark our ratios by hand the assets continue being down in security was million the average loans being at end impacted With was was to Common deposits reduction earnings in continues will end was remained Equity as it continue by not drove markdown and available-for-sale I'll of to rise, X securities capital

Charles. Thanks,

community. service we As the I'd like is strength relationship with metrics. our superior that we and to encouraged strong it quality the maintain increase our leadership this allows loans our quarter us commentary, asset position customers culture wrap our to by that Also, up the say of and in provide are our in to based

all thank of respect, diversity a both now the work we it for the will would as and in serve. and questions. like workplace remain their for inclusion at With Lastly, of I us hard committed Eagle employees Question-And-Answer all to of open all our we Session and that, culture always, communities to up

Thank first go Please KBW. ahead. that I The Mealor coming from you. Catherine Instructions] have of question is [Operator

line is Your open.

Hi, good morning.

morning, good Catherine. Hi,

morning, Good Catherine.

those to higher next might of way is deposit you give get for where your quarters, you Thanks. of deposit go be last higher some guess, a to and I us increase case better you kind And Or deposit to your just around a do be front-running cycle. story we to color next? cost, what been going you ended a which peers? there more broad typical to as quarters? quarter some than into you sense have made beta start couple of are Could just should the costs. past on kind quickly with maybe then, the where and a I of this picture to just over kind couple betas than want the the deposit similar believe Is cost that that's betas the of are of it's slow costs

really since of point lag with with hard on are that X.X% abstracted over beta, movements. still X/XX to Obviously, rate up sheet in payoffs. past sensitivity income about as XX-month a tune other Sure the status it's and is to XX%. of I yes, got the rate say thing, addition Even on asset interest with repricing the of and interest of period. asset varying factors We've mentioned relationships a at like beta variety levels that. is modeling to balance Catherine, sensitivity seeing increased of we right the a a basis world the liability a an risk the modeling to funding we're XXX versus average effect our move in real away from that there forecast

important Our quarter, we our beta, move modeling. those in it’s align as third think as of to match was just or XX.X% you noninterest-bearing our I strong we've It's right, it's XX% beat increase also deposits for with mind that mentioned, total to quarter. around deposit balances, thought. endeavor seen the to either the So, which third right? forward, keep We'll in that does

fund I'll just the continue are it's keep also all And funding add and us lost so, banks the in plugging and on yes, possible. obviously this difficult to But going to we efficiently that try that to in environment. not away be most going is more for bank

deposit… expect you would And

lost think we I Catherine, you.

Janice can talk a bit.

on as that have. loan period would something required banking strongly is probably didn't excess prior accounts we as could in deposit during we've thing request. and That's the say always of we in pursue any One connection liquidity I without years, that, focused relationship

required basic And rate into compensating changing I think were refocusing we environment. tactics move expect the and deposits we that the as balances had will those have using we XXXX. on we pre that I that those same we're level when on success

we're to the Yeah, Catherine her. queue we trying back on I think working get lost in because

Instructions] [Operator

her get any we then able move there. we we're not to if Lisa, that I on have other questions in think the queue to can back maybe out

Okay. Instructions] [Operator

is. her bring I she back. Here want to

back, Catherine. Welcome

ahead. open. Catherine, is go your line Please

again. pressed just X I star great. Okay,

back? am So I

You're back.

right. All

Okay.

and hear I So, talking was guess anything saying. I everyone could

question I you'll grow of do appreciate next actually to I the guess kind for us? my of couple past just – the deposits out get all deposits quarters laid you big in we able for be just move you I guess else commentary. of listing into think deposits given just somewhere I kind So before follow-up as year on the picture, you you was all shrink believe

Yeah, that supply as right. environment shrinking. is difficult Again, this money answer I the - think the a that's is certainly desire,

be lot a going deposits. banks of to think with those are challenged I finding

yes, desire. but So, is that the

Catherine, as we all move that but that as requiring and Jan of was we move also deposits relationships gathering certain our for to we now that lost also. we excess has back amounts our the this we past to will for I of of are have as saying deposits in help further think during and And the continue liquidity some focus not and you, than of will focus process a pandemic had strong much the as in may while a been all and we be. been that it that were

Great.

like then the And really other great. I was good. Okay, loan actually, thought, data the on side,

we that pricing any hikes or that we Just is should new with this we data . that kind is of change forward? maybe next quarter, this see data within on may that a that coming saw dynamics of of level kind is couple XX% you kind the is of move there as think rate where

as sheet. the And rate. side generally, I would off, of could think only call should pauses, But do we're the about with Fed is the others you our be have of see strength, they they mention, balance after got they if if of on it variable once – XX% this think associated on there lag effects many repricing earnings comment consistent have lingering probably. portfolio obviously, I season during the quarter-over-quarter we we've fairly two quarter adjustable if obviously, I level with that, Yeah, or -- the made or a after asset the cause some loan

and from that from going didn't Okay, markets, so And are get other companies are they're lending. your from saying remarks. more there that in you And construction hearing heard different quarter prepared we commentary slow again, are but then banks to sense this I've great. I some all

kind credits in you're new that about thinking environment? in any construction and new of on Just originations how thoughts book this

think requests. construction I still of Well, type still project. are There very entertaining we Multi-family a is our still the product strong market. really housing shortage. It's upon is in dependent a

We distribution seeing and support to that remain properties are industrial investors networks. also attractive to continue

can't for not are about implement we're office why no if see selective side. we on looking successful and standards it I to our with reason think but underwriting we We be I right have, construction the continuing as continue now

a ourselves market think into there to always people special particularly side. additional the multifamily is as We on as election positive also subsequent There kind moving of here, in market is people the demand relates so. we net DC of past projects for pretty always right, construction coming each it cycle, move

Eagle. been And strength a that's always of

Yes.

on And the last buyback. is then question my just

your very Again, high. are are very, capital You've of high, and got a CRE there capital. to an ratios regulatory absolute TC ratios the on basis, but lot construction

where the buyback given trading? So on is your reengaging thoughts stock any

that's case quarter. – capital, it's We dividend shareholders it's in sit always compelling about talking return declared this managing yes, and be as certainly way. always valuations you and $X.XX some We Certainly, where point are But, can the made to for we're talking today. to to something trying Yes. about. here I'd another point something out we're actively

– you your do need And in outstanding re – update or me, you to do an currently have buyback up thoughts. order to that remind is your

year. expires – the current Yes. of end the expires at It program year. the The

Okay.

need you you to just engage? before you So regulatory Board – or to get need get approval

already. we've the Board approval received Actually,

initiate, be to So well. we able would as

Great.

Okay. Thanks so much.

Yes.

you. I President queue are over closing and ahead like go Susan of to in Q&A for the Riel, and back the End no There CEO turn questions and call more would Thank remarks. to

questions on join again with thank look the and We for you next you appreciate to Thank We quarter. time today you. – you the to taking the speaking call. seeing forward us to

joining Everyone, today’s thank you call. conference for

your You a rest day. all of have great