Eagle Bancorp (EGBN) 25 Apr 242024 Q1 Earnings call transcript

Good day and thank you for standing by. Welcome to the Eagle Bancorp, Inc.

First Quarter 2024 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Eric Newell, Chief Financial Officer of Eagle Bancorp, Inc. ahead. go Please

is Bancorp. This Chief Officer Financial Good Eric Eagle of morning. Newell,

information.The Before like undue call I that unless presentation, you this which promises we the of by Bancorp information result begin GAAP and performance would We any include morning's make filed made the statements website forward-looking caution made law. our earnings about future statements. to some comments today. which section to to during is forward-looking statements Investor this of place are not forward-looking contains only new cannot any reliance of everyone Eagle the remind the and earnings year information any company's in this that on This comparable not Form reports update on statements.Our XX-K to required Form will current differ factors most to undertake the non-GAAP morning, these information. developments results reconciliations risk release, speak for including posted Relations in actual or and commentary presentation the a as future of materially of SEC, forward-looking with the as could projected identify cause financial the XXXX fiscal directly those does slides, X-K, or events from

Williams; Susan. Our or CEO, it over and Susan periodic online on our company me to would turn reports website Chief is are Credit now Bank Charles our President Levingston.I Riel; Jan available at the Officer, With our and from to Financial the like Chief today SEC's Officer, website. our

first by a in call I net impacted on moment. results net our loss quarter continued office I and in portfolio. our from reflect first, management our recognized stability quarter income our revenue the pre-provision was discussed quarter, a earnings I in the on Good to through But these will while fourth January. first strategies in you you, morning, on Eric. Thank The worked that team everyone. continue last update executing have

by customers As informed a credit Jan and will proactive in first more continuing benefits quarter have our District to markets. address maturities review impacted timely quarter's will our the credit the addressing by We've on prudent EagleBank. losses detail, identifying of capital evolving, charge-off Central proactive are Eric Eric been for challenges. Business information the preservation. how was the discuss with is The about of approach in be to that more relationship.We allowance the company's and the posture to of net our challenges demonstrated upcoming income office

XX.X%. are revenue weeks other to customers allow relationships. products of the are our year, footprint. opened markets more with are all assets.We $XX Most new new X end, of we and at net local will level deepen acquisition quarter quarter, early months quarter hard through work deposit in our deposit been to has challenges. customers our on March promising.Over us relationships pre-provision diversify Eagle that Tier the common ratio at digital these To promotion our our greater teams our to of work capital as in the our including highly of on XXX banking Based cross-sell are strategy we've have growing that Last been our expanded market on these the last our equity strategies and portfolio. our a strong new our just portfolio that developing strategies, confident to channels, to Our and executing outside stood channel. strategies. to mentioned of introduced last through into our soft preserving I banks XX top and XX focus team office ratio, capital The widely billion the launch. in X our than We've direct two first started quartile channel The ago results to capital at on Eagle's December levels total during

quarter, developed built organizations. banking this their we ] Once ex-Patriot also our augment by to the has team and nicely expect C&I to gathering efforts.Another deposit services breadth growth up and includes the a of at programs of support that Management is of of new important [ C&I business we loans. This During depth running, strategy former loans. better on-boarded growth business Treasury line the the and offered expanding our

Our are activity seeing more and our segments. C&I pipelines we as growing education are in government contracting

growth Charter the School strong continue and XXXX of presence.In to team I retirement next relationships C&I July Rheaume, we of where team. late segment, and his win a contracting source in was we announced we the new first to quarter, leads appreciate government are a Lindsey who revenue our Our am in on contributions Lindsey EagleBank. excited the chapter for his establishing February,

this spring. We a identified later leader expect to have new

the disappointed I'm and in metropolitan EagleBank was on about am serving around investors customers I of estate area the D.C. future. Washington, premise real quarterly results, business commercial at excited While the the commercial built

First through allows new them just the service expertise customers, we better initiatives combination culture. to partner Our discussed, us concierge remain our committed providing challenges.In with our customers through our to with Relationship

interest through also strategies income. net income work cycle on net will our fee and through pre-provision focus growth revenue of be we the and As growing credit, of

sustainable Eric. over have I identified actions hand the needed we've a Our continued to of with regardless strong that consistent set foundation and objective am to and interest rate that, profitability for us be to the I'll well is growth it improved confident environment. up positioned success.With for

Thanks, or provision diluted quarter. quarter the the was per the Driving $XXX,XXX quarter a loss share. Susan. for totaling $XX.X the loss $X.XX a of in losses million in for the We loss credit net reported

March the at ACL XX X.XX% for and X.XX% ACL $XX.X OpEx XX. While disclosing at The loan office ACL million from to coverage on new to from loans net we XX, XX%, resulting rated at deck, increased X.XX% that through coverage million portfolio.The X.XX% charge-offs XX. we've $XX.X attributed December are earnings to office totaled December to our increased March to $XX.X million, credit an release the at allowance December loans XX losses performing XX. total is the to performing appraisals loans properties. office at nearing our increasing substandard reflecting information are have at March ACL received from In

focused will it more, ACL the methodology as new the While on available. loans Jan considering on establish incorporate office touch We to ACL. comprehensively it for has designed risks information relating as to been we becomes remain the

has recent evaluations. relating ACL are set available information the information to appropriate.Inputs With is to March dependent limited loans on us XX, we a data believe that office the at on

first ending savings deposit flat quarter note, million basis the drove the strategic we as and to deposit in money $X associated expense X to increased benefits when NIM of of increasing an year.Noninterest in from reduce took quarter the quarter points Net quarter the period-end benefits only majority from due quarter quarter. in increase million December on compensation rates higher initiatives. basis the in quarter, of while first I X.XX%, reoccur interest total and so incentive $XX deposits we the of attributed early provision showed first last $XX.X decline XX quarter. the continues, totaled see the a market in had X previous first quarter. portion our from market our million driver of net in fourth the to million from quarter improvement increasing $XX.X declining income points the $X.X Seasonal totaled in before XX% in remained to may in the portfolio. provision discovery quarter.While the tax were the opportunities a with $XXX $XX.X And $XX from not Notwithstanding rates. did certain average would was interest-bearing liabilities million fourth deposits some in changes in or fallen, which increased the balances March types, revenue the pre-provision from that payments, increased rates paid cost by reflecting balance of salaries fourth million, ACL seasonal price with relatively increases million from at the recent the this and billion linked reversal the expense, a period, the XX the

along growth with loans salaries quarterly We construction XXXX up updated and the provided For flat attributed XXXX. declined accruals increased, part $X.X in portions FDIC reflecting effective $XX our our we portfolio, in the tax revenue XXXX, net our pre-provision at of remainder loan components our funding million loan in to earnings, insurance quarter strategy million, with In increases of by the which had on modifications lower relatively incentive existing view assessment.During rate. of the end. expense we deck, period for comparable use to quarter, investor performance. the driven our loans

we view XXXX.We Our our this full XX on from year our augmented office PPNR and on communicated pages largely January deck for of unchanged in XX. in quarter remains disclosure portfolio the the investor what

expectations on the betas in had have million changes of XXXX originations We our comments we flattened. on deposits weighted in expect model a that rate interest the Susan's X.XX%. loan $XXX.X average Our any do to goals. not forecasting, strategic our mirror the but generally Of rates of quarter,

of by impact strength AOCI. a at Lastly, was which interest its impacted XX.XX%, company.Our quarter equity rates end on remains the capital and common tangible core ratio higher was

September. management options pertains has to subordinated Our is options our consolidated maturity conditions. XX. ratio rate we market in and capital it our March interest factors Key the environment opportunities, as CETX deployment Senior debt those XX.X% consider include at been as evaluating Jan?

Eric. you, Thank

the properties. relationship current office evaluated appraisal. charged of the off a of well as cash we've we the and we we rates interest Central our after individually practice as Central The have recent the District quarter, on quarter.To-date, income quarter. rather interest portfolio. but a -- the one seen during reverse from office the nearing we of collected At than sales mentioned, recognized and X.X% standard relationship $XXX,XXX accruing on had the a deficiency maturity a collateral in at the of Business was cap as other from that discount office the higher XX, loan charge-offs largest appraisals The we appraisal cost seen appraisals was during flows Business properties. underlying than source subject is we've March to As rate loan and rate as of an materially ordered It's important loss entered note XX% and District

Business of no Central appraisal. For there other maturing, an in the would remainder which office loans result XXXX, updated District are

forward. of risk average rating discovery not for presentation, XX and in our of we appraisals Business office Central March at portfolio office income-producing X,XXX is expectation portfolio going loans is non-office our the indicative earnings our Central X,XXX note more predictable the CRE. make of year. we District and not District that of XX is our Our loans and page price X,XXX. and March visualized was indicative that our portfolio.On Business continue It's at office to XX believe risk important change to rating will CRE total last office most for is December ratings X,XXX income-producing The weighted have compared at risk XX Office severe internal we

disappointed, not recognition it's entirely While is loss unexpected. the

are loans, an of increase and the expect losses team our through We December working additional as losses at X.XX% been through cycle. from We've identify X.XX% anticipated loans preparing total ACL.We're a now total for XX. to recognized of

reviewing with our unpredictable we where emphasize months of we appropriate for As taking valuation the differing one We've include which payment to loss-absorbing also our additional perspectives extensions, in course ACL methodologies, maturities rates over and may we unexpected been of cap CRE of data associated appropriate. presentation, to significant assets, and office significant action earnings enhanced short and and over on the a seen enhanced wide as the a and discount mutually have and to portfolio and capabilities office as incorporate account information rates.We have as disclosure solution mitigate Thus time, for support, rates market mentioned, cash mitigation credit relatively collateral. largely price for somewhat the solutions due guarantor return far, goal actively our To flow and evaluation reserves in maturities.We our all Eric expected office is most maturity with us appraisals the losses a XX that taking for clients are as office well designed are previously sweeps, include into is requirements and creating process and what emerge paydown next improved CETX our ongoing we with our clients posture inform our well. maturities, We've capital. for acceptable Such an action and helps bespoke to our risks. and as discovery of result periods have loans have discrepancies ACL deemed risk will risks for the illustrate bank. as

of included borrowers Our keeping ] our [ solutions to-date control properties. have their

to was million, worked increased bridging debt, at XX, aforementioned it have and assets. March $XXX.X million two the to loan that, total we million. were units in brought leases, has there at loans increase have Of $XX.X on $XX.X were little the Susan million the into mention increased in our We that Nonperforming million, of of and March received which criticized at XX. XX, XX to to performing March on and criticized residential extensions past for to C&I residential the loss hand prior risk migrating $XX One Susan? We it's short associated quarter. assets to $XX.X points Loans million $XX.X was loans days which posing I'll loans, paydowns due with was $XX.X are rent March million classified paydowns at income-producing resolution page and evaluation. property which office total the $XX.X from $XX.X The sufficient pay-off satisfy million to special at collaboratively earnings XX basis million XX% to of the provide sold, use.Each nonperforming.NPAs to end from with million debt XX disclosure are commencement new to $XXX.X performing debt.With noted up our our possible at million loans XX on assessed of and whenever $XX.X current, of wrap-up. was of XX. existing classified for other presentation borrowers CRE $XX back loans. we sell the as and under increased total than as are more provide increase due was Total and construction office asset a a been and interest-only XX periods, loans project is unique units as December reposition million

perseverance Thanks, its and Jan. I year. said team over showed our the focus last previously client tenacity,

This quarter and this year different. are no

committed engagement to our surveillance heightened continued with office are We portfolio. and our our of

as expertise challenged gives commercial to interest over clients the this lender with just Our years XX higher in us work rates. market by a our

for capital it Our customers.With equity senior made and on with who returns net revenue, turn flexible intended future that another invested shareholders. give customers with will strong in the our and be on like years.Our closing, serve employees and us we've strategies are appropriate and ability to every In providing and levels returns customers and strong XX make work a hard thank make drive for the day of to questions. partnerships now our our team for success capital to Eagle that, we'll in management can communities and in to supports customers I our open our and would I up growth be while pre-provision services our communities our assets which products designed for our

[Operator question from comes Piper with Sandler. Casey first Instructions] Whitman Our

where this large get you you office size amount took can of the loan quarter? had reappraisal, net you in specific of to the a a loan charge-offs address For that one on

Yeah. $XX keep on was [ the the months would The date project relationship. these I ago. loan leased, XX which million appraisals We same XX% ] itself loans. as -- current appraisal was

an period XX-month where property on to decline charge-off of a million. a area the had $XX which think was in it, the I it over XX%, about value close partial pushed pretty into we

Okay.

remaining And is nonaccruals in so $XX right million the now?

correct. That's

substandard at special in it already Was mention year-end? Okay. or

Yes.

was of do your have given you said All Business that some think it of the of I across any of whole sort other this this say the the in the million or office, one size this market? But Central average one biggest markets the Okay. District. to in others you then $XX And right. your largest safe size is was

loans, larger of geographic County, There large loans couple there are downtown other Montgomery other [indiscernible]. a and are areas.

haven't issues Business in successful as terms they value heavily as been we've degradation and appraisals think suburban through Central seen of in in I markets District. have those the hit the

loans total that of $XX up Business for to one size, other We -- comes four renewal in XXXX. of the a in is million of about million. District million Central total have one There $XXX other $XX

road. hits there's it's small of the remainder pretty that There's down $X in XXXX. loan, far XXXX, The one So million nothing. about

So it's pretty a well fairly over so. split five up next matures the years and over or stratified schedule

a in I just us through appreciate going Eagle? non-interest-bearing would that. drop comments think much I'll switching more, just you seasonality? for land of ask around to not And walk then quarter this maybe gears, where as non-interest-bearing attribute that just can Eric, some percentage ultimately to you you one is how

Yes.

particularly I deposits have goal is I that to longer-term deposit about and bringing deposits. during and would XX%. at prepared through I it more that operating the segment. customers XX% to would I the quarter, our non-interest XX% comments, channels, I our quarter that of balance note, say the Susan $XXX that period would was in payments around my -- in drop million be greater the franchise attribute previous I seasonal talked grow non-interest-bearing about mean to all -- and think had in the goal average accounts but our of objectives -- say acquisition to our obviously majority This I the takes our enhancing accounts would again, that Commercial tax of XX, March than total the goal and due of At have. year our low-cost quarter. end to was but strategic deposits our during would our the

with comes Our next question from Mealor Catherine KBW.

on follow-up a just Maybe credit.

it's what over this hard But maybe classified of feel like place. is what as that And more year you're -- the of have coming this hard where it go? safe know rest and would be the in -- of you in versus criticized reserve are that you be any or maturing the seeing you a helpful. all slide you've be and saw what's helpful. because just might what your look reserve the appraisals I values range to in kind coming you've the got this range could at of really Is there ratio -- -- what could of this what's was we really quarter. kind reserve range because Just reasonable would be build year maybe from charge-offs model provisioning these where over your and builds do currently got But

we Catherine, for of do market today, we provision have, end risk and Well, between data ] into incorporate at approach. to be total ACL ACL think at the and our to is of adequate our our [ And looking we're coverage on coverage $X.XX the new forecast $X.XX we'll that continue XXXX loans.

in losses for on been has transacted risk thin. still that's on based area credit that everything really Our discovery distressed and a sale. been is has office price pretty Pretty appraisal much or

and So They're we appraisal. on would over for the between to estimate things the ballpark that it's give remainder the based the But the year. out I of million what know place. settle could for of know really the today, charge-offs a range on hard I year. in for exactly million will my somewhere where rest all $XX $XX thoughts you

I Central one a office Great. range. mentioned I about you assuming some know a the -- markets other in mean, appraisals But of it's it's [indiscernible]. are of range like I'm on that decline. the just it. not know or much in County Business That's your how of values value was different helpful the I District Montgomery kind again, puts XX%.

give you Just you're appraisals. any what color can in kind seeing on of those

saw I as as even CBD, we think been the severe And as other areas. not appraisal. it's don't within been severe the has in recent in It most what

market market I market on for are in too seeing be think any ask are levels a some because What there at there instances, the the apart be there transactions transaction. in appraisers and trades bid far which only some the right CBD, we're market. is interpreting to out distressed distressed really aren't are that going to now, are

rates higher to office seen those seeing markets And so cap that It high from rates. factors they not from using X% as a discounting for other X.X% rates and has I've as properties.I'm on happened anywhere cap in level. have that X% seeing I'm discount range for to been to are of XX.X%.

out been trophy properties, and situation there. suburban in range I'm not wide of for appraised in erosion not properties ] pretty there's while. And some the are the that fact level. at seeing we're nearly [ A in the a much same a there's the do very level. I appreciative So but not a the properties same must CBD think

through I best remainder year of think number, the I rest everything year, have we're of it you coming the year. up ballpark what over gone that's the estimate of have for for move kind gave -- given of could the in the and that our

Jan. one question Okay. Very helpful. maybe Thank just much you And so margin. on the

You for the outlook XXX XXX for the reiterated to year. your be margin to

-- came was in know but that course, from reversal. interest of this Of some the it lower quarter, I that

So low it what range of the like safe is place high-end but can sheet things margin? push that of that doing to I take gets gets within balance is what -- the of your or you feels mid- safe be, cuts are the there just that margin the your think higher? that range? to Does rate kind end you're that it mean, towards

X I estimate No, points on about question. interest the appreciate to mentioned, margin. reversal, impact that on Yeah. $XXX,XXX basis that the on be that the note, the we And Jan

effect to while and growth I think just of X.X% in of comes we digital from successes, because deposit would channel, comes up it -- I how momentum that that reversal, that, think have starting end that's and our gets range.To acquire it our we're come -- to building example, not bottom type a price which for your and about question our it's at see had a there range, down us higher you on answer at for So in at quarter, what lot that had the that growing core success building customer the higher NIM is of deposit those FHLB can our deeper deposits.So of a reducing that borrowings, to million example, it customer, of relationships has the usage have was we're year liability core into funds. a the it of And full then we're of for able of higher investments rolling $XXX of is cost deposit, think reduce the our our as and for 'XX earning in or the that I lot books, off about cost We have strategy. which than X%. us do is are our the the -- in

benefit to So basis originations I sitting you of just pretty have yield the new is even we're close XXX the loan in of it's at on a cash do if us. market giving seeing about spreads yield. that are what points higher the think that

So becoming is strategy, that more the for think year XXXX XXXX. liability a strategy success a and up in getting the in lot back our good I half honestly of of successful and setting liability it us really

Christopher from with Montgomery comes question Janney next Our Scott. Marinac

one on quick a just the Eric, you for interest. non-accrued

still but the still back, So portion of correct? Is on that you're that going get to that's you loan non-accrual. have the

Correct.

you build charge-off sort Okay. you bit really now them simply a modified the Jan, And of I the kind you level can have some not or and loans or little many guess modified the appropriate. reserve then talk about having where loans for of of with renewing are

while, maturity within in not It's office menu in once particular, the think we're doing got that portfolio have Well, a you've a are generally, I we if see of often. a some exercising. options issue. cases, that modifications we a but payoff, full In we

get is I difficult certainly think a office more premium. hefty financing from it's banks. Perhaps available -- financing private to imagine for at

those to to looking ones have at We do them. So are we situations. modify extend

perspective, we cases, ultimate of that for been the part deal maturities we of portfolio arena. other we've far a projected where the wildcard and to that have situation earlier, range the to working in borrower coming some in we're that continue be I being think all possible what in as the minimizing providing evaluated updated appraisals. road in those successful year in within paydowns getting a loans at we bank from the while We're that and in mentioned upside appraisal the to on and borrower theoretically that's avenue and where an for down where for this stay have up the the risk as process.We're loss charge-off I the to potential out, Catherine are required be each and with fortunate are could looking so have an will

Great. And this is modifying and current of cycles, past that guidelines sort on put really all the you've within year the regulators of too. last that in used done place in loans

So it's all consistent.

Absolutely. Yes.

just the remarks a you thought often can want just I then us to more happening? cash? And color down give more I on collateral helpful. little was your about on that's how more and getting you're drill comment really prepared further how often

not it's than deals happening more in happening in. It's

-- go-forward thinking about funding you instituted of basis to office have the we to cash a flow of re-tenanting cost in and for the cost sweeps on really think accumulated need be making payments. I addition

and place reserve, three a six worked space we've flow long-term where lease because we've not the substantially been have that we've through, extension and had I to commence are that that we doesn't only for In the currently into successful want a sweeping that. payment we retenant property. think be with of least deals at reserve to a but cash So we we a And also pretty have of the had large in with the rent working months. in that.We've had We've credit or instances. for number through exception tenant of has borrower an interest-only all downs a done entered pay modifications have

making make payments. a rent return of to payments give IO six to with them amortization So the we'll months consistent

in bespoke we're the that come we circumstances and terms think up I that we're pretty working with through. the So of solutions

And getting not occur. as cash, you're seeing this collateral defaults you're

that message predominant I you're morning. this you. not throwing So be a mean it's as at seems triggering keys if to people

our That, No. It's situation be don't it. not good a managers. we're probably property think, banks that to very I is really business. want not at We're And not in.

investors, their borrower chance the with think, investment for having a to I good to solution So staying some is everyone. a return

last question of me, out on the with do if reserve maturity wall? not reserve the some And it's to maturities existing have loss that you XXXX, Great. the in does I of as kind even just though office. has then as near-term far mean kind for content on loan, have

we've it probability our methodology of based a more mention loans it a reserve is the will really given or analysis The and special substandard that additional to terms have reserve. and on qualitative adding additional where in Well, that a reserves of the a are reserve does added focused default. quantitative loss overlay we've on on default that been

do So of think general want CECL methodology. part Eric, to? just you that's our I

No.

You I put got to a risk we're I and guess really we're looking office it perspective, of the just default, button as that in it, of for rating a at loans the from probability on when it. Yeah. -- qualitative maturities focused given loss default. agnostic mean, internal we're to on

Thank point. good we for that's No, you background a Great. all greatly it. the appreciate had,

to now remarks. CEO, Riel, turn This President back for session. I concludes the would Susan like and to closing question-and-answer it

quarter. We meeting look forward to you your questions on Thank us join with and appreciate time again the to next the you you. taking We call.

Thank for This concludes today's call. conference participating. you

disconnect. now You may