EGBN - Earnings call transcript Q1 2020

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to Eagle Bancorp’s First Quarter 2020 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. [Operator Instructions] As a reminder, today’s program is being recorded.

I would now like to introduce your host for today’s program, Charles Levingston, Chief Financial Officer. ahead. go Please

Charles Levingston

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

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

this from year, forward-looking the for XX-Q, on to company’s morning. reports Form actual fiscal current statements factors certain materially quarterly X-K reports results Our Form identify XXXX those that our any XX-K on the made projected Form in and could differ cause

not or does any include statements to information. contains comparable SEC mornings’ and company Investor earnings update The undertake information this section the of the forward-looking most reconciliations directly in The will Relations as website to filed new release, of of with or commentary posted GAAP company’s information which non-GAAP information. the a developments. result financial future is events This the

company’s on the Our SEC company or periodic online available the reports website or from the are website.

remind is earnings, would sheet margin, you the I guidance. that, or in not to our to with markets it like balance the establish policy

Susan would the I introduce Eagle Riel, to like of President and Bancorp. Now, CEO

Susan Riel

Thanks, Charles.

and Officer, Before also that Jan Credit my to here wanted mention questions. I our available Chief with formal begin Williams, later be remarks, I will us for all is

I our is EagleBank to and challenges I shareholders stress the would like a environment. would and this which brief of This you related changed wishes and like world. we has concern the we during way to disease has pandemic, responded business. best to time our do by way how certainly begin presented impacting great of the give by the others all call to extending our this on this whole to COVID-XX live summary

enhanced safety of over severity health immediately when February, the our the realized system working remotely the from access. Within we our taking started late had capabilities XX% In their days, homes. steps XX community. remote of customers, to We protect our and for of COVID-XX, employees and potential we staff we

enhance During increased site. for that followed we our employees, period, the In to authorities. were CDC we guidelines on government of who all situations, have our the safety facilities local and sanitization coming

Prior to with allow employees Program medical to matters. Federal improve Relief additional the to our for established for coverage in, and for EagleBank paid leave kicking CareFirst plans we worked the COVID-XX-related

area, monitor to take continue steps of We the spread appropriate and families. and in and employees to as metropolitan COVID-XX health of Washington the the safety our foster their we’ll

of and customers necessary outreach encourage with our six level us our closed offer of high We our online and services remotely. branches the service, a ensure services. that To left banking we maintain and of facilitate XX knew use customers open XX to access enacted and mobile to to how reach drive-through to programs

that make the sure vendors We worked technology our was with to available. appropriate

customer, had the days. appropriate. contacted terminals one how for borrowing customers discuss deposit for our where installed to we they XX remote We assess doing example, and delivered and were modifications For within loan need three to

We our exposures in discuss call. we’ll later in assessed and have those and our risk portfolio the

SBA-guaranteed is be which demand. had aspects administrative costs. systems to Bank CARES this in the initially, base, Program, participating trouble Act have of customer business small our with proven program Paycheck other processing difficult. The keeping forgivable to support businesses Protection offers and payroll To to our And the fund small loans very up

We through loans million approved approximately enhanced date, this of we $XXX processing have capability. program. to our And

and funding better the on needs to able are being additional this funding the expected, handle to if program be customer we’ll approved. for this for responsive as We focused our program additional

as our them and to other test. on have relied to systems last six operations, business a the our put During have we technology support weeks, really we communications

meetings group, conducted to video adapted As have of use the teleconferencing we a conferencing. through and

Finastra shareholders disruption to the May. to with well in our incident and very meeting a have late hold reacted March, in place annual systems backup wire in we framework virtual and transfer processing core the Our

Of total $X.X Given a and our COVID-XX or hardest service portfolio sectors the on million, of impact we accommodation billion, have the that of our the the the quite bit by have pandemic $XXX X.X% of $XX portfolio business the in and loan trade. risk to firms food assessing for million, time retail or in loans those in we has loans hit industry, the had economy, the X.X% downturn. in spent another

There concern about global has rent been payments.

note in XX% with and or another of XX% CRE down portfolio loans these been performing book the better of CRE We economic that also cycles. segments billion, note of so $X.X have loans. during two our And credit that portfolio and owner-occupied of income-producing million, loan $XXX loan our previous is would comprised types

Under responsive loan During been stimulus to our our of to our guidance legislation. risks including and state the we that guidance, provisions this period of actions, enhanced uncertainty, and Board of employees, has and and been Directors to company. affect reporting would and attentive forbearance the have stability Board’s outlook matters and federal regulatory the mandates customers

a don’t We have crystal ball.

through ability community coming and challenges DC second leading the metropolitan However, two is we current us should the our as which work One through banks and are credit position allow profitability, Washington position for cycle; of to reasons: confident area. in strong one capital the to the of is the work market our our

This and The U.S.. a major fifth the region stimulus our the new national from funds remain is and federal program, economy believe here government in federal to likely regional experience in to from will government the previous currently largest the metropolitan percentage of stay efforts that we economy stimulus Washington the is area. is past a has the programs significant created restart intended

results to of would like discussion to I Now quarter first turn the company’s financial the XXXX. for the

net first $XX.X of to of the $XX.X for income For the we XXXX. as million, quarter, reported million quarter compared

diluted of earnings basic the the quarter share, meaningful, per because two A comparison major really share, as per each period items. share, isn’t unusual of diluted and first earnings periods and Earnings for basic of for $X.XX had some the XXXX. to per $X.XX were compared straight-up

$X.XX charge $X.X of loss expenses results million, the as loan and last former of XX% The to QX the CECL. additions first for accounting our CEO, retirement included to for year of results – adoption per related for related reserves the known significant standard XXXX to a quarter share non-recurring compensation includes of of new

million This new general in adopted allowance one reserve resulting to and as stockholders’ significant a on to million XXXX, adjustments, for for impact $X.X was CECL day accounting $XX.X which an X, increase of losses credit methodology first were quarter. commitments. the methodology the an the of had, The January unfunded expected, increase the as charges were equity, and for results of

for we unfunded the made Of to During totaling first general the both provisions, provisions matters. quarter have additional of those about and million. COVID-XX can $XX.X allowance commitments, additional be two-thirds to XXXX, the attributed reserve

to portfolio how economic from the due their losses flows Since monitor turmoil to is economy the cash volatile the service reviewing the pandemic. volatile – to and potential been We mid-March, to for we debt. have how assess impacting credit continue COVID-XX individual their ability

accounting of at the As net loans $XXX these XXX approved was modifications increase of X.XX% allowance for of in credit for of of a about pre-tax an The the result negative December from the – and loan standard had XX, of XX, XXXX April quarter of provision XXXX. March XX. total factors losses reviewed $XX.X all income million. had X.XX% to for loans, an related at totaling The and we on impact loans total had adoption first CECL million of

a quarter, the state deposits margin, With with first are and of the quality continued in pleased solid continued growth strong total results efficiency would and that productivity. interest we during total net said, stable that we continued saw asset I which and loans,

the first the quarterly of legal impacting in see the an margin pleased the of other expenses. elevated same in In of We the after decreases level net first major quarter XXXX. was leveling was level of quarter, X.XX% the XXXX. were this was addition adjustments, to of as to fourth continuation and earnings X.XX% CECL-related quarters quarter the the several The off the for interest from margin item the of

yields by an quarter of XXXX, XX first points the basis loan for X.XX% of During average the period. decreased to

market reduce with down line our the Importantly, Fed during moves able deposit money quarter. in rates, costs the CD to we Fed, significantly and were the by pushing

of XX quarter. basis the by for to decreased deposits cost X.XX% points interest-bearing The

in our While for many adjust and the by competitors in aggressively quarter of reductions to funds, first and the rate was did deposit reduced anticipation X.XX% aggregate response which not short-term and moved of our our much, successfully as cost of deposit rates Reserve XXXX. we rates Federal

during net by impacted interest two the quarter. margin The other was factors

excess result reduced on-balance The than negative first near sheet item had more to the Reserve, zero. The as $XXX was million about liquidity they the Federal in these invested we on liquidity margin uncertain had was effect sufficient we with the that, held during a rates times.

the The average ratio deposit to quarter loan XX.X%. for was

cost benefit deposits. margin ability to at of of and XX.X% maintain deposit total On accounts demand continued the funds other hand, to from our average our

DDA Our of to be continues the high major bank. level a of strength deposits

XX annualized first loans points statistics of points decreased quarter credit of quarter average basis for to quarter basis quality the XX have from for strong basis first fourth XXXX. to of level Net XXXX. continue the XXXX XX were We of and of a charge-off quarter, for points the the

of through a at March million XXXX. OREO assets during assets XX, the points basis At due basis by addition December a XX XX, year to and percentage XX XX two nonperforming of as total points, ago assets the basis were compared pieces $X as Nonperforming quarter, increased acquired of property foreclosure. to points

a $XX at and points points, loans XXXX compared XX, to points XX XX Nonperforming were as at at basis of loans quarter-end and million, XXXX. total XX, March percentage basis XX as December were basis

the December XXXX, XXXX. of at nonperforming As and XX, the as was at XXXX for March of remains levels, these believe adjustments. was the CECL mentioned, XXX% loans, Overall, reserved. At COVID-XX-related adequately total credit loans losses due to compared X.XX% coverage XX, and quarter, allowance quality the credit of at the first March XXX% solid. Bank ratio is primarily we to XX, the At end XXX%

a first during than XXXX. were of of the decrease first the first million, The largest increases while XXXX, in about we quarter during $XXX loan balances For higher X% the in of in of construction loans, quarter of or during XXXX. quarter achieved loan quarter We CRE growth saw income-producing quarter than Average the the X.X% and loans average loans. C&I XXXX for fourth loan balances greater X.X%. were the were quarter

grown by XXXX, loans Since have our we XX% C&I income-producing and by March loans XX%. CRE XX,

While growth to quarter our liquidity C&I credit, has of portion positions construction in $X their was the as lines million, a significant in the at matters. lending due flat March remained to to COVID-XX-related portfolio in added of advances under loan about in just the clients response

of quarter first that was this estimate the XXXX We half growth of the loan attributable about to during activity.

Our new loan to promising, loans look is the due for demand to uncertainty hard determine, the caused pipeline by but continues to pandemic.

during period-end grew a by of On deposits total million the XXXX. quarter first $XXX basis,

experienced slight million, saw deposits during the decrease significant While of average XXXX. a balances our $XX fluctuations first quarter of deposit

increases early significant many equity cash volatile While markets. to March, our saw the balances in response in pandemic we were low, February in and the in accumulated seasonably quarter, customers as the of

billion, deposits XX%, in $X.X to but changed first growth for were Average XXXX. of annual of as the rate XXXX, quarter the a quarter XXXX from exhibiting fourth first of healthy quarter compared the little

on primarily compared in quarter, year, attributable of strong quarter the XXXX mortgage-backed market by as The was decrease residential pricing sales Non-interest a to very of sale originations securities. negatively the otherwise losses in residential first lesser in hedging increase. of $X.X to and volume for XX% revenue mortgages million impacted as in to loan the dislocation gains quarter million was income the due of mortgage $X.X the last was an

Net XX.XX% XXXX, was investment efficiency of the quarter $XXX,XXX XX.XX% gains quarter first for compared The were to slightly first of for $XXX,XXX same a ago in the quarter period the year lower in XXXX. compared XXXX, as as XXXX. at for and of XX.XX% to fourth ratio the

a to previously governmental the higher ratio level the our disclosed investigations first due disclosed attributable fee of of defense action was class efficiency XXXX both legal rates level related previously to lower revenue and to expenditures interest and in of higher the substantially lawsuit. reduced quarter The

regional the the area. Washington by the economy of the While fifth are in we $XXX cautiously optimistic caused At have billion. largest States, for product range prospects with about pandemic, are uncertainty the we the gross all grappling with XXXX, end United metropolitan of the we regional long a COVID-XX

on or in X%, The University released $X.X the if to economy the regional this Fuller a GRP to billion XX its growth their on be analysis pandemic, which level year, would about the local Institute areas the of normal X% impact XXXX. recently effects reduction at that George days, indicates rate the of shutdown Mason for our would growth that of and return

would sectors. restaurant As with the locally damage level, to the national the be biggest and hotel

we monitor our in portfolio. So closely to will exposures loan those continue

Our Board a is maintaining sound, financially well-capitalized committed institution. to

We CECL to suspension repurchases – of have share prior to additions done standard the and retained earnings by been continued the profitability that over have our combined quarters, the adopting repurchase the as from made four effect recent our offset the by of program. the last

Board continue regional any any – pandemic the statistics to quality in potential The economy COVID-XX capital-related assess asset considering actions. will potential the and of the our I’m impact capital on sorry,

net over the income. quarters, of that last proud company four earned in even $XXX.X has are We with all million challenges our have we the addressed

have million through dividends the book XX% tangible to and and period, value $XXX per same repurchases returned $XX.XX. cash During have that share share to by our increased shareholders we

At at well-capitalized are XXXX compared levels risk-based March levels. XXXX. to XX.XX% capital March at year above as XX.XX% XX, a tangible at and XX.XX% well moved XXXX. averages to XX, These peer ratio The XX, equity XX.XX%, regulatory ago December ratio from total March XXXX, was the XX, and XX.XX% common

We X. this Annual in our you A.M. support be you of XX:XX many at appreciate that on published May those were Meeting how was XX. able on on that Shareholders hope held our shareholders to on our basis for on will proxy, April and Instructions participate. the remind to to meeting I like which We would the included of virtual a register you call. of are

concludes my We to pleased any That take be remarks. final time. at this would questions

Operator

& from [Operator question Boenning Zwick Instructions] from comes Our line first Erik the Scattergood. of

please. Your question,

Erik Zwick

morning. good Hi,

Charles Levingston

morning, Good Erik.

Susan Riel

Good morning.

Erik Zwick

you’d internal the conclusion? as have could its be compliance that that special government’s investigation that also expect nearing a concluded, reviews sign should the Given by interpreted and your be audit committee

Susan Riel

and investigations anything. engage We and resolution, I the continue timing my to offer with outcome still the to impossible or it’s said, opinion. government will predict the That

matters. quarter these each these professional are much believe are understanding of As It proceeding closer proceeds, in and we manner. is expeditiously that a that belief my we investigations to resolution and

are production feasible phase I cycle. the document to the making complete efforts understand extent the of to we investigation

that hopeful permit a efforts us lower expenses during before are again. summer We potential up counsel may to low outside these picking

General warned or impossible some thought Counsel observations the me, I opinion. And are to be pace, my investigations, predict these as For emphasis, my it government would but direction of of it’s helpful has outcome to the share that.

Erik Zwick

in regard on, you been completed Thanks, two foreclosed Susan. I see appreciate similar experiencing high-end you the the sell? color there. guess, they that these properties And newly that how to do have the trying I for was were projects And to stress? properties sponsor they portfolio any long were With or other be your could properties seasoned sale?

Janice Williams

really portfolio. This is aren’t the properties Jan There Williams. in similar significant

– properties the of both One properties. residential are single-family

is One historic and high-end. of restoration them finished a just very

it’s turnaround during a in saleable it’s the whether difficult quick current say. said, being to That coronavirus era,

are margined within appraised well We value.

with feeling fairly comfortable So that.

difficult is to timing more call. the think I

is is Row, DC. Mass is The property one Avenue. on One in Washington Embassy Georgetown, other in also

has Georgetown that property in one renovated. large but been an The and not is older, very property

at So that houses, time realtors with them. at one disposition properties. take around again, exactly taking to value it’s while people was to property comfortable so a reduced to I’m the the look carrying not about. speaking be I could great values. they’re to a is be expensive it first to a And But But

Erik Zwick

How along me still at the is by percentage end $X.X portfolio today? Understood. question color you today far terms provide industry And some is? use I’ll And you. type? in about diversification The approximately ongoing last just what billion. step construction those aside. the of intended and properties construction Thank one of for into Can construction

Susan Riel

tell Well, can has of been you disruption this in different point, service. that terms give construction. at property across ongoing can construction, stratification essential I an I there It’s in not types. considered been, you

That future. projects. there in couldn’t slowdowns future the chain with issues that any been supply haven’t there issues couldn’t or be mean So that there on the doesn’t be in

XX% for a is we in X.X%. about hotel offices about mixed portfolio But it about performing use, is XX%, condominiums, than XX% construction of in is is little less retail under X%, single-family, XX% XX% About right multifamily, the expected. residential and of as exactly now, is around

So where comfortable overall, are. with we’re we pretty

that been for I last thrown be the to XXXX. timeline. of about on first As quarters, you finished we’re know, the of for of will will – be it anticipated we’ve finished the in in talking the several I’ve been coronavirus. that confident Obviously, what been we with deemphasizing recession been the a think construction a timeline and original we’ve a thinking portfolio. likely terms in bit And about part our has have queue that according loop But in

Erik Zwick

for my Thanks questions. taking

Charles Levingston

Thank you, Erik.

Operator

you. Thank

Comery question G. of Steve comes line next from Research. Our the from

Your question, please.

Steve Comery

good morning. Hey, guys,

Charles Levingston

morning. Good

Susan Riel

Good morning.

Steve Comery

wanted I million $XXX of ask PPP Susan, the know, about about to balance. I disclosures. you talked

out Just how these for that you give us how sense was wondering or could the you of of unfilled of was before money? clients that makeup many were then us and the – of And maybe when what maybe just existing kind clients? new ran most applications went of a loans many can like if program tell that that that

Susan Riel

– performance around businesses is a to was bringing difficult was average primarily about loan was up size approved $XXX those of smaller up We mixed, an that $XXX,XXX. the numbers. million, for – are somewhere it It $XXX was up. hoped. and have round we say it very automated system We we on first The approximate million. side, have would as strong would not to time I a that The a I the not system – had had be Bank as

get to approval, expect an happen. around around get to clock been been as have very more Should prepared. same working thing. are to many additional doing geared And have we there and the present, ready that banks are working we be to many, up applications clock We the the funding

a expect our aside and we have performance point for the will us. at since to better be we money be – this any we set So money guarantee no are not guarantees given will

So hopefully, that answers your question.

Steve Comery

Yes. helpful. That’s very

Okay. loan indication wondering in us of that wasn’t is I maybe And floors an disclosure of time? that just And the balances sure. point by or end now quarter, Is the size the to then floors. press to appreciate affected the I give each wanted could at in I April? release. you ask about referring in if about kind the of

Charles Levingston

Yes.

– – is this great month. lot this took is but in the So of Steve, typically place Obviously, sorry, place until a a Charles. resets movement take The it’s beginning the the question. March, Fed of don’t

end say here at billion, $X.X So late – closer in of, want and Sitting we’re floors the those to the April, floor the at $X.X to total right billion, I about the around out of probably with that’s billion. floors quarter, were loans the $X.X billion. loans of $X

end with at will month. the So most of this loans floors at floors be – of by the

Steve Comery

more very of X.XX% own I performance. Okay, talked you about increasing know and just your of for credit just provision on of then increasing to allowance outstanding CECL helpful. the based allowance, me. the estimation one And sort then

when comfortable about you level set? how you on March XX, versus wondering how that that Just now felt guys was feel

Susan Riel

numbers. to we’re driven is I tools some fair able with looking see our comfort that level the a various still our including employ – near-term deal change what off CECL materially borrowers, changed. likely great significant the we think on to when not amount forecasts, I we’ve businesses been were will think, again. has a But uncertainty confidence if working that operating, be give model unemployment has of at of There me a

forecast cause next quarters a that’s just this if next about at of to change allowance probably couple So impossible significant the quarter, could the tell over grow, that the to point. there’s in

Charles Levingston

it’s a to disproportionate of relief relative of One sure rest a obviously, element is level. recipient of resiliency is of the the lot passed certainly Yes. make DC that the the somewhat we a DC the metro at appreciated is want nation, federal of to

make So in and that that we we consider sure forward. want accounted going to for that is modeling something our

Steve Comery

Okay. Thank you much. very

Operator

you. Thank

the line from comes Mealor from KBW. Catherine question of next Our

please. Your question,

Catherine Mealor

Thanks.

Just quarter. further bill you assumptions how may and talk your some since a that baseline used of quarter-end? on you’re build follow-up changed to how those question the you have a CECL the this reserve the maybe bit economic thinking scenarios quarter? reserves this Can And some about little of about

Charles Levingston

Right.

published an through as Wall actually again, So utilized Journal. based by we Street economic performance made I adjustments the local the And mentioned on metro forecast previously, DC crisis.

XX. that actually was forecast April on economic So published

So again, of change today men. not from a lot

at between relative in – that of measure local period in the the XXXX rate DC’s at So, our better as unemployment, driver significant mentioned, rate. between what performance rate that it like survey, Jan the those in national again, the CECL times, in the looked in about was the looking unemployment And rate DC’s at XX% specifically performing we scenarios. the XXXX difference and versus unemployment determined is nationally we against model, that XX% of a forecasted looking was looking unemployment DC’s rate unemployment unemployment difficult national

So was significant and, has aspect the again, the last, driver of XX really, the of days. not model changed XX, the quantitative it. again, call a in CECL much that

Catherine Mealor

that us some that deferral Okay. portfolio? That’s digging hotel of flagged that’s book, of you. much little about the your hotels? in larger service of on hotels Thanks. just Maybe just portfolio, the give maybe helpful. you really versus And of color percentage talk how And into is that payment portfolio – a luxury credit can of in that maybe then Thank any book and limited kind currently. kind

Janice Williams

Catherine, Jan. it’s Hi, Okay.

Catherine Mealor

Hey, Jan. Hi.

Janice Williams

I deferral two will loans two $XX are million. that that you hotel right have is for had on exposure tell now. Total about hotels those we

deferrals working the of that with. part XX-day So that certainly is we’re

chosen we’ve making SBA the in where those deferrals not of to except SBA with XXX case the the payments. go is think, days loans I

XXX of There including loan. loans, couple SBA in that’s specifically That’s an are construction. one a

We haven’t seen interruption any with that construction.

alternate is located Maryland. currently we’ve our hotels. is It most that or in closed I deferred, It discussed is a College a estimate there think largest not but presently hotel making probably the are that’s loan time sources of I for payments. Park, two

But that a the at payment Again, number be portion with of for have as to crystal I of deferral situation opposed there. probably would be at payments. deferral a A request our guess a principal a for looking customers we’ll entire or of XX-day asked deferral ball there there. point will a the interest-only some

So a at we’re fast will looking in depend to turnaround work. of things how that on basis. case-by-case on terms back And much

Although think the me, most expect hospitality I do folks, to on lag recovery. including

Catherine Mealor

balance that Great. College What was the of Park hotel loan?

Janice Williams

$XXX million.

Catherine Mealor

Okay, okay. in portfolio? Is that credit the largest that

Janice Williams

Yes, it is.

Catherine Mealor

Great.

And Okay, deposit for give Can quarter? sense give as around quarter we on second great. color then help maybe quarter-end, last Charles margin. type to kind just And you us us at us or your are the one of one from been any a into we to in seeing costs the that same second the the we’ve magnitude kind where all of of can companies? drop see going of

Charles Levingston

Yes, Catherine. sure. Thanks,

rate sits in of in month top our Susan XX our as made the now remarks, her obviously, to alluded money we March, around market So Tier move, points. basis

So see we I bit to that higher expect the little for much two Hopefully, the months of from help. going that a provides as some said forward, quarter. benefit would of first

yields. by right loan fact along that, points the of we quarter-over-quarter – again, with loan yes, the XX felt cost But the funds basis pretty encouraged declined right

with So the I quarter. our growth think over close able have consider DDAs to fact also even been to that in we the to it’s helpful XX% maintain

yes, assistance should I see some there. we So, think,

the liquidity start about We the we talking to our to cash you have first that normalize a note additional we margin, operating that benefit or did of some of those more to that lot start some we’re the cash. certainly path made saw would the as, that the experienced didn’t To certainly forward, get decision in quarter. again, customers the to endure a and up can move of see run the again, while extent of margin. Also, comfortable the environment with customers and to the

Catherine Mealor

Great.

much. great. Okay, it so you sounds Thank

Charles Levingston

Thanks, Catherine. Yes.

Operator

you. Thank

line Montgomery from from Janney question of comes Scott. Marinac the Chris next Our

Your question, please.

Christopher Marinac

portfolio. thanks. if wanted if big kind or the all morning. of that million look X% I the previous add at the Hey, Should quarter? the for would on I March? into go kind on we guess just now also loans? if general reassess the based the of update pushing data classified criticized kind build And I million, $XXX Good Or where kind of $XXX balance questioning on guess, of those and those quasi you described, And of you’re continue end hotel to of And at deferrals of have, credit of consider folks. you the reserve just we go? kind you does Jan, picture that that Jan us the could we criticized

Janice Williams

That of evaluated We forward. they X/XX been get individual take level They segregated much modifications the will going report credits a of scrutiny. a are Sure. and as that all have and portfolio. higher consists do change, by industry, certainly not as of downgraded in

more you’ll pushed I or beyond get that underlying preexisting see their don’t mention credit they’ll to watch know probably issues. think, special into category. I unless

So we’re on and staying following advice we’ve given that accounting that. been the top of

economic reserve. with deal on modifications substandard based the to additions really, conditions overlay, really of drove the properties. think the is None the I what

result Harbor Safe TDR haven’t for fact, a criticized coronavirus classified anything these to the in would or we opposed that’s modified that In modifications. as

comfortable that So I think we’re pretty on scale.

terms In by of Most modest bag. flat our real whether substandard of of and we’re categories, it’s whether residential pretty mixed much what’s commercial estate. in at a is it and estate, they’re real looking it’s increase or doubtful levels secured

couple we’ve facilities also quasi specialized looking are pushed category. a that type There restaurants We medical that have at. of number into we’re that of a

any had problem the particular loans. haven’t covenants they as recent Although their of meeting the most end and March the in of financials,

are everything closely. very We’re monitoring cautious forward about going and

any reaching don’t out industry, the place. what put – that the in expect really deferrals to additional think to modifying of impacted can in serial customers each We for these capacity and seasoned very to us that department’s proactive in to credit we’ve be process. the expanded loan We’ve portfolio bringing sorry, can customers. monitoring we And I in do see types in and and what we professionals assist I’m tried of for plans assist longer-term

Charles Levingston

as downgrade credits our should CECL kind And and that I’d resources be in to provide flow any also and those just Chris, going additional reflected model monitoring these add, those through our of credits, reserves are that will forward.

Christopher Marinac

Okay.

So reflected already in for will do kind some special of the substandard figures determined that of XX-Q, that in mention or and where terms have you filing next get the are? final of watch the

Janice Williams

for deferral Right XX, those of determined problem that that’s is have was we’re March consider. any the credit enhancements weakness a company. add bank already now, might to companies concession downgraded. would had they return for That the do if with is we And there loans financials the and remediate on plan. future on would for at in anyone days focused a in needed based We those expect of working XX us And been on as X/XX. any have long-term with a

Christopher Marinac

criticized, That’s when clarify Okay, great. a watch is all helpful. you right? just to very rated And that considered is have credit not then that

Janice Williams

That is correct. Yes.

Christopher Marinac

roughly, then and Okay, just you And in today on a of that and quick unpledged just with And perfect. are FHLB change of quarter? update? How Charles kind securities follow-up just where did a liquidity. quick the kind access for

Charles Levingston

Sure. Yes.

end it, or through, to a another, insured saw so we is one about we of network Today, got towards access there. promontories, FHL funds deposit We’ve and liquidity call $X.XX – $X.X the at of our influx we Fed network, in So, buy, the billion availability on-balance quarter. billion. sheet significant like their lines, again, availability networks again,

Christopher Marinac

you the this morning. background much for Thank all Great. very

Charles Levingston

Sure. Thanks.

Susan Riel

you. Thank

Operator

you. Thank

the Preston line comes from Stephens Our of next question Brody Inc. from

Your question, please.

Brody Preston

doing is everybody hope I everyone. well. morning, Good

Charles Levingston

morning. good Hey,

Brody Preston

Hi.

But living due So with I here. some given of the sheet liquidity with to I right on just uncertainty sort now. know of maintain sort you said Fed, the here. balance to to the excess it’s you’re uncertainty the COVID, liquidity want just death with stick

to if get wanted Just for could you of access throughout a of see the maintain the sense heightened we sort levels year, just remainder given the uncertainty? liquidity

Charles Levingston

given to depositors Yes. we’ve sheet to environment, needs be see concerns I review the see both amount and in I I of funding certainly as over year. again, on liquidity maintaining – got what could a sufficient normal meet do in an otherwise above certain any throughout may we operating that believe COVID. beyond Chris, I the off-balance mentioned needs and would elevated additional

is is of intentional it then us of moving and our just cash. and customers thanking to some Some it

where that extent move draw terms I more on that we more terms again, some again, be, intentional in and the the comfortable liquidity the be today. a to pandemic availability that cash, in outcome out the the the then have. of position. are of to we fairly can our all get of certain, they of And, clarity down feel would But decision we So, COVID-XX we of more

Brody Preston

Okay.

short-term investment that this million and trended is quarter? sort that So that and that around or – change for remaining $XXX of planning, deposits post those the levels? in Is is interest-bearing quarter, down

Charles Levingston

bit customers and seen of from – with that. a certainly any I bit we’ve little cash. getting Yes. away moving things – we a to Again, make little on statements certain more from But state the comfortable forward-looking don’t away want

Brody Preston

Okay.

wanted just give others Okay. to And to as not. then, you you had have? if others haven’t as reducing color us the know as rates you mentioned but that could moved deposits, I aggressively why guys been any with you aggressively pretty

Charles Levingston

gain to sure, money rest get and ahead share – in world they I’m But maintain hard when our cost be me world to it not short-term of effort the with Fed. us to the competition. that, all in an of the aggressively down guess quite manage did the because rates the market sense the made for us It’s of uncertain kind an My for for to time. might best want

Brody Preston

half mentioned about quarter was of Okay. utilization. And then the to growth this due you line that increased loan

if know was the us could Just utilization of to X/XX? rate what wanted as you give

Charles Levingston

is above beyond I so growth see. would that the and of what don’t offhand. we half $XXX again, about normally or – that million But have about

Susan Riel

follow-up with that’s something can think I you. for I

Brody Preston

Okay.

Susan Riel

…sure you’ll e-mail after.

Brody Preston

to All cash right, some clients, clients that because the who just a Was like savings saw, then, or clients that number is that that’ll the move work. or And or to deposit and flow popping? market sort you had cash. I high moved is understand big two of money one three growth that of that you

Charles Levingston

are larger that saw functioning a kind Yes. some a inflow. intermediary that was financial who It capacity lot customers of did of

Brody Preston

what portfolio any as if about have could to give far? the primary stuff maybe and cumulative stress the of of like us as so, some And losses metrics Okay. you testing portfolio, you inkling tests that? in stress some terms so And like then on think we run the look

Susan Riel

probably shape. think to real pretty test run industry this commercial segments income-producing quarter, I all come a quarter. estate good have we’re stress on we’ll we’ve construction back in every the specific we’ve that run But some And running about. be concerned on stress most of and tests the

We on increase of if income about rates. only and in of would X% interest that interest of a an to would continue the still perform in had we an XX% basis, portfolio XX% show drop

more be in some of decline to and income. going with of a in increase we’re So an tweaking interest rates less that

Brody Preston

Okay.

Okay. any ones to had – properties ultra the sponsor are more sponsor? that And repossessed. then – loans the high-end quick The have me. from been have two you the last two you Do

Susan Riel

Sorry.

Brody Preston

you Do have the…

Charles Levingston

the high-end with associated sponsor estate? the into real Insights

Susan Riel

A very strong. sponsor, strong very

Brody Preston

Okay.

Susan Riel

depositor. High

Brody Preston

Okay. then… And

Charles Levingston

you what or the about was about asking general? Specifically I’m – were sorry, just OREO Brody, specifically moved to

Brody Preston

exposure if just you more you know exposure? this about how sponsor. to No, And I had the any specific wanted so, if felt to

Susan Riel

The sponsor properties? on the OREO

Charles Levingston

Correct.

Brody Preston

Yes.

Susan Riel

misunderstood. sorry, thought you I on asking I the were property. hotel the about I’m sponsor

On probably of two experienced the on properties that in the one high-end sponsor bigger and hugely not that issues. was market his the is –

the listed. money much think I put ask too houses them into too and you had he much when money for

those was in we’ll It not, do put We’re foreclosures on difficult at a pre-coronavirus wheels in much when a to the were more that and recovery reasonable or whether months motion those that. number January. It’s – see we but ago. predict occurred

able very we’ll current So what value, long see lasts, I’m carrying the ultimately produce, to comfortable how we’re but depending with. upon this

Brody Preston

impossibility timing the resolution sounds you production Okay. of to still But it predicting in of clarify the one, and document to the the And then Is just last the fair the phase of investigation. Susan, are all that, investigations. understand say? to that wanted the uncertainty you the like

Susan Riel

at – phase. we’re that still are end the it, we we in are still but of We believe

Brody Preston

color. everyone, very the right. much, Thank for you All all Okay. I appreciate it.

Janice Williams

Thank you.

Susan Riel

Thank you.

Charles Levingston

Thanks, Brody.

Operator

question-and-answer Thank program session to and like the of further CEO, remarks. today’s back any you. This Riel, does hand to I’d President program. for Susan conclude the

Susan Riel

time, and look July. to, thank Now you you of for participating, speaking to to I’d like forward at in this again all

Operator

your gentlemen, program. you, for participation This conference. in today’s does the and ladies Thank conclude

disconnect. day. You may Good now

Eagle Bancorp (EGBN) 23 Apr 202020 Q1 Earnings call transcript