EGBN - Earnings call transcript Q1 2021

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Operator

Hello, and welcome to the Eagle Bancorp, Inc.

First Quarter 2021 Earnings Call. Please note that today's meeting is being recorded. [Operator Instructions]. It is now my pleasure to turn today's meeting over to Chief Financial Officer, Charles Levingston. ahead. go Please

Charles Levingston

Good Officer Sean. 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

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

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

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

Susan Riel

earnings a record pandemic our on Eagle quarter highest welcome to at is Earnings Good a imagine COVID-XX ago, than Thank to XXXX. It more you, to and call Equity hard X began an of first little for are quarters. all-time has go post earning the levels. risen Charles. our of to high. morning, will year the when that

Asset were a believe quality stronger Efficiency continues market strengthen. In ways, progress better and we is remains a believe we towards ago. to making now our a year strength, than and these we are position we in area reopening.

later news also got the litigation on on. share front We some with have good you that I'll

most million on X down, $XXX.X last million equity. or at average earnings end second on was a tangible when per quarter positively earnings share. recent our nation our quarters, $XX.X and XX.XX% assets. Earnings share. of the XXXX, includes locked X.XX% was totaled These quarter which per quarter the $X.XX average or of a billion Common or are first. were in equity over the $X.X Earnings XX.XX% common the to on Focusing $X.XX was diluted accretive of return This assets return the equity.

our credit million And the asset economic loans, At combined loans. PPP of with ratios, this a of decision NPAs charge-offs as quality $X.X quality. assets. of quarter, and locally our reversal, the a loans, asset from improved make X.XX% the with as reserves reversal losses. well decrease X.XX% Even nationally are total Turning These informed for our to in allowance end net excluding loans. quarter, X.XX% were to outlook an average of for were annualized

compared out completed for the strong $XX.X a we our year XX proxy proxy, to this revenue In quarter. our efficiency, we in terms of reported operating This a and to from the a with just million, lowest and XX.X% is million, X.X% an leader be X.X% efficiency of peers ratio. year just ago. for continue ago. Total up through $XX the expenses revenue achieved ratio quarter mailed up listed Noninterest and was were control. efficiency efficiency growth We from expense

always expense to management. prudent in our are We approach

example, were and relocating improve leases These combining in have also a we rental X locations, quarter, new $XXX,XXX back to single with leases to I projected save been As branches last mentioned expenses. annually expiring expiring a small into office X and with us moves locations completed facility. are

our our contributions moving have like residential once division Before mention would on, and mortgage again made. I to lending the team

data approached was with in Publicly guidelines. environment. In that And apply. or events XX% back then, allowing XX% the Virginia, appeared some both nationals capacity. In month wedding up capacity. for and capacity X.X% in rollout at Maryland is investment. as and levels industry During the down noted ramp-up of mortgage dining shows Virginia lot to rates XX% and to any from will Washington open and also XX% and process. areas slightly, its convention X.X% a stadiums dynamics expands preliminary that increasing expect restaurants, to February. headquarters is by to capacity continues restrictions. loosening our assisted giving months. and low in forgiveness now call, more follows a in in MSA, hotel the completions may due restrictions On loan jurisdictions our removing payoffs and them low may quarter, vaccine our also COVID-related It in lending were Since lift all the past nominal capacity. at including located, had should headwinds division on is $X form business indoor from interest and of gain our sale economy to venues, XXXX line. distance the with residential demand consumer the are The interest scope. of many experiencing our the available maintain that allowing increased elevated we prepays on loosened round were PPP our restrictions great must typically In work. million. team We with occupancy venues but disproportionately spending part changed of we worked also locked venues X limits September. are Montgomery market, mortgage County, was gyms to low indoors and physical a outdoor with has at restaurants open benefit X our a Maryland and March. we limited revenue unemployment another rate concert businesses has $XXX the we December believe United contribute still spending, the loans quarter, loans residential operate open division to where meaningfully convention These And in of DC be to centers of March. the market proposed restaurants unemployment existing million successful people larger nationwide In with continue And This down clients faced open This rate the improved through Indoor stepping to District with DC, stricter improving which occupancy. expanded approximately precedes X.X% local quarter last or government going and Even latest in and our and stimulus. mortgage rates. in from outdoor at a and bottom Moreover, competitively regards interest and in restrictions and project on retail

excited XXXX. and in the where looks throughout are most to We Eaglebank to community, opportunities available the strong we loan our about get of rest projects. pipeline relationships pursue intends on continue commercial long-standing assertively

resumes any commercial in economic large equity finance positioned to capacity ultimately believe pandemic marketplace billion conditions. are Obviously, and risk-based projects, the on we almost aside, capital with have increases hopeful recovery up of XX.XX%. competitive and the we common market once well loan pick social extremely We economic advantage and developments, and for economic loan activity take Those of subsides that its timing of normal the $X.X depend of we the demand interactions. and to uncertainties pace demand will remain society will

remain and we was tangible XX% share, up on a year shareholders, focused per Book book share, from to $XX.XX rose from building year our value. X.X% ago, $XX.XX For ago. per a value up

$X.XX repurchase new We per also share stock the and program. quarterly dividend to increased authorized a

our the we year. Bank's Steve, the repurchase Committee. the Risk independent technological adds the brokerage be founder as managing in the not stock Board Board his of market and Directors on joined we principal to Ernie as serves to estate real technology the real Committee. in and Ernie, firm, full-service CEO and members run-up estate of his the equities, of who on I at commercial would own Board in Jarvis. X were serves Steve his expertise company, the expertise January, Loan new brings own like welcome also to and with Although as start active expected our in as bank to Freidkin

to understand the X our of repeatedly, in of have we committed diverse corporate female a value different male our as are perspectives. in X gender measures, said Business XX% last market. have having mid-sized ranked Notably people XX Washington I color. month, directors, identify of and directors Journal As staff the Eaglebank us other minorities. of Board of as and the on our terms is ethnicity being for in based In to us diversity regards diversity This eighth of of companies was terms

support council and a have tasked people we and developing thrive. diversity And also initiatives help launched equity to this we our organization. our diversity, inclusion we throughout and created must diverse While inclusion year, additional with workforce, a

company settle alleged Now covered following action agreement a on or for action wrongdoing concession in agreement expected class our claims subject on to we of carriers. to and mediation, fully admission on exchange the be all to the In to legal million amount previously or reached is of court class of any total which suit any the for front. the payment good settlement our days company April approval, XX, mentioned nonbinding the defender. I the by $X.X disclosed insurance by in the occurred an without lawsuit putative payment the news is release by The a

settlement with previously to May derivative XX, still the remains for In litigation subject the hearing preliminary approval, addition, of with in the set connection shareholder stipulation XXXX. disclosed court

some government to our on nothing major court We settled material to matters anticipation to is disclosed securing forward there putting report of are and commercial and approval both questions, likely previously litigation matters pleased us. investigations. have the these In behind look

progress made is and these with of We matters. resolution being the cooperate a believe towards continue government to

Before turning support that, like With work their Chief Williams, to would their our our like our to Jan would duties Credit Officer. all of to to it the to and employees speaking for over I all hard over I commitment thank clients. Jan, turn

Janice Williams

portfolio loan Good economy, the in primarily improved for the million regard the in allowance credit all for credit to reversal outlook unemployment metrics reduction of morning, the Susan. the the the contributed in the you, the the to everyone. improved of the and improvement from $X.X With Thank numbers, reduction loans total losses, allowance.

end. X a to loans period. and the of NPAs With return assets up basis XX the X.XX%, year-end primarily on credits. to for the was down XXX% X charge-offs, lower PPP increased the which status losses were quarter end. of for accrual payoffs metrics from basis in our loans as credit points quarter loans, restaurant some over allowance XXX%, points from coverage was losses, hotel, and prior to linked nonperforming same were primarily we million. loans SBA saw loans, The total from even credit total quarters, nonperforming consisted for our dollars, NPAs allowance down $X.X decline prior the to for basis Comparing a with reversal, excluding nonperforming at loans, In down from reduction points,

our Before once the latest we round quarter, PPP. with jumped PPP a clients In Charles, of in again to quick the program. the on I it hand help first off to update

quarter the the forgiven quarter, million. $XXX loans PPP Levingston, turn Chief $XXX Outstanding it With over I'd assisted loans in $XX with Financial end clients million. of loans like originated PPP at our Charles to of forgiveness that, we Officer. to process For were and million

Charles Levingston

losses had contribution as quarter mortgage Thank a the residential first from COVID-XX loss and of of in quarter a position. XXXX, were difficult credit a we quarter mark-to-market was pandemic the allowance hedge you, quarter as whereas coming first impact also of contains Jan. of Comparisons into a just for reserves the first XXXX the from we substantial XXXX the on current focus, are reversal team, to the building the and our for

million XXXX. added to a and reasons for XXXX revenue in PPNR these For table release. to $XX.X the It million we versus of up apples compare of shows at quarters first net quarter first our apples $XX.X earnings our first XXXX, the quarter help XXXX, from the pre-provision of for to

As increase basis of Comparing quarter annualized average linked is decrease XX.X% net from first the was performance percentage income the X of XXXX, the from outpacing of more a the PPNR X.XX%. was assets, is points in PPNR million. of quarter but first quarters, XXXX This in over the up in assets, our increase interest XX.X%. $X.X down

nonlegal the in-the-money FHLB earnings up captured These changes higher led had legal but in first noninterest fees. $XXX,XXX million by and Both provisions up to on these was line, annual record provisions. Contributing started, $X.X basis, the first quarter cancellation of losses and were bit for XXXX running was deposits of earnings we positive a the advisory X higher prior to incentive When the and resulting $XX a Bottom as $X.X earnings $X $XXX,XXX. to reversals on improvements, the an by assets quarter were professional borrowing, swing this of quarter Noninterest pretax the to $XXX and due the had a they $X.X by of for deposit With up X flowed was in the about allowance $XX.X company. million. the million for a deposits unfunded linked a the end were increase million out quarter quarter. costs million, linked-quarter fees on the to in the in for million were million, continued Offsetting $XXX,XXX, the income of inflows during these mostly quarters. of quarter, gain. attributable a the commitments, credit expenses mostly and

$XX.X at flat at As were a and deposits billion, $X.X quarter result, at end, were flat assets also billion.

As securities liquidity agency little deposits were we excess made a ended callable to in putting investments. mortgage-backed some and XX agency flat, of progress $XXX Investments over years work primarily million bonds. X%

our matured. XX back higher quarter. lower. run quarter average for invest weighted a out us form for deposits. These for in of continually XXXX. XX $XXX.X points, Average unchanged of of CDs of to XXXX Also, Overall, and X.X% alternatives to balance accounts liquidity [indiscernible] $XXX.X half the the form added and quarter average weighted prior in a funding CD to had of market in moved at and months Putting XX wrap -- quarter our -- cost of the total issuance. look from X.XX% to higher-yielding quarter. the up. market back rate a of fourth first million steady continue Susan prior from some of We first XX lower that points, or lower term quarter with points down in NIM keeping down basis about from the CDs work the savings XXXX, cost million now short were points CDs balances basis deposits, will the excess XX.X% I'll hand which X.XX% in cost to XX quarter low of the liquidity costs other at money basis costs funds We down the seek is prior it cash. of helped to cost off quarter. excess and on our a with In of that, to in was The the average money CDs the decreased from cost was in balance of XXXX, the keep of first With average basis

Susan Riel

Thanks, Charles.

positive best to our As our results, and XXXX, our ability. to continue we will and investors efforts into serve performance both and we to community of will strive further continue the move to our we deliver operating

decent and again at and flow and projects remains joining remains income-producing capitalization market Washington this Our development continue Thanks on business and the destination. a strong. premier quarter. credits a tourist earnings, quality center pace, Deal credit us for

We open up the now will call questions. for

Operator

[Operator Instructions].

comes from from Whitman question of first Your Piper Casey line the Sandler.

Casey Whitman

think I'll picture. first, just ask bigger I

are of products, inning get think perhaps think we in economy transition the sheet trying what maybe my I we industry, from consider As -- on, shifts you we Eagle? the confident in, and that of specifically that across process? we how to participate what some Or going offset are some kind I'm the of sort from about that that certain away reopens, emphasis growth is, there's around you'll the just should as head the are going mix strategic fully? still in that to be at see we balance

Janice Williams

the terms of assets mix In of forward? going our

Casey Whitman

terms sort you And -- that I Yes. right is now. mean, maybe do in the where construction on and emphasis think just... or just of of

Janice Williams

No.

I think construction fully that we are prepared doing are lending. and

adds them. lift I room below opportunities. got the side. that have going We've are a And regulatory see on be opportunities think concentration I would of I we'll now the loans. there forecast expect think the those the there, to just for and desirability threshold certainly continuing economic to to We're lend construction to

Casey Whitman

Got few it. Great. expense I'll a just ask questions.

the Just from first some second to relocation the the think, already? realized, quarter? Or in the branch that savings you or consolidations, that clarify, in the is will numbers be of

Charles Levingston

Yes.

going going savings Again, $XXX,XXX I our forward. on about specifically annually think that's realized to kind just of rent expenses. be Yes. calculation is in more our

Casey Whitman

Got it. on one. settlement. class One more action expense the Congrats

might professional you stable we us can line, have? given expect bit on about from down level it's the wondering, here? expense that a run from I versus, relief to think come a that's you it where appreciate line $X outlook quarter. do million pretty for year you can settlements the think I ago, Or but little materially was more that a this legal give Just the already fees

Charles Levingston

again, the there's the production that that still mentioned of terms settlement bulk with information, to associated the right, be investigations, expenses we're cases, as we've previously, there'll of those associated off, a with although, in expense of going is be going of matters continued but litigation to expectation these lot relates these be has to Obviously, which private dealing the providing administration that of with the cost. -- it cost tapered as the the related Yes. to are

I me, take that for So greater, unknown, it's my wouldn't what worth. let's as advised -- it's significantly certainly counsel but yes, but it's expect

Casey Whitman

Okay.

like good of and for payable run whatever taxes the So been it this salaries expense would rate some pretty expenses. sounds this quarter is a have minus

Charles Levingston

Yes.

Operator

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

Steven Comery

pace any I stays the loan tepid? liquidity your this to into I opportunities. book. remains Maybe securities continuing there if look securities your about the on Charles, the wanted comments sheet bit to deployment for ask book, on balance of appreciated thoughts on liquidity a demand of and

Charles Levingston

Yes.

So to next is portfolio. your hope deploy liquidity with the excess best in into point, to to do. what seems the balance investment sheet, that's Steve, on first liquidity that to the choice But obviously, significant amount of our have the we'd be we option loans, this and

and of Our the a clip call and a is finding deployed. has act it, points not a alternative that between little the additional far healthy return that bit ourselves between is balancing a But been, going month exposing insight. too best million Hopefully, on next to of again, price you gives that and the bit curve million loans. and to $XX $XX It picking risk. right

Steven Comery

to that's on moving Yes. loans. Maybe Yes, helpful.

quarter. bank the line of So that seeing in I due to loans? to in noticed area the quarter increased over disclosure that accommodation exposure Was in actually is new make Or draws? opportunities the that foodservices,

Janice Williams

They more as existing lines, I expand recently have and right grow. working we not strong with now, large very we're same soliciting one very time bank at point. that's chain line successful a customers but line equity our say selectively of of and new continuing and for to this deposits are had at were a with are to we the approved grows. actively restaurants customers. our restaurant We would had seeing There raise increased certainly and usage the customers quite

Steven Comery

Okay.

And maybe there up a the mix you of market? for more if seeing changing dynamics rates which how solidly yields Okay. loan quarter. versus have the discussion rise and yields, you're wonder then I could what one quarter like much in the pretty was me on loan in were about over maybe

Charles Levingston

Sure.

are X%. We see continues. also there. coupons did this the But we're these So the the that on pressure that a past yield call in around I to say contribution pricing days put being that positive prepays seeing some would quarter are made

pressures, it of So terms again, side. those some it lighter versus mix, was had quarter front the to we'll And particularly the little in get the extent C&I the than a in was, lift. But we've terms in we're positive definitely, on of that guess, I CRE on pricing continue, typically C&I CRE, past. seeing

Janice Williams

Yes.

awful are now, types. an there liquidity contributing pricing all move as there's the higher-yielding into looking asset right to to of pressure think which I lot banks out is

back the we will a Casey C&I construction in I see the So versus not with composition I making CRE be changes we're do our books. that, into overall we'll earlier. also discussed shifting but probably of side bit as significant say more

Steven Comery

And way on I you of quantify know want if put don't Okay. number kind to an prepayments yield? impact any out, to the this Charles, but of big were how

Charles Levingston

did have on I get Let's but that with that. that, run see number. have back we here. don't I'll to you

Operator

Your Stuart of next from -- from the question sorry, Steven KBW. comes Lotz line

Stuart Lotz

you if Do maybe to next on reserve couple reserve maybe provision the continue of can ACL this where and continue the quarters? rundown we of line you outlook see provisions, the your that negative further we Charles, some in in of for couple last continue the expect assuming following with charge-offs and could to quarter. let the And they've to release quarters? start been come maybe

Charles Levingston

We morning. good we are the last success seeing I be time. week. of dependent there's a spending guess, we -- at with Yes. it are We saw saw in deployment out end, will like prints the unemployment It's to vaccines print forecast going some at pretty looks quarter point lot there. economic a where next that good consumer of really on Certainly, what -- this be

loans else those Jan, on will quarter, -- to addition to? you -- are can need which many on in to it provision. that we seem how signs much be but will dependent add loans be obviously anything want the quarter how forecasts, put additional on positive also to loan over So and growth

Janice Williams

going improvement metrics that portfolio. say it's be on credit dependent would our I the Yes. also in within to continued

terms possibility, a out of of certainly actually happen. to unknown or that in when if So but there is there's going lot a

Stuart Lotz

Jan, prepared didn't can give classifieds or the sorry I if where any maybe on you this comments, trended anything And -- in I see in the missed list quarter? just release. I'm but detail this watch

Janice Williams

Sure. Yes, the the stable is classified overall nothing down The about million. list there. very portfolio significant, $XX portion $XXX,XXX, of watch is about down

side. on So all really are signs the credit positive metric

significant I the think of PPP of a plan. post maintain continued category period we've performance watch regular to number a loans that as sustained received in under second deferrals wait for payment we

assuming So that would well, the reduction think further it's goes that, would future. -- I you in see

Stuart Lotz

on it. Got maybe too. loan modifications, And

X% and any was at I under quarter? up ticked to this closer color of this on think driving you What can growth? that And guys were the back X%. provide you you kind year-end

Janice Williams

X anyone also deferral. with interest-only category there nothing number. that restaurants There's And have hotel deferral are Yes. that full don't don't was are We couple -- is that's a on see a contributing I expect And third in a getting terms. interest-only that to that of terms. there to on

to So these deferral plus. the are second potentially new

Stuart Lotz

Yes, very helpful.

maybe so, more Charles. just one for And

share buyback on your we And at you this And this do the with how the But a full And quarter. December. about year? expected in I XX.X%. the little has X.X million little TCE -- were utilizing if authorization? guys active than a recovered are back plan less bit. you guys still buyback You think we currency thinking announced And

Charles Levingston

Yes.

ongoing I something aware us think economy, obviously, a very basis. continue on position, position capital a strong it's of we evaluate rebounding We're in our puts an great which certainly to for we note and dividend, loans. we're in increase relation. as -- well into also, deploy our as about additional did and to you thinking that will slightly note -- that certainly But

to marketplace, going our basis. to the that's as a a to it right capital see is regular be that, in toolbox But that. have price is we'll tool we think deploy opportunity evaluated fluctuations we the again, So where an on do also in

Operator

from Varga comes next question Your from Stephens Inc. Samuel

Samuel Varga

coverage give little it, credit portfolio have for little of on items ask office a if do and conversation. back to wanted I you values work regards And to what ratios. insight the to just And portfolio question any ask of about trend? loan another that? morning. wanted the a I'm on in your you a terms look bit to Could us from maybe Brody sense this going like home I to bit with

Janice Williams

Yes. the portfolio The work-from-home well really has up office of COVID. despite remarkably held atmosphere

I X think more would anticipate the future. is do desired remote existing over will be or time, period type working lot the We that in footprints a to will in years and tenants in a it District, place. status, the Business so office are portfolio. the most of of with if have the Central to significant impact and in that permanent mature occur as smaller of leases perhaps are do has billion we of $X And roughly property the there a that change

and we it So that carefully. looking at monitoring are

But the test drops I in incremental product, this stress we that model income-producing think have properties in as the we of to XXX% portfolio any role every at drop are the revenues future. leases seen what out very of severe point, do we don't we've and portion making also all blocks. income-producing might try quarter to average right happen the that on in significant haven't rents in we because suffering out side now been

currently feeling our I terms that longer-term have think where properties. we strategy, we pretty loan feel dilution to values we but in are in of like office the we're this a good about is

Samuel Varga

X% then there drops Great. were helpful. very big quarter-over-quarter And in picture loan a kind back We CRE That's noticed more to of switching that perspective portfolio. construction. and on the

sense a just that. driving get for to wanted been we might so And what have

Janice Williams

portfolio. factor. loan in think to It's difficult time very a to I the an philosophy an overall a about and pick make it's assessment as timing really point

by seeing I XX-year area, the of looking at lots in property the a way, office but we're think we're including opportunities, with GSA lease.

it's So They're and evaluated as think very office properties you individually. would be. vulnerable individual as might really all not

that expect in continue be and we that we'll don't see assertive less portfolio to segment So the our of intend I CRE philosophy, grow. to

Samuel Varga

And get your looks question around then a more I want just guess big to I picture. kind involvement like what sense PPP. Great. of for X one round

some maybe in that then the expectations forgiveness items on schedule. change noted and You've around the

If you on that, please. color could give some

Janice Williams

tell the anyone in in of piece, and going process to it's of order from a Small what's flash daily would think business. almost more needed us PPP terms order still program. portfolio, arduous the Association beginning information was forgiveness than be at In to the We're when have for to Business the thought it process on I how getting the much and

difficult to certainty, with also we expect you've rate say that? forward. it's level I think forgiveness which at at of So looking Charles, go any see to been might the

Charles Levingston

I as we continue mean a to applications with borrowers submit forgiveness albeit are the to slowly the there's process, Yes. to for it's moving, those forgiveness process. our Jan work But difficult on SBA. the -- gears and noted,

-- it but we're So moving along.

Operator

President CEO, will I call Susan Riel, over and to remarks. the now closing turn back for

Susan Riel

Thanks again seeing great Have for of at we the joining you us a forward look end next day. quarter. today, to and

Operator

today's meeting. concludes This

You may disconnect. now

Eagle Bancorp (EGBN) 22 Apr 212021 Q1 Earnings call transcript