EGBN - Earnings call transcript Q4 2021

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Operator

Hello. Thank you for standing by, and welcome to the Eagle Bancorp Fourth Quarter and Year-End 2021 Earnings Conference Call. At this time all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator instructions]. today's be that advised be conference recorded. may Please instructions]. [Operator hand over to I would speaker conference to like now your the today. Charles Levingston, Chief Financial Officer. ahead. go Please

Charles Levingston

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

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

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

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

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

Susan Riel

Good pleased to report few welcome more year-end. Charles. year-end, our we finish year you, with and earnings earnings at morning, the to A later, for Thank detail were and in highs. cover are another will year, strong a highlights, assets successful call. record at which I'm

Asset a point. by quality most grew by loans, PPP, $XXX X.X% to continues in million improve. or Efficiency quarter. fourth strong remains And the excluding importantly,

out the profitable year Focusing tangible were on $X.XX for earnings assets, per on consecutive first, dividends, a per was average XX% common equity. which $X.XX of the paid and XX.XX% in were was it year. for on diluted the average record XXnd our share we X.XX% year And Earnings Returns share. earnings.

$XX reversal for With for credit year million a informed even the was the million, to XXXX. quarter, from allowance provisioning loans. losses, of in consecutive will our review, Jan reversal $XX.X make total reversal full of followed that the the with of our quarter, and on Turning with X net improved the ratios, the to quality quarters. to we've basis of ratios asset asset charge-offs end quality, for assets quarter, are these XX average assets, some points the the nine combined to past These points basis the for a decision which increase for seen factors fourth in the year of on $X improved at Both million non-performing lowest annualized loans.

ratio be the an we leader, a XX.X% In efficiency of quarter. with operating terms continue to of efficiency, for

December, closed had This on and that of reducing always closure branch client branches, always prudent branches leases, expense critical to and raising The banking recent digital year, count We location through million. per XX, branch Virginia was most three an Northern expiring other our sound channels. in Yet management. safe to and all $XXX and deposits to served from controls eye and to keep be our our are are necessary which who investments approach infrastructure and operate can our institution. average in we Reston we a

last market a about more said conditions, quality Now, that call, loans. has quarter’s on on taken the loan bank given On the we competitive spreads credit opportunities. let's talk high stance

our by So, half accounted even particularly by pay commercial encouraging the was increase C&I owner-occupied saw net that of a some quarter also was lot CRE unfunded income-producing end, portfolio. XX.XX%, and projects. and contributions our growth, remained continue would as high, from teams, our were we largest us significant The net up. of of successful December. grow risk-based note, gives loans, in loans $X to loans, for which it Construction We CRE. almost billion to payoffs total but loan room and loans downs the offset And like to and followed in completed mostly in at both CRE were increased, also capital commitments

the ended fourth lending with rights trade origination also other a and well Our in XXXX. resulted that of year The fees, mortgage in servicing teams quarter income FHA premiums, million. strong, team $X.X did

$X team million. loans year, the fourth quarter team for the mortgage was XXXX. million, The year, for a total the the as had to it year. giving Locked second-best For the top would its total of mortgage billion $X.X be were difficult almost $XXX

And up increasing Book per year per share, year a $XX.XX contributed book value X.X% shareholders, a X% value and book to both values. ago. our rose from our to rose For tangible ago. share, from to $XX.XX up tangible earnings

share, Based quarters of share quarterly times, XXXX, dividend night's XX,XXX and $XX.XX three of last dividend the year $XX.XX We in to regards the X.X%. a in stock $X.XX per plan, annualized increased to repurchase fourth also over per moving the of XXXX. stock per average for at and per share of quarterly dividend quarter price In $X.XX our on our from repurchased share. of the closing third fourth $X.XX yield we just share, an per price is shares

outstanding X.X for share plan of million Additionally, a repurchase shares, in approximately new adopted or X% board December, the XXXX shares.

government, impact unemployment picture in robust, the the continues remain from continues the on On Washington projects when dialogues in peaked, in and the and litigation respect with local to the This and of week. consumer, appears to and the our this the from of be data, to improve. to moves based down fell area as the government in periods, on cases our And SEC cases US spending passing, in reserves. With have unemployment to X.X%. and the was the our for The XX% rate strong, forward. a factor in and Omicron investigations, of same to rate as particular, release our would Also, continue Williams, progress duties with government ongoing, construction rate, investigations, to in are our Jan August, we cooperate X.X% contracting, new Officer. With to be Reserve, the turn area ground, all make matters. these with the Chief to I Credit over unemployment, reported X.X% drop fell like the speaking drop we Federal And November. disclosed unemployment that, new from in we the market X.X% resolution towards

Jan Williams

the everyone. to seen Thank you, since morning, before continues have we levels Susan, and good to improve not pandemic. Credit

quarter. $XX.X XX fourth pre-COVID from $XXX loans, about of CRE, mentioned, X.XX reversal Total our ACL and loan past were Comparatively, for approximately growth on basis XXXX off, NPAs below our basis for moved the in the and largest were were X.XX loan were of on this came million. $XXX,XXX. million pre-CECL quarter The million, C&I and With XX% last of at XX% assets. There ex-PPP million, of Total fourth in XXXX, ACL a of charge-offs quarter to commercial PPP, in reserves XX to $X.X points totaled charged million. smaller $X.X residential credits. were were points. the were which million, were NPAs quarter Susan XXXX, were and $XX.X off SBA, partially charged and which $XX.X remaining eight the NPAs was which charge-offs well or Net loans. loans loan

their during the number In on credits, past portion risk loans particular, were while watch that of a the terms of quarter, portfolio increased, and classified special the watch down. In classifications, mention at placed were of the is upgrading period. lower end of coverage show with of Even COVID because continuing to after ACL, we’re loans a non-performing of sustained modification, second modification ratio XXX%. performance our our

quarter, down a where in seven million been that in begin the above quarters. given normalized the the it's credit more for booked allowance fell the the our as a $X.X metrics we And It's range In to this the prior transitioning $X.X the that pandemic, long-term properties from loss property. worth regards OREO remaining number we the also $X.X quarter, allowance, for crisis gain appropriate this OREO of using million XXX% last we've been to is from since three, sale from the XXX% with reversal it to XXX% level in well modeled beginning While value million. default prior we given of to loss quarter, is was on like noting aggregate of of average the the the losses, to of away determined carrying default. a largest

actual considered unemployment risk below industries. continuing and hospitality our environmental XXXX and by Chief Charles the significantly it over qualitative With the forecast. rates other economic remaining potential factors, The Additionally, XXXX, loss there is the Financial to we I'd in to in to restaurant Officer. turn things, among that, improvement were And experienced the of bank and a levels. number including, Levingston, like

Charles Levingston

Thanks, Jan.

loans quarter, which fee drop in net with forgiveness million, and $X a million. $XX PPP quarter, primary basis million rose PPP net on of was million. income, to $XX up quarter, million. linked-quarter $XX.X quarter a the the the income the with included fourth third of income is attributable to differences $XXX assets million, loans much up to $XXX,XXX. PPP ended which interest For income of In The $XX ended down $X.X from prior Interest $XX.X just lower billion, as PPP down of earnings, the million regards down was remaining occurred were,

recorded than the loan of half December. more increase was in Additionally,

$XXX,XXX, quarter. of fees million. So, share-based the offset up company's million income higher incentive expenses performance were million. a Non-interest assessment in by it compensation. and Non-interest Compensation were expenses. little excluding up $X.X on FDIC of gains, up on up increases result increases bonus decline in partially impact a were was interest benefits $X.X million in accruals these to were fourth $X.X security as and the and had $X.X income, based Professional

residential and fell, more was on mortgage sale gain earlier, sale. the gain made group, FHA loans mentioned good of fourth but $X.X Susan our had than a difference the up the which OREO on by million As quarter,

a other a The reversal impacting gain smaller included items under all securities. basis from on a linked-quarter earnings million. net This and smaller the smaller, provision $X the on were much

more million, put More you'll Susan well increases million million, and in to and sheet, Fed mortgage-backed On our our the to some quarter loans. are the - the a more at held balance activity the cash securities, if $XXX - agency which most excluding Munis. loans since of in the to see half effort as changes loans, end, and linked-quarter by portfolio. On $XXX of biggest $XXX at than the prior pass-through rose PPP investment purchases while December, was the from covered, the securities cash in increased $XXX basis, were use of fell cash in corporates million. Investment as put

bearing, up side million other as were by the prior deposits of basis. $XXX to linked-quarter bank, non-interest flow sheet, quarter, the the to $XXX from into which average which million. were at the rose is Most deposits to like On on I non-interest-bearing continue of the deposits balance this inflows the rose a XX.X% in XX.X% average quarter. deposits, look A past measure

to late net had were quarter. securities into X.XX% the loans Also, to points we yields for interest on PPP in a linked-quarter The positive linked-quarter on were For basis of deployment down from margin, basis basis, X.XX points impact, XX basis. and occurred fees, down but cash eight on adjusted interest a a X.XX.

later. of our the expense price included. cost in basis that redeemed to There The was are the basis issuance was quarter any the higher is nine or the earlier this points. the down of funds, quarter first but from quarter. rate of decline XX still maturities Looking favorable are higher our issuance of the Part CDs, or runoff fourth the cost books, of role was played sub-debt year. any in interest some at points a CDs absence minor on mid-XXXX without that This

percentage from Susan of reprise. benefit Lastly, we as come deposits wrap asset-sensitive a are rate the that, rates hand rising large to short of With up. bearing. floor loans in off I'll should terms for sensitivity, or a and our Susan. remain it And of back non-interest

Susan Riel

Thanks, Charles.

committed their to in employees respect, and of clients remain diversity, second serve. And thank would year. for wrap up a work workplace hard like culture and do all commentary, all the our As we we to the we of support our and our commitment to the both I during communities pandemic’s their inclusion,

XXXX, have are good our company we to feel position encouraged competitive, strong, Lastly, and the very momentum dynamic market. a about in and going into and we

for up open now will question. We

Operator

Thank you. [Operator Instructions].

Whitman Our first Piper Casey with question comes from Sandler.

may your question. You proceed with

Casey Whitman

Hey, morning. good

Just maybe start off with we'll expenses.

line? pretty $XX around this assume in that So, particular the that some where salaries you and what the at is the the just line, that expectation this a at that get do million a quarter, first now we run for line or is run of in right looking fourth think Can think or we might quarter, for in I XXXX? back it's quarter. in growth reasonable rate benefits good

Charles Levingston

have in an year I did mean, extraordinary Casey, I'd we Yes. XXXX. say,

that Some of able year incentive year reflected the of in - the the we of wouldn't accrual. from same is in kind particularly next in, reversals I were allowance. to annual expect take incentive that that terms necessarily

So, that I that see don't year. same associated kind with following the heavy incentive know of we

Casey Whitman

Okay. are that work guys maybe targeting can you with? Is a efficiency ratio sort of there long-term we

Charles Levingston

been years, of the to we've we that XX% around couple operating where past to where place number, is think I continue for were play. a hoping

Casey Whitman

to FDIC were they about run Okay. the continue fourth And low expenses? they think as you in Do what the quarter? as

Charles Levingston

in in fourth expenses. we calculation terms large that a assessment the the had noted of came for We of about release Yes. press what to, our in previously third out the quarter, bank

I that's So, anticipate things where continuing.

Casey Whitman

understood. just me on more Okay, one for Maybe capital.

would robust Assuming keep you do price, take you for up looking what some current it big putting stock a to have and at appetite for growth can here more the guys aggressive we buybacks become there? or

Charles Levingston

Yes.

we as evaluate contemplate on to basis that. continue play we're think day-by-day want we a where options I how continue Yes. we're to to our quarter-by-quarter, going with to -

to day-by-day So, kind it's I - think be a a just it going of is thing.

Casey Whitman

jump Understood. Thanks. someone else I'll let on.

Operator

Thank you.

Our comes Catherine next with Mealor from question KBW.

You may proceed your question. with

Catherine Mealor

that wanted Thanks. you sensitivity mentioned, I morning. Good to asset about talk Charles.

variable. how can loan and loans quarter’s your you reprices last just I XX% of and it looks your how much if may that like of are loan were yields should we Just, Can of yields, of start that maybe the immediately Thanks. looked XX-Q of this new you about about question about my on much side. of in that offset first lag? quarter? still And repricing until on a think that is then portfolio kind second part how within we with loan where coming bottom? downward the So, the talk get to

Charles Levingston

Catherine. Sure thing, Yes.

So, as that position, evaluate point we're seeing interest income period, our of as plus rate under I and we look a at net shock impact positive XX-month asset-sensitivity just risk interest over X%. XXX-basis a

there. around of XX% quarter coming this did new then, on, large to And in that adjustable rate Total loans of still got, end LIBOR-based, there. we've around, the of are impacted new were still of so kind where that's on booked. you're of or number, around Yields the variable be So, the total just terms prime-based quarter we loans in XX%, somewhere SOFR-based, of around loans, story terms portfolio the so. right loans would XX% with are that total, of the of or and in quarter there. the a have prior volume terms X.XX in neighborhood very

booking And where So, again, are the as many we're quarter. rate. that's of currently those loans of floating fourth

Catherine Mealor

hike? of Okay. floors much immediately with will see on the that like much, that first impact reprice the you XX% And again, how - rate very variable, or most do

Charles Levingston

Yes.

or basis basis move so So, $XXX We another above up XX - about add XX, $X.X reprice as would XX so probably it's in another there. - we million re-pricing, points, with of floor terms or billion if that. points

$X.X it's with billion So, floors. about

Catherine Mealor

it. Got

just composition, great. so then argue good. got you this two, to deposit mean, fast last growing weren't as much deposit were you where I were quarter’s because, perhaps cycle you've And business really as I you Okay, they will growth you’ve liquidity when got lower your betas as you last, look was your cycle in believe could mean, that than be at in

Alco that? deposit And so, betas because how sometimes I you will modeling do you in maybe your more guess first, maybe And realistically, happen reality. within within within modeling, about then - Alco then a there's maybe and think I how difference do also think what think you between actually

Charles Levingston

growth beta that's as do that's good might that. to But think No, there's with I we mean, a for point. got shy of a up great the be particularly at a the model X.X think you deposit chance, continued experience? actual set currently going that be point rates. we've out the it I

extent of the benefit actual greater only beta to is the experience that inures our beta, So, sensitivity. to that our asset lower, of

Catherine Mealor

Great.

harassing NIM on stop. Charles, I’m My is and question Okay. I'll cash. the then just last you,

balance so You sheet. have much cash your on

So, what kind securities loans? you'll quickly how deploy of strategy should that we and expect into for

Charles Levingston

our game we yes, Yes. We the reserves, in just Obviously, of as on have years, steady clip now first expect is we’ll it I our those absent reserves. the overnight and at rate why there loans. a math interest is position sidelines, so to couple model Yes. cash than that overnight, it we're the hikes enough over want funds Fed it's it wait out deployment portfolio. of of But again, get that, grows. a And the as investment better earning balances terms to that's out sitting in to look here. excess and put the on choice in loans. healthy to kind It's on would cash particularly of continue

Catherine Mealor

Great. so Thank you help. All the right. for much

Operator

Thank you.

Inc. Stephens, with from comes question Preston next Our Brody

proceed your question. with may You

Brody Preston

to growth PPP I of back see nice the solid Hey, return just core levels was on to here, excluding you to growth. this loan It I was start good guess morning, quarter. wanted guys everyone. Hey,

hired producers guess out historically And you - think thinking you've would the pipelines so, wanted expect any we ask, kind normalized I on where about to currently, Eagle, of going loan go-forward about strong strength shake pretty do but new of on grower, rate - economy, all that basis you of forward? have where I as VC growth a just the to new a been run maybe

Susan Riel

than a but think here with degree predict to basis. it economy the a local point, at is national has strong. any significantly I on this Well, it's particularly Unemployment been certainty and of I lower do think difficult national basis is

well continues to an the So, I grow have grow of economy think probably years. and couple to that poised through next we're

fixed where are In the terms rate for think in I opportunity take what and on that out we drop happens banks. it of whether to rate to refinancing I refi that's see some going other That will usage with we'll as increase economy to with some rates with things grows. shifts. to of extent area, the because demand do perhaps loans the a think line start on see we interest in depend

a So, feeling opportunity good I'm that we have here.

Charles Levingston

pipeline. Good

Susan Riel

do add have to to Charles, want that? you you anything

Charles Levingston

pipeline quarterly We our we have to the over averages unfunded close we to that remain pretty of strong. - continue saw No, $X time, about commitments remains a period billion.

yes, healthy growth. to have we'll expect So, that continue we

Jan Williams

Our lending into optimistic teams going XXXX. are pretty

Brody Preston

slug work the but the industry. a you strong has maybe Charles, it. and for Got there, guys portfolio, to then just remained decent for And obviously, growth securities on deposit of all you liquidity put

think expect securities I increase have pace if quarter about the linked-quarter think XX% And of duration to help But appreciate like the I also, it. forward, about on as happen growth I'd anything. so, wouldn't what next you the portfolio, me it. going then And securities a or

Charles Levingston

have our we of week, right But duration duration, And use - the four this or continue continue growth month as there, and a we such, to to to as recent evaluate effective kind area another years. - is find growth by those The quarter. obviously of just we'll week bank month. because healthy your out. continue we're just whether customers not to for need quick deposit by is Yes, Yes. customers. guess to hit mine, is around as Kind dollars fourth that saw some some draw in those of good

QE the effort surge, ago. quarters I a think we stopped liquidity several surge, calling

portfolio. that yes, of So, pretty at maintained. mentioned equal, portfolio, all comes earlier, a well. that sure we as healthy the for things of kicking Loan we investment of be cash growing clip the know But month make use deploying I’d we've base there's portfolio there off that investment some for with to also to after think continue cash some But as into a We I want that first. a it's month. got lot that, cash

the really So, just act. be it is to balancing going

So, yes.

Brody Preston

do percent, of Charles? securities you is what know the any, portfolio And if floating rate, Understood.

Charles Levingston

have right? don't not rate on but that be I - there's I off-hand, going paper to lot back in can small, of it's relatively It's I get mean, there. that. a variable

Brody Preston

ticked that. offline up that ask And quarter-over-quarter. to front. I the on on I like follow guess again I'll legal was just the looked one wanted up That Okay. last it expense

proceedings. I the So, I the that guys in just anything anything about that specific wanted to was noticed put legal there then And that? didn't release, drove in ask, you

And or so, us are ongoing? or are those - is those behind it now, still

Jan Williams

proceedings are legal with The we derivative Xth. we've moved shareholder settled - The action, them. October on forward

as and we a the on continue today, to class and is on FCC on the Our Federal towards settlement that. hearing And resolution have federal the Reserve, as that. make later in district far court we action day progress track,

Brody Preston

Understood.

Charles Levingston

well. former answer question I’ve to your Brody, got an as

I we're as at rate. looking about X% the total portfolio floating of think

Brody Preston

it. you the very appreciate I questions, much Got for Thank answers. taking my everybody.

Operator

you. Thank

Erik & from Boenning with Zwick Our comes next question Scattergood.

with proceed question. may You your

Erik Zwick

maybe four good margin Good And that reflect reflect loans securities. net the the new I balance back X.XX, morning, are the given quarter kind some didn't there on, a interest of some of did at moving pieces. I first some on to just the margin think of about bit. Wanted color little to everyone. start sheet, as it, circling the guess, you've

core, way loans the increases, grow as this consider Just just new XQ a that have here trying to you're in were there it? funds about something any good Fed the else bottom added well? point, what Can from rate think margin? absent and think to at the potentially we Is point? at the growth given in to it Is this that loan for expecting seen

Charles Levingston

I - now, right. right to cash because build I'm lot think of mean, I pointing a the Yes. you're

trading some if certainly later impact a loan portfolio, those from I continue. some down maturing But potential prevailing You new of year. a in through they the of in as the on increases heard rates would of be five as bigger got had were the much suggest saves quarter. and of a I've you've they're looked kind higher this of and hikes were assets, see loans downward would not, even cash terms next drift the in - marks I impact, go impact with on quarter. countervailing really mentioned, coming any it some, the yields at rate not you’ve on mentioned, didn't a believe coming But off. are more the cost of maybe That's purchases a the lot year. cost the little think funds, of anywhere the question of that has current cost as rate And And coming four, probabilities, But to even earning in there's likely that and - front. still done investment or CDs There's got on effect. IM of some one But the the where the yes, we I loans these build mix think, experience. that days booked I the there's

some I all that and best I to don't make together mix kind you’ve is hurt helped of got guess. know color. or there So, there, but if your Yes,

Erik Zwick

No, any for in last Charles, again, probably rate you appreciate I there. was effective color one the tax And one, definitely additional outlook the ’XX? for helpful. That

Charles Levingston

up unlikely I end minus somewhat any mean, actions with where full think our from which that's for from point at bodies. - - were pretty barring we range XXXX, the close this legislative to XX% year or plus I that Yes. we in appear

Erik Zwick

Thanks it. much my questions. for Got taking so

Operator

not turn I'm any call back any time. the for questions to would Susan I Thank showing closing at you. And over further remarks. to Riel this like not

Susan Riel

today taking Have start, appreciate great call. all to good questions We day. XXXX your your for this speaking a and again off is a look of a We us few with we you on and that time to in hope you months. the to forward to be

Operator

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

now may disconnect. You

Eagle Bancorp (EGBN) 20 Jan 222021 Q4 Earnings call transcript