Earnings call transcript Q2 2023

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Operator

Good day, and thank you for standing by. Welcome to the Eagle Bancorp Second Quarter 2023 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] Please be advised that today’s conference is being recorded.

to Levingston, conference Chief like speaker to now Charles today, Financial would hand over the your I Officer. Please go ahead.

Charles Levingston

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

the would Before begin remind some this statements. the considered the may I any forward-looking We any comments our we future not like cannot performance, made formal during earnings. to made formal and make presentation, everyone markets to that be guidance forward-looking call policy of promises the our providing with is call it None this with of statements during interpreted should about to respect establish be guidance.

developments that for differ any XXXX in XXXX on result future identify reports morning. from new could does Form not year, XX-Q forward-looking company's factors to Eagle those a Bancorp X-K or the this actual results required cause and XX-K statements forward-looking materially the or to of current for as the undertake projected Form statements unless Our information risk by any fiscal law. update made certain events

include of will the directly section and non-GAAP of comparable with information. website information. contains release, which The commentary to is Investor posted our morning's This filed SEC, the Relations this earnings information in reconciliations the financial GAAP most

the Our online periodic on at are website. available company the reports from our SEC's website or

detail. take President return end, discuss credit financials local of overview. economy, Bancorp Eagle matters. all will reserves discuss CEO will her of quality the loans, the off the Officer, more available and Williams, us Then Jan high-level and be Then three Susan with our us to thoughts in I'll our Riel, a questions. This Chief At morning, start Credit to on will

to like Rail. would our I Susan turn it and to CEO, President over now

Susan Riel

I difficult and in everyone. environment. our we improved the performance from the morning, second Good with operating making a prior that am very quarter pleased quarter Charles. progress you, Thank are

level and income asset our metrics we increasing kept increased reduce mix second by to the earnings capitalization net deposits strong. funding high improved our per During quarter, of our and share maintained quality borrowings,

stock dividend X.XX%. repurchased Additionally, we to continue was the average basis, equivalent price, on tangible to our quarter shares. And quarter, yield of our Based common $XX.X our out night's million price combined stock annualized during of XX% current year. pay value. million of the of shares in dividend we last closing X.X an and repurchase returned at to our shareholders a capital we the On second

the continuous One and In seeking regards X expenses. throughout branches. other year, to for originating and this cost improvement. earnings, made of the closed are in by steps savings month, way taking to difficult first opportunities increase decision we we earnings In we pursuing is reduce are actively the we to half residential ceased mortgages also identified enact Earlier force a reduction the bank. to

that and well qualities We for us know of to have and turmoil. economic a been Throughout comes earnings have from commitment a of support served times history, these risk Eagle during also strength management. our strong underwriting

quarter, risk-adjusted consecutive and as to maintaining the an on increase focus returns seventh we While a our deposits borrowings. was high loans with grew for for costs environment modest funding in continue

next. while easy a platforms strength. retain we be and reciprocal hard asset customers And quality deposits. and discuss environment, deposit have some quality remains well. results they and focused restructure regards good Jan using remain near their working deposit task to This deposit and will is increase, low metrics asset to historically other In levels. metrics, this highly as helping seen attract continues on is this but accounts in team Our existing costs to new expand an relationships not

over I'll it that, Jan. to hand With

Janice Williams

the to is nationwide unemployment up quarter the pre-pandemic This separation continues historical in to gives asset May, rate. morning, slightly again market of June, from of ACL. metropolitan more us Susan, in which you, area rate relative X.X% national which fell good above seen to with low This the and The in Washington, everyone. this our was in aligns figure the the and Thank of long-term XXXX. a in strength D.C. the metrics The be the X.X% to December to just strength can market quality Washington the even in area bank. more unemployment statistical difference and source our Washington be area X.X% provision

NPAs assets. were XX total to basis points

area quarter The end current total commercial in quarter. portfolio was of increase past is located XX which is a charge-off prior was to charged quarter, largely node an this for portion second days and million. D.C. one the $X.X the a million primarily one other Northern property, from Baltimore, credit bringing $XX.X charge-off to The Washington, $XX.X net the billion. up increase past million, from the quarter outside one There the on million. of office was in $XX.X from multifamily million the off of office While over XX Loans quarter. at notable last were during for $X.X due total NPAs were Virginia, $XX.X due

provision the to For the with ACL ACL in end, moved down a increase last quarter two at X small lower basis quarter. to and loans was charge-offs which loans our second provision somewhat quarter, than X%. $X.X we of an relatively point This, had million, the combined

was Our coverage loans. X.X ratio non-performing times

the in data, and partially This based for quantitative higher higher lower the CRE reserve, was for in by offset The driven The modeling With allowance mentioned earlier. I the quantitative reserve Q&A by offset the was on office driven provision, based unemployment improvements reserve lower higher model. provision ACL a loans. a properties, local a portion food allowance regard by as is primarily lower service reserve was formula-based. which to was lower by on accommodations partially a of credit Q&A

work Suboptimal participation increases limit office return in to continues to occupancy.

announced have the Amazon plans HQX and in-office to government federal increase the presence in their both However, fall.

by have any end on secured estate outstanding These detail loans XX. some quarter. total were real loans. second office not This did construction portfolio June additional nonowner-occupied of of we're at quarter, of loans the credits as We XX.X% commercial the providing CRE the office geographic

faced to understand work to borrower. properties proactive of be well maximize Office with in properties XX.X% collaboratively in in Northern these in Maryland with additional could both Washington, XX% better located To outside returns XX.X% and the market primarily bank Virginia D.C., CRE income-producing we clients these X% the with in advance to in located continue an monitor those out reaching the are headwinds to in to commercial and and D.C. our the be levers the of that markets. credits, maturities borrowers

see remain other Overall, to to we off. add apply strong in of to will loans and said loans credit, continue our Having customary terms commercial high-quality we to to that, pipeline and portfolio run we cautious, exercise standards. as and the our continue opportunities underwriting maintain selectivity

over like Chief With it to Levingston, turn Officer. that, Charles Financial to I'd our

Charles Levingston

Thank March good mix. deposit faded, you, quarter and back were has and volatility to broader experienced Jan. able improve we was This a in the funding we in that market our

efforts During to the quarter, continued we gather deposits organically. our

deposits, from growth brokered. However, which this predominantly quarter were time came deposit

organic our deposit growth, is ability plus. funding is While out for preference to turn our a

million. drew and mix. for borrowings net this use to rate paid borrowings million. $XXX these This additional took the FHLB $XXX this, result we a the resulted do we million on To and opportunity deposits BTF of by down in reduce maturity in reduction borrowings Additionally, -- and improve borrowings to $XXX short-term

now June BTFP the borrowings blended is attractive. of more for The rate the X.XX%. shorter-term for versus and deposits FHLB had our terms added The term XXXX, BTFP years swap reason XX, rate on X-year of X.XX% funding. of the a X broker we as in X.X is The a that X.XX% approximately had at was --

a At average quarter decrease XX% were deposits, prior deposits. noninterest-bearing in quarter. see the average end, from non-interest-bearing down did also deposits XX% in of We

and our XX.X%. On down ratio the side, XXX% plus deposits down uninsured came to loan-to-deposit were to

As statement, of noninterest-bearing the the net basis X.XX%, XX were interest funding of was income result costs. XXXX income points. million, down The to net was deposits for a and second down the deposits $X.X and higher it from continued movement margin to quarter time decreases the overall interest relates

As we interest a mentioned income last from in there is lag quarter, loans.

As rate will and more the pace rates at have impact. from new loans the benefit market loans the rate variable the an increases, resetting of from of Fed slows

income the through statement. Moving

was provisions ACL this and entered we expect is the we bright some $X.X that of for source spot infrequent income commitments of additional of income quarter. $XXX,XXX the XX to quarter, into generated year. of the SBIC income the quarter. fee don't recurring item that had of income The an Our in agreements we for a ago. swap this a more end unfunded We an be Non-interest first income invested years were SBIC as And at Jan about from mentioned. reduced, million

some the In being prided to seasonal first expense in operate onetime ourselves that in was proxy compensation always we improvement quarter, showed have also contains and Non-interest expenses, our highly at higher as XX.X%, has compares expenses. continue range. aim efficient, to efficiency to regards we well XX% the quarter this Historically, on peers. ratio but it man. to to been our This past XX% still the

can reduction and bank, make and progress. continue an undertaken review we effort have all we expense do better the However, expenses we throughout know to to

-- Early savings expense the and million $X.X reduction of of implemented in were cost In quarter unamortized quarter, plus was other and generate XXXX, associated an Washington, XX annual expenses review $XXX,XXX. quarter, relatively in that expiring the or additional of near expected And the rental of costs in are Northern to our physical reduces reduction items the in the second locations we million the at XXXX. one was market, banking third Virginia. leases supporting also billion. savings noninterest of D.C. branches, in $X.X in assets to a one pretax two closed in the is the The $XX D.C. footprint company low in as This $XXX,XXX. half second and force second included expiration, a

Janice Williams

Let up left me pick off. ourselves

of On the bottom net income $X.XX. EPS line, $X.X up million and with

core company. Lastly, strength the of capital a is

ratio borrowing last our proxy the expect. services quarter. XX.XX% through support provide and capacity flexibility was This end of tangible an of and Our at gives And customers equity to all was quarter the than BTFP billion. which financial FHLB $X.XX aggregate common had us our we higher peers

relationships our first leadership us to generate was Last our community earnings provide provide celebrated anniversary, in Bank service with level a vision, for This week, of clients, the remain shareholders. original to which XXth enables to to position vision Eagle our peer-leading superior committed efficiency. maintain and and our we

thank closing, day a In like success. to Eagle entire employees our work make I as to would who as senior management our team hard well every

for now With open we questions. will things up that,

Operator

Certainly. come Piper Sandler & And from of [Operator Instructions] Whitman Casey our question will Co. first

open. is line Your

Casey Whitman

relationship? us walk through kind us Hey. LTV? nonaccrual? And took Good like decision morning, the can Do of established on loan we'll maybe that have how what large call. the everyone. large put you and Thank you off maybe what the to is the you you the you some that you one Thanks. Jan, against credit. the for prompted on start And charge-off it? reserves of give metrics office on Can underlying

Janice Williams

$X.X portfolio, the tenant the this single-tenant one was the because few charge-off charge-off have properties took that vacated. very was million. the The use we We of in

income We the sweeping really best have property. this process property residential and we the the months And highest for the as think of is land at I last use re-tenanting work of XX a point. been the considering through

The came also in ahead it XX.X%, with a $X.X million. appraisal to highest million. use, and loan $X around have of it was of million. elected take collateral about outstanding And the we around to at but we reappraised have go chose and we million. $XX charge-off cash carrying the $XX And We're best

go the to process, to XX this We probably months accomplish. to expect will through it XX take but development months

how So there. that's got we

Casey Whitman

an just of the Okay. relationships of can the of size the in book? that or in would sort us office idea of you Is be portfolio your what top one largest give

Janice Williams

million proactively way we -- reaching up maturing months level. loans quarter, $XXX next in have ranges borrowers. and about have The $XX of XX I'm addressing. million, third we have at between quarter sorry, out $XXX It the year, the second million. this to all to the In I we're those far total that that about the that in We're a few

anticipating XXX. agreements on Some are sponsors, with maturities any of have we worked accounts place we that with. XX-ish extensions out about that we've those for the the issues into aren't put based as other then and that And particular we short-term

However, will dealing the isn't I with as extensions office, as would for be market anticipate that you financing we there. know,

of with that I So fair the would portfolio. on amount a expect be we'll dealing extensions

Casey Whitman

whole? the you LTV updated Do have the for Okay.

Janice Williams

XX%.

Casey Whitman

Jan. Thank Okay. you,

Moving your looks might It on, your buyback are you guys pretty authorization. active exhausted you this with quarter. have like

stock going just forward your book, you given still? speak place got a and of new a in tangible to can you've capital the or putting lot So appetite and

Charles Levingston

Yeah.

are this year, any my for exhaust new program. this We absence did this point, at repurchases at least -- At there. foresee, XXXX this point don't our correct, this we Sorry the point, or at you program addition of at point. we

Casey Whitman

let you, Okay. guys. I'll else someone on. Thank jump

Operator

for our next question Scott. of will moment And come Christopher from Montgomery one And our next Janney question. Marinac

Your line is open.

Christopher Marinac

Hi. Thanks. morning. Good

there? kind to get Just wanted to cost part third stabilize might also what of to of Charles where getting of quarter? as about of you you is funding may kind debt And we that the terminal a of sort for that your funds. total kind ask Are in see mix sort of of of the be

Charles Levingston

that brokered quarter in on the will term are we've list impacted the be this rates point, all Fed immersively, the at in the respond to certainly the those rising of ended to all Yeah. I deposits your in yesterday rates. put we right? from So it's Goddeeris, latest this by however, additionally still, right, that money increase mean -- second got to short-term --

is great it not It competition be been are think strong respond. pretty will aggressive as we has deposits, in to here. the we're do necessarily going making be order peak still for the again, past But as in I hitting because to likely adjustments

the I conventional that's think wisdom.

of more expect a I bit cost there in So be there would funds. that may little lift

we to keep we're able side. may Hopefully, a the on on that would here be pace bottom also asset expect I the margin However, seeing front.

Christopher Marinac

the for kind side, happening may And do where of whole that quarters? And about you comments office question for then, is of criticized go that. the on for kind what a outside Thank you. few Got think just next Jan, the in classified you portfolio your you of there? and

Janice Williams

much all. have seen Honestly, the but small distressing. on in side XXX,XXX, XXX,XXX, the erosion C&I we little very at portfolio, few XXX,XXX, entire particularly that's loans, not nothing A

side. loans a in the On the problem the XX-day not that we've portfolio category. the amongst CRE multifamily side, other which is that losses was partners, due concerned office due on loan past in quarter, XX- on about I'm than that. precipitating is the the past dispute charge-off to this discussed the There the

what's at don't up I non-performing it's as asset. in theory, going could possible happen. to that end So point, a But this believe that's

Christopher Marinac

of of it. kind charge-offs revert next then something of And two, in similar? or Got the the level or back would quarter expect should we kind

Janice Williams

at the we now I quarters. would be loan had that am that I way be But the they number not of have are charged quarter. second that I a that our were level off felt office working couple anticipating more, they extensions happening they or the suspect. If we're think of would will right over through we in next

be could I that by possible always it's surprised appraisal. an So

Christopher Marinac

Great. I Thank questions, it. morning. the you all taking this appreciate for

Charles Levingston

Chris. Thanks,

Operator

our question of Catherine Mealor And KBW. next our will next for question. moment from One come

open, line is Your Catherine.

Catherine Mealor

morning. Good Thanks.

Charles Levingston

Good morning.

Catherine Mealor

at some like of this maybe Are you anecdotally you process through of in million you're looked these typically when next as flavor Can what putting originally working next borrowers your seeing where when seeing that for has a where to may you was over talk through Just new originated? the extensions, you're us relative you seeing expect loan one the office are of what look you in kind and equity? give $XXX us you value quarter. appraised what just kind were just

Janice Williams

in its a suited leasing to not been multi-tenanted lot appraisal There and there. and there there's and of issues is property that rollover because I well good be Well, have no would that's an that residential. shows pretty could and could any property diminution doesn't flipped each be there's a value to say unique, being

head, facility because is I'm think of have, that located the single-tenanted so the we not one only high I one my other like to a But strong could market And going And and it's top have but single-tenanted there be properties there security can unique near that something off has issues any is this particular is residential here. Naptha. of property.

So I'm seen seen I've time It's with problems not and case, case by expecting big drops I've that. drop. every no

Catherine Mealor

Got it.

your your on current is portfolio? reserve what And office Okay.

Janice Williams

The is The is on list about substandard on reserve reserve X%. reserve overall is X.X%. The watch X%.

Catherine Mealor

is And substandard? how versus much of your office watch on portfolio

Janice Williams

say conditions and right also associated of total our As, added this let's of to quarter. because have times I pretty market we three We I that now. loans but me, think did of don't portfolio a in downgrade list to front watch with the aggressive

said probably probably it's it's about So around $XXX million. as up

Catherine Mealor

move it this Great. classified -- any is there criticized was Okay. it. then And or in quarter? Got

Janice Williams

of Yes. the see. substandard substandard one in loan of with upgraded I'm its We million. the balance would the off we be -- through. but a quarter, to other moved when going process expect we'll to partially probably days expecting that office XX go they charged extensions moved that deals take to We next the mention and documenting $XX.X that's agreements but to we're are for. special that negotiating, classified couple another probably we will to get us are down that is loans I done, that to

Catherine Mealor

Okay. Great.

depending to works these extensions as go. migration are think to that going was portfolio? then lower work just Chris reserve your charge-offs build minute should question you some these it to a your through is should be is on So see what continue from to assume it the or fair you ago still how -- see fair today, of to answer or But that you

Janice Williams

the within and drive a to going of what to work think is federal that depend with really is going work think backdoor in-person happens Northern back I to Virginia, on particular submarket. September it HQX that I lot it's in government

depend depend. a this And get it's but on we going which, what think whether to recession, seem quite I going as likely, to point, doesn't happens. So it's at

of months, portfolio We been in through terms of next renewals extensions. close half XX office will have to the over the and

where think makes I shake obviously things upon So out it easier. if rates XX down, from depending now, they're months

consider. there Just there are out a to lot factors of

Catherine Mealor

Thank taking you appreciate for my I it. questions.

Operator

And to showing to would closing and Riel, I'm like President back no I Susan CEO conference questions. for turn the remarks. now further

Susan Riel

call take a to speaking forward on for I next to the I quarter. again day. with look to participating Have this want thank everyone time and you good

Operator

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

now You disconnect. may

Eagle Bancorp (EGBN) 27 Jul 232023 Q2 Earnings call transcript