EGBN - Earnings call transcript Q4 2024

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Operator

Good day and thank you for standing by. Welcome to the Eagle Bancorp Inc. Fourth Quarter and Year-End 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. Instructions]. [Operator of that the being speaker conference Newell, Financial advised like would today, conference Chief hand Inc. to over Officer today's be recorded. I is now Eric Please Bancorp Eagle to your go Please ahead.

Eric Newell

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

the the forward-looking of undue statements. future make promises made we We that begin to performance everyone call forward-looking statements. these about you on place I cannot reliance presentation, Before during not and like our would remind some comments are to caution today any

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

CEO, to our and our it on the I turn or President website SEC's Susan. Williams. now Riel, reports periodic at and like me the available to are today With online Our would Kevin over Jan is company from website. Geoghegan, Susan

Susan Riel

result valuation particularly provision credit million of we night, approach through an reported to for navigating Eric. income risk, you, Thank Last proactive everyone. losses. the This quarter. our morning, $XX.X increased for reflects Good net

the due environment. this effort, the and appraisal. a new make improving status cautious optimism manage loan to part million through fundamentals challenging As we nonaccrual as contractual us we continues moved payments to property's gives loan This $XX.X to office a of

remains and are market team reflect that long-term risk we better and focused them. positions EagleBank disclosures amid Our disciplined addressing The transparency, commitment our evolving introduced stakeholders quarter a helping dynamics. loan for strategy see clients we even our the understand how enhanced on to executing success last

sheet Looking we a building of strategy. components our We foundation Fourth progress our testament term quarter bank team $XXX.X a back deposit sustainable key allowed profitability of debt, funding strength $X us growth strength, fully relationships deposits made income, significant billion to to management. to million on and program XXXX, toward and liquidity our strengthened balance for the repay deepen and of grow in C&I fee our growth.

to look and solutions top adapt our by As local clients. our The presence and energized values to geographic and These made create progress our a qualities we've DMV, and rooted team value advantage. that enable a in ahead. the entire as us we role build trust deeply the relationship-first competitive opportunities lender commercial is ahead, strong deliver the long-term our change for

for our in our our results Jan. I over to With goals are shareholders. to ability the in XXXX, execute groundwork and things on laid With that, strategic turn we will deliver confident

Janice Williams

Thank you, Susan.

Our mention to special impacted an asset the migration were in substandard quality the fourth of office loan nonaccrual metrics by from quarter.

on historical backward-looking are on higher XXXX. value appraisal last payments. extension At and properties because of of appraisal occurring loan The office recent showed appraisals matured since of be XXXX. dependent in new current remain same May seen our indications the market. date the in appraisal is and XXXX, flowing in Cash While and new from valuations XX% fourth the continues improvement leasing December, the the and time, absorption comparables. a appraisals. There activity in of transactions the borrower obtained. are to at positive inherently September The increases of was in We've net to quarter in are cash flow a decline heavily than

not So an capture market may appraisal today current fully trends.

As more less market transactions appraisals. volatility we would occur, anticipate in

believe we've remains appraisal, a sweeping than individually X/X outcome charge-off the on reserve. build-out the leases time. We is evaluated and adequately loan and loan we been million, flow of cash $XX.X was late in and reserves more The was $X Since took this for building placed the of payment of reserves. loan Given at of reserved The balance contained already the on new loan million. nonaccrual. the the XXXX, which

are We charge-offs and continue of charge-offs Page loan in reserves. of about XX $X.X additional $XX.X resulting to points. sweep totaled earnings Details the cash building quarter, XXXX our million or Net XX million the continue XX basis on and in included fourth flow excess deck.

During separate the and office loans were mention special quarter, that upgraded previously two pass. to substandard we

better exploring continue to position borrower one borrower the bank and the allowing curtailments to loans, with For of principal to those a the redevelopment property worked multifamily. secure putting the with we three-year a X in of extension

On received that than a in of reduced loan-to-value XX%. the less resulted other, we curtailment a

quarter. XX, our disclosure the the criticized on of loans migration an were increased our during upgrade Loans increase office mention mention were September Special aforementioned to $XX.X Eric? in by reserves December following at mention from Nonperforming Substandard to decreasing at with support Other $XX.X of $XXX.X loan a proceeds from totaling to special $XXX.X Nonperforming million. prior the million presentation of $XXX.X assets in to Page A during the XX a to an $XX.X for fourth basis positive September direct more substandard total operations. our represents multifamily improved classified from were fourth result quarter. also office loans pass upgraded loan nonaccrual at the at driven quarter. our quarter estate office exit. $XX.X million million the to $XX.X loan of million loans addition were and We increase classified to due $XX.X loan. owner-occupied to to This pass past preplanned XX. points as HUD criticized sufficient the performing assignment quarter downgrades loans decreased in quarter included at are million a of the of commercial XX, upgraded XX C&I additional repay from hotel million quarter substandard million. million end debt. X.X%, earnings $XX $XXX.X $XX.X in to than a million to of assets of contract note to end XX migration December industrial X rated XX days of saw of due the property. an overall that from XX% loan $XX million the XX, the We sufficient loans million of fourth real the and million cash from was special during

Eric Newell

$XX.X Jan. the $X.X an reported This tax quarter. of Thanks, prior The share. the contributed a investment interest benefit quarter to the diluted provision per the offset and Pretax compares benefit, during million the net or of Taxes decline lower pretax net return fee lower from pretax for million diluted income $X.X income million losses, expenses credit despite fourth quarter We in provision income, $XX.X adjustment $XX.X to for to due $X.X to quarter. income share. decline. unchanged fourth expense per representing $X.XX $X.XX totaling or million in credit million noninterest income This by declined to in from quarter. tax million were quarter tax largely uncertain was higher purchased the and the tax partially higher

$XX.XX equity end. December XX.XX% annual compared contingent XX.XX% points per Average higher share at leverage Tier position $XXX.X ago due to losses $X.XX also Tangible decreased a XX remains XX, capital Tier end. to increased significant million per remained value X have than On and Tier XX slightly this more strong. XX.XX%. sheet achieved basis to quarter-over-quarter. channel. increased strong. ratio December ratio Book XXXX. quarter our as prior Common basis at X digital A unrealized amount was common to capital share equity liquidity through from at points to decreased X basis rates as balance ratio growth assets increased of quarter deposits grown Our average year the XX to market increased points X

we due was million because saw loan before has Home outstanding discount bank originations of the due quarter. At third $XX.X interest due the discussed quarter $XXX loan. unencumbered from end our the on weighted in migration to a XXXX. from We borrowings term non-maturity had the interest Management originations provision average average income One-Way interest expect income Generally, brokered of and contractual the with The million Our of Of third mix CDs largest loan the shift of expense window, deposits deposits interest deposits fourth total brokered year million the XXXX interest million the of $X.X X.XX% X.XX%. $XXX,XXX throughout $X the period one at quarter, to fully interest in paid to brokered to liquidity early from of non-maturity $XXX.X This securities relationships relationships. facilitated Federal from at XX. basis weighted billion deposits reduced income and and office quarter, second higher September in deposits. pay contributor reversal X.XX%. to another. to Loan funding the NIM. X the a of the our totaled XX% proportionately non-maturity totaled the brokered a from funding compares million billion. of Net were assets income end rates in XXXX Bank, decline Growth rates. declined we comparable the interest-earning earning contractual of totaled funded average previously of to increased proportion declined quarter, in off that nonaccrual our in to of deposits reduced $XX.X ability our resize NIM rate in points decline half to available Insured declining of the Reserve $XX.X the in cash third Federal Net program in quarter. funded decreasing rate to

investments a to expense advertising fourth growth previous for in Noninterest will swap added to as from the released November and deposits due as quarter, first $XX.X the income from along quarter. to earlier third which $XX.X its run were value XX our deposit This employee our for and In as lower fall. December, policies, million, SBIC income repeat each FOMC which expense digital our to deck true-up by follows compensation rates MSRs, our decreased not the non-maturity the early related higher taken life did accounting, the and quarterly well a severance in forfeitures quarter. rates to income we compensation FOMC quarter. in management as totaled rate the increasing Noninterest and the on in cash prior FDIC the earnings, insurance updated easing back-to-back and decisions fourth Following points of on basis quarter. the did and such a transactions and on professional of rate the share-based points. by surrender ease departing XXXX. higher in cumulative from benefits by not spend January, policy the third income in declined reduced due investor view bank-owned declined from Salaries reduce XX because increase the reoccur starting the channel. million increased basis sale we expenses by items in non-maturity with quarter actions expenses. In Legal, offset of Marketing of

year the in growth is management portfolio thoughts on completed, our we a net average process period-end reinvest between though margin. loans. cash Earning to continue the budgeting our asset growth. has X% take of as Our investment and next loans from shows more flat of and view With growth precise interest slide flows remain X%,

enhance quarter, there is to is portfolio of Kevin our wholesale and are that to optimizing noted and the Growing spread. over and investment benefit I'll reducing also turn expected this to relationship loan from it deposits funding to of spread. As last expected the ACL. to use mix discuss repositioning an expected contribute

Kevin Geoghegan

you, Thank Eric.

to $X.X $X.X As net increased the charge-offs quarter million. Jan from million third mentioned,

the uncertainties. of reserves sufficiency will to continue our We market to address evaluate qualitative

economic that reflected the currently will accounted driven This the in increases in loans. in model quarter, mentioned individually losses reserve and result expect we would is, that use qualitative increases fact, shift future that any be of credit not we if would we to during could future reserves reserves. in our from allowance the there our quarter. build, for for expectations a individually specific assessed reserves, However, be loans. in inform stem Last the inputs the from any, specific reserve by in for Should driver reserves be significant evaluated

representing on for specific which increased our loan office The XX is XX/XX, to allowance investor reserves $XXX to discussed of an at deck. on X.XX%, living reserves reserves the we at nonaccrual Page ACL it previously, The increase loans quarter. million coverage evaluated prior office # specific from addition increased X the In X the loan, XX/XX, performing losses credit X/XX of associated assisted associated total with an individually office the following our totals relationship, at loan X.XX% reserves. our from listing loans for specific with at into to coverage of bps down due the to X.XX%

Finally, short reserves for wrap-up. turn it our are over to that Susan a we believe I'll continue adequate. to

Susan Riel

goals, growing building last team and The deposits, diversifying, focusing excellence. completed on and Kevin. Thanks, foundational actions operational to relationship our support year strategic

that we same results. beginning remain as valuation on focused operational successes Office our reach will and to we see to quality time, maturity. mitigating time drive concerns risk take will it addressing the loans approach early goals, At While are asset

a to amid I serve. want commitment take deeply communities As market sets DMV. In thank dynamics to community-focused This employees. the evolving pride Bank in dedicated in to we positions the being Eagle thrive bank, our apart connected closing, and we us

makes stakeholders. we open ensures a continue up now to to value our that, questions. will deliver for work and we success Eagle customers and things hard Your Bank With

Operator

comes Crowley Sandler. with Instructions] Our question Justin first from [Operator Piper

Justin Crowley

A XXXX the Just you're bit were we but the particularly some Does reappraisal on these and larger move wanted as you outside District and to thinking has portfolio change overall, that these Montgomery the insulated how across all get loan quarter. more to look especially of in issue got through areas what's County about hit thought in an with of downgraded been some risk. from like situation in of Central at sort risk closer the that year a loans volatility Class maybe Obviously, of Business office this that as maturities? buildings, D.C.'s

Janice Williams

Yes.

much focused been we and a rates, whether different ameliorated in are or in think is suburban rates, the and said, of in Central I the more different Central decline The the District perspectives appraisers is cap office, extent Business District. leasing suburbs. have That certain discount on on Business rates. have values all to severity appraised appropriate

activity. suburban personally, I me, Class a of with increased was discount to For surprised a market see A rate XX% leasing in

to to we overall, see the On has activity. the other stabilization leasing can current that hand, time the been reduced

has a stabilized looking of value You're particular $XXX at million. property about this

that's in So XXXX.

of So increases to I think as changes you're in going decreases in see particular optimism or going the leasing class continue. pace position to are that this cautious a be have building. I we of to

have Montgomery that a you That's you our one there's is office May status, If deck. the our valuation from property thought that an property compared XX% of until look XXXX. is of, a of that similar of and we took size in #X into placed provided similar of also other the to nonperforming in at just -- And may list. County, property list on there XX was appraisal that in that's 'XX top on particular drop was and appraisal that XXXX appraised that on February the in that property January May XXXX on we

reappraisal $X in value If slag of be it appraised XXXX, comes million and extrapolate a this there, took be in you up property looking decline just kind office XX% that at the from for ballpark on a would you'd potential and charge-off.

think a number. I it's So don't staggering

and But have different discounts we're with on a of and rates top field and cap of I think borrowers. that may matter to you're work at You different you these continuing apply, looking that's judgment. at

the leasing. of assisted the property ability work that necessary cash helped both flow also fact the valuation any that value-add with and we fund collateral sweeping the connection nonperforming that in and that became significant was been and forward the us TI on a for of time, had period that continue to really One things in in us is

work new in TI there right a know on I now So is lease. progress particular

optimism front. have that question? cautious Did answer I on that So your

Justin Crowley

some leasing that's improving quarter. further the on that that just I a noted nonaccrual little unpack for moved of to just that Can detail, No, fundamentals mention guess, like just other that helpful. looked you you currently Yes. more And you with terms -- in had called has that's squares and the this just or just property little on activity that maybe occupancy a how the of loan levels what special out?

Janice Williams

addition to couple right Well, has occupancy more get to I the and over and reductions can last managed you to fairly that but period lease-up of stabilization. consistent what rapid in it's it's ticked that tell up activity we're in concessions the a leasing in difficult now, to seeing market, been are sustain a years

you've ago, and in not a the down an one were point, -- a at was allowances raised summer, and think maybe foot. eyebrow at we're at I $XXX TI foot that $XX we X looking years now around

and So proximate in are I rents also both and very are property think more seeing this effective in activity properties. gross similar we increasing

on optimism So I that. have

Justin Crowley

likely know direct your GSA provide the out government on Got And to the are headlines new preliminary have government any days sales on would, federal office relatedly, the it's Okay. some of the you on just place administration recent of out. course, some et any then able exposure time of potentially been to space, canceling I in then moves detail leases, book? describing take I there But cetera, for potential early, it. office? which some guess of with somewhat could to and now, impact in thoughts play but have large-scale And

Janice Williams

little to very have We GSA. exposure

this occupancy time, are less Those be sector don't it's bigger that I the as it the activity. was you that leasing. think in than changed point. those at provide It think this certainly were, properties. government would CMBS X that believes the changed, think do has to as leases private And for do least large I surprise to a ways. on get around think good is job. it administration has expensively I the GSA huge That lease government privatize to chatter had better the the could at it appears providing GSA market. at want pulls the a I properties can thought part, itself most that and the administration to

the expect as in be office. So some across I directive to to some I for concurrent country. be place for that leasing some going think this some more federal to back would the be the they to sell a result of go. do to area, go means would trying there's employees There to has them properties,

that uptick So properties available the those think for might leasing. with have be area, and selling significant appear the to properties that to be there B+, contemplating they're A- that and floor an plates government to federal be are could will could for a the market I front. do properties significant be I see B-, in that the C+ that period, properties, think, brought back rehabbed take it something

thoughts person's it. one just So on

Justin Crowley

gears could that's little. larger Okay. your competitor a some you who's add merger whether dislocation for transaction extent involved how talent? right in-market That's or There's play it shifting opportunity out helpful. you And opportunity to business from any a has created standpoint, in new obviously Or think then To a folks? do now. already what

Susan Riel

opportunities us. We will think it for bring

in mean us. that the opportunities area, will we'll think we this largest for community banker So and be

that already opportunities them. with we be there'll course, shared some have people, and are with customers Of there

So we're do a anything? add as to it you at positive Eric, for want looking us.

Eric Newell

hope with when be there's opportunities share us that Yes, when close, analyze as our or customers. share and the there's customer. greater where proposition there's we there's think there in well a value mobilized around milestones new them that that market wallet a We customers able legal as share to we we for and deepen that to relationships will transaction team to greater to conversion, share acquire get customers, has that be of shared opportunities if a

Operator

Catherine question from with comes Mealor KBW. next Our

Catherine Mealor

Maybe just credit. one back on

maybe substandard sit to at the net at which our think for see would reserve and on you your do of Or we me makes builds place kind think builds continue we're inflows today reserve about and As exposure, and as your certainly put see and good charge-offs, range allowance. potential reserve, It here think 'XX? know but to a throughout we're outlook the you you hard to a I about of today? expect kind a of less in to was of feel good peak credits, special you mention course like it's

that. on thoughts your about curious Just

Eric Newell

for In idiosyncratic a But noise there our sense talked any evaluate not do what point. a currently feel office if we see build the that the reserve issue could there. Yes. with individually put this process, last requires that beyond addressing a that believe that there's adequate comments I at us on about that that overlay, costs. Kevin's loan, as we feel I we credit be is an in anticipate budgeting that a office, that is concerns, call credit range qualitative we're approach it out we to

to expect it think we XXXX, to continue I and points XX the range. be basis to XX that for was

Susan Riel

I And or of maybe range? versus same kind charge-offs in they're that's provisioning the guess

Eric Newell

now reserve that it of XXX we XX approximately XX, loans, a in Yes. months 'XX, going XXX And we I have you're information look that of basis thing in because what even points We've I ending based in our think mean we adequate. that we're without as and actually, months. lot over Thinking is basis reserve 'XX, to the on last December build the kind was a at about build, out. June to achieved same loans. achieved believe XX, today, points the at and XX I that at

Catherine Mealor

balance the this Okay. growth excess Great. just balance And deposit on outlook liquidity big was the build and quarter. then a the the sheet from there sheet, in for

was from average average flat. earning some that, see thought end year. such a of but at a that the bit larger decline that of asset for base was interesting And to I maybe work, we're the put earning coming so I of you excess think would liquidity of kind we it little guide still as might your just assets

as liquidity growth. into and thoughts book your on kind think of of about bond curious about Just that kind the we excess into loan

Eric Newell

the We're assets the expecting is bond into not teams. any And in the goal portfolio. bond to get the percentage portfolio fact, in to growth our of currently

of around Charles reasons NIM XX%, and we're think process, previously above there I our XXXX can why, And improvement budgeting disclosed the you outlook one see our was versus in in had we quarter. for that. last saying is was that in on an what that

in comment have excess utilized $XXX spread. materially contributes the balance it sheet, You well expected utilized are throughout our of increase expectations we million into earning go would that into not even have flows the to -- or currently an cash is some case. XXXX. cash portfolio quarter, be on loan mean that fourth had cash go to in average true the about what us really which about into is. this in as around do are portfolio, I that loan we X% the The that to portfolio loan We that's goal want better the

Catherine Mealor

And versus made CRE? business. you've of I of there? noticed growth, in couple And commentary on much just C&I your new in coming C&I the a that of is Any line how hires that loan thoughts

Susan Riel

seeing of as positive way. already in Lee increased that hires the the seeing with C&I activity from and with we're in very changes in the we've strategic in area that a results We're positive Evelyn made far, Group very, the Head area we the have made that bringing so C&I

Eric Newell

particularly. CRE team seeing the in growth, We payoffs is our Catherine, In quarter. the yes, terms multifamily saw fourth of some in space,

I flows to what expected might that and can cash And we use to the work of some activity that opt think allow second in to Riel seeing and of also can CRE is be we're coming back then on -- pipelines, to, C&I redeploy the first opt us a believe that I the terms our portfolio. well. us we payoffs quarter. capacity that team quarter in to in types any more do about the of as expecting made some on And in comment depending will

Susan Riel

payoffs. Right. result We're our concentration CRE really down looking coming those a as at of

Eric Newell

Which concentration ours a is CRE focus is reducing of that ratio. big

Operator

I further back I'm CEO, closing remarks. for this turn President would time. to to at questions and like showing it no Susan now Riel,

Susan Riel

to to us Okay. Have a questions I'd next like We the you for forward today. again for taking and speaking join great with day. you everyone to your thank time look quarter.

Operator

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

now may disconnect. You

Eagle Bancorp (EGBN) 23 Jan 252024 Q4 Earnings call transcript