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Eagle Bancorp, Inc. Announces Net Income For Second Quarter 2023 Of $28.7 Million Or $0.94 Per Diluted Share
Source: Nasdaq GlobeNewswire / 26 Jul 2023 15:15:01 America/Chicago
BETHESDA, Md., July 26, 2023 (GLOBE NEWSWIRE) -- Eagle Bancorp, Inc. (the "Company") (NASDAQ: EGBN), the parent company of EagleBank (the "Bank"), today announced net income of $28.7 million for the second quarter 2023, compared to net income of $24.2 million for the first quarter 2023 (the "prior quarter") and $15.7 million for the second quarter 2022 (the "year-ago quarter"). Net income (basic and diluted) was $0.94 per share for the second quarter 2023, compared to $0.78 per share for the prior quarter, and $0.49 per share for the year-ago quarter. Net income for the year-ago quarter included one-time costs related to the legal settlements associated with the previously disclosed government investigations.
The $4.5 million increase in earnings from the prior quarter was attributable to several items including income from a Small Business Investment Company ("SBIC") investment, an increase in swap fee income, lower noninterest expenses, a lower provision for credit losses and a lower provision for unfunded commitments. These improvements were partially offset by lower net interest income as the cost of funding outpaced the increase in yield on earning assets.
Second Quarter 2023 Highlights
- The Company declared a quarterly dividend of $0.45 per share.
- The Company repurchased 1,200,000 shares in the second quarter at an average price of $24.48 per share.
- Common equity and tangible common equity ratios at quarter-end were 11.05% and 10.21%1, respectively.
- Nonperforming assets as a percent of assets was 0.28%. Net charge-off for the quarter was $5.6 million, or 0.29%.
- The provision for credit losses was $5.2 million for the quarter, as compared to $6.2 million the prior quarter. The allowance for credit losses as a percent of total loans was 1.00% down from 1.01% a quarter ago.
- Loans at quarter-end were $7.8 billion, up $29 million from the prior quarter-end. This was the seventh consecutive quarterly increase.
- The funding mix changed as deposits at quarter-end were $7.7 billion, up $255 million from the prior quarter-end, and short-term borrowings were $1.8 billion, down $277 million from the prior quarter-end. The increase in deposits was primarily from growth in brokered time deposits and the decrease in borrowings was from repayment of Federal Home Loan Bank ("FHLB") borrowings.
- Total estimated uninsured deposits at June 30, 2023 were $2.3 billion, or 29.4% of deposits.
- The Company has implemented an expense reduction plan. In the second quarter, two branches were closed with an annual pre-tax cost savings in rental expense of $408 thousand. Early in the third quarter, the Company also implemented a reduction-in-force that along with identified cost savings is expected to generate cost savings of $2.4 million in the second half of 2023 plus an additional reduction of $5.8 million in 2024.
(Dollars in thousands, except per share data) As of or for the Three Months Ended Percent Change June 30, March 31, June 30, Q2-23 Q2-23 2023 2023 2022 vs. Q1-23 vs. Q2-22 Earnings and Per Share Data Net Income / (Loss) $28,692 $24,234 $15,696 18.4 % 82.8 % Adjusted Net Income2 — — $38,570 — (25.6)% Earnings per share (diluted) $0.94 $0.78 $0.49 20.6 % 91.9 % Adjusted earnings per share (diluted)2 — — $1.20 — (21.6)% Dividend per share $0.45 $0.45 $0.45 — — Return ratios Return on average assets 0.96 % 0.86 % 0.54 % — — Return on average common equity 9.24 % 7.92 % 4.91 % — — Return on average tangible common equity2 10.08 % 8.65 % 5.35 % — — Net interest margin 2.49 % 2.77 % 2.94 % — — Efficiency ratio2 47.2 % 51.6 % 66.6 % — — Balance Sheet Assets $ 11,035 $ 11,089 $ 10,942 (0.5)% 0.9 % Loans $ 7,767 $ 7,738 $ 7,155 0.4 % 8.6 % Deposits $ 7,718 $ 7,463 $ 9,172 3.4 % (15.8)% Borrowings $ 1,907 $ 2,184 $ 350 (12.7)% 445.2 % Book and Tangible Book Book value per share $ 40.78 $ 39.92 $ 39.05 2.2 % 4.4 % Tangible book per share2 $ 37.29 $ 36.57 $ 35.80 2.0 % 4.2 % Capital ratios Equity/assets 11.05 % 11.20 % 11.45 % — — Tangible equity/assets 10.21 % 10.36 % 10.60 % — — Total capital (to risk weighted assets) 14.51 % 14.74 % 15.14 % — — Asset quality Allowance for credit losses to total loans 1.00 % 1.01 % 1.02 % — — Nonperforming assets ("NPAs") to total assets 0.28 % 0.08 % 0.19 % — — Net charge-off to average loans (annualized) 0.29 % 0.05 % (0.04)% — — CEO Commentary
Susan G. Riel, President and Chief Executive Officer of Eagle Bancorp, Inc. commented, "While earnings stabilized and were higher than the prior quarter, we remain committed to improving results for our shareholders. During the quarter, our deposits were up, borrowings decreased, and credit metrics continue to remain strong. And, while rising rates continued to put pressure on bank stocks, we used the opportunity to repurchase shares at a historically low price relative to book and tangible book values. Additionally, our regulatory capital ratios remain strong."
"We are also mindful of continuing to remain a highly efficient bank and in the first half of the year we took action to save costs by closing three branches3 and ceasing the origination of first lien residential mortgages as future prospects for sufficient returns were low. Early in the third quarter, we also made the difficult decision to implement a reduction-in-force along with a strategic review of operating expenses."
"We once again thank all of our employees for their commitment in serving the needs of our clients and communities. Additionally, we remain committed to a culture of respect, diversity and inclusion in both the workplace and the communities we serve."Income Statement
- Net interest income was $71.8 million for the second quarter 2023, compared to $75.0 million for the prior quarter and $82.9 million for the year-ago quarter. The decrease in net interest income from the prior quarter was primarily driven by the impact of higher interest rates paid on deposits and the full impact of changes in the funding mix beginning late in the first quarter of 2023. These changes included a higher level of borrowings at rates higher than those of the deposits those borrowings replaced, as well as a shift in noninterest bearing deposit accounts to interest bearing deposit accounts. Although higher interest rates benefited loan yields as variable rate loans adjusted upward and new loans were added at current, higher rates, the increase to interest income was less than the increase in interest expense on average deposits and average borrowings.
- Net interest margin ("NIM") was 2.49% for the second quarter 2023, compared to 2.77% for the prior quarter and 2.94% for the year-ago quarter. The decrease in margin from the prior quarter was 28 basis points. The NIM contraction was based on the cost of funds increasing by 58 basis points, partially offset by the yield on earning assets increasing 27 basis points.
- The yield on the loan portfolio was 6.64% for the second quarter 2023, compared to 6.35% for the prior quarter and 4.51% for the year-ago quarter. The increase of 29 basis points from the prior quarter was from variable rate loans adjusting upward and from higher rates on newly originated loans.
- The yield on interest earning assets, which is inclusive of the yields on loans and securities, was 5.44% for the second quarter 2023 compared to 5.17% for the prior quarter and 3.39% for the year-ago quarter. The increase of 27 basis points from the prior quarter was from variable rate loans adjusting upward, higher rates on newly originated loans, and higher rates on short-term investments.
- The cost of funds was 3.20% for second quarter 2023, compared to 2.62% for the prior quarter and 0.49% for the year-ago quarter.4 The increase of 58 basis points from the prior quarter was primarily due to the impact of higher interest rates paid on deposits and the full impact of changes late in the first quarter of 2023 that included a higher level of borrowings at rates higher than those of the deposits the borrowings replaced along with a continued shift in noninterest bearing deposit accounts to interest bearing deposit accounts.
- Pre-provision net revenue ("PPNR"),5 a non-GAAP measure, was $42.4 million, or 1.43% of average assets for the second quarter 2023, up from $38.1 million and 1.35%, respectively. This increase from the prior quarter in both PPNR and PPNR as a percent of average assets was primarily attributable to the combined impact of the higher noninterest income and lower noninterest expense outpacing the decline in net interest income.
(Dollars in thousands) Three Months Ended Percent Change June 30, March 31, June 30, Q2-23 Q2-23 2023 2023 2022 vs. Q1-23 vs. Q2-22 Net interest income $ 71,811 $ 75,024 $ 82,918 (4.3)% (13.4)% Noninterest income 8,595 3,700 5,564 132.3 % 54.5 % Noninterest expense (37,978 ) (40,584 ) (58,962 ) (6.4)% (35.6)% PPNR (non-GAAP) $ 42,428 $ 38,140 $ 29,520 11.2 % 43.7 % Average Assets $ 11,960,111 $ 11,426,056 $ 11,701,679 4.7 % 2.2 % As a Percent of Average Assets Basis Point Change Net interest income 2.41 % 2.66 % 2.81 % (25) bps (40) bps Noninterest income 0.29 % 0.13 % 0.19 % 16 bps 10 bps Noninterest expense (1.27)% (1.44)% (2.00)% 17 bps 73 bps PPNR to Average Assets (non-GAAP) 1.43 % 1.35 % 1.00 % 8 bps 43 bps - Provision for credit losses on loans was $5.2 million for the second quarter 2023, compared to $6.2 million for the prior quarter and $0.5 million for the year-ago quarter. The decrease in the second quarter 2023 provision over the prior quarter was primarily driven by a lower quantitative formula reserve partially offset by a higher reserve based on the qualitative and environmental ("Q&E") portion of the credit model. The decrease in quantitative reserves was primarily driven by improvements in local unemployment data. The increase in Q&E modeling was driven by a higher allowance for commercial real estate office properties partially offset by a lower allowance for accommodations and food services.
- Noninterest income was $8.6 million for the second quarter 2023, as compared to $3.7 million for the prior quarter and $5.6 million for the year-ago quarter. The primary driver for the increase in the second quarter 2023 from the prior quarter were income of $2.8 million from an SBIC fund and an increase in swap fee income of $959 thousand.
- Noninterest expense was $38.0 million for the second quarter 2023 compared to $40.6 million for the prior quarter and $59.0 million for the year-ago quarter. Noninterest expense was down $2.6 million from the prior quarter, primarily due to the prior quarter including higher compensation and legal expenses and was down $21.0 million from the year-ago quarter which included a large non-recurring expense related to legal settlements associated with the previously disclosed government investigations.
Notable changes from the prior quarter were as follows:
- Salaries and employee benefits were $22.0 million, down $2.2 million from the prior quarter. The decrease was primarily due to a reduction in the annual incentive bonus accrual and payroll taxes from the prior quarter.
- Legal, accounting and professional fees were $2.6 million, down $605 thousand from the prior quarter. The decrease was primarily due to lower legal expenses.
- FDIC insurance was $2.6 million, up $1.1 million from the prior quarter. The increase was primarily from higher assessment fees in 2023.
- Other expenses were $3.3 million, down $1.3 million from the prior quarter. The decrease was primarily due to the prior quarter including compensation to the Company's Executive Chairman.
During the second quarter 2023, the Georgetown branch (DC) and Chantilly branch (VA) were closed as their leases were expiring. Associated unamortized costs included in the second quarter was $240 thousand. This reduced our branch count to thirteen, and the annualized pre-tax cost savings in rental expense starting in the third quarter of 2023 will be approximately $408 thousand.
- Efficiency ratio6 was 47.2% for the second quarter 2023, compared to 51.6% for the prior quarter. The improvement in the efficiency ratio this quarter was primarily driven by higher noninterest income (as a result of income from an SBIC fund and swap fee income) and lower noninterest expense, which more than offset the reduction in net interest income.
- Effective income tax rate for the second quarter 2023 was 22.2%, compared to 22.1% for the prior quarter.
Balance Sheet
- Total assets were $11.0 billion at June 30, 2023, down 0.5% from a quarter ago and up 0.9% from a year ago. The decrease in assets from a quarter ago was primarily from lower balances in investment securities, partially offset by limited growth in loans. Loans-to-deposits was 101% at June 30, 2023, down from 104% a quarter ago.
- Investment securities Available-for-Sale ("AFS") had a balance of $1.5 billion at June 30, 2023, down 2.9% from a quarter ago and down 12.5% from a year ago. The decrease from the prior quarter-end was primarily from principal paydowns, maturities received and lower carrying values on AFS securities. No new investments were purchased during the second quarter of 2023.
- Investment securities Held-to-Maturity ("HTM") had a balance of $1.1 billion at June 30, 2023, down 1.9% from a quarter ago and down 7.7% from a year ago. The decrease from the prior quarter-end was primarily from principal paydowns and maturities received. No new investments were purchased during the second quarter of 2023.
Investment securities HTM had a fair value that was $132 million less than carrying value at quarter-end, compared to a difference of $112 million a quarter ago.
- Total loans (excluding loans held for sale) were $7.8 billion at June 30, 2023, up 0.4% from a quarter ago and up 8.6% from a year ago. The increase in total loans from the prior quarter-end was driven by growth in commercial real estate ("CRE") loans as period-end balances for commercial & industrial loans and construction loans for commercial and residential properties were down.
At June 30, 2023, income-producing commercial real estate loans secured by office properties other than owner-occupied properties ("CRE office loans") were 12.6% of the total loan portfolio, and we did not have any office construction loans (secured by offices outstanding). Our CRE office loans are primarily located in the Washington DC market with 24.1% in the District of Columbia, 33.0% in Washington's Maryland suburbs, 34.9% in Northern Virginia, and 8.0% located outside these markets.
(Dollars in thousands) June 30, 2023 March 31, 2023 June 30, 2022 Amount % Amount % Amount % Loan Balances - Period End: Commercial and Industrial $ 1,431,284 18 % $ 1,482,983 19 % $ 1,394,835 20 % PPP loans 649 — % 709 — % 8,977 — % Commercial real estate - income producing 4,086,049 53 % 3,970,903 51 % 3,606,506 50 % Commercial real estate - owner occupied 1,122,334 14 % 1,095,699 14 % 1,080,249 15 % 1-4 Family mortgage 76,596 1 % 73,677 1 % 72,793 1 % Construction - commercial and residential 862,869 11 % 948,877 13 % 804,170 11 % Construction - C&I (owner occupied) 132,843 2 % 109,013 1 % 129,717 2 % Home equity 53,934 1 % 53,829 1 % 53,193 1 % Other consumer 161 — % 1,986 — % 4,246 — % Total loans $ 7,766,719 100 % $ 7,737,676 100 % $ 7,154,686 100 % - Allowance for credit losses was 1.00% of total loans at June 30, 2023, compared to 1.01% a quarter ago, and 1.02% a year ago. See commentary above in section "Provision for Credit Losses on Loans."
Net charge-off was $5.6 million for the quarter, which as a percent of average loans (excluding loans held for sale)7 was 0.29% for the second quarter 2023, compared to 0.05% a quarter ago, and net recovery of 0.04% the year-ago quarter. Charge-offs for the second quarter 2023 were primarily from two office properties outside of the District of Columbia.
- Nonperforming loans and assets were $29.2 million and $30.7 million, respectively, at June 30, 2023.
- Nonperforming loans ("NPLs") as a percent of loans were 0.38% at June 30, 2023, compared to 0.09% a quarter ago and 0.26% a year ago. The increase from a quarter ago was primarily from one commercial office note in Northern Virginia, of which a portion was charged off during the second quarter of 2023.
- Nonperforming assets ("NPAs") as a percent of assets were 0.28% at June 30, 2023, compared to 0.08% a quarter ago and 0.19% a year ago. The increase in NPAs from the prior quarter are related to the same NPL discussed above. At quarter end, other real estate owned consisted of three properties with an aggregate value of $1.5 million.
- Loans 30-89 days late were $41.4 million at June 30, 2023, up from $15.7 million a quarter ago and $3.9 million a year ago. The increase from the prior quarter was primarily from one multi-family credit for $39.5 million.
(Dollars in thousands) Three Months Ended or As Of June 30, March 31, June 30, 2023 2023 2022 Asset Quality: Net charge-off (recovery) $ 5,598 $ 975 $ (674 ) Nonperforming loans $ 29,170 $ 6,756 $ 18,842 Other real estate owned $ 1,487 $ 1,962 $ 1,487 Nonperforming assets $ 30,657 $ 8,718 $ 20,329 - Total deposits were $7.7 billion at June 30, 2023, up 3.4% from a quarter ago and down 15.8% from a year ago. The increase from the prior quarter-end was primarily attributable to an increase in brokered time deposits. For the quarter, average noninterest bearing deposits to average total deposits was 30.1% for the second quarter 2023, down from 37.4% a quarter ago and down from 37.9% for the year-ago quarter. The percentage decrease in the second quarter 2023 reflected a lower level of noninterest bearing deposits and a higher level of brokered time deposits.
Total estimated uninsured deposits at June 30, 2023 were $2.3 billion8, or 29.4% of deposits.
- Other short-term borrowings were $1.8 billion at June 30, 2023, down from $2.1 billion a quarter ago, and up from $280 million a year ago. The decrease in borrowings of $277 million from a quarter ago was primarily driven by the increase in deposits which were used to pay down borrowings. During the quarter, FHLB borrowings decreased by $777 million, while Bank Term Funding Program ("BTFP") borrowings increased by $500 million.
- BTFP borrowings were $1.3 billion at June 30, 2023 with a rate of 4.53% for a term of up to one year from the date the proceeds were borrowed.
- FHLB borrowings were $537 million at June 30, 2023 with a floating rate, at an average rate of 5.34% for terms that are either overnight or less than three months.
Borrowings from the BTFP are secured by U.S. Treasuries, agency debt and mortgage-backed securities as collateral, and borrowings from the FHLB are secured by collateral consisting of qualifying loans in the Bank's commercial mortgage, residential mortgage and home equity loan portfolios as well as qualifying securities.
The BTFP provides a source of liquidity in addition to sources available from the FHLB and others. The Company drew advances from the BTFP to optimize its funding mix taking into account collateral terms and interest rates at the time the program was accessed. As of June 30, 2023, the Company had aggregate undrawn borrowing capacity of $1.84 billion, which includes $1.57 billion in additional aggregate capacity to borrow with the FHLB and BTFP on assets that have been pledged and unencumbered securities totaling approximately $0.27 billion available for pledging to the FHLB or BTFP.
- Total shareholders’ equity was $1.2 billion at June 30, 2023, down 1.8% from a quarter ago, and down 2.6% from a year ago. The decrease in shareholders' equity of $22.2 million from the prior quarter-end was primarily from share repurchases, dividends declared and lower valuations of AFS securities, partially offset by net income. Values for book and tangible book were up as share repurchases, at prices below book and tangible book values, reduced the number of shares outstanding in each of the past two quarters.
- Book value per share was $40.78, up $0.86 from a quarter ago, and up $1.73 from a year ago.
- Tangible book value per share9 was $37.29, up $0.72 from a quarter ago, and up $1.49 from a year ago.
- Dividends: On June 29, 2023, the Board of Directors declared a quarterly cash dividend of $0.45 per share payable on July 28, 2023 to shareholders of record on July 20, 2023.
- Stock Repurchases: During the quarter, the Company repurchased 1,200,000 shares at an average price of $24.48 per share (including commissions), totaling an aggregate of $29.4 million.
- Capital ratios for the Company are in the table below. Regulatory capital ratios for the Company continue to be strong and in excess of the regulatory requirements (inclusive of applicable buffers).
For the Company Regulatory June 30, March 31, June 30, Capital 202310 2023 2022 Requirements Regulatory Capital Ratios Total Capital (to risk weighted assets) 14.51 % 14.74 % 15.14 % 10.50 % Tier 1 Capital (to risk weighted assets) 13.55 % 13.75 % 14.06 % 8.50 % Common Equity Tier 1 (to risk weighted assets) 13.55 % 13.75 % 14.06 % 7.00 % Tier 1 Capital (to average assets) 10.84 % 11.42 % 10.68 % 4.00 % Common Capital Ratios Common Equity Ratio 11.05 % 11.20 % 11.45 % — Tangible Common Equity Ratio8 10.21 % 10.36 % 10.60 % — Additional financial information: The financial information that follows provides more detail on the Company’s financial performance for the three months ended June 30, 2023 as compared to the three months ended March 31, 2023 and June 30, 2022, as well as eight quarters of trend data. Persons wishing additional information should refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, and other reports filed with the SEC.
About Eagle Bancorp: The Company is the holding company for EagleBank, which commenced operations in 1998. The Bank is headquartered in Bethesda, Maryland, and operates through thirteen banking offices and four lending offices, located in Suburban Maryland, Washington, D.C. and Northern Virginia. The Company focuses on building relationships with businesses, professionals and individuals in its marketplace, and is committed to a culture of respect, diversity, equity and inclusion in both its workplace and the communities in which it operates.
Conference call: Eagle Bancorp will host a conference call to discuss its second quarter 2023 financial results on Thursday, July 27, 2023 at 10:00 a.m. eastern time. The public is invited to listen to this call by registering at the link https://register.vevent.com/register/BI30f9a7927bd6415a9f57cd5c54b5bf55 or by accessing the call on the Company’s website, www.EagleBankCorp.com. A replay of the conference call will be available on the Company’s website through August 10, 2023.
Forward-looking statements: This press release contains forward-looking statements within the meaning of the Securities Exchange Act of 1934, as amended, including statements of goals, intentions, and expectations as to future trends, plans, events or results of Company operations and policies and regarding general economic conditions. In some cases, forward-looking statements can be identified by use of words such as "may," "will," "can," "anticipates," "believes," "expects," "plans," "estimates," "potential," "continue," "should," "could," "strive," "feel" and similar words or phrases. These statements are based upon current and anticipated economic conditions, nationally and in the Company’s market (including ongoing challenges and uncertainties relating to the continued evolution of COVID-19, including its impact on our credit quality, asset and loan growth and broader business operations; volatility in interest rates and interest rate policy; the current high inflationary environment; competitive factors) and other conditions (such as the impact of bank failures or adverse developments at other banks and related negative press about the banking industry in general on investor and depositor sentiment regarding the stability and liquidity of banks), which by their nature are not susceptible to accurate forecast and are subject to significant uncertainty. Because of these uncertainties and the assumptions on which this discussion and the forward-looking statements are based, actual future operations and results in the future may differ materially from those indicated herein. For details on factors that could affect these expectations, see the risk factors and other cautionary language included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 and in other periodic and current reports filed with the SEC. Readers are cautioned against placing undue reliance on any such forward-looking statements. The Company’s past results are not necessarily indicative of future performance, and nothing contained herein is meant to or should be considered and treated as earnings guidance of future quarters’ performance projections. Information regarding the Company’s uninsured deposits consists of preliminary estimates, which are forward-looking statements and subject to change, possibly materially, as the Company completes its second quarter 2023 Call Report. All information is as of the date of this press release. Any forward-looking statements made by or on behalf of the Company speak only as to the date they are made. Except to the extent required by applicable law or regulation, the Company undertakes no obligation to revise or update publicly any forward-looking statement for any reason.
1 A reconciliation between this non-GAAP financial measure and the nearest GAAP measure is provided in the tables that accompany this document.
2 A reconciliation between this non-GAAP financial measure and the nearest GAAP measure is provided in the tables that accompany this document. Adjusted net income and adjusted earnings per share (diluted) for the year ago quarter are compared to GAAP net income and earnings per share for the second quarter of 2023.
3 Branches closed were Alexandria, VA (March 2023), Georgetown, DC (May 2023) and Chantilly, VA (May 2023).
4 Beginning in the second quarter of 2023, the Company revised its methodology for calculating cost of funds. Prior periods have been conformed to the current presentation. See footnote (3) on page 14.
5 A reconciliation between this non-GAAP financial measure and the nearest GAAP measure is provided in the table below.
6 A reconciliation between this non-GAAP financial measure and the nearest GAAP measure is provided in the tables that accompany this document.
7 Net charge-offs as a percent of average loans (excluding loans held for sale) are shown on an annualized basis.
8 Estimated amount of uninsured deposits to be reported on line RCON5597 of schedule RC-O in EagleBank's June 30, 2023 Call Report.
9 A reconciliation of non-GAAP financial measures to the nearest GAAP measure is provided in the tables that accompany this document.
10 Capital ratios for June 30, 2023 are subject to final filings with the Federal Reserve.GAAP Reconciliation (unaudited) (dollars in thousands, except per share data) June 30, March 31, June 30, 2023 2023 2022 Tangible equity and assets Common shareholders' equity $ 1,219,766 $ 1,241,958 $ 1,252,720 Less: Intangible assets (104,220 ) (104,226 ) (104,257 ) Tangible common equity $ 1,115,546 $ 1,137,732 $ 1,148,463 Book value per common share $ 40.78 $ 39.92 $ 39.05 Less: Intangible book value per common share (3.49 ) (3.35 ) (3.25 ) Tangible book value per common share $ 37.29 $ 36.57 $ 35.80 Shares outstanding period end 29,912,082 31,111,647 32,081,241 Total assets $ 11,034,741 $ 11,088,867 $ 10,941,655 Less: Intangible assets (104,220 ) (104,226 ) (104,257 ) Tangible assets $ 10,930,521 $ 10,984,641 $ 10,837,398 Tangible common equity ratio 10.21 % 10.36 % 10.60 % Three Months Ended June 30, March 31, June 30, 2023 2023 2022 Average tangible common equity Average common shareholders' equity $ 1,245,647 $ 1,240,978 $ 1,281,742 Less: Average intangible assets (104,224 ) (104,231 ) (104,246 ) Average tangible common equity $ 1,141,423 $ 1,136,747 $ 1,177,496 Return on Average Tangible Common Equity 10.08 % 8.65 % 5.35 % Adjusted Efficiency Net interest income $ 71,811 $ 75,024 $ 82,918 Noninterest income 8,595 3,700 5,564 Operating revenue $ 80,406 $ 78,724 $ 88,482 Noninterest expense $ 37,978 $ 40,584 $ 58,962 Less: Penalty, disgorgement and prejudgment interest — — 22,874 Adjusted noninterest expense $ 37,978 $ 40,584 $ 36,088 Efficiency ratio 47.2 % 51.6 % 66.6 % Adjusted efficiency ratio 47.2 % 51.6 % 40.8 % GAAP Reconciliation (unaudited) (dollars in thousands, except per share data) Three Months Ended June 30, March 31, June 30, 2023 2023 2022 Adjusted Net Income Net Income $ 28,692 $ 24,234 $ 15,696 Income before income tax expense $ 36,872 $ 31,128 $ 28,472 Reversal: Penalty, disgorgement & prejudgment interest — — 22,874 Adjusted income before income tax expense 36,872 31,128 51,346 Income tax expense(1) 8,180 6,894 12,776 Adjusted net income $ 28,692 $ 24,234 $ 38,570 Adjusted Earnings Per Share Earnings per share (diluted) $ 0.94 $ 0.78 $ 0.49 Reversal: Penalty, disgorgement and prejudgment interest — — 0.71 Adjusted earnings per share (diluted) $ 0.94 $ 0.78 $ 1.20 Weighted average common shares outstanding, diluted 30,505,468 31,180,346 32,142,427 (1) For the three months ended June 30, 2023, the effective tax rate for the quarter was applied to the adjustment. For the three months ended June 30, 2022, the adjustment was non-taxable with no impact of the effective tax rate.
Tangible common equity to tangible assets (the "tangible common equity ratio"), tangible book value per common share, average tangible common equity, and the return on average tangible common equity are non-GAAP financial measures derived from GAAP based amounts. The Company calculates the tangible common equity ratio by excluding the balance of intangible assets from common shareholders' equity and dividing by tangible assets. The Company calculates tangible book value per common share by dividing tangible common equity by common shares outstanding, as compared to book value per common share, which the Company calculates by dividing common shareholders' equity by common shares outstanding. The Company calculates the annualized return on average tangible common equity ratio by dividing net income available to common shareholders by average tangible common equity, which is calculated by excluding the average balance of intangible assets from the average common shareholders’ equity. The Company considers this information important to shareholders as tangible equity is a measure that is consistent with the calculation of capital for bank regulatory purposes, which excludes intangible assets from the calculation of risk based ratios, and as such is useful for investors, regulators, management and others to evaluate capital adequacy and to compare against other financial institutions. The above tables provides reconciliation of these financial measures defined by GAAP with non-GAAP financial measures.
Efficiency ratio is a non-GAAP measure calculated by dividing GAAP non-interest expense by the sum of GAAP net interest income and GAAP non-interest (loss) income. The Company believes that reporting the non-GAAP efficiency ratio more closely measures its effectiveness of controlling operational activities. The table above shows the calculation of the efficiency ratio from these GAAP measures.
Adjusted net income is a non-GAAP financial measure calculated by reversing the penalty, disgorgement and prejudgment interest (2nd quarter 2022) to net income. The Company considers this information important to shareholders because it illustrates net income excluding the impact of non-recurring items. The above table provides reconciliation of these financial measures defined by GAAP to non-GAAP financial measures.
Adjusted earnings per share is a non-GAAP financial measure calculated by dividing the penalty, disgorgement and prejudgment interest (2nd quarter 2022) by weighted average common shares outstanding (diluted) then adding the result to earnings per share. The Company considers this information important to shareholders because it illustrates earnings on a per share basis excluding the impact of non-recurring items. The above table provides reconciliation of these financial measures defined by GAAP to non-GAAP financial measures.
Pre-provision net revenue is a non-GAAP financial measure derived from GAAP based amounts. The Company calculates PPNR by subtracting noninterest expenses from the sum of net interest income and noninterest income. PPNR to Average Assets is calculated by dividing the PPNR amount by average assets to obtain a percentage. The Company considers this information important to shareholders because it illustrates revenue excluding the impact of provisions and reversals to the allowance for credit losses on loans. The table in the "Income Statement" section of this earnings release provides a reconciliation of PPNR and PPNR to Average Assets to the nearest GAAP measure.
Eagle Bancorp, Inc. Consolidated Balance Sheets (Unaudited) (Dollars in thousands, except per share data) June 30, March 31, June 30, Assets 2023 2023 2022 Cash and due from banks $ 9,865 $ 9,940 $ 13,132 Federal funds sold 3,981 3,746 42,697 Interest-bearing deposits with banks and other short-term investments 174,072 159,078 369,337 Investment securities available-for-sale at fair value (amortized cost of $1,732,722, $1,763,371, and $1,897,985, net of allowance for credit losses of $17, $31 and $18 as of June 30, 2023, March 31, 2023 and June 30, 2022, respectively) 1,535,589 1,582,185 1,755,254 Investment securities held-to-maturity at amortized cost, net of allowance for credit losses of $2,010, $2,008 and $826 (fair value of $923,313, $965,786 and $1,084,706, as of June 30, 2023, March 31, 2023 and June 30, 2022, respectively) 1,055,181 1,075,303 1,143,632 Federal Reserve and Federal Home Loan Bank stock 46,199 79,134 33,990 Loans held for sale — 6,488 13,814 Loans 7,766,719 7,737,676 7,154,686 Less allowance for credit losses (78,029 ) (78,377 ) (72,665 ) Loans, net 7,688,690 7,659,299 7,082,021 Premises and equipment, net 11,979 12,929 13,643 Operating lease right-of-use assets 21,580 23,060 27,548 Deferred income taxes 92,574 89,117 92,167 Bank-owned life insurance 111,565 111,217 110,047 Goodwill and intangible assets, net 104,220 104,226 104,257 Other real estate owned 1,487 1,962 1,487 Other assets 177,759 171,183 138,629 Total assets $ 11,034,741 $ 11,088,867 $ 10,941,655 Liabilities and Shareholders' Equity Deposits: Noninterest bearing demand $ 2,010,353 $ 2,247,706 $ 2,831,934 Interest bearing transaction 930,308 907,637 985,431 Savings and money market 2,791,040 2,970,093 4,741,180 Time deposits 1,986,426 1,337,805 613,073 Total deposits 7,718,127 7,463,241 9,171,618 Customer repurchase agreements 37,017 37,854 26,539 Other short-term borrowings 1,836,759 2,113,801 280,000 Long-term borrowings 69,856 69,825 69,732 Operating lease liabilities 26,007 27,634 32,414 Reserve for unfunded commitments 7,023 6,704 4,921 Other liabilities 120,186 127,850 103,711 Total liabilities 9,814,975 9,846,909 9,688,935 Shareholders' Equity Common stock, par value $.01 per share; shares authorized 100,000,000, shares issued and outstanding 29,912,082, 31,111,647, and 32,081,241 respectively 296 308 318 Additional paid in capital 370,278 397,012 440,418 Retained earnings 1,040,779 1,025,552 964,353 Accumulated other comprehensive loss (191,587 ) (180,914 ) (152,369 ) Total Shareholders' Equity 1,219,766 1,241,958 1,252,720 Total Liabilities and Shareholders' Equity $ 11,034,741 $ 11,088,867 $ 10,941,655 Eagle Bancorp, Inc. Consolidated Statements of Income (Unaudited) (Dollars in thousands, except per share data) Three Months Ended June 30, March 31, June 30, 2023 2023 2022 Interest Income Interest and fees on loans $ 128,993 $ 120,850 $ 80,142 Interest and dividends on investment securities 14,241 13,545 12,997 Interest on balances with other banks and short-term invest. 13,229 5,774 2,451 Interest on federal funds sold 47 78 45 Total interest income 156,510 140,247 95,635 Interest Expense Interest on deposits 59,422 48,954 11,538 Interest on customer repurchase agreements 333 302 22 Interest on other short-term borrowings 23,907 14,930 120 Interest on long-term borrowings 1,037 1,037 1,037 Total interest expense 84,699 65,223 12,717 Net Interest Income 71,811 75,024 82,918 Provision for Credit Losses 5,238 6,164 495 Provision for Unfunded Commitments 318 848 553 Net Interest Income After Provision For Credit Losses 66,255 68,012 81,870 Noninterest Income Service charges on deposits 1,626 1,510 1,345 Gain on sale of loans 95 305 855 Net gain (loss) on sale of investment securities 2 (21 ) (151 ) Increase in cash surrender value of bank-owned life insurance 648 655 632 Other income 6,224 1,251 2,883 Total noninterest income 8,595 3,700 5,564 Noninterest Expense Salaries and employee benefits 21,957 24,174 21,805 Premises and equipment expenses 3,227 3,317 3,523 Marketing and advertising 884 636 1,186 Data processing 3,354 3,099 2,729 Legal, accounting and professional fees 2,649 3,254 2,137 FDIC insurance 2,581 1,486 906 Other expenses 3,326 4,618 26,676 Total noninterest expense 37,978 40,584 58,962 Income Before Income Tax Expense 36,872 31,128 28,472 Income Tax Expense 8,180 6,894 12,776 Net Income $ 28,692 $ 24,234 $ 15,696 Earnings Per Common Share Basic $ 0.94 $ 0.78 $ 0.49 Diluted $ 0.94 $ 0.78 $ 0.49 Eagle Bancorp, Inc. Consolidated Average Balances, Interest Yields And Rates vs. Prior Quarter (Unaudited) (Dollars in thousands) Three Months Ended June 30, 2023 March 31, 2023 Average
BalanceInterest Average
Yield/RateAverage
BalanceInterest Average
Yield/RateASSETS Interest earning assets: Interest bearing deposits with other banks and other short-term investments $ 1,053,961 $ 13,229 5.03 % $ 526,506 $ 5,774 4.45 % Loans held for sale(1) 813 13 6.40 % 4,093 60 5.86 % Loans(1) (2) 7,790,555 128,980 6.64 % 7,712,023 120,790 6.35 % Investment securities available-for-sale(2) 1,626,330 8,526 2.10 % 1,660,258 7,811 1.91 % Investment securities held-to-maturity(2) 1,068,755 5,715 2.14 % 1,087,047 5,734 2.14 % Federal funds sold 5,636 47 3.34 % 14,890 78 2.12 % Total interest earning assets 11,546,050 $ 156,510 5.44 % 11,004,817 $ 140,247 5.17 % Total noninterest earning assets 492,426 495,889 Less: allowance for credit losses 78,365 74,650 Total noninterest earning assets 414,061 421,239 TOTAL ASSETS $ 11,960,111 $ 11,426,056 LIABILITIES AND SHAREHOLDERS' EQUITY Interest bearing liabilities: Interest bearing transaction $ 1,312,710 $ 10,640 3.25 % $ 1,065,421 $ 6,107 2.32 % Savings and money market 2,967,678 30,861 4.17 % 3,326,807 33,274 4.06 % Time deposits 1,675,690 17,921 4.29 % 1,078,227 9,573 3.60 % Total interest bearing deposits 5,956,078 59,422 4.00 % 5,470,455 48,954 3.63 % Customer repurchase agreements 41,105 333 3.25 % 38,257 302 3.20 % Other short-term borrowings 1,991,557 23,907 4.80 % 1,251,392 14,930 4.77 % Long-term borrowings 69,845 1,037 5.94 % 69,814 1,037 5.94 % Total interest bearing liabilities 8,058,585 $ 84,699 4.22 % 6,829,918 $ 65,223 3.87 % Noninterest bearing liabilities: Noninterest bearing demand 2,558,860 3,263,670 Other liabilities 97,019 91,490 Total noninterest bearing liabilities 2,655,879 3,355,160 Shareholders’ equity 1,245,647 1,240,978 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 11,960,111 $ 11,426,056 Net interest income $ 71,811 $ 75,024 Net interest spread 1.22 % 1.30 % Net interest margin 2.49 % 2.77 % Cost of funds(3) 3.20 % 2.62 % (1) Loans placed on nonaccrual status are included in average balances. Net loan fees and late charges included in interest income on loans totaled $4.2 million and $3.7 million for the three months ended June 30, 2023 and March 31, 2023, respectively.
(2) Interest and fees on loans and investments exclude tax equivalent adjustments.
(3) Beginning in the second quarter of 2023, the Company revised its cost of funds methodology to use a daily average calculation where interest expense on interest bearing liabilities is divided by average interest bearing liabilities and average noninterest bearing deposits. Previously, the Company calculated the cost of funds as the difference between yield on earning assets and net interest margin. Under the current methodology, the cost of funds for fourth quarter 2022 was 1.74% and for third quarter 2022 was 1.09%.Eagle Bancorp, Inc. Consolidated Average Balances, Interest Yields And Rates vs. Year Ago Quarter (Unaudited) (Dollars in thousands) Three Months Ended June 30, 2023 2022 Average
BalanceInterest Average
Yield/RateAverage
BalanceInterest Average
Yield/RateASSETS Interest earning assets: Interest bearing deposits with other banks and other short-term investments $ 1,053,961 $ 13,229 5.03 % $ 1,193,253 $ 2,451 0.82 % Loans held for sale(1) 813 13 6.40 % 16,342 179 4.38 % Loans(1) (2) 7,790,555 128,980 6.64 % 7,104,727 79,963 4.51 % Investment securities available-for-sale(2) 1,626,330 8,526 2.10 % 1,793,047 7,022 1.57 % Investment securities held-to-maturity(2) 1,068,755 5,715 2.14 % 1,157,308 5,975 2.07 % Federal funds sold 5,636 47 3.34 % 35,590 45 0.51 % Total interest earning assets 11,546,050 $ 156,510 5.44 % 11,300,267 $ 95,635 3.39 % Total noninterest earning assets 492,426 474,336 Less: allowance for credit losses 78,365 72,924 Total noninterest earning assets 414,061 401,412 TOTAL ASSETS $ 11,960,111 $ 11,701,679 LIABILITIES AND SHAREHOLDERS' EQUITY Interest bearing liabilities: Interest bearing transaction $ 1,312,710 $ 10,640 3.25 % $ 856,388 $ 630 0.30 % Savings and money market 2,967,678 30,861 4.17 % 4,810,047 8,772 0.73 % Time deposits 1,675,690 17,921 4.29 % 657,220 2,136 1.30 % Total interest bearing deposits 5,956,078 59,422 4.00 % 6,323,655 11,538 0.73 % Customer repurchase agreements 41,105 333 3.25 % 25,112 22 0.35 % Other short-term borrowings 1,991,557 23,907 4.80 % 57,750 120 0.83 % Long-term borrowings 69,845 1,037 5.94 % 69,721 1,037 5.95 % Total interest bearing liabilities 8,058,585 $ 84,699 4.22 % 6,476,238 $ 12,717 0.79 % Noninterest bearing liabilities: Noninterest bearing demand 2,558,860 3,861,231 Other liabilities 97,019 82,468 Total noninterest bearing liabilities 2,655,879 3,943,699 Shareholders’ equity 1,245,647 1,281,742 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 11,960,111 $ 11,701,679 Net interest income $ 71,811 $ 82,918 Net interest spread 1.22 % 2.60 % Net interest margin 2.49 % 2.94 % Cost of funds(3) 3.20 % 0.49 % (1) Loans placed on nonaccrual status are included in average balances. Net loan fees and late charges included in interest income on loans totaled $4.2 million and $4.3 million for the three months ended June 30, 2023 and June 30, 2022, respectively.
(2) Interest and fees on loans and investments exclude tax equivalent adjustments.
(3) Beginning in the the second quarter of 2023, the Company revised its cost of funds methodology to use a daily average calculation where interest expense on interest bearing liabilities is divided by average interest bearing liabilities and average noninterest bearing deposits. Previously, the Company calculated the cost of funds as the difference between yield on earning assets and net interest margin.Eagle Bancorp, Inc. Statements of Income and Highlights Quarterly Trends (Unaudited) (Dollars in thousands, except per share data) Three Months Ended June 30, March 31, December 31, September 30, June 30, March 31, December 31, September 30, Income Statements: 2023 2023 2022 2022 2022 2022 2021 2021 Total interest income $ 156,510 $ 140,247 $ 129,130 $ 111,527 $ 95,635 $ 88,321 $ 86,230 $ 89,152 Total interest expense 84,699 65,223 43,530 27,630 12,717 7,869 8,044 10,107 Net interest income 71,811 75,024 85,600 83,897 82,918 80,452 78,186 79,045 Provision for (reversal of) credit losses 5,238 6,164 (464 ) 3,022 495 (2,787 ) (6,412 ) (8,203 ) Provision for (reversal of) unfunded commitments 318 848 161 774 553 (11 ) (632 ) 716 Net interest income after provision for credit losses 66,255 68,012 85,903 80,101 81,870 83,250 85,230 86,532 Noninterest income before investment gain (loss) 8,593 3,721 5,326 5,304 5,715 7,478 9,668 6,780 Net gain (loss) on sale of investment securities 2 (21 ) 3 4 (151 ) (25 ) 906 1,519 Total noninterest income 8,595 3,700 5,329 5,308 5,564 7,453 10,574 8,299 Salaries and employee benefits 21,957 24,174 23,691 21,538 21,805 17,019 24,608 22,145 Premises and equipment 3,227 3,317 3,292 3,275 3,523 3,128 3,755 3,859 Marketing and advertising 884 636 1,290 1,181 1,186 1,064 1,286 1,013 Other expenses 11,910 12,457 10,645 10,212 32,448 9,801 9,660 9,358 Total noninterest expense 37,978 40,584 38,918 36,206 58,962 31,012 39,309 36,375 Income before income tax expense 36,872 31,128 52,314 49,203 28,472 59,691 56,495 58,456 Income tax expense 8,180 6,894 10,121 11,906 12,776 13,947 14,875 14,847 Net income $ 28,692 $ 24,234 $ 42,193 $ 37,297 $ 15,696 $ 45,744 $ 41,620 $ 43,609 Per Share Data: Earnings per weighted average common share, basic $ 0.94 $ 0.78 $ 1.32 $ 1.16 $ 0.49 $ 1.43 $ 1.30 $ 1.36 Earnings per weighted average common share, diluted $ 0.94 $ 0.78 $ 1.32 $ 1.16 $ 0.49 $ 1.42 $ 1.30 $ 1.36 Weighted average common shares outstanding, basic 30,454,766 31,109,267 31,819,631 32,084,464 32,080,657 32,033,280 31,950,320 31,959,357 Weighted average common shares outstanding, diluted 30,505,468 31,180,346 31,898,619 32,155,678 32,142,427 32,110,099 32,030,998 32,030,527 Actual shares outstanding at period end 29,912,082 31,111,647 31,346,903 32,082,321 32,081,241 32,079,474 31,950,092 31,947,458 Book value per common share at period end $ 40.78 $ 39.92 $ 39.18 $ 38.02 $ 39.05 $ 39.89 $ 42.28 $ 41.68 Tangible book value per common share at period end(1) $ 37.29 $ 36.57 $ 35.86 $ 34.77 $ 35.80 $ 36.64 $ 38.97 $ 38.39 Dividend per common share $ 0.45 $ 0.45 $ 0.45 $ 0.45 $ 0.45 $ 0.40 $ 0.40 $ 0.40 Performance Ratios (annualized): Return on average assets 0.96 % 0.86 % 1.49 % 1.29 % 0.54 % 1.46 % 1.32 % 1.46 % Return on average common equity 9.24 % 7.92 % 13.57 % 11.64 % 4.91 % 13.83 % 12.30 % 13.00 % Return on average tangible common equity(1) 10.08 % 8.65 % 14.82 % 12.67 % 5.35 % 14.99 % 13.35 % 14.11 % Net interest margin 2.49 % 2.77 % 3.14 % 3.02 % 2.94 % 2.65 % 2.55 % 2.73 % Efficiency ratio(2) 47.2 % 51.6 % 42.8 % 40.6 % 66.6 % 35.3 % 44.3 % 41.7 % Other Ratios: Allowance for credit losses to total loans(3) 1.00 % 1.01 % 0.97 % 1.04 % 1.02 % 1.01 % 1.06 % 1.21 % Allowance for credit losses to total nonperforming loans 268 % 1,160 % 1,151 % 997 % 386 % 301 % 257 % 265 % Nonperforming loans to total loans(3) 0.38 % 0.09 % 0.08 % 0.10 % 0.26 % 0.33 % 0.41 % 0.46 % Nonperforming assets to total assets 0.28 % 0.08 % 0.08 % 0.09 % 0.19 % 0.23 % 0.26 % 0.31 % Net charge-off (recovery)(annualized) to average total loans(3) 0.29 % 0.05 % 0.05 % — % (0.04) % 0.03 % 0.07 % 0.08 % Tier 1 capital (to average assets) 10.84 % 11.42 % 11.63 % 11.55 % 10.68 % 9.82 % 10.19 % 10.58 % Total capital (to risk weighted assets) 14.51 % 14.74 % 14.94 % 15.60 % 15.14 % 15.21 % 15.74 % 16.18 % Common equity tier 1 capital (to risk weighted assets) 13.55 % 13.75 % 14.03 % 14.64 % 14.06 % 14.12 % 14.63 % 14.95 % Tangible common equity ratio(1) 10.21 % 10.36 % 10.18 % 10.52 % 10.60 % 10.57 % 10.60 % 10.68 % Average Balances (in thousands): Total assets $ 11,960,111 $ 11,426,056 $ 11,255,956 $ 11,431,110 $ 11,701,679 $ 12,701,152 $ 12,538,596 $ 11,826,326 Total earning assets $ 11,546,050 $ 11,004,817 $ 10,829,703 $ 11,030,670 $ 11,300,267 $ 12,326,473 $ 12,180,872 $ 11,486,280 Total loans(3) $ 7,790,555 $ 7,712,023 $ 7,379,198 $ 7,282,589 $ 7,104,727 $ 7,053,701 $ 6,890,414 $ 7,055,621 Total deposits $ 8,514,938 $ 8,734,125 $ 9,524,139 $ 9,907,497 $ 10,184,886 $ 10,874,976 $ 10,670,206 $ 9,948,114 Total borrowings $ 2,102,507 $ 1,359,463 $ 411,060 $ 158,001 $ 152,583 $ 371,987 $ 402,393 $ 448,697 Total shareholders’ equity $ 1,245,647 $ 1,240,978 $ 1,233,705 $ 1,271,753 $ 1,281,742 $ 1,341,785 $ 1,342,525 $ 1,331,022 (1) A reconciliation of non-GAAP financial measures to the nearest GAAP measure is provided in the tables that accompany this document.
(2) Computed by dividing noninterest expense by the sum of net interest income and noninterest income.
(3) Excludes loans held for sale.EAGLE BANCORP, INC. CONTACT: David G. Danielson 240.552.9534