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Eagle Bancorp, Inc. Announces Net Income for First Quarter 2023 of $24.2 Million or $0.78 per Diluted Share
Source: Nasdaq GlobeNewswire / 19 Apr 2023 15:15:01 America/Chicago
BETHESDA, Md., April 19, 2023 (GLOBE NEWSWIRE) -- Eagle Bancorp, Inc. (the "Company") (NASDAQ: EGBN), the parent company of EagleBank (the "Bank"), today announced net income of $24.2 million for the first quarter 2023, compared to net income of $42.2 million for the fourth quarter 2022 (the "prior quarter") and $45.7 million for the first quarter 2022 (the "year ago quarter"). Net income was $0.78 per share (basic and diluted) for the first quarter 2023, compared to $1.32 per share (basic and diluted) for the prior quarter, and $1.43 per share (basic) and $1.42 per share (diluted) for the year-ago quarter.
The $18.0 million decrease in earnings from the prior quarter was primarily attributable to the decrease in net interest income and a higher provision for credit losses. The decrease in net interest income was primarily attributable to higher interest expense as the rate paid on deposits increased in response to Federal Reserve rate increases and the funding mix changed reflecting a higher level of borrowings at rates higher than those of the deposits the borrowings replaced. These increases in interest expense outpaced the increase in interest income from loans. Additionally, the higher provision for credit losses was primarily attributable to qualitative factors, loan growth, and, to a lesser extent, reserves on corporate bonds within the securities portfolio.
First Quarter 2023 Highlights
- Common equity and tangible common equity ratios at quarter-end were 11.20% and 10.36%1, respectively.
- Nonperforming assets as a percent of assets was 0.08%. Net charge-off for the quarter was $975 thousand.
- Investment securities Held-to-Maturity had a fair value that was $112 million less than carrying value at quarter-end. This amount (unadjusted for tax impact) is 9.0% of quarter-end common shareholders' equity, which was $1.2 billion, and 9.8% of quarter-end tangible common equity, which was $1.1 billion1.
- Loans at quarter-end were $7.7 billion, up $102 million from the prior quarter-end. This was the sixth consecutive quarterly increase. Loans were up 1.3% from the prior quarter and 8.8% from the year-ago quarter.
- The provision for credit losses was $6.2 million for the quarter, as compared to a reversal of $0.5 million the prior quarter. The allowance for credit losses on loans was 1.01%, up from 0.97% a quarter ago and flat from 1.01% a year ago.
- The funding mix changed as deposits at quarter-end were $7.5 billion, down $1.2 billion from the prior quarter-end. Short-term borrowings were $2.1 billion, up $1.1 billion from the prior quarter-end.
- Aggregate borrowing capacity at quarter-end was $1.7 billion, which consists of $689 million of additional aggregate capacity to borrow from the Federal Home Loan Bank of Atlanta ("FHLB") and Bank Term Funding Program ("BTFP") on assets that have been pledged, and unencumbered securities totaling approximately $1.0 billion available for pledging to the FHLB or the BTFP.
- Uninsured deposits at quarter-end were $3.2 billion2, or 42.9% of total deposits.
- For our shareholders, during the quarter the Company repurchased 400,000 shares at an average price of $45.65 per share (including commissions), totaling an aggregate of $18.3 million. Additionally, the Company declared a quarterly dividend of $0.45 per share.
(Dollars in thousands, except per share data) As of or for the Three Months Ended Percent Change March 31, Dec. 31, March 31, Q1-23 Q1-23 2023 2022 2022 vs. Q4-22 vs. Q1-22 Income Statement Net income $ 24,234 $ 42,193 $ 45,744 (42.6 )% (47.0 )% Net income per diluted share $ 0.78 $ 1.32 $ 1.42 (40.9 )% (45.1 )% Dividend per common share $ 0.45 $ 0.45 $ 0.40 — % 12.5 % Selected Ratios Return on average assets 0.86 % 1.49 % 1.46 % — — — Return on average common equity 7.92 % 13.57 % 13.83 % — — — Return on average tangible common equity3 8.65 % 14.82 % 14.99 % — — — Net interest margin 2.77 % 3.14 % 2.65 % — — — Efficiency ratio3 51.6 % 42.8 % 35.3 % — — — Balance Sheet Assets $ 11,088,867 $ 11,150,854 $ 11,227,223 (0.6 )% (1.2 )% Loans $ 7,737,676 $ 7,635,632 $ 7,113,807 1.3 % 8.8 % Deposits $ 7,463,241 $ 8,713,182 $ 9,586,259 (14.3 )% (22.1 )% Total capital (to risk weighted assets) 14.74 % 14.94 % 15.21 % — — Per Share Book value per share $ 39.92 $ 39.18 $ 39.89 1.9 % 0.1 % Tangible book value per share3 $ 36.57 $ 35.86 $ 36.64 2.0 % (0.2 )% Asset quality Allowance for credit losses to total loans 1.01 % 0.97 % 1.01 % — — — Nonperforming assets ("NPAs") to total assets 0.08 % 0.08 % 0.23 % — — — Net charge-off to average loans (annualized) 0.05 % 0.05 % 0.03 % — — — CEO Commentary
Susan G. Riel, President and Chief Executive Officer of Eagle Bancorp, Inc., commented, "While we are disappointed with our first quarter operating results, our capital ratios are well in excess of regulatory minimums and our asset quality metrics remained strong, even against the backdrop of a challenging market, including continued disintermediation of deposits amid a rising interest rate environment. We met the liquidity needs of our depositors, and the credit needs of our borrowers, while holding firm to our commitment to strong underwriting and risk management practices. Additionally, first quarter earnings provided continued support for shareholders in the form of share repurchases and dividends. I believe our strong Relationships FIRST franchise and balance sheet, including a sizable amount of unencumbered assets and borrowing capacity, position EagleBank well to meet the banking needs of the communities and customers we serve."
"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 $75.0 million for the first quarter 2023, compared to $85.6 million for the prior quarter and $80.5 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, a change in the funding mix reflecting a higher level of borrowings at rates higher than those of the deposits the borrowings replaced, and, late in the quarter, a shift in noninterest bearing deposit accounts to interest bearing deposit accounts. Higher interest rates also benefited loan yields as variable rate loans adjusted upward, new loans were added at current rates and total loans were higher, but the increase to interest income was less than the increase in interest expense on average deposits and average borrowings.
- Net interest margin ("NIM") was 2.77% for the first quarter 2023, compared to 3.14% for the prior quarter and 2.65% for the year-ago quarter. The decrease in margin from the prior quarter was 37 basis points. The NIM contraction was based on the cost of funds increasing by 81 basis points, partially offset by the yield on earning assets increasing 44 basis points.
- The yield on interest earning assets, which is inclusive of the yields on loans and securities, was 5.17% for the first quarter 2023 compared to 4.73% for the prior quarter and 2.91% for the year-ago quarter. The increase of 44 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 yield on the loan portfolio was 6.35% for the first quarter 2023, compared to 5.87% for the prior quarter and 4.35% for the year-ago quarter. The increase of 48 basis points from the prior quarter was from variable rate loans adjusting upward and from higher rates on newly originated loans.
- The cost of funds was 2.40% for first quarter 2023, compared to 1.59% for the prior quarter and 0.26% for the year-ago quarter. The increase of 81 basis points from the prior quarter was primarily due to higher rates paid on savings and money market accounts and a change in the funding mix reflecting a higher level of borrowings at rates higher than those of the deposits the borrowings replaced. Additionally, late in the quarter, some noninterest bearing deposit accounts moved to interest bearing deposit accounts.
- Pre-provision net revenue ("PPNR"),4 a non-GAAP measure, was $38.1 million for the first quarter 2023, compared to $52.0 million for the prior quarter and $56.9 million for the year-ago quarter. As a percent of average assets, PPNR for the first quarter 2023 was 1.35%5, compared to 1.83%5 for the prior quarter and 1.79%5 for the year-ago quarter. This decrease in both PPNR and PPNR as a percent of average assets from the prior quarter was primarily attributable to the decrease in net interest income as a percent of average assets (down 35 bps) as the rise in deposit and borrowing costs increased interest expense faster than the rise in loan rates increased interest income and, to a lesser extent, the decrease in noninterest income as a percent of average assets (down 6 bps) as the mortgage division ceased taking mortgage applications in the first quarter of 2023.
(Dollars in thousands) Three Months Ended Percent Change March 31, December 31, March 31, Q1-23 Q1-23 2023 2022 2022 vs. Q4-22 vs. Q1-22 Net interest income $ 75,024 $ 85,600 $ 80,452 (12.4 )% (6.7 )% Noninterest income 3,700 5,329 7,453 (30.6 )% (50.4 )% Less: Noninterest expense (40,584 ) (38,918 ) (31,012 ) 4.3 % 30.9 % PPNR $ 38,140 $ 52,011 $ 56,893 (26.7 )% (33.0 )% Average Assets $ 11,426,056 $ 11,255,956 $ 12,701,152 1.5 % (10.0 )% As a Percent of Average Assets Basis Point Change Net interest income 2.66 % 3.01 % 2.53 % (35) bps 13 bps Noninterest income 0.13 % 0.19 % 0.23 % (6) bps (10) bps Noninterest expense (1.44 )% (1.37 )% (0.97 )% (7) bps (47) bps PPNR to Average Assets (non-GAAP) 1.35 % 1.83 % 1.79 % (48) bps (44) bps - Provision for credit losses on loans was $6.2 million for the first quarter 2023, compared to a reversal of $0.5 million for the prior quarter and a reversal of $2.8 million for the year-ago quarter. The increase in the first quarter 2023 provision over the prior quarter was primarily driven by changes in the qualitative and environmental ("Q&E") portion of the credit model associated with an additional allowance for commercial real estate office properties, and an increase in loans. Additionally, $1.2 million of the first quarter 2023 provision related to several corporate bonds in the securities portfolio. Corporate bonds represented less than 4% of the book value of the securities portfolio (combined available-for-sale and held-to-maturity portfolios).
- Noninterest income was $3.7 million for the first quarter 2023, as compared to $5.3 million for the prior quarter and $7.5 million for the year-ago quarter. The primary driver for the decrease in the first quarter 2023 and the prior quarter as compared to the year-ago quarter is higher rates on mortgage loans leading to fewer mortgage originations. Additionally, the residential mortgage division ceased taking mortgage applications in the first quarter of 2023.
- Noninterest expense was $40.6 million for the first quarter 2023 compared to $38.9 million for the prior quarter and $31.0 million for the year-ago quarter. Noninterest expense was up $1.7 million from the prior quarter, which included a $958 thousand one-time reversal of a legal accounts receivable (described below). The notable changes from the prior quarter were as follows:
- Salaries and employee benefits were $24.2 million, up $483 thousand from the prior quarter. The increase was primarily due to a combination of higher employee benefit costs and higher payroll taxes offset by lower incentive accruals.
- Legal, accounting and professional fees were $3.3 million, up $701 thousand from the prior quarter. The increase was primarily due to a $958 thousand reversal of legal accounts receivable as Directors & Officers insurance availability relating to the previously settled litigations and investigations was fully depleted.
- Marketing and advertising expenses were $636 thousand, down $654 thousand from the prior quarter as advertising and promotion costs were reduced.
- Other expenses were $4.6 million, up $1.4 million from the prior quarter. The increase was primarily attributable to compensation for the Company's Executive Chairman.
At the end of the quarter, the Alexandria, Virginia branch was closed as it had an expiring lease. This reduced our branch count to fifteen and the annualized pre-tax cost savings in rental expense will be approximately $197 thousand.
- Efficiency ratio6 was 51.6% for the first quarter 2023 compared to 42.8% for the prior quarter and 35.3% for the year-ago quarter. The increase in the efficiency ratio this quarter was primarily driven by the impact of higher interest rates on funding driving down net interest income, rather than an increase in noninterest expense. In comparison to the prior quarter, net interest income as a percent of average assets was down 35 basis points while noninterest expense as a percent of average assets was up 7 basis points.
- Effective income tax rate for the first quarter 2023 was 22.1%, compared to 19.3% for the prior quarter and 23.4% for the year-ago quarter. The increase in the effective tax rate from the prior quarter was due to the prior quarter including an update to our apportionment of revenues among the states in which we operate.
Balance Sheet
- Total assets were $11.1 billion at March 31, 2023, down 0.6% from a quarter ago and down 1.2% from a year ago. The decrease in assets from the prior quarter-end was primarily from a reduction in interest bearing deposits with other banks, securities and Fed Funds sold, partially offset by higher loans.
- Investment securities Available-for-Sale ("AFS") had a balance of $1.6 billion at March 31, 2023, down 1.0% from a quarter ago and down 10.9% from a year ago. The decrease from the prior quarter-end was primarily from principal paydowns and maturities received, offset by a slightly higher carrying value on AFS securities. No new investments were purchased during the first quarter of 2023.
- Investment securities Held-to-Maturity ("HTM") had a balance of $1.1 billion at March 31, 2023, down 1.7% from a quarter ago and down 6.8% from a year ago. The decrease from the prior quarter-end was primarily from principal paydowns and maturities received, as well as a higher credit reserve placed against several corporate bond securities within the portfolio. No new investments were purchased during the first quarter of 2023.
Investment securities HTM had a fair value which was $112 million less than carrying value at quarter-end, compared to a difference of $125 million a quarter ago.
- Total loans (excluding loans held for sale) were $7.7 billion at March 31, 2023, up 1.3% from a quarter ago and up 8.8% from a year ago. The increase in total loans from the prior quarter-end was driven by growth in commercial real estate ("CRE") loans and commercial & industrial loans ("C&I"). The increase in loans and the decrease in deposits increased the loan-to-deposit ratio to 104% from 88% the prior quarter.
- Allowance for credit losses was 1.01% of total loans at March 31, 2023, compared to 0.97% a quarter ago, and 1.01% a year ago. See commentary above in section "Provision for Credit Losses on Loans".
Net charge-off was $975 thousand for the quarter, which as a percent of average loans (excluding loans held for sale)7 was 0.05% for the first quarter 2023, compared to 0.05% a quarter ago, and 0.03% the year-ago quarter.
- Nonperforming loans and assets were $6.8 million and $8.7 million, respectively, at March 31, 2023.
- Nonperforming loans as a percent of loans were 0.09% at March 31, 2023, compared to 0.08% a quarter ago and 0.33% a year ago. At quarter end, the number of nonperforming notes was 18, down from 21 the prior quarter end.
- Nonperforming assets as a percent of assets were 0.08% at March 31, 2023, compared to 0.08% a quarter ago and 0.23% a year ago. At quarter end, other real estate owned ("OREO") consisted of four properties with an aggregate value of $2.0 million.
- Loans 30-89 days late were $15.7 million at March 31, 2023, up from $2.2 million a quarter ago and $13.0 million a year ago. The increase from the prior quarter was from one credit for $14.1 million, which has since been brought current.
- Total deposits were $7.5 billion at March 31, 2023, down 14.3% from a quarter ago and down 22.1% from a year ago. The decrease from the prior quarter-end was primarily attributable to outflows from noninterest bearing deposits and savings/money market accounts, partially offset by the increase in time deposits. For the quarter, average noninterest bearing deposits to average total deposits was 37.4% for the first quarter 2023, down from 40.9% a quarter ago and up from 36.1% for the year-ago quarter. The percentage in the first quarter 2023 reflected lower noninterest bearing deposits, partially offset by lower average deposits.
Total estimated uninsured deposits at March 31, 2023 were $3.2 billion8, or 42.9% of deposits.
- Other short-term borrowings were $2.1 billion at March 31, 2023, up from $975 million a quarter ago, and up from $150 million a year ago. The increase in borrowings from the prior quarter-end was primarily driven by the decrease in total deposits and, to a lesser extent, loan growth. These short-term borrowings consisted of $800 million from the BTFP secured by U.S. Treasuries, agency debt and mortgage-backed securities as collateral, and $1.3 billion from the FHLB 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 March 31, 2023, the Company had aggregate undrawn borrowing capacity of $1.7 billion, which includes $689 million in additional aggregate capacity to borrow with the FHLB and BTFP on assets that have been pledged and unencumbered securities totaling approximately $1.0 billion available for pledging to the FHLB or BTFP.
- BTFP borrowings were $800 million at March 31, 2023 with a rate of 4.38% for a term of up to one year.
- FHLB borrowings were $1.3 billion at March 31, 2023 with a floating rate, at an average rate of 5.08%.
- Total shareholders’ equity was $1.2 billion at March 31, 2023, up 1.1% from a quarter ago, and down 2.9% from a year ago. The increase in shareholders' equity of $13.6 million from the prior quarter-end was primarily from net income and improved valuations of AFS securities, partially offset by reductions in capital from the impact of share repurchases and dividends declared. Net income for the quarter was $0.78 per share and dividends declared were $0.45 per share.
- Book value per share was $39.92, up $0.74 from a quarter ago, and up $0.03 from a year ago.
- Tangible book value per share9 was $36.57, up $0.71 from a quarter ago, and down $0.07 from a year ago.
- Dividends: On March 16, 2023, the Board of Directors declared a quarterly cash dividend of $0.45 per share payable on April 28, 2023 to shareholders of record on April 6, 2023.
- Stock Repurchases: During the quarter, the Company repurchased 400,000 shares at an average price of $45.65 per share (including commissions), totaling an aggregate of $18.3 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). Regulatory capital ratios based on risk weighted assets were down primarily on the increase in risk weighted assets from the prior quarter. Common capital ratios were higher as retained earnings and reduction in unrealized losses on investment securities AFS led to an increase in both equity and tangible common equity, and assets and tangible assets were slightly lower than the prior quarter.
For the Company Minimum Required March 31, December 31, March 31, For Capital 202310 2022 2022 Adequacy Purposes Regulatory Capital Ratios Total Capital (to risk weighted assets) 14.74% 14.94% 15.21% 10.50% Tier 1 Capital (to risk weighted assets) 13.75% 14.03% 14.12% 8.50% Common Equity Tier 1 (to risk weighted assets) 13.75% 14.03% 14.12% 7.00% Tier 1 Capital (to average assets) 11.42% 11.63% 9.82% 4.00% Common Capital Ratios Common Equity Ratio 11.20% 11.02% 11.40% — Tangible Common Equity Ratio9 10.36% 10.18% 10.57% — Additional financial information: The financial information that follows provides more detail on the Company’s financial performance for the three months ended March 31, 2023 as compared to the three months ended December 31, 2022 and March 31, 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 fifteen banking offices and five 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 first quarter 2023 financial results on Thursday, April 20, 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/BI71620bd5fb594956898b4cef6d7bd4ea 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 May 4, 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 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 first 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 Estimated amount of uninsured deposits to be reported on line RCON5597 of schedule RC-O in EagleBank's March 31, 2023 Call Report.
3 A reconciliation between this non-GAAP financial measure and the nearest GAAP measure is provided in the tables that accompany this document.
4 A reconciliation between this non-GAAP financial measure and the nearest GAAP measure is provided in the table below.
5 Periods of less than one year are annualized.
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 March 31, 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 March 31, 2023 are subject to final filings with the Federal Reserve.Eagle Bancorp, Inc. Consolidated Financial Highlights (Unaudited) (Dollars in thousands, except per share data) Three Months Ended March 31, December 31, March 31, 2023 2022 2022 Income Statements: Total interest income $ 140,247 $ 129,130 $ 88,321 Total interest expense 65,223 43,530 7,869 Net interest income 75,024 85,600 80,452 Provision for (reversal of) credit losses 6,164 (464 ) (2,787 ) Provision for (reversal of) unfunded commitments 848 161 (11 ) Net interest income after provision for credit losses 68,012 85,903 83,250 Noninterest income (before investment gain) 3,721 5,326 7,478 Net gain (loss) on sale of investment securities (21 ) 3 (25 ) Total noninterest income 3,700 5,329 7,453 Total noninterest expense 40,584 38,918 31,012 Income before income tax expense 31,128 52,314 59,691 Income tax expense 6,894 10,121 13,947 Net income $ 24,234 $ 42,193 $ 45,744 Per Share Data: Earnings per weighted average common share, basic $ 0.78 $ 1.32 $ 1.43 Earnings per weighted average common share, diluted $ 0.78 $ 1.32 $ 1.42 Weighted average common shares outstanding, basic 31,109,267 31,819,631 32,033,280 Weighted average common shares outstanding, diluted 31,180,346 31,898,619 32,110,099 Actual shares outstanding at period end 31,111,647 31,346,903 32,079,474 Book value per common share at period end $ 39.92 $ 39.18 $ 39.89 Tangible book value per common share at period end (1) $ 36.57 $ 35.86 $ 36.64 Dividend per common share $ 0.45 $ 0.45 $ 0.40 Performance Ratios (annualized): Return on average assets 0.86 % 1.49 % 1.46 % Return on average common equity 7.92 % 13.57 % 13.83 % Return on average tangible common equity (1) 8.65 % 14.82 % 14.99 % Net interest margin 2.77 % 3.14 % 2.65 % Efficiency ratio (2) 51.6 % 42.8 % 35.3 % Other Ratios: Allowance for credit losses to total loans (3) 1.01 % 0.97 % 1.01 % Allowance for credit losses to total nonperforming loans 1,160 % 1,151 % 301 % Nonperforming loans to total loans (3) 0.09 % 0.08 % 0.33 % Nonperforming assets to total assets 0.08 % 0.08 % 0.23 % Net charge-off (annualized) to average total loans (3) 0.05 % 0.05 % 0.03 % Average noninterest bearing deposits to average deposits 37.4 % 40.9 % 36.1 % Yield on loans(3) 6.35 % 5.87 % 4.35 % Cost of funds 2.40 % 1.59 % 0.26 % Eagle Bancorp, Inc. Consolidated Financial Highlights (Continued) (Unaudited) (Dollars in thousands) Three Months Ended March 31, December 31, March 31, 2023 2022 2022 Capital Ratios: Tier 1 capital (to average assets)(4) 11.42 % 11.63 % 9.82 % Total capital (to risk weighted assets)(4) 14.74 % 14.94 % 15.21 % Common equity tier 1 capital (to risk weighted assets)(4) 13.75 % 14.03 % 14.12 % Common equity to total assets 11.20 % 11.02 % 11.40 % Tangible common equity ratio (1) 10.36 % 10.18 % 10.57 % Loan Balances - Period End: Commercial and Industrial $ 1,482,983 $ 1,487,349 $ 1,377,615 PPP loans 709 3,256 35,744 Commercial real estate - income producing 3,970,903 3,919,941 3,543,795 Commercial real estate - owner occupied 1,095,699 1,110,325 1,104,982 1-4 Family mortgage 73,677 73,001 72,238 Construction - commercial and residential 948,877 877,755 783,101 Construction - C&I (owner occupied) 109,013 110,479 140,282 Home equity 53,829 51,782 54,804 Other consumer 1,986 1,744 1,246 Total loans $ 7,737,676 $ 7,635,632 $ 7,113,807 Average Balances: Total assets $ 11,426,056 $ 11,255,956 $ 12,701,152 Total earning assets $ 11,004,817 $ 10,829,703 $ 12,326,473 Total loans(3) $ 7,712,023 $ 7,379,198 $ 7,053,701 Total deposits $ 8,734,125 $ 9,524,139 $ 10,874,976 Total borrowings $ 1,359,463 $ 411,060 $ 371,987 Total shareholders’ equity $ 1,240,978 $ 1,233,705 $ 1,341,785 Asset Quality: Net charge-off $ 975 $ 896 $ 459 Nonperforming loans $ 6,757 $ 6,469 $ 23,750 Other real estate owned $ 1,962 $ 1,962 $ 1,635 Nonperforming assets $ 8,719 $ 8,431 $ 25,386 (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. The efficiency ratio measures a bank’s overhead as a percentage of its revenue.
(3) Excludes loans held for sale.
(4) Capital ratios for March 31, 2023 are subject to final filings with the Federal Reserve.GAAP Reconciliation (unaudited) (dollars in thousands, except per share data) March 31, December 31, March 31, 2023 2022 2022 Common shareholders' equity $ 1,241,958 $ 1,228,321 $ 1,279,554 Less: Intangible assets (104,226 ) (104,233 ) (104,241 ) Tangible common equity $ 1,137,732 $ 1,124,088 $ 1,175,313 Book value per common share $ 39.92 $ 39.18 $ 39.89 Less: Intangible book value per common share (3.35 ) (3.32 ) (3.25 ) Tangible book value per common share $ 36.57 $ 35.86 $ 36.64 Total assets $ 11,088,867 $ 11,150,854 $ 11,227,223 Less: Intangible assets (104,226 ) (104,233 ) (104,241 ) Tangible assets $ 10,984,641 $ 11,046,621 $ 11,122,982 Tangible common equity ratio 10.36 % 10.18 % 10.57 % Three Months Ended March 31, December 31, March 31, 2023 2022 2022 Average common shareholders' equity $ 1,240,978 $ 1,233,705 $ 1,341,785 Less: Average intangible assets (104,231 ) (104,238 ) (104,246 ) Average tangible common equity $ 1,136,747 $ 1,129,467 $ 1,237,539 Net income $ 24,234 $ 42,193 $ 45,744 Return on average tangible common equity(1) 8.65 % 14.82 % 14.99 % Net interest income $ 75,024 $ 85,600 $ 80,452 Noninterest income 3,700 5,329 7,453 Operating revenue $ 78,724 $ 90,929 $ 87,905 Noninterest expense $ 40,584 $ 38,918 $ 31,012 Efficiency ratio 51.6 % 42.8 % 35.3 % (1) Periods of less than a year are annualized.
GAAP Reconciliation (unaudited) - Continued
Tangible common equity to tangible assets (the "tangible common equity ratio"), tangible book value per common share, 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 table provides reconciliation of these financial measures defined by GAAP with 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.
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.
Eagle Bancorp, Inc. Consolidated Balance Sheets (Unaudited) (Dollars in thousands, except per share data) March 31, December 31, March 31, Assets 2023 2022 2022 Cash and due from banks $ 9,940 $ 12,655 $ 12,140 Federal funds sold 3,746 33,927 27,359 Interest-bearing deposits with banks and other short-term investments 159,078 265,272 682,883 Investment securities available-for-sale at fair value (amortized cost of $1,763,183 , $1,803,898, and $1,873,491, net of allowance for credit losses of $31, $17 and $18 as of March 31, 2023, December 31, 2022 and March 31, 2022, respectively) 1,582,185 1,598,666 1,775,633 Investment securities held-to-maturity at amortized cost, net of allowance for credit losses of $2,008, $766 and $817 (fair value of $965,786, $968,707 and $1,144,505, as of March 31, 2023, December 31, 2022 and March 31, 2022, respectively) 1,075,303 1,093,374 1,153,399 Federal Reserve and Federal Home Loan Bank stock 79,134 65,067 29,026 Loans held for sale 6,488 6,734 25,504 Loans 7,737,676 7,635,632 7,113,807 Less allowance for credit losses (78,377 ) (74,444 ) (71,505 ) Loans, net 7,659,299 7,561,188 7,042,302 Premises and equipment, net 12,929 13,475 14,014 Operating lease right-of-use assets 23,060 24,544 28,969 Deferred income taxes 89,117 96,567 81,087 Bank-owned life insurance 111,217 110,998 109,415 Goodwill and intangible assets, net 104,226 104,233 104,241 Other real estate owned 1,962 1,962 1,635 Other assets 171,183 162,192 139,616 Total assets $ 11,088,867 $ 11,150,854 $ 11,227,223 Liabilities and Shareholders' Equity Deposits: Noninterest bearing demand $ 2,247,706 $ 3,150,751 $ 2,951,594 Interest bearing transaction 907,637 1,138,235 888,598 Savings and money market 2,970,093 3,640,697 5,047,548 Time deposits 1,337,805 783,499 698,519 Total deposits 7,463,241 8,713,182 9,586,259 Customer repurchase agreements 37,854 35,100 28,293 Other short-term borrowings 2,113,801 975,001 150,000 Long-term borrowings 69,825 69,794 69,701 Operating lease liabilities 27,634 29,267 33,935 Reserve for unfunded commitments 6,704 5,857 4,369 Other liabilities 127,850 94,332 75,112 Total liabilities 9,846,909 9,922,533 9,947,669 Shareholders' Equity Common stock, par value $.01 per share; shares authorized 100,000,000, shares issued and outstanding 31,111,647, 31,346,903, and 32,079,474 respectively 308 310 318 Additional paid in capital 397,012 412,303 437,820 Retained earnings 1,025,552 1,015,215 963,140 Accumulated other comprehensive loss (180,914 ) (199,507 ) (121,724 ) Total Shareholders' Equity 1,241,958 1,228,321 1,279,554 Total Liabilities and Shareholders' Equity $ 11,088,867 $ 11,150,854 $ 11,227,223 Eagle Bancorp, Inc. Consolidated Statements of Income (Unaudited) (Dollars in thousands, except per share data) Three Months Ended March 31, December 31, March 31, 2023 2022 2022 Interest Income Interest and fees on loans $ 120,850 $ 109,251 $ 75,830 Interest and dividends on investment securities 13,545 13,591 11,430 Interest on balances with other banks and short-term invest. 5,774 5,696 1,057 Interest on federal funds sold 78 592 4 Total interest income 140,247 129,130 88,321 Interest Expense Interest on deposits 48,954 39,239 6,359 Interest on customer repurchase agreements 302 266 13 Interest on other short-term borrowings 14,930 2,988 460 Interest on long-term borrowings 1,037 1,037 1,037 Total interest expense 65,223 43,530 7,869 Net Interest Income 75,024 85,600 80,452 Provision for (Reversal of) Credit Losses 6,164 (464 ) (2,787 ) Provision for (Reversal of) Unfunded Commitments 848 161 (11 ) Net Interest Income After Provision For Credit Losses 68,012 85,903 83,250 Noninterest Income Service charges on deposits 1,510 1,429 1,286 Gain on sale of loans 305 534 1,492 Net gain (loss) on sale of investment securities (21 ) 3 (25 ) Increase in cash surrender value of bank-owned life insurance 655 658 626 Other income 1,251 2,705 4,074 Total noninterest income 3,700 5,329 7,453 Noninterest Expense Salaries and employee benefits 24,174 23,691 17,019 Premises and equipment expenses 3,317 3,292 3,128 Marketing and advertising 636 1,290 1,064 Data processing 3,099 3,117 2,880 Legal, accounting and professional fees 3,254 2,553 1,561 FDIC insurance 1,486 1,718 1,058 Other expenses 4,618 3,257 4,302 Total noninterest expense 40,584 38,918 31,012 Income Before Income Tax Expense 31,128 52,314 59,691 Income Tax Expense 6,894 10,121 13,947 Net Income $ 24,234 $ 42,193 $ 45,744 Earnings Per Common Share Basic $ 0.78 $ 1.32 $ 1.43 Diluted $ 0.78 $ 1.32 $ 1.42 Eagle Bancorp, Inc. Consolidated Average Balances, Interest Yields And Rates vs. Prior Quarter (Unaudited) (Dollars in thousands) Three Months Ended March 31, 2023 December 31, 2022 Average
BalanceInterest Average
Yield/RateAverage
BalanceInterest Average
Yield/RateASSETS Interest earning assets: Interest bearing deposits with other banks and other short-term investments $ 526,506 $ 5,774 4.45 % $ 600,653 $ 5,696 3.76 % Loans held for sale (1) 4,093 60 5.86 % 6,868 102 5.94 % Loans (1) (2) 7,712,023 120,790 6.35 % 7,379,198 109,149 5.87 % Investment securities available-for-sale (2) 1,660,258 7,811 1.91 % 1,658,228 7,753 1.85 % Investment securities held-to-maturity (2) 1,087,047 5,734 2.14 % 1,105,209 5,838 2.10 % Federal funds sold 14,890 78 2.12 % 79,547 592 2.95 % Total interest earning assets 11,004,817 $ 140,247 5.17 % 10,829,703 $ 129,130 4.73 % Total noninterest earning assets 495,889 501,977 Less: allowance for credit losses 74,650 75,724 Total noninterest earning assets 421,239 426,253 TOTAL ASSETS $ 11,426,056 $ 11,255,956 LIABILITIES AND SHAREHOLDERS' EQUITY Interest bearing liabilities: Interest bearing transaction $ 1,065,421 $ 6,107 2.32 % $ 996,951 $ 3,877 1.54 % Savings and money market 3,326,807 33,274 4.06 % 3,963,022 31,571 3.16 % Time deposits 1,078,227 9,573 3.60 % 667,202 3,791 2.25 % Total interest bearing deposits 5,470,455 48,954 3.63 % 5,627,175 39,239 2.77 % Customer repurchase agreements 38,257 302 3.20 % 45,521 266 2.32 % Other short-term borrowings 1,251,392 14,930 4.77 % 295,756 2,988 4.04 % Long-term borrowings 69,814 1,037 5.94 % 69,783 1,037 5.94 % Total interest bearing liabilities 6,829,918 $ 65,223 3.87 % 6,038,235 $ 43,530 2.86 % Noninterest bearing liabilities: Noninterest bearing demand 3,263,670 3,896,964 Other liabilities 91,490 87,052 Total noninterest bearing liabilities 3,355,160 3,984,016 Shareholders’ equity 1,240,978 1,233,705 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 11,426,056 $ 11,255,956 Net interest income $ 75,024 $ 85,600 Net interest spread 1.30 % 1.87 % Net interest margin 2.77 % 3.14 % Cost of funds 2.40 % 1.59 % (1) Loans placed on nonaccrual status are included in average balances. Net loan fees and late charges included in interest income on loans totaled $3.7 million and $3.8 million for the three months ended March 31, 2023 and December 31, 2022, respectively.
(2) Interest and fees on loans and investments exclude tax equivalent adjustments.
Eagle Bancorp, Inc. Consolidated Average Balances, Interest Yields And Rates vs. Year Ago Quarter (Unaudited) (Dollars in thousands) Three Months Ended March 31, 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 $ 526,506 $ 5,774 4.45 % $ 2,403,017 $ 1,057 0.18 % Loans held for sale (1) 4,093 60 5.86 % 26,887 219 3.26 % Loans (1) (2) 7,712,023 120,790 6.35 % 7,053,701 75,611 4.35 % Investment securities available-for-sale (2) 1,660,258 7,811 1.91 % 2,794,681 11,280 1.64 % Investment securities held-to-maturity (2) 1,087,047 5,734 2.14 % 24,011 150 2.53 % Federal funds sold 14,890 78 2.12 % 24,176 4 0.07 % Total interest earning assets 11,004,817 $ 140,247 5.17 % 12,326,473 $ 88,321 2.91 % Total noninterest earning assets 495,889 449,625 Less: allowance for credit losses 74,650 75,105 Total noninterest earning assets 421,239 374,520 TOTAL ASSETS $ 11,426,056 $ 12,700,993 LIABILITIES AND SHAREHOLDERS' EQUITY Interest bearing liabilities: Interest bearing transaction $ 1,065,421 $ 6,107 2.32 % $ 754,833 $ 322 0.17 % Savings and money market 3,326,807 33,274 4.06 % 5,476,721 3,723 0.28 % Time deposits 1,078,227 9,573 3.60 % 722,646 2,314 1.30 % Total interest bearing deposits 5,470,455 48,954 3.63 % 6,954,200 6,359 0.37 % Customer repurchase agreements 38,257 302 3.20 % 25,628 13 0.21 % Other short-term borrowings 1,251,392 14,930 4.77 % 276,669 460 0.67 % Long-term borrowings 69,814 1,037 5.94 % 69,690 1,037 5.95 % Total interest bearing liabilities 6,829,918 $ 65,223 3.87 % 7,326,187 $ 7,869 0.44 % Noninterest bearing liabilities: Noninterest bearing demand 3,263,670 3,920,776 Other liabilities 91,490 112,404 Total noninterest bearing liabilities 3,355,160 4,033,180 Shareholders’ equity 1,240,978 1,341,626 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 11,426,056 $ 12,700,993 Net interest income $ 75,024 $ 80,452 Net interest spread 1.30 % 2.47 % Net interest margin 2.77 % 2.65 % Cost of funds 2.40 % 0.26 % (1) Loans placed on nonaccrual status are included in average balances. Net loan fees and late charges included in interest income on loans totaled $3.7 million and $3.7 million for the three months ended March 31, 2023 and March 31, 2022, respectively.
(2) Interest and fees on loans and investments exclude tax equivalent adjustments.
Eagle Bancorp, Inc. Statements of Income and Highlights Quarterly Trends (Unaudited) (Dollars in thousands, except per share data) Three Months Ended Income Statements: March 31, December 31, September 30, June 30, March 31, December 31, September 30, June 30, 2023 2022 2022 2022 2022 2021 2021 2021 Total interest income $ 140,247 $ 129,130 $ 111,527 $ 95,635 $ 88,321 $ 86,230 $ 89,152 $ 94,920 Total interest expense 65,223 43,530 27,630 12,717 7,869 8,044 10,107 10,288 Net interest income 75,024 85,600 83,897 82,918 80,452 78,186 79,045 84,632 Provision for (reversal of) credit losses 6,164 (464 ) 3,022 495 (2,787 ) (6,412 ) (8,203 ) (3,856 ) Provision for (reversal of) unfunded commitments 848 161 774 553 (11 ) (632 ) 716 (761 ) Net interest income after provision for credit losses 68,012 85,903 80,101 81,870 83,250 85,230 86,532 89,249 Noninterest income before investment gain (loss) 3,721 5,326 5,304 5,715 7,478 9,668 6,780 10,607 Net gain (loss) on sale of investment securities (21 ) 3 4 (151 ) (25 ) 906 1,519 318 Total noninterest income 3,700 5,329 5,308 5,564 7,453 10,574 8,299 10,925 Salaries and employee benefits 24,174 23,691 21,538 21,805 17,019 24,608 22,145 19,876 Premises and equipment 3,317 3,292 3,275 3,523 3,128 3,755 3,859 3,644 Marketing and advertising 636 1,290 1,181 1,186 1,064 1,286 1,013 980 Other expenses 12,457 10,645 10,212 32,448 9,801 9,660 9,358 10,994 Total noninterest expense 40,584 38,918 36,206 58,962 31,012 39,309 36,375 35,494 Income before income tax expense 31,128 52,314 49,203 28,472 59,691 56,495 58,456 64,680 Income tax expense 6,894 10,121 11,906 12,776 13,947 14,875 14,847 16,687 Net income $ 24,234 $ 42,193 $ 37,297 $ 15,696 $ 45,744 $ 41,620 $ 43,609 $ 47,993 Per Share Data: Earnings per weighted average common share, basic $ 0.78 $ 1.32 $ 1.16 $ 0.49 $ 1.43 $ 1.30 $ 1.36 $ 1.50 Earnings per weighted average common share, diluted $ 0.78 $ 1.32 $ 1.16 $ 0.49 $ 1.42 $ 1.30 $ 1.36 $ 1.50 Weighted average common shares outstanding, basic 31,109,267 31,819,631 32,084,464 32,080,657 32,033,280 31,950,320 31,959,357 31,962,819 Weighted average common shares outstanding, diluted 31,180,346 31,898,619 32,155,678 32,142,427 32,110,099 32,030,998 32,030,527 32,025,110 Actual shares outstanding at period end 31,111,647 31,346,903 32,082,321 32,081,241 32,079,474 31,950,092 31,947,458 31,961,573 Book value per common share at period end $ 39.92 $ 39.18 $ 38.02 $ 39.05 $ 39.89 $ 42.28 $ 41.68 $ 40.87 Tangible book value per common share at period end (1) $ 36.57 $ 35.86 $ 34.77 $ 35.80 $ 36.64 $ 38.97 $ 38.39 $ 37.58 Dividend per common share $ 0.45 $ 0.45 $ 0.45 $ 0.45 $ 0.40 $ 0.40 $ 0.40 $ 0.35 Performance Ratios (annualized): Return on average assets 0.86 % 1.49 % 1.29 % 0.54 % 1.46 % 1.32 % 1.46 % 1.68 % Return on average common equity 7.92 % 13.57 % 11.64 % 4.91 % 13.83 % 12.30 % 13.00 % 14.92 % Return on average tangible common equity(1) 8.65 % 14.82 % 12.67 % 5.35 % 14.99 % 13.35 % 14.11 % 16.25 % Net interest margin 2.77 % 3.14 % 3.02 % 2.94 % 2.65 % 2.55 % 2.73 % 3.04 % Efficiency ratio (2) 51.55 % 42.8 % 40.6 % 66.6 % 35.3 % 44.3 % 41.7 % 37.1 % Other Ratios: Allowance for credit losses to total loans (3) 1.01 % 0.97 % 1.04 % 1.02 % 1.01 % 1.06 % 1.21 % 1.28 % Allowance for credit losses to total nonperforming loans 1,160 % 1,151 % 997 % 386 % 301 % 257 % 265 % 187 % Nonperforming loans to total loans (3) 0.09 % 0.08 % 0.10 % 0.26 % 0.33 % 0.41 % 0.46 % 0.68 % Nonperforming assets to total assets 0.08 % 0.08 % 0.09 % 0.19 % 0.23 % 0.26 % 0.31 % 0.50 % Net charge-off (recovery)(annualized) to average total loans (3) 0.05 % 0.05 % — % (0.04 )% 0.03 % 0.07 % 0.08 % 0.30 % Tier 1 capital (to average assets) 11.42 % 11.63 % 11.55 % 10.68 % 9.82 % 10.19 % 10.58 % 10.65 % Total capital (to risk weighted assets) 14.74 % 14.94 % 15.60 % 15.14 % 15.21 % 15.74 % 16.18 % 17.44 % Common equity tier 1 capital (to risk weighted assets) 13.75 % 14.03 % 14.64 % 14.06 % 14.12 % 14.63 % 14.95 % 14.24 % Tangible common equity ratio (1) 10.36 % 10.18 % 10.52 % 10.60 % 10.57 % 10.60 % 10.68 % 11.07 % Average Balances (in thousands): Total assets $ 11,426,056 $ 11,255,956 $ 11,431,110 $ 11,701,679 $ 12,701,152 $ 12,538,596 $ 11,826,326 $ 11,453,080 Total earning assets $ 11,004,817 $ 10,829,703 $ 11,030,670 $ 11,300,267 $ 12,326,473 $ 12,180,872 $ 11,486,280 $ 11,152,933 Total loans(3) $ 7,712,023 $ 7,379,198 $ 7,282,589 $ 7,104,727 $ 7,053,701 $ 6,890,414 $ 7,055,621 $ 7,382,238 Total deposits $ 8,734,125 $ 9,524,139 $ 9,907,497 $ 10,184,886 $ 10,874,976 $ 10,670,206 $ 9,948,114 $ 9,530,909 Total borrowings $ 1,359,463 $ 411,060 $ 158,001 $ 152,583 $ 371,987 $ 402,393 $ 448,697 $ 536,926 Total shareholders’ equity $ 1,240,978 $ 1,233,705 $ 1,271,753 $ 1,281,742 $ 1,341,785 $ 1,342,525 $ 1,331,022 $ 1,290,029 (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.CONTACT:
David G. Danielson
240.552.9534