Eagle Bancorp, Inc. Announces Third Quarter 2024 Results
BETHESDA, Md., Oct. 23, 2024 (GLOBE NEWSWIRE) -- Eagle Bancorp, Inc. ("Eagle", the "Company") (NASDAQ:EGBN), the Bethesda-based holding company for EagleBank, one of the largest community banks in the Washington D.C. area, reported its unaudited results for the third quarter ended September 30, 2024.
Eagle reported net income of $21.8 million or $0.72 per share for the third quarter 2024, compared to a net loss of $83.8 million during the second quarter in which the Company recorded a $104.2 million impairment in the value of goodwill. Operating net income1 in the second quarter, adjusted to exclude the impairment charge on goodwill, was $20.4 million or $0.67 per share per diluted share. Pre-provision net revenue ("PPNR")1 in the third quarter was $35.2 million compared to a pre-provision net loss of $69.8 million for the prior quarter, or $34.4 million of PPNR when adjusted to exclude the impairment charge on goodwill1.
The $1.4 million increase in operating net income1 over the prior quarter is attributed to a positive variance of $2.2 million related to the change in provision for unfunded commitments; $1.6 million increase in non-interest income; and a $490 thousand increase in net interest income, offset by a $1.3 million increase in operating non-interest expense, adjusted to exclude the impairment charge on goodwill, and a $1.1 million increase in provision for credit losses.
"We continue to strategically position the Company for future growth as evidenced by actions taken during the quarter with the refinancing of our maturing subordinated debt and the recalibration of our common dividend strategy," said Susan G. Riel, President and Chief Executive Officer of the Company. "We announced the addition of Evelyn Lee to our senior leadership as our Chief Lending Officer for our commercial lending team. As a 25 year banker in the Washington D.C. market, I am excited about accomplishing our strategic goal of continuing to build out our commercial banker group and pursuing diversification of the loan portfolio and growing our relationship deposits," added Ms. Riel.
Eric R. Newell, Chief Financial Officer of the Company said, "Raising senior debt in the third quarter demonstrates the confidence debt investors have in our vision and the future of the Company. Operating performance was stable from last quarter evidenced by operating net income1 increasing $1.4 million to $21.8 million in the third quarter. We continued to build our reserve for credit losses, with coverage as a percentage of total held for investment loans at 1.40% increasing 7 basis points from last quarter. Common equity tier one capital increased to 14.5% and our tangible common equity1 ratio exceeds 10%."
Ms. Riel added, "I thank all of our employees for their hard work and their commitment to a culture of respect, diversity and inclusion in both the workplace and the communities we serve."
Third Quarter 2024 Highlights
The Company repaid $70 million of maturing subordinated debt and issued $77.7 million of 10% unsecured senior debt maturing September 30, 2029.
During the quarter, the Company announced a recalibration of the common stock dividend to $0.165 per share from $0.45 per share in the second quarter an action estimated to retain an additional $32 million of capital annually to meet growth and investment objectives.
The ACL as a percentage of total loans held for investment was 1.40% at quarter-end; up from 1.33% at the prior quarter-end. Performing office coverage2 was 4.55% at quarter-end; as compared to 4.05% at the prior quarter-end.
Nonperforming assets increased $38.2 million to $137.1 million as of September 30, 2024 and were 1.22% of total assets compared to 0.88% as of June 30, 2024. Inflows to non-performing loans in the quarter totaled $45.5 million offset by $9 million of outflows, of which $5 million was the loan held for sale at June 30, 2024 and an increase of other real estate owned of $2.0 million. The inflows were predominantly associated with $27.3 million in mixed use land loans and $17.9 million in an assisted living facility loan.
Substandard loans declined $17.0 million to $391.3 million and special mention loans increased $57.1 million to $365.0 million at September 30, 2024.
Net charge-offs for the third quarter were 0.26% compared to 0.11% for the second quarter 2024. Of the total $5.3 million of net charge offs in the quarter, $3.8 million is associated with a senior living property that has not stabilized.
The net interest margin ("NIM") decreased slightly to 2.37% for the third quarter 2024, compared to 2.40% for the prior quarter, primarily due to continued decline in average non-interest bearing deposits. Net interest income increased $490 thousand from the second quarter to $71.8 million in the third quarter.
At quarter-end, the common equity ratio, tangible common equity ratio1, and common equity tier 1 capital (to risk-weighted assets) ratio were 10.86%, 10.86%, and 14.54%, respectively.
Total estimated insured deposits at quarter-end were $6.4 billion, or 74.5% of deposits, stable from the second quarter total of 72.5% of deposits.
Total on-balance sheet liquidity and available capacity was $4.6 billion at quarter-end compared to $4.0 billion at June 30, 2024.
Income Statement
Net interest income was $71.8 million for the third quarter 2024, compared to $71.4 million for the prior quarter. The increase in net interest income was primarily driven by an increase in the average balances of deposits held with other banks and average loans partially offset by higher average interest-bearing deposits and higher rates paid on those deposits in the third quarter from the prior quarter.
Provision for credit losses was $10.1 million for the third quarter 2024, compared to $9.0 million for the prior quarter. The increase in the provision quarter over quarter reflects higher net charge-offs in the third quarter from the prior quarter. Reserve for unfunded commitments was a reversal of $1.6 million due to lower unfunded commitments in our construction portfolio. This compared to a reserve for unfunded commitments in the prior quarter of $0.6 million.
Noninterest income was $6.95 million for the third quarter 2024, compared to $5.33 million for the prior quarter. The primary driver for the increase was higher swap fee income.
Noninterest expense was $43.6 million for the third quarter 2024, compared to $146.5 million for the prior quarter. The decrease over the comparative quarters was primarily due to a goodwill impairment charge of $104.2 million in the second quarter 2024. When excluding the goodwill impairment charge, the increase quarter over quarter was associated with increased FDIC insurance expense.
Loans and Funding
Total loans were $8.0 billion at September 30, 2024, down 0.4% from the prior quarter-end. The decrease in total loans was driven by a reduction in commercial loans and income producing commercial real estate loans from the prior quarter-end, partially offset by increased fundings of ongoing construction projects for commercial and residential properties.At September 30, 2024, income-producing commercial real estate loans secured by office properties other than owner-occupied properties were 10.8% of the total loan portfolio, down from 11.3% at the prior quarter-end.
Total deposits at quarter-end were $8.5 billion, up $273.5 million, or 3.3%, from the prior quarter-end. The increase was primarily attributable to an increase in time deposits from the company's digital acquisition channel. Period end deposits have increased $165 million when compared to prior year comparable period end of September 30, 2023.
Other short-term borrowings were $1.2 billion at September 30, 2024, down 25.3% from the prior quarter-end as maturing FHLB borrowings were paid down with increased cash from deposits.
Asset Quality
Allowance for credit losses was 1.40% of total loans held for investment at September 30, 2024, compared to 1.33% at the prior quarter-end. Performing office coverage was 4.55% at quarter-end; as compared to 4.05% at the prior quarter-end.
Net charge-offs were $5.3 million for the quarter compared to $2.3 million in the second quarter of 2024.
Nonperforming assets were $137.1 million at September 30, 2024.
NPAs as a percentage of assets were 1.22% at September 30, 2024, compared to 0.88% at the prior quarter-end. At September 30, 2024, other real estate owned consisted of four properties with an aggregate carrying value of $2.7 million. The increase in NPAs was predominantly associated with $27.3 million in mixed use land loans and $17.9 million in an assisted living facility loan.
Loans 30-89 days past due were $56.3 million at September 30, 2024, compared to $8.4 million at the prior quarter-end. Of the total increase, $25 million was brought current subsequent to quarter-end.
Capital
Total shareholders' equity was $1.2 billion at September 30, 2024, up 4.8% from the prior quarter-end. The increase in shareholders' equity of $56.0 million was primarily due to increased valuations of available-for-sale securities and an increase in retained earnings.
Book value per share and Tangible book value per share3 was $40.61, up $1.86 from the prior quarter-end.
Additional financial information: The financial information that follows provides more detail on the Company's financial performance for the three months ended September 30, 2024 as compared to the three months ended June 30, 2024 and September 30, 2023, 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, 2023, 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 twelve 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 third quarter 2024 financial results on Thursday, October 24, 2024 at 10:00 a.m. Eastern Time.
The listen-only webcast can be accessed at:
https://edge.media-server.com/mmc/p/79xpxyi2
For analysts who wish to participate in the conference call, please register at the following URL:https://register.vevent.com/register/BI6cdce3c45a9f49219ea94a6f7c9fa083
A replay of the conference call will be available on the Company's website through November 7, 2024: https://www.eaglebankcorp.com/
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 volatility in interest rates and interest rate policy; the current 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, 2023 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. 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.
Eagle Bancorp, Inc.
Consolidated Statements of Operations (Unaudited)
(Dollars in thousands, except per share data)
Three Months Ended
September 30,
June 30,
September 30,
2024
2024
2023
Interest Income
Interest and fees on loans
$
139,836
$
137,616
$
132,273
Interest and dividends on investment securities
12,578
12,405
13,732
Interest on balances with other banks and short-term investments
21,296
19,568
15,067
Interest on federal funds sold
103
142
77
Total interest income
173,813
169,731
161,149
Interest Expense
Interest on deposits
81,190
76,846
70,929
Interest on customer repurchase agreements
332
330
311
Interest on other short-term borrowings
20,448
21,202
18,152
Interest on long-term borrowings
$
—
—
1,038
Total interest expense
101,970
98,378
90,430
Net Interest Income
71,843
71,353
70,719
Provision for Credit Losses
10,094
8,959
5,644
Provision (Reversal) for Credit Losses for Unfunded Commitments
(1,593
)
608
(839
)
Net Interest Income After Provision for Credit Losses
63,342
61,786
65,914
Noninterest Income
Service charges on deposits
1,747
1,653
1,631
Gain on sale of loans
20
37
(5
)
Net gain on sale of investment securities
3
3
5
Increase in cash surrender value of bank-owned life insurance
731
709
669
Other income
4,450
2,930
4,047
Total noninterest income
6,951
5,332
6,347
Noninterest Expense
Salaries and employee benefits
21,675
21,770
21,549
Premises and equipment expenses
2,794
2,894
3,095
Marketing and advertising
1,588
1,662
768
Data processing
3,435
3,495
3,194
Legal, accounting and professional fees
3,433
2,705
2,162
FDIC insurance
7,399
5,917
3,342
Goodwill impairment
—
104,168
—
Other expenses
3,290
3,880
3,523
Total noninterest expense
43,614
146,491
37,633
(Loss) Income Before Income Tax Expense
26,679
(79,373
)
34,628
Income Tax Expense
4,864
4,429
7,245
Net (Loss) Income
$
21,815
$
(83,802
)
$
27,383
(Loss) Earnings Per Common Share
Basic
$
0.72
$
(2.78
)
$
0.91
Diluted
$
0.72
$
(2.78
)
$
0.91
Eagle Bancorp, Inc.
Consolidated Balance Sheets (Unaudited)
(Dollars in thousands, except per share data)
September 30,
June 30,
September 30,
2024
2024
2023
Assets
Cash and due from banks
$
16,383
$
10,803
$
8,625
Federal funds sold
9,610
5,802
13,611
Interest-bearing deposits with banks and other short-term investments
584,491
526,228
235,819
Investment securities available-for-sale at fair value (amortized cost of $1,550,038, $1,613,659, and $1,732,722, respectively, and allowance for credit losses of $17, $17 and $17, respectively)
1,433,006
1,584,435
1,474,945
Investment securities held-to-maturity at amortized cost, net of allowance for credit losses of $1,237, $2,012 and $2,010, respectively (fair value of $868,425, $856,275 and $923,313, respectively)
961,925
982,955
1,032,485
Federal Reserve and Federal Home Loan Bank stock
37,728
54,274
25,689
Loans held for sale
—
5,000
—
Loans
7,970,269
8,001,739
7,916,391
Less: allowance for credit losses
(111,867
)
(106,301
)
(83,332
)
Loans, net
7,858,402
7,895,438
7,833,059
Premises and equipment, net
8,291
8,788
11,216
Operating lease right-of-use assets
15,167
16,250
20,151
Deferred income taxes
74,381
86,236
98,987
Bank-owned life insurance
115,064
114,333
112,234
Goodwill and intangible assets, net
21
129
105,239
Other real estate owned
2,743
773
1,487
Other assets
167,840
174,396
190,667
Total Assets
$
11,285,052
$
11,465,840
$
11,164,214
Liabilities and Shareholders' Equity
Liabilities
Deposits:
Noninterest-bearing demand
$
1,609,823
$
1,693,955
$
2,072,665
Interest-bearing transaction
903,300
1,123,980
932,779
Savings and money market
3,316,819
3,165,314
3,129,773
Time deposits
2,710,908
2,284,099
2,241,089
Total deposits
8,540,850
8,267,348
8,376,306
Customer repurchase agreements
32,040
39,220
25,689
Other short-term borrowings
1,240,000
1,659,979
1,300,001
Long-term borrowings
75,812
—
69,887
Operating lease liabilities
18,755
20,016
24,422
Reserve for unfunded commitments
5,060
6,653
6,183
Other liabilities
147,111
139,348
145,842
Total Liabilities
10,059,628
10,132,564
9,948,330
Shareholders' Equity
Common stock, par value $0.01 per share; shares authorized 100,000,000, shares issued and outstanding 30,173,200 30,180,482, and 30,185,732, respectively
298
297
296
Additional paid-in capital
382,284
380,142
372,394
Retained earnings
967,019
949,863
1,054,699
Accumulated other comprehensive loss
(124,177
)
(160,843
)
(211,505
)
Total Shareholders' Equity
1,225,424
1,169,459
1,215,884
Total Liabilities and Shareholders' Equity
$
11,285,052
$
11,302,023
$
11,164,214
Loan Mix and Asset Quality(Dollars in thousands)
September 30,
June 30,
September 30,
2024
2024
2023
Amount
%
Amount
%
Amount
%
Loan Balances - Period End:
Commercial
$
1,154,349
14
%
$
1,238,261
15
%
$
1,418,760
18
%
PPP loans
348
—
%
407
—
%
588
—
%
Income producing - commercial real estate
4,155,120
52
%
4,217,525
53
%
4,147,301
52
%
Owner occupied - commercial real estate
1,276,240
16
%
1,263,714
16
%
1,182,959
15
%
Real estate mortgage - residential
57,223
1
%
61,338
1
%
76,511
1
%
Construction - commercial and residential
1,174,591
15
%
1,063,764
13
%
904,282
11
%
Construction - C&I (owner occupied)
100,662
1
%
99,526
1
%
129,616
2
%
Home equity
51,567
1
%
52,773
1
%
53,917
1
%
Other consumer
169
—
%
4,431
—
%
2,457
—
%
Total loans
$
7,970,269
100
%
$
8,001,739
100
%
$
7,916,391
100
%
Three Months Ended or As Of
September 30,
June 30,
September 30,
2024
2024
2023
Asset Quality:
Net charge-offs
$
5,303
$
2,285
$
340
Nonperforming loans
$
134,371
$
98,169
$
70,148
Other real estate owned
$
2,743
$
773
$
1,757
Nonperforming assets
$
137,114
$
98,942
$
71,905
Special mention
$
364,983
$
307,906
$
158,182
Substandard
$
391,301
$
408,311
$
219,001
