Eagle Bancorp(US:EGBN)2021-11-08 16:00Loan Portfolio and Credit Losses - As of September 30, 2021, the Bank had an outstanding balance of Paycheck Protection Program (PPP) loans remaining of $67.3 million[233]. - The Company had ongoing temporary modifications on approximately 6 loans representing approximately $70 million, which is about 1.0% of total loans[235]. - The Company’s allowance for credit losses (ACL) is influenced by the composition and quality of the loan portfolio, as well as prevailing economic conditions[249]. - The Company utilizes a loan-level probability of default (PD) and loss given default (LGD) cash flow method to estimate expected credit losses across various loan segments[244]. - The Company’s credit loss provisions are subject to significant judgment and estimates based on economic forecasts and historical loss rates[242]. - The allowance for credit losses on loans decreased by $14.5 million during the nine months ended September 30, 2021, compared to a provision of $40.7 million for the same period in 2020[4]. - The provision for credit losses showed a reversal of $14.4 million for the nine months ended September 30, 2021, compared to a provision of $40.7 million for the same period in 2020[275]. - The provision for credit losses on loans for the three months ended September 30, 2021, was a reversal of $8.3 million, compared to a provision of $6.6 million for the same period in 2020[4]. - The coverage ratio for the allowance for credit losses to total nonperforming loans was 265.32% at September 30, 2021, compared to 179.80% at December 31, 2020[321]. - Total nonperforming loans were $31.2 million at September 30, 2021, which is 0.46% of total loans, down from $60.9 million or 0.79% at December 31, 2020[319]. Financial Performance - Net income for the three months ended September 30, 2021 was $43.6 million, a 5% increase from $41.3 million in the same period in 2020[253]. - Total revenue for the three months ended September 30, 2021 was $87.3 million, down from $96.9 million in the same period in 2020[255]. - Net interest income remained flat at $79.0 million for the three months ended September 30, 2021, despite a 13% increase in average earning assets[255]. - The net interest margin decreased to 2.73% for the three months ended September 30, 2021, compared to 3.08% for the same period in 2020[256]. - Total noninterest income decreased by 53% to $8.3 million for the three months ended September 30, 2021, down from $17.8 million in the same period in 2020[258]. - Gain on sale of loans for the three months ended September 30, 2021 was $3.3 million, a 73% decrease from $12.2 million in the same period in 2020[259]. - Noninterest expenses totaled $109.9 million for the nine months ended September 30, 2021, a 1% increase from $109.2 million for the same period in 2020[279]. - Salaries and employee benefits increased by $9.5 million or 18% to $63.8 million for the nine months ended September 30, 2021 compared to $54.3 million for the same period in 2020[280]. - Income tax expenses increased by 45% to $46 million for the nine months ended September 30, 2021 compared to the same period in 2020[284]. - The efficiency ratio was 41.7% for the three months ended September 30, 2021, compared to 38.1% for the same period in 2020[262]. Assets and Deposits - Total assets increased to $11.83 billion at September 30, 2021 from $10.47 billion at the end of 2020[295]. - Total assets increased to $11,600,210, up from $10,084,081 in the previous year, representing a growth of approximately 15.06%[1]. - Total deposits increased by 18.2% year-over-year, with average deposits up 15.8% for the three months ended September 30, 2021[264]. - Total deposits rose to $9.7 billion at September 30, 2021, compared to $9.2 billion at December 31, 2020[353]. - Noninterest bearing deposits increased by $27.1 million, while interest bearing deposits rose by $452.2 million for the nine months ended September 30, 2021[368]. - Total deposits included $2.7 billion of brokered deposits, representing 28.3% of total deposits, an increase from 26.2% at December 31, 2020[369]. - The Company had $2.84 billion in noninterest bearing demand deposits, representing 29% of total deposits as of September 30, 2021, compared to 31% at December 31, 2020[372]. Interest Rates and Risk Management - The simulation analysis indicated a 33.8% increase in net interest income with a 400 basis point increase in interest rates[402]. - The Company expects that if interest rates increase by 100 basis points, net interest income and net interest margin will increase modestly due to significant volumes of variable rate assets[413]. - Conversely, if interest rates decline by 100 basis points, net interest income and margin are expected to decline modestly as the impact of lower market rates on liquid assets outweighs the ability to lower interest rates on interest-bearing liabilities[415]. - The Company’s overall interest rate risk position is primarily assessed through simulation analysis rather than solely relying on gap position changes[411]. - Current strategies for maximizing interest income have been deemed appropriate in light of economic and interest rate trends[412]. Operational Changes and COVID-19 Impact - The Company continues to monitor the impact of COVID-19 on its operations and financial results, with uncertainties remaining for 2021 and 2022[238]. - The Company has implemented a hybrid workplace model, allowing employees to work remotely part of the week while ensuring at least 50% of staff are in the office daily[231]. - The Bank is actively monitoring rent collections and working with commercial real estate borrowers to manage potential impacts from the pandemic[366]. - Accommodation and Food Services industry exposure represents 9.1% of the Bank's loan portfolio, indicating heightened risk from the COVID-19 pandemic[364]. Capital and Equity - The ratio of common equity to total assets increased to 11.49% at September 30, 2021 from 11.16% at December 31, 2020[285]. - Total shareholders' equity increased by $90.8 million to $1.33 billion as of September 30, 2021, from $1.24 billion at December 31, 2020[354]. - The total risk-based capital ratio was 16.59% at September 30, 2021, compared to 17.04% at December 31, 2020[355]. - The common equity tier 1 (CET1) risk-based capital ratio improved to 15.33% at September 30, 2021, from 13.49% at December 31, 2020[355]. - Management continuously monitors capital adequacy to support anticipated asset growth and absorb potential losses[418]. - The Company maintains a capital structure to ensure an adequate level of capital, with internal minimum targets for regulatory capital ratios exceeding well-capitalized ratios[421].