Eagle Bancorp(EGBN) - 2022 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For Q3 2022, net income was $37.3 million or $1.16 per diluted share, which is $1.3 million or $0.04 per share lower than adjusted Q2 net income of $38.6 million or $1.20 per share [25] - Net interest income increased by $1 million, with interest income up $15.9 million due to higher average loan balances and increased yields on adjustable rate loans [26] - The margin improved slightly to 3.02%, an increase of 8 basis points from the prior quarter [28] Business Line Data and Key Metrics Changes - Loans increased by $150 million from the prior quarter, marking the fourth consecutive quarterly increase, primarily driven by the Commercial Real Estate (CRE) team [7] - Non-performing assets (NPAs) were 9 basis points on assets at quarter end, with total NPAs down to $9.6 million from $20.3 million in the prior quarter [19] - The allowance for credit losses (ACL) to loans was 1.04%, up slightly from 1.02% in the previous quarter [19] Market Data and Key Metrics Changes - The unemployment rate in the Washington Metropolitan Statistical Area remained low at 3.6% [15] - Spending from government and contractors continues to stabilize the local economy, with an uptick in unfunded commitments and increased monthly construction funding [16] - There is a noted softening in demand for central business district office properties and capital equipment purchases [18] Company Strategy and Development Direction - The company remains focused on increasing value for shareholders through dividends, declaring a dividend of $0.45 per share, returning approximately $14.4 million to shareholders [12] - The company emphasizes its commitment to the local business community and plans to continue providing financing for affordable housing projects [11] - The management is refocusing on gathering deposits for all relationships and requiring certain amounts of deposits as part of their strategy moving forward [50] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about loan growth and asset quality metrics, highlighting a strong relationship-based culture with customers [38] - The company acknowledges the challenges in the current environment for finding deposits but aims to grow deposits as they refocus on required deposit accounts [49] - Management believes that the demand for multifamily construction projects will remain strong due to ongoing housing shortages [54] Other Important Information - The company closed one branch at quarter end, resulting in estimated annual cost savings of $275,000 [32] - Regulatory capital ratios remained strong, with common equity to assets at 11.4%, down 5 basis points [37] Q&A Session Summary Question: Insights on deposit costs and future expectations - Management discussed the challenges in predicting deposit costs and mentioned an average beta of about 70% for interest rate risk modeling [43] - They noted that funding for all banks will be more difficult in the current environment but are focused on efficient funding strategies [44] Question: Expectations for deposit growth - Management expressed a desire to grow deposits despite the challenging environment, emphasizing a return to focusing on required deposits [49] Question: Loan data and future rate hikes - Management indicated that loan growth should remain consistent quarter-over-quarter, with about 60% of the loan portfolio being variable or adjustable rate [52] Question: Construction lending outlook - Management confirmed they are still considering construction requests, particularly for multifamily and industrial properties, while being selective about office projects [55] Question: Thoughts on share buyback - Management acknowledged the potential for a buyback program and noted that the current buyback program expires at the end of the year, with Board approval already received for re-engagement [59]