Eagle Bancorp, Inc. Announces Net Income for Third Quarter 2022 of $37.3 Million or $1.16 per Diluted Share

BETHESDA, Md., Oct. 19, 2022 (GLOBE NEWSWIRE) -- Eagle Bancorp, Inc. (the "Company") (NASDAQ: EGBN), the parent company of EagleBank (the "Bank"), today announced net income of $37.3 million for the third quarter 2022, compared to net income of $15.7 million for the prior quarter and $43.6 million for the year-ago quarter. Net income (basic and diluted) was $1.16 per share for the third quarter 2022, compared to $0.49 per share for the prior quarter and $1.36 per share for the year-ago quarter.

The increase in earnings of $21.6 million from the second quarter of 2022 (the "prior quarter") was primarily attributable to the prior quarter having one-time noninterest expense accruals of $22.9 million related to the previously disclosed settlement agreements with the Securities and Exchange Commission ("SEC") and the Board of Governors of the Federal Reserve System ("FRB"). Partially offsetting this increase in earnings from the second quarter of 2022 was the increase in the provision for credit losses by $2.5 million in the third quarter.

Earnings per share (diluted) of $1.16 for the third quarter of 2022 reflects a decrease of $0.04 per share as compared to adjusted earnings per share (diluted) for the prior quarter of $1.20,¹ which is adjusted to remove the one-time noninterest expense accruals described above.

Year-to-date earnings per share (diluted)² of $3.07, reflects a decrease of $1.15 per share compared to prior year-to-date earnings per share (diluted) of $4.22. If adjusted to remove the one-time noninterest expense accruals described above, year-to-date adjusted earnings per share (diluted) of $3.78¹, reflects a decrease of $0.44 per share, compared to prior year-to-date earnings per share (diluted) of $4.22.

Third Quarter 2022 Highlights

• Loans increased by $149.8 million from the prior quarter-end. This was the fourth consecutive quarterly increase. Loans were up 2.1% from the prior quarter and 6.6% from the year-ago quarter.

• The provision for credit losses was $3.0 million for the quarter, up from $0.5 million the prior quarter. This increased the allowance for credit losses on loans to 1.04%, up from 1.02% a quarter ago and down from 1.21% a year ago.

• Deposits decreased by $408.3 million from the prior quarter end, and average deposits for the quarter decreased by $277.4 million. This decrease, coupled with the increase in loans, raised the quarter-end loans-to-deposits ratio to 83%, up from 78% a quarter ago and 71% a year ago.

• The increase in the overall interest rate environment continued to create unrealized losses in securities available-for-sale ("AFS"), which are recorded in accumulated other comprehensive income (loss). As a result, shareholders' equity, book value per share and tangible book value per share all declined from the prior quarter end.

• During the quarter, the Company declared a quarterly dividend of $0.45 per share.

• At quarter end, the Company closed its Merrifield, Virginia branch as the lease was expiring.

(Dollars in thousands, except per share)	As Of or For the Three Months Ended												Percent Change
	Sept. 30,				June 30,				Sept. 30,				Q3-22			Q3-22
		2022				2022				2021			vs. Q2-22			vs. Q3-21
Income Statement
Net income	$	37,297			$	15,696			$	43,609			137.6	%		(14.5	)%
Net income per diluted share	$	1.16			$	0.49			$	1.36			136.7	%		(14.7	)%
Dividend per common share	$	0.45			$	0.45			$	0.40			—	%		12.5	%
Selected Ratios
Return on Average Assets		1.29	%			0.54	%			1.46	%
Return on Average Common Equity		11.64	%			4.91	%			13.00	%
Return on Average Tangible Common Equity3		12.67	%			5.35	%			14.11	%
Net interest margin		3.02	%			2.94	%			2.73	%
Efficiency Ratio3		40.6	%			66.6	%			41.7	%
Balance Sheet
Assets	$	10,713,044			$	10,941,655			$	11,585,317			(2.1	)%		(7.5	)%
Loans	$	7,304,498			$	7,154,686			$	6,850,863			2.1	%		6.6	%
Loans (excluding PPP loans)4	$	7,297,257			$	7,145,709			$	6,783,552			2.1	%		7.6	%
Deposits	$	8,763,350			$	9,171,618			$	9,668,488			(4.5	)%		(9.4	)%
Total Capital (to risk weighted assets)		16.10	%			15.70	%			16.59	%
Per Share
Book value per share	$	38.02			$	39.05			$	41.68			(2.6	)%		(8.8	)%
Tangible book value per share	$	34.77			$	35.80			$	38.39			(2.9	)%		(9.4	)%
Asset quality
Allowance for credit losses to total loans		1.04	%			1.02	%			1.21	%
Nonperforming assets ("NPAs") to total assets		0.09	%			0.19	%			0.31	%
Net (recovery) charge-off ratio to avg. loans (annualized)		0.00	%			(0.04	)%			0.08	%

CEO Commentary

Susan G. Riel, President and Chief Executive Officer of Eagle Bancorp, Inc. commented, "The results for the third quarter are encouraging as loan balances increased for a fourth consecutive quarter and asset quality metrics remained strong."

"Additionally, both our CRE and C&I teams had their best quarter of the year so far, and pipelines remain strong. As we close out 2022, our lending teams continue to be active and successful in their calling efforts. And on construction lending, even with the successful completion of projects, our unfunded commitments were up slightly to $2.4 billion at quarter-end. As more opportunities arise, even with a more difficult economy, our total risk-based capital of 16.10% gives us ample room to continue to grow the loan portfolio, and with equity of more than $1.2 billion, the ability to close on credits of substantial size."

"For our shareholders, we remain focused on returning cash through dividends. At the end of the quarter, our board declared a dividend of $0.45 per share."

"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 $83.9 million for the third quarter 2022, compared to $82.9 million for the prior quarter and $79.0 million for the year-ago quarter. The increase in net interest income from the prior quarter was driven by higher average loans for the quarter, higher yield on loans as the overall rate environment increased, and higher rates on short-term investments and investment securities; offset by the impact of fewer earning assets. The combination of these factors outpaced the increase in interest expense on a smaller deposit base. Deposits declined during the third quarter as a result of disintermediation in the current ongoing higher interest rate environment.

• Net interest margin was 3.02% for the third quarter 2022, compared to 2.94% for the prior quarter and 2.73% for the year-ago quarter. The increase in margin from the prior quarter was limited to 8 basis points. The relatively slow rate of NIM growth was primarily due to an increase in the cost of funds resulting from ongoing market volatility and the high interest rate environment, which substantially offset the increase in yield on interest earning assets. For the third quarter, our increased yield on interest earning assets was only slightly more than the increase in the cost of funds.

  • The yield on interest earning assets, which is inclusive of the yields on loans and securities, was 4.01% for the third quarter 2022 compared to 3.39% for the prior quarter and 3.08% for the year-ago quarter. The increase of 62 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 5.10% for the third quarter 2022, compared to 4.51% for the prior quarter and 4.59% for the year-ago quarter. The increase of 59 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 0.99% for third quarter 2022, compared to 0.45% for the prior quarter and 0.35% for the year-ago quarter. The increase of 54 basis points from the prior quarter was primarily due to higher deposit rates paid on savings and money market accounts during the third quarter and utilizing short-term investments and short-term borrowings to satisfy deposit outflows resulting from the reduction of interest-bearing deposits with the Bank during the third quarter.

• Pre-provision net revenue ("PPNR"),⁵ a non-GAAP measure, was $53.0 million for the third quarter 2022, compared to $29.5 million for the prior quarter and $51.0 million for the year-ago quarter. As a percent of average assets, PPNR for the third quarter 2022 was 1.85%, compared to 1.01% for the prior quarter and 1.72% for the year-ago quarter. This increase in both PPNR and PPNR as a percent of average assets from the prior quarter was primarily attributable to the prior quarter having a one-time accrual of $22.9 million in noninterest expense in connection with the settlement agreements with the SEC and FRB.

(Dollars in thousands)	Three Months Ended												Percent Change
	Sept 30,				June 30,				Sept 30,				Q3-22			Q3-22
		2022				2022				2021			vs. Q2-22			vs. Q3-21
Net interest income	$	83,897			$	82,918			$	79,045			1.2	%		6.1	%
Noninterest income		5,308				5,564				8,299			(4.6	)%		(36.0	)%
Less: Noninterest expense		(36,206	)			(58,962	)			(36,375	)		(38.6	)%		(0.5	)%
PPNR	$	52,999			$	29,520			$	50,969			79.5	%		4.0	%
Average Assets	$	11,431,110			$	11,701,679			$	11,826,326			(2.3	)%		(3.3	)%
PPNR to Avg. Assets (non-GAAP)		1.85	%			1.01	%			1.72	%

• Provision for credit losses on loans was $3.0 million for the third quarter 2022, compared to a provision of $0.5 million for the prior quarter and a reversal of $8.2 million for the year-ago quarter. The increase in the third quarter 2022 provision over the prior quarter was primarily driven by higher period-end loan balances, higher reserves on one individually evaluated loan, and a modest weakening in the unemployment forecast coupled with an increase in the localization factor based on the national unemployment forecast. These factors were partially mitigated by improvements observed in a number of Q&E factors, including improved risk ratings on hotel loans which were greater than the increased management overlay on office property loans in the Washington DC area.

• Noninterest income was $5.3 million for the third quarter 2022, as compared to $5.6 million for the prior quarter and $8.3 million for the year-ago quarter. The primary driver for the decrease from the prior quarter and the year ago quarter is higher rates on mortgage loans leading to fewer mortgage originations.

Residential mortgage loan locked commitments were $57.5 million, down from $92.0 million the prior quarter and down from $279.8 million for the year-ago quarter. As interest rates continued to rise in the second quarter, refinance activity continued to slow resulting in fewer locked loans.

• Noninterest expense was $36.2 million for the third quarter 2022 compared to $59.0 million for the prior quarter and $36.4 million for the year-ago quarter. The notable changes from the prior quarter were as follows:

  • Other expenses in the prior quarter included one-time accruals of $22.9 million in non-tax deductible expenses related to the settlement agreements with the SEC and FRB.

  • Salaries and employee benefits were $21.5 million, down $267 thousand from the prior quarter. The decrease was primarily due to lower incentive bonus accruals.

  • Data processing expenses were $3.4 million, up $716 thousand from the prior quarter. The increase was primarily attributable to expenses associated with network upgrades.

  • Legal, accounting and professional fees were $2.3 million, up $195 thousand from the prior quarter.

At the end of the quarter, the Merrifield, Virginia branch was closed, reducing the number of banking locations to sixteen. Estimated annual cost savings on rent, common area maintenance and taxes are $275 thousand. All branch employees were repositioned to fill open positions at other locations, and deposits were transferred to our Fairfax, Virginia branch. There were no notable unamortized expenses as the lease is set to expire on October 31, 2022.

• Efficiency ratio⁶ was 40.6% for the third quarter 2022 compared to 66.6% for the prior quarter and 41.7% for the year-ago quarter. The improvement in the efficiency ratio this quarter was primarily driven by the inclusion of one-time expenses related to the settlement agreements with the SEC and FRB in the prior quarter.

• Effective income tax rate for the third quarter 2022 was 24.2%, compared to 44.9% for the prior quarter and 25.4% for the year-ago quarter. The decrease in the effective tax rate this quarter was primarily driven by the inclusion of one-time non-deductible expenses related to the settlement agreements with the SEC and FRB in the prior quarter.

Balance Sheet

• Total assets at September 30, 2022 were $10.7 billion, down 2.1% from a quarter ago and down 7.5% from a year ago. The decrease from the prior quarter-end was primarily driven by the utilization of interest-bearing deposits with banks and other short-term investments along with short-term borrowings to satisfy deposit outflows; and decreases in the value of our investment securities AFS as interest rates rose during the quarter.

• Investment securities AFS and Held-to-Maturity ("HTM") had an aggregate balance of $2.8 billion at September 30, 2022, down 4.7% from a quarter ago and up 54.7% from a year ago. The decrease from the prior quarter-end was primarily from lower carrying values on AFS securities and principal paydowns. If the overall interest rate environment continues to rise, carrying values will continue to decrease for securities in the AFS portfolio. Investments purchased during the third quarter of 2022 were primarily agency mortgage backed securities and agency bonds.

• Total loans (excluding loans held for sale) were $7.304 billion as of September 30, 2022, up 2.1% from a quarter ago and up 6.6% from a year ago. Excluding PPP loans, loan balances were $7.297 billion as of September 30, 2022, up 2.1% from a quarter ago and up 7.6% from a year ago.⁷ The increase in loans, excluding PPP loans, from the prior quarter-end was driven by growth in commercial real estate ("CRE") loans and commercial & industrial loans ("C&I").

													Percent Change
(Dollars in thousands)	September 30,				June 30,				September 30,				Q3-22			Q3-22
		2022				2022				2021			vs. Q2-22			vs. Q3-21
Total loans, excluding loans held for sale (GAAP)	$	7,304,498			$	7,154,686			$	6,850,863			2.1	%		6.6	%
Less: PPP loans (non-GAAP)		(7,241	)			(8,977	)			(67,311	)
Total loans, excluding loans held for sale and PPP loans (non-GAAP)	$	7,297,257			$	7,145,709			$	6,783,552			2.1	%		7.6	%

• Allowance for credit losses was 1.04% of total loans at September 30, 2022, compared to 1.02% a quarter ago, and 1.21% a year ago. See commentary above in section "Provision for Credit Losses on Loans".

Net charge-off as a percent of average loans (excluding loans held for sale) was a net recovery of $57 thousand, which was less than 0.01%⁸ for the third quarter 2022, as compared to a recovery of 0.04%⁸ a quarter ago, and a net charge-off of 0.08%⁸ for the year-ago quarter.

• Nonperforming loans and assets: Nonperforming loans decreased compared to the prior quarter and the year-ago quarter. The decrease was driven primarily by loans being paid in full or returning to accrual status due to ongoing payment performance. One note was moved from nonperforming loans to nonperforming assets. At quarter end, other real estate owned ("OREO") consisted of four properties with a value of $2.0 million.

  • Nonperforming loans as a percent of loans were 0.10% at September 30, 2022, compared to 0.26% a quarter ago and 0.46% a year ago.

  • Nonperforming assets as a percent of assets were 0.09% at September 30, 2022, compared to 0.19% a quarter ago and 0.31% a year ago.

• Total deposits were $8.8 billion at September 30, 2022, down 4.5% from a quarter ago and down 9.4% from a year ago. The outflow of deposits increased the ratio of loans-to-deposits to 83% from 78% the prior quarter. This decrease is primarily attributable to current market conditions and a loss of deposits through disintermediation as a result of the continued increase in the overall interest rate environment. Most of the outflows were from interest bearing accounts (savings and money market accounts) as average noninterest bearing deposits to average total deposits was 38.4% for the third quarter 2022, up from 37.9% a quarter ago and 33.9% for the year-ago quarter.

• Total shareholders’ equity was $1.2 billion at September 30, 2022, down 2.6% from a quarter ago, and down 8.4% from a year ago. The decrease in shareholders' equity from the prior quarter-end was primarily due to the continued increase in the overall interest rate environment, which created increased unrealized losses in investment securities AFS, that are recorded in accumulated other comprehensive income (loss). These reductions to equity were partially offset by earnings of $1.16 per share, less dividends declared of $0.45 per share (retained earnings of $0.71).

  • Book value per share was $38.02, down $1.03 from a quarter ago, and down $3.66 from a year ago.

  • Tangible book value per share⁹ was $34.77, down $1.03 from a quarter ago, and down $3.62 from a year ago.

• Dividends: On September 20, 2022, the Board of Directors declared a quarterly cash dividend of $0.45 per share payable on October 31, 2022 to shareholders of record on October 10, 2022.

• Capital ratios for the Company are in the table below.

	For the Company
	September 30,			June 30,			September 30,
	202210			2022			2021
Regulatory Ratios
Total Capital (to risk weighted assets)	16.10	%		15.70	%		16.59	%
Tier 1 Capital (to risk weighted assets)	15.11	%		14.58	%		15.33	%
Common Equity Tier 1 (to risk weighted assets)	15.11	%		14.58	%		15.33	%
Tier 1 Capital (to average assets)	11.55	%		10.68	%		10.58	%
Common Capital Ratios
Common Equity Ratio	11.39	%		11.45	%		11.49	%
Tangible Common Equity Ratio	10.52	%		10.60	%		10.68	%

Additional financial information: The financial information that follows provides more detail on the Company’s financial performance for the three months ended September 30, 2022 as compared to the three months ended June 30, 2022 and September 30, 2021 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, 2021, quarterly report on Form 10-Q for the quarter ended June 30, 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 sixteen 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 third quarter 2022 financial results on Thursday, October 20, 2022 at 10:00 a.m. eastern time. The public is invited to listen to this registering at the link https://register.vevent.com/register/BIb2a1705d60bc42988a46b4c716f15944 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 November 3, 2022.

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 evolution and continuation of the COVID-19 pandemic, 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 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, 2021 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.

______________
¹ A reconciliation between this non-GAAP financial measure and the nearest GAAP measure is provided in the tables that accompany this document.
² Year-to-date is for the nine months ended September 30, 2022. Prior year-to-date is for the nine months ended September 30, 2021.
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 under the subsection, "Total Loans."
⁵ A reconciliation between this non-GAAP financial measure and the nearest GAAP measure is provided in the table below. An explanation of the reconciliations and the reasons why the Company believes this non-GAAP financial measure to be important for investors is included with the reconciliation tables accompanying this document.
⁶ A reconciliation between this non-GAAP financial measure and the nearest GAAP measure is provided in the tables that accompany this document.
⁷ A reconciliation between this non-GAAP financial measure and the nearest GAAP measure is provided in the following table. An explanation of the reconciliations and the reasons why the Company believes this non-GAAP financial measure to be important for investors is included with the reconciliation tables accompanying this document.
⁸ On an annualized basis.
⁹ A reconciliation of non-GAAP financial measures to the nearest GAAP measure is provided in the tables that accompany this document.
¹⁰Capital ratios for September 30, 2022 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
	September 30,				June 30,				September 30,
	2022				2022				2021
Income Statements:
Total interest income	$	111,527			$	95,635			$	89,152
Total interest expense		27,630				12,717				10,107
Net interest income		83,897				82,918				79,045
Provision for (reversal of) credit losses		3,022				495				(8,203	)
Provision for unfunded commitments		774				553				716
Net interest income after provision for credit losses		80,101				81,870				86,532
Noninterest income (before investment gain)		5,304				5,715				6,780
Net gain (loss) on sale of investment securities		4				(151	)			1,519
Total noninterest income		5,308				5,564				8,299
Total noninterest expense		36,206				58,962				36,375
Income before income tax expense		49,203				28,472				58,456
Income tax expense		11,906				12,776				14,847
Net income	$	37,297			$	15,696			$	43,609
Per Share Data:
Earnings per weighted average common share, basic	$	1.16			$	0.49			$	1.36
Earnings per weighted average common share, diluted	$	1.16			$	0.49			$	1.36
Weighted average common shares outstanding, basic		32,084,464				32,080,657				31,959,357
Weighted average common shares outstanding, diluted		32,155,678				32,142,427				32,030,527
Actual shares outstanding at period end		32,082,321				32,081,241				31,947,458
Book value per common share at period end	$	38.02			$	39.05			$	41.68
Tangible book value per common share at period end(1)	$	34.77			$	35.80			$	38.39
Dividend per common share	$	0.45			$	0.45			$	0.40
Performance Ratios (annualized):
Return on average assets		1.29	%			0.54	%			1.46	%
Return on average common equity		11.64	%			4.91	%			13.00	%
Return on average tangible common equity(1)		12.67	%			5.35	%			14.11	%
Net interest margin		3.02	%			2.94	%			2.73	%
Efficiency ratio(2)		40.6	%			66.6	%			41.7	%
Other Ratios:
Allowance for credit losses to total loans(3)		1.04	%			1.02	%			1.21	%
Allowance for credit losses to total nonperforming loans		997	%			386	%			265	%
Nonperforming loans to total loans(3)		0.10	%			0.26	%			0.46	%
Nonperforming assets to total assets		0.09	%			0.19	%			0.31	%
Net (recovery) charge-off (annualized) to average total loans(3)		0.00	%			(0.04	)%			0.08	%
Average noninterest bearing deposits to average deposits		38.4	%			37.9	%			33.9	%
Yield on loans(3)		5.10	%			4.51	%			4.59	%
Cost of funds		0.99	%			0.45	%			0.35	%

Eagle Bancorp, Inc.
Consolidated Financial Highlights (Continued) (Unaudited)
(Dollars in thousands)
	Three Months Ended
	September 30,				June 30,				September 30,
	2022				2022				2021
Capital Ratios
Tier 1 capital (to average assets)		11.55	%			10.68	%			10.58	%
Total capital (to risk weighted assets)		16.10	%			15.70	%			16.59	%
Common equity tier 1 capital (to risk weighted assets)		15.11	%			14.58	%			15.33	%
Common equity to total assets		11.39	%			11.45	%			11.49	%
Tangible common equity ratio(1)		10.52	%			10.60	%			10.68	%
Loan Balances - Period End:
Commercial and Industrial	$	1,415,998			$	1,394,835			$	1,289,215
PPP loans		7,241				8,977				67,311
Commercial real estate - income producing		3,668,720				3,606,506				3,337,303
Commercial real estate - owner occupied		1,091,283				1,080,249				977,617
1-4 Family mortgage		71,731				72,793				76,259
Construction - commercial and residential		858,100				804,170				824,133
Construction - C&I (owner occupied)		139,238				129,717				222,366
Home equity		51,396				53,193				55,527
Other consumer		791				4,246				1,132
Total loans	$	7,304,498			$	7,154,686			$	6,850,863
Average Balances:
Total assets