Eagle Bancorp, Inc Announces Net Income For Second Quarter 2023 Of $28.7 Million Or $0.94 Per Diluted Share.

BETHESDA, Md: Eagle Bancorp, Inc. (the "Company") (NASDAQ: EGBN), the parent company of EagleBank (the "Bank"), today announced net income of $28.7 million for the second quarter 2023, compared to net income of $24.2 million for the first quarter 2023 (the "prior quarter") and $15.7 million for the second quarter 2022 (the "year-ago quarter"). Net income (basic and diluted) was $0.94 per share for the second quarter 2023, compared to $0.78 per share for the prior quarter, and $0.49 per share for the year-ago quarter. Net income for the year-ago quarter included one-time costs related to the legal settlements associated with the previously disclosed government investigations.

The $4.5 million increase in earnings from the prior quarter was attributable to several items including income from a Small Business Investment Company ("SBIC") investment, an increase in swap fee income, lower noninterest expenses, a lower provision for credit losses and a lower provision for unfunded commitments. These improvements were partially offset by lower net interest income as the cost of funding outpaced the increase in yield on earning assets.

Second Quarter 2023 Highlights

The Company declared a quarterly dividend of $0.45 per share.

The Company repurchased 1,200,000 shares in the second quarter at an average price of $24.48 per share.

Common equity and tangible common equity ratios at quarter-end were 11.05% and 10.21%1, respectively.

Nonperforming assets as a percent of assets was 0.28%. Net charge-off for the quarter was $5.6 million, or 0.29%.

The provision for credit losses was $5.2 million for the quarter, as compared to $6.2 million the prior quarter. The allowance for credit losses as a percent of total loans was 1.00% down from 1.01% a quarter ago.

Loans at quarter-end were $7.8 billion, up $29 million from the prior quarter-end. This was the seventh consecutive quarterly increase.

The funding mix changed as deposits at quarter-end were $7.7 billion, up $255 million from the prior quarter-end, and short-term borrowings were $1.8 billion, down $277 million from the prior quarter-end. The increase in deposits was primarily from growth in brokered time deposits and the decrease in borrowings was from repayment of Federal Home Loan Bank ("FHLB") borrowings.

Total estimated uninsured deposits at June 30, 2023 were $2.3 billion, or 29.4% of deposits.

The Company has implemented an expense reduction plan. In the second quarter, two branches were closed with an annual pre-tax cost savings in rental expense of $408 thousand. Early in the third quarter, the Company also implemented a reduction-in-force that along with identified cost savings is expected to generate cost savings of $2.4 million in the second half of 2023 plus an additional reduction of $5.8 million in 2024.

(Dollars in thousands, except per share data)

As of or for the Three Months Ended

Percent Change

June 30,

March 31,

June 30,

Q2-23

Q2-23

2023

2023

2022

vs. Q1-23

vs. Q2-22

Earnings and Per Share Data

Net Income / (Loss)

$28,692

$24,234

$15,696

18.4

%

82.8

%

Adjusted Net Income2

--

--

$38,570

--

(25.6)%

Earnings per share (diluted)

$0.94

$0.78

$0.49

20.6

%

91.9

%

Adjusted earnings per share (diluted)2

--

--

$1.20

--

(21.6)%

Dividend per share

$0.45

$0.45

$0.45

--

--

Return ratios

Return on average assets

0.96

%

0.86

%

0.54

%

--

--

Return on average common equity

9.24

%

7.92

%

4.91

%

--

--

Return on average tangible common equity2

10.08

%

8.65

%

5.35

%

--

--

Net interest margin

2.49

%

2.77

%

2.94

%

--

--

Efficiency ratio2

47.2

%

51.6

%

66.6

%

--

--

Balance Sheet

Assets

$

11,035

$

11,089

$

10,942

(0.5)%

0.9

%

Loans

$

7,767

$

7,738

$

7,155

0.4

%

8.6

%

Deposits

$

7,718

$

7,463

$

9,172

3.4

%

(15.8)%

Borrowings

$

1,907

$

2,184

$

350

(12.7)%

445.2

%

Book and Tangible Book

Book value per share

$

40.78

$

39.92

$

39.05

2.2

%

4.4

%

Tangible book per share2

$

37.29

$

36.57

$

35.80

2.0

%

4.2

%

Capital ratios

Equity/assets

11.05

%

11.20

%

11.45

%

--

--

Tangible equity/assets

10.21

%

10.36

%

10.60

%

--

--

Total capital (to risk weighted assets)

14.51

%

14.74

%

15.14

%

--

--

Asset quality

Allowance for credit losses to total loans

1.00

%

1.01

%

1.02

%

--

--

Nonperforming assets ("NPAs") to total assets

0.28

%

0.08

%

0.19

%

--

--

Net charge-off to average loans (annualized)

0.29

%

0.05

%

(0.04)%

--

--

CEO Commentary

Susan G. Riel, President and Chief Executive Officer of Eagle Bancorp, Inc. commented, "While earnings stabilized and were higher than the prior quarter, we remain committed to improving results for our shareholders. During the quarter, our deposits were up, borrowings decreased, and credit metrics continue to remain strong. And, while rising rates continued to put pressure on bank stocks, we used the opportunity to repurchase shares at a historically low price relative to book and tangible book values. Additionally, our regulatory capital ratios remain strong."

We are also mindful of continuing to remain a highly efficient bank and in the first half of the year we took action to save costs by closing three branches3 and ceasing the origination of first lien residential mortgages as future prospects for sufficient returns were low. Early in the third quarter, we also made the difficult decision to implement a reduction-in-force along with a strategic review of operating expenses.

"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 $71.8 million for the second quarter 2023, compared to $75.0 million for the prior quarter and $82.9 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 and the full impact of changes in the funding mix beginning late in the first quarter of 2023. These changes included a higher level of borrowings at rates higher than those of the deposits those borrowings replaced, as well as a shift in noninterest bearing deposit accounts to interest bearing deposit accounts. Although higher interest rates benefited loan yields as variable rate loans adjusted upward and new loans were added at current, higher rates, the increase to interest income was less than the increase in interest expense on average deposits and average borrowings.

Net interest margin ("NIM") was 2.49% for the second quarter 2023, compared to 2.77% for the prior quarter and 2.94% for the year-ago quarter. The decrease in margin from the prior quarter was 28 basis points. The NIM contraction was based on the...