Eagle Bancorp, Inc.

Hello, thank you for standing by and welcome to the Eagle Bancorp fourth quarter and year-end 2021 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1 on your telephone. Please be advised that today's conference may be recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Charles Levingston, Chief Financial Officer. Please go ahead.

Charles Levingston Thank you, Josh. Good morning. This is Charles Levingston, Chief Financial Officer of Eagle Bancorp. Before we begin the presentation, I would like to remind everyone that some of the comments made during this call may be considered forward-looking statements. While our growth and performance over this past quarter have been positive, we cannot make any promises about future performance, and it is our policy not to establish with the markets any formal guidance with respect to our earnings. None of the forward-looking statements made during this call should be interpreted as our providing formal guidance. Our Form 10-K for the 2020 fiscal year, our quarterly reports on Form 10-Q and current reports on Form 8-K identify certain risk factors that could cause the company's actual results to differ materially from those projected in any forward-looking statements made this morning. Eagle Bank Corp. does not undertake to update any forward-looking statements as a result of new information or future events or developments unless required by law. This morning's commentary will include non-GAAP financial information. The earnings release, which is posted in the investor relations section of our website and filed with the SEC, contains reconciliations of this information to the most directly comparable GAAP information. Our periodic reports are available from EGLE online at our website or on the SEC's website. This morning, Susan Reel, the president and CEO of EGLE Bank Corp., will start us off with a high-level overview. Then Jan Williams, our chief credit officer, will discuss her thoughts on loans, reserves, and credit quality matters. Then I'll return to discuss our financials in more detail. At the end, all three of us will be available to take questions. I would now like to turn it over to our president and CEO, Susan Reel.

Thank you, Charles. Good morning and welcome to our earnings call. I'm pleased to report another successful year with a strong finish at year end. A few highlights, which we will cover in more detail later, are earnings for the year and assets at year end were record highs. Asset quality continues to improve. Efficiency remains a strong point. And most importantly, loans, excluding PPP, grew by $231 million, or by 3.4 percent in the fourth quarter. Focusing on earnings first, it was our 22nd consecutive profitable year. Earnings for the year were a record $5.52 per diluted share, and we paid out $1.40 per share in dividends, which was 25 percent of earnings. Returns for the year were 1.49% on average assets and 14.73% on average tangible common equity. Turning to asset quality, at the end of the quarter, non-performing assets improved to 26 basis points on assets, and for the quarter, annualized net charge-offs improved to 7 basis points on average loans. Both of these ratios are the lowest we've seen in the past nine quarters. These asset quality ratios, combined with some factors that Jan will review, informed our decision to make a fourth consecutive reversal from our allowance for credit losses, even with the increase in loans. With a reversal of $7 million for the quarter, the total reversal for the year was $21.9 million which followed provisioning of $47 million for the full year of 2020. In terms of operating efficiency, we continue to be a leader with an efficiency ratio of 44.3% for the quarter. We are always prudent in our approach to expense management, yet we always keep an eye on critical infrastructure and investments in controls that are necessary to operate a safe and sound banking institution. This year, we closed three branches, all of which had expiring leases and clients who can be served from other Northern Virginia branches and through digital channels. The most recent closure was our Reston location in December, reducing our branch count to 17 and raising our average deposits per branch to $587 million. Now, let's talk about loans. On last quarter's call, we said that given the market conditions, the bank has taken a more competitive stance on credit spreads on high-quality loan opportunities. So, it was encouraging that even as payoffs and paydowns remained high, loans were up, and we saw significant contributions from both our CRE and C&I teams, particularly in December. The largest net increase was in owner-occupied CRE loans, which accounted for almost half of the net growth, followed by commercial loans and some income-producing CRE. Construction loans also increased, but were mostly offset by successful completed projects. We would also like to note our $2 billion in unfunded commitments at quarter end, and our total risk-based capital of 16.15% gives us a lot of room to continue to grow the loan portfolio. Our other lending teams also did well in 2021. The FHA team ended the year strong with a fourth quarter that resulted in trade premiums, origination fees, and mortgage servicing rights income of $2.5 million. For the year, the total was $5.6 million. The mortgage team had its second-best year, as it would be difficult to top 2020. Locked loans for the fourth quarter were $163 million, giving the mortgage team a total of almost $1 billion for the year. For our shareholders, our earnings contributed to increasing both book and tangible values. Book value rose to $42.28 per share, up 8.3% from a year ago, and tangible book value rose to $38.97 per share, up 9% from a year ago. We also increased the quarterly dividend three times. moving from 22 cents per share in the fourth quarter of 2020 to 40 cents per share in the third and fourth quarters of 2021. Based on last night's closing stock price of $60.77 per share and a quarterly dividend of 40 cents per share, our annualized dividend yield is 2.6%. In regards to our stock repurchase plan, For the year, we repurchased just over 13,000 shares at an average price of $51.78 per share. Additionally, in December, the Board adopted a new 2022 share repurchase plan for 1.6 million shares, or approximately 5% of outstanding shares. On the ground, our market continues to be robust as spending from the government Government contracting and the consumer remained strong, and construction on new projects moved forward. And based on government data, the unemployment picture continues to improve. The unemployment rate in the Washington area fell from 4.9% when we reported in August to 3.5% in November. And for the same period, the U.S. unemployment rate fell from 5.2% to 4.2 percent. This drop in unemployment, in particular the drop in the local rate, was a factor in the release of reserves. Also, the impact of Omicron appears to be passing as cases in our area have peaked, with new cases down 30 percent this week. With respect to our litigation and investigation, our dialogues with the SEC and the Federal Reserve are ongoing. And we cooperate with these investigations, and we continue to make progress towards a resolution of all disclosed matters. With that, I would like to turn the speaking duties over to Jan Williams, our Chief Credit Officer.