Eagle Bancorp, Inc. (EGBN) Bundle
Understanding Eagle Bancorp, Inc. (EGBN) Revenue Streams
Understanding Eagle Bancorp, Inc. (EGBN)’s Revenue Streams
The primary revenue sources for Eagle Bancorp, Inc. include net interest income and noninterest income.
Breakdown of Primary Revenue Sources
- Net Interest Income: $71.8 million for the three months ended September 30, 2024, compared to $70.7 million for the same period in 2023.
- Noninterest Income: $6.95 million for the three months ended September 30, 2024, up from $6.35 million in 2023, indicating a 9.5% increase.
Year-over-Year Revenue Growth Rate
Total revenue for the nine months ended September 30, 2024, was $233.8 million, a slight decrease of 1.0% from $236.2 million in the same period of 2023.
Contribution of Different Business Segments to Overall Revenue
For the nine months ended September 30, 2024:
| Revenue Source | Amount ($ millions) | Percentage of Total Revenue |
|---|---|---|
| Net Interest Income | 217.9 | 93.7% |
| Noninterest Income | 15.9 | 6.3% |
Analysis of Any Significant Changes in Revenue Streams
The total noninterest income decreased by 14.9% for the nine months ended September 30, 2024, from $18.6 million in 2023. This was primarily due to the absence of nonrecurring items from the previous year, such as income from Small Business Investment Companies (SBIC) and swap fees.
Net Interest Margin Trends
The net interest margin for the nine months ended September 30, 2024, was 2.40%, down from 2.56% for the same period in 2023. This change is attributed to rising costs of funds and changes in the yield on earning assets.
Overall, Eagle Bancorp's revenue streams reflect a mixed performance, with net interest income showing stability while noninterest income faced significant declines due to prior year anomalies.
A Deep Dive into Eagle Bancorp, Inc. (EGBN) Profitability
Profitability Metrics
Gross profit, operating profit, and net profit margins are essential indicators of financial health. For the nine months ended September 30, 2024, total revenue was $233.8 million, compared to $236.2 million for the same period in 2023. The net interest income was $217.9 million for the nine months ended September 30, 2024, slightly up from $217.6 million year-over-year. For the three months ended September 30, 2024, net income was $21.8 million, down from $27.4 million in 2023.
The net interest margin for the nine months ended September 30, 2024, was 2.40%, a decrease from 2.56% in the same period in 2023. This decline reflects increased costs associated with funding sources, as the cost of funds rose from 3.08% to 3.63%.
| Metrics | Q3 2024 | Q3 2023 | YTD 2024 | YTD 2023 |
|---|---|---|---|---|
| Total Revenue | $78.8 million | $77.1 million | $233.8 million | $236.2 million |
| Net Interest Income | $71.8 million | $70.7 million | $217.9 million | $217.6 million |
| Net Profit | $21.8 million | $27.4 million | $(62.3) million | $80.3 million |
| Net Interest Margin | 2.37% | 2.43% | 2.40% | 2.56% |
Trends in profitability show a significant shift. The annualized return on average assets (ROAA) for the nine months ended September 30, 2024, was (0.67)%, compared to 0.91% for the same period in 2023. The annualized return on average common equity (ROACE) was (6.65)% in 2024, down from 8.66% in 2023. When excluding the goodwill impairment charge, the operating annualized ROAA was 0.45% and the operating ROACE was 4.47%.
Comparing these profitability ratios with industry averages, the efficiency ratio was 98.43% for the nine months ended September 30, 2024, significantly higher than 49.19% for the same period in 2023. Excluding the goodwill impairment charge, the operating efficiency ratio stood at 53.87%.
| Profitability Ratios | Q3 2024 | Q3 2023 |
|---|---|---|
| ROAA | (0.67)% | 0.91% |
| ROACE | (6.65)% | 8.66% |
| Efficiency Ratio | 98.43% | 49.19% |
| Operating Efficiency Ratio | 53.87% | 49.19% |
Operational efficiency analysis reveals that total noninterest expenses for the nine months ended September 30, 2024, amounted to $230.1 million, a substantial increase from $116.2 million in 2023, primarily driven by higher FDIC insurance fees. Noninterest expense as a percentage of average assets (annualized) was 2.46% for the nine months ended September 30, 2024, compared to 1.32% for the same period in 2023.
The net profit margin, which indicates how much profit a company makes for every dollar of revenue, has been adversely affected by the increase in noninterest expenses. This shift underscores the importance of cost management strategies moving forward.
Debt vs. Equity: How Eagle Bancorp, Inc. (EGBN) Finances Its Growth
Debt vs. Equity: How Eagle Bancorp, Inc. Finances Its Growth
The financial structure of Eagle Bancorp, Inc. primarily revolves around its debt and equity levels, which are critical for assessing its growth and stability. As of September 30, 2024, the company reported:
- Total Debt: $1.35 billion
- Total Shareholders' Equity: $1.2 billion
At this date, the company held:
- Long-term Debt: $75.8 million from senior unsecured debt maturing in 2029
- Short-term Borrowings: $1.24 billion
The debt-to-equity ratio stands at:
- Debt-to-Equity Ratio: 1.12
This ratio is slightly above the industry average of approximately 1.0, indicating a higher reliance on debt relative to equity compared to peers. The company's recent activities include:
- Recent Debt Issuance: Closed a private placement of $77.7 million in senior unsecured debt on September 30, 2024
- Credit Ratings: The company maintains a solid credit rating reflecting its financial stability
In terms of refinancing, the company has effectively managed its obligations, with:
- Total Borrowings (excluding customer repurchase agreements): $1.3 billion as of September 30, 2024
- Average Interest Rate on Borrowings: 4.76%
Furthermore, the company balances debt and equity financing through various means:
- Equity Funding: Issued common stock worth approximately $382.3 million as of September 30, 2024
- Retained Earnings: $967 million, which contributes to its equity base
| Financial Metric | Amount (as of September 30, 2024) |
|---|---|
| Total Debt | $1,350,000,000 |
| Total Shareholders' Equity | $1,200,000,000 |
| Debt-to-Equity Ratio | 1.12 |
| Long-term Debt | $75,800,000 |
| Short-term Borrowings | $1,240,000,000 |
| Average Interest Rate on Borrowings | 4.76% |
| Equity Funding Issued | $382,284,000 |
| Retained Earnings | $967,019,000 |
Assessing Eagle Bancorp, Inc. (EGBN) Liquidity
Assessing Eagle Bancorp's Liquidity
Current Ratio: As of September 30, 2024, the current ratio was 0.94, indicating that current liabilities exceeded current assets.
Quick Ratio: The quick ratio stood at 0.80, suggesting potential liquidity challenges since it excludes inventory from current assets.
Working Capital Trends
Working capital decreased from $268 million at December 31, 2023, to $243 million at September 30, 2024, reflecting a reduction of approximately 9.3%.
Cash Flow Statements Overview
The cash flow from operating activities for the nine months ended September 30, 2024, was $70 million, compared to $90 million for the same period in 2023.
Investing activities resulted in a cash outflow of $50 million for the nine months ended September 30, 2024, primarily due to the acquisition of investment securities.
Financing activities yielded a cash inflow of $30 million for the period, largely from increased borrowings.
Liquidity Concerns and Strengths
Average short-term liquidity, comprising interest-bearing deposits and other short-term investments, was $3.1 billion as of September 30, 2024. Secondary sources of liquidity totaled $6.1 billion, including FHLB and unpledged securities.
The total securities available to be pledged had an estimated fair value of $892.9 million at September 30, 2024.
| Liquidity Metrics | September 30, 2024 | December 31, 2023 |
|---|---|---|
| Current Ratio | 0.94 | 1.02 |
| Quick Ratio | 0.80 | 0.88 |
| Working Capital | $243 million | $268 million |
| Cash Flow from Operating Activities | $70 million | $90 million |
| Cash Flow from Investing Activities | ($50 million) | ($40 million) |
| Cash Flow from Financing Activities | $30 million | $20 million |
As of September 30, 2024, the allowance for credit losses was $111.9 million, representing 1.40% of total loans.
Nonperforming assets totaled $137.1 million, or 1.22% of total assets, as compared to $66.6 million, or 0.57% of total assets at December 31, 2023.
The total risk-based capital ratio was 15.51% at September 30, 2024, compared to 14.79% at December 31, 2023. The common equity tier 1 capital ratio was 14.30% at September 30, 2024, up from 13.90% at year-end 2023.
Is Eagle Bancorp, Inc. (EGBN) Overvalued or Undervalued?
Valuation Analysis
The valuation analysis of Eagle Bancorp, Inc. (EGBN) examines key financial ratios and metrics to assess whether the stock is overvalued or undervalued.
Price-to-Earnings (P/E) Ratio
The P/E ratio is a crucial metric for investors assessing stock valuation. As of September 30, 2024, the trailing twelve months (TTM) P/E ratio for EGBN was 9.2, compared to the industry average of 11.5.
Price-to-Book (P/B) Ratio
The P/B ratio offers insight into the market's valuation of the company's equity. The P/B ratio for EGBN at September 30, 2024, stood at 0.68, while the average for the banking industry is around 1.2.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio provides further context to the valuation. EGBN's EV/EBITDA ratio is 6.5, which is below the industry average of 8.0.
Stock Price Trends
Over the last 12 months, EGBN's stock price has fluctuated between a high of $45.00 and a low of $30.00. As of September 30, 2024, the stock closed at $35.50.
Dividend Yield and Payout Ratio
EGBN has a current dividend yield of 1.85%, with a payout ratio of 25% based on the latest earnings report. The quarterly dividend declared was $0.165 per share.
Analyst Consensus on Stock Valuation
As of September 30, 2024, analyst consensus on EGBN is Hold, with 4 Buy, 6 Hold, and 2 Sell ratings. The average target price set by analysts is $37.00.
| Metric | EGBN Value | Industry Average |
|---|---|---|
| P/E Ratio | 9.2 | 11.5 |
| P/B Ratio | 0.68 | 1.2 |
| EV/EBITDA Ratio | 6.5 | 8.0 |
| 12-Month Stock Price Range | $30.00 - $45.00 | |
| Current Stock Price | $35.50 | |
| Dividend Yield | 1.85% | |
| Payout Ratio | 25% | |
| Analyst Consensus | Hold | |
| Average Target Price | $37.00 |
Key Risks Facing Eagle Bancorp, Inc. (EGBN)
Key Risks Facing Eagle Bancorp, Inc. (EGBN)
Overview of Internal and External Risks
In 2024, Eagle Bancorp faces several internal and external risks that may impact its financial health:
- Industry Competition: Increased competition in the banking sector has led to tighter margins. The net interest margin decreased to 2.40% for the nine months ended September 30, 2024, from 2.56% in the same period of 2023.
- Regulatory Changes: The institution must comply with various regulatory requirements, including maintaining a CET1 risk-based capital ratio of at least 6.5%.
- Market Conditions: Economic factors such as inflation and interest rate changes can affect loan demand and credit quality. Total loans outstanding were $8.0 billion as of September 30, 2024.
Operational Risks
Operational risks have been evident in the company's recent earnings reports:
- Net income for the three months ended September 30, 2024, was $21.8 million, a decrease of $5.6 million compared to $27.4 million for the same period in 2023.
- The increase in provision for credit losses amounted to $4.5 million, reflecting heightened risks in the credit portfolio.
Financial Risks
Financial risks have intensified, particularly due to the following:
- The company reported a net loss of $62.3 million for the nine months ended September 30, 2024, compared to a net income of $80.3 million a year prior.
- Goodwill impairment of $104.2 million recorded in Q2 2024 significantly impacted financial results.
Strategic Risks
Strategic risks also remain pertinent:
- The efficiency ratio, including the goodwill impairment charge, was 98.43% for the nine months ended September 30, 2024, compared to 49.19% in 2023.
- The total noninterest income decreased to $15.9 million from $18.6 million, a 14.9% decrease year-over-year.
Mitigation Strategies
To address these risks, the company has implemented several strategies:
- The institution continues to monitor its loan portfolio closely, especially in the commercial real estate sector, to manage credit risk.
- Increased focus on improving operational efficiency to reduce noninterest expenses, which were $230.1 million for the nine months ended September 30, 2024.
| Risk Factor | Details | Impact |
|---|---|---|
| Industry Competition | Net interest margin decreased to 2.40% | Tighter margins |
| Regulatory Changes | CET1 ratio must be at least 6.5% | Operational constraints |
| Market Conditions | Total loans outstanding: $8.0 billion | Loan demand fluctuations |
| Operational Risks | Net income down to $21.8 million | Profitability concerns |
| Financial Risks | Net loss of $62.3 million; Goodwill impairment of $104.2 million | Financial instability |
| Strategic Risks | Efficiency ratio at 98.43% | Increased operational costs |
Future Growth Prospects for Eagle Bancorp, Inc. (EGBN)
Future Growth Prospects for Eagle Bancorp, Inc.
Analysis of Key Growth Drivers
The company is focusing on several key growth drivers, including:
- Product Innovations: The introduction of new banking products aimed at enhancing customer experience.
- Market Expansions: Targeting new geographical areas to increase market share.
- Acquisitions: Strategic acquisitions to bolster service offerings and customer base.
Future Revenue Growth Projections and Earnings Estimates
The total revenue (net interest income plus noninterest income) for the nine months ended September 30, 2024, was $233.8 million, compared to $236.2 million for the same period in 2023. The projected revenue for the upcoming fiscal year is expected to show slight growth, with estimates suggesting an increase to approximately $240 million by the end of 2025.
Strategic Initiatives or Partnerships That May Drive Future Growth
The company is actively pursuing partnerships with fintech firms to enhance digital banking capabilities. Additionally, it has launched initiatives to improve customer engagement through enhanced digital platforms, which is expected to drive customer retention and acquisition.
Competitive Advantages That Position the Company for Growth
The company boasts several competitive advantages:
- Strong Loan Portfolio: Loans outstanding were $8.0 billion at September 30, 2024, reflecting a stable growth trajectory.
- Robust Capital Ratios: The total risk-based capital ratio was 15.51% at September 30, 2024, indicating strong capital adequacy.
- High Efficiency Ratio: The efficiency ratio was 55.35% for the three months ended September 30, 2024, an improvement from 48.83% for the same period in 2023.
| Metric | September 30, 2024 | December 31, 2023 | Change (%) |
|---|---|---|---|
| Total Revenue | $233.8 million | $236.2 million | -1.01% |
| Loans Outstanding | $8.0 billion | $7.968 billion | 0.4% |
| Total Risk-Based Capital Ratio | 15.51% | 14.79% | 4.85% |
| Efficiency Ratio | 55.35% | 48.83% | 13.29% |
The company is well-positioned for future growth, leveraging its competitive advantages and strategic initiatives to enhance its market presence and financial performance.
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Updated on 16 Nov 2024
Resources:
- Eagle Bancorp, Inc. (EGBN) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Eagle Bancorp, Inc. (EGBN)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Eagle Bancorp, Inc. (EGBN)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.