Eagle Bancorp, Inc. (NASDAQ:EGBN) Q4 2019 Earnings Conference Call - Final Transcript

Jan 16, 2020 • 10:00 am ET

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Eagle Bancorp, Inc. (NASDAQ:EGBN) Q4 2019 Earnings Conference Call - Final Transcript

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Q & A
Operator
Operator

[Operator Instructions] Our first question comes from Casey Whitman with Piper Sandler.

Analyst
Casey Orr Whitman

Good morning.

Executive
Charles D. Levingston

Good morning.

Executive
Susan G. Riel

Hi, Casey.

Analyst
Casey Orr Whitman

Hey, just a first quick question on the margin. I appreciate your commentary around it. Just, I guess, assuming we don't get more downward movement in short-term rates, well, one, how much more room do you have to lower deposit costs in this scenario? And then, I guess with the liquidity coming off by year-end, could we actually see the margin move up pretty meaningfully in the first quarter and then maybe hold steady from there? Is that one way to think about it? Or how should we think about the margin outlook?

Executive
Charles D. Levingston

Yeah, Casey, we've seen some of the liquidity recover here in the last couple of weeks here as we move back into a new year. I think given the current facts and circumstances, it's reasonable to expect that there may be some improvement in the margin going forward, as you suggested, with some of the normalization of the liquidity. We are originating loans right around the win [Phonetic] leverage coupon of the overall portfolio, and also, as you referenced, the stable rate environment, the stable rate outlook.

So I think the only other headwind in addition to our ability to lower funding costs would be certainly compression on credit spreads with -- in the absence of any kind of significant credit event, more broadly -- market based broadly -- broad credit events, there's going to be some reticence to widen those spreads by our competitors as well. So we still have to compete on that front. But yeah, in terms of being able to lower deposit rates, I do think that there will continue to be some competitiveness on the deposit side as well. We're still seeing a little bit of that, but it's certainly softened since the second, third quarter of last year, but I do think it could be reasonable to expect a little bit of an improvement in the margin.

Analyst
Casey Orr Whitman

Okay. And then maybe just touching on that a little more. Just as we think about where you guys kind of want to hold liquidity, should we think about it as just your average loan deposit ratio maybe heading more towards like 100% or so versus I think it was 98 or so percent this quarter, would that be one way to think about it?

Executive
Charles D. Levingston

Ideally, we -- I think I've stated before that if we could achieve 101%, 102%] loan to deposit ratio, that would be fine on my end. We want to make sure that we're accommodating our customers. And I think we've seen a lot of liquidity we saw flow in the third and fourth quarter was symptomatic of broader market themes as more cash just flowed into the banking system.

So, to the extent that that phenomenon continues, we'll continue to have these elevated costs. Again, if I had my druthers, we'd be at 101%, 102% on average.

Analyst
Casey Orr Whitman

Okay. Thank you. Helpful. And