Why Eagle Bancorp, Inc. (NASDAQ: EGBN) stock is under pressure

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Eagle Bancorp, Inc. (NASDAQ: EGBN) stock fell 1.29% on January 15th, 2020 (Source: Google finance) and continued its bearish momentum on January 16th, 2020 falling over 0.2% (as of 9:50 am GMT-5; Source: Google finance). The company reported 12% decline in the net income to $35.5 million from the comparable quarter a year ago. The company missed analysts’ consensus estimate as net interest income fell and non-interest expenses rose in the fourth quarter. For FY 19, the company has reported 6% fall in the net income to $142.9 million as compared to $152.3 million for the year ended December 31, 2018.

EGBN in the fourth quarter of FY 19 has reported the adjusted earnings per share of $1.06, missing the analysts’ estimates for the adjusted earnings per share of $1.07, according to analysts polled by FactSet. Net interest income fell more than 1% to $80.7 million. Non-interest income rose 11% to $6.7 million. Net interest income was higher than the $80.2 million analysts were expecting, as was non-interest income, which beat an average estimate of $5.5 million. The company delivered the total revenue (net interest income plus noninterest income) for the fourth quarter of 2019 of $87.4 million, as compared to $87.8 million for the fourth quarter of 2018 and $87.3 for the third quarter in 2019.

Moreover, for the fourth quarter of 2019, the company had experienced solid growth of average deposits as compared to minimal loan growth, which has resulted in significantly higher average liquidity. This higher average liquidity, which is $739 million for the fourth quarter of 2019 compared to $306 million normalized average for the first three quarters of 2019 have led to a fall in the net interest margin to 3.49% for the fourth quarter from 3.72% in the third quarter of 2019. The higher liquidity position in the fourth quarter is due to an average loan to deposit ratio of 98% as compared to 102% for the third quarter of 2019. The decrease in net interest margin for the fourth quarter is due to a 21 basis point fall in the yield on the loan portfolio to 5.18% compared to 5.39% for the third quarter 2019, mainly due to the significant fall in the one month average LIBOR interest rate in the fourth quarter, which is down 39 basis points to 1.79%.

Additionally, Total assets at December 31, 2019 were $8.99 billion, which increased 7% as compared to $8.39 billion at December 31, 2018. Total loans (excluding loans held for sale) were $7.54 billion at December 31, 2019, which is an 8% increase as compared to $6.99 billion at December 31, 2018.

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