Good day, ladies and gentlemen and welcome to the First Quarter 2018 Earnings Call for Eagle Bancorp. At this time, all participants are in a listen-only mode. [Operator Instructions] I would now like to turn the call over to Mr. Charles Levingston, Chief Financial Officer. Sir, you may begin.

Thank you, Victor. 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 maybe considered forward-looking statements. Our Form 10-K for the 2017 fiscal year, our quarterly reports on Form 10-Q and current reports on Form 8-K identify certain factors that could cause the company’s actual results to differ materially from those projected in any forward-looking statements made this morning. The company does not undertake to update any forward-looking statements as a result of new information or future events or developments. Our periodic reports are available from the company or online on the company’s website or the SEC website. I would like to remind you that while we think that our prospects for continued growth and performance are good, it is our policy not to establish with the markets any earnings, margin or balance sheet guidance. Now, I would like to introduce Ron Paul, the Chairman and CEO of Eagle Bancorp.

Thank you, Charles. Welcome to all of you for our discussion and results for the first quarter of 2018. We appreciate you joining us this morning and your continued interest. As usual, our Chief Credit Officer, Jan Williams was also on the line with us and she, Charles and I will be glad to answer any questions later in the call. We are very pleased to announce that earnings for the first quarter were $35.7 million, a 32% increase from $27 million of the 3 months ending March 31, 2017. While the reduction in the corporate income tax rate is contributing to increasing net income for many U.S. corporations in 2018, for EagleBank, it was about one factor that is driving our improved operating results. Overall, our pre-tax income for the first quarter of 2018 of $48 million was 13% higher than the $42.3 million pre-tax income for the first quarter of 2017. We are very proud that not only of the growth in pre-tax and net income, but with the quality of our earnings and the high level of profitability which is reflected in a return on average assets of 1.91% during the first quarter, which has increased from 1.62% in the first quarter of 2017. The ROAA of 1.91 is also a record level for our company and is significantly above industry and peer group averages. The return on average common equity was also very strong at 15.99% for the first quarter improved from 12.74% a year ago. The highlights of our performance in the first quarter and the key drivers of the increased profitability were a very favorable and slightly expanded net interest margin, continued excellent credit quality with low levels of charge-offs in problem loans and growth in both loans and deposits. We continued our focus…

[Operator Instructions] And our first question comes from line of Catherine Mealor from KBW. You may begin.

Thanks. Good morning.

Good morning Catherine.

Maybe first upon the CD growth that we saw this quarter and then your comments Ron about your CD campaign, can you just give us any color around that strategy, the incremental cost of the CD is coming on right now and then how big you think it’s reasonable to assume your CDs get to as a percentage of deposits?

In looking at deposits Catherine, we have always felt that we were managing between wholesale and core and realized that now the opportunity is for us to be going to the CD market to be able to go on the longer end of the CD market. So I think that the opportunity for us to continue to grow CDs in a rising interest rate environment is a great opportunity for us. Charles, do you want to add something?

Yes. Certainly as we look at the direction of rates these days, locking in some what could potentially be lower cost funding over the term of those rates call it 18 months or 2 years, it seems to be a prudent move at this point. So again not a muffle that we have exercised a lot in the past, but it seems to have been pretty effective for us here in the first quarter and expected to continue to use that as a portion of the funding.

Catherine, I also want to add to that that there is a number of very wealthy customers that we currently have and we have not been competitive to be able to get their CD product. And we are actively working with them on being able to bring them into [Technical Difficulty] under our CD program.

Okay, that’s quite helpful. And then as we think about improving your deposit betas are moving higher and which just given your growth and the CD strategy that makes sense. But how should we think about your ability to manage the margin from here? I mean the part of what happened to your margin this quarter, which was great to see for that increase, part of that did come from positive mix shifts from excess liquidity. So, as you kind of used that – as you moved through that lever moving forward, do you think the direction of the margins from here like we see from compression just as deposit betas continue to increase or do you think you have got enough room on the loan side to be able to maintain your margin even at this higher beta level? Thanks.

Yes, Catherine. I think as you pointed out, we did benefit from positive mix, not only slightly higher loan to deposit ratio on average of 106, but also from the fact that we increased our DDAs by a full percentage point saw some benefit there. Additionally, obviously yields going up on the loan portfolio from a 5.21 to 5.30 quarter-over-quarter were also helpful. I do think with the way that rates had moved and the competitiveness of the deposit market we will continue to see upward pressure on funding cost. And just the pricing discipline on the loan side is going to require our focus to ensure that we are able to keep pace with that – with those rising funding costs. But I think that considering where the margin is, I wouldn’t be surprised with a flat to slightly compressed margin moving forward.

Catherine, also I would like to add that seeing where we are within the cycle we would be looking – we are looking more and more for longer term type debt and longer term type debt based on the yield curve obviously will lend us into a lower lending world away from the agency side, but into the longer world of many firms, so another reason that you are likely to see the consolidation of the NIM.

And it’s also worth noting the variable and adjustable rate portion of our loan portfolio up to 67% of our loans are variable and adjustable rates. Also I think we talked about on our prior earnings call, we pushed through the floors on 93% of our loans that currently have floors that those loans do represents about 57% of our total loan portfolio. We are seeing a lot more sensitivity there given the rate move that took place actually last December, we of those loans with floors we saw about a 0.2 basis point increase in the coupon on those loans from quarter-to-quarter, which again point out the sensitivities to that portion of the book. So, you continue to see that lift which will be helpful for those loan yields.

And can we [ph] still have any loan growth as well as a way to manage the margin or is your outlook for double-digit loan growth still intact?

Catherine, we believe that we will be able to able to maintain in that very low double-digit loan growth of between a combination of the C&I, CRE and the other products that we have very, very low.

Got it. Okay, thank you. Appreciate it. Great quarter.

Thanks, Catherine.

Thank you. And our next question is from the line of Joe Gladue from Merion Capital Group. You may begin.

Good morning. I guess wanted to ask about just elevated legal and professional fees from the internet event, is some of that expected to continue or is that largely completed in the first quarter?

We have some potential runoff that we might have into the second quarter, but we don’t know whether they will be further. We didn’t expect the initial findings. So, I really can’t comment as to whether or not there will be additional expected costs.

Okay. And just wondering if you comment I guess both on the loan and deposit side, there has been a good bit of consolidation in nearby markets in last quarter too? And has that created any significant change on either the competitiveness on the loan or deposit side?

Joe, we just – we are so grateful to have such loyal customers that have been with us for so long and have been through the goods and the bads. And these are people that know that we know the market, they know that we know the property, they know that we understand the expectations as far as rental increases and what’s going on within the market and these are the people that have recognized that we needed deposits to fund the loans and that we are going to be there at closing to fund the loan requests. So I think based on that they get it, we get it. We understand that’s the give and take process and that’s what has let us to the growth that we have had over the past 20 years and we just don’t see that continue – that changing at all. We see the continuation of that model being the model that seems to work very, very well.

Alright. Thank you.

Thank you.

And our next question comes from the line of Austin Nicholas from Stephens. You may begin.

Hey guys, good morning.

Good morning.

Maybe just hitting on the expenses real quick, most of my questions were answered there, but maybe given the marketing efforts that you mentioned, should we expect the marketing expense to be a little higher this year versus last year?

No, the marketing expense that we have and the programs that we have – the programs, we have eight programs from both a short-term and a long-term on increasing deposits. The expenses associated with those marketing expenses really just boots on the ground, it’s energy and effort of getting out and meeting with our certain type of customers and being able to pursue certain type of customers. There will be a slight increase in marketing but nothing on any materiality.

Got it, okay, great. And then maybe just one other one, as your capital continues to build and it’s being very strong, can you maybe just remind us of how you are managing that and any potential usage of that form a dividend or I mean M&A?

We talk about it, we think about it all the time, obviously our goal right now is continuing to maintain that base of increasing our source of capital which makes us sleep well at night and is something that we are looking to continue to do.

I would also like to point out, Austin, I mean when I look at return on average tangible common equity for the first quarter we posted 16.86% of return there which is still pretty strong and favorable, so still making good use of the capital at this point.

Great, that’s all I have got. Thanks guys.

Thank you.

Thanks Austin.

And I am showing no further questions at this time. I would now like to turn the call back to Mr. Ron Paul for closing remarks.

I would like to thank everybody for attending the call. I appreciate the questions and obviously we are always available to answer any questions during the course of the quarter. And thank you all and enjoy the spring. Thank you very much.

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program and you may all disconnect. Everyone, have a great day.