Eagle Bancorp Inc.

01/16/2019 | Press release | Distributed by Public on 01/16/2019 17:34

CORRECTING and REPLACING -- Eagle Bancorp, Inc.

BETHESDA, Md., Jan. 16, 2019 (GLOBE NEWSWIRE) -- In a release issued earlier today by Eagle Bancorp, Inc. (NASDAQ:EGBN), we are advised by the company that '$40.4 Million' in the headline should have been '$40.3 Million.' The corrected release follows:

Eagle Bancorp, Inc. Announces Record Earnings With Net Income of $40.3 Million for the Fourth Quarter and $152.3 Million for the Full Year of 2018

Eagle Bancorp, Inc. (the 'Company') (NASDAQ:EGBN), the parent company of EagleBank, today announced quarterly net income of $40.3 million for the three months ended December 31, 2018, a 159% increase on a net income basis (34% increase on an operating basis) over the $15.6 million net income ($30.2 million on an operating basis) for the three months ended December 31, 2017.

For the year ended December 31, 2018, the Company's net income was $152.3 million, a 52% increase (33% increase on an operating basis) over the $100.2 million ($114.8 million on an operating basis) for the year ended December 31, 2017.

In 2017, for the fourth quarter and full year, operating earnings exclude one time charges of $14.6 million ($0.42 per diluted common share), required as a result of the Tax Cuts and Jobs Act of 2017 ('Tax Reform') enacted in late December 2017. Where appropriate, parenthetical references refer to operating earnings, which the Company believes are more relevant comparisons to current and historical period results of operations. Reconciliations of 2017 GAAP earnings to operating earnings are contained in the tables that follow.

Net income for the three months ended December 31, 2018 was $1.17 per basic and diluted common share as compared to $0.46 per basic common share and $0.45 per diluted common share ($0.88 per basic and diluted common share on an operating basis), for the same period in 2017, a 33% increase in diluted earnings per share (on an operating basis) for the fourth quarter of 2018 over 2017.

For the full year 2018, net income was $4.44 per basic common share and $4.42 per diluted common share as compared to $2.94 per basic common share and $2.92 per diluted common share ($3.36 per basic common share and $3.35 per diluted common share on an operating basis) for 2017, a 32% increase in diluted earnings per share (on an operating basis) for the full year of 2018 over 2017.

'We are very pleased to report a continued trend of balanced and consistently strong financial performance,' noted Ronald D. Paul, Chairman and Chief Executive Officer of Eagle Bancorp, Inc. 'Our net income in the fourth quarter represents ten years of quarterly increases in operating earnings dating back to the first quarter of 2009, a record of consistency rarely seen in public company financial performance. Our strong financial performance has resulted from a combination of steady average balance sheet growth, revenue growth, and very favorable operating leverage. Additionally, we have maintained solid asset quality over an extended period through disciplined risk management practices. These factors have combined to achieve a return on average assets of 1.90% for the fourth quarter of 2018, a return on average common equity of 14.82%, and a return on average tangible common equity ratio of 16.43%, while sustaining very strong capital levels.'

Mr. Paul added, 'For the fourth quarter of 2018, we experienced very strong average deposit growth which was invested at lower market interest rates, resulting in above average liquidity. This liquidity, which was invested at short term market rates, contributed to a decline in the net interest margin to 3.97% for the fourth quarter from 4.14% in the third quarter of 2018. Average deposit balances increased 7.2% for the fourth quarter 2018 over the third quarter 2018. We attribute the significant average increase to seasonality, market conditions and our well developed customer relationships leading to success in gathering core deposits. Steady growth in loan balances continued, increasing 3.8% on average for the fourth quarter of 2018 over the third quarter of 2018. Period end to period end, loan balances increased 2.1%, for the fourth quarter 2018 while deposit balances increased a very strong 9.4%. The higher liquidity position in the fourth quarter resulted in an average loan to deposit ratio of 99% as compared to 102% for both the third quarter of 2018 and the fourth quarter of 2017.' Mr. Paul added, 'We consider average balances more indicative of our growth performance, since maintaining favorable averages translates to improved revenue. Growth in our average balance sheet combined with a continuing favorable net interest margin contributed to revenue growth increases of 3.5% in the fourth quarter 2018 over the fourth quarter of 2017 and by 1.0% over the third quarter of 2018. Also contributing to the decreased net interest margin for the fourth quarter was a 9 basis point decline in the yield on the loan portfolio to 5.60% versus 5.69% for the third quarter, as the quarter saw substantial payoffs of higher yielding loans. Fourth quarter loan payoffs were the highest of any quarter in 2018, and were due substantially to above average sales of condominium units financed by the bank. These are projects that are performing well resulting in more rapid pay-downs of construction loans. Notwithstanding the payoff of higher yielding loans, the Company's loan portfolio yield continues to benefit from both higher general market interest rates and disciplined loan pricing and we believe that the yield on our loan portfolio continues to be superior to peer bank returns. Importantly, our credit quality remained very strong in the fourth quarter as the level of nonperforming assets was just 0.21% of total assets at December 31, 2018 and the annualized level of net credit losses to average loans was 0.05%.' Mr. Paul added, 'The Company's operating efficiency, another key driver of our financial performance, remained favorable.' For the fourth quarter in 2018, the efficiency ratio was 36.1%, as compared to 36.4% in the third quarter of 2018, and was 37.3% for the full year 2018.

For the full year 2018 over 2017, average deposit growth was 11%, average loan growth was 12%, revenue growth was 8.4% and noninterest expense growth was 6.9%. The net interest margin for 2018 was 4.10% as compared to 4.15% for the year 2017, well above peer banking companies. Period end to period end, loan growth in 2018 was 9% and deposit growth was 19%.

Comparing asset yields and cost of funds for the full year of 2018 to the full year 2017, loan yields were up 37 basis points (from 5.17% to 5.54%), yields on earning assets were up 36 basis points (from 4.73% to 5.09%) and the composite cost of funds was up 41 basis points (from 0.58% to 0.99%). Importantly, our funding costs, while up in 2018 over 2017, continue to benefit from the substantial level of average noninterest deposits as a percentage of average total deposits of 33.4% in 2018. Additionally, the significant portion of the loan portfolio being variable and adjustable rate in a rising rate environment tends to mitigate the effects of higher cost of funds. Mr. Paul added, 'Given the more competitive interest rate environment in 2018 for both loan rates and funding costs, coupled with a flatter yield curve and the Federal Open Market Committee's ('FOMC') four short term rate increases, the Company believes management of the net interest margin has been disciplined and effective.'

Pre-tax, pre-provision income was $56.1 million for the fourth quarter of 2018 a 2% increase over $55.1 million for the fourth quarter of 2017 and a 1% increase over the $55.3 million for the third quarter of 2018. Pre-tax, pre-provision income was $212.9 million for the full year 2018 as compared to $194.7 million for the full year 2017, a 9% increase.

The annualized return on average assets ('ROAA') was 1.90% for the fourth quarter of 2018 as compared to 0.82% (1.60% on an operating basis) for the fourth quarter of 2017 and was 1.91% for the year 2018 as compared to 1.41% (1.62% on an operating basis) for the twelve months ended December 31, 2017. The annualized return on average tangible common equity ('ROATCE') was 16.43% for the fourth quarter of 2018 as compared to 7.31% (14.17% on an operating basis) for the fourth quarter of 2017 and was 16.63% for the full year 2018 as compared to 12.54% (14.37% on an operating basis) for the year ended December 31, 2017.

Asset quality measures remained solid in the fourth quarter of 2018. At December 31, 2018, the Company's nonperforming loans amounted to $16.3 million (0.23% of total loans) as compared to $15.1 million (0.22% of total loans) at September 30, 2018 and $13.2 million (0.21% of total loans) at December 31, 2017. Nonperforming assets amounted to $17.7 million (0.21% of total assets) at December 31, 2018 compared to $16.5 million (0.20% of total assets) at September 30, 2018 and $14.6 million (0.20% of total assets) at December 31, 2017. For the year of 2018, the Company recorded net charge-offs of $3.5 million (0.05% of average loans), as compared to net charge-offs of $3.3 million (0.06% of average loans) for the year of 2017.

Management continues to remain attentive to any signs of deterioration in borrowers' financial conditions and is proactive in taking the appropriate steps to mitigate risk. Furthermore, the Company is diligent in placing loans on nonaccrual status and believes, based on its loan portfolio risk analysis, that its December 31, 2018 allowance for credit losses, at 1.00% of total loans (excluding loans held for sale), is adequate to absorb potential credit losses within the loan portfolio as of the end of the year. The allowance for credit losses was 1.00% of total loans at December 31, 2018 and 1.01% at December 31, 2017. The allowance for credit losses represented 430% of nonperforming loans at December 31, 2018.

Total assets at December 31, 2018 were $8.39 billion, a 4% increase as compared to $8.06 billion at September 30, 2018, and a 12% increase as compared to $7.48 billion at December 31, 2017. Total loans (excluding loans held for sale) were $6.99 billion at December 31, 2018, a 2% increase as compared to $6.84 billion at September 30, 2018, and a 9% increase as compared to $6.41 billion at December 31, 2017. Loans held for sale amounted to $19.3 million at December 31, 2018 as compared to $18.7 million at September 30, 2018, a 3% increase, and $25.1 million at December 31, 2017, a 23% decrease. The investment portfolio totaled $784.1 million at December 31, 2018, a 9% increase from $722.7 million at September 30, 2018. As compared to December 31, 2017, the investment portfolio at December 31, 2018 increased by $194.9 million or 33%.

Total deposits at December 31, 2018 were $6.97 billion, compared to deposits of $6.37 billion at September 30, 2018, a 9% increase, and deposits of $5.85 billion at December 31, 2017, a 19% increase. Total borrowed funds (excluding customer repurchase agreements) were $217.3 million at December 31, 2018, $542.2 million at September 30, 2018 and $541.9 million at December 31, 2017, a $324.9 million decrease in the fourth quarter and a $324.6 million decrease during 2018.

Total shareholders' equity at December 31, 2018 increased 4%, to $1.11 billion, compared to $1.06 billion at September 30, 2018, and increased 17%, from $950.4 million at December 31, 2017. Growth in retained earnings has enhanced the Company's capital position well in excess of regulatory requirements for well capitalized status. The total risk based capital ratio was 16.07% at December 31, 2018, as compared to 15.74% at September 30, 2018, and 15.02% at December 31, 2017. In addition, the tangible common equity ratio was 12.11% at December 31, 2018, compared to 12.01% at September 30, 2018 and 11.44% at December 31, 2017.

While the Company's earnings beginning in 2018 benefitted from the lower corporate federal income tax statutory rates resulting from Tax Reform, companies were required to revalue their deferred tax positions as of December 31, 2017 at these lower federal income tax rates. Since the new law was enacted on December 22, 2017, this revaluation was accounted for in the fourth quarter of 2017 through adjustments to income tax expense on the Consolidated Statements of Income. This adjustment increased income tax expense for the fourth quarter of 2017 and full year 2017 by $14.6 million ($0.43 per basic and $0.42 per diluted share). As a result of reduced rates, the Company incurred substantially reduced income tax expense in 2018.

Analysis of the three months ended December 31, 2018 compared to December 31, 2017

Net interest income increased 8% for the three months ended December 31, 2018 over the same period in 2017 ($81.7 million versus $75.4 million), resulting from growth in average earning assets of 13% partially offset by a 16 basis point reduction of the net interest margin. The net interest margin was 3.97% for the three months ended December 31, 2018, as compared to 4.13% for the three months ended December 31, 2017. The Company believes its net interest margin remains favorable compared to peer banking companies and that its disciplined approach to managing the loan portfolio to a 5.60% yield for the fourth quarter of 2018 has been a significant factor in its overall profitability.

The provision for credit losses was $2.6 million for the three months ended December 31, 2018 as compared to $4.1 million for the three months ended December 31, 2017. The lower provisioning in the fourth quarter of 2018, as compared to the fourth quarter of 2017, is primarily due to lower loan growth ($146.8 million vs. $327.3 million) due to higher loan payoffs and lower net charge-offs. Net charge-offs of $844 thousand in the fourth quarter of 2018 represented an annualized 0.05% of average loans, excluding loans held for sale, as compared to net charge-offs of $2.3 million, or an annualized 0.15% of average loans, excluding loans held for sale, in the fourth quarter of 2017. Net charge-offs in the fourth quarter of 2018 were attributable primarily to commercial loans ($801 thousand).

Noninterest income for the three months ended December 31, 2018 decreased to $6.1 million from $9.5 million for the three months ended December 31, 2017, due substantially to a $1.2 million nonrecurring adjustment to a tax credit investment recorded in the fourth quarter of 2017 and a $354 thousand prepayment penalty associated with a single credit that was recorded during the fourth quarter of 2017. The FHA business unit generated income of $507 thousand on the origination, securitization, servicing and sale of FHA Multifamily-Backed GNMA securities in the fourth quarter of 2018 compared to $948 thousand for the same period in 2017. The residential mortgage unit had lower sales and resulting gains on the sale of these loans in the fourth quarter of 2018 (gains of $1.2 million for the fourth quarter of 2018 versus $1.6 million for the same period in 2017). Residential mortgage loans closed were $91 million for the fourth quarter in 2018 versus $136 million for the fourth quarter of 2017. The SBA business unit generated $167 thousand in revenue during the fourth quarter of 2018 from sales of the guaranteed portion on SBA loans compared to $893 thousand for the same period in 2017.

The efficiency ratio, which measures the ratio of noninterest expense to total revenue, was 36.09% for the fourth quarter of 2018, as compared to 35.12% for the fourth quarter of 2017. Noninterest expenses totaled $31.7 million for the three months ended December 31, 2018, as compared to $29.8 million for the three months ended December 31, 2017. Salaries and employee benefits expenses decreased $771 thousand in the fourth quarter of 2018 as compared to the fourth quarter of 2017 due to lower incentive and stock based compensation accruals, partially offset by higher salaries. Legal, accounting, and professional fees increased by $946 thousand due substantially to advisory services associated with enhancing our risk management systems including corporate governance as we approach $10 billion in assets. Other expenses increased $965 thousand due primarily to higher broker fees and franchise taxes.

The effective income tax rate was substantially lower (24.7%) for the fourth quarter 2018 as compared to 69.5% for the same period in 2017 due primarily to the lower corporate federal tax rate of 21% in 2018 versus 35% in 2017 and a $14.6 million deferred tax asset adjustment to income tax expense during the fourth quarter of 2017 both as a result of Tax Reform.

Analysis of the year ended December 31, 2018 compared to December 31, 2017

Net interest income increased 12% for the year ended December 31, 2018 over the same period in 2017 ($317.0 million versus $283.9 million), resulting from growth in average earning assets of 13%. The net interest margin was 4.10% for the year ended December 31, 2018 as compared to 4.15% for the same period in 2017. The Company believes its net interest margin remains favorable compared to peer banking companies and that its disciplined approach to managing the loan portfolio yield to 5.54% for the full year of 2018 has been a significant factor in its overall profitability. Additionally, the percentage of average noninterest bearing deposits to total deposits was 33.4% for the full year of 2018 versus 32.5% for the same period in 2017.

The provision for credit losses was $8.7 million for the year ended December 31, 2018 as compared to $9.0 million for the year ended December 31, 2017. The lower provisioning during 2018, as compared to 2017, is due to lower loan growth ($579.9 million versus $733.6 million) due to higher loan payoffs. Net charge-offs of $3.5 million during 2018 represented an annualized 0.05% of average loans, excluding loans held for sale, as compared to $3.3 million or an annualized 0.06% of average loans, excluding loans held for sale, in 2017. Net charge-offs during 2018 were attributable primarily to commercial loans ($3.2 million).

Noninterest income for the year ended December 31, 2018 was $22.6 million as compared to $29.4 million for the year ended December 31, 2017, a 23% decrease. This decrease was primarily due to $2.1 million lower revenue on the origination, securitization, servicing, and sale of FHA Multifamily-Backed GNMA securities, a $1.2 million nonrecurring adjustment to a tax credit investment recorded in the fourth quarter of 2017, a $354 thousand prepayment penalty associated with a single credit that was recorded during the fourth quarter of 2017, $269 thousand of premium and servicing income recorded during 2017 resulting from the portfolio sale of $44.3 million in residential mortgages and HELOC's out of the loan portfolio, $3.3 million lower gains on sale of loans, and $445 thousand lower gain on sale of investment securities. The FHA business unit generated income of $357 thousand on the origination, securitization, servicing and sale of FHA Multifamily-Backed GNMA securities for the full year 2018 compared to $2.5 million for the same period in 2017. The residential mortgage unit had $5.4 million of gains on the sale of loans for the full year of 2018 versus $7.8 million for the same period in 2017 resulting from fewer loan originations and subsequent loan sales. Residential mortgage loans closed were $424 million for the full year 2018 versus $608 million for the full year 2017. The SBA business unit generated $540 thousand in revenue from sales of the guaranteed portion on SBA loans for the full year 2018 compared to $1.5 million for the same period in 2017.

Noninterest expenses totaled $126.7 million for the year ended December 31, 2018, as compared to $118.6 million for the year ended December 31, 2017, a 7% increase. Data processing increased by $1.5 million due primarily to the costs of software and infrastructure investments. Legal, accounting and professional fees increased by $4.7 million due primarily to due diligence costs from independent consultants associated with the internet event late in 2017 as well as costs to enhance risk management systems, including corporate governance as we approach $10 billion in assets. For 2018, the efficiency ratio was 37.31% as compared to 37.84% for the same period in 2017.

The financial information which follows provides more detail on the Company's financial performance for the three and twelve months ended December 31, 2018 as compared to the three and twelve months ended December 31, 2017 as well as providing eight quarters of trend data. Persons wishing additional information should refer to the Company's Form 10-K for the year ended December 31, 2017 and other reports filed with the Securities and Exchange Commission (the 'SEC').

About Eagle Bancorp: The Company is the holding company for EagleBank, which commenced operations in 1998. The Bank is headquartered in Bethesda, Maryland, and operates through twenty branch offices, located in Suburban Maryland, Washington, D.C. and Northern Virginia. The Company focuses on building relationships with businesses, professionals and individuals in its marketplace.

Conference Call: Eagle Bancorp will host a conference call to discuss its fourth quarter and year end 2018 financial results on Thursday, January 17, 2019 at 10:00 a.m. eastern time. The public is invited to listen to this conference call by dialing 1.877.303.6220, conference ID Code is 1481537, or by accessing the call on the Company's website, www.EagleBankCorp.com. A replay of the conference call will be available on the Company's website through January 31, 2019.

Forward-looking Statements: This press release contains forward-looking statements within the meaning of the Securities Exchange Act of 1934, as amended, including statements of goals, intentions, and expectations as to future trends, plans, events or results of Company operations and policies and regarding general economic conditions. In some cases, forward-looking statements can be identified by use of words such as 'may,' 'will,' 'anticipates,' 'believes,' 'expects,' 'plans,' 'estimates,' 'potential,' 'continue,' 'should,' and similar words or phrases. These statements are based upon current and anticipated economic conditions, nationally and in the Company's market, interest rates and interest rate policy, competitive factors, and other conditions which by their nature, are not susceptible to accurate forecast and are subject to significant uncertainty. Because of these uncertainties and the assumptions on which this discussion and the forward-looking statements are based, actual future operations and results in the future may differ materially from those indicated herein. For details on factors that could affect these expectations, see the risk factors and other cautionary language included in the Company's Annual Report on Form 10-K for the year ended December 31, 2017 and in other periodic and current reports filed with the SEC. Readers are cautioned against placing undue reliance on any such forward-looking statements. The Company's past results are not necessarily indicative of future performance.

Eagle Bancorp, Inc.
Consolidated Financial Highlights (Unaudited)
(dollars in thousands, except per share data)
Three Months Ended December 31, Year Ended December 31,
2018 2017 2018 2017
Income Statements:
Total interest income $ 105,581 $ 86,526 $ 393,286 $ 324,034
Total interest expense 23,869 11,167 76,293 40,147
Net interest income 81,712 75,359 316,993 283,887
Provision for credit losses 2,600 4,087 8,660 8,971
Net interest income after provision for credit losses 79,112 71,272 308,333 274,916
Noninterest income (before investment gains) 6,060 9,496 22,489 28,830
Gain on sale of investment securities 29 - 97 542
Total noninterest income 6,089 9,496 22,586 29,372
Total noninterest expense 31,687 29,803 126,711 118,552
Income before income tax expense 53,514 50,965 204,208 185,736
Income tax expense 13,197 35,396 51,932 85,504
Net income $ 40,317 $ 15,569 $ 152,276 $ 100,232
Per Share Data:
Earnings per weighted average common share, basic $ 1.17 $ 0.46 $ 4.44 $ 2.94
Earnings per weighted average common share, diluted $ 1.17 $ 0.45 $ 4.42 $ 2.92
Weighted average common shares outstanding, basic 34,349,089 34,179,793 34,306,336 34,138,536
Weighted average common shares outstanding, diluted 34,460,985 34,334,873 34,443,040 34,320,639
Actual shares outstanding at period end 34,387,919 34,185,163 34,387,919 34,185,163
Book value per common share at period end $ 32.25 $ 27.80 $ 32.25 $ 27.80
Tangible book value per common share at period end (1) $ 29.17 $ 24.67 $ 29.17 $ 24.67
Performance Ratios (annualized):
Return on average assets 1.90% 0.82% 1.91% 1.41%
Return on average common equity 14.82% 6.49% 14.89% 11.06%
Return on average tangible common equity 16.43% 7.31% 16.63% 12.54%
Net interest margin 3.97% 4.13% 4.10% 4.15%
Efficiency ratio (2) 36.09% 35.12% 37.31% 37.84%
Other Ratios:
Allowance for credit losses to total loans (3) 1.00% 1.01% 1.00% 1.01%
Allowance for credit losses to total nonperforming loans 429.72% 489.20% 429.72% 489.20%
Nonperforming loans to total loans (3) 0.23% 0.21% 0.23% 0.21%
Nonperforming assets to total assets 0.21% 0.20% 0.21% 0.20%
Net charge-offs (annualized) to average loans (3) 0.05% 0.15% 0.05% 0.06%
Common equity to total assets 13.22% 12.71% 13.22% 12.71%
Tier 1 capital (to average assets) 12.08% 11.45% 12.08% 11.45%
Total capital (to risk weighted assets) 16.07% 15.02% 16.07% 15.02%
Common equity tier 1 capital (to risk weighted assets) 12.47% 11.23% 12.47% 11.23%
Tangible common equity ratio (1) 12.11% 11.44% 12.11% 11.44%
Loan Balances - Period End (in thousands):
Commercial and Industrial $ 1,553,111 $ 1,375,939 $ 1,553,111 $ 1,375,939
Commercial real estate - owner occupied $ 887,814 $ 755,444 $ 887,814 $ 755,444
Commercial real estate - income producing $ 3,256,899 $ 3,047,094 $ 3,256,899 $ 3,047,094
1-4 Family mortgage $ 106,418 $ 104,357 $ 106,418 $ 104,357
Construction - commercial and residential $ 1,039,815 $ 973,141 $ 1,039,815 $ 973,141
Construction - C&I (owner occupied) $ 57,797 $ 58,691 $ 57,797 $ 58,691
Home equity $ 86,603 $ 93,264 $ 86,603 $ 93,264
Other consumer $ 2,988 $ 3,598 $ 2,988 $ 3,598
Average Balances (in thousands):
Total assets $ 8,415,480 $ 7,487,624 $ 7,958,941 $ 7,089,211
Total earning assets $ 8,171,010 $ 7,242,994 $ 7,726,401 $ 6,853,815
Total loans $ 6,897,434 $ 6,207,505 $ 6,638,136 $ 5,939,985
Total deposits $ 6,950,714 $ 6,101,727 $ 6,444,551 $ 5,787,665
Total borrowings $ 342,637 $ 382,687 $ 453,581 $ 355,377
Total shareholders' equity $ 1,079,622 $ 951,727 $ 1,022,642 $ 906,169

(1) Tangible common equity to tangible assets (the 'tangible common equity ratio') and tangible book value per common share are non-GAAP financial measures derived from GAAP based amounts. The Company calculates the tangible common equity ratio by excluding the balance of intangible assets from common shareholders' equity and dividing by tangible assets. The Company calculates tangible book value per common share by dividing tangible common equity by common shares outstanding, as compared to book value per common share, which the Company calculates by dividing common shareholders' equity by common shares outstanding. The Company considers this information important to shareholders as tangible equity is a measure that is consistent with the calculation of capital for bank regulatory purposes, which excludes intangible assets from the calculation of risk based ratios and as such is useful for investors, regulators, management and others to evaluate capital adequacy and to compare against other financial institutions. The table below provides a reconciliation of these non-GAAP financial measures with financial measures defined by GAAP.

GAAP Reconciliation (Unaudited)
(dollars in thousands except per share data)
Year Ended Year Ended
December 31, 2018 December 31, 2017
Common shareholders' equity $ 1,108,941 $ 950,438
Less: Intangible assets (105,766 ) (107,212 )
Tangible common equity $ 1,003,175 $ 843,226
Book value per common share $ 32.25 $ 27.80
Less: Intangible book value per common share (3.08 ) (3.13 )
Tangible book value per common share $ 29.17 $ 24.67
Total assets $ 8,389,137 $ 7,479,029
Less: Intangible assets (105,766 ) (107,212 )
Tangible assets $ 8,283,371 $ 7,371,817
Tangible common equity ratio 12.11% 11.44%
Average common shareholders' equity $ 1,022,642 $ 906,169
Less: Average intangible assets (106,806 ) (107,117 )
Average tangible common equity $ 915,836 $ 799,052
Net Income Available to Common Shareholders $ 152,276 $ 100,232
Average tangible common equity $ 915,836 $ 799,052
Annualized Return on Average Tangible Common Equity (1) 16.63% 12.54%

(2) Computed by dividing noninterest expense by the sum of net interest income and noninterest income.

(3) Excludes loans held for sale.

Three Months Ended December 31, Three Months Ended
September 30,
Years Ended December 31,
2018 2017 2018 2018 2017
Net income $ 40,317 $ 15,569 $ 38,948 $ 152,276 $ 100,232
Income Tax Expense 13,197 35,396 13,928 51,932 85,504
Provision for Credit Losses 2,600 4,087 2,441 8,660 8,971
Pre-Tax, Pre-Provision Income $ 56,114 $ 55,052 $ 55,317 $ 212,868 $ 194,707
Eagle Bancorp, Inc.
GAAP Reconciliation (Unaudited)
(dollars in thousands except per share data)
Three Months Ended December 31, 2017 Year Ended December 31, 2017
GAAP Change Non-GAAP GAAP Change Non-GAAP
Income Statements:
Income tax expense 35,395 (14,588 ) 20,807 85,504 (14,588 ) 70,916
Net income $ 15,569 14,588 $ 30,157 $ 100,232 14,588 $ 114,820
Earnings Per Common Share
Earnings per weighted average common share, basic $ 0.46 $ 0.43 $ 0.88 $ 2.94 $ 0.43 $ 3.36
Earnings per weighted average common share, diluted $ 0.45 $ 0.42 $ 0.88 $ 2.92 $ 0.42 $ 3.35
Performance Ratios (annualized):
Return on average assets 0.82% 1.60% 1.41% 1.62%
Return on average common equity 6.49% 12.57% 11.06% 12.67%
Return on average tangible common equity 7.31% 14.17% 12.54% 14.37%
As of December 31, 2017
Assets GAAP Change Non-GAAP
Deferred income taxes 28,770 14,588 43,358
Total Assets $ 7,479,029 $ 14,588 $ 7,493,617
Shareholders' Equity
Retained earnings 431,544 14,588 446,132
Total Shareholders' Equity 950,438 14,588 965,026
Total Liabilities and Shareholders' Equity $ 7,479,029 14,588 $ 7,493,617
Eagle Bancorp, Inc.
Consolidated Balance Sheets (Unaudited)
(dollars in thousands, except per share data)
Assets December 31, 2018 September 30, 2018 December 31, 2017
Cash and due from banks $ 6,773 $ 4,459 $ 7,445
Federal funds sold 11,934 17,284 15,767
Interest bearing deposits with banks and other short-term investments 303,157 162,734 167,261
Investment securities available for sale, at fair value 784,139 722,674 589,268
Federal Reserve and Federal Home Loan Bank stock 23,506 37,257 36,324
Loans held for sale 19,254 18,728 25,096
Loans 6,991,447 6,844,672 6,411,528
Less allowance for credit losses (69,944 ) (68,189 ) (64,758 )
Loans, net 6,921,503 6,776,483 6,346,770
Premises and equipment, net 16,851 17,457 20,991
Deferred income taxes 33,027 35,196 28,770
Bank owned life insurance 73,441 73,007 60,947
Intangible assets, net 105,766 106,481 107,212
Other real estate owned 1,394 1,394 1,394
Other assets 88,392 84,701 71,784
Total Assets $ 8,389,137 $ 8,057,855 $ 7,479,029
Liabilities and Shareholders' Equity
Deposits:
Noninterest bearing demand $ 2,104,220 $ 2,057,886 $ 1,982,912
Interest bearing transaction 593,107 459,455 420,417
Savings and money market 2,949,559 2,573,258 2,621,146
Time, $100,000 or more 801,957 758,152 515,682
Other time 525,442 523,554 313,827
Total deposits 6,974,285 6,372,305 5,853,984
Customer repurchase agreements 30,413 36,446 76,561
Other short-term borrowings - 325,000 325,000
Long-term borrowings 217,296 217,198 216,905
Other liabilities 58,202 45,255 56,141
Total liabilities 7,280,196 6,996,204 6,528,591
Shareholders' Equity
Common stock, par value $.01 per share; shares authorized 100,000,000, shares
issued and outstanding 34,387,919, 34,308,473, and 34,185,163, respectively 342 341 340
Additional paid in capital 528,380 526,423 520,304
Retained earnings 584,494 544,177 431,544
Accumulated other comprehensive loss (4,275 ) (9,290 ) (1,750 )
Total Shareholders' Equity 1,108,941 1,061,651 950,438
Total Liabilities and Shareholders' Equity $ 8,389,137 $ 8,057,855 $ 7,479,029
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Eagle Bancorp, Inc.
Consolidated Statements of Income (Unaudited)
(dollars in thousands, except per share data)
Three Months Ended December 31, Years Ended December 31,
Interest Income 2018 2017 2018 2017
Interest and fees on loans $ 97,682 $ 81,967 $ 368,606 $ 308,510
Interest and dividends on investment securities 5,382 3,360 17,907 12,214
Interest on balances with other banks and short-term investments 2,464 1,174 6,616 3,258
Interest on federal funds sold 53 25 157 52
Total interest income 105,581 86,526 393,286 324,034
Interest Expense
Interest on deposits 20,314 7,820 60,210 27,286
Interest on customer repurchase agreements 59 61 225 197
Interest on other short-term borrowings 517 307 3,942 748
Interest on long-term borrowings 2,979 2,979 11,916 11,916
Total interest expense 23,869 11,167 76,293 40,147
Net Interest Income 81,712 75,359 316,993 283,887
Provision for Credit Losses 2,600 4,087 8,660 8,971
Net Interest Income After Provision For Credit Losses 79,112 71,272 308,333 274,916
Noninterest Income
Service charges on deposits 1,826 1,723 7,014 6,364
Gain on sale of loans 1,331 2,536 5,963 9,275
Gain on sale of investment securities 29 - 97 542
Increase in the cash surrender value of bank owned life insurance 434 603 1,507 1,711
Other income 2,469 4,634 8,005 11,480
Total noninterest income 6,089 9,496 22,586 29,372
Noninterest Expense
Salaries and employee benefits 15,907 16,678 67,734 67,129
Premises and equipment expenses 3,969 4,019 15,660 15,632
Marketing and advertising 1,147 1,222 4,566 4,095
Data processing 2,570 2,163 9,714 8,220
Legal, accounting and professional fees 2,460 1,514 9,742 5,053
FDIC insurance 953 491 3,512 2,554
Other expenses 4,681 3,716 15,783 15,869
Total noninterest expense 31,687 29,803 126,711 118,552
Income Before Income Tax Expense 53,514 50,965 204,208 185,736
Income Tax Expense 13,197 35,396 51,932 85,504
Net Income $ 40,317 $ 15,569 $ 152,276 $ 100,232
Earnings Per Common Share
Basic $ 1.17 $ 0.46 $ 4.44 $ 2.94
Diluted $ 1.17 $ 0.45 $ 4.42 $ 2.92
Eagle Bancorp, Inc.
Consolidated Average Balances, Interest Yields And Rates (Unaudited)
(dollars in thousands)
Three Months Ended December 31,
2018 2017
Average Balance Interest Average
Yield/Rate
Average Balance Interest Average
Yield/Rate
ASSETS
Interest earning assets:
Interest bearing deposits with other banks and other short-term investments $ 459,139 $ 2,464 2.13% $ 381,339 $ 1,175 1.22%
Loans held for sale (1) 21,457 256 4.77% 38,449 379 3.94%
Loans (1) (2) 6,897,434 97,426 5.60% 6,207,505 81,588 5.21%
Investment securities available for sale (2) 775,706 5,382 2.75% 603,550 3,360 2.21%
Federal funds sold 17,274 53 1.22% 12,151 25 0.82%
Total interest earning assets 8,171,010 105,581 5.13% 7,242,994 86,527 4.74%
Total noninterest earning assets 313,614 308,022
Less: allowance for credit losses 69,144 63,392
Total noninterest earning assets 244,470 244,630
TOTAL ASSETS $ 8,415,480 $ 7,487,624
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing liabilities:
Interest bearing transaction $ 539,764 $ 1,096 0.81% $ 380,137 $ 456 0.48%
Savings and money market 2,754,480 11,688 1.68% 2,923,750 5,113 0.69%
Time deposits 1,329,294 7,530 2.25% 811,484 2,251 1.10%
Total interest bearing deposits 4,623,538 20,314 1.74% 4,115,371 7,820 0.75%
Customer repurchase agreements 40,859 59 0.57% 80,758 61 0.30%
Other short-term borrowings 84,515 517 2.39% 85,057 307 1.41%
Long-term borrowings 217,263 2,979 5.37% 216,872 2,979 5.38%
Total interest bearing liabilities 4,966,175 23,869 1.91% 4,498,058 11,167 0.98%
Noninterest bearing liabilities:
Noninterest bearing demand 2,327,176 1,986,356
Other liabilities 42,507 51,483
Total noninterest bearing liabilities 2,369,683 2,037,839
Shareholders' Equity 1,079,622 951,727
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 8,415,480 $ 7,487,624
Net interest income $ 81,712 $ 75,360
Net interest spread 3.22% 3.76%
Net interest margin 3.97% 4.13%
Cost of funds 1.16% 0.61%
(1) Loans placed on nonaccrual status are included in average balances. Net loan fees and late charges included in interest income on loans totaled $4.7 million and $5.2 million for the three months ended December 31, 2018 and 2017, respectively.
(2) Interest and fees on loans and investments exclude tax equivalent adjustments.
Eagle Bancorp, Inc.
Consolidated Average Balances, Interest Yields and Rates (Unaudited)
(dollars in thousands)
Year Ended December 31,
2018 2017
Average Balance Interest Average
Yield/Rate
Average Balance Interest Average
Yield/Rate
ASSETS
Interest earning assets:
Interest bearing deposits with other banks and other short-term investments $ 356,017 $ 6,616 1.86% $ 313,296 $ 3,258 1.04%
Loans held for sale (1) 23,877 1,095 4.59% 35,813 1,400 3.91%
Loans (1) (2) 6,638,136 367,511 5.54% 5,939,985 307,110 5.17%
Investment securities available for sale (1) 692,753 17,907 2.58% 557,049 12,214 2.19%
Federal funds sold 15,618 157 1.01% 7,672 52 0.68%
Total interest earning assets 7,726,401 393,286 5.09% 6,853,815 324,034 4.73%
Total noninterest earning assets 299,653 296,562
Less: allowance for credit losses 67,113 61,166
Total noninterest earning assets 232,540 235,396
TOTAL ASSETS $ 7,958,941 $ 7,089,211
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing liabilities:
Interest bearing transaction $ 460,599 $ 3,348 0.73% $ 369,953 $ 1,537 0.42%
Savings and money market 2,691,726 35,534 1.32% 2,739,776 17,284 0.63%
Time deposits 1,141,795 21,328 1.87% 799,816 8,465 1.06%
Total interest bearing deposits 4,294,120 60,210 1.40% 3,909,545 27,286 0.70%
Customer repurchase agreements 44,333 225 0.51% 73,237 197 0.27%
Other short-term borrowings 192,131 3,942 2.02% 65,416 748 1.13%
Long-term borrowings 217,117 11,916 5.41% 216,724 11,916 5.42%
Total interest bearing liabilities 4,747,701 76,293 1.61% 4,264,922 40,147 0.94%
Noninterest bearing liabilities:
Noninterest bearing demand 2,150,431 1,878,120
Other liabilities 38,167 40,000
Total noninterest bearing liabilities 2,188,598 1,918,120
Shareholders' equity 1,022,642 906,169
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 7,958,941 $ 7,089,211
Net interest income $ 316,993 $ 283,887
Net interest spread 3.48% 3.79%
Net interest margin 4.10% 4.15%
Cost of funds 0.99% 0.58%
(1) Loans placed on nonaccrual status are included in average balances. Net loan fees and late charges included in interest income on loans totaled $19.6 million and $18.1 million for the years ended December 31, 2018 and 2017, respectively.
(2) Interest and fees on loans and investments exclude tax equivalent adjustments.
Eagle Bancorp, Inc.
Statements of Income and Highlights Quarterly Trends (Unaudited)
(dollars in thousands, except per share data)
Three Months Ended
December 31, September 30, June 30, March 31, December 31, September 30, June 30, March 31,
Income Statements: 2018 2018 2018 2018 2017 2017 2017 2017
Total interest income $ 105,581 $ 102,360 $ 96,296 $ 89,049 $ 86,526 $ 82,370 $ 79,344 $ 75,794
Total interest expense 23,869 21,069 18,086 13,269 11,167 10,434 9,646 8,900
Net interest income 81,712 81,291 78,210 75,780 75,359 71,936 69,698 66,894
Provision for credit losses 2,600 2,441 1,650 1,969 4,087 1,921 1,566 1,397
Net interest income after provision for credit losses 79,112 78,850 76,560 73,811 71,272 70,015 68,132 65,497
Noninterest income (before investment gains) 6,060 5,640 5,527 5,262 9,496 6,773 6,997 5,565
Gain on sale of investment securities 29 - 26 42 - 11 26 505
Total noninterest income 6,089 5,640 5,553 5,304 9,496 6,784 7,023 6,070
Salaries and employee benefits 15,907 17,157 17,812 16,858 16,678 16,905 16,869 16,677
Premises and equipment 3,969 3,889 3,873 3,929 4,019 3,846 3,920 3,847
Marketing and advertising 1,147 1,191 1,291 937 1,222 732 1,247 894
Other expenses 10,664 9,377 9,313 9,397 7,884 8,033 7,965 7,814
Total noninterest expense 31,687 31,614 32,289 31,121 29,803 29,516 30,001 29,232
Income before income tax expense 53,514 52,876 49,824 47,994 50,965 47,283 45,154 42,335
Income tax expense 13,197 13,928 12,528 12,279 35,396 17,409 17,382 15,318
Net income 40,317 38,948 37,296 35,715 15,569 29,874 27,772 27,017
Per Share Data:
Earnings per weighted average common share, basic $ 1.17 $ 1.14 $ 1.09 $ 1.04 $ 0.46 $ 0.87 $ 0.81 $ 0.79
Earnings per weighted average common share, diluted $ 1.17 $ 1.13 $ 1.08 $ 1.04 $ 0.45 $ 0.87 $ 0.81 $ 0.79
Weighted average common shares outstanding, basic 34,349,089 34,308,684 34,305,693 34,260,882 34,179,793 34,173,893 34,128,598 34,069,528
Weighted average common shares outstanding, diluted 34,460,985 34,460,794 34,448,354 34,406,310 34,334,873 34,338,442 34,324,120 34,284,316
Actual shares outstanding at period end 34,387,919 34,308,473 34,305,071 34,303,056 34,185,163 34,174,009 34,169,924 34,110,056
Book value per common share at period end $ 32.25 $ 30.94 $ 29.82 $ 28.72 $ 27.80 $ 27.33 $ 26.42 $ 25.59
Tangible book value per common share at period end (1) $ 29.17 $ 27.84 $ 26.71 $ 25.60 $ 24.67 $ 24.19 $ 23.28 $ 22.45
Performance Ratios (annualized):
Return on average assets 1.90% 1.93% 1.92% 1.91% 0.82% 1.66% 1.60% 1.62%
Return on average common equity 14.82% 14.85% 14.93% 14.99% 6.49% 12.86% 12.51% 12.74%
Return on average tangible common equity 16.43% 16.54% 16.71% 16.86% 7.31% 14.55% 14.22% 14.56%
Net interest margin 3.97% 4.14% 4.15% 4.17% 4.13% 4.14% 4.16% 4.14%
Efficiency ratio (2) 36.09% 36.37% 38.55% 38.38% 35.12% 37.49% 39.10% 40.06%
Other Ratios:
Allowance for credit losses to total loans (3) 1.00% 1.00% 1.00% 1.00% 1.01% 1.03% 1.02% 1.03%
Allowance for credit losses to total nonperforming loans 429.72% 452.28% 612.42% 491.56% 489.20% 379.11% 356.00% 416.91%
Nonperforming loans to total loans (3) 0.23% 0.22% 0.16% 0.20% 0.21% 0.27% 0.29% 0.25%
Nonperforming assets to total assets 0.21% 0.20% 0.16% 0.19% 0.20% 0.24% 0.26% 0.22%
Net charge-offs (annualized) to average loans (3) 0.05% 0.05% 0.05% 0.06% 0.15% 0.00% 0.02% 0.04%
Tier 1 capital (to average assets) 12.08% 12.13% 11.97% 11.76% 11.45% 11.78% 11.61% 11.51%
Total capital (to risk weighted assets) 16.07% 15.74% 15.59% 15.32% 15.02% 15.30% 15.13% 14.97%
Common equity tier 1 capital (to risk weighted assets) 12.47% 12.11% 11.89% 11.57% 11.23% 11.40% 11.18% 10.97%
Tangible common equity ratio (1) 12.11% 12.01% 11.79% 11.57% 11.44% 11.35% 11.15% 10.97%
Average Balances (in thousands):
Total assets $ 8,415,480 $ 8,023,535 $ 7,789,564 $ 7,597,485 $ 7,487,624 $ 7,128,769 $ 6,959,994 $ 6,772,164
Total earning assets $ 8,171,010 $ 7,793,422 $ 7,558,138 $ 7,373,535 $ 7,242,994 $ 6,897,613 $ 6,728,055 $ 6,538,377
Total loans $ 6,897,434 $ 6,646,264 $ 6,569,931 $ 6,433,730 $ 6,207,505 $ 5,946,411 $ 5,895,174 $ 5,705,261
Total deposits $ 6,950,714 $ 6,485,144 $ 6,269,126 $ 6,063,017 $ 6,101,727 $ 5,827,953 $ 5,660,119 $ 5,554,402
Total borrowings $ 342,637 $ 464,460 $ 485,729 $ 523,369 $ 382,687 $ 344,959 $ 375,124 $ 318,143
Total shareholders' equity $ 1,079,622 $ 1,040,826 $ 1,002,091 $ 966,585 $ 951,727 $ 921,493 $ 890,498 $ 859,779
(1) Tangible common equity to tangible assets (the 'tangible common equity ratio') and tangible book value per common share are non-GAAP financial measures derived from GAAP based amounts. The Company calculates the tangible common equity ratio by excluding the balance of intangible assets from common shareholders' equity and dividing by tangible assets. The Company calculates tangible book value per common share by dividing tangible common equity by common shares outstanding, as compared to book value per common share, which the Company calculates by dividing common shareholders' equity by common shares outstanding. The Company considers this information important to shareholders as tangible equity is a measure that is consistent with the calculation of capital for bank regulatory purposes, which excludes intangible assets from the calculation of risk based ratios and as such is useful for investors, regulators, management and others to evaluate capital adequacy and to compare against other financial institutions.
(2) Computed by dividing noninterest expense by the sum of net interest income and noninterest income.
(3) Excludes loans held for sale.
EAGLE BANCORP, INC.
CONTACT:
Michael T. Flynn
301.986.1800

Source: Eagle Bancorp, Inc.