Results

Eagle Bancorp Inc.

10/16/2019 | Press release | Distributed by Public on 10/16/2019 14:43

Eagle Bancorp, Inc. Announces Net Earnings of $36.5 Million for the Third Quarter 2019 and Assets Exceeding $9.0 Billion

BETHESDA, Md., Oct. 16, 2019 (GLOBE NEWSWIRE) -- Eagle Bancorp, Inc. (the 'Company') (NASDAQ:EGBN), the parent company of EagleBank (the 'Bank'), today announced quarterly net income of $36.5 million for the three months ended September 30, 2019, a 6% decrease from $38.9 million net income for the three months ended September 30, 2018. Net income per basic common share for the three months ended September 30, 2019 was $1.07 compared to $1.14 for the same period in 2018. Net income per diluted common share for the three months ended September 30, 2019 was $1.07 compared to $1.13 for the same period in 2018.

Earnings in the third quarter of 2019 were impacted by two significant non-recurring expense items. The Company recorded $2.0 million of accelerated shared based compensation expense due to the resignation of certain directors of the Company and Bank. Secondly, as a result of the FDIC Deposit Insurance Fund exceeding 1.38% of insured deposits at June 30, 2019, EagleBank recognized a $1.1 million credit to its FDIC assessment expense in the third quarter of 2019. Excluding these two non-recurring items, net income for the third quarter of 2019 would have been $37.1 million ($1.08 per diluted share).

For the nine months ended September 30, 2019, the Company's net income was $107.5 million, a 4% decrease from $112.0 million net income for the same period in 2018. Net income per basic common share for the nine months ended September 30, 2019 was $3.12 compared to $3.26 for the same period in 2018. Net income per diluted common share for the nine months ended September 30, 2019 was $3.12 compared to $3.25 for the same period in 2018.

'Notwithstanding the negative impact that very low interest rates and a flat yield curve are having on our revenues and net interest margin, we are pleased to report a continued quarterly trend of both loan and deposit growth, together with solid asset quality and favorable operating leverage. Additionally, our capital base remains very strong, with ratios well in excess of the requirements for well capitalized status,' noted Susan G. Riel, President and Chief Executive Officer of Eagle Bancorp, Inc. Ms. Riel added that 'period end loan growth in the quarter was 2.3%, and average loans were 13% higher in the third quarter 2019 as compared to the third quarter of 2018. For the third quarter of 2019, period end deposit growth was a very strong 6.5% and average deposits were 13% higher as compared to the same period in 2018. Total revenue for the third quarter of 2019 was $87.3 million compared to $86.9 million for the third quarter of 2018 and was 4% higher for the first nine months of 2019 over the same period in 2018.'

The net interest margin ('NIM') in the third quarter of 2019 was 3.72% as compared to 3.91% in the second quarter of 2019 and 4.14% for the third quarter of 2018. Ms. Riel added, 'The net interest margin of banks is being challenged by a very flat yield curve and further declines of interest rates from already low levels. In this environment, the Company remains committed to maintaining efficiency and growing the loan portfolio while focusing attention on loan quality and pricing discipline. Further, an increase in the mix of average balance sheet liquidity in the third quarter of 2019 in addition to short-term rate declines contributed to the 19 basis point decline in the NIM over the second quarter of 2019. The average one month LIBOR rate was down 26 basis points in the third quarter of 2019 as compared to the second quarter of 2019. Ms. Riel added, 'We continue to see good lending opportunities and have worked to attract more deposits to fund those loans and to bring down the loan to deposit ratio at third quarter-end 2019 compared to second quarter-end 2019. Furthermore, by sustaining favorable operating leverage, we maintain strong profitability while rates remain very low and we stay well positioned when interest rates begin moving back to more normalized levels, given the degree of variability in our asset pricing.'

Third quarter earnings resulted in an annualized return on average assets ('ROAA') of 1.62%, an annualized return on average common equity ('ROACE') of 12.09%, and an annualized return on average tangible common equity ('ROATCE') of 13.25%.

For the first nine months of 2019, total loans grew 8% over December 31, 2018, and average loans were 11% higher in the first nine months of 2019 as compared to the first nine months of 2018. At September 30, 2019, total deposits were 6% higher than deposits at December 31, 2018, while average deposits were 13% higher for the first nine months of 2019 compared with the first nine months of 2018.

Comparing asset yields and cost of funds in the third quarter of 2019 to the third quarter of 2018, loan yields were down 30 basis points (from 5.69% to 5.39%), yields on earning assets were down 21 basis points (from 5.21% to 4.98%) and the cost of funds was up 21 basis points (from 1.07% to 1.28%). Ms. Riel noted, 'Given our balance sheet growth goals and the fact that average US Treasury rates beyond three year terms have declined over 100 basis points in the third quarter of 2019 versus the third quarter of 2018, we did expect our margin to compress but the extent has been more than we projected owing in part to higher fixed rate time deposit funding mix. Importantly, our funding costs, which were slightly lower in the third quarter 2019 relative to the second quarter 2019, continue to benefit from the substantial average mix of noninterest deposits of 30% for the third quarter, versus 31% for the second quarter of 2019.

Total revenue (net interest income plus noninterest income) for the third quarter of 2019 was $87.3 million, compared to the $86.9 million of total revenue earned for the third quarter of 2018 and 1% lower than the $87.7 million of revenue in the second quarter of 2019. For the nine month periods ended September 30, total revenue was $262.3 million for 2019, as compared to $251.8 million in 2018, a 4% increase.

The Company continues to benefit from solid asset quality. For the third quarter of 2019, net charge-offs (annualized) were 0.08% of average loans, as compared to 0.05% for the third quarter of 2018. Nonperforming assets amounted to $59.1 million (0.66% of total assets) at September 30, 2019 compared to $16.5 million (0.20% of total assets) at September 30, 2018 and $17.7 million (0.21% of total assets) at December 31, 2018. Nonperforming assets of $59.1 million as of September 30, 2019 included one loan of $16.5 million which was brought current shortly after quarter end. Excluding this loan the ratio of nonperforming assets to total assets would have been 0.47% as of September 30, 2019. At September 30, 2019, the Company's nonperforming loans amounted to $57.7 million (0.76% of total loans) as compared to $15.1 million (0.22% of total loans) at September 30, 2018 and $16.3 million (0.23% of total loans) at December 31, 2018. Nonperforming loans of $57.7 million as of September 30, 2019 included one loan of $16.5 million which was brought current shortly after quarter end. Excluding this loan the ratio of nonperforming loans to total loans would have been 0.54% as of September 30, 2019.

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 when appropriate and believes, based on its loan portfolio risk analysis, that its allowance for credit losses, at 0.98% of total loans (excluding loans held for sale) at September 30, 2019, is adequate to absorb potential credit losses within the loan portfolio at that date. The allowance for credit losses was 1.00% at both September 30, 2018 and December 31, 2018. The allowance for credit losses at September 30, 2019 represented 128% of nonperforming loans, as compared to 452% at September 30, 2018 and 430% at December 31, 2018. Excluding the $16.5 million nonperforming loan that was brought current shortly after quarter end, the coverage ratio would have been 179% as of September 30, 2019.

'Productivity continued to be favorable in the third quarter,' noted Ms. Riel. The efficiency ratio of 38.34% reflects management's ongoing efforts to maintain superior operating leverage. The annualized ratio of noninterest expenses as a percentage of average assets was 1.50% in the third quarter of 2019 as compared to 1.58% in the third quarter of 2018. A well trained and knowledgeable staff, strict attention to personnel increases, a focus on process improvement including strong third party vendor relationships, and a continuing modest level of problem assets, have been other major factors in maintaining favorable operating leverage. Additionally, the Company continues to invest in IT systems and resources, including its online client services. Ms. Riel further noted, 'Our goal is to improve operating performance without inhibiting growth or negatively impacting our ability to service our customers. We will continue to maintain strict oversight of expenses, while focusing our spending on advancing infrastructure that keeps us competitive and supports growth initiatives while prudently managing risk.'

Total assets at September 30, 2019 were $9.00 billion, a 12% increase as compared to $8.06 billion at September 30, 2018, and a 7% increase as compared to $8.39 billion at December 31, 2018. Total loans (excluding loans held for sale) were $7.56 billion at September 30, 2019, a 10% increase as compared to $6.84 billion at September 30, 2018, and an 8% increase as compared to $6.99 billion at December 31, 2018. Loans held for sale amounted to $52.2 million at September 30, 2019 as compared to $18.7 million at September 30, 2018, a 179% increase, and $19.3 million at December 31, 2018, a 171% increase. The investment portfolio totaled $708.5 million at September 30, 2019, a 2% decrease from the $722.7 million balance at September 30, 2018. As compared to December 31, 2018, the investment portfolio at September 30, 2019 decreased by $75.6 million or 10%.

Total deposits at September 30, 2019 were $7.40 billion, compared to deposits of $6.37 billion at September 30, 2018, a 16% increase, and deposits of $6.97 billion at December 31, 2018, a 6% increase. Total borrowed funds (excluding customer repurchase agreements) were $317.6 million at September 30, 2019, $542.2 million at September 30, 2018, and $217.3 million at December 31, 2018. We continue to work on expanding the breadth and depth of our existing relationships while we pursue building new relationships.

Total shareholders' equity at September 30, 2019 increased 12%, to $1.18 billion, compared to $1.06 billion at September 30, 2018, and increased 7% from $1.10 billion at December 31, 2018. The Company's capital position remains substantially in excess of regulatory requirements for well capitalized status, with a total risk based capital ratio of 16.08% at September 30, 2019, as compared to 15.74% at September 30, 2018, and 16.08% at December 31, 2018. In addition, the tangible common equity ratio was 12.13% at September 30, 2019, compared to 12.01% at September 30, 2018 and 12.11% at December 31, 2018. Furthermore, Kroll Bond Rating Agency reaffirmed our BBB+ senior unsecured debt rating (A- at the Bank level) based on our strong capital position, above-peer earnings, low operating expense base relative to peer, and a history of strong asset quality metrics.

On August 9, 2019, the Company announced a Share Repurchase Plan which authorized share repurchases up to 5% of outstanding shares (1,715,547) until expiration on December 31, 2019. Through September 30, 2019, the Company has repurchased 822,200 shares at a weighted average price of $40.58 per share.

The Company announced a regular quarterly cash dividend on September 25, 2019 of $0.22 per share to shareholders of record on October 15, 2019 and payable October 31, 2019.

Under FDIC regulations, banks having consolidated assets below $10 billion paid a refundable assessment into the FDIC insurance fund over a nine quarter period beginning with the third quarter of 2016. That assessment was to be credited back to the institution if and when the deposit insurance fund ('DIF') exceeded 1.38% of insured deposits, which occurred with the June 30, 2019 computation. The credit amount for EagleBank for the third quarter of 2019 is $1.1 million. Additionally, if the DIF remains above 1.38% of insured deposits at September 30, 2019, EagleBank will receive an additional credit of approximately $600 thousand to be recorded for the fourth quarter of 2019.

Analysis of the three months ended September 30, 2019 compared to September 30, 2018

For the three months ended September 30, 2019, the Company reported an annualized ROAA of 1.62% as compared to 1.93% for the three months ended September 30, 2018. The annualized ROACE for the three months ended September 30, 2019 was 12.09% as compared to 14.85% for the three months ended September 30, 2018. The annualized ROATCE for the three months ended September 30, 2019 was 13.25% as compared to 16.54% for the three months ended September 30, 2018.

Net interest income decreased less than 1% for the three months ended September 30, 2019 from the same period in 2018 ($81.0 million versus $81.3 million), resulting from compressed margins associated with increased costs of funds and lower loan yields due in part to enhanced competitive pressure more than offsetting growth in average earning assets of 11%. The net interest margin was 3.72% for the three months ended September 30, 2019, as compared to 4.14% for the three months ended September 30, 2018. In spite of our margin compression over the past 12 months, the Company believes its current net interest margin remains favorable compared to peer banking companies and that its disciplined approach to managing the loan portfolio yield to 5.39% for the third quarter of 2019 (as compared to 5.69% for the same period in 2018) has been a significant factor in its overall profitability.

The provision for credit losses was $3.2 million for the three months ended September 30, 2019 as compared to $2.4 million for the three months ended September 30, 2018. Net charge-offs of $1.5 million in the third quarter of 2019 represented an annualized 0.08% of average loans, excluding loans held for sale, as compared to $862 thousand, or an annualized 0.05% of average loans, excluding loans held for sale, in the third quarter of 2018. Net charge-offs in the third quarter of 2019 were attributable primarily to commercial loans ($1.6 million).

Noninterest income for the three months ended September 30, 2019 increased to $6.3 million from $5.6 million for the three months ended September 30, 2018, a 12% increase, due substantially to $1.1 million higher gains on the sale of residential mortgage loans ($2.5 million versus $1.4 million) resulting from higher loan origination and sales volume as compared to 2018, partially offset by lower service charges on deposit accounts of $320 thousand. Residential mortgage loans closed were $224 million for the third quarter of 2019 versus $107 million for the third quarter of 2018.

The efficiency ratio, which measures the ratio of noninterest expense to total revenue, was 38.34% for the third quarter of 2019, as compared to 36.37% for the third quarter of 2018. Noninterest expenses totaled $33.5 million for the three months ended September 30, 2019, as compared to $31.6 million for the three months ended September 30, 2018, a 6% increase. Salaries and employee benefits expense increased by $1.9 million due primarily to the $2.0 million of non-recurring charges related to the acceleration of share based compensation expense. Legal, accounting and professional fees increased $1.5 million from $2.1 million to $3.6 million, as discussed below. Data processing expense increased by $199 thousand due primarily to the costs of software and infrastructure investments. FDIC insurance decreased $848 thousand from $933 thousand to $85 thousand as the increased premium cost of a higher assessment base was effectively offset by the $1.2 million FDIC assessment credit detailed above.

Analysis of the nine months ended September 30, 2019 compared to September 30, 2018

For the nine months ended September 30, 2019, the Company reported an annualized ROAA of 1.66% as compared to 1.92% for the nine months ended September 30, 2018. The annualized ROACE for the nine months ended September 30, 2019 was 12.34% as compared to 14.92% for the nine months ended September 30, 2018. The annualized ROATCE for the nine months ended September 30, 2019 was 13.57% as compared to 16.70% for the nine months ended September 30, 2018.

Net interest income increased 3% for the nine months ended September 30, 2019 over the same period in 2018 ($243.3 million versus $235.3 million), resulting from growth in average earning assets of 11%. The net interest margin was 3.88% for the nine months ended September 30, 2019 and 4.15% for the same period in 2018. 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 first nine months of 2019 (as compared to 5.51% for the same period in 2018) has been a significant factor in its overall profitability.

The provision for credit losses was $10.1 million for the nine months ended September 30, 2019 as compared to $6.1 million for the nine months ended September 30, 2018. The higher provisioning for the nine months ended September 30, 2019, as compared to the same period in 2018, is due primarily to higher net charge-offs. Net charge-offs of $6.4 million for the nine months ended September 30, 2019 represented an annualized 0.12% of average loans, excluding loans held for sale, as compared to $2.6 million, or an annualized 0.05% of average loans, excluding loans held for sale, in the first nine months of 2018. Net charge-offs in the first nine months of 2019 were attributable to commercial real estate loans ($5.0 million) and commercial loans ($1.4 million).

Noninterest income for the nine months ended September 30, 2019 increased to $19.0 million from $16.5 million for the nine months ended September 30, 2018, a 15% increase, due substantially to $1.6 million higher gains on the sale of investment securities primarily due to $829 thousand of noninterest income recognized during March 2019 on interest rate swap terminations, and $1.4 million higher gains on the sale of residential mortgage loans ($5.7 million versus $4.3 million) resulting from higher volume as compared to 2018, offset by $394 thousand lower service charges on deposit accounts. Residential mortgage loans closed were $470 million for the nine months ended September 30, 2019 versus $334 million for the same period in 2018.

Noninterest expenses totaled $105.1 million for the nine months ended September 30, 2019, as compared to $95.0 million for the nine months ended September 30, 2018, an 11% increase. Cost increases for salaries and benefits for the nine months ended September 30, 2019 were $8.7 million, due primarily to $8.2 million of nonrecurring charges related to acceleration of share based compensation expenses associated with the retirement of our former Chairman and Chief Executive Officer and the resignation of certain directors. Legal, accounting, and professional fees increased by $792 thousand from $7.3 million to $8.1 million, the reasons of which are further discussed below. Other expenses increased $1.4 million, due primarily to real estate and utility costs on special assets ($441 thousand) and director compensation ($424 thousand).

Legal, accounting and professional fees and expenses for the three months ended September 30, 2019 increased to $3.6 million from $2.1 million for the same period in 2018, a 70% increase. Legal, accounting and professional fees and expenses for the nine months ended September 30, 2019 increased to $8.1 million from $7.3 million for the same period in 2018, an 11% increase. The increased expenses for both the quarter to date and year to date 2019 periods were primarily associated with government agencies investigations previously disclosed in the second quarter 2019 earnings press release. The Company expects to incur elevated levels of legal and professional fees and expenses for at least the remainder of 2019 as it continues to cooperate with these investigations. Other than these increased costs, we do not believe at this time that the resolution of these investigations will be materially adverse to the Company. As a result of these ongoing investigations, there have been no regulatory restrictions placed on the Company's ability to fully engage in its banking business as presently conducted. We are, however, unable to predict the duration, scope or outcome of these investigations.

The effective income tax rate for the third quarter of 2019 was 27.9% as compared to 26.3% for the third quarter of 2018 due primarily to a decrease in federal tax credits, an increase in nondeductible expenses, and adjustments related to the completion of the 2018 tax returns.

The financial information that follows provides more detail on the Company's financial performance for the three and nine months ended September 30, 2019 as compared to the three and nine months ended September 30, 2018 as well as providing eight quarters of trend data. Persons wishing to obtain additional information should refer to the Company's Form 10-K for the year ended December 31, 2018 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 third quarter 2019 financial results on Thursday, October 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 6989578, 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 October 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, 2018 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 September 30, Nine Months Ended September 30,
2019 2018 2019 2018
Income Statements:
Total interest income $ 109,034 $ 102,360 $ 322,447 $ 287,705
Total interest expense 28,045 21,069 79,112 52,424
Net interest income 80,989 81,291 243,335 235,281
Provision for credit losses 3,186 2,441 10,146 6,060
Net interest income after provision for credit losses 77,803 78,850 233,189 229,221
Noninterest income (before investment gains) 6,161 5,640 17,337 16,429
Gain on sale of investment securities 153 - 1,628 68
Total noninterest income 6,314 5,640 18,965 16,497
Total noninterest expense 33,473 31,614 105,136 95,024
Income before income tax expense 50,644 52,876 147,018 150,694
Income tax expense 14,149 13,928 39,531 38,735
Net income $ 36,495 $ 38,948 $ 107,487 $ 111,959
Per Share Data:
Earnings per weighted average common share, basic $ 1.07 $ 1.14 $ 3.12 $ 3.26
Earnings per weighted average common share, diluted $ 1.07 $ 1.13 $ 3.12 $ 3.25
Weighted average common shares outstanding, basic 34,232,890 34,308,684 34,418,154 34,291,929
Weighted average common shares outstanding, diluted 34,255,889 34,460,794 34,450,876 34,444,389
Actual shares outstanding at period end 33,720,522 34,308,473 33,720,522 34,308,473
Book value per common share at period end $ 35.13 $ 30.94 $ 35.13 $ 30.94
Tangible book value per common share at period end (1) $ 32.02 $ 27.84 $ 32.02 $ 27.84
Dividend per common share $ 0.22 $ - $ 0.44 $ -
Performance Ratios (annualized):
Return on average assets 1.62% 1.93% 1.66% 1.92%
Return on average common equity 12.09% 14.85% 12.34% 14.92%
Return on average tangible common equity 13.25% 16.54% 13.57% 16.70%
Net interest margin 3.72% 4.14% 3.88% 4.15%
Efficiency ratio (2) 38.34% 36.37% 40.08% 37.74%
Other Ratios:
Allowance for credit losses to total loans (3) 0.98% 1.00% 0.98% 1.00%
Allowance for credit losses to total nonperforming loans 127.87% 452.28% 127.87% 452.28%
Nonperforming loans to total loans (3) 0.76% 0.22% 0.76% 0.22%
Nonperforming assets to total assets 0.66% 0.20% 0.66% 0.20%
Net charge-offs (annualized) to average loans (3) 0.08% 0.05% 0.12% 0.05%
Common equity to total assets 13.16% 13.18% 13.16% 13.18%
Tier 1 capital (to average assets) 12.19% 12.13% 12.19% 12.13%
Total capital (to risk weighted assets) 16.08% 15.74% 16.08% 15.74%
Common equity tier 1 capital (to risk weighted assets) 12.76% 12.11% 12.76% 12.11%
Tangible common equity ratio (1) 12.13% 12.01% 12.13% 12.01%
Loan Balances - Period End (in thousands):
Commercial and Industrial $ 1,466,862 $ 1,493,577 $ 1,466,862 $ 1,493,577
Commercial real estate - owner occupied $ 956,345 $ 863,162 $ 956,345 $ 863,162
Commercial real estate - income producing $ 3,812,284 $ 3,189,910 $ 3,812,284 $ 3,189,910
1-4 Family mortgage $ 104,563 $ 104,864 $ 104,563 $ 104,864
Construction - commercial and residential $ 1,053,789 $ 1,047,591 $ 1,053,789 $ 1,047,591
Construction - C&I (owner occupied) $ 81,916 $ 56,572 $ 81,916 $ 56,572
Home equity $ 81,117 $ 86,525 $ 81,117 $ 86,525
Other consumer $ 2,285 $ 2,471 $ 2,285 $ 2,471
Average Balances (in thousands):
Total assets $ 8,923,406 $ 8,023,535 $ 8,659,916 $ 7,805,089
Total earning assets $ 8,655,196 $ 7,793,422 $ 8,391,463 $ 7,576,570
Total loans $ 7,492,816 $ 6,646,264 $ 7,265,726 $ 6,550,754
Total deposits $ 7,319,314 $ 6,485,144 $ 7,068,137 $ 6,273,975
Total borrowings $ 345,464 $ 464,460 $ 360,920 $ 490,970
Total shareholders' equity $ 1,197,513 $ 1,040,826 $ 1,164,541 $ 1,003,439

(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 calculates return on average tangible common equity by dividing annualized year to date net income by tangible common equity. 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)
Three Months Ended Nine Months Ended Twelve Months Ended Three Months Ended Nine Months Ended
September 30, 2019 September 30, 2019 December 31, 2018 September 30, 2018 September 30, 2018
Common shareholders' equity $ 1,184,594 $ 1,108,941 $ 1,061,651
Less: Intangible assets (104,915 ) (105,766 ) (106,481 )
Tangible common equity $ 1,079,679 $ 1,003,175 $ 955,170
Book value per common share $ 35.13 $ 32.25 $ 30.94
Less: Intangible book value per common share (3.11 ) (3.08 ) (3.10 )
Tangible book value per common share $ 32.02 $ 29.17 $ 27.84
Total assets $ 9,003,467 $ 8,389,137 $ 8,057,855
Less: Intangible assets (104,915 ) (105,766 ) (106,481 )
Tangible assets $ 8,898,552 $ 8,283,371 $ 7,951,374
Tangible common equity ratio 12.13% 12.11% 12.01%
Average common shareholders' equity $ 1,197,513 $ 1,164,541 $ 1,022,642 $ 1,040,826 $ 1,003,439
Less: Average intangible assets (105,034 ) (105,297 ) (106,806 ) (106,629 ) (106,949 )
Average tangible common equity $ 1,092,479 $ 1,059,245 $ 915,836 $ 934,197 $ 896,490
Net Income Available to Common Shareholders $ 36,495 $ 107,487 $ 152,276 $ 38,949 $ 111,959
Average tangible common equity $ 1,092,479 $ 1,059,245 $ 915,836 $ 934,197 $ 896,490
Annualized Return on Average Tangible Common Equity (1) 13.25% 13.57% 16.63% 16.54% 16.70%
Eagle Bancorp, Inc.
GAAP Reconciliation (Unaudited)
(dollars in thousands except per share data)
Nine Months Ended September 30, 2019
GAAP Change Non-GAAP
Noninterest Expense
Nonperforming assets $ 59,137 $ (16,528 ) $ 42,609
Nonperforming loans $ 57,650 $ (16,528 ) $ 41,122
Other Ratios (annualized):
Nonperforming assets to total assets (4) 0.66% 0.47%
Nonperforming loans to total loans (4) 0.76% 0.54%
Allowance for credit losses to total nonperforming loans (4) 127.87% 179.27%

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

(3) Excludes loans held for sale.

(4) Nonperforming loans at September 30, 2019, includes a $16.5 million loan that was brought current shortly after quarter end.

Eagle Bancorp, Inc.
Consolidated Balance Sheets (Unaudited)
(dollars in thousands, except per share data)
Assets September 30, 2019 December 31, 2018 September 30, 2018
Cash and due from banks $ 6,657 $ 6,773 $ 4,459
Federal funds sold 27,711 11,934 17,284
Interest bearing deposits with banks and other short-term investments 361,154 303,157 162,734
Investment securities available for sale, at fair value 708,545 784,139 722,674
Federal Reserve and Federal Home Loan Bank stock 28,725 23,506 37,257
Loans held for sale 52,199 19,254 18,728
Loans 7,559,161 6,991,447 6,844,672
Less allowance for credit losses (73,720 ) (69,944 ) (68,189 )
Loans, net 7,485,441 6,921,503 6,776,483
Premises and equipment, net 14,515 16,851 17,457
Operating lease right-of-use assets 26,552 - -
Deferred income taxes 29,722 33,027 35,196
Bank owned life insurance 74,726 73,441 73,007
Intangible assets, net 104,915 105,766 106,481
Other real estate owned 1,487 1,394 1,394
Other assets 81,118 88,392 84,701
Total Assets $ 9,003,467 $ 8,389,137 $ 8,057,855
Liabilities and Shareholders' Equity
Deposits:
Noninterest bearing demand $ 2,051,106 $ 2,104,220 $ 2,057,886
Interest bearing transaction 918,011 593,107 459,455
Savings and money market 3,034,530 2,949,559 2,573,258
Time, $100,000 or more 772,340 801,957 758,152
Other time 626,526 525,442 523,554
Total deposits 7,402,513 6,974,285 6,372,305
Customer repurchase agreements 30,297 30,413 36,446
Other short-term borrowings 100,000 - 325,000
Long-term borrowings 217,589 217,296 217,198
Operating lease liabilities 29,586 - -
Other liabilities 38,888 58,202 45,255
Total liabilities 7,818,873 7,280,196 6,996,204
Shareholders' Equity
Common stock, par value $.01 per share; shares authorized 100,000,000, shares
issued and outstanding 33,720,522, 34,387,919, and 34,308,473, respectively 336 342 341
Additional paid in capital 502,566 528,380 526,423
Retained earnings 677,055 584,494 544,177
Accumulated other comprehensive income (loss) 4,637 (4,275 ) (9,290 )
Total Shareholders' Equity 1,184,594 1,108,941 1,061,651
Total Liabilities and Shareholders' Equity $ 9,003,467 $ 8,389,137 $ 8,057,855
`
Eagle Bancorp, Inc.
Consolidated Statements of Income (Unaudited)
(dollars in thousands, except per share data)
Three Months Ended September 30, Nine Months Ended September 30,
Interest Income 2019 2018 2019 2018
Interest and fees on loans $ 102,297 $ 95,570 $ 302,007 $ 270,924
Interest and dividends on investment securities 4,904 4,875 15,740 12,525
Interest on balances with other banks and short-term investments 1,762 1,897 4,533 4,152
Interest on federal funds sold 71 18 167 104
Total interest income 109,034 102,360 322,447 287,705
Interest Expense
Interest on deposits 24,576 16,719 67,937 39,896
Interest on customer repurchase agreements 82 54 255 166
Interest on other short-term borrowings 408 1,317 1,983 3,425
Interest on long-term borrowings 2,979 2,979 8,937 8,937
Total interest expense 28,045 21,069 79,112 52,424
Net Interest Income 80,989 81,291 243,335 235,281
Provision for Credit Losses 3,186 2,441 10,146 6,060
Net Interest Income After Provision For Credit Losses 77,803 78,850 233,189 229,221
Noninterest Income
Service charges on deposits 1,494 1,814 4,794 5,188
Gain on sale of loans 2,563 1,434 5,874 4,632
Gain on sale of investment securities 153 - 1,628 68
Increase in the cash surrender value of bank owned life insurance 431 373 1,285 1,073
Other income 1,673 2,019 5,384 5,536
Total noninterest income 6,314 5,640 18,965 16,497
Noninterest Expense
Salaries and employee benefits 19,095 17,157 60,482 51,827
Premises and equipment expenses 3,503 3,889 11,007 11,691
Marketing and advertising 1,210 1,191 3,626 3,419
Data processing 2,183 2,423 7,161 7,144
Legal, accounting and professional fees 3,625 2,130 8,074 7,282
FDIC insurance 85 933 2,327 2,559
Other expenses 3,772 3,891 12,459 11,102
Total noninterest expense 33,473 31,614 105,136 95,024
Income Before Income Tax Expense 50,644 52,876 147,018 150,694
Income Tax Expense 14,149 13,928 39,531 38,735
Net Income $ 36,495 $ 38,948 $ 107,487 $ 111,959
Earnings Per Common Share
Basic $ 1.07 $ 1.14 $ 3.12 $ 3.26
Diluted $ 1.07 $ 1.13 $ 3.12 $ 3.25
Eagle Bancorp, Inc.
Consolidated Average Balances, Interest Yields And Rates (Unaudited)
(dollars in thousands)
Three Months Ended September 30,
2019 2018
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 $ 344,853 $ 1,762 2.03 % $ 377,324 $ 1,897 1.99 %
Loans held for sale (1) 49,765 492 3.95 % 23,511 274 4.66 %
Loans (1) (2) 7,492,816 101,805 5.39 % 6,646,264 95,296 5.69 %
Investment securities available for sale (2) 741,907 4,904 2.62 % 735,586 4,875 2.63 %
Federal funds sold 25,855 71 1.09 % 10,737 18 0.67 %
Total interest earning assets 8,655,196 109,034 5.00 % 7,793,422 102,360 5.21 %
Total noninterest earning assets 341,452 297,815
Less: allowance for credit losses 73,242 67,702
Total noninterest earning assets 268,210 230,113
TOTAL ASSETS $ 8,923,406 $ 8,023,535
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing liabilities:
Interest bearing transaction $ 791,785 $ 1,828 0.92 % $ 482,820 $ 973 0.80 %
Savings and money market 2,922,751 13,606 1.85 % 2,596,010 9,636 1.47 %
Time deposits 1,444,328 9,142 2.51 % 1,220,755 6,110 1.99 %
Total interest bearing deposits 5,158,864 24,576 1.89 % 4,299,585 16,719 1.54 %
Customer repurchase agreements 27,809 82 1.17 % 30,445 54 0.70 %
Other short-term borrowings 100,100 408 1.59 % 216,851 1,317 2.38 %
Long-term borrowings 217,555 2,979 5.36 % 217,164 2,979 5.37 %
Total interest bearing liabilities 5,504,328 28,045 2.02 % 4,764,045 21,069 1.75 %
Noninterest bearing liabilities:
Noninterest bearing demand 2,160,450 2,185,559
Other liabilities 61,115 33,105
Total noninterest bearing liabilities 2,221,565 2,218,664
Shareholders' Equity 1,197,513 1,040,826
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 8,923,406 $ 8,023,535
Net interest income $ 80,989 $ 81,291
Net interest spread 2.98 % 3.46 %
Net interest margin 3.72 % 4.14 %
Cost of funds 1.28 % 1.07 %
(1) Loans placed on nonaccrual status are included in average balances. Net loan fees and late charges included in interest income on loans totaled $4.3 million and $5.0 million
for the three months ended September 30, 2019 and 2018, 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)
Nine Months Ended September 30,
2019 2018
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 $ 285,150 $ 4,533 2.13 % $ 321,266 $ 4,152 1.73 %
Loans held for sale (1) 34,265 1,041 4.05 % 24,692 839 4.53 %
Loans (1) (2) 7,265,726 300,966 5.54 % 6,550,754 270,085 5.51 %
Investment securities available for sale (1) 784,970 15,740 2.68 % 664,798 12,525 2.52 %
Federal funds sold 21,352 167 1.05 % 15,060 104 0.92 %
Total interest earning assets 8,391,463 322,447 5.14 % 7,576,570 287,705 5.08 %
Total noninterest earning assets 339,355 294,948
Less: allowance for credit losses 70,902 66,429
Total noninterest earning assets 268,453 228,519
TOTAL ASSETS $ 8,659,916 $ 7,805,089
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing liabilities:
Interest bearing transaction $ 696,825 $ 4,206 0.81 % $ 433,921 $ 2,252 0.69 %
Savings and money market 2,781,663 37,848 1.82 % 2,670,578 23,846 1.19 %
Time deposits 1,406,237 25,883 2.46 % 1,078,608 13,798 1.71 %
Total interest bearing deposits 4,884,725 67,937 1.86 % 4,183,107 39,896 1.28 %
Customer repurchase agreements 29,617 255 1.15 % 45,504 166 0.49 %
Other short-term borrowings 113,845 1,983 2.30 % 228,398 3,425 1.98 %
Long-term borrowings 217,458 8,937 5.42 % 217,068 8,937 5.43 %
Total interest bearing liabilities 5,245,645 79,112 2.02 % 4,674,077 52,424 1.50 %
Noninterest bearing liabilities:
Noninterest bearing demand 2,183,412 2,090,868
Other liabilities 66,318 36,705
Total noninterest bearing liabilities 2,249,730 2,127,573
Shareholders' equity 1,164,541 1,003,439
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 8,659,916 $ 7,805,089
Net interest income $ 243,335 $ 235,281
Net interest spread 3.12 % 3.58 %
Net interest margin 3.88 % 4.15 %
Cost of funds 1.26 % 0.93 %
(1) Loans placed on nonaccrual status are included in average balances. Net loan fees and late charges included in interest income on loans totaled $13.1 million and $14.9 million
for the nine months ended September 30, 2019 and 2018, 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
September 30, June 30, March 31, December 31, September 30, June 30, March 31, December 31,
Income Statements: 2019 2019 2019 2018 2018 2018 2018 2017
Total interest income $ 109,034 $ 108,279 $ 105,134 $ 105,581 $ 102,360 $ 96,296 $ 89,049 $ 86,526
Total interest expense 28,045 26,950 24,117 23,869 21,069 18,086 13,269 11,167
Net interest income 80,989 81,329 81,017 81,712 81,291 78,210 75,780 75,359
Provision for credit losses 3,186 3,600 3,360 2,600 2,441 1,650 1,969 4,087
Net interest income after provision for credit losses 77,803 77,729 77,657 79,112 78,850 76,560 73,811 71,272
Noninterest income (before investment gains) 6,161 5,797 5,379 6,060 5,640 5,527 5,262 9,496
Gain on sale of investment securities 153 563 912 29 - 26 42 -
Total noninterest income 6,314 6,360 6,291 6,089 5,640 5,553 5,304 9,496
Salaries and employee benefits 19,095 17,743 23,644 15,907 17,157 17,812 16,858 16,678
Premises and equipment 3,503 3,652 3,852 3,969 3,889 3,873 3,929 4,019
Marketing and advertising 1,210 1,268 1,148 1,147 1,191 1,291 937 1,222
Other expenses 9,665 10,696 9,660 10,664 9,377 9,313 9,397 7,884
Total noninterest expense 33,473 33,359 38,304 31,687 31,614 32,289 31,121 29,803
Income before income tax expense 50,644 50,730 45,644 53,514 52,876 49,824 47,994 50,965
Income tax expense 14,149 13,487 11,895 13,197 13,928 12,528 12,279 35,396
Net income 36,495 37,243 33,749 40,317 38,948 37,296 35,715 15,569
Per Share Data:
Earnings per weighted average common share, basic $ 1.07 $ 1.08 $ 0.98 $ 1.17 $ 1.14 $ 1.09 $ 1.04 $ 0.46
Earnings per weighted average common share, diluted $ 1.07 $ 1.08 $ 0.98 $ 1.17 $ 1.13 $ 1.08 $ 1.04 $ 0.45
Weighted average common shares outstanding, basic 34,232,890 34,540,152 34,480,772 34,349,089 34,308,684 34,305,693 34,260,882 34,179,793
Weighted average common shares outstanding, diluted 34,255,889 34,565,253 34,536,236 34,460,985 34,460,794 34,448,354 34,406,310 34,334,873
Actual shares outstanding at period end 33,720,522 34,539,853 34,537,193 34,387,919 34,308,473 34,305,071 34,303,056 34,185,163
Book value per common share at period end $ 35.13 $ 34.30 $ 33.25 $ 32.25 $ 30.94 $ 29.82 $ 28.72 $ 27.80
Tangible book value per common share at period end (1) $ 32.02 $ 31.25 $ 30.20 $ 29.17 $ 27.84 $ 26.71 $ 25.60 $ 24.67
Dividend per common share $ 0.22 $ 0.22 $ - $ - $ - $ - $ - $ -
Performance Ratios (annualized):
Return on average assets 1.62% 1.74% 1.62% 1.90% 1.93% 1.92% 1.91% 0.82%
Return on average common equity 12.09% 12.81% 12.12% 14.82% 14.85% 14.93% 14.99% 6.49%
Return on average tangible common equity 13.25% 14.08% 13.38% 16.43% 16.54% 16.71% 16.86% 7.31%
Net interest margin 3.72% 3.91% 4.02% 3.97% 4.14% 4.15% 4.17% 4.13%
Efficiency ratio (2) 38.34% 38.04% 43.87% 36.09% 36.37% 38.55% 38.38% 35.12%
Other Ratios:
Allowance for credit losses to total loans (3) 0.98% 0.98% 0.98% 1.00% 1.00% 1.00% 1.00% 1.01%
Allowance for credit losses to total nonperforming loans (4) 127.87% 192.70% 173.72% 429.72% 452.28% 612.42% 491.56% 489.20%
Nonperforming loans to total loans (3) (4) 0.76% 0.51% 0.56% 0.23% 0.22% 0.16% 0.20% 0.21%
Nonperforming assets to total assets (4) 0.66% 0.45% 0.50% 0.21% 0.20% 0.16% 0.19% 0.20%
Net charge-offs (annualized) to average loans (3) 0.08% 0.08% 0.19% 0.05% 0.05% 0.05% 0.06% 0.15%
Tier 1 capital (to average assets) 12.19% 12.66% 12.49% 12.08% 12.13% 11.97% 11.76% 11.45%
Total capital (to risk weighted assets) 16.08% 16.36% 16.22% 16.08% 15.74% 15.59% 15.32% 15.02%
Common equity tier 1 capital (to risk weighted assets) 12.76% 12.87% 12.69% 12.47% 12.11% 11.89% 11.57% 11.23%
Tangible common equity ratio (1) 12.13% 12.60% 12.59% 12.11% 12.01% 11.79% 11.57% 11.44%
Average Balances (in thousands):
Total assets $ 8,923,406 $ 8,595,523 $ 8,455,680 $ 8,415,480 $ 8,023,535 $ 7,789,564 $ 7,597,485 $ 7,487,624
Total earning assets $ 8,655,196 $ 8,328,323 $ 8,185,711 $ 8,171,010 $ 7,793,422 $ 7,558,138 $ 7,373,535 $ 7,242,994
Total loans $ 7,492,816 $ 7,260,899 $ 7,038,472 $ 6,897,434 $ 6,646,264 $ 6,569,931 $ 6,433,730 $ 6,207,505
Total deposits $ 7,319,314 $ 6,893,981 $ 6,987,468 $ 6,950,714 $ 6,485,144 $ 6,269,126 $ 6,063,017 $ 6,101,727
Total borrowings $ 345,464 $ 470,214 $ 266,209 $ 342,637 $ 464,460 $ 485,729 $ 523,369 $ 382,687
Total shareholders' equity $ 1,197,513 $ 1,166,487 $ 1,128,869 $ 1,079,622 $ 1,040,826 $ 1,002,091 $ 966,585 $ 951,727
(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.
(4) Nonperforming loans at September 30, 2019, includes a $16.5 million loan that was brought current shortly after quarter end.

EAGLE BANCORP, INC.
CONTACT:
Michael T. Flynn
301.986.1800

Source: Eagle Bancorp, Inc.