PART I. FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) The unaudited consolidated financial statements as of September 30, 2020, detail the company's financial position, performance, and cash flows, including notes on accounting policies and COVID-19 impacts [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) Consolidated Balance Sheet Highlights (in thousands) | Account | September 30, 2020 | December 31, 2019 | Change | | :--- | :--- | :--- | :--- | | **Total Assets** | **$10,106,294** | **$8,988,719** | **+12.4%** | | Loans, net | $7,770,040 | $7,472,090 | +4.0% | | Total Deposits | $8,178,785 | $7,224,391 | +13.2% | | **Total Liabilities** | **$8,882,892** | **$7,798,038** | **+13.9%** | | **Total Shareholders' Equity** | **$1,223,402** | **$1,190,681** | **+2.7%** | [Consolidated Statements of Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income) Consolidated Income Statement Highlights (in thousands, except per share data) | Metric | Three Months Ended Sep 30, 2020 | Three Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $79,038 | $80,989 | $240,145 | $243,335 | | Provision for Credit Losses | $6,607 | $3,186 | $40,654 | $10,146 | | **Net Income** | **$41,346** | **$36,495** | **$93,325** | **$107,487** | | **Diluted EPS** | **$1.28** | **$1.07** | **$2.88** | **$3.12** | - Net income for Q3 2020 **increased 13.3% YoY to $41.3 million**, driven by a significant increase in noninterest income, particularly a **$9.7 million YoY increase in gain on sale of loans**; however, for the nine months ended September 30, 2020, **net income decreased 13.2% YoY to $93.3 million**, primarily due to a four-fold increase in the provision for credit losses[13](index=13&type=chunk) [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Cash Flow Summary (in thousands) | Activity | Nine Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2019 | | :--- | :--- | :--- | | Net cash provided by operating activities | $107,585 | $92,339 | | Net cash used in investing activities | ($475,566) | ($499,399) | | Net cash provided by financing activities | $983,116 | $480,718 | | **Net Increase in Cash and Cash Equivalents** | **$615,135** | **$73,658** | - The significant increase in cash and cash equivalents during the first nine months of 2020 was primarily driven by a **$954.4 million increase in deposits**, which fueled financing activities[26](index=26&type=chunk) [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes detail accounting policies, the adoption of the CECL standard, COVID-19 impacts, and breakdowns of key financial items - On January 1, 2020, the company adopted the new **CECL accounting standard** (ASU 2016-13), which resulted in a day-one cumulative-effect adjustment that **decreased retained earnings by $10.9 million**, net of tax; this standard replaces the incurred loss model with a lifetime expected credit loss model[21](index=21&type=chunk)[47](index=47&type=chunk)[87](index=87&type=chunk) - In response to the COVID-19 pandemic, the company implemented a short-term loan modification program; as of September 30, 2020, ongoing temporary modifications were in place for approximately 321 loans, representing an **outstanding balance of $851 million (10.8% of total loans)**[43](index=43&type=chunk)[157](index=157&type=chunk) - The company is an active participant in the Paycheck Protection Program (PPP), with **PPP loans totaling $456.1 million** as of September 30, 2020; these loans are fully guaranteed by the U.S. government[44](index=44&type=chunk)[113](index=113&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=51&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management analyzes financial performance, noting higher Q3 income offset by a nine-month decline due to increased credit loss provisions [Results of Operations](index=55&type=section&id=Results%20of%20Operations) Q3 2020 net income rose on strong noninterest income, though nine-month results fell due to higher credit loss provisions and margin compression Key Performance Metrics | Metric | Q3 2020 | Q3 2019 | 9M 2020 | 9M 2019 | | :--- | :--- | :--- | :--- | :--- | | Net Income (in millions) | $41.3 | $36.5 | $93.3 | $107.5 | | Diluted EPS | $1.28 | $1.07 | $2.88 | $3.12 | | Net Interest Margin | 3.08% | 3.72% | 3.27% | 3.88% | | ROAA (annualized) | 1.57% | 1.62% | 1.24% | 1.66% | | ROACE (annualized) | 14.46% | 12.09% | 10.44% | 12.34% | - The **provision for credit losses increased significantly to $6.6 million for Q3 2020 and $40.7 million for the first nine months of 2020**, compared to $3.2 million and $10.1 million for the respective periods in 2019; this increase is attributed to the implementation of the CECL accounting standard and the economic impact of COVID-19[275](index=275&type=chunk)[315](index=315&type=chunk)[316](index=316&type=chunk) - **Noninterest income surged 183% YoY in Q3 2020 to $17.8 million**, primarily due to a **$12.2 million gain on sale of loans**, which was up 377% from Q3 2019, reflecting a strong residential mortgage market and an accounting adjustment that accelerated revenue recognition[278](index=278&type=chunk)[280](index=280&type=chunk)[342](index=342&type=chunk) [Financial Condition](index=70&type=section&id=Financial%20Condition) Total assets grew to $10.1 billion, driven by deposit growth, while credit loss allowances and nonperforming assets increased Balance Sheet Summary (in billions) | Account | Sep 30, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | Total Assets | $10.1 | $9.0 | | Total Loans | $7.9 | $7.6 | | Total Deposits | $8.2 | $7.2 | | Total Shareholders' Equity | $1.22 | $1.19 | - **Nonperforming assets stood at $63.0 million**, or 0.62% of total assets, at September 30, 2020, an increase from $50.2 million, or 0.56% of total assets, at December 31, 2019[325](index=325&type=chunk)[337](index=337&type=chunk) - The company identified industries of potential concern due to COVID-19, with loans to the **Accommodation & Food Services sector representing 10.2%** of the total loan portfolio and **Retail Trade representing 1.3%**[380](index=380&type=chunk)[382](index=382&type=chunk) [Liquidity and Capital Resources](index=73&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains a strong liquidity position and capital ratios well above regulatory minimums, with a delayed CECL impact on capital Regulatory Capital Ratios (Company) | Ratio | Sep 30, 2020 | Dec 31, 2019 | Minimum for Well-Capitalized* | | :--- | :--- | :--- | :--- | | CET1 Capital Ratio | 13.19% | 12.87% | 6.50% | | Tier 1 Capital Ratio | 13.19% | 12.87% | 8.00% | | Total Capital Ratio | 16.72% | 16.20% | 10.00% | | Tier 1 Leverage Ratio | 10.82% | 11.62% | 5.00% | `*Applies to Bank only` - The company has substantial secondary liquidity sources, including the ability to **borrow up to $1.3 billion from the FHLB** (with $350 million outstanding) and purchase up to $155 million in federal funds[395](index=395&type=chunk) - The company's Board of Directors declared a **quarterly cash dividend of $0.22 per share** in September 2020[442](index=442&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=81&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company has a moderate interest rate risk profile, with simulations showing limited net interest income sensitivity to rate changes Interest Rate Sensitivity Analysis (at Sep 30, 2020) | Change in Interest Rates (basis points) | Percentage change in net interest income (next 12 months) | | :--- | :--- | | +200 | +6.0% | | +100 | +1.9% | | -100 | (1.3)% | | -200 | (2.0)% | [Controls and Procedures](index=81&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls were deemed effective, and remediation for a prior material weakness is considered complete - Management believes that the deficiencies contributing to a previously disclosed **material weakness have been remediated** as of June 30, 2020[454](index=454&type=chunk) - Key remediation actions included **splitting the roles of Chairman and CEO**, restructuring the Board of Directors, enhancing policies for related party transactions, and reinforcing the risk management function[455](index=455&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=83&type=section&id=Item%201.%20Legal%20Proceedings) The company faces a class action lawsuit and regulatory investigations concerning internal controls and related party transactions - A **putative class action lawsuit** was filed against the Company, alleging violations of the Securities Exchange Act of 1934 related to disclosures about internal controls and related party loans; the defendants' motion to dismiss is currently under consideration by the court[460](index=460&type=chunk) - The Company has received document requests and subpoenas from regulators and U.S. Attorney's offices in connection with **investigations into related party transactions**, the retirement of former officers, and relationships with a local public official[462](index=462&type=chunk) [Risk Factors](index=83&type=section&id=Item%201A.%20Risk%20Factors) Key risks include the adverse impacts of the COVID-19 pandemic on credit quality, capital, liquidity, and operational security - The **COVID-19 pandemic** is expected to continue adversely affecting customers, potentially worsening credit quality; industries of particular concern include **Accommodation and Food Service (10.2% of loan portfolio)** and **Retail Trade (1.3% of loan portfolio)**[463](index=463&type=chunk)[467](index=467&type=chunk) - The company may need to record **additional provisions for credit losses** as the pandemic evolves, and the uncertainty impairs the ability to accurately forecast future losses under the new CECL methodology[468](index=468&type=chunk) - **Operational risks have increased** due to remote work arrangements, including heightened cybersecurity threats (phishing, malware), potential disruptions to IT infrastructure, and challenges in maintaining compliance programs like anti-money laundering[473](index=473&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=85&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered equity sales occurred, and no shares were repurchased in Q3 2020 under the reinstated buyback program Issuer Purchases of Equity Securities (Q3 2020) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Maximum Number of Shares that May Yet Be Purchased | | :--- | :--- | :--- | :--- | | July 2020 | 0 | N/A | 447,890 | | August 2020 | 157* | $29.52 | 447,733 | | September 2020 | 0 | N/A | 447,733 | | **Total** | **157** | **$29.52** | **447,733** | `*Includes shares acquired for tax withholding on vested restricted shares.`

Eagle Bancorp, Inc. (NASDAQ:EGBN) Q3 2020 Earnings Conference Call October 22, 2020 10:00 AM ET Company Participants Charles Levingston - Chief Financial Officer Susan Riel - President & Chief Executive Officer Jan Williams - Chief Credit Officer Conference Call Participants Casey Whitman - Piper Sandler Steven Comery - G. Research Catherine Mealor - KBW Christopher Marinac - Janney Montgomery Scott Brody Preston - Stephens, Inc Erik Zwick - Boenning & Scattergood Operator Ladies and gentlemen, thank you fo ...

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited consolidated financial statements, including balance sheets, income statements, and cash flows [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) The balance sheet shows total assets grew to $9.8 billion, driven by loan and deposit growth Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2020 | December 31, 2019 | Change (%) | | :----------------------------- | :------------ | :---------------- | :--------- | | Total Assets | $9,799,670 | $8,988,719 | 8.9% | | Total Liabilities | $8,611,775 | $7,798,038 | 10.4% | | Total Shareholders' Equity | $1,187,895 | $1,190,681 | -0.2% | | Loans, net | $7,912,965 | $7,472,090 | 5.9% | | Total Deposits | $7,935,972 | $7,224,391 | 9.9% | [Consolidated Statements of Operations](index=4&type=section&id=Consolidated%20Statements%20of%20Operations) The income statement reflects a 22.5% decrease in quarterly net income due to a significant rise in credit loss provisions Consolidated Statements of Operations Highlights (in thousands) | Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Change (%) | | :----------------------------- | :------------------------------- | :------------------------------- | :--------- | | Net Income | $28,856 | $37,243 | -22.5% | | Net Interest Income | $81,363 | $81,329 | 0.04% | | Provision for Credit Losses | $19,737 | $3,600 | 448.3% | | Noninterest Income | $12,495 | $6,360 | 96.5% | | Basic EPS | $0.90 | $1.08 | -16.7% | | Diluted EPS | $0.90 | $1.08 | -16.7% | | **Metric** | **Six Months Ended June 30, 2020** | **Six Months Ended June 30, 2019** | **Change (%)** | | Net Income | $51,979 | $70,992 | -26.8% | | Basic EPS | $1.60 | $2.06 | -22.3% | | Diluted EPS | $1.60 | $2.05 | -22.0% | [Consolidated Statements of Comprehensive Income](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Comprehensive income declined by 27.5% in the quarter, impacted by lower net income and unrealized gains Consolidated Statements of Comprehensive Income Highlights (in thousands) | Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Change (%) | | :----------------------------------- | :------------------------------- | :------------------------------- | :--------- | | Comprehensive Income | $30,459 | $42,002 | -27.5% | | Total unrealized gain on investment securities | $1,333 | $5,508 | -75.8% | | **Metric** | **Six Months Ended June 30, 2020** | **Six Months Ended June 30, 2019** | **Change (%)** | | Comprehensive Income | $63,688 | $79,034 | -19.4% | | Total unrealized gain on investment securities | $12,833 | $10,887 | 17.9% | [Consolidated Statements of Changes in Shareholders' Equity](index=6&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Shareholders'%20Equity) Shareholders' equity slightly decreased due to the CECL adoption impact, share repurchases, and dividend payments Shareholders' Equity Changes (in thousands) | Metric | June 30, 2020 | December 31, 2019 | | :----------------------------------- | :------------ | :---------------- | | Total Shareholders' Equity | $1,187,895 | $1,190,681 | | Impact of adopting ASC 326 (CECL) on Retained Earnings (Jan 1, 2020) | $(10,931) | N/A | | Common stock repurchased (Six Months Ended June 30, 2020) | $(44,168) | N/A | | Cash dividends declared (Six Months Ended June 30, 2020) | $(14,180) | N/A | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Cash flows show a significant increase in financing activities, leading to a substantial rise in cash and cash equivalents Consolidated Statements of Cash Flows Highlights (Six Months Ended June 30, in thousands) | Metric | 2020 | 2019 | Change (%) | | :----------------------------------- | :----- | :----- | :--------- | | Net cash provided by operating activities | $48,317 | $48,805 | -1.0% | | Net cash used in investing activities | $(408,179) | $(369,004) | 10.6% | | Net cash provided by financing activities | $753,931 | $194,969 | 286.7% | | Net Increase (Decrease) In Cash and Cash Equivalents | $394,069 | $(125,230) | N/A | | Cash and Cash Equivalents at End of Period | $636,042 | $196,634 | 223.5% | [Notes to Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) These notes provide detailed explanations of the accounting policies and financial statement line items [Note 1. Summary of Significant Accounting Policies](index=8&type=section&id=Note%201.%20Summary%20of%20Significant%20Accounting%20Policies) This note details the basis of financial statement presentation, key policies, and the adoption of the CECL standard - Eagle Bancorp, Inc. operates as a full-service community bank primarily in Northern Virginia, Suburban Maryland, and Washington, D.C., offering real estate, commercial, and consumer lending, as well as deposit products[26](index=26&type=chunk) - The COVID-19 pandemic has adversely impacted various industries, potentially reducing fee and interest income, and increasing credit losses. The Company has implemented loan modification programs and participated in the Paycheck Protection Program (PPP)[29](index=29&type=chunk)[31](index=31&type=chunk)[32](index=32&type=chunk)[40](index=40&type=chunk)[41](index=41&type=chunk) - Effective January 1, 2020, the Company adopted ASU 2016-13 (CECL), replacing the incurred loss methodology with an expected loss methodology for credit losses, resulting in an initial adjustment of **$10.6 million to the allowance for credit losses** and **$4.1 million to the reserve for unfunded commitments**, charged to retained earnings[44](index=44&type=chunk)[85](index=85&type=chunk) - Short-term loan modifications made in good faith due to COVID-19 for current borrowers are not considered Troubled Debt Restructurings (TDRs) under the CARES Act. As of June 30, 2020, approximately **708 loans ($1.63 billion) were modified** under this program[40](index=40&type=chunk)[84](index=84&type=chunk) - The Company originated **$456 million in PPP loans** to over 1,400 businesses as of June 30, 2020, which are fully guaranteed by the U.S. government and do not carry an allowance for credit loss[41](index=41&type=chunk)[116](index=116&type=chunk) - The Allowance for Credit Losses (ACL) is an estimate of expected credit losses on loans and available-for-sale debt securities, measured using a collective (pool) basis with a lifetime loss-rate model, adjusted for current conditions and reasonable forecasts, including regional unemployment as a loss driver[48](index=48&type=chunk)[52](index=52&type=chunk)[70](index=70&type=chunk) Provision for Credit Losses Breakdown (Six Months Ended June 30, 2020, in thousands) | Category | Amount | | :-------------------- | :------- | | Loans | $33,909 | | AFS Debt Securities | $138 | | **Total** | **$34,047** | [Note 2. Cash and Due from Banks](index=23&type=section&id=Note%202.%20Cash%20and%20Due%20from%20Banks) This note details the Bank's reserve balances with the Federal Reserve and balances with other correspondent banks - The Bank maintains sufficient noninterest reserve balances with the Federal Reserve Bank to meet requirements, plus **significant interest-bearing excess reserves**[91](index=91&type=chunk) - Interest-bearing balances are held with the Federal Home Loan Bank of Atlanta, and noninterest-bearing balances with domestic correspondent banks for services[92](index=92&type=chunk) [Note 3. Investment Securities Available-for-Sale](index=23&type=section&id=Note%203.%20Investment%20Securities%20Available-for-Sale) This note details the composition and fair value of the available-for-sale investment securities portfolio Investment Securities Available-for-Sale (June 30, 2020, in thousands) | Category | Amortized Cost | Estimated Fair Value | Gross Unrealized Gains | Gross Unrealized Losses | Allowance for Credit Losses | | :----------------------------------- | :------------- | :------------------- | :--------------------- | :---------------------- | :-------------------------- | | U.S. agency securities | $116,223 | $117,054 | $1,580 | $749 | $— | | Residential mortgage backed securities | $516,297 | $531,528 | $15,346 | $115 | $— | | Municipal bonds | $86,374 | $90,694 | $4,333 | $— | $13 | | Corporate bonds | $31,561 | $32,920 | $1,562 | $78 | $125 | | Other equity investments | $198 | $198 | $— | $— | $— | | **Total** | **$750,653** | **$772,394** | **$22,821** | **$942** | **$138** | - Total gross unrealized losses were primarily due to interest rate changes, not credit quality, for U.S. government agency securities. However, a **$138 thousand allowance for credit losses** was recorded for AFS corporate and municipal securities due to potential credit losses[97](index=97&type=chunk)[79](index=79&type=chunk) - Proceeds from sales and calls of investment securities were **$120.0 million** for the six months ended June 30, 2020, up from $42.1 million for the same period in 2019[101](index=101&type=chunk) - The carrying value of securities pledged as collateral for certain government deposits, repurchase agreements, and lines of credit was **$346 million** at June 30, 2020[102](index=102&type=chunk) [Note 4. Mortgage Banking Derivatives](index=27&type=section&id=Note%204.%20Mortgage%20Banking%20Derivatives) This note describes the Bank's use of derivatives in its mortgage banking activities and the impact of COVID-19 - The Bank uses interest rate lock commitments and forward sales contracts of mortgage-backed securities (MBS) as derivatives in its mortgage banking activities[103](index=103&type=chunk) - During the second quarter of 2020, the Company **suspended mandatory locking of loans for sale** due to significant market dislocation from COVID-19 and operational strain[107](index=107&type=chunk) - At June 30, 2020, there were **no material mortgage banking derivative financial instruments**. At June 30, 2019, the notional value of these instruments was $124.5 million[107](index=107&type=chunk) - A **net loss of $(165) thousand** related to mortgage banking derivative instruments was included in other noninterest income for the six months ended June 30, 2020, compared to a net gain of $219 thousand for the same period in 2019[108](index=108&type=chunk) [Note 5. Loans and Allowance for Credit Losses](index=29&type=section&id=Note%205.%20Loans%20and%20Allowance%20for%20Credit%20Losses) This note provides a detailed breakdown of the loan portfolio, credit quality indicators, and allowance for credit losses Loan Portfolio Composition (June 30, 2020, in thousands) | Loan Type | Amount | % of Total Loans | | :----------------------------------- | :------- | :--------------- | | Commercial | $1,607,056 | 20% | | PPP loans | $456,476 | 6% | | Income producing - commercial real estate | $3,678,946 | 46% | | Owner occupied - commercial real estate | $964,077 | 12% | | Real estate mortgage - residential | $93,601 | 1% | | Construction - commercial and residential | $995,550 | 12% | | Construction - C&I (owner occupied) | $149,845 | 2% | | Home equity | $74,921 | 1% | | Other consumer | $1,289 | 0% | | **Total Loans** | **$8,021,761** | **100%** | Allowance for Credit Losses Activity (Six Months Ended June 30, 2020, in thousands) | Metric | 2020 | | :----------------------------------- | :----- | | Balance at beginning of period, prior to adoption of ASC 326 | $69,944 | | Impact of adopting ASC 326 | $10,614 | | Net loans charged-off | $(9,385) | | Provision for credit losses | $37,623 | | **Ending balance** | **$108,796** | - PPP loans are included in the CECL model but do not carry an allowance for credit loss due to being **fully guaranteed by the U.S. government**[116](index=116&type=chunk) Nonaccrual Loans (June 30, 2020, in thousands) | Loan Type | Nonaccrual No Allowance | Nonaccrual with Allowance | Total Nonaccrual Loans | | :----------------------------------- | :---------------------- | :------------------------ | :--------------------- | | Commercial | $1,507 | $15,214 | $16,721 | | Income producing - commercial real estate | $8,544 | $8,735 | $17,279 | | Owner occupied - commercial real estate | $7,065 | $3,690 | $10,755 | | Real estate mortgage - residential | $5,503 | $2,713 | $8,216 | | Construction - commercial and residential | $2,298 | $3,087 | $5,385 | | Home equity | $50 | $550 | $600 | | Other consumer | $— | $6 | $6 | | **Total** | **$24,967** | **$33,995** | **$58,962** | - As of June 30, 2020, there were **13 Troubled Debt Restructurings (TDRs) totaling approximately $20.3 million**, with 10 of these loans ($12.3 million) performing under their modified terms. The CARES Act allows temporary suspension of TDR treatment for COVID-19 related modifications[152](index=152&type=chunk)[149](index=149&type=chunk) [Note 6. Leases](index=43&type=section&id=Note%206.%20Leases) This note discusses the Company's accounting for operating leases, primarily for real estate properties - As of June 30, 2020, the Company had **$25.4 million of operating lease Right-of-Use (ROU) assets** and **$27.1 million of operating lease liabilities** on its Consolidated Balance Sheet[156](index=156&type=chunk) Net Lease Cost (Six Months Ended June 30, in thousands) | Metric | 2020 | 2019 | | :----------- | :----- | :----- | | Net Lease Cost | $4,349 | $4,245 | - The weighted average lease term for operating leases was **4.62 years**, and the weighted average discount rate was **4.00%** as of June 30, 2020[160](index=160&type=chunk) [Note 7. Other Derivatives](index=45&type=section&id=Note%207.%20Other%20Derivatives) This note explains the Company's use of interest rate swaps for hedging and customer risk management - As of June 30, 2020, the Company had one designated cash flow hedge notional interest rate swap transaction outstanding amounting to **$100 million**, associated with its variable rate deposits[165](index=165&type=chunk) - An estimated **$1.3 million will be reclassified as an increase in interest expense** from cash flow hedges over the next twelve months[166](index=166&type=chunk) - The Company uses non-designated derivatives to facilitate customer risk management strategies, which are simultaneously hedged by offsetting derivatives with third parties[167](index=167&type=chunk) - Derivative agreements contain credit risk contingent features, including collateral posting requirements and default provisions based on indebtedness or capital status[169](index=169&type=chunk)[172](index=172&type=chunk) - As of June 30, 2020, the aggregate fair value of derivative contracts with credit risk contingent features in a net liability position totaled **$6.1 million**, requiring **$1.9 million in posted collateral**[173](index=173&type=chunk) Fair Value of Derivatives (June 30, 2020, in thousands) | Type | Notional Amount | Fair Value | Balance Sheet Category | | :----------------------------------- | :-------------- | :--------- | :--------------------- | | Designated Cash Flow Hedge (Interest Rate Product) | $100,000 | $1,330 | Other Liabilities | | Non-designated Hedges (Interest Rate Product) | $154,447 | $4,523 | Other Assets | | Non-designated Hedges (Interest Rate Product) | $154,447 | $4,818 | Other Liabilities | | Non-designated Hedges (Other Contracts) | $27,150 | $150 | Other Liabilities | [Note 8. Other Real Estate Owned](index=52&type=section&id=Note%208.%20Other%20Real%20Estate%20Owned) This note reports the activity and balance of properties acquired through foreclosure - The ending balance of Other Real Estate Owned (OREO) was **$8,237 thousand** at June 30, 2020[182](index=182&type=chunk) - Real estate acquired from borrowers totaled **$6,750 thousand** for the six months ended June 30, 2020[182](index=182&type=chunk) - There were **no sales of OREO property** for the three and six months ended June 30, 2020 and 2019[181](index=181&type=chunk)[182](index=182&type=chunk) [Note 9. Long-Term Borrowings](index=52&type=section&id=Note%209.%20Long-Term%20Borrowings) This note details the Company's long-term borrowings, including subordinated notes and FHLB advances - Total long-term borrowings amounted to **$267,882 thousand** at June 30, 2020[184](index=184&type=chunk) - Long-term borrowings include **$70.0 million of 5.75% subordinated notes** due September 1, 2024, and **$150.0 million of 5.00% Fixed-to-Floating Rate Subordinated Notes** due August 1, 2026, both qualifying as Tier 2 capital[184](index=184&type=chunk)[185](index=185&type=chunk) - On February 26, 2020, the Bank borrowed **$50 million under an FHLB advance** at a fixed rate of 1.81% with a maturity date of February 26, 2030, to support loan growth[186](index=186&type=chunk) [Note 10. Net Income per Common Share](index=53&type=section&id=Note%2010.%20Net%20Income%20per%20Common%20Share) This note provides the calculation of basic and diluted net income per common share Earnings Per Common Share (EPS) (in thousands, except per share data) | Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Change (%) | | :----------------------------------- | :------------------------------- | :------------------------------- | :--------- | | Basic EPS | $0.90 | $1.08 | -16.7% | | Diluted EPS | $0.90 | $1.08 | -16.7% | | **Metric** | **Six Months Ended June 30, 2020** | **Six Months Ended June 30, 2019** | **Change (%)** | | Basic EPS | $1.60 | $2.06 | -22.3% | | Diluted EPS | $1.60 | $2.05 | -22.0% | [Note 11. Other Comprehensive Income](index=54&type=section&id=Note%2011.%20Other%20Comprehensive%20Income) This note presents the components of other comprehensive income and changes in accumulated other comprehensive income Other Comprehensive Income (in thousands) | Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Change (%) | | :----------------------------------- | :------------------------------- | :------------------------------- | :--------- | | Other Comprehensive Income | $1,603 | $4,759 | -66.3% | | **Metric** | **Six Months Ended June 30, 2020** | **Six Months Ended June 30, 2019** | **Change (%)** | | Other Comprehensive Income | $11,709 | $8,042 | 45.6% | | Net unrealized gain on securities available-for-sale | $11,689 | $11,979 | -2.4% | - The balance of accumulated other comprehensive income (loss), net of tax, was **$14,668 thousand** at June 30, 2020[194](index=194&type=chunk) [Note 12. Fair Value Measurements](index=57&type=section&id=Note%2012.%20Fair%20Value%20Measurements) This note describes the fair value hierarchy and presents assets and liabilities measured at fair value - The fair value hierarchy categorizes inputs into **Level 1** (quoted prices in active markets), **Level 2** (observable inputs other than Level 1), and **Level 3** (unobservable inputs)[198](index=198&type=chunk)[199](index=199&type=chunk)[200](index=200&type=chunk) Assets Measured at Fair Value on a Recurring Basis (June 30, 2020, in thousands) | Category | Level 1 | Level 2 | Level 3 | Total (Fair Value) | | :----------------------------------- | :------ | :------ | :------ | :----------------- | | Investment securities available-for-sale | $— | $719,276 | $33,118 | $752,394 | | Loans held for sale | $— | $68,433 | $— | $68,433 | | Interest Rate Caps | $— | $4,454 | $— | $4,454 | | **Total Assets** | **$—** | **$792,163** | **$33,118** | **$825,281** | Liabilities Measured at Fair Value on a Recurring Basis (June 30, 2020, in thousands) | Category | Level 1 | Level 2 | Level 3 | Total (Fair Value) | | :----------------------------------- | :------ | :------ | :------ | :----------------- | | Interest rate swap derivatives | $— | $1,330 | $— | $1,330 | | Derivative liability | $— | $150 | $— | $150 | | Interest Rate Caps | $— | $4,748 | $— | $4,748 | | **Total Liabilities** | **$—** | **$6,228** | **$—** | **$6,228** | - Loans held for sale are carried at fair value (**$68,433 thousand** at June 30, 2020) and classified as Level 2[206](index=206&type=chunk)[211](index=211&type=chunk) Assets Measured at Fair Value on a Nonrecurring Basis (June 30, 2020, in thousands) | Category | Level 1 | Level 2 | Level 3 | Total (Fair Value) | | :----------------------------------- | :------ | :------ | :------ | :----------------- | | Commercial | $— | $— | $18,047 | $18,047 | | Income producing - commercial real estate | $— | $— | $27,295 | $27,295 | | Owner occupied - commercial real estate | $— | $— | $10,815 | $10,815 | | Real estate mortgage - residential | $— | $— | $7,960 | $7,960 | | Construction - commercial and residential | $— | $— | $5,385 | $5,385 | | Home equity | $— | $— | $600 | $600 | | Other consumer | $— | $— | $6 | $6 | | Other real estate owned | $— | $— | $8,237 | $8,237 | | **Total Assets** | **$—** | **$—** | **$78,345** | **$78,345** | - The fair value of loans at June 30, 2020, was **$7,828,639 thousand**, compared to a carrying value of $7,912,965 thousand, with the fair value measurement classified as Level 3[226](index=226&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=65&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes financial performance, the impact of COVID-19, critical accounting policies, and capital adequacy [GENERAL](index=65&type=section&id=GENERAL) This section provides an overview of Eagle Bancorp, Inc as a community-focused bank in the Washington, D.C area - Eagle Bancorp, Inc. is a Bethesda, Maryland-headquartered bank holding company, operating through its wholly-owned subsidiary EagleBank, providing commercial and consumer banking services[230](index=230&type=chunk) - The Company primarily serves Northern Virginia, Suburban Maryland, and Washington, D.C., with **twenty branch offices** and various lending centers[230](index=230&type=chunk)[26](index=26&type=chunk) - Services offered include business and personal checking, NOW accounts, money market and savings accounts, commercial, construction, and consumer loans, residential mortgages, cash management, and origination/sale of SBA and FHA loans[232](index=232&type=chunk) [Impact of COVID-19](index=66&type=section&id=Impact%20of%20COVID-19) This section discusses the significant impact of the COVID-19 pandemic on the Company's operations and financial results - The COVID-19 pandemic has caused widespread economic and financial disruptions, impacting customer creditworthiness and business activity[233](index=233&type=chunk) - The Company has modified business practices, including directing employees to work from home and implementing business continuity plans[234](index=234&type=chunk) - As of June 30, 2020, the Bank had **$456 million in outstanding Paycheck Protection Program (PPP) loans** to over 1,400 businesses, with an average interest rate of 1.00% and an average yield of 2.91% (including fee amortization) for the second quarter of 2020[236](index=236&type=chunk) - As of June 30, 2020, temporary loan modifications were granted on approximately 708 loans, representing **$1.63 billion (approximately 20% of total loans)** in outstanding exposure, with deferred payments due at maturity. These modifications are not reflected as troubled debt restructurings (TDRs) due to provisions of the CARES Act[239](index=239&type=chunk)[240](index=240&type=chunk) - The economic pressures and CECL implementation have contributed to an **increased provision for credit losses** for the first six months of 2020, and the Company suspended its share repurchase program[241](index=241&type=chunk) [CRITICAL ACCOUNTING POLICIES](index=68&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES) This section highlights the adoption of the CECL standard for estimating credit losses and the assessment of goodwill - Effective January 1, 2020, the Company adopted the **CECL standard**, replacing the 'incurred loss' approach with an 'expected loss' approach for credit loss estimation, requiring significant management judgment and reliance on forecasts[244](index=244&type=chunk)[245](index=245&type=chunk)[247](index=247&type=chunk) - The Allowance for Credit Losses (ACL) and Reserve for Unfunded Commitments (RUC) are estimated based on past events, current conditions, and reasonable and supportable forecasts, with historical loss experience adjusted for asset-specific and environmental factors[246](index=246&type=chunk) - As of June 30, 2020, a goodwill impairment test was performed due to COVID-19, concluding that **no impairment existed**, though future events could lead to recording an impairment loss[250](index=250&type=chunk) [RESULTS OF OPERATIONS](index=72&type=section&id=RESULTS%20OF%20OPERATIONS) This section analyzes financial performance for the three and six months ended June 30, 2020, compared to 2019 [Earnings Summary](index=72&type=section&id=Earnings%20Summary) This summary reviews financial performance, highlighting decreases in net income and EPS and increased credit loss provisions Earnings Summary Highlights (in millions, except EPS) | Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Change (%) | | :----------------------------- | :------------------------------- | :------------------------------- | :--------- | | Net Income | $28.9 | $37.2 | -23% | | Basic EPS | $0.90 | $1.08 | -17% | | Provision for Credit Losses | $19.7 | $3.6 | 448% | | Net Interest Income | $81.4 | $81.3 | 0.1% | | Net Interest Margin | 3.26% | 3.91% | -65 bps | | Noninterest Income | $12.5 | $6.4 | 96% | | Efficiency Ratio | 37.18% | 38.04% | -0.86% | | Net Charge-offs | $7.1 | $1.5 | 373% | | **Metric** | **Six Months Ended June 30, 2020** | **Six Months Ended June 30, 2019** | **Change (%)** | | Net Income | $52.0 | $71.0 | -27% | | Basic EPS | $1.60 | $2.06 | -22% | | Total Assets (June 30) | $9,800 | $8,670 | 13% | | Total Loans (June 30) | $8,020 | $7,200 | 11% | | Total Deposits (June 30) | $7,940 | $7,220 | 10% | - The increase in provision for credit losses was primarily due to the **implementation of the CECL accounting standard** and increased reserves associated with the impact of COVID-19[254](index=254&type=chunk)[270](index=270&type=chunk) - Net charge-offs in the second quarter of 2020 were primarily attributable to **one commercial relationship** to a personal services company that ceased business operations as a result of COVID-19[261](index=261&type=chunk) - Noninterest income increased significantly due to **higher gains on the sale of residential mortgage loans**, higher gains from FHA loan origination/securitization/sale/servicing, increased SBIC income, higher swap fee income, and higher prepayment fees[264](index=264&type=chunk)[284](index=284&type=chunk) [Net Interest Income and Net Interest Margin](index=78&type=section&id=Net%20Interest%20Income%20and%20Net%20Interest%20Margin) This section analyzes the components of net interest income and margin, highlighting the impact of interest rates and loan growth Net Interest Income and Margin Trends (in thousands, except percentages) | Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Change (bps) | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------- | | Net Interest Income | $81,363 | $81,329 | N/A | | Net Interest Margin | 3.26% | 3.91% | -65 | | Average Earning Asset Yields | 3.91% | 5.21% | -130 | | Average Cost of Interest Bearing Liabilities | 1.01% | 2.06% | -105 | | Net Interest Spread | 2.90% | 3.15% | -25 | | **Metric** | **Six Months Ended June 30, 2020** | **Six Months Ended June 30, 2019** | **Change (bps)** | | Net Interest Income | $161,107 | $162,346 | N/A | | Net Interest Margin | 3.36% | 3.97% | -61 | | Net Interest Spread | 2.90% | 3.20% | -30 | - The addition of PPP loans (average yield of 2.91%) **negatively impacted the overall yield** of the total loan portfolio by approximately seven basis points in Q2 2020 and four basis points for the six months ended June 30, 2020[293](index=293&type=chunk)[295](index=295&type=chunk)[296](index=296&type=chunk) - Average loans increased by **$754.9 million** and average deposits increased by **$1.59 billion** for the three months ended June 30, 2020, compared to the same period in 2019[296](index=296&type=chunk) - Average liquidity for the second quarter of 2020 was **$1.1 billion**, significantly higher than $229 million for the second quarter of 2019, contributing to net interest margin compression[296](index=296&type=chunk) [Provision for Credit Losses](index=85&type=section&id=Provision%20for%20Credit%20Losses) This section discusses the provision for credit losses, including the adoption of CECL and the effects of COVID-19 Provision for Credit Losses and Net Charge-offs (Six Months Ended June 30, in thousands) | Metric | 2020 | 2019 | Change (%) | | :----------------------------------- | :----- | :----- | :--------- | | Provision for Credit Losses- Loans | $33,909 | $6,960 | 387.2% | | Net Charge-offs | $9,385 | $4,818 | 94.8% | | Annualized ratio of net charge-offs to average loans | 0.24% | 0.13% | 84.6% | - The higher provisioning in 2020 is primarily due to the **implementation of the CECL accounting standard** and the impact of COVID-19 on actual and expected future credit losses[314](index=314&type=chunk) - Upon adoption of CECL on January 1, 2020, the allowance for credit losses was **increased by $10.6 million**, charged to retained earnings[314](index=314&type=chunk)[318](index=318&type=chunk) - The allowance for credit losses represented **1.36% of loans outstanding** at June 30, 2020, compared to 0.98% at December 31, 2019[263](index=263&type=chunk) [FINANCIAL CONDITION](index=97&type=section&id=FINANCIAL%20CONDITION) This section reviews the Company's financial position, including assets, liabilities, equity, and capital ratios [Summary](index=97&type=section&id=Summary) This summary provides a high-level overview of the Company's financial position and key capital ratios Financial Condition Summary (in millions, except per share data) | Metric | June 30, 2020 | December 31, 2019 | Change (%) | | :----------------------------------- | :------------ | :---------------- | :--------- | | Total Assets | $9,800 | $8,990 | 9% | | Total Loans (excluding HFS) | $8,020 | $7,550 | 6% | | Total Deposits | $7,940 | $7,220 | 10% | | Total Shareholders' Equity | $1,190 | $1,190 | 0% | | Book Value Per Share | $36.86 | $35.82 | 3% | | Tangible Book Value Per Share | $33.62 | $32.67 | 3% | | Common Equity Tier 1 (CET1) Risk Based Capital Ratio | 12.80% | 12.87% | -0.07% | | Total Risk Based Capital Ratio | 16.26% | 16.20% | 0.06% | | Tier 1 Leverage Ratio | 10.63% | 11.62% | -0.99% | | Tangible Common Equity Ratio | 11.17% | 12.22% | -1.05% | - The Company's capital ratios remain **substantially in excess of regulatory minimum** and buffer requirements, with all ratios above well-capitalized levels[365](index=365&type=chunk) - The share repurchase program was **placed on hold** during the first quarter of 2020 due to heightened stock market volatility and uncertainty regarding COVID-19, with no shares repurchased in the second quarter[366](index=366&type=chunk) [Loan Portfolio Exposures- COVID-19](index=99&type=section&id=Loan%20Portfolio%20Exposures-%20COVID-19) This section details loan portfolio exposures to industries potentially impacted by COVID-19 Loan Portfolio Exposure to COVID-19 Impacted Industries (June 30, 2020, in thousands) | Industry | Principal Balance | % of Loan Portfolio | | :----------------------------------- | :---------------- | :------------------ | | Accommodation & Food Services | $840,961 | 10.5% | | Retail Trade | $106,544 | 1.3% | Commercial Real Estate (CRE) Loan Exposures by Property Type (June 30, 2020, in thousands) | Property Type | Principal Balance | % of Loan Portfolio | | :----------------------------------- | :---------------- | :------------------ | | Restaurant | $31,364 | 0.4% | | Hotel | $35,815 | 0.4% | | Retail | $405,918 | 5.1% | - The Bank is actively working with customers in impacted industries, providing **PPP loans and payment deferrals** or interest-only periods, and monitoring rent collections for CRE investor borrowers[374](index=374&type=chunk)[376](index=376&type=chunk) [Deposits and Other Borrowings](index=101&type=section&id=Deposits%20and%20Other%20Borrowings) This section describes the Company's funding sources, including deposits and borrowings - Noninterest bearing deposits increased by **$351.7 million** and interest bearing deposits increased by **$359.9 million** for the six months ended June 30, 2020, compared to December 31, 2019[378](index=378&type=chunk) - Brokered deposits (excluding CDARS and ICS two-way) totaled **$1.79 billion (23% of total deposits)** at June 30, 2020[379](index=379&type=chunk) - Noninterest bearing demand deposits reached **$2.42 billion (30% of total deposits)** at June 30, 2020, partly due to funding of PPP loans[380](index=380&type=chunk) - Time deposits decreased by **$129.5 million** to $1.15 billion at June 30, 2020, from December 31, 2019[384](index=384&type=chunk) - FHLB advances increased to **$300.0 million** at June 30, 2020, from $250 million at December 31, 2019, supporting loan growth[385](index=385&type=chunk) [Liquidity Management](index=103&type=section&id=Liquidity%20Management) This section outlines the Company's liquidity strategy and sources of funds - Primary liquidity sources include cash, excess Federal Reserve reserves, loan repayments, federal funds sold, investment maturities/sales, and new core deposits[387](index=387&type=chunk) - Secondary liquidity sources include FHLB borrowings, brokered deposits, and federal funds purchased lines of credit[387](index=387&type=chunk) - At June 30, 2020, the Company had **$5.24 billion of primary and secondary liquidity sources**, deemed adequate to meet current and projected funding needs[392](index=392&type=chunk) - Average short-term liquidity was **$1.14 billion** in the second quarter of 2020, exceeding average needs[391](index=391&type=chunk) - The Bank is eligible for FHLB advances up to **$1.88 billion**, with $300 million outstanding at June 30, 2020[387](index=387&type=chunk) [Asset/Liability Management and Quantitative and Qualitative Disclosures about Market Risk](index=105&type=section&id=Asset%2FLiability%20Management%20and%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section details strategies for managing interest rate risk, including simulation models and gap analysis [Commitments and Contractual Obligations](index=105&type=section&id=Commitments%20and%20Contractual%20Obligations) This section details the Company's off-balance sheet commitments and their associated risks Loan Commitments and Lines of Credit (June 30, 2020, in thousands) | Category | Amount | | :----------------------------------- | :------------- | | Unfunded loan commitments | $2,208,726 | | Unfunded lines of credit | $90,704 | | Letters of credit | $59,455 | | **Total** | **$2,358,885** | - Unfunded loan commitments include **$253.9 million** related to short-term interest rate lock commitments on residential mortgage loans[393](index=393&type=chunk) - The total commitment amount does not necessarily represent future cash requirements as commitments may expire without being drawn[393](index=393&type=chunk)[394](index=394&type=chunk) [Interest Rate Risk Management](index=107&type=section&id=Interest%20Rate%20Risk%20Management) This section describes the approach to managing interest rate risk through its Asset/Liability Committee (ALCO) - The net interest margin for the six months ended June 30, 2020, was **3.36%**, compared to 3.97% for the same period in 2019[400](index=400&type=chunk) - The duration of the investment portfolio was **3.1 years**, the loan portfolio was **1.5 years**, the interest-bearing deposit portfolio was **3.3 years**, and the borrowed funds portfolio was **6.3 years** at June 30, 2020[402](index=402&type=chunk)[403](index=403&type=chunk)[404](index=404&type=chunk)[411](index=411&type=chunk) - Fixed rate loans amounted to **44% of total loans**, while variable and adjustable rate loans comprised **56%** (offset by 3% from PPP loans) at June 30, 2020[403](index=403&type=chunk)[405](index=405&type=chunk) - The net unrealized gain before income tax on the investment portfolio was **$21.8 million** at June 30, 2020, representing 3.0% of the portfolio's book value, primarily due to lower interest rates[406](index=406&type=chunk) Simulation Analysis: Percentage Change in Key Metrics (Next 12 Months, June 30, 2020) | Change in Interest Rates (basis points) | Percentage change in net interest income | Percentage change in net income | Percentage change in market value of portfolio equity | | :-------------------------------------- | :--------------------------------------- | :------------------------------ | :---------------------------------------------------- | | +400 | +17.4% | +31.6% | +17.3% | | +300 | +12.0% | +21.8% | +13.8% | | +200 | +6.7% | +12.1% | +10.0% | | +100 | +2.3% | +4.2% | +5.7% | | 0 | — | — | — | | -100 | -0.3% | -0.5% | -15.8% | | -200 | -0.8% | -1.4% | -28.1% | - Simulation results are within policy limits for net interest income, but **down-rate scenarios exceeded limits** due to the already low level of rates on non-maturing deposit instruments[412](index=412&type=chunk) [GAP Analysis](index=111&type=section&id=GAP%20Analysis) This section presents a static gap analysis to monitor interest rate sensitivity - At June 30, 2020, the Company had a **positive gap position of approximately $476 million** (5% of total assets) out to three months, and a positive cumulative gap position of $624 million (6% of total assets) out to twelve months[421](index=421&type=chunk) - This represents a shift from a negative gap position at March 31, 2019, and is within guideline limits established by the ALCO[421](index=421&type=chunk) - If interest rates increase by 100 basis points, net interest income and net interest margin are expected to increase modestly. If rates decline by 100 basis points, net interest income and margin are expected to decline modestly[423](index=423&type=chunk)[424](index=424&type=chunk) [Capital Resources and Adequacy](index=112&type=section&id=Capital%20Resources%20and%20Adequacy) This section discusses capital adequacy, regulatory requirements, and commercial real estate concentration risk - Non-owner-occupied commercial real estate (CRE) loans (including construction, land, and land development loans) represent **342% of total risk-based capital** at June 30, 2020. Construction, land, and land development loans represent 106% of total risk-based capital[429](index=429&type=chunk) - The Company and the Bank meet all Basel III Rules regulatory capital requirements, including the capital conservation buffer of 2.5% of CET1 capital, and are considered **well-capitalized**[434](index=434&type=chunk) Company Capital Ratios (June 30, 2020, in thousands) | Ratio | Amount | Ratio | Minimum Required For Capital Adequacy Purposes | To Be Well Capitalized Under Prompt Corrective Action Regulations* | | :----------------------------------- | :----- | :---- | :--------------------------------------------- | :--------------------------------------------------------------- | | CET1 capital (to risk weighted assets) | $1,085,861 | 12.80% | 7.00% | 6.50% | | Total capital (to risk weighted assets) | $1,379,471 | 16.26% | 10.50% | 10.00% | | Tier 1 capital (to risk weighted assets) | $1,085,861 | 12.80% | 8.50% | 8.00% | | Tier 1 capital (to average assets) | $1,085,861 | 10.63% | 4.00% | 5.00% | - The Company elected to adopt the March 2020 interim final rule, which provides an alternative option to **temporarily delay for two years the estimated impact of CECL adoption on regulatory capital**, followed by a three-year phase-in period[443](index=443&type=chunk) - The share repurchase program was **put on hold** during the first quarter of 2020 due to heightened stock market volatility and uncertainty regarding COVID-19, with no shares repurchased in the second quarter[436](index=436&type=chunk) - A regular quarterly cash dividend of **$0.22 per share** was announced on June 24, 2020[437](index=437&type=chunk) [Use of Non-GAAP Financial Measures](index=115&type=section&id=Use%20of%20Non-GAAP%20Financial%20Measures) This section explains the use of non-GAAP measures and provides a reconciliation to GAAP measures - The Company uses non-GAAP measures like tangible common equity to tangible assets, tangible book value per common share, and annualized return on average tangible common equity to evaluate capital adequacy and compare against other financial institutions[445](index=445&type=chunk) Non-GAAP Financial Measures (June 30, 2020, in thousands, except per share data) | Metric | Amount | | :----------------------------------- | :------------- | | Tangible common equity | $1,083,244 | | Tangible book value per common share | $33.62 | | Tangible common equity ratio | 11.17% | | Annualized Return on Average Tangible Common Equity (Three Months Ended June 30, 2020) | 10.80% | - These non-GAAP measures are derived by **excluding intangible assets** from common shareholders' equity and total assets, consistent with bank regulatory capital calculations[445](index=445&type=chunk)[448](index=448&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=118&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section references the MD&A for detailed information on the company's market risk management - Detailed market risk disclosures are provided in Item 2, 'Management's Discussion and Analysis of Financial Condition and Results of Operations,' under the caption 'Asset/Liability Management and Quantitative and Qualitative Disclosure about Market Risk'[450](index=450&type=chunk) [Item 4. Controls and Procedures](index=118&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of disclosure controls and details the remediation of prior material weaknesses - Management concluded that the Company's disclosure controls and procedures were **effective as of June 30, 2020**, providing reasonable assurance for timely and accurate reporting[450](index=450&type=chunk) - Previously disclosed **material weaknesses in internal control over financial reporting have been remediated** through enhanced controls, including changes in leadership roles, Board restructuring, new committee appointments (e.g., Risk Committee), hiring a Chief Legal Officer, formalizing the ethics program, enhancing related party transaction policies, and reinforcing risk management[452](index=452&type=chunk)[453](index=453&type=chunk) - No material changes in internal control over financial reporting occurred during the second quarter of 2020, other than the described remediation efforts[452](index=452&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=120&type=section&id=Item%201.%20Legal%20Proceedings) This section updates on ongoing legal matters, including a class action lawsuit and governmental investigations - A putative **class action lawsuit** was filed alleging materially false or misleading statements regarding internal controls and related party loans, causing a decline in stock value. The Company intends to vigorously defend against these claims[458](index=458&type=chunk) - The Company has received document requests and subpoenas from securities and banking regulators and U.S. Attorney's offices related to related party transactions, former officers' retirement, and relationships with a public official, and is **cooperating with these ongoing investigations**[459](index=459&type=chunk) - **No regulatory restrictions** have been placed on the Company's ability to fully engage in its banking business as a result of these ongoing investigations[459](index=459&type=chunk) - The duration, scope, or outcome of these investigations and litigation are unpredictable, but based on current information, the Company does not believe the liabilities will have a **material effect** on its financial position[457](index=457&type=chunk)[459](index=459&type=chunk) [Item 1A. Risk Factors](index=120&type=section&id=Item%201A.%20Risk%20Factors) This section highlights the significant adverse impacts of the COVID-19 pandemic on the company's business and operations - The COVID-19 pandemic and resulting containment measures have caused widespread economic and financial disruptions, with **significant, adverse, and potentially material impacts** on the Company's business, financial condition, liquidity, and results of operations[461](index=461&type=chunk) - Loan credit quality is expected to deteriorate, particularly in the **Accommodation and Food Service industry (10.5% of loan portfolio)** and **Retail Trade industry (1.3%)**, and for real estate-secured loans (79% of the portfolio)[463](index=463&type=chunk) - **Increased provisions for credit losses** are expected due to CECL and COVID-19, with $19.7 million and $34.0 million increases for the three and six months ended June 30, 2020, respectively[464](index=464&type=chunk) - **Increased demands on capital and liquidity** are anticipated due to higher loan originations (e.g., PPP loans with lower rates), potential draws on existing credit lines, and reduced capital/liquidity for more profitable loans[465](index=465&type=chunk) - **Operational risks are heightened** by remote working strategies, including increased cybersecurity risks, potential disruptions to information technology infrastructure, and strain on risk management models[472](index=472&type=chunk) - Reliance on external vendors and service providers (e.g., real estate appraisers, recording offices) may lead to **delays in loan origination and closings** due to limited availability caused by containment measures[473](index=473&type=chunk) - Strategic and reputational risks include potential damage to the Company's brand if its response to the pandemic is perceived as inadequate, and an **increased risk of litigation and regulatory scrutiny**[474](index=474&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=124&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section reports on shares purchased by the Company and the suspension of the share repurchase program - The Company purchased **58 shares of common stock** at $44.60 per share during April 2020, primarily in connection with satisfying tax withholding obligations on vested restricted shares[476](index=476&type=chunk) - The share repurchase program was **suspended during the first quarter of 2020** due to heightened stock market volatility and uncertainty regarding the impact of COVID-19, resulting in no shares repurchased during the second quarter of 2020[476](index=476&type=chunk) - As of June 30, 2020, **447,890 shares remained authorized for repurchase** under the Repurchase Program[476](index=476&type=chunk) [Item 3. Defaults Upon Senior Securities](index=125&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section states that there were no defaults upon senior securities during the reporting period - No defaults upon senior securities were reported[477](index=477&type=chunk) [Item 4. Mine Safety Disclosures](index=125&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section states that the disclosure item for mine safety is not applicable to the Company - This item is not applicable to the Company[477](index=477&type=chunk) [Item 5. Other Information](index=125&type=section&id=Item%205.%20Other%20Information) This section states that there are no required 8-K disclosures or changes in procedures for director nominations - No required 8-K disclosures were reported[477](index=477&type=chunk) - No changes in procedures for director nominations were reported[477](index=477&type=chunk) [Item 6. Exhibits](index=126&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications and interactive data files - The exhibits include the Certificate of Incorporation, Bylaws, Subordinated Indentures, a Restricted Stock Award Agreement, Certifications from the CEO and CFO, and Interactive Data Files (XBRL) for the financial statements[478](index=478&type=chunk) [Signatures](index=127&type=section&id=Signatures) This section contains the signatures of the President and CEO, and the EVP and CFO, certifying the report - The report was signed by Susan G. Riel, President and Chief Executive Officer, and Charles D. Levingston, Executive Vice President and Chief Financial Officer, on August 10, 2020[482](index=482&type=chunk)

Eagle Bancorp, Inc. (NASDAQ:EGBN) Q2 2020 Earnings Conference Call July 23, 2020 10:00 AM ET Company Participants Charles Levingston - EVP & CFO Susan Riel - President, CEO & Director Janice Williams - EVP Conference Call Participants Christopher Marinac - Janney Montgomery Scott Steven Comery - G. Research Andrew Terrell - Stephens Inc. Stuart Lotz - KBW Erik Zwick - Boenning and Scattergood Operator Ladies and gentlemen, thank you for standing by, and welcome to the Eagle Bancorp, Inc. Second Quarter 2020 ...

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) The unaudited statements reflect the company's financial position, operations, and cash flows, impacted by CECL adoption and COVID-19 [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) Total assets grew to $9.99 billion, driven by deposit growth, while the allowance for credit losses increased due to CECL adoption Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2020 | December 31, 2019 | Change (%) | | :--- | :--- | :--- | :--- | | **Total Assets** | **$9,992,219** | **$8,988,719** | **+11.2%** | | Loans, net | $7,744,537 | $7,472,090 | +3.6% | | Allowance for credit losses | $96,336 | $73,658 | +30.8% | | Total Deposits | $8,141,568 | $7,224,391 | +12.7% | | Total Liabilities | $8,829,441 | $7,798,038 | +13.2% | | Total Shareholders' Equity | $1,162,778 | $1,190,681 | -2.3% | [Consolidated Statements of Operations](index=4&type=section&id=Consolidated%20Statements%20of%20Operations) Net income decreased 31.5% to $23.1 million, primarily due to a significantly higher provision for credit losses Q1 2020 vs Q1 2019 Performance (in thousands, except per share data) | Metric | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | Change (%) | | :--- | :--- | :--- | :--- | | Net Interest Income | $79,744 | $81,017 | -1.6% | | Provision for Credit Losses | $14,310 | $3,360 | +325.9% | | Noninterest Income | $5,470 | $6,291 | -13.1% | | Noninterest Expense | $37,347 | $38,304 | -2.5% | | **Net Income** | **$23,123** | **$33,749** | **-31.5%** | | **Diluted EPS** | **$0.70** | **$0.98** | **-28.6%** | - Legal, accounting and professional fees **increased significantly to $7.0 million** in Q1 2020 from $1.7 million in Q1 2019[14](index=14&type=chunk) [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash from financing activities drove a $697.6 million net increase in cash and cash equivalents for the period Cash Flow Summary (in thousands) | Activity | Three Months Ended March 31, 2020 | | :--- | :--- | | Net cash provided by operating activities | $35,786 | | Net cash used in investing activities | ($304,522) | | Net cash provided by financing activities | $966,377 | | **Net Increase in Cash and Cash Equivalents** | **$697,641** | [Notes to Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail the material impacts of CECL adoption, the company's response to COVID-19, and credit quality details - The company adopted ASU 2016-13 (CECL) on January 1, 2020, replacing the incurred loss model with an expected loss model, resulting in a **$10.6 million increase to the allowance for credit losses** on loans and a **$4.1 million increase to the reserve for unfunded commitments**[44](index=44&type=chunk)[46](index=46&type=chunk)[86](index=86&type=chunk) - In response to COVID-19, the company implemented a loan modification program, granting temporary relief on approximately **382 loans totaling $576 million in exposure** through April 30, 2020[40](index=40&type=chunk)[152](index=152&type=chunk) - The company is an active participant in the SBA's Paycheck Protection Program (PPP), with **$444.8 million in principal outstanding** across 1,090 borrowers as of April 30, 2020[41](index=41&type=chunk) - The allowance for credit losses is estimated using a Discounted Cash Flow (DCF) method for most loan pools, which models lifetime probability of default and loss given default using **national unemployment as a key loss driver**[73](index=73&type=chunk)[74](index=74&type=chunk)[75](index=75&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=46&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the Q1 net income decline to a higher credit loss provision and legal fees driven by CECL and COVID-19 [Results of Operations](index=49&type=section&id=Results%20of%20Operations) Net income fell due to a 398% increase in the credit loss provision and a sharp rise in legal fees, despite lower operating expenses Key Performance Metrics (Annualized) | Metric | Q1 2020 | Q1 2019 | | :--- | :--- | :--- | | Return on Average Assets (ROAA) | 0.98% | 1.62% | | Return on Average Common Equity (ROACE) | 7.81% | 12.12% | | Return on Average Tangible Common Equity (ROATCE) | 8.56% | 13.38% | | Net Interest Margin | 3.49% | 4.02% | | Efficiency Ratio | 43.83% | 43.87% | - The provision for credit losses increased to **$16.4 million, a 398% increase** from Q1 2019, due to the adoption of CECL and increased reserves associated with the COVID-19 pandemic[259](index=259&type=chunk)[270](index=270&type=chunk) - Legal, accounting and professional fees **increased by $5.3 million (309%) to $7.0 million**, primarily associated with ongoing governmental investigations and defense of a class action lawsuit[274](index=274&type=chunk)[328](index=328&type=chunk) [Financial Condition](index=62&type=section&id=Financial%20Condition) Total assets grew 11% to $9.99 billion, with key loan portfolio exposures to COVID-19 identified in specific sectors COVID-19 Loan Portfolio Exposure as of March 31, 2020 | Industry / Property Type | Principal Balance (in thousands) | % of Loan Portfolio | | :--- | :--- | :--- | | Accommodation & Food Services | $761,346 | 9.7% | | Retail Trade | $89,753 | 1.1% | | CRE - Retail Property | $391,158 | 5.0% | | CRE - Hotel Property | $40,751 | 0.5% | | CRE - Restaurant Property | $40,031 | 0.5% | - **Nonperforming assets were stable at 0.56%** of total assets at March 31, 2020, totaling $56.0 million[298](index=298&type=chunk) - Brokered deposits (excluding reciprocal CDARS/ICS) were **$2.09 billion, or 26% of total deposits**, at March 31, 2020[350](index=350&type=chunk) [Liquidity and Capital Resources](index=66&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintained strong liquidity and capital ratios, though the share repurchase program was suspended due to market uncertainty Regulatory Capital Ratios as of March 31, 2020 | Ratio | Company Actual | Minimum for Adequacy (incl. buffer) | To Be Well-Capitalized* | | :--- | :--- | :--- | :--- | | CET1 Capital Ratio | 12.14% | 7.00% | 6.5% | | Tier 1 Capital Ratio | 12.14% | 8.50% | 8.0% | | Total Capital Ratio | 15.44% | 10.50% | 10.0% | | Tier 1 Leverage Ratio | 11.33% | 4.00% | 5.0% | *Applies to Bank only - The company **suspended its share repurchase program** due to COVID-19 uncertainty after repurchasing 1,193,052 shares in Q1 2020 at an average price of $37.31[337](index=337&type=chunk)[406](index=406&type=chunk) - The company has elected to adopt the interim final rule providing a **two-year delay followed by a three-year phase-in for the regulatory capital impact of CECL**[413](index=413&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=70&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company manages interest rate risk via its ALCO, with simulations showing moderate sensitivity to rate changes Interest Rate Sensitivity Analysis (Next 12 Months) | Change in Interest Rates (bps) | % Change in Net Interest Income | % Change in Net Income | % Change in Market Value of Portfolio Equity | | :--- | :--- | :--- | :--- | | +200 | +7.2% | +12.7% | +10.6% | | +100 | +2.8% | +4.9% | +6.1% | | -100 | -6.0% | -10.4% | -16.6% | - At March 31, 2020, **61% of the total loan portfolio consisted of variable and adjustable rate loans**, providing some protection in a rising rate environment[373](index=373&type=chunk)[375](index=375&type=chunk) - The cumulative 12-month GAP position was **negative $269 million (3% of total assets)**, a shift from a positive GAP at year-end 2019, indicating a more liability-sensitive stance[392](index=392&type=chunk) [Controls and Procedures](index=70&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls were deemed ineffective as of March 31, 2020, due to a previously identified material weakness - Management concluded that **disclosure controls and procedures were not effective** as of March 31, 2020, due to a previously disclosed material weakness[418](index=418&type=chunk) - **Remediation efforts are ongoing** and include restructuring the Board, hiring a new Chief Legal Officer, enhancing policies for related party transactions, and reinforcing the risk management function[421](index=421&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=72&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in a class action lawsuit and regulatory investigations related to internal controls and other matters - A putative class action lawsuit filed in July 2019 alleges violations of the Securities Exchange Act related to **disclosures about internal controls and related party loans**[426](index=426&type=chunk) - The company has received various subpoenas and document requests from regulators and U.S. Attorney's offices in connection with **investigations into related party transactions** and other matters[427](index=427&type=chunk) [Risk Factors](index=72&type=section&id=Item%201A.%20Risk%20Factors) Key risks include adverse impacts from the COVID-19 pandemic on credit quality, capital, and operational stability - The COVID-19 pandemic is expected to have **significant adverse impacts on loan credit quality**, especially within the Accommodation & Food Service (9.7% of portfolio) and Retail Trade (1.1% of portfolio) industries[428](index=428&type=chunk)[431](index=431&type=chunk) - The **CECL methodology, combined with economic uncertainty** from the pandemic, may lead to increased and more volatile provisions for credit losses[432](index=432&type=chunk) - **Operational risks are heightened** due to remote work arrangements, including increased cybersecurity threats and potential disruptions from third-party service providers[439](index=439&type=chunk)[440](index=440&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=74&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased 1.2 million shares in Q1 2020 before suspending its buyback program due to market uncertainty Issuer Purchases of Equity Securities (Q1 2020) | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | Jan 1-31, 2020 | 219,812 | $44.47 | | Feb 1-29, 2020 | 343,211 | $44.65 | | Mar 1-31, 2020 | 630,029 | $30.93 | | **Total** | **1,193,052** | **$37.31** | [Defaults Upon Senior Securities](index=75&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities were reported during the period - **No defaults upon senior securities** were reported for the period[445](index=445&type=chunk) [Mine Safety Disclosures](index=75&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section is not applicable to the company's operations - This item is **not applicable** to the company[445](index=445&type=chunk) [Other Information](index=75&type=section&id=Item%205.%20Other%20Information) No other material information was required to be disclosed for the period - **No other information** was required to be disclosed under this item[445](index=445&type=chunk) [Exhibits](index=75&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including certifications and various corporate agreements

Eagle Bancorp, Inc. (NASDAQ:EGBN) Q1 2020 Earnings Conference Call April 23, 2020 10:00 AM ET Company Participants Charles Levingston - Executive Vice President and Chief Financial Officer of Eagle Bancorp, Inc. and EagleBank Susan Riel - President and Chief Executive Officer of Eagle Bancorp, Inc., President and Chief Executive Officer of EagleBank Janice Williams - Executive Vice President of Eagle Bancorp, Inc., Senior Executive Vice President and Chief Credit Officer of EagleBank Conference Call Partici ...

Part I [Business](index=4&type=section&id=Item%201.%20Business) Eagle Bancorp, Inc. operates EagleBank, a D.C. metro area community bank focused on commercial real estate lending, subject to extensive regulation - Eagle Bancorp, Inc. is the holding company for **EagleBank**, operating **20 banking offices** across Suburban Maryland, D.C., and Northern Virginia[12](index=12&type=chunk)[13](index=13&type=chunk) - The loan portfolio is heavily concentrated in commercial real estate, with **78%** in CRE loans and **85%** of all loans secured by real estate at year-end 2019[25](index=25&type=chunk)[361](index=361&type=chunk) - The company is subject to extensive regulation by the **Federal Reserve Board** and **Maryland Office of Financial Regulation**, covering capital requirements, lending, and consumer protection[69](index=69&type=chunk)[70](index=70&type=chunk)[77](index=77&type=chunk) Loan Portfolio Composition (December 31, 2019) | Loan Category | Amount (in thousands) | % of Total | | :--- | :--- | :--- | | Commercial | $1,545,906 | 20% | | Income producing - commercial real estate | $3,702,747 | 50% | | Owner occupied - commercial real estate | $985,409 | 13% | | Real estate mortgage - residential | $104,221 | 1% | | Construction - commercial and residential | $1,035,754 | 14% | | Construction - C&I (owner occupied) | $89,490 | 1% | | Home equity & Other consumer | $82,221 | 1% | | **Total Loans** | **$7,545,748** | **100%** | [Risk Factors](index=29&type=section&id=Item%201A.%20Risk%20Factors) The company faces market, operational, and regulatory risks, including stock price volatility, high CRE loan concentration, litigation, and cybersecurity threats - The company's stock price may fluctuate significantly due to factors such as operating results, analyst reports, strategic actions, and general market conditions, with short seller reports previously causing significant declines[133](index=133&type=chunk)[136](index=136&type=chunk) - A substantial portion of the loan portfolio (**85%** at Dec 31, 2019) is secured by real estate, primarily commercial real estate in the Washington, D.C. area, exposing the company to local market risks[175](index=175&type=chunk) - The adoption of the Current Expected Credit Loss (CECL) model, effective January 1, 2020, is expected to materially affect the allowance for credit losses and may create more volatility, with an anticipated one-time **10% to 20%** increase in its reserve upon adoption[152](index=152&type=chunk)[153](index=153&type=chunk) - The company is subject to litigation and regulatory actions, including ongoing investigations by securities and banking regulators and U.S. Attorney's offices, which could result in significant fines or restrictions[184](index=184&type=chunk)[185](index=185&type=chunk) - Operations are increasingly conducted electronically, increasing risks related to cybersecurity, where a breach could result in remediation costs, regulatory penalties, litigation, and reputational damage[210](index=210&type=chunk)[211](index=211&type=chunk)[212](index=212&type=chunk) [Unresolved Staff Comments](index=49&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the Securities and Exchange Commission - None[219](index=219&type=chunk) [Properties](index=50&type=section&id=Item%202.%20Properties) The company operates from 30 leased facilities, including 20 branch offices and corporate centers across Suburban Maryland, Northern Virginia, and D.C - All properties from which the Company operates are leased, including **20 branch offices**, executive offices, commercial lending centers, and residential lending centers as of December 31, 2019[220](index=220&type=chunk)[224](index=224&type=chunk) [Legal Proceedings](index=51&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in a class-action lawsuit and ongoing regulatory investigations concerning internal controls, related-party loans, and former officer conduct - A putative class action lawsuit was filed against the Company in July 2019, alleging violations of the Securities Exchange Act of 1934 related to disclosures about internal controls and related party loans[226](index=226&type=chunk)[227](index=227&type=chunk) - The Company has received document requests and subpoenas from securities and banking regulators and U.S. Attorney's offices, believed to relate to related party transactions, the retirement of former officers/directors, and relationships with a local public official[228](index=228&type=chunk) [Mine Safety Disclosures](index=52&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[229](index=229&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=52&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on Nasdaq (EGBN), initiated a quarterly dividend, and authorized a share repurchase program for up to **1.64 million** shares - The Company's common stock is listed on the **Nasdaq Capital Market** under the symbol "**EGBN**"[231](index=231&type=chunk) - In the second quarter of 2019, the Company began paying a regular quarterly dividend of **$0.22 per share**, totaling **$0.66 per share** for the year[232](index=232&type=chunk) Issuer Repurchases of Common Stock (Q4 2019) | Period | Total Shares Purchased | Average Price Paid Per Share | Shares Purchased as Part of Publicly Announced Program | | :--- | :--- | :--- | :--- | | Oct 2019 | 160,707 | $44.52 | 141,000 | | Nov 2019 | 283,500 | $44.68 | 283,500 | | Dec 2019 | 57,800 | $44.30 | 57,800 | | **Total** | **502,007** | **$44.59** | **482,300** | - On December 18, 2019, the Board extended and expanded the stock repurchase program, authorizing the purchase of up to **1,641,000 shares** through December 31, 2020[240](index=240&type=chunk) [Selected Financial Data](index=56&type=section&id=Item%206.%20Selected%20Financial%20Data) This section presents a five-year summary of key consolidated financial data, including balance sheet, income statement, per-share metrics, and performance ratios Selected Financial Data (2015-2019) | (in thousands) | 2019 | 2018 | 2017 | 2016 | 2015 | | :--- | :--- | :--- | :--- | :--- | :--- | | Total Assets | $8,988,719 | $8,389,137 | $7,479,029 | $6,890,096 | $6,075,577 | | Loans | $7,545,748 | $6,991,447 | $6,411,528 | $5,677,893 | $4,998,368 | | Deposits | $7,224,391 | $6,974,285 | $5,853,984 | $5,716,114 | $5,158,444 | | Total Shareholders' Equity | $1,190,681 | $1,108,941 | $950,438 | $842,799 | $738,601 | | Net Income | $142,943 | $152,276 | $100,232 | $97,707 | $84,167 | Selected Performance Ratios (2015-2019) | Ratio | 2019 | 2018 | 2017 | 2016 | 2015 | | :--- | :--- | :--- | :--- | :--- | :--- | | Net Interest Margin | 3.77% | 4.10% | 4.15% | 4.16% | 4.33% | | Efficiency Ratio | 39.99% | 37.31% | 37.84% | 40.29% | 42.49% | | Return on Average Assets | 1.61% | 1.91% | 1.41% | 1.52% | 1.49% | | Return on Average Common Equity | 12.20% | 14.89% | 11.06% | 12.27% | 12.32% | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=60&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Net income decreased **6%** to **$142.9 million** in 2019 due to margin compression and higher expenses, despite **7%** asset growth to **$8.99 billion** and strong capital - Net income for 2019 was **$142.9 million** (**$4.18** per diluted share), a **6%** decrease from **$152.3 million** (**$4.42** per diluted share) in 2018[293](index=293&type=chunk)[296](index=296&type=chunk) - The net interest margin decreased by **33 basis points** to **3.77%** in 2019 from **4.10%** in 2018, driven by a **43 basis point** decrease in the net interest spread as the cost of interest-bearing liabilities increased[299](index=299&type=chunk)[300](index=300&type=chunk)[301](index=301&type=chunk) - Noninterest expense increased **10%** to **$139.9 million** in 2019, primarily due to **$8.2 million** in nonrecurring charges for accelerated share-based compensation related to executive retirements and a **25%** increase in legal and professional fees associated with government investigations[306](index=306&type=chunk)[336](index=336&type=chunk)[339](index=339&type=chunk) - Total assets grew **7%** to **$8.99 billion** at year-end 2019, while total loans increased **8%** to **$7.55 billion**, and the company's capital ratios remained well above regulatory requirements for "well capitalized" status[344](index=344&type=chunk)[346](index=346&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=110&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company manages interest rate risk through ALCO, showing moderate asset sensitivity with a projected **5.1%** net interest income increase from a **100 bps** rate hike - The company's **Asset Liability Committee (ALCO)** monitors and manages interest rate risk through established policies and regular reviews[485](index=485&type=chunk) Interest Rate Sensitivity Analysis (as of Dec 31, 2019) | Change in Interest Rates (bps) | % Change in Net Interest Income (12 mo.) | % Change in Net Income (12 mo.) | | :--- | :--- | :--- | | +400 | +20.9% | +36.2% | | +200 | +10.4% | +18.0% | | +100 | +5.1% | +8.8% | | (100) | -3.2% | -5.6% | | (200) | -7.7% | -13.3% | - At December 31, 2019, the company had a **positive cumulative GAP position of $243 million** (**3% of total assets**) within 12 months, indicating that more assets than liabilities would reprice in a rising rate environment over that period[510](index=510&type=chunk) [Financial Statements and Supplementary Data](index=118&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section contains audited 2019 financial statements, with an unqualified auditor opinion on financials but an adverse opinion on internal controls due to a material weakness - The independent auditor, **Dixon Hughes Goodman LLP**, issued an **unqualified opinion** on the consolidated financial statements, stating they present fairly, in all material respects, the financial position of the Company[521](index=521&type=chunk) - The auditor issued an **adverse opinion** on the Company's internal control over financial reporting as of December 31, 2019, due to a **material weakness** related to "**tone at the top**" issues that contributed to a control environment insufficiently tailored to the culture of deference afforded to the former CEO[543](index=543&type=chunk)[859](index=859&type=chunk) Consolidated Balance Sheet Highlights (in thousands) | | Dec 31, 2019 | Dec 31, 2018 | | :--- | :--- | :--- | | **Assets** | | | | Total Loans, net | $7,472,090 | $6,921,503 | | Total Assets | $8,988,719 | $8,389,137 | | **Liabilities & Equity** | | | | Total Deposits | $7,224,391 | $6,974,285 | | Total Liabilities | $7,798,038 | $7,280,196 | | Total Shareholders' Equity | $1,190,681 | $1,108,941 | Consolidated Statement of Operations Highlights (in thousands) | | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | Net Interest Income | $324,045 | $316,993 | $283,887 | | Provision for Credit Losses | $13,091 | $8,660 | $8,971 | | Noninterest Income | $25,699 | $22,586 | $29,372 | | Noninterest Expense | $139,862 | $126,711 | $118,552 | | **Net Income** | **$142,943** | **$152,276** | **$100,232** | [Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=196&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on accounting and financial disclosures - None[851](index=851&type=chunk) [Controls and Procedures](index=196&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded disclosure controls were ineffective due to a material weakness from "tone at the top" issues related to the former CEO, impacting related-party loan and vendor contract reviews, with remediation efforts ongoing - Management concluded that due to a **material weakness** in internal control over financial reporting, the Company's **disclosure controls and procedures were not effective** as of December 31, 2019[852](index=852&type=chunk) - The **material weakness** stemmed from "**tone at the top**" issues contributing to a control environment insufficiently tailored to the culture of deference for the former Chairman, President and CEO, manifesting in deficiencies related to communication, review of related party loans, and review of vendor contracts[859](index=859&type=chunk) - Remediation efforts undertaken in 2019 include splitting the **Chairman and CEO roles**, restructuring the Board, hiring a new **Chief Legal Officer**, formalizing the ethics program, and enhancing policies for related party transactions and vendor contracts[863](index=863&type=chunk) [Other Information](index=199&type=section&id=Item%209B.%20Other%20Information) The company reports no other information for this item - None[866](index=866&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=199&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the company's 2020 definitive proxy statement - The information required by this item is incorporated by reference from the Company's definitive Proxy Statement for the Annual Meeting of Shareholders to be held on May 21, 2020[868](index=868&type=chunk) [Executive Compensation](index=199&type=section&id=Item%2011.%20Executive%20Compensation) Executive compensation details, including director compensation, are incorporated by reference from the company's 2020 definitive proxy statement - The information required by this item is incorporated by reference from the Company's definitive Proxy Statement[869](index=869&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=199&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) This section provides information on securities authorized for issuance under equity compensation plans, with further details incorporated from the 2020 proxy statement Equity Compensation Plan Information (as of Dec 31, 2019) | Plan Category | Securities to be Issued Upon Exercise (a) | Weighted-Average Exercise Price (b) | Securities Available for Future Issuance (c) | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by security holders | 6,589 | $19.99 | 1,059,207 | | Equity compensation plans not approved by security holders | 0 | $0 | 0 | | **Total** | **6,589** | **$19.99** | **1,059,207** | [Certain Relationships and Related Transactions, and Director Independence](index=200&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on related party transactions and director independence is incorporated by reference from the company's 2020 definitive proxy statement - The information required by this item is incorporated by reference from the Company's definitive Proxy Statement[875](index=875&type=chunk) [Principal Accountant Fees and Services](index=200&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Details on principal accountant fees and services are incorporated by reference from the company's 2020 definitive proxy statement - The information required by this item is incorporated by reference from the Company's definitive Proxy Statement[876](index=876&type=chunk) Part IV [Exhibits, Financial Statement Schedules](index=200&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists all financial statements, schedules, and exhibits filed as part of the Form 10-K report, including key corporate documents and SEC certifications - This section lists all financial statements and exhibits filed with the annual report, with all financial statement schedules omitted as the required information is either inapplicable or included elsewhere in the report[877](index=877&type=chunk)

Eagle Bancorp, Inc. (NASDAQ:EGBN) Q4 2019 Earnings Conference Call January 16, 2020 10:00 AM ET Company Participants Charles Levingston - CFO Susan Riel - President & CEO Jan Williams - CCO Conference Call Participants Casey Whitman - Piper Sandler Joe Gladue - Alden Securities Catherine Mealor - KBW Brody Preston - Stephens, Inc. Christopher Marinac - Janney Montgomery Scott Steve Comery - G. Research Erik Zwick – Boenning & Scattergood Operator Ladies and gentlemen, thank you for standing by, and welcome ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended September 30, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | --- | --- | |--------------------------------------------------------------------------------------------|-----------------------------------------------------| | | | | For the transiti ...

Eagle Bancorp, Inc. (NASDAQ:EGBN) Q3 2019 Earnings Conference Call October 17, 2019 10:00 AM ET Company Participants Charles Levingston - CFO Norman Pozez - Chairman Susan Riel - President & CEO Jan Williams - Chief Credit Officer Conference Call Participants Catherine Mealor - KBW Casey Whitman - Sandler O'Neill Christopher Marinac - Janney Montgomery Steven Comery - G. Research Erik Zwick - Boenning & Scattergood Operator Ladies and gentlemen, thank you for standing by and welcome to The Eagle Bancorp Inc ...