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Eagle Bancorp, Inc. Announces Another Quarter of Record Earnings With Second Quarter 2018 Net Income up 34% Over 2017

BETHESDA, Md., July 18, 2018 (GLOBE NEWSWIRE) — Eagle Bancorp, Inc. (the “Company”) (NASDAQ:EGBN), the parent company of EagleBank, today announced record quarterly net income of $37.3 million for the three months ended June 30, 2018, a 34% increase over the $27.8 million net income for the three months ended June 30, 2017. Net income per basic common share for the three months ended June 30, 2018 was $1.09 compared to $0.81 for the same period in 2017, a 35% increase. Net income per diluted common share for the three months ended June 30, 2018 was $1.08 compared to $0.81 for the same period in 2017, a 33% increase. 

Eagle Bancorp, Inc. Logo

For the six months ended June 30, 2018, the Company’s net income was $73.0 million, a 33% increase over the $54.8 million of net income for the same period in 2017. Net income per basic common share for the six months ended June 30, 2018 was $2.13 compared to $1.61 for the same period in 2017, a 32% increase. Net income per diluted common share for the six months ended June 30, 2018 was $2.12 compared to $1.60 for the same period in 2017, a 32% increase.

“We are very pleased to report another quarter of favorable earnings, which continued to exhibit positive trends of balance sheet growth, revenue growth, solid asset quality and favorable operating leverage,” noted Ronald D. Paul, Chairman and Chief Executive Officer of Eagle Bancorp, Inc. Mr. Paul continued, “The Company’s assets ended the quarter at $7.88 billion, representing 9% growth over the second quarter of 2017 and total shareholders’ equity exceeded $1.00 billion for the first time.  Second quarter 2018 earnings resulted in a return on average assets of 1.92%, return on average common equity (“ROACE”) of 14.93% and a return on average tangible common equity (“ROATCE”) of 16.71%.” Mr. Paul added “Our financial results in the second quarter continue to exhibit balanced and consistent performance.”

While the lower effective tax rate of 25.1% for the second quarter of 2018 resulting from the Tax Act signed in December 2017 contributed to higher net earnings, on a pre-tax basis, second quarter earnings in 2018 increased 10% over the second quarter in 2017 and increased 4% over the first quarter of 2018. 

The Company’s performance in the second quarter of 2018 as compared to the second quarter of 2017 was highlighted by 11% growth in both average total loans and average total deposits, by a relatively stable net interest margin of 4.15% as compared to 4.16% and by 9% growth in total revenue to $83.8 million. Mr. Paul noted that the Company continues to focus more on growth of average balances year over year and quarter over quarter since that measure relates more directly to income statement results. Comparing average balances in the second quarter of 2018 versus the first quarter of 2018, average loan growth was 2% and average deposit growth was 3%.

Mr. Paul added, “In the second quarter of 2018, period end total loans growth was a modest 1% over March 31, 2018, while total deposits increased 2% over March 31, 2018. New loans settled in the second quarter of 2018 were similar to the first quarter of 2018, which had a 3% growth rate, however, substantial loan payoffs and delays in new loan fundings occurred in the second quarter which restrained net loan growth. The total of unfunded loan commitments remains stable over the last six quarters at approximately $2.4 billion. The Company continues to emphasize strategies focusing on achieving core deposit growth. Significantly, the mix of noninterest deposits to total deposits averaged 33% in the second quarter of 2018 as compared to 32% in the second quarter of 2017. Since spread earnings are the key element of our revenue, we remain focused on our net interest margin, which has been stable as market rates and related deposit rates have continued to increase.”  

The net interest margin was 4.15% for the second quarter of 2018, down one basis point from the second quarter of 2017 and down two basis points from the first quarter of 2018. Mr. Paul noted, “While we are seeing a higher cost of funds, we are also experiencing higher loan yields, in part due to rate adjustments in our predominately variable and adjustable rate loan portfolio.” The Company’s net interest income increased 12% in the second quarter of 2018 over 2017 as the Company has continued its emphasis on disciplined pricing for both new loans and funding sources. The Company believes that it has a superior net interest margin compared to peers, but it is also focused on all factors that contribute to Earnings Per Share (“EPS”) growth.

For the first six months of 2018, total loans grew 4% over December 31, 2017, and averaged 12% higher for the first six months of 2018 as compared to the first six months of 2017. At June 30, 2018, total deposits were 7% higher than deposits at December 31, 2017, and averaged 10% higher for the first six months of 2018 compared with the first six months of 2017.

Total revenue (net interest income plus noninterest income) for the second quarter of 2018 was $83.8 million, or 9% above the $76.7 million of total revenue earned for the second quarter of 2017 and was 3% higher than the $81.1 million of revenue earned in the first quarter of 2018. For the six month periods ended June 30, total revenue was $164.9 million for 2018, as compared to $149.7 million in 2017, a 10% increase.  

The primary driver of the Company’s revenue growth for the second quarter of 2018 as compared to the second quarter of 2017 was its net interest income growth of 12% ($78.2 million versus $69.7 million). Noninterest income (excluding investment gains) declined by 21% in the second quarter 2018 over 2017 ($5.5 million versus $7.0 million), due substantially to lesser sales of Small Business Administration (“SBA”) and residential mortgage loans and the resulting gains on the sale of these loans, and by lower revenue associated with the origination, securitization, servicing and sale of FHA Multifamily-Backed Government National Mortgage Association (“GNMA”) securities. Mr. Paul added that “while these business lines do exhibit variations in revenue from quarter to quarter all three business units above are important to our long term continued success.”  

Asset quality measures remained solid at June 30, 2018. Net charge-offs (annualized) were 0.05% of average loans for the second quarter of 2018, as compared to 0.02% of average loans for the second quarter of 2017. At June 30, 2018, the Company’s nonperforming loans amounted to $10.9 million (0.16% of total loans) as compared to $17.1 million (0.29% of total loans) at June 30, 2017 and $13.2 million (0.21% of total loans) at December 31, 2017. Nonperforming assets amounted to $12.3 million (0.16% of total assets) at June 30, 2018 compared to $18.5 million (0.26% of total assets) at June 30, 2017 and $14.6 million (0.20% of total assets) at December 31, 2017.

Management continues to remain attentive to any signs of deterioration in borrowers’ financial conditions and is proactive in taking the appropriate steps to mitigate risk. Furthermore, the Company is diligent in placing loans on nonaccrual status and believes, based on its loan portfolio risk analysis, that its allowance for credit losses, at 1.00% of total loans (excluding loans held for sale) at June 30, 2018, is adequate to absorb potential credit losses within the loan portfolio at that date. The allowance for credit losses was 1.02% at June 30, 2017 and 1.01% of total loans at December 31, 2017. The allowance at June 30, 2018 for credit losses represented 612% of nonperforming loans, as compared to 356% at June 30, 2017 and 489% at December 31, 2017.

“The Company’s productivity continued to be very favorable in the second quarter,” noted Mr. Paul. The efficiency ratio of 38.55% reflects management’s ongoing efforts to maintain superior operating leverage. The annualized level of noninterest expenses as a percentage of average assets has declined to 1.66% in the second quarter of 2018 as compared to 1.72% in the second quarter of 2017. A stable staff, capacity utilization, branch rationalization, a low level of problem assets, and leveraging of other fixed costs have been the major reasons for improved operating leverage. The Company continues to make investments in its infrastructure including IT systems and resources and online client services. Our goal is to improve operating performance without inhibiting growth or negatively impacting our ability to service our customers. Mr. Paul further noted, “We will continue to maintain strict oversight of expenses, while retaining an infrastructure to remain competitive, support our growth initiatives, manage risk, and proactively enhance our risk management systems as we continue to grow.”

Total assets at June 30, 2018 were $7.88 billion, a 9% increase as compared to $7.24 billion at June 30, 2017, and a 5% increase as compared to $7.48 billion at December 31, 2017. Total loans (excluding loans held for sale) were $6.65 billion at June 30, 2018, an 11% increase as compared to $5.99 billion at June 30, 2017, and a 4% increase as compared to $6.41 billion at December 31, 2017. Loans held for sale amounted to $30.5 million at June 30, 2018 as compared to $49.3 million at June 30, 2017, a 38% decrease, and $25.1 million at December 31, 2017, a 22% increase. The investment portfolio totaled $656.9 million at June 30, 2018, a 32% increase from the $497.7 million balance at June 30, 2017. As compared to December 31, 2017, the investment portfolio at June 30, 2018 increased by $67.6 million or 12%.

Total deposits at June 30, 2018 were $6.27 billion, compared to deposits of $5.87 billion at June 30, 2017, a 7% increase, and deposits of $5.85 billion at December 31, 2017, a 7% increase. Total borrowed funds (excluding customer repurchase agreements) were $517.1 million at June 30, 2018, $361.7 million at June 30, 2017 and $541.9 million at December 31, 2017. We continue to work on expanding the breadth and depth of our existing relationships while we pursue building new relationships.

Total shareholders’ equity at June 30, 2018 increased 13%, to $1.02 billion, compared to $902.7 million at June 30, 2017, and increased 8%, from $950.4 million at December 31, 2017. The Company’s capital position remains substantially in excess of regulatory requirements for well capitalized status, with a total risk based capital ratio of 15.59% at June 30, 2018, as compared to 15.13% at June 30, 2017, and 15.02% at December 31, 2017. In addition, the tangible common equity ratio was 11.79% at June 30, 2018, compared to 11.15% at June 30, 2017 and 11.44% at December 31, 2017.

Analysis of the three months ended June 30, 2018 compared to June 30, 2017

For the three months ended June 30, 2018, the Company reported an annualized ROAA of 1.92% as compared to 1.60% for the three months ended June 30, 2017. The annualized ROACE for the three months ended June 30, 2018 was 14.93% as compared to 12.51% for the three months ended June 30, 2017. The annualized ROATCE for the three months ended June 30, 2018 was 16.71% as compared to 14.22% for the three months ended June 30, 2017.

Net interest income increased 12% for the three months ended June 30, 2018 over the same period in 2017 ($78.2 million versus $69.7 million), resulting from growth in average earning assets of 12%. The net interest margin was 4.15% for the three months ended June 30, 2018, as compared to 4.16% for the three months ended June 30, 2017. The Company believes its current net interest margin remains favorable compared to peer banking companies and that its disciplined approach to managing the loan portfolio yield to 5.53% for the second quarter of 2018 (as compared to 5.14% for the same period in 2017) has been a significant factor in its overall profitability.

The provision for credit losses was $1.7 million for the three months ended June 30, 2018 as compared to $1.6 million for the three months ended June 30, 2017. Net charge-offs of $848 thousand in the second quarter of 2018 represented an annualized 0.05% of average loans, excluding loans held for sale, as compared to $367 thousand, or an annualized 0.02% of average loans, excluding loans held for sale, in the second quarter of 2017. Net charge-offs in the second quarter of 2018 were attributable primarily to commercial real estate loans ($479 thousand) and commercial loans ($385 thousand).

Noninterest income for the three months ended June 30, 2018 decreased to $5.6 million from $7.0 million for the three months ended June 30, 2017, a 21% decrease, due substantially to lower gains on the sale of residential mortgage loans ($1.7 million versus $2.5 million) resulting from lower volume as compared to 2017, and minimal revenue associated with the origination, securitization, servicing, and sale of FHA Multifamily-Backed GNMA securities as compared to $752 thousand during the second quarter of 2017. Residential mortgage loans closed were $126 million for the second quarter of 2018 versus $188 million for the second quarter of 2017.

The efficiency ratio, which measures the ratio of noninterest expense to total revenue, was 38.55% for the second quarter of 2018, as compared to 39.10% for the second quarter of 2017. Noninterest expenses totaled $32.3 million for the three months ended June 30, 2018, as compared to $30.0 million for the three months ended June 30, 2017, an 8% increase. Cost increases for salaries and benefits were $943 thousand, due primarily to merit increases and benefit costs. Data processing expense increased by $407 thousand due primarily to the costs of software and infrastructure investments. Legal, accounting and professional fees increased $882 thousand due to due diligence from independent consultants associated with the internet event late in 2017 and efforts to enhance our risk management systems.

Analysis of the six months ended June 30, 2018 compared to June 30, 2017

For the six months ended June 30, 2018, the Company reported an annualized ROAA of 1.91% as compared to 1.61% for the six months ended June 30, 2017. The annualized ROACE for the six months ended June 30, 2018 was 14.96% as compared to 12.62% for the six months ended June 30, 2017. The annualized ROATCE for the six months ended June 30, 2018 was 16.78% as compared to 14.38% for the six months ended June 30, 2017.

Net interest income increased 13% for the six months ended June 30, 2018 over the same period in 2017 ($154.0 million versus $136.6 million), resulting from growth in average earning assets of 13%. The net interest margin was 4.16% for both the six months ended June 30, 2018 and 2017. The Company believes its current net interest margin remains favorable compared to peer banking companies and that its disciplined approach to managing the loan portfolio yield to 5.42% for the first six months of 2018 (as compared to 5.15% for the same period in 2017) has been a significant factor in its overall profitability.

The provision for credit losses was $3.6 million for the six months ended June 30, 2018 as compared to $3.0 million for the six months ended June 30, 2017. The higher provisioning for the six months ended June 30, 2018, as compared to the same period in 2017, is due primarily to higher net charge-offs. Net charge-offs of $1.8 million for the six months ended June 30, 2018 represented an annualized 0.05% of average loans, excluding loans held for sale, as compared to $989 thousand, or an annualized 0.03% of average loans, excluding loans held for sale, in the first six months of 2017. Net charge-offs in the first six months of 2018 were attributable primarily to commercial loans ($1.4 million) and commercial real estate loans ($540 thousand) offset by a net recovery in consumer loans ($135 thousand).

Noninterest income for the six months ended June 30, 2018 decreased to $10.9 million from $13.1 million for the six months ended June 30, 2017, a 17% decrease, due substantially to lower gains on the sale of residential mortgage loans ($2.9 million versus $4.3 million) resulting from lower volume as compared to 2017, and minimal revenue associated with the origination, securitization, servicing, and sale of FHA Multifamily-Backed GNMA securities for the six months ended June 30, 2018 versus $752 thousand for the same period in 2017. Residential mortgage loans closed were $226 million for the six months ended June 30, 2018 versus $338 million for the same period in 2017.

Noninterest expenses totaled $63.4 million for the six months ended June 30, 2018, as compared to $59.2 million for the six months ended June 30, 2017, a 7% increase. Cost increases for salaries and benefits for the six months ended June 30, 2018 were $1.1 million, due primarily to merit increases and benefit costs. Data processing expense increased by $683 thousand due primarily to the costs of software and infrastructure investments. Legal, accounting and professional fees increased $2.9 million due to due diligence from independent consultants associated with the internet event late in 2017 and efforts to enhance our risk management systems. Other expenses decreased $1.1 million, due primarily to a net loss on the sale of OREO in the first quarter of 2017 ($361 thousand) and lower costs to maintain OREO properties ($276 thousand). For the first six months of 2018, the efficiency ratio was 38.47% as compared to 39.57% for the same period in 2017.

The financial information which follows provides more detail on the Company’s financial performance for the three and six months ended June 30, 2018 as compared to the three and six months ended June 30, 2017 as well as providing eight quarters of trend data. Persons wishing additional information should refer to the Company’s Form 10-K for the year ended December 31, 2017 and other reports filed with the Securities and Exchange Commission (the “SEC”).

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

Conference Call: Eagle Bancorp will host a conference call to discuss its second quarter 2018 financial results on Thursday, July 19, 2018 at 10:00 a.m. eastern daylight time. The public is invited to listen to this conference call by dialing 1.877.303.6220, conference ID Code is 5875946, or by accessing the call on the Company’s website, www.EagleBankCorp.com. A replay of the conference call will be available on the Company’s website through August 2, 2018.

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

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Eagle Bancorp, Inc.              
Consolidated Financial Highlights (Unaudited)              
(dollars in thousands, except per share data)      
  Three Months Ended June 30,   Six Months Ended June 30,
    2018       2017       2018       2017  
Income Statements:              
Total interest income $ 96,296     $ 79,344     $ 185,345     $ 155,138  
Total interest expense   18,086       9,646       31,355       18,546  
Net interest income   78,210       69,698       153,990       136,592  
Provision for credit losses   1,650       1,566       3,619       2,963  
Net interest income after provision for credit losses   76,560       68,132       150,371       133,629  
Noninterest income (before investment gains)   5,526       6,997       10,788       12,562  
Gain on sale of investment securities   26       26       68       531  
Total noninterest income   5,552       7,023       10,856       13,093  
Total noninterest expense   32,289       30,001       63,410       59,233  
Income before income tax expense   49,823       45,154       97,817       87,489  
Income tax expense   12,528       17,382       24,807       32,700  
Net income $ 37,295     $ 27,772     $ 73,010     $ 54,789  
               
Per Share Data:              
Earnings per weighted average common share, basic $ 1.09     $ 0.81     $ 2.13     $ 1.61  
Earnings per weighted average common share, diluted $ 1.08     $ 0.81     $ 2.12     $ 1.60  
Weighted average common shares outstanding, basic   34,305,693       34,128,598       34,283,412       34,099,228  
Weighted average common shares outstanding, diluted   34,448,354       34,324,120       34,427,613       34,304,285  
Actual shares outstanding at period end   34,305,071       34,169,924       34,305,071       34,169,924  
Book value per common share at period end $ 29.82     $ 26.42     $ 29.82     $ 26.42  
Tangible book value per common share at period end (1) $ 26.71     $ 23.28     $ 26.71     $ 23.28  
               
Performance Ratios (annualized):              
Return on average assets   1.92%       1.60%       1.91%       1.61%  
Return on average common equity   14.93%       12.51%       14.96%       12.62%  
Return on average tangible common equity   16.71%       14.22%       16.78%       14.38%  
Net interest margin   4.15%       4.16%       4.16%       4.16%  
Efficiency ratio (2)   38.55%       39.10%       38.47%       39.57%