Eagle Bancorp
Annual Report 2020

Plain-text annual report

2020 Report to Shareholders To Our Shareholders On behalf of the Board of Directors of Eagle Bancorp, we are pleased to present our 2020 financial results and highlight a few of our achievements during such a challenging year. As we drafted last year’s shareholder letter, the pandemic was about two months old, and we faced a mountain of unknown challenges. A deadly pandemic would soon spread across the globe, civil unrest would grip the nation, and America’s democracy would be put to the test. It was a year like no other. Today, while there are still challenges to overcome, we see a light at the end of the tunnel and look forward to the reopening of the economy and the prospects for renewed growth. Prior to sharing our financial results, we want to express how proud we are of the Eagle team. This has been an unprecedented year. The global pandemic has impacted all of us in profound ways. But we’ve seen such great resiliency in our team members. It was our Eagle team that found new ways to serve our clients and community safely. Our “frontline” workers continued to open the Bank’s branches with enhanced safety precautions and new protocols, while others worked remotely via wall-to-wall video calls. Various team members assisted customers whose businesses were impacted, staying late into the night to complete Payroll Protection Program (PPP) loan applications. Others worked behind the scenes to make sure operations ran smoothly. It was truly a team effort. For our clients, we actively participated in the SBA’s Payroll Protection Program, originating loans to over 1,400 small businesses. By year-end 2020, we had PPP loans outstanding of $455 million. In the first quarter of 2021, we focused on helping our clients through another round of applications, and will continue to work with clients on the forgiveness process. It is through these efforts that our 2020 results were remarkable. Our assets soared, the mortgage division drove second-half earnings to record levels, we completed one stock repurchase plan and announced another. We also maintained a high level of capitalization, continued to build tangible book value, increased reserves, and preserved credit quality. At the end of 2020, Eagle’s assets were $11.1 billion, up $2.1 billion for the year. The increase was largely led by strong deposit inflows from our corporate clients. While these deposits reduced net interest margin, our net interest income declined only slightly. It is our belief that continuing to serve our many long-term clients for their deposit needs is of primary importance. For the year, Eagle’s earnings were $132 million, or $4.09 per diluted share. While earnings were down from 2019, earnings in the second half of 2020 were strong at $80.2 million, or $2.49 per share. Our mortgage division had a gain on sales of loans of $21.8 million for the year, with most gains occurring in the second half of 2020. Additionally, we returned almost $90 million to our shareholders in the form of stock repurchases and dividends. For the year, we repurchased stock valued at $61.4 million, completing our 2019 stock repurchase plan, and declared dividends of $28.3 million, which was $0.88 per share. In late December, we authorized a new stock repurchase plan for 2021 for up to 5% of outstanding shares, or approximately 1.6 million shares. Eagle’s strong capital position and credit quality are just a few of the factors that support authorizing a new stock repurchase plan. As of December 31, 2020, Tier 1 capital was 10.31%, common equity tier 1 capital was 13.49%, and total capital (to risk-weighted assets) was 17.04%. Net charge-offs to average loans were 0.26% and the allowance for credit losses to loans was 1.41%. Our capital position was bolstered by strong earnings. For the year, returns on average assets and average tangible common equity were 1.28% and 12.03%, respectively. These earnings helped us to continue building book and tangible book value throughout the year. At year-end, book value was $39.05 per share, up 9.0% from the prior year-end, and tangible book value was $35.74 per share, up 9.4%. We also continued to show discipline on costs and boast an efficiency ratio superior to our peers. For the year, the efficiency ratio was 39.3%, slightly better than the 40.0% in the prior year. In 2021, as part of our continued effort to reduce expenses, we relocated two branches with expiring higher cost leases to nearby locations and have consolidated two back-office locations into a single location. As we continue to grow, we have also brought on more talent. In 2020, we added Jeff Curry as Chief Risk Officer and Paul Saltzman as Chief Legal Officer to our executive team. And in January 2021, we added two new directors: Ernest Jarvis, who has expertise in commercial real estate, and Steven Freidkin, who has expertise in information technology. In 2021, we will continue our focus on diversity and inclusion. At the board level, we have a diverse group that includes four women and two men who identify as minorities. In 2020, we formed a Diversity and Inclusion (D&I) Council to identify areas of opportunity and programs to support these efforts. The D&I Council comprises a group of 16 employees from across the company. Near the end of 2020, we also conducted an anonymous employee engagement survey on culture, management, career opportunities, compensation, and benefits. The results of the survey will help us set goals and create incentives to improve Eagle’s work environment and team member satisfaction. These initiatives are extremely important to the continued success of the Bank and have the full support of both the senior staff and the Board. In a year of turmoil, the Eagle team has remained strong because we continue to put relationships FIRST. As you may know, FIRST is an acronym: Flexible. Involved. Responsive. Strong. Trusted. These are our shared values. They make up who we are and serve as our North Star. They have successfully guided the Bank through the challenges of the past year and shine the way for better days ahead. We want to thank the entire Eagle team for their incredible commitment, perseverance, and dedication to our customers. We also want to thank all our shareholders for their continued support and trust. We remain forever grateful. Sincerely, Norman R. Pozez Executive Chairman of the Board Susan G. Riel President and Chief Executive Officer 2 3 Eagle Bancorp, Inc. 2020 Report to ShareholdersSIX-YEAR SUMMARY OF SELECTED FINANCIAL DATA Dollars in millions, except per share data ASSETS & TANGIBLE BOOK VALUE COMMON EQUITY & CAPITAL RATIOS Assets 1 Tangible Book Value Per Share Common Equity CET1 Capital Total Capital (to RWA) Return on average assets E Net income C N A M R O F R E P Net interest margin Efficiency ratio1 Return on average tangible equity N O M M O C R E P Cash dividends A Diluted earnings T A D E R A H S Tangible book value per share2 Common shares outstanding (in millions) Assets Loans Allowance for loan losses Deposits Shareholders’ equity Tangible common equity3 Net charge-offs to average loans Nonperforming assets to assets Allowance for credit losses to loans CET1 capital (to risk weighted assets) Total capital (to risk weighted assets) Tier 1 capital (to average assets) Tangible common equity ratio Book value per share Less: Intangible book value Tangible book value per share2 Shareholders’ equity Less: Intangible assets, net Tangible common equity3 Assets Less: Intangible assets Tangible Assets A T A D T E E H S E C N A L A B T E S S A Y T I L A U Q L A T I P A C N O I T A I L I C N O C E R P A A G N O N - ’20 $ 132.2 1.28% 12.03% 3.19% 39.3% FOR THE YEAR OR YEAR ENDED DECEMBER 31 ’16 97.7 ’19 $ 142.9 ’18 $ 152.3 ’17 $ 100.2 $ 1.61% 13.40% 3.77% 40.0% 1.91% 16.63% 4.10% 37.3% 1.41% 12.54% 4.15% 37.8% 1.52% 14.19% 4.16% 40.3% ’15 $ 84.2 1.49% 14.69% 4.33% 42.5% $ 4.09 $ 4.18 $ 4.42 $ 2.92 $ 2.86 $ 2.50 $ 0.88 $ 0.66 - - - - $ 35.74 $ 32.67 $ 29.17 $ 24.67 $ 21.61 $ 18.83 31.8 33.2 34.4 34.2 34.0 33.5 $ 11,118 $ 8,989 $ 8,389 $ 7,479 $ 6,890 $ 6,076 7,760 110 9,189 1,241 1,136 0.26% 0.59% 1.41% 13.49% 17.04% 10.31% 10.31% 7,546 74 7,224 1,191 1,086 0.13% 0.56% 0.98% 12.87% 16.20% 11.62% 12.22% 6,991 70 6,974 1,109 1,003 0.05% 0.21% 1.00% 12.49% 16.08% 12.10% 12.11% 6,412 65 5,854 950 843 0.06% 0.20% 1.01% 11.23% 15.02% 11.45% 11.44% 5,678 59 5,716 843 735 0.09% 0.30% 1.04% 10.80% 14.89% 10.72% 10.84% 4,998 53 5,158 739 630 0.17% 0.31% 1.05% 10.68% 12.75% 10.90% 10.56% $ 39.05 $ 35.82 $ 32.25 $ 27.80 $ 24.77 $ 22.07 3.31 3.15 3.08 3.13 3.16 3.24 $ 35.74 $ 32.67 $ 29.17 $ 24.67 $ 21.61 $ 18.83 $ 1,241 $ 1,191 $ 1,109 $ 950 $ 843 $ 739 105 105 106 107 107 109 $ 1,136 $ 1,086 $ 1,003 $ 843 $ 735 $ 630 $ 11,118 $ 8,989 $ 8,389 $ 7,479 $ 6,890 $ 6,076 105 105 106 107 107 109 $ 11,013 $ 8,884 $ 8,283 $ 7,372 $ 6,783 $ 5,967 Average common shareholders’ equity $ 1,204 $ 1,172 $ 1,023 $ 906 $ 796 $ 678 Less: Average intangible assets Average tangible common equity 105 105 107 107 107 109 $ 1,099 $ 1,067 $ 916 $ 799 $ 689 $ 569 $12,000 $10,000 ) I S N O L L M N I I ( S T E S S A $8,000 $6,000 $4,000 $2,000 $0 $60 $50 $40 $30 $20 $10 $0 E R A H S R E P E U L A V K O O B E L B G N A T I ) I S N O L L M N I I ( I Y T U Q E N O M M O C $1,200 $1,000 $800 $600 $400 $200 $0 2015 2016 2017 2018 2019 2020 2015 2016 2017 2018 2019 2020 NET INCOME & EPS (DILUTED) LOANS & ASSET QUALITY Net Income Earnings Per Share (Diluted) $200 $150 $100 $50 $0 ) D E T U L D I ( E R A H S R E P S G N N R A E I $7 $6 $5 $4 $3 $2 $1 $0 ) I S N O L L M N I I ( E M O C N I T E N Non-Performing Assets to Total Assets Net Charge-offs to Average Loans Total Loans $8,000 $6,000 ) I S N O L L M N I $4,000 $2,000 I ( S N A O L L A T O T $0 20% 15% 10% 5% 0% 4% 3% 2% 1% 0% I O T A R L A T P A C I I Y T L A U Q T E S S A 2015 2016 2017 2018 2019 2020 2015 2016 2017 2018 2019 2020 TOTAL SHAREHOLDER RETURN PERFORMANCE COMPOUNDED ANNUAL GROWTH RATE 12/31/10 to 12/31/20 12/31/10 to 3/12/21 Eagle Bancorp, Inc. 12.6% 15.9% NASDAQ Composite Index 18.5% 18.5% S&P 500 Index 13.9% 14.2% KBW NASDAQ Regional Banking Index 8.5% 12.0% 1 Efficiency ratio, a non-GAAP financial measure, is computed by dividing noninterest expense by the sum of net interest income and noninterest income. 2 Tangible book value per share, a non-GAAP financial measure, is defined as tangible common equity divided by common shares outstanding. 3 Tangible common equity, a non-GAAP financial measure, is defined as shareholders’ equity reduced by goodwill and other intangible assets. 1 Tangible book value per share, a non-GAAP financial measure, is defined as tangible common equity divided by common shares outstanding. See non-GAAP reconciliation on prior page. Source: S&P Global Market Intelligence 4 5 INDEX VALUEEGBN0100200300400500600KBW NASDAQ Regional Banking IndexS&P 500 IndexNASDAQ Composite IndexEagle Bancorp, Inc.3/12/202112/31/202012/31/201912/31/201812/31/201712/31/201612/31/201512/31/201412/31/201312/31/201212/31/201112/31/2010Eagle Bancorp, Inc. 2020 Report to Shareholders BOARD OF DIRECTORS * Norman R. Pozez Executive Chairman of Eagle Bancorp, Inc. Executive Chairman of EagleBank Chairman and Chief Executive Officer of Uniwest Companies Matthew D. Brockwell (Retired) Audit Partner at PricewaterhouseCoopers LLP (PwC) Steven Freidkin CEO and Founder of Ntiva, Inc. Ernest Drew Jarvis Managing Principal of Jarvis Commercial Real Estate Theresa G. LaPlaca (Retired) Executive Vice President at Wells Fargo Leslie Ludwig Co-Founder of L&L Advisors Kathy A. Raffa, CPA Office Managing Partner of Marcum LLP’s Washington, DC, Region Susan G. Riel President and Chief Executive Officer of Eagle Bancorp, Inc. President and Chief Executive Officer of EagleBank James A. Soltesz, P.E. ** President and Chief Executive Officer of Soltesz, Inc. Benjamin M. Soto, Esquire President and Chief Executive Officer of Premium Title & Escrow, LLC EXECUTIVE OFFICERS Susan G. Riel President and Chief Executive Officer of Eagle Bancorp, Inc., and EagleBank Jeff Curry Executive Vice President of Eagle Bancorp, Inc. Executive Vice President & Chief Risk Officer of EagleBank Charles D. Levingston, CPA Executive Vice President and Chief Financial Officer of Eagle Bancorp, Inc., and EagleBank Antonio F. Marquez Executive Vice President of Eagle Bancorp, Inc. Senior Executive Vice President and President of Commercial Banking of EagleBank Lindsey S. Rheaume Executive Vice President of Eagle Bancorp, Inc. Executive Vice President and Chief Commercial & Industrial Lending Officer of EagleBank Paul Saltzman, Esquire Executive Vice President and Chief Legal Officer of Eagle Bancorp, Inc., and EagleBank Janice L. Williams, Esquire Executive Vice President of Eagle Bancorp, Inc. Senior Executive Vice President and Chief Credit Officer of EagleBank 6 VIRTUAL ANNUAL MEETING Thursday, May 20, 2021, at 10:00 a.m. EDT See Proxy Statement for details on virtual meeting. FORM 10-K The Company’s Form 10-K may be obtained, free of charge, by contacting: Jane E. Cornett Vice President & Corporate Secretary, Eagle Bancorp, Inc. 7830 Old Georgetown Road, Third Floor, Bethesda, MD 20814 240.497.2041 jcornett@EagleBankCorp.com For more 2020 financial information about Eagle Bancorp, Inc., visit our Investor Relations page at www.EagleBankCorp.com. STOCK EXCHANGE LISTING Common shares of Eagle Bancorp are traded on the Nasdaq Capital Market under the symbol EGBN. TRANSFER AGENT Computershare Trust Company, NA By Regular Mail P.O. Box 505000, Louisville, KY 40233-5000 By Overnight Delivery 462 South 4th Street, Suite 1600, Louisville, KY 40202 By Phone Toll Free 877.282.1168 CORPORATE OFFICES 7830 Old Georgetown Road, Third Floor, Bethesda, MD 20814 301.986.1800 INVESTOR RELATIONS David G. Danielson 7830 Old Georgetown Road, Third Floor, Bethesda, MD 20814 240.552.9534 ddanielson@EagleBankCorp.com COUNSEL Cleary Gottlieb Steen & Hamilton LLP 2112 Pennsylvania Avenue, NW, Washington, DC 20037 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Dixon Hughes Goodman LLP 4350 Congress Street, Suite 900, Charlotte, NC 28209 * Directors of Eagle Bancorp, Inc. and EagleBank ** Lead Independent Director EagleBank: Member Federal Deposit Insurance Corporation, Equal Housing Lender, Member Federal Reserve System, Member Federal Home Loan Bank of Atlanta, Affirmative Action/Equal Opportunity Employer ©2021 Eagle Bancorp, Inc. VIRGINIA Alexandria 277 S. Washington Street, Alexandria, VA 22314 Ballston 4420 N. Fairfax Drive, Arlington, VA 22203 Chantilly 13986 Metrotech Drive, Chantilly, VA 20151 Dulles Town Center 45745 Nokes Boulevard, Suite 150, Sterling, VA 20166 Fairfax 11166 Fairfax Boulevard, Fairfax, VA 22030 Merrifield 2905 District Avenue, Suite 190, Fairfax, VA 22031 Reston 12011 Sunset Hills Road, Reston, VA 20190 Tysons Corner 8245 Boone Boulevard, Tysons Corner, VA 22182 MARYLAND Bethesda 7735 Old Georgetown Road, Suite 100, Bethesda, MD 20814 Chevy Chase 5480 Wisconsin Avenue, Suite 5476B, Chevy Chase, MD 20815 Park Potomac 12505 Park Potomac Avenue, Potomac, MD 20854 Shady Grove 9600 Blackwell Road, Rockville, MD 20850 Silver Spring 8665-B Georgia Avenue, Silver Spring, MD 20910 Twinbrook 12300 Twinbrook Parkway, Suite 100, Rockville, MD 20852 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Branch Office Corporate Headquarters Regional Headquarters Loan Production Office WASHINGTON, DC Dupont Circle 1228 Connecticut Avenue, NW, Washington, DC 20036 15 16 Gallery Place 700 K Street, NW, Suite 60, Washington, DC 20001 17 18 19 LPO LPO LPO LPO LPO Georgetown 3143 N Street, NW, Washington, DC 20007 K Street 2001 K Street, NW, Washington, DC 20006 McPherson Square 1425 K Street, NW, Washington, DC 20005 LOAN PRODUCTION OFFICES 7830 Old Georgetown Road, Bethesda, MD 20814 4550 Forbes Boulevard, Lanham, MD 20706 2001 K Street, NW, Suite 150, Washington, DC 20006 8245 Boone Boulevard, Suite 820, Tysons Corner, VA 22182 6010 Executive Boulevard, Suite 300, Rockville, MD 20852 OTHER OFFICES Premier Banking 2001 K Street, NW, Suite 150, Washington, DC 20006 Eagle Insurance Services, LLC 7830 Old Georgetown Road, Bethesda, MD 20814 Investment Advisory Services 7830 Old Georgetown Road, Bethesda, MD 20814 7 2954959549527039566661234671011121314151617195LPOLPOLPOLPOLPO1898RockvilleRosslynSilver SpringLanhamPotomacMerrifieldFairfaxTysons CornerRestonSterlingChantillyBethesdaMONTGOMERY COUNTYPRINCE GEORGE’S COUNTYFAIRFAX COUNTYARLINGTONALEXANDRIALOUDOUN COUNTYDCMDVAEagle Bancorp, Inc. 2020 Report to Shareholders Our Mission We have a mission to be the most respected and profitable community bank. To do this, we put relationships first, to the delight of our customers, employees, and shareholders, and relentlessly deliver the most compelling service and value. Our Values RELATIONSHIPS F•I•R•S•T Flexible We begin our relationships based on our time-tested tradition of listening to each customer, collaborating with colleagues, and designing a comprehensive, creative solution that brings value to and appreciation from our customers. We enhance the relationship with empowered, “Yes, We Can” service and live up to our strong belief that formulas don’t make good banking sense, relationships do. Being entrepreneurial—it is our differentiator. Involved We build our relationships by developing a rapport that is based on partnership, mutual respect, and a desire to delight. We are unwavering in our commitment to the goals and growth of our customers, colleagues, and community through volunteerism. We believe that doing the little extras and staying involved with our customers demonstrates our difference. Responsive We shape our relationships by taking ownership for being ever-responsive, from beginning to end, day in and day out. We understand that reliable, accurate, and time-sensitive communication is fundamental to preserving reputation and relationships, internally and externally. Strong We strengthen our relation ships each time we are called upon for our expertise and know-how. We are committed to enhancing our professional knowledge in order to remain credible, current, and strong partners with our customers, colleagues, and community. Our history of sustaining a well-capitalized and profitable position emphasizes our strength and reinforces our relationships. We believe that diversity of talent equals diversity of thought, and only serves to strengthen our role as community builders. Trusted We uphold our relationships with honesty, openness and reliability. Our actions reflect our values, and underscore our commitment to a diverse and inclusive environment. We can be counted on to do “the right thing.” We understand that underlying a sound, long-lasting relationship is the essential element of trust. Trust can be lost in a moment, so we are vigilant in our actions and words. E A G L E B A N K C O R P. C O M 

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