Eagle Bancorp
Annual Report 2022

Plain-text annual report

2022 REPORT TO SHAREHOLDERS TO OUR SHAREHOLDERS Celebration This summer, our Bank will be celebrating the 25th anniversary of its founding. A quarter century is an exciting milestone for us, and we are grateful to our customers, shareholders, and all members of our EagleBank team that built such a successful and respected institution within our community. For the past 25 years, Eagle has soared over many milestones. Seven quarters after our launch, in the first quarter of 2000, we turned our first profit. Our streak continues as we began 2023 by recording our 92nd consecutive profitable quarter(1). With assets topping $11 billion, and offices in Maryland, Virginia and the District of Columbia, we are one of the largest community banks based in the Washington DC area, which remains one of the most attractive markets in the nation. Culture and Community A hallmark of Eagle is our Relationships F-I-R-S-T culture. This means we listen to what our customers say and remain FLEXIBLE with our “yes we can” solutions. We continue to build relationships that keep us INVOLVED with our clients. We take ownership of being RESPONSIVE to our clients’ needs. And we build STRONG connections so that in uncertain times, we continue to be a TRUSTED partner. As part of our relationships F-I-R-S-T culture, we continue to embrace diversity, equity and inclusion and we strive to do our part to make the world a better place to live, work and to conduct business. • Our Diversity, Equity and Inclusion Council has successfully launched four employee resource groups and a mentorship program that formally pairs skilled, knowledgeable mentors with mentees who can learn from them through regular, ongoing interactions. Calling Bethesda home since 1998 • Our EagleBank Foundation has provided over $5 million to local charities and organizations since its founding. Core Strengths • Our Environmental, Social and Governance (“ESG”) Task Force recently held its first meeting. The group will assist us in setting strategy with respect to ESG and work to maintain our commitment to ESG issues that concern all of us. • Our commitment to affordability remains steadfast. Since the beginning of last year, we have announced financing for seven affordable housing projects and schools, with total aggregate financing of up to $308 million. All of these initiatives, and others, are extremely important to us and have the full commitment of our board and executive team. Results On behalf of the Board of Directors of Eagle Bancorp, we are pleased to present our 2022 financial results in this report and highlight several achievements. Even with the challenges posed by higher interest rates, inflation and a potential recession, this past year has been a success. One notable milestone in mid-2022 was the settlement agreements resolving outstanding investigations with two of our regulators, which put an end to several years of litigation. While the settlement agreements set earnings back in the first half of 2022, those one-time As we look at 2023, our core strengths give us the opportunity to overcome challenges in the market. Our balance sheet, equity base, asset quality and efficiency give us the foundation, resources, and confidence to continue to lend when other banks may pull back. • Our balance sheet has been managed to limit the adverse impact of the risk of rising rates. Most of our loans are adjustable-rate loans and less than a quarter of our assets are in fixed rate securities. • Our equity remains robust and provides us with financial flexibility. At year-end, tangible common equity was $1.1 billion, which was 10.2% of tangible assets(2). This is well above the median of publicly traded banks and thrifts of 7.7%(3). • Our asset quality metrics are strong and indicative of our long history of conservative underwriting standards. At year-end, non- performing assets were just 0.08% of assets, and charge-offs for the year were 0.01% of average loans. • Our efficiency has been and continues to be among the best. With our branch light model, we continue to keep our noninterest expenses lower than others but still serve our clients who wish to visit a branch. costs are now behind us, and we are now able to close that chapter and renew our focus on taking the bank to new heights into our next Gratitude quarter century. Our 2022 financial results were down from the prior year, but if adjusted to remove one-time events related to the settlement agreements, were closer to pre-pandemic results. In 2022, returns on average tangible common equity and average assets were 11.97% and 1.20% respectively, and earnings per share was $4.39. On an adjusted basis, earnings per share was $4.95(2). For our shareholders, we continue to look to return cash through dividends. In the second quarter of 2022, we raised our quarterly dividend from $0.40 to $0.45 per share and declared total dividends of $1.75 per share for the year. Based on our fourth quarter 2022 dividend, our annualized dividend is now $1.80 per share, and based on the year-end closing stock price of $44.07 per share, our dividend yield was 4.08%. Additionally, we continue to utilize stock repurchases to support our stock’s value. In the fourth quarter of 2022, we repurchased 738,300 shares with a total aggregate value of $33.1 million. And for 2023, the board has adopted a new share repurchase program authorizing the repurchase of 1.6 million shares, or approximately 5% of outstanding shares. As our first quarter century comes to a close, we would like to thank our teammates for all their hard work. We also wish to express our gratitude to our customers, shareholders and partners in the community for putting your trust in Eagle. Norman R. Pozez Executive Chairman of the Board Susan G. Riel President Chief Executive Officer 2 (1) From 1st quarter 2000 through 4th quarter 2022. (2) See non-GAAP reconciliation following the financial highlights. (3) Piper Sandler weekly publication, All Publicly-Traded U.S. Banks & Thrifts, March 13, 2023 3 Eagle Bancorp, Inc. 2022 Report to ShareholdersC N A M R O F R E P N O M M O C R E P E R A H S T E E H S E C N A L A B 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 SIX-YEAR SUMMARY OF SELECTED FINANCIAL DATA Dollars in millions, except per share data E Net income Return on average assets Return on average tangible common equity Net interest margin Efficiency ratio1 Diluted earnings Adjusted diluted earnings Cash dividends FOR THE YEAR OR YEAR ENDED DECEMBER 31 $ ’22 140.9 1.20% 11.97% 2.93% 46.3% $ ’21 176.7 1.49% 14.73% 2.81% 40.9% ’20 $ 132.2 1.28% 12.03% 3.19% 39.3% ’19 $ 142.9 1.61% 13.40% 3.77% 40.0% ’18 $ 152.3 1.91% 16.63% 4.10% 37.3% $ 4.39 $ 5.52 $ 4.09 $ 4.18 $ 4.42 $ $ 4.95 1.75 - - $ 1.40 $ 0.88 - $ 0.66 $ 32.67 - - $12,000 $12,000 ’17 $ 100.2 1.41% 12.54% 4.15% ) s n o i l l i m n i ( 37.8% s t e s s A $ 2.92 - - $10,000 $8,000 ) s n o i l l i m n i ( s t e s s A $6,000 $4,000 $2,000 $0 ) $10,000 s n o $8,000 m n $6,000 i l l i i ( s t e $4,000 s s A $2,000 ) s n $10,000 o $10,000 $12,000 i l l i m ) $8,000 s ) s n n n o o i ( i l l i i l l i i ( i ( m n s $6,000 t m e s n s A s $4,000 s t t e e s s s s A A $2,000 $8,000 $10,000 $6,000 $8,000 $6,000 $4,000 $4,000 $2,000 $2,000 $0 Tangible book value per share2 $ 35.86 $ 38.97 $ 35.74 $ 29.17 $ 24.67 Common shares outstanding (in millions) 31.3 32.0 31.8 33.2 34.4 34.2 Assets Loans Allowance for loan losses Deposits Shareholders’ equity Tangible common equity3 T E S S A Net charge-offs to average loans Y T I L A U Q Nonperforming assets to assets Allowance for credit losses to loans Common equity ratio Tangible common equity ratio NON-GAAP RECONCILIATION Book value per share Less: Intangible book value $ 11,151 $ 11,847 $ 11,118 $ 8,989 $ 8,389 $ 7,479 7,636 74 8,713 1,228 1,124 0.01% 0.08% 0.97% 11.02% 10.18% 7,066 75 9,982 1,351 1,247 0.18% 0.26% 1.06% 11.40% 10.60% 7,760 110 9,189 1,241 1,136 0.26% 0.59% 1.41% 11.16% 10.31% 7,546 6,991 6,412 74 7,224 1,191 1,086 0.13% 0.56% 0.98% 13.25% 12.22% 70 6,974 1,109 1,003 0.05% 0.21% 1.00% 13.22% 12.11% 65 5,854 950 843 0.06% 0.20% 1.01% 12.71% 11.44% $ 39.18 $ 42.28 $ 39.05 $ 35.82 $ 32.25 $ 27.80 3.32 3.31 3.31 3.15 3.08 3.13 i l l i i ( i ( i ( i l i l l i i l l i l i ) s ) s ) n s n ) o s n o n o o m m m m n n n n e e m e m e m m o o c o o c n c n c I n n I t I t e t e N e N N t e N i ( I Tangible book value per share2 $ 35.86 $ 38.97 $ 35.74 $ 32.67 $ 29.17 $ 24.67 Shareholders’ equity Less: Intangible assets $ 1,228 $ 1,351 $ 1,241 $ 1,191 $ 1,109 $ 950 104 104 104 105 106 107 Tangible common equity3 $ 1,124 $ 1,247 $ 1,137 $ 1,086 $ 1,003 $ 843 Assets Less: Intangible assets Tangible assets $ 11,151 $ 11,847 $ 11,118 $ 8,989 $ 8,389 $ 7,479 104 104 105 105 106 107 $ 11,047 $ 11,743 $ 11,013 $ 8,884 $ 8,283 $ 7,372 Average common shareholders’ equity $ 1,282 $ 1,305 $ 1,204 $ 1,172 $ 1,023 $ 906 Less: Average intangible assets 104 104 104 105 107 107 Average tangible common equity $ 1,178 $ 1,201 $ 1,100 $ 1,067 $ 916 $ 799 Net income per share (diluted) Reversal: Accrual reduction4 Reversal: Penalty and related5 $ 4.39 (0.15) 0.71 Adjusted net income per share (diluted) $ 4.95 - - - - - - - - - - - - - - - - - - - - e u l a V x e d n I 4 1 Efficiency ratio, a non-GAAP financial measure, is computed by dividing non-interest expense by the sum of net interest income and non-interest 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. 4 Reversal of accrual reduction for non-tax deductible expenses of $5.0 million related to share-based compensation awards and deferred compensation for the Company’s former CEO and Chairman, recorded in the first quarter of 2022. 5 Reversal of accrual for non-tax deductible expenses of $22.9 million in connection with the Company’s agreements in principal with the SEC and FRB to resolve the previously disclosed investigations with respect to the Company, recorded in the second quarter of 2022. ASSETS & TANGIBLE BOOK VALUES Assets and Tangible Book Values Assets and Tangible Book Values Assets and Tangible Book Values Assets Assets Assets and Tangible Book Values Tangible Book Value Per Share (1) Tangible Book Value Per Share¹ Assets and Tangible Book Values Assets Assets $12,000 $12,000 Tangible Book Value Per Share (1) Tangible Book Value Per Share¹ Assets Tangible Book Value Per Share¹ $60.00 $50.00 $60.00 $40.00 $50.00 $30.00 $40.00 $30.00 $20.00 $20.00 $10.00 e $60.00 r a h S e $50.00 r e r e a r P a h h S e S u r $40.00 r e l e a p P V e e k u u $30.00 o l l a a o V V B k k o e o $20.00 o l o b B B i g e n e b l a $10.00 b g T i n g a n T a T $0.00 l i $10.00 $0.00 $0.00 $60.00 $60.00 $50.00 $50.00 $40.00 $40.00 $30.00 $30.00 $20.00 $20.00 $10.00 2020 $10.00 $0.00 2021 $0.00 2021 e r e a r h a S h r S e P r e e P u e l a u V l a k V o o k B o o e B b e g n b 2021 a g T n 2022 a T l i l i $0 $0 2016 $0 2017 2017 2016 2017 2018 2019 2018 2017 2019 2018 2018 2020 2019 2019 2021 2020 2020 2022 2017 2018 2019 2020 2021 2022 NET INCOME & EPS (DILUTED) Net Income & EPS (diluted) Net Income & EPS (diluted) Net Income & EPS (diluted) Net Income & EPS (diluted) Net Income Net Income Net Income Earnings Per Share (diluted) Earnings Per Share (diluted) Net Income Earnings Per Share (diluted) Adjusted Earnings Per Share (diluted)¹ Adjusted Earnings Per Share (diluted)¹ Earnings Per Share (diluted) Adjusted Earnings Per Share (diluted)¹ Adjusted Earnings Per Share (diluted) $200 $200 $200 $180 $180 $200 $180 $160 $160 $160 $140 $140 $140 $150 $120 $120 $120 $100 $100 $100 $80 $80 $100 $80 $60 $60 $60 $40 $40 $40 $50 $20 $20 $20 $0 $0 $0 $0 $7.00 $7.00 $7.00 $7.00 $6.00 $6.00 $6.00 $6.00 $5.00 $5.00 $5.00 $5.00 $4.00 $4.00 $4.00 $4.00 $3.00 $3.00 $3.00 $3.00 $2.00 $2.00 $2.00 $2.00 $1.00 $1.00 $1.00 $1.00 $0.00 $0.00 $0.00 $0.00 2017 2017 2017 2017 2018 2018 2018 2018 2019 2019 2019 2019 2020 2020 2020 2020 2021 2021 2021 2021 2022 2022 2022 2022 ) s n o i l l i m n i ( e m o c n I t e N ( ) l i ) ) ) d d d e d e t e e t u t t u u l u i l d i l d i d ( d ( e ( e e r e r a r r a a h a h h S h S S S r r e r r e e p e p p p s s s g s g g n g n n i n n i n n i r n r r a r a a E a E E E i ) d e t u l i d ( e r a h S r e p s g n n r a E i e r a h S r e P e u l a V k o o B e b g n a T l i COMMON EQUITY & CAPITAL RATIOS LOANS & ASSET QUALITY o i t a R l a t i p a C y t i l a u Q t e s s A ) s n o i l l i m n i ( y t i u q E n o m m o C ) s n o i l l i m n i ( s n a o L l a t o T TOTAL SHAREHOLDER RETURN PERFORMANCE Source: S&P Global Market Intelligence © 2023 1 See non-GAAP reconciliation on prior page. COMPOUNDED ANNUAL GROWTH RATE 12/31/12 to 12/31/22 12/31/12 to 3/3/23 Eagle Bancorp, Inc. 10.3% 10.1% NASDAQ Composite Index 14.4% 15.4% S&P 500 Index 12.6% 13.0% KBW NASDAQ Regional Banking Index 10.3% 10.4% 5 010020030040050060012/31/1212/31/1312/31/1412/31/1512/31/1612/31/1712/31/1812/31/1912/31/2012/31/2112/31/2203/03/23Chart TitleEagle Bancorp, Inc.NASDAQ Composite IndexS&P 500 IndexKBW NASDAQ Regional Banking Index0.00%5.00%10.00%15.00%20.00%$0$200$400$600$800$1,000$1,200$1,400201720182019202020212022Capital RatiosCommon Equity (in millions)Common Equity and Capital RatiosCommon EquityCommon Equity RatioTangible Common Equity Ratio¹0.00%0.50%1.00%1.50%2.00%2.50%3.00%$0$1,000$2,000$3,000$4,000$5,000$6,000$7,000$8,000201720182019202020212022Asset Quality Total Loans (in millions)Loans & Asset QualityTotal LoansNon-Performing Assets to Total AssetsNet Charge-offs to Average Loans0.00%0.50%1.00%1.50%2.00%2.50%3.00%3.50%4.00%$0$1,000$2,000$3,000$4,000$5,000$6,000$7,000$8,000201720182019202020212022Asset Quality Total Loans (in millions)Loans & Asset QualityTotal LoansNon-Performing Assets to Total AssetsNet Charge-offs to Average Loans0.00%5.00%10.00%15.00%20.00%$0$200$400$600$800$1,000$1,200$1,400201720182019202020212022Capital RatiosCommon Equity (in millions)Common Equity and Capital RatiosCommon EquityCommon Equity RatioTangible Common Equity Ratio¹0.00%5.00%10.00%15.00%20.00%$0$200$400$600$800$1,000$1,200$1,400201720182019202020212022Capital RatiosCommon Equity (in millions)Common Equity and Capital RatiosCommon EquityCommon Equity RatioTangible Common Equity Ratio¹0.00%5.00%10.00%15.00%20.00%$0$200$400$600$800$1,000$1,200$1,400201720182019202020212022Capital RatiosCommon Equity (in millions)Common Equity and Capital RatiosCommon EquityCommon Equity RatioTangible Common Equity Ratio¹Eagle Bancorp, Inc. 2022 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 Senior Vice President and Chief Financial Officer of the University of Oklahoma Steven J. Freidkin Founder and Chief Executive Officer of Ntiva, Inc. Ernest D. Jarvis Managing Principal of Jarvis Commercial Real Estate Theresa G. LaPlaca Founder and President of TLP Leadership Advisory Services A. 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 VIRTUAL ANNUAL MEETING Thursday, May 18, 2023, 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, Bethesda, MD 20814 240.497.2041 | jcornett@EagleBankCorp.com For more 2022 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. CORPORATE OFFICES 7830 Old Georgetown Road, Bethesda, MD 20814 301.986.1800 INVESTOR RELATIONS David G. Danielson 7830 Old Georgetown Road, Bethesda, MD 20814 240.552.9534 | ddanielson@EagleBankCorp.com 6 EXECUTIVE MANAGEMENT Susan G. Riel *** President and Chief Executive Officer of Eagle Bancorp, Inc., and EagleBank Joseph L. Clarke Executive Vice President and Chief Operating 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 Jay Namputhiripad Executive Vice President and Chief Risk Officer of EagleBank Lindsey S. Rheaume *** Executive Vice President of Eagle Bancorp, Inc. Executive Vice President and Chief Commercial & Industrial Lending Officer of EagleBank Ryan Riel Executive Vice President and Chief Real Estate 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 TRANSFER AGENT Computershare Trust Company, NA By Regular Mail P.O. Box 43006, Providence, RI 02940-3078 By Overnight Delivery 150 Royall St., Suite 101, Canton, MA 02021 By Phone Toll Free 877.282.1168 COUNSEL Cleary Gottlieb Steen & Hamilton LLP 2112 Pennsylvania Avenue, NW, Washington, DC 20037 Thompson Hine LLP 1919 M Street, NW, Suite 700, Washington, DC 20036 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Crowe LLP 1455 Pennsylvania Avenue, NW, Suite 700, Washington, DC 20004 * Directors of Eagle Bancorp, Inc., and EagleBank ** Lead Independent Director *** Executive Officer of Eagle Bancorp, Inc. 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 ©2023 Eagle Bancorp, Inc. VIRGINIA Ballston 4420 N. Fairfax Drive, Arlington, VA 22203 Chantilly 13986 Metrotech Drive, Chantilly, VA 20151 Fairfax 11166 Fairfax Boulevard, Fairfax, VA 22030 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 1 2 3 4 5 6 7 8 9 10 Twinbrook 12300 Twinbrook Parkway, Suite 100, Rockville, MD 20852 Branch Office Corporate Headquarters Regional Headquarters Loan Production Office WASHINGTON, DC Dupont Circle 1228 Connecticut Avenue, NW, Washington, DC 20036 Gallery Place 700 K Street, NW, Suite 60, Washington, DC 20001 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 11 12 13 14 15 LPO LPO LPO LPO OTHER OFFICES Corporate Headquarters 7830 Old Georgetown Road, Bethesda, MD 20814 Premier Banking 2001 K Street, NW, Suite 150, Washington, DC 20006 7 29549595495270395666626716789101112151323LPOLPOLPO1454RockvilleRosslynSilver SpringChevy ChaseLanhamPotomacMerrifieldFairfaxTysons CornerSterlingChantillyBethesdaMONTGOMERYCOUNTYPRINCEGEORGE’SCOUNTYFAIRFAX COUNTYARLINGTONALEXANDRIALOUDOUN COUNTYDCMDVALPOEagle Bancorp, Inc. 2022 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. 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 demonstrate 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 relationships 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 AG L E B A N KC O R P.C O M 

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