updated 10/20/2010 9:46:05 PM ET 2010-10-21T01:46:05

BETHESDA, Md., Oct. 20, 2010 (GLOBE NEWSWIRE) -- Eagle Bancorp, Inc. (the "Company") (Nasdaq:EGBN), the parent company of EagleBank, today announced net income of $4.8 million for the quarter ended September 30, 2010, a 74% increase over the $2.7 million for the quarter ended September 30, 2009. Net income available to common shareholders increased 107% to $4.4 million ($0.22 per basic and diluted common share) for the quarter ended September 30, 2010, compared to $2.1 million ($0.16 per basic common share and $0.15 per diluted common share) for the quarter ended September 30, 2009.

For the nine months ended September 30, 2010, the Company's net income was $11.6 million, a 55% increase over the $7.5 million for the nine months ended September 30, 2009. Net income available to common shareholders increased 87% to $10.6 million ($0.54 per basic common share and $0.53 per diluted common share), as compared to $5.7 million ($0.44 per basic common share and $0.43 per diluted common share) for the same nine month period in 2009.

"We are extremely pleased to report continuing trends of strong earnings and balance sheet growth through the third quarter of 2010. These results reflect substantial revenue growth, continued growth in loans and core deposits and continued solid asset quality," noted Ronald D. Paul, Chairman, President and Chief Executive Officer of Eagle Bancorp, Inc. "In contrast to many businesses and financial institutions which are struggling with weakness in the general economy, Eagle Bancorp continues to perform very well. Third quarter earnings mark seven successive quarters of record growth in net income," added Mr. Paul. "Further, EagleBank has remained diligent in meeting the credit needs of clients throughout our market area, as reflected by the $214 million, or 16%, growth rate in total loans, excluding loans held for sale, over the past twelve months. Over the same period, total deposits increased $314 million, or 24%, which includes the addition of many new and expanded relationships to our client base. Recently reported data from the FDIC shows that EagleBank has gained deposit market share in both Montgomery County, Maryland and Washington D.C. in the twelve months ended June 30, 2010," noted Mr. Paul. "Additionally, we see great opportunities for EagleBank in the Washington D.C. and Northern Virginia markets. Our recently announced Gallery Place and Rosslyn branch offices will be EagleBank's newest banking offices in the District of Columbia and Northern Virginia. Both locations are mixed commercial, retail and residential neighborhoods that we believe will be receptive to the banking, insurance brokerage and other financial services that we offer."

A continuing trend of quarterly growth in both average loans and deposits together with a stable and favorable net interest margin were the key drivers of increases in revenue and net income in both the third quarter and nine month results. Average loans, including loans held for sale, increased 18% and 14% for the three and nine months ended September 30, 2010, respectively, over the comparable prior year period. Average deposits increased 22% and 27% for the three and nine months ended September 30, 2010, respectively, due substantially to growth in money market and non-interest bearing demand accounts.

At September 30, 2010, total assets reached a milestone and were $2.01 billion compared to $1.68 billion at September 30, 2009, a 19% increase. Total deposits were $1.65 billion at September 30, 2010, a 24% increase over deposits of $1.33 billion at September 30, 2009, while total loans, excluding loans held for sale, increased to $1.53 billion at September 30, 2010, from $1.32 billion at September 30, 2009, a 16% increase. The investment portfolio, as of September 30, 2010, totaled $259 million, a 24% increase over the $210 million balance at September 30, 2009.  The investment portfolio valuation continues to show substantial unrealized gains, $4.8 million net of tax, at September 30, 2010, as compared to $4.0 million net of tax, at June 30, 2010. Total borrowed funds increased to $148.4 million at September 30, 2010 from $138.6 million at September 30, 2009, a 7% increase, resulting from higher demand for retail customer repurchase agreements. Excluding growth in customer repurchase agreements which are considered stable and core funding, alternative funding sources declined by $10 million. Total stockholders' equity increased to $202.3 million at September 30, 2010. The Company's capital position remains substantially in excess of regulatory well capitalized measures. In addition, the tangible common equity ratio (tangible common equity to tangible assets) is 8.77% at September 30, 2010.

Net interest income increased 31% for the three months ended September 30, 2010 over the same period in 2009, as the Company posted a strong net interest margin of 4.10% for the third quarter of 2010, unchanged from the three months ended June 30, 2010 and 33 basis points higher than the 3.77% achieved in the third quarter of 2009. The higher margin in the third quarter of 2010 as compared to the same period of 2009 was due to lower funding costs for both deposits and borrowings more than offsetting declines in earning asset yields. The Company's net interest margin continues to compare favorably to peer banking companies.

Average loans, including loans held for sale, increased $64 million (4%) and average deposits increased $81 million (5%) during the three months ended September 30, 2010, as compared to the three months ended June 30, 2010. The increase in average loans in the third quarter of 2010 as compared to the second quarter of 2010 is primarily attributable to growth in income-producing commercial real estate loans, commercial and industrial loans, and to substantially higher average loans held for sale, due to expansion of the residential mortgage origination division. Increases in average deposits in the third quarter of 2010, as compared to the second quarter of 2010, is attributable to growth in both noninterest bearing demand deposits and money market accounts.      

At September 30, 2010, the Company's level of nonperforming assets was $29.2 million, representing 1.46% of total assets, compared to $28.9 million of nonperforming assets, or 1.49% of total assets, at June 30, 2010 and $27.4 million, or 1.63% of total assets, at September 30, 2009. Management remains attentive to early signs of deterioration in borrowers' financial conditions and to taking the appropriate action 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 loan losses, at 1.45% of total loans at September 30, 2010, is adequate to absorb potential credit losses within the loan portfolio at that date. Included in nonperforming assets at September 30, 2010 were $4.6 million of other real estate owned ("OREO") as compared to $3.6 million at June 30, 2010 and $4.6 million at September 30, 2009. 

Analysis of the three months ended September 30, 2010 compared to 2009

For the three months ended September 30, 2010, the Company reported an annualized return on average assets (ROAA) of 0.96% as compared to 0.67% for the three months ended September 30, 2009. The annualized return on average common equity (ROAE) for the most recent quarter was 9.93%, as compared to 7.85% for the three months ended September 30, 2009. The increase in these ratios is due primarily to a higher net interest margin in the current period versus 2009.  

Net interest income increased 31% for the three months ended September 30, 2010 over the same period in 2009, resulting from a 33 basis point increase in the net interest margin over the past twelve months and strong balance sheet growth. For the three months ended September 30, 2010, the net interest margin was 4.10% as compared to 3.77% for the three months ended September 30, 2009.

The provision for credit losses was $2.0 million for the three months ended September 30, 2010 as compared to $1.9 million for the three months ended September 30, 2009. At September 30, 2010, the allowance for credit losses represented 1.45% of loans outstanding, as compared to 1.51% at September 30, 2009 and 1.45% at June 30, 2010. The higher provisioning in the third quarter of 2010, as compared to the third quarter of 2009, is primarily attributable to loan growth. The six basis point decline in the reserve year over year is based upon the heavier weighting of our consistently low levels of historical losses in the reserve methodology, beginning in the second quarter of 2010. Net charge-offs of $1.5 million represented 0.39% of average loans, excluding loans held for sale, in the third quarter of 2010, as compared to $1.6 million or 0.48% of average loans, excluding loans held for sale, in the third quarter of 2009. Net charge-offs in the third quarter of 2010 were attributable to charge-offs in consumer loans ($11 thousand), commercial real estate loans ($177 thousand), commercial and industrial loans ($254 thousand), commercial real estate loans – owner occupied ($322 thousand), construction loans ($693 thousand), and the unguaranteed portion of SBA loans ($7 thousand).

At September 30, 2010, the allowance for credit losses represented 90% of nonperforming loans as compared to 86% at June 30, 2010 and 88% at September 30, 2009. 

Noninterest income for the three months ended September 30, 2010 increased to $2.3 million from $1.5 million for the three months ended September 30, 2009, a 57% increase. This increase was due primarily to $260 thousand in gains realized on the sale of investment securities and an increase of $447 thousand in gains realized on the sale of SBA and residential loans. Gains on the sale of SBA loans decreased $62 thousand while gains on the sales of residential mortgages increased $509 thousand. With the late second quarter expansion of the residential mortgage origination division, the Company realized higher amounts of noninterest income from the sale of residential mortgage loans for the three months ended September 30, 2010. Investment gains realized in the third quarter of 2010 were the result of asset/liability management decisions to sell a portion of mortgage-backed securities that exhibited substantial prepayment risk. Also contributing to the increase in noninterest income in 2010 compared to 2009 was an increase of $87 thousand in service fees and a $63 thousand increase in other income.

The efficiency ratio, which measures the ratio of noninterest expense to total revenue, was 58.66% for the third quarter of 2010, as compared to 62.29% for the third quarter of 2009, as the Company enhanced its productivity. As compared to the second quarter of 2010, the third quarter efficiency ratio was lower (from 63.69% to 58.66%) due to increases in net interest income resulting from loan growth and from lower expenses for premises and equipment due to the absence of a one-time expense related to the acceleration of a lease obligation for a branch closed in the second quarter of 2010. Noninterest expenses were $12.9 million for the three months ended September 30, 2010, as compared to $10.3 million for the three months ended September 30, 2009, a 26% increase. Cost increases were incurred for salaries and benefits of $1.4 million due to additional residential mortgage staff. Premises and equipment expenses were $223 thousand higher due primarily to the acceleration of the amortization of the leasehold improvements for the closure of the 1725 Eye Street NW branch in Washington D.C. Other expenses increased by $670 thousand with $174 thousand due to the operating and disposition costs of OREO properties and marketing and advertising cost increases of $163 thousand. FDIC insurance premiums were $142 thousand higher due to deposit growth of $314 million compared to the third quarter of 2009. 

Analysis of the nine months ended September 30, 2010 compared to 2009

For the nine months ended September 30, 2010, the Company reported an annualized ROAA of 0.82% as compared to 0.64% for the nine months of 2009, while the annualized ROAE was 8.24% in 2010, as compared to 7.02% for the same nine month period in 2009. The increase in these ratios was due primarily to an increase in the net interest margin over the past twelve months, resulting primarily from lower funding costs.  

For the first nine months of 2010, net interest income increased 30% over the same period for 2009. Average loans, including loans held for sale, increased 14% and average deposits increased by 27%. The net interest margin was 4.06% for the nine months of 2010, as compared to 3.81% for the nine months of 2009. The Company has been able to maintain its loan yields in 2010 close to 2009 levels as a result of its loan pricing practices and has been able to reduce its funding costs, while maintaining a favorable deposit mix as a result of sales efforts focused on increasing and deepening client relationships.

The provision for credit losses was $5.8 million for the first nine months of 2010 as compared to $5.1 million in 2009. The higher provisioning in 2010 as compared to 2009 is attributable to both higher amounts of loan growth in the first nine months of 2010 compared to 2009, and to slightly higher net charge-offs in 2010 as compared to 2009, offset by a change in the reserve calculation to include the heavier weighting of our consistently low levels of historical losses in the reserve methodology, beginning in the second quarter of 2010. For the nine months ended September 30, 2010, net charge-offs totaled $4.1 million (0.38% of average loans) compared to $3.6 million (0.37% of average loans) for the nine months ended September 30, 2009. Net charge-offs in the nine months ended September 30, 2010 were attributable to charge-offs in consumer loans ($20 thousand), commercial real estate loans – income producing ($49 thousand), commercial real estate loans ($177 thousand), commercial real estate loans – owner occupied ($322 thousand), commercial and industrial loans ($1.2 million), construction loans ($1.7 million), and the unguaranteed portion of SBA loans ($659 thousand).

Noninterest income for the nine months of 2010 was $5.6 million compared to $6.0 million in 2009, a decrease of 8%. This decrease was due primarily to a $704 thousand decline in gains on the sale of investment securities. Investment gains realized in both the first nine months of 2010 and 2009 were the result of asset/liability management decisions to reduce call risk in the portfolio of U.S. Agency securities, to mitigate potential extension risk in longer-term mortgage-backed securities, and to mitigate prepayment risk in mortgage-backed securities. Excluding investment securities gains, total noninterest income was $4.7 million for the first nine months of 2010 as compared to $4.5 million for the same period in 2009, the increase being attributed to increases in service charges and to increased loan fees.

Noninterest expenses were $37.5 million for the first nine months of 2010, as compared to $32.1 million for 2009, a 17% increase. The increase is primarily due to salaries, incentive compensation and benefits increases of $2.7 million from the expansion of the residential mortgage division, premises and equipment expense increases of $1.2 million and other expense increases of $1.4 million. Other expense increases include $720 thousand due to the operating and disposition costs of OREO properties; legal, accounting and professional fees of $140 thousand and data processing costs of $175 thousand. Premises and equipment expenses include approximately $595 thousand due to the acceleration of the remaining lease term for the closure of the Sligo branch in Silver Spring, Maryland in April, 2010, and $232 thousand due to the acceleration of the amortization of the leasehold improvements for the closure of the 1725 Eye Street NW branch in September 2010. The higher costs were somewhat offset by a reduction in FDIC insurance of $438 thousand, as a result of the absence of a special assessment of approximately $723 thousand recorded in the second quarter of 2009. For the first nine months of 2010, the efficiency ratio was 61.42% as compared to 65.84% for the nine months ended September 30, 2009. Cost control remains a key operating objective of the Company.

At September 30, 2010, the Company had a total risk based capital ratio of 12.66%, a Tier 1 risk based capital ratio of 10.88%, and a Tier 1 leverage ratio of 9.66%, all measures substantially above regulatory well capitalized measures.

The financial information which follows provides more detail on the Company's financial performance for the nine and three months ended September 30, 2010 as compared to the nine and three months ended September 30, 2009, 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, 2009 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 conducts full service commercial banking through twelve offices, located in Montgomery County, Maryland, Washington, D.C. and Fairfax County, Virginia. The Company focuses on building relationships with businesses, professionals and individuals in its marketplace.

The Eagle Bancorp, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=6101

Conference Call: Eagle Bancorp will host a conference call to discuss the third quarter 2010 financial results on Thursday, October 21, 2010 at 10:00 a.m. eastern time. The public is invited to listen to this conference call by dialing 877-303-6220, conference ID Code is 15848421, 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 November 4, 2010.

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, 2009 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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