Eagle Bancorp, Inc. Announces Record Earnings for Both Fourth Quarter 2010 and Full Year 2010, Marking Eight Consecutive Quarters of Increasing Profits

/ Source: GlobeNewswire

BETHESDA, Md., Jan. 26, 2011 (GLOBE NEWSWIRE) -- Eagle Bancorp, Inc. (the "Company") (Nasdaq:EGBN), the parent company of EagleBank, today announced record net income of $16.7 million for the year ended December 31, 2010, a 60% increase over the $10.4 million for the year ended December 31, 2009. Net income available to common shareholders increased 89% to $15.4 million ($0.78 per basic common share and $0.77 per diluted common share) for the year ended December 31, 2010, compared to $8.1 million ($0.55 per basic and diluted common share) for the year ended December 31, 2009.

For the three months ended December 31, 2010, the Company's net income was $5.1 million, a 71% increase over the $3.0 million for the three months ended December 31, 2009. Net income available to common shareholders increased 96% to $4.7 million ($0.24 per basic common share and $0.23 per diluted common share), as compared to $2.4 million ($0.12 per basic and diluted common share) for the same three month period in 2009.

"We are extremely pleased to report continued strong financial performance for our Company for both the fourth quarter and full year 2010," noted Ronald D. Paul, Chairman, President and Chief Executive Officer of Eagle Bancorp, Inc. "Fourth quarter 2010 results represent the eighth consecutive quarter of increasing net income. Our financial performance results have been highlighted by substantial revenue growth from a combination of loan and core deposit growth, a favorable net interest margin and fee income from the sale of residential mortgages," added Mr. Paul. "Additionally, the Company has maintained solid asset quality performance during the difficult economic period of the past few years and we have improved our operating efficiency. As a growth-oriented Company, our financial results reflect the organization's ability and desire to continue lending in the Washington D.C. metropolitan area, as evidenced by a $276 million, or 20% increase in portfolio loans in 2010; our ability to continue building new and existing client relationships, as evidenced by an 18% increase in deposits in 2010; and by our ability to successfully manage credit risk in our lending and investment activities," noted Mr. Paul.

Recently announced new branches in both Washington D.C. and Northern Virginia will further enhance the Company's opportunities to add valuable client relationships. A new office in the Gallery Place area adjacent to the Verizon Center in downtown Washington D.C. opened this week, and two offices, in the Rosslyn and Ballston areas in Northern Virginia, are planned to open in the second quarter of 2011.

A continuing trend of quarterly growth in both average loans and deposits together with an improving net interest margin were the primary drivers of increases in revenue and net income in both the fourth quarter and full year 2010 results. Average loans, including loans held for sale, increased 24% and 17% for the three and twelve months ended December 31, 2010, respectively, over the comparable prior year periods. Average deposits increased 24% and 26% for the three and twelve months ended December 31, 2010, respectively, due substantially to growth in money market and non-interest bearing demand accounts. Additionally, substantial noninterest income growth from our residential mortgage activity (expanded in April 2010) contributed to revenue growth in both the fourth quarter 2010 and full year 2010.

At December 31, 2010, total assets were $2.10 billion compared to $1.81 billion at December 31, 2009, a 16% increase. Total deposits were $1.73 billion at December 31, 2010, an 18% increase over deposits of $1.46 billion at December 31, 2009, while total loans, excluding loans held for sale, increased to $1.68 billion at December 31, 2010, from $1.40 billion at December 31, 2009, a 20% increase. Loans held for sale amounted to $80.6 million at December 31, 2010 as compared to $1.6 million at December 31, 2009, due to the expansion of the residential mortgage division during the year. The investment portfolio totaled $228.0 million at December 31, 2010, a 2% decrease from the $235.2 million balance at December 31, 2009. Total borrowed funds decreased 3% to $146.9 million at December 31, 2010, from $150.1 million at December 31, 2009. Alternative funding sources declined by $10.0 million in 2010, excluding growth in customer repurchase agreements. Total stockholders' equity increased to $204.7 million at December 31, 2010, from $188.3 million at December 31, 2009. The Company's capital position remains substantially in excess of regulatory requirements for well capitalized status, with a total risk based capital ratio of 11.93% at December 31, 2010. In addition, the tangible common equity ratio (tangible common equity to tangible assets) ended 2010 at 8.53%.

At December 31, 2010, the Company's nonperforming assets amounted to $32.0 million, representing 1.53% of total assets, compared to $27.1 million of nonperforming assets, or 1.50% of total assets, at December 31, 2009 and $29.2 million, or 1.46% of total assets, at September 30, 2010. 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 1.48% of total loans at December 31, 2010, is adequate to absorb potential credit losses within the loan portfolio at that date. Included in nonperforming assets at December 31, 2010 were $6.7 million of other real estate owned ("OREO") as compared to $5.1 million at December 31, 2009 and $4.6 million at September 30, 2010.

Analysis of the three months ended December 31, 2010 compared to 2009

For the three months ended December 31, 2010, the Company reported an annualized return on average assets (ROAA) of 0.96% as compared to 0.68% for the three months ended December 31, 2009. The annualized return on average common equity (ROAE) for the most recent quarter was 9.89%, as compared to 5.76% for the three months ended December 31, 2009. The increase in these ratios is due primarily to a higher net interest margin in the current period versus 2009, increased noninterest income and improved operating efficiency.  

Net interest income increased 27% for the three months ended December 31, 2010 over the same period in 2009, resulting from a 22 basis point increase in the net interest margin and strong balance sheet growth. For the three months ended December 31, 2010, the net interest margin was 4.18% as compared to 3.96% for the three months ended December 31, 2009.

The provision for credit losses was $3.6 million for the three months ended December 31, 2010 as compared to $2.5 million for the three months ended December 31, 2009. At December 31, 2010, the allowance for credit losses represented 1.48% of loans outstanding, as compared to 1.47% at December 31, 2009 and 1.45% at September 30, 2010. The higher provisioning in the fourth quarter of 2010, as compared to the fourth quarter of 2009, is primarily attributable to substantially higher loan growth. Net charge-offs of $1.0 million represented 0.26% of average loans, excluding loans held for sale, in the fourth quarter of 2010, as compared to $1.8 million or 0.54% of average loans, excluding loans held for sale, in the fourth quarter of 2009. Net charge-offs in the fourth quarter of 2010 were primarily attributable to charge-offs of commercial real estate loans ($350 thousand), commercial and industrial loans ($562 thousand), and the unguaranteed portion of SBA loans ($91 thousand).

At December 31, 2010, the allowance for credit losses represented 98% of nonperforming loans as compared to 94% at December 31, 2009 and 90% at September 30, 2010.

Noninterest income for the three months ended December 31, 2010 increased to $3.7 million from $1.3 million for the three months ended December 31, 2009, a 188% increase. This increase was due primarily to increases of $1.8 million in gains realized on the sale of residential loans and $496 thousand in increased gains realized on the sale of investment securities. Gains on the sale of SBA loans decreased $70 thousand. Investment gains realized in the fourth 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 $52 thousand in service fees and a $121 thousand increase in other income. Excluding investment securities gains, total noninterest income was $3.2 million for the fourth quarter of 2010 as compared to $1.3 million for the fourth quarter of 2009, a 149% increase.

The efficiency ratio, which measures the ratio of noninterest expense to total revenue, was 53.98% for the fourth quarter of 2010, as compared to 59.02% for the fourth quarter of 2009, as the Company enhanced its productivity. As compared to the third quarter of 2010, the fourth quarter efficiency ratio was lower (from 58.68% to 53.98%) due to increases in revenue (net interest income and noninterest income) substantially offsetting increases in noninterest expenses. Noninterest expenses were $13.5 million for the three months ended December 31, 2010, as compared to $10.6 million for the three months ended December 31, 2009, a 27% increase. Cost increases were incurred for salaries and benefits of $1.9 million due substantially to additional residential mortgage staff, and to increases in incentive compensation. Premises and equipment expenses were $108 thousand lower due primarily to the consolidation of two branches during 2010. Other expenses increased by $624 thousand, with $200 thousand due to the operating and disposition costs of OREO properties. Marketing and advertising costs decreased by $175 thousand due to the Company's reduced sponsorship role in the Military Bowl in 2010. FDIC insurance premiums were $387 thousand higher due to substantially higher deposit balances, increased costs of the transaction account guarantee program and lower costs in the fourth quarter of 2009 resulting from accrual adjustments.

Analysis of the twelve months ended December 31, 2010 compared to 2009

For the twelve months ended December 31, 2010, the Company reported an ROAA of 0.86% as compared to 0.65% for the year of 2009, while the ROAE was 8.74% in 2010, as compared to 6.52% for 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, to increases in noninterest income, and from improved operating efficiency.  

In 2010, net interest income increased 29% over 2009. Average loans, including loans held for sale, increased 17% and average deposits increased by 26%. The net interest margin was 4.09% for 2010, as compared to 3.85% for the year 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 $9.3 million for the year of 2010 as compared to $7.7 million in 2009. The higher provisioning in 2010 as compared to 2009 is attributable to substantially higher amounts of loan growth in 2010 compared to 2009. For the twelve months ended December 31, 2010, net charge-offs totaled $5.2 million (0.35% of average loans) compared to $5.5 million (0.42% of average loans) for the twelve months ended December 31, 2009. Net charge-offs in the twelve months ended December 31, 2010 were primarily attributable to charge-offs of commercial real estate loans – owner occupied ($246 thousand), commercial real estate loans ($716 thousand), commercial and industrial loans ($1.7 million), construction loans ($1.7 million), and the unguaranteed portion of SBA loans ($750 thousand).

Noninterest income for the year of 2010 was $9.2 million compared to $7.3 million in 2009, an increase of 27%. This increase was due primarily to a $1.8 million increase in gains realized on the sale of residential loans and $234 thousand of other income. Gains on the sale of SBA loans decreased $70 thousand. These increases were partially offset by a $208 thousand decline in gains on the sale of investment securities. Investment gains realized in both 2010 and 2009 were the result of asset/liability management decisions to either reduce call risk in the portfolio of U.S. Agency securities, to mitigate potential extension risk in longer-term mortgage-backed securities or to mitigate prepayment risk in mortgage-backed securities. Excluding investment securities gains, total noninterest income was $7.9 million for the year of 2010 as compared to $5.8 million for 2009, a 37% increase.

Noninterest expenses were $51.0 million for the year of 2010, as compared to $42.8 million for 2009, a 19% increase. The increase is primarily due to salaries, incentive compensation and benefits increases of $4.6 million including staffing increases primarily as a result of expansion of the residential mortgage division, to premises and equipment expense increases of $1.1 million and to other expense increases of $2.1 million. Other expense increases include $851 thousand due to the operating and disposition costs of OREO properties; legal, accounting and professional fees of $256 thousand and data processing cost increases of $273 thousand. Premises and equipment expenses include approximately $827 thousand due to the acceleration of rent and leasehold improvement amortization for the consolidation of two branch offices in 2010. These higher costs were partially offset by a reduction in marketing and advertising costs of $41 thousand and lower FDIC insurance costs of $51 thousand, largely as a result of the absence of a special assessment of approximately $723 thousand recorded in the second quarter of 2009. For the full year of 2010, the efficiency ratio was 59.26% as compared to 64.01% for the same period in 2009. Cost control remains a key operating objective of the Company.

At December 31, 2010, the Company had a total risk based capital ratio of 11.93%, a Tier 1 risk based capital ratio of 10.20%, and a Tier 1 leverage ratio of 9.38%, all measures substantially above the regulatory requirements for well capitalized status.

The financial information which follows provides more detail on the Company's financial performance for the twelve and three months ended December 31, 2010 as compared to the twelve and three months ended December 31, 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 thirteen 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

Conference Call: Eagle Bancorp will host a conference call to discuss the fourth quarter 2010 financial results on Thursday, January 27, 2011 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 34956216, or by accessing the call on the Company's website, . A replay of the conference call will be available on the Company's website through February 10, 2011.

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.

CONTACT: Eagle Bancorp, Inc. Michael T. Flynn 301.986.1800