Eagle Bancorp, Inc. Announces Record Earnings Representing a 16% Increase for the Full Year 2016 and a 15% Increase in Net Income for the Fourth Quarter 2016

BETHESDA, Md., Jan. 18, 2017 (GLOBE NEWSWIRE) — Eagle Bancorp, Inc. (the “Company”) (NASDAQ:EGBN), the parent company of EagleBank, today announced record quarterly net income of $25.7 million for the three months ended December 31, 2016, a 15% increase over the $22.3 million net income for the three months ended December 31, 2015. 

Net income per basic common share for the three months ended December 31, 2016 was $0.76 compared to $0.67 for the same period in 2015, a 13% increase. Net income per diluted common share for the three months ended December 31, 2016 was $0.75 compared to $0.65 for the same period in 2015, a 15% increase.

For the year ended December 31, 2016, the Company’s net income was $97.7 million, a 16% increase over the $84.2 million for the year ended December 31, 2015. Net income available to common shareholders was $97.7 million ($2.91 per basic common share and $2.86 per diluted common share), as compared to $83.6 million ($2.54 per basic common share and $2.50 per diluted common share) for the same period in 2015, a 15% increase per basic share and a 14% increase per diluted share.

“We are very pleased to report a continued trend of balanced and consistently strong financial performance,” noted Ronald D. Paul, Chairman and Chief Executive Officer of Eagle Bancorp, Inc. “Our net income has increased for 32 consecutive quarters dating back to the first quarter of 2009.  This strong financial performance has resulted from a combination of steady balance sheet growth, revenue growth, solid asset quality, and favorable operating leverage.” Loan balances increased 4% in the fourth quarter and deposit balances increased 3%.  Mr. Paul added, “A lower net interest margin in the fourth quarter (3.96% versus 4.11% in the third quarter 2016) was due substantially to higher average liquidity as average deposit growth in the fourth quarter exceeded average loan growth by about $275 million. The loan pipeline remains strong, and the yield on the loan portfolio in the fourth quarter was 3 basis points higher at 5.11% versus 5.08% for the third quarter, as the Company continues to demonstrate discipline in its loan pricing. Additionally, our favorable credit quality improved even more in the fourth quarter as we recorded net recoveries of $97 thousand for the latest three months and the level of nonperforming assets was just 0.30% of total assets at December 31, 2016. Mr. Paul further added, “that the Company’s operating efficiency, another key driver of financial performance remained quite strong in the fourth quarter, as noninterest expense growth was 3% while total revenue increased by 4%, which further improved the efficiency ratio to 40.22% for the most recent quarter.”             

The Company’s financial performance in the fourth quarter of 2016 as compared to the fourth quarter in 2015 was highlighted by growth in average total loans of 15% and by growth in average total deposits of 17%. Total revenue increased 7% in the fourth quarter of 2016 over 2015 and increased 4% over the third quarter of 2016. Noninterest expenses increased 4% for the fourth quarter 2016 over 2015 and 3% over the third quarter of 2016.  For the fourth quarter in 2016, the efficiency ratio was 40.22%, as compared to 40.54% in the third quarter of 2016 and 41.47% for the fourth quarter in 2015. Mr. Paul added, “The Company remains committed to cost management measures and strong productivity.”

The annualized return on average assets (“ROAA”) was 1.46% for the fourth quarter in 2016 and 1.52% for the twelve months ended December 31, 2016. The annualized return on average common equity (“ROACE”) was 12.26% for the fourth quarter in 2016 and 12.27% for the year ended December 31, 2016.

For the full year 2016, loans grew 14% and averaged 16% higher. For the full year 2016, deposits increased 11% and averaged 14% higher. For the full year 2016, total revenue increased by 10% while total noninterest expenses increased 4%.  

For the fourth quarter of 2016, the net interest margin was 3.96%, as compared to 4.11% for the third quarter of 2016 and 4.38% for the fourth quarter of 2015. As noted above, the higher average liquidity position in the fourth quarter was the most significant factor in the quarterly net interest margin decline of 15 basis points. In addition to stronger average deposit growth over loan growth in the fourth quarter (8% versus 3%), the sub-debt raise in late July at a cost of 5.00% has negatively impacted the net interest margin in the fourth quarter by 18 basis points.

For the full year of 2016, the net interest margin was 4.16% as compared to 4.33% for the year ended December 31, 2015. The sub-debt raise in July 2016 negatively impacted the net interest margin in the twelve month period ending December 31, 2016 by nine basis points. Mr. Paul noted, “The persistently low interest rate environment has continued to challenge bank spread earnings. In the current environment, the Company has continued its emphasis on disciplined pricing for both new loans and funding sources, which has resulted in the Company maintaining a superior net interest margin.”

Asset quality measures improved further in the fourth quarter of 2016 from an already solid position. For the fourth quarter of 2016, the Company recorded a net recovery (annualized) of 0.01% of average loans, as compared to net charge-offs (annualized) of 0.18% of average loans for the fourth quarter of 2015. At December 31, 2016, the Company’s nonperforming loans amounted to $17.9 million (0.31% of total loans) as compared to $22.2 million (0.41% of total loans) at September 30, 2016 and $13.2 million (0.26% of total loans) at December 31, 2015. Nonperforming assets amounted to $20.6 million (0.30% of total assets) at December 31, 2016 compared to $27.5 million (0.41% of total assets) at September 30, 2016 and $19.1 million (0.31% of total assets) at December 31, 2015.

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 December 31, 2016 allowance for credit losses, at 1.04% of total loans (excluding loans held for sale), is adequate to absorb potential credit losses within the loan portfolio as of the end of the quarter. The allowance for credit losses was 1.04% of total loans at September 30, 2016 and 1.05% at December 31, 2015. The allowance for credit losses represented 330% of nonperforming loans at December 31, 2016.

Total assets at December 31, 2016 were $6.89 billion, a 2% increase as compared to $6.76 billion at September 30, 2016, and a 13% increase as compared to $6.08 billion at December 31, 2015. Total loans (excluding loans held for sale) were $5.68 billion at December 31, 2016, a 4% increase as compared to $5.48 billion at September 30, 2016, and a 14% increase as compared to $5.00 billion at December 31, 2015. Loans held for sale amounted to $51.6 million at December 31, 2016 as compared to $78.1 million at September 30, 2016, a 34% decrease, and $47.5 million at December 31, 2015, a 9% increase. The investment portfolio totaled $538.1 million at December 31, 2016, a 25% increase from the $430.7 million balance at September 30, 2016. As compared to December 31, 2015, the investment portfolio at December 31, 2016 increased by $50.2 million or 10%.

Total deposits at December 31, 2016 were $5.72 billion, compared to deposits of $5.56 billion at September 30, 2016, a 3% increase, and deposits of $5.16 billion at December 31, 2015, an 11% increase. Total borrowed funds (excluding customer repurchase agreements) were $216.5 million at December 31, 2016, $266.4 million at September 30, 2016 and $68.9 million at December 31, 2015.

Total shareholders’ equity at December 31, 2016 increased 3%, to $842.8 million, compared to $815.6 million at September 30, 2016, and increased 14%, from $738.6 million at December 31, 2015. During the fourth quarter of 2016, 378,495 net shares were issued upon the exercise in full of the outstanding warrant. Increased retained earnings together with the $150 million of qualifying capital raised in a ten year sub-debt issue in July 2016 has enhanced the Company’s capital position well in excess of regulatory requirements for well capitalized status. The total risk based capital ratio was 14.89% at December 31, 2016, as compared to 15.05% at September 30, 2016, and 12.75% at December 31, 2015. In addition, the tangible common equity ratio was 10.84% at December 31, 2016, compared to 10.64% at September 30, 2016 and 10.56% at December 31, 2015.

Analysis of the three months ended December 31, 2016 compared to December 31, 2015

For the three months ended December 31, 2016, the Company reported an annualized ROAA of 1.46% as compared to 1.50% for the three months ended December 31, 2015. The annualized ROACE for the three months ended December 31, 2016 was 12.26%, as compared to 12.08% for the three months ended December 31, 2015.

Total revenue (net interest income plus noninterest income) for the fourth quarter of 2016 was $74.0 million, or 7% above the $69.1 million of total revenue earned for the fourth quarter of 2015 and was 4% higher than the $71.1 million of revenue earned in the third quarter of 2016.

Net interest income increased 7% for the three months ended December 31, 2016 over the same period in 2015 ($67.0 million versus $62.6 million). Growth in average earning assets was 19% and the net interest margin was 3.96% for the three months ended December 31, 2016, as compared to 4.38% for the three months ended December 31, 2015. The Company believes its net interest margin remains favorable compared to peer banking companies and that its disciplined approach to managing the loan portfolio yield to 5.11% for the fourth quarter in 2016 has been a significant factor in its overall profitability.

The provision for credit losses was $2.1 million for the three months ended December 31, 2016 as compared to $4.6 million for the three months ended December 31, 2015. The lower provisioning in the fourth quarter of 2016, as compared to the fourth quarter of 2015, is primarily due to overall improved asset quality. Net recoveries of $97 thousand in the fourth quarter of 2016 represented an annualized 0.01% of average loans, excluding loans held for sale, as compared to $2.2 million of net charge-offs or an annualized 0.18% of average loans, excluding loans held for sale, in the fourth quarter of 2015. Net charge-offs in the fourth quarter of 2016 were attributable primarily to commercial loans ($814 thousand) offset by a recovery in investment-commercial real estate loans ($895 thousand).

Noninterest income for the three months ended December 31, 2016 increased to $7.0 million from $6.5 million for the three months ended December 31, 2015, an 8% increase. This increase was primarily due to higher net gains on sales of residential mortgage loans of $971 thousand. Residential mortgage loans closed were $241 million for the fourth quarter in 2016 versus $181 million for the fourth quarter of 2015.   

The efficiency ratio, which measures the ratio of noninterest expense to total revenue, was 40.22% for the fourth quarter of 2016, as compared to 41.47% for the fourth quarter of 2015. Noninterest expenses totaled $29.8 million for the three months ended December 31, 2016, as compared to $28.6 million for the three months ended December 31, 2015, a 4% increase. Cost increases for salaries and benefits were $1.9 million, due primarily to increased staff, merit increases and incentive compensation. Premises and equipment expenses were $271 thousand lower, due primarily to lower leasing expense as two branch offices were downsized and two leases expired. Marketing and advertising expense increased by $378 thousand primarily due to costs associated with digital and print advertising and sponsorships. FDIC insurance premium expense decreased by $281 thousand due to a change in the FDIC insurance premium formula for small institutions effective July 1, 2016. Other expenses decreased by $669 thousand primarily due to lower fees incurred to maintain OREO properties.

Analysis of the year ended December 31, 2016 compared to December 31, 2015

For the year ended December 31, 2016, the Company reported an annualized ROAA of 1.52% as compared to 1.49% for the year ended December 31, 2015. The annualized ROACE for the year ended December 31, 2016 was 12.27%, as compared to 12.32% for the year ended December 31, 2015. For the year ended December 31, 2016 total revenue was $285.4 million, as compared to $260.6 million for the same period in 2015, a 10% increase.  

Net interest income increased 10% for the year ended December 31, 2016 over the same period in 2015 ($258.2 million versus $233.9 million). Growth in average earning assets was 15% and the net interest margin was 4.16% for the year ended December 31, 2016 as compared to 4.33% for the same period in 2015. The Company believes its net interest margin remains favorable compared to peer banking companies and that its disciplined approach to managing the loan portfolio yield to 5.11% for the year ended December 31, 2016 has been a significant factor in its overall profitability.

The provision for credit losses was $11.3 million for the year ended December 31, 2016 as compared to $14.6 million for the year ended December 31, 2015. The lower provisioning for 2016 is due to lower net charge-offs and to overall improved asset quality. Net charge-offs of $4.9 million during 2016 represented an annualized 0.09% of average loans, excluding loans held for sale, as compared to $8.0 million or an annualized 0.17% of average loans, excluding loans held for sale, during 2015. Net charge-offs during 2016 were attributable primarily to commercial ($3.5 million) and investment-commercial real estate ($1.4 million).

Noninterest income for the year ended December 31, 2016 was $27.3 million as compared to $26.6 million for the year ended December 31, 2015, a 3% increase. This increase was primarily due to increased service charges on deposit accounts, increased gains on sale of SBA loans, and increased gains on sale of OREO.

Noninterest expenses totaled $115.0 million for the year ended December 31, 2016, as compared to $110.7 million for the year ended December 31, 2015, a 4% increase. Cost increases for salaries and benefits were $5.3 million, due primarily to increased staff, merit increases, and incentive compensation. Premises and equipment expenses were $908 thousand lower, due primarily to lower leasing expense as two branch offices were downsized and two locations were closed due to the leases expiring. Marketing and advertising expense increased by $747 thousand primarily due to costs associated with digital and print advertising and sponsorships. Data processing expense increased $214 thousand, while FDIC insurance premium expense decreased by $436 thousand due to a change in the FDIC insurance premium formula for small institutions effective July 1, 2016. For 2016, the efficiency ratio was 40.29% as compared to 42.49% for the same period in 2015.

The financial information which follows provides more detail on the Company’s financial performance for the three and twelve months ended December 31, 2016 as compared to the three and twelve months ended December 31, 2015 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, 2015 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-one branch offices, located in Montgomery County, 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 fourth quarter 2016 financial results on Thursday, January 19, 2017 at 10:00 a.m. eastern standard time. The public is invited to listen to this conference call by dialing 1.877.303.6220, conference ID Code is 46041015, 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 February 2, 2017.

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, 2015 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.

(1)  Tangible common equity to tangible assets (the “tangible common equity ratio”) and tangible book value per common share are non-GAAP financial measures derived from GAAP based amounts. The Company calculates the tangible common equity ratio by excluding the balance of intangible assets from common shareholders’ equity and dividing by tangible assets. The Company calculates tangible book value per common share by dividing tangible common equity by common shares outstanding, as compared to book value per common share, which the Company calculates by dividing common shareholders’ equity by common shares outstanding. The Company considers this information important to shareholders as tangible equity is a measure that is consistent with the calculation of capital for bank regulatory purposes, which excludes intangible assets from the calculation of risk based ratios and as such is useful for investors, regulators, management and others to evaluate capital adequacy and to compare against other financial institutions. The table below provides a reconciliation of these non-GAAP financial measures with financial measures defined by GAAP.

(2) Computed by dividing noninterest expense by the sum of net interest income and noninterest income.

(3) Excludes loans held for sale.

CONTACT: EAGLE BANCORP, INC.
CONTACT:
Michael T. Flynn
301.986.1800