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Section 1: 10-Q/A (QUARTERLY REPORT)

EAGLE BANCORP INC - 1050441 - 2019
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UNITED STATES 
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
 
FORM 10-Q/A
 
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
 
 
OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
 
 
 
For the Quarterly Period Ended June 30, 2019
 
 
 
 
 
OR
 
 
 
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
 
 
OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
For the transition period from to_________
 
Commission File Number 0-25923
 
Eagle Bancorp, Inc.
 
(Exact name of registrant as specified in its charter)
 
Maryland
 
52-2061461
(State or other jurisdiction of
 
(I.R.S. Employer
incorporation or organization)
 
Identification No.)
 
 
 
7830 Old Georgetown Road,Third Floor ,Bethesda ,Maryland
 
20814
(Address of principal executive offices)
 
(Zip Code)
 
(301 )986-1800
(Registrant’s telephone number, including area code) 
(Former name, former address and former fiscal year, if changed since last report)
 
Securities Registered under Section 12(b) of the Act:
 
Title of Each Class
 
Trading Symbol(s)
 
Name of Each Exchange on Which Registered
Common Stock , $0.01 par value
 
EGBN
 
The Nasdaq Stock Market, LLC
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.Yes ☒   No ☐
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).Yes ☒ No ☐
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 
 
Large accelerated filer
Accelerated filer
 
Non-accelerated filer  
Smaller Reporting Company
 
 
Emerging Growth Company  
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act 
Yes ☐ No
 
As of July 31, 2019, the registrant had 34,542,796 shares of Common Stock outstanding.
 
 
 
 
 

EXPLANATORY NOTE

 

This Amendment No. 1 (this “Amendment”) to Form 10-Q for the fiscal quarter ended June 30, 2019, amends Eagle Bancorp. Inc.’s (the “Company”) Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, which was originally filed with the Securities and Exchange Commission on August 9, 2019 (the “Original Filing”).

 

This Amendment No. 1 is being filed solely to (i) include the iXBRL; and (ii) to add external links to the Exhibit Index.

 

This Amendment No. 1 does not reflect events that may have occurred subsequent to the filing date of the Original Filing and does not modify or update in any way disclosures made in the Original Filing.

 
 
 
 
EAGLE BANCORP, INC.
TABLE OF CONTENTS
 
PART I.
FINANCIAL INFORMATION
 
 
 
 
 
 
 
 
 
3
 
 
 
3
 
 
4
 
 
 
5
 
 
 
6
 
 
 
8
 
 
 
9
 
 
 
 
 
 
 
38
 
 
 
 
 
 
 
62
 
 
 
 
 
 
 
62
 
 
 
 
 
 
 
63
 
 
 
 
 
 
 
63
 
 
 
 
 
 
 
63
 
 
 
 
 
 
 
63
 
 
 
 
 
 
 
63
 
 
 
 
 
 
 
63
 
 
 
 
 
 
 
63
 
 
 
 
 
 
 
63
 
 
 
 
 
 
 
66
 
 
 
Item 1 – Financial Statements (Unaudited)
 
EAGLE BANCORP, INC.
Consolidated Balance Sheets (Unaudited)
(dollars in thousands, except per share data)
 
Assets
 
June 30, 2019
 
 
December 31, 2018
 
Cash and due from banks
 
$
6,735
 
 
$
6,773
 
Federal funds sold
 
 
17,914
 
 
 
11,934
 
Interest bearing deposits with banks and other short-term investments
 
 
171,985
 
 
 
303,157
 
Investment securities available-for-sale, at fair value
 
 
745,343
 
 
 
784,139
 
Federal Reserve and Federal Home Loan Bank stock
 
 
33,993
 
 
 
23,506
 
Loans held for sale
 
 
37,506
 
 
 
19,254
 
Loans
 
 
7,392,615
 
 
 
6,991,447
 
Less allowance for credit losses
 
 
(72,086
)
 
 
(69,944
)
Loans, net
 
 
7,320,529
 
 
 
6,921,503
 
Premises and equipment, net
 
 
15,176
 
 
 
16,851
 
Operating lease right-of-use assets
 
 
28,214
 
 
 
 
Deferred income taxes
 
 
30,220
 
 
 
33,027
 
Bank owned life insurance
 
 
74,295
 
 
 
73,441
 
Intangible assets, net
 
 
105,219
 
 
 
105,766
 
Other real estate owned
 
 
1,394
 
 
 
1,394
 
Other assets
 
 
81,480
 
 
 
88,392
 
Total Assets
 
$
8,670,003
 
 
$
8,389,137
 
 
 
 
 
 
 
 
 
 
Liabilities and Shareholders’ Equity
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
Deposits:
 
 
 
 
 
 
 
 
Noninterest bearing demand
 
$
1,873,902
 
 
$
2,104,220
 
Interest bearing transaction
 
 
862,553
 
 
 
593,107
 
Savings and money market
 
 
2,712,143
 
 
 
2,949,559
 
Time, $ 100,000 or more
 
 
801,469
 
 
 
801,957
 
Other time
 
 
699,825
 
 
 
525,442
 
Total deposits
 
 
6,949,892
 
 
 
6,974,285
 
Customer repurchase agreements
 
 
31,669
 
 
 
30,413
 
Other short-term borrowings
 
 
225,000
 
 
 
 
Long-term borrowings
 
 
217,491
 
 
 
217,296
 
Operating lease liabilities
 
 
31,659
 
 
 
 
Other liabilities
 
 
29,710
 
 
 
58,202
 
Total Liabilities
 
 
7,485,421
 
 
 
7,280,196
 
 
 
 
 
 
 
 
 
 
Shareholders’ Equity
 
 
 
 
 
 
 
 
Common stock, par value $.01 per share; shares authorized100,000,000 , shares issued and outstanding34,539,853 and34,387,919 , respectively
 
 
343
 
 
 
342
 
Additional paid in capital
 
 
532,585
 
 
 
528,380
 
Retained earnings
 
 
647,887
 
 
 
584,494
 
Accumulated other comprehensive income (loss)
 
 
3,767
 
 
 
(4,275
)
Total Shareholders’ Equity
 
 
1,184,582
 
 
 
1,108,941
 
Total Liabilities and Shareholders’ Equity
 
$
8,670,003
 
 
$
8,389,137
 
 
See notes to consolidated financial statements.
 
3
 
 
EAGLE BANCORP, INC. 
Consolidated Statements of Operations (Unaudited)
(dollars in thousands, except per share data)
 
 
 
Three Months Ended June 30 ,
 
 
Six Months Ended June 30 ,
 
 
 
2019
 
 
2018
 
 
2019
 
 
2018
 
Interest Income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest and fees on loans
 
$
101,889
 
 
$
90,924
 
 
$
199,710
 
 
$
175,354
 
Interest and dividends on investment securities
 
 
5,238
 
 
 
4,058
 
 
 
10,836
 
 
 
7,650
 
Interest on balances with other banks and short-term investments
 
 
1,105
 
 
 
1,274
 
 
 
2,771
 
 
 
2,255
 
Interest on federal funds sold
 
 
47
 
 
 
40
 
 
 
96
 
 
 
86
 
Total interest income
 
 
108,279
 
 
 
96,296
 
 
 
213,413
 
 
 
185,345
 
Interest Expense
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest on deposits
 
 
22,461
 
 
 
14,048
 
 
 
43,361
 
 
 
23,177
 
Interest on customer repurchase agreements
 
 
75
 
 
 
62
 
 
 
173
 
 
 
112
 
Interest on short-term borrowings
 
 
1,435
 
 
 
997
 
 
 
1,575
 
 
 
2,108
 
Interest on long-term borrowings
 
 
2,979
 
 
 
2,979
 
 
 
5,958
 
 
 
5,958
 
Total interest expense
 
 
26,950
 
 
 
18,086
 
 
 
51,067
 
 
 
31,355
 
Net Interest Income
 
 
81,329
 
 
 
78,210
 
 
 
162,346
 
 
 
153,990
 
Provision for Credit Losses
 
 
3,600
 
 
 
1,650
 
 
 
6,960
 
 
 
3,619
 
Net Interest Income After Provision For Credit Losses
 
 
77,729
 
 
 
76,560
 
 
 
155,386
 
 
 
150,371
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Noninterest Income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Service charges on deposits
 
 
1,606
 
 
 
1,760
 
 
 
3,300
 
 
 
3,374
 
Gain on sale of loans
 
 
1,923
 
 
 
1,675
 
 
 
3,311
 
 
 
3,198
 
Gain on sale of investment securities
 
 
563
 
 
 
26
 
 
 
1,475
 
 
 
68
 
Increase in the cash surrender value of bank owned life insurance
 
 
429
 
 
 
356
 
 
 
854
 
 
 
700
 
Other income
 
 
1,839
 
 
 
1,736
 
 
 
3,711
 
 
 
3,517
 
Total noninterest income
 
 
6,360
 
 
 
5,553
 
 
 
12,651
 
 
 
10,857
 
Noninterest Expense
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Salaries and employee benefits
 
 
17,743
 
 
 
17,812
 
 
 
41,387
 
 
 
34,670
 
Premises and equipment expenses
 
 
3,652
 
 
 
3,873
 
 
 
7,504
 
 
 
7,802
 
Marketing and advertising
 
 
1,268
 
 
 
1,291
 
 
 
2,416
 
 
 
2,228
 
Data processing
 
 
2,603
 
 
 
2,404
 
 
 
4,978
 
 
 
4,721
 
Legal, accounting and professional fees
 
 
2,740
 
 
 
2,179
 
 
 
4,449
 
 
 
5,152
 
FDIC insurance
 
 
1,126
 
 
 
951
 
 
 
2,242
 
 
 
1,626
 
Other expenses
 
 
4,227
 
 
 
3,779
 
 
 
8,687
 
 
 
7,211
 
Total noninterest expense
 
 
33,359
 
 
 
32,289
 
 
 
71,663
 
 
 
63,410
 
Income Before Income Tax Expense
 
 
50,730
 
 
 
49,824
 
 
 
96,374
 
 
 
97,818
 
Income Tax Expense
 
 
13,487
 
 
 
12,528
 
 
 
25,382
 
 
 
24,807
 
Net Income
 
$
37,243
 
 
$
37,296
 
 
$
70,992
 
 
$
73,011
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings Per Common Share
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
 
$
1.08
 
 
$
1.09
 
 
$
2.06
 
 
$
2.13
 
Diluted
 
$
1.08
 
 
$
1.08
 
 
$
2.05
 
 
$
2.12
 
 
See notes to consolidated financial statements.
 
4
 
 
 
EAGLE BANCORP, INC.
Consolidated Statements of Comprehensive Income (Unaudited)
(dollars in thousands)
  
 
 
Three Months Ended June 30 ,
 
 
Six Months Ended June 30 ,
 
 
 
2019
 
 
2018
 
 
2019
 
 
2018
 
Net Income
 
$
37,243
 
 
$
37,296
 
 
$
70,992
 
 
$
73,011
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unrealized gain (loss) on securities available for sale
 
 
5,925
 
 
 
(1,935
)
 
 
11,979
 
 
 
(7,058
)
Reclassification adjustment for net gains included in net income
 
 
(417
)
 
 
(20
)
 
 
(1,092
)
 
 
(51
)
Total unrealized gain (loss) on investment securities
 
 
5,508
 
 
 
(1,955
)
 
 
10,887
 
 
 
(7,109
)
Unrealized (loss) gain on derivatives
 
 
(513
)
 
 
692
 
 
 
(1,665
)
 
 
2,925
 
Reclassification adjustment for amounts included in net income
 
 
(236
)
 
 
64
 
 
 
(1,180
)
 
 
(1
)
Total unrealized (loss) gain on derivatives
 
 
(749
)
 
 
756
 
 
 
(2,845
)
 
 
2,924
 
Other comprehensive income (loss)
 
 
4,759
 
 
 
(1,199
)
 
 
8,042
 
 
 
(4,185
)
Comprehensive Income
 
$
42,002
 
 
$
36,097
 
 
$
79,034
 
 
$
68,826
 
 
See notes to consolidated financial statements.
 
5
 
 
EAGLE BANCORP, INC.
Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)
(dollars in thousands except share data)
 
 
 
Common
 
 
Additional Paid
 
 
Retained
 
 
Accumulated
Other Comprehensive
 
 
Total Shareholders’
 
 
 
Shares
 
 
Amount
 
 
in Capital
 
 
Earnings
 
 
Income (Loss)
 
 
Equity
 
Balance April 1, 2019
 
 
34,537,193
 
 
$
343
 
 
$
530,894
 
 
$
618,243
 
 
$
(992
)
 
$
1,148,488
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Income
 
 
 
 
 
 
 
 
 
 
 
37,243
 
 
 
 
 
 
37,243
 
Other comprehensive income, net of tax
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4,759
 
 
 
4,759
 
Stock-based compensation expense
 
 
 
 
 
 
 
 
1,471
 
 
 
 
 
 
 
 
 
1,471
 
Issuance of common stock related to options exercised, net of shares withheld for payroll taxes
 
 
750
 
 
 
 
 
 
37
 
 
 
 
 
 
 
 
 
37
 
Vesting of time based stock awards issued at date of grant, net of shares withheld for payroll taxes
 
 
(1,800
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Issuance of common stock related to employee stock purchase plan
 
 
3,710
 
 
 
 
 
 
183
 
 
 
 
 
 
 
 
 
183
 
Cash dividends declared ($0.22 per share)
 
 
 
 
 
 
 
 
 
 
 
(7,599
)
 
 
 
 
 
(7,599
)
Balance June 30, 2019
 
 
34,539,853
 
 
$
 
 
$
 
 
$
 
 
$
 
 
$
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance April 1, 2018
 
 
34,303,056
 
 
$
341
 
 
$
522,316
 
 
$
467,933
 
 
$
(5,410
)
 
$
985,180
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Income
 
 
 
 
 
 
 
 
 
 
 
37,296
 
 
 
 
 
 
37,296
 
Other comprehensive loss, net of tax
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1,199
)
 
 
(1,199
)
Stock-based compensation expense
 
 
 
 
 
 
 
 
1,667
 
 
 
 
 
 
 
 
 
1,667
 
Vesting of time based stock awards issued at date of grant, net of shares withheld for payroll taxes
 
 
(1,255
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Issuance of common stock related to employee stock purchase plan
 
 
3,270
 
 
 
 
 
 
193
 
 
 
 
 
 
 
 
 
193
 
Balance June 30, 2018
 
 
34,305,071
 
 
$
341
 
 
$
524,176
 
 
$
505,229
 
 
$
(6,609
)
 
$
1,023,137
 
 
See notes to consolidated financial statements.
 
6
 
 
EAGLE BANCORP, INC.
Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)
(dollars in thousands except share data)
 
 
 
Common
 
 
Additional Paid
 
 
Retained
 
 
Accumulated
Other
Comprehensive
 
 
Shareholders’
 
 
 
Shares
 
 
Amount
 
 
in Capital
 
 
Earnings
 
 
Income (Loss)
 
 
Equity
 
Balance January 1, 2019
 
 
34,387,919
 
 
$
342
 
 
$
528,380
 
 
$
584,494
 
 
$
(4,275
)
 
$
1,108,941
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Income
 
 
 
 
 
 
 
 
 
 
 
70,992
 
 
 
 
 
 
70,992
 
Other comprehensive income, net of tax
 
 
 
 
 
 
 
 
 
 
 
 
 
 
8,042
 
 
 
8,042
 
Stock-based compensation expense
 
 
 
 
 
 
 
 
3,501
 
 
 
 
 
 
 
 
 
3,501
 
Issuance of common stock related to options exercised, net of shares withheld for payroll taxes
 
 
26,784
 
 
 
 
 
 
332
 
 
 
 
 
 
 
 
 
332
 
Vesting of time based stock awards issued at date of grant, net of shares withheld for payroll taxes
 
 
(12,744
)
 
 
1
 
 
 
(1
)
 
 
 
 
 
 
 
 
 
Vesting of performance based stock awards, net of shares withheld for payroll taxes
 
 
17,655
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Time based stock awards granted
 
 
112,636
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Issuance of common stock related to employee stock purchase plan
 
 
7,603
 
 
 
 
 
 
373
 
 
 
 
 
 
 
 
 
373
 
Cash dividends declared ($ 0.22 per share)
 
 
 
 
 
 
 
 
 
 
 
(7,599
)
 
 
 
 
 
(7,599
)
Balance June 30, 2019
 
 
34,539,853
 
 
$
343
 
 
$
532,585
 
 
$
647,887
 
 
$
3,767
 
 
$
1,184,582
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance January 1, 2018
 
 
34,185,163
 
 
$
340
 
 
$
520,304
 
 
$
431,544
 
 
$
(1,750
)
 
$
950,438
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Income
 
 
 
 
 
 
 
 
 
 
 
73,011
 
 
 
 
 
 
73,011
 
Other comprehensive loss, net of tax
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(4,185
)
 
 
(4,185
)
Stock-based compensation expense
 
 
 
 
 
 
 
 
3,143
 
 
 
 
 
 
 
 
 
3,143
 
Issuance of common stock related to options exercised, net of shares withheld for payroll taxes
 
 
32,230
 
 
 
 
 
 
338
 
 
 
 
 
 
 
 
 
338
 
Vesting of time based stock awards issued at date of grant, net of shares withheld for payroll taxes
 
 
(13,361
)
 
 
1
 
 
 
(1
)
 
 
 
 
 
 
 
 
 
Time based stock awards granted
 
 
94,344
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Issuance of common stock related to employee stock purchase plan
 
 
6,695
 
 
 
 
 
 
392
 
 
 
 
 
 
 
 
 
392
 
Reclassification of the income tax effects of the Tax Cuts and Jobs Act from AOCI (ASU 2018 -02 )
 
 
 
 
 
 
 
 
 
 
 
674
 
 
 
(674
)
 
 
 
Balance June 30, 2018
 
 
34,305,071
 
 
$
341
 
 
$
524,176
 
 
$
505,229
 
 
$
(6,609
)
 
$
1,023,137
 
 
See notes to consolidated financial statements.
 
7
 
 
EAGLE BANCORP, INC.
Consolidated Statements of Cash Flows (Unaudited)
(dollars in thousands)
  
 
 
Six Months Ended June 30 ,
 
 
 
2019
 
 
2018
 
Cash Flows From Operating Activities:
 
 
 
 
 
 
 
 
Net Income
 
$
70,992
 
 
$
73,011
 
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
 
 
 
 
Provision for credit losses
 
 
6,960
 
 
 
3,619
 
Depreciation and amortization
 
 
3,567
 
 
 
3,561
 
Amortization of operating lease right-of-use assets
 
 
1,360
 
 
 
 
Gains on sale of loans
 
 
(3,311
)
 
 
(3,198
)
Gains on sale of GNMA loans
 
 
(71
)
 
 
 
Securities premium amortization (discount accretion), net
 
 
2,519
 
 
 
2,169
 
Origination of loans held for sale
 
 
(230,865
)
 
 
(224,643
)
Proceeds from sale of loans held for sale
 
 
215,995
 
 
 
222,444
 
Net increase in cash surrender value of BOLI
 
 
(854
)
 
 
(700
)
Deferred income tax expense (benefit)
 
 
2,807
 
 
 
1,533
 
Net gain on sale of investment securities
 
 
(1,475
)
 
 
(68
)
Stock-based compensation expense
 
 
3,501
 
 
 
3,143
 
Net tax benefits from stock compensation
 
 
10
 
 
 
108
 
Decrease (increase) in other assets
 
 
6,912
 
 
 
(12,644
)
Decrease in other liabilities
 
 
(29,242
)
 
 
(14,254
)
Net cash provided by operating activities
 
 
48,805
 
 
 
54,081
 
Cash Flows From Investing Activities:
 
 
 
 
 
 
 
 
Purchases of available-for-sale investment securities
 
 
(63,572
)
 
 
(150,528
)
Proceeds from maturities of available-for-sale securities
 
 
67,223
 
 
 
42,144
 
Proceeds from sale/call of available-for-sale securities
 
 
42,143
 
 
 
28,974
 
Purchases of Federal Reserve and Federal Home Loan Bank stock
 
 
(76,150
)
 
 
(42,179
)
Proceeds from redemption of Federal Reserve and Federal Home Loan Bank stock
 
 
65,663
 
 
 
42,628
 
Net increase in loans
 
 
(405,986
)
 
 
(241,944
)
Decrease (increase) in premises and equipment
 
 
1,675
 
 
 
(936
)
Net cash used in investing activities
 
 
(369,004
)
 
 
(321,841
)
Cash Flows From Financing Activities:
 
 
 
 
 
 
 
 
(Decrease) increase in deposits
 
 
(24,393
)
 
 
414,774
 
Increase (decrease) in customer repurchase agreements
 
 
1,256
 
 
 
(47,426
)
Increase (decrease) in short-term borrowings
 
 
225,000
 
 
 
(25,000
)
Proceeds from exercise of equity compensation plans
 
 
332
 
 
 
338
 
Proceeds from employee stock purchase plan
 
 
373
 
 
 
392
 
Cash dividends paid
 
 
(7,599
)
 
 
 
Net cash provided by financing activities
 
 
194,969
 
 
 
343,078
 
Net (Decrease) Increase In Cash and Cash Equivalents
 
 
(125,230
)
 
 
75,318
 
Cash and Cash Equivalents at Beginning of Period
 
 
321,864
 
 
 
190,473
 
Cash and Cash Equivalents at End of Period
 
$
196,634
 
 
$
265,791
 
Supplemental Cash Flows Information:
 
 
 
 
 
 
 
 
Interest paid
 
$
51,735
 
 
$
30,242
 
Income taxes paid
 
$
31,850
 
 
$
31,200
 
Non-Cash Investing Activities
 
 
 
 
 
 
 
 
Initial recognition of operating lease right-of-use assets
 
$
29,574
 
 
$
 
Initial recognition of operating lease liabilities
 
$
33,535
 
 
$
 
 
See notes to consolidated financial statements. 
 
8
 
 
EAGLE BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
Note 1. Summary of Significant Accounting Policies
 
 
Basis of Presentation
 
The Consolidated Financial Statements include the accounts of Eagle Bancorp, Inc. and its subsidiaries (the “Company”). Active subsidiaries include: EagleBank (the “Bank”), Eagle Insurance Services, LLC, Bethesda Leasing, LLC, and Landroval Municipal Finance, Inc., with all significant intercompany transactions eliminated.
 
The Consolidated Financial Statements of the Company included herein are unaudited. The Consolidated Financial Statements reflect all adjustments, consisting of normal recurring accruals that in the opinion of management, are necessary to present fairly the results for the periods presented. The amounts as of and for the year ended December 31, 2018 were derived from audited Consolidated Financial Statements. Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. The Company applies the accounting policies contained in Note 1 to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. There have been no significant changes to the Company’s Accounting Policies as disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 except as indicated in the “Accounting Standards Adopted in 2019” section below. The Company believes that the disclosures are adequate to make the information presented not misleading. Certain reclassifications have been made to amounts previously reported to conform to the current period presentation.
 
These statements should be read in conjunction with the audited Consolidated Financial Statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. Operating results for the three and six months ended June 30, 2019 are not necessarily indicative of the results of operations to be expected for the remainder of the year, or for any other period.
 
 
 
Nature of Operations
 
The Company, through the Bank, conducts a full service community banking business, primarily in Northern Virginia, Suburban Maryland, and Washington, D.C. The primary financial services offered by the Bank include real estate, commercial and consumer lending, as well as traditional deposit and repurchase agreement products. The Bank is also active in the origination and sale of residential mortgage loans, the origination of small business loans, and the origination, securitization and sale of multifamily Federal Housing Administration (“FHA”) loans. The guaranteed portion of small business loans, guaranteed by the Small Business Administration (“SBA”), is typically sold to third party investors in a transaction apart from the loan’s origination. The Bank offers its products and services through twenty banking offices, five lending centers and various electronic capabilities, including remote deposit services and mobile banking services. Eagle Insurance Services, LLC, a subsidiary of the Bank, offers access to insurance products and services through a referral program with a third party insurance broker. Landroval Municipal Finance, Inc., a subsidiary of the Bank, focuses on lending to municipalities by buying debt on the public market as well as direct purchase issuance.
 
 
 
Use of Estimates
 
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. Actual results may differ from those estimates and such differences could be material to the financial statements.
 
 
 
 
 
New Authoritative Accounting Guidance
 
Accounting Standards Adopted in 2019
 
ASU 2016-02, “Leases (Topic 842).” ASU 2016-02 has, among other things, required lessees to recognize a lease liability, which is a lessee’s obligation to make lease payments, measured on a discounted basis; and a right-of-use (“ROU”) asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. ASU 2016-02 did not significantly change lease accounting requirements applicable to lessors; however, certain changes were made to align, where necessary, lessor accounting with the lessee accounting model and ASC Topic 606, “Revenue from Contracts with Customers.” ASU 2016-02 became effective for us on January 1, 2019 and initially required transition using a modified retrospective approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. In July 2018, the FASB issued ASU 2018-11, “Leases (Topic 842) – Targeted Improvements,” which, among other things, provides an additional transition method that allows entities to not apply the guidance in ASU 2016-02 in the comparative periods presented in the financial statements and instead recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. In December 2018, the FASB also issued ASU 2018-20, “Leases (Topic 842) - Narrow-Scope Improvements for Lessors,” which provides for certain policy elections and changes lessor accounting for sales and similar taxes and certain lessor costs. Upon adoption of ASU 2016-02, ASU 2018-11 and ASU 2018-20 on January 1, 2019, we recognized ROU assets of $29.6 million and related lease liabilities of $33.5 million which reduced the March 31, 2019 total risk based capital ratio by six basis points. We elected to apply certain practical expedients provided under ASU 2016-02 whereby we did not reassess (i) whether any expired or existing contracts were or contained leases, (ii) the lease classification for any expired or existing leases and (iii) initial direct costs for any existing leases. We also elected to not apply the recognition requirements of ASU 2016-02 to any short-term leases (as defined by related accounting guidance). We utilized the modified-retrospective transition approach prescribed by ASU 2018-11.
 
Accounting Standards Pending Adoption
 
A
SU 2016-13,
“Measurement of Credit Losses on Financial Instruments (Topic 326).”
This ASU significantly changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. In issuing the standard, the FASB is responding to criticism that today’s guidance for determining the allowance for credit losses delays recognition of expected future credit losses. The standard will replace today’s “incurred loss” approach with an “expected loss” model. The new model, referred to as the current expected credit loss (“CECL”) model, will apply to: (1) financial assets subject to credit losses and measured at amortized cost, and (2) certain off-balance sheet credit exposures. This includes, but is not limited to, loans, leases, held-to-maturity securities, loan commitments, and financial guarantees. The CECL model does not apply to available-for-sale (“AFS”) debt securities. For AFS debt securities with unrealized losses, entities will measure credit losses in a manner similar to what they do today, except that the losses will be recognized as allowances rather than reductions in the amortized cost of the securities. The ASU also simplifies the accounting model for purchased credit-impaired debt securities and loans. ASU 2016-13 also expands the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating the allowance for loan and lease losses. In addition, entities will need to disclose the amortized cost balance for each class of financial asset by credit quality indicator, disaggregated by the year of origination. ASU No. 2016-13 is effective for the Company beginning on January 1, 2020. Entities will apply any changes resulting from the application of the new standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (i.e., modified retrospective approach). We have substantially concluded our data gap analysis and have contracted with third parties to develop and evaluate a model to comply with CECL requirements. We have entered our data into the model and are working on the qualitative and forecasting aspects of the methodology. We have established a steering committee with representation from various departments across the enterprise. The committee has agreed to a project plan and has regular meetings to ensure adherence to our implementation timeline. The Company is currently evaluating the provisions of ASU No. 2016-13 to determine the potential impact the new standard will have on the Company's Consolidated Financial Statements.
 
 
 
Note 2. Cash and Due from Banks
 
Regulation D of the Federal Reserve Act requires that banks maintain noninterest reserve balances with the Federal Reserve Bank based principally on the type and amount of their deposits. During 2019, the Bank maintained balances at the Federal Reserve sufficient to meet reserve requirements, as well as significant excess reserves, on which interest is paid.
 
Additionally, the Bank maintains interest bearing balances with the Federal Home Loan Bank of Atlanta and noninterest bearing balances with domestic correspondent banks as compensation for services they provide to the Bank.
 
 
 
10 
 
 
 
Note 3. Investment Securities Available-for-Sale
 
 
Amortized cost and estimated fair value of securities available-for-sale are summarized as follows:
 
 
 
 
 
 
Gross
 
 
Gross
 
 
Estimated
 
June 30, 2019
 
Amortized
 
 
Unrealized
 
 
Unrealized
 
 
Fair
 
(dollars in thousands)
 
Cost
 
 
Gains
 
 
Losses
 
 
Value
 
U. S. agency securities
 
$
225,389
 
 
$
940
 
 
$
659
 
 
$
225,670
 
Residential mortgage backed securities
 
 
440,243
 
 
 
5,186
 
 
 
1,884
 
 
 
443,545
 
Municipal bonds
 
 
67,835
 
 
 
1,503
 
 
 
 
 
 
69,338
 
Corporate bonds
 
 
6,502
 
 
 
70
 
 
 
 
 
 
6,572
 
Other equity investments
 
 
218
 
 
 
 
 
 
 
 
 
218
 
 
 
$
740,187
 
 
$
7,699
 
 
$
2,543
 
 
$
745,343
 
 
 
 
 
 
 
Gross
 
 
Gross
 
 
Estimated
 
December 31, 2018
 
Amortized
 
 
Unrealized
 
 
Unrealized
 
 
Fair
 
(dollars in thousands)
 
Cost
 
 
Gains
 
 
Losses
 
 
Value
 
U. S. agency securities
 
$
260,150
 
 
$
228
 
 
$
4,033
 
 
$
256,345
 
Residential mortgage backed securities
 
 
477,949
 
 
 
1,575
 
 
 
7,293
 
 
 
472,231
 
Municipal bonds
 
 
45,814
 
 
 
439
 
 
 
484
 
 
 
45,769
 
Corporate bonds
 
 
9,503
 
 
 
79
 
 
 
6
 
 
 
9,576
 
Other equity investments
 
 
218
 
 
 
 
 
 
 
 
 
218
 
 
 
$
793,634
 
 
$
2,321
 
 
$
11,816
 
 
$
784,139
 
 
 
In addition, at June 30, 2019 and December 31, 2018 the Company held $34.0 million and $23.5 million, respectively, in equity securities in a combination of Federal Reserve Bank (“FRB”) and Federal Home Loan Bank (“FHLB”) stocks, which are required to be held for regulatory purposes and which are not marketable, and therefore are carried at cost.
 
 
Gross unrealized losses and fair value by length of time that the individual available-for-sale securities have been in a continuous unrealized loss position are as follows:
 
 
 
 
 
 
Less than
 
 
12Months
 
 
 
 
 
 
 
 
 
12Months
 
 
or Greater
 
 
Total
 
 
 
 
 
 
Estimated
 
 
 
 
 
Estimated
 
 
 
 
 
Estimated
 
 
 
 
June 30, 2019
 
Number of
 
 
Fair
 
 
Unrealized
 
 
Fair
 
 
Unrealized
 
 
Fair
 
 
Unrealized
 
(dollars in thousands)
 
Securities
 
 
Value
 
 
Losses
 
 
Value
 
 
Losses
 
 
Value
 
 
Losses
 
U. S. agency securities
 
 
39
 
 
$
26,149
 
 
$
50
 
 
$
99,252
 
 
$
609
 
 
$
125,401
 
 
$
659
 
Residential mortgage backed securities
 
 
103
 
 
 
4,234
 
 
 
13
 
 
 
174,316
 
 
 
1,871
 
 
 
178,550
 
 
 
1,884
 
Municipal bonds
 
 
2
 
 
 
1,500
 
 
 
 
 
 
 
 
 
 
 
 
1,500
 
 
 
 
 
 
 
144
 
 
$
31,883
 
 
$
63
 
 
$
273,568
 
 
$
2,480
 
 
$
305,451
 
 
$
2,543
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Less than
 
 
12Months
 
 
 
 
 
 
 
 
 
 
 
 
12Months
 
 
or Greater
 
 
Total
 
 
 
 
 
 
Estimated
 
 
 
 
 
Estimated
 
 
 
 
 
Estimated
 
 
 
 
December 31, 2018
 
Number of
 
 
Fair
 
 
Unrealized
 
 
Fair
 
 
Unrealized
 
 
Fair
 
 
Unrealized
 
(dollars in thousands)
 
Securities
 
 
Value
 
 
Losses
 
 
Value
 
 
Losses
 
 
Value
 
 
Losses
 
U. S. agency securities
 
 
58
 
 
$
72,679
 
 
$
533
 
 
$
144,636
 
 
$
3,500
 
 
$
217,315
 
 
$
4,033
 
Residential mortgage backed securities
 
 
151
 
 
 
61,199
 
 
 
527
 
 
 
225,995
 
 
 
6,766
 
 
 
287,194
 
 
 
7,293
 
Municipal bonds
 
 
11
 
 
 
4,299
 
 
 
50
 
 
 
17,041