Note 1Summary of Significant Accounting Policies
The Consolidated Financial Statements include the accounts of Eagle Bancorp, Inc. and its subsidiaries (the "Company"), EagleBank (the "Bank"), Eagle Commercial
Ventures, LLC ("ECV"), Eagle Insurance Services, LLC, and Bethesda Leasing, LLC, with all significant intercompany transactions eliminated. The investment in subsidiaries is
recorded on the Company's books (Parent Only) on the basis of its equity in the net assets of the subsidiary. The accounting and reporting policies of the Company conform to generally accepted
accounting principles ("GAAP") in the United States of America and to general practices in the banking industry. Certain reclassifications have been made to amounts previously reported to conform to
the classification made in 2013. The following is a summary of the more significant accounting policies.
Nature of Operations
The Company, through the Bank, conducts a full service community banking business, primarily in Montgomery County, Maryland,
Washington, D.C., and Northern Virginia. 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 and the origination of small business 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. As of December 31, 2013, the Bank offers its products and services through
eighteen banking offices 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. Eagle Commercial Ventures, LLC, a direct subsidiary of the Company, provides
subordinated financing for the acquisition, development and construction of real estate projects. These transactions involve higher levels of risk, together with commensurate higher returns. Refer to
Higher Risk LendingRevenue Recognition below.
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.
Cash Flows
For purposes of reporting cash flows, cash and cash equivalents include cash and due from banks, federal funds sold, and interest
bearing deposits with other banks which have an original maturity of three months or less.
Loans Held for Sale
The Company engages in sales of residential mortgage loans and the guaranteed portion of SBA loans originated by the Bank. Loans held
for sale are carried at the lower of aggregate cost or fair value. Fair value is derived from secondary market quotations for similar instruments. Gains and losses on sales of
87
Table of Contents
Eagle Bancorp, Inc.
Notes to Consolidated Financial Statements
for the Years Ended December 31, 2013, 2012 and 2011: (Continued)
Note 1Summary of Significant Accounting Policies (Continued)
these
loans are recorded as a component of noninterest income in the Consolidated Statements of Operations.
The
Company's current practice is to sell residential mortgage loans on a servicing released basis, and, therefore, it has no intangible asset recorded for the value of such servicing as
of December 31, 2013 and December 31, 2012. The sale of the guaranteed portion of SBA loans on a servicing retained basis gives rise to an Excess Servicing Asset, which is computed on a
loan by loan basis with the unamortized amount being included in Intangible assets in the Consolidated Balance Sheets. This Excess Servicing Asset is being amortized on a straight-line basis (with
adjustment for prepayments) as an offset to servicing fees collected and is included in Other income in the Consolidated Statement of Operations.
The
Company enters into commitments to originate residential mortgage loans whereby the interest rate on the loan is determined prior to funding (i.e. rate lock commitments). Such
rate lock commitments on mortgage loans to be sold in the secondary market are considered to be derivatives but are effectively offset by whole loan purchase commitments from various investors. The
period of time between issuance of a loan commitment to the customer and closing and sale of the loan to an investor generally ranges from 30 to 90 days under current market conditions. The
Company protects itself from changes in interest rates through the use of best efforts forward delivery commitments, whereby the investor commits to purchase a loan at a price representing a premium
on the day the borrower commits to an interest rate with the intent that the buyer/investor has assumed the interest rate risk on the loan. As a result, the Company is not generally exposed to losses
on loans sold nor will it realize gains, related to rate lock commitments due to changes in interest rates.
The
market values of rate lock commitments and best efforts contracts are not readily ascertainable with precision because rate lock commitments and best efforts contracts are not
actively traded. Because of the high correlation between rate lock commitments and best efforts contracts, no gain or loss should occur on the rate lock commitments.
In
circumstances where the Company does not deliver the whole loan to an investor, but rather elects to retain the loan in its portfolio, the loan is transferred from held for sale at
fair value.
Investment Securities
The Company has no securities classified as trading, nor are any investment securities classified as held to maturity. Marketable
equity securities and debt securities not
classified as held to maturity or trading are classified as available-for-sale. Securities available-for-sale are acquired as part of the Company's asset/liability management strategy and may be sold
in response to changes in interest rates, current market conditions, loan demand, changes in prepayment risk and other factors. Securities available-for-sale are carried at fair value, with unrealized
gains or losses being reported as accumulated other comprehensive income/(loss), a separate component of shareholders' equity, net of deferred income tax. Realized gains and losses, using the specific
identification method, are included as a separate component of noninterest income in the Consolidated Statements of Operations.
Premiums
and discounts on investment securities are amortized/accreted to the earlier of call or maturity based on expected lives, which lives are adjusted based on prepayments and call
optionality. Declines in the fair value of individual available-for-sale securities below their cost that are other-than-temporary in nature result in write-downs of the individual securities to their
fair value. Factors
88
Table of Contents
Eagle Bancorp, Inc.
Notes to Consolidated Financial Statements
for the Years Ended December 31, 2013, 2012 and 2011: (Continued)
Note 1Summary of Significant Accounting Policies (Continued)
affecting
the determination of whether other-than-temporary impairment has occurred include a downgrading of the security by a rating agency, a significant deterioration in the financial condition of
the issuer, or a change in management's intent and ability to hold a security for a period of time sufficient to allow for any anticipated recovery in fair value. Management systematically evaluates
investment securities for other-than-temporary declines in fair value on a quarterly basis. This analysis requires management to consider various factors, which include: (1) duration and
magnitude of the decline in value; (2) the financial condition of the issuer or issuers: and (3) structure of the security.
The
entire amount of an impairment loss is recognized in earnings only when: (1) the Company intends to sell the debt security; (2) it is more likely than not that the
Company will have to sell the security before recovery of its amortized cost basis; or (3) the Company does not expect to recover the entire amortized cost basis of the security. In all other
situations, only the portion of the impairment loss representing the credit loss must be recognized in earnings, with the remaining portion being recognized in shareholders' equity as comprehensive
income, net of deferred taxes.
Loans
Loans are stated at the principal amount outstanding, net of unamortized deferred costs and fees. Interest income on loans is accrued
at the contractual rate on the principal amount outstanding. It is the Company's policy to discontinue the accrual of interest when
circumstances indicate that collection is doubtful. Deferred fees and costs on loans are being amortized on the interest method over the term of the loan.
Management
considers loans impaired when, based on current information, it is probable that the Company will not collect all principal and interest payments according to contractual
terms. Loans are evaluated for impairment in accordance with the Company's portfolio monitoring and ongoing risk assessment procedures. Management considers the financial condition of the borrower,
cash flow of the borrower, payment status of the loan, and the value of the collateral, if any, securing the loan. Generally, impaired loans do not include large groups of smaller balance homogeneous
loans such as residential real estate and consumer type loans which are evaluated collectively for impairment and are generally placed on nonaccrual when the loan becomes 90 days past due as to
principal or interest. Loans specifically reviewed for impairment are not considered impaired during periods of "minimal delay" in payment (ninety days or less) provided eventual collection of all
amounts due is expected. The impairment of a loan is measured based on the present value of expected future cash flows discounted at the loan's effective interest rate, or the fair value of the
collateral if repayment is expected to be provided solely by the collateral. In appropriate circumstances, interest income on impaired loans may be recognized on the cash basis.
Higher Risk LendingRevenue Recognition
The Company has occasionally made higher risk acquisition, development, and construction ("ADC") loans that entail higher risks than
ADC loans made following normal underwriting practices ("higher risk loan transactions"). These higher risk loan transactions are currently made through the Company's subsidiary, ECV. This activity is
limited as to individual transaction amount and total exposure amounts, based on capital levels, and is carefully monitored. The loans are carried on the balance sheet at amounts outstanding and meet
the loan classification requirements of the Accounting Standard Executive
89
Table of Contents
Eagle Bancorp, Inc.
Notes to Consolidated Financial Statements
for the Years Ended December 31, 2013, 2012 and 2011: (Continued)
Note 1Summary of Significant Accounting Policies (Continued)
Committee
("AcSEC") guidance reprinted from the CPA Letter, Special Supplement, dated February 10, 1986 (also referred to as Exhibit 1 to AcSEC Practice Bulletin No. 1).
Additional interest earned on these higher risk loan transactions (as defined in the individual loan agreements) is recognized as realized under the provisions contained in AcSEC's guidance reprinted
from the CPA Letter, Special Supplement, dated February 10, 1986 (also referred to as Exhibit 1 to AcSEC Practice Bulletin No.1) and Staff Accounting Bulletin No. 101 (Revenue
Recognition in Financial Statements). Certain additional interest is included as a component of noninterest income. ECV recorded no additional interest on higher risk transactions during 2013, 2012 or
2011 (although normal interest income was recorded) and had five higher risk lending transactions outstanding as of December 31, 2013, as
compared to four higher risk lending transaction outstanding as of December 31, 2012, amounting to $7.4 million and $3.5 million, respectively.
Allowance for Credit Losses
The allowance for credit losses represents an amount, which in management's judgment, is adequate to absorb probable losses on existing
loans and other extensions of credit that may become uncollectible. The adequacy of the allowance for credit losses is determined through careful and continuous review and evaluation of the loan
portfolio and involves the balancing of a number of factors to establish a prudent level of allowance. Among the factors considered in evaluating the adequacy of the allowance for credit losses are
lending risks associated with growth and entry into new markets, loss allocations for specific credits, the level of the allowance to nonperforming loans, historical loss experience, economic
conditions, portfolio trends and credit concentrations, changes in the size and character of the loan portfolio, and management's judgment with respect to current and expected economic conditions and
their impact on the existing loan portfolio. Allowances for impaired loans are generally determined based on collateral values. Loans or any portion thereof deemed uncollectible are charged against
the allowance, while recoveries are credited to the allowance. Management adjusts the level of the allowance through the provision for credit losses, which is recorded as a current period operating
expense. The allowance for credit losses consists of allocated and unallocated components.
The
components of the allowance for credit losses represent an estimation done pursuant to Accounting Standards Codification ("ASC") Topic 450,
"Contingencies,"
or ASC Topic 310,
"Receivables."
Specific allowances are established in cases where
management has identified significant conditions or circumstances related to a specific credit that management believes indicate the probability that a loss may be incurred. For potential problem
credits for which specific allowance amounts have not been determined, the Company establishes allowances according to the application of credit risk factors. These factors are set by management and
approved by the appropriate Board committee to reflect its assessment of the relative level of risk inherent in each risk grade. A third component of the allowance computation, termed a nonspecific or
environmental factors allowance, is based upon management's evaluation of various environmental conditions that are not directly measured in the determination of either the specific allowance or
formula allowance. Such conditions include general economic and business conditions affecting key lending areas, credit quality trends (including trends in delinquencies and nonperforming loans
expected to result from existing conditions), loan volumes and concentrations, specific industry conditions within portfolio categories, recent loss experience in particular loan categories, duration
of the current business cycle, bank regulatory examination results, findings of outside review consultants, and management's judgment with respect to various other conditions including credit
administration and
90
Table of Contents
Eagle Bancorp, Inc.
Notes to Consolidated Financial Statements
for the Years Ended December 31, 2013, 2012 and 2011: (Continued)
Note 1Summary of Significant Accounting Policies (Continued)
management
and the quality of risk identification systems. Executive management reviews these environmental conditions quarterly, and documents the rationale for all changes.
Management
believes that the allowance for credit losses is adequate; however, determination of the allowance is inherently subjective and requires significant estimates. While
management uses available information to recognize losses on loans, future additions to the allowance may be necessary based on changes in economic conditions. Evaluation of the potential effects of
these factors on estimated losses involves a high degree of uncertainty, including the strength and timing of economic cycles and concerns over the effects of a prolonged economic downturn in the
current cycle. In addition, various regulatory agencies, as an integral part of their examination process, and independent consultants engaged by the Bank, periodically review the Bank's loan
portfolio and allowance for credit losses. Such review may result in recognition of additions to the allowance based on their judgments of information available to them at the time of their
examination.
Premises and Equipment
Premises and equipment are stated at cost less accumulated depreciation and amortization computed using the straight-line method for
financial reporting purposes. Premises and equipment are depreciated over the useful lives of the assets, which generally range from seven years for furniture, fixtures and equipment, three to five
years for computer software and hardware, and ten to forty years for buildings and building improvements. Leasehold improvements are amortized over the terms of the respective leases, which may
include renewal options where management has the positive intent to exercise such options, or the estimated useful lives of the improvements, whichever is shorter. The costs of major renewals and
betterments are capitalized, while the costs of ordinary maintenance and repairs are expensed as incurred. These costs are included as a component of premises and equipment expenses on the
Consolidated Statements of Operations.
Other Real Estate Owned (OREO)
Assets acquired through loan foreclosure are held for sale and are initially recorded at fair value less estimated selling costs when
acquired, establishing a new cost basis. The new basis is supported by recent appraisals. Costs after acquisition are generally expensed. If the fair value of the asset declines, a write-down is
recorded through noninterest expense. The valuation of foreclosed assets is subjective in nature and may be adjusted in the future because of changes in market conditions or appraised values.
Goodwill and Other Intangible Assets
Goodwill and other intangible assets are subject to impairment testing at least annually, or when events or changes in circumstances
indicate the assets might be impaired. Intangible assets (other than goodwill) are amortized to expense using accelerated or straight-line methods over their respective estimated useful lives. The
Company's testing of potential goodwill impairment at December 31, 2013, resulted in no impairment being recorded.
Customer Repurchase Agreements
The Company enters into agreements under which it sells securities subject to an obligation to repurchase the same securities. Under
these arrangements, the Company may transfer legal control over
91
Table of Contents
Eagle Bancorp, Inc.
Notes to Consolidated Financial Statements
for the Years Ended December 31, 2013, 2012 and 2011: (Continued)
Note 1Summary of Significant Accounting Policies (Continued)
the
assets but still retain effective control through an agreement that both entitles and obligates the Company to repurchase the assets. As a result, securities sold under agreements to repurchase
are accounted for as collateralized financing arrangements and not as a sale and subsequent repurchase of securities. The agreements are entered into primarily as accommodations for large commercial
deposit customers. The obligation to repurchase the securities is reflected as a liability in the Company's Consolidated Balance Sheets, while the securities underlying the securities sold under
agreements to repurchase remain in the respective assets accounts and are delivered to and held as collateral by third party trustees.
Marketing and Advertising
Marketing and advertising costs are generally expensed as incurred.
Income Taxes
The Company employs the liability method of accounting for income taxes as required by ASC Topic 740,
"
Income Taxes
." Under the liability method, deferred-tax assets and liabilities are determined based on differences between the financial statement
carrying amounts and the tax bases of existing assets and liabilities (i.e., temporary timing differences) and are measured at the enacted rates that will be in effect when these differences
reverse. The Company utilizes statutory requirements for its income tax accounting, and avoids risks associated with potentially problematic tax positions that may incur challenge upon audit, where an
adverse outcome is more likely than not. Therefore, no provisions are made in the Company's tax reserves for uncertain tax positions or accompanying potential tax penalties and interest for
underpayments of income taxes. In accordance with ASC Topic 740, the Company may establish a reserve against deferred tax assets in those cases where realization is less than certain, although no such
reserves exist at either December 31, 2013 or December 31, 2012.
Transfer of Financial Assets
Transfers of financial assets are accounted for as sales, when control over the assets has been surrendered. Control over transferred
assets is deemed to be surrendered when: (1) the assets have been isolated from the Company; (2) the transferee obtain the right (free of conditions that constrain it from taking
advantage of that right) to pledge or exchange the transferred assets; and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase
them before their maturity. In certain cases, the recourse to the Bank to repurchase assets may exist but be deemed immaterial based on the specific facts and circumstances.
Earnings per Common Share
Basic net income per common share is derived by dividing net income available to common shareholders by the weighted-average number of
common shares outstanding during the period measured. Diluted earnings per common share is computed by dividing net income available to common shareholders by the weighted-average number of common
shares outstanding during the period measured including the potential dilutive effects of common stock equivalents. Earnings per share amounts for periods ending prior to June 30, 2013 have
been adjusted to reflect a 10% stock dividend paid on June 14, 2013.
92
Table of Contents
Eagle Bancorp, Inc.
Notes to Consolidated Financial Statements
for the Years Ended December 31, 2013, 2012 and 2011: (Continued)
Note 1Summary of Significant Accounting Policies (Continued)
Stock-Based Compensation
In accordance with ASC Topic 718,
"Compensation,"
the Company records as compensation
expense an amount equal to the amortization (over the remaining service period) of the fair value (computed at the date of option grant) of any outstanding fixed stock option grant and restricted
stock award, which vest subsequent to December 31, 2005. Compensation expense on variable stock option grants (i.e. performance based grants) if any, is recorded based on the probability
of achievement of the goals underlying the performance grant. Refer to Note 13 for a description of stock-based compensation awards, activity and expense for the years ended December 31,
2013, 2012 and 2011.
New Authoritative Accounting Guidance
In February 2013, the FASB issued ASU 2013-02, "Comprehensive Income (Topic 220)Reporting of Amounts Reclassified Out of
Accumulated Other Comprehensive Income." ASU 2013-02 amends recent guidance related to the reporting of comprehensive income to enhance the reporting of reclassifications out of accumulated other
comprehensive income. The Company adopted the provisions of ASU No. 2013-02 effective January 1, 2013. As the Company provided these required disclosures in the notes to the Consolidated
Financial Statements, the adoption of ASU No. 2013-02 had no impact on the Company's consolidated statements of income and condition. See Note 19 to the consolidated financial statements
for the disclosures required by ASU No. 2013-02.
Note 2Cash and Due from Banks
Regulation D of the Federal Reserve Act requires that banks maintain reserve balances with the Federal Reserve Bank based principally on the type and amount of their deposits.
During 2013, the Bank maintained balances at the Federal Reserve (in addition to vault cash) to meet the reserve requirements as well as balances to partially compensate for services. Late in 2008,
the Federal Reserve in connection with the Emergency Economic Stabilization Act of 2008 began paying a nominal amount of interest on balances held, which interest on excess reserves was increased
under provisions of the Dodd Frank Wall Street Reform and Consumer Protection Act passed in July 2010. Additionally, the Bank maintains interest-bearing balances with the Federal Home Loan Bank of
Atlanta and noninterest bearing balances with six domestic correspondent banks as compensation for services they provide to the Bank.
93
Table of Contents
Eagle Bancorp, Inc.
Notes to Consolidated Financial Statements
for the Years Ended December 31, 2013, 2012 and 2011: (Continued)
Note 3Investment Securities Available-for-Sale
The amortized cost and estimated fair values of investments available-for-sale at December 31, 2013 and 2012 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2013
|
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Estimated
Fair
Value
|
|
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
U. S. Government agency securities
|
|
$
|
46,640
|
|
$
|
843
|
|
$
|
148
|
|
$
|
47,335
|
|
Residential mortgage backed securities
|
|
|
234,206
|
|
|
1,143
|
|
|
6,675
|
|
|
228,674
|
|
Municipal bonds
|
|
|
102,423
|
|
|
2,017
|
|
|
2,700
|
|
|
101,740
|
|
Other equity investments
|
|
|
396
|
|
|
|
|
|
12
|
|
|
384
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
383,665
|
|
$
|
4,003
|
|
$
|
9,535
|
|
$
|
378,133
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2012
|
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Estimated
Fair
Value
|
|
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
U. S. Government agency securities
|
|
$
|
47,606
|
|
$
|
1,477
|
|
$
|
1
|
|
$
|
49,082
|
|
Residential mortgage backed securities
|
|
|
170,649
|
|
|
2,730
|
|
|
296
|
|
|
173,083
|
|
Municipal bonds
|
|
|
72,050
|
|
|
5,314
|
|
|
51
|
|
|
77,313
|
|
Other equity investments
|
|
|
407
|
|
|
|
|
|
65
|
|
|
342
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
290,712
|
|
$
|
9,521
|
|
$
|
413
|
|
$
|
299,820
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
unrealized losses that exist are generally the result of changes in market interest rates and interest spread relationships since original purchases. The weighted average duration of
debt securities, which comprise 99.9% of total investment securities, is relatively short at 4.3 years. The gross unrealized loss on other equity investments represents common stock of one
local banking company owned by the Company, and traded on a broker "bulletin board" exchange. The estimated fair value is determined by broker quoted prices. The unrealized loss is deemed a result of
generally weak valuations for many smaller community bank stocks. The individual banking company is profitable, has good financial trends and has a satisfactory capital position. If quoted prices are
not available, fair value is measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security's credit
rating, prepayment assumptions and other factors such as credit loss assumptions. The Company does not believe that the investment securities that were in an unrealized loss position as of
December 31, 2013 represent an other-than-temporary impairment for the reasons noted. The Company does not intend to sell the investments and it is more likely than not that the Company will
not have to sell the securities before recovery of its amortized cost basis, which may be at maturity. In addition, at December 31, 2013, the Company held $11.3 million in equity
securities in a combination of Federal Reserve Bank ("FRB") and Federal Home Loan Bank ("FHLB") stocks, which are held for regulatory purposes and are not marketable.
94
Table of Contents
Eagle Bancorp, Inc.
Notes to Consolidated Financial Statements
for the Years Ended December 31, 2013, 2012 and 2011: (Continued)
Note 3Investment Securities Available-for-Sale (Continued)
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 as of December 31,
2013 and 2012 are as follows:
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 12 Months
|
|
12 Months or Greater
|
|
Total
|
|
December 31, 2013
|
|
Estimated
Fair Value
|
|
Unrealized
Losses
|
|
Estimated
Fair Value
|
|
Unrealized
Losses
|
|
Estimated
Fair Value
|
|
Unrealized
Losses
|
|
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U. S. Government agency securities
|
|
$
|
4,782
|
|
$
|
148
|
|
$
|
|
|
$
|
|
|
$
|
4,782
|
|
$
|
148
|
|
Residential mortgage backed securities
|
|
|
155,475
|
|
|
5,992
|
|
|
15,658
|
|
|
683
|
|
|
171,133
|
|
|
6,675
|
|
Municipal bonds
|
|
|
50,450
|
|
|
2,512
|
|
|
3,196
|
|
|
188
|
|
|
53,646
|
|
|
2,700
|
|
Other equity investments
|
|
|
|
|
|
|
|
|
165
|
|
|
12
|
|
|
165
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
210,707
|
|
$
|
8,652
|
|
$
|
19,019
|
|
$
|
883
|
|
$
|
229,726
|
|
$
|
9,535
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
Less than 12 Months
|
|
12 Months or Greater
|
|
Total
|
|
December 31, 2012
|
|
Estimated
Fair Value
|
|
Unrealized
Losses
|
|
Estimated
Fair Value
|
|
Unrealized
Losses
|
|
Estimated
Fair Value
|
|
Unrealized
Losses
|
|
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U. S. Government agency securities
|
|
$
|
2,999
|
|
$
|
1
|
|
$
|
|
|
$
|
|
|
$
|
2,999
|
|
$
|
1
|
|
Residential mortgage backed securities
|
|
|
44,992
|
|
|
263
|
|
|
2,743
|
|
|
33
|
|
|
47,735
|
|
|
296
|
|
Municipal bonds
|
|
|
3,964
|
|
|
51
|
|
|
|
|
|
|
|
|
3,964
|
|
|
51
|
|
Other equity investments
|
|
|
|
|
|
|
|
|
112
|
|
|
65
|
|
|
112
|
|
|
65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
51,955
|
|
$
|
315
|
|
$
|
2,855
|
|
$
|
98
|
|
$
|
54,810
|
|
$
|
413
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
amortized cost and estimated fair values of investments available-for-sale at December 31, 2013 and 2012 by contractual maturity are shown below. Expected maturities will
differ from contractual
maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2013
|
|
December 31, 2012
|
|
(dollars in thousands)
|
|
Amortized
Cost
|
|
Estimated
Fair Value
|
|
Amortized
Cost
|
|
Estimated
Fair Value
|
|
U. S. Government agency securities maturing:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One year or less
|
|
$
|
19,025
|
|
$
|
19,133
|
|
$
|
5,038
|
|
$
|
5,053
|
|
After one year through five years
|
|
|
27,615
|
|
|
28,202
|
|
|
42,568
|
|
|
44,029
|
|
Residential mortgage backed securities
|
|
|
234,206
|
|
|
228,674
|
|
|
170,649
|
|
|
173,083
|
|
Municipal bonds maturing:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
After one year through five years
|
|
|
25,718
|
|
|
26,008
|
|
|
11,469
|
|
|
11,978
|
|
Five years through ten years
|
|
|
76,705
|
|
|
75,732
|
|
|
60,581
|
|
|
65,335
|
|
Other equity investments
|
|
|
396
|
|
|
384
|
|
|
407
|
|
|
342
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
383,665
|
|
$
|
378,133
|
|
$
|
290,712
|
|
$
|
299,820
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In
2013, gross realized gains on sales of investment securities were $237 thousand and gross realized losses on sales of investment securities were $218 thousand. In 2012,
gross realized gains on sales of investment securities were $941 thousand and gross realized losses on sales of investment securities were
95
Table of Contents
Eagle Bancorp, Inc.
Notes to Consolidated Financial Statements
for the Years Ended December 31, 2013, 2012 and 2011: (Continued)
Note 3Investment Securities Available-for-Sale (Continued)
$251 thousand.
In 2011, realized gains on sales of investment securities were $1.4 million and there were no realized losses on sales of investment securities.
Proceeds
from sales and calls of investment securities in 2013 were $22.1 million, in 2012 were $77.1 million, and in 2011 were $85.9 million.
At
December 31, 2013, $274.2 million (fair value) of securities were pledged as collateral for certain government deposits, and securities sold under agreement to
repurchase. The outstanding balance of no single issuer, except for U.S. Government and U.S. Government agency securities, exceeded ten percent of shareholders' equity at December 31, 2013 or
2012.
Note 4Loans and Allowance for Credit Losses
The Bank makes loans to customers primarily in the Washington, D.C. metropolitan area and
surrounding communities. A substantial portion of the Bank's loan portfolio consists of loans to businesses secured by real estate and other business assets.
Loans,
net of unamortized net deferred fees, at December 31, 2013 and 2012 are summarized by type as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2013
|
|
December 31, 2012
|
|
(dollars in thousands)
|
|
Amount
|
|
%
|
|
Amount
|
|
%
|
|
Commercial
|
|
$
|
694,350
|
|
|
24
|
%
|
$
|
545,070
|
|
|
22
|
%
|
Income producingcommercial real estate
|
|
|
1,119,800
|
|
|
38
|
%
|
|
914,638
|
|
|
37
|
%
|
Owner occupiedcommercial real estate
|
|
|
317,491
|
|
|
11
|
%
|
|
297,857
|
|
|
12
|
%
|
Real estate mortgageresidential
|
|
|
90,418
|
|
|
3
|
%
|
|
61,871
|
|
|
3
|
%
|
Constructioncommercial and residential
|
|
|
574,167
|
|
|
19
|
%
|
|
533,722
|
|
|
21
|
%
|
ConstructionC&I (owner occupied)
|
|
|
34,659
|
|
|
1
|
%
|
|
28,808
|
|
|
1
|
%
|
Home equity
|
|
|
110,242
|
|
|
4
|
%
|
|
106,844
|
|
|
4
|
%
|
Other consumer
|
|
|
4,031
|
|
|
|
|
|
4,285
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
|
2,945,158
|
|
|
100
|
%
|
|
2,493,095
|
|
|
100
|
%
|
Less: Allowance for Credit Losses
|
|
|
(40,921
|
)
|
|
|
|
|
(37,492
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loans
|
|
$
|
2,904,237
|
|
|
|
|
$
|
2,455,603
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unamortized
net deferred fees amounted to $12.7 million and $8.8 million at December 31, 2013 and 2012, of which $235 thousand and $301 thousand at
December 31, 2013 and 2012, respectively, represented net deferred costs on home equity loans.
As
of December 31, 2013 and 2012, the Bank serviced $67.6 million and $41.2 million, respectively, of loan participations which are not reflected as loan balances on
the Consolidated Balance Sheets.
96
Table of Contents
Eagle Bancorp, Inc.
Notes to Consolidated Financial Statements
for the Years Ended December 31, 2013, 2012 and 2011: (Continued)
Note 4Loans and Allowance for Credit Losses (Continued)
Loan Origination/Risk Management
The Company's goal is to mitigate risks in the event of unforeseen threats to the loan portfolio as a result of economic downturn or
other negative influences. Plans for mitigating inherent risks in managing loan assets include: carefully enforcing loan policies and procedures, evaluating each borrower's business plan during the
underwriting process and throughout the loan
term, identifying and monitoring primary and alternative sources for loan repayment, and obtaining collateral to mitigate economic loss in the event of liquidation. Specific loan reserves are
established based upon credit and/or collateral risks on an individual loan basis. A risk rating system is employed to proactively estimate loss exposure and provide a measuring system for setting
general and specific reserve allocations.
The
composition of the Company's loan portfolio is heavily weighted toward commercial real estate, both owner occupied and investment real estate. The combination of owner occupied
commercial real estate and owner occupied commercial real estate construction represent 12% of the loan portfolio. At December 31, 2013, the combination of commercial real estate and real
estate construction loans represent approximately 69% of the loan portfolio. When owner occupied commercial real estate and owner occupied commercial construction loans are excluded, the percentage of
commercial real estate and construction loans to total loans decreases to 57%. These loans are underwritten to mitigate lending risks typical of this type of loan such as declines in real estate
values, changes in borrower cash flow and general economic conditions. The Bank typically requires a maximum loan to value of 80% and minimum cash flow debt service coverage of 1.15 to 1.00. Personal
guarantees are generally required, but may be limited. In making real estate commercial mortgage loans, the Bank generally requires that interest rates adjust not less frequently than five years.
The
Company is also an active traditional commercial lender providing loans for a variety of purposes, including cash flow, equipment and account receivable financing. This loan category
represents approximately 24% of the loan portfolio at December 31, 2013 and was generally variable or adjustable rate. Commercial loans meet reasonable underwriting standards, including
appropriate collateral and cash flow necessary to support debt service. Personal guarantees are generally required, but may be limited. SBA loans represent 1% of the commercial loan category of loans.
In originating SBA loans, the Company assumes the risk of non-payment on the unguaranteed portion of the credit. The Company generally sells the guaranteed portion of the loan generating noninterest
income from the gains on sale, as well as servicing income on the portion participated. SBA loans are subject to the same cash flow analyses as other commercial loans. SBA loans are subject to a
maximum loan size established by the SBA.
Approximately
4% of the loan portfolio at December 31, 2013 consists of home equity loans and lines of credit and other consumer loans. These credits, while making up a smaller
portion of the loan portfolio, demand the same emphasis on underwriting and credit evaluation as other types of loans advanced by the Bank.
The
remaining 3% of the loan portfolio consists of residential mortgage loans. These are typically loans underwritten to the same underwriting standards as residential loans held for
sale but for shorter terms, generally less than 10 years.
Loans
are secured primarily by duly recorded first deeds of trust. In some cases, the Bank may accept a recorded junior trust position. In general, borrowers will have a proven ability
to build, lease, manage
97
Table of Contents
Eagle Bancorp, Inc.
Notes to Consolidated Financial Statements
for the Years Ended December 31, 2013, 2012 and 2011: (Continued)
Note 4Loans and Allowance for Credit Losses (Continued)
and/or
sell a commercial or residential project and demonstrate satisfactory financial condition. Additionally, an equity contribution toward the project is customarily required.
Construction
loans require that the financial condition and experience of the general contractor and major subcontractors be satisfactory to the Bank. Guaranteed, fixed price contracts
are required whenever appropriate, along with payment and performance bonds or completion bonds for larger scale projects.
Loans
intended for residential land acquisition, lot development and construction are made on the premise that the land: 1) is or will be developed for building sites for
residential structures, and; 2) will ultimately be utilized for construction or improvement of residential zoned real properties, including the creation of housing. Residential development and
construction loans will finance projects such as single family subdivisions, planned unit developments, townhouses, and condominiums. Residential land acquisition, development and construction loans
generally are underwritten with a maximum term of 36 months, including extensions approved at origination.
Commercial
land acquisition and construction loans are secured by real property where loan funds will be used to acquire land and to construct or improve appropriately zoned real
property for the creation of income producing or owner user commercial properties. Borrowers are generally required to put equity into each project at levels determined by the appropriate Loan
Committee. Commercial land acquisition and construction loans generally are underwritten with a maximum term of 24 months.
Substantially
all construction draw requests must be presented in writing on American Institute of Architects documents and certified either by the contractor, the borrower and/or the
borrower's architect. Each draw request shall also include the borrower's soft cost breakdown certified by the borrower or its Chief Financial Officer. Prior to an advance, the Bank or its contractor
inspects the project to determine that the work has been completed, to justify the draw requisition.
Commercial
permanent loans are secured by improved real property which is generating income in the normal course of operation. Debt service coverage, assuming stabilized occupancy, must
be satisfactory to support a permanent loan. The debt service coverage ratio is ordinarily at least 1.15 to 1.00. As part of the underwriting process, debt service coverage ratios are stress tested
assuming a 200 basis point increase in interest rates from their current levels.
Commercial
permanent loans generally are underwritten with a term not greater than 10 years or the remaining useful life of the property, whichever is lower. The preferred term is
between 5 to 7 years, with amortization to a maximum of 25 years.
The
Company's loan portfolio includes loans made for real estate Acquisition, Development and Construction ("ADC") purposes, including both investment and owner occupied projects. ADC
loans amounted to $608.8 million at December 31, 2013. A portion of the ADC portfolio, both speculative and non-speculative, includes loan funded interest reserves at origination. ADC
loans containing loan funded interest reserves represent approximately 47% of the outstanding ADC loan portfolio at December 31, 2013. The decision to establish a loan-funded interest reserve
is made upon origination of the ADC loan and is based upon a number of factors considered during underwriting of the credit including: (i) the feasibility of the project; (ii) the
experience of the sponsor; (iii) the creditworthiness of the borrower and guarantors; (iv) borrower equity contribution; and (v) the level of collateral protection. When
appropriate, an interest reserve provides an effective means of addressing the cash flow characteristics of a properly underwritten ADC loan. The Company does not significantly utilize interest
reserves in other loan
98
Table of Contents
Eagle Bancorp, Inc.
Notes to Consolidated Financial Statements
for the Years Ended December 31, 2013, 2012 and 2011: (Continued)
Note 4Loans and Allowance for Credit Losses (Continued)
products.
The Company recognizes that one of the risks inherent in the use of interest reserves is the potential masking of underlying problems with the project and/or the borrower's ability to repay
the loan. In order to mitigate this inherent risk, the Company employs a series of reporting and monitoring mechanisms on all ADC loans, whether or not an interest reserve is provided, including:
(i) construction and development timelines which are monitored on an ongoing basis which track the progress of a given project to the timeline projected at origination; (ii) a
construction loan administration department independent of the lending function; (iii) third party independent construction loan inspection reports; (iv) monthly interest reserve
monitoring reports detailing the balance of the interest reserves approved at origination and the days of interest carry represented by the reserve balances as compared to the then current anticipated
time to completion and/or sale of speculative projects; and (v) quarterly commercial real estate construction meetings among senior Company management, which includes monitoring of current and
projected real estate market conditions. If a project has not performed as expected, it is not the customary practice of the Company to increase loan funded interest reserves.
From
time to time the Company may make loans for its own portfolio or through its higher risk loan affiliate, ECV. Such loans, which are made to finance projects (which may also be
financed at the Bank level), may have higher risk characteristics than loans made by the Bank, such as lower priority interests and/or higher loan to value ratios. The Company seeks an overall
financial return on these transactions commensurate with the risks and structure of each individual loan. Certain transactions may bear current interest at a rate with a significant premium to normal
market rates. Other loan transactions may carry a standard rate of current interest, but also earn additional interest based on a percentage of the profits of the underlying project or a fixed accrued
rate of interest.
The
following tables detail activity in the allowance for credit losses by portfolio segment for the years ended December 31, 2013 and 2012. Allocation of a portion of the
allowance to one category of loans does not preclude its availability to absorb losses in other categories.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
Commercial
|
|
Income
Producing
Commercial
Real Estate
|
|
Owner
Occupied
Commercial
Real Estate
|
|
Real Estate
Mortgage
Residential
|
|
Construction
Commercial and
Residential
|
|
Home
Equity
|
|
Other
Consumer
|
|
Total
|
|
For the Year Ended December 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for credit losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period
|
|
$
|
9,412
|
|
$
|
9,148
|
|
$
|
2,781
|
|
$
|
659
|
|
$
|
13,391
|
|
$
|
1,730
|
|
$
|
371
|
|
$
|
37,492
|
|
Loans charged-off
|
|
|
(4,275
|
)
|
|
(602
|
)
|
|
|
|
|
|
|
|
(2,010
|
)
|
|
(89
|
)
|
|
(63
|
)
|
|
(7,039
|
)
|
Recoveries of loans previously charged-off
|
|
|
161
|
|
|
|
|
|
|
|
|
|
|
|
688
|
|
|
11
|
|
|
6
|
|
|
866
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loans charged-off
|
|
|
(4,114
|
)
|
|
(602
|
)
|
|
|
|
|
|
|
|
(1,322
|
)
|
|
(78
|
)
|
|
(57
|
)
|
|
(6,173
|
)
|
Provision for credit losses
|
|
|
4,482
|
|
|
1,813
|
|
|
1,118
|
|
|
285
|
|
|
1,865
|
|
|
219
|
|
|
(180
|
)
|
|
9,602
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
9,780
|
|
$
|
10,359
|
|
$
|
3,899
|
|
$
|
944
|
|
$
|
13,934
|
|
$
|
1,871
|
|
$
|
134
|
|
$
|
40,921
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for credit losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
$
|
1,323
|
|
$
|
1,098
|
|
$
|
1,853
|
|
$
|
27
|
|
$
|
1,625
|
|
$
|
526
|
|
$
|
68
|
|
$
|
6,520
|
|
Collectively evaluated for impairment
|
|
|
8,457
|
|
|
9,261
|
|
|
2,046
|
|
|
917
|
|
|
12,309
|
|
|
1,345
|
|
|
66
|
|
|
34,401
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
9,780
|
|
$
|
10,359
|
|
$
|
3,899
|
|
$
|
944
|
|
$
|
13,934
|
|
$
|
1,871
|
|
$
|
134
|
|
$
|
40,921
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
99
Table of Contents
Eagle Bancorp, Inc.
Notes to Consolidated Financial Statements
for the Years Ended December 31, 2013, 2012 and 2011: (Continued)
Note 4Loans and Allowance for Credit Losses (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
Commercial
|
|
Income
Producing
Commercial
Real Estate
|
|
Owner
Occupied
Commercial
Real Estate
|
|
Real Estate
Mortgage
Residential
|
|
Construction
Commercial and
Residential
|
|
Home
Equity
|
|
Other
Consumer
|
|
Total
|
|
For the Year Ended December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for credit losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period
|
|
$
|
9,609
|
|
$
|
7,304
|
|
$
|
1,898
|
|
$
|
399
|
|
$
|
8,546
|
|
$
|
1,528
|
|
$
|
369
|
|
$
|
29,653
|
|
Loans charged-off
|
|
|
(3,481
|
)
|
|
(1,189
|
)
|
|
(350
|
)
|
|
(300
|
)
|
|
(3,033
|
)
|
|
(698
|
)
|
|
(47
|
)
|
|
(9,098
|
)
|
Recoveries of loans previously charged-off
|
|
|
144
|
|
|
18
|
|
|
|
|
|
|
|
|
510
|
|
|
73
|
|
|
2
|
|
|
747
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loans charged-off
|
|
|
(3,337
|
)
|
|
(1,171
|
)
|
|
(350
|
)
|
|
(300
|
)
|
|
(2,523
|
)
|
|
(625
|
)
|
|
(45
|
)
|
|
(8,351
|
)
|
Provision for credit losses
|
|
|
3,140
|
|
|
3,015
|
|
|
1,233
|
|
|
560
|
|
|
7,368
|
|
|
827
|
|
|
47
|
|
|
16,190
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
9,412
|
|
$
|
9,148
|
|
$
|
2,781
|
|
$
|
659
|
|
$
|
13,391
|
|
$
|
1,730
|
|
$
|
371
|
|
$
|
37,492
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for credit losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
$
|
2,158
|
|
$
|
1,201
|
|
$
|
753
|
|
$
|
|
|
$
|
3,718
|
|
$
|
243
|
|
$
|
41
|
|
$
|
8,114
|
|
Collectively evaluated for impairment
|
|
|
7,254
|
|
|
7,947
|
|
|
2,028
|
|
|
659
|
|
|
9,673
|
|
|
1,487
|
|
|
330
|
|
|
29,378
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
9,412
|
|
$
|
9,148
|
|
$
|
2,781
|
|
$
|
659
|
|
$
|
13,391
|
|
$
|
1,730
|
|
$
|
371
|
|
$
|
37,492
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
Company's recorded investments in loans as of December 31, 2013 and December 31, 2012 related to each balance in the allowance for loan losses by portfolio segment and
disaggregated on the basis of the Company's impairment methodology was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
Commercial
|
|
Income
Producing
Commercial
Real Estate
|
|
Owner
occupied
Commercial
Real Estate
|
|
Real Estate
Mortgage
Residential
|
|
Construction
Commercial and
Residential
|
|
Home
Equity
|
|
Other
Consumer
|
|
Total
|
|
December 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded investment in loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
$
|
9,614
|
|
$
|
2,682
|
|
$
|
7,574
|
|
$
|
113
|
|
$
|
13,862
|
|
$
|
682
|
|
$
|
70
|
|
$
|
34,597
|
|
Collectively evaluated for impairment
|
|
|
684,736
|
|
|
1,117,118
|
|
|
309,917
|
|
|
90,305
|
|
|
594,964
|
|
|
109,560
|
|
|
3,961
|
|
|
2,910,561
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
694,350
|
|
$
|
1,119,800
|
|
$
|
317,491
|
|
$
|
90,418
|
|
$
|
608,826
|
|
$
|
110,242
|
|
$
|
4,031
|
|
$
|
2,945,158
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded investment in loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
$
|
15,177
|
|
$
|
11,401
|
|
$
|
8,723
|
|
$
|
|
|
$
|
36,502
|
|
$
|
510
|
|
$
|
43
|
|
$
|
72,356
|
|
Collectively evaluated for impairment
|
|
|
529,893
|
|
|
903,237
|
|
|
289,134
|
|
|
61,871
|
|
|
526,028
|
|
|
106,334
|
|
|
4,242
|
|
|
2,420,739
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
545,070
|
|
$
|
914,638
|
|
$
|
297,857
|
|
$
|
61,871
|
|
$
|
562,530
|
|
$
|
106,844
|
|
$
|
4,285
|
|
$
|
2,493,095
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
December 31, 2013, the nonperforming loans acquired from Fidelity have a carrying value of $2.0 million and an unpaid principal balance of $11.5 million and were
evaluated separately in accordance with ASC Topic 310-30,
"Loans and Debt Securities Acquired with Deteriorated Credit Quality
." The various impaired
loans were recorded at estimated fair value with any excess being charged-off or treated as a non-accretable discount. Subsequent downward adjustments to the valuation of impaired loans acquired
100
Table of Contents
Eagle Bancorp, Inc.
Notes to Consolidated Financial Statements
for the Years Ended December 31, 2013, 2012 and 2011: (Continued)
Note 4Loans and Allowance for Credit Losses (Continued)
will
result in additional loan loss provisions and related allowance for credit losses. Subsequent upward adjustments to the valuation of impaired loans acquired will result in accretable discount. No
adjustments have been made to the fair value amounts of impaired loans subsequent to the allowable period of adjustment from the date of acquisition.
Credit Quality Indicators
The Company uses several credit quality indicators to manage credit risk in an ongoing manner. The Company's primary credit quality
indicators are to use an internal credit risk rating system that categorizes loans into pass, watch, special mention, or classified categories. Credit risk ratings are applied individually to those
classes of loans that have significant or unique credit characteristics that benefit from a case-by-case evaluation. These are typically loans to businesses or individuals in the classes which
comprise the commercial portfolio segment. Groups of loans that are underwritten and structured using standardized criteria and characteristics, such as statistical models (e.g., credit scoring
or payment performance), are typically risk rated and monitored collectively. These are typically loans to individuals in the classes which comprise the consumer portfolio segment.
101
Table of Contents
Eagle Bancorp, Inc.
Notes to Consolidated Financial Statements
for the Years Ended December 31, 2013, 2012 and 2011: (Continued)
Note 4Loans and Allowance for Credit Losses (Continued)
The following are the definitions of the Company's credit quality indicators:
|
|
|
Pass:
|
|
Loans in all classes that comprise the commercial and consumer portfolio segments that are not adversely rated, are contractually current as to principal and interest, and are otherwise in compliance with the contractual
terms of the loan agreement. Management believes that there is a low likelihood of loss related to those loans that are considered pass.
|
Watch:
|
|
Loan paying as agreed with generally acceptable asset quality; however the obligor's performance has not met expectations. Balance sheet and/or income statement has shown deterioration to the point that the obligor
could not sustain any further setbacks. Credit is expected to be strengthened through improved obligor performance and/or additional collateral within a reasonable period of time.
|
Special Mention:
|
|
Loans in the classes that comprise the commercial portfolio segment that have potential weaknesses that deserve management's close attention. If not addressed, these potential weaknesses may result in deterioration of
the repayment prospects for the loan. The special mention credit quality indicator is not used for classes of loans that comprise the consumer portfolio segment. Management believes that there is a moderate likelihood of some loss related to those
loans that are considered special mention.
|
Classified:
|
|
Classified (a) Substandard
Loans inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified
have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the company will sustain some loss if the deficiencies are not corrected. Loss potential, while existing
in the aggregate amount of substandard loans, does not have to exist in individual loans classified substandard.
|
|
|
Classified (b) Doubtful
Loans that have all the weaknesses inherent in a loan classified substandard, with the added characteristic that the weaknesses make collection or
liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. The possibility of loss is extremely high, but because of certain important and reasonably specific pending factors, which may
work to the advantage and strengthening of the assets, its classification as an estimated loss is deferred until its more exact status may be determined.
|
102
Table of Contents
Eagle Bancorp, Inc.
Notes to Consolidated Financial Statements
for the Years Ended December 31, 2013, 2012 and 2011: (Continued)
Note 4Loans and Allowance for Credit Losses (Continued)
The
Company's credit quality indicators are updated generally on a quarterly basis, but no less frequently than annually. The following table presents by class and by credit quality
indicator, the recorded investment in the Company's loans and leases as of December 31, 2013.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
Pass
|
|
Watch and
Special Mention
|
|
Substandard
|
|
Doubtful
|
|
Total
Loans
|
|
December 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
655,409
|
|
$
|
29,327
|
|
$
|
9,614
|
|
$
|
|
|
$
|
694,350
|
|
Income producingcommercial real estate
|
|
|
1,095,285
|
|
|
21,833
|
|
|
2,682
|
|
|
|
|
|
1,119,800
|
|
Owner occupiedcommercial real estate
|
|
|
294,337
|
|
|
15,580
|
|
|
7,574
|
|
|
|
|
|
317,491
|
|
Real estate mortgageresidential
|
|
|
89,501
|
|
|
804
|
|
|
113
|
|
|
|
|
|
90,418
|
|
Constructioncommercial and residential
|
|
|
575,321
|
|
|
19,643
|
|
|
13,862
|
|
|
|
|
|
608,826
|
|
Home equity
|
|
|
107,415
|
|
|
2,145
|
|
|
682
|
|
|
|
|
|
110,242
|
|
Other consumer
|
|
|
3,961
|
|
|
|
|
|
70
|
|
|
|
|
|
4,031
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,821,229
|
|
$
|
89,332
|
|
$
|
34,597
|
|
$
|
|
|
$
|
2,945,158
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
495,072
|
|
$
|
34,821
|
|
$
|
15,170
|
|
$
|
7
|
|
$
|
545,070
|
|
Income producingcommercial real estate
|
|
|
892,569
|
|
|
10,668
|
|
|
11,401
|
|
|
|
|
|
914,638
|
|
Owner occupiedcommercial real estate
|
|
|
275,864
|
|
|
13,270
|
|
|
8,723
|
|
|
|
|
|
297,857
|
|
Real estate mortgageresidential
|
|
|
61,134
|
|
|
737
|
|
|
|
|
|
|
|
|
61,871
|
|
Constructioncommercial and residential
|
|
|
508,166
|
|
|
17,862
|
|
|
36,502
|
|
|
|
|
|
562,530
|
|
Home equity
|
|
|
104,302
|
|
|
2,032
|
|
|
510
|
|
|
|
|
|
106,844
|
|
Other consumer
|
|
|
4,230
|
|
|
12
|
|
|
43
|
|
|
|
|
|
4,285
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,341,337
|
|
$
|
79,402
|
|
$
|
72,349
|
|
$
|
7
|
|
$
|
2,493,095
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonaccrual and Past Due Loans
Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were
due. Loans are placed on nonaccrual status when, in management's opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory provisions.
Loans may be placed on nonaccrual status regardless of whether or not such loans are considered past due. When interest accrual is discontinued, all unpaid accrued interest is reversed. Interest
income is subsequently recognized only to the extent cash payments are received in excess of principal due. Loans are returned to accrual status when all the principal and interest amounts
contractually due are brought current and future payments are reasonably assured.
103
Table of Contents
Eagle Bancorp, Inc.
Notes to Consolidated Financial Statements
for the Years Ended December 31, 2013, 2012 and 2011: (Continued)
Note 4Loans and Allowance for Credit Losses (Continued)
The
following presents by class of loan, information related to nonaccrual loans as of the year ended December 31, 2013 and 2012.
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
December 31, 2013
|
|
December 31, 2012
|
|
Commercial
|
|
$
|
6,779
|
|
$
|
4,799
|
|
Income producingcommercial real estate
|
|
|
2,525
|
|
|
3,458
|
|
Owner occupiedcommercial real estate
|
|
|
5,452
|
|
|
2,578
|
|
Real estate mortgageresidential
|
|
|
887
|
|
|
699
|
|
Constructioncommercial and residential
|
|
|
8,366
|
|
|
18,594
|
|
Home equity
|
|
|
623
|
|
|
513
|
|
Other consumer
|
|
|
70
|
|
|
43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total nonaccrual loans(1)(2)
|
|
$
|
24,702
|
|
$
|
30,684
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
Excludes
troubled debt restructurings ("TDRs") that were performing under their restructured terms totaling $7.9 million at December 31, 2013,
and $15.3 million at December 31, 2012.
-
(2)
-
Gross
interest income that would have been recorded in 2013 if nonaccrual loans shown above had been current and in accordance with their original terms was
$1.8 million, while interest actually recorded on such loans was $117 thousand. See Note 1 to the Consolidated Financial Statements for a description of the Company's policy for
placing loans on nonaccrual status.
The
following table presents by class, an aging analysis and the recorded investments in loans past due as of December 31, 2013 and 2012.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
Loans
30-59 Days
Past Due
|
|
Loans
60-89 Days
Past Due
|
|
Loans 90 Days
or More
Past Due
|
|
Total Past
Due
Loans
|
|
Current
Loans
|
|
Total Recorded
Investment in
Loans
|
|
December 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
1,698
|
|
$
|
11,146
|
|
$
|
6,779
|
|
$
|
19,623
|
|
$
|
674,727
|
|
$
|
694,350
|
|
Income producingcommercial real estate
|
|
|
818
|
|
|
|
|
|
2,525
|
|
|
3,343
|
|
|
1,116,457
|
|
|
1,119,800
|
|
Owner occupiedcommercial real estate
|
|
|
360
|
|
|
2,121
|
|
|
5,452
|
|
|
7,933
|
|
|
309,558
|
|
|
317,491
|
|
Real estate mortgageresidential
|
|
|
|
|
|
|
|
|
887
|
|
|
887
|
|
|
89,531
|
|
|
90,418
|
|
Constructioncommercial and residential
|
|
|
|
|
|
|
|
|
8,366
|
|
|
8,366
|
|
|
600,460
|
|
|
608,826
|
|
Home equity
|
|
|
626
|
|
|
359
|
|
|
623
|
|
|
1,608
|
|
|
108,634
|
|
|
110,242
|
|
Other consumer
|
|
|
|
|
|
15
|
|
|
70
|
|
|
85
|
|
|
3,946
|
|
|
4,031
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,502
|
|
$
|
13,641
|
|
$
|
24,702
|
|
$
|
41,845
|
|
$
|
2,903,313
|
|
$
|
2,945,158
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
104
Table of Contents
Eagle Bancorp, Inc.
Notes to Consolidated Financial Statements
for the Years Ended December 31, 2013, 2012 and 2011: (Continued)
Note 4Loans and Allowance for Credit Losses (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
Loans
30-59 Days
Past Due
|
|
Loans
60-89 Days
Past Due
|
|
Loans 90 Days
or More
Past Due
|
|
Total Past
Due
Loans
|
|
Current
Loans
|
|
Total Recorded
Investment in
Loans
|
|
December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
3,784
|
|
$
|
598
|
|
$
|
4,799
|
|
$
|
9,181
|
|
$
|
535,889
|
|
$
|
545,070
|
|
Income producingcommercial real estate
|
|
|
1,538
|
|
|
992
|
|
|
3,458
|
|
|
5,988
|
|
|
908,650
|
|
|
914,638
|
|
Owner occupiedcommercial real estate
|
|
|
369
|
|
|
4,081
|
|
|
2,578
|
|
|
7,028
|
|
|
290,829
|
|
|
297,857
|
|
Real estate mortgageresidential
|
|
|
|
|
|
107
|
|
|
699
|
|
|
806
|
|
|
61,065
|
|
|
61,871
|
|
Constructioncommercial and residential
|
|
|
6,276
|
|
|
675
|
|
|
18,594
|
|
|
25,545
|
|
|
536,985
|
|
|
562,530
|
|
Home equity
|
|
|
1,150
|
|
|
352
|
|
|
513
|
|
|
2,015
|
|
|
104,829
|
|
|
106,844
|
|
Other consumer
|
|
|
|
|
|
5
|
|
|
43
|
|
|
48
|
|
|
4,237
|
|
|
4,285
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
13,117
|
|
$
|
6,810
|
|
$
|
30,684
|
|
$
|
50,611
|
|
$
|
2,442,484
|
|
$
|
2,493,095
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired Loans
Loans are considered impaired when, based on current information and events, it is probable the Company will be unable to collect all
amounts due in accordance with the original contractual terms of the loan agreement, including scheduled principal and interest payments. Impairment is evaluated in total for smaller-balance loans of
a similar nature and on an individual loan basis for other loans. If a loan is impaired, a specific valuation allowance is allocated, if necessary, so that the loan is reported net, at the present
value of estimated future cash flows using the loan's existing rate or at the fair value of collateral if repayment is expected solely from the collateral. Interest payments on impaired loans are
typically applied to principal unless collectability of the principal amount is reasonably assured, in which case interest is recognized on a cash basis. Impaired loans, or portions thereof, are
charged off when deemed uncollectible.
The
following table presents by class, information related to impaired loans for the years ended December 31, 2013 and 2012.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
Recorded
Investment
|
|
Interest Income
Recognized
|
|
|
|
Unpaid
Contractual
Principal
Balance
|
|
Recorded
Investment
With No
Allowance
|
|
Recorded
Investment
With
Allowance
|
|
|
|
|
|
(dollars in thousands)
|
|
Total
Recorded
Investment
|
|
Related
Allowance
|
|
Quarter
To Date
|
|
Year
To Date
|
|
Quarter
To Date
|
|
Year
To Date
|
|
December 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
6,779
|
|
$
|
2,327
|
|
$
|
4,452
|
|
$
|
6,779
|
|
$
|
1,323
|
|
$
|
8,193
|
|
$
|
8,877
|
|
$
|
53
|
|
$
|
131
|
|
Income producingcommercial real estate
|
|
|
5,902
|
|
|
1,322
|
|
|
4,580
|
|
|
5,902
|
|
|
1,098
|
|
|
6,183
|
|
|
5,755
|
|
|
38
|
|
|
175
|
|
Owner occupiedcommercial
|
|
|
5,452
|
|
|
111
|
|
|
5,341
|
|
|
5,452
|
|
|
1,853
|
|
|
5,939
|
|
|
6,285
|
|
|
52
|
|
|
108
|
|
Real estate mortgageresidential
|
|
|
887
|
|
|
774
|
|
|
113
|
|
|
887
|
|
|
27
|
|
|
891
|
|
|
792
|
|
|
2
|
|
|
2
|
|
Constructioncommercial and residential
|
|
|
13,233
|
|
|
5,358
|
|
|
7,575
|
|
|
12,933
|
|
|
1,625
|
|
|
13,405
|
|
|
17,298
|
|
|
44
|
|
|
169
|
|
Home equity
|
|
|
623
|
|
|
|
|
|
623
|
|
|
623
|
|
|
526
|
|
|
567
|
|
|
508
|
|
|
2
|
|
|
4
|
|
Other consumer
|
|
|
70
|
|
|
|
|
|
70
|
|
|
70
|
|
|
68
|
|
|
58
|
|
|
34
|
|
|
1
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
32,946
|
|
$
|
9,892
|
|
$
|
22,754
|
|
$
|
32,646
|
|
$
|
6,520
|
|
$
|
35,236
|
|
$
|
39,549
|
|
$
|
192
|
|
$
|
591
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
105
Table of Contents
Eagle Bancorp, Inc.
Notes to Consolidated Financial Statements
for the Years Ended December 31, 2013, 2012 and 2011: (Continued)
Note 4Loans and Allowance for Credit Losses (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
Recorded
Investment
|
|
Interest Income
Recognized
|
|
|
|
Unpaid
Contractual
Principal
Balance
|
|
Recorded
Investment
With No
Allowance
|
|
Recorded
Investment
With
Allowance
|
|
|
|
|
|
(dollars in thousands)
|
|
Total
Recorded
Investment
|
|
Related
Allowance
|
|
Quarter
To Date
|
|
Year
To Date
|
|
Quarter
To Date
|
|
Year
To Date
|
|
December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
9,461
|
|
$
|
5,767
|
|
$
|
3,481
|
|
$
|
9,248
|
|
$
|
2,158
|
|
$
|
8,372
|
|
$
|
7,772
|
|
$
|
151
|
|
$
|
245
|
|
Income producingcommercial real estate
|
|
|
5,600
|
|
|
3,830
|
|
|
1,770
|
|
|
5,600
|
|
|
1,201
|
|
|
5,695
|
|
|
6,609
|
|
|
38
|
|
|
152
|
|
Owner occupiedcommercial
|
|
|
6,659
|
|
|
5,602
|
|
|
1,057
|
|
|
6,659
|
|
|
753
|
|
|
4,517
|
|
|
2,746
|
|
|
213
|
|
|
252
|
|
Real estate mortgageresidential
|
|
|
699
|
|
|
699
|
|
|
|
|
|
699
|
|
|
|
|
|
706
|
|
|
714
|
|
|
|
|
|
|
|
Constructioncommercial and residential
|
|
|
25,347
|
|
|
14,727
|
|
|
8,508
|
|
|
23,235
|
|
|
3,718
|
|
|
24,859
|
|
|
26,430
|
|
|
63
|
|
|
202
|
|
Home equity
|
|
|
513
|
|
|
134
|
|
|
379
|
|
|
513
|
|
|
243
|
|
|
592
|
|
|
534
|
|
|
1
|
|
|
9
|
|
Other consumer
|
|
|
43
|
|
|
1
|
|
|
42
|
|
|
43
|
|
|
41
|
|
|
25
|
|
|
17
|
|
|
2
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
48,322
|
|
$
|
30,760
|
|
$
|
15,237
|
|
$
|
45,997
|
|
$
|
8,114
|
|
$
|
44,766
|
|
$
|
44,822
|
|
$
|
468
|
|
$
|
862
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Modifications
A modification of a loan constitutes a troubled debt restructuring ("TDR") when a borrower is experiencing financial difficulty and the
modification constitutes a concession. The Company offers various types of concessions when modifying a loan. Commercial and industrial loans modified in a TDR often involve temporary interest-only
payments, term extensions, and converting revolving credit lines to term loans. Additional collateral, a co-borrower, or a guarantor is often requested. Commercial mortgage and construction loans
modified in a TDR often involve reducing the interest rate for the remaining term of the loan, extending the maturity date at an interest rate lower than the current market rate for new debt with
similar risk, or substituting or adding a new
borrower or guarantor. Construction loans modified in a TDR may also involve extending the interest-only payment period.
Loans
modified in a TDR for the Company may have the financial effect of increasing the specific allowance associated with the loan. An allowance for impaired consumer and commercial
loans that have been modified in a TDR is measured based on the present value of expected future cash flows discounted at the loan's effective interest rate, the loan's observable market price, or the
estimated fair value of the collateral, less any selling costs, if the loan is collateral dependent. Management exercises significant judgment in developing these estimates.
The
following table presents by class, information related to loans modified in a TDR during the years ended December 31, 2013 and 2012.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
Number of
Contracts
|
|
TDRs Performing
to Modified Terms
|
|
TDRs Not Performing
to Modified Terms
|
|
Total
TDRs
|
|
December 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
3
|
|
$
|
|
|
$
|
4,042
|
|
$
|
4,042
|
|
Income producingcommercial real estate
|
|
|
3
|
|
|
3,377
|
|
|
217
|
|
|
3,594
|
|
Owner occupiedcommercial real estate
|
|
|
1
|
|
|
|
|
|
4,081
|
|
|
4,081
|
|
Constructioncommercial and residential
|
|
|
2
|
|
|
4,567
|
|
|
912
|
|
|
5,479
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
9
|
|
$
|
7,944
|
|
$
|
9,252
|
|
$
|
17,196
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
106
Table of Contents
Eagle Bancorp, Inc.
Notes to Consolidated Financial Statements
for the Years Ended December 31, 2013, 2012 and 2011: (Continued)
Note 4Loans and Allowance for Credit Losses (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
Number of
Contracts
|
|
TDRs Performing
to Modified Terms
|
|
TDRs Not Performing
to Modified Terms
|
|
Total
TDRs
|
|
December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
3
|
|
$
|
4,449
|
|
$
|
|
|
$
|
4,449
|
|
Income producingcommercial real estate
|
|
|
2
|
|
|
2,142
|
|
|
217
|
|
|
2,359
|
|
Owner occupiedcommercial real estate
|
|
|
1
|
|
|
4,081
|
|
|
|
|
|
4,081
|
|
Constructioncommercial and residential
|
|
|
2
|
|
|
4,641
|
|
|
966
|
|
|
5,607
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
8
|
|
$
|
15,313
|
|
$
|
1,183
|
|
$
|
16,496
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During
the year ended December 31, 2013, four performing TDRs totaling approximately $8.1 million experienced defaults on their modified terms. A default is considered to
have occurred once the TDR is past due 90 days or more, or it has been placed on nonaccrual. These four previously performing TDRs were reclassified; three to nonperforming loans, one to OREO
after the Company took possession of the underlying collateral. Commercial and consumer loans modified in a TDR are closely monitored for delinquency as an early indicator of possible future default.
If loans modified in a TDR subsequently default, the Company evaluates the loan for possible further impairment. The allowance may be increased, adjustments may be made in the allocation of the
allowance, or partial charge-offs may be taken to further write-down the carrying value of the loan. One loan totaling $1.2 million was modified in a TDR during the year ended
December 31 2013, as compared to two loans totaling $2.6 million were modified during the year ended December 31, 2012.
Related Party Loans
Certain directors and executive officers have had loan transactions with the Company. Such loans were made in the ordinary course of
business on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with outsiders. The following table summarizes changes in
amounts of loans outstanding, both direct and indirect, to those persons during 2013 and 2012.
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
2013
|
|
2012
|
|
Balance at January 1,
|
|
$
|
31,435
|
|
$
|
24,685
|
|
Additions
|
|
|
7,091
|
|
|
13,488
|
|
Repayments
|
|
|
(8,403
|
)
|
|
(6,738
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31,
|
|
$
|
30,123
|
|
$
|
31,435
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 5Premises and Equipment
Premises and equipment include the following at December 31:
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
2013
|
|
2012
|
|
Leasehold improvements
|
|
$
|
18,213
|
|
$
|
16,183
|
|
Furniture and equipment
|
|
|
18,289
|
|
|
14,986
|
|
Less accumulated depreciation and amortization
|
|
|
(19,765
|
)
|
|
(15,908
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total premises and equipment, net
|
|
$
|
16,737
|
|
$
|
15,261
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
107
Table of Contents
Eagle Bancorp, Inc.
Notes to Consolidated Financial Statements
for the Years Ended December 31, 2013, 2012 and 2011: (Continued)
Note 5Premises and Equipment (Continued)
Total depreciation and amortization expense for the years ended December 31, 2013, 2012, and 2011, was $3.9 million, $3.1 million, and $2.3 million,
respectively.
The
Company leases banking and office space in twenty three locations under non-cancelable lease arrangements accounted for as operating leases. The initial lease periods range from five
to ten years
and provide for one or more five year renewal options. The leases in some cases provide for scheduled annual rent escalations and require that the Bank (lessee) pay certain operating expenses
applicable to the leased space. Rent expense applicable to operating leases amounted to $6.9 million for 2013, $6.1 million in 2012, and $5.3 million in 2011. The Company
subleased two leased premises during 2013 and 2012, and three leased premises during 2011 and recorded $57 thousand, $99 thousand, and $324 thousand respectively, as a reduction
of rent expense during 2013, 2012, and 2011.
At
December 31, 2013, future minimum lease payments under non-cancelable operating leases having an initial term in excess of one year are as follows:
|
|
|
|
|
Years ending December 31:
|
|
|
|
(dollars in thousands)
|
|
|
|
2014
|
|
$
|
6,809
|
|
2015
|
|
|
6,818
|
|
2016
|
|
|
6,064
|
|
2017
|
|
|
4,849
|
|
2018
|
|
|
4,169
|
|
Thereafter
|
|
|
9,708
|
|
|
|
|
|
|
|
|
|
|
Total minimum lease payments
|
|
$
|
38,417
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
108
Table of Contents
Eagle Bancorp, Inc.
Notes to Consolidated Financial Statements
for the Years Ended December 31, 2013, 2012 and 2011: (Continued)
Note 6Intangible Assets
Intangible assets are included in the Consolidated Balance Sheets as a separate line item, net of accumulated amortization and consist of the following items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
Gross
Intangible
Assets
|
|
Additions
|
|
Accumulated
Amortization
|
|
Net
Intangible
Assets
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill(1)
|
|
$
|
2,163
|
|
$
|
|
|
$
|
|
|
$
|
2,163
|
|
Core deposit(2)
|
|
|
2,520
|
|
|
|
|
|
(1,407
|
)
|
|
1,113
|
|
Excess servicing(3)
|
|
|
526
|
|
|
339
|
|
|
(631
|
)
|
|
234
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,209
|
|
$
|
339
|
|
$
|
(2,038
|
)
|
$
|
3,510
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill(1)
|
|
$
|
2,163
|
|
$
|
|
|
$
|
|
|
$
|
2,163
|
|
Core deposit(2)
|
|
|
2,520
|
|
|
|
|
|
(1,041
|
)
|
|
1,479
|
|
Excess servicing(3)
|
|
|
490
|
|
|
36
|
|
|
(383
|
)
|
|
143
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,173
|
|
$
|
36
|
|
$
|
(1,424
|
)
|
$
|
3,785
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
The
Company recorded an initial amount of unidentified intangible (goodwill) incident to the acquisition of Fidelity & Trust Financial Corporation
("Fidelity") of approximately $360 thousand. Based on allowable adjustments through August 31, 2009, the unidentified intangible (goodwill) amounted to approximately $2.2 million.
-
(2)
-
In
connection with the Fidelity acquisition (August 2008) and a one branch purchase (January 2011) the Company made an allocation of the purchase price to
the core deposit intangibles which were $2.3 million and $215 thousand respectively based on an independent evaluation. The amount of the core deposit intangible relating to the one
branch acquisition was fully amortized at December 31, 2013. The amount of the core deposit intangible relating to the Fidelity acquisition at December 31, 2013 was $1.1 million,
which is being amortized over its remaining economic life of 2.2 years as a component of other noninterest expense.
-
(3)
-
The
Company recognizes a servicing asset for the computed value of servicing fees on the sale of the guaranteed portion of SBA loans, which is in excess of
a normal servicing fee. Assumptions related to the loan term and amortization period are made to arrive at the initial recorded value.
The
aggregate amortization expense was $614 thousand, $396 thousand, and $314 thousand for the years ended December 31, 2013, 2012, and 2011, respectively.
109
Table of Contents
Eagle Bancorp, Inc.
Notes to Consolidated Financial Statements
for the Years Ended December 31, 2013, 2012 and 2011: (Continued)
Note 6Intangible Assets (Continued)
The
future estimated annual amortization expense is presented below:
|
|
|
|
|
Years ending December 31:
|
|
|
|
(dollars in thousands)
|
|
|
|
2014
|
|
$
|
309
|
|
2015
|
|
|
301
|
|
2016
|
|
|
293
|
|
2017
|
|
|
150
|
|
2018
|
|
|
60
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,113
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 7Deposits
The following table provides information regarding the Bank's deposit composition and shows the average rate being paid on the interest bearing deposits at December 31, 2013, 2012
and 2011.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
2012
|
|
2011
|
|
(dollars in thousands)
|
|
Balance
|
|
Average
Rate
|
|
Balance
|
|
Average
Rate
|
|
Balance
|
|
Average
Rate
|
|
Noninterest bearing demand
|
|
$
|
849,409
|
|
|
|
|
$
|
881,390
|
|
|
|
|
$
|
688,506
|
|
|
|
|
Interest bearing transaction
|
|
|
118,580
|
|
|
0.26
|
%
|
|
113,813
|
|
|
0.34
|
%
|
|
80,105
|
|
|
0.38
|
%
|
Savings and money market
|
|
|
1,811,088
|
|
|
0.35
|
%
|
|
1,374,869
|
|
|
0.48
|
%
|
|
1,068,370
|
|
|
0.72
|
%
|
Time, $100,000 or more
|
|
|
203,706
|
|
|
0.88
|
%
|
|
232,875
|
|
|
1.12
|
%
|
|
332,470
|
|
|
1.08
|
%
|
Other time
|
|
|
242,631
|
|
|
0.54
|
%
|
|
294,275
|
|
|
0.71
|
%
|
|
222,644
|
|
|
1.72
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,225,414
|
|
|
|
|
$
|
2,897,222
|
|
|
|
|
$
|
2,392,095
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
remaining maturity of time deposits at December 31, 2013, 2012 and 2011 are as follows:
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
2013
|
|
2012
|
|
2011
|
|
Three months or less
|
|
$
|
82,790
|
|
$
|
102,022
|
|
$
|
132,387
|
|
More than three months through six months
|
|
|
109,101
|
|
|
88,156
|
|
|
112,167
|
|
More than six months through twelve months
|
|
|
118,646
|
|
|
104,122
|
|
|
89,486
|
|
Over twelve months
|
|
|
135,800
|
|
|
232,850
|
|
|
221,074
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
446,337
|
|
$
|
527,150
|
|
$
|
555,114
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
110
Table of Contents
Eagle Bancorp, Inc.
Notes to Consolidated Financial Statements
for the Years Ended December 31, 2013, 2012 and 2011: (Continued)
Note 7Deposits (Continued)
Interest
expense on deposits for the years ended December 31, 2013, 2012 and 2011 is as follows:
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
2013
|
|
2012
|
|
2011
|
|
Interest bearing transaction
|
|
$
|
298
|
|
$
|
289
|
|
$
|
236
|
|
Savings and money market
|
|
|
5,765
|
|
|
5,946
|
|
|
8,488
|
|
Time, $100,000 or more
|
|
|
2,080
|
|
|
2,729
|
|
|
5,695
|
|
Other time
|
|
|
2,471
|
|
|
3,093
|
|
|
2,829
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
10,614
|
|
$
|
12,057
|
|
$
|
17,248
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 8Borrowings
Information relating to short-term and long-term borrowings is as follows for the years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
2012
|
|
2011
|
|
(dollars in thousands)
|
|
Amount
|
|
Rate
|
|
Amount
|
|
Rate
|
|
Amount
|
|
Rate
|
|
Short-term:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At Year-End:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer repurchase agreements and federal funds purchased repurchase
|
|
$
|
80,471
|
|
|
0.28
|
%
|
$
|
101,338
|
|
|
0.31
|
%
|
$
|
103,362
|
|
|
0.43
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
80,471
|
|
|
|
|
$
|
101,338
|
|
|
|
|
$
|
103,362
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Daily Balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer repurchase agreements and federal funds purchased repurchase
|
|
$
|
94,566
|
|
|
0.27
|
%
|
$
|
96,141
|
|
|
0.34
|
%
|
$
|
116,367
|
|
|
0.59
|
%
|
Federal Home Loan Bankcurrent portion
|
|
|
|
|
|
|
|
|
503
|
|
|
0.41
|
%
|
|
|
|
|
|
|
Maximum Month-end Balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer repurchase agreements and federal funds purchased repurchase
|
|
$
|
106,975
|
|
|
0.23
|
%
|
$
|
111,580
|
|
|
0.34
|
%
|
$
|
147,671
|
|
|
0.53
|
%
|
Federal Home Loan Bankcurrent portion
|
|
|
|
|
|
|
|
|
10,000
|
|
|
2.98
|
%
|
|
|
|
|
|
|
Long-term:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At Year-End:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal Home Loan Bank
|
|
$
|
30,000
|
|
|
2.46
|
%
|
$
|
30,000
|
|
|
2.43
|
%
|
$
|
40,000
|
|
|
2.96
|
%
|
Subordinated Notes
|
|
|
9,300
|
|
|
8.50
|
%
|
|
9,300
|
|
|
10.00
|
%
|
|
9,300
|
|
|
10.00
|
%
|
United Bank Line of Credit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Daily Balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal Home Loan Bank
|
|
$
|
30,000
|
|
|
2.46
|
%
|
$
|
37,404
|
|
|
2.90
|
%
|
$
|
40,000
|
|
|
2.96
|
%
|
Subordinated Notes
|
|
|
9,300
|
|
|
9.64
|
%
|
|
9,300
|
|
|
10.00
|
%
|
|
9,300
|
|
|
10.00
|
%
|
United Bank Line of Credit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum Month-end Balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal Home Loan Bank
|
|
$
|
30,000
|
|
|
2.46
|
%
|
$
|
40,000
|
|
|
2.96
|
%
|
$
|
40,000
|
|
|
2.96
|
%
|
Subordinated Notes
|
|
|
9,300
|
|
|
10.00
|
%
|
|
9,300
|
|
|
10.00
|
%
|
|
9,300
|
|
|
10.00
|
%
|
United Bank Line of Credit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
111
Table of Contents
Eagle Bancorp, Inc.
Notes to Consolidated Financial Statements
for the Years Ended December 31, 2013, 2012 and 2011: (Continued)
Note 8Borrowings (Continued)
The
Company offers its business customers a repurchase agreement sweep account in which it collateralizes these funds with U.S. Government agency and mortgage backed securities
segregated in its investment portfolio for this purpose. By entering into the agreement, the customer agrees to have the Bank repurchase the designated securities on the business day following the
initial transaction in consideration of the payment of interest at the rate prevailing on the day of the transaction.
The
Bank has commitments from correspondent banks under which it can purchase up to $127.5 million in federal funds on an unsecured basis, against which there were no amounts
outstanding at December 31, 2013 and can borrow unsecured funds under one-way Certificates of Deposit Account Registry Service ("CDARS") brokered deposits in the amount of
$555.6 million, against which there was $7.7 million outstanding at December 31, 2013. The Bank has a commitment at December 31, 2013 from the Promontory Interfinancial
Network to place up to $300.0 million of brokered deposits from its Insured Network Deposit ("IND") program with the Bank in amounts requested by the Bank, against which there was
$159.3 million outstanding at December 31, 2013. At December 31, 2013, the Bank was also eligible to make advances from the FHLB up to $427.7 million based on collateral at
the FHLB, of which $30.0 million was outstanding at December 31, 2013. The Bank may enter into repurchase agreements as well as obtain additional borrowing capabilities from the FHLB
provided adequate collateral exists to secure these lending relationships. The Bank also has a back-up borrowing facility through the Discount Window at the Federal Reserve Bank of Richmond ("Federal
Reserve Bank"). This facility, which amounts to approximately $375.0 million, is collateralized with specific loan assets identified to the Federal Reserve Bank. It is anticipated that, except
for periodic testing, this facility would be utilized for contingency funding only.
In
December 2013, the Company renewed its Loan Agreement and related Stock Security Agreement and Promissory Note (the "credit facility") with a regional bank, pursuant to which the
Company may borrow, on a revolving basis, up to $50 million for working capital purposes, or to finance capital contributions to the Bank in whole and to ECV in part. This facility was
originally entered into in August 2008 and has been renegotiated over the past five years to its current terms. The credit facility is secured by a first lien on a portion of the stock of the Bank,
and bears interest at a floating rate equal to the Wall Street Journal Prime Rate minus 0.25% with a floor interest rate of 3.50%. Interest is payable on a monthly basis. The term of the credit
facility expires on September 30, 2014. There were no amounts outstanding under this credit at December 31, 2013 or 2012.
On
September 3, 2013 the Company amended the terms of the $9.3 million of subordinated notes dated August 30, 2010. Under the amendment, the maturity date is
extended from September 30, 2016 to September 30, 2021 and the interest rate is changed from 10%, to a fixed interest rate of 8.5% until August 30, 2016 and thereafter at a fixed
rate of interest equal to the then current yield on the 5 year U.S. Treasury Note plus 7.03%. The notes are intended to qualify as Tier 2 capital for regulatory purposes to the fullest
extent permitted under the currently applicable capital regulations. It is not anticipated that the notes will qualify for capital treatment upon implementation of recently adopted Basel III capital
requirements. The payment of principal on the notes may only be accelerated upon the occurrence of certain bankruptcy or receivership related events relating to the Company or, to the extent permitted
under capital rules to be adopted by the Federal Reserve Board pursuant to the Dodd-Frank Act, a major bank subsidiary of the Company.
112
Table of Contents
Eagle Bancorp, Inc.
Notes to Consolidated Financial Statements
for the Years Ended December 31, 2013, 2012 and 2011: (Continued)
Note 8Borrowings (Continued)
Under current capital rules, the capital treatment of the notes must be phased out, at a rate of 20% of the original principal amount per year during the last five years of the term of
the notes, commencing on October 1, 2016. Currently, $9.3 million of subordinated notes are includible as Tier 2 capital.
Note 9Preferred Stock and Warrants
On July 14, 2011, the Company entered into and consummated a Securities Purchase Agreement (the "Purchase Agreement") with the Secretary of the Treasury of the United States (the
"Secretary") under the Small Business Lending Fund program. Pursuant to the Purchase Agreement, the Company issued 56,600 shares of the Company's Senior Non-Cumulative Perpetual Preferred Stock,
Series B (the "Series B Preferred Stock"), having a liquidation amount per share equal to $1,000, for a total purchase price of $56,600,000.
The
Series B Preferred Stock is entitled to receive non-cumulative dividends, beginning October 1, 2011. The dividend rate, as a percentage of the liquidation amount, can
fluctuate on a quarterly basis during the first ten quarters during which the Series B Preferred Stock is outstanding, based upon changes in the level of "Qualified Small Business Lending" or
"QSBL" (as defined in the Purchase Agreement) by the Bank. The dividend rate for the first ten dividend periods was one percent (1%). For the eleventh calendar quarter through four and
one half years after issuance, the dividend rate will be fixed at one percent (1%) based upon the increase in QBSL as compared to the baseline. After four and one half years from issuance, the
dividend rate will increase to nine percent (9%).
The
Series B Preferred Stock may be redeemed at any time at the Company's option, at a redemption price of 100% of the liquidation amount plus accrued but unpaid dividends to the
date of redemption for the current period, subject to the approval of its federal banking regulator.
On
July 14, 2011, concurrent with the sale of the Series B Preferred Stock under the Small Business Lending Fund, the Company entered into and consummated a letter
agreement with the United States Treasury Department, pursuant to which the Company redeemed, out of the proceeds of the issuance of the Series B Preferred Stock, all 23,325 outstanding shares
of the Series A Preferred Stock related to the Company\'s participation in the Troubled Asset Relief Program's Capital Purchase Program (the "CPP"), for a redemption price of $23,425,398,
including accrued but unpaid dividends to the date of redemption. The Series A Preferred Stock was originally issued on December 5, 2008 for an amount of $38,235,000. Previously, on
December 23, 2009, $15,000,000 of Series A Preferred Stock was redeemed.
On
November 18, 2011 under provisions of the CPP the Company issued to the Treasury warrants for 423,977 shares (as adjusted reflect the 10% stock dividend paid on June 14,
2013) of Company common stock at $6.76 per share (as adjusted for the 10% stock dividend paid on June 14, 2013) were sold by the Treasury. At December 31, 2013 those warrants remain
outstanding and have an expiration date of December 8, 2018. Upon exercise, which is at the option of the holder, the Company will issue a number of shares of Company common stock in exchange
for the warrants equal to the number of shares subject to the warrant less the number of shares determined by multiplying the number of shares subject to the warrant by the strike price and dividing
the result by the current share price.
113
Table of Contents
Eagle Bancorp, Inc.
Notes to Consolidated Financial Statements
for the Years Ended December 31, 2013, 2012 and 2011: (Continued)
Note 10Income Taxes
Federal and state income tax expense consists of the following for the years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
2013
|
|
2012
|
|
2011
|
|
Current federal income tax
|
|
$
|
26,136
|
|
$
|
20,937
|
|
$
|
12,760
|
|
Current state income tax
|
|
|
6,147
|
|
|
4,543
|
|
|
3,051
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current
|
|
|
32,283
|
|
|
25,480
|
|
|
15,811
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred federal income tax benefit
|
|
|
(3,909
|
)
|
|
(4,564
|
)
|
|
(2,062
|
)
|
Deferred state income tax benefit
|
|
|
(56
|
)
|
|
(33
|
)
|
|
(18
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred
|
|
|
(3,965
|
)
|
|
(4,597
|
)
|
|
(2,080
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax expense
|
|
$
|
28,318
|
|
$
|
20,883
|
|
$
|
13,731
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Temporary
timing differences between the amounts reported in the financial statements and the tax bases of assets and liabilities result in deferred taxes. Gross deferred tax assets and
liabilities, shown as the sum of the appropriate tax effect for each significant type of temporary difference, is presented below for the years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
2013
|
|
2012
|
|
2011
|
|
Deferred tax assets
|
|
|
|
|
|
|
|
|
|
|
Allowance for credit losses
|
|
$
|
16,440
|
|
$
|
15,035
|
|
$
|
11,864
|
|
Deferred loan fees and costs
|
|
|
5,039
|
|
|
3,020
|
|
|
1,871
|
|
Stock-based compensation
|
|
|
1,370
|
|
|
829
|
|
|
453
|
|
Net operating loss
|
|
|
3,449
|
|
|
3,952
|
|
|
3,952
|
|
Unrealized loss on securities available for sale
|
|
|
2,213
|
|
|
|
|
|
|
|
Deferred rent
|
|
|
|
|
|
|
|
|
51
|
|
Premises and equipment
|
|
|
1,283
|
|
|
989
|
|
|
653
|
|
Other
|
|
|
4
|
|
|
4
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
29,798
|
|
|
23,829
|
|
|
18,848
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain on securities available for sale
|
|
|
|
|
|
(3,643
|
)
|
|
(3,250
|
)
|
Excess servicing
|
|
|
(95
|
)
|
|
(58
|
)
|
|
(72
|
)
|
Deferred rent
|
|
|
(264
|
)
|
|
(322
|
)
|
|
|
|
Intangible assets
|
|
|
(490
|
)
|
|
(678
|
)
|
|
(853
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
(849
|
)
|
|
(4,701
|
)
|
|
(4,175
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred income tax account
|
|
$
|
28,949
|
|
$
|
19,128
|
|
$
|
14,673
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
114
Table of Contents
Eagle Bancorp, Inc.
Notes to Consolidated Financial Statements
for the Years Ended December 31, 2013, 2012 and 2011: (Continued)
Note 10Income Taxes (Continued)
A
reconciliation of the statutory federal income tax rate to the Company's effective income tax rate for the years ended December 31 follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
2012
|
|
2011
|
|
Statutory federal income tax rate
|
|
|
35.00
|
%
|
|
35.00
|
%
|
|
35.00
|
%
|
Increase (decrease) due to
|
|
|
|
|
|
|
|
|
|
|
State income taxes, net of federal income tax benefit
|
|
|
5.26
|
|
|
5.22
|
|
|
5.15
|
|
Tax exempt interest and dividend income
|
|
|
(2.17
|
)
|
|
(2.46
|
)
|
|
(3.03
|
)
|
Stock-based compensation expense
|
|
|
0.06
|
|
|
0.08
|
|
|
0.18
|
|
Other
|
|
|
(0.56
|
)
|
|
(0.66
|
)
|
|
(1.44
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rates
|
|
|
37.59
|
%
|
|
37.18
|
%
|
|
35.86
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
net operating loss carry forward acquired in conjunction with the Fidelity acquisition is subject to annual limits under Section 382 of the Internal Revenue Code of
$718 thousand and expires in 2027. The Company remains subject to examination for the years ending after December 31, 2009.
Note 11Net Income per Common Share
The calculation of net income per common share for the years ended December 31 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
2012
|
|
2011
|
|
(dollars and shares in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
Basic:
|
|
|
|
|
|
|
|
|
|
|
Net income available to common shareholders
|
|
$
|
46,441
|
|
$
|
34,723
|
|
$
|
23,047
|
|
Average common shares outstanding
|
|
|
25,726
|
|
|
23,136
|
|
|
21,819
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per common share
|
|
$
|
1.81
|
|
$
|
1.50
|
|
$
|
1.05
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted:
|
|
|
|
|
|
|
|
|
|
|
Net income available to common shareholders
|
|
$
|
46,441
|
|
$
|
34,723
|
|
$
|
23,047
|
|
Average common shares outstanding
|
|
|
25,726
|
|
|
23,136
|
|
|
21,819
|
|
Adjustment for common share equivalents
|
|
|
633
|
|
|
608
|
|
|
498
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average common shares outstanding-diluted
|
|
|
26,359
|
|
|
23,744
|
|
|
22,317
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income per common share
|
|
$
|
1.76
|
|
$
|
1.46
|
|
$
|
1.04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anti-dilutive shares
|
|
|
35,079
|
|
|
131,182
|
|
|
218,620
|
|
The
Company declared a 10% stock dividend payable on June 14, 2013. Per share amounts and the number of outstanding shares for periods ended prior to June 30, 2013 have
been adjusted to give effect to the 10% common stock dividend.
Note 12Related Party Transactions
During 2013, approximately $897 thousand in interest was paid to the current or former directors of the Company or accounts for the benefit of such persons in respect of
subordinated notes, which were amended in 2013. See Note 8 for additional information regarding the subordinated notes.
115
Table of Contents
Eagle Bancorp, Inc.
Notes to Consolidated Financial Statements
for the Years Ended December 31, 2013, 2012 and 2011: (Continued)
Note 12Related Party Transactions (Continued)
The
Bank leases office space, at a current monthly base rental of $96,125, excluding certain pass through expenses, from limited liability companies in which a trust for the benefit of
an executive officer's children has an 85% interest in one instance and a 51% interest in another.
The
Bank has obtained certain deposits through title company clients in which a director of the Bank has a direct interest and for which a broker fee of 0.50% of average deposits is paid
monthly in arrears. During 2013 and 2012, approximately $1 thousand and $2 thousand, respectively, in broker fees were paid.
Mr. Rogers
is a partner in the law firm Shulman, Rogers, Gandal, Pordy & Ecker, P.A. which has provided, and continues to provide, legal services to the Company and its
subsidiaries. During 2013, the Company and its subsidiaries paid aggregate fees of $970,840 to that firm. Under Mr. Roger's arrangement with his firm, he does not participate in the profits or
revenues resulting from the provision of legal services to the Company and its subsidiaries, and he receives no other compensation or benefits in lieu of such participation.
Note 13Stock-Based Compensation
The following discussion includes the effects of changes in stock options and restricted stock shares and exercise prices resulting from the 10% common stock dividend paid on
June 14, 2013.
The
Company maintains the 1998 Stock Option Plan ("1998 Plan"), the 2006 Stock Plan ("2006 Plan") and the 2011 Employee Stock Purchase Plan ("2011 ESPP"). In connection with the
acquisition of Fidelity, the Company assumed the Fidelity 2004 Long Term Incentive Plan and 2005 Long Term Incentive Plan (the "Fidelity Plans"). No additional options may be granted under the 1998
Plan or the Fidelity Plans.
The
2006 Plan provides for the issuance of awards of incentive stock options, non-qualifying stock options, restricted stock and stock appreciation rights to selected key employees and
members of the Board. As amended, 1,996,500 shares of common stock are subject to issuance pursuant to awards under the 2006 Plan. Stock options awards are issued with an exercise price equal to the
average of the high and low price of the Company's shares at the date of grant.
For
awards that are service based, compensation expense is being recognized over the service (vesting) period based on fair value, which for stock option grants is computed using the
Black-Scholes model, and for restricted stock awards is based on the average of the high and low stock price of the Company's shares on the date of grant. For awards that are performance-based,
compensation expense is recorded based on the probability of achievement of the goals underlying the grant. No performance-based awards are outstanding at December 31, 2013.
In
January 2013, the Company awarded an employee stock options to purchase 3,300 shares which have a ten-year term and vest in five substantially equal installments on the first through
fifth anniversary of the date of grant.
In
February 2013, the Company awarded 421,425 shares of restricted stock to senior officers, directors and employees. The shares vest in four substantially equal installments beginning
on the first anniversary of the date of grant.
In
May 2013, the Company awarded 3,025 shares of restricted stock to eight employees. The shares vest in four substantially equal installments beginning on the first anniversary of the
date of grant.
116
Table of Contents
Eagle Bancorp, Inc.
Notes to Consolidated Financial Statements
for the Years Ended December 31, 2013, 2012 and 2011: (Continued)
Note 13Stock-Based Compensation (Continued)
Below is a summary of stock option activity for the twelve months ended December 31, 2013, 2012 and 2011. The information excludes restricted stock units and awards.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
2012
|
|
2011
|
|
|
|
Shares
|
|
Weighted-
Average
Exercise Price
|
|
Shares
|
|
Weighted-
Average
Exercise Price
|
|
Shares
|
|
Weighted-
Average
Exercise Price
|
|
Beginning Balance
|
|
|
722,155
|
|
$
|
10.18
|
|
|
919,371
|
|
$
|
10.23
|
|
|
1,099,306
|
|
$
|
9.63
|
|
Issued
|
|
|
3,300
|
|
|
20.03
|
|
|
5,500
|
|
|
15.48
|
|
|
4,950
|
|
|
11.78
|
|
Exercised
|
|
|
(198,588
|
)
|
|
9.99
|
|
|
(167,882
|
)
|
|
10.01
|
|
|
(150,237
|
)
|
|
6.32
|
|
Forfeited
|
|
|
(2,420
|
)
|
|
7.40
|
|
|
(3,493
|
)
|
|
6.22
|
|
|
(17,952
|
)
|
|
6.57
|
|
Expired
|
|
|
(23,113
|
)
|
|
10.05
|
|
|
(31,341
|
)
|
|
13.92
|
|
|
(16,696
|
)
|
|
10.48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Balance
|
|
|
501,334
|
|
$
|
10.34
|
|
|
722,155
|
|
$
|
10.18
|
|
|
919,371
|
|
$
|
10.23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
following summarizes information about stock options outstanding at December 31, 2013. The information excludes restricted stock units and awards.
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options
Outstanding
|
|
Weighted-Average
Exercise Price
|
|
Weighted-Average
Remaining
Contractual Life
|
|
Outstanding:
|
|
Range of Exercise Prices
|
|
$5.76 $8.00
|
|
|
242,770
|
|
$
|
5.76
|
|
|
5.02
|
|
$8.01 $10.00
|
|
|
73,242
|
|
|
9.67
|
|
|
0.88
|
|
$10.01 $20.00
|
|
|
109,994
|
|
|
12.55
|
|
|
3.79
|
|
$20.01 $24.46
|
|
|
75,328
|
|
|
22.52
|
|
|
1.90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
501,334
|
|
$
|
10.34
|
|
|
3.68
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options
Exercisable
|
|
Weighted-Average
Exercise Price
|
|
Exercisable:
|
|
Range of Exercise Prices
|
|
$5.76 $8.00
|
|
|
143,147
|
|
$
|
5.76
|
|
$8.01 $10.00
|
|
|
73,242
|
|
|
9.67
|
|
$10.01 $20.00
|
|
|
78,517
|
|
|
12.97
|
|
$20.01 $24.46
|
|
|
72,028
|
|
|
22.64
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
366,934
|
|
$
|
11.40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
117
Table of Contents
Eagle Bancorp, Inc.
Notes to Consolidated Financial Statements
for the Years Ended December 31, 2013, 2012 and 2011: (Continued)
Note 13Stock-Based Compensation (Continued)
The
fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option pricing model with the assumptions as shown in the table below used for grants
during the years ended December 31, 2013, 2012 and 2011.
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2013
|
|
2012
|
|
2011
|
Expected Volatility
|
|
|
34.12
|
%
|
|
36.64
|
%
|
33.61% 36.64%
|
Weighted-Average Volatility
|
|
|
34.12
|
%
|
|
36.64
|
%
|
35.60%
|
Expected Dividends
|
|
|
0.0
|
%
|
|
0.0
|
%
|
0.0%
|
Expected Term (In years)
|
|
|
7.5
|
|
|
7.5
|
|
6.0 7.5
|
Risk-Free Rate
|
|
|
1.31
|
%
|
|
1.13
|
%
|
1.82%
|
Weighted-Average Fair Value (Grant date)
|
|
$
|
7.83
|
|
$
|
6.35
|
|
$4.61
|
The
expected lives are based on the "simplified" method allowed by ASC Topic 718
"Compensation,"
whereby the expected term is equal to the
midpoint between the vesting date and the end of the contractual term of the award.
The
total intrinsic value of outstanding stock options and outstanding exercisable stock options was $10.2 million and $7.1 million, respectively, at December 31,
2013 and 2012. The total intrinsic value of stock options exercised during the years ended December 31, 2013, 2012 and 2011 was $3.1 million, $1.1 million and
$855 thousand, respectively. The total fair value of stock options vested was $133 thousand, $136 thousand and $151 thousand for 2013, 2012 and 2011, respectively.
Unrecognized stock-based compensation expense related to stock options totaled $135 thousand at December 31, 2013. At such date, the weighted-average period over which this unrecognized
expense was expected to be recognized was 3.70 years.
Cash
proceeds, tax benefits and intrinsic value related to total stock options exercised is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(dollars in thousands)
|
|
2013
|
|
2012
|
|
2011
|
|
Proceeds from stock options exercised
|
|
$
|
1,984
|
|
$
|
1,685
|
|
$
|
944
|
|
Tax benefits related to stock options exercised
|
|
|
410
|
|
|
369
|
|
|
143
|
|
Intrinsic value of stock options exercised
|
|
|
3,060
|
|
|
1,100
|
|
|
855
|
|
The
Company has unvested restricted stock award grants of 614,580 shares from the 2006 Plan at December 31, 2013. Unrecognized stock based compensation expense related to
restricted stock awards totaled $8.7 million at December 31, 2013. At such date, the weighted-average period over which this
118
Table of Contents
Eagle Bancorp, Inc.
Notes to Consolidated Financial Statements
for the Years Ended December 31, 2013, 2012 and 2011: (Continued)
Note 13Stock-Based Compensation (Continued)
unrecognized
expense was expected to be recognized was 2.90 years. The following table summarizes the unvested restricted stock awards at December 31, 2013 and 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2013
|
|
2012
|
|
|
|
Shares
|
|
Weighted-
Average Grant
Date Fair Value
|
|
Shares
|
|
Weighted-
Average Grant
Date Fair Value
|
|
Unvested at Beginning
|
|
|
348,353
|
|
$
|
13.79
|
|
|
222,793
|
|
$
|
10.61
|
|
Issued
|
|
|
424,450
|
|
|
20.64
|
|
|
268,115
|
|
|
15.30
|
|
Forfeited
|
|
|
(1,318
|
)
|
|
13.23
|
|
|
(15,051
|
)
|
|
11.05
|
|
Vested
|
|
|
(156,905
|
)
|
|
13.04
|
|
|
(127,504
|
)
|
|
11.73
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested at End
|
|
|
614,580
|
|
$
|
18.71
|
|
|
348,353
|
|
$
|
13.79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Approved
by shareholders in May 2011, the 2011 ESPP reserved 550,000 shares of common stock for issuance to employees. Whole shares are sold to participants in the plan at 85% of the
lower of the stock price at the beginning or end of each quarterly offering period. The 2011 ESPP is available to all eligible employees who have completed at least one year of continuous employment,
work at least 20 hours per week and at least five months a year. Participants may contribute a minimum of $10 per pay period to a maximum of $6,250 per offering period or $25,000 annually (not
to exceed more than 10% of compensation per pay period). At December 31, 2013, the 2011 ESPP had 473,804 shares remaining for issuance.
Included
in salaries and employee benefits the Company recognized $3.3 million, $2.5 million and $1.1 million in stock-based compensation expense for 2013, 2012 and
2011, respectively. Stock-based compensation expense is recognized ratably over the requisite service period for all awards.
Note 14Employee Benefit Plans
The Company has a qualified 401(k) Plan which covers all employees who have reached the age of 21 and have completed at least one month of service as defined by the Plan. The Company
makes contributions to the Plan based on a matching formula, which is annually reviewed. For years 2013, 2012 and 2011, the Company recognized $878 thousand, $780 thousand, and
$628 thousand in expense, respectively. These amounts are included in salaries and employee benefits in the accompanying Consolidated Statements of Operations.
Note 15Supplemental Executive Retirement Plan
In February 2013, the Compensation Committee authorized Supplemental Executive Retirement and Death Benefit Agreements (the "SERP Agreements") with each of the Bank's executive officers
other than Mr. Paul, which upon the executive's retirement, will provide for a stated monthly payment for such executive's lifetime or alternatively, a lump sum payment at the option of the
executive. The retirement benefit is computed as a percentage of each executive's projected average base salary over the five years preceding retirement, assuming retirement at age 67. The SERP
Agreements provide that (a) the benefits vest ratably over six years of service to the Bank, with the executive receiving credit for
years of service prior to entering into the SERP Agreement (b) death, disability and change-in-control shall result in
119
Table of Contents
Eagle Bancorp, Inc.
Notes to Consolidated Financial Statements
for the Years Ended December 31, 2013, 2012 and 2011: (Continued)
Note 15Supplemental Executive Retirement Plan (Continued)
immediate
vesting, and (c) the monthly amount will be reduced if retirement occurs earlier than age 67 for any reason other than death, disability or change-in-control. The SERP Agreements
further provide for a death benefit in the event the retired executive dies prior to receiving 180 monthly installments, paid either in a lump sum payment or continued monthly installment
payments, such that the executive's beneficiary has received payment(s) sufficient to equate to a cumulative 180 monthly installments.
The
SERP Agreements are unfunded arrangements maintained primarily to provide supplemental retirement benefits and comply with Section 409A of the Internal Revenue Code. The Bank
has elected to finance the retirement benefits by purchasing fixed annuity contracts with three insurance carriers totaling $10.7 million that have been designed to provide a future source of
funds for the lifetime retirement benefits of the SERP Agreements. The primary impetus for utilizing fixed annuities is a substantial savings in compensation expenses for the Bank as opposed to a
traditional SERP Agreement. The annuity contracts accrued $551 thousand of income for the year ended December 31, 2013, which is included in other noninterest income on the Consolidated
Statement of Operations. The cash surrender value of the annuity contracts is $11.2 million at December 31, 2013 and is included in Other assets on the Consolidated Balance Sheet. For
the year ended December 31, 2013, the Company recorded benefit expense accruals of $1.7 million for this post retirement benefit.
Upon
death of an executive, the annuity contract related to such executive terminates. The Bank has purchased additional bank owned life insurance contracts, which would effectively fund
payments (up to a 15 year certain amount) to the executives' named beneficiaries.
Note 16Financial Instruments with Off-Balance Sheet Risk
Various commitments to extend credit are made in the normal course of banking business. Letters of credit are also issued for the benefit of customers. These commitments are subject to
loan underwriting standards and geographic boundaries consistent with the Company's loans outstanding.
Commitments
to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require payment of a fee. Since some of the commitments are expected to expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements.
Loan
commitments outstanding and lines and letters of credit at December 31, 2013 and 2012 are as follows:
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
2013
|
|
2012
|
|
Unfunded loan commitments
|
|
$
|
1,150,556
|
|
$
|
718,386
|
|
Unfunded lines of credit
|
|
|
79,786
|
|
|
74,094
|
|
Letters of credit
|
|
|
51,768
|
|
|
58,378
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,282,110
|
|
$
|
850,858
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Because
most of the Company's business activity is with customers located in the Washington, D.C., metropolitan area, a geographic concentration of credit risk exists within the loan
portfolio, the performance of which will be influenced by the economy of the region.
120
Table of Contents
Eagle Bancorp, Inc.
Notes to Consolidated Financial Statements
for the Years Ended December 31, 2013, 2012 and 2011: (Continued)
Note 16Financial Instruments with Off-Balance Sheet Risk (Continued)
The
Bank maintains a reserve for the potential repurchase of residential mortgage loans, which amounted to $57 thousand at December 31, 2013 and $225 thousand at
December 31, 2012. These amounts are included in Other liabilities in the accompanying Consolidated Balance Sheets. Changes in the balance of the reserve are a component of Other expenses in
the accompanying Consolidated Statements of Operations. The reserve is available to absorb losses on the repurchase of loans sold related to document and other fraud, early payment default and early
payoff. Through December 31, 2013, no reserve charges have occurred related to fraud or early payment default.
Note 17Litigation
In the normal course of its business, the Company is involved in litigation arising from banking, financial, and other activities it conducts. Management, after consultation with legal
counsel, does not anticipate that the ultimate liability, if any, arising out of these matters will have a material effect on the Company's financial condition, operating results or liquidity.
Note 18Regulatory Matters
The Company and Bank are subject to various regulatory capital requirements administered by the Federal banking agencies. Failure to meet minimum capital requirements can initiate
certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company's financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, the Company and Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain
off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk
weighting, and other factors.
Quantitative
measures established by regulation to ensure capital adequacy require the Company and Bank to maintain amounts and ratios (set forth in the table below) of total capital and
Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital (as defined) to average assets (as defined). Management believes, as of
December 31, 2013 and 2012, that the Company and Bank met all capital adequacy requirements to which they are subject.
121
Table of Contents
Eagle Bancorp, Inc.
Notes to Consolidated Financial Statements
for the Years Ended December 31, 2013, 2012 and 2011: (Continued)
Note 18Regulatory Matters (Continued)
The
actual capital amounts and ratios for the Company and Bank as of December 31, 2013 and 2012 are presented in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
To Be Well
Capitalized
Under Prompt
Corrective
Action Provision
Ratio*
|
|
|
|
Company
|
|
Bank
|
|
|
|
|
|
For Capital
Adequacy
Purposes
Ratio
|
|
(dollars in thousands)
|
|
Actual
Amount
|
|
Ratio
|
|
Actual
Amount
|
|
Ratio
|
|
As of December 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital (to risk weighted assets)
|
|
$
|
440,332
|
|
|
13.01
|
%
|
$
|
403,910
|
|
|
12.00
|
%
|
|
8.0
|
%
|
|
10.0
|
%
|
Tier 1 capital (to risk weighted assets)
|
|
|
390,111
|
|
|
11.53
|
%
|
|
363,166
|
|
|
10.79
|
%
|
|
4.0
|
%
|
|
6.0
|
%
|
Tier 1 capital (to average assets)
|
|
|
390,111
|
|
|
10.93
|
%
|
|
363,166
|
|
|
10.22
|
%
|
|
3.0
|
%
|
|
5.0
|
%
|
As of December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital (to risk weighted assets)
|
|
$
|
381,808
|
|
|
12.20
|
%
|
$
|
350,609
|
|
|
11.25
|
%
|
|
8.0
|
%
|
|
10.0
|
%
|
Tier 1 capital (to risk weighted assets)
|
|
|
338,138
|
|
|
10.80
|
%
|
|
312,974
|
|
|
10.05
|
%
|
|
4.0
|
%
|
|
6.0
|
%
|
Tier 1 capital (to average assets)
|
|
|
338,138
|
|
|
10.44
|
%
|
|
312,974
|
|
|
9.70
|
%
|
|
3.0
|
%
|
|
5.0
|
%
|
Bank
and holding company regulations, as well as Maryland law, impose certain restrictions on dividend payments by the Bank, as well as restricting extensions of credit and transfers of
assets between the Bank and the Company. At December 31, 2013, the Bank could pay dividends to the parent to the extent of its earnings so long as it maintained required capital ratios.
122
Table of Contents
Eagle Bancorp, Inc.
Notes to Consolidated Financial Statements
for the Years Ended December 31, 2013, 2012 and 2011: (Continued)
Note 19Other Comprehensive Income
The following table presents the components of other comprehensive income (loss) for the years ended December 31, 2013, 2012 and 2011.
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
Before Tax
|
|
Tax Effect
|
|
Net of Tax
|
|
Year Ended December 31, 2013
|
|
|
|
|
|
|
|
|
|
|
Net unrealized loss on securities available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
Net unrealized loss on securities available-for-sale
|
|
$
|
(14,622
|
)
|
$
|
(5,849
|
)
|
$
|
(8,773
|
)
|
Less: Reclassification adjustment for net gains included in net income
|
|
|
(19
|
)
|
|
(8
|
)
|
|
(11
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive Loss
|
|
$
|
(14,641
|
)
|
$
|
(5,857
|
)
|
$
|
(8,784
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
Net unrealized gain on securities available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
Net unrealized gain on securities available-for-sale
|
|
$
|
1,673
|
|
$
|
669
|
|
$
|
1,004
|
|
Less: Reclassification adjustment for net gains included in net income
|
|
|
(690
|
)
|
|
(276
|
)
|
|
(414
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive Income
|
|
$
|
983
|
|
$
|
393
|
|
$
|
590
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2011
|
|
|
|
|
|
|
|
|
|
|
Net unrealized gain on securities available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
Net unrealized gain on securities available-for-sale
|
|
$
|
6,140
|
|
$
|
2,456
|
|
$
|
3,684
|
|
Less: Reclassification adjustment for net gains included in net income
|
|
|
(1,445
|
)
|
|
(578
|
)
|
|
(867
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive Income
|
|
$
|
4,695
|
|
$
|
1,878
|
|
$
|
2,817
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
123
Table of Contents
Eagle Bancorp, Inc.
Notes to Consolidated Financial Statements
for the Years Ended December 31, 2013, 2012 and 2011: (Continued)
Note 19Other Comprehensive Income (Continued)
The
following table presents the changes in each component of accumulated other comprehensive income (loss), net of tax, for the years ended December 31, 2013, 2012 and 2011.
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
Securities
Available For Sale
|
|
Accumulated Other
Comprehensive (Loss) Income
|
|
Year Ended December 31, 2013
|
|
|
|
|
|
|
|
Balance at Beginning of Period
|
|
$
|
5,465
|
|
$
|
5,465
|
|
Other comprehensive (loss) before reclassifications
|
|
|
(8,773
|
)
|
|
(8,773
|
)
|
Amounts reclassified from accumulated other comprehensive income
|
|
|
(11
|
)
|
|
(11
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net other comprehensive (loss) during period
|
|
|
(8,784
|
)
|
|
(8,784
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at End of Period
|
|
$
|
(3,319
|
)
|
$
|
(3,319
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2012
|
|
|
|
|
|
|
|
Balance at Beginning of Period
|
|
$
|
4,875
|
|
$
|
4,875
|
|
Other comprehensive income before reclassifications
|
|
|
1,004
|
|
|
1,004
|
|
Amounts reclassified from accumulated other comprehensive income
|
|
|
(414
|
)
|
|
(414
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net other comprehensive income during period
|
|
|
590
|
|
|
590
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at End of Period
|
|
$
|
5,465
|
|
$
|
5,465
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2011
|
|
|
|
|
|
|
|
Balance at Beginning of Period
|
|
$
|
2,058
|
|
$
|
2,058
|
|
Other comprehensive income before reclassifications
|
|
|
3,684
|
|
|
3,684
|
|
Amounts reclassified from accumulated other comprehensive income
|
|
|
(867
|
)
|
|
(867
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net other comprehensive income during period
|
|
|
2,817
|
|
|
2,817
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at End of Period
|
|
$
|
4,875
|
|
$
|
4,875
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
following table presents the amounts reclassified out of each component of accumulated other comprehensive income (loss) for the years ended December 31, 2013, 2012 and 2011.
|
|
|
|
|
|
|
|
|
|
|
|
Details about Accumulated Other
Comprehensive Income Components (dollars in thousands)
|
|
Amount Reclassified from
Accumulated Other
Comprehensive (Loss) Income
|
|
Affected Line Item in
the Statement Where
Net Income is Presented
|
|
|
Year Ended December 31,
|
|
|
|
|
2013
|
|
2012
|
|
2011
|
|
|
Realized gain on sale of investment securities
|
|
$
|
19
|
|
$
|
690
|
|
$
|
1,445
|
|
Gain on sale of investment securities
|
|
|
|
(8
|
)
|
|
(276
|
)
|
|
(578
|
)
|
Tax Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Reclassifications for the Period
|
|
$
|
11
|
|
$
|
414
|
|
$
|
867
|
|
Net of Tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
124
Table of Contents
Eagle Bancorp, Inc.
Notes to Consolidated Financial Statements
for the Years Ended December 31, 2013, 2012 and 2011: (Continued)
Note 20Fair Value Measurements
The fair value of an asset or liability is the price that would be received to sell that asset or paid to transfer that liability in an orderly transaction occurring in the principal
market (or most advantageous market in the absence of a principal market) for such asset or liability. In estimating fair value, the Company utilizes valuation techniques that are consistent with the
market approach, the income approach and/or the cost approach. Such valuation techniques are consistently applied. Inputs to valuation techniques include the assumptions that market participants would
use in pricing an asset or liability. ASC Topic 820,
"Fair Value Measurements and Disclosures,"
establishes a fair value hierarchy
for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is
as follows:
|
|
|
|
|
Level 1
|
|
Quoted prices in active exchange markets for identical assets or liabilities; also includes certain U.S. Treasury and other U.S. Government and agency securities actively traded in over-the-counter markets.
|
|
Level 2
|
|
Observable inputs other than Level 1 including quoted prices for similar assets or liabilities, quoted prices in less active markets, or other observable inputs that can be corroborated by observable market data;
also includes derivative contracts whose value is determined using a pricing model with observable market inputs or can be derived principally from or corroborated by observable market data. This category generally includes certain U.S. Government
and agency securities, corporate debt securities, derivative instruments, and residential mortgage loans held for sale.
|
|
Level 3
|
|
Unobservable inputs supported by little or no market activity for financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments
for which the determination of fair value requires significant management judgment or estimation; also includes observable inputs for single dealer nonbinding quotes not corroborated by observable market data. This category generally includes certain
private equity investments, retained interests from securitizations, and certain collateralized debt obligations.
|
125
Table of Contents
Eagle Bancorp, Inc.
Notes to Consolidated Financial Statements
for the Years Ended December 31, 2013, 2012 and 2011: (Continued)
Note 20Fair Value Measurements (Continued)
Assets and Liabilities Recorded as Fair Value on a Recurring Basis
The table below presents the recorded amount of assets and liabilities measured at fair value on a recurring basis as of
December 31, 2013 and 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
Quoted Prices
(Level 1)
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
Significant Other
Unobservable
Inputs (Level 3)
|
|
Total
(Fair Value)
|
|
December 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment securities available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U. S. Government agency securities
|
|
$
|
|
|
$
|
47,335
|
|
$
|
|
|
$
|
47,335
|
|
Residential mortgage backed securities
|
|
|
|
|
|
228,674
|
|
|
|
|
|
228,674
|
|
Municipal bonds
|
|
|
|
|
|
101,740
|
|
|
|
|
|
101,740
|
|
Other equity investments
|
|
|
165
|
|
|
|
|
|
219
|
|
|
384
|
|
Residential mortgage loans held for sale
|
|
|
|
|
|
42,030
|
|
|
|
|
|
42,030
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets measured at fair value on a recurring basis as of December 31, 2013
|
|
$
|
165
|
|
$
|
419,779
|
|
$
|
219
|
|
$
|
420,163
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
Quoted Prices
(Level 1)
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
Significant Other
Unobservable
Inputs (Level 3)
|
|
Total
(Fair Value)
|
|
December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment securities available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U. S. Government agency securities
|
|
$
|
|
|
$
|
49,082
|
|
$
|
|
|
$
|
49,082
|
|
Residential mortgage backed securities
|
|
|
|
|
|
173,083
|
|
|
|
|
|
173,083
|
|
Municipal bonds
|
|
|
|
|
|
77,313
|
|
|
|
|
|
77,313
|
|
Other equity investments
|
|
|
112
|
|
|
|
|
|
230
|
|
|
342
|
|
Residential mortgage loans held for sale
|
|
|
|
|
|
226,923
|
|
|
|
|
|
226,923
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets measured at fair value on a recurring basis as of December 31, 2012
|
|
$
|
112
|
|
$
|
526,401
|
|
$
|
230
|
|
$
|
526,743
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Securities Available-for-Sale
Investment securities available-for-sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted
prices, if available. If quoted prices are not available, fair value is measured using independent pricing models or other model-based valuation techniques such as the present value of future cash
flows, adjusted for the security's credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level 1 securities include those traded on an active exchange such as
the New York Stock Exchange, Treasury securities that are traded by dealers or brokers in active over-the-counter markets and money market funds. Level 2 securities include U.S. Government
agency debt securities, mortgage backed securities issued by government sponsored entities and municipal bonds. Securities classified as Level 3 include securities in less liquid markets.
The
Company's residential loans held for sale are reported on an aggregate basis at the lower of cost or fair value.
126
Table of Contents
Eagle Bancorp, Inc.
Notes to Consolidated Financial Statements
for the Years Ended December 31, 2013, 2012 and 2011: (Continued)
Note 20Fair Value Measurements (Continued)
The
following is a reconciliation of activity for assets measured at fair value based on Significant Other Unobservable Inputs (Level 3):
|
|
|
|
|
|
|
|
|
|
Other Equity Investments
|
|
(dollars in thousands)
|
|
December 31, 2013
|
|
December 31, 2012
|
|
Balance, beginning of period
|
|
$
|
230
|
|
$
|
226
|
|
Realized gains included in other noninterest income
|
|
|
|
|
|
4
|
|
Principal redemption
|
|
|
(11
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of period
|
|
$
|
219
|
|
$
|
230
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis
The Company may be required from time to time, to measure certain assets at fair value on a nonrecurring basis in accordance with GAAP.
These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period. There are no liabilities, which the Company measures at
fair value on a nonrecurring basis. Assets measured at fair value on a nonrecurring basis are included in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
Quoted Prices
(Level 1)
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
Significant Other
Unobservable
Inputs (Level 3)
|
|
Total
(Fair Value)
|
|
December 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
|
|
$
|
4,367
|
|
$
|
1,089
|
|
$
|
5,456
|
|
Income producingcommercial real estate
|
|
|
|
|
|
2,806
|
|
|
1,998
|
|
|
4,804
|
|
Owner occupiedcommercial real estate
|
|
|
|
|
|
2,712
|
|
|
887
|
|
|
3,599
|
|
Real estate mortgageresidential
|
|
|
|
|
|
86
|
|
|
774
|
|
|
860
|
|
Constructioncommercial and residential
|
|
|
|
|
|
4,228
|
|
|
7,080
|
|
|
11,308
|
|
Home equity
|
|
|
|
|
|
50
|
|
|
47
|
|
|
97
|
|
Other consumer
|
|
|
|
|
|
|
|
|
2
|
|
|
2
|
|
Other real estate owned
|
|
|
|
|
|
9,225
|
|
|
|
|
|
9,225
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets measured at fair value on a nonrecurring basis as of December 31, 2013
|
|
$
|
|
|
$
|
23,474
|
|
$
|
11,877
|
|
$
|
35,351
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
127
Table of Contents
Eagle Bancorp, Inc.
Notes to Consolidated Financial Statements
for the Years Ended December 31, 2013, 2012 and 2011: (Continued)
Note 20Fair Value Measurements (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
Quoted Prices
(Level 1)
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
Significant Other
Unobservable
Inputs (Level 3)
|
|
Total
(Fair Value)
|
|
December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
|
|
$
|
3,040
|
|
$
|
4,050
|
|
$
|
7,090
|
|
Income producingcommercial real estate
|
|
|
|
|
|
2,723
|
|
|
1,676
|
|
|
4,399
|
|
Owner occupiedcommercial real estate
|
|
|
|
|
|
5,699
|
|
|
207
|
|
|
5,906
|
|
Real estate mortgageresidential
|
|
|
|
|
|
|
|
|
699
|
|
|
699
|
|
Constructioncommercial and residential
|
|
|
|
|
|
9,219
|
|
|
10,298
|
|
|
19,517
|
|
Home equity
|
|
|
|
|
|
267
|
|
|
3
|
|
|
270
|
|
Other consumer
|
|
|
|
|
|
|
|
|
2
|
|
|
2
|
|
Other real estate owned
|
|
|
|
|
|
4,969
|
|
|
330
|
|
|
5,299
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets measured at fair value on a nonrecurring basis as of December 31, 2012
|
|
$
|
|
|
$
|
25,917
|
|
$
|
17,265
|
|
$
|
43,182
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
The Company does not record loans at fair value on a recurring basis, however, from time to time, a loan is considered impaired and an
allowance for loan loss is established. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan are considered
impaired. Once a loan is identified as individually impaired, management measures impairment in accordance with ASC Topic 310,
"Receivables."
The fair
value of impaired loans is estimated using one of several methods, including the collateral value, market value of similar debt, enterprise value, liquidation value and discounted cash flows. Those
impaired loans not requiring a specific allowance represent loans for which the fair value of expected repayments or collateral exceed the recorded investment in such loans. At December 31,
2013, substantially all of the totally impaired loans were evaluated based upon the fair value of the collateral. In accordance with ASC Topic 820, impaired loans where an allowance is established
based on the fair value of collateral require classification in the fair value hierarchy. When the fair value of the collateral is based on an observable market price or a current appraised value, the
Company records the loan as nonrecurring Level 2. When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised
value and there is no observable market price, the Company records the loan as nonrecurring Level 3.
The
Company discloses fair value information about financial instruments for which it is practicable to estimate the value, whether or not such financial instruments are recognized on
the balance sheet. Fair value is the amount at which a financial instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation, and is best
evidenced by quoted market price, if one exists.
128
Table of Contents
Eagle Bancorp, Inc.
Notes to Consolidated Financial Statements
for the Years Ended December 31, 2013, 2012 and 2011: (Continued)
Note 20Fair Value Measurements (Continued)
Quoted market prices, if available, are shown as estimates of fair value. Because no quoted market prices exist for a portion of the Company's financial instruments, the fair value of
such instruments has been derived based on management's assumptions with respect to future economic conditions, the amount and timing of future cash flows and estimated discount rates. Different
assumptions could significantly affect these estimates. Accordingly, the net realizable value could be materially different from the estimates presented below. In addition, the estimates are only
indicative of individual financial
instrument values and should not be considered an indication of the fair value of the Company taken as a whole.
The
following methods and assumptions were used to estimate the fair value of each category of financial instrument for which it is practicable to estimate value:
Cash due from banks and federal funds sold:
For cash and due from banks and federal funds sold the carrying amount approximates fair
value.
Interest bearing deposits with other banks:
Values are estimated by discounting the future cash flows using the current rates at which
similar
deposits would be earning.
Investment securities:
For these instruments, fair values are based upon quoted prices, if available. If quoted prices are not
available, fair value
is measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security's credit rating, prepayment assumptions
and other factors such as credit loss assumptions.
Federal Reserve and Federal Home Loan Bank stock:
The carrying amount approximate the fair values at the reporting date.
Loans held for sale:
Fair values are at the carrying value (lower of cost or market) since such loans are typically committed to be
sold (servicing
released) at a profit.
Loans:
For variable rate loans that re-price on a scheduled basis, fair values are based on carrying values. The fair value of the
remaining loans
are estimated by discounting the estimated future cash flows using the current interest rate at which similar loans would be made to borrowers with similar credit ratings and for the same remaining
term.
Bank owned life insurance:
The fair value of bank owned life insurance is the current cash surrender value, which is the carrying
value.
Other earning assets:
The fair value of the annuity investments is the carrying amount at the reporting date.
Noninterest bearing deposits:
The fair value of these deposits is the amount payable on demand at the reporting date, since generally
accepted
accounting standards do not permit an assumption of core deposit value.
Interest bearing deposits:
The fair value of interest bearing transaction, savings, and money market deposits with no defined maturity
is the amount
payable on demand at the reporting date, since generally accepted accounting standards do not permit an assumption of core deposit value.
129
Table of Contents
Eagle Bancorp, Inc.
Notes to Consolidated Financial Statements
for the Years Ended December 31, 2013, 2012 and 2011: (Continued)
Note 20Fair Value Measurements (Continued)
Certificates of deposit:
The fair value of certificates of deposit is estimated by discounting the future cash flows using the current
rates at which
similar deposits with remaining maturities would be accepted.
Customer repurchase agreements and federal funds purchased:
The carrying amount approximate the fair values at the reporting date.
Borrowings:
The carrying amount for variable rate borrowings approximate the fair values at the reporting date. The fair value of fixed
rate FHLB
advances and the subordinated notes are estimated by computing the discounted value of contractual cash flows payable at current interest rates for obligations with similar remaining terms. The fair
value of variable rate FHLB advances is estimated to be carrying value since these liabilities are based on a spread to a current pricing index.
Off-balance sheet items:
Management has reviewed the unfunded portion of commitments to extend credit, as well as standby and other
letters of
credit, and has determined that the fair value of such instruments is equal to the fee, if any, collected and unamortized for the commitment made.
130
Table of Contents
Eagle Bancorp, Inc.
Notes to Consolidated Financial Statements
for the Years Ended December 31, 2013, 2012 and 2011: (Continued)
Note 20Fair Value Measurements (Continued)
The
estimated fair values of the Company's financial instruments at December 31, 2013 and 2012 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements
|
|
(dollars in thousands)
|
|
Carrying
Value
|
|
Fair
Value
|
|
Quoted Prices in
Active Markets for
Identical Assets or
Liabilities
(Level 1)
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
Significant
Unobservable Inputs
(Level 3)
|
|
December 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
9,577
|
|
$
|
9,577
|
|
$
|
|
|
$
|
9,577
|
|
$
|
|
|
Federal funds sold
|
|
|
5,695
|
|
|
5,695
|
|
|
|
|
|
5,695
|
|
|
|
|
Interest bearing deposits with other banks
|
|
|
291,688
|
|
|
291,688
|
|
|
|
|
|
291,688
|
|
|
|
|
Investment securities
|
|
|
378,133
|
|
|
378,133
|
|
|
165
|
|
|
377,749
|
|
|
219
|
|
Federal Reserve and Federal Home Loan Bank stock
|
|
|
11,272
|
|
|
11,272
|
|
|
|
|
|
11,272
|
|
|
|
|
Loans held for sale
|
|
|
42,030
|
|
|
42,030
|
|
|
|
|
|
42,030
|
|
|
|
|
Loans
|
|
|
2,945,158
|
|
|
2,979,180
|
|
|
|
|
|
14,249
|
|
|
2,964,931
|
|
Bank owned life insurance
|
|
|
39,738
|
|
|
39,738
|
|
|
|
|
|
39,738
|
|
|
|
|
Other earning assets
|
|
|
11,227
|
|
|
11,227
|
|
|
|
|
|
11,227
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest bearing deposits
|
|
|
849,409
|
|
|
849,409
|
|
|
|
|
|
849,409
|
|
|
|
|
Interest bearing deposits
|
|
|
2,376,005
|
|
|
2,375,861
|
|
|
|
|
|
2,375,861
|
|
|
|
|
Borrowings
|
|
|
119,771
|
|
|
120,764
|
|
|
|
|
|
120,764
|
|
|
|
|
December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
7,439
|
|
$
|
7,439
|
|
$
|
|
|
$
|
7,439
|
|
$
|
|
|
Federal funds sold
|
|
|
7,852
|
|
|
7,852
|
|
|
|
|
|
7,852
|
|
|
|
|
Interest bearing deposits with other banks
|
|
|
324,043
|
|
|
324,043
|
|
|
|
|
|
324,043
|
|
|
|
|
Investment securities
|
|
|
299,820
|
|
|
299,820
|
|
|
112
|
|
|
299,478
|
|
|
230
|
|
Federal Reserve and Federal Home Loan Bank stock
|
|
|
10,694
|
|
|
10,694
|
|
|
|
|
|
10,694
|
|
|
|
|
Loans held for sale
|
|
|
226,923
|
|
|
226,923
|
|
|
|
|
|
226,923
|
|
|
|
|
Loans
|
|
|
2,493,095
|
|
|
2,515,409
|
|
|
|
|
|
33,990
|
|
|
2,481,419
|
|
Bank owned life insurance
|
|
|
14,135
|
|
|
14,135
|
|
|
|
|
|
14,135
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest bearing deposits
|
|
|
881,390
|
|
|
881,390
|
|
|
|
|
|
881,390
|
|
|
|
|
Interest bearing deposits
|
|
|
2,015,832
|
|
|
2,017,623
|
|
|
|
|
|
2,017,623
|
|
|
|
|
Borrowings
|
|
|
140,638
|
|
|
142,765
|
|
|
|
|
|
142,765
|
|
|
|
|
131
Table of Contents
Eagle Bancorp, Inc.
Notes to Consolidated Financial Statements
for the Years Ended December 31, 2013, 2012 and 2011: (Continued)
Note 21Quarterly Results of Operations (unaudited)
The following table reports quarterly results of operations (unaudited) for 2013, 2012 and 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
(dollars in thousands except per share data)
|
|
Fourth
Quarter
|
|
Third
Quarter
|
|
Second
Quarter
|
|
First
Quarter
|
|
Total interest income
|
|
$
|
41,652
|
|
$
|
39,724
|
|
$
|
37,985
|
|
$
|
37,933
|
|
Total interest expense
|
|
|
2,938
|
|
|
3,021
|
|
|
3,121
|
|
|
3,424
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
38,714
|
|
|
36,703
|
|
|
34,864
|
|
|
34,509
|
|
Provision for credit losses
|
|
|
2,508
|
|
|
1,372
|
|
|
2,357
|
|
|
3,365
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after provision for credit losses
|
|
|
36,206
|
|
|
35,331
|
|
|
32,507
|
|
|
31,144
|
|
Noninterest income
|
|
|
4,304
|
|
|
5,236
|
|
|
7,065
|
|
|
8,111
|
|
Noninterest expense
|
|
|
21,524
|
|
|
21,673
|
|
|
20,685
|
|
|
20,697
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income tax expense
|
|
|
18,986
|
|
|
18,894
|
|
|
18,887
|
|
|
18,558
|
|
Income tax expense
|
|
|
6,983
|
|
|
7,137
|
|
|
7,212
|
|
|
6,986
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
12,003
|
|
|
11,757
|
|
|
11,675
|
|
|
11,572
|
|
Preferred stock dividends and discount accretion
|
|
|
141
|
|
|
142
|
|
|
142
|
|
|
141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common shareholders
|
|
$
|
11,862
|
|
$
|
11,615
|
|
$
|
11,533
|
|
$
|
11,431
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic(1 & 2)
|
|
$
|
0.46
|
|
$
|
0.45
|
|
$
|
0.45
|
|
$
|
0.45
|
|
Diluted(1& 2)
|
|
$
|
0.45
|
|
$
|
0.44
|
|
$
|
0.44
|
|
$
|
0.44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
(dollars in thousands except per share data)
|
|
Fourth
Quarter
|
|
Third
Quarter
|
|
Second
Quarter
|
|
First
Quarter
|
|
Total interest income
|
|
$
|
38,164
|
|
$
|
36,636
|
|
$
|
34,575
|
|
$
|
32,568
|
|
Total interest expense
|
|
|
3,427
|
|
|
3,328
|
|
|
3,561
|
|
|
4,098
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
34,737
|
|
|
33,308
|
|
|
31,014
|
|
|
28,470
|
|
Provision for credit losses
|
|
|
4,139
|
|
|
3,638
|
|
|
4,443
|
|
|
3,970
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after provision for credit losses
|
|
|
30,598
|
|
|
29,670
|
|
|
26,571
|
|
|
24,500
|
|
Noninterest income
|
|
|
6,060
|
|
|
4,851
|
|
|
4,441
|
|
|
6,012
|
|
Noninterest expense
|
|
|
20,325
|
|
|
19,107
|
|
|
18,537
|
|
|
18,562
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income tax expense
|
|
|
16,333
|
|
|
15,414
|
|
|
12,475
|
|
|
11,950
|
|
Income tax expense
|
|
|
6,135
|
|
|
5,739
|
|
|
4,692
|
|
|
4,317
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
10,198
|
|
|
9,675
|
|
|
7,783
|
|
|
7,633
|
|
Preferred stock dividends and discount accretion
|
|
|
141
|
|
|
142
|
|
|
142
|
|
|
141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common shareholders
|
|
$
|
10,057
|
|
$
|
9,533
|
|
$
|
7,641
|
|
$
|
7,492
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic(1 & 2)
|
|
$
|
0.40
|
|
$
|
0.41
|
|
$
|
0.34
|
|
$
|
0.34
|
|
Diluted(1& 2)
|
|
$
|
0.39
|
|
$
|
0.40
|
|
$
|
0.33
|
|
$
|
0.33
|
|
132
Table of Contents
Eagle Bancorp, Inc.
Notes to Consolidated Financial Statements
for the Years Ended December 31, 2013, 2012 and 2011: (Continued)
Note 21Quarterly Results of Operations (unaudited) (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
(dollars in thousands except per share data)
|
|
Fourth
Quarter
|
|
Third
Quarter
|
|
Second
Quarter
|
|
First
Quarter
|
|
Total interest income
|
|
$
|
33,091
|
|
$
|
30,741
|
|
$
|
28,996
|
|
$
|
26,296
|
|
Total interest expense
|
|
|
4,820
|
|
|
5,365
|
|
|
5,102
|
|
|
4,790
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
28,271
|
|
|
25,376
|
|
|
23,894
|
|
|
21,506
|
|
Provision for credit losses
|
|
|
2,765
|
|
|
2,887
|
|
|
3,215
|
|
|
2,116
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after provision for credit losses
|
|
|
25,506
|
|
|
22,489
|
|
|
20,679
|
|
|
19,390
|
|
Noninterest income
|
|
|
3,864
|
|
|
3,511
|
|
|
3,193
|
|
|
2,933
|
|
Noninterest expense
|
|
|
18,307
|
|
|
15,723
|
|
|
14,933
|
|
|
14,313
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income tax expense
|
|
|
11,063
|
|
|
10,277
|
|
|
8,939
|
|
|
8,010
|
|
Income tax expense
|
|
|
3,889
|
|
|
3,783
|
|
|
3,185
|
|
|
2,874
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
7,174
|
|
|
6,494
|
|
|
5,754
|
|
|
5,136
|
|
Preferred stock dividends and discount accretion
|
|
|
142
|
|
|
166
|
|
|
883
|
|
|
320
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common shareholders
|
|
$
|
7,032
|
|
$
|
6,328
|
|
$
|
4,871
|
|
$
|
4,816
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic(1 & 2)
|
|
$
|
0.32
|
|
$
|
0.29
|
|
$
|
0.23
|
|
$
|
0.22
|
|
Diluted(1& 2)
|
|
$
|
0.32
|
|
$
|
0.28
|
|
$
|
0.22
|
|
$
|
0.22
|
|
-
(1)
-
Earnings
per common share are calculated on a quarterly basis and may not be additive to the year to date amount.
-
(2)
-
Per
share amounts have been adjusted to give effect to the 10% common stock dividend paid on June 14, 2013.
133
Table of Contents
Eagle Bancorp, Inc.
Notes to Consolidated Financial Statements
for the Years Ended December 31, 2013, 2012 and 2011: (Continued)
Note 22Parent Company Financial Information
Condensed financial information for Eagle Bancorp, Inc. (Parent Company only) is as follows:
Condensed Balance Sheets
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
December 31,
2013
|
|
December 31,
2012
|
|
Assets
|
|
|
|
|
|
|
|
Cash
|
|
$
|
17,140
|
|
$
|
16,877
|
|
Cash equivalents
|
|
|
8,693
|
|
|
8,641
|
|
Investment securities available for sale, at fair value
|
|
|
265
|
|
|
212
|
|
Investment in subsidiaries
|
|
|
376,416
|
|
|
332,477
|
|
Other assets
|
|
|
1,000
|
|
|
1,353
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
403,514
|
|
$
|
359,560
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
Other liabilities
|
|
$
|
351
|
|
$
|
284
|
|
Long-term borrowings
|
|
|
9,300
|
|
|
9,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
9,651
|
|
|
9,584
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders' Equity
|
|
|
|
|
|
|
|
Preferred stock, Series B
|
|
|
56,600
|
|
|
56,600
|
|
Common stock
|
|
|
253
|
|
|
226
|
|
Warrant
|
|
|
946
|
|
|
946
|
|
Additional paid in capital
|
|
|
242,990
|
|
|
180,593
|
|
Retained earnings
|
|
|
96,393
|
|
|
106,146
|
|
Accumulated other comprehensive (loss) income
|
|
|
(3,319
|
)
|
|
5,465
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders' equity
|
|
|
393,863
|
|
|
349,976
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Shareholders' Equity
|
|
$
|
403,514
|
|
$
|
359,560
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
134
Table of Contents
Eagle Bancorp, Inc.
Notes to Consolidated Financial Statements
for the Years Ended December 31, 2013, 2012 and 2011: (Continued)
Note 22Parent Company Financial Information (Continued)
Condensed Statements of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(dollars in thousands)
|
|
2013
|
|
2012
|
|
2011
|
|
Income
|
|
|
|
|
|
|
|
|
|
|
Other interest and dividends
|
|
$
|
117
|
|
$
|
78
|
|
$
|
5,056
|
|
Gain on sale of investment securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Income
|
|
|
117
|
|
|
78
|
|
|
5,056
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
897
|
|
|
946
|
|
|
943
|
|
Legal and professional
|
|
|
142
|
|
|
192
|
|
|
214
|
|
Directors' fees
|
|
|
187
|
|
|
237
|
|
|
178
|
|
Other
|
|
|
946
|
|
|
816
|
|
|
781
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Expenses
|
|
|
2,172
|
|
|
2,191
|
|
|
2,116
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) Income Before Income Tax (Benefit) and Equity in Undistributed Income of Subsidiaries
|
|
|
(2,055
|
)
|
|
(2,113
|
)
|
|
2,940
|
|
Income Tax Benefit
|
|
|
(810
|
)
|
|
(838
|
)
|
|
(813
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) Income Before Equity in Undistributed Income of Subsidiaries
|
|
|
(1,245
|
)
|
|
(1,275
|
)
|
|
3,753
|
|
Equity in Undistributed Income of Subsidiaries
|
|
|
48,252
|
|
|
36,564
|
|
|
20,805
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
|
47,007
|
|
|
35,289
|
|
|
24,558
|
|
Preferred Stock Dividends and Discount Accretion
|
|
|
566
|
|
|
566
|
|
|
1,511
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income Available to Common Shareholders
|
|
$
|
46,441
|
|
$
|
34,723
|
|
$
|
23,047
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
135
Table of Contents
Eagle Bancorp, Inc.
Notes to Consolidated Financial Statements
for the Years Ended December 31, 2013, 2012 and 2011: (Continued)
Note 22Parent Company Financial Information (Continued)
Condensed Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(dollars in thousands)
|
|
2013
|
|
2012
|
|
2011
|
|
Cash Flows From Operating Activities
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
47,007
|
|
$
|
35,289
|
|
$
|
24,558
|
|
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
Equity in undistributed income of subsidiary
|
|
|
(48,252
|
)
|
|
(36,564
|
)
|
|
(20,805
|
)
|
Excess tax benefit on stock-based compensation
|
|
|
(410
|
)
|
|
(369
|
)
|
|
(143
|
)
|
Decrease (increase) in other assets
|
|
|
353
|
|
|
(34
|
)
|
|
784
|
|
Increase (decrease) in other liabilities
|
|
|
67
|
|
|
(50
|
)
|
|
203
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by operating activities
|
|
|
(1,235
|
)
|
|
(1,728
|
)
|
|
4,597
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities
|
|
|
|
|
|
|
|
|
|
|
Investment in subsidiary (net)
|
|
|
(810
|
)
|
|
(34,143
|
)
|
|
(31,964
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) investing activities
|
|
|
(810
|
)
|
|
(34,143
|
)
|
|
(31,964
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities
|
|
|
|
|
|
|
|
|
|
|
Issuance of Series B Preferred Stock
|
|
|
|
|
|
|
|
|
56,600
|
|
Redemption of Series A Preferred Stock
|
|
|
|
|
|
|
|
|
(23,235
|
)
|
Cash paid in lieu of fractional shares
|
|
|
(11
|
)
|
|
|
|
|
|
|
Issuance of common stock
|
|
|
|
|
|
42,956
|
|
|
|
|
Proceeds from exercise of stock options
|
|
|
1,984
|
|
|
1,685
|
|
|
944
|
|
Preferred stock dividends
|
|
|
(566
|
)
|
|
(566
|
)
|
|
(1,033
|
)
|
Excess tax benefit on stock-based compensation
|
|
|
410
|
|
|
369
|
|
|
143
|
|
Proceeds from employee stock purchase plan
|
|
|
543
|
|
|
447
|
|
|
124
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
2,360
|
|
|
44,891
|
|
|
33,543
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Increase in Cash
|
|
|
315
|
|
|
9,020
|
|
|
6,176
|
|
Cash and Cash Equivalents at Beginning of Year
|
|
|
25,518
|
|
|
16,498
|
|
|
10,322
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents at End of Year
|
|
$
|
25,833
|
|
$
|
25,518
|
|
$
|
16,498
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
136
Table of Contents