BETHESDA, Md., Oct. 22, 2009 (GLOBE NEWSWIRE) -- Eagle Bancorp, Inc. (the "Company") (Nasdaq:EGBN), the parent company of EagleBank, today announced net income of $2.7 million for the quarter ended September 30, 2009, a 21% increase over the $2.3 million for the quarter ended September 30, 2008. Net income available to common shareholders was $2.1 million ($0.16 per basic common share and $0.15 per diluted common share) for the three months ended September 30, 2009, compared to $2.3 million ($0.20 per basic common share and $0.19 per diluted common share) for the three months ended September 30, 2008, a 5% decrease.

For the nine months ended September 30, 2009, the Company's net income was $7.5 million, a 30% increase over the $5.8 million for the nine months ended September 30, 2008. Net income available to common shareholders was $5.7 million ($0.44 per basic common share and $0.43 per diluted common share), as compared to $5.8 million ($0.53 per basic common share and $0.52 per diluted common share) for the same period in 2008, a 1% decrease.

"After completing a very successful offering of $55 million of common stock during the quarter, to support continued growth, we are very pleased to report our results for the third quarter of 2009. These results reflect earnings growth, continued deposit growth and continued declines in the level of nonperforming assets," noted Ronald D. Paul, Chairman, President and Chief Executive Officer of Eagle Bancorp, Inc. "At a time of continuing stress in our financial markets and in the general economy, Eagle Bancorp continues to perform well in many aspects," added Mr. Paul. "EagleBank has remained diligent in meeting the credit needs of its clients throughout its market area, as reflected by the $147 million, or 13%, loan growth over the past twelve months. Over the same time period, total deposits increased $195 million, or 17%, from core deposit growth. The continued growth in loans and deposits is a clear sign that the integration of Eagle Bancorp and Fidelity & Trust Financial Corporation ("Fidelity") and its subsidiary Fidelity & Trust Bank has been successful and that we have been able to maintain the high standard of banking that our new and existing customers deserve."

The continued growth in loans, average deposits, and other funding sources were the major drivers of the increase in net interest income for the three and nine months ended September 30, 2009, as compared to the three and nine month periods ended September 30, 2008. Both lending and deposit activities showed growth for the three and nine months ended September 30, 2009 as compared to the same periods in 2008. Average loans increased 43% and 61% for the three and nine months ended September 30, 2009, respectively. Average deposits increased 53% and 65% for the three and nine months ended September 30, 2009, respectively. Both periods gains were due in part to the acquisition of Fidelity, completed as of August 31, 2008.

At September 30, 2009, total assets were $1.7 billion compared to $1.5 billion at September 30, 2008, a 15% increase. Total deposits amounted to $1.3 billion, at September 30, 2009, a 17% increase over deposits of $1.1 billion at September 30, 2008, while total loans increased to $1.3 billion at September 30, 2009, from $1.2 billion at September 30, 2008, a 13% increase. Total borrowed funds, which include customer repurchase agreements, decreased to $138.6 million at September 30, 2009 from $195.4 million at September 30, 2008, a 29% decrease, as substantial growth in core deposits was used to pay-down alternative funding sources.

Mr. Paul added, "In spite of uncertainty in the financial markets and a difficult interest rate environment the Company maintained a strong net interest margin for the third quarter of 2009 of 3.77%, which was slightly lower than the net interest margin in the second quarter of 2009 of 3.91%. The slightly lower margin in the third quarter was due to higher average liquidity during the quarter ended September 30, 2009 as compared to the quarter ended June 30, 2009." The higher average liquidity is reflected in higher average federal funds sold as both the average and quarterly growth in deposits in the third quarter of 2009 exceeded loan growth. Loan growth amounted to $4 million in the third quarter, as compared to $84 million of deposit growth. The slower loan growth is attributable to both seasonality and to anticipated loan fundings in the third quarter which carried into the fourth quarter of 2009. Based on the current amount of loan commitments, fourth quarter loan growth appears to be strong. The significant increase in deposits in the third quarter is primarily attributable to a marketing campaign for money market accounts.

At September 30, 2009, the Company's level of nonperforming assets of $27.4 million, representing 1.63% of total assets, was lower than the $34.1 million of nonperforming assets or 2.14% of total assets, at June 30, 2009. At December 31, 2008, nonperforming assets were $26.4 million, 1.76% of total assets. Management remains attentive to early signs of deterioration in borrowers' financial conditions and to taking the appropriate action to mitigate risk. Furthermore, the Company is diligent in placing loans on nonaccrual status and believes, based on its loan portfolio risk analysis, that its allowance for loan losses at 1.51% of total loans at September 30, 2009 is adequate to absorb potential credit losses in the loan portfolio at that date. Included in nonperforming assets, at September 30, 2009, the Company held $4.6 million of Other Real Estate Owned ("OREO") as compared to $909 thousand at December 31, 2008 and $65 thousand at September 30, 2008.

Analysis of the three months ended September 30, 2009 versus 2008

For the three months ended September 30, 2009, the Company reported an annualized return on average assets of 0.67% as compared to 0.82% for the three months ended September 30, 2008. The annualized return on average common equity for the most recent quarter was 7.62%, as compared to 9.97% for the three months ended September 30, 2008. Declines in these ratios were due primarily to declines in the net interest margin, which factor is affecting all financial institutions, and to substantially higher provisions for loan losses.

Net interest income increased 38% for the three months ended September 30, 2009 over 2008, as the effect of balance sheet growth was partially offset by a 34 basis points decline in the net interest margin over the past twelve months. For the three months ended September 30, 2009, the net interest margin was 3.77% as compared to 4.11% for the three months ended September 30, 2008. The Company's net interest margin for the third quarter of 2009 declined by 14 basis points to 3.77% from 3.91% for the second quarter of 2009, due to slower loan growth and higher level of average balance sheet liquidity in the third quarter of 2009 as compared to the second quarter of 2009. Additionally, the $12.15 million of subordinated notes issued on August 28, 2008 represent an additional category of interest expense for the third quarter of 2009 which only existed in the last month of the third quarter of 2008. The Company's net interest margin remains favorable to peer banking companies.

The provision for credit losses was $1.9 million for the three months ended September 30, 2009 as compared to $995 thousand for the three months ended September 30, 2008. At September 30, 2009, the allowance for credit losses represented 1.51% of loans outstanding, as compared to 1.45% at December 31, 2008 and 1.46% at September 30, 2008. The higher provisioning and higher allowance percentages in the third quarter of 2009 as compared to the third quarter of 2008 are primarily attributable to higher levels of net credit losses and to risk migration within the loan portfolio due to assessments of general weakness in current economic conditions in the third quarter of 2009. Net credit losses represented 0.48% of average loans in the third quarter of 2009, as compared to 0.27% of average loans in the third quarter of 2008.

At September 30, 2009, the allowance for credit losses represented 88% of nonperforming loans as compared to 72% at December 31, 2008 and 82% at September 30, 2008. The higher coverage ratio at September 30, 2009 is due to the decline in nonperforming loans over the past two quarters. At September 30, 2009, approximately $13.1 million of nonperforming loans represent impaired loans acquired from Fidelity (58% of nonperforming loans) which in accordance with generally accepted accounting principles, are carried at fair value, without any allowance attributable to pre-acquisition deterioration. Adjusting for these impaired loans carried at fair value, the pro-forma coverage ratio of the allowance to nonperforming loans is 92%.

For the three months ended September 30, 2009, the Company recorded net charge-offs of $1.6 million as compared to $540 thousand of net charge-offs for the three months ended September 30, 2008. Net charge-offs in the third quarter of 2009 were attributable to charge-offs in the unguaranteed portion of SBA loans ($107 thousand), commercial and industrial loans ($631 thousand), consumer loans ($258 thousand), mortgage loans ($391 thousand), and commercial real estate investment property loans ($186 thousand), and owner occupied commercial real estate loans ($6 thousand).

The ratio of nonperforming loans to total loans declined significantly to 1.73% of total loans at September 30, 2009 as compared to 2.36% of total loans at June 30, 2009. Total nonperforming loans were $22.8 million at September 30, 2009 as compared to $31.0 million at June 30, 2009, a decline of $8.2 million. The ratio of nonperforming loans to total loans at September 30, 2009 of 1.73% as compared to 1.79% of total loans at September 30, 2008, due to a small increase in nonperforming loans of $1.8 million year over year offset by a larger loan portfolio at September 30, 2009.

Noninterest income for the three months ended September 30, 2009 increased to $1.5 million from $1.2 million for the three months ended September 30, 2008, a 24% increase. This increase was due primarily to higher service charges on deposit accounts of $195 thousand, and to higher gains realized on the sale of residential and SBA loans of $165 thousand.

Noninterest expenses were $10.3 million for the three months ended September 30, 2009, as compared to $7.6 million for the three months ended September 30, 2008, a 36% increase. The Fidelity acquisition increased the size of the organization resulting in higher staff levels and related personnel costs of $956 thousand, increased occupancy costs of $418 thousand, and higher data processing of $247 thousand. In addition, higher costs were incurred for marketing and advertising of $103 thousand, legal, accounting and professional fees of $416 thousand, and FDIC insurance of $398 thousand. Other expenses increased $172 thousand primarily due to $37 thousand in OREO expenses, $33 thousand in record management and storage costs, $45 thousand in amortization of core deposits, and $57 thousand in general and administrative costs. The efficiency ratio, which measures the ratio of noninterest expense to total revenue, was 62.29% for the third quarter of 2009, as compared to 62.51% for the third quarter of 2008.

Analysis of the nine months ended September 30, 2009 versus 2008

For the nine months ended September 30, 2009, the Company reported an annualized return on average assets of 0.64% as compared to 0.81% for the first nine months of 2008, while the annualized return on average common equity was 7.02% in 2009, as compared to 8.95% for the same nine month period in 2008. Declines in these ratios were due primarily to declines in the net interest margin, and to substantially higher provisions for loan losses.

For the first nine months of 2009, net interest income increased 49% over the same period for 2008. Average loans increased 61% and average deposits increased by 65%. Both periods gains were due in part to the acquisition of Fidelity completed August 31, 2008. The net interest margin was 3.81% for the first nine months in 2009 as compared to 4.20% for the first nine months in 2008, as the effects of a steep decline in market interest rates impacted the Company.

The provision for credit losses was $5.1 million for the first nine months of 2009 as compared to $2.5 million in 2008. The higher provisioning in the first nine months of 2009 as compared to 2008 is attributable to higher net charge-offs in 2009, risk migration within the portfolio and increased reserves for problem loans.

For the nine months ended September 30, 2009 net charge-offs totaled $3.6 million (0.37% of average loans) versus $958 thousand (0.16% of average loans) for the nine months ended September 30, 2008. Net charge-offs in the nine months ended September 30, 2009 were attributable to charge-offs in the unguaranteed portion of SBA loans ($302 thousand), commercial and industrial loans ($2.1 million), consumer loans ($380 thousand), mortgage loans ($391 thousand), and commercial real estate investment property loans ($373 thousand) and owner occupied commercial real estate loans ($38 thousand).

Noninterest income for the first nine months of 2009 was $6.0 million compared to $3.1 million in the first nine months of 2008, an increase of 94%. This increase was due primarily to higher service charges of $889 thousand resulting primarily from increased numbers of deposit accounts, higher gains realized on the sale of residential and SBA loans of $544 thousand, and gains realized on the investment securities portfolio of $1.5 million. Investment gains were the result of asset/liability management decisions in the second quarter of 2009 to reduce call risk in the portfolio of U.S. Agency securities, to reduce potential extension risk in longer term U.S. Agency mortgage backed securities and to better position the investment portfolio for potentially higher interest rates over future years.

Noninterest expenses were $32.1 million for the first nine months of 2009, as compared to $20.3 million for 2008, a 58% increase. The primary reason for this increase was the Fidelity acquisition which increased the size of the organization resulting in higher staff levels and related personnel costs of $4.0 million, increased occupancy costs of $1.9 million, and data processing of $627 thousand. In addition, higher costs were incurred for marketing and advertising of $465 thousand, legal, accounting and professional fees of $1.4 million, and FDIC insurance fees of $2.1 million which includes the special FDIC assessment of approximately $723 thousand recorded in the second quarter of 2009 and increased deposit insurance rates beginning in the first quarter of 2009. Other expenses increased $1.3 million primarily due to $199 thousand in OREO expenses, $224 thousand for a director fee agreement termination payment, $123 thousand in amortization of core deposit intangibles, $102 thousand in record management and storage costs, $79 thousand in insurance expense and $573 thousand in general and administrative costs due to the growth of the organization subsequent to the Fidelity acquisition. For the nine months ended September 30, 2009, the efficiency ratio was 65.84% as compared to 63.74% for the nine months ended September 30, 2008.

The Company and EagleBank were well capitalized at September 30, 2009. On August 15, 2009, the Company paid the quarterly dividend payment of $478 thousand on the $38.2 million of preferred stock Series A, issued in December 2008 to the U.S. Treasury under the Capital Purchase Plan (commonly referred to as TARP). On September 21, 2009, the Company sold 6,731,640 shares of its common stock at $8.20 per share, including 878,040 shares subject to the underwriter's over-allotment option. As a result of the capital raise, we expect to receive approval from the U.S. Treasury to reduce by 50% the number of shares of common stock subject to the warrant issued to the Treasury. The additional capital substantially improves already healthy capital ratios. At September 30, 2009, Eagle Bancorp had a total risk based capital ratio of 15.57%, a Tier 1 risk based capital ratio of 13.65%, and a tangible common equity capital ratio of 9.56%.

The financial information which follows on the following pages provides more detail on the Company's performance for the nine and three months ended September 30, 2009 as compared to the nine and three months ended September 30, 2008, as well as providing eight quarters of trend data. Persons wishing additional information should refer to the Company's Form 10-K for the year ended December 31, 2008 as filed with the Securities and Exchange Commission (the "SEC").

About Eagle Bancorp: The Company is the holding company for EagleBank which commenced operations in 1998. The Bank is headquartered in Bethesda, Maryland, and conducts full service commercial banking through thirteen offices, located in Montgomery County, Maryland, Washington, D.C. and Fairfax County, Virginia. A new office in Potomac, Maryland is planned to open in the fourth quarter of 2009. The Company focuses on building relationships with businesses, professionals and individuals in its marketplace.

The Eagle Bancorp, Inc.