EAGLE BANCORP INC
For the period ended Dec 31, 2024. Filed Feb 27, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Feb 27, 2025
EGBN$33.81+0.6%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-02-29.
0001050441-24-000053
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-K
Period ended 2024-12-31; filed 2025-02-27.
0001050441-25-000051
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 65 previous paragraphs and 56 current paragraphs.
35 unchanged; 15 reworded; 4 added; 15 removed; 0 previous and 2 current paragraphs rearranged.
Tables are not compared: 1 previous and 1 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (4)
Current report
•Changes in trade, immigration, fiscal and monetary policies;
Current report
•Political uncertainty in the United States and its effects on the economy of the Washington, D.C. metropolitan area;
Current report
The Company’s capital position remained strong in 2024 as a result of its strong retained earnings position, despite the impact of the goodwill impairment on 2024 net loss. As a result of the Company’s strong capital position, we were able to continue our quarterly dividend in 2024. The quarterly cash dividend amount was recalibrated to $0.165 in the third quarter of 2024 to reflect the company’s growth plans.
Current report
Loans that have evidence of credit deterioration are excluded from the loan segments subject to the quantitative model described above and are individually assessed.
Removed paragraphs (15)
Previous report
•Our decision to cease originating residential mortgages;
Previous report
The Company’s capital position remained strong in 2023 as a result of continued earnings, improved economic conditions and strong asset quality. As a result of the Company’s strong capital position and earnings, we were able to continue our quarterly dividend in 2023. Additionally, the Company was active in share repurchase activity as we repurchased 1,600,000 shares at an average price of $29.74 per share during 2023.
Previous report
On January 1, 2020, when the Company adopted FASB's Accounting Standard Codification ("ASC") 326, Measurement of Credit Losses on Financial Instruments, and its related amendments, our methodology for estimating these credit losses changed significantly from years prior to 2020. The standard replaced the “incurred loss” approach with a “current expected credit loss” approach known as CECL, which requires an estimate of the credit losses expected over the life of an exposure (or pool of exposures). CECL removes the incurred loss approach’s threshold that delayed the recognition of a credit loss until it was “probable” a loss event was “incurred.”
Previous report
The ACL represents the expected credit losses arising from the Company's loan and available-for-sale ("AFS") securities portfolios. The ACL is determined as follows:
Previous report
Going forward, the impact of utilizing the CECL approach to calculate the reserve for credit losses will be significantly
Previous report
Goodwill
Previous report
Goodwill represents the excess of the cost of an acquisition over the fair value of the net assets acquired. Goodwill is subject to impairment testing, which must be conducted at least annually or upon the occurrence of a triggering event. Various factors, such as the Company’s results of operations, the trading price of the Company’s common stock relative to the book value per share, macroeconomic conditions and conditions in the banking sector, inform whether a triggering event for an interim goodwill impairment test has occurred. Goodwill is recorded and evaluated for impairment at its reporting unit, the Company. The Company's policy is to test goodwill for impairment annually as of December 31, or on an interim basis if an event triggering an impairment assessment is determined to have occurred.
Previous report
Testing of goodwill impairment comprises a two-step process. First, the Company performs a qualitative assessment to evaluate relevant events or circumstances to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the Company determines that it is more likely than not that an impairment has occurred, it proceeds to the quantitative impairment test, whereby it calculates the fair value of the reporting unit and compares it with its carrying amount, including goodwill. In its performance of impairment testing, the Company has the unconditional option to proceed directly to the quantitative impairment test, bypassing the qualitative assessment. If the carrying amount of the reporting unit exceeds the fair value, the amount by which the carrying amount exceeds fair value, up to the carrying value of goodwill, is recorded through earnings as an impairment charge. If the results of the qualitative assessment indicate that it is not more likely than not that an impairment has occurred, or if the quantitative impairment test results in a fair value of the reporting unit that is greater than the carrying amount, then no impairment charge is recorded.
Previous report
During the second quarter of 2023, Management determined that a triggering event had occurred as a result of a sustained decrease in the Company's stock price and a revision in the earnings outlook in comparison to budget for the remainder of 2023 due primarily to the economic uncertainty and market volatility resulting from the rising interest rate environment and the stress in the banking sector in the first and second quarters of 2023. The Company performed a qualitative assessment and quantitative impairment test on its only reporting unit as of May 31, 2023. The Company engaged a third-party service provider to assist Management with the determination of the fair value of the Company in the second quarter of 2023. In accordance with its regular schedule for impairment testing, the Company performed a second qualitative assessment and quantitative impairment test on its only reporting unit as of December 31, 2023. The resulting calculations indicated that the fair value exceeded the carrying amount of the Company's only reporting unit by approximately 17% and 21% as of May 31, 2023 and December 31, 2023, respectively, which resulted in a determination of no impairment loss on the Company's only reporting unit.
Previous report
The method employed was a combination of a risk-weighted income valuation methodology, comprising a discounted cash flow analysis, and a market valuation methodology, comprising the guideline public company method.
Previous report
Significant judgment is necessary in the determination of the fair value of a reporting unit. The income valuation methodology requires an estimation of future cash flows, considering the after-tax results of operations, the extent and timing of credit losses, and appropriate discount and growth rates. Actual future cash flows may differ from forecasted results based on the assumptions used.
Previous report
In performing the discounted cash flow analysis, the Company utilized multi-year cash projections that rely on internal forecasts of loan and deposit growth, bond mix, financing composition, market pricing of securities, credit performance, forward interest rates, future returns driven by net interest margin, fee generation and expense incurrence, industry and economic trends, and other relevant considerations. The long-term growth rate used in the calculation of fair value was derived from published projections of the inflation rate and GDP, along with Management estimates.
Previous report
The discount rate was calculated as the cost of equity capital using the modified capital asset pricing model, which includes variables including the risk-free interest rate, beta, equity risk premium, size premium, and company-specific risk premium.
Previous report
The market approach considers a combination of price to tangible book value and price to earnings, adjusted based on companies similar to the reporting unit and adjusted for selected multiples, along with a control premium based on a review of transactions in the banking industry in order to calculate the indicated value of the Company's equity on a control, marketable basis.
Previous report
Future events could cause the Company to conclude that the Company’s goodwill has become impaired, which would result in recording an impairment loss. Any resulting impairment loss could have a material adverse impact on the Company’s financial condition and results of operations, however, it would not impact our regulatory capital ratios, tangible common equity ratio, nor our liquidity position. Management has evaluated and will continue to evaluate economic conditions in interim periods for triggering events.
Reworded paragraphs (15)
Previous wording
The following discussion provides information about the results of operations, financial condition, liquidity, and capital resources of the Company. The Company’s primary subsidiary is the Bank, and the Company’s other direct and indirect active subsidiaries are Bethesda Leasing, LLC, Eagle Insurance Services, LLC and Landroval Municipal Finance, Inc.
Current wording
The following discussion provides information about the results of operations, financial condition, liquidity, and capital resources of the Company as of the dates and periods indicated. The Company’s primary subsidiary is the Bank, and the Company’s other direct and indirect active subsidiaries are Bethesda Leasing, LLC, Eagle Insurance Services, LLC and Landroval Municipal Finance, Inc.
Previous wording
•The effects or impact of any litigation, regulatory proceeding, including enforcement proceedings and any possibly resulting fines, judgments, expenses or restrictions on our business activities;
Current wording
•The effects or impact of any litigation, governmental investigations and proceedings, including enforcement proceedings and any possibly resulting fines, judgments, expenses or restrictions on our business activities;
Previous wording
If one or more of the factors affecting our forward looking information and statements proves incorrect, then our actual results, performance or achievements could differ materially from those expressed in, or implied by, forward looking information and statements contained in this report. You should not place undue reliance on our forward looking information and statements. We will not update the forward looking statements to reflect actual results or changes in the factors affecting the forward looking statements.
Current wording
If one or more of the factors affecting our forward looking information and statements proves incorrect, then our actual results, performance or achievements could differ materially from those expressed in, or implied by, forward looking information and statements contained in this report. No undue reliance should be placed on our forward looking information and statements. We will not update the forward looking statements to reflect actual results or changes in the factors affecting the forward looking statements.
Previous wording
The Company is a one-bank holding company headquartered in Bethesda, Maryland, which is currently celebrating twenty-five years of successful operations. The Company provides general commercial and consumer banking services through the Bank, its wholly owned banking subsidiary, a Maryland chartered bank which is a member of the Federal Reserve. The Company was organized in October 1997 and to be the holding company for the Bank. The Bank was organized in 1998 as an independent, community oriented, full service banking alternative to the super regional financial institutions, which dominate the Company’s primary market area. The Company’s philosophy is to provide superior, personalized service to its customers. The Company focuses on relationship banking, providing each customer with a number of services and becoming familiar with and addressing customer needs in a proactive, personalized fashion. The Bank currently has a total of thirteen branch offices (six in Suburban Maryland, four in Washington, D.C. and three in Northern Virginia), a principal corporate office, four lending centers (two are co-located with branches and one co-located in the principal corporate office) and one operations center. Refer to the Business Section above, which describes in detail the various banking services offered.
Current wording
The Company provides general commercial and consumer banking services through the Bank, its wholly owned banking subsidiary, a Maryland chartered bank which is a member of the Federal Reserve. The Company was organized in October 1997 and to be the holding company for the Bank. The Bank was organized in 1998 as an independent, community oriented, full service banking alternative to the super regional financial institutions, which dominate the Company’s primary market area. The Company’s philosophy is to provide superior, personalized service to its customers. The Company focuses on relationship banking, providing each customer with a number of services and becoming familiar with and addressing customer needs in a proactive, personalized fashion. The Bank currently has a total of twelve branch offices (six in Suburban Maryland, three in Washington, D.C. and three in Northern Virginia), a principal corporate office, four lending centers (two are co-located with branches and one co-located in the principal corporate office) and one operations center. Refer to the Business Section above, which describes in detail the various banking services offered.
Previous wording
General economic, political, social and health conditions affect financial markets, and therefore, our business. As the economy has experienced higher levels of inflation, interest rates have increased due to current monetary policies. Fiscal and monetary policies have a direct and indirect impact on the level and volatility of interest rates, liquidity of financial markets, the availability and cost of capital, and market conditions of financing. In 2022, the Federal Reserve Open Market Committee ("FOMC"), began a series of rate increases thereby discontinuing the generally accommodative monetary policy it had pursued when the COVID-19 pandemic began in early 2020. In late 2022, the Federal Reserve begun tapering purchases of securities and is no longer expanding its balance sheet as aggressively. Actual real U.S. GDP growth for 2023 was 3.3%, in contrast to 2.1% growth in 2022 as the economy grew despite continuing to experience the effects of inflationary pressures and rising interest rates that also existed in 2022. The employment climbed throughout 2023 as the U.S. unemployment rate ended the year at 3.7%, up from 3.4% at the end of 2022.
Current wording
General economic, political, social and health conditions affect financial markets, and therefore, our business. As the economy experienced higher levels of inflation in the recent past, interest rates increased in 2023, however as inflationary pressure during 2024 subsided, the Federal Reserve decreased interest rates three times for a total of 100 basis points. Fiscal and monetary policies have a direct and indirect impact on the level and volatility of interest rates, liquidity of financial markets, the availability and cost of capital, and market conditions of financing. Actual real U.S. GDP growth for 2024 was 3.1%, compared to 3.3% growth in 2023, as the economy continues to grow despite continuing to experience the effects of inflationary pressures and higher interest rates which were raised in 2022 and 2023. Unemployment slightly increased through 2024 as the U.S. unemployment rate ended the year at 4.0%, up from 3.7% at the end of 2023.
Previous wording
Longer-term U.S. interest rates increased in 2023, with the ten year U.S. Treasury rate averaging 3.96% in 2023 as compared to 2.95% in 2022. The yield curve in 2023 was inverted as rates increased sharply on the short end of the curve and remained anchored on the longer end versus a more normal shape in 2022.
Current wording
Longer-term U.S. interest rates increased in 2024, with the ten year U.S. Treasury rate averaging 4.21% in 2024 as compared to 3.96% in 2023. The yield curve steepened in 2024 as short-term rates decreased due to Federal Reserve rate cuts while long-term rates increased compared to 2023.
Previous wording
We believe the Company’s primary market, the Washington, D.C. metropolitan area, continues to exhibit a certain degree of resilience relative to other parts of the country despite the volatility in the current economic environment. The Washington, D.C. metropolitan area maintains a diverse economy which includes a stable public sector, a large healthcare component, substantial business services and a highly educated work force. The private sector, in particular, the Leisure and Hospitality sector has seen some recovery in recent years following the adverse effects of the pandemic. The multi-family commercial real estate leasing sector, notwithstanding increased supply of units in the Bank’s market area, has held up relatively well, particularly for well-located close-in projects. While commercial real estate office properties continue to experience challenges, the Company has remained focused on monitoring this sector and working with borrowers in order to mitigate credit losses within our loan portfolio. Overall, we believe commercial real estate values have generally decreased moderately, but we continue to be cautious of the cap rates at which some assets are trading, and therefore, we are being careful with valuations.
Current wording
We believe the Company’s primary market, the Washington, D.C. metropolitan area, continues to exhibit resilience relative to other parts of the country despite the volatility in the current economic environment. The Washington, D.C. metropolitan area maintains a diverse economy which includes the public sector, a large healthcare component, substantial business services and a highly educated work force. The private sector, in particular, the Leisure and Hospitality sector has seen some recovery in recent years following the adverse effects of the pandemic. The multi-family commercial real estate leasing sector, notwithstanding increased supply of units in the Bank’s market area, has held up relatively well, particularly for well-located close-in projects. While commercial real estate office properties continue to experience challenges, the Company has remained focused on monitoring this sector and working with borrowers in order to mitigate credit losses within our loan portfolio. Overall, we believe commercial real estate values have generally decreased and we continue to be cautious of the cap rates at which such assets are trading, resulting in conservative valuations.
Previous wording
At December 31, 2023, the Company had total assets of approximately $11.7 billion, total loans of $8.0 billion, total deposits of $8.8 billion and thirteen branches in the Washington, D.C. metropolitan area. The loan portfolio continued to grow in the year ended December 31, 2023, due primarily to our income producing commercial real estate ("CRE") loan originations and fundings, along with increases in our owner occupied CRE loans, and to a lesser extent, construction - commercial and residential loans and construction C&I (owner occupied) loans. Amidst this growth, we have remained cognizant of the volatility in our industry, capital markets and interest rate markets. While we remain cautious with regard to CRE market conditions, principally office, the strength of the Washington D.C. metro area in certain sectors, particularly multi-family commercial real estate and the housing market, continue to drive premiums for well-located properties.
Current wording
At December 31, 2024, the Company had total assets of approximately $11.1 billion, total loans of $7.9 billion, total deposits of $9.1 billion and twelve branches in the Washington, D.C. metropolitan area. We have remained cognizant of the volatility in our industry, capital markets and interest rate markets. While we remain cautious with regard to commercial real estate ("CRE") market conditions, principally office, the strength of the Washington D.C. metro area in certain sectors, particularly multi-family commercial real estate and the housing market, continue to drive premiums for well-located properties.
Previous wording
The Company has the financial resources to meet, and remains committed to meeting, the credit needs of its community. Loan balances increased in 2022 and 2023 as rising rates led to deposit disintermediation reducing our liquidity levels and earning assets. The yield on earning assets continued to increase in 2023. During the year ended December 31, 2023, the yield on earning assets increased by 171 basis points (from 3.74% to 5.45%) while cost of funds increased 229 basis points (from 0.88% to 3.17%) which resulted in a decrease of 40 basis points in the net interest margin.
Current wording
The Company has the financial resources to meet, and remains committed to meeting, the credit needs of its community. Loan balances increased in the CRE segments in 2024 which, combined with the higher levels of interest rates, resulted in changes in our liquidity mix as increases in interest-bearing deposits offset a decrease in non-interest bearing deposits. The yield on earning assets continued to increase in 2024. During the year ended December 31, 2024, the yield on earning assets increased by 20 basis points (from 5.45% to 5.65%) while cost of funds increased 42 basis points (from 3.17% to 3.59%) which resulted in a decrease of 16 basis points in the net interest margin.
Previous wording
A consequence of lending activities is that we may incur credit losses, so we record an allowance for credit losses ("ACL") with respect to loan receivables and a reserve for unfunded commitments (“RUC”) as estimates of those losses. The amount of such losses will vary depending upon the risk characteristics of the loan portfolio as affected by economic conditions such as changes in interest rates, the financial performance of borrowers and regional unemployment rates, which management estimates by using a national forecast and estimating a regional adjustment based on historical differences between the two.
Current wording
The amount of such losses will vary depending upon the risk characteristics of the loan portfolio as affected by economic conditions such as changes in interest rates, the financial performance of borrowers and regional unemployment rates, which management estimates by using a national forecast and estimating a regional adjustment based on historical differences between the two.
Previous wording
The Company uses a loan-level probability of default ("PD")/ loss given default ("LGD") cash flow method with an exposure at default ("EAD") model to estimate expected credit losses for the commercial, income producing – commercial real estate, owner occupied – commercial real estate, real estate mortgage - residential, construction – commercial and residential, construction – C&I (owner occupied), home equity and other consumer loan pools. For each of these loan segments, the Company generates cash flow projections at the instrument level wherein payment expectations are adjusted for estimated prepayment speed, probability of default and loss given default. The modeling of expected prepayment speeds is based on historical internal data.
Current wording
We estimate the ACL on loans using a quantitative model that uses a probability of default ("PD") / loss given default ("LGD") cash flow method with an exposure at default ("EAD") model to estimate expected credit losses for our loan segments. The modeling of expected prepayment speeds is based on historical internal data and adjustments to account for loan-specific risk characteristics after pooling our loan portfolio based on similar risk characteristics.
Previous wording
The Company uses regression analysis of historical internal and peer data (as Company loss data is insufficient) to determine suitable loss drivers to utilize when modeling lifetime PD and LGD. This analysis also determines how expected PD will react to forecasted levels of the loss drivers. For our cash flow model, management utilizes and forecasts regional unemployment by using a national forecast and estimating a regional adjustment based on historical differences between the two as a loss driver over our reasonable and supportable period of 18 months, and reverts back to a historical loss rate over the following twelve months on a straight-line basis. Management leverages economic projections from reputable and independent third parties to inform its loss driver forecasts over the forecast period.
Current wording
The Company uses regression analysis of historical internal and peer data provided by a third-party service provider (as Company loss data is insufficient) to determine suitable loss drivers to utilize when modeling lifetime PD and LGD. This analysis also determines how expected PD will react to forecasted levels of the loss drivers. During the three months ended March 31, 2024, management enhanced the cash flow model to incorporate three additional macroeconomic variables. The four economic variables selected, national unemployment (original variable used), Commercial Real Estate ("CRE") Price Index, House Price Index and Gross Domestic Product ("GDP"), are incorporated by utilizing a Loss Driver Analysis approach that factors in historical losses, including during the Great Recession, of regional peer banks and the Bank. The updated model incorporates a weighting of three economic scenarios; baseline, upside and downside. The scenarios cover the four economic forecast variables, with each segment of the portfolio linked to two of these variables, depending on the segment. The loss driver analysis is spread over a reasonable and supportable period of 18 months and reverts back to a historical loss rate over twelve months on a straight-line basis over the loan's remaining maturity. Management leverages economic projections from reputable and independent third parties to inform its loss driver forecasts over the forecast period.
Previous wording
influenced by the composition, characteristics and quality of our loan portfolio, as well as the prevailing economic conditions and forecasts utilized. Material changes to these and other relevant factors may result in greater volatility to the reserve for credit losses, and therefore, greater volatility to our reported earnings. For example, the effects of the COVID-19 pandemic and related hybrid or fully remote working environment has negatively impacted the performance outlook in the central business district office commercial real estate segment of our loan portfolio, which informed our CECL economic forecast and continued to adversely impact our loss reserve as of December 31, 2023. See Notes 1, 3 and 4 to the Consolidated Financial Statements, the “Provision for Credit Losses” section in Management’s Discussion and Analysis and the risk factors related to our business and economic conditions in Item 1A for more information on the provision for credit losses.
Current wording
Management has developed an analytical process to monitor the adequacy of the ACL. Our methodology for determining our ACL was developed utilizing, among other factors, the guidance from federal banking regulatory agencies and relevant available information from internal and external sources and relating to past events, current conditions and reasonable and supportable forecasts. The process is being continually enhanced and refined based on periodic reviews. Material changes to these and other relevant factors may result in greater volatility to the reserve for credit losses, and therefore, greater volatility to our reported earnings. For example, the effects of the COVID-19 pandemic and related hybrid or fully remote working environment has negatively impacted the performance outlook in the central business district office CRE segment of our loan portfolio, which informed our CECL economic forecast and continued to adversely impact our loss reserve as of December 31, 2024. See Notes 1, 3 and 4 to the Consolidated Financial Statements, the “Provision for Credit Losses” and "Allowance for Credit Losses" section in Management’s Discussion and Analysis of Financial Condition and Results of Operations and the risk factors related to our business and economic conditions in Item 1A for more information on the provision for credit losses and ACL for the loan portfolio.
Previous wording
The Provision for Unfunded Commitments represents the expected credit losses on off-balance sheet commitments such as unfunded commitments to extend credit and standby letters of credit. The RUC is determined by estimating future draws and applying the expected loss rates on those draws.
Current wording
The RUC represents the expected credit losses on off-balance sheet commitments such as unfunded commitments to extend credit and standby letters of credit. The RUC is determined by estimating future draws and applying the expected loss rates on those draws.
Previous wording
The ACL also includes an amount for inherent risks not reflected in the historical analyses. Relevant factors include, but are not limited to, concentrations of credit risk, changes in underwriting standards, experience and depth of lending staff and trends in delinquencies. While our methodology in establishing the reserve for credit losses attributes portions of the ACL and RUC to the commercial and consumer portfolio segments, the entire ACL and RUC is available to absorb credit losses expected in the total loan portfolio and total amount of unfunded credit commitments, respectively.
Current wording
While our methodology in establishing the reserve for credit losses attributes portions of the ACL and RUC to the commercial and consumer portfolio segments, the entire ACL and RUC is available to absorb credit losses expected in the total loan portfolio and total amount of unfunded credit commitments, respectively. Our model may reflect assumptions by management that are not covered by the qualitative and environmental factors, and we reevaluate all of its factors quarterly.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
A consequence of lending activities is that we may incur credit losses, so we record an allowance for credit losses ("ACL") with respect to loan receivables and a reserve for unfunded commitments (“RUC”) as estimates of those losses. The amount of the ACL on loans is based on management's assessment of current expected credit losses in the portfolio.
Current report — wording carried from elsewhere
The ACL also includes an amount for inherent risks not reflected in the historical analyses. Relevant factors reflected in the qualitative component of the reserve include, but are not limited to, concentrations of credit risk, changes in underwriting standards, experience and depth of lending staff and trends in delinquencies.