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Item 9A. Controls and Procedures

2021-03-01 compared with 2020-03-02 · 78 added, 84 removed, 122 unchanged (57% of the section changed)

1 unchanged sentence

Disclosure Controls and Procedures

The Company’s management, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, evaluated, as of the last day of the period covered by this report, the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”).

Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that, due to the material weakness in the Company’s internal control over financial reporting described below, the Company’s disclosure controls and procedures were not effective to provide reasonable assurance that information required to be disclosed in the reports we file and submit under the Exchange Act is recorded, processed, summarized and reported as and when required and that it is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Notwithstanding the material weakness, management believes, based on its procedures in preparing this report, that the consolidated financial statements included in this report fairly present, in all material respects, the Company’s financial position, results of operations and cash flows as of and for the periods presented in conformity with accounting principles generally accepted in the United States of America.

In addition, the Chief Executive Officer and the Chief Financial Officer believe that had the material weakness described below been identified at the relevant time, they would have concluded that the Company’s disclosure controls and procedures were not effective as of December 31, 2017 and 2018 (and the interim periods in 2017, 2018 and 2019).

Notwithstanding the material weakness, management believes that the 2017 and 2018 consolidated financial statements, as well as the interim financial statements in 2017, 2018 and 2019, fairly present, in all material respects, the Company’s financial position, results of operations and cash flows as of and for the periods presented in conformity with accounting principles generally accepted in the United States of America.

As described in the Company’s 2019 Annual Report on Form 10-K, filed with the SEC on March 2, 2020, the Company’s Chief Executive Officer and the Chief Financial Officer had previously concluded that, due to the material weakness in the Company’s internal control over financial reporting that stemmed from “tone at the top” issues that contributed to a control environment that was insufficiently tailored to the culture of deference afforded to the former Chairman, President and Chief Executive Officer (the “Material Weakness”), the Company’s disclosure controls and procedures were not effective as of December 31, 2019.

As discussed in further detail below under the heading, “Remediation,” the deficiencies contributing to such Material Weakness were fully remediated as of December 31, 2020.

The Company’s management, under the supervision and with the participation of the Chief Executive Officer, Executive Chairman and Chief Financial Officer, evaluated, as of the last day of the period covered by this report, the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as defined in Rule 13a-15(e) under the Exchange Act.

Based on that evaluation, the Chief Executive Officer, Executive Chairman and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures as of December 31, 2020 were effective to provide reasonable assurance that information required to be disclosed in the reports we file and submit under the Exchange Act is recorded, processed, summarized and reported as and when required and that it is accumulated and communicated to our management, including the Chief Executive Officer, Executive Chairman and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Management’s Report on Internal Control Over Financial Reporting

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The independent auditors and the internal auditors have full and unlimited access to the Audit Committee, with or without the presence of management, to discuss the adequacy of internal control over financial reporting, and any other matters which they believe should be brought to the attention of the Audit Committee.

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Management assessed the Company’s system of internal control over financial reporting as of December 31, 2020.

This assessment was conducted based on the Committee of Sponsoring Organizations (“COSO”) of the Treadway Commission “Internal Control – Integrated Framework (2013).” Based on this assessment, management has concluded that the Company’s internal control over financial reporting was not effective as of December 31, 2019 due to the material weakness identified below.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

In 2019, the Special Compliance Committee reviewed, and subsequently the Audit Committee has been reviewing, with the assistance of outside legal counsel that had no involvement in the underlying matters, the facts and circumstances associated with various governmental investigations and legal proceedings (see “Legal Proceedings”).

In connection with this review, certain deficiencies in the Company’s internal controls were identified, which, in management’s opinion, when evaluated collectively, amounted to a material weakness in the Company’s internal control over financial reporting as of December 31, 2017 and 2018.

This material weakness stemmed from “tone at the top” issues that contributed to a control environment that was insufficiently tailored to the culture of deference afforded to the former Chairman, President and Chief Executive Officer.

This material weakness manifested in deficiencies in the following areas:

● the communication of certain relevant information to key constituents within the Company;

● the review, categorization and reporting of related party loans;

● the review of certain vendor contracts.

Management believes that while the material weakness did not result in any material misstatement of our financial statements, there is a reasonable possibility that material misstatements in our annual or interim consolidated financial statements would not be prevented or detected.

In addition, management believes that had the material weakness described above been identified at the relevant time, they would have concluded that the Company’s internal control over financial reporting was not effective as of December 31, 2017 and 2018.

This assessment was conducted based on the COSO of the Treadway Commission “Internal Control – Integrated Framework (2013).” Based on this assessment, management has concluded that the Company’s internal control over financial reporting was effective as of December 31, 2020.

The 2020 financial statements have been audited by the independent registered public accounting firm of Dixon Hughes Goodman LLP (“DHG”).

1 unchanged sentence

That report has also been made a part of this Annual Report.

During the course of the year ended December 31, 2019, management believes that the deficiencies that contributed to the material weakness in 2017 and 2018 were effectively remediated;

however, the material weakness will not be considered fully remediated until the enhanced controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

Changes in Internal Control over Financial Reporting

As described in the Company’s 2019 Annual Report on Form 10-K, management had assessed the Company’s system of internal control over financial reporting as of December 31, 2019 based on the Committee of Sponsoring Organizations (“COSO”) of the Treadway Commission “Internal Control – Integrated Framework (2013)” and concluded that the Company’s internal control over financial reporting was not effective as of December 31, 2019 due to the Material Weakness.

During the course of the year ended December 31, 2020, management tested the enhanced controls that had been previously implemented to remediate the deficiencies that contributed to the Material Weakness to determine whether they operate effectively over time.

As previously described in Part I, Item 4 of our Quarterly Reports on Form 10-Q for the quarters ended June 30, 2020 and September 30, 2020, that testing process was completed earlier this year.

As of December 31, 2020, the enhanced controls are operating effectively and the deficiencies that contributed to the Material Weakness have been fully and effectively remediated.

The results of the year-end audit of the Company’s internal control over financial reporting by DHG, the Company’s independent auditors, are set forth in DHG’s report on the effectiveness of internal control over financial reporting, which has been made a part of this Annual Report.

The following contributed to this remediation:

8 unchanged sentences

• the active encouragement by management, with the assistance of the Chairman and the rest of the Board, of an open and collaborative culture, to set an appropriate “tone at the top.”

Changes in Internal Control over Financial Reporting

In addition, in the first quarter of 2020, the following further contributed to this remediation:

upon the appointment of our Chairman, Norman R.

Pozez, as Executive Chairman of the Board of Directors, the Board of Directors appointed Theresa G.

LaPlaca as Lead Independent Director of the Board of Directors.

Other than the remediation described above, there were no changes in the Company’s internal control over financial reporting during the quarter ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

/s/ Charles D.

President and Chief Executive Officer of the Company

Executive Vice President and Chief Financial Officer of the Company

Riel /s/ Charles D.

Levingston /s/ Norman R.

President and Chief Executive Officer of the Company Executive Vice President and Chief Financial Officer of the Company Executive Chairman of the Company

OTHER INFORMATION

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DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this Item is incorporated by reference to the material appearing under the captions “Election of Directors” and “Delinquent Section 16(a) Reports” in the Company’s definitive proxy statement for the Annual Meeting of Shareholders to be held on May 21, 2020 (the “Proxy Statement”).

The Company has adopted a code of ethics that applies to its Chief Executive Officer and Chief Financial Officer.

A copy of the code of ethics will be provided to any person, without charge, upon written request directed to Jane Cornett, Corporate Secretary, Eagle Bancorp, Inc., 7830 Old Georgetown Road, Third Floor, Bethesda, Maryland 20814.

The information required by this Item is incorporated by reference to the material appearing under the captions “Election of Directors,” “Executive Officers Who Are Not Directors,” “Delinquent Section 16(a) Reports” and “2020 Meetings, Committees, and Procedures of the Board of Directors” in the Company’s definitive proxy statement for the Annual Meeting of Shareholders to be held on May 20, 2021 (the “Proxy Statement”).

The Company has adopted a code of ethics that applies to its Chief Executive Officer and Chief Financial Officer which is available on our website at https://ir.eaglebankcorp.com/ .

This reference to our website is an inactive textual reference only, and is not a hyperlink.

The information on our website is not incorporated by reference in this Form 10-K, and you should not consider it a part of this Form 10-K.

A copy of the code of ethics will also be provided to any person, without charge, upon written request directed to Jane Cornett, Corporate Secretary, Eagle Bancorp, Inc., 7830 Old Georgetown Road, Third Floor, Bethesda, Maryland 20814.

There have been no material changes in the procedures previously disclosed by which shareholders may recommend nominees to the Company’s Board of Directors.

EXECUTIVE COMPENSATION

The information required by this Item is incorporated by reference to the material appearing under the captions “Election of Directors – Director Compensation” and “Compensation Discussion and Analysis” in the Proxy Statement.

The information required by this Item is incorporated by reference to the material appearing under the captions “Election of Directors – Director Compensation,” “2020 Meetings, Committees, and Procedures of the Board of Directors,” “Compensation Committee Report” and “Compensation Discussion and Analysis” in the Proxy Statement.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Securities Authorized for Issuance Under Equity Compensation Plans.

The following table sets forth information regarding outstanding options and other rights to purchase or acquire common stock granted under the Company’s compensation plans as of December 31, 2019:

Equity Compensation Plan Information

Number of securities

remaining available for

Number of securities to be

future issuance under equity

issued upon exercise of

Weighted average exercise

compensation plans

price of outstanding

excluding securities reflected

Plan category

options, warrants and rights

in column (a)

Equity compensation plans approved by security holders (1)

Equity compensation plans not approved by security holders

(1) Consists of the Company’s 2016 Stock Plan, 2011 Employee Stock Purchase Plan, 2006 Stock Plan, and the VHB 2010 Long-Term Incentive Plan.

For additional information, see Note 13 to the Consolidated Financial Statements.

(2) Shares available for issuance under the 2016 Stock Plan and the 2011 Employee Stock Purchase Plan.

The remainder of the information required by this Item is incorporated by reference to the material appearing under the caption “Voting Securities and Principal Shareholders” in the Proxy Statement.

The information required by this Item is incorporated by reference to the material appearing under the caption “Security Ownership of Certain Beneficial Owners and Management” in the 2021 Proxy Statement.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

The information required by this Item is incorporated by reference to the material appearing under the captions “Election of Directors” and “Certain Relationships and Related Transactions” in the Proxy Statement.

The information required by this Item is incorporated by reference to the material appearing under the captions “Election of Directors,” "Corporate Governance" and “Certain Relationships and Related Transactions” in the Proxy Statement.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

4 unchanged sentences

Consolidated Balance Sheets at December 31, 2020 and 2019

Consolidated Statements of Operations for the years ended December 31, 2019, 2018 and 2017

Consolidated Statements of Income for the years ended December 31, 2020, 2019 and 2018

Consolidated Statements of Comprehensive Income for the years ended December 31, 2020, 2019 and 2018

3 unchanged sentences

All financial statement schedules have been omitted as the required information is either inapplicable or included in the Consolidated Financial Statements or related notes.

Renumber exhibits and notes as necessary

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Description of Exhibit

27 unchanged sentences

10.17 + Virginia Heritage Bank 2010 Long-Term Incentive Plan (21)

2020 Senior Executive Incentive Plan (22)

2020 Long Term Incentive Plan (23)

10.18 + Supplemental Executive Retirement Plan Agreement between EagleBank and Charles D.

Levingston dated as of January 29, 2020 (22)

10.19 + 2022 Long Term Incentive Plan, as amended on February 10, 2020 (23)

10.20 + Employment Agreement between EagleBank and Paul Saltzman (24)

1 unchanged sentence

10.22 + Amended and Restated Non-Compete Agreement, dated as of December 31, 2019 among Eagle Bancorp, Inc., Eagle Bank, and Norman R.

Statement Regarding Computation of Per Share Income

See Note 15 to Consolidated Financial Statements

10.23 Form of Non-Employee Director Restricted Stock Award (Time Vested) (25)

10.24+ Form of Executive Officer Performance Vested Restricted Stock Unit Award Agreement (26)

10.25+ Form of Executive Officer Restricted stock Award Agreement (Time Vested) (27)

10.26+ Restricted Stock Award Agreement for Norman R.

Pozez dated April 2, 2020 (28)

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10.27+ Employment Agreement dated as of March 1, 2021, between EagleBank and Jeffrey M.

16 Letter from Dixon Hughes Goodman LLP to the Securities and Exchange Commission, dated October 7, 2020 (29)

21 Subsidiaries of the Registrant

2 unchanged sentences

31.2 Certification of Charles D.

31.3 Certification of Norman R.

32.1 Certification of Susan G.

32.2 Certification of Charles D.

32.3 Certification of Norman R.

101 Interactive data files pursuant to Rule 405 of Regulation S-T:

Consolidated Balance Sheets at December 31, 2019 and 2018

Consolidated Statement of Operations for the years ended December 31, 2019, 2018 and 2017

Consolidated Statement of Comprehensive Income for the years ended December 31, 2019, 2018 and 2017

Consolidated Statement of Changes in Shareholders’ Equity for the years ended December 31, 2019, 2018 and 2017

Consolidated Statement of Cash Flows for the years ended December 31, 2019, 2018 and 2017

Notes to the Consolidated Financial Statements

(i) Consolidated Balance Sheets at December 31, 2020 and 2019

(ii) Consolidated Statement of Operations for the years ended December 31, 2020, 2019 and 2018

(iii) Consolidated Statement of Comprehensive Income for the years ended December 31, 2020, 2019 and 2018

(iv) Consolidated Statement of Changes in Shareholders’ Equity for the years ended December 31, 2020, 2019 and 2018

(v) Consolidated Statement of Cash Flows for the years ended December 31, 2020, 2019 and 2018

(vi) Notes to the Consolidated Financial Statements

104 The cover page of this Annual Report on Form 10-K, formatted in Inline XBRL

(+) Indicates management contract or compensatory plan or arrangement

(1) Incorporated by reference to the Exhibit of the same number to the Company’s Current Report on Form 8-K filed on May 17, 2016.

11 unchanged sentences

(13) Incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed on February 3, 2020.

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(14) Incorporated by reference to Exhibit 10.4 to the Company's Current Report on Form 8-K filed on February 3, 2020.

3 unchanged sentences

(18) Incorporated by reference to Exhibit 10.22 to the Company's Annual Report on Form 10-K for the Year ended December 31, 2013.

Incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed on February 15, 2019.

(19) Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on December 26, 2019.

(20) Incorporated by reference to Exhibit 4.1 to the Company's Registration Statement on Form S-8 (No.

(21) Incorporated by reference to Exhibit 4.2 to the Company's Registration Statement on Form S-8 (No.

Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on December 26, 2019.

(22) Incorporated by reference to Exhibit 10.16 to the Company’s Quarterly Report on Form 10-Q filed on May 11, 2020.

(23) Incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed on December 26, 2019.

(24) Incorporated by reference to Exhibit 10.9 to the Company's Current Report on Form 8-K filed on February 3, 2020.

(25) Incorporated by reference to Exhibit 10.13 to the Company's Quarterly Report on Form 10-Q filed on May 11, 2020.

(26) Incorporated by reference to Exhibit 10.14 to the Company's Quarterly Report on Form 10-Q filed on May 11, 2020.

(27) Incorporated by reference to Exhibit 10.15 to the Company's Quarterly Report on Form 10-Q filed on May 11, 2020.

(28) Incorporated by reference to Exhibit 10.12 to the Company's Quarterly Report on Form 10-Q filed on May 11, 2020.

(29) Incorporated by reference to Exhibit 16.1 to the Company's Current Report on Form 8-K filed on October 7, 2020.

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Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

EAGLE BANCORP, INC.

March 2, 2020

March 1, 2021 by:

Riel, President and CEO

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Name Position Date

/s/ Matthew D.

March 2, 2020

Brockwell Director March 1, 2021

/s/ Steven Freidkin Director March 1, 2021

Steven Freidkin

/s/ Ernest D.

Jarvis Director March 1, 2021

/s/ Theresa G.

March 2, 2020

/s/ Leslie Ludwig

March 2, 2020

LaPlaca Director March 1, 2021

/s/ Charles D.

Levingston Executive Vice President March 1, 2021

Levingston and Chief Financial Officer of the Company

(Principal Financial and Accounting Officer)

/s/ Leslie Ludwig Director March 1, 2021

Leslie Ludwig

/s/ Norman R.

Chairman of the Company

March 2, 2020

President and Chief

March 2, 2020

Executive Officer of the Company

Pozez Executive Chairman of the Company March 1, 2021

Raffa Director March 1, 2021

Riel President and Chief March 1, 2021

Riel Executive Officer of the Company

(Principal Executive Officer)

Soltesz, P.E.

March 2, 2020

Director March 1, 2021

/s/ Benjamin M.

Soto, Esquire

March 2, 2020

/s/ Leland M.

March 2, 2020

/s/ Charles D.

Executive Vice President

March 2, 2020

and Chief Financial Officer of the Company

(Principal Financial and Accounting Officer)

Soto, Esquire Director March 1, 2021

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures