Item 9A. Controls and Procedures
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
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
The Company’s management is responsible for the preparation, integrity and fair presentation of the financial statements included in this Annual Report. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America and reflect management’s judgments and estimates concerning the effects of events and transactions that are accounted for or disclosed.
Management is also responsible for establishing and maintaining effective internal control over financial reporting (as defined in Rule 13a-15 under the Exchange Act). The Company’s internal control over financial reporting includes those policies and procedures that pertain to the Company’s ability to record, process, summarize and report reliable financial data. The internal control system contains monitoring mechanisms, and appropriate actions taken to correct identified deficiencies. Management believes that internal control over financial reporting, which is subject to scrutiny by management and the Company’s internal auditors, supports the integrity and reliability of the financial statements. Management recognizes that there are inherent limitations in the effectiveness of any internal control system, including the possibility of human error and the circumvention or overriding of internal controls. Accordingly, even effective internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation. In addition, because of changes in conditions and circumstances, the effectiveness of internal control over financial reporting may vary over time. The Audit Committee of the Board of Directors (the “Committee”) is comprised entirely of outside directors who are independent pursuant to stock exchange and SEC rules. The Committee is responsible for the appointment and compensation of the independent auditors and makes decisions regarding the appointment or removal of members of the internal audit function. The Committee meets periodically with management, the independent auditors, and the internal auditors to ensure that they are carrying out their responsibilities. The Committee is also responsible for performing an oversight role by reviewing and monitoring the financial, accounting, and auditing procedures of the Company in addition to reviewing the Company’s financial reports. 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 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”). DHG has also issued a report on the effectiveness of internal control over financial reporting. That report has also been made a part of this Annual Report.
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:
• the split of the roles of Chairman and Chief Executive Officer and the appointment of our current Chairman, Norman R. Pozez, and our current President and Chief Executive Officer, Susan G. Riel;
• the restructuring of the Board of Directors to reduce its size and strengthen its risk and financial reporting oversight functions, including the addition of two new independent directors with extensive experience in risk management and public accounting;
• adjustment of the membership of the committees of the Board of Directors, the appointment of new committee chairs and the establishment of a Risk Committee;
• the process of hiring a new Chief Legal Officer (effective January 2020);
• formalizing the Company’s ethics program, including establishing an Ethics Office and appointing an Ethics officer with accountability to the Audit Committee, and increased ethics training for Company employees;
• the enhancement of the Company’s policies and procedures for the identification, review and reporting of related party transactions;
• the reinforcement of the Company’s risk management function, including the addition of personnel and the enhanced review and monitoring of vendor contracts; and
• 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.”
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/ Susan G. Riel /s/ Charles D. Levingston /s/ Norman R. Pozez
President and Chief Executive Officer of the Company Executive Vice President and Chief Financial Officer of the Company Executive Chairman of the Company
ITEM 9B. OTHER INFORMATION
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None
PART III
ITEM 10. 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,” “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.
ITEM 11. EXECUTIVE COMPENSATION
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.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
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.
ITEM 13. 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,” "Corporate Governance" and “Certain Relationships and Related Transactions” in the Proxy Statement.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this Item is incorporated by reference to the material appearing under the caption “Ratification of the Appointment of Independent Registered Public Accounting Firm – Fees Paid to Independent Accounting Firm” in the Proxy Statement.
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following financial statements are included in this report
Reports of Dixon Hughes Goodman LLP, Independent Registered Public Accounting Firm
Consolidated Balance Sheets at December 31, 2020 and 2019
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
Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, 2020, 2019 and 2018
Consolidated Statements of Cash Flows for the years ended December 31, 2020, 2019 and 2018
Notes to the Consolidated Financial Statements
All financial statement schedules have been omitted as the required information is either inapplicable or included in the Consolidated Financial Statements or related notes.
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Exhibit No. Description of Exhibit
3.1 Certificate of Incorporation of the Company, as amended (1)
3.2 Bylaws of the Company (2)
4.1 Subordinated Indenture, dated as of August 5, 2014, between the Company and Wilmington Trust, National Association, as Trustee (3)
4.2 First Supplemental Indenture, dated as of August 5, 2014, between the Company and Wilmington Trust, National Association, as Trustee (4)
4.3 Form of Global Note representing the 5.75% Subordinated Notes due September 1, 2024 (included in Exhibit 4.2)
4.4 Second Supplemental Indenture, dated as of July 26, 2016, between the Company and Wilmington Trust, National Association, as Trustee (5)
4.5 Form of Global Note representing the 5.00% Fix-to-Floating Rate Subordinated Notes due August 1, 2026 (included in Exhibit 4.4)
4.6 Description of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934
10.1 + 2006 Stock Plan (6)
10.2 + 2016 Stock Plan (7)
10.3 + Amended and Restated Employment Agreement dated as of January 8, 2020, between EagleBank and Charles D. Levingston(8)
10.4 + Second Amended and Restated Employment Agreement dated as of January 14, 2020, between EagleBank and Antonio F. Marquez (9)
10.5 + Amended and Restated Employment Agreement dated as of December 31, 2019, between EagleBank and Susan G. Riel (10)
10.6 + Second Amended and Restated Employment Agreement dated as of January 28, 2020, between EagleBank and Janice L. Williams (11)
10.7 + Second Amended and Restated Employment Agreement dated as of January 28, 2020 between EagleBank and Lindsey S. Rheaume (12)
10.8 + Amended and Restated Non-Compete Agreement dated as of January 28, 2020, between EagleBank and Charles D. Levingston (13)
10.9 + Amended and Restated Non-Compete Agreement dated as of January 14, 2020, between EagleBank and Antonio F. Marquez (14)
10.10 + Amended and Restated Non-Compete Agreement dated as of December 31, 2019, between EagleBank and Susan G. Riel (15)
10.11 + Amended and Restated Non-Compete Agreement dated as of January 28, 2020, between EagleBank and Janice L. Williams (16)
10.12 + Amended and Restated Non-Compete Agreement dated as of January 28, 2020, between EagleBank and Lindsey S. Rheaume (17)
10.14 + Form of Supplemental Executive Retirement Plan Agreement (18)
10.15 + 2020 Senior Executive Incentive Plan (19)
10.16 + Virginia Heritage Bank 2006 Stock Option Plan (20)
10.17 + Virginia Heritage Bank 2010 Long-Term Incentive Plan (21)
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)
10.21 + Amended and Restated Chairman Compensation Agreement, dated as of December 31, 2020, among Eagle Bancorp, Inc., Eagle Bank and Norman R. Pozez
10.22 + Amended and Restated Non-Compete Agreement, dated as of December 31, 2019 among Eagle Bancorp, Inc., Eagle Bank, and Norman R. Pozez
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. Curry
16 Letter from Dixon Hughes Goodman LLP to the Securities and Exchange Commission, dated October 7, 2020 (29)
21 Subsidiaries of the Registrant
23.1 Consent of Dixon Hughes Goodman LLP
31.1 Certification of Susan G. Riel
31.2 Certification of Charles D. Levingston
31.3 Certification of Norman R. Pozez
32.1 Certification of Susan G. Riel
32.2 Certification of Charles D. Levingston
32.3 Certification of Norman R. Pozez
101 Interactive data files pursuant to Rule 405 of Regulation S-T:
(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.
(2) Incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed on December 18, 2017.
(3) Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on August 5, 2014.
(4) Incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on August 5, 2014.
(5) Incorporated by Reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on July 22, 2016
(6) Incorporated by reference to Exhibit 4 to the Company’s Registration Statement on Form S-8 (No. 333-187713)
(7) Incorporated by reference to Exhibit 4 to the Company’s Registration Statement on Form S-8 (No. 333-211857)
(8) Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on February 3, 2020.
(9) Incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed on February 3, 2020.
(10) Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on January 14, 2020.
(11) Incorporated by reference to Exhibit 10.5 to the Company's Current Report on Form 8-K filed on February 3, 2020.
(12) Incorporated by reference to Exhibit 10.7 to the Company's Current Report on Form 8-K filed on February 3, 2020.
(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.
(15) Incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed on January 14, 2020.
(16) Incorporated by reference to Exhibit 10.6 to the Company's Current Report on Form 8-K filed on February 3, 2020.
(17) Incorporated by reference to Exhibit 10.8 to the Company's Current Report on Form 8-K filed on February 3, 2020.
(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.
(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. 333-199875)
(21) Incorporated by reference to Exhibit 4.2 to the Company's Registration Statement on Form S-8 (No. 333-199875)
(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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SIGNATURES
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 1, 2021 by: /s/ Susan G. Riel
Susan G. 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. Brockwell Director March 1, 2021
Matthew D. Brockwell
/s/ Steven Freidkin Director March 1, 2021
Steven Freidkin
/s/ Ernest D. Jarvis Director March 1, 2021
Ernest D. Jarvis
/s/ Theresa G. LaPlaca Director March 1, 2021
Theresa G. LaPlaca
/s/ Charles D. Levingston Executive Vice President March 1, 2021
Charles D. 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. Pozez Executive Chairman of the Company March 1, 2021
Norman R. Pozez
/s/ Kathy A. Raffa Director March 1, 2021
Kathy A. Raffa
/s/ Susan G. Riel President and Chief March 1, 2021
Susan G. Riel Executive Officer of the Company
(Principal Executive Officer)
/s/ James A. Soltesz, P.E. Director March 1, 2021
James A. Soltesz
/s/ Benjamin M. Soto, Esquire Director March 1, 2021
Benjamin M. Soto