The settlement of a lawsuit between Native Americans and the U.S. government boosted deposits at Eagle Bancorp Inc. in Maryland by more than a half billion dollars.
American Indian farmers sued the federal government in 1999, alleging longstanding discrimination in their attempts to obtain loans from the U.S. Department of Agriculture. The two sides agreed to settle the Keepseagle v. Vilsack class action for $760 million, and the settlement won approval from a federal judge in April.
A big portion of that money — about $618 million — will be held at EagleBank of Bethesda, Md., for an indefinite period of time, says Ron Paul, the chief executive of Eagle Bancorp. That's because one of Eagle's customers is a law firm representing plaintiffs in the case. Paul declined to identify the law firm client, but Cohen Milstein Sellers & Toll PLLC of Washington, D.C., is the lead counsel to the plaintiffs and confirmed Thursday that it deposited the funds at EagleBank. The bank has served as escrow agent for Cohen Milstein in other legal matters, according to legal documents.
"It was a great slug of cash to get, but equally important was the fact that we were able to be approved by all the regulatory agencies, including the judicial system, on allowing that amount of money," Paul told investors during a conference in New York on Monday.
EagleBank will hold the money in escrow until it's distributed to all class-action plaintiffs who file successful claims. "It could be years before all the money actually gets dispersed," Paul says. "We believe that the money will be with us for a good period of time."
Though Eagle Bancorp described the funds in a presentation to investors as a "settlement deposit," the company actually categorized the money as an asset on its third-quarter balance sheet. The money was listed in the asset category "interest-bearing deposits with banks and other short-term investments," according to its 10-Q filing with the Securities and Exchange Commission.
As a result of the inflow of money, EagleBank's total assets jumped to $3.2 billion in the third quarter, a 37% increase from the second quarter. Eagle Bancorp is holding the deposits at the Federal Reserve Bank in "excess reserves," earning 0.25%, according to the 10-Q. The funds contributed about $30,000 to Eagle Bancorp's third-quarter earnings, but had a negative impact on its "net interest margin, return on assets, and the capital leverage position."