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Eagle Bancorp Montana, Inc. - Quarter Report: 2023 June (Form 10-Q)

ebmt20230630_10q.htm
 

Table of Contents

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2023

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _____ to _____.

 

Commission file number 1-34682

 

Eagle Bancorp Montana, Inc.


(Exact name of registrant as specified in its charter)

 

Delaware

27-1449820

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

 

1400 Prospect Avenue, Helena, MT 59601


(Address of principal executive offices) (Zip code)

 

(406) 442-3080


(Registrant's telephone number, including area code)

 

Not Applicable


(Former name, former address and former fiscal year, if changed since last report)

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer     ☐

Accelerated filer       ☐

Non-accelerated filer       ☒

Smaller reporting company   ☒

 

Emerging growth company   ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

 

 

 

APPLICABLE ONLY TO CORPORATE ISSUERS

 

Indicate the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date:

 

Common stock, par value $0.01 per share

7,988,132 shares outstanding

As of July 31, 2023

 

 

 

 

EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

 

PART I.

FINANCIAL INFORMATION

PAGE

 

 

 

Item 1.

Financial Statements (Unaudited)

 

 

 

 

 

Condensed Consolidated Statements of Financial Condition as of June 30, 2023 and December 31, 2022

1

 

 

 

 

Condensed Consolidated Statements of Income for the three and six months ended June 30, 2023 and 2022

3

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2023 and 2022

5

 

 

 

 

Condensed Consolidated Statements of Changes in Shareholders' Equity for the three and six months ended June 30, 2023 and 2022

6

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022

7

 

 

 

 

Notes to Condensed Consolidated Financial Statements (Unaudited)

9

 

 

 

 

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

28

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

41

 

 

 

Item 4.

Controls and Procedures

42

 

 

 

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

43

Item 1A. Risk Factors 43

Item 2. 

Unregistered Sales of Equity Securities and Use of Proceeds

43

Item 3.

Defaults Upon Senior Securities

43

Item 4. 

Mine Safety Disclosures

43

Item 5.

Other Information

44

Item 6. 

Exhibits

44

 

 

 

Signatures

45

 

 

EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES

 

Cautionary Note Regarding Forward-Looking Statements 

 

This report includes “forward-looking statements” within the meaning and protections of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. All statements other than statements of historical fact are statements that could be forward-looking statements. You can identify these forward-looking statements through our use of words such as “may,” “will,” “anticipate,” “assume,” “should,” “indicate,” “would,” “believe,” “contemplate,” “expect,” “estimate,” “continue,” “plan,” “project,” “could,” “intend,” “target” and other similar words and expressions of the future. These forward-looking statements include, but are not limited to:

 

statements of our goals, intentions and expectations;

statements regarding our business plans, prospects, growth and operating strategies;

statements regarding the asset quality of our loan and investment portfolios; and

estimates of our risks and future costs and benefits.

 

These forward-looking statements are based on current beliefs and expectations of the management of Eagle Bancorp Montana, Inc. (“Eagle” or the “Company”) and Opportunity Bank of Montana (“OBMT” or the “Bank”), Eagle’s wholly-owned subsidiary, and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change.

 

The following factors, among others, could cause the Company’s actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:

 

changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees and capital requirements;

 

the emergence or continuation of widespread health emergencies or pandemics, including the magnitude and duration of the ongoing novel coronavirus, or COVID-19, and its impacts on the economies and communities we serve, which may likely have an adverse impact on our credit portfolio, goodwill, stock price, borrowers and the economy as a whole both globally and domestically;

 

local, regional, national and international economic and market conditions and events and the impact they may have on us, our customers and our assets and liabilities;

 

competition among depository and other traditional and non-traditional financial service providers;

 

risks related to the concentration of our business in Montana, including risks associated with changes in the prices, values and sales volume of residential and commercial real estate in Montana;

 

inflation and changes in the interest rate environment that reduce our margins or reduce the fair value of financial instruments;

 

our ability to attract deposits and other sources of funding or liquidity;

  the impact of adverse developments affecting the U.S. banking industry, including bank failures and liquidity concerns, which could cause continued or worsening economic and market volatility, and regulatory responses thereto;
  the possibility that future credit losses may be higher than currently expected due to changes in economic assumptions, customer behavior, adverse developments with respect to U.S. or global economic conditions and other uncertainties, including the impact of supply chain disruptions, inflationary pressures and labor shortages on economic conditions and our business;
  an inability to access capital markets or maintain deposits or borrowing costs;
  uncertainty regarding the content, timing and impact of regulatory capital and liquidity requirements;
  the risks related to the transition and physical impacts of climate change;
  our ability to achieve environmental, social and governance goals and commitments or the impact of any changes in the Company’s sustainability strategy or commitments generally;
 

changes or volatility in the securities markets that lead to impairment in the value of our investment securities and goodwill;

 

our ability to implement our growth strategy, including identifying and consummating suitable acquisitions, raising additional capital to finance such transactions, entering new markets, possible failures in realizing the anticipated benefits from such acquisitions and an inability of our personnel, systems and infrastructure to keep pace with such growth;

 

the effect of acquisitions we may make, if any, including, without limitation, the failure to achieve expected revenue growth and/or expense savings from such acquisitions, including our recent acquisition of First Community Bancorp, Inc.;

 

risks related to the integration of any businesses we have acquired or expect to acquire, including exposure to potential asset quality and credit quality risks and unknown or contingent liabilities, the time and costs associated with integrating systems, technology platforms, procedures and personnel, including our recent acquisition of First Community Bancorp, Inc.;

 

potential impairment on the goodwill we have recorded or may record in connection with business acquisitions;

 

political developments, uncertainties or instability;

  our ability to enter new markets successfully and capitalize on growth opportunities;
  the need to retain capital for strategic or regulatory reasons;
  changes in consumer spending, borrowing and savings habits;
 

our ability to continue to increase and manage our commercial and residential real estate, multi-family and commercial business loans;

 

the level of future deposit insurance premium assessments;

  our ability to implement new technologies and maintain secure and reliable technology systems;
 

our ability to develop and maintain secure and reliable information technology systems, effectively defend ourselves against cyberattacks, or recover from breaches to our cybersecurity infrastructure;

 

the failure of assumptions underlying the establishment of allowance for possible loan losses and other estimates;

 

changes in the financial performance and/or condition of our borrowers and their ability to repay their loans when due; and

 

the effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Securities and Exchange Commission, the Public Company Accounting Oversight Board, the Financial Accounting Standards Board and other accounting standard setters.

 

Because of these and other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements. For a further list and description of various risks, relevant factors and uncertainties that could cause future results or events to differ materially from those expressed or implied in our forward-looking statements, see the Part II, Item 1A, “Risk Factors” and Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections contained elsewhere in this report, as well as our Annual Report on Form 10-K for the year ended December 31, 2022, any subsequent Reports on Form 10-Q and Form 8-K, and other filings with the SEC. We do not undertake any obligation to publicly update or correct any forward-looking statements to reflect events or circumstances that subsequently occur, or of which we hereafter become aware.

 

 

 

EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Dollars in Thousands, Except for Per Share Data)

(Unaudited)

 

  

June 30,

  

December 31,

 
  

2023

  

2022

 

ASSETS:

        

Cash and due from banks

 $21,878  $19,321 

Interest-bearing deposits in banks

  1,116   2,490 

Total cash and cash equivalents

  22,994   21,811 
         

Securities available-for-sale

  325,964   349,495 

Federal Home Loan Bank ("FHLB") stock

  10,099   5,089 

Federal Reserve Bank ("FRB") stock

  4,131   4,131 

Mortgage loans held-for-sale, at fair value

  22,381   8,250 

Loans receivable, net of allowance for credit losses of $15,560 at June 30, 2023 and $14,000 at December 31, 2022 (1)

  1,405,923   1,339,678 

Accrued interest and dividends receivable

  11,194   11,284 

Mortgage servicing rights, net

  15,501   15,412 

Assets held-for-sale, at fair value

  323   1,305 

Premises and equipment, net

  88,760   84,323 

Cash surrender value of life insurance, net

  47,520   47,724 

Goodwill

  34,740   34,740 

Core deposit intangible, net

  6,648   7,459 

Other assets

  27,101   17,683 
         

Total assets

 $2,023,279  $1,948,384 
         

(1) Allowance for credit losses at June 30, 2023; allowance for loan losses for prior period.

        

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 

 

EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Continued)

(Dollars in Thousands, Except for Per Share Data)

(Unaudited)

 

  

June 30,

  

December 31,

 
  

2023

  

2022

 

LIABILITIES:

        

Deposit accounts:

        

Noninterest-bearing

 $432,463  $468,955 

Interest-bearing

  1,145,904   1,166,317 

Total deposits

  1,578,367   1,635,272 
         

Accrued expenses and other liabilities

  32,002   26,458 

FHLB advances and other borrowings

  191,260   69,394 

Other long-term debt:

        

Principal amount

  60,155   60,155 

Unamortized debt issuance costs

  (1,230)  (1,311)

Total other long-term debt, net

  58,925   58,844 
         

Total liabilities

  1,860,554   1,789,968 
         

SHAREHOLDERS' EQUITY:

        

Preferred stock (par value $0.01 per share; 1,000,000 shares authorized; no shares issued or outstanding)

  -   - 

Common stock (par value $0.01 per share; 20,000,000 shares authorized; 8,507,429 shares issued at June 30, 2023 and December 31, 2022; 7,988,132 and 8,006,033 shares outstanding at June 30, 2023 and December 31, 2022), respectively

  85   85 

Additional paid-in capital

  109,345   109,164 

Unallocated common stock held by Employee Stock Ownership Plan ("ESOP")

  (4,870)  (5,156)

Treasury stock, at cost (519,297 and 501,396 shares at June 30, 2023 and December 31, 2022, respectively)

  (11,574)  (11,343)

Retained earnings

  93,462   92,023 

Accumulated other comprehensive loss, net of tax

  (23,723)  (26,357)

Total shareholders' equity

  162,725   158,416 
         

Total liabilities and shareholders' equity

 $2,023,279  $1,948,384 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 

 

EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

 (Dollars in Thousands, Except for Per Share Data)

(Unaudited)

 

   

Three Months Ended

   

Six Months Ended

 
   

June 30,

   

June 30,

 
   

2023

   

2022

   

2023

   

2022

 

INTEREST AND DIVIDEND INCOME:

                               

Interest and fees on loans

  $ 19,137     $ 14,895     $ 36,874     $ 26,268  

Securities available-for-sale

    2,949       2,011       5,792       3,308  

FHLB and FRB dividends

    161       38       268       97  

Other interest income

    25       108       46       147  

Total interest and dividend income

    22,272       17,052       42,980       29,820  
                                 

INTEREST EXPENSE:

                               

Deposits

    4,155       422       6,615       734  

FHLB advances and other borrowings

    2,179       15       3,321       21  

Other long-term debt

    674       648       1,352       1,253  

Total interest expense

    7,008       1,085       11,288       2,008  
                                 

NET INTEREST INCOME

    15,264       15,967       31,692       27,812  
                                 

Provision for credit losses (1)

    319       858       598       1,137  
                                 

NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES

    14,945       15,109       31,094       26,675  
                                 

NONINTEREST INCOME:

                               

Service charges on deposit accounts

    527       394       866       725  

Mortgage banking, net

    3,864       5,491       6,914       11,736  

Interchange and ATM fees

    641       621       1,218       1,074  

Appreciation in cash surrender value of life insurance

    503       250       783       457  

Net gain (loss) on sale of available-for-sale securities

    2       (6 )     (222 )     (6 )

Net gain on sale/disposal of premises and equipment

    70       -       83       -  

Other noninterest income

    597       592       1,233       1,649  

Total noninterest income

  $ 6,204     $ 7,342     $ 10,875     $ 15,635  
                                 

(1) Provision for credit losses for the three and six months ended June 30, 2023; provision for loan losses for the three and six months ended June 30, 2022.

                               

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 

EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Continued)

(Dollars in Thousands, Except for Per Share Data)

(Unaudited)

 

   

Three Months Ended

   

Six Months Ended

 
   

June 30,

   

June 30,

 
   

2023

   

2022

   

2023

   

2022

 

NONINTEREST EXPENSE:

                               

Salaries and employee benefits

  $ 11,084     $ 11,431     $ 20,777     $ 21,812  

Occupancy and equipment expense

    2,071       1,817       4,144       3,495  

Data processing

    1,572       1,413       2,784       2,664  

Advertising

    309       303       590       588  

Amortization

    397       440       815       562  

Loan costs

    464       587       909       1,133  

Federal Deposit Insurance Corporation ("FDIC") insurance premiums

    393       144       561       237  

Professional and examination fees

    592       356       1,076       678  

Acquisition costs

    -       1,876       -       2,193  

Other noninterest expense

    1,908       1,679       3,667       3,632  

Total noninterest expense

    18,790       20,046       35,323       36,994  
                                 

INCOME BEFORE PROVISION FOR INCOME TAXES

    2,359       2,405       6,646       5,316  
                                 

Provision for income taxes

    344       634       1,389       1,329  
                                 

NET INCOME

  $ 2,015     $ 1,771     $ 5,257     $ 3,987  
                                 

BASIC EARNINGS PER COMMON SHARE

  $ 0.26     $ 0.24     $ 0.67     $ 0.57  
                                 

DILUTED EARNINGS PER COMMON SHARE

  $ 0.26     $ 0.24     $ 0.67     $ 0.57  

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 

EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Dollars in Thousands)

(Unaudited)

 

   

Three Months Ended

   

Six Months Ended

 
   

June 30,

   

June 30,

 
   

2023

   

2022

   

2023

   

2022

 
                                 

NET INCOME

  $ 2,015     $ 1,771     $ 5,257     $ 3,987  
                                 

OTHER ITEMS OF COMPREHENSIVE (LOSS) INCOME BEFORE TAX:

                               

Change in fair value of investment securities available-for-sale

    (1,624 )     (13,581 )     3,353       (30,648 )

Reclassification for net realized (income) loss on investment securities available-for-sale

    (2 )     6       222       6  

Total other comprehensive (loss) income

    (1,626 )     (13,575 )     3,575       (30,642 )
                                 

Income tax benefit (provision) related to securities available-for-sale

    428       3,574       (941 )     8,068  
                                 

COMPREHENSIVE INCOME (LOSS)

  $ 817     $ (8,230 )   $ 7,891     $ (18,587 )

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 

 

EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES

 CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

For the Three and Six Months Ended June 30, 2023 and 2022

(Dollars in Thousands, Except for Per Share Data)

(Unaudited)

 

                          

ACCUMULATED

     
          

ADDITIONAL

  

UNALLOCATED

          

OTHER

     
  

PREFERRED

  

COMMON

  

PAID-IN

  

ESOP

  

TREASURY

  

RETAINED

  

COMPREHENSIVE

     
  

STOCK

  

STOCK

  

CAPITAL

  

SHARES

  

STOCK

  

EARNINGS

  

(LOSS) INCOME

  

TOTAL

 
                                 

Balance at March 31, 2023

 $-  $85  $109,265  $(5,013) $(11,343) $92,547  $(22,525) $163,016 

Net income

  -   -   -   -   -   2,015   -   2,015 

Other comprehensive loss

  -   -   -   -   -   -   (1,198)  (1,198)

Dividends paid ($.1375 per share)

  -   -   -   -   -   (1,100)  -   (1,100)

Stock compensation expense

  -   -   144   -   -   -   -   144 

ESOP shares allocated (5,997 shares)

  -   -   (64)  143   -   -   -   79 

Treasury stock purchased (17,901 shares at $12.89 average cost per share)

              (231)        (231)

Balance at June 30, 2023

 $-  $85  $109,345  $(4,870) $(11,574) $93,462  $(23,723) $162,725 
                                 

Balance at March 31, 2022

 $-  $71  $80,960  $(5,586) $(9,592) $86,750  $(9,080) $143,523 

Net income

  -   -   -   -   -   1,771   -   1,771 

Other comprehensive loss

  -   -   -   -   -   -   (10,001)  (10,001)

Dividends paid ($0.125 per share)

  -   -   -   -   -   (1,011)  -   (1,011)

Stock issued in connection with First Community Bancorp, Inc. acquisition

  -   14   28,337   -   -   -   -   28,351 

Stock compensation expense

  -   -   135   -   -   -   -   135 

ESOP shares allocated (5,997 shares)

  -   -   (22)  143   -   -   -   121 

Treasury stock purchased (5,000 shares at $19.75 average cost per share)

  -   -   -   -   (99)  -   -   (99)

Balance at June 30, 2022

 $-  $85  $109,410  $(5,443) $(9,691) $87,510  $(19,081) $162,790 
                                 

Balance at December 31, 2022

 $-  $85  $109,164  $(5,156) $(11,343) $92,023  $(26,357) $158,416 

Net income

  -   -   -   -   -   5,257   -   5,257 

New credit standard (Topic 326) - impact in year of adoption

  -   -   -   -   -   (1,616)  -   (1,616)

Other comprehensive income

  -   -   -   -   -   -   2,634   2,634 

Dividends paid ($.275 per share)

  -   -   -   -   -   (2,202)  -   (2,202)

Stock compensation expense

  -   -   289   -   -   -   -   289 

ESOP shares allocated (11,994 shares)

  -   -   (108)  286   -   -   -   178 

Treasury stock purchased (17,901 shares at $12.89 average cost per share)

  -   -   -   -   (231)  -   -   (231)

Balance at June 30, 2023

 $-  $85  $109,345  $(4,870) $(11,574) $93,462  $(23,723) $162,725 
                                 

Balance at December 31, 2021

 $-  $71  $80,832  $(5,729) $(7,321) $85,383  $3,493  $156,729 

Net income

  -   -   -   -   -   3,987   -   3,987 

Other comprehensive loss

  -   -   -   -   -   -   (22,574)  (22,574)

Dividends paid ($0.25 per share)

  -   -   -   -   -   (1,860)  -   (1,860)

Stock issued in connection with First Community Bancorp, Inc. acquisition

  -   14   28,337   -   -   -   -   28,351 

Stock compensation expense

  -   -   270   -   -   -   -   270 

ESOP shares allocated (11,994 shares)

  -   -   (29)  286   -   -   -   257 

Treasury stock purchased (105,000 shares at $22.57 average cost per share)

  -   -   -   -   (2,370)  -   -   (2,370)

Balance at June 30, 2022

 $-  $85  $109,410  $(5,443) $(9,691) $87,510  $(19,081) $162,790 

 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 

 

EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 

(Dollars in Thousands)

(Unaudited)

 

 

   

Six Months Ended

 
   

June 30,

 
   

2023

   

2022

 

CASH FLOWS FROM OPERATING ACTIVITIES:

               

Net income

  $ 5,257     $ 3,987  

Adjustments to reconcile net income to net cash (used in) provided by operating activities:

               

Provision for credit losses (1)

    598       1,137  

Recovery of mortgage servicing rights

    -       (56 )

Depreciation

    1,901       1,707  

Net amortization of investment securities premiums and discounts

    533       774  

Amortization of mortgage servicing rights

    886       1,118  

Amortization of right-of-use assets

    341       344  

Amortization of core deposit intangible

    815       562  

Compensation expense related to restricted stock awards

    289       270  

ESOP compensation expense for allocated shares

    178       257  

Net gain on sale of loans

    (4,960 )     (11,453 )

Originations of loans held-for-sale

    (161,384 )     (314,621 )

Proceeds from sales of loans held-for-sale

    152,213       334,946  

Net gain on sale of real estate owned and other repossessed assets

    -       (13 )

Net gain on sale/disposal of premises and equipment

    (83 )     (1 )

Net realized loss on sales of available-for-sale securities

    222       6  

Net appreciation in cash surrender value of life insurance

    (588 )     (457 )

Net change in:

               

Accrued interest and dividends receivable

    90       (999 )

Other assets

    (4,685 )     (373 )

Accrued expenses and other liabilities

   

(663

)     (437 )

Net cash (used in) provided by operating activities

    (9,040 )     16,698  
                 

CASH FLOWS FROM INVESTING ACTIVITIES:

               

Activity in available-for-sale securities:

               

Sales

    34,020       43,794  

Maturities, principal payments and calls

    20,265       15,201  

Purchases

    (28,126 )     (77,073 )

FHLB stock purchased

    (5,010 )     (10 )

FRB stock purchased

    -       (392 )

Net cash received from acquisitions

    -       13,397  

Loan origination and principal collection, net

    (68,608 )     (129,737 )

Proceeds from bank owned life insurance

    765       -  

Proceeds from sale of premises and equipment

    979       5  

Purchases of premises and equipment, net

    (6,590 )     (6,959 )

Net cash used in investing activities

  $ (52,305 )   $ (141,774 )
                 

(1) Provision for credit losses for the quarter ended June 30, 2023; provision for loan losses for prior period.

               

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 

EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Dollars in Thousands)

(Unaudited)

 

 

Six Months Ended

 
 

June 30,

 
 

2023

 

2022

 

CASH FLOWS FROM FINANCING ACTIVITIES:

           

Net (decrease) increase in deposits

$ (56,905 ) $ 85,324  

Net short-term advances from  FHLB and other borrowings

  121,866     -  

Advances on long-term FHLB and other borrowings

  -     4,500  

Payments on long-term FHLB and other borrowings

  -     (5,000 )

Proceeds from issuance of subordinated debentures

 

-

   

40,000

 

Repayment of senior debt

  -     (10,000 )

Payments for debt issuance costs

 

-

   

(917)

 

Purchase of treasury stock

  (231 )   (2,370 )

Dividends paid

  (2,202 )   (1,860 )

Net cash provided by financing activities

  62,528     109,677  
             

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

  1,183     (15,399 )
             

CASH AND CASH EQUIVALENTS, beginning of period

  21,811     61,434  
             

CASH AND CASH EQUIVALENTS, end of period

$ 22,994   $ 46,035  
             
             

SUPPLEMENTAL CASH FLOW INFORMATION:

           

Cash paid during the period for interest

$ 8,612   $ 1,530  

Cash paid during the period for income taxes

  2,014     2,720  
             

NONCASH INVESTING AND FINANCING ACTIVITIES:

           

Increase (decrease) in fair value of securities available-for-sale

$ 3,575   $ (30,642 )

Mortgage servicing rights recognized

  975     2,178  

Right-of-use assets obtained in exchange for lease liabilities

  3     59  

Loans transferred to real estate and other assets acquired in foreclosure

  -     328  

Stock issued in connection with acquisition

  -     28,351  

Commitments to invest in Low-Income Housing Tax Credit projects

  4,972     -  

Cumulative effect adjustment to retained earnings due to adoption of Topic 326

  (1,616 )   -  

 

See Note 2. Mergers and Acquisitions for additional information related to assets acquired and liabilities assumed in acquisitions.

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 
- 8 -

EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

 

NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Organization

 

Eagle Bancorp Montana, Inc. (“Eagle” or the “Company”), is a Delaware corporation that holds 100% of the capital stock of Opportunity Bank of Montana (“OBMT” or the “Bank”), formerly American Federal Savings Bank (“AFSB”). The Bank was founded in 1922 as a Montana chartered building and loan association and has conducted operations and maintained its administrative office in Helena, Montana since that time. In 1975, the Bank adopted a federal thrift charter and in October 2014 converted to a Montana chartered commercial bank and became a member bank in the Federal Reserve System.

 

In September 2021, the Company entered into an Agreement and Plan of Merger ("Merger Agreement") with First Community Bancorp, Inc. ("FCB"), a Montana corporation, and FCB's wholly-owned subsidiary, First Community Bank, a Montana chartered commercial bank. The Merger Agreement provided that, upon the terms and subject to the conditions set forth in the Merger Agreement, FCB would merge with and into Eagle, with Eagle continuing as the surviving corporation. The merger closed on April 30, 2022. First Community Bank operated nine branches in Ashland, Culbertson, Froid, Glasgow, Helena, Hinsdale, Three Forks and Wolf Point, Montana. 

 

In March 2021, the Bank established a subsidiary, Opportunity Housing Fund, LLC ("OHF"), to invest in Low-Income Housing Tax Credit ("LIHTC") projects. The LIHTC program is designed to encourage capital investment in construction and rehabilitation of low-income housing. Tax credits are allowable over a 10-year period. Investments in LIHTC projects are included in other assets on the consolidated statements of financial condition and totaled $3,915,000 and $1,237,000 as of June 30, 2023 and December 31, 2022, respectively. The Company's remaining capital commitments to these LIHTC projects were $4,972,000 as of June 30, 2023 and are included in accrued expenses and other liabilities on the consolidated statements of financial condition. 

 

On January 1, 2020, the Company acquired Western Holding Company of Wolf Point, ("WHC"), a Montana corporation, and WHC's wholly-owned subsidiary, Western Bank of Wolf Point ("WB"), a Montana chartered commercial bank. The acquisition included one branch in Wolf Point, Montana. In addition, Western Financial Services, Inc. ("WFS") was acquired through the WHC merger. WFS facilitates deferred payment contracts for customers that produce agricultural products.  

 

The Bank currently has 31 full-service branches. The Bank’s principal business is accepting deposits and, together with funds generated from operations and borrowings, investing in various types of loans and securities. The Bank also operated certain branches under the names Dutton State Bank, Farmers State Bank of Denton and The State Bank of Townsend. Effective January 2022, these branches were rebranded and are now only operating as Opportunity Bank of Montana. 

 

Basis of Financial Statement Presentation and Use of Estimates

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X as promulgated by the Securities and Exchange Commission (“SEC”). It is recommended that these unaudited interim condensed consolidated financial statements be read in conjunction with the Company’s Annual Report on Form 10-K with all of the audited information and footnotes required by U.S. GAAP for complete financial statements for the year ended December 31, 2022, as filed with the SEC on March 8, 2023. In the opinion of management, all normal adjustments and recurring accruals considered necessary for a fair presentation of the financial position and results of operations for the periods presented have been included.

 

The results of operations for the six-month period ended  June 30, 2023 are not necessarily indicative of the results to be expected for the year ending  December 31, 2022 or any other period. In preparing condensed consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the condensed consolidated statement of financial condition and reported amounts of revenues and expenses during the reporting period. Actual results could differ from estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, mortgage servicing rights, the fair value of financial instruments, the valuation of goodwill and deferred tax assets and liabilities.

 

Principles of Consolidation

 

The condensed consolidated financial statements include Eagle, the Bank, OHF, Eagle Bancorp Statutory Trust I (the “Trust”) and WFS. All significant intercompany transactions and balances have been eliminated in consolidation.

 

Reclassifications 

 

Certain prior period amounts were reclassified to conform to the presentation for 2023. These reclassifications had no impact on net income or shareholders’ equity.

 

Subsequent Events

 

The Company has evaluated events and transactions subsequent to June 30, 2023 for recognition and/or disclosure.

 

 

- 9 -

EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued

 

Recently Adopted Accounting Pronouncements 

 

On January 1, 2023, the Company adopted Accounting Standards Update ("ASU") No. 2017-04, Intangibles – Goodwill and Other (Topic 350) to amend and simplify current goodwill impairment testing to eliminate Step 2 from the current provisions. Under the new guidance, an entity should perform the goodwill impairment test by comparing the fair value of a reporting unit with its carrying value and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if a quantitative impairment test is necessary. The adoption of ASU No. 2017-04 did not have a material impact on the consolidated financial statements.

 

Application of New Accounting Guidance Adopted in 2023 

 

On January 1, 2023, the Company adopted ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326), intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. This guidance is commonly referred to as Current Expected Credit Losses ("CECL"), and the CECL model is based on expected credit losses rather than the model used for periods prior to January 1, 2023, which was based on incurred losses. The allowance for credit losses is established for current expected credit losses on the Company's loan portfolio, including unfunded loan commitments, for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better estimate their credit losses. The standard also requires enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. These disclosures include qualitative and quantitative requirements that provide additional information about the amounts recorded in the financial statements. Additionally, Topic 326 amends the accounting for credit losses on available-for-sale debt securities, requiring credit losses on available-for-sale debt securities to be presented as an allowance rather than a write-down for those securities management does not intend to sell or is not likely to be required to sell.

 

The Company adopted Topic 326 using the modified retrospective basis with the cumulative effect of initially applying the amendments recognized in retained earnings. Results for reporting periods beginning after January 1, 2023 are presented under ASC 326. Results from periods prior to January 1, 2023 are presented using previously applicable U.S. GAAP. The adoption resulted in an increase of $700,000 to our allowance for credit losses ("ACL"), an increase of $1,500,000 to our allowance for unfunded loan commitments, and a net-of-tax cumulative effect adjustment of $1,616,000 to decrease the beginning balance of retained earnings. 

 

The adoption of this guidance did not have an impact on the Company's available-for-sale securities. However, any subsequent estimated credit losses are required to be recognized through an allowance for credit losses associated with the applicable securities.

 

The Company finalized the adoption of ASC 326 as of January 1, 2023 as detailed in the following table:
 
  

January 1, 2023 As Reported Under Topic 326

  

January 1, 2023 Pre-Topic 326 Adoption

  

Impact of Topic 326 Adoption

 

Assets

            

Real estate loans:

            

Residential 1-4 family

 $1,493  $1,472  $21 

Commercial real estate

  9,571   9,037   534 
             

Other loans:

            

Home equity

  512   509   3 

Consumer

  343   342   1 

Commercial

  2,781   2,640   141 

Allowance for credit losses on loans

 $14,700  $14,000  $700 
             

Liabilities

            

Allowance for credit losses on unfunded loan commitments

 $1,500  $-  $1,500 
             

Total

         $2,200 
 

 

Allowance for Credit Losses on Loans – The allowance for credit losses on loans is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans. The Company has elected to exclude accrued interest receivable from the amortized cost basis of loans, and accrued interest is reported separately on the consolidated statements of financial condition. Loans are charged off against the allowance when management believes the uncollectability of a loan balance is confirmed and recoveries are credited to the allowance when received. The Company may also account for expected recoveries should information of an anticipated recovery become available. In the case of actual or expected recoveries, amounts may not exceed the aggregate of amounts previously charged off.
 
Management utilizes relevant available information, from internal and external sources, relating to past events, current conditions, historical loss experience, and reasonable and supportable forecasts. The lookback period in the analysis includes historical data from 2014 to present. Adjustments to historical loss information are made when management determines historical data is not likely reflective of the current portfolio such as limited data sets or lack of default or loss history. Management may selectively apply external market data to subjectively adjust the Company’s own loss history including index or peer data. 

 

Collective Assessment – The allowance for credit losses on loans is measured on a collective cohort basis when similar risk characteristics exist. Generally, collectively assessed loans are grouped first by call report code, then by similar risk characteristics.

 

- 10 -

EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued

 

The Company has elected to use the Weighted Average Remaining Maturity (WARM) methodology for all cohorts. The WARM methodology looks at historical quarterly loss rates for each loan cohort over the established “look back” period to determine an average loss rate for each cohort. Each cohort is analyzed to determine the remaining life using amortization schedules, including prepayments.

 

Historical charge off and recovery activity is compared to loan balances in each cohort quarterly and is averaged to determine an estimated annual charge off rate. The average loss rate over this look-back period is applied annually over the remaining life of the cohort to determine an expected loss percentage.

 

The Company utilizes reasonable and supportable forecasted losses based on current economic conditions when estimating the allowance for credit losses on loans. Forecasts are based on regression and matrix models that compare national economic indicators to peer charge off rates and local economic indicators to the Company’s charge off rates. The expected loss rates for each cohort are compared to forecasted loss rates and are adjusted by the difference between the calculated expected loss rates and forecasted loss rates. The forecasting models are updated and compared to loss rates quarterly.

 

The Company recognizes that all significant factors that affect the collectability of the loan portfolio must be considered to determine the estimated credit losses as of the evaluation date. Furthermore, the methodology, in and of itself and even when selectively adjusted by comparison to market and peer data, does not provide a sufficient basis to determine the estimated credit losses. The Company adjusts the modeled expected losses by qualitative adjustments to incorporate significant risks to form a sufficient basis to estimate the credit losses.

 

Individual Assessment  Loans classified as Nonaccrual will be reviewed quarterly for potential individual assessment.

 

The Company has elected the collateral-dependent practical expedient for its collateral-dependent loans, where estimated credit losses are based upon the fair value of the collateral, less costs to sell if applicable. This practical expedient can be applied to a loan if the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the sale or operation of the collateral. If it is probable that the Company will foreclose on the collateral, the use of the fair value of the collateral to calculate an allowance for credit loss is required. Estimates of future collateral proceeds will be based upon available appraisals, reference to recent valuations of comparable properties, and any other sources of information believed appropriate by management under the specific circumstances. When appraisals are ordered to support the analysis of a collateral-dependent loan, the appraisal is reviewed internally.

 

Where the primary and/or expected source of repayment of a specific loan is believed to be the receipt of principal and interest payments from the borrower and/or the refinancing of the loan by another creditor, impairment will generally be measured based upon the present value of expected proceeds discounted at the contractual interest rate. Expected refinancing proceeds may be estimated from review of term sheets actually received by the borrower from other creditors and/or from the Company’s knowledge of terms generally available from other banks.

 

Determining the Contractual Life – Expected credit losses are estimated over the contractual life of the loans, adjusted for expected prepayments when appropriate. The contractual life excludes expected extensions, renewals and modifications. Prepayment assumptions will be determined by analysis of historical behavior by loan cohort.

 

Restructured Loans – On January 1, 2023, the Company also adopted ASU No. 2022-02, Financial Instruments – Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures. This guidance was an update to ASU No. 2016-13, and the Company adopted using the modified retrospective transition method. The amendments in this update eliminated the accounting guidance for troubled debt restructure ("TDR") loans and enhanced the disclosure requirements for certain loan modifications of receivables made to borrowers experiencing financial difficulty. The allowance for credit losses on loans that are considered modifications to borrowers experiencing financial difficulty are measured using the same method as all other loans held for investment. In addition, for public business entities, the amendments in the update require that entities disclose current-period gross charge-offs by year of origination for financing receivables. This information must be included in the vintage disclosures, which require an entity to disclose the amortized cost basis of loans by credit-quality indicator and the loan category by year of origination.

 

Allowance for Credit Losses on Unfunded Commitments – The Company estimates expected credit losses over the period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The allowance for credit losses on unfunded commitments is adjusted through a provision for credit losses expense. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life. The estimate utilizes the same factors and assumptions as the allowance for credit losses on loans and is applied at the same collective cohort level.

 
Recently Issued Accounting Pronouncements  

 

In March 2020, the FASB issued ASU No. 2020- 04, Reference Rate Reform (Topic 848) which provides temporary optional expedients to ease the financial reporting burdens of the expected market transition from London Interbank Offered Rate (“LIBOR”) to an alternative reference rate such as SOFR. The guidance was effective upon issuance and generally can be applied through December 31, 2024. The Company evaluated the guidance and identified substitution rates for impacted loans. In January 2021, the FASB issued ASU No. 2021- 01, Reference Rate Reform (Topic 848), which clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. ASU No. 2021- 01 was effective upon issuance and generally can be applied through December 31, 2024. ASU No. 2021- 01 has not had and is not expected to have a significant impact on the Company's consolidated financial statements.

 

- 11 -

EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

 

NOTE 2. MERGERS AND ACQUISITIONS

 

Effective April 30, 2022, Eagle completed its previously announced merger with FCB. The acquisition closed after receipt of approvals from regulatory authorities, approval of FCB shareholders and the satisfaction of other closing conditions. The total consideration paid was $38,577,000 and included cash consideration of $10,226,000 and common stock issued of $28,351,000.

 

This transaction was accounted for under the acquisition method of accounting.

 

All of the assets acquired and liabilities assumed were recognized at their acquisition-date fair value, while transaction costs and restructuring costs associated with the business combinations were expensed as incurred. Determining the fair value of assets and liabilities is a complicated process involving significant judgment regarding methods and assumptions used to calculate estimated fair values. The excess of the acquisition consideration over the fair value of assets acquired and liabilities assumed, if any, is allocated to goodwill. The goodwill recorded is not deductible for federal income tax purposes.

 

The following table summarizes the fair values of the assets acquired and liabilities assumed, consideration paid and the resulting goodwill.

 

  

FCB

 
  

April 30,

 
  

2022

 
  

(In Thousands)

 

Assets acquired:

    

Cash and cash equivalents

 $23,623 

Securities available-for-sale

  126,123 

Loans receivable

  190,894 

Premises and equipment

  6,393 

Cash surrender value of life insurance

  8,638 

Core deposit intangible

  7,004 

Other assets

  7,687 

Total assets acquired

 $370,362 
     

Liabilities assumed:

    

Deposits

 $321,107 

Accrued expenses and other liabilities

  1,767 

Other borrowings

  22,853 

Total liabilities assumed

 $345,727 
     

Net assets acquired

 $24,635 
     

Consideration paid:

    

Cash

 $10,226 

Common stock issued (1,396,596 shares)

  28,351 

Total consideration paid

 $38,577 
     

Goodwill resulting from acquisition

 $13,942 

 

FCB investments were written down an additional $4,559,000 to fair value on the date of acquisition based on market prices obtained from an independent third party.

 

- 12 -

EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

NOTE 2. MERGERS AND ACQUISITIONS – continued

 

For acquisitions, the fair value analysis of the loan portfolios resulted in a valuation adjustment for each loan based on an amortization schedule of expected cash flow. Individual amortization schedules were used for each loan over a certain amount and those with specifically identified loss exposure. The remainder of the loans were grouped by type and risk rating into loan pools (based on loan type, fixed or variable interest rate, revolving or term payments and risk rating). Yield inputs for the amortization schedules included contractual interest rates, estimated prepayment speeds, liquidity adjustments and market yields. Credit inputs for the amortization schedules included probability of payment default, loss given default rates and individually identified loss exposure.             

  

The total accretable discount on FCB acquired loans was $5,416,000 as of April 30, 2022. During the three months ended June 30, 2023, accretion of the loan discount was $276,000. The remaining accretable loan discount was $3,548,000as of June 30, 2023. Three impaired loans were acquired through the FCB acquisition with insignificant balances as of April 30, 2022.

 

Fair value adjustments recorded for FCB related to premises and equipment were insignificant overall. The Company used independent third party appraisals in the determination of the fair value of acquired properties.

 

Core deposit intangible assets of $7,004,000 were recorded for FCB and are being amortized using an accelerated method over the estimated useful lives of the related deposits of 10 years from date of acquisition. For acquisitions, the core deposit intangible value is a function of the difference between the cost of the acquired core deposits and the alternative cost of funds. These cash flow streams were discounted to present value. The fair value of other deposit accounts acquired were valued by estimating future cash flows to be received or paid from individual or homogenous groups of assets and liabilities and then discounting those cash flows to a present value using rates of return that were available in financial markets for similar financial instruments on or near the acquisition date.

 

Direct costs related to the acquisition were expensed as incurred. The Company recorded no acquisition costs related to FCB during the six months ended June 30, 2023, and $2,296,000during the year ended December 31, 2022. Acquisition costs included professional fees and data processing expenses incurred related to the acquisition.

 

Operations of acquired entities have been included in the condensed consolidated financial statements since date of acquisition. The Company does not consider them as separate reporting segments and does not track the amount of revenues and net income attributable since acquisition. As such, it is impracticable to determine such amounts for the period from acquisition date through June 30, 2023

 

 

NOTE 3. INVESTMENT SECURITIES

 

The amortized cost and fair values of securities, together with unrealized gains and losses, were as follows:

 

  

June 30, 2023

  

December 31, 2022

 
      

Gross

          

Gross

     
  

Amortized

  

Unrealized

  

Fair

  

Amortized

  

Unrealized

  

Fair

 
  

Cost

  

Gains

  

(Losses)

  

Value

  

Cost

  

Gains

  

(Losses)

  

Value

 
  

(In Thousands)

 

Available-for-Sale:

                                

U.S. government and agency obligations

 $7,416  $163  $(205) $7,374  $2,575  $2  $(187) $2,390 

U.S. Treasury obligations

  52,462   -   (6,404)  46,058   58,715   -   (6,764)  51,951 

Municipal obligations

  152,990   67   (13,865)  139,192   190,811   77   (18,039)  172,849 

Corporate obligations

  4,242   -   (411)  3,831   7,240   1   (251)  6,990 

Mortgage-backed securities

  30,739   -   (1,952)  28,787   31,553   -   (1,900)  29,653 

Collateralized mortgage obligations

  97,648   -   (9,536)  88,112   90,812   -   (8,681)  82,131 

Asset-backed securities

  12,672   43   (105)  12,610   3,569   -   (38)  3,531 

Total

 $358,169  $273  $(32,478) $325,964  $385,275  $80  $(35,860) $349,495 

 

- 13 -

EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

NOTE 3. INVESTMENT SECURITIES continued

 

Proceeds from sale of available-for sale securities and the associated realized gains and losses were as follows:

 

  

Three Months Ended

  

Six Months Ended

 
  

June 30,

  

June 30,

 
  

2023

  

2022

  

2023

  

2022

 
  

(In Thousands)

         

Proceeds from sale of available-for-sale securities

 $11,247  $43,794  $34,020  $43,794 
                 

Gross realized gain on sale of available-for-sale securities

 $49  $-  $69  $- 

Gross realized loss on sale of available-for-sale securities

  (47)  (6)  (291)  (6)

Net realized gain (loss) on sale of available-for-sale securities

 $2  $(6) $(222) $(6)

 

The amortized cost and fair value of securities by contractual maturity are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

 

  

June 30, 2023

 
  

Amortized

  

Fair

 
  

Cost

  

Value

 
  

(In Thousands)

 

Due in one year or less

 $4,354  $4,344 

Due from one to five years

  28,757   26,662 

Due from five to ten years

  76,238   66,909 

Due after ten years

  120,433   111,150 
   229,782   209,065 

Mortgage-backed securities

  30,739   28,787 

Collateralized mortgage obligations

  97,648   88,112 

Total

 $358,169  $325,964 

 

As of  June 30, 2023 and December 31, 2022, securities with a fair value of $25,080,000 and $58,942,000, respectively, were pledged to secure public deposits and for other purposes required or permitted by law.

 

The Company’s investment securities that have been in a continuous unrealized loss position for less than twelve months and those that have been in a continuous unrealized loss position for twelve or more months were as follows:

 

  

June 30, 2023

 
  

Less Than 12 Months

  

12 Months or Longer

 
      

Gross

      

Gross

 
  

Fair

  

Unrealized

  

Fair

  

Unrealized

 
  

Value

  

Losses

  

Value

  

Losses

 
  

(In Thousands)

 

U.S. government and agency obligations

 $798  $(92) $946  $(113)

U.S. Treasury obligations

  -   -   46,058   (6,404)

Municipal obligations

  39,143   (848)  86,487   (13,017)

Corporate obligations

  1,118   (132)  2,713   (279)

Mortgage-backed securities and collateralized mortgage obligations

  23,173   (951)  93,725   (10,537)

Asset-backed securities

  9,404   (105)  -   - 

Total

 $73,636  $(2,128) $229,929  $(30,350)

 

- 14 -

EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 

NOTE 3. INVESTMENT SECURITIES continued

 

  

December 31, 2022

 
  

Less Than 12 Months

  

12 Months or Longer

 
      

Gross

      

Gross

 
  

Fair

  

Unrealized

  

Fair

  

Unrealized

 
  

Value

  

Losses

  

Value

  

Losses

 
  

(In Thousands)

 

U.S. government and agency obligations

 $1,773  $(187) $-  $- 

U.S. Treasury obligations

  10,969   (196)  40,982   (6,568)

Municipal obligations

  128,036   (8,781)  33,092   (9,258)

Corporate obligations

  4,994   (246)  995   (5)

Mortgage-backed securities and collateralized mortgage obligations

  67,310   (3,647)  44,444   (6,934)

Asset-backed securities

  3,531   (38)  -   - 

Total

 $216,613  $(13,095) $119,513  $(22,765)

 

As of  June 30, 2023 and December 31, 2022, there were, respectively, 326 and 388 securities in unrealized loss positions. Based on analysis of available-for-sale debt securities with unrealized losses as of June 30, 2023, the Company determined the decline in value was unrelated to credit losses and was primarily caused by changes in interest rates and market spreads subsequent to the initial purchase of the securities. The Company is not likely to be required to sell these securities prior to maturity. As a result, no ACL was recorded on available-for-sale securities at June 30, 2023. As part of this determination, consideration was given to the extent to which fair value was less than amortized cost, adverse security ratings by a rating agency and other factors. 

 

NOTE 4. LOANS RECEIVABLE  

 

Loans receivable consisted of the following:

 

  

June 30,

  

December 31,

 
  

2023

  

2022

 
  

(In Thousands)

 

Real estate loans:

        

Residential 1-4 family

 $182,953  $195,703 

Commercial real estate

  875,545   826,549 
         

Other loans:

        

Home equity

  80,333   74,271 

Consumer

  30,065   27,609 

Commercial

  252,587   231,291 
         

Total

  1,421,483   1,355,423 
         

Deferred loan fees, net(1)

  -   (1,745)

Allowance for credit losses (2)

  (15,560)  (14,000)

Total loans, net

 $1,405,923  $1,339,678 
         

(1) Deferred loan fees, net are included in individual loan categories above and totaled $1.48 million for the quarter ended June 30, 2023.

        

(2) Allowance for credit losses for the quarter ended June 30, 2023; allowance for loan losses for prior periods.

        

 

Included in the above are loans guaranteed by U.S. government agencies totaling $24,705,000 and $24,605,000 at June 30, 2023 and  December 31, 2022, respectively. 

 

- 15 -

EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 

NOTE 4. LOANS RECEIVABLE – continued

 

The following table provides allowance for credit losses activity for the three months ended June 30, 2023.

 

  

Residential

  

Commercial

  

Home

             
  

1-4 Family

  

Real Estate

  

Equity

  

Consumer

  

Commercial

  

Total

 
  

(In Thousands)

 

Allowance for credit losses on loans:

                        

Beginning balance, March 31, 2023

 $1,580  $9,732  $513  $344  $2,831  $15,000 

Charge-offs

  -   -   -   (29)  (26)  (55)

Recoveries

  189   6   9   -   2   206 

Provision

  17   273   4   3   112   409 

Total ending allowance balance, June 30, 2023

 $1,786  $10,011  $526  $318  $2,919  $15,560 

 

The following table provides allowance for credit losses activity for the six months ended June 30, 2023.

 

  

Residential

  

Commercial

  

Home

             
  

1-4 Family

  

Real Estate

  

Equity

  

Consumer

  

Commercial

  

Total

 
  

(In Thousands)

 

Allowance for credit losses on loans:

                        

Beginning balance, December 31, 2022, prior to adoption of ASC 326

 $1,472  $9,037  $509  $342  $2,640  $14,000 

Impact of adopting ASC 326

  21   534   3   1   141   700 

Charge-offs

  -   -   -   (30)  (26)  (56)

Recoveries

  195   11   9   1   12   228 

Provision

  98   429   5   4   152   688 

Total ending allowance balance, June 30, 2023

 $1,786  $10,011  $526  $318  $2,919  $15,560 

 

The following table provides allowance for loan losses activity for the three and six months ended June 30, 2022.

 

  

Residential

  

Commercial

  

Home

             
  

1-4 Family

  

Real Estate

  

Equity

  

Consumer

  

Commercial

  

Total

 
  

(In Thousands)

 

Allowance for loan losses:

                        

Beginning balance, March 31, 2022

 $1,616  $7,659  $536  $357  $2,532  $12,700 

Charge-offs

  -   -   (32)  -   (215)  (247)

Recoveries

  -   8   -   1   5   14 

Provision

  27   670   3   3   155   858 

Ending balance, June 30, 2022

 $1,643  $8,337  $507  $361  $2,477  $13,325 
                         

Allowance for loan losses:

                        

Beginning balance, December 31, 2021

 $1,596  $7,470  $533  $365  $2,536  $12,500 

Charge-offs

  -   -   (32)  (8)  (299)  (339)

Recoveries

  -   14   -   1   12   27 

Provision

  47   853   6   3   228   1,137 

Ending balance, June 30, 2022

 $1,643  $8,337  $507  $361  $2,477  $13,325 
                         

Ending balance, June 30, 2022 allocated to loans individually evaluated for impairment

 $199  $-  $-  $-  $319  $518 
                         

Ending balance, June 30, 2022 allocated to loans collectively evaluated for impairment

 $1,444  $8,337  $507  $361  $2,158  $12,807 
                         

Loans receivable:

                        

Ending balance, June 30, 2022

 $186,229  $743,326  $62,445  $25,775  $234,741  $1,252,516 
                         

Ending balance, June 30, 2022 of loans individually evaluated for impairment

 $573  $1,173  $119  $35  $1,670  $3,570 
                         

Ending balance, June 30, 2022 of loans collectively evaluated for impairment

 $185,656  $742,153  $62,326  $25,740  $233,071  $1,248,946 

 

- 16 -

EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 

NOTE 4. LOANS RECEIVABLE – continued

 

Internal classification of the loan portfolio by amortized cost and based on year originated was as follows:

 

  

June 30, 2023

 
  

2023

  

2022

  

2021

  

2020

  

2019

  

Prior

  

Revolving Loans

  

Total Loans

 
  

(In Thousands)

 

RESIDENTIAL 1-4 FAMILY

                                

Pass

 $5,455  $37,629  $25,727  $15,883  $11,654  $33,829  $2,501  $132,678 

Special Mention

  -   -   -   -   -   232   -   232 

Substandard

  -   -   -   -   -   527   -   527 

Total Residential 1-4 family

  5,455   37,629   25,727   15,883   11,654   34,588   2,501   133,437 

RESIDENTIAL 1-4 FAMILY CONSTRUCTION

                                

Pass

  3,820   33,921   11,158   -   -   301   316   49,516 

Special Mention

  -   -   -   -   -   -   -   - 

Total Residential 1-4 family construction

  3,820   33,921   11,158   -   -   301   316   49,516 

COMMERCIAL REAL ESTATE

                                

Pass

  32,372   135,828   144,174   55,342   57,149   113,899   31,868   570,632 

Special Mention

  544   -   -   -   3,533   2,360   -   6,437 

Substandard

  -   -   -   -   -   667   -   667 

Total Commercial real estate

  32,916   135,828   144,174   55,342   60,682   116,926   31,868   577,736 

COMMERCIAL CONSTRUCTION AND DEVELOPMENT

                                

Pass

  10,124   84,040   43,024   6,854   7,027   4,336   2,110   157,515 

Special Mention

  -   -   -   -   -   1,004   -   1,004 

Total Commercial construction and development

  10,124   84,040   43,024   6,854   7,027   5,340   2,110   158,519 

FARMLAND

                                

Pass

  10,005   36,986   20,607   23,127   9,799   31,413   4,053   135,990 

Special Mention

  -   -   -   -   -   -   -   - 

Substandard

  -   407   -   1,091   183   1,619   -   3,300 

Total Farmland

  10,005   37,393   20,607   24,218   9,982   33,032   4,053   139,290 

HOME EQUITY

                                

Pass

  611   5,098   389   591   657   2,291   70,502   80,139 

Substandard

  -   -   -   -   -   114   80   194 

Total Home Equity

  611   5,098   389   591   657   2,405   70,582   80,333 

CONSUMER

                                

Pass

  8,096   10,213   4,510   2,613   761   1,649   2,086   29,928 

Special Mention

  -   -   -   -   -   -   -   - 

Substandard

  15   33   7   51   3   11   17   137 

Total Consumer

  8,111   10,246   4,517   2,664   764   1,660   2,103   30,065 

COMMERCIAL

                                

Pass

  15,901   25,832   26,184   22,643   3,801   7,356   26,563   128,280 

Special Mention

  -   -   -   29   -   140   418   587 

Substandard

  -   72   18   96   19   -   4   209 

Doubtful

  -   -   -   -   -   8   -   8 

Total Commercial

  15,901   25,904   26,202   22,768   3,820   7,504   26,985   129,084 

AGRICULTURAL

                                

Pass

  29,776   26,608   8,917   6,948   2,150   1,733   44,467   120,599 

Special Mention

  -   94   -   -   -   -   -   94 

Substandard

  -   210   186   55   863   559   837   2,710 

Doubtful

  -   -   -   -   -   100   -   100 

Total Agricultural

  29,776   26,912   9,103   7,003   3,013   2,392   45,304   123,503 

TOTAL LOANS

                                

Pass

  116,160   396,155   284,690   134,001   92,998   196,807   184,466   1,405,277 

Special Mention

  544   94   -   29   3,533   3,736   418   8,354 

Substandard

  15   722   211   1,293   1,068   3,497   938   7,744 

Doubtful

  -   -   -   -   -   108   -   108 

Total

 $116,719  $396,971  $284,901  $135,323  $97,599  $204,148  $185,822  $1,421,483 

 

 

- 17 -

EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

NOTE 4. LOANS RECEIVABLE – continued

 

Internal classification of the loan portfolio was as follows (prior to the adoption of ASU No. 2016-13):

 

  

December 31, 2022

 
      

Special

                 
  

Pass

  

Mention

  

Substandard

  

Doubtful

  

Loss

  

Total

 
  

(In Thousands)

 

Real estate loans:

                        

Residential 1-4 family

 $135,079  $515  $353   -  $-  $135,947 

Residential 1-4 family construction

  59,756   -   -   -   -   59,756 

Commercial real estate

  520,505   16,833   1,732   -   -   539,070 

Commercial construction and development

  150,101   1,044   -   -   -   151,145 

Farmland

  131,646   2,232   2,456   -   -   136,334 

Other loans:

                        

Home equity

  74,147   -   124   -   -   74,271 

Consumer

  27,560   10   39   -   -   27,609 

Commercial

  125,035   1,476   736   8   -   127,255 

Agricultural

  101,441   311   2,182   102   -   104,036 

Total

 $1,325,270  $22,421  $7,622  $110  $-  $1,355,423 

 

The following tables include information regarding delinquencies within the loan portfolio.

 

  

June 30, 2023

 
  

Loans Past Due and Still Accruing

                 
      

 

                     

 

     90 Days      Nonaccrual  Nonaccrual         
  

30-89 Days

  

and

      

Loans with

  

Loans with

  

Current

  

Total

 
  

Past Due

  

Greater

  

Total

  

no ACL

  

ACL

  

Loans

  

Loans

 
  

(In Thousands)

 

Real estate loans:

                            

Residential 1-4 family

 $687  $329  $1,016  $322  $-  $132,099  $133,437 

Residential 1-4 family construction

  -   -   -   -   -   49,516   49,516 

Commercial real estate

  -   -   -   668   -   577,068   577,736 

Commercial construction and development

  -   -   -   -   -   158,519   158,519 

Farmland

  233   -   233   2,313   1,734   135,010   139,290 

Other loans:

                            

Home equity

  425   -   425   178   -   79,730   80,333 

Consumer

  73   -   73   67   21   29,904   30,065 

Commercial

  633   40   673   213   -   128,198   129,084 

Agricultural

  27   -   27   3,196   849   119,431   123,503 

Total

 $2,078  $369  $2,447  $6,957  $2,604  $1,409,475  $1,421,483 

 

- 18 -

EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

NOTE 4. LOANS RECEIVABLE – continued

 

  

December 31, 2022

 
  

Loans Past Due and Still Accruing

             
      

90 Days

                 
  

30-89 Days

  

and

      

Nonaccrual

  

Current

  

Total

 
  

Past Due

  

Greater

  

Total

  

Loans

  

Loans

  

Loans

 
  

(In Thousands)

 

Real estate loans:

                        

Residential 1-4 family

 $1,798  $330  $2,128  $483  $133,336  $135,947 

Residential 1-4 family construction

  500   -   500   -   59,256   59,756 

Commercial real estate

  780   -   780   350   537,940   539,070 

Commercial construction and development

  -   -   -   -   151,145   151,145 

Farmland

  1,620   -   1,620   754   133,960   136,334 

Other loans:

                        

Home equity

  226   -   226   107   73,938   74,271 

Consumer

  93   -   93   25   27,491   27,609 

Commercial

  597   746   1,343   44   125,868   127,255 

Agricultural

  -   -   -   1,535   102,501   104,036 

Total

 $5,614  $1,076  $6,690  $3,298  $1,345,435  $1,355,423 

 

 

The following tables presents the amortized cost basis of collateral-dependent loans by class of loans.

 

  

June 30, 2023

 
  

Real Estate

  

Business Assets

  

Other

 
  

(In Thousands)

     

Real estate loans:

            

Residential 1-4 family

 $411  $-  $- 

Commercial real estate

  39   628   - 

Farmland

  4,164   -   - 

Other loans:

          - 

Home equity

  159   -   - 

Consumer

  -      68 

Commercial

  -   353   - 

Agricultural

  -   2,876   - 

Total

 $4,773  $3,857  $68 

 

Prior to the implementation of ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326) on January 1, 2023, a loan was considered impaired when the Company determined it was probable that it would be unable to collect all amounts due to the contractual terms of the loan agreement, including scheduled interest payments. Various factors determined impairment such as the financial condition of the borrower, value of the underlying collateral, and general economic conditions.

 

The implementation of ASU No. 2016-13 significantly changed disclosures related to loans and, as a result, certain disclosures are no longer required. The following tables represent disclosures for the prior period that are no longer required as of January 1, 2023, but are included in this Form 10-Q since the Company is required to disclose comparative information. 

 

The following table provides additional information on impaired loans with and without related allowance reserves at December 31, 2022: 

 

  

December 31, 2022

 
      

Unpaid

     
  

Recorded

  

Principal

  

Related

 
  

Investment

  

Balance

  

Allowance

 
  

(In Thousands)

 

Real estate loans:

            

Residential 1-4 family

 $483  $585  $- 

Residential 1-4 family construction

  -   -   - 

Commercial real estate

  3,614   3,697   - 

Commercial construction and development

  -   -   - 

Farmland

  754   866   - 

Other loans:

            

Home equity

  107   133   - 

Consumer

  25   30   - 

Commercial

  184   232   35 

Agricultural

  1,535   1,633   115 

Total

 $6,702  $7,176  $150 

 

- 19 -

EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

NOTE 4. LOANS RECEIVABLE – continued

 

The following table provides information on impaired loans for the three and six months ended June 30, 2022:

 

  

Three Months Ended

 Six Months Ended 
  

June 30, 2022

 June 30, 2022 
  

Average Recorded Investment

 
  

(In Thousands)

 (In Thousands) 

Real estate loans:

       

Residential 1-4 family

 $580 $595 

Residential 1-4 family construction

  -  169 

Commercial real estate

  1,134  1,213 

Commercial construction and development

  -  - 

Farmland

  1,189  1,200 

Other loans:

       

Home equity

  115  117 

Consumer

  40  49 

Commercial

  68  300 

Agricultural

  1,654  1,672 

Total

 $4,780 $5,315 

 

Interest income recognized on nonaccrual loans for the three and six months ended June 30, 2023 and 2022 is considered insignificant. Interest payments received on a cash basis related to nonaccrual loans were $418,000 at June 30, 2023 and $415,000 at  December 31, 2022.

 

Effective January 1, 2023, the Company adopted ASU No. 2022-02, Financial Instruments - Credit Losses (Topic 326) Troubled Debt Restructurings and Vintage Disclosures. The update eliminated the recognitions and measure of TDRs while expanding loan modification and vintage disclosures for borrowers experiencing financial difficulty. Due to the removal of the TDR designation, the Company evaluates all loan restructurings according to accounting guidance for loan modifications. Modifications to borrowers experiencing financial difficulties are considered modifications if the creditor grants a concession to the debtor, for economic or legal reasons related to the debtor's financial difficulties, that it would not otherwise consider. Loan modifications that result in a change in the timing or amount of contractual cash flows include situations where there are interest rate reductions, term extensions, other than insignificant payment delays, and combinations of the listed modifications.

 

As of  June 30, 2023, the Company modified one commercial real estate loan with an amortized cost basis of $544,000 for a borrower experiencing financial difficulty by consolidating two lines of credit and refinancing into one long term loan for ten years. There was no forgiveness of principal and the loan was current with its modified terms as of June 30, 2023. 

 

Prior to the adoption of ASU No. 2022-02, during the three months ended June 30, 2022, there were no new TDR loans. During the six months ended June 30, 2022, there were two new TDR loans. The recorded investments for both agricultural loans at the time of restructure were $331,000 and $145,000. No charge-offs were incurred and the loans continue to be on nonaccrual status.

 

 

NOTE 5. MORTGAGE SERVICING RIGHTS

 

The Company is servicing mortgage loans for the benefit of others which are not included in the condensed consolidated statements of financial condition and have unpaid principal balances of $2,030,603,000 and $2,022,066,000 at  June 30, 2023 and December 31, 2022, respectively. Servicing loans for others generally consists of collecting mortgage payments, maintaining escrow accounts, disbursing payments to investors and foreclosure processing. Mortgage loan servicing fees were $1,269,000 and $1,199,000 for the three months ended June 30, 2023 and 2022, respectively. Mortgage loan servicing fees were $2,535,000 and $2,355,000 for the six months ended June 30, 2023 and 2022, respectively. These fees, net of amortization, are included in mortgage banking, net which is a component of noninterest income on the condensed consolidated statements of income.

 

Custodial balances maintained in connection with the foregoing loan servicing are included in noninterest checking deposits and were $12,742,000 and $11,912,000 at  June 30, 2023 and December 31, 2022, respectively.

 

- 20 -

EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

NOTE 5. MORTGAGE SERVICING RIGHTS – continued

 

The following table is a summary of activity in mortgage servicing rights:

 

  

As of or For the

 
  

Three Months Ended

 
  

June 30,

 
  

2023

  

2022

 
  

(In Thousands)

 

Mortgage servicing rights:

        

Beginning balance

 $15,875  $14,288 

Mortgage servicing rights capitalized

  112   1,030 

Amortization of mortgage servicing rights

  (486)  (509)

Ending balance

 $15,501  $14,809 

 

  

As of or For the

 
  

Six Months Ended

 
  

June 30,

 
  

2023

  

2022

 
  

(In Thousands)

 

Mortgage servicing rights:

        

Beginning balance

 $15,412  $13,749 

Mortgage servicing rights capitalized

  975   2,178 

Amortization of mortgage servicing rights

  (886)  (1,118)

Ending balance

 $15,501  $14,809 

Valuation allowance:

        

Beginning balance

  -   (56)

Recovery of mortgage servicing rights

  -   56 

Ending balance

  -   - 

Mortgage servicing rights, net

 $15,501  $14,809 

 

Recovery of servicing rights is included in other noninterest expense on the condensed consolidated statements of income.

  

The fair values of these rights were $20,199,000 and $19,288,000 at  June 30, 2023 and December 31, 2022, respectively. The fair value of servicing rights was determined at loan level, depending on the interest rate and term of the specific loan, using the following valuation assumptions:

 

  

June 30,

  

December 31,

 
  

2023

  

2022

 

Key assumptions:

      

Discount rate

 12%  12% 

Prepayment speed range

 101-599%

 

 116-210% 

Weighted average prepayment speed

 114%  131% 

 

 

NOTE 6. DEPOSITS

 

Deposits are summarized as follows:

 

  

June 30,

  

December 31,

 
  

2023

  

2022

 
  

(In Thousands)

 

Noninterest checking

 $432,463  $468,955 

Interest-bearing checking

  224,690   252,922 

Savings

  245,316   273,790 

Money market

  320,361   387,947 

Time certificates of deposit

  355,537   251,658 

Total

 $1,578,367  $1,635,272 

 

 

 

- 21 -

EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

NOTE 7. OTHER LONG-TERM DEBT

 

Other long-term debt consisted of the following:

 

 

June 30, 2023

 

December 31, 2022

 
   

Unamortized

   

Unamortized

 
   

Debt

   

Debt

 
 

Principal

Issuance

 

Principal

Issuance

 
 

Amount

Costs

 

Amount

Costs

 
 

(In Thousands)

 

Subordinated debentures fixed at 5.50% to floating, due 2030

$15,000$(235)$15,000$(249)

Subordinated debentures fixed at 3.50% to floating, due 2032

 40,000 (995) 40,000 (1,062)

Subordinated debentures variable at 3-Month Libor plus 1.42%, due 2035

 5,155 -  5,155 - 

Total other long-term debt

$60,155$(1,230)$60,155$(1,311)

 

In January 2022, the Company completed the issuance of $40,000,000 in aggregate principal amount of subordinated notes due in 2032 in a private placement transaction to certain institutional accredited investors and qualified buyers. The notes bear interest at an annual fixed rate of 3.50% payable semi-annually. Starting February 1, 2027, interest will accrue at a floating rate per annum equal to a benchmark rate, which is expected to be three-month term Secured Overnight Financing Rate ("SOFR") plus a spread of 218.0 basis points, payable quarterly. The notes are subject to redemption at the option of the Company on or after February 1, 2027. The subordinated debentures qualify as Tier 2 capital for regulatory capital purposes. 

 

In June 2020, the Company completed the issuance of $15,000,000 in aggregate principal amount of subordinated notes due in 2030 in a private placement transaction to certain qualified institutional accredited investors. The notes bear interest at an annual fixed rate of 5.50% payable semi-annually. Starting July 1, 2025, interest will accrue at a floating rate per annum equal to a benchmark rate, which is expected to be three-month term SOFR plus a spread of 509.0 basis points, payable quarterly. The notes are subject to redemption at the option of the Company on or after July 1, 2025. The subordinated debentures qualify as Tier 2 capital for regulatory capital purposes. 

 

In February 2017, the Company completed the issuance, through a private placement, of $10,000,000 aggregate principal amount of 5.75% fixed senior unsecured notes due in 2022. The interest was paid semi-annually through maturity date. The notes were not subject to redemption at the option of the Company. The notes were redeemed on February 15, 2022.

 

In September 2005, the Company completed the private placement of $5,155,000 in subordinated debentures to the Trust. The Trust funded the purchase of the subordinated debentures through the sale of trust preferred securities to First Tennessee Bank, N.A. with a liquidation value of $5,155,000. Using interest payments made by the Company on the debentures, the Trust began paying quarterly dividends to preferred security holders in December 2005. The annual percentage rate of the interest payable on the subordinated debentures and distributions payable on the preferred securities was fixed at 6.02% until December 2010 then became variable at three-month LIBOR plus 1.42%, making the rate 6.97% and 6.20% as of June 30, 2023 and December 31, 2022, respectively. In December of 2022, Governors of the Federal Reserve System adopted final rule 12 C.F.R. Part 253, Regulation Implementing the Adjustable Interest Rate (LIBOR) Act. Rule 253 identified SOFR-benchmark rates to replace LIBOR in certain financial contracts after June 30, 2023. As a result the variable rate for interest payable will be converting soon to three-month CME Term SOFR plus 0.26%. Dividends on the preferred securities are cumulative and the Trust may defer the payments for up to five years. The preferred securities mature in December 2035 unless the Company elects and obtains regulatory approval to accelerate the maturity date. The subordinated debentures qualify as Tier 1 capital for regulatory purposes.

 

- 22 -

 
 

NOTE 8. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

 

The following table includes information regarding the activity in accumulated other comprehensive income (loss).

 

   

Unrealized

 
   

(Losses) Gains

 
   

on Securities

 
   

Available-for-Sale

 
   

(In Thousands)

 

Balance, March 31, 2023

  $ (22,525 )

Other comprehensive loss, before reclassifications and income taxes

    (1,624 )

Amounts reclassified from accumulated other comprehensive loss, before income taxes

    (2 )

Income tax benefit

    428  

Total other comprehensive loss

    (1,198 )

Balance, June 30, 2023

  $ (23,723 )
         

Balance, March 31, 2022

  $ (9,080 )

Other comprehensive loss, before reclassifications and income taxes

    (13,581 )

Amounts reclassified from accumulated other comprehensive loss, before income taxes

    6  

Income tax benefit

    3,574  

Total other comprehensive loss

    (10,001 )

Balance, June 30, 2022

  $ (19,081 )
         

Balance, December 31, 2022

  $ (26,357 )

Other comprehensive income, before reclassifications and income taxes

    3,353  

Amounts reclassified from accumulated other comprehensive loss, before income taxes

    222  

Income tax provision

    (941 )

Total other comprehensive income

    2,634  

Balance, June 30, 2023

  $ (23,723 )
         

Balance, December 31, 2021

  $ 3,493  

Other comprehensive loss, before reclassifications and income taxes

    (30,648 )

Amounts reclassified from accumulated other comprehensive income, before income taxes

    6  

Income tax benefit

    8,068  

Total other comprehensive loss

    (22,574 )

Balance, June 30, 2022

  $ (19,081 )

 

 

 

- 23 -

 

 

NOTE 9. EARNINGS PER COMMON SHARE 

 

The computations of basic and diluted earnings per common share are as follows:

 

   

Three Months Ended

   

Six Months Ended

 
   

June 30,

   

June 30,

 
   

2023

   

2022

   

2023

   

2022

 
   

(Dollars in Thousands, Except Per Share Data)

 

Basic weighted average shares outstanding

    7,789,559       7,410,796       7,789,872       6,960,963  

Dilutive effect of stock compensation

    3,851       11,226       3,065       12,270  

Diluted weighted average shares outstanding

    7,793,410       7,422,022       7,792,937       6,973,233  
                                 

Net income available to common shareholders

  $ 2,015     $ 1,771     $ 5,257     $ 3,987  
                                 

Basic earnings common per share

  $ 0.26     $ 0.24     $ 0.67     $ 0.57  
                                 

Diluted earnings per common share

  $ 0.26     $ 0.24     $ 0.67     $ 0.57  
                                 

Restricted stock units excluded from the diluted average outstanding share calculation because their effect would be anti-dilutive

    24,545       -       18,046       -  
                                 

 

 

 

NOTE 10. DERIVATIVES AND HEDGING ACTIVITIES 

 

The Company enters into commitments to originate and sell mortgage loans. The Bank uses derivatives to hedge the risk of changes in fair values of interest rate lock commitments and mortgage loans held-for-sale. An optimal amount of mortgage loans are sold directly into bulk commitments with investors at the time an interest rate is locked, other loans are sold on an individual best efforts basis at the time an interest rate is locked, and the remaining balance of locked loans are hedged using To-Be-Announced (“TBA”) mortgage-backed securities or bulk mandatory forward loan sale commitments.

 

Derivatives are accounted for as free-standing or economic derivatives and are measured at fair value. Derivatives are recorded as either other assets or other liabilities on the condensed consolidated statements of condition.

 

Derivatives are summarized as follows:

 

  

June 30, 2023

  

December 31, 2022

 
  

Notional

  

Fair Value

  

Notional

  

Fair Value

 
  

Amount

  

Asset

  

Liability

  

Amount

  

Asset

  

Liability

 
  

(In Thousands)

 

Interest rate lock commitments

 $35,690  $-  $57  $18,603  $-  $81 

Forward TBA mortgage-backed securities

  21,000   81   -   13,000   11   - 

 

Changes in the fair value of the derivatives are recorded in mortgage banking, net within noninterest income on the condensed consolidated statements of income. Net gains of $211,000 were recorded for the three months ended June 30, 2023 compared to net losses of $551,000 for the three months ended June 30, 2022. Net gains of $94,000 were recorded for the six months ended  June 30, 2023 compared to net losses of $491,000 for the six months ended June 30, 2022. 

 

NOTE 11. FAIR VALUE OF FINANCIAL INSTRUMENTS

 

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. 

 

Assets and liabilities that are measured at fair value are grouped in three levels within the fair value hierarchy based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.

 

The fair value hierarchy is as follows:

 

Level 1 Inputs – Valuations are based on unadjusted quoted prices in active markets for identical assets or liabilities.

 

Level 2 Inputs – Valuations are based on quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuations for which all significant assumptions are observable or can be corroborated by observable market data.

 

Level 3 Inputs – Valuations are based on unobservable inputs that may include significant management judgment and estimation.

 

A description of the valuation methodologies used for assets and liabilities measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy at the reporting date, is set forth below.

 

- 24 -

EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

NOTE 11. FAIR VALUE OF FINANCIAL INSTRUMENTS – continued

 

Available-for-Sale Securities – Securities classified as available-for-sale are reported at fair value utilizing Level 1 (nationally recognized securities exchanges) and Level 2 inputs. For level 2 securities, the Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include but is not limited to dealer quotes, market spreads, cash flows, the U. S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayments speeds, credit information and the bond’s terms and conditions.

 

Loans Held-for-Sale – These loans are reported at fair value. Fair value is determined based on expected proceeds based on committed sales contracts and commitments of similar loans if not already committed and are considered Level 2 inputs.

 

Derivative Instruments – The fair value of the interest rate lock commitments, forward TBA mortgage-backed securities and mandatory forward commitments are estimated using quoted or published market prices for similar instruments and adjusted for factors such as pull-through rate assumptions based on historical information, where appropriate. Interest rate lock commitments are considered Level 3 inputs and forward TBA mortgage-backed securities and mandatory forward commitments are considered Level 2 inputs.

 

Collateral-Dependent Loans – Individually reviewed collateral-dependent loans are reported at the fair value of the underlying collateral less costs to sell. Collateral-dependent loans are considered Level 3 inputs. Collateral values are estimated using Level 3 inputs based on internally customized discounting criteria.

 

Real Estate and Other Repossessed Assets – Fair values are determined at the time the loan is foreclosed upon and the asset is transferred from loans. The value is based primarily on third party appraisals, less costs to sell and are considered Level 3 inputs for determining fair value. Repossessed assets are reviewed and evaluated periodically for additional impairment and adjusted accordingly.

 

Mortgage Servicing Rights – The fair value of mortgage servicing rights are estimated using net present value of expected cash flows based on a third party model that incorporates industry assumptions and is adjusted for factors such as prepayment speeds and are considered Level 3 inputs.

 

The following tables summarize financial assets and financial liabilities measured at fair value on a recurring basis, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value.

 

  

June 30, 2023

 
  

Level 1

  

Level 2

  

Level 3

  

Total Fair

 
  

Inputs

  

Inputs

  

Inputs

  

Value

 
  

(In Thousands)

 

Financial assets:

                

Available-for-sale securities

                

U.S. government and agency obligations

 $-  $7,374  $-  $7,374 

U.S. Treasury obligations

  46,058   -   -   46,058 

Municipal obligations

  -   139,192   -   139,192 

Corporate obligations

  -   3,831   -   3,831 

Mortgage-backed securities

  -   28,787   -   28,787 

Collateralized mortgage obligations

  -   88,112   -   88,112 

Asset-backed securities

  -   12,610   -   12,610 

Loans held-for-sale

  -   22,381   -   22,381 

Forward TBA mortgage-backed securities

  -   81   -   81 

Financial liabilities:

                

Interest rate lock commitments

  -   -   57   57 

 

  

December 31, 2022

 
  

Level 1

  

Level 2

  

Level 3

  

Total Fair

 
  

Inputs

  

Inputs

  

Inputs

  

Value

 
  

(In Thousands)

 

Financial assets:

                

Available-for-sale securities

                

U.S. government and agency obligations

 $-  $2,390  $-  $2,390 

U.S. Treasury obligations

  51,951   -   -   51,951 

Municipal obligations

  -   172,849   -   172,849 

Corporate obligations

  -   6,990   -   6,990 

Mortgage-backed securities

  -   29,653   -   29,653 

Collateralized mortgage obligations

  -   82,131   -   82,131 

Asset-backed securities

  -   3,531   -   3,531 

Loans held-for-sale

  -   8,250   -   8,250 

Forward TBA mortgage-backed securities

  -   11   -   11 

Financial liabilities:

                

Interest rate lock commitments

  -   -   81   81 

 

- 25 -

EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 

NOTE 11. FAIR VALUE OF FINANCIAL INSTRUMENTS – continued

 

Certain financial assets may be measured at fair value on a nonrecurring basis. These assets are subject to fair value adjustments that result from the application of lower of cost or fair value accounting or write-downs of individual assets, such as impaired loans that are collateral-dependent, real estate and other repossessed assets and mortgage servicing rights.

 

The following table summarizes financial assets measured at fair value on a nonrecurring basis for which a nonrecurring change in fair value has been recorded during the reporting periods presented:  

 

  

June 30, 2023

 
  

Level 1

  

Level 2

  

Level 3

  

Total Fair

 
  

Inputs

  

Inputs

  

Inputs

  

Value

 
  

(In Thousands)

 

Collateral-dependent loans individually evaluated, net of ACL(1)

 $-  $-  $2,677  $2,677 

Mortgage servicing rights

  -   -   -   - 

 

  

December 31, 2022

 
  

Level 1

  

Level 2

  

Level 3

  

Total Fair

 
  

Inputs

  

Inputs

  

Inputs

  

Value

 
  

(In Thousands)

 

Impaired loans(1)

 $-  $-  $281  $281 

Mortgage servicing rights

  -   -   1,346  $1,346 

 

(1The Company adopted ASC 326 as of January 1, 2023, under which the concept of impaired loans went away. The comparable period presents impaired loans under previously applicable GAAP.

 

The following table represents the Banks’s Level 3 financial assets and liabilities, the valuation techniques used to measure the fair value of those financial assets and liabilities, and the significant unobservable inputs and the ranges of values for those inputs.

 

  

Principal

 

Significant

 

Range of

 
  

Valuation

 

Unobservable

 

Significant Input

 

Instrument

 

Technique

 

Inputs

 

Values

 
        

Collerateral-dependent loans individually evaluated

 

Fair value of underlying collateral

 

Discount applied to the obtained appraisal

 

10-30%

 

Real estate and other repossessed assets

 

Fair value of collateral

 

Discount applied to the obtained appraisal

 

10-30%

 

Interest rate lock commitments

 

Internal pricing model

 

Pull-through expectations

 

80-90%

 

 

The following tables provide a reconciliation of assets and liabilities measured at fair value using significant unobservable inputs (Level 3) on a recurring basis during the three months and six months ended June 30, 2023.

 

  

Three Months Ended

  

Six Months Ended

 
  

June 30,

  

June 30,

 
  

2023

  

2022

  

2023

  

2022

 
  

Interest Rate Lock Commitments

  

Interest Rate Lock Commitments

 
  

(In Thousands)

  

(In Thousands)

 

Beginning balance

 $130  $91  $(81) $1,218 

Purchases and issuances

  (186)  448   (150)  735 

Sales and settlements

  (1)  (205)  174   (1,619)

Ending balance

 $(57) $334  $(57) $334 

Unrealized (losses) gains related to items held at end of period

 $(187) $243  $24  $(884)

 

- 26 -

EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 

NOTE 11. FAIR VALUE OF FINANCIAL INSTRUMENTS – continued  

 

The tables below summarize the estimated fair values of financial instruments of the Company, whether or not recognized at fair value on the condensed consolidated statements of condition. The tables are followed by methods and assumptions that were used by the Company in estimating the fair value of the classes of financial instruments.

 

  

June 30, 2023

 
              

Total

     
  

Level 1

  

Level 2

  

Level 3

  

Estimated

  

Carrying

 
  

Inputs

  

Inputs

  

Inputs

  

Fair Value

  

Amount

 
  

(In Thousands)

 

Financial assets:

                    

Cash and cash equivalents

 $22,994  $-  $-  $22,994  $22,994 

FHLB stock

  -   10,099   -   10,099   10,099 

FRB stock

  -   4,131   -   4,131   4,131 

Loans receivable, gross

  -   -   1,362,776   1,362,776   1,421,483 

Accrued interest and dividends receivable

  11,194   -   -   11,194   11,194 

Mortgage servicing rights

  -   -   20,199   20,199   15,501 

Financial liabilities:

                    

Non-maturing interest-bearing deposits

  -   790,367   -   790,367   790,367 

Noninterest-bearing deposits

  432,463   -   -   432,463   432,463 

Time certificates of deposit

  -   -   351,199   351,199   355,537 

Accrued expenses and other liabilities

  31,945   -   -   31,945   31,945 

FHLB advances and other borrowings

  -   -   191,107   191,107   191,260 

Other long-term debt

  -   -   56,864   56,864   60,155 

 

  

December 31, 2022

 
              

Total

     
  

Level 1

  

Level 2

  

Level 3

  

Estimated

  

Carrying

 
  

Inputs

  

Inputs

  

Inputs

  

Fair Value

  

Amount

 
  

(In Thousands)

 

Financial assets:

                    

Cash and cash equivalents

 $21,811  $-  $-  $21,811  $21,811 

FHLB stock

  -   5,089   -   5,089   5,089 

FRB stock

  -   4,131   -   4,131   4,131 

Loans receivable, gross

  -   -   1,322,814   1,322,814   1,353,678 

Accrued interest and dividends receivable

  11,284   -   -   11,284   11,284 

Mortgage servicing rights

  -   -   19,288   19,288   15,412 

Financial liabilities:

                    

Non-maturing interest-bearing deposits

  -   914,659   -   914,659   914,659 

Noninterest-bearing deposits

  468,955   -   -   468,955   468,955 

Time certificates of deposit

  -   -   246,348   246,348   251,658 

Accrued expenses and other liabilities

  26,377   -   -   26,377   26,377 

FHLB advances and other borrowings

  -   -   69,373   69,373   69,394 

Other long-term debt

  -   -   56,721   56,721   60,155 

 

 
- 27 -

EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Introduction 

 

This discussion and analysis provides information that management believes is necessary to understand Eagle's financial condition, changes in financial condition, results of operations, and cash flows for the three and six months ended June 30, 2023, as compared to 2022. The following should be read in conjunction with the Company's Consolidated Financial Statements, and accompanying Notes thereto, for the year ended December 31, 2022, included in Eagle's Annual Report on Form 10-K filed with the United States Securities and Exchange Commission (SEC) on March 8, 2023, and in conjunction with the Condensed Consolidated Financial Statements, and accompanying Notes thereto, included in Part I - Item 1. Financial Statements. The results of operations for the three and six months ended June 30, 2023, are not necessarily indicative of the future results that may be attained for the entire year or other interim periods. 

 

Executive Summary

 

The Company’s primary business activity is the ownership of its wholly owned subsidiary, Opportunity Bank of Montana (the “Bank”). The Bank is a Montana chartered commercial bank that focuses on both consumer and commercial lending. It engages in typical banking activities: acquiring deposits from local markets and originating loans and investing in securities. Our earnings depend primarily on our level of net interest income, which is the difference between interest earned on our interest-earning assets, consisting primarily of loans and investment securities, and the interest paid on interest-bearing liabilities, consisting primarily of deposits, borrowed funds, and trust-preferred securities. Net interest income is a function of our interest rate spread, which is the difference between the average yield earned on our interest-earning assets and the average rate paid on our interest-bearing liabilities, as well as a function of the average balance of interest-earning assets compared to interest-bearing liabilities. Also contributing to our earnings is noninterest income, which consists primarily of service charges and fees on loan and deposit products and services, net gains and losses on sale of assets, and mortgage loan service fees. Net interest income and noninterest income are offset by provisions for loan losses, general administrative and other expenses, including salaries and employee benefits and occupancy and equipment costs, as well as by state and federal income tax expense.  

 

The Bank has a strong mortgage lending focus, with a large portion of its loan originations represented by single-family residential mortgages, which has enabled it to successfully market home equity loans, as well as a wide range of shorter term consumer loans for various personal needs (automobiles, recreational vehicles, etc.). The Bank has also focused on adding commercial loans to its portfolio, both real estate and non-real estate. We have made significant progress in this initiative. The purpose of this diversification is to mitigate the Bank’s dependence on the residential mortgage market, as well as to improve our ability to manage our interest rate spread. Recent acquisitions have added to our agricultural loans, which generally have shorter maturities and nominally higher interest rates. This has provided additional interest income and improved interest rate sensitivity. The Bank’s management recognizes that fee income will also enable it to be less dependent on specialized lending and it now maintains a significant loan serviced portfolio which provides a steady source of fee income. Fee income is also supplemented with fees generated from deposit accounts. The Bank has a high percentage of non-maturity deposits, such as checking accounts and savings accounts, which allows management flexibility in managing its spread. Non-maturity deposits and certificates of deposits do not automatically reprice as interest rates rise. Gain on sale of loans also provides significant noninterest income in periods of high mortgage loan origination volumes. Such income will be, and has recently been, adversely affected in periods of lower mortgage activity.

 

Management continues to focus on improving the Bank’s earnings. Management believes the Bank needs to continue to concentrate on increasing net interest margin, other areas of fee income and control of operating expenses to achieve earnings growth going forward. Management’s strategy of growing the loan portfolio and deposit base is expected to help achieve these goals as follows: loans typically earn higher rates of return than investments; a larger deposit base should yield higher fee income; increasing the asset base will reduce the relative impact of fixed operating costs. The biggest challenge to the strategy is funding the growth of the statement of financial condition in an efficient manner. It may become more difficult to maintain deposit growth due to significant competition, the current conditions in the banking industry and possible reduced customer demand for deposits as customers may shift into other asset classes.

 

The level and movement of interest rates impacts the Bank’s earnings as well. The Federal Open Market Committee increased the federal funds target rate to 4.50% during the year ended December 31, 2022. The rate increased to 5.25% during the six months ended June 30, 2023

 

Recent Events

 

Acquisitions

 

On September 30, 2021, the Company entered into an Agreement and Plan of Merger with First Community Bancorp, Inc. ("FCB"), a Montana corporation, and FCB's wholly-owned subsidiary, First Community Bank, a Montana chartered commercial bank. The Merger Agreement provided that, upon the terms and subject to the conditions set forth in the Merger Agreement, FCB would merge with and into Eagle, with Eagle continuing as the surviving corporation. The transaction closed on April 30, 2022. In the transaction, Eagle acquired nine retail bank branches and two loan production offices in Montana. The total consideration paid was $38.58 million and included cash consideration of $10.23 million and common stock issued of $28.35 million.

 

- 28 -

EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

 

 

Financial Condition

 

Comparisons of financial condition in this section are between June 30, 2023 and December 31, 2022.

 

Total assets were $2.02 billion at June 30, 2023, an increase of $74.90 million, or 3.8% from $1.95 billion at December 31, 2022Loans receivable, net increased by $66.24 million from December 31, 2022. Securities available-for-sale decreased $23.54 million or 6.7% from December 31, 2022. Total liabilities were $1.86 billion at June 30, 2023, an increase of $70.58 million, or 3.9%, from $1.79 billion at December 31, 2022. Total borrowings increased $121.95 million from December 31, 2022 and total deposits decreased $56.90 million from December 31, 2022. Total shareholders’ equity increased $4.31 million or 2.7% from December 31, 2022.

 

Financial Condition Details

 

Investment Activities

 

The following table summarizes investment activities:

 

   

June 30,

   

December 31,

 
   

2023

   

2022

 
   

Fair Value

   

Percentage of Total

   

Fair Value

   

Percentage of Total

 
   

(Dollars in Thousands)

 

Securities available-for-sale:

                               

U.S. government and agency obligations

  $ 7,374       2.26 %   $ 2,390       0.68 %

U.S. Treasury obligations

    46,058       14.13       51,951       14.86  

Municipal obligations

    139,192       42.70       172,849       49.47  

Corporate obligations

    3,831       1.18       6,990       2.00  

Mortgage-backed securities

    28,787       8.83       29,653       8.48  

Collateralized mortgage obligations

    88,112       27.03       82,131       23.50  

Asset-backed securities

    12,610       3.87       3,531       1.01  

Total securities available-for-sale

  $ 325,964       100.00 %   $ 349,495       100.00 %

 

Securities available-for-sale were $325.96 million at June 30, 2023, a decrease of $23.54 million from $349.50 million at December 31, 2022. The decrease was due to sales of $34.02 million and maturity, principal payments and call activity of $20.27 million. These decreases were largely offset by $28.13 million in investment purchases. In addition, the unrealized losses on securities improved from year end, decreasing by $3.57 million. 

 

- 29 -

EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 

Financial Condition – continued

 

Lending Activities 

 

The following table includes the composition of the Bank’s loan portfolio by loan category: 

 

   

June 30,

   

December 31,

 
   

2023

   

2022

 
   

Amount

   

Percent of Total

   

Amount

   

Percent of Total

 
   

(Dollars in thousands)

 

Real estate loans:

                               

Residential 1-4 family (1)

  $ 133,437       9.39 %   $ 135,947       10.03 %

Residential 1-4 family construction

    49,516       3.48       59,756       4.41  

Total residential 1-4 family

    182,953       12.87       195,703       14.44  
                                 

Commercial real estate

    577,736       40.64       539,070       39.76  

Commercial construction and development

    158,519       11.15       151,145       11.15  

Farmland

    139,290       9.80       136,334       10.06  

Total commercial real estate

    875,545       61.59       826,549       60.97  
                                 

Total real estate loans

    1,058,498       74.46       1,022,252       75.41  
                                 

Other loans:

                               

Home equity

    80,333       5.65       74,271       5.48  

Consumer

    30,065       2.12       27,609       2.04  
                                 

Commercial

    129,084       9.08       127,255       9.39  

Agricultural

    123,503       8.69       104,036       7.68  

Total commercial loans

    252,587       17.77       231,291       17.07  
                                 

Total other loans

    362,985       25.54       333,171       24.59  
                                 

Total loans

    1,421,483       100.00 %     1,355,423       100.00 %
                                 

Deferred loan fees(2)

    -               (1,745 )        

Allowance for credit losses (3)

    (15,560 )             (14,000 )        

Total loans, net

  $ 1,405,923             $ 1,339,678          

 

 

(1) 

Excludes loans held-for-sale.

  (2) Deferred loan fees, net included in individual loan categories above for the quarter ended June 30, 2023.
  (3) Allowance for credit losses for the quarter ended June 30, 2023; allowance for loan losses for prior periods. 

 

Loans receivable, net increased $66.24 million, or 4.9%, to $1.41 billion at June 30, 2023 from $1.34 billion at December 31, 2022. Total commercial real estate loans increased $49.00 million, total commercial loans increased $21.30 million, total home equity loans increased $6.06 million, consumer loans increased $2.46 million and total residential loans decreased $12.75 million.

 

Total loan originations were $339.17 million for the six months ended June 30, 2023. Total residential 1-4 family originations were $177.89 million, which includes $161.38 million of loans held-for-sale originations. Total commercial originations were $82.21 million. Total commercial real estate originations were $59.90 million. Home equity loan originations totaled $9.80 million. Consumer loan originations totaled $9.37 million.  Loans held-for-sale increased by $14.13 million to $22.38 million at June 30, 2023 from $8.25 million at December 31, 2022.

 

- 30 -

EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Financial Condition – continued

 

Lending Activities– continued

 

Generally, our collection procedures provide that when a loan is 15 or more days delinquent, the borrower is sent a past due notice. If the loan becomes 30 days delinquent, the borrower is sent a written delinquency notice requiring payment. If the delinquency continues, subsequent efforts are made to contact the delinquent borrower, including face to face meetings and counseling to resolve the delinquency. All collection actions are undertaken with the objective of compliance with the Fair Debt Collection Act.

 

For mortgage loans and home equity loans, if the borrower is unable to cure the delinquency or reach a payment agreement, we will institute foreclosure actions. If a foreclosure action is taken and the loan is not reinstated, paid in full or refinanced, the property is sold at judicial sale at which we may be the buyer if there are no adequate offers to satisfy the debt. Any property acquired as the result of foreclosure, or by deed in lieu of foreclosure, is classified as real estate owned until such time as it is sold or otherwise disposed of. When real estate owned is acquired, it is recorded at its fair market value less estimated selling costs. The initial recording of any loss is charged to the allowance for credit losses. Subsequent write-downs are recorded as a charge to operations. As of June 30, 2023 and December 31, 2022 there was no real estate owned and other repossessed property. 

 

The following table sets forth information regarding nonperforming assets:

 

   

June 30,

   

December 31,

 
   

2023

   

2022

 
   

(Dollars in Thousands)

 

Nonaccrual loans

               

Real estate loans:

               

Residential 1-4 family

  $ 322     $ 483  

Commercial real estate

    668       350  

Farmland

    4,047       143  

Other loans:

               

Home equity

    178       96  

Consumer

    88       25  

Commercial

    213       44  

Agricultural

    4,045       1,059  

Accruing loans delinquent 90 days or more

               

Real estate loans:

               

Residential 1-4 family

    329       330  

Other loans:

               

Commercial

    40       746  

Restructured loans:

    -       4,502  

Total nonperforming loans

    9,930       7,778  

Real estate owned and other repossessed property, net

    -       -  

Total nonperforming assets

  $ 9,930     $ 7,778  
                 

Total nonperforming loans to total loans

    0.70 %     0.57 %

Total nonperforming loans to total assets

    0.49 %     0.40 %

Total nonaccrual loans to total loans

    0.67 %     0.24 %

Total nonperforming assets to total assets

    0.49 %     0.40 %

 

Nonaccrual loans as of June 30, 2023 and December 31, 2022 include $1,743,000 and $694,000, respectively of acquired loans that deteriorated subsequent to the acquisition date. 

 

Effective January 1, 2023, the Company adopted ASU No. 2022-02, Financial Instruments - Credit Losses (Topic 326) Troubled Debt Restructurings ("TDRs") and Vintage Disclosures. The update eliminated the recognition and measurement of TDRs, therefore, TDRs are not included in nonperforming assets as of June 30, 2023. 

 

 

- 31 -

EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 

Financial Condition – continued

 

Deposits and Other Sources of Funds

 

The following table includes deposit accounts by category:

 

   

June 30,

   

December 31,

 
   

2023

   

2022

 
           

Percent

           

Percent

 
   

Amount

   

of Total

   

Amount

   

of Total

 
   

(Dollars in Thousands)

 

Noninterest checking

  $ 432,463       27.39 %   $ 468,955       28.68 %

Interest-bearing checking

    224,690       14.24       252,922       15.47  

Savings

    245,316       15.54       273,790       16.74  

Money market

    320,361       20.30       387,947       23.72  

Total

    1,222,830       77.47       1,383,614       84.61  

Certificates of deposit accounts:

                               

IRA certificates

    24,150       1.53       24,907       1.52  

Brokered certificates

    15,119       0.96       -       0.00  

Other certificates

    316,268       20.04       226,751       13.87  

Total certificates of deposit

    355,537       22.53       251,658       15.39  

Total deposits

  $ 1,578,367       100.00 %   $ 1,635,272       100.00 %

 

Deposits decreased by $56.90 million, or 3.5%, to $1.58 billion at June 30, 2023 from $1.64 billion at December 31, 2022. Money market decreased by $67.59 million, noninterest checking decreased by $36.50 million, savings decreased by $28.47 million, and interest-bearing checking decreased by $28.23 million. As indicated in the table above, the decreases were largely offset by increases in certificates of deposits of $103.88 million and this increase was impacted by $15.12 million of fixed rate brokered certificates. 

 

The estimated amount of uninsured deposits was $289.14 million or 18% of total deposits at June 30, 2023.

 

The following table summarizes borrowing activity:

 

   

June 30,

   

December 31,

 
   

2023

   

2022

 
   

Net

   

Percent

   

Net

   

Percent

 
   

Amount

   

of Total

   

Amount

   

of Total

 
   

(Dollars in Thousands)

 

FHLB advances and other borrowings

  $ 191,260       76.45 %   $ 69,394       54.11 %

Other long-term debt:

                               

Subordinated debentures fixed at 5.50% to floating, due 2030

    14,765       5.90       14,751       11.50  

Subordinated debentures fixed at 3.50% to floating, due 2032

    39,005       15.59       38,938       30.37  

Subordinated debentures variable, due 2035

    5,155       2.06       5,155       4.02  

Total other long-term debt

    58,925       23.55       58,844       45.89  

Total borrowings

  $ 250,185       100.00 %   $ 128,238       100.00 %

 

Total borrowings increased by $121.95 million, or 95.1% to $250.19 million at June 30, 2023 from $128.24 million at December 31, 2022. This increase is largely due to an increase in FHLB advances and other borrowings related to funding loan growth. 

 

Shareholders’ Equity

 

Total shareholders’ equity increased by $4.31 million, or 2.7%, to $162.73 million at June 30, 2023 from $158.42 million at December 31, 2022. The increase was impacted by net income of $5.26 million and a decrease in unrealized losses on securities available-for-sale of $2.63 million. These increases were offset by a net of tax cumulative adjustment of $1.62 million related to the adoption of the Current Expected Credit Losses standard and dividends paid of $2.20 million. 

 

- 32 -

EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 

Analysis of Net Interest Income

 

The Bank’s earnings have historically depended primarily upon net interest income, which is the difference between interest income earned on loans and investments and interest paid on deposits and any borrowed funds. It is the single largest component of Eagle’s operating income. Net interest income is affected by (i) the difference between rates of interest earned on loans and investments and rates paid on interest-bearing deposits and borrowings (the “interest rate spread”) and (ii) the relative amounts of loans and investments and interest-bearing deposits and borrowings.

 

The following table includes average balances for financial condition items, as well as interest and dividends and average yields related to the average balances. All average balances are daily average balances. Nonaccrual loans were included in the computation of average balances, but have been reflected in the table as loans carrying a zero yield. The yields include the effect of deferred fees and discounts and premiums that are amortized or accreted to interest income or expense. 

 

   

For the Three Months Ended June 30,

 
   

2023

   

2022

 
   

Average

   

Interest

           

Average

   

Interest

         
   

Daily

   

and

   

Yield/

   

Daily

   

and

   

Yield/

 
   

Balance

   

Dividends

   

Cost(4)

   

Balance

   

Dividends

   

Cost(4)

 
   

(Dollars in Thousands)

 

Assets:

                                               

Interest-earning assets:

                                               

Investment securities

  $ 343,634     $ 2,949       3.44 %   $ 347,168     $ 2,011       2.32 %

FHLB and FRB stock

    13,181       161       4.90       6,010       38       2.54  

Loans receivable(1)

    1,407,316       19,137       5.45       1,157,839       14,895       5.16  

Other earning assets

    2,575       25       3.89       53,033       108       0.82  

Total interest-earning assets

    1,766,706       22,272       5.06       1,564,050       17,052       4.37  

Noninterest-earning assets

    232,251                       188,866                  

Total assets

  $ 1,998,957                     $ 1,752,916                  
                                                 

Liabilities and equity:

                                               

Interest-bearing liabilities:

                                               

Deposit accounts:

                                               

Checking

  $ 238,149     $ 264       0.44 %   $ 245,431     $ 25       0.04 %

Savings

    241,096       37       0.06       264,878       39       0.06  

Money market

    322,912       1,163       1.44       382,353       259       0.27  

Certificates of deposit

    338,764       2,691       3.19       165,355       99       0.24  

FHLB advances and other borrowings

    164,992       2,179       5.30       7,533       15       0.80  

Other long-term debt

    58,912       674       4.59       63,006       648       4.13  

Total interest-bearing liabilities

    1,364,825       7,008       2.06       1,128,556       1,085       0.39  

Noninterest checking

    439,422                       449,748                  

Other noninterest-bearing liabilities

    33,176                       24,193                  

Total liabilities

    1,837,423                       1,602,497                  
                                                 

Total equity

    161,534                       150,419                  
                                                 

Total liabilities and equity

  $ 1,998,957                     $ 1,752,916                  

Net interest income/interest rate spread(2)

          $ 15,264       3.00 %           $ 15,967       3.98 %
                                                 

Net interest margin(3)

                    3.47 %                     4.09 %

Total interest-earning assets to interest-bearing liabilities

                    129.45 %                     138.59 %

 

(1) Includes loans held-for-sale.

(2) Interest rate spread represents the difference between the average yield on interest-earning assets and the average rate on interest-bearing liabilities.

(3) Net interest margin represents income before the provision for loan losses divided by average interest-earning assets.

(4) For purposes of this table, tax exempt income is not calculated on a tax equivalent basis.

 

 

- 33 -

EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

 

   

For the Six Months Ended June 30,

 
   

2023

   

2022

 
   

Average

   

Interest

           

Average

   

Interest

         
   

Daily

   

and

   

Yield/

   

Daily

   

and

   

Yield/

 
   

Balance

   

Dividends

   

Cost(4)

   

Balance

   

Dividends

   

Cost(4)

 
   

(Dollars in Thousands)

 

Assets:

                                               

Interest-earning assets:

                                               

Investment securities

  $ 344,330     $ 5,792       3.39 %   $ 310,273     $ 3,308       2.15 %

FHLB and FRB stock

    11,750       268       4.60 %     5,279       97       3.71  

Loans receivable(1)

    1,387,153       36,874       5.36 %     1,066,515       26,268       4.97  

Other earning assets

    2,637       46       3.52 %     60,636       147       0.49  

Total interest-earning assets

    1,745,870       42,980       4.96 %     1,442,703       29,820       4.17  

Noninterest-earning assets

    227,297                       172,043                  

Total assets

  $ 1,973,167                     $ 1,614,746                  
                                                 

Liabilities and equity:

                                               

Interest-bearing liabilities:

                                               

Deposit accounts:

                                               

Checking

  $ 245,368     $ 450       0.37 %   $ 226,440     $ 38       0.03 %

Savings

    250,280       72       0.06 %     243,324       69       0.06  

Money market

    338,239       2,109       1.26 %     338,459       452       0.27  

Certificates of deposit

    311,251       3,984       2.58 %     155,836       175       0.23  

FHLB advances and other borrowings

    130,948       3,321       5.11       4,422       21       0.96  

Other long-term debt

    58,893       1,352       4.63       62,679       1,253       4.03  

Total interest-bearing liabilities

    1,334,979       11,288       1.71 %     1,031,160       2,008       0.39  

Noninterest checking

    447,741                       409,211                  

Other noninterest-bearing liabilities

    28,537                       22,534                  

Total liabilities

    1,811,257                       1,462,905                  
                                                 

Total equity

    161,910                       151,841                  
                                                 

Total liabilities and equity

  $ 1,973,167                     $ 1,614,746                  

Net interest income/interest rate spread(2)

          $ 31,692       3.25 %           $ 27,812       3.78 %
                                                 

Net interest margin(3)

                    3.66 %                     3.89 %

Total interest-earning assets to interest-bearing liabilities

                    130.78 %                     139.91 %

 

(1) Includes loans held-for-sale.

(2) Interest rate spread represents the difference between the average yield on interest-earning assets and the average rate on interest-bearing liabilities.

(3) Net interest margin represents income before the provision for loan losses divided by average interest-earning assets.

(4) For purposes of this table, tax exempt income is not calculated on a tax equivalent basis.

 

- 34 -

EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Rate/Volume Analysis

 

The following tables present the dollar amount of changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to: (1) changes in volume multiplied by the old rate; (2) changes in rate, which are changes in rate multiplied by the old volume; and (3) changes not solely attributable to rate or volume, which have been allocated proportionately to the change due to volume and the change due to rate.

 

   

For the Three Months Ended June 30,

 
   

2023

   

2022

 
           

Due to

                   

Due to

         
   

Volume

   

Rate

   

Net

   

Volume

   

Rate

   

Net

 
   

(In Thousands)

 

Interest-earning assets:

                                               

Investment securities

  $ (20 )   $ 958     $ 938     $ 716     $ 277     $ 993  

FHLB and FRB stock

    45       78       123       15       (40 )     (25 )

Loans receivable(1)

    3,209       1,033       4,242       3,160       723       3,883  

Other earning assets

    (103 )     20       (83 )     (12 )     88       76  

Total interest-earning assets

    3,131       2,089       5,220       3,879       1,048       4,927  
                                                 

Interest-bearing liabilities:

                                               

Checking

    (1 )     240       239       4       9       13  

Savings

    (4 )     2       (2 )     10       -       10  

Money Market

    (40 )     944       904       80       54       134  

Certificates of deposit

    104       2,488       2,592       5       (106 )     (101 )

FHLB advances and other borrowings

    314       1,850       2,164       (11 )     (19 )     (30 )

Other long-term debt

    (42 )     68       26       433       (174 )     259  

Total interest-bearing liabilities

    331       5,592       5,923       521       (236 )     285  
                                                 

Change in net interest income

  $ 2,800     $ (3,503 )   $ (703 )   $ 3,358     $ 1,284     $ 4,642  

 

   

For the Six Months Ended June 30,

 
   

2023

   

2022

 
           

Due to

                   

Due to

         
   

Volume

   

Rate

   

Net

   

Volume

   

Rate

   

Net

 
   

(In Thousands)

 

Interest earning assets:

                                               

Investment securities

  $ 363     $ 2,121     $ 2,484     $ 1,307     $ 106     $ 1,413  

FHLB and FRB stock

    119       52       171       10       (45 )     (35 )

Loans receivable(1)

    7,897       2,709       10,606       4,228       (1 )     4,227  

Other earning assets

    (141 )     40       (101 )     (15 )     104       89  

Total interest earning assets

    8,238       4,922       13,160       5,530       164       5,694  
                                                 

Interest bearing liabilities:

                                               

Checking

    3       409       412       6       10       16  

Savings

    2       1       3       16       (3 )     13  

Money Market

    -       1,657       1,657       120       97       217  

Certificates of deposit

    175       3,634       3,809       (25 )     (255 )     (280 )

FHLB advances and other borrowings

    601       2,699       3,300       (74 )     (20 )     (94 )

Other long-term debt

    (76 )     175       99       859       (385 )     474  

Total interest bearing liabilities

    705       8,575       9,280       902       (556 )     346  
                                                 

Change in net interest income

  $ 7,533     $ (3,653 )   $ 3,880     $ 4,628     $ 720     $ 5,348  

 

(1) Includes loans held-for-sale.

 

- 35 -

EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

 

Results of Operations for the Three Months Ended June 30, 2023 and 2022

 

Net Income. Eagle’s net income for the three months ended June 30, 2023 was $2.02 million compared to $1.77 million for the three months ended June 30, 2022. The increase of $244,000 was primarily due to a decrease in noninterest expense of $1.26 million and provision for income taxes of $290,000. The decrease in expenses was largely offset by a decrease in noninterest income of $1.14 million and a decrease in net interest income after provision for credit losses of $164,000. Basic and diluted earnings per common share were both $0.26 for the current period. Basic and diluted earnings per common share were both $0.24 for the prior year comparable period.

 

Net Interest Income. Net interest income decreased to $15.26 million for the three months ended June 30, 2023, from $15.97 million for the same quarter in the prior year. The decrease of $703,000, or 4.4%, was the result of an increase in interest expense of $5.92 million partially offset by an increase in interest and dividend income of $5.22 million.

 

Interest and Dividend Income. Interest and dividend income was $22.27 million for the three months ended June 30, 2023 compared to $17.05 million for the three months ended June 30, 2022. Interest and fees on loans increased to $19.14 million for the three months ended June 30, 2023 from $14.90 million for the three months ended June 30, 2022. This increase of $4.24 million, or 28.5%, was due to an increase in the average balance of loans, as well as an increase in the average yield on loans. Average balances for loans receivable, including loans held-for-sale, for the three months ended June 30, 2023 were $1.41 billion, compared to $1.16 billion for the prior year period. This represents an increase of $249.48 million, or 21.5% and was impacted by organic growth. The average interest rate earned on loans receivable also increased by 29 basis points, from 5.16% for the three months ended June 30, 2022 to 5.45% for the current period. Interest accretion on purchased loans was $309,000 for the three months ended June 30, 2023 which resulted in a 7 basis point increase in net interest margin compared to $790,000 for the three months ended June 30, 2022 which resulted in a 20 basis point increase in net interest margin. Interest on investment securities available-for-sale increased by $938,000 period over period. Average balances for investments decreased slightly to $343.63 million for the three months ended June 30, 2023 from $347.17 million for the three months ended June 30, 2022. Average interest rates earned on investments increased to 3.44% for the three months ended June 30, 2023 from 2.32% for the three months ended June 30, 2022.

 

Interest Expense. Total interest expense was $7.01 million for the three months ended June 30, 2023 compared to $1.09 million for the three months ended June 30, 2022. The increase of $5.92 million, or 543.1% was largely due to an increase of $3.74 million in interest expense on deposits, as well as a net increase of $2.18 million in interest expense on total borrowings. The overall average rate on total deposits was up from 0.11% for the three months ended June 30, 2022 compared to 1.05% for the three months ended June 30, 2023. In addition, the average balance for total deposits was $1.58 billion for the three months ended June 30, 2023 compared to $1.51 billion for the three months ended June 30, 2022. The increase in total borrowings was driven by the average rate paid on FHLB advances and other borrowings, which increased from 0.80% for the three months ended June 30, 2022, to 5.30% for the three months ended June 30, 2023. The average balance for FHLB advances and other borrowings also increased from $70.54 million for the three months ended June 30, 2022 to $223.90 million for the three months ended June 30, 2023. Short-term borrowings have increased to fund loan growth. 

 

Provision for Credit Losses. Provision for credit losses was $319,000 for the three months ended June 30, 2023, compared to $858,000 in loan loss provisions, prior to the adoption of the Current Expected Credit Losses standard, for the three months ended June 30, 2022. The provision for credit losses for three months ended June 30, 2023 includes a provision for credit losses on loans of $409,000 and a decrease in the provision for unfunded commitments of $90,000.

 

Noninterest Income. Total noninterest income was $6.20 million for the three months ended June 30, 2023 compared to $7.34 million for the three months ended June 30, 2022. The decrease of $1.14 million was primarily due to a decrease in mortgage banking, net of $1.63 million. Mortgage banking, net includes net gain on sale of mortgage loans which decreased to $2.76 million for the three months ended June 30, 2023 compared to $5.22 million for the three months ended June 30, 2022. During the three months ended June 30, 2023, $84.76 million residential mortgage loans were sold compared to $150.52 million in the same period in the prior year. Mortgage volumes have been impacted by the current interest rate environment. Gross margin levels decreased 22 basis points from 3.47% for the three months ended June 30, 2022 to 3.25% for the three months ended June 30, 2023.

 

Noninterest Expense. Noninterest expense was $18.79 million for the three months ended June 30, 2023 compared to $20.05 million for the three months ended June 30, 2022, a slight decrease of $1.26 million or 6.3%. The decrease was primarily related to acquisition costs of $1.88 million incurred during the three months ended June 30, 2022 related to the completed merger with FCB. There were no acquisition costs during the three months ended June 30, 2023.

 

Provision for Income Taxes. Provision for income taxes was $344,000 for the three months ended June 30, 2023, compared to $634,000 for the three months ended June 30, 2022 due to the increase in proportion of tax-exempt income compared to the pretax earnings. The effective tax rate was 14.6% for the current period, decreasing from 26.4% for the prior period.

 

- 36 -

EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Results of Operations for the Six Months Ended June 30, 2023 and 2022 

 

Net Income. Eagle’s net income for the six months ended June 30, 2023 was $5.26 million compared to $3.99 million for the six months ended June 30, 2022. The increase of $1.27 million was primarily due to an increase in net interest income of $3.88 million and a decrease in noninterest expense of $1.67 million. These decreases were partially offset by a decrease in noninterest income of $4.76 million. Basic and diluted earnings per common share were both $0.67 for the current period. Basic and diluted earnings per common share were both $0.57 for the prior year comparable period.

 

Net Interest Income. Net interest income increased to $31.69 million for the six months ended June 30, 2023, from $27.81 million for the same quarter in the prior year. The increase of $3.88 million, or 14.0%, was the result of an increase in interest and dividend income of $13.16 million partially offset by an increase in interest expense of $9.28 million.

 

Interest and Dividend Income. Interest and dividend income was $42.98 million for the six months ended June 30, 2023 compared to $29.82 million for the six months ended June 30, 2022. Interest and fees on loans increased to $36.87 million for the six months ended June 30, 2023 from $26.27 million for the six months ended June 30, 2022. This increase of $10.60 million, or 40.4%, was due to an increase in the average balance of loans, as well as an increase in the average yield on loans. Average balances for loans receivable, including loans held-for-sale, for the six months ended June 30, 2023 were $1.39 billion, compared to $1.07 billion for the prior year period. This represents an increase of $320.63 million, or 30.1%, and was impacted by organic growth. The average interest rate earned on loans receivable also increased by 39 basis points, from 4.97% for the six months ended June 30, 2022 to 5.36% for the current period. Interest accretion on purchased loans was $663,000 for the six months ended June 30, 2023 which resulted in an 8 basis point increase in net interest margin compared to $897,000 for the six months ended June 30, 2022 which resulted in a 13 basis point increase in net interest margin. Interest on investment securities available-for-sale increased by $2.48 million period over period. Average interest rates earned on investments increased to 3.39% for the six months ended June 30, 2023 from 2.15% for the six months ended June 30, 2022. In addition, average balances for investments increased to $344.33 million for the six months ended June 30, 2023 from $310.27 million for the six months ended June 30, 2022.

 

Interest Expense. Total interest expense was $11.29 million for the six months ended June 30, 2023 compared to $2.01 million for the six months ended June 30, 2022. The increase of $9.28 million, or 461.7%, was largely due to an increase of $5.89 million in interest expense on deposits, as well as a net increase of $3.40 million in interest expense on total borrowings. The overall average rate on total deposits was up from 0.11% for the six months ended June 30, 2022 compared to 0.84% for the six months ended June 30, 2023. In addition, the average balance for total deposits was $1.59 billion for the six months ended June 30, 2023 compared to $1.37 billion for the six months ended June 30, 2022. The increase in the interest expense on total borrowings was largely due to the average rate paid on FHLB advances and other borrowings, which increased from 0.96% for the six months ended June 30, 2022 to 5.11% for the six months ended June 30, 2023. The average balance for FHLB advances and other borrowings also increased from $4.42 million for the six months ended June 30, 2022 to $130.95 million for the six months ended June 30, 2023. Short-term borrowings have increased to fund loan growth. 

 

Provision for Credit Losses. Provision for credit losses was $598,000 for the six months ended June 30, 2023, compared to $1.14 million in loan loss provisions, prior to the adoption of the Current Expected Credit Losses standard, for the six months ended June 30, 2022. The provision for credit losses for the six months ended June 30, 2023 includes a provision for credit losses on loans of $688,000 and a decrease in the provision for unfunded commitments of $90,000.

 

Noninterest Income. Total noninterest income was $10.88 million for the six months ended June 30, 2023 compared to $15.64 million for the six months ended June 30, 2022. The decrease of $4.76 million was primarily due to a decrease in mortgage banking, net of $4.83 million. Mortgage banking, net includes net gain on sale of mortgage loans which decreased to $4.96 million for the six months ended June 30, 2023 compared to $11.45 million for the six months ended June 30, 2022. During the six months ended June 30, 2023, $147.15 million residential mortgage loans were sold compared to $322.66 million in the same period in the prior year. Mortgage volumes have been impacted by the current interest rate environment. Gross margin levels decreased 18 basis points from 3.55% for the six months ended June 30, 2022 to 3.37% for the six months ended June 30, 2023.

 

Noninterest Expense. Noninterest expense was $35.32 million for the six months ended June 30, 2023 compared to $36.99 million for the six months ended June 30, 2022, a slight decrease of $1.67 million or 4.5%. The decrease was primarily related to acquisition costs of $2.19 million incurred during the six months ended June 30, 2022 related to the completed merger with FCB. There were no acquisition costs during the three months ended June 30, 2023.

 

Provision for Income Taxes. Provision for income taxes was $1.39 million for the six months ended June 30, 2023, compared to $1.33 million for the six months ended June 30, 2022. The year-to-date effective tax rate was 20.9% for the current period compared to and 25.0% for same period in 2022. The anticipated effective tax rate for 2023 is lower due to the increase in proportion of tax exempt income compare to the pretax earnings.  

 

- 37 -

EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 

 

Liquidity and Capital Resources 

 

Liquidity

 

The Bank is required by regulation to maintain sufficient levels of liquidity for safety and soundness purposes. Appropriate levels of liquidity will depend upon the types of activities in which the company engages. For internal reporting purposes, the Bank uses policy minimums of 1.0% and 8.0% for “basic surplus” and “basic surplus with FHLB” as internally defined. In general, the “basic surplus” is a calculation of the ratio of unencumbered short-term assets reduced by estimated percentages of CD maturities and other deposits that may leave the Bank in the next 90 days divided by total assets. “Basic surplus with FHLB” adds to “basic surplus” the additional borrowing capacity the Bank has with the FHLB of Des Moines. The Bank exceeded those minimum ratios as of June 30, 2023 and December 31, 2022.

 

The Bank’s primary sources of funds are deposits, repayment of loans and mortgage-backed securities, maturities of investments, funds provided from operations, advances from the FHLB of Des Moines and other borrowings. Scheduled repayments of loans and mortgage-backed securities and maturities of investment securities are generally predictable. However, other sources of funds, such as deposit flows and loan prepayments, can be greatly influenced by the general level of interest rates, economic conditions and competition. The Company uses liquidity resources principally to fund existing and future loan commitments. It also uses them to fund maturing certificates of deposit and demand deposit withdrawals, for investment purposes, to meet operating expenses and capital expenditures, for dividend payments and stock repurchases and to maintain adequate liquidity levels.

 

Liquidity may be adversely affected by unexpected deposit outflows, higher interest rates paid by competitors, and similar matters. Management monitors projected liquidity needs and determines the level desirable based in part on the Bank's commitments to make loans and management’s assessment of the Bank's ability to generate funds.

 

The Bank's available borrowing capacity was approximately $315.60 million as of June 30, 2023 and $419.20 million as of December 31, 2022.

 

   

June 30,

   

December 31,

 
   

2023

   

2022

 
   

Borrowings

   

Remaining Borrowing

   

Borrowings

   

Remaining Borrowing

 
   

Outstanding

   

Capacity

   

Outstanding

   

Capacity

 
   

(Dollars in Thousands)

 

Federal Home Loan Bank advances

  $ 191,260     $ 198,600     $ 69,394     $ 296,200  

Federal Reserve Bank discount window

    -       32,000       -       38,000  

Correspondent bank lines of credit

    -       85,000       -       85,000  

Total

  $ 191,260     $ 315,600     $ 69,394     $ 419,200  

 

During the first quarter of 2023, the FRB offered a new Bank Term Funding Program ("BTFP") for eligible depository institutions. The BTFP offers loans of up to one year in length to institutions pledging collateral eligible for purchase by FRB such as U.S. treasuries, agency securities, and mortgage-backed securities. These assets will be valued at par. The Company is not currently utilizing the program; however, this is an additional available funding source.

 

In addition to bank level liquidity management, Eagle must manage liquidity at the parent company level for various operating needs, including the servicing of debt, the payment of dividends on our common stock, share repurchases, payment of general corporate expense, and potential capital infusions into subsidiaries. The primary source of liquidity for Eagle consists of dividends from the Bank, which is governed by certain rules and regulations of the Montana Division of Banking and Financial Institutions and the Federal Reserve, and access to capital markets. Eagle also has a $10.00 million line of credit with a correspondent bank. There was no outstanding balance for this line of credit at both June 30, 2023 and December 31, 2022. Eagle's ability to receive dividends from the Bank in future periods will depend on several factors, including, without limitation, the Bank's future profits, asset quality, liquidity, and overall condition. In addition, both the Montana Division of Banking and Financial Institutions and Federal Reserve may require approval to pay dividends, based on certain regulatory statutes and limitations.

 

Eagle presently believes that the sources of liquidity discussed above, including existing liquid funds on hand, are sufficient to meet its anticipated funding needs. However, if economic conditions were to significantly deteriorate, regulatory capital requirements for Eagle or the Bank were to increase as the result of regulatory directives or otherwise, or Eagle were to believe it is prudent to enhance current liquidity levels, then Eagle may seek additional liquidity from external sources.

 

Capital Resources

 

As of June 30, 2023, the Bank’s internally determined measurement of sensitivity to interest rate movements as measured by a 200 basis point rise in interest rates scenario, increased the economic value of equity (“EVE”) by 0.80% compared to a decrease of 12.60% at December 31, 2022. The Bank is within the guidelines set forth by the Board of Directors for interest rate risk sensitivity in rising interest rate scenarios.

 

- 38 -

EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The Company's and the Bank's regulatory capital was in excess of all applicable regulatory requirements and the Bank is deemed "well capitalized" pursuant to State of Montana and FRB rules as of June 30, 2023. The Company's and the Bank's actual capital amounts and ratios as of June 30, 2023 are presented in the table below and all of the ratios, with the exception of the Tier 1 capital adjusted total average assets ratio, include the capital conservation buffer of 2.50%. 

 

                                   

Minimum

 
                                   

To Be Well

 
                   

Minimum Required

   

Capitalized Under

 
                   

for Capital Adequacy

   

Prompt Corrective

 
   

Actual

   

Purposes

   

Action Provisions

 
   

Amount

   

Ratio

   

Amount

   

Ratio

   

Amount

   

Ratio

 
   

(Dollars in Thousands)

 

June 30, 2023:

                                               

Total risk-based capital to risk weighted assets

                                               

Consolidated

  $ 226,001       13.79 %   $ 172,022       10.50 %     N/A       N/A  

Bank

    211,558       12.93       171,862       10.50       163,679       10.00 %
                                                 

Tier 1 capital to risk weighted assets

                                               

Consolidated

    154,031       9.40       139,256       8.50       N/A       N/A  

Bank

    194,588       11.89       139,127       8.50       130,943       8.00  
                                                 

Common equity Tier 1 capital to risk weighted assets

                                               

Consolidated

    149,031       9.10       114,682       7.00       N/A       N/A  

Bank

    194,588       11.89       114,575       7.00       106,391       6.50  
                                                 

Tier 1 capital to adjusted total average assets

                                               

Consolidated

    154,031       7.74       79,650       4.00       N/A       N/A  

Bank

    194,588       9.77       79,684       4.00       99,605       5.00  

 

                                   

Minimum

 
                                   

To Be Well

 
                   

Minimum Required

   

Capitalized Under

 
                   

for Capital Adequacy

   

Prompt Corrective

 
   

Actual

   

Purposes

   

Action Provisions

 
   

Amount

   

Ratio

   

Amount

   

Ratio

   

Amount

   

Ratio

 
   

(Dollars in Thousands)

 

December 31, 2022:

                                               

Total risk-based capital to risk weighted assets

                                               

Consolidated

  $ 219,595       14.10 %   $ 163,560       10.50 %     N/A       N/A  

Bank

    202,905       13.04       163,444       10.50       155,661       10.00 %
                                                 

Tier 1 capital to risk weighted assets

                                               

Consolidated

    150,595       9.67       132,406       8.50       N/A       N/A  

Bank

    188,905       12.14       132,312       8.50       124,529       8.00  
                                                 

Common equity Tier 1 capital to risk weighted assets

                                               

Consolidated

    145,594       9.35       109,040       7.00       N/A       N/A  

Bank

    188,905       12.14       108,962       7.00       101,179       6.50  
                                                 

Tier 1 capital to adjusted total average assets

                                               

Consolidated

    150,595       7.78       77,422       4.00       N/A       N/A  

Bank

    188,905       9.82       76,947       4.00       96,184       5.00  

 

- 39 -

EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

 

 

Impact of Inflation and Changing Prices

 

Our condensed consolidated financial statements and the accompanying notes, which are found in Part I, Item 1, have been prepared in accordance with generally accepted accounting principles, which require the measurement of financial position and operating results in terms of historical dollars without considering the change in the relative purchasing power of money over time and due to inflation. The impact of inflation is reflected in the increased cost of our operations. Interest rates have a greater impact on our performance than do the general levels of inflation. Interest rates do not necessarily move in the same direction or to the same extent as the prices of goods and services.

 

Interest Rate Risk

 

Interest rate risk is the potential for loss of future earnings resulting from adverse changes in the level of interest rates. Interest rate risk results from several factors and could have a significant impact on the Company’s net interest income, which is the Company's primary source of revenue. Net interest income is affected by changes in interest rates, the relationship between rates on interest-bearing assets and liabilities, the impact of interest fluctuations on asset prepayments and the mix of interest-bearing assets and liabilities.

 

Although interest rate risk is inherent in the banking industry, banks are expected to have sound risk management practices in place to measure, monitor and control interest rate exposures. The objective of interest rate risk management is to contain the risks associated with interest rate fluctuations. The process involves identification and management of the sensitivity of net interest income to changing interest rates.

 

The ongoing monitoring and management of this risk is an important component of the Company’s asset/liability committee, which is governed by policies established by the Company’s Board that are reviewed and approved annually. The Board delegates responsibility for carrying out the asset/liability management policies to the Bank’s asset/liability committee. In this capacity, the asset/liability committee develops guidelines and strategies impacting the Company’s asset/liability management related activities based upon estimated market risk sensitivity, policy limits and overall market interest rate levels and trends. The Company’s goal of its asset and liability management practices is to maintain or increase the level of net interest income within an acceptable level of interest rate risk. 

 

The Bank has established acceptable levels of interest rate risk as follows for an instantaneous and permanent shock in rates: projected net interest income over the next twelve months (i.e. year-1) and the subsequent twelve months (i.e. year-2) will not be reduced by more than 15.0% given an immediate increase or decrease in interest rates of up to 200 basis points or by more than 10.0% given an immediate increase or decrease in interest rates of up to 100 basis points. 

 

The following table includes the Bank’s net interest income sensitivity analysis.

 

                   

Changes in Market

   

Rate Sensitivity

     

Interest Rates

   

As of June 30, 2023

   

Policy

(Basis Points)

   

Year 1

   

Year 2

   

Limits

                   

+200

    -5.8%     5.1%     -15.0%

+100

    -2.6%     7.0%     -10.0%
-100     2.4%     8.9%     -10.0%
-200     3.9%     8.5%     -15.0%

 

Critical Accounting Policies and Estimates

 

The accounting and financial reporting policies of Eagle are in accordance with generally accepted accounting principles ("GAAP") and conform to the accounting and reporting guidelines prescribed by bank regulatory authorities. Eagle has identified certain of its accounting policies as “critical accounting policies,” consisting of those related to the allowance for credit losses and business combinations. In determining which accounting policies are critical in nature, Eagle has identified the policies that require significant judgment or involve complex estimates. It is management's practice to discuss critical accounting policies with the Board of Directors' Audit Committee on a periodic basis, including the development, selection, implementation, and disclosure of the critical accounting policies. The application of these policies has a significant impact on Eagle’s unaudited interim consolidated financial statements. Eagle’s financial results could differ significantly if different judgments or estimates are used in the application of these policies. All accounting policies described in "Part II - Item 8. Financial Statements and Supplementary Data - Note 1 – Organization and Summary of Significant Accounting Policies" in Eagle’s 2022 Form 10-K should be reviewed for a greater understanding of how we record and report our financial performance. There have been no significant changes to the accounting policies, estimates, and assumptions, or the judgments affecting the application of these estimates and assumptions from those disclosed in Eagle’s 2022 Form 10-K, other than the adoption of Accounting Standards Update ("ASU") No. 2016-13 Financial Instruments - Credit Losses, referred to as the Current Expected Credit Losses ("CECL") model on January 1, 2023 and ASU No. 2022-02 Financial Instruments - Credit Losses, Troubled Debt Restructurings and Vintage Disclosures, an update to ASU No. 2016-13. For additional information on CECL, see Note 1. Organization and Summary of Significant Accounting Policies included in Part I. Item 1 of this report. 

 

 

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EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

This item has been omitted based on Eagle’s status as a smaller reporting company.

 

- 41 -

EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Item 4. Controls and Procedures 

 

As of the end of the period covered by this report, we conducted an evaluation under the supervision and with the participation of our management including our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”) of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms, including to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is accumulated and communicated to management to allow timely decisions regarding required disclosure. Based on that evaluation, our CEO and CFO concluded that as of June 30, 2023, our disclosure controls and procedures were effective. During the last quarter, there were no changes in the Company’s internal control over financial reporting that have materially affected, or were reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

 

- 42 -

EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Part II - OTHER INFORMATION

 

Item 1.

Legal Proceedings.

 

Neither the Company nor the Bank is involved in any pending legal proceeding other than non-material legal proceedings occurring in the ordinary course of business.

 

Item 1A.

Risk Factors

 

There have not been any material changes in the risk factors previously disclosed in Part 1, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022, as supplemented in Part II, Item 1A of our Quarterly Report on Form 10-Q for the period ended March 31, 2023.

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

 

On April 20, 2023, Eagle's Board of Directors authorized the repurchase of up to 400,000 shares of its common stock beginning May 1, 2023. Under the plan, shares may be purchased by the Company on the open market or in privately negotiated transactions. The extent to which the company repurchases its shares and the timing of such repurchase will depend on market conditions and other corporate considerations. The plan expires on May 1, 2024. The following table summarizes the Company's purchase of its common stock for the three months ended June 30, 2023 under this plan. 
 
                   

Total Number

   

 

 
                   

of Shares

   

Maximum

 
                   

Purchased

   

Number of

 
   

 

           

as Part of

   

Shares that

 
   

Total

   

 

   

Publicly

   

May Yet Be

 
   

Number of

   

Average

   

Announced

   

Purchased

 
    Shares     Price Paid     Plans     Under the Plans  
   

Purchased

   

Per Share

   

or Programs

   

or Programs

 
                                 

April 1, 2023 through April 30, 2023

    -     $ -       -       400,000  
                                 

May 1, 2023 through May 31, 2023

    12,777       13.07       12,777       387,223  
                                 

June 1, 2023 through June 30, 2023

    5,124       12.46       5,124       382,099  
                                 

Total

    17,901     $ 12.89       17,901          

 

 
On April 21, 2022, Eagle's Board authorized the repurchase of up to 400,000 shares of its common stock. Under the plan, shares could be purchased by the Company on the open market or in privately negotiated transactions. The extent to which the company repurchased its shares and the timing of such repurchases depended on market conditions and other corporate considerations. During the second quarter of 2022, 5,000 shares were purchased under this plan at an average price of $19.75. During the third quarter of 2022, 99,517 shares were purchased under this plan at an average price of $19.45. During the fourth quarter of 2022, 6,608 shares were purchased under this plan at an average price of $18.80. No shares were purchased during the first quarter of 2023 under this plan. The plan expired on April 21, 2023.
 

On July 22, 2021, Eagle's Board authorized the repurchase of up to 100,000 shares of its common stock. Under the plan, shares could be purchased by the Company on the open market or in privately negotiated transactions. The extent to which the company repurchased its shares and the timing of such repurchases depended on market conditions and other corporate considerations. No shares were purchased during the third or fourth quarter of 2021. However, during the first quarter of 2022, the Company repurchased the total authorized amount of 100,000 shares at an average price of $22.71 per share. The plan expired on July 22, 2022. 

 

Item 3.

Defaults Upon Senior Securities.

 

Not applicable.

 

Item 4.

Mine Safety Disclosures


Not applicable.

 

- 43 -

EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 

Part II - OTHER INFORMATION - continued

 

 

 

Item 5.

Other Information.

 

None.

 

Item 6.

Exhibits. 

 

Exhibit

Number

Description

 

 

2.1 Agreement and Plan of Merger, dated as of September 30, 2021, by and among Eagle Bancorp Montana, Inc., Opportunity Bank of Montana, First Community Bancorp, Inc. and First Community Bank (incorporated by reference to Exhibit 2.1 of our Current Report on Form 8-K filed on October 1, 2021).
   

3.1

Amended and Restated Certificate of Incorporation of Eagle Bancorp Montana, Inc. (incorporated by reference to Exhibit 3.1 of our Current Report on Form 8-K filed on February 23, 2010).

 

 

3.2

Certificate of Amendment to the Amended and Restated Certificate of Incorporation. (incorporated by reference to Exhibit 3.2 of our Quarterly Report on Form 10-Q filed on May 9, 2019).

 

 

3.3

Bylaws of Eagle Bancorp Montana, Inc., amended as of August 20, 2015 (incorporated by reference to 3.1 of our Current Report on Form 8-K filed on August 25, 2015).

   
10.1 Employment Agreement, effective as of May 25, 2023, among Laura F. Clark, Eagle Bancorp Montana, Inc. and Opportunity Bank of Montana (incorporated by reference herein to Exhibit 10.1 of our Current Report on Form 8-K filed on June 1, 2023).

 

 

31.1

Certification by Laura F. Clark, Chief Executive Officer, pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 (a) of the Sarbanes-Oxley Act of 2002.

 

 

31.2

Certification by Miranda J. Spaulding, Chief Financial Officer, pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 (a) of the Sarbanes-Oxley Act of 2002.

 

 

32.1

Certification by Laura F. Clark, Chief Executive Officer, and Miranda J. Spaulding, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

101.INS Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)(1)
   

101.SCH

Inline XBRL Taxonomy Extension Schema Document(1)

 

 

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document(1)

 

 

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document(1)

 

 

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document(1)

 

 

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document(1)

   
104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

   
(1)These interactive data files shall not be deemed filed for purposes of Section 11 or 12 of the Securities Act of 1933, as amended, or Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability under those sections. 

 

- 44 -

EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

SIGNATURES

 

Pursuant to the requirements 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 MONTANA, INC.

 

  

 

  

 

  

Date: August 3, 2023

By:  

/s/ Laura F. Clark

 

Laura F. Clark

 

President/CEO

 

 

 

 

 

 

  

 

  

 

  

Date: August 3, 2023

By:  

/s/ Miranda J. Spaulding

 

Miranda J. Spaulding

 

SVP/CFO

 

 

- 45 -