Eagle Bancorp Montana, Inc. [EBMT] Filings

10-Q 1 ebmt20240630_10q.htm FORM 10-Q ebmt20240630_10q.htm

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, 2024

☐	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

8,016,784 shares outstanding

As of July 31, 2024

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EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES

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PART I.	FINANCIAL INFORMATION	PAGE

Item 1.	Financial Statements (Unaudited)

	Condensed Consolidated Statements of Financial Condition as of June 30, 2024 and December 31, 2023	1

	Condensed Consolidated Statements of Income for the three months and six months ended June 30, 2024 and 2023	3

	Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months and six months ended June 30, 2024 and 2023	5

	Condensed Consolidated Statements of Changes in Shareholders' Equity for the three months and six months ended June 30, 2024 and 2023	6

	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2024 and 2023	7

	Notes to Condensed Consolidated Financial Statements (Unaudited)	9

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	25

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39

Item 4.	Controls and Procedures	39

PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 3.	Defaults Upon Senior Securities	40
Item 4.	Mine Safety Disclosures	40
Item 5.	Other Information	41
Item 6.	Exhibits	41

Signatures		42

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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, including the ability of the U.S. Congress to increase the U.S. statutory debt limit, as needed, as well as the impact of the 2024 U.S. presidential election, 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 or reduces loan demand;

	●	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;

●

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;

●

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, 2023, 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.

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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,
	2024		2023
ASSETS:
Cash and due from banks	$	22,361	$	23,243
Interest-bearing deposits in banks		1,401		1,302
Total cash and cash equivalents		23,762		24,545

Securities available-for-sale, at fair value (amortized cost of $335,210 at June 30, 2024 and $345,355 at December 31, 2023)		306,869		318,279
Federal Home Loan Bank ("FHLB") stock		10,136		9,191
Federal Reserve Bank ("FRB") stock		4,131		4,131
Mortgage loans held-for-sale, at fair value		10,518		11,432
Loans receivable, net of allowance for credit losses of $16,830 at June 30, 2024 and $16,440 at December 31, 2023		1,500,663		1,468,049
Accrued interest and dividends receivable		13,195		12,485
Mortgage servicing rights, net		15,614		15,853
Assets held-for-sale, at cost		257		-
Premises and equipment, net		98,397		94,282
Cash surrender value of life insurance, net		48,529		47,939
Goodwill		34,740		34,740
Core deposit intangible, net		5,168		5,880
Other assets		26,976		28,860

Total assets	$	2,098,955	$	2,075,666

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

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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,
	2024			2023
LIABILITIES:
Deposit accounts:
Noninterest-bearing	$	400,113		$	418,727
Interest-bearing		1,218,752			1,216,468
Total deposits		1,618,865			1,635,195

Accrued expenses and other liabilities		35,804			36,462
FHLB advances and other borrowings		215,050			175,737
Other long-term debt:
Principal amount		60,155			60,155
Unamortized debt issuance costs		(1,081	)		(1,156	)
Total other long-term debt, net		59,074			58,999

Total liabilities		1,928,793			1,906,393

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, 2024 and December 31, 2023; 8,016,784 shares outstanding at June 30, 2024 and December 31, 2023)		85			85
Additional paid-in capital		108,962			108,819
Unallocated common stock held by Employee Stock Ownership Plan ("ESOP")		(4,297	)		(4,583	)
Treasury stock, at cost (490,645 shares at June 30, 2024 and December 31, 2023)		(11,124	)		(11,124	)
Retained earnings		97,413			96,021
Accumulated other comprehensive loss, net of tax		(20,877	)		(19,945	)
Total shareholders' equity		170,162			169,273

Total liabilities and shareholders' equity	$	2,098,955		$	2,075,666

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

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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,
	2024		2023		2024		2023
INTEREST AND DIVIDEND INCOME:
Interest and fees on loans	$	22,782	$	19,137	$	44,724	$	36,874
Securities available-for-sale		2,631		2,949		5,355		5,792
FHLB and FRB dividends		264		161		511		268
Other interest income		145		25		174		46
Total interest and dividend income		25,822		22,272		50,764		42,980

INTEREST EXPENSE:
Deposits		6,884		4,155		13,432		6,615
FHLB advances and other borrowings		2,625		2,179		5,122		3,321
Other long-term debt		681		674		1,364		1,352
Total interest expense		10,190		7,008		19,918		11,288

NET INTEREST INCOME		15,632		15,264		30,846		31,692

Provision for credit losses		412		319		277		598

NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES		15,220		14,945		30,569		31,094

NONINTEREST INCOME:
Service charges on deposit accounts		428		527		828		866
Mortgage banking, net		2,417		3,864		4,594		6,914
Interchange and ATM fees		640		641		1,203		1,218
Appreciation in cash surrender value of life insurance		320		503		608		783
Net gain (loss) on sale of available-for-sale securities		-		2		-		(222	)
Other noninterest income		464		667		988		1,316
Total noninterest income	$	4,269	$	6,204	$	8,221	$	10,875

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

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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,
	2024		2023		2024		2023
NONINTEREST EXPENSE:
Salaries and employee benefits	$	10,273	$	11,084	$	19,991	$	20,777
Occupancy and equipment expense		2,104		2,071		4,203		4,144
Data processing		1,382		1,572		2,907		2,784
Advertising		316		309		569		590
Amortization		348		397		717		815
Loan costs		412		464		810		909
Federal Deposit Insurance Corporation ("FDIC") insurance premiums		284		393		583		561
Professional and examination fees		423		592		907		1,076
Other noninterest expense		1,765		1,908		3,653		3,667
Total noninterest expense		17,307		18,790		34,340		35,323

INCOME BEFORE PROVISION FOR INCOME TAXES		2,182		2,359		4,450		6,646

Provision for income taxes		444		344		814		1,389

NET INCOME	$	1,738	$	2,015	$	3,636	$	5,257

BASIC EARNINGS PER COMMON SHARE	$	0.22	$	0.26	$	0.46	$	0.67

DILUTED EARNINGS PER COMMON SHARE	$	0.22	$	0.26	$	0.46	$	0.67

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

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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,
	2024			2023			2024			2023

NET INCOME	$	1,738		$	2,015		$	3,636		$	5,257

OTHER ITEMS OF COMPREHENSIVE INCOME (LOSS) BEFORE TAX:
Change in fair value of investment securities available-for-sale		524			(1,624	)		(1,265	)		3,353
Reclassification for net realized (gains) losses on investment securities available-for-sale		-			(2	)		-			222
Total other comprehensive income (loss)		524			(1,626	)		(1,265	)		3,575

Income tax (provision) benefit related to securities available-for-sale		(138	)		428			333			(941	)

COMPREHENSIVE INCOME	$	2,124		$	817		$	2,704		$	7,891

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

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EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

For the six months ended June 30, 2024 and 2023

(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 April 1, 2024	$	-	$	85	$	108,893		$	(4,440	)	$	(11,124	)	$	96,797		$	(21,263	)	$	168,948
Net income		-		-		-			-			-			1,738			-			1,738
Other comprehensive income		-		-		-			-			-			-			386			386
Dividends paid ($0.1400 per share)		-		-		-			-			-			(1,122	)		-			(1,122	)
Stock compensation expense		-		-		135			-			-			-			-			135
ESOP shares allocated (5,997 shares)		-		-		(66	)		143			-			-			-			77
Balance at June 30, 2024	$	-	$	85	$	108,962		$	(4,297	)	$	(11,124	)	$	97,413		$	(20,877	)	$	170,162

Balance at April 1, 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 ($0.1375 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 January 1, 2024	$	-	$	85	$	108,819		$	(4,583	)	$	(11,124	)	$	96,021		$	(19,945	)	$	169,273
Net income		-		-		-			-			-			3,636			-			3,636
Other comprehensive loss		-		-		-			-			-			-			(932	)		(932	)
Dividends paid ($0.2800 per share)		-		-		-			-			-			(2,244	)		-			(2,244	)
Stock compensation expense		-		-		270			-			-			-			-			270
ESOP shares allocated (11,994 shares)		-		-		(127	)		286			-			-			-			159
Balance at June 30, 2024	$	-	$	85	$	108,962		$	(4,297	)	$	(11,124	)	$	97,413		$	(20,877	)	$	170,162

Balance at January 1, 2023	$	-	$	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 ($0.275 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

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

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EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

(Unaudited)

	Six Months Ended
	June 30,
	2024		2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	3,636	$	5,257
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Provision for credit losses		277		598