2024
ANNUAL REPORT
OUR MISSION
To provide strong financial futures
for Montanans.
EAGLE BANCORP MT, INC. 2
OPPORTUNITY BANK OF MONTANA
opened its doors in August of 1922 as
American Building and Loan with a single
office in Helena. Since our first day, we have
been a Montana community financial institution
committed to providing strong financial futures
for Montanans. Over a century later, we have
grown to 30 locations across Montana, offering
customers a full range of banking, lending, and
digital services.
OUR HISTORY: STABILITY AND GROWTH
American Building and Loan survived
the turbulence of the early 20th century,
including the crash of 1929 and the Great
Depression. It served customers under this
name for more than 50 years before a period
of rapid expansion in the 1970s, becoming
American Savings and Loan Association and
then American Federal Savings and Loan
Association, with the adoption of a federal thrift
charter in 1975. By 1980, American Federal
Savings and Loan had grown to include branch
locations in Townsend, Butte, and Bozeman.
To diversify its offerings, American Federal
Savings and Loan converted its charter to
a federal savings bank in 1991, becoming
American Federal Savings Bank, the name
that would remain for the next 23 years. Eagle
Bancorp was established in 1999 as the holding
company for the bank and began offering
shares to the public in 2000. A subsequent
public offering in 2010 made it possible for
Eagle stock to be traded publicly on the
NASDAQ stock exchange. In 2012, American
Federal doubled its branch network and further
expanded its footprint across Montana through
the purchase of seven Montana bank branches
owned by Sterling Financial Corporation.
In 2014, American Federal applied to the State
of Montana to convert its charter from a federal
savings bank to a Montana state-chartered bank.
This change in charter provided an opportunity
to emphasize our Montana roots with a rebrand
as Opportunity Bank of Montana, the name we
proudly operate under today.
A series of acquisitions followed our rebranding.
The bank acquired TwinCo, Inc. in 2018 adding
two branches in Madison County. In 2019, the
bank acquired Big Muddy Bancorp, Inc. adding
branches in Teton and Fergus Counties, and,
in January 2020, the bank completed the
acquisition of Western Holding Company of Wolf
Point adding a branch in Roosevelt County. In
April 2022, the bank completed the acquisition
of First Community Bancorp Inc., further
expanding into Roosevelt County, and adding
branches in Rosebud and Valley Counties.
These acquisitions solidified our position as the
fourth-largest bank headquartered in Montana
and expanded our branch network into the
agriculturally focused Ruby Valley, Golden
Triangle, and Hi-Line regions.
Fort Peck Reservoir
near Glasgow, Montana
EAGLE BANCORP MT, INC. 3
2020
YEAR ENDED
2021
YEAR ENDED
2022
YEAR ENDED
2023
YEAR ENDED
2024
YEAR ENDED
SELECTED FINANCIAL CONDITION DATA:
Total Assets .........................................
Net Loans ............................................
Total Securities ....................................
Total Deposits .....................................
Total Shareholders’ Equity ...............
SELECTED OPERATING DATA:
Net Interest Income ............................
Provision for Credit Losses ..............
Noninterest Income ...........................
Noninterest Expense .........................
NET INCOME........................
(DOLLARS IN THOUSANDS)
$1,948,384
1,339,678
349,495
1,635,272
158,416
63,312
2,001
26,220
73,683
$10,701
10,701
$1,435,926
920,639
271,262
1,222,549
156,729
46,540
861
46,183
72,580
$14,419
14,419
$1,257,634
829,503
162,946
1,033,083
152,938
43,170
3,130
47,366
58,966
$21,206
21,206
$2,075,666
1,468,049
318,279
1,635,195
169,273
62,477
1,456
22,722
72,089
$10,056
10,056
$2,103,090
1,503,796
292,590
1,681,228
174,765
63,438
518
17,776
69,306
$9,778
$9,778
EARNINGS PER SHARE - basic in dollars
TOTAL ASSETS - dollars in millions
DIVIDENDS - dollars per share (annualized)
STOCK PRICE - in dollars
24
23
22
21
20
0.35
0.40
0.45
0.50
0.55
$0.60
24
23
22
21
20
$3.50
0.50
1.00
1.50
2.00
2.50
3.00
24
23
22
21
20
$2,200
$1,000
$1,100
$1,200
$1,300
$1,400
$1,500
$1,600
$1,700
$1,800
$1,900
$2,000
$2,100
24
23
22
21
20
8
10
12
14
16
18
20
22
$24
FINANCIAL HIGHLIGHTS
EAGLE BANCORP MT, INC. 4
March 20, 2025
To Our Shareholders, Customers, and Friends:
On behalf of our Board of Directors, thank you for
your loyal support of Eagle Bancorp, Montana,
Inc. I am pleased to present our Annual Report to
Shareholders for the fiscal year ending December
31, 2024. Our consistent approach of growing the
franchise, both through steady, organic growth and
strategic acquisitions, continues to guide us as a
growing community bank and helped us achieve
solid results for 2024. We are proud to be the
fourth largest independent Montana-based bank,
and as we celebrate our 102nd year of operation, we
look forward to carrying this momentum forward to
being the bank of choice for all Montanans.
The persistently high interest rate environment from
the prior year carried into 2024, presenting another
challenging year for the banking industry. While
interest rate volatility and economic uncertainties
continued to impact the financial sector for the
greater part of the year, the rate easing by the
Fed that began in September has already started
to have an impact on improving funding costs
and expanding margins, and we finished the year
strong. For 2024, our earnings were $9.8 million
with earnings per diluted share of $1.24, compared
to $10.1 million and $1.29 per diluted share in 2023.
While we were successful at generating increases
in net interest income during the year, non-interest
income decreased due to lower volumes in
mortgage banking activity from the soft residential
real estate market nationwide. However, we were
able to reduce non-interest expenses by 3.9%
in 2024 as operational expenses remained well-
controlled and credit quality continued to be strong.
Throughout the year we continued to expand our
capabilities to deliver products and services to our
customers and communities throughout Montana.
As anticipated, overall loan growth moderated
during 2024 due to the rapid rate increases by
the Federal Reserve in 2022 and 2023, and the
“higher for longer” interest rate environment we
found ourselves operating in for most of 2024. As
a result, net loans ended the year at $1.50 billion,
up 2.4% from a year ago. We were encouraged by
the broad-based loan demand from our customers
across many different borrowing sectors during the
year, and we are anticipating steady single-digit
loan growth in the year ahead.
One of the uncertainties for banks nationwide
heading into this interest rate cycle was its effect
on credit quality. I am pleased to report that our
credit metrics remained steady throughout the
year, ending with non-performing loans at only
0.25% of total loans at year end. We feel that
we are well positioned going forward, having a
significant allowance for credit losses of 1.11% of
portfolio loans and 437.7% of nonperforming loans
at year-end.
We continue to maintain a stable core deposit
base, with non-CDs representing 72.5% of total
deposits at year end. While deposit balances
expanded during the year, increasing $46.0 million,
or 2.8%, over the last 12 months, our deposit
mix continued to change as higher interest rates
enticed depositors to move to higher-yielding
accounts. However, the recent rate cuts by the
Federal Reserve that began in September started
easing deposit pricing during the fourth quarter,
and we anticipate this will continue into 2025 as
we move through this next rate cycle.
As a result of the Company’s solid earnings and
strong capital position, our Board of Directors
raised the quarterly cash dividend during 2024
to $0.1425 per share. Our cash dividend has
increased every year since 2000. We continue
to work to enhance shareholder value and
are committed to paying dividends to our
shareholders.
We continue to maintain a stable
core deposit base, with
non-CDs representing 72.5% of
total deposits at year end.
PRESIDENT’S LETTER
We are making solid progress in building our
community bank franchise across the state
of Montana and we believe that we are well
positioned in our markets to continue to grow.
As we look to 2025, we are prepared to weather
any economic and interest rate cycles that come
our way as we stay conservative in our lending
and operating procedures. We greatly appreciate
our customers for their continuing partnership as
well as our shareholders for entrusting us with
their capital.
On behalf of the Board of Directors and senior
management team, I want to thank you for your
continued support.
Laura F. Clark
President and Chief Executive Officer
Very Sincerely,
Helena, Montana
EAGLE BANCORP MT, INC. 5
Our consistent approach of growing the franchise, both
through steady, organic growth and strategic acquisitions,
continues to guide us as a growing community bank
and helped us achieve solid results for 2024.
EXECUTIVE TEAM
LAURA F. CLARK
President
Chief Executive Officer
RACHEL R. AMDAHL
Senior Vice President
Chief Operations Officer
ALANA M. BINDE
Senior Vice President
Chief Human Resource Officer
LINDA M. CHILTON
Senior Vice President
Chief Retail Officer
DALE F. FIELD
Senior Vice President
Chief Credit Officer
CHANTELLE R. NASH
Senior Vice President
Chief Risk Officer
Chief Administrative Officer
Corporate Secretary
MIRANDA J. SPAULDING
Senior Vice President
Chief Financial Officer
Missoula, Montana
EAGLE BANCORP MT, INC. 6
P. DARRYL RENSMON
Senior Vice President
Chief Operating Officer
MARK A. O'NEILL
Senior Vice President
Chief Lending Officer
EAGLE BANCORP MT, INC. 7
BOARD OF DIRECTORS
RICK F. HAYS
Board Chair
Retired
Helena, MT
THOMAS J. MCCARVEL
Vice Chair
Retired
Helena, MT
TANYA J. CHEMODUROW
Retired
Missoula, MT
SHAVON R. CAPE
Co-Founder
JWT Restaurant Group, LLC
Bozeman, MT
COREY I. JENSEN
Retired
Billings, MT
PETER J. JOHNSON
Retired
Helena, MT
KENNETH M. WALSH
Retired
Twin Bridges, MT
SAMUEL D. WATERS
Retired
Glasgow, MT
MAUREEN J. RUDE
Retired
Helena, MT
CYNTHIA A. UTTERBACK
Principal
Pinion
Helena, MT
EAGLE BANCORP MT, INC. 8
BRANCH LOCATIONS
ASHLAND
300 Main St
Ashland, MT 59003
BIG TIMBER
101 McLeod St
Big Timber, MT 59011
BILLINGS
1005 N 27th St
Billings, MT 59101
1639 Main St
Billings, MT 59105
1112 Shiloh Crossing Blvd
Billings, MT 59102
BOZEMAN
1455 W Oak St
Bozeman, MT 59715
4150 Valley Commons Dr
Bozeman, MT 59718
BUTTE
3401 Harrison Ave
Butte, MT 59701
CHOTEAU
27 1st St NW
Choteau, MT 59422
CULBERTSON
205 Broadway Ave
Culbertson, MT 59218
DENTON
423 Broadway Ave
Denton, MT 59430
DUTTON
101 Main St W
Dutton, MT 59433
FROID
109 Main St
Froid, MT 59226
GLASGOW
540 2nd Ave S
Glasgow, MT 59230
GREAT FALLS
501 River Dr S
Great Falls, MT 59405
HAMILTON
711 S 1st St
Hamilton, MT 59840
HELENA
HEADQUARTERS
1400 Prospect Ave
Helena, MT 59601
28 Neill Ave
Helena, MT 59601
7517 Roughsawn Dr
Helena, MT 59602
2090 Cromwell Dixon Ln
Helena, MT 59602
HINSDALE
203 Montana St
Hinsdale, MT 59241
LIVINGSTON
123 S Main St
Livingston, MT 59047
MISSOULA
1821 South Ave W
Missoula, MT 59801
2215 W Broadway St
Missoula, MT 59808
SHERIDAN
103 N Main St
Sheridan, MT 59749
THREE FORKS
120 S Montana St
Three Forks, MT 59752
TOWNSEND
400 Broadway St
Townsend, MT 59644
TWIN BRIDGES
107 S Main St
Twin Bridges, MT 59754
WINIFRED
205 Main St #2
Winifred, MT 59489
WOLF POINT
111 3rd Ave S
Wolf Point, MT 59201
FORM 10-K
[ This Page Intentionally Left Blank ]
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended
December 31, 2024
or
☐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)
Registrant’s telephone number, including area code
406-442-3080
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading symbol(s)
Name of each exchange on which registered
Common Stock par value $0.01 per share
EBMT
Nasdaq Global Market
Securities registered pursuant to section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes ☒ No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ☐ Yes ☒ No
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 has filed a report on and attestation to its management's assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public
accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based
compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10d-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes ☒ No
The aggregate market value of the common stock held by non-affiliates of Eagle, computed by reference to the closing price at which
the stock was sold as of June 30, 2024 was $96,951,000. The outstanding number of shares of common stock of Eagle as of February 28,
2025 was 7,977,177.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company’s definitive Proxy Statement relating to its 2025 annual meeting of stockholders (“2025 Proxy Statement”) are
incorporated by reference into Part III of this Form 10-K. The 2025 Proxy Statement will be filed with the Securities and Exchange
Commission within 120 days after the Company’s fiscal year end to which this report relates.
i
TABLE OF CONTENTS
Page
PART I
ITEM 1.
DESCRIPTION OF BUSINESS ....................................................................................................................
3
ITEM 1A.
RISK FACTORS ........................................................................................................................................... 15
ITEM 1B.
UNRESOLVED STAFF COMMENTS ........................................................................................................ 25
ITEM 1C.
CYBERSECURITY ....................................................................................................................................... 25
ITEM 2.
PROPERTIES ................................................................................................................................................ 27
ITEM 3.
LEGAL PROCEEDINGS .............................................................................................................................. 27
ITEM 4.
MINE SAFETY DISCLOSURES ................................................................................................................. 27
PART II
ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES ....................................................................... 28
ITEM 6.
[RESERVED] ................................................................................................................................................ 29
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS ..................................................................................................................................... 29
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK .............................. 50
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA .............................................................. 50
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE ..................................................................................................................... 50
ITEM 9A. CONTROLS AND PROCEDURES .............................................................................................................. 50
ITEM 9B.
OTHER INFORMATION ............................................................................................................................. 52
ITEM 9C.
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS ............. 52
PART III
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE ....................................... 53
ITEM 11.
EXECUTIVE COMPENSATION ................................................................................................................. 53
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS ................................................................................................ 53
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE ..................................................................................................................................... 53
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES ............................................................................... 53
PART IV
ITEM 15.
EXHIBIT AND FINANCIAL STATEMENT SCHEDULES ....................................................................... 53
ITEM 16.
FORM 10-K SUMMARY ............................................................................................................................. 58
1
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K 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;
●
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 services businesses;
●
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;
●
the impact of continuing adverse developments affecting the U.S. banking industry, including the associated impact
of any regulatory changes or other mitigation efforts taken by governmental agencies in response 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;
●
the impact of any new regulatory, policy or enforcement developments resulting from the change in U.S. presidential
administration; 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;
●
our ability to assess and monitor the effect of artificial intelligence on our business and operations;
●
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;
●
unforeseen events, such as pandemics or natural disasters, and any governmental or societal responses thereto;
●
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;
2
●
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;
●
possible impairments of securities held by us, including those issued by government entities and government
sponsored enterprises;
●
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 and our dependence on the
technology of outside service providers;
●
the failure of assumptions underlying the establishment of allowance for possible credit 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 and auditing 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 I, Item 1A, “Risk Factors” and Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition
and Results of Operations” sections contained elsewhere in this report, as well as 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. We
caution that the foregoing list of risk factors is not exclusive and not to place undue reliance on forward-looking statements.
3
PART I
ITEM 1.
DESCRIPTION OF BUSINESS.
Overview
Eagle Bancorp Montana, Inc. (“Eagle” or the “Company”), is a Delaware corporation, and a bank holding company registered
under the Bank Holding Company Act of 1956 that holds 100% of the capital stock of Opportunity Bank of Montana (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. The Bank currently has 30 full-service branches and
32 automated teller machines located in our market areas and we participate in the Money Pass® ATM network.
We provide loan and deposit services to customers who are predominantly small businesses and individuals throughout
Montana. We are a diversified lender with a focus on residential mortgage loans, commercial real estate mortgage loans,
commercial business loans, agricultural loans and second mortgage/home equity loan products.
The Bank is headquartered at 1400 Prospect Avenue, Helena, Montana, 59601. Investor information for the Company may
be found at www.opportunitybank.com. The contents on or accessible through our website are not incorporated into this
report.
Acquisitions
As a continuing part of its growth strategy, the Company intends to enhance its market share in Montana through organic
growth and opportunistic acquisitions. Potential acquisitions are periodically evaluated by the Company's Merger
and Acquisition Committee.
In April 2022, the Company acquired First Community Bancorp, Inc. ("FCB"), a Montana corporation, and FCB's wholly-
owned subsidiary, First Community Bank, a Montana chartered commercial bank. 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.
In January 2020, the Company acquired Western Holding Company of Wolf Point, a Montana corporation (“WHC”), and
WHC’s wholly-owned subsidiary, Western Bank of Wolf Point, a Montana chartered commercial bank (“WB”) merged into
the Bank. In the transaction, Eagle acquired one retail branch in Wolf Point, Montana. The total consideration paid was $14.97
million and included cash consideration of $6.50 million and common stock issued of $8.47 million.
In January 2019, the Company acquired Big Muddy Bancorp, Inc. (“BMB”).This acquisition included four branches in
Townsend, Dutton, Denton and Choteau, Montana. The total consideration paid was $16.44 million of Eagle common stock
issued.
In January 2018, the Company acquired TwinCo, Inc. (“TwinCo”). This acquisition included two branches in Madison
County, Montana. The total consideration paid was $18.93 million and included cash consideration of $9.90 million and
common stock issued of $9.03 millio
Business Strategy
Our principal strategy is to continue our profitability through building a diversified loan portfolio and operating the Bank as
a full-service community bank that offers both retail and commercial loan and deposit products in all of its markets. We offer
mortgage loans, the majority of which are sold on the secondary market with loan servicing retained. We believe that this
focus will enable us to continue to grow our franchise, while maintaining our commitment to customer service, high asset
quality and sustained net earnings.
4
The following are the key elements of our business strategy:
●
Continue to diversify our portfolio by emphasizing our growth in commercial real estate and commercial business
loans, including agricultural loans, as a complement to our single family residential real estate lending while
maintaining disciplined credit underwriting standards. As of December 31, 2024, commercial real estate and
commercial business loans constituted approximately 78.60% of total loans;
●
Continue to emphasize the attraction and retention of core deposits;
●
Seek opportunities where presented to acquire other institutions or expand our branch network through opening new
branches and/or loan production offices;
●
Maintain our strong asset quality; and
●
Operate as a community-oriented financial institution that offers a broad array of financial products and services
with focus on the customer experience.
Our results of operations may be significantly affected by our ability to effectively implement our business strategy including
our plans for expansion through strategic acquisitions. If we are unable to effectively integrate and manage acquired or merged
businesses or attract significant new business through our branching efforts, our financial performance may be negatively
affected.
Market Areas
We conduct business through our headquarters in Helena, Montana, in addition to 28 other full-service branches located in
Ashland, Big Timber, Billings, Bozeman, Butte, Choteau, Culbertson, Denton, Dutton, Froid, Glasgow, Great Falls,
Hamilton, Helena, Hinsdale, Livingston, Missoula, Sheridan, Three Forks, Townsend, Twin Bridges, Winifred and Wolf
Point, Montana.
Montana is one of the largest states in terms of land mass but ranks as one of the least populated states. According to U.S.
Census Bureau data for 2020, it had a population of 1.08 million. Helena is Montana’s state capital and is the county seat of
Lewis and Clark County. It is located within 120 miles of four of Montana's other five largest cities: Missoula, Great Falls,
Bozeman and Butte, and is approximately midway between Yellowstone and Glacier National Parks. Significant contributors
to Montana's economy are agriculture, construction, energy production, forestry, healthcare, manufacturing, mining and the
service industry. Tourism is also a large part of Montana's economy and is highly influenced by national parks, ski resorts,
lakes and rural scenic areas.
The following table reflects our deposit market share and ranking by county:
County
Total Market Share
Percentage (1)
Deposit Market
Share Rank (1)
Broadwater, MT
100.00 %
1
Cascade, MT
1.54
8
Fergus, MT
6.36
5
Gallatin, MT
4.68
8
Lewis and Clark, MT
14.93
3
Madison, MT
37.65
2
Missoula, MT
1.56
10
Park, MT
9.94
4
Ravalli, MT
3.22
6
Roosevelt, MT
49.60
2
Rosebud, MT
7.68
3
Silver Bow, MT
13.12
4
Sweet Grass, MT
40.22
1
Teton, MT
18.80
2
Valley, MT
51.52
1
Yellowstone, MT
1.10
7
(1) Source: FDIC.gov-data as of June 30, 2024.
5
Competition
We face strong competition in our primary market areas for retail deposits and the origination of loans from both banks and
non-bank competitors. Historically, Montana was a unit banking state. This means that the ability of Montana state banks to
create branches was either prohibited or significantly restricted. As a result of unit banking, Montana has a significant number
of independent financial institutions serving a single community in a single location. While the state’s population is
approximately 1.13 million people, there are 44 credit unions in Montana as well as one state-chartered thrift institution and
35 commercial banks as of December 31, 2024. Our most direct competition for depositors has historically come from
national banks, super-regional banks, locally owned banks, nontraditional internet based banks, thrift institutions and credit
unions operating in our primary market areas. Competition in our primary market areas has increased in recent years. Our
competition for loans also comes from banks, thrifts, credit unions and government sponsored entities in addition to mortgage
bankers and brokers. Through successive acquisitions, the Company has entered several markets in Montana that are
predominantly reliant on agriculture. Accordingly, our lending activities in these markets focus on farm and ranch real estate,
annual operating lines of credit, and agriculture related term debt. Competition for agricultural loans comes from both
traditional Montana banks and an increasing number of nonbank lenders. These nonbank lenders range from government
sponsored entities to large national insurance companies.
Technological advances have made it possible for our competitors, including nonbank competitors, to offer products and
services that traditionally were banking products, and for financial institutions and other companies to provide electronic and
internet-based financial solutions, including online deposit accounts, electronic payment processing and marketplace lending,
without having a physical presence where their customers are located. In addition, many of our non-bank competitors are not
subject to the same extensive federal regulations that govern bank holding companies and federally insured banks. In many
cases, our competitors have substantially greater resources and lending limits and offer certain services that we do not
currently provide. Our principal market areas can be characterized as markets with moderately increasing incomes, relatively
low unemployment, increasing wealth (particularly in the growing resort areas such as Bozeman) and moderate population
growth.
Lending Activities
General
The Bank originates residential 1-4 family loans held for investment and originated for sale in the secondary market. The
Bank also originates commercial real estate, home equity, consumer and commercial loans. Residential 1-4 family loans
include residential mortgages and construction of residential properties. Commercial real estate loans include loans on multi-
family dwellings, nonresidential property, commercial construction and development and farmland loans. Home equity loans
include loans secured by the borrower’s primary residence. Typically, the property securing such loans is subject to a prior
lien. Consumer loans consist of loans secured by collateral other than real estate, such as automobiles, recreational vehicles
and boats. Personal loans and lines of credit are made on deposits held by the Bank and on an unsecured basis. Commercial
business loans consist of business loans and lines of credit on a secured and unsecured basis and include agriculture production
loans.
Fee Income
The Bank receives lending related fee income from a variety of sources. Its principal source of this income is from the
origination and servicing of sold mortgage loans. Fees generated from mortgage loan servicing generally consist of collecting
mortgage payments, maintaining escrow accounts, disbursing payments to investors and foreclosure processing for loans held
by others. Mortgage loan servicing fees were $5.11 million and $5.09 million for the years ended December 31, 2024 and
2023, respectively. Other loan related fee income for late charges and other ancillary fees were $1.30 million and
$1.38 million for the years ended December 31, 2024 and 2023, respectively.
Residential 1-4 Family Loans
The Bank originates residential 1-4 family mortgage loans secured by property located in the Bank’s market areas. At
December 31, 2024, the Bank's balance of 1-4 family mortgage loans was $153.72 million or 10.11% of total loans. The Bank
generally originates residential 1-4 family mortgage loans in amounts of up to 80.0% of the lesser of the appraised value or
the selling price of the mortgaged property without requiring private mortgage insurance. A mortgage loan originated by the
Bank, whether fixed rate or adjustable rate, can have a term of up to 30 years. The Bank holds substantially all of its adjustable
rate and its 8, 10 and 12-year fixed rate loans in portfolio. Adjustable rate loans limit the periodic interest rate adjustment and
the minimum and maximum rates that may be charged over the term of the loan. The Bank’s fixed rate 15-year and 20-year
6
loans are held in portfolio or sold in the secondary market depending on market conditions. Generally, all 30-year fixed rate
loans are sold in the secondary market. The volume of loan sales is dependent on the volume, type and term of loan
originations, as well as market conditions.
The Bank derives a significant portion of its noninterest income from servicing of loans that it has sold. The Bank offers
many of the fixed rate loans it originates for sale in the secondary market on a servicing retained basis. This means that we
process the borrower’s payments and send them to the purchaser of the loan. This retention of servicing enables the Bank to
increase fee income and maintain a relationship with the borrower. At December 31, 2024, the Bank had $2.02 billion in
residential 1-4 family mortgage loans and $152.14 million in other loan categories sold with servicing retained. The Bank
does not ordinarily purchase home mortgage loans from other financial institutions.
Property appraisals on real estate securing the Bank’s single-family residential loans are made by state certified and licensed
independent appraisers who are approved annually by the Board. Appraisals are performed in accordance with applicable
regulations and policies. The Bank generally obtains title insurance policies on all first mortgage real estate loans originated.
On occasion, refinancing of mortgage loans are approved using title reports instead of title insurance. Title reports are also
allowed on home equity loans. Borrowers generally remit funds with each monthly payment of principal and interest, to a
loan escrow account from which the Bank makes disbursements for such items as real estate taxes and hazard and mortgage
insurance premiums as they become due.
The Bank also lends funds for the residential 1-4 family construction. Residential 1-4 family construction loans are made
both to individual homeowners for the construction of their primary residence and, to a lesser extent, to local builders for the
construction of pre-sold houses or houses that are being built for sale in the future. Residential 1-4 family construction loans
accounted for $45.70 million or 3.01% of the Bank’s total loan portfolio at December 31, 2024.
Commercial Real Estate Loans
The Bank originates commercial real estate loans including loans on multi-family dwellings. Commercial real estate loans
made up 42.48% of the Bank’s total loan portfolio, or $645.96 million at December 31, 2024. The Bank’s commercial real
estate loans are primarily permanent loans secured by improved property such as office buildings, retail stores, commercial
warehouses and apartment buildings. The terms and conditions of each loan are tailored to the needs of the borrower and
based on the financial strength of the project and any guarantors. Generally, commercial real estate loans originated by the
Bank will not exceed 80.0% of the appraised value or the selling price of the property, whichever is less. Commercial real
estate loans are typically made with fixed rates of interest and 5 to 15-year maturities. Upon maturity, the loan is repaid or
the terms and conditions are renegotiated. Generally, all commercial real estate loans that we originate are secured by property
located in the state of Montana and within the market areas of the Bank. The Bank's largest single commercial real estate loan
at December 31, 2024 was originated by the Bank and participated 44.10% to another bank in Alaska. The Bank's share of
the total outstanding loan at December 31, 2024 was $13.81 million and it is collateralized by commercial real estate located
in Bozeman, Montana. At December 31, 2024, this loan is performing in accordance with its repayment terms.
The Bank also lends funds for commercial construction and development. Commercial construction and development loans
accounted for $124.21 million or 8.17% of the Bank’s total loan portfolio at December 31, 2024. In addition, the bank
originates loans secured by farm and ranch real estate. Farmland loans accounted for $146.61 million or 9.64% of the Bank’s
total loan portfolio at December 31, 2024.
Home Equity Loans
The Bank also originates home equity loans. These loans are secured by the borrowers’ primary residence, but are typically
subject to a prior lien, which may or may not be held by the Bank. At December 31, 2024, $97.54 million or 6.41% of our
total loans were home equity loans. Borrowers may use the proceeds from the Bank’s home equity loans for many purposes,
including home improvement, debt consolidation or other purchasing needs. The Bank offers fixed rate, fixed payment home
equity loans as well as variable and fixed rate home equity lines of credit. Fixed rate home equity loans typically have terms
of no longer than 15 years.
Home equity loans are secured by real estate but they have historically carried a greater risk than first lien residential
mortgages because of the existence of a prior lien on the property securing the loan, as well as the flexibility the borrower
has with respect to the loan proceeds. The Bank attempts to minimize this risk by maintaining conservative underwriting
policies on such loans. We generally make home equity loans for not more than 85.0% of appraised value of the underlying
real estate collateral, less the amount of any existing prior liens on the property securing the loan.
7
Consumer Loans
As part of its strategy to invest in higher yielding shorter term loans, the Bank emphasized growth of its consumer lending
portfolio in recent years. This portfolio includes personal loans secured by collateral other than real estate, unsecured personal
loans and lines of credit and loans secured by deposits held by the Bank. As of December 31, 2024, consumer loans totaled
$28.51 million or 1.88% of the Bank’s total loan portfolio. These loans consist primarily of auto loans, RV loans, boat loans,
personal loans and credit lines and deposit account loans. Consumer loans are originated in the Bank’s market areas and
generally have maturities of up to 7 years. For loans secured by savings accounts, the Bank will lend up to 90.0% of the
account balance on single payment loans and up to 100.0% for monthly payment loans.
Consumer loans have a shorter term and generally provide higher interest rates than residential loans. Consumer loans can be
helpful in improving the spread between average loan yield and cost of funds and at the same time improve the matching of
the maturities of rate sensitive assets and liabilities.
The underwriting standards employed by the Bank for consumer loans include a determination of the applicant’s credit history
and an assessment of the applicant’s ability to meet existing obligations and payments on the proposed loan. The stability of
the applicant’s monthly income may be determined by verification of gross monthly income from primary employment, and
additionally from any verifiable secondary income. Creditworthiness of the applicant is of primary consideration; however,
the underwriting process also includes a comparison of the value of the collateral in relation to the proposed loan amount.
Commercial Loans
Commercial business loans amounted to $144.04 million, or 9.47% of the Bank’s total loan portfolio at December 31,
2024. Agricultural production loans amounted to $134.35 million, or 8.83% of the Bank’s total loan portfolio at December
31, 2024. The Bank’s commercial business loans are traditional business loans and are not secured by real estate. Such loans
may be structured as unsecured lines of credit or may be secured by inventory, accounts receivable or other business assets.
Agricultural operating loans are generally secured with equipment, cattle, crops or other non-real property and at times the
underlying real property.
Commercial business loans of this nature usually involve greater credit risk than residential 1-4 family loans. The collateral
we receive is typically related directly to the performance of the borrower’s business which means that repayment of
commercial business loans is dependent on the successful operations and income stream of the borrower’s business. Such
risks can be significantly affected by economic conditions. In addition, commercial lending generally requires substantially
greater oversight efforts compared to residential real estate lending.
Loans to One Borrower
Under Montana law, commercial banks such as the Bank, are subject to certain exemptions and are allowed to select the
Office of the Comptroller of the Currency (“OCC”) formula used to determine limits on credit concentrations to single
borrowers to an amount equal to 15.0% of the institution’s total capital. As of December 31, 2024, the Bank’s limit to a single
borrower was $34.40 million. Our largest aggregation of loans to one borrower was approximately $34.58 million at
December 31, 2024. The total amount subject to the lending limit at December 31, 2024 was $18.99 million. This consisted
of seven loans: four commercial real estate loans each secured by a single property, two commercial loans secured by
equipment and one construction loan secured by a single property. The first commercial real estate loan had a principal
balance of $1.35 million at December 31, 2024. As of December 31, 2024, the principal balance on the second commercial
real estate loan was $1.38 million. The third commercial real estate loan had a principal balance of $11.02 million as of
December 31, 2024. However, another bank is 50.0% participating in this loan for $5.51 million. The fourth commercial real
estate loan had a principal balance of $601,000 as of December 31, 2024. The fifth commercial loan had a principal balance
of $55,000 as of December 31, 2024. The sixth commercial loan had a principal balance of $12,000 as of December 31,
2024. The seventh construction loan had a principal balance of $20.16 million as of December 31, 2024. However, another
bank is 50.0% participating in this loan for $10.08 million. At December 31, 2024, these loans were performing in accordance
with their terms. The Bank maintains the servicing for these loans.
Loan Solicitation and Processing
Our customary sources of mortgage loan applications include repeat customers, walk-ins and referrals from home builders
and real estate brokers. We also advertise in local newspapers and on local radio and television. We currently have the ability
to accept online mortgage loan applications through our website. Our branch managers and loan officers located at our
headquarters and in branches, have authority to approve certain types of loans when presented with a completed application.
8
Other loans must be approved at our main offices as disclosed below. Loan consultants or loan brokers are generally
not utilized for either residential or commercial lending activities.
After receiving a loan application from a prospective borrower, a credit report and verifications are obtained to confirm
specific information relating to the loan applicant’s employment, income and credit standing. When required by our policies,
an appraisal of the real estate intended to secure the proposed loan is undertaken by an independent fee appraiser. In
connection with the loan approval process, our staff analyzes the loan applications and the property involved. Officers and
branch managers are granted lending authority based on the nature of the loan and the managers’ level of experience. We
have established a series of loan committees to approve any loans which may exceed the lending authority of particular
officers or branch managers. Three Directors of the Board are required for approval of any loan, or aggregation of loans to a
single borrower, that currently exceeds $7.50 million.
Loan applicants are promptly notified of the decision by a letter setting forth the terms and conditions of the decision. If
approved, these terms and conditions include the amount of the loan, interest rate basis, amortization term, a brief description
of real estate to be mortgaged, tax escrow and the notice of requirement of insurance coverage to be maintained. We generally
require title insurance on first mortgage loans and fire and casualty insurance on all properties securing loans, which insurance
must be maintained during the entire term of the loan.
Loan Commitments
We generally provide commitments to fund fixed and adjustable-rate single-family mortgage loans for periods up to 60 days
at a specified term and interest rate, and other loan categories for shorter time periods. The total amount of loans in process
of origination for sale into the secondary market with interest rate lock commitments was $10.16 million as of December 31,
2024.
Investment Activities
General
State-chartered commercial banks such as the Bank have the authority to invest in various types of investment securities,
including United States Treasury obligations, securities of various Federal agencies (including securities collateralized by
mortgages), certificates of deposits of insured banks and savings institutions, municipal securities, corporate debt securities
and loans to other banking institutions.
Eagle maintains liquid assets that may be invested in specified short-term securities and other investments. Liquidity levels
may be increased or decreased depending on the yields on investment alternatives. They may also be increased based on
management’s judgment as to the attractiveness of yields available in relation to other opportunities. Liquidity levels can also
change based on management’s expectation of future yield levels, as well as management’s projections as to the short-term
demand for funds to be used in the Bank’s loan origination and other activities.
Investment Policies
The investment policy of Eagle, which is established by the Board, is designed to foster earnings and liquidity within prudent
interest rate risk guidelines, while complementing the Bank’s lending activities. The policy provides for available-for-sale
(including those accounted for under ASC Topic 825), held-to-maturity and trading classifications. However, Eagle currently
does not hold any securities for purposes of trading or held-to-maturity. The policy permits investments in high credit quality
instruments with diversified cash flows while permitting us to maximize total return within the guidelines set forth in our
interest rate risk and liquidity management policies. Permitted investments include but are not limited to U.S. government
obligations, government agency or government-sponsored agency obligations, state, county and municipal obligations, asset-
backed securities and mortgage-backed securities (“MBSs”). Collateralized mortgage obligations (“CMOs”), investment
grade corporate debt securities and commercial paper are also included.
Our investment policy also includes several specific guidelines and restrictions to ensure adherence with safe and sound
activities. The policy prohibits investments in high-risk mortgage derivative products (as defined within the policy) without
prior approval from the Board. To secure such approval, management must demonstrate the business advantage of such
investments.
We do not participate in the use of off-balance sheet derivative financial instruments, except interest rate caps and floors.
Further, Eagle does not invest in securities which are not rated investment grade at time of purchase.
9
The Board, through its asset/liability committee, has charged the President and CEO with implementation of the investment
policy. All transactions are reported to the Board monthly, as well as the current composition of the portfolio, including
market values and unrealized gains and losses.
Sources of Funds
General
Deposits are the major source of our funds for lending and other investment purposes. Borrowings are also used to compensate
for reductions in the availability of funds from other sources. In addition to deposits and borrowings, we derive funds from
loans and investment securities principal payments. Funds are also derived from proceeds for the maturity, call and sale of
investment securities and from the sale of loans. Loan and investment securities principal payments are a relatively stable
source of funds, while loan prepayments and deposit inflows are significantly influenced by general interest rates and financial
market conditions.
Deposits
We offer a variety of deposit accounts. Deposit account terms vary, primarily as to the required minimum balance amount,
the amount of time that the funds must remain on deposit and the applicable interest rate.
Our current deposit products include certificates of deposit accounts ranging in terms from 90 days to five years, as well as,
checking, savings and money market accounts. Individual retirement account (“IRA”) certificates are included in certificates
of deposit. The Bank may also enter into fixed rate brokered certificates when rates are competitive with other funding
sources.
Deposits are obtained primarily from residents of Montana. We believe we are able to attract deposit accounts by offering
outstanding service, competitive interest rates, convenient locations and service hours. We use traditional methods of
advertising to attract new customers and deposits, including radio, television, print media advertising, and sales training.
Management believes that nonresidents of Montana hold an insignificant number and amount of deposit accounts.
We pay interest rates on deposits which are competitive in our market. Interest rates on deposits are set by senior management,
based on a number of factors, including: projected cash flow; a current survey of a selected group of competitors’ rates for
similar products; external data which may influence interest rates; investment opportunities and loan demand; and scheduled
certificate maturities and loan and investment repayments.
Borrowings
Deposits are the primary source of funds for our lending and investment activities and for general business purposes.
However, as the need arises, or in order to take advantage of funding opportunities, we also borrow funds in the form of
advances from FHLB of Des Moines ("FHLB") to supplement our supply of lendable funds and to meet deposit withdrawal
requirements. We have Federal funds lines of credit with Pacific Coast Bankers Bank (“PCBB”), PNC Financial Services
Group, Inc. (“PNC”), United Bankers’ Bank (“UBB”) and Texas Independent Bank ("TIB"). In addition, Eagle has a line of
credit with Bell Bank.
In January 2022, the Company completed the issuance of $40.00 million 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. A portion of the net proceeds were used to redeem $10.00 million of senior notes due
in February 2022. In June 2020, the Company completed the issuance of $15.00 million 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%. Starting July 1, 2025, interest will accrue at a floating rate per annum
equal to a benchmark rate, which is expected to be the three-month term SOFR plus a spread of 509.0 basis points. In
September 2005, the Company formed a special purpose subsidiary, Eagle Bancorp Statutory Trust I (the “Trust”), for the
purpose of issuing trust preferred securities in the amount of $5.16 million. The Company issued subordinated debentures to
the Trust, and the coupon on the debentures matches the dividend payment on the trust preferred securities. Upon the closing
of the second-step conversion and reorganization, we assumed the obligations of our predecessor in connection with the
subordinated debentures and trust preferred securities.
10
Subsidiary Activity
We are permitted to invest in the capital stock of, or originate secured or unsecured loans to, subsidiary corporations. The
following are subsidiaries of the Company: Opportunity Bank of Montana, Eagle Bancorp Statutory Trust I, Opportunity
Financial Services, Inc., formerly Western Financial Services, and Opportunity Housing Fund, LLC, which is a subsidiary of
the Bank.
Employees and Human Capital Resources
Opportunity Bank of Montana is committed to providing equal employment opportunity and maintaining an environment
that encourages appropriate conduct among all persons and fosters respect for and inclusion of individuals with diverse
perspectives, work experiences, lifestyles, and cultures. Embracing equal employment opportunity and the diversity and
inclusion of our workforce helps the Bank achieve its mission and each of us to live our core values.
As of December 31, 2024, we had 372 full-time employees and 10 part-time employees. The employees are not represented
by a collective bargaining unit. We believe our relationship with our employees to be good. The Company is led by a female
CEO. The executive team is comprised of 5 females and 3 males.
The Board of Directors oversees the strategic management of our human capital resources. The Human Resources
Department's day-to-day responsibility is managing our human capital resources.
Retention and Benefits
Employee retention helps us operate efficiently and achieve one of our business objectives, which is being a high-level service
provider. We believe our commitment to living out our core values, actively prioritizing concern for our employees’ well-
being, supporting our employees’ career goals, offering competitive wages and providing valuable benefits aids in retention
of our top-performing employees. We promote the health and wellness of our employees and strive to keep the employee
portion of health care premiums to a minimum. In addition, nearly all of our employees are shareholders of the Company
through participation in our ESOP, which aligns employee and shareholder interests by providing stock ownership on a tax-
deferred basis at no investment cost to our employees.
Growth and Development
We believe that the success of our business is largely due to the quality of our employees, the development of each employee's
full potential, and our ability to provide timely and satisfying recognition and rewards. Amid a competitive labor market, we
continue to develop and deliver job specific training programs, leadership and coaching opportunities, career development
opportunities including tuition reimbursement, and the retention of top talent through succession planning. Whenever
possible, we strive to fill vacancies from within. In addition, our internship programs, in partnership with state colleges and
technical schools, help ensure a steady pipeline of accomplished talent.
Health and Safety
The safety, health and wellness of our employees is a top priority. Robust wellness initiatives supporting a healthy lifestyle
are encouraged through an established employee wellness program. All employees and their dependents have access to an
employee assistance program which provides expert resources in support of employee family work/life services,
emotional/physical well-being, financial and legal assistance.
Community Involvement
Providing a meaningful impact to our communities has always been a focus for our Company. We actively support causes
that are close to our hearts and demonstrate that being an integral part of our Montana communities means rolling up our
sleeves and lending a hand wherever needed. Employees are encouraged to become involved in their communities and are
offered paid time off for participating in bank-sponsored events. Employees may also take 12 hours of paid time off per
calendar year during normal working hours for individual volunteer efforts.
11
Regulation
Set forth below is a brief description of certain laws and regulations applicable to Eagle and the Bank. These descriptions of
laws and regulations as well as those contained elsewhere do not purport to be complete and are qualified in their entirety by
reference to applicable laws and regulations. Legislative or regulatory changes in the future could adversely affect our
operations or financial condition.
General
As a state-chartered commercial bank, the Bank is subject to extensive regulation, examination and supervision by the Federal
Reserve Bank of Minneapolis ("FRB") and Montana Division of Banking and Financial Institutions. The Bank is a member
of the FRB System and its deposit accounts are insured up to applicable limits by the Deposit Insurance Fund, which is
administered by the Federal Deposit Insurance Corporation (“FDIC”). There are periodic examinations to evaluate the Bank’s
safety and soundness and compliance with various regulatory requirements. Under certain circumstances, the FDIC may also
examine the Bank. This regulatory structure is intended primarily for the protection of the insurance fund and depositors. The
regulatory structure also gives the regulatory authorities extensive discretion in connection with their supervisory and
enforcement activities and examination policies, including policies with respect to the classification of assets and the
establishment of adequate allowance for credit losses for regulatory purposes. Eagle, as a bank holding company, is required
to file certain reports with, and is subject to examination by, and must otherwise comply with the rules and regulations of the
FRB. Eagle is also subject to the rules and regulations of the Securities and Exchange Commission (“SEC”) under the federal
securities laws. See Holding Company Regulation section below.
Federal Regulation of Commercial Banks
General
Deposits in the Bank, a Montana state-chartered commercial bank, are insured by the FDIC. The bank has no branches in any
other state. The Bank is subject to regulation and supervision by the Montana Department of Administration’s Banking and
Financial Institutions Division and the FRB. The federal laws that apply to the Bank regulate, among other things, the scope
of its business, its investments, its reserves against deposits, the timing of the availability of deposited funds, and the nature,
amount of, and collateral for loans. Federal laws also regulate community reinvestment and insider credit transactions and
impose safety and soundness standards.
The Bank’s general permissible lending limit for loans-to-one-borrower is 15.0% of unimpaired capital and surplus. An
additional amount may be lent, equal to 10.0% of total capital, if the loan is fully secured by certain readily marketable
collateral, which is defined to include certain financial instruments and bullion but generally does not include real estate.
The federal banking agencies have adopted guidelines establishing safety and soundness standards on such matters as loan
underwriting and documentation, asset quality, earnings standards, internal controls and audit systems, interest rate risk
exposure and compensation and other employee benefits. If the appropriate federal banking agency determines that an
institution fails to meet any standard prescribed by the guidelines, the agency may require the institution to submit to the
agency an acceptable plan to achieve compliance with the standard. If an institution fails to submit or implement an acceptable
plan, the appropriate federal banking agency may issue an enforceable order requiring correction of the deficiencies.
Federal Home Loan Bank System
The Bank is a member of the FHLB of Des Moines. FHLB of Des Moines is one of 11 regional FHLBs that administer the
home financing credit function of banks, credit unions and savings institutions. Each FHLB serves as a reserve or central
bank for its members within its assigned region. It is funded primarily from proceeds derived from the sale of consolidated
obligations of the FHLB System. It makes loans or advances to members in accordance with policies and procedures,
established by the Board of Directors of the FHLB, which are subject to the oversight of the Federal Housing Finance Board.
All advances from the FHLB are required to be fully secured by sufficient collateral as determined by the FHLB. In addition,
all long-term advances are required to provide funds for residential home financing. As a member, the Bank is required to
purchase and maintain a specified amount of shares of capital stock in the FHLB of Des Moines.
The FHLBs continue to contribute to low- and moderately-priced housing programs through direct loans or interest subsidies
on advances targeted for community investment and low- and moderate-income housing projects. These contributions have
affected adversely the level of FHLB dividends paid and could continue to do so in the future. These contributions could also
12
have an adverse effect on the value of FHLB stock in the future. A reduction in value of the Bank’s FHLB stock may result
in a corresponding reduction in the Bank’s capital.
Federal Reserve System
The Federal Reserve System requires all depository institutions to maintain noninterest-bearing reserves at specified levels
against their checking and non-personal time deposits. The balances maintained to meet the reserve requirements imposed
by the Federal Reserve System may be used to satisfy liquidity requirements.
As a member of the Federal Reserve System, the Bank is required to maintain a minimum level of investment in FRB stock
based on a specific percentage of its capital and surplus. A reduction in value of the Bank’s FRB stock may result in a
corresponding reduction in the Bank’s capital.
Insurance of Deposit Accounts
Deposit accounts at the Bank are insured by the FDIC, generally up to a maximum of $250,000 per separately insured
depositor and up to a maximum of $250,000 for self-directed retirement accounts. The Bank’s deposits, therefore, are subject
to FDIC deposit insurance assessments. Assessments paid to the FDIC by the Bank and other banking institutions are used
to fund the FDIC’s Federal Deposit Insurance Fund.
Insurance of Accounts and Regulation by the FDIC
As insurer of deposits in banks, the FDIC imposes deposit insurance premiums and is authorized to conduct examinations of
and to require reporting by FDIC-insured institutions. It also may prohibit any FDIC-insured institution from engaging in any
activity the FDIC determines by regulation or order to pose a serious risk to the fund. The FDIC also has the authority to
initiate enforcement actions against savings institutions, after giving FRB an opportunity to take such action. Insurance of
deposits may be terminated by the FDIC upon a finding that the institution has engaged in unsafe or unsound practices, is in
an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition
imposed by the FDIC or written agreement with the FDIC. We are not aware of any practice, condition or violation that might
lead to the termination of the Bank’s deposit insurance.
The FDIC assesses deposit insurance premiums on each insured institution quarterly based on annualized rates for one of
four risk categories. The assessment base for calculating deposit insurance assessments is an institution's average total assets
minus its average tangible equity (defined as Tier 1 capital). Under the FDIC’s risk-based assessment system, insured
institutions are assigned to one of four risk categories based on supervisory evaluations, regulatory capital levels and certain
other risk factors. Rates are based on each institution’s risk category and certain specified risk adjustments. Stronger
institutions pay lower rates while riskier institutions pay higher rates. The assessment rate schedule establishes assessments
ranging from 2.5 to 45 basis points. The FDIC may increase or decrease its rates for each quarter by 2 basis points without
further rulemaking. In an emergency, the FDIC may also impose a special assessment.
A significant increase in insurance premiums would likely have an adverse effect on the operating expenses and results of
operations of the Bank. There can be no prediction as to what insurance assessment rates will be in the future. In addition to
the assessment for deposit insurance, through 2019, institutions were required to make payments on bonds issued in the late
1980s by the Financing Corporation to recapitalize a predecessor deposit insurance fund.
Capital Requirements
Federal regulations require Federal Reserve member banks, such as Opportunity Bank of Montana and all other FDIC insured
depository institutions to meet several minimum capital standards: a common equity Tier 1 capital to risk-based assets ratio
of 4.5%, a Tier 1 capital to risk-based assets ratio of 6.0%, a total capital to risk-based assets of 8.0%, and a 4.0% Tier 1
capital to total average assets leverage ratio.
Common equity Tier 1 capital is generally defined as common stockholders’ equity and retained earnings. Tier 1 capital is
generally defined as common equity Tier 1 and additional Tier 1 capital. Additional Tier 1 capital includes certain
noncumulative perpetual preferred stock and related surplus and minority interests in equity accounts of consolidated
subsidiaries. Total capital includes Tier 1 capital (common equity Tier 1 capital plus additional Tier 1 capital) and Tier 2
capital. Tier 2 capital is comprised of capital instruments and related surplus meeting specified requirements, and may include
cumulative preferred stock and long-term perpetual preferred stock, mandatory convertible securities, intermediate preferred
stock and subordinated debt.
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Also included in Tier 2 capital is the allowance for credit losses limited to a maximum of 1.25% of risk-weighted assets and,
for institutions that have exercised an opt-out election regarding the treatment of accumulated other comprehensive income
(“AOCI”), up to 45% of net unrealized gains on available-for-sale equity securities with readily determinable fair market
values. Institutions that have not exercised the AOCI opt-out have AOCI incorporated into common equity Tier 1 capital
(including unrealized gains and losses on available-for-sale-securities). The Bank exercised its AOCI opt-out election.
Calculation of all types of regulatory capital is subject to deductions and adjustments specified in the regulations.
In determining the amount of risk-weighted assets for purposes of calculating risk-based capital ratios, all assets, including
certain off-balance sheet assets (e.g., recourse obligations, direct credit substitutes, residual interests) are multiplied by a risk
weight factor assigned by the regulations based on the risks believed inherent in the type of asset. Higher levels of capital are
required for asset categories believed to present greater risk. For example, a risk weight of 0% is assigned to cash and U.S.
government securities, a risk weight of 50% is generally assigned to prudently underwritten first lien 1-4 family residential
mortgage loans, a risk weight of 100% is assigned to commercial and consumer loans, a risk weight of 150% is assigned to
certain past due loans and a risk weight of between 0% to 600% is assigned to permissible equity interests, depending on
certain specified factors.
In addition to establishing the minimum regulatory capital requirements, the regulations limit capital distributions and certain
discretionary bonus payments to management if the institution does not hold a “capital conservation buffer” consisting of
2.5% of common equity Tier 1 capital to risk-weighted assets above the amount necessary to meet each of its minimum risk-
based capital requirements. The Bank’s actual capital ratios are set out in Item 7. “Management’s Discussion and Analysis
of Financial Condition and Results of Operations.”
Prompt Corrective Action
Federal law establishes a prompt corrective action framework to resolve the problems of undercapitalized depository
institutions. The Federal Reserve has adopted regulations to implement the prompt corrective action legislation. Those
regulations were amended effective January 1, 2015 to incorporate the previously mentioned increased regulatory capital
standards that were effective on the same date. An institution is deemed to be “well capitalized” if it has a total risk-based
capital ratio of 10.0% or greater, a Tier 1 risk-based capital ratio of 8.0% or greater, a leverage ratio of 5.0% or greater and a
common equity Tier 1 ratio of 6.5% or greater. An institution is “adequately capitalized” if it has a total risk-based capital
ratio of 8.0% or greater, a Tier 1 risk-based capital ratio of 6.0% or greater, a leverage ratio of 4.0% or greater and a common
equity Tier 1 ratio of 4.5% or greater. An institution is “undercapitalized” if it has a total risk-based capital ratio of less than
8.0%, a Tier 1 risk-based capital ratio of less than 6.0%, a leverage ratio of less than 4.0% or a common equity Tier 1 ratio
of less than 4.5%. An institution is deemed to be “significantly undercapitalized” if it has a total risk-based capital ratio of
less than 6.0%, a Tier 1 risk-based capital ratio of less than 4.0%, a leverage ratio of less than 3.0% or a common equity Tier
1 ratio of less than 3.0%. An institution is considered to be “critically undercapitalized” if it has a ratio of tangible equity (as
defined in the regulations) to total assets that is equal to or less than 2.0%.
Generally, a receiver or conservator must be appointed for an institution that is “critically undercapitalized” within specific
time frames. The regulations also provide that a capital restoration plan must be filed with the FDIC within 45 days of the
date a commercial bank receives notice that it is “undercapitalized,” “significantly undercapitalized” or “critically
undercapitalized.” Various restrictions, such as restrictions on capital distributions and growth, also apply to
“undercapitalized” institutions. The Federal Reserve may also take any one of a number of discretionary supervisory actions
against undercapitalized institutions, including the issuance of a capital directive and the replacement of senior executive
officers and directors.
The Bank was classified as “well-capitalized” under the prompt corrective action framework as of December 31, 2024.
Limitations on Capital Distributions
A principal source of the parent holding company’s cash is from dividends received from the Bank, which are subject to
government regulation and limitation. Regulatory authorities may prohibit banks and bank holding companies from paying
dividends in a manner that would constitute an unsafe or unsound banking practice. In addition, a bank may not pay cash
dividends if that payment could reduce the amount of its capital below that necessary to meet minimum applicable regulatory
capital requirements. The Bank is subject to Montana state law and, in certain circumstances, Montana law places limits or
restrictions on a bank’s ability to declare and pay dividends. Additionally, current guidance from the FRB provides, among
other things, that dividends per share on the Company’s common stock generally should not exceed earnings per common
share, measured over the previous four fiscal quarters. Federal regulations also limit banks’ ability to issue dividends by
imposing a capital conservation buffer requirement.
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Transactions with Affiliates
The Bank’s authority to engage in transactions with “affiliates” is limited by regulations and by Sections 23A and 23B of the
Federal Reserve Act as implemented by the FRB’s Regulation W. The term “affiliates” for these purposes generally means
any company that controls or is under common control with an institution. Eagle and the Bank are separate and distinct legal
entities. Eagle is an affiliate of the Bank. In general, transactions with affiliates must be on terms that are as favorable to the
institution as comparable transactions with non-affiliates. In addition, certain types of transactions, i.e. “covered transactions,”
are restricted to an aggregate percentage of the institution’s capital. Collateral in specified amounts must be provided by
affiliates in order to receive loans from an institution. In addition, banks are prohibited from lending to any affiliate that is
engaged in activities that are not permissible for bank holding companies and no bank may purchase the securities of any
affiliate other than a subsidiary.
Our authority to extend credit to executive officers, directors and 10.0% or greater shareholders (“insiders”), as well as entities
controlled by these persons, is governed by Sections 22(g) and 22(h) of the Federal Reserve Act and its implementing
regulation, FRB Regulation O. Among other things, loans to insiders must be made on terms substantially the same as those
offered to unaffiliated individuals and not involve more than the normal risk of repayment. There is an exception for bank-
wide lending programs that do not discriminate in favor of insiders. Regulation O also places individual and aggregate limits
on the amount of loans that may be made to insiders based, in part, on the institution’s capital position, and requires that
certain prior board approval procedures be followed. Extensions of credit to executive officers are subject to additional
restrictions on the types and amounts of loans that may be made. At December 31, 2024, we were in compliance with these
regulations.
Holding Company Regulation
General
Eagle is a bank holding company subject to regulatory oversight of the FRB. Eagle is required to register and file reports with
the FRB and is subject to regulation and examination by the FRB. In addition, the FRB has enforcement authority over Eagle
and its nonbank institution subsidiaries which also permits the FRB to restrict or prohibit activities that are determined to
present a serious risk to the Bank.
Mergers and Acquisitions
Eagle must obtain approval from the FRB before acquiring more than 5.0% of the voting stock of another bank or bank
holding company or acquiring such an institution or holding company by merger, consolidation or purchase of its assets. In
evaluating an application for Eagle to acquire control of a bank, the FRB would consider the financial and managerial
resources and future prospects of Eagle and the target institution, the effect of the acquisition on the risk to the Deposit
Insurance Fund, the convenience and the needs of the community and competitive factors.
Eagle obtained the necessary approvals from the FRB and the Montana Division of Banking and Financial Institutions before
acquiring each of its previous acquisitions.
Acquisition of Eagle
Under the Bank Holding Company Act and the Change in Bank Control Act, a notice or application must be submitted to the
FRB if any person (including a company), or a group acting in concert, seeks to acquire 10.0% or more of Eagle’s outstanding
voting stock, unless the FRB has found that the acquisition will not result in a change in control of Eagle. In acting on such
a notice or application, the FRB must take into consideration certain factors, including the financial and managerial resources
of the acquirer and the anti-trust effect of the acquisition. Any company that acquires control will be subject to regulation as
a bank holding company.
Federal Securities Laws
Eagle’s common stock is registered with the SEC under the Exchange Act. We are subject to the information, proxy
solicitation, insider trading restrictions and other requirements under the Exchange Act. Our Annual Reports on Form 10-K,
Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports, and proxy statements
filed with or furnished to the SEC, are available free of charge through our Internet website, www.opportunitybank.com, as
soon as reasonably practical after we have electronically filed such material with, or furnished it to, the SEC.
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The SEC maintains an Internet site that contains reports, proxy and information statements and other information regarding
issuers that file electronically with the SEC at www.sec.gov. The contents on or accessible through, these websites are not
incorporated into this filing. Further, our references to the URLs for these websites are intended to be inactive textual
references only.
Sarbanes-Oxley Act of 2002
The Sarbanes-Oxley Act addresses, among other issues, corporate governance, auditing and accounting, executive
compensation and enhanced and timely disclosure of corporate information. As directed by the Sarbanes-Oxley Act, our
Chief Executive Officer and Chief Financial Officer are required to certify that our quarterly and annual reports do not contain
any untrue statement of a material fact. The rules adopted by the Securities and Exchange Commission under the Sarbanes-
Oxley Act have several requirements, including having these officers certify that: they are responsible for establishing,
maintaining and regularly evaluating the effectiveness of our internal control over financial reporting; they have made certain
disclosures to our auditors and the audit committee of the board of directors about our internal control over financial reporting;
and they have included information in our quarterly and annual reports about their evaluation and whether there have been
changes in our internal control over financial reporting or in other factors that could materially affect internal control over
financial reporting.
ITEM 1A.
RISK FACTORS
Risks Related to Economic and Market Conditions
Our business may be adversely affected by conditions in the financial markets and economic conditions generally and
in our market areas in particular.
Our financial performance generally, and in particular the ability of our borrowers to pay interest on and repay principal of
outstanding loans and the value of collateral securing those loans, as well as demand for loans and other products and services
we offer and whose success we rely on to drive our future growth, is highly dependent upon the business environment in the
markets in which we operate, principally in Montana, and in the United States as a whole. Unlike larger banks that are more
geographically diversified, we provide banking and financial services to customers primarily in Montana. The economic
conditions in our local markets may be different from, and in some instances worse than, the economic conditions in the
United States as a whole. Some elements of the business environment that affect our financial performance include short-
term and long-term interest rates, the prevailing yield curve, inflation and price levels, monetary policy, unemployment and
strength of the domestic economy and local economy in the markets in which we operate. Unfavorable market conditions can
result in deterioration in the credit quality of our borrowers and the demand for our products and services, an increase in the
number of loan delinquencies, defaults and charge-offs, additional provisions for credit losses, adverse asset values and an
overall material adverse effect on the quality of our loan portfolio. Unfavorable or uncertain economic and market conditions
can be caused by declines in economic growth, business activity or investor or business confidence; limitations on the
availability or increases in the cost of credit and capital; increases in inflation or interest rates; high unemployment; natural
disasters; state or local government insolvency; or a combination of these or other factors.
In recent years, economic growth and business activity across a wide range of industries and regions in the U.S. has been
slow and uneven. There are continuing concerns related to the level of U.S. government debt and fiscal actions that may be
taken to address that debt, further declining oil prices and ongoing federal budget negotiations that may have a destabilizing
effect on financial markets. There can be no assurance that economic conditions will continue to improve, and these
conditions could worsen. Economic pressure on consumers and uncertainty regarding continuing economic improvement
may result in changes in consumer and business spending, borrowing and saving habits. Such conditions could have a material
adverse effect on the credit quality of our loans or our business, financial condition or results of operations.
Additionally, financial markets may be adversely affected by the current or anticipated impact of military conflict, including
escalating military tension between Russia and Ukraine, the Middle East, terrorism and other geopolitical events.
Our success depends, to a certain extent, upon global, domestic and local economic and political conditions, as well as
governmental monetary policies. Conditions such as changes in interest rates, money supply, levels of employment and other
factors beyond our control may have a negative impact on economic activity. Any contraction of economic activity, including
an economic recession, may adversely affect our asset quality, deposit levels and loan demand and, therefore, our earnings.
In particular, interest rates are highly sensitive to many factors that are beyond our control, including global, domestic and
local economic conditions and the policies of various governmental and regulatory agencies and, specifically, the Federal
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Reserve. Throughout 2023 the Federal Open Market Committee (“FOMC”) raised the target range for the federal funds rate
on four separate occasions, citing inflationary pressures. The last Federal Funds Target rate change occurred on July 26, 2023,
and the FOMC has since adopted a cautious approach as inflationary pressures have moderated but remain uncertain.
Forecasts for 2024 indicate potential interest rate reductions, but persistent inflation may either delay reductions or may call
for further rate increases by the FOMC.
The tightening of the Federal Reserve’s monetary policies, including increases in the target range for the federal funds rate
as well as the conclusion of the Federal Reserve’s tapering of asset purchases, together with ongoing economic and
geopolitical instability, increases the risk of an economic recession. Although forecasts have varied, the potential of slowing
economic growth and persistent inflation could lead to the contraction of the U.S. gross domestic output in 2024. Any such
downturn, especially domestically and in the regions in which we operate, may adversely affect our asset quality, deposit
levels, loan demand and results of operations.
As a result of the economic and geopolitical factors discussed above, financial institutions also face heightened credit risk,
among other forms of risk. Of note, because we have a significant amount of real estate loans, decreases in real estate values
could adversely affect the value of property used as collateral, which, in turn, can adversely affect the value of our loan and
investment portfolios. Adverse economic developments, specifically including inflation-related impacts, may have a negative
effect on the ability of our borrowers to make timely repayments of their loans or to finance future home purchases. Moreover,
while commercial real estate values have stabilized as demand has returned to pre-pandemic levels in several markets, the
outlook for commercial real estate remains dependent on the broader economic environment and, specifically, how major
subsectors respond to a rising interest rate environment and higher prices for commodities, goods and services. In each case,
credit performance over the medium- and long-term is susceptible to economic and market forces and therefore forecasts
remain uncertain. Instability and uncertainty in the commercial and residential real estate markets, as well as in the broader
commercial and retail credit markets, could have a material adverse effect on our financial condition and results of operations.
Declines in home values could decrease our loan originations and increase delinquencies and defaults.
Declines in home values in our markets could adversely impact results from operations. Like all financial institutions, we are
subject to the effects of any economic downturn, and in particular, a significant decline in home values would likely lead to
a decrease in new home equity loan originations and increased delinquencies and defaults in both the consumer home equity
loan and residential real estate loan portfolios and result in increased losses in these portfolios. Declines in the average sale
prices of homes in our primary markets could lead to higher credit losses on loans.
Changes in interest rates could adversely affect our results of operations and financial condition.
Our results of operations and financial condition are significantly affected by changes in interest rates. Our results of
operations depend substantially on our net interest income, which is the difference between the interest income we earn on
our interest-earning assets, such as loans and securities, and the interest expense we pay on our interest-bearing liabilities,
such as deposits, borrowings and trust preferred securities.
Changes in interest rates may also affect the average life of loans and mortgage-related securities. Decreases in interest rates
can result in increased prepayments of loans and mortgage-related securities, as borrowers refinance to reduce their borrowing
costs. Under these circumstances, we are subject to reinvestment risk to the extent that we are unable to reinvest the cash
received from such prepayments at rates that are comparable to the rates on existing loans and securities. Additionally,
increases in interest rates may decrease loan demand and make it more difficult for borrowers to repay adjustable rate loans.
Also, increases in interest rates may extend the life of fixed rate assets, which would restrict our ability to reinvest in higher
yielding alternatives, and may result in customers withdrawing certificates of deposit early so long as the early withdrawal
penalty is less than the interest they could receive as a result of the higher interest rates.
Changes in interest rates also affect the current fair value of our interest-earning securities portfolio. Generally, the value of
securities moves inversely with changes in interest rates.
We may be impacted by the retirement of London Interbank Offered Rate (“LIBOR”) as a reference rate.
Many of our lending products, securities, derivatives, and other financial transactions utilize a benchmark rate, such as
LIBOR, to determine the applicable interest rate or payment amount. The U.K. Financial Conduct Authority and the ICE
Benchmark Administration have announced that the publication of the most commonly used U.S. Dollar LIBOR tenors will
cease to be provided or cease to be representative after June 30, 2023. The publication of all other LIBOR settings ceased to
be provided or ceased to be representative as of December 31, 2021.
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The Adjustable Interest Rate (LIBOR) Act (LIBOR Act), enacted in March 2022, provides a statutory framework to replace
U. S. Dollar LIBOR with a benchmark rate based on the Secured Overnight Financing Rate (“SOFR”) for contracts governed
by U.S. law that have no fallbacks or fallbacks that would require the use of a poll or LIBOR-based rate, and in December
2022, the FRB adopted rules which identify different SOFR-based replacement rates for derivative contracts, for cash
instruments such as floating-rate notes and preferred stock, for consumer loans, for certain government-sponsored enterprise
contracts and for certain asset-backed securities. We continue to monitor market developments and regulatory updates related
to the cessation of LIBOR. As the transition from LIBOR is ongoing, there continues to be uncertainty as to the ultimate
effect of the transition on the financial markets for LIBOR-linked financial instruments.
The discontinuation of a benchmark rate, changes in a benchmark rate, or changes in market perceptions of the acceptability
of a benchmark rate, including LIBOR, could, among other things, adversely affect the value of and return on certain of our
financial instruments or products, result in changes to our risk exposures, or require renegotiation of previous transactions.
In addition, any such discontinuation or changes, whether actual or anticipated, could result in market volatility, increased
compliance, legal and operational costs, and risks associated with customer disclosures and contract negotiations. Although
the LIBOR Act includes safe harbors if the FRB-identified SOFR-based replacement rate is selected, these safe harbors are
untested. As a result, and despite the enactment of the LIBOR Act, for the most commonly used U.S. Dollar LIBOR settings,
the use or selection of a successor rate could also expose us to risks associated with disputes with customers and other market
participants in connection with implementing LIBOR fallback provisions.
Strong competition may limit growth and profitability.
Competition in the banking and financial services industry is intense. We compete with commercial banks, savings
institutions, mortgage brokerage firms, credit unions, finance companies, mutual funds, insurance companies, and brokerage
and investment banking firms operating locally and elsewhere. Many of these competitors (whether regional or national
institutions) have substantially greater resources and lending limits than we have and may offer certain services that we do
not or cannot provide. Our profitability depends upon our ability to successfully compete in our market areas.
We are subject to physical and financial risks associated with climate change and other weather and natural disaster
impacts.
The current and anticipated effects of climate change are creating an increasing level of concern for the state of the global
environment. As a result, political and social attention to the issue of climate change has increased. In recent years,
governments across the world have entered into international agreements to attempt to reduce global temperatures, in part by
limiting greenhouse gas emissions. Although the U.S. rejoined the Paris Agreement, effective as of February 19, 2021, and
the U.S. Congress, state legislatures and federal and state regulatory agencies have continued to propose and advance
numerous legislative and regulatory initiatives seeking to mitigate the effects of climate change, each of which may result in
the imposition of taxes and fees, the required purchase of emission credits, and the implementation of significant operational
changes, which may require us to expend significant capital and incur compliance, operating, maintenance and remediation
costs. Given the lack of empirical data on the credit and other financial risks posed by climate change, it is impossible to
predict how climate change may impact our financial condition and operations; however, as a banking organization, the
physical effects of climate change on the Bank may present certain unique risks.
The physical risks of climate change include discrete events, such as flooding, hurricanes, tornadoes, and wildfires, and
longer-term shifts in climate patterns, such as extreme heat, sea level rise, and more frequent and prolonged drought. Physical
risks may alter the Company’s strategic direction in order to mitigate certain financial risks. Our operations are located in
Montana and are susceptible to severe weather events including severe droughts, wildfires, floods, severe winter storms and
tornadoes. Any of these, or any other severe weather event, could cause disruption to our operations and could have a material
adverse effect on our overall business, results of operations or financial condition. We have taken certain preemptive measures
that we believe will mitigate these adverse effects; however, such measures cannot prevent the disruption that a catastrophic
drought, wildfire, tornado or other severe weather event could cause to the markets that we serve and any resulting adverse
impact on our customers, such as hindering our borrowers’ ability to timely repay their loans, diminishing the value of any
collateral held by us, interrupting supply chains, causing significant property damage, causing us to incur additional expense
or resulting in a loss of revenue, and affecting the stability of our deposit base. The severity and impact of future droughts,
wildfires, floods, tornadoes and other weather-related events are difficult to predict and may be exacerbated by global climate
change. Such events may also cause reductions in regional and local economic activity that may have an adverse effect on
our customers, which could limit our ability to raise and invest capital in these areas and communities, each of which could
have a material adverse effect on our financial condition and results of operations.
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Climate change may worsen the frequency and severity of future droughts, wildfires, floods, tornadoes and other extreme
weather-related events that could cause disruption to our business and operations. Chronic results of climate change such as
shifting weather patterns could also cause disruption to our business and operations. Climate change may also result in new
and/or more stringent regulatory requirements for the Company, which could materially affect the Company’s results of
operations by requiring the Company to take costly measures to comply with any new laws or regulations related to climate
change that may be forthcoming. New regulations, shift in customer behaviors, supply chain collapse or breakthrough
technologies that accelerate the transition to a lower carbon economy may negatively affect certain sectors and borrowers in
our loan portfolio, impacting their ability to timely repay their loans or decreasing the value of any collateral held by us.
The emergence or continuation of widespread health emergencies or pandemics could have a material adverse effect
on our business, results of operations and financial condition, and such effects will depend on future developments,
which are highly uncertain and are difficult to predict.
Pandemics could adversely impact our workforce and operations and the operations of our borrowers, customers and business
partners. As a result, we may experience financial losses due to a number of operational factors impacting us or our borrowers,
customers or business partners. These factors may be prevalent for a significant period of time and may adversely affect our
business, results of operations and financial condition even after an outbreak has subsided.
The extent to which an outbreak impacts our business, results of operations and financial condition will depend on future
developments, which are highly uncertain and are difficult to predict, including, but not limited to, the duration and spread
of the outbreak and its variants, its severity, the actions to contain the virus or treat its impact, the effectiveness of vaccination
programs for the virus, vaccination rates, and how quickly and to what extent normal economic and operating conditions can
resume. Even after an outbreak has subsided, we may continue to experience materially adverse impacts to our business as a
result of the virus’s global economic impact, including the availability of credit, adverse impacts on our liquidity and any
recession that has occurred or may occur in the future.
Risks Related to Our Business
We hold certain intangible assets that could be classified as impaired in the future. If these assets are considered to be
either partially or fully impaired in the future, our earnings and the book values of these assets would decrease.
As a result of our branch and whole bank acquisitions we record goodwill. Our consolidated balance sheet at December 31,
2024 included goodwill of $34.74 million. We are required to test our goodwill for impairment on a periodic basis. The
impairment testing process considers a variety of factors, including the current market price of our common shares, the
estimated net present value of our assets and liabilities and information concerning the terminal valuation of similarly situated
insured depository institutions. It is possible that future impairment testing could result in a partial or full impairment of the
value of our goodwill. If an impairment determination is made in a future reporting period, our earnings and the book value
of goodwill will be reduced by the amount of the impairment.
Risks associated with system failures, interruptions, or breaches of security could negatively affect our earnings.
Information technology systems are critical to our business. We use various technology systems to manage our customer
relationships, general ledger, securities, deposits, and loans. We have established policies and procedures to prevent or limit
the impact of system failures, interruptions, and security breaches, but such events may still occur or may not be adequately
addressed if they do occur. In addition, any compromise of our systems could deter customers from using our products and
services. Although we rely on security systems to provide security and authentication necessary to effect the secure
transmission of data, these precautions may not protect our systems from compromises or breaches of security.
In addition, we outsource a majority of our data processing to certain third-party providers. If these third-party providers
encounter difficulties, or if we have difficulty communicating with them, our ability to adequately process and account for
transactions could be affected, and our business operations could be adversely affected. Threats to information security also
exist in the processing of customer information through various other vendors and their personnel.
The occurrence of any system failures, interruption, or breach of security could damage our reputation and result in a loss of
customers and business thereby subjecting us to additional regulatory scrutiny, or could expose us to litigation and possible
financial liability. Any of these events could have a material adverse effect on our financial condition and results of operations.
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If the allowance for credit losses is not sufficient to cover actual credit losses, our earnings could decrease.
Our customers may not repay their loans according to the original terms, and the collateral, if any, securing the payment of
these loans may be insufficient to pay any remaining loan balance. We may experience significant credit losses, which may
have a material adverse effect on operating results. We make various assumptions and judgments about the collectability of
the loan portfolio, including the creditworthiness of borrowers and the value of the real estate and other assets serving as
collateral for the repayment of loans. If the assumptions prove to be incorrect, the allowance for credit losses may not be
sufficient to cover expected losses in our loan portfolio, resulting in additions to the allowance. Material additions to the
allowance would materially decrease net income.
Our emphasis on the origination of consumer, commercial real estate and commercial business loans is one of the more
significant factors in evaluating the allowance for credit losses. As we continue to increase the amount of such loans,
additional or increased provisions for credit losses may be necessary and would decrease earnings.
Bank regulators periodically review our allowance for credit losses and may require an increase to the provision for
credit losses or further loan charge-offs. Any increase in our allowance for credit losses or loan charge-offs as required by
these regulatory authorities may have a material adverse effect on our results of operations or financial condition.
We could record future losses on our securities portfolio.
A number of factors or combinations of factors could require us to conclude in one or more future reporting periods that an
unrealized loss exists with respect to our investment securities portfolio that constitutes an impairment that is other than
temporary, which could result in material losses to us. These factors include, but are not limited to, continued failure by the
issuer to make scheduled interest payments, an increase in the severity of the unrealized loss on a particular security, an
increase in the continuous duration of the unrealized loss without an improvement in value or changes in market conditions
and/or industry or issuer specific factors that would render us unable to forecast a full recovery in value. In addition, the fair
values of securities could decline if the overall economy and the financial condition of some of the issuers deteriorates and
there is limited liquidity for these securities.
Changes in our accounting policies or in accounting standards could materially affect how we report our financial
condition and results of operations.
Our accounting policies are essential to understanding our financial results and condition. Some of these policies require the
use of estimates and assumptions that may affect the value of our assets or liabilities and financial results. Some of our
accounting policies are critical because they require management to make difficult, subjective, and complex judgments about
matters that are inherently uncertain and because it is likely that materially different amounts would be reported under
different conditions or using different assumptions. If such estimates or assumptions underlying our financial statements are
incorrect, we may experience material losses.
From time to time, the Financial Accounting Standards Board and the Securities and Exchange Commission change the
financial accounting and reporting standards or the interpretation of those standards that govern the preparation of our
financial statements. These changes are beyond our control, can be hard to predict and could materially impact how we report
our results of operations and financial condition. We could also be required to apply a new or revised standard retroactively,
resulting in our restating prior period financial statements in material amounts.
Because we have increased our commercial real estate and commercial business loan originations, our credit risk has
increased and continued downturns in the local real estate market or economy could adversely affect our earnings.
We intend to continue our recent emphasis on originating commercial real estate and commercial business loans. Commercial
real estate and commercial business loans generally have more risk than the residential real estate (1-4 family) loans we
originate. Because the repayment of commercial real estate and commercial business loans depends on the successful
management and operation of the borrower’s properties or related businesses, repayment of such loans can be affected by
adverse conditions in the local real estate market or economy. Commercial real estate and commercial business loans may
also involve relatively large loan balances to individual borrowers or groups of related borrowers. A downturn in the real
estate market or the local economy could adversely affect the value of properties securing the loan or the revenues from the
borrower’s business, thereby increasing the risk of nonperforming loans. As our commercial real estate and commercial
business loan portfolios increase, the corresponding risks and potential for losses from these loans may also increase.
20
Many of our commercial real estate and commercial business loans are made to small-to-mid-sized businesses. These small-
to-mid-sized businesses frequently have smaller market share than their competition, may be more vulnerable to economic
downturns, often need substantial additional capital to expand or compete and may experience significant volatility in
operating results. Any one or more of these factors may impair the borrower’s ability to repay a loan. In addition, the success
of a small-to-mid-sized business often depends on the management talents and efforts of one or two persons or a small group
of persons and the death, disability or resignation of one or more of these persons could have a material adverse impact on
the business and its ability to repay a loan. Economic downturns and other events that negatively impact our market areas
could cause us to incur substantial credit losses that could have an adverse effect on our business, financial condition and
results of operations.
We continually encounter technological change.
The financial services industry is continually undergoing rapid technological change with frequent introductions of new,
technology-driven products and services. The effective use of technology increases efficiency and enables financial
institutions to better serve customers and to reduce costs. Our future success depends, in part, upon our ability to address the
needs of our customers by using technology to provide products and services that will satisfy customer demands, as well as
to create additional efficiencies in our operations. Many of our competitors have substantially greater resources to invest in
technological improvements than we do. We may not be able to effectively implement new, technology-driven products and
services or be successful in marketing these products and services to our customers. In addition, the implementation of
technological changes and upgrades to maintain current systems and integrate new ones may also cause service interruptions,
transaction processing errors and system conversion delays and may cause us to fail to comply with applicable laws or be
vulnerable to cyberattacks. Failure to successfully keep pace with technological change affecting the financial services
industry and avoid interruptions, errors and delays could have a material adverse effect on our business, financial condition
or results of operations.
We expect that new technologies and business processes applicable to the consumer credit industry will continue to emerge,
and these new technologies and business processes may be better than those we currently use. Because the pace of
technological change is high and our industry is intensely competitive, we may not be able to sustain our investment in new
technology as critical systems and applications become obsolete or as better ones become available. A failure to maintain
current technology and business processes could cause disruptions in our operations or cause our products and services to be
less competitive, all of which could have a material adverse effect on our business, financial condition or results of operations.
We depend on the services of our executive officers and other key employees.
Our success depends upon the continued employment of certain members of our senior management team. We also depend
upon the continued employment of the individuals that manage several of our key functional areas. The departure of any
member of our senior management team may adversely affect our operations.
We earn a significant portion of our noninterest income through sales of residential mortgages in the secondary
market. We rely on the mortgage secondary market for some of our liquidity.
Our mortgage banking activities provide a significant portion of our noninterest income. We originate and sell mortgage
loans, including $211.78 million of mortgage loans sold during 2024. We rely on Federal National Mortgage Association
(“FNMA”), Federal Home Loan Mortgage Corporation (“FHLMC”) and other purchasers to purchase loans in order to reduce
our credit risk and provide funding for additional loans we desire to originate. We cannot provide assurance that these
purchasers will not materially limit their purchases from us due to capital constraints or other factors, including, with respect
to FNMA and FHLMC, a change in the criteria for conforming loans. In addition, various proposals have been made to reform
the U.S. residential mortgage finance market, including the role of FNMA and FHLMC. The exact effects of any such reforms
are not yet known but may limit our ability to sell conforming loans to FNMA and FHLMC. In addition, mortgage lending
is highly regulated, and our inability to comply with all federal and state regulations and investor guidelines regarding the
origination, underwriting documentation and servicing of mortgage loans may also impact our ability to continue selling
mortgage loans. If we are unable to continue to sell loans in the secondary market or we experience a period of low mortgage
activity, our noninterest income as well as our ability to fund, and thus originate, additional mortgage loans may be adversely
affected, which could have a material adverse effect on our business, financial condition or results of operations.
21
There can be no assurance we will be able to continue paying dividends on our common stock at recent levels.
We may not be able to continue paying quarterly dividends commensurate with recent levels given that the ability to pay
dividends on our common stock depends on a variety of factors. The payment of dividends is subject to government regulation
in that the regulatory authorities may prohibit banks and bank holding companies from paying dividends that would constitute
an unsafe or unsound banking practice. Our ability to pay dividends is subject to certain regulatory requirements. The Federal
Reserve generally prohibits a bank holding company from declaring or paying a cash dividend which would impose undue
pressure on the capital of a subsidiary bank or would be funded only through borrowing or other arrangements that might
adversely affect a bank holding company’s financial position. The Federal Reserve Board policy is that a bank holding
company should not continue its existing rate of cash dividends on its common stock unless its net income is sufficient to
fully fund each dividend and its prospective rate of earnings retention appears consistent with its capital needs, asset quality
and overall financial condition. The power of the board of directors of an insured depository institution to declare a cash
dividend or other distribution with respect to capital is subject to statutory and regulatory restrictions which limit the amount
available for such distribution depending upon the earnings, financial condition and cash needs of the institution, as well as
general business conditions.
As a result, future dividends will generally depend on the level of earnings at the Bank. The Bank is subject to Montana law
and, in certain circumstances, Montana law places limits or restrictions on a bank’s ability to declare and pay dividends. Also,
in the event there shall occur an event of default on any of our debt instruments, we would be unable to pay any dividends on
our common stock.
Our business strategy includes significant growth plans, and our financial condition and results of operations could
be negatively affected if we fail to grow or fail to manage our growth effectively.
We intend to pursue an organic growth strategy for our business; however, we regularly evaluate potential acquisitions and
expansion opportunities. If appropriate opportunities present themselves, we expect to engage in selected acquisitions of
financial institutions, branch acquisitions and other business growth initiatives or undertakings. There can be no assurance
that we will successfully identify appropriate opportunities, that we will be able to negotiate or finance such activities or that
such activities, if undertaken, will be successful. There are risks associated with our growth strategy. To the extent that we
grow through acquisitions, we cannot ensure that we will be able to adequately or profitably manage this growth.
Acquiring other banks, branches or other assets, as well as other expansion activities, involves various risks including the
risks of incorrectly assessing the credit quality of acquired assets, encountering greater than expected costs of integrating
acquired banks or branches, the risk of loss of customers and/or employees of the acquired institution or branch, executing
cost savings measures, not achieving revenue enhancements and otherwise not realizing the transaction’s anticipated benefits.
Our ability to address these matters successfully cannot be assured. In addition, our strategic efforts may divert resources or
management’s attention from ongoing business operations, may require investment in integration and in development and
enhancement of additional operational and reporting processes and controls and may subject us to additional regulatory
scrutiny.
Our growth initiatives may also require us to recruit and retain experienced personnel to assist in such initiatives. Accordingly,
the failure to identify and retain such personnel would place significant limitations on our ability to successfully execute our
growth strategy. In addition, to the extent we expand our lending beyond our current market areas, we could incur additional
risks related to those new market areas. We may not be able to expand our market presence in our existing market areas or
successfully enter new markets.
If we do not successfully execute our acquisition growth plan, it could adversely affect our business, financial condition,
results of operations, reputation and growth prospects. In addition, if we were to conclude that the value of an acquired
business had decreased and that the related goodwill had been impaired, that conclusion would result in an impairment of
goodwill charge, which would adversely affect our results of operations. While we believe we will have the executive
management resources and internal systems in place to successfully manage our future growth, there can be no assurance
growth opportunities will be available or that we will successfully manage our growth.
22
We may be unsuccessful in integrating the operations of the business we have acquired or expect to acquire in the
future.
From time to time, we evaluate and acquire businesses that we believe complement our existing business. The acquisition
component of our growth strategy depends on the successful integration of these acquisitions. We face numerous risks and
challenges to the successful integration of acquired businesses, including the following:
● the potential for unexpected costs, delays and challenges that may arise in integrating acquisitions into our existing
business;
● limitations on our ability to realize the expected cost savings and synergies from an acquisition;
● challenges related to integrating acquired operations, including our ability to retain key employees and maintain
relationships with significant customers and depositors;
● challenges related to the integration of businesses that operate in new geographic areas, including difficulties in
identifying and gaining access to customers in new markets; and
● the discovery of previously unknown liabilities following an acquisition associated with the acquired business.
If we are unable to successfully integrate the businesses we acquire, our business, financial condition and results of operations
may be materially adversely affected.
Failure to maintain effective internal control over financial reporting or disclosure controls and procedures could
adversely affect our ability to report our financial condition and results of operations accurately and on a timely basis.
A failure to maintain effective internal control over financial reporting or disclosure controls and procedures could adversely
affect our ability to report our financial results accurately and on a timely basis, which could result in a loss of investor
confidence in our financial reporting or adversely affect our access to sources of liquidity. Furthermore, because of the
inherent limitations of any system of internal control over financial reporting, including the possibility of human error, the
circumvention or overriding of controls and fraud, even effective internal controls may not prevent or detect all
misstatements.
We have identified a material weakness in our internal control over financial reporting. Failure to remediate, improve
and maintain the quality of internal control over financial reporting could result in material misstatements in our
financial statements and could materially and adversely affect our ability to provide timely and accurate financial
information about the Company, which could harm our reputation and share price.
In March 2025, we identified control deficiencies involving classification of borrowings in the financing activities section of
the statement of cash flows. Specifically, the Company’s controls were not designed at a sufficient level of precision to ensure
the proper classification of borrowings as short-term or long-term so that the borrowings from and repayments to are
appropriately presented either on a net basis or a gross basis within the financing section of the statement of cash flows.
Management concluded that these control deficiencies constituted a material weakness in our internal control over financial
reporting, as the identified deficiencies could have had a direct or indirect impact on some of our financial reporting controls
related to borrowings.
A “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that
there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not
be prevented or detected on a timely basis. Management cannot be certain that other deficiencies or material weaknesses will
not arise or be identified or that the Company will be able to correct and maintain adequate controls over financial processes
and reporting in the future.
Management, with oversight from the Audit Committee, is committed to maintaining a strong internal control environment,
and has taken, and will continue to take, actions necessary to remediate the material weakness. The identified material
weakness in our internal control over financial reporting will not be considered remediated until the remediated controls
operate for a sufficient period of time and can be tested and concluded by management to be designed and operating
effectively. We cannot provide any assurance that our remediation efforts will be successful or that our internal control over
financial reporting will be effective as a result of these efforts. As we continue to evaluate operating effectiveness and monitor
improvements to our internal control over financial reporting, we may take additional measures to address control deficiencies
or modify our remediation efforts.
23
Unsuccessful remediation efforts could result in material misstatements in, or restatements of, the Company’s financial
statements, could cause the Company to fail to meet its reporting obligations and/or could cause investors to lose confidence
in the Company’s reported financial information, which would adversely affect the trading price of the Company’s common
stock and harm the Company’s reputation. In addition, such failures could result in violations of applicable securities laws,
an inability to meet Nasdaq listing requirements, a default in covenants under the Company’s credit facilities, and/or exposure
to lawsuits, investigations or other legal proceedings.
Changes in interest rates may change the value of our mortgage servicing rights portfolio, which may increase the
volatility of our earnings.
As a result of our mortgage servicing business, which we may expand in the future, we have a portfolio of mortgage servicing
rights (“MSR”) assets. An MSR is the right to service a mortgage loan - collect principal, interest and escrow amounts - for
a fee. We measure and carry all of our residential MSR assets using the fair value measurement method. Fair value is
determined as the present value of estimated future net servicing income, calculated based on a number of variables, including
assumptions about the likelihood of prepayment by borrowers.
Current trends of rising interest rates have resulted in an increased valuation of the MSR asset, however one of the principal
risks associated with MSR assets is that in a declining interest rate environment, they will likely lose a substantial portion of
their value as a result of higher than anticipated prepayments. Moreover, if prepayments are greater than expected, the cash
we receive over the life of the mortgage loans would be reduced.
An increased size of our MSR portfolio could result in us carrying significant asset balances. This could result in a reduction
in our liquidity and cause a reduction in our capital ratios. The combination of these impacts along with other impacts, could
cause us to not have sufficient liquidity or capital.
At December 31, 2024, our MSR asset had a fair value of $15.38 million. All income related to retained servicing, including
changes in the value of the MSR asset, is included in noninterest income. Depending on the interest rate environment and
market trends related to MSR sales, it is possible that the fair value of our MSR asset may be reduced in the future. If such
changes in fair value significantly reduce the carrying value of our MSR asset, our financial condition and results of operations
would be negatively affected.
Farmland and agriculture production lending presents unique credit risk.
As of December 31, 2024, approximately 18.48% of our total gross loan portfolio was comprised of farmland and agricultural
production loans. As of December 31, 2024, we had $280.96 million in farmland and agricultural production loans, including
$146.61 million in farmland loans, and $134.35 million in agricultural production loans. Repayment of farmland and
agricultural production loans depends primarily on the successful raising and feeding of livestock or planting and harvest of
crops and marketing the harvested commodity. Collateral securing these loans may be a illiquid. In addition, the limited
purpose of some agricultural-related collateral affects credit risk because such collateral may have limited or no other uses to
support values when loan repayment problems emerge. Our farmland and agricultural production lending staff have specific
technical expertise that we depend on to mitigate our lending risks for these loans and we may have difficulty retaining or
replacing such individuals. Many external factors can impact our agricultural borrowers' ability to repay their loans, including
adverse weather conditions, water issues, commodity price volatility, diseases, land values, production costs, changing
government regulations and subsidy programs, changing tax treatment, technological changes, labor market
shortages/increased wages, and changes in consumers' preferences, over which our borrowers may have no control. These
factors, as well as recent volatility in certain commodity prices could adversely impact the ability of those to whom we have
made farmland and agricultural production loans to perform under the terms of their borrowing arrangements with us, which
in turn could result in credit losses and adversely affect our business, financial condition and results of operations.
Consumers may decide not to use banks to complete their financial transactions.
Technology and other changes are allowing parties to complete financial transactions through alternative methods that
historically have involved banks. For example, consumers can now maintain funds that would have historically been held as
bank deposits in brokerage accounts, mutual funds or general purpose reloadable prepaid cards. Consumers can also complete
transactions such as paying bills and/or transferring funds directly without the assistance of banks. The process of eliminating
banks as intermediaries could result in the loss of fee income, as well as the loss of customer deposits and the related income
generated from those deposits. The loss of these revenue streams and the lower cost of deposits as a source of funds could
have a material adverse effect on our financial condition and results of operations.
24
Rights Related to the Legal and Regulatory Environment
We face a risk of noncompliance and enforcement action with the Bank Secrecy Act and other anti-money laundering
statutes and regulations.
The Bank Secrecy Act, the Patriot Act and other laws and regulations require financial institutions, among other duties, to
institute and maintain an effective anti-money laundering program and file suspicious activity and currency transaction
reports as appropriate. The federal Financial Crimes Enforcement Network is authorized to impose significant civil money
penalties for violations of those requirements and has recently engaged in coordinated enforcement efforts with the individual
federal banking regulators, as well as the U.S. Department of Justice, Drug Enforcement Administration and IRS. We are
also subject to increased scrutiny of compliance with the rules enforced by the Office of Foreign Assets Control. If our
policies, procedures and systems are deemed deficient, we would be subject to liability, including fines and regulatory actions,
which may include restrictions on our ability to pay dividends and the necessity to obtain regulatory approvals to proceed
with certain aspects of our business plan, including any future acquisition plans. Failure to maintain and implement adequate
programs to combat money laundering and terrorist financing could also have serious reputational consequences for us. Any
of these results could have an adverse effect on our business, financial condition and results of operations.
We operate in a highly regulated environment and may be adversely affected by changes in laws and regulations.
We are subject to extensive regulation, supervision and examination by the Board of Governors of the Federal Reserve Board
and the Montana Division of Banking and Financial Institutions. The federal banking laws and regulations govern the
activities in which we may engage and are primarily for the protection of depositors and the Deposit Insurance Fund at the
FDIC. These regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities,
including the ability to impose restrictions on a bank’s operations, reclassify assets, determine the adequacy of a bank’s
allowance for credit losses and determine the level of deposit insurance premiums assessed. Any change in such regulation
and oversight, whether in the form of regulatory policy, new regulations or legislation or additional deposit insurance
premiums could have a material impact on our operations. Because our business is highly regulated, the laws and applicable
regulations are subject to frequent change. Any new laws, rules and regulations could make compliance more difficult or
expensive or otherwise adversely affect our business, financial condition or prospects.
Future legislation, regulatory reform or policy changes under the current U.S. administration could have a material
effect on our business and results of operations.
New legislation, regulatory reform or policy changes under the current U.S. administration, including financial services
regulatory reform, tax reform, and GSE reform, could impact our business. At this time, we cannot predict the scope or nature
of these changes or assess what the overall effect of such potential changes could be on our results of operations or cash
flows.
If our investment in the Federal Home Loan Bank of Des Moines becomes impaired, our earnings and shareholders’
equity could decrease.
We are required to own common stock of FHLB to qualify for membership in the FHLB System and to be eligible to borrow
funds under the FHLB’s advance program. The aggregate cost of our FHLB common stock as of December 31, 2024 was
$7.78 million. FHLB common stock is not a marketable security and can only be redeemed by the FHLB.
FHLB’s may be subject to accounting rules and asset quality risks that could materially lower their regulatory capital. In an
extreme situation, it is possible that the capitalization of a FHLB, including the FHLB of Des Moines, could be substantially
diminished or reduced to zero. Consequently, we believe that there is a risk that our investment in FHLB of Des Moines
common stock could be deemed impaired at some time in the future, and if this occurs, it would cause our earnings and
shareholders’ equity to decrease by the amount of the impairment charge.
25
A continuation of recent turmoil in our industry, and responsive measures to manage it, could have an adverse effect
on our financial position or results of operations.
Over the past year, several financial services institutions have failed or required outside liquidity support—in many cases, as
a result of the inability of the institutions to obtain needed liquidity. The impact of this situation has led to risk of additional
stress to other financial services institutions and the financial services industry generally as a result of increased lack of
confidence in the financial sector. U.S. regulators have taken action in an effort to strengthen public confidence in the banking
system, including the creation of a new Bank Term Funding Program. There can be no assurance that these actions will
stabilize the financial services industry and financial markets. While we currently do not anticipate liquidity constraints of
the kind that caused certain other financial services institutions to fail or require external support, constraints on our liquidity
could occur as a result of unanticipated deposit withdrawals because of market distress or our inability to access other sources
of liquidity, including through the capital markets due to unforeseen market dislocations or interruptions. Moreover, some of
our customers may become less willing to maintain deposits at the Bank because of broader market concerns with the level
of insurance available on those deposits. Our business and our financial condition and results of operations could be adversely
affected by continued soundness concerns regarding financial institutions generally and our counterparties specifically and
limitations resulting from further governmental action in an effort to stabilize or provide additional regulation of the financial
system as impact of excessive deposit withdrawals.
ITEM 1B.
UNRESOLVED STAFF COMMENTS.
None.
ITEM 1C. CYBERSECURITY
Cyber criminals are becoming more sophisticated and effective every day, and they are increasingly targeting financial
institutions. We recognize the critical importance of maintaining the safety and security of our systems and data and employ
a multi-layered strategy for overseeing and managing cybersecurity and related risks. Our board of directors (the Board) and
our management are actively involved in the oversight of our risk management program, of which cybersecurity represents
an important component. As described in more detail below, we have established policies, standards, processes, and practices
for assessing, identifying, and managing material risks from cybersecurity threats. We have devoted significant financial and
personnel resources to implement and maintain security measures to meet regulatory requirements and customer expectations,
and we intend to continue to make significant investments to maintain the security of our data and cybersecurity infrastructure.
There can be no guarantee that our policies and procedures will be properly followed in every instance or that those policies
and procedures will be effective. We believe we have not experienced any cybersecurity incidents that have materially
affected our business to date. We can provide no assurance that there will not be incidents in the future or that they will not
materially affect us, including our business strategy, results of operations, or financial condition.
Risk Management and Strategy
Our policies, standards, processes, and practices for assessing, identifying, and managing material risks from cybersecurity
threats are integrated into our overall risk management program and are based on frameworks established by the National
Institute of Standards and Technology (NIST), the Federal Financial Institutions Examination Council (FFIEC), and other
applicable industry standards. Our cybersecurity program in particular focuses on the following key areas:
Collaboration
Our cybersecurity risks are identified and addressed through a comprehensive, cross-functional approach. Key security, risk,
and compliance stakeholders meet regularly to develop strategies for preserving the confidentiality, integrity and availability
of Company and customer information, identifying, preventing, and mitigating cybersecurity threats, and effectively
responding to cybersecurity incidents. We maintain controls and procedures that are designed to ensure prompt escalation of
certain cybersecurity incidents so that decisions regarding public disclosure and reporting of such incidents can be made by
management and the Board in a timely manner.
Risk Assessment
At least annually, we conduct a cybersecurity risk assessment using the FFIEC Cybersecurity Assessment Tool that considers
information from internal stakeholders, known information security vulnerabilities, and information from external sources
(e.g., reported security incidents that have impacted other companies, industry trends, and evaluations by third parties and
consultants). The results of the assessment are used to drive alignment on, and prioritization of, initiatives to enhance our
security controls, make recommendations to improve processes, and inform a broader enterprise-level risk assessment that is
presented to our Board, Audit Committee, and members of management.
26
Technical Safeguards
We regularly assess and deploy technical safeguards designed to protect our information systems from cybersecurity threats.
Such safeguards are regularly evaluated and improved based on vulnerability assessments, cybersecurity threat intelligence,
and incident response experience.
●
Multi-Layered Defense and Continuous Monitoring - We work to protect our computing environments and products
from cybersecurity threats through multi-layered defenses and apply lessons learned from our defense and
monitoring efforts to help prevent future attacks. We utilize data analytics to detect anomalies and search for cyber
threats. We use a third-party Managed Security Service Provider (MSSP) to provide comprehensive cyber threat
detection and response capabilities and maintain a 24x7 monitoring system which complements the technology,
processes, and threat detection techniques we use to monitor, manage, and mitigate cybersecurity threats. At least
annually, we engage third party consultants or auditors to assist in assessing, identifying and/or managing
cybersecurity threats.
●
Information Sharing and Collaboration - We work with government, customer, industry and/or supplier partners,
such as the Financial Services Information Sharing and Analysis Center and other government-industry
partnerships, to gather and develop best practices and share information to address cyber threats. These relationships
enable the rapid sharing of threat and vulnerability mitigation information across the defense industrial base and
supply chain.
●
Training and Awareness - We provide awareness training to our employees to help identify, avoid, and mitigate
cybersecurity threats. Our employees participate quarterly in required training, including privacy, phishing, and
other awareness training. We also periodically host tabletop exercises with management and other employees to
practice rapid cyber incident response.
●
Third-Party Service Provider Management – We have implemented controls designed to identify and mitigate
cybersecurity threats associated with our use of third-party service providers. Such providers are subject to security
risk assessments at the time of onboarding, contract renewal, and upon detection of an increase in risk profile. We
use a variety of inputs in such risk assessments, including information supplied by providers and third parties. In
addition, we require our providers to meet appropriate security requirements, controls and responsibilities and
investigate security incidents that have impacted our third-party providers, as appropriate.
Incident Response and Recovery Planning
We have established comprehensive incident response and recovery plans and continue to regularly test and evaluate the
effectiveness of those plans. Our incident response and recovery plans address and guide our employees, management, and
the Board on our response to a cybersecurity incident.
External Assessments
Our cybersecurity policies, standards, processes, and practices are regularly assessed by external auditors and regulatory
examiners. These assessments include a variety of activities including information security maturity assessments, audits and
independent reviews of our information security control environment and operating effectiveness. The results of significant
assessments are reported to management, the Board and Audit Committee. Cybersecurity processes are adjusted based on the
information provided from these assessments.
Governance
Board Oversight
Our Board of Directors has ultimate oversight of cybersecurity risk, which it manages as part of our enterprise risk
management program. The Board receives regular reports from our Vice President Director of Information Security on
various cybersecurity efforts, including risk assessments, mitigation strategies, areas of emerging risks, incidents and industry
trends, and other areas of importance. In addition, we have an escalation process in place to inform senior management and
the Board of Directors of material issues.
27
Management’s Role
Our cybersecurity program is coordinated by our Vice President Director of Information Security, who reports to our Senior
Vice President Chief Risk Officer and Chief Administrative Officer, in partnership with our Director of Information Systems
and Technology ("IS&T"). Our Director of Information Security started with us in 2012 and holds numerous credentials
including: Certified Information Systems Security Professional, Certified Public Accountant, and Certified Fraud Examiner.
The Director of Information Security is informed about and monitors prevention, detection, mitigation, and remediation
efforts through regular communication and reporting from the IS&T team and our Managed Services Provider, who is
overseen by the Director of IS&T. The Director of IS&T started with us in 2020, holds a Bachelor of Science in Business
Administration, Information Technology and has over 15 years of direct experience managing information systems and
technology. The Director of IS&T is responsible for implementing and maintaining the systems and tools to protect the
technology stack we use. The Director of IS&T reports to the Senior Vice President, Chief Operating Officer.
ITEM 2.
PROPERTIES.
The Company's executive office is located at 1400 Prospect Avenue in Helena, Montana. The following table provides
information on the Company's 31 properties as of December 31, 2024, including locations by city, as well as whether they
are owned or leased.
Occupancy Type
Locations
Owned
Leased
Total Locations
Ashland, Montana
1
-
1
Big Timber, Montana
1
-
1
Billings, Montana
3
-
3
Bozeman, Montana
2
1
3
Butte, Montana
1
-
1
Choteau, Montana
1
-
1
Culbertson, Montana
1
-
1
Denton, Montana
1
-
1
Dutton, Montana
1
-
1
Froid, Montana
1
-
1
Glasgow, Montana
1
-
1
Great Falls, Montana
-
1
1
Hamilton, Montana
1
-
1
Helena, Montana
5
-
5
Hinsdale, Montana
1
-
1
Livingston, Montana
1
-
1
Missoula, Montana
1
-
1
Sheridan, Montana
1
-
1
Three Forks, Montana
1
-
1
Townsend, Montana
1
-
1
Twin Bridges, Montana
1
-
1
Winifred, Montana
-
1
1
Wolf Point, Montana
1
-
1
Total
28
3
31
Management believes all locations are in good condition and meet the operating needs of the Company. For additional
information regarding the Company's premises and equipment and lease obligations, see Note 5 to the Consolidated Financial
Statements in "Item 8. Financial Statements and Supplementary Data".
ITEM 3.
LEGAL PROCEEDINGS.
The Bank, from time to time, is a party to routine litigation, which arises in the normal course of business, such as claims to
enforce liens, condemnation proceedings on properties in which the Bank holds security interests, claims involving the
making and servicing of real property loans, and other issues incident to the business of the Bank. In the opinion of
management, the resolution of these legal actions is not expected to have a material adverse effect on the Company's results
of operations.
ITEM 4.
MINE SAFETY DISCLOSURES.
Not applicable.
28
PART II
ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES.
Our common stock is traded on the Nasdaq Global Market under the symbol “EBMT.” At the close of business on December
31, 2024, there were 8,507,429 shares of common stock outstanding, held by approximately 939 shareholders of record. The
closing price of the common stock on December 31, 2024, was $15.33 per share.
Payment of dividends on our shares of common stock is subject to determination and declaration by the Board of Directors
(the “Board’’) and will depend upon a number of factors, including capital requirements, regulatory limitations on the
payment of dividends, our results of operations and financial condition, tax considerations and general economic conditions.
No assurance can be given that dividends will be declared or, if declared, what the amount of dividends will be, or whether
such dividends, once declared, will continue.
Because we are a bank holding company and do not engage directly in business activities of a material nature, our ability to
pay dividends to our stockholders depends, in large part, upon our receipt of dividends from our bank subsidiary, which is
also subject to numerous limitations on the payment of dividends under federal and state banking laws, regulations and
policies. The present and future dividend policy of our bank subsidiary is subject to the discretion of its Board. Our subsidiary
bank is not obligated to pay dividends.
On April 18, 2024, Eagle's Board of Directors authorized the repurchase of up to 400,000 shares of its common stock
beginning May 1, 2024. 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 following table summarized the Company's purchase of its
common stock for the year ended December 31, 2024 under this plan.
Total Number
Maximum
of Shares
Number of
Purchased
Shares that
Total
as Part of
May Yet Be
Number of
Average
Publicly
Purchased
Shares
Price Paid Announced Plans Under the Plans
Purchased Per Share
or Programs
or Programs
October 1, 2024 through October 31, 2024
- $
-
-
-
November 1, 2024 through November 30, 2024
-
-
-
-
December 1, 2024 through December 31, 2024
25,000
16.74
25,000
375,000
Total
25,000 $
16.74
25,000
During January 2025, the Company purchased 50,000 shares at an average price of $15.11 under its repurchase plan. The
plan expires on May 1, 2025.
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. During the second quarter of 2023, 17,901 shares were purchased
under this plan at an average price of $12.89. No shares were purchased during the third or fourth quarter of 2023, or during
the first of second quarter of 2024 under this plan. The plan expired on May 1, 2024.
29
On April 21, 2022, Eagle's Board of Directors (the "Board") authorized the repurchase of up to 400,000 shares of its common
stock. 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 upon 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.
ITEM 6.
[RESERVED]
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following discussion and analysis of the financial condition and results of operations of Eagle is intended to help investors
understand our company and our operations. The financial review is provided as a supplement to, and should be read in
conjunction with the Consolidated Financial Statements and the related Notes included elsewhere in this report.
Introduction
Eagle Bancorp Montana, Inc. is a bank holding company registered under the Bank Holding Company Act, is incorporated
under the laws of Delaware and headquartered in Helena, Montana. Through its wholly-owned subsidiary, Opportunity Bank
of Montana, a Montana state-chartered bank that is a member of the Federal Reserve System, the Company provides
commercial and consumer banking services.
The following Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") describes
Eagle and its subsidiaries' results of operations for the year ended December 31, 2024 as compared to the year ended
December 31, 2023, and also analyzes our financial condition as of December 31, 2024 as compared to December 31, 2023.
Like most banking institutions, our principal business consists of attracting deposits from the general public and the business
community and making loans secured by various types of collateral, including real estate and other consumer assets. We are
significantly affected by prevailing economic conditions, particularly interest rates, as well as government policies
concerning, among other things, monetary and fiscal affairs, housing and financial institutions and regulations regarding
lending and other operations, privacy and consumer disclosure. Attracting and maintaining deposits is influenced by a number
of factors, including interest rates paid on competing investments offered by other financial and nonfinancial institutions,
account maturities, fee structures and levels of personal income and savings. Lending activities are affected by the demand
for funds and thus are influenced by interest rates, the number and quality of lenders and regional economic conditions.
Sources of funds for lending activities include deposits, borrowings, repayments on loans, cash flows from maturities of
investment securities and income provided from operations.
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 credit 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 our portfolio, both real estate and non-real estate. We have made significant progress in this initiative
over the past decade. As of December 31, 2024, commercial real estate loans represented 60.3% of the total loan portfolio,
including farmland loans representing 9.6% of the total loan portfolio. Commercial business loans represented 18.3% of the
total loan portfolio, including agricultural loans representing 8.8% of the total loan portfolio. The purpose of this
diversification is to mitigate our 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
30
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 maintains
a significant loan serviced portfolio, which provides a steady source of fee income. As of December 31, 2024, we had
mortgage servicing rights, net of $15.38 million compared to $15.85 million as of December 31, 2023. 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.
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 deposit do not automatically reprice as interest rates rise.
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 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. Though deposit growth has been
steady, it may become more difficult to maintain due to significant competition and possible reduced customer demand for
deposits as customers may shift into other asset classes.
Other than short term residential construction loans, we do not offer “interest only” mortgage loans on residential 1-4 family
properties (where the borrower pays interest but no principal for an initial period, after which the loan converts to a fully
amortizing loan). We also do not offer loans that provide for negative amortization of principal, such as “Option ARM” loans,
where the borrower can pay less than the interest owed on their loan, resulting in an increased principal balance during the
life of the loan. We do not offer “subprime loans” (loans that generally target borrowers with weakened credit histories
typically characterized by payment delinquencies, previous charge-offs, judgments, bankruptcies, or borrowers with
questionable repayment capacity as evidenced by low credit scores or high debt-burden ratios) or Alt-A loans (traditionally
defined as loans having less than full documentation).
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 5.50% during the year ended December 31, 2023. The rate decreased to 4.50% during the year
ended December 31, 2024.
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 goodwill. In determining which accounting policies are critical in nature, Eagle has identified the policies
that require significant judgment or involve complex estimates. Eagle’s financial results could differ significantly if different
judgments or estimates are used in the application of these policies. The critical accounting policies and related estimates are
summarized below.
Allowance for Credit Losses
The allowance for credit losses ("ACL") on loans is a valuation account that is management’s estimate of the amount
considered necessary to absorb expected losses in the loan portfolio at the balance sheet date. The allowance is deducted from
the loans’ amortized cost basis to present the net amount expected to be collected on the loans and is established through the
provision for credit losses. Increases in the allowance are charged against income, and decreases in the allowance are recorded
through net income as a reversal of the provision for credit losses.
Quarterly, an assessment is performed of the risks expected in the loan portfolio. A detailed review is conducted for
significant loans identified as having weaknesses that do not share common risk characteristics with other loans. The
methodology for determining the adequacy of the allowance for credit losses is considered a critical accounting policy by
management due to its complexity and the high degree of judgment involved. The primary factors and assumptions considered
include loan volume, credit ratings, delinquency status, prepayment speeds, weighted average lives, and other relevant
available information from internal and external sources related to past events and historical loss experience. Management
uses qualitative judgment to adjust loss rates to reflect management’s assessment of current economic conditions, along
with reasonable and supportable forecasts.
31
The allowance is based on information known at the time of the review. Changes in factors underlying the assessment for
subsequent evaluations of the loan portfolio could have a material impact on the amount of the allowance that is necessary
and the amount of provision to be charged against earnings. See Note 3 to the Consolidated Financial Statements in “Item 8.
Financial Statements and Supplementary Data” for further information.
Goodwill
The excess of consideration paid over fair value of net assets acquired for acquisitions is recorded as goodwill. Goodwill is
not amortized but is tested at least annually for impairment or more frequently if events occur or circumstances change that
indicate impairment may exist. A goodwill impairment test is performed by comparing the fair value of the reporting unit
with its carrying value. An impairment charge is recorded for the amount by which the carrying amount exceeds the reporting
unit's fair value. A weighted average of both the market and income approaches is used in valuing the reporting unit’s fair
value. Weightings are assigned to the approaches regarding fair value and the sensitivity of other weighting scenarios is
considered. The market approach incorporates comparable public company information, valuation multiples and
consideration of a market control premium along with data related to comparable observed purchase transactions in the
financial services industry. The income approach consists of discounting projected future cash flows, which are derived from
internal forecasts and economic expectations for the reporting unit. The significant inputs and assumptions for the income
approach include a discount rate and projected earnings of the Company in future years for which there is inherent uncertainty.
The sensitivity of a range of reasonable discount rates based on the current economic environment is considered.
During the quarter ended September 30, 2024, management performed a quantitative goodwill impairment test with assistance
from a third-party valuation specialist. The interim determination was primarily driven by a revision in the Company's
earnings outlook in comparison to budget. The interim goodwill impairment assessment as of August 31, 2024 concluded
that goodwill was not impaired. Our quantitative annual impairment tests as of October 31, 2024 and 2023 also did not result
in impairment. However, changing economic conditions that may adversely affect the Company's performance, the fair value
of its assets and liabilities, or its stock price could result in future impairment. Any resulting impairment loss could have a
material adverse impact on the Company's financial condition and results of operations. Management will continue to monitor
events that could influence this conclusion in the future. See Note 7 to the Consolidated Financial Statements in “Item 8.
Financial Statements and Supplementary Data” for further information.
The Company's accounting policies and discussion of recent accounting pronouncements is included in Note 1 to the
Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data".
Financial Condition
December 31, 2024 compared to December 31, 2023
Total assets were $2.10 billion at December 31, 2024, an increase of $27.42 million, or 1.3% from $2.08 billion at December
31, 2023. Loans receivable, net increased by $35.75 million or 2.4%, to $1.50 billion at December 31, 2024 from $1.47 billion
at December 31, 2023. However, securities available-for-sale decreased by $25.69 million or 8.1% from December 31, 2023.
Total borrowings decreased $34.66 million to $200.08 million at December 31, 2024, from $234.74 million at December 31,
2023. Total liabilities were $1.93 billion at December 31, 2024, an increase of $21.94 million, or 1.2%, from $1.91 billion at
December 31, 2023. Total deposits increased by $46.03 million or 2.8% to $1.68 billion from $1.64 billion at December 31,
2023. Total shareholders’ equity increased by $5.50 million or 3.2% from December 31, 2023.
32
Financial Condition Details
Investment Activities
We maintain a portfolio of investment securities, classified as either available-for-sale or held-to-maturity to enhance total
return on investments. Our investment securities generally include U.S. government and agency obligations, U.S. treasury
obligations, Small Business Administration pools, municipal securities, corporate obligations, mortgage-backed securities
(“MBSs”), collateralized mortgage obligations (“CMOs”) and asset-backed securities (“ABSs”), all with varying
characteristics as to rate, maturity and call provisions. There were no held-to-maturity investment securities included in the
investment portfolio at December 31, 2024 or 2023. All investment securities included in the investment portfolio are
available-for-sale. Eagle also has interest-bearing deposits in other banks and federal funds sold, as well as stock in FHLB
and FRB. FHLB stock was $7.78 million and $9.19 million at December 31, 2024 and 2023, respectively. FRB stock was
$4.13 million for both at December 31, 2024 and 2023.
The following table summarizes investment activities:
December 31,
2024
2023
2022
Fair
Value
Percentage
of Total
Fair
Value
Percentage
of Total
Fair
Value
Percentage
of Total
(Dollars in Thousands)
Securities available-for-sale:
U.S. government and agency obligations
$
5,195
1.78% $
6,543
2.06% $
2,390
0.68%
U.S. treasury obligations
46,913
16.03% 46,815
14.71 51,951
14.86
Municipal obligations
117,877
40.29% 137,950
43.33 172,849
49.47
Corporate obligations
4,162
1.42%
3,905
1.23
6,990
2.00
Mortgage-backed securities
28,235
9.65% 26,753
8.41 29,653
8.48
Collateralized mortgage obligations
82,623
28.24% 86,568
27.20 82,131
23.50
Asset-backed securities
7,585
2.59%
9,745
3.06
3,531
1.01
Total securities available-for-sale
$ 292,590
100.00% $318,279
100.00% $349,495
100.00%
Securities available-for-sale were $292.59 million at December 31, 2024, a decrease of $25.69 million, or 8.1%, from
$318.28 million at December 31, 2023. The decrease was due to sales of $14.12 million and maturity, principal payments
and call activity of $21.45 million. These decreases were partially offset by $10.98 million in investment purchases. In
addition, unrealized losses on securities increased from prior year by $273,000.
33
The following table sets forth information regarding fair values, weighted average yields and maturities of investments. The yields have been computed on a tax equivalent
basis. Maturities are based on the final contractual payment dates and do not reflect the impact of prepayments or early redemptions that may occur.
December 31, 2024
One Year or Less One to Five Years Five to Ten Years
After Ten Years
Total Investment Securities
Fair
Value
Weighted
Average
Yield
Fair
Value
Weighted
Average
Yield
Fair
Value
Weighted
Average
Yield
Fair
Value
Weighted
Average
Yield
Fair
Value
Approximate
Market Value
Weighted
Average
Yield
(Dollars in Thousands)
Securities available-for-sale:
U.S. government and agency
obligations
$
- $
- $
263 $
6.28 $ 3,200 $
4.76 $
1,732 $
6.98 $
5,195 $
5,195
5.57%
U.S. treasury obligations
4,932
2.79 26,394
1.34 15,587 $
1.66
- $
- 46,913
46,913
1.60
Municipal obligations
2,590
2.85 5,627
3.41 50,335 $
2.72 59,325 $
3.22 117,877
117,877
2.81
Corporate obligations
998
3.00
-
- 3,164 $
4.98
- $
-
4,162
4,162
4.51
Mortgage-backed securities
34
3.40 2,166
3.33 2,499 $
3.38 23,536 $
4.39 28,235
28,235
4.21
Collateralized mortgage obligations 2,388
1.00 3,374
7.34
778 $
3.12 76,083 $
3.72 82,623
82,623
3.72
Asset-backed securities
-
-
-
-
-
-
7,585 $
6.07
7,585
7,585
6.07
Total securities available-for-sale
$ 10,942
2.43% $ 37,824
2.33% $ 75,563
2.71% $ 168,261
3.78% $ 292,590 $
292,590
3.16%
34
Lending Activities
The following table includes the composition of the Bank’s loan portfolio by loan category:
December 31,
2024
2023
2022
2021
2020
Amount
Percent
of Total Amount
Percent
of Total Amount
Percent
of Total Amount
Percent
of Total Amount
Percent
of Total
(Dollars in thousands)
Real estate loans:
Residential 1-4 family (1)
$
153,721 10.11% $
156,578 10.55% $
135,947 10.03% $ 101,180 10.82% $ 110,802 13.14%
Residential 1-4 family construction
45,701
3.01
43,434
2.93
59,756
4.41
45,635
4.88
46,290
5.49
Total residential 1-4 family
199,422 13.12
200,012 13.48
195,703 14.44 146,815 15.70 157,092 18.63
Commercial real estate
645,962 42.48
608,691 40.99
539,070 39.76 410,568 43.92 316,668 37.56
Commercial construction and development
124,211
8.17
158,132 10.65
151,145 11.15
92,403
9.88
65,281
7.74
Farmland
146,610
9.64
142,590
9.61
136,334 10.06
67,005
7.17
65,918
7.82
Total commercial real estate
916,783 60.29
909,413 61.25
826,549 60.97 569,976 60.97 447,867 53.12
Total real estate loans
1,116,205 73.41 1,109,425 74.73 1,022,252 75.41 716,791 76.67 604,959 71.75
Other loans:
Home equity
97,543
6.41
86,932
5.86
74,271
5.48
51,748
5.54
56,563
6.71
Consumer
28,513
1.88
30,125
2.03
27,609
2.04
18,455
1.97
20,168
2.39
Commercial
144,039
9.47
132,709
8.94
127,255
9.39 101,535 10.86 109,209 12.95
Agricultural
134,346
8.83
125,298
8.44
104,036
7.68
46,335
4.96
52,242
6.20
Total commercial loans
278,385 18.30
258,007 17.38
231,291 17.07 147,870 15.82 161,451 19.15
Total other loans
404,441 26.59
375,064 25.27
333,171 24.59 218,073 23.33 238,182 28.25
Total loans
1,520,646 100.00% 1,484,489 100.00% 1,355,423 100.00% 934,864 100.00% 843,141 100.00%
Deferred loan fees(2)
-
-
(1,745)
(1,725)
(2,038 )
Allowance for credit losses (3)
(16,850)
(16,440)
(14,000)
(12,500)
(11,600 )
Total loans, net
$ 1,503,796
$ 1,468,049
$ 1,339,678
$ 920,639
$ 829,503
(1) Excludes loans held-for-sale.
(2) Deferred loan fees, net included in individual loan buckets above for the years ended December 31, 2024 and 2023.
(3) Allowance for credit losses for the years ended December 31, 2024 and 2023; allowance for loan losses for the years ended December 31, 2022, 2021 and 2020.
35
Loans receivable, net increased $35.75 million, or 2.4%, to $1.50 billion at December 31, 2024 from $1.47 billion at
December 31, 2023. Total commercial loans increased $20.38 million, total home equity loans increased $10.61 million, and
total commercial real estate loans increased $7.37 million. These increases were slightly offset by decreases in consumer
loans of $1.62 million and residential loans of $590,000.
Total loan originations were $607.73 million for the year ended December 31, 2024. Total residential 1-4 family originations
were $271.79 million, which includes $214.32 million of originations of loans held-for-sale. Total commercial originations
were $155.11 million. Total commercial real estate originations were $135.55 million. Home equity loan originations totaled
$31.63 million. Consumer loan originations totaled $13.65 million. Loans held-for-sale increased by $1.94 million, to $13.37
million at December 31, 2024 from $11.43 million at December 31, 2023.
The following table includes the composition of the commercial real estate loan category:
December 31, 2024
(In Thousands)
Non-Owner
Occupied
Owner
Occupied
Total
Percent of
Total CRE
Automotive related
$
- $
23,738 $
23,738
3.67%
Bars and restaurants
5,030
15,912
20,942
3.24
Car washes
884
-
884
0.14
Construction and related industries
19,717
13,968
33,685
5.21
Healthcare and social assistance
10,483
13,907
24,390
3.78
Hospitality industry related
-
13,764
13,764
2.13
Hotels and other traveler accommodations
66,702
-
66,702
10.33
Industrial/warehouse
51,168
-
51,168
7.92
Lessors of mini warehouses and self-storage units
16,682
-
16,682
2.58
Lessors of nonresidential buildings
67,782
-
67,782
10.49
Lessors of other real estate property
31,675
-
31,675
4.90
Multifamily
113,789
-
113,789
17.63
Office space
20,553
38,104
58,657
9.08
Other
37,876
25,253
63,129
9.77
Other real estate rental and leasing
6,836
-
6,836
1.06
Real estate leasing activities
-
27,465
27,465
4.25
Wholesale and retail trade
11,969
12,705
24,674
3.82
Total commercial real estate
$
461,146 $
184,816 $
645,962
100.00%
December 31, 2023
(In Thousands)
Non-Owner
Occupied
Owner
Occupied
Total
Percent of
Total CRE
Automotive related
$
- $
22,241 $
22,241
3.65%
Bars and restaurants
5,565
14,954
20,519
3.37
Car washes
10,792
-
10,792
1.77
Construction and related industries
17,530
11,840
29,370
4.83
Healthcare and social assistance
10,206
21,564
31,770
5.22
Hospitality industry related
-
14,756
14,756
2.42
Hotels and other traveler accommodations
58,157
-
58,157
9.55
Industrial/warehouse
43,983
-
43,983
7.23
Lessors of mini warehouses and self-storage units
13,959
-
13,959
2.29
Lessors of nonresidential buildings
63,515
-
63,515
10.44
Lessors of other real estate property
9,778
-
9,778
1.61
Multifamily
86,980
-
86,980
14.29
Office space
20,150
40,657
60,807
9.99
Other
54,556
25,197
79,753
13.11
Other real estate rental and leasing
4,877
-
4,877
0.80
Real estate leasing activities
-
28,998
28,998
4.76
Wholesale and retail trade
14,575
13,861
28,436
4.67
Total commercial real estate
$
414,623 $
194,068 $
608,691
100.00%
36
Commercial real estate loans made up $645.96 million or 42.5% of the Bank's total loan portfolio at December 31, 2024,
compared to $608.69 million or 41.0% at December 31, 2023. The Bank's commercial real estate loans are primarily
permanent loans secured by improved property such as office buildings, retail stores, commercial warehouses, and apartment
buildings. The terms and conditions of each loan are tailored to the needs of the borrower and based on the financial strength
of the project and any guarantors. Generally, commercial real estate loans originated by the Bank will not exceed 80.0% of
the appraised value or the selling price of the property, whichever is less. The Bank's commercial real estate portfolio's
average loan-to-value ratio range was 26% to 51% as of December 31, 2024.
The Bank's asset quality with respect to commercial real estate loans has remained strong despite recent economic and market
conditions. The Bank has limited exposure in the office space sector, none of which is located in central business districts.
Management believes that the Bank has implemented appropriate risk management practices, including regular and ongoing
loan reviews, stress tests, and sensitivity analysis. Loan reviews include monitoring past due rates, non-performing trends,
concentrations, loan to values, and other qualitative factors. The Bank's loan policy is robust and is updated annually or as
needed to meet the risk mitigation and strategic goals of the bank.
Loan Maturities. The following table sets forth the estimated maturity of the loan portfolio of the Bank at December 31, 2024.
Balances exclude deferred loan fees and allowance for credit losses. Scheduled principal repayments of loans do not
necessarily reflect the actual life of such assets. The average life of a loan is typically substantially less than its contractual
terms because of prepayments. In addition, due on sale clauses on loans generally give the Bank the right to declare loans
immediately due and payable in the event, among other things, the borrower sells the real property, subject to the mortgage,
and the loan is not paid off. All mortgage loans are shown to be maturing based on the date of the last payment required by
the loan agreement, except as noted.
Loans having no stated maturity, those without a scheduled payment, demand loans and matured loans, are shown as due
within six months.
One Year or
Less
After One
Year to
Five Years
After Five
Years to
Fifteen
Years
After
Fifteen
Years
Total
Total residential 1-4 family (1)
$
43,100 $
11,271 $
26,302 $
118,749 $
199,422
Total commercial real estate
66,335
40,342
197,651
612,455
916,783
Home equity
9,199
32,444
54,947
953
97,543
Consumer
1,802
20,065
6,296
350
28,513
Total Commercial
109,247
87,915
74,101
7,122
278,385
Total loans (1)
$
229,683 $
192,037 $
359,297 $
739,629 $ 1,520,646
(1) Excludes loans held-for-sale
The following table includes loans by fixed or adjustable rates at December 31, 2024:
Fixed
Adjustable
Total
(Dollars in Thousands)
Due after December 31, 2024
Total residential 1-4 family (1)
$
36,292 $
120,030 $
156,322
Total commercial real estate
125,426
725,022 850,448.00
Home equity
4,513
83,831 88,344.00
Consumer
25,107
1,604 26,711.00
Total commercial
99,405
69,733 169,138.00
Total due after December 31, 2024
290,743 1,000,220 1,290,963
Due in less than one year
100,320
129,363
229,683
Total loans (1)
$
391,063 $ 1,129,583 $ 1,520,646
Percent of total
25.72%
74.28%
100.00%
(1) Excludes loans held-for-sale
37
Delinquent Loans. The following table provides information regarding the Bank’s delinquent loans:
December 31, 2024
30-89 Days
90 Days and Greater
Number Amount
Percentage
of Total Number Amount
Percentage
of Total
(Dollars in Thousands)
(Dollars in Thousands)
Loan type:
Real estate loans:
Residential 1-4 family
9 $
1,326
12.90%
1 $
623
100.00%
Commercial real estate
5
5,739
55.84
-
-
0.00
Commercial construction and
development
2
951
9.25
-
-
0.00
Farmland
2
54
0.53
-
-
0.00
Other loans:
Home equity
5
382
3.72
-
-
0.00
Consumer
56
195
1.90
-
-
0.00
Commercial
4
1,064
10.35
-
-
0.00
Agricultural
4
566
5.51
0.00
Total
87 $
10,277
100.00%
1 $
623
100.00%
Nonperforming Assets. The following table sets forth information regarding nonperforming assets:
December 31,
2024 2023 2022 2021 2020
(Dollars in Thousands)
Non-accrual loans
Real estate loans:
Residential 1-4 family
$
469 $
297 $
483 $
616 $
684
Residential 1-4 family construction
961
757
-
337
337
Commercial real estate
268
340
350
497
631
Commercial construction and development
2
-
-
-
36
Farmland
190
3,716
143
989
2,245
Other loans:
Home equity
335
182
96
100
94
Consumer
121
60
25
62
151
Commercial
204
27
44
516
537
Agricultural
677
3,016
1,059
1,718
1,542
Accruing loans delinquent 90 days or more
Real estate loans:
Residential 1-4 family
623
-
330
-
34
Residential 1-4 family construction
-
-
-
-
170
Farmland
-
26
-
-
-
Other loans:
Home equity
-
-
-
-
-
Commercial
-
-
746
-
6
Agricultural
-
-
-
-
182
Restructured loans
-
-
4,502
2,224
1,824
Total nonperforming loans
3,850
8,421
7,778
7,059
8,473
Real estate owned and other repossessed property, net
45
5
-
4
25
Total nonperforming assets
$
3,895 $
8,426 $
7,778 $
7,063 $
8,498
Total nonperforming loans to total loans
0.25%
0.57%
0.57%
0.76%
1.00%
Total nonperforming loans to total assets
0.18%
0.41%
0.40%
0.49%
0.67%
Total nonaccrual loans to total loans
0.21%
0.57%
0.24%
0.59%
0.74%
Total nonperforming assets to total assets
0.19%
0.41%
0.40%
0.49%
0.68%
38
Nonaccrual loans as of December 31, 2024 and 2023 include $591,000 and $1,681,000, respectively of acquired loans that
deteriorated subsequent to the acquisition date.
During the year ended December 31, 2024, the Bank sold two real estate owned and other repossessed assets resulting in a
net loss of $6,000. There were no subsequent write-downs on real estate owned or other repossessed assets during the year
ended December 31, 2024. During the year ended December 31, 2023, the Bank sold one real estate owned and other
repossessed asset. There were no subsequent write-up on real estate owned and other repossessed assets during the year ended
December 31, 2023.
Management, in compliance with regulatory guidelines, conducts an internal loan review program, whereby loans are placed
or classified in categories depending upon the level of risk of nonpayment or loss. These categories are special mention,
substandard, doubtful or loss. Management utilizes relevant available information to establish an allowance for credit losses
on loans. The allowance is measured on a collective pool basis when similar risk characteristics exist. Loans considered to
have different risk characteristics that do not fall within any pool will be analyzed individually on a quarterly basis for
potential individual reserve requirements. Collateral-dependent loans and nonperforming loans will generally be evaluated
individually.
Management’s evaluation of classification of assets and adequacy of the allowance for credit losses is reviewed by the Board
on a regular basis and by regulatory agencies as part of their examination process. We also utilize a third-party review as part
of our loan classification process. In addition, on an annual basis or more often if needed, the Company formally reviews the
ratings of all commercial real estate, real estate construction, and commercial business loans that have a principal balance of
$750,000 or more.
The following table reflects our classified assets:
December 31, 2024
Special
Pass
Mention Substandard Doubtful
Total
(In Thousands)
Real estate loans:
Residential 1-4 family
$
152,522 $
623 $
576 $
- $
153,721
Residential 1-4 family construction
44,740
-
961
-
45,701
Commercial real estate
641,858
260
3,844
-
645,962
Commercial construction and development
122,806
-
1,405
-
124,211
Farmland
144,720
1,580
310
-
146,610
Other loans:
Home equity
97,026
115
402
-
97,543
Consumer
28,381
8
124
-
28,513
Commercial
141,992
592
1,455
-
144,039
Agricultural
131,165
2,618
563
-
134,346
Total loans
1,505,099
5,907
9,640
- 1,520,646
Real estate owned/repossessed property, net
45
$ 1,520,691
39
December 31, 2023
Special
Pass
Mention Substandard Doubtful
Total
(In Thousands)
Real estate loans:
Residential 1-4 family
$
155,235 $
1,168 $
175 $
- $
156,578
Residential 1-4 family construction
42,677
-
757
-
43,434
Commercial real estate
600,492
7,860
339
-
608,691
Commercial construction and development
156,056
2,076
-
-
158,132
Farmland
140,848
-
1,742
-
142,590
Other loans:
Home equity
86,735
-
197
-
86,932
Consumer
30,038
18
69
-
30,125
Commercial
129,644
3,006
59
-
132,709
Agricultural
123,542
-
1,756
-
125,298
Total loans
1,465,267
14,128
5,094
- 1,484,489
Real estate owned/repossessed property, net
5
$ 1,484,494
Allowance for Credit Losses. The Bank segregates its loan portfolio for credit losses into the following broad categories:
residential 1-4 family, commercial real estate, home equity, consumer and commercial. The Bank provides for a general
allowance for expected losses in the portfolio in the categories referenced above. General loss percentages which are
calculated based on historical analyses and other factors such as volume and severity of delinquencies, local and national
economy, underwriting standards and other factors. This portion of the allowance is calculated for expected losses which
probably exist as of the evaluation date even though they might not have been identified by the more objective processes
used. This is due to the risk of error and/or inherent imprecision in the process. This portion of the allowance is subjective in
nature and requires judgments based on qualitative factors which do not lend themselves to exact mathematical calculations
such as: trends in delinquencies and nonaccruals; trends in volume; terms and portfolio mix; new credit products; changes in
lending policies and procedures; and changes in the outlook for the local and national economy.
40
At least quarterly, the management of the Bank evaluates the need to establish an allowance for credit losses on specific loans
when a finding is made that a loss is estimable and probable. Such evaluation includes a review of all loans for which full
collectability may not be reasonably assured and considers, among other matters: the estimated market value of the underlying
collateral of problem loans; prior loss experience; economic conditions; and overall portfolio quality.
Provisions for, or adjustments to, estimated losses are included in earnings in the period they are established. At December
31, 2024, we had $16.85 million in allowance for credit losses. At December 31, 2023, we had $16.44 million in allowance for
loan losses.
While we believe we have established our existing allowance for credit losses in accordance with generally accepted
accounting principles, there can be no assurance that bank regulators, in reviewing our loan portfolio, will not request that
we significantly increase our allowance for credit losses, or that general economic conditions, a deteriorating real estate
market, or other factors will not cause us to significantly increase our allowance for credit losses, therefore negatively
affecting our financial condition and earnings.
In originating loans, we recognize that credit losses will be experienced and that the risk of loss will vary with, among other
things, the type of loan being made, the creditworthiness of the borrower over the term of the loan and, in the case of a secured
loan, the quality of the security for the loan.
It is our policy to review our loan portfolio, in accordance with regulatory classification procedures, on at least a quarterly
basis.
The following table includes information for allowance for credit losses:
Years Ended
December 31,
2024
2023
2022
(Dollars in Thousands)
Beginning balance
$
16,440 $
14,000 $
12,500
Impact of adopting ASC 326
-
700
-
Provision for credit losses
408
1,666
2,001
Charge-offs
Residential 1-4 Family
(11)
-
(199)
Commercial real estate
-
-
-
Home equity
-
-
(32)
Consumer
(65)
(50)
(31)
Commercial
(10)
(129)
(299)
Recoveries
Residential 1-4 Family
-
195
4
Commercial real estate
18
23
30
Home equity
-
13
-
Consumer
3
3
4
Commercial
67
19
22
Net loan charge-offs (recoveries)
2
74
(501)
Ending balance
$
16,850 $
16,440 $
14,000
Allowance for credit losses to total loans excluding loans held-for-sale
1.11%
1.11%
1.03%
Allowance for credit losses to total nonperforming loans
437.66%
195.23%
179.99%
Allowance for credit losses to nonaccrual loans
526.56%
249.96%
424.50%
Net charge-offs (recoveries) to average loans outstanding during the period
0.00%
0.01%
-0.04%
Net charge-offs to average loans outstanding for each loan category are considered insignificant for the periods presented in
the table above.
41
The following table presents allocation of the allowance for credit losses by loan category and the percentage of loans in each
category to total loans:
December 31,
2024
2023
2022
Amount
Percentage
of
Allowance
to Total
Allowance
Loan
Category
to Total
Loans Amount
Percentage
of
Allowance
to Total
Allowance
Loan
Category
to Total
Loans Amount
Percentage
of
Allowance
to Total
Allowance
Loan
Category
to Total
Loans
(Dollars in Thousands)
Real estate loans:
Residential 1-4 family
$ 1,911
11.34%
13.12 % $ 1,866
11.35%
13.48% $ 1,472
10.51 %
14.44%
Commercial real estate
10,907
64.74
60.29 10,691
65.03
61.25 9,037
64.55
60.97
Total real estate loans
12,818
76.08
73.41 12,557
76.38
74.73 10,509
75.06
75.41
Other loans:
Home equity
553
3.28
6.41
540
3.28
5.86
509
3.64
5.48
Consumer
245
1.45
1.88
304
1.85
2.03
342
2.44
2.04
Commercial
3,234
19.19
18.30 3,039
18.49
17.38 2,640
18.86
17.07
Total other loans
4,032
23.92
26.59 3,883
23.62
25.27 3,491
24.94
24.59
Total
$ 16,850
100.00% 100.00 % $ 16,440
100.00% 100.00% $ 14,000
100.00 % 100.00%
Deposits and Other Sources of Funds
Deposits. Deposits are the Company’s primary source of funds. Core deposits are deposits that are more stable and somewhat
less sensitive to rate changes. They also represent a lower cost source of funds than rate sensitive, more volatile accounts
such as certificates of deposit. We believe that our core deposits are checking, savings, money market and IRA accounts.
Based on our historical experience, we include IRA accounts funded by certificates of deposit as core deposits because they
exhibit the principal features of core deposits in that they are stable and generally are not rate sensitive. Core deposits were
$1.24 billion or 73.7% of the Bank’s total deposits at December 31, 2024 ($1.22 billion or 72.5% excluding IRA certificates
of deposit). The presence of a high percentage of core deposits and, in particular, transaction accounts reflects in part due to
our strategy to restructure our liabilities to more closely resemble the lower cost of liabilities of a commercial bank. However,
a significant portion of our deposits is in certificate of deposit form and there was growth in this area during 2024. This shift
to certificate of deposits has added to our overall cost of funds and could continue to in the future.
42
The following table includes deposit accounts and associated weighted average interest rates for each category of deposits:
December 31,
2024
2023
2022
Percent
of
Weighted
Average
Percent
of
Weighted
Average
Percent
of
Weighted
Average
Amount Total
Rate Amount Total
Rate Amount Total
Rate
(Dollars in Thousands)
Noninterest
checking
$ 419,211 24.94%
0.00% $ 418,727 25.61 %
0.00% $ 468,955 28.68%
0.00%
Interest-bearing
checking
221,476 13.17
0.18 211,101 12.91
0.05 252,922 15.47
0.11
Savings
210,572 12.52
0.06 230,711 14.11
0.06 273,790 16.74
0.06
Money market
367,094 21.83
1.82 330,274 20.20
1.66 387,947 23.72
1.12
Total
1,218,353 72.46
0.47 1,190,813 72.83
0.40 1,383,614 84.61
0.34
Certificates of
deposit
accounts:
IRA certificates
21,419
1.27
0.94
22,960
1.40
0.75
24,907
1.52
0.48
Brokered
certificates
-
-
0.00
72,168
4.41
5.28
-
0.00
0.00
Other
certificates
441,456 26.27
4.41 349,254 21.36
4.04 226,751 13.87
1.51
Total
certificates
of deposit 462,875 27.54
4.25 444,382 27.17
4.08 251,658 15.39
1.41
Total
deposits $1,681,228 100.00%
1.59% $ 1,635,195 100.00 %
1.45% $1,635,272 100.00%
0.50%
Overall deposits increased year over year by $46.03 million. Certificates of deposits increased $18.49 million while savings
decreased by $20.14 million. All other categories of deposits increased as follows: money market increased by $36.82
million, interest-bearing checking increased $10.38 million, and noninterest checking increased by $484,000. There was
migration during the year from lower yielding deposit accounts to certificates of deposit as consumers shifted funds to higher
yielding deposits.
At December 31, 2024 and 2023, the Company held $632.95 million and $618.78 million, respectively, in deposit accounts
that met or exceeded the Federal Deposit Insurance Corporation ("FDIC") requirements of $250,000 and greater. However,
the estimated amount of uninsured deposits was approximately $323.12 million or 18.9% of total deposits at December 31,
2024 considering other factors such as joint accounts, deposits collateralized by Bank securities and deposit sharing programs
like Intrafi Cash Service.
The following table shows the amount of certificates of deposit with balances of $250,000 and greater by time remaining
until maturity as of December 31, 2024:
Balance
$250,000
and Greater
(In Thousands)
3 months or less
$
74,271
Over 3 to 6 months
31,044
Over 6 to 12 months
35,109
Over 12 months
5,229
Total
$
145,653
Our depositors are primarily residents of the state of Montana.
43
Borrowings. Deposits are the primary source of funds for our lending and investment activities and for general business
purposes. However, as the need arises, or in order to take advantage of funding opportunities, we also borrow funds in the
form of advances from FHLB of Des Moines to supplement our supply of lendable funds and to meet deposit withdrawal
requirements. The Bank has Federal funds lines of credit with PCBB, PNC, TIB and UBB. Eagle has a line of credit with
Bell Bank.
Advances from FHLB and other borrowings decreased by $34.81 million to $140.93 million at December 31, 2024
from $175.74 million at December 31, 2023. The decrease was related to an increase in deposits. The weighted average rate
for borrowings was 4.72% as of December 31, 2024, compared to 5.48% at December 31, 2023.
Other Long-Term Debt. The following table summarizes other long-term debt activity:
December 31,
December 31,
2024
2023
Net
Percent
Net
Percent
Amount of Total Amount of Total
(Dollars in Thousands)
Subordinated debentures fixed at 5.50% to floating, due 2030
$
14,815 $
25.05 $
14,781 $
25.05
Subordinated debentures fixed at 3.50% to floating, due 2032
39,179
66.24
39,063
66.21
Subordinated debentures variable at 3-Month SOFR plus
1.68%, due 2035
5,155
8.71
5,155
8.74
Total other long-term debt, net
$
59,149
100.00% $
58,999
100.00%
Total other long-term debt was $59.15 million at December 31, 2024 compared to $59.00 million at December 31, 2023.
Shareholders’ Equity
Total shareholders’ equity increased by $5.50 million or 3.2%, to $174.77 million at December 31, 2024 from $169.27 million
at December 31, 2023. This increase was primarily the result of net income of $9.78 million. This increase was partially offset
by dividends paid of $4.54 million.
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.
44
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.
Year Ended December 31, 2024 Year Ended December 31, 2023
Year Ended December 31, 2022
Average Interest
Average Interest
Average Interest
Daily
and
Yield/
Daily
and
Yield/
Daily
and
Yield/
Balance Dividends Cost(4) Balance Dividends Cost(4) Balance Dividends Cost(4)
(Dollars in Thousands)
Assets:
Interest earning assets:
Investment securities
$
306,538 $ 10,428
3.39% $
328,533 $ 11,376
3.46% $
336,779 $
8,579
2.55%
FHLB and FRB stock
13,535
1,085
7.99
12,851
727
5.66
6,369
302
4.74
Loans receivable(1)
1,523,384
92,282
6.04 1,436,672
79,423
5.53 1,194,788
60,353
5.05
Other earning assets
6,663
416
6.23
2,671
89
3.33
34,170
228
0.67
Total interest-earning assets
1,850,120 104,211
5.62 1,780,727
91,615
5.14 1,572,106
69,462
4.42
Noninterest-earning assets
241,931
234,859
196,813
Total assets
$2,092,051
$2,015,586
$1,768,919
Liabilities and equity:
Interest-bearing liabilities:
Deposit accounts:
Checking
$
218,175 $
391
0.18% $
237,006 $
595
0.25% $
244,208 $
173
0.07%
Savings
212,221
134
0.06
238,695
146
0.06
269,033
128
0.05
Money market
350,431
8,660
2.46
331,199
5,548
1.68
358,122
1,711
0.48
Certificates of deposit
443,313
18,653
4.20
357,573
11,568
3.24
188,954
1,112
0.59
FHLB advances and other
borrowings
190,082
10,211
5.36
159,667
8,562
5.36
14,627
514
3.51
Other long-term debt
59,080
2,724
4.60
58,930
2,719
4.61
59,807
2,512
4.2
Total interest-bearing liabilities
1,473,302
40,773
2.76 1,383,070
29,138
2.11 1,134,751
6,150
0.54
Noninterest checking
412,251
439,388
453,841
Other noninterest-bearing liabilities
41,907
34,321
24,672
Total liabilities
1,927,460
1,856,779
1,613,264
Total equity
164,591
158,807
155,655
Total liabilities and equity
$2,092,051
$2,015,586
$1,768,919
Net interest income/interest rate
spread(2)
$ 63,438
2.86%
$ 62,477
3.04%
$ 63,312
3.88%
Net interest margin(3)
3.42%
3.51%
4.03%
Total interest earning assets to
interest-bearing liabilities
125.58%
128.75%
138.54%
(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 credit losses (for years ended December 31, 2024
and December 31, 2023) or provision for loan losses (for the year ended December 31, 2022) divided by average
interest-earning assets.
(4)
For purposes of this table, tax exempt income is not calculated on a tax equivalent basis.
45
Rate/Volume Analysis
The following table presents 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.
Year Ended December 31, 2024
Year Ended December 31, 2023
Due to
Due to
Volume
Rate
Net
Volume
Rate
Net
(In Thousands)
Interest earning assets:
Investment securities
$
(762) $
(186) $
(948 ) $
(210) $
3,007 $
2,797
FHLB and FRB stock
39
319
358
307
118
425
Loans receivable(1)
4,794
8,065
12,859
12,218
6,852
19,070
Other earning assets
133
194
327
(210)
71
(139 )
Total interest earning assets
4,204
8,392
12,596
12,105
10,048
22,153
Interest-bearing liabilities:
Checking
(47)
(157)
(204)
(5)
427
422
Savings
(16)
4
(12)
(14)
32
18
Money market
322
2,790
3,112
(129)
3,966
3,837
Certificates of deposit
2,774
4,311
7,085
992
9,464
10,456
FHLB advances and other borrowings
1,631
18
1,649
5,097
2,951
8,048
Other long-term debt
7
(2)
5
(37)
244
207
Total interest-bearing liabilities
4,671
6,964
11,635
5,904
17,084
22,988
Change in net interest income
$
(467) $
1,428 $
961 $
6,201 $ (7,036) $
(835 )
(1) Includes loans held-for-sale.
Results of Operations
Comparison of Operating Results for the Years Ended December 31, 2024 and 2023
Net Income
Eagle’s net income for the year ended December 31, 2024 was $9.78 million compared to $10.06 million for the year ended
December 31, 2023. The decrease of $278,000 or 2.8% was driven by a decrease in noninterest income of $4.94 million. This
decrease was largely offset by decrease in noninterest expense of $2.78 million and an increase in net interest income after
provision for credit losses of $1.90 million. Basic and diluted earnings per common share were $1.25 and $1.24,
respectively, for the year ended December 31, 2024. Basic and diluted earnings per common share were both $1.29 for the
year ended December 31, 2023.
Net Interest Income
Net interest income increased slightly to $63.44 million for the year ended December 31, 2024, from $62.48 million for the
year ended December 31, 2023. This increase of $961,000, or 1.5%, was primarily the result of an increase in interest and
dividend income of $12.59 million largely offset by an increase in interest expense of $11.63 million.
Interest and Dividend Income
Interest and dividend income was $104.21 million for the year ended December 31, 2024, compared to $91.62 million for the
year ended December 31, 2023, an increase of $12.59 million, or 13.7%. Interest and fees on loans increased to $92.28 million
for the year ended December 31, 2024 from $79.42 million for the same period ended December 31, 2023. This increase of
$12.86 million, or 16.2%, was due in part to an increase in the average yield of loans. The average interest rate earned on loans
receivable increased by 51 basis points, from 5.53% for the year ended December 31, 2023, to 6.04% for the year ended
December 31, 2024.
46
Interest accretion on purchased loans was $751,000 for the year ended December 31, 2024, which resulted in a 4 basis point
increase in net interest margin, compared to $1.01 million for the year ended December 31, 2023, which resulted in a 6 basis
point increase in net interest margin. In addition, average balances for loans receivable, including loans-held-for-sale, for the
year ended December 31, 2024 were $1.52 billion, compared to $1.44 billion for the year ended December 31, 2023. This
represents an increase of $86.71 million, or 6.00% and was due to organic growth. Interest on investment securities available-
for-sale decreased by $948,000 or 8.3% period over period, primarily due to the decrease in average balances for investments
from $328.53 million for the year ended December 31, 2023, to $306.54 million for the year ended December 31, 2024. In
addition, average interest rates earned on investments decreased from 3.46% for the year ended December 31, 2023, to 3.39%
for the year ended December 31, 2024.
Interest Expense
Total interest expense was $40.77 million for the year ended December 31, 2024, increasing from $29.14 million for the year
ended December 31, 2023. The increase of $11.63 million was due to an increase of $9.98 million in interest expense on
deposits and a net increase of $1.65 million in interest expense on total borrowings. The overall average rate on total deposits
was 1.70% for the year ended December 31, 2024, compared to 1.11% for the year ended December 31, 2023. In addition,
the average balance for total deposits was $1.64 billion for the year ended December 31, 2024, compared to $1.60 billion for
the year ended December 31, 2023. The average balance for total borrowings increased from $218.60 million for the year
ended December 31, 2023 to $249.16 million for the year ended December 31, 2024. The increase was due to FHLB advances
and other borrowings being deployed to fund loan growth. The average rate paid on total borrowings also increased from
5.16% for the year ended December 31, 2023, to 5.18% for the year ended December 31, 2024.
Provision for Credit Losses
Provision for credit losses was $518,000 for the year ended December 31, 2024, compared to $1.46 million in loan loss
provisions for the year ended December 31, 2023. The provision for credit losses for the year ended December 31, 2024
includes a provision for credit losses on loans of $408,000 and a provision for unfunded commitments of $110,000.
Noninterest Income
Total noninterest income was $17.78 million for the year ended December 31, 2024, compared to $22.72 million for the year
ended December 31, 2023. The decrease of $4.94 million, or 21.7% was primarily due to a decrease in mortgage banking,
net of $4.96 million for the year ended December 31, 2024. Mortgage banking, net includes net gain on sale of mortgage
loans which decreased $4.66 million to $6.74 million for the year ended December 31, 2024, compared to $11.40 million for
the year ended December 31, 2023. During the year ended December 31, 2024, $211.78 million residential mortgage loans
were sold compared to $344.31 million in the prior year. In addition, gross margin on sale of mortgage loans has compressed
due to increased competition and less volume. For the year ended December 31, 2024, gross margin was 3.18% compared to
3.31% for the year ended December 31, 2023.
Noninterest Expense
Noninterest expense was $69.31 million for the year ended December 31, 2024, compared to $72.09 million for the year
ended December 31, 2023, a decrease of $2.78 million, or 3.9%. The largest driver of the decrease was salaries and employee
benefits, decreasing 7.6% or $3.25 million to $39.72 million for the year ended December 31, 2024 compared to $42.97
million for the year ended December 31, 2023. This decrease was due to fewer full-time employees in 2024, resulting in
lower salaries and lower group health insurance costs. In addition, commissions paid decreased due to lower commissions
paid on residential mortgage originations.
Provision for Income Taxes
Provision for income taxes was $1.61 million for the year ended December 31, 2024, compared to $1.60 million for the year
ended December 31, 2023. The effective tax rate was 14.2% for the year ended December 31, 2024 compared to 13.7% for
the prior year and is due to the increase in proportion of tax-exempt income compared to pretax earnings, as well as tax credits
from investments in low-income housing tax projects.
47
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 December 31, 2024 and 2023.
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, for 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 Eagle’s
commitments to make loans and management’s assessment of Eagle’s ability to generate funds.
The Bank's available borrowing capacity was approximately $404.0 million as of December 31, 2024 and $398.50 million as
of December 31, 2023.
December 31,
December 31,
2024
2023
Borrowings
Remaining
Borrowing
Borrowings
Remaining
Borrowing
Outstanding
Capacity
Outstanding
Capacity
(Dollars in Thousands)
Federal Home Loan Bank advances
$
140,930 $
276,664 $
175,737 $
266,017
Federal Reserve Bank discount window
-
27,349
-
32,472
Correspondent bank lines of credit
-
100,000
-
100,000
Total
$
140,930 $
404,013 $
175,737 $
398,489
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 are valued at par. The Company
did not utilize the program during 2023. In March of 2024, the Company accessed borrowings through the BTFP. In
September of 2024, the Company paid off the borrowings.
Brokered deposits are another source of funding the Bank may utilize from time to time. As of December 31, 2024, the Bank
had no brokered certificates and $5.57 million in brokered money market deposits. As of December 31, 2023, the Bank had
$72.17 million in brokered certificates and $5.28 million in brokered money market deposits. Policy limits for brokered
deposits are set at 10% of assets.
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 line of credit with a
correspondent bank, which was increased from $10.00 million to $15.00 million as of October 30, 2023. There was no
outstanding balance for this line of credit at December 31, 2024 or December 31, 2023.
48
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 in the short and long term. 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.
Comparison of Cash Flow for Years Ended December 31, 2024 and 2023
Net cash provided by the Company’s operating activities, which is primarily comprised of cash transactions affecting net
income, was $28.54 million for the year ended December 31, 2024 compared to $9.35 million for the prior year. Net cash
provided by operating activities was higher for the year ended December 31, 2024 primarily due to changes in loans held-
for-sale activity. Mortgage volumes have been impacted by the current interest rate environment.
Net cash used in the Company’s investing activities, which is primarily comprised of cash transactions related to activity in
the loan portfolio and investment securities, was $27.80 million for the year ended December 31, 2024 compared to $108.21
million for the year ended December 31, 2023. Net cash used in investing activities for the year ended December 31, 2024,
was impacted by loan originations being higher than loan pay-off and principal payments during the year. Loan origination
and principal collection, net was $36.20 million for the year ended December 31, 2024. Pay-off activity has slowed with
current interest rate levels. Available-for-sale securities sales and maturities, principal payments and calls were $35.27 million
for the year ended December 31, 2024. A portion of the proceeds were used to purchase additional available-for-sale securities
totaling $10.98 million. Net cash used in investing activities for the year ended December 31, 2023 was due in part to loan
originations being higher than loan pay-off and principal payments during the year. Loan origination and principal collection,
net was $130.74 million for the year ended December 31, 2023. In addition, available-for-sale securities purchases were
$28.13 million during the year ended December 31, 2023, more than offset by available-for sale securities sales and
maturities, principal payments and calls of $66.72 million.
Net cash provided by the Company’s financing activities was $6.27 million for the year ended December 31, 2024 compared
to $101.59 million for the year ended December 31, 2023. Net cash provided by financing activities for the year ended
December 31, 2024 was driven by an increase in deposits of $46.03 million, largely offset by a decrease in borrowings of
$34.81 million. Net cash provided by financing activities for the year ended December 31, 2023 was largely impacted by
borrowings of $106.34 million utilized to fund continued loan growth.
During the third quarter of 2024, net borrowing activity of $43.43 million was presented in the Form 10-Q statement of cash
flows for the nine months ended September 30, 2024. The total amount for net borrowing activity was reported correctly;
however, the specific borrowing line items in the cash flows from financing activities were incorrect. The borrowing activity
was presented as follows: $14.26 million net short-term advances on FHLB and other borrowings, $29.17 million advances
on long-term FHLB and other borrowings and no payments on long-term FHLB and other borrowings. The correct amounts
are as follows: $40.74 million net short-term payments on FHLB and other borrowings, $105.00 million advances on long-
term FHLB and other borrowings and $20.83 million payments on long-term FHLB and other borrowings. See ITEM 9A.
Controls and Procedures for additional information regarding this matter.
Capital Resources
At December 31, 2024, 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 1.7% compared to
a decrease of 1.3% at December 31, 2023. The Bank is within the guidelines set forth by the Board of Directors for interest
rate sensitivity.
The Bank’s Tier 1 leverage ratio, as measured under State of Montana and FRB rules, increased from 9.75% as of December
31, 2023 to 10.07% as of December 31, 2024. The Bank’s strong capital position helps to mitigate its interest rate risk
exposure.
49
As of December 31, 2024, the Company’s regulatory capital was in excess of all applicable regulatory requirements and
is deemed “well capitalized” pursuant to State of Montana and FRB rules. At December 31, 2024, the Bank’s total capital,
Tier 1 capital, common equity Tier 1 capital and Tier 1 leverage ratios amounted to 13.49%, 12.41%, 12.41% and 10.07%,
respectively, compared to regulatory requirements of 10.50%, 8.50%, 7.00% and 4.00%, respectively.
Impact of Inflation and Changing Prices
Our consolidated financial statements and the accompanying notes, which are found in Item 8, 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 net income. Net interest income is affected by changes in interest rates, the relationship between
rates on interest-earning assets and interest-bearing 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. Our asset and liability policy and strategies are expected
to continue as described so long as competitive and regulatory conditions in the financial institution industry and market
interest rates continue as they have in recent years.
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) will not be reduced by more than 20.0% given an
immediate increase or decrease in interest rates of up to 400 basis points, and the subsequent twelve months (i.e. year-2) will
not be reduced by more than 25.0% given an immediate increase or decrease in interest rates of up to 400 basis points.
The following table includes the Bank's net interest income sensitivity analysis.
Changes in Market
Rate Sensitivity
Policy
Policy
Interest Rates
As of December 31, 2024
Limits
Limits
(Basis Points)
Year 1
Year 2
Year 1
Year 2
+300
-7.8%
6.9 %
-15.0 %
-20.0%
+200
-5.2%
7.0 %
-15.0 %
-15.0%
+100
-2.3%
7.8 %
-10.0 %
-10.0%
-100
1.3%
5.3 %
-10.0 %
-10.0%
-200
2.4%
2.5 %
-15.0 %
-15.0%
-300
3.9%
-0.2 %
-15.0 %
-20.0%
50
The following table discloses how the Bank’s economic value of equity (“EVE”) would react to interest rate changes.
Changes in Market
EVE as a % Change from 0 Shock
Interest Rates
As of December 31, 2024
Board Policy
(Basis Points)
Projected EVE
Limit
Maximum % change:
+300
2.2%
-35.0%
+200
1.7%
-30.0%
+100
1.5%
-20.0%
0
0.0%
0.0%
-100
-3.1%
-20.0%
-200
-7.9%
-30.0%
-300
-14.6%
-35.0%
Off-Balance Sheet Arrangements
As a financial services provider, we routinely are a party to various financial instruments with off-balance-sheet risks, such
as commitments to extend credit and unused lines of credit. While these contractual obligations represent our future cash
requirements, a significant portion of commitments to extend credit may expire without being drawn upon. Such
commitments are subject to the same credit policies and approval process accorded to loans we make.
Commitments are summarized as follows:
December 31,
2024
2023
(In Thousands)
Commitments to extend credit
$
267,623 $
271,552
Letters of credit
7,409
9,457
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
This item has been omitted based on Eagle’s status as a smaller reporting company.
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Eagle’s audited consolidated financial statements, notes thereto, and auditor’s reports are found immediately following Part
III of this report.
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
ITEM 9A.
CONTROLS AND PROCEDURES.
Disclosure Controls and Procedures
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, as amended, as of
December 31, 2024, 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 December 31, 2024, our
disclosure controls and procedures were not effective as of such date due to a material weakness in internal control over
financial reporting as described below.
51
Management Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such
term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Our management conducted an assessment of the
effectiveness of our internal control over financial reporting. This assessment was based upon the criteria for effective internal
control over financial reporting established in the 2013 Internal Control - Integrated Framework, issued by the Committee of
Sponsoring Organizations of the Treadway Commission.
The Company’s internal control over financial reporting involves a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. Internal control over financial reporting includes the controls themselves, as
well as monitoring of the controls and internal auditing practices and actions to correct deficiencies identified. Because of its
inherent limitations, internal control over financial reporting may not prevent or detect all misstatements.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2024.
Based on this assessment, management concluded that, as of December 31, 2024, the Company’s internal control over
financial reporting was not effective.
In connection with the preparation of this Annual Report on Form 10-K, we identified a material weakness in internal control
over financial reporting related to the design of controls over preparation of the statement of cash flows. Specifically, the
Company’s controls were not designed at a sufficient level of precision to ensure the proper classification of borrowings as
short-term or long-term so that the borrowings from and repayments to are appropriately presented either on a net basis or a
gross basis within the financing section of the statement of cash flows. A material weakness is a deficiency, or a combination
of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material
misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
The control deficiency created a reasonable possibility that a material misstatement to the consolidated financial statements
would not be prevented or detected on a timely basis. As a result, management believes that, as of December 31, 2024, our
internal control over financial reporting was not effective.
The Company’s independent registered public accounting firm, Moss Adams LLP has issued an adverse audit report on the
effectiveness of the Company’s internal control over financial reporting as of December 31, 2024, which appears in Item 8
of this Form 10-K. Following identification of the material weakness and prior to filing this Annual Report on Form 10-K,
we completed procedures to ensure borrowings were classified correctly on the statement of cash flows for the year ended
December 31, 2024. Based on these procedures, management believes that our consolidated financial statements included in
this Form 10-K have been prepared in accordance with U.S. GAAP. Our CEO and CFO have certified that, based on their
knowledge, the financial statements, and other financial information included in this Form 10-K, fairly present in all material
respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in
this Form 10-K. Moss Adams LLP has issued an unqualified opinion on our financial statements, which is included in Item
8 of this Form 10-K.
Changes in Internal Control over Financial Reporting
There were no changes in the Company’s internal control over financial reporting identified in connection with the evaluation
required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during the quarter ended December 31,
2024 that have materially affected, or were reasonably likely to materially affect, the Company’s internal control over
financial reporting.
Remediation Plan
As noted above, subsequent to December 31, 2024, we identified a material weakness in internal control related to the review
of the classification of borrowings in the financing activities section of the statement of cash flows. Management, with
oversight from the Audit Committee, is implementing measures designed to ensure that the control deficiency contributing
to the material weakness is remediated so that controls are designed, implemented and operating effectively. The remediation
action includes restructuring the design of control activities, including consideration of system impacts, surrounding the
classification of borrowing activities in order to facilitate appropriate presentation in the financial statements. We believe this
action will remediate the material weakness. The weakness will not be considered remediated until the applicable controls
operate for a sufficient period of time and management has concluded, through testing, that these controls are operating
effectively. We expect that the remediation of this material weakness will be completed in 2025.
52
ITEM 9B.
OTHER INFORMATION.
Adoption or Termination of Trading Arrangements by Directors and Executive Officers.
During the quarter ended December 31, 2024, no director or officer (as defined in Rule 16a-1(f) under the Securities Exchange
Act of 1934) of the Company adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading
arrangement," as each term is defined in Item 408(a) of Regulation S-K.
ITEM 9C.
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTION.
Not applicable.
53
PART III
Except as provided below, the information required by Items 10, 11, 12, 13 and 14 is hereby incorporated by reference from
our definitive proxy statement to be filed with the Securities and Exchange Commission within 120 days after the close of
our year ended December 31, 2024.
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
Information about our directors may be found under the caption “Proposal I – Election of Directors” in our Proxy Statement
for the 2025 Annual Meeting of Stockholders (the “Proxy Statement”). The information in the Proxy Statement set forth
under the captions of “Board Attendance and Committees,” “Board Leadership Structure,” “The Board’s Role in Risk
Oversight” and “Code of Ethics” is incorporated herein by reference.
Information about our executive officers may be found under the caption "Executive Officers" in our Proxy Statement and is
incorporated herein by reference.
Code of Ethics
We have a code of ethics that applies to all of our employees, including our principal executive officer, principal financial
officer, principal accounting officer and our Board. Our Code of Ethics and Conflict of Interest Policy is available on our
website at www.opportunitybank.com. We will disclose on our website any amendments to or waivers from any provision of
our Code of Ethics and Conflict of Interest Policy that applies to any of the directors or executive officers.
ITEM 11.
EXECUTIVE COMPENSATION.
The information in the Proxy Statement set forth under the captions of “Directors’ Compensation” and “Executive
Compensation” is incorporated herein by reference.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.
The information in the Proxy Statement set forth under the caption of “Beneficial Ownership of Common Stock” is
incorporated herein by reference.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE.
The information in the Proxy Statement set forth under the captions of “Transactions with Certain Related Persons” and
“Board Independence” is incorporated herein by reference.
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES.
The information in the Proxy Statement set forth under the caption of “Proposal 2 – Ratification of Appointment of
Independent Registered Public Accounting Firm” is incorporated herein by reference.
PART IV
ITEM 15.
EXHIBIT AND FINANCIAL STATEMENT SCHEDULES.
(a) (1) The following documents are filed as part of this report: The audited Consolidated Statements of Financial Condition
of Eagle Bancorp Montana, Inc. and subsidiaries as of December 31, 2024 and 2023 and the related Consolidated
Statements of Income, Consolidated Statements of Comprehensive Income, Consolidated Statements of Changes in
Shareholders' Equity and Consolidated Statements of Cash Flows for the years then ended, together with the related
notes and Report of Independent Registered Public Accounting Firm.
(2) Schedules omitted as they are not applicable.
(3) Exhibits.
54
Exhibits 10.1 through 10.16 and 10.23 through 10.36 are management contracts or compensatory plans or arrangements.
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
Exhibit 3.1 of our Current Report on Form 8-K filed on August 25, 2015).
4.1
Form of Common Stock Certificate of Eagle Bancorp Montana, Inc. (incorporated by reference to Exhibit
4 of our Registration Statement on Form S-1 filed on December 17, 2009).
4.2
Form of 6.75% Subordinated Note due 2025 (incorporated by reference to Exhibit 4.1 of our Current
Report on Form 8-K filed on June 19, 2015).
4.3
Form of 5.75% Subordinated Note due 2022 (incorporated by reference to Exhibit 4.1 of our Current
Report on Form 8-K filed on February 13, 2017).
4.4
Description of Eagle Bancorp Montana, Inc.’s Securities Registered under Section 12 of the Securities
Exchange Act of 1934 (incorporated by reference to Exhibit 4.4 of our Annual Report on Form 10-K
filed on March 11, 2020).
4.5
Form of 3.50% Subordinated Note due 2032 (incorporated by reference to Exhibit 4.1 of our Current
Report on Form 8-K filed on January 24, 2022).
4.6
Indenture dated January 21, 2022, by and between Eagle Bancorp Montana, Inc. and U.S. Bank National
Association, as trustee (incorporated by reference to Exhibit 4.1 of our Current Report on Form 8-K filed
on January 24, 2022).
10.1
Employment Contract, effective as of April 27, 2015, among Peter J. Johnson, Eagle Bancorp Montana,
Inc. and Opportunity Bank of Montana (incorporated by reference to Exhibit 10.2 of our Current Report
on Form 8-K filed on April 29, 2015).
10.2
Form of Change in Control Agreement entered into between Opportunity Bank of Montana and its
executive officers (incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K filed on
September 28, 2022).
10.3
Amended Salary Continuation Agreement, dated April 27, 2015, between Peter J. Johnson and
Opportunity Bank of Montana (incorporated by reference to Exhibit 10.7 of our Current Report on Form
8-K filed on August 24, 2015).
10.4
Amendment to Salary Continuation Agreement between Opportunity Bank of Montana and Peter J.
Johnson (incorporated by reference to Exhibit 10.2 of our Current Report on Form 8-K filed on October
11, 2018).
10.5
Second Amendment to the Salary Continuation Agreement between Opportunity Bank of Montana and
Peter J. Johnson dated August 20, 2021 (incorporated by reference to Exhibit 10.1 of our Current Report
on Form 8-K filed on August 24, 2021).
10.6
Salary Continuation Agreement, dated November 1, 2014, between Laura F. Clark and Opportunity Bank
of Montana (incorporated by reference to Exhibit 10.1 of our Quarterly Report on Form 10-Q filed on
May 9, 2019).
55
10.7
Amendment to Salary Continuation Agreement between Opportunity Bank of Montana and Laura F.
Clark (incorporated by reference to Exhibit 10.3 of our Current Report on Form 8-K filed on October 11,
2018).
10.8
Amendment to Salary Continuation Agreement between Opportunity Bank of Montana and Laura F.
Clark (incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K filed on September
22, 2020).
10.9
Salary Continuation Agreement, dated November 16, 2006, between Rachel R. Amdahl and American
Federal Savings Bank (incorporated by reference to Exhibit 10.18 of our Amendment No. 1 to
Registration Statement on Form S-1 filed on February 1, 2010).
10.10
American Federal Savings Bank Split-Dollar Plan, effective October 21, 2004 (incorporated by reference
to Exhibit 10.19 of our Amendment No. 1 to Registration Statement on Form S-1 filed on February 1,
2010).
10.11
Summary of American Federal Savings Bank Bonus Plan (incorporated by reference to Exhibit 10.20 of
our Amendment No. 2 to Registration Statement on Form S-1 filed on February 16, 2010).
10.12
2011 Stock Incentive Plan for Directors, Officers and Employees (incorporated by reference to Exhibit
10.1 of the Registration Statement on Form S-8 (File No. 333-182360) filed with the SEC on June 27,
2012).
10.13
Amendment No. 1 to the Eagle Bancorp Montana, Inc. 2011 Stock Incentive Plan for Directors, Officers,
and Employees (incorporated by reference to Exhibit 10.13 of our Annual Report on Form 10-K filed on
March 15, 2016).
10.14
Amendment No. 2 to the Eagle Bancorp Montana, Inc. 2011 Stock Incentive Plan for Directors, Officers
and Employees (incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K filed on
April 21, 2017).
10.15
Amendment No. 3 to the Eagle Bancorp Montana, Inc. 2011 Stock Incentive Plan for Directors, Officers
and Employees (incorporated by reference to Exhibit 10.1 of our Quarterly Report on Form 10-Q filed
on May 11, 2020).
10.16
Amendment No. 4 to the Eagle Bancorp Montana, Inc. 2011 Stock Incentive Plan for Directors, Officers
and Employees (incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K filed on
April 27, 2022.
10.17
Form of Subordinated Note Purchase Agreement (incorporated by reference to Exhibit 10.1 of our
Current Report on Form 8-K filed on June 19, 2015).
10.18
Form of Subordinated Note Purchase Agreement (incorporated by reference to Exhibit 10.1 of our
Current Report on Form 8-K filed on February 13, 2017).
10.19
Form of Subordinated Note Purchase Agreement dated June 10, 2020, by and among Eagle Bancorp
Montana, Inc. and the Purchasers (incorporated by reference to Exhibit 10.1 of our Current Report on
Form 8-K filed on June 10, 2020).
10.20
Form of Subordinated Note Purchase Agreement dated January 21, 2022, by and among Eagle Bancorp
Montana, Inc. and the Purchasers (incorporated by reference to Exhibit 10.1 of our Current Report on
Form 8-K filed on January 24, 2022).
10.21
Form of Registration Rights Agreement dated January 21, 2022, by and among Eagle Bancorp Montana,
Inc. and the Purchasers (incorporated by reference to Exhibit 10.2 of our Current Report on Form 8-K
filed on January 24, 2022).
56
10.22
Form of Eagle Bancorp Montana, Inc. Indemnification Agreement (incorporated by reference to Exhibit
10.15 of our Annual Report on Form 10-K filed on March 12, 2019).
10.23
Salary Continuation Agreement between Opportunity Bank of Montana and Patrick D. Rensmon
(incorporated herein by reference to Exhibit 10.1 of our Current Report on Form 8-K filed on October
11, 2018).
10.24
Salary Continuation Agreement between Opportunity Bank of Montana and Mark O’Neill (incorporated
by reference to Exhibit 10.4 of our Quarterly Report on Form 10-Q filed on November 14, 2018).
10.25
Salary Continuation Agreement between Opportunity Bank of Montana and Dale Field (incorporated by
reference to Exhibit 10.2 of our Quarterly Report on Form 10-Q filed on May 9, 2019).
10.26
Second Amendment to Salary Continuation Agreement between Opportunity Bank of Montana and Dale
Field (incorporated by reference to Exhibit 10.2 of our Quarterly Report on Form 10-Q filed on
November 4, 2022).
10.27
Amendment to Salary Continuation Agreement between Opportunity Bank of Montana and Dale Field
(incorporated by reference to Exhibit 10.5 of our Quarterly Report on Form 10-Q filed on November 14,
2018).
10.28
Salary Continuation Agreement between Opportunity Bank of Montana and Chantelle Nash
(incorporated by reference to Exhibit 10.3 of our Quarterly Report on Form 10-Q filed on May 9, 2019).
10.29
Amendment to Salary Continuation Agreement between Opportunity Bank of Montana and Chantelle
Nash (incorporated by reference to Exhibit 10.6 of our Quarterly Report on Form 10-Q filed on
November 14, 2018).
10.30
Salary Continuation Agreement between Opportunity Bank of Montana and Linda Chilton (incorporated
by reference to Exhibit 10.1 of our Quarterly Report on Form 10-Q filed on November 5, 2020).
10.31
2020 Non-Employee Director Award Plan (incorporated by reference to Exhibit 10.2 of our Quarterly
Report on Form 10-Q filed on May 11, 2020).
10.32
Amendment No. 1 to the 2020 Non-Employee Director Award Plan (incorporated by reference to Exhibit
10.1 of our Current Report on Form 8-K filed on April 26, 2023).
10.33
Salary Continuation Agreement between Opportunity Bank of Montana and Alana Binde (incorporated
by reference to Exhibit 10.1 of our Quarterly Report on Form 10-Q filed on November 4, 2022).
10.34
Salary Continuation Agreement between Opportunity Bank of Montana and Miranda Spaulding
(incorporated by reference to Exhibit 10.2 of our Quarterly Report on Form 10-Q filed on November 9,
2022).
10.35
Deferred Compensation Agreement between Eagle Bancorp Montana, Inc. and Peter J. Johnson
(incorporated by reference to Exhibit 10.34 of our Annual Report on Form 10-K filed on March 8, 2023).
10.36
Employment Agreement, effective as of May 25, 2023, among Laura F. Clark, Eagle Bancorp Montana,
Inc., and Opportunity Bank of Montana (incorporated by reference to Exhibit 10.1 of our Current Report
on Form 8-K filed on June 1, 2023).
10.37
Fourth Amendment to Salary Continuation Agreement between Opportunity Bank of Montana and Laura
F. Clark adopted October 17, 2024 (incorporated by reference to Exhibit 10.1 of our Current Report on
Form 8-K filed on October 22, 2024).
10.38
First Amendment to Salary Continuation Agreement between Opportunity Bank of Montana and
Miranda J. Spaulding adopted October 17, 2024 (incorporated by reference to Exhibit 10.2 of our Current
Report on Form 8-K filed on October 22, 2024).
57
10.39
Third Amendment to Salary Continuation Agreement between Opportunity Bank of Montana and Dale
F. Field adopted October 17, 2024 (incorporated by reference to Exhibit 10.3 of our Current Report on
Form 8-K filed on October 22, 2024).
10.40
Second Amendment to Salary Continuation Agreement between Opportunity Bank of Montana and
Rachel R. Amdahl adopted November 1, 2024 (incorporate by reference to Exhibit 10.4 of our Current
Report on Form 10-Q filed on November 11,2024).
10.41
First Amendment to Salary Continuation Agreement between Opportunity Bank of Montana and Alana
Binde adopted November 1, 2024 (incorporate by reference to Exhibit 10.5 of our Current Report on
Form 10-Q filed on November 11,2024).
10.42
Second Amendment to Salary Continuation Agreement between Opportunity Bank of Montana and
Chantelle Nash adopted November 1, 2024 (incorporate by reference to Exhibit 10.6 of our Current
Report on Form 10-Q filed on November 11,2024).
10.43
First Amendment to Salary Continuation Agreement between Opportunity Bank of Montana and Mark
O'Neill adopted November 1, 2024 (incorporate by reference to Exhibit 10.7 of our Current Report on
Form 10-Q filed on November 11,2024).
10.44
First Amendment to Salary Continuation Agreement between Opportunity Bank of Montana and Patrick
D. Rensmon adopted November 1, 2024 (incorporate by reference to Exhibit 10.8 of our Current Report
on Form 10-Q filed on November 11,2024).
19.1
Insider Trading Policies and Procedures.
21.1
Subsidiaries of Registrant.
23.1
Consent of Moss Adams LLP.
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 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 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.
97.1
Eagle Bancorp Montana, Inc. Clawback Policy (incorporated by reference to Exhibit 97.1 of our Annual
Report on Form 10-K filed on March 6, 2024).
*
The schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. Eagle Bancorp Montana agrees to
furnish supplementally a copy of such schedules, or any section thereof, to the SEC upon request.
(b) See item 15(a)(3) above.
(c) See Item 15(a)(1) and 15(a)(2) above.
58
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)
101.SCH
Inline XBRL Taxonomy Extension Schema Document
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
ITEM 16.
FORM 10-K SUMMARY.
None.
59
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.
EAGLE BANCORP MONTANA, INC.
/s/ Laura F. Clark
Laura F. Clark
President and Chief Executive Officer
March 14, 2025
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated.
Signatures
Title
Date
/s/ Laura F. Clark
President and Chief Executive Officer
March 14, 2025
Laura F. Clark
Director (Principal Executive Officer)
/s/ Miranda J. Spaulding
Chief Financial Officer
March 14, 2025
Miranda J. Spaulding
(Principal Financial Officer and
Principal Accounting Officer)
/s/ Rick F. Hays
Chairman
March 14, 2025
Rick F. Hays
/s/ Thomas J. McCarvel
Vice Chairman
March 14, 2025
Thomas J. McCarvel
/s/ Peter J. Johnson
Director
March 14, 2025
Peter J. Johnson
/s/ Maureen J. Rude
Director
March 14, 2025
Maureen J. Rude
/s/ Shavon R. Cape
Director
March 14, 2025
Shavon R. Cape
/s/ Tanya J. Chemodurow
Director
March 14, 2025
Tanya J. Chemodurow
/s/ Kenneth M. Walsh
Director
March 14, 2025
Kenneth M. Walsh
/s/ Corey Jensen
Director
March 14, 2025
Corey Jensen
/s/ Cynthia A. Utterback
Director
March 14, 2025
Cynthia A. Utterback
/s/ Samuel D. Waters
Director
March 14, 2025
Samuel D. Waters
Exhibit 31.1
CERTIFICATION 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
I, Laura F. Clark, Chief Executive Officer of Eagle Bancorp Montana, Inc., certify that:
1.
I have reviewed this annual report on Form 10-K of Eagle Bancorp Montana, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of,
and for, the periods presented in this report;
4.
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which
this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting
to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial
reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of
directors (or persons performing the equivalent functions):
(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role
in the registrant’s internal control over financial reporting.
Date: March 14, 2025
/s/ Laura F. Clark
Laura F. Clark
Chief Executive Officer
Exhibit 31.2
CERTIFICATION 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
I, Miranda J. Spaulding, Chief Financial Officer of Eagle Bancorp Montana, Inc., certify that:
1.
I have reviewed this annual report on Form 10-K of Eagle Bancorp Montana, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of,
and for, the periods presented in this report;
4.
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which
this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting
to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial
reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of
directors (or persons performing the equivalent functions):
(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role
in the registrant’s internal control over financial reporting.
Date: March 14, 2025
/s/ Miranda J. Spaulding
Miranda J. Spaulding
Chief Financial Officer
Principal Accounting Officer
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Eagle Bancorp Montana, Inc. (the “Company”) on Form 10-K for the year
ended December 31, 2024 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, Laura
F. Clark, Chief Executive Officer of the Company, and Miranda J. Spaulding, Chief Financial Officer of the Company, certify,
pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the undersigned’s
knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as
amended; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
A signed original of this written statement required by Section 906 will be retained by the Company and furnished to the
Securities and Exchange Commission or its staff upon request.
/s/ Laura F. Clark
/s/ Miranda J. Spaulding
Laura F. Clark
Miranda J. Spaulding
Chief Executive Officer
Chief Financial Officer and Principal Accounting Officer
(Principal Executive Officer)
(Principal Financial Officer)
March 14, 2025
March 14, 2025
A N D S U B S I D I A R Y
CONSOLIDATED FINANCIAL STATEMENTS
and
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
DECEMBER 31, 2024 AND 2023
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
Contents
Page
Report of Independent Registered Public Accounting Firm (Moss Adams LLP, Spokane, Washington, PCAOB
ID: 659) ..........................................................................................................................................................................
1
Financial Statements
Consolidated Statements of Financial Condition ......................................................................................................
5
Consolidated Statements of Income ..........................................................................................................................
6
Consolidated Statements of Comprehensive Income .................................................................................................
7
Consolidated Statements of Changes in Shareholders’ Equity ...................................................................................
8
Consolidated Statements of Cash Flows ...................................................................................................................
9
Notes to Consolidated Financial Statements ..............................................................................................................
11
1
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of
Eagle Bancorp Montana, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated statements of financial condition of Eagle Bancorp
Montana, Inc. (and subsidiaries) (the “Company”) as of December 31, 2024 and 2023, the related
consolidated statements of income, comprehensive income, changes in shareholders’ equity and
cash flows for the years then ended, and the related notes (collectively referred to as the
“consolidated financial statements”). We also have audited the Company’s internal control over
financial reporting as of December 31, 2024, based on criteria established in Internal Control -
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission (“COSO”).
In our opinion, the consolidated financial statements referred to above present fairly, in all material
respects, the consolidated financial position of the Company as of December 31, 2024 and 2023, and
the consolidated results of its operations and its cash flows for the years then ended, in conformity
with accounting principles generally accepted in the United States of America. Also in our opinion,
because of the effect of the material weakness identified below on the achievement of the objectives
of the control criteria, the Company has not maintained effective internal control over financial
reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated
Framework (2013) issued by COSO.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for
maintaining effective internal control over financial reporting, and for its assessment of the
effectiveness of internal control over financial reporting, included in the accompanying Management
Annual Report on Internal Control over Financial Reporting included in Item 9A. Our responsibility is
to express an opinion on the Company’s consolidated financial statements and an opinion on the
Company’s internal control over financial reporting based on our audits. We are a public accounting
firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and
are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission
and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require
that we plan and perform the audits to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement, whether due to error or fraud, and whether
effective internal control over financial reporting was maintained in all material respects.
2
Our audits of the consolidated financial statements included performing procedures to assess the
risks of material misstatement of the consolidated financial statements, whether due to error or fraud,
and performing procedures to respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our
audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements.
Our audit of internal control over financial reporting included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, and testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk. Our
audits also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audits provide a reasonable basis for our opinions.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial
reporting, such that there is a reasonable possibility that a material misstatement of the Company’s
annual or interim financial statements will not be prevented or detected on a timely basis. The
following material weakness has been identified and included in management’s assessment in
Item 9A:
The Company’s controls were not designed at a sufficient level of precision to ensure the
proper classification of borrowings as short-term or long-term so that the borrowings from and
repayments to are appropriately presented either on a net basis or a gross basis within the
financing section of the statement of cash flows.
We considered the material weakness in determining the nature, timing, and extent of audit tests
applied in our audit of the Company’s consolidated financial statements as of and for the year ended
December 31, 2024, and our opinion on such consolidated financial statements was not affected.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles. A company’s internal
control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the
risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
3
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the
consolidated financial statements that were communicated or required to be communicated to the
audit committee and that (1) relate to accounts or disclosures that are material to the consolidated
financial statements and (2) involved our especially challenging, subjective, or complex judgments.
The communication of critical audit matters does not alter in any way our opinion on the consolidated
financial statements, taken as a whole, and we are not, by communicating the critical audit matters
below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to
which they relate.
Allowance for Credit Losses – Qualitative Factors
As described in Note 3 to the consolidated financial statements, the Company’s allowance for credit
losses (ACL) on loans was $16.9 million at December 31, 2024. The ACL 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 ACL on loans is measured on a collective pool basis when similar risk
characteristics exist. The Company utilizes the Weighted Average Remaining Maturity (WARM)
methodology, which applies historical loss rates over the estimated remaining life of each loan pool.
Modeled expected losses are adjusted to reflect current economic conditions and reasonable and
supportable forecasts through the use of quantitative models and qualitative factors. Loans
considered to have different risk characteristics that do not fall within any pool are analyzed
individually.
We identified management’s estimation of qualitative factors used to adjust the modeled expected
losses as a critical audit matter. The estimation of these factors, based on management’s evaluation
of available internal and external data, is subjective in nature and requires significant judgment by
management. Auditing management’s judgments regarding the determination of qualitative factors
applied to the ACL on loans involves a high degree of subjectivity.
Addressing the matter involved performing procedures and evaluating audit evidence in connection
with forming our overall opinion on the consolidated financial statements. Our audit procedures
related to qualitative factors included the following, among others:
Testing the design, implementation, and operating effectiveness of controls relating to
management’s calculation of the allowance for credit losses, including controls over the
identification and assessment of the qualitative factors used.
Testing the methodology used in the ACL calculation and evaluating whether the qualitative
factors used in the calculation are supported by management’s analysis, including testing the
key underlying information utilized by management;
Testing the mathematical accuracy of the ACL calculation and the application of the
qualitative factors within the calculation;
Developing an independent expectation of the ACL using a combination of internal and
external data and comparing the expected balance to the Company’s recorded amounts.
4
Goodwill
As described in Note 1 to the consolidated financial statements, the Company’s goodwill balance was
$34.7 million as of December 31, 2024. The Company assesses goodwill for impairment annually, or
more often if events or circumstances indicate there may be impairment. During the year ended
December 31, 2024, the Company identified a triggering event and performed an interim impairment
test as of August 31, 2024, in addition to its annual impairment test as of October 31, 2024. The
impairment tests did not result in any goodwill impairment for the year ended December 31, 2024.
We identified the goodwill impairment tests performed during the period as a critical audit matter. The
determination of the fair value of the Company’s reporting unit requires management to make
significant assumptions that are subject to estimation uncertainty. The performance of audit
procedures related to management’s estimates for the interim and annual impairment tests required
extensive audit effort, including the use of personnel with specialized skill and knowledge pertaining
to valuation techniques. Additionally, the evaluation of audit evidence of more sensitive assumptions
required especially challenging and subjective auditor judgment, including those assumptions
underlying the projections of future cash flows utilized in the income approach, the selection of peer
data utilized in the market approach, and the relative weight assigned to the different valuation
methodologies.
Addressing the matter involved performing procedures and evaluating audit evidence in connection
with forming our overall opinion on the consolidated financial statements. Our audit procedures
related to the methods and assumptions used in the goodwill impairment tests included the following,
among others:
Testing the design, implementation, and operating effectiveness of controls relating to the
methods and assumptions used in the Company’s goodwill impairment tests;
With the assistance of our valuation specialist, (1) testing the reasonableness of the methods
and certain key assumptions used and (2) performing a shadow calculation to recreate the
results of the valuation model;
Evaluating the relative weight assigned to the valuations indicated by the market and income
approaches;
Validating the completeness, accuracy, and reliability of underlying data used in the
Company’s analysis;
Evaluating the reasonableness of the assumptions utilized by the Company in the
determination of the estimated projected cash flows used in the income approach and the
reasonableness of the selection of peer data utilized in the market approach.
Spokane, Washington
March 14, 2025
We have served as the Company’s auditor since 2019.
- 5 -
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in Thousands, Except for Per Share Data)
December 31,
2024
2023
ASSETS:
Cash and due from banks
$
29,824 $
23,243
Interest-bearing deposits in banks
1,735
1,302
Federal funds sold
-
-
Total cash and cash equivalents
31,559
24,545
Securities available-for-sale, at fair value (amortized cost of $319,939 and $345,355 at
December 31, 2024 and December 31, 2023, respectively)
292,590
318,279
Federal Home Loan Bank ("FHLB") stock
7,778
9,191
Federal Reserve Bank ("FRB") stock
4,131
4,131
Mortgage loans held-for-sale, at fair value
13,368
11,432
Loans receivable, net of allowance for credit losses of $16,850 and $16,440 at December 31,
2024 and December 31, 2023, respectively
1,503,796
1,468,049
Accrued interest and dividends receivable
12,890
12,485
Mortgage servicing rights, net
15,376
15,853
Assets held-for-sale, at cost
960
-
Premises and equipment, net
101,540
94,282
Cash surrender value of life insurance, net
53,232
47,939
Goodwill
34,740
34,740
Core deposit intangible, net
4,499
5,880
Deferred tax asset, net
10,364
9,771
Other assets
16,267
19,089
Total assets
$
2,103,090 $
2,075,666
LIABILITIES:
Deposit accounts:
Noninterest-bearing
$
419,211 $
418,727
Interest-bearing
1,262,017
1,216,468
Total deposits
1,681,228
1,635,195
Accrued expenses and other liabilities
47,018
36,462
FHLB advances and other borrowings
140,930
175,737
Other long-term debt:
Principal amount
60,155
60,155
Unamortized debt issuance costs
(1,006 )
(1,156 )
Total other long-term debt, net
59,149
58,999
Total liabilities
1,928,325
1,906,393
COMMITMENTS AND CONTINGENCIES (NOTE 10)
SHAREHOLDERS' EQUITY:
Preferred stock (par value $0.01 per share; 1,000,000 shares authorized; no shares issued or
outstanding)
-
-
Common stock ($0.01 par value; 20,000,000 shares authorized; 8,507,429 shares issued at
December 31, 2024 and 2023 respectively; 8,027,177 and 8,016,784 shares outstanding at
December 31, 2024 and 2023, respectively)
85
85
Additional paid-in capital
108,334
108,819
Unallocated common stock held by Employee Stock Ownership Plan ("ESOP")
(4,011 )
(4,583 )
Treasury stock, at cost (480,252 and 490,645 shares at December 31, 2024 and 2023,
respectively)
(10,761 )
(11,124 )
Retained earnings
101,264
96,021
Accumulated other comprehensive loss, net of tax
(20,146 )
(19,945 )
Total shareholders' equity
174,765
169,273
Total liabilities and shareholders' equity
$
2,103,090 $
2,075,666
The accompanying notes are an integral part of these consolidated financial statements.
- 6 -
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands, Except for Per Share Data)
Years Ended
December 31,
2024
2023
INTEREST AND DIVIDEND INCOME:
Interest and fees on loans
$
92,282 $
79,423
Securities available-for-sale
10,428
11,376
FHLB and FRB dividends
1,085
727
Other interest income
416
89
Total interest and dividend income
104,211
91,615
INTEREST EXPENSE:
Deposits
27,838
17,857
FHLB advances and other borrowings
10,211
8,562
Other long-term debt
2,724
2,719
Total interest expense
40,773
29,138
NET INTEREST INCOME
63,438
62,477
Provision for credit losses
518
1,456
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES
62,920
61,021
NONINTEREST INCOME:
Service charges on deposit accounts
1,645
1,757
Mortgage banking, net
10,014
14,970
Interchange and ATM fees
2,540
2,524
Appreciation in cash surrender value of life insurance
2,054
1,466
Net loss on sale of available-for-sale securities
(141)
(222)
Other noninterest income
1,664
2,227
Total noninterest income
17,776
22,722
NONINTEREST EXPENSE:
Salaries and employee benefits
39,715
42,973
Occupancy and equipment expense
8,531
8,072
Data processing
6,209
5,943
Software subscriptions
2,127
2,064
Advertising
1,312
1,375
Amortization
1,391
1,587
Loan costs
1,567
1,887
Federal Deposit Insurance Corporation ("FDIC") insurance premiums
1,165
1,150
Professional and examination fees
1,941
1,922
Other noninterest expense
5,348
5,116
Total noninterest expense
69,306
72,089
INCOME BEFORE PROVISION FOR INCOME TAXES
11,390
11,654
Provision for income taxes
1,612
1,598
NET INCOME
$
9,778 $
10,056
BASIC EARNINGS PER COMMON SHARE
$
1.25 $
1.29
DILUTED EARNINGS PER COMMON SHARE
$
1.24 $
1.29
The accompanying notes are an integral part of these consolidated financial statements.
- 7 -
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in Thousands)
Years Ended
December 31,
2024
2023
NET INCOME
$
9,778 $
10,056
OTHER ITEMS OF COMPREHENSIVE (LOSS) INCOME BEFORE TAX:
Change in fair value of investment securities available-for-sale
(414)
8,482
Reclassification for net realized losses on investment securities available-for-sale
141
222
Total other comprehensive (loss) income
(273)
8,704
Income tax benefit (provision) related to securities available-for-sale
72
(2,292)
COMPREHENSIVE INCOME
$
9,577 $
16,468
The accompanying notes are an integral part of these consolidated financial statements.
- 8 -
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Dollars in Thousands, Except for Per Share Data)
Accumulated
Additional Unallocated
Other
Preferred Common Paid-In
ESOP
Treasury Retained Comprehensive
Stock Stock Capital
Shares
Stock Earnings (Loss) Income Total
Balance at January 1, 2024
$
- $
85 $ 108,819 $
(4,583) $(11,124) $ 96,021 $
(19,945) $169,273
Net income
-
-
-
-
-
9,778
-
9,778
Other comprehensive loss
-
-
-
-
-
-
(201)
(201)
Dividends paid ($0.565 per share)
-
-
-
-
- (4,535)
- (4,535)
Stock compensation expense
-
-
523
-
-
-
-
523
Treasury stock reissued for stock
incentive plans (35,393 shares at
$22.07 average cost per share)
-
-
(781 )
-
781
-
-
-
ESOP shares allocated (23,990 shares)
-
-
(227 )
573
-
-
-
346
Treasury stock purchased (25,000
shares at $16.74 average cost per
share)
-
-
-
-
(419)
-
-
(419)
Balance at December 31, 2024
$
- $
85 $ 108,334 $
(4,010) $(10,762) $101,264 $
(20,146) $174,765
Balance at January 1, 2023
$
- $
85 $ 109,164 $
(5,156) $(11,343) $ 92,023
(26,357) $158,416
Net income
-
-
-
-
- 10,056
- 10,056
Other comprehensive income
-
-
-
-
-
-
6,412
6,412
Impact of the adoption of ASC 326
Credit Losses
-
-
-
-
- (1,616)
- (1,616)
Dividends paid ($0.555 per share)
-
-
-
-
- (4,442)
- (4,442)
Stock compensation expense
-
-
347
-
-
-
-
347
Treasury stock reissued for stock
incentive plans (25,751 shares at
$15.85 average cost per share)
-
-
(450 )
450
-
-
-
ESOP shares allocated (23,990 shares)
-
-
(242 )
573
-
-
-
331
Treasury stock purchased (17,901
shares at $12.89 average cost per
share)
-
-
-
-
(231)
-
-
(231)
Balance at December 31, 2023
$
- $
85 $ 108,819 $
(4,583) $(11,124) $ 96,021 $
(19,945) $169,273
The accompanying notes are an integral part of these consolidated financial statements.
- 9 -
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
Years Ended
December 31,
2024
2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
$
9,778 $
10,056
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses
518
1,456
Depreciation
5,170
3,934
Net amortization of investment securities premiums and discounts
1,027
1,051
Amortization of mortgage servicing rights
1,833
1,706
Amortization of right-of-use assets
498
664
Amortization of core deposit intangibles
1,391
1,587
Compensation expense related to restricted stock awards
523
347
ESOP compensation expense for allocated shares
346
331
Deferred income tax benefit
(529)
(671)
Net gain on sale of loans
(6,741)
(11,396)
Originations of loans held-for-sale
(214,323)
(347,711)
Proceeds from sales of loans held-for-sale
217,772
353,778
Net realized loss on sales of available-for-sale securities
141
222
Net appreciation in cash surrender value of life insurance
(3,036)
(1,466)
Net change in:
Accrued interest and dividends receivable
(405)
(1,201)
Other assets
516
(10,273)
Accrued expenses and other liabilities
14,060
6,932
Net cash provided by operating activities
28,539
9,346
CASH FLOWS FROM INVESTING ACTIVITIES:
Activity in available-for-sale securities:
Sales
14,121
34,020
Maturities, principal payments and calls
21,145
32,695
Purchases
(10,980)
(28,126)
FHLB stock redeemed (purchased)
1,413
(4,102)
Loan origination and principal collection, net
(36,204)
(130,742)
(Purchase) proceeds of bank owned life insurance
(3,275)
1,230
Proceeds from sale of real estate and other repossessed assets acquired in settlement of
loans
3
-
Proceeds from sale of premises and equipment
60
1,009
Purchases of premises and equipment, net
(14,080)
(14,189)
Net cash used in investing activities
(27,797)
(108,205)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits
46,033
(77)
Net short-term (payments) advances from FHLB and other borrowings
(107,724)
91,343
Advances on long-term FHLB and other borrowings
135,000
15,000
Payments on long-term FHLB and other borrowings
(62,083)
-
Purchase of treasury stock
(419)
(231)
Dividends paid
(4,535)
(4,442)
Net cash provided by financing activities
6,272
101,593
NET INCREASE IN CASH AND CASH EQUIVALENTS
7,014
2,734
CASH AND CASH EQUIVALENTS, beginning of period
24,545
21,811
CASH AND CASH EQUIVALENTS, end of period
$
31,559 $
24,545
The accompanying notes are an integral part of these consolidated financial statements.
- 10 -
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Dollars in Thousands)
Years Ended
December 31,
2024
2023
(In Thousands)
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the year for interest
$
37,910 $
24,815
Cash paid during the year for income taxes, net of refunds
549
3,009
NON-CASH OPERATING, INVESTING AND FINANCING ACTIVITIES:
(Decrease) increase in fair value of securities available-for-sale
$
(273) $
8,704
Mortgage servicing rights recognized
1,356
2,147
Right-of-use assets (used) obtained in exchange for lease liabilities
(151)
11
Loans transferred to real estate and other assets acquired in foreclosure
49
5
(Increase) decrease in commitments to invest in Low-Income Housing Tax Credit
projects
(2,445)
2,660
Cumulative effect adjustment to retained earnings due to the adoption of ASC 326 Credit
Losses
-
(1,616)
The accompanying notes are an integral part of these consolidated financial statements.
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- 11 -
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.
Eagle Bancorp Statutory Trust I (the “Trust”) was established in September 2005 and is owned 100% by Eagle.
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. During the year ended December 31,
2021, OHF made investments in two LIHTC projects. Investments in LIHTC projects are included in other
assets on the statement of financial condition and totaled $6,759,000 and $7,644,000 as of December 31, 2024
and 2023, respectively. Outstanding funding obligations for LIHTC projects are included in other liabilities on
the statement of financial condition and totaled $215,000 at December 31, 2024.
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. In December 2023, WFS changed its name to
Opportunity Financial Services, Inc. ("OFS"). OFS facilitates deferred payment contracts for customers that
produce agricultural products.
The Bank is headquartered in Helena, Montana, and has additional branches in Ashland, Big Timber, Billings,
Bozeman, Butte, Choteau, Culbertson, Denton, Dutton, Froid, Glasgow, Great Falls, Hamilton, Hinsdale,
Livingston, Missoula, Sheridan, Three Forks, Townsend, Twin Bridges, Winifred and Wolf Point, Montana.
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.
Basis of Financial Statement Presentation and Use of Estimates
The consolidated financial statements have been prepared in accordance with accounting principles generally
accepted in the United States of America (“GAAP”). In preparing 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 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
credit losses and the potential impairment of goodwill.
Principles of Consolidation
The consolidated financial statements include Eagle, the Bank, Eagle Bancorp Statutory Trust I (the "Trust"),
OFS and OHF. All significant intercompany transactions and balances have been eliminated in consolidation.
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- 12 -
NOTE 1:
Organization and Summary of Significant Accounting Policies – continued
Reclassifications
Certain prior period amounts were reclassified to conform to the presentation for 2024. These reclassifications
had no impact on net income or total shareholders’ equity.
Subsequent Events
The Company has evaluated events and transactions subsequent to December 31, 2024 for recognition and/or
disclosure.
During January 2025, the Company purchased 50,000 shares at an average price of $15.11 under its repurchase
plan. See Note 14. Capital Management and Regulatory Matters for additional information regarding the
repurchase plan.
Significant Group Concentrations of Credit Risk
Most of the Company’s business activity is with customers located within Montana. Note 2: Investment
Securities discusses the types of securities that the Company invests in. Note 3: Loans discusses the types of
lending that the Company engages in. The Company does not have any significant concentrations to any one
industry or customer.
Cash and Cash Equivalents
For the purpose of presentation in the consolidated statements of cash flows, cash and cash equivalents are
defined as those amounts included in the statements of financial condition captions “cash and due from banks,”
“interest-bearing deposits in banks” and “federal funds sold,” all of which mature within ninety days.
Investment Securities
The Company can designate debt and equity securities as held-to-maturity, available-for-sale or trading. At
December 31, 2024 and 2023 all securities were designated as available-for-sale.
Held-to-Maturity – Debt investment securities that management has the positive intent and ability to hold until
maturity are classified as held-to-maturity and are carried at their remaining unpaid principal balance, net of
unamortized premiums or unaccreted discounts.
Available-for-Sale – Investment securities that will be held for indefinite periods of time, including securities
that may be sold in response to changes in market interest or prepayment rates, need for liquidity and changes
in the availability of and the yield of alternative investments, are classified as available-for-sale. These assets
are carried at fair value. Unrealized gains and losses, net of tax, are reported as other comprehensive income.
Gains and losses on the sale of available-for-sale securities are recorded on the trade date and determined using
the specific identification method. In general, premiums are amortized and discounts are accreted over the
period remaining to maturity, except for premiums on callable bonds which are amortized to the earliest call
date.
Trading – Investments that are purchased with the intent of selling them within a short period of time.
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- 13 -
NOTE 1:
Organization and Summary of Significant Accounting Policies – continued
Allowance for Credit Losses - Available-for-Sale Securities
For available-for-sale securities in an unrealized loss position, the Company will first determine whether it
intends to sell the security or will more likely than not be required to sell the security before recovery of its
amortized cost basis. The security’s amortized cost basis will be written down to fair value through other
expense if either of the criteria regarding intent or requirement to sell is met. If neither of the aforementioned
criteria are met, the Company will determine whether the decline in fair value has resulted from credit losses.
If a credit loss exists, the Company will report the portion of impairment related to credit losses in an allowance
for credit losses with an offsetting entry to net income. The amount of ACL is limited to the amount fair value
is less than the amortized cost basis. Any portion of estimated credit losses that have not been recorded through
an ACL are reported in other comprehensive income net of tax.
Federal Home Loan Bank Stock
The Company’s investment in Federal Home Loan Bank (“FHLB”) of Des Moines stock is a restricted
investment carried at cost ($100 per share par value), which approximates its fair value. As a member of the
FHLB system, the Company is required to maintain a minimum level of investment in FHLB stock based on
total assets and a specific percentage of its outstanding FHLB advances. The Company had 77,777 and
91,907 FHLB shares at December 31, 2024 and 2023, respectively. Dividends are paid quarterly and are subject
to FHLB board approval. Management evaluates FHLB stock for impairment as needed.
Federal Reserve Bank Stock
The Company’s investment in FRB stock is a restricted investment carried at cost, which approximates its fair
value. Although the par value of the stock is $100 per share, banks pay only $50 per share at the time of purchase,
with the understanding that the other half of the subscription amount is subject to call at any time. As a member
of the Federal Reserve System, the Company is required to maintain a minimum level of investment in FRB
stock based on a specific percentage of its capital and surplus. The Company had 82,618 FRB shares at
both December 31, 2024 and 2023. Dividends are received semi-annually at a fixed rate of 6.00% on the total
number of shares.
Mortgage Loans Held-for-Sale
Mortgage loans originated and intended for sale in the secondary market are carried at fair value. Mortgage
loans held-for-sale are sold with mortgage servicing rights either released or retained by the Bank. Fair value
for loans held-for-sale is determined by commitments from investors or current secondary market prices for
loans with similar coupons and maturities. Loan origination fees and costs are recognized in earnings at the time
of origination.
Loans
The Bank originates mortgage, commercial, agricultural and consumer loans primarily to customers located in
Montana. The ability of the Bank’s debtors to honor their contracts is dependent upon the general economic
conditions in this area.
Loans receivable that management has the intent and ability to hold for the foreseeable future or until maturity
or payoff are reported at their outstanding unpaid principal balances net of any unearned income, allowance for
credit losses, and unamortized deferred fees or costs on originated loans and unamortized premiums or
unaccreted discounts on purchased loans. Interest income is accrued on the unpaid principal balance. Loan
origination fees, net of certain direct origination costs are deferred and amortized over the contractual life of the
loan, and recorded as an adjustment to the yield, using the interest method.
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- 14 -
NOTE 1:
Organization and Summary of Significant Accounting Policies – continued
Loans – continued
Nonaccrual and Past Due Loans – Loans are considered past due if the required principal and interest payments
have not been received as of the date such payments were due. Loans are placed on nonaccrual status when, in
management's opinion, the borrower may be unable to meet payment obligations as they become due, as well
as when required by regulatory provisions. In determining whether or not a borrower may be unable to meet
payment obligations for each class of loans, the Bank considers the borrower's debt service capacity through
the analysis of current financial information, if available, and/or current information with regards to the Bank's
collateral position. Regulatory provisions would typically require the placement of a loan on nonaccrual status
if (i) principal or interest has been in default for a period of 90 days or more unless the loan is both well secured
and in the process of collection or (ii) full payment of principal and interest is not expected. Loans may be
placed on nonaccrual status regardless of whether or not such loans are considered past due. When interest
accrual is discontinued, all unpaid accrued interest is reversed. The interest on these loans is accounted for on
the cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual
status when all the principal and interest amounts contractually due are brought current and future payments are
reasonably assured.
Residential 1-4 Family Loans – The Bank originates 1-4 family residential mortgage loans collateralized by
owner-occupied and non-owner-occupied real estate. Repayment of these loans may be subject to adverse
conditions in the real estate market or the economy to a greater extent than other types of loans. Loans
collateralized by 1-4 family residential real estate generally have been originated in amounts up to 80.00% of
appraised values before requiring private mortgage insurance. The underwriting analysis includes credit
verification, appraisals and a review of the financial condition of the borrower. The Company will either hold
these loans in its portfolio or sell them on the secondary market, depending upon market conditions and the type
and term of the loan originations. Generally, all 30-year fixed rate loans are sold in the secondary market.
Commercial Real Estate Loans – The Bank makes commercial real estate loans, land loans (both developed and
undeveloped) and loans on multi-family dwellings. Commercial real estate loans are collateralized by owner-
occupied and non-owner-occupied real estate. Payments on loans secured by such properties are often dependent
on the successful operation or management of the properties. Accordingly, repayment of these loans may be
subject to adverse conditions in the real estate market or the economy to a greater extent than other types of
loans. When underwriting these loans, the Bank seeks to minimize these risks in a variety of ways, including
giving careful consideration to the property’s operating history, future operating projections, current and
projected occupancy, location and physical condition. The underwriting analysis also includes credit
verification, analysis of global cash flow, appraisals and a review of the financial condition of the borrower.
Construction Loans – The Bank makes loans to finance the construction of residential properties. The majority
of the Bank’s residential construction loans are made to individual homeowners for the construction of their
primary residence and, to a lesser extent, to local builders for the construction of pre-sold houses or houses that
are being built for sale in the future. The Bank also originates commercial construction and development loans.
Construction loans involve additional risks attributable to the fact that loan funds are advanced upon the security
of a project under construction, and the project is of uncertain value prior to its completion. Because of
uncertainties inherent in estimating construction costs, the market value of the completed project and the effects
of governmental regulation on real property, it can be difficult to accurately evaluate the total funds required to
complete a project and the related loan to value ratio. As a result of these uncertainties, construction lending
often involves the disbursement of substantial funds with repayment dependent, in part, on the success of the
ultimate project rather than the ability of a borrower or guarantor to repay the loan. If the Company is forced to
foreclose on a project prior to completion, there is no assurance that the Company will be able to recover the
entire unpaid portion of the loan. In addition, the Company may be required to fund additional amounts to
complete a project and may have to hold the property for an indeterminable period of time. While the Bank has
underwriting procedures designed to identify what it believes to be acceptable levels of risks in construction
lending, no assurance can be given that these procedures will prevent losses from the risks described above.
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- 15 -
NOTE 1:
Organization and Summary of Significant Accounting Policies – continued
Loans – continued
Agricultural Loans – The Bank makes agricultural operating loans as well as long term agricultural real estate
loans. Agricultural operating loans are generally secured with equipment, cattle, crops or other non-real property
and at times the underlying real property. Agricultural real estate loans are secured with farm and ranch real
estate. Payments on both types of agricultural loans are dependent on successful operation of the farm and/or
ranch. Repayment is also affected by agricultural conditions that may include adverse weather conditions such
as drought, hail, flooding and severe winters. Also impacting the borrower’s ability to repay are commodity
prices associated with the agricultural operation. When underwriting these loans, the Bank seeks to minimize
these risks in a variety of ways, including giving careful consideration to the farm or ranch’s operating history,
future operating projections, current and projected commodity prices and crop insurance. The underwriting
analysis also includes credit verification, analysis of global cash flow, appraisals and a review of the financial
condition of the borrower.
Home Equity Loans – The Bank originates home equity loans that are secured by the borrowers’ primary
residence. These loans are typically subject to a prior lien, which may or may not be held by the Bank. Although
these loans are secured by real estate, they carry a greater risk than first lien 1-4 family residential mortgages
because of the existence of a prior lien on the property as well as the flexibility the borrower has with respect
to the proceeds. The Bank attempts to minimize this risk by maintaining conservative underwriting policies on
these types of loans. Generally, home equity loans are made for up to 85.00% of the appraised value of the
underlying real estate collateral, less the amount of any existing prior liens on the property securing the loan.
Consumer Loans – Consumer loans made by the Bank include automobile loans, recreational vehicle loans,
boat loans, personal loans, credit lines, loans secured by deposit accounts and other personal loans. Risk is
minimized due to relatively small loan amounts that are spread across many individual borrowers.
Commercial Loans – A broad array of commercial lending products are made available to businesses for
working capital (including inventory and accounts receivable), purchases of equipment and machinery and
business. Bank’s commercial loans are underwritten on the basis of the borrower’s ability to service such debt
as reflected by cash flow projections. Commercial loans are generally collateralized by business assets, accounts
receivable and inventory, certificates of deposit, securities, guarantees or other collateral. The Bank also
generally obtains personal guarantees from the principals of the business. Working capital loans are primarily
collateralized by short-term assets, whereas term loans are primarily collateralized by long-term assets. As a
result, commercial loans involve additional complexities, variables and risks and require more thorough
underwriting and servicing than other types of loans.
Allowance for Credit Losses – 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. In the case of 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 historical data is not likely reflective of the current portfolio due to changing economic conditions or
when there is a lack of default or loss history. Changes in the allowance for credit losses are recorded as a
provision for credit losses.
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- 16 -
NOTE 1:
Organization and Summary of Significant Accounting Policies – continued
Allowance for Credit Losses – continued
Collective Assessment – The allowance for credit losses on loans is measured on a collective pool basis when
similar risk characteristics exist. Generally, collectively assessed loans are grouped first by call report code, then
by similar risk characteristics.
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 pool.
The Company has elected to use the Weighted Average Remaining Maturity (WARM) methodology for all
pools. The WARM methodology looks at historical quarterly loss rates for each loan pool over the established
“look back” period to determine an average loss rate for each pool. Each pool 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 pool 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 pool to determine an expected loss percentage.
The Company incorporates current economic conditions based on quantitative 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 rate for each pool is adjusted by the difference between the Bank's historical loss rate and the
rate determined in the economic models.
Additionally, the Company uses reasonable and supportable forecasted economic indicators through a
qualitative adjustment. Economic indicators are compared to peer charge off rates through a regression analysis.
Predicted loss rates are then determined by applying the forecasted economic indicators to the regression and
are compared to the current charge off rates to determine any potential qualitative adjustment.
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. The methodology primarily relies
on historic charge off data to determine a loss rate to apply to each pool and does not inherently consider risks
in the loan portfolio. Therefore, 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 Analysis – Loans considered to have different risk characteristics that do not fall within any pool will
be analyzed individually on a quarterly basis for potential individual reserve requirements.
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.
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- 17 -
NOTE 1:
Organization and Summary of Significant Accounting Policies – continued
Loan Modifications Made to Borrowers Experiencing Financial Difficulty
The Company identifies a modification to a borrower experiencing financial difficulty as a loan where a
concession is granted for economic or legal reasons related to the borrower's financial difficulties that it would
not otherwise consider. Loan modifications include situations where there is principal forgiveness, interest rate
reductions, term extensions, other-than-significant payment delays, or any combinations of these. The
allowance for credit losses on loans that are considered modifications to borrowers experiencing financial
difficulty are measured by the Company using the same method as all other loans held for investment.
Allowance for Credit Losses – 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. 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 pool level.
Mortgage Servicing Rights
Servicing assets are recognized as separate assets when rights are acquired through sale of financial assets. For
sales of mortgage loans, a portion of the cost of originating the loan is allocated to the servicing right based on
relative fair value. Fair value is based on a market price valuation model that calculates the present value of
estimated future net servicing income. The valuation model incorporates assumptions that market participants
would use in estimating future net servicing income, such as the cost to service, the discount rate, the custodial
earnings rate, an inflation rate, ancillary income, prepayment speeds and default rates and losses.
Servicing assets are evaluated for impairment based upon the fair value of the rights as compared to amortized
cost. Impairment is determined by stratifying rights into tranches based on predominant characteristics, such as
interest rate, loan type and investor type. Impairment is recognized through a valuation allowance for an
individual tranche, to the extent that the fair value is less than the capitalized amount for the tranches. If the
Company later determines that all or a portion of the impairment no longer exists for a particular tranche, a
reduction of the allowance may be recorded as an increase to income. Capitalized servicing rights are reported
as assets and are amortized in proportion to, and over the period of, the estimated future net servicing income
of the underlying financial assets.
Servicing fee income is recorded for fees earned for servicing loans. The fees are based on a contractual
percentage of the outstanding principal and are recorded as income when earned. The amortization of mortgage
servicing rights is netted against loan servicing fee income.
Premises and Equipment
Land is carried at cost. Property and equipment are recorded at cost less accumulated depreciation. Depreciation
is computed using the straight-line method over the expected useful lives of the assets, ranging from 3 to 40
years. The costs of maintenance and repairs are expensed as incurred, while major expenditures for renewals
and betterments are capitalized.
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- 18 -
NOTE 1:
Organization and Summary of Significant Accounting Policies – continued
Leases
The Company leases certain premises from third parties under various operating lease agreements. Operating
leases are included in premises and equipment, net and other liabilities on the consolidated statements of
financial position. Lease expense for lease payments is recognized on a straight-line basis over the life of the
lease. Right-of-use assets and corresponding lease liabilities are recognized at lease commencement date based
on the present value of lease payments over the lease term. If an implicit rate is not available in the lease, the
Company uses an incremental borrowing rate to determine the present value of lease payments. Lease and non-
lease components are accounted for separately. Leases with a lease term of 12 months or less are not recorded
on the consolidated statements of financial condition.
Cash Surrender Value of Bank Owned Life Insurance
Bank Owned Life Insurance (“BOLI”) policies are reflected on the consolidated statements of financial
condition at cash surrender value, net of other charges or amounts due that are probable at settlement. Changes
in the net cash surrender value of the policies, as well as insurance proceeds received, are reflected in noninterest
income on the consolidated statements of income and are not subject to income taxes.
Real Estate and Other Repossessed Assets
Assets acquired through, or in lieu of, loan foreclosure are initially recorded at fair value less estimated selling
cost at the date of foreclosure, establishing a new carrying value. All write-downs based on the asset’s fair value
at the date of acquisition are charged to the allowance for credit losses. Costs of significant property
improvements are capitalized, whereas costs relating to holding property are expensed. Valuations are
periodically performed by management, and any subsequent write-downs are recorded as a charge to operations,
if necessary, to reduce the carrying value of a property to the lower of its cost or fair value less cost to sell. Real
estate and other repossessed properties was $45,000 and $5,000 at December 31, 2024 and 2023, respectively.
Revenue Recognition
The majority of our revenue-generating transactions are not subject to Accounting Standards Codification
(“ASC”) Topic 606, including revenue generated from financial instruments, such as our loans, guarantees,
derivatives and investment securities, as well as revenue related to our mortgage servicing activities, as these
activities are subject to other GAAP discussed elsewhere within our disclosures. ASC Topic 606 is applicable
to noninterest revenue streams such as service charges on deposit accounts, interchange and other fees and
commodity sales income. Descriptions of our revenue-generating activities that are within the scope of ASC
Topic 606 and are recorded in noninterest income on the consolidated statements of income are discussed below:
Service Charges on Deposit Accounts – Revenue from service charges consists of service charges and fees on
deposit accounts under depository agreements with customers to provide access to deposited funds and, when
applicable, pay interest on deposits. Service charges on deposit accounts may be transactional or non-
transactional in nature. Transactional service charges occur in the form of a service or penalty and are charged
upon the occurrence of an event (e.g., overdraft fees, ATM fees, wire transfer fees). Transactional service
charges are recognized as services are delivered to and consumed by the customer, or as penalty fees are
charged. Non-transactional service charges are charges that are based on a broader service, such as account
maintenance fees and dormancy fees, and are recognized on a monthly basis. Service charges on deposit
accounts were $1,645,000 and $1,757,000 for the years ended December 31, 2024 and 2023, respectively.
Interchange and ATM Fees – Revenue from debit card fees includes interchange fee income from debit cards
processed through card association networks. Interchange fees represent a portion of a transaction amount that
the Company and other involved parties retain to compensate themselves for giving the cardholder immediate
access to funds. Interchange rates are generally set by the card association networks and are based on purchase
volumes and other factors. The Company records interchange fees as services are provided. Interchange and
ATM fees were $2,540,000 and $2,524,000 for the years ended December 31, 2024 and 2023, respectively.
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- 19 -
NOTE 1:
Organization and Summary of Significant Accounting Policies – continued
Revenue Recognition – continued
Commodity Sales Income – The Company's subsidiary, OFS, processes deferred payment contracts between
suppliers and customers of agricultural commodities. The revenue from these contracts is accounted for in
accordance with ASC Topic 606. The Company is considered an agent in these contracts, as: (i) the Company
facilitates payment from customer to supplier, (ii) the Company does not take inventory of commodities as they
are delivered by supplier to the customer, (iii) pricing of commodities is determined by the market, (iv)
consideration on deferred payment contracts is insignificant to the Company and (v) the Company’s exposure
to credit risk is minimal. Revenue is recognized net of expenses and reported in other noninterest income in the
financial statements. Commodity sales income and the corresponding commodity sales expense
were $13,043,000 and $6,087,000 for the years ended December 31, 2024 and 2023, respectively, for a net
impact of $0.
Income Taxes
The Company adopted authoritative guidance related to accounting for uncertainty in income taxes, which sets
out a consistent framework to determine the appropriate level of tax reserves to maintain for uncertain tax
positions.
The Company’s income tax expense consists of the following components: current and deferred. Current income
tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted
tax law to the taxable income or excess of deductions over revenues. The Company determines deferred income
taxes using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is
based on the tax effects of the differences between the book and tax bases of assets and liabilities, and enacted
changes in tax rates and laws are recognized in the period in which they occur.
Deferred income tax expense results from changes in deferred tax assets and liabilities between periods.
Deferred tax assets are recognized if it is more likely than not, based on the technical merits, that the tax position
will be realized or sustained upon examination. The term more likely than not means a likelihood of more than
50 percent; the terms examined and upon examination also include resolution of the related appeals or litigation
processes, if any. A tax position that meets the more-likely-than-not recognition threshold is initially and
subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being
realized upon settlement with a taxing authority that has full knowledge of all relevant information. The
determination of whether or not a tax position has met the more-likely-than-not recognition threshold considers
the facts, circumstances, and information available at the reporting date and is subject to management’s
judgment. Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available,
it is more likely than not that some portion or all of a deferred tax asset will not be realized.
The Company recognizes income tax related penalties and interest, if any, in the provision for income taxes in
the consolidated statements of income. Based on management's analysis, the Company did not have any
uncertain tax positions as of December 31, 2024 and 2023. The Company files tax returns in the U.S. federal
jurisdiction and the State of Montana. There are currently no income tax examinations underway for these
jurisdictions. The Company's income tax returns are subject to examination by relevant taxing authorities as
follows: U.S. Federal income tax returns for tax years 2021 and forward; Montana income tax returns for tax
years 2021 and forward.
Employee Stock Ownership Plan
Compensation expense recognized for the Company’s Employee Stock Ownership Plan (“ESOP”) equals the
fair value of shares that have been allocated or committed to be released for allocation to participants during the
year. Any difference between the fair value of the shares at the time and the ESOP’s original acquisition cost is
charged or credited to shareholders’ equity (additional paid-in capital). The cost of ESOP shares that have not
yet been allocated or committed to be released is deducted from shareholders’ equity.
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- 20 -
NOTE 1:
Organization and Summary of Significant Accounting Policies – continued
Treasury Stock
Treasury stock is accounted for on the cost method.
Advertising Costs
The Company expenses advertising costs as they are incurred. Advertising costs were $1,312,000 and
$1,375,000 for the years ended December 31, 2024 and 2023, respectively.
Stock-Based Compensation
Compensation cost is recognized for restricted stock awards, based on the fair value of the awards at the grant
date. Compensation cost is recognized over the required service period, generally defined as the vesting period.
Shares of restricted stock granted through the 2011 Stock Incentive Plan, as amended, vest in equal installments
over three or five years beginning one year from the grant date. Shares of restricted stock granted through the
2020 Non-Employee Director Award Plan vest one year from the grant date.
Earnings Per Common Share
Basic earnings per common share is computed by dividing net earnings allocated to common stock by the
weighted-average number of common shares outstanding during the applicable period. Diluted earnings per
common share is computed using the weighted-average number of shares determined for the basic earnings per
common share computation plus the dilutive effect of stock compensation using the treasury stock method.
Comprehensive Income (Loss)
Comprehensive income (loss) is comprised of net income and other comprehensive income (loss). Other
comprehensive income (loss) includes items recorded directly to equity, such as unrealized holding gains and
losses on securities available-for-sale.
Loan Commitments and Related Financial Instruments
Financial instruments include off-balance-sheet credit instruments, such as commitments to make loans and
commercial letters of credit, issued to meet customer financing needs. The face amount for these items
represents the exposure to loss, before considering customer collateral or ability to repay. Such financial
instruments are recorded when they are funded.
Derivatives
The Company’s derivatives are primarily the result of its mortgage banking activities and are in the form of
interest rate lock commitments (“IRLCs), To-Be-Announced (“TBA”) mortgage-backed securities and bulk
mandatory forward loan sale commitments. The derivatives are accounted for as free-standing or economic
derivatives and are measured at fair value. The derivatives are recognized as either assets or liabilities on the
consolidated statements of financial condition and the changes in the fair value of the derivatives are recorded
in noninterest income in mortgage banking, net in the on the consolidated statements of income.
Fair Value of Financial Instruments
Fair values of financial instruments are estimated using relevant market information and other assumptions. Fair
value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk,
prepayments and other factors, especially in the absence of broad markets for particular items. Changes in
assumptions or in market conditions could significantly affect the estimates. See Note 17. Fair Value of
Financial Instruments for more information.
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- 21 -
NOTE 1:
Organization and Summary of Significant Accounting Policies – continued
Transfers of Financial Assets
Transfers of an entire financial asset, a group of entire financial assets, or participating interest in an entire
financial asset are accounted for as sales when control over the assets has been surrendered. Control over
transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company, (2)
the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge
or exchange the transferred assets, and (3) the Company does not maintain effective control over the transferred
assets through an agreement to repurchase them before their maturity.
Goodwill and Other Intangible Assets
Goodwill is recorded upon completion of a business combination as the difference between the purchase price
and the fair value of net identifiable assets acquired. Subsequent to initial recognition, the Company tests
goodwill for impairment annually as of October 31, or more often if events or circumstances, such as adverse
changes in the business climate indicate there may be impairment. A goodwill impairment test is performed by
comparing the fair value of the reporting unit with its carrying value. An impairment charge is recorded for the
amount by which the carrying amount exceeds the reporting unit's fair value. For goodwill considerations the
Company is a single reporting unit. A weighted average of both the market and income approaches is used in
valuing the reporting unit’s fair value. Weightings are assigned to the approaches regarding fair value and the
sensitivity of other weighting scenarios is considered. The market approach incorporates comparable public
company information, valuation multiples and consideration of a market control premium along with data
related to comparable observed purchase transactions in the financial services industry. The income approach
consists of discounting projected future cash flows, which are derived from internal forecasts and economic
expectations for the reporting unit. The significant inputs and assumptions for the income approach include
projected earnings of the Company in future years for which there is inherent uncertainty and the discount rate.
The sensitivity of a range of reasonable discount rates based on the current economic environment is considered.
During the quarter ended September 30, 2024, management performed a quantitative goodwill impairment test
with assistance from a third-party valuation specialist. The interim determination was primarily driven by a
revision in the Company's earnings outlook in comparison to budget. The interim goodwill impairment
assessment as of August 31, 2024 concluded that goodwill was not impaired. Our quantitative annual
impairment tests as of October 31, 2024 and 2023 also did not result in impairment. However, changing
economic conditions that may adversely affect the Company's performance, the fair value of its assets and
liabilities, or its stock price could result in future impairment. Any resulting impairment loss could have a
material adverse impact on the Company's financial condition and results of operations. Management will
continue to monitor events that could influence this conclusion in the future.
Goodwill recorded for the FCB acquisition during the second quarter of 2022 was $13,942,000. Goodwill
related to acquisitions prior to 2022 totaled $20,798,000. Other identifiable intangible assets recorded by the
Company represent the future benefit associated with the acquisition of the core deposits. Core deposit
intangible assets are being amortized over 10 years utilizing methods that approximate the expected attrition of
the deposits. The amortization expense is included in the noninterest expense section of the consolidated
statements of income.
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- 22 -
NOTE 1:
Organization and Summary of Significant Accounting Policies – continued
Segment Reporting
Management considers operations to be aggregated in one operating segment, as well as one reportable segment.
The Company operates as one line of business (community banking) by providing a similar base of commercial
and retail customers with comparable product and service offerings throughout our Montana markets. The
Company adopted ASU No. 2023-07, Segment Reporting (Topic 280) during the year ended December 31,
2024. The President/Chief Executive Officer (“CEO”) serves as the Company’s chief operating decision maker
(“CODM”). The CODM is responsible for assessing performance and allocating operating and capital
expenditure resources.
The CODM regularly assesses the performance of the single operating and reporting segment based on
consolidated net income. The CODM reviews expenses at a level consistent with those reported in the
Company’s consolidated statements of income. All significant expense categories are reflected in the
consolidated statements of income. The measure of segment assets is reflected in the consolidated statements
of financial condition as total assets.
Recently Adopted 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 Secured Overnight Financing
Rate ("SOFR"). The Company evaluated this guidance and identified substitution rates for impacted loans and
debt. 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. The Company has reviewed all of its LIBOR
based products and all products have been adjusted to another index as LIBOR ceased to be published after June
30, 2023. ASU No. 2021-01 did not have a significant impact on the Company's consolidated financial
statements.
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to
Reportable Segment Disclosures. The updated accounting guidance requires expanded reportable segment
disclosures, primarily related to significant segment expenses which are regularly provided to the company's
chief operating decision maker. The guidance is effective for fiscal years beginning after December 15, 2023,
and interim periods within annual periods beginning after December 15, 2024. Retrospective application is
required. The Company adopted the updated guidance during the year ended December 31, 2024 and it did not
have a significant impact on the Company's financial statement disclosures as the Company has a single
reportable segment.
Recently Issued Accounting Pronouncements
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income
Tax Disclosures. The updated accounting guidance requires enhanced income tax disclosures, including the
disaggregation of existing disclosures related to the tax rate reconciliation and income taxes paid. This ASU is
effective for annual periods beginning after December 15, 2024 with early adoption permitted. The Company
is currently evaluating the effect the updated guidance will have on its consolidated financial statements and
related disclosures.
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- 23 -
NOTE 2:
Investment Securities
The amortized cost and fair values of securities, together with unrealized gains and losses, were as follows:
December 31, 2024
Gross
Gross
Amortized Unrealized Unrealized
Fair
Cost
Gains
Losses
Value
(In Thousands)
Available-for-sale:
U.S. government and agency
obligations
$
5,298 $
85 $
(188 ) $
5,195
U.S. treasury obligations
52,592
-
(5,679 )
46,913
Municipal obligations
131,109
1
(13,233 )
117,877
Corporate obligations
4,249
-
(87 )
4,162
Mortgage-backed securities
29,867
21
(1,653 )
28,235
Collateralized mortgage obligations
89,313
11
(6,701 )
82,623
Asset-backed securities
7,511
83
(9 )
7,585
Total
$
319,939 $
201 $
(27,550 ) $
292,590
December 31, 2023
Gross
Gross
Amortized Unrealized Unrealized
Fair
Cost
Gains
Losses
Value
(In Thousands)
Available-for-sale:
U.S. government obligations
$
6,574 $
121 $
(152 ) $
6,543
U.S. treasury obligations
52,505
-
(5,690 )
46,815
Municipal obligations
149,168
460
(11,678 )
137,950
Corporate obligations
4,245
-
(340 )
3,905
Mortgage-backed securities
28,426
-
(1,673 )
26,753
Collateralized mortgage obligations
94,709
-
(8,141 )
86,568
Asset-backed securities
9,728
32
(15 )
9,745
Total
$
345,355 $
613 $
(27,689 ) $
318,279
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- 24 -
NOTE 2:
Investment Securities – continued
Proceeds from sales of available-for-sale securities and the associated gross realized gains and losses were as
follows:
Years Ended
December 31,
2024
2023
(In Thousands)
Proceeds from sale of available-for-sale securities
$
14,121 $
34,020
Gross realized gain on sale of available-for-sale securities
$
28 $
69
Gross realized loss on sale of available-for-sale securities
(169 )
(291 )
Net realized loss on sale of available-for-sale securities
$
(141 ) $
(222 )
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.
December 31, 2024
Amortized
Fair
Cost
Value
(In Thousands)
Due in one year or less
$
8,566 $
8,520
Due from one to five years
35,162
32,285
Due from five to ten years
83,805
72,286
Due after ten years
73,226
68,641
200,759
181,732
Mortgage-backed securities
29,867
28,235
Collateralized mortgage obligations
89,313
82,623
Total
$
319,939 $
292,590
At December 31, 2024 and 2023, securities with a fair value of $22,892,000 and $23,076,000, respectively,
were pledged to secure public deposits and for other purposes required or permitted by law.
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- 25 -
NOTE 2:
Investment Securities – continued
The Company’s investment securities that have been in a continuous unrealized loss position for less than 12
months and those that have been in a continuous unrealized loss position for 12 or more months were as follows:
December 31, 2024
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
$
- $
- $
1,749 $
(188 )
U.S. treasury obligations
-
-
46,914
(5,679 )
Municipal obligations
14,678
(261 )
102,521
(12,972 )
Corporate obligations
-
-
4,163
(87 )
Mortgage-backed securities and collateralized
mortgage obligations
10,984
(188 )
85,392
(8,166 )
Asset-backed securities
1,993
(9 )
-
-
Total
$
27,655 $
(458 ) $ 240,739 $
(27,092 )
December 31, 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
$
402 $
- $
1,800 $
(152)
U.S. treasury obligations
-
-
46,816
(5,690 )
Municipal obligations
12,000
(63 )
91,869
(11,615 )
Corporate obligations
-
-
3,905
(340 )
Mortgage-backed securities and collateralized
mortgage obligations
11,452
(156 )
101,869
(9,658 )
Asset-backed securities
2,521
(10 )
2,202
(5 )
Total
$
26,375 $
(229 ) $ 248,461 $
(27,460 )
As of December 31, 2024 and December 31, 2023, there were, respectively, 284 and 286 securities in unrealized
loss positions. Based on analysis of available-for-sale debt securities with unrealized losses as of December 31,
2024, 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. Management
does not intend to sell and 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 December 31, 2024 and no other-than-
temporary impairment was recorded at December 31, 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.
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- 26 -
NOTE 3:
Loans
Loans receivable consisted of the following:
December 31,
2024
2023
(In Thousands)
Real estate loans:
Residential 1-4 family
$
199,422 $
200,012
Commercial real estate
916,783
909,413
Other loans:
Home equity
97,543
86,932
Consumer
28,513
30,125
Commercial
278,385
258,007
Total
1,520,646
1,484,489
Allowance for credit losses
(16,850 )
(16,440 )
Total loans, net
$ 1,503,796 $
1,468,049
Included in the above are loans guaranteed by U.S. government agencies totaling $16,309,000 and $23,215,000
at December 31, 2024 and December 31, 2023, respectively.
The following table provides allowance for credit losses activity for the year ended December 31, 2024.
Residential Commercial Home
1-4 Family Real Estate Equity Consumer Commercial
Total
(In Thousands)
Allowance for credit
losses on loans:
Beginning balance,
January 1, 2024
$
1,866 $
10,691 $ 540 $
304 $
3,039 $
16,440
Charge-offs
(11)
-
-
(65)
(10)
(86)
Recoveries
-
18
-
3
67
88
Provision
56
198
13
3
138
408
Total ending allowance
balance, December 31,
2024
$
1,911 $
10,907 $ 553 $
245 $
3,234 $
16,850
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- 27 -
NOTE 3:
Loans – continued
The following table provides allowance for credit losses activity for the year ended December 31, 2023.
Residential Commercial Home
1-4 Family Real Estate Equity Consumer Commercial
Total
(In Thousands)
Allowance for credit losses
on loans:
Beginning balance,
January 1, 2023, 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
-
-
-
(50)
(129)
(179)
Recoveries
195
23
13
3
19
253
Provision
178
1,097
15
8
368
1,666
Total ending allowance
balance, December 31,
2023
$
1,866 $
10,691 $ 540 $
304 $
3,039 $
16,440
The Company utilizes an 8-point internal loan rating system, largely based on regulatory classifications, as
follows:
Loans Rated Pass – these are loans in categories 1 – 5 that are considered to be protected by the current net
worth and paying capacity of the obligor, or by the value of the asset or the underlying collateral.
Loans Rated Special Mention – these loans in category 6 have potential weaknesses and are watched closely by
management. If left uncorrected, these potential weaknesses may result in deterioration of the repayment
prospects for the asset at some future date.
Loans Rated Substandard – these loans in category 7 are inadequately protected by the current net worth and
paying capacity of the obligor or the collateral pledged, if any. Loans so classified have a well-defined weakness
or weaknesses. They are characterized by the distinct possibility that the Company will sustain some loss if the
deficiencies are not corrected.
Loans Rated Doubtful – these loans in category 8 have all the weaknesses inherent in those classified
Substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis
of currently existing facts, conditions, and values, highly questionable and improbable.
Loans Rated Loss – these loans are considered uncollectible and are not part of the 8-point rating system. They
are of such small value that their continuance as assets without establishment of a specific reserve is not
warranted. This classification does not mean that an asset has absolutely no recovery or salvage value, but,
rather, that it is not practical or desirable to defer writing off a basically worthless asset even though practical
recovery may be affected in the future.
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- 28 -
NOTE 3:
Loans – continued
The following table presents the internal classification of the loan portfolio by amortized cost and based on year
originated. Generally, current period renewals of credit are re-underwritten and considered current period
originations for purposes of the table below.
December 31, 2024
2024
2023
2022
2021
2020
Prior
Revolving
Loans
Total
Loans
(In Thousands)
RESIDENTIAL 1-4 FAMILY
Pass
$ 19,197 $ 26,976 $ 31,265 $ 20,658 $ 13,509 $ 34,913 $
6,004 $ 152,522
Special Mention
-
-
623
-
-
-
-
623
Substandard
-
-
-
-
-
576
-
576
Total Residential 1-4 family
19,197 26,976 31,888 20,658 13,509 35,489
6,004
153,721
Current-period gross charge-offs
-
-
-
-
-
11
-
11
RESIDENTIAL 1-4 FAMILY CONSTRUCTION
Pass
20,593
5,526 18,621
-
-
-
-
44,740
Substandard
-
204
-
757
-
-
-
961
Total Residential 1-4 family construction
20,593
5,730 18,621
757
-
-
-
45,701
Current-period gross charge-offs
-
-
-
-
-
-
-
-
COMMERCIAL REAL ESTATE
Pass
49,084 59,172 184,072 130,274 47,481 132,838
38,937
641,858
Special Mention
-
260
-
-
-
-
-
260
Substandard
-
490
-
463
-
2,891
-
3,844
Total Commercial real estate
49,084 59,922 184,072 130,737 47,481 135,729
38,937
645,962
Current-period gross charge-offs
-
-
-
-
-
-
-
-
COMMERCIAL CONSTRUCTION AND
DEVELOPMENT
Pass
37,265 21,430 35,323
9,628
5,033
8,676
5,451
122,806
Substandard
-
-
438
-
2
965
-
1,405
Total Commercial construction and
development
37,265 21,430 35,761
9,628
5,035
9,641
5,451
124,211
Current-period gross charge-offs
-
-
-
-
-
-
-
-
FARMLAND
Pass
21,543 18,083 29,983 18,991 20,076 33,721
2,323
144,720
Special Mention
-
342
813
205
-
220
-
1,580
Substandard
188
-
-
-
65
57
-
310
Total Farmland
21,731 18,425 30,796 19,196 20,141 33,998
2,323
146,610
Current-period gross charge-offs
-
-
-
-
-
-
-
-
HOME EQUITY
Pass
1,031
1,438
3,248
362
483
2,234
88,230
97,026
Special Mention
-
-
-
-
-
22
93
115
Substandard
-
-
-
43
-
89
270
402
Total Home Equity
1,031
1,438
3,248
405
483
2,345
88,593
97,543
Current-period gross charge-offs
-
-
-
-
-
-
-
-
CONSUMER
Pass
10,828
7,580
4,547
1,666
961
798
2,001
28,381
Special Mention
-
8
-
-
-
-
-
8
Substandard
-
66
19
-
24
14
1
124
Total Consumer
10,828
7,654
4,566
1,666
985
812
2,002
28,513
Current-period gross charge-offs
-
23
15
5
1
15
6
65
COMMERCIAL
Pass
29,540 25,748 19,189 15,851 17,617
6,208
27,839
141,992
Special Mention
-
127
95
-
-
-
370
592
Substandard
1,192
41
6
22
-
190
4
1,455
Total Commercial
30,732 25,916 19,290 15,873 17,617
6,398
28,213
144,039
Current-period gross charge-offs
-
-
-
-
10
-
10
AGRICULTURAL
Pass
39,001 21,690
9,014
4,215
3,143
1,608
52,494
131,165
Special Mention
1,811
159
15
-
-
37
596
2,618
Substandard
-
-
-
-
1
515
47
563
Total Agricultural
40,812 21,849
9,029
4,215
3,144
2,160
53,137
134,346
Current-period gross charge-offs
-
-
-
-
-
-
-
-
TOTAL LOANS
Pass
228,082 187,643 335,262 201,645 108,303 220,996 223,279 1,505,210
Special Mention
1,811
896
1,546
205
-
279
1,059
5,796
Substandard
1,380
801
463
1,285
92
5,297
322
9,640
Total
$ 231,273 $ 189,340 $ 337,271 $ 203,135 $ 108,395 $ 226,572 $ 224,660 $ 1,520,646
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- 29 -
NOTE 3:
Loans – continued
December 31, 2023
2023
2022
2021
2020
2019
Prior
Revolving
Loans
Total Loans
(In Thousands)
RESIDENTIAL 1-4 FAMILY
Pass
$ 10,987 $
15,696 $
24,575 $
38,738 $
28,122 $
30,938 $
6,179 $
155,235
Special Mention
-
-
-
940
-
228
-
1,168
Substandard
-
-
-
-
-
175
-
175
Total Residential 1-4 family
10,987
15,696
24,575
39,678
28,122
31,341
6,179
156,578
Current-period gross charge-offs
-
-
-
-
-
-
-
-
RESIDENTIAL 1-4 FAMILY
CONSTRUCTION
Pass
-
-
6,088
21,889
14,700
-
-
42,677
Substandard
-
-
757
-
-
-
-
757
Total Residential 1-4 family
construction
-
-
6,845
21,889
14,700
-
-
43,434
Current-period gross charge-offs
-
-
-
-
-
-
-
-
COMMERCIAL REAL ESTATE
Pass
55,820
50,408 141,407 154,941
63,174 103,620
31,122
600,492
Special Mention
2,593
1,948
493
1,512
1,314
-
-
7,860
Substandard
-
-
-
-
-
339
-
339
Total Commercial real estate
58,413
52,356 141,900 156,453
64,488 103,959
31,122
608,691
Current-period gross charge-offs
-
-
-
-
-
-
-
-
COMMERCIAL CONSTRUCTION
AND DEVELOPMENT
Pass
6,900
6,399
19,500
80,061
31,149
3,762
8,285
156,056
Special Mention
-
-
441
511
134
990
-
2,076
Total Commercial construction
and development
6,900
6,399
19,941
80,572
31,283
4,752
8,285
158,132
Current-period gross charge-offs
-
-
-
-
-
-
-
-
FARMLAND
Pass
9,551
21,728
19,795
36,291
19,452
29,551
4,480
140,848
Substandard
483
65
-
407
-
787
-
1,742
Total Farmland
10,034
21,793
19,795
36,698
19,452
30,338
4,480
142,590
Current-period gross charge-offs
-
-
-
-
-
-
-
-
HOME EQUITY
Pass
621
565
376
3,630
1,736
2,398
77,409
86,735
Substandard
-
-
-
-
-
107
90
197
Total Home Equity
621
565
376
3,630
1,736
2,505
77,499
86,932
Current-period gross charge-offs
-
-
-
-
-
-
-
-
CONSUMER
Pass
449
1,953
3,398
8,109
13,083
1,069
1,977
30,038
Special Mention
-
-
-
18
-
-
-
18
Substandard
-
37
-
8
-
22
2
69
Total Consumer
449
1,990
3,398
8,135
13,083
1,091
1,979
30,125
Current-period gross charge-offs
1
-
28
2
16
4
-
51
COMMERCIAL
Pass
2,834
20,496
22,804
23,581
31,661
6,354
21,914
129,644
Special Mention
-
25
33
109
-
98
2,741
3,006
Substandard
-
-
17
9
-
33
-
59
Total Commercial
2,834
20,521
22,854
23,699
31,661
6,485
24,655
132,709
Current-period gross charge-offs
-
-
26
-
-
8
-
34
AGRICULTURAL
Pass
1,473
5,818
7,241
16,856
40,176
1,517
50,461
123,542
Substandard
427
55
435
282
-
557
-
1,756
Total Agricultural
1,900
5,873
7,676
17,138
40,176
2,074
50,461
125,298
Current-period gross charge-offs
-
-
-
1
-
93
-
94
TOTAL LOANS
Pass
88,635 123,063 245,184 384,096 243,253 179,209
201,827
1,465,267
Special Mention
2,593
1,973
967
3,090
1,448
1,316
2,741
14,128
Substandard
910
157
1,209
706
-
2,020
92
5,094
Total
$ 92,138 $ 125,193 $ 247,360 $ 387,892 $ 244,701 $ 182,545 $
204,660 $ 1,484,489
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- 30 -
NOTE 3:
Loans – continued
The following tables include information regarding delinquencies within the loan portfolio.
December 31, 2024
Loans Past Due and Still
Accruing
30-89
Days
90
Days
Nonaccrual Nonaccrual
Past
and
Loans with Loans with Current
Total
Due Greater Total no ACL
ACL
Loans
Loans
(In Thousands)
Real estate loans:
Residential 1-4 family
$ 1,326 $
623 $ 1,949 $
469 $
- $ 151,303 $ 153,721
Residential 1-4 family
construction
-
-
-
961
-
44,740 $
45,701
Commercial real estate
5,739
- 5,739
268
- 639,955 $ 645,962
Commercial construction and
development
951
-
951
2
- 123,258 $ 124,211
Farmland
54
-
54
190
- 146,366 $ 146,610
Other loans:
Home equity
382
-
382
335
-
96,826 $
97,543
Consumer
195
-
195
98
23
28,197 $
28,513
Commercial
1,064
- 1,064
200
4 142,771 $ 144,039
Agricultural
566
-
566
677
- 133,103 $ 134,346
Total
$10,277 $
623 $10,900 $
3,200 $
27 $ 1,506,519 $1,520,646
December 31, 2023
Loans Past Due and Still
Accruing
30-89
Days
90
Days
Nonaccrual Nonaccrual
Past
and
Loans with Loans with Current
Total
Due Greater Total no ACL
ACL
Loans
Loans
(In Thousands)
Real estate loans:
Residential 1-4 family
$
305 $
- $
305 $
297 $
- $ 155,976 $ 156,578
Residential 1-4 family
construction
-
-
-
757
-
42,677
43,434
Commercial real estate
697
-
697
340
- 607,654 608,691
Commercial construction and
development
194
-
194
-
- 157,938 158,132
Farmland
404
26
430
1,982
1,734 138,444 142,590
Other loans:
Home equity
32
-
32
182
-
86,718
86,932
Consumer
115
-
115
45
15
29,950
30,125
Commercial
-
-
-
27
- 132,682 132,709
Agricultural
74
-
74
2,947
69 122,208 125,298
Total
$ 1,821 $
26 $ 1,847 $
6,577 $
1,818 $1,474,247 $1,484,489
Interest income recognized on impaired loans for the year ended December 31, 2024 and 2023 was considered
insignificant. Interest payments received on a cash basis related to nonaccrual loans were $522,000 at December
31, 2024 and $471,000 at December 31, 2023.
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- 31 -
NOTE 3:
Loans – continued
The following tables presents the amortized cost basis of collateral-dependent loans by class of loans.
December 31, 2024
Real Estate
Business
Assets
Other
(In Thousands)
Real estate loans:
Residential 1-4 family
$
967 $
- $
-
Residential 1-4 family construction
961
-
-
Commercial real estate
1,395
228
-
Farmland
108
-
-
Other loans:
Home equity
216
-
-
Consumer
-
-
104
Commercial
-
220
4
Agricultural
37
244
-
Total
$
3,684 $
692 $
108
December 31, 2023
Real Estate
Business
Assets
Other
(In Thousands)
Real estate loans:
Residential 1-4 family
$
264 $
- $
-
Residential 1-4 family construction
757
-
-
Commercial real estate
39
300
-
Farmland
4,116
-
-
Other loans:
Home equity
44
-
-
Consumer
-
-
36
Commercial
-
-
-
Agricultural
-
2,465
-
Total
$
5,220 $
2,765 $
36
The Company offers modifications of loans to borrowers experiencing financial difficulty by providing principal
forgiveness, interest rate reductions, term extensions, other than insignificant payment delays, or any
combination of these.
During the year ended December 31, 2024, the Company modified one commercial loan and two farmland
loans. The commercial loan was modified to allow for interest only payments for 6 months. The loan had an
amortized cost of $124,000 or 0.09% of commercial loans at December 31, 2024. The first farmland loan was
modified by extending the payment for seven months during the second quarter of 2024. The loan paid off
during the fourth quarter of 2024. The second farmland loan was modified by consolidating debts and
refinancing into a 15-year loan with a variable interest rate adjustable every 5 years. The loan had an amortized
cost of $188,000 or 0.13% of farmland loans at December 31, 2024.
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- 32 -
NOTE 3:
Loans – continued
During the year ended December 31, 2023, the Company modified two commercial real estate loans. The first
loan was modified by consolidating two lines of credit and refinancing into one long term loan for ten years.
The loan had an amortized cost of $524,000 or 0.09% of commercial real estate loans at December 31, 2023.
The second loan was modified by consolidating four loans and refinancing into one short-term, interest only
loan for 12 months. The second loan was paid off during the year ended December 31, 2023. There was no
forgiveness of principal for either of the loans, and the remaining loan with its modified terms was in the 30-89
days past due category as of December 31, 2024.
Loans are granted to directors and officers of the Company in the ordinary course of business on substantially
the same terms as those prevailing at the time for comparable transactions with other persons.
Loans receivable (including loans sold and serviced for others) from related parties, including directors and
executive officers were as follows:
(In Thousands)
Balance, January 1, 2023
$
1,884
Principal additions
2,315
Principal payments
(233 )
Balance, December 31, 2023
$
3,966
Principal additions
1,353
Principal payments
(2,130 )
Balance, December 31, 2024
$
3,189
In addition to the balances included above, available lines of credit were $358,000 and $1,649,000 at December
31, 2024 and 2023, respectively, and includes the ending balances from the tables above.
December 31,
2024
2023
(In Thousands)
Loans serviced, for the benefit of others, for directors, executive officers
and their related parties
$
1,262 $
1,373
Years Ended
December 31,
2024
2023
(In Thousands)
Interest income from loans owned for directors, executive officers and their
related parties
$
204 $
96
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- 33 -
NOTE 4:
Mortgage Servicing Rights
The Company is servicing mortgage loans for the benefit of others which are not included in the consolidated
statements of financial condition and have unpaid principal balances of $2,016,242,000 and $2,066,505,000 at
December 31, 2024 and 2023, 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 $5,111,000 and $5,086,000 for the years ended December 31, 2024 and 2023,
respectively. These fees, net of amortization, are included in mortgage banking, net, which is a component of
noninterest income on the consolidated statements of income.
Custodial balances maintained in connection with the foregoing loan servicing are included in noninterest
checking deposits and were $10,077,000 and $8,539,000 at December 31, 2024 and 2023, respectively.
The following table is a summary of activity in mortgage servicing rights:
Years Ended
December 31,
2024
2023
(In Thousands)
Mortgage servicing rights:
Beginning balance
$
15,853 $
15,412
Mortgage servicing rights capitalized
1,356
2,147
Amortization of mortgage servicing rights
(1,833 )
(1,706 )
Ending balance
$
15,376 $
15,853
There were no valuation allowances during December 31, 2024 and 2023.
The fair values of these mortgage servicing rights were $20,370,000 and $20,388,000 at December 31, 2024
and 2023, respectively. The fair value of mortgage servicing rights was determined at loan level, depending on
the interest rate and term of the specific loan, using the following valuation assumptions:
December 31,
2024
2023
Key assumptions:
Discount rate
12
%
12
%
Prepayment speed range
0-209
%
104-526
%
Weighted average prepayment speed
110
%
119
%
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- 34 -
NOTE 5:
Premises and Equipment
The cost and accumulated depreciation of premises and equipment was as follows:
December 31,
2024
2023
(In Thousands)
Land
$
13,920 $
13,202
Buildings and improvements
89,640
85,369
Furniture and equipment
18,945
16,894
Construction in progress
10,060
4,299
132,565
119,764
Accumulated depreciation
(32,684)
(27,790)
Premises and equipment, net, excluding right-of-use assets
99,881
91,974
Right-of-use assets
1,659
2,308
Premises and equipment, net
$
101,540 $
94,282
Depreciation expense was $5,170,000 and $3,934,000 for the years ended December 31, 2024 and 2023,
respectively.
The Company leases locations under various operating lease agreements. Leases with a lease term of 12 months
at commencement are not recorded on the statements of financial position. The Company’s leases have
maturities ranging from 2025 to 2028, some of which include lessee options to extend the leases for up to 10
years.
The following table summarizes the Company’s leases:
December 31
2024
2023
(In Thousands)
Right-of-use assets, net of amortization
$
1,659 $
2,308
Lease liabilities
1,010
1,499
Operating cash flows
371
543
Weighted average remaining lease term (years)
3.66
4.56
Weighted average discount rate
2.70 %
2.69%
The components of lease cost, which were included in occupancy and equipment expense on the consolidated
statements of income, were as follows:
December 31
2024
2023
(In Thousands)
Operating lease cost
$
531 $
710
Short-term lease cost
5
3
Total lease cost
$
536 $
713
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- 35 -
NOTE 5:
Premises and Equipment – continued
The following table presents the maturities of lease liabilities at December 31, 2024 for future periods:
(In Thousands)
2025
$
342
2026
238
2027
238
2028
238
2029
-
Thereafter
-
Total lease payments
1,056
Less imputed interest
(46)
Present value of lease liabilities
$
1,010
The Company also leases office space to third parties through operating leases. The lease income from these
leases for the years ending December 31, 2024 and 2023 was not significant.
NOTE 6:
Other Intangible Assets
The components of core deposit intangible assets were as follows:
December 31,
2024
2023
(In Thousands)
Core deposit intangible
$
10,809 $
11,840
Accumulated amortization
(6,310 )
(5,960 )
Core deposit intangible, net
$
4,499 $
5,880
Core deposit intangible assets are amortized on an accelerated basis over their estimated life of 10 years.
Amortization expense related to intangible assets was $1,381,000 and $1,579,000 for the years ended December
31, 2024 and 2023. The estimated aggregate future amortization expense for core deposit intangible assets
remaining as of December 31, 2024 was as follows:
Years ending December 31:
(In Thousands)
2025
$
1,185
2026
989
2027
792
2028
595
2029
428
Thereafter
510
Total
$
4,499
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- 36 -
NOTE 7:
Deposits
Deposits are summarized as follows:
December 31,
2024
2023
Weighted
Weighted
Average
Average
Balance
Rate
Balance
Rate
(Dollars in Thousands)
Noninterest checking
$
419,211
0.00 % $
418,727
0.00 %
Interest-bearing checking
221,476
0.18
211,101
0.05
Savings
210,572
0.06
230,711
0.06
Money market
367,094
1.82
330,274
1.66
Time certificates of deposits
462,875
4.25
444,382
4.08
Total
$ 1,681,228
1.59 % $ 1,635,195
1.45 %
At December 31, 2024 and 2023, the Company held $632,951,000 and $618,784,000, respectively, in deposit
accounts that met or exceeded the Federal Deposit Insurance Corporation (“FDIC”) requirements of $250,000
and greater.
Time certificates of deposit include $0 and $72,168,000 of fixed rate brokered certificates at December 31, 2024
and 2023, respectively.
At December 31, 2024, the scheduled maturities of time deposits were as follows:
Years ending December 31:
(In Thousands)
2025
$
447,321
2026
9,383
2027
3,384
2028
1,422
2029
1,277
Thereafter
88
Total
$
462,875
Interest expense on deposits was as follows:
Years Ended
December 31,
2024
2023
(In Thousands)
Checking
$
391 $
595
Savings
134
106
Money market
8,660
5,549
Time certificates of deposits
18,653
11,607
Total
$
27,838 $
17,857
At December 31, 2024 and 2023, the Company reclassified $252,000 and $242,000, respectively, in overdrawn
deposits as loans.
Related party deposits, including directors’ and executive officers’ deposit accounts at December 31, 2024 and
2023 were $4,370,000 and $5,463,000, respectively.
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- 37 -
NOTE 8:
Advances from the Federal Home Loan Bank and Other Borrowings
At December 31, 2024, advances from the FHLB of Des Moines and other borrowings mature as follows:
Years ending December 31:
(In Thousands)
2025
$
113,013
2026
27,917
2027
-
2028
-
2029
-
Thereafter
-
Total
$
140,930
Federal Home Loan Bank Advances
FHLB advances may include both amortizing and non-amortizing advances. Non-amortizing advances are due
in full at maturity. Advances are subject to prepayment penalties. Interest rates on these advances are fixed.
Advances are collateralized by a blanket pledge of the Bank’s loan portfolio. The Company’s investment in
FHLB stock is also pledged as collateral on these advances. The total FHLB funding available to the Company
at December 31, 2024, was 45.00% of total Bank assets as determined by FHLB, or approximately
$963,924,000. The balance of advances was $140,930,000 and $175,737,000 at December 31, 2024 and 2023,
respectively. The Bank also has a contingent letter of credit with FHLB for $520,000 at both December 31,
2024 and 2023.
Other Borrowings
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 are valued at par. The Company did not utilize the program during 2023. In March of 2024, the Company
accessed borrowings through the BTFP. In September of 2024, the Company paid off the borrowings. In
addition, at December 31, 2024, Eagle had a $15,000,000 line of credit with Bell Bank. The line of credit is
secured by Eagle's ownership of the Bank's stock. The balance of this line of credit was $0 at both December
31, 2024 and 2023.
Federal Funds Purchased
At December 31, 2024, the Bank had $85,000,000 in Federal funds lines of credit with unaffiliated institutions,
including Pacific Coast Bankers Bank ("PCBB"), PNC Financial Services Group, Inc. ("PNC"), United Bankers'
Bank ("UBB") and Texas Independent Bank ("TIB"). The balance of these lines of credit was $0 at
both December 31, 2024 and 2023.
All Borrowings Outstanding
For all borrowings outstanding the weighted average interest rate for advances at December 31, 2024 and 2023
was 4.72% and 5.48%, respectively. The average amount outstanding was $190,082,000 and $159,667,000 for
2024 and 2023, respectively. The maximum amount outstanding at any month-end was $247,500,000 and
$199,757,000 for 2024 and 2023, respectively.
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- 38 -
NOTE 9:
Other Long-Term Debt
Other long-term debt consisted of the following:
December 31,
2024
2023
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 $
(185) $ 15,000 $
(219)
Subordinated debentures fixed at 3.50% to
floating, due 2032
40,000
(821)
40,000
(937)
Subordinated debentures variable at 3-Month
SOFR plus 1.68%, due 2035
5,155
-
5,155
-
Total other long-term debt
$ 60,155 $
(1,006) $ 60,155 $
(1,156)
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. A portion of the net proceeds
were used to redeem the $10,000,000 senior notes which matured in February 2022.
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 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 6.20% as of December 31, 2023. 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 converted to three-
month CME Term SOFR plus 1.68% during the year ended December 31, 2024. The rate was 5.99% as of
December 31, 2024. 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.
During the year ended December 31, 2024 and 2023, interest expense on all other long-term debt was
$2,724,000 and $2,719,000, respectively, which includes $149,000 and $156,000 in amortization for debt
issuance costs, respectively. Debt issuance costs consisting primarily of underwriting discounts and professional
fees were capitalized and are being amortized through maturity to interest expense using the straight-line
method.
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- 39 -
NOTE 10: Commitments and Contingencies
Financial Instruments and Off-Balance-Sheet Activities
All financial instruments held or issued by the Company are held or issued for purposes other than trading. In
the ordinary course of business, the Bank enters into off-balance-sheet financial instruments consisting of
commitments to extend credit and forward delivery commitments for the sale of whole loans to the secondary
market.
In response to marketplace demands, the Bank routinely makes commitments to extend credit for fixed rate and
variable rate loans with or without rate lock guarantees. When rate lock guarantees are made to customers, the
Bank becomes subject to market risk for changes in interest rates that occur between the rate lock date and the
date that a firm commitment to purchase the loan is made by a secondary market investor.
Commitments to extend credit are agreements to lend to a customer as long as the borrower satisfies the Bank’s
underwriting standards and related provisions of the borrowing agreements. Commitments generally have fixed
expiration dates or other termination clauses. The Bank uses the same credit policies in making commitments
to extend credit as it does for on-balance-sheet instruments. Collateral is required for substantially all loans, and
normally consists of real property. The Bank’s experience has been that substantially all loan commitments are
completed or terminated by the borrower within 3 to 12 months.
Commitments are summarized as follows:
December 31,
2024
2023
(In Thousands)
Commitments to extend credit
$
267,623 $
271,552
Letters of credit
7,409
9,457
Employment Contracts
The Company has entered into change of control agreements with its executive officers other than the Chief
Executive Officer. The change in control agreements provide a double trigger benefit equal to the sum of the
executive’s annual salary and incentive bonus for the most recently completed year. The benefits are payable in
the event that four months prior to, in connection with or within 18 months after a change in control the
executive’s employment is terminated without cause or if the executive resigns for good reason. The change in
control agreements are for two years, renewing automatically for successive one-year periods unless Eagle
or the executive provide written notice of nonrenewal 60 days before the contract anniversary date. If the officer
timely and properly elects health continuation coverage under the Consolidated Omnibus Budget Reconciliation
Act of 1985 ("COBRA"), the Bank will pay the Executive's monthly COBRA premium paid for himself/herself
and his/her dependents for all applicable group health plan benefits until the earliest of (i) the expiration of
twelve months of coverage, (ii) the date the executive is no longer eligible to receive COBRA continuation
coverage, and (iii) the date on which the executive receives or becomes eligible to receive substantially similar
coverage from another employer or source.
Legal Proceedings
Various legal claims also arise from time to time in the normal course of business which, in the opinion of
management, will have no material effect on the Company’s financial statements.
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- 40 -
NOTE 11: Income Taxes
The components of the Company’s provision (benefit) for income taxes was as follows:
Years Ended
December 31,
2024
2023
(In Thousands)
Current
U.S. federal
$
1,575 $
1,585
Montana
566
684
Total current income tax provision
2,141
2,269
Deferred
U.S. federal
(435 )
(512 )
Montana
(94 )
(159 )
Total deferred income tax (benefit) provision
(529 )
(671 )
Total income tax provision
$
1,612 $
1,598
The nature and components of deferred tax assets and liabilities were as follows:
December 31,
2024
2023
(In Thousands)
Deferred tax assets:
Allowance for credit losses
$
4,433 $
4,329
Deferred loan fees
402
366
Lease liability
266
395
Deferred compensation
1,835
1,818
Employee benefits
625
678
Unrealized losses on securities available-for-sale
7,194
7,129
Acquisition costs
98
133
Acquisition fair value adjustments
2,757
3,058
Other
694
699
Total deferred tax assets
18,304
18,605
Deferred tax liabilities:
Premises and equipment
514
879
Right-of-use asset
436
608
FHLB stock
-
21
Mortgage servicing rights
4,045
4,174
Goodwill
1,488
1,366
Intangibles
1,121
1,436
Other
336
350
Total deferred tax liabilities
7,940
8,834
Net deferred tax asset
$
10,364 $
9,771
The Company believes, based upon the available evidence, that all deferred tax assets will be realized in the
normal course of operations. Accordingly, these assets have not been reduced by a valuation allowance.
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- 41 -
NOTE 11: Income Taxes – continued
A reconciliation of the Company’s effective provision (benefit) for income taxes to the statutory federal income
tax rate was as follows:
Years Ended
December 31,
2024
2023
% of
% of
Pretax
Pretax
Amount Income Amount
Income
(Dollars in Thousands)
Federal income taxes at the statutory rate
$
2,392
21.00% $
2,447
21.00%
State income taxes
566
4.97
684
5.87
Tax-exempt interest income
(295 )
-2.59
(342 )
-2.93
Income from bank-owned life insurance
(432 )
-3.79
(308 )
-2.64
Federal tax credits
(968)
-8.50
(764)
-6.55
Other, net
349
3.06
(119 )
-1.04
Provision for income taxes and effective tax rate
$
1,612
14.15% $
1,598
13.71%
Investments in LIHTC projects are accounted for using the proportional amortization method. The proportional
amortization method allows the investor to amortize the cost of the investment in proportion to tax credits and
other tax benefits received. The net investment performance is recognized in the statement of income as a
component of income tax provision (benefit). Amortization of the investment in LIHTC projects was $890,000
for the year ended December 31, 2024 and $870,000 for the year ended December 31, 2023. There is no non-
income-tax related activity recognized from the investments in LIHTC projects.
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- 42 -
NOTE 12: 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, January 1, 2024
$
(19,945)
Other comprehensive loss, before reclassifications and income taxes
(414)
Amounts reclassified from accumulated other comprehensive loss, before income taxes
141
Income tax benefit
72
Total other comprehensive loss
(201)
Balance, December 31, 2024
$
(20,146)
Balance, January 1, 2023
$
(26,357)
Other comprehensive income, before reclassifications and income taxes
8,482
Amounts reclassified from accumulated other comprehensive income, before income
taxes
222
Income tax provision
(2,292)
Total other comprehensive income
6,412
Balance, December 31, 2023
$
(19,945)
NOTE 13: Earnings Per Common Share
The computations of basic and diluted earnings per common share are below.
Years Ended
December 31,
2024
2023
(Dollars in Thousands, Except for Per Share Data)
Basic weighted average shares outstanding
7,838,822
7,793,352
Dilutive effect of stock compensation
14,970
4,891
Diluted weighted average shares outstanding
7,853,792
7,798,243
Net income available to common shareholders
$
9,778 $
10,056
Basic earnings per common share
$
1.25 $
1.29
Diluted earnings per common share
$
1.24 $
1.29
Restricted stock units excluded from the diluted average
outstanding share calculation because their effect
would be anti-dilutive
8,344
21,666
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- 43 -
NOTE 14: Capital Management and Regulatory Matters
Federal regulations require Federal Reserve member banks, such as Opportunity Bank of Montana and all other
FDIC insured depository institutions, to meet several minimum capital standards: a common equity Tier 1
capital to risk-based assets ratio of 4.5%, a Tier 1 capital to risk-based assets ratio of 6.0%, a total capital to
risk-based assets of 8.0%, and a Tier 1 capital to total average assets leverage ratio of 4.0%. Federal
law establishes a prompt corrective action framework to resolve the problems of undercapitalized depository
institutions. Failure to meet minimum capital requirements can initiate certain mandatory and possibly
additional discretionary actions that, if undertaken, could have a direct material effect on the Company’s
financial statements. Prompt corrective action provisions are not applicable to bank holding companies.
In addition to establishing the minimum regulatory capital requirements, the regulations limit capital
distributions and certain discretionary bonus payments to management if the institution does not hold a “capital
conservation buffer” consisting of 2.5% of common equity Tier 1 capital to risk-weighted assets above the
amount necessary to meet each of its minimum risk-based capital requirements. An institution is considered
"adequately capitalized" if it has a leverage ratio of 4.0%, and including the conservation buffer, a common
equity Tier 1 capital to risk-based assets ratio of 7.0%, a Tier 1 capital to risk-weighted assets ratio of 8.5% and
a total capital to risk-weighted assets ratio of 10.5%.
Management believes that, as of December 31, 2024, the Company and the Bank meet all capital adequacy
requirements.
As of December 31, 2024, the most recent notification from the FRB categorized the Bank as well capitalized
under the regulatory framework for prompt corrective action. There are no conditions or events since the
notification that management believes have changed the Bank's category. The Bank’s actual capital amounts
and ratios as of December 31, 2024 are presented in the table below and all of the ratios, with the exception of
the Tier 1 capital to 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)
December 31, 2024:
Total risk-based capital to
risk weighted assets
$ 229,316
13.49% $ 178,521
10.50% $ 170,020
10.00%
Tier 1 capital to risk
weighted assets
211,066
12.41 144,517
8.50 136,016
8.00
Common equity Tier 1
capital to risk weighted
assets
211,066
12.41 119,014
7.00 110,513
6.50
Tier 1 capital to adjusted
total average assets
211,066
10.07
83,861
4.00 104,826
5.00
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- 44 -
NOTE 14: Capital Management and Regulatory Matters – continued
The Company's and the Bank’s actual capital amounts and ratios as of December 31, 2023 are presented in the
table below and all of the ratios, with the exception of the Tier 1 capital to 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)
December 31, 2023:
Total risk-based capital to
risk weighted assets
$ 218,909
13.01% $ 176,692
10.50% $ 168,278
10.00%
Tier 1 capital to risk
weighted assets
201,179
11.96 143,037
8.50 134,623
8.00
Common equity Tier 1
capital to risk weighted
assets
201,179
11.96 117,795
7.00 109,381
6.50
Tier 1 capital to adjusted
total average assets
201,179
9.75
82,569
4.00 103,212
5.00
Dividend Limitations
Under State of Montana banking regulation, member banks such as the Bank generally may declare annual cash
dividends up to an amount equal to the previous two years’ net earnings. Dividends in excess of such amount
require approval of the Division of Banking. The Bank paid dividends of $3,700,000 to Eagle during the
year ended December 31, 2024. No dividends were paid to Eagle during the year ended December 31, 2023.
Eagle paid dividends of $0.565 and $0.555 per share to its shareholders during the years ended December 31,
2024 and 2023, respectively.
Stock Repurchase Program
On April 18, 2024, Eagle's Board of Directors (the "Board") authorized the repurchase of up to 400,000 shares
of its common stock beginning May 1, 2024. 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. No shares
were purchased during the second or third quarter of 2024 under this plan. During the fourth quarter of 2024,
25,000 shares were purchased under this plan at an average price of $16.74. The plan expires on May 1, 2025.
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. During the second quarter
of 2023, 17,901 shares were purchased under this plan at an average price of $12.89. No shares were purchased
during the third or fourth quarter of 2023 under this plan. No shares were purchased during the first or second
quarter of 2024 under this plan. The plan expired on May 1, 2024.
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- 45 -
NOTE 14: Capital Management and Regulatory Matters – continued
On April 21, 2022, Eagle's Board of Directors (the "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 or second quarter of 2023 under this plan. The plan expired on April 21, 2023.
Liquidation Rights
Eagle Bancorp Montana, Inc. holds a liquidation account for the benefit of certain depositors of the Bank who
remain depositors of the Bank at the time of liquidation. The liquidation account is designed to provide payments
to these depositors of their liquidation interests in the event of a liquidation of Eagle and the Bank, or the Bank
alone. In the unlikely event that Eagle and the Bank were to liquidate in the future, all claims of creditors,
including those of depositors, would be paid first, followed by distribution to depositors as of November 30,
2008 (who continue to be the Bank’s depositors) of the liquidation account maintained by Eagle. Also, in a
complete liquidation of both entities, or of just the Bank, when Eagle has insufficient assets to fund the
liquidation account distribution due to depositors and the Bank has positive net worth, the Bank would
immediately pay amounts necessary to fund Eagle’s remaining obligations under the liquidation account. If
Eagle is completely liquidated or sold apart from a sale or liquidation of the Bank, then the rights of such
depositors in the liquidation account maintained by Eagle would be surrendered and treated as a liquidation
account in the Bank, the “bank liquidation account” and these depositors shall have an equivalent interest in the
bank liquidation account and the same rights and terms as the liquidation account.
After two years from the date of the 2010 conversion and upon the written request of the FDIC, Eagle will
eliminate or transfer the liquidation account and the interests in such account to the Bank and the liquidation
account would become the liquidation account of the Bank and not subject in any manner or amount to Eagle’s
creditors. Also, under the rules and regulations of the FDIC, no post-conversion merger, consolidation, or
similar combination or transaction with another depository institution in which Eagle or the Bank is not the
surviving institution would be considered a liquidation and, in such a transaction, the liquidation account would
be assumed by the surviving institution.
NOTE 15: Benefit Plans
Profit Sharing Plan
The Company provides a noncontributory profit sharing plan for eligible employees who have completed one
year of service. The amount of the Company’s annual contribution is determined by the Board. Profit sharing
expense was $1,186,000 and $1,272,000 for the years ended December 31, 2024 and 2023, respectively.
The Company’s profit sharing plan includes a 401(k) feature. At the discretion of the Board, the Company may
match up to 50.00% of participants’ contributions up to a maximum of 4.00% of participants’ salaries. For the
years ended December 31, 2024 and 2023, the Company’s match was $519,000 and $552,000, respectively.
Deferred Compensation Plans
The Company has entered into deferred compensation contracts with certain key employees. The contracts
provide fixed benefits payable in equal annual installments upon retirement. The charge to expense is based on
the present value computations of anticipated liabilities. For the years ended December 31, 2024 and 2023, the
total expense was $661,000 and $625,000, respectively. The liability for the deferred compensation plan was
$6,469,000 and $6,420,000 at December 31, 2024 and 2023, respectively, which is included in accrued
expenses and other liabilities in the consolidated statements of financial condition.
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- 46 -
NOTE 15: Employee Benefits – continued
Employee Stock Ownership Plan
The Company provides an ESOP for eligible employees who meet certain age and service requirements.
The Company sold 251,256 shares of common stock to the ESOP at a price of $23.88 per share in June 2021.
The shares were purchased from Eagle by the ESOP in exchange for a loan totaling $6,000,000. The loan has a
ten-year term and bears interest at 3.00%. The Bank makes annual contributions to the ESOP sufficient to satisfy
the debt service requirements of the loan. The ESOP uses these contributions, and dividends received by the
ESOP on unallocated shares, to make principal and interest payments on the loan to the Company. The shares
held by the ESOP will be used for allocations to employees of the Company over a ten-year period.
Shares purchased by the ESOP are held in a suspense account by the plan trustee until allocated to participant
accounts. Shares released from the suspense account are allocated to participants on the basis of their relative
compensation in the year of allocation. Participants become vested in the allocated shares over a period not to
exceed seven years. Any forfeited shares are allocated to other participants in the same proportion as
contributions. As shares are committed to be released, the Company reports compensation expense equal to the
average daily market prices of the shares. The compensation expense is accrued throughout the year. Dividends
on ESOP shares are recorded as a reduction to retained earnings.
Total ESOP expenses of $237,000 and $212,000 were recognized for the years ended December 31, 2024 and
2023, respectively.
The following table shows the components of the ESOP shares:
December 31,
2024
2023
Allocated shares
255,351
240,266
Unallocated shares
167,932
191,922
Total ESOP shares
423,283
432,188
Fair value of unallocated shares (in thousands)
$
2,574 $
3,030
Stock Incentive Plans
The Company adopted the stock incentive plan on November 1, 2011. This plan provides for different types of
awards including stock options, restricted stock and performance shares. Under this plan, awards of Eagle's
common stock may be made to eligible directors, officers and employees. This plan was amended multiple
times, most recently in 2022 to increase the maximum number of shares of restricted stock for issuance under
this plan to 393,571. The number of shares of restricted stock available to award under this plan was 104,575 as
of December 31, 2024. This plan also includes shares available to be awarded for stock options totaling 246,427.
However, no stock options have been awarded under this plan.
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- 47 -
NOTE 15: Employee Benefits – continued
Stock Incentive Plans - continued
The following table shows the activity of the restricted stock awards granted under this plan:
Number of
Shares
Unvested awards as of January 1, 2023
70,361
Awards granted
20,870
Awards vested
(20,132 )
Awards forfeited
(1,200 )
Unvested awards as of December 31, 2023
69,899
Awards granted
-
Awards vested
(20,102 )
Awards forfeited
(14,513 )
Unvested awards as of December 31, 2024
35,284
At December 31, 2024, the Company has unrecognized expense of approximately $562,000 for this plan, which
it expects to recognize ratably through November 2027.
The Company established a nonemployee director award plan effective April 23, 2020. Under this plan, awards
of Eagle's common stock may be made to eligible directors. This plan was amended during 2023 and increased
the maximum number of shares of restricted stock for issuance under this plan to 88,000. The number of shares
of restricted stock available to award under this plan was 48,127 as of December 31, 2024.
The following table shows the activity of the restricted stock awards granted under this plan:
Number of
Shares
Unvested awards as of January 1, 2023
8,520
Awards granted
15,291
Awards vested
(8,520 )
Awards forfeited
-
Unvested awards as of December 31, 2023
15,291
Awards granted
12,270
Awards vested
(15,291 )
Awards forfeited
-
Unvested awards as of December 31, 2024
12,270
At December 31, 2024, the Company has unrecognized expense of approximately $166,000 for this plan, which
it expects to recognize ratably through November 2025.
The Company recognized total compensation expense of $523,000 and $347,000 for these plans during the
years ended December 31, 2024 and 2023, respectively.
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- 48 -
NOTE 16: 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 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 consolidated statements of condition.
Derivatives are summarized as follows:
December 31, 2024
December 31, 2023
Notional
Fair Value
Notional
Fair Value
Amount Asset Liability Amount Asset Liability
(In Thousands)
Interest rate lock commitments
$ 10,155 $
- $
103 $ 15,670 $
15 $
-
Forward TBA mortgage-backed
securities
10,000
142
- 12,000
-
75
Changes in the fair value of the derivatives are recorded in mortgage banking, net within noninterest income on
the consolidated statements of income. A net gain of $99,000 was recorded for the year ended December 31,
2024 compared to a net gain of $10,000 for the year ended December 31, 2023.
NOTE 17: 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.
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- 49 -
NOTE 17: 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 to be Level 2.
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, adjusted for factors such as pull-through rate assumptions based on historical information,
where appropriate. Interest rate lock commitments are considered to be Level 3 and the forward TBA mortgage-
backed securities and mandatory forward commitments are considered to be Level 2.
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 classified within Level 3 of the fair
value hierarchy.
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 present value of
expected cash flows based on a third-party model that incorporated industry assumptions and is adjusted for
factors such as prepayment speeds and are considered level 3 inputs.
The following table summarizes financial assets and 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:
December 31, 2024
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
$
- $
5,195 $
- $
5,195
U.S. treasury obligations
46,913
-
-
46,913
Municipal obligations
- 117,877
-
117,877
Corporate obligations
-
4,162
-
4,162
Mortgage-backed securities
-
28,235
-
28,235
Collateralized mortgage obligations
-
82,623
-
82,623
Asset-backed securities
-
7,585
-
7,585
Loans held-for-sale
-
13,368
-
13,368
Forward TBA mortgage-backed securities
-
142
-
142
Financial liabilities:
Interest rate lock commitments
-
-
103
103
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- 50 -
NOTE 17: Fair Value of Financial Instruments – continued
December 31, 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
$
- $
6,543 $
- $
6,543
U.S. treasury obligations
46,815
-
-
46,815
Municipal obligations
- 137,950
- 137,950
Corporate obligations
-
3,905
-
3,905
Mortgage-backed securities
-
26,753
-
26,753
Collateralized mortgage obligations
-
86,568
-
86,568
Asset-backed securities
-
9,745
-
9,745
Loans held-for-sale
-
11,432
-
11,432
Interest rate lock commitments
-
-
15
15
Financial liabilities:
Forward TBA mortgage-backed securities
-
75
-
75
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 collateral-dependent loans, real estate and other repossessed assets and mortgage
servicing rights.
The following tables summarize 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:
December 31, 2024
Level 1 Level 2 Level 3 Total Fair
Inputs
Inputs Inputs
Value
(In Thousands)
Collateral-dependent loans individually evaluated, net
of ACL
$
- $
- $
96 $
96
December 31, 2023
Level 1 Level 2 Level 3 Total Fair
Inputs
Inputs
Inputs
Value
(In Thousands)
Collateral-dependent loans individually evaluated, net
of ACL
$
- $
- $
1,782 $
1,782
The following table represents the Bank's financial assets and liabilities measured at fair value on a recurring
and nonrecurring basis, the valuation techniques used to measure the fair value of those 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
Collateral-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
85 - 95%
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- 51 -
NOTE 17: Fair Value of Financial Instruments – continued
The following table provides a reconciliation of assets and liabilities measured at fair value using significant
unobservable inputs (Level 3) on a recurring basis during the year ended December 31, 2024.
December 31,
2024
December 31,
2023
Interest Rate Lock Commitments
(In Thousands)
Beginning Balance
$
15 $
(81)
Purchases and issuances
(644)
(339)
Sales and settlements
526
435
Ending Balance
$
(103) $
15
Unrealized (losses) gains related to items held at end of period
$
(118) $
96
The tables below summarize the estimated fair values of financial instruments of the Company, whether or not
recognized at fair value on the 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.
December 31, 2024
Level 1 Level 2
Level 3
Total
Carrying
Inputs Inputs
Inputs
Fair Value Amount
(In Thousands)
Financial assets:
Cash and cash equivalents
$ 31,559 $
- $
- $
31,559 $
31,559
FHLB stock
-
7,778
-
7,778
7,778
FRB stock
-
4,131
-
4,131
4,131
Loans receivable, gross
-
- 1,466,511 1,466,511 1,520,646
Mortgage servicing rights
-
-
20,370
20,370
15,376
Financial liabilities:
Non-maturing interest-bearing deposits
- 799,142
-
799,142
799,142
Time certificates of deposit
-
-
461,254
461,254
462,875
FHLB advances and other borrowings
-
-
141,057
141,057
140,930
Other long-term debt
-
-
58,024
58,024
60,155
December 31, 2023
Level 1 Level 2
Level 3
Total
Carrying
Inputs Inputs
Inputs
Fair Value Amount
(In Thousands)
Financial assets:
Cash and cash equivalents
$ 24,545 $
- $
- $
24,545 $
24,545
FHLB stock
-
9,191
-
9,191
9,191
FRB stock
-
4,131
-
4,131
4,131
Loans receivable, gross
-
- 1,416,203 1,416,203 1,484,489
Mortgage servicing rights
-
-
20,388
20,388
15,853
Financial liabilities:
Non-maturing interest-bearing deposits
- 772,086
-
772,086
772,086
Time certificates of deposit
-
-
441,939
441,939
444,382
FHLB advances and other borrowings
-
-
175,842
175,842
175,737
Other long-term debt
-
-
58,094
58,094
60,155
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- 52 -
NOTE 18: Condensed Parent Company Financial Statements
Included below are the condensed financial statements of the Parent Company, Eagle Bancorp Montana, Inc.:
December 31,
2024
2023
(In Thousands)
Assets:
Cash and cash equivalents
$
1,863 $
2,426
Securities available-for-sale
732
796
Investment in Eagle Bancorp Statutory Trust I
155
155
Investment in Subsidiaries
227,470
219,090
Other assets
4,717
6,831
Total assets
$
234,937 $
229,298
Liabilities and Shareholders' Equity:
Accounts payable and accrued expenses
$
1,023 $
1,026
Other long-term debt
59,149
58,999
Shareholders' equity
174,765
169,273
Total liabilities and shareholders' equity
$
234,937 $
229,298
Years Ended
December 31,
2024
2023
(In Thousands)
Interest income
$
48 $
55
Interest expense
(2,735)
(2,729)
Noninterest income
73
211
Noninterest expense
(825)
(976)
Loss before income taxes
(3,439)
(3,439)
Income tax benefit
(931)
(914)
Loss before equity in undistributed earnings of Subsidiaries
(2,508)
(2,525)
Equity in undistributed earnings of Subsidiaries
12,286
12,581
Net income
$
9,778 $
10,056
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- 53 -
NOTE 18: Condensed Parent Company Financial Statements – continued
Years Ended
December 31,
2024
2023
(In Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
$
9,778 $
10,056
Adjustments to reconcile net income to net cash used in operating
activities:
Equity in undistributed earnings of Subsidiaries
(12,286 )
(12,581)
Other adjustments, net
2,281
(1,302)
Net cash used in operating activities
(227 )
(3,827)
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash contribution from Opportunity Bank of Montana
3,700
-
Activity in available-for-sale securities:
Maturities, principal payments and calls
60
5,072
Net cash provided by investing activities
3,760
5,072
CASH FLOWS FROM FINANCING ACTIVITIES:
ESOP payments and dividends
320
479
Payments to purchase treasury stock
(419 )
(231)
Treasury shares reissued for compensation
538
337
Dividends paid
(4,535 )
(4,442 )
Net cash used in financing activities
(4,096 )
(3,857)
NET DECREASE IN CASH AND CASH EQUIVALENTS
(563 )
(2,612)
CASH AND CASH EQUIVALENTS, beginning of period
2,426
5,038
CASH AND CASH EQUIVALENTS, end of period
$
1,863 $
2,426
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- 54 -
NOTE 19: Restatement of Interim Financial Information (UNAUDITED)
Restatement of Unaudited Condensed Statement of Cash Flows
In connection with the preparation of the consolidated statement of cash flows for the year ended December 31,
2024, the Company concluded the proper classification of borrowings as short-term or long-term was not
properly presented within the statement of cash flows for the nine months ended September 30, 2024. See below
for a reconciliation from the previously reported amounts in the Company's Quarterly Reports on Form 10-Q to
the restated amounts for the nine months ended September 30, 2024. The previously reported amounts are
labeled "As Reported" in the table below. The amounts labeled "Adjustments" represent the effects of this
restatement. The classification errors were isolated to the financing activities section of the statement of cash
flows and had no impact on net cash provided by financing activities. In addition, there was no impact to the
unaudited condensed consolidated statement of condition, statement of income, statement of comprehensive
income or statement of changes in shareholder’s equity for the same period.
Nine Months Ended September 30, 2024
As Reported Adjustments As Restated
(In Thousands)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits
$
15,317 $
- $
15,317
Net short-term advances (payments) on FHLB and
other borrowings
14,263
(55,000)
(40,737)
Advances on long-term FHLB and other borrowings
29,167
75,833
105,000
Payments on long-term FHLB and other borrowings
-
(20,833)
(20,833)
Purchase of treasury stock
-
-
-
Dividends paid
(3,387)
-
(3,387)
Net cash provided by financing activities
$
55,360 $
- $
55,360
EAGLE BANCORP MT, INC. 15
SHAREHOLDER INFORMATION
STOCK LISTING
Symbol: EBMT
Nasdaq Global Market
SHAREHOLDER SERVICES
AGENT COMPUTERSHARE
INVESTOR SERVICES
PO Box 43006
Providence, RI 02940-3006
1.800.368.5948
CORPORATE HEADQUARTERS
1400 Prospect Ave
Helena, MT 59601
406.442.3080
INVESTOR INFORMATION
Copies of reports filed with the
Securities and Exchange Commission
are available without charge online
at www.sec.gov or the Investor
Relations section of our website at
www.opportunitybank.com
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
MOSS ADAMS LLP
601 W. Riverside Ave Ste 1800
Spokane, WA 99201
509.747.2600
SHAREHOLDER CONTACT
CHANTELLE NASH, CORPORATE
SECRETARY
Opportunity Bank of Montana
PO Box 4999
Helena, MT 59604-4999
406.442.3080
cnash@oppbank.com
CORPORATE COUNSEL
NIXON PEABODY, LLP
799 9th St NW Ste 500
Washington, DC 20001
202.585.8000
www.nixonpeabody.com
Livingston, Montana
EAGLE BANCORP MONTANA, INC.
EAGLE BANCORP MONTANA, INC.
1400 Prospect Ave | Helena, MT 59601
1400 Prospect Ave | Helena, MT 59601
Cover photo: Choteau, Montana