UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2022
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For the transition period from _____ to _____. |
Commission file number 1-34682
Eagle Bancorp Montana, Inc.
(Exact name of small business issuer 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)
(406) 442-3080
(Issuer's telephone number)
Website address: www.opportunitybank.com
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.
days. Yes [X]☒ No [ ]☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes [X]☒ 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. [ ]Act. ☐
Indicate by check mark whether the registrant is a shell company (defined in Rule 12b-2 of the Exchange Act). Yes [ ]☐ No [X]☒
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 |
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date:
Common stock, par value $0.01 per share |
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As of November 13, 2017April 29, 2022
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
PART I. |
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| Notes to the Unaudited Condensed Consolidated Financial Statements | ||
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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PART II. | OTHER INFORMATION | ||
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Item 1A. |
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EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
Cautionary Note Regarding Forward-Looking Statements
This report includes “forward-looking statements” within the meaning and protections of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. All statements other than statements of historical fact are statements that could be forward-looking statements. You can identify these forward-looking statements through our use of words such as “may,” “will,” “anticipate,” “assume,” “should,” “indicate,” “would,” “believe,” “contemplate,” “expect,” “estimate,” “continue,” “plan,” “project,” “could,���” “intend,” “target” and other similar words and expressions of the future. These forward-looking statements include, but are not limited to:
● | statements of our goals, intentions and expectations; |
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● | statements regarding the | |
● | 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 (the(“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’sCompany’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; |
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● | inflation and changes in the interest rate environment that reduce our margins or reduce the fair value of financial instruments; |
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● | changes or volatility in the securities markets; |
● | our ability to implement our growth strategy, including identifying and consummating suitable acquisitions, raising additional capital to finance such transactions, entering new markets, possible failures in realizing the anticipated benefits from such acquisitions and an inability of our personnel, systems and infrastructure to keep pace with such growth; |
● | the effect of acquisitions we may make, if any, including, without limitation, the failure to achieve expected revenue growth and/or expense savings from such acquisitions, including our recent acquisition of First Community Bancorp, Inc.; |
● | risks related to the integration of any businesses we have acquired or expect to acquire, including exposure to potential asset quality and credit quality risks and unknown or contingent liabilities, the time and costs associated with integrating systems, technology platforms, procedures and personnel, including our recent acquisition of First Community Bancorp, Inc.; |
● | potential impairment on the goodwill we have recorded or may record in connection with business acquisitions; |
● | political developments, uncertainties or instability; |
● | our ability to enter new markets successfully and capitalize on growth opportunities; |
● | the need to retain capital for strategic or regulatory reasons; | |
● | changes in consumer spending, borrowing and savings habits; | |
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● | changes in the financial performance |
● | the effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Securities and Exchange Commission, the Public Company Accounting Oversight Board, the Financial Accounting Standards Board and other accounting standard setters. |
Because of these and other uncertainties, our actual future results may be materially different from the results indicated by these forward-lookingforward-looking statements. For a further list and description of various risks, relevant factors and uncertainties that could cause future results or events to differ materially from those expressed or implied in our forward-looking statements, see the Part II, Item 1A, “Risk Factors” and Part I, Item 7,2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections contained elsewhere in this report, as well as our Annual Report on Form 10-K for the year ended December 31, 2016,2021, any subsequent Reports on Form 10-Q and Form 8-K, and other filings with the SEC. We do not undertake any obligation to publicly update or correct any forward-looking statements to reflect events or circumstances that subsequently occur, or of which we hereafter become aware.
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in Thousands, Except for Per Share Data)
(Unaudited)
March 31, | December 31, | |||||||
2022 | 2021 | |||||||
ASSETS: | ||||||||
Cash and due from banks | $ | 17,516 | $ | 10,938 | ||||
Interest-bearing deposits in banks | 62,697 | 43,669 | ||||||
Federal funds sold | 14,889 | 6,827 | ||||||
Total cash and cash equivalents | 95,102 | 61,434 | ||||||
Securities available-for-sale | 264,635 | 271,262 | ||||||
Federal Home Loan Bank ("FHLB") stock | 1,723 | 1,702 | ||||||
Federal Reserve Bank ("FRB") stock | 2,974 | 2,974 | ||||||
Mortgage loans held-for-sale, at fair value | 22,295 | 25,819 | ||||||
Loans receivable, net of allowance for loan losses of $12,700 at March 31, 2022 and $12,500 at December 31, 2021 | 945,981 | 920,639 | ||||||
Accrued interest and dividends receivable | 5,750 | 5,751 | ||||||
Mortgage servicing rights, net | 14,288 | 13,693 | ||||||
Premises and equipment, net | 69,536 | 67,266 | ||||||
Cash surrender value of life insurance, net | 36,681 | 36,474 | ||||||
Goodwill | 20,798 | 20,798 | ||||||
Core deposit intangible, net | 1,660 | 1,780 | ||||||
Deferred tax asset, net | 3,776 | 0 | ||||||
Other assets | 6,854 | 6,334 | ||||||
Total assets | $ | 1,492,053 | $ | 1,435,926 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Continued)
(Dollars in Thousands, Except for Per Share Data)
(Unaudited)
March 31, | December 31, | |||||||
2022 | 2021 | |||||||
LIABILITIES: | ||||||||
Deposit accounts: | ||||||||
Noninterest-bearing | $ | 371,818 | $ | 368,846 | �� | |||
Interest-bearing | 898,758 | 853,703 | ||||||
Total deposits | 1,270,576 | 1,222,549 | ||||||
Accrued expenses and other liabilities | 18,968 | 21,131 | ||||||
Deferred tax liability, net | 0 | 648 | ||||||
FHLB advances and other borrowings | 0 | 5,000 | ||||||
Other long-term debt: | ||||||||
Principal amount | 60,155 | 30,155 | ||||||
Unamortized debt issuance costs | (1,169 | ) | (286 | ) | ||||
Total other long-term debt, net | 58,986 | 29,869 | ||||||
Total liabilities | 1,348,530 | 1,279,197 | ||||||
SHAREHOLDERS' EQUITY: | ||||||||
Preferred stock (par value $0.01 per share; 1,000,000 shares authorized; no shares issued or outstanding) | 0 | 0 | ||||||
Common stock (par value $0.01 per share; 20,000,000 shares authorized; 7,110,833 shares issued; 6,694,811 shares outstanding at March 31, 2022 and December 31, 2021, respectively) | 71 | 71 | ||||||
Additional paid-in capital | 80,960 | 80,832 | ||||||
Unallocated common stock held by Employee Stock Ownership Plan ("ESOP") | (5,586 | ) | (5,729 | ) | ||||
Treasury stock, at cost (416,022 and 316,022 shares at March 31, 2022 and December 31, 2021, respectively) | (9,592 | ) | (7,321 | ) | ||||
Retained earnings | 86,750 | 85,383 | ||||||
Accumulated other comprehensive (loss) income, net of tax | (9,080 | ) | 3,493 | |||||
Total shareholders' equity | 143,523 | 156,729 | ||||||
Total liabilities and shareholders' equity | $ | 1,492,053 | $ | 1,435,926 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands, Except for Per Share Data)
(Unaudited)
Three Months Ended | ||||||||
March 31, | ||||||||
2022 | 2021 | |||||||
INTEREST AND DIVIDEND INCOME: | ||||||||
Interest and fees on loans | $ | 11,373 | $ | 11,029 | ||||
Securities available-for-sale | 1,297 | 877 | ||||||
FHLB and FRB dividends | 59 | 69 | ||||||
Other interest income | 39 | 26 | ||||||
Total interest and dividend income | 12,768 | 12,001 | ||||||
INTEREST EXPENSE: | ||||||||
Deposits | 312 | 402 | ||||||
FHLB advances and other borrowings | 6 | 70 | ||||||
Other long-term debt | 605 | 390 | ||||||
Total interest expense | 923 | 862 | ||||||
NET INTEREST INCOME | 11,845 | 11,139 | ||||||
Loan loss provision | 279 | 299 | ||||||
NET INTEREST INCOME AFTER LOAN LOSS PROVISION | 11,566 | 10,840 | ||||||
NONINTEREST INCOME: | ||||||||
Service charges on deposit accounts | 331 | 273 | ||||||
Mortgage banking, net | 6,245 | 11,763 | ||||||
Interchange and ATM fees | 453 | 425 | ||||||
Appreciation in cash surrender value of life insurance | 207 | 158 | ||||||
Other noninterest income | 1,057 | 774 | ||||||
Total noninterest income | $ | 8,293 | $ | 13,393 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Continued)
(Dollars in Thousands, Except for Per Share Data)
(Unaudited)
Three Months Ended | ||||||||
March 31, | ||||||||
2022 | 2021 | |||||||
NONINTEREST EXPENSE: | ||||||||
Salaries and employee benefits | $ | 10,381 | $ | 12,086 | ||||
Occupancy and equipment expense | 1,678 | 1,430 | ||||||
Data processing | 1,251 | 1,297 | ||||||
Advertising | 285 | 273 | ||||||
Amortization of core deposit intangible | 122 | 144 | ||||||
Loan costs | 546 | 722 | ||||||
Federal Deposit Insurance Corporation ("FDIC") insurance premiums | 93 | 81 | ||||||
Professional and examination fees | 322 | 282 | ||||||
Acquisition costs | 317 | 0 | ||||||
Other noninterest expense | 1,953 | 898 | ||||||
Total noninterest expense | 16,948 | 17,213 | ||||||
INCOME BEFORE PROVISION FOR INCOME TAXES | 2,911 | 7,020 | ||||||
Provision for income taxes | 695 | 1,755 | ||||||
NET INCOME | $ | 2,216 | $ | 5,265 | ||||
BASIC EARNINGS PER SHARE | $ | 0.34 | $ | 0.78 | ||||
DILUTED EARNINGS PER SHARE | $ | 0.34 | $ | 0.78 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in Thousands)
(Unaudited)
Three Months Ended | ||||||||
March 31, | ||||||||
2022 | 2021 | |||||||
NET INCOME | $ | 2,216 | $ | 5,265 | ||||
OTHER ITEMS OF COMPREHENSIVE (LOSS) INCOME BEFORE TAX: | ||||||||
Change in fair value of investment securities available-for-sale | (17,067 | ) | (2,572 | ) | ||||
Reclassification for net realized gain (loss) on investment securities available-for-sale | 0 | 0 | ||||||
Total other comprehensive loss | (17,067 | ) | (2,572 | ) | ||||
Income tax benefit related to securities available-for-sale | 4,494 | 677 | ||||||
COMPREHENSIVE (LOSS) INCOME | $ | (10,357 | ) | $ | 3,370 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For the Three Months Ended March 31, 2022 and 2021
(Dollars in Thousands, Except for Per Share Data)
(Unaudited)
September 30, | December 31, | |||||||
2017 | 2016 | |||||||
ASSETS: | ||||||||
Cash and due from banks | $ | 7,371 | $ | 6,531 | ||||
Interest bearing deposits in banks | 784 | 787 | ||||||
Total cash and cash equivalents | 8,155 | 7,318 | ||||||
Securities available-for-sale | 120,767 | 128,436 | ||||||
Federal Home Loan Bank stock | 4,121 | 4,012 | ||||||
Federal Reserve Bank stock | 871 | 871 | ||||||
Investment in Eagle Bancorp Statutory Trust I | 155 | 155 | ||||||
Mortgage loans held-for-sale | 9,606 | 18,230 | ||||||
Loans receivable, net of deferred loan fees of $1,027 at September 30, 2017 and $1,092 at December 31, 2016 and allowance for loan losses of $5,500 at September 30, 2017 and $4,770 at December 31, 2016 | 504,684 | 461,391 | ||||||
Accrued interest and dividends receivable | 2,269 | 2,123 | ||||||
Mortgage servicing rights, net | 6,398 | 5,853 | ||||||
Premises and equipment, net | 20,860 | 19,393 | ||||||
Cash surrender value of life insurance | 14,385 | 14,095 | ||||||
Real estate and other repossessed assets acquired in settlement of loans, net | 527 | 825 | ||||||
Goodwill | 7,034 | 7,034 | ||||||
Core deposit intangible, net | 300 | 384 | ||||||
Deferred tax asset, net | 1,349 | 1,965 | ||||||
Other assets | 1,089 | 1,840 | ||||||
Total assets | $ | 702,570 | $ | 673,925 |
The accompanying notes are an integral part of these unaudited consolidated financial statements.
ACCUMULATED | ||||||||||||||||||||||||||||||||
ADDITIONAL | UNALLOCATED | OTHER | ||||||||||||||||||||||||||||||
PREFERRED | COMMON | PAID-IN | ESOP | TREASURY | RETAINED | COMPREHENSIVE | ||||||||||||||||||||||||||
STOCK | STOCK | CAPITAL | SHARES | STOCK | EARNINGS | INCOME (LOSS) | TOTAL | |||||||||||||||||||||||||
Balance at January 1, 2022 | $ | 0 | $ | 71 | $ | 80,832 | $ | (5,729 | ) | $ | (7,321 | ) | $ | 85,383 | $ | 3,493 | $ | 156,729 | ||||||||||||||
Net income | 0 | 0 | 0 | 0 | 0 | 2,216 | 0 | 2,216 | ||||||||||||||||||||||||
Other comprehensive loss | 0 | 0 | 0 | 0 | 0 | 0 | (12,573 | ) | (12,573 | ) | ||||||||||||||||||||||
Dividends paid ($0.125 per share) | 0 | 0 | 0 | 0 | 0 | (849 | ) | 0 | (849 | ) | ||||||||||||||||||||||
Stock compensation expense | 0 | 0 | 135 | 0 | 0 | 0 | 0 | 135 | ||||||||||||||||||||||||
ESOP shares allocated (5,997 shares) | 0 | 0 | (7 | ) | 143 | 0 | 0 | 0 | 136 | |||||||||||||||||||||||
Treasury stock purchased (100,000 shares at $22.71 average cost per share) | 0 | 0 | 0 | 0 | (2,271 | ) | 0 | 0 | (2,271 | ) | ||||||||||||||||||||||
Balance at March 31, 2022 | $ | 0 | $ | 71 | $ | 80,960 | $ | (5,586 | ) | $ | (9,592 | ) | $ | 86,750 | $ | (9,080 | ) | $ | 143,523 | |||||||||||||
Balance at January 1, 2021 | $ | 0 | $ | 71 | $ | 77,602 | $ | (145 | ) | $ | (4,423 | ) | $ | 73,982 | $ | 5,851 | $ | 152,938 | ||||||||||||||
Net income | 0 | 0 | 0 | 0 | 0 | 5,265 | 0 | 5,265 | ||||||||||||||||||||||||
Other comprehensive loss | 0 | 0 | 0 | 0 | 0 | 0 | (1,895 | ) | (1,895 | ) | ||||||||||||||||||||||
Dividends paid ($.0975 per share) | 0 | 0 | 0 | 0 | 0 | (661 | ) | 0 | (661 | ) | ||||||||||||||||||||||
Stock compensation expense | 0 | 0 | 90 | 0 | 0 | 0 | 0 | 90 | ||||||||||||||||||||||||
ESOP shares allocated (4,154 shares) | 0 | 0 | 52 | 42 | 0 | 0 | 0 | 94 | ||||||||||||||||||||||||
Balance at March 31, 2021 | $ | 0 | $ | 71 | $ | 77,744 | $ | (103 | ) | $ | (4,423 | ) | $ | 78,586 | $ | 3,956 | $ | 155,831 |
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Continued)
(Dollars in Thousands, Except for Per Share Data)
(Unaudited)
September 30, | December 31, | |||||||
2017 | 2016 | |||||||
LIABILITIES: | ||||||||
Deposit accounts: | ||||||||
Noninterest bearing | $ | 104,866 | $ | 82,877 | ||||
Interest bearing | 420,301 | 429,918 | ||||||
Total deposits | 525,167 | 512,795 | ||||||
Accrued expenses and other liabilities | 5,426 | 4,291 | ||||||
Federal Home Loan Bank advances and other borrowings | 83,836 | 82,413 | ||||||
Other long-term debt: | ||||||||
Principal amount | 25,155 | 15,155 | ||||||
Unamortized debt issuance costs | (360) | (185) | ||||||
Total other long-term debt less unamortized debt issuance costs | 24,795 | 14,970 | ||||||
Total liabilities | 639,224 | 614,469 | ||||||
SHAREHOLDERS' EQUITY: | ||||||||
Preferred stock (par value $0.01 per share; 1,000,000 shares authorized; no shares issued or outstanding) | - | - | ||||||
Common stock (par value $0.01 per share; 8,000,000 shares authorized; 4,083,127 shares issued; 3,811,409 shares outstanding at September 30, 2017 and December 31, 2016) | 41 | 41 | ||||||
Additional paid-in capital | 22,477 | 22,366 | ||||||
Unallocated common stock held by Employee Stock Ownership Plan | (684) | (809) | ||||||
Treasury stock, at cost | (2,971) | (2,971) | ||||||
Retained earnings | 43,837 | 41,240 | ||||||
Net accumulated other comprehensive income (loss) | 646 | (411) | ||||||
Total shareholders' equity | 63,346 | 59,456 | ||||||
Total liabilities and shareholders' equity | $ | 702,570 | $ | 673,925 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOMECASH FLOWS
(Dollars(Dollars in Thousands, Except for Per Share Data)Thousands)
(Unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
INTEREST AND DIVIDEND INCOME: | ||||||||||||||||
Interest and fees on loans | $ | 6,478 | $ | 5,461 | $ | 18,222 | $ | 15,253 | ||||||||
Securities available-for-sale | 693 | 709 | 2,136 | 2,196 | ||||||||||||
Federal Home Loan Bank and Federal Reserve Bank dividends | 48 | 37 | 124 | 103 | ||||||||||||
Interest on deposits in banks | 2 | - | 3 | 1 | ||||||||||||
Other interest income | 3 | 1 | 4 | 4 | ||||||||||||
Total interest and dividend income | 7,224 | 6,208 | 20,489 | 17,557 | ||||||||||||
INTEREST EXPENSE: | ||||||||||||||||
Deposits | 386 | 383 | 1,142 | 1,119 | ||||||||||||
Federal Home Loan Bank advances and other borrowings | 329 | 209 | 856 | 622 | ||||||||||||
Other long-term debt | 350 | 195 | 969 | 584 | ||||||||||||
Total interest expense | 1,065 | 787 | 2,967 | 2,325 | ||||||||||||
NET INTEREST INCOME | 6,159 | 5,421 | 17,522 | 15,232 | ||||||||||||
Loan loss provision | 331 | 472 | 934 | 1,381 | ||||||||||||
NET INTEREST INCOME AFTER LOAN LOSS PROVISION | 5,828 | 4,949 | 16,588 | 13,851 | ||||||||||||
NONINTEREST INCOME: | ||||||||||||||||
Service charges on deposit accounts | 250 | 229 | 721 | 639 | ||||||||||||
Net gain on sale of loans (includes $657 and $859 for the three months ended September 30, 2017 and 2016, respectively, and $1,556 and $2,130 for the nine months ended September 30, 2017 and 2016, respectively, related to accumulated other comprehensive earnings reclassification) | 2,574 | 3,164 | 6,662 | 7,320 | ||||||||||||
Mortgage loan servicing fees | 525 | 462 | 1,581 | 1,267 | ||||||||||||
Wealth management income | 142 | 166 | 463 | 461 | ||||||||||||
Interchange and ATM fees | 214 | 227 | 648 | 652 | ||||||||||||
Appreciation in cash surrender value of life insurance | 125 | 133 | 375 | 358 | ||||||||||||
Net gain (loss) on sale of available-for-sale securities (includes $0 and $110 for the three months ended September 30, 2017 and 2016, respectively, and ($14) and $194 for the nine months ended September 30, 2017 and 2016, respectively, related to accumulated other comprehensive earnings reclassification) | - | 110 | (14 | ) | 194 | |||||||||||
Net (loss) gain on sale of real estate owned and other repossessed property | - | (6 | ) | (25 | ) | 6 | ||||||||||
Other noninterest income | 158 | 204 | 355 | 494 | ||||||||||||
Total noninterest income | 3,988 | 4,689 | 10,766 | 11,391 |
Three Months Ended | ||||||||
March 31, | ||||||||
2022 | 2021 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net income | $ | 2,216 | $ | 5,265 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Loan loss provision | 279 | 299 | ||||||
Recovery of mortgage servicing rights | (56 | ) | (677 | ) | ||||
Depreciation | 842 | 649 | ||||||
Net amortization of investment securities premiums and discounts | 380 | 238 | ||||||
Amortization of mortgage servicing rights | 609 | 994 | ||||||
Amortization of right-of-use assets | 172 | 128 | ||||||
Amortization of core deposit intangible | 122 | 144 | ||||||
Compensation expense related to restricted stock awards | 135 | 90 | ||||||
ESOP compensation expense for allocated shares | 136 | 94 | ||||||
Deferred income tax provision | 71 | 66 | ||||||
Net gain on sale of loans | (6,233 | ) | (14,277 | ) | ||||
Originations of loans held-for-sale | (170,074 | ) | (267,168 | ) | ||||
Proceeds from sales of loans held-for-sale | 179,831 | 275,451 | ||||||
Net (gain) loss on sale of real estate owned and other repossessed assets | (14 | ) | 9 | |||||
Net gain on sale/disposal of premises and equipment | (1 | ) | 0 | |||||
Net appreciation in cash surrender value of life insurance | (207 | ) | (158 | ) | ||||
Net change in: | ||||||||
Accrued interest and dividends receivable | (1 | ) | 314 | |||||
Other assets | (145 | ) | 3,084 | |||||
Accrued expenses and other liabilities | (2,168 | ) | (614 | ) | ||||
Net cash provided by operating activities | 5,894 | 3,931 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Activity in available-for-sale securities: | ||||||||
Maturities, principal payments and calls | 9,338 | 2,355 | ||||||
Purchases | (20,158 | ) | (25,663 | ) | ||||
FHLB stock (purchased) redeemed | (21 | ) | 83 | |||||
Loan origination and principal collection, net | (27,096 | ) | 10,233 | |||||
Proceeds from sale of real estate and other repossessed assets acquired in settlement of loans | 5 | 16 | ||||||
Purchases of premises and equipment, net | (3,284 | ) | (3,986 | ) | ||||
Net cash used in investing activities | $ | (41,216 | ) | $ | (16,962 | ) |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOMECASH FLOWS (Continued)
(Dollars in Thousands, Except for Per Share Data)Thousands)
(Unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
NONINTEREST EXPENSE: | ||||||||||||||||
Salaries and employee benefits | $ | 4,331 | $ | 4,177 | $ | 13,350 | $ | 11,783 | ||||||||
Occupancy and equipment expense | 680 | 698 | 2,069 | 2,158 | ||||||||||||
Data processing | 563 | 456 | 1,696 | 1,467 | ||||||||||||
Advertising | 255 | 192 | 713 | 530 | ||||||||||||
Amortization of mortgage servicing rights | 288 | 326 | 812 | 839 | ||||||||||||
Amortization of core deposit intangible and tax credits | 107 | 112 | 321 | 335 | ||||||||||||
Federal insurance premiums | 78 | 99 | 198 | 305 | ||||||||||||
Postage | 48 | 60 | 147 | 148 | ||||||||||||
Legal, accounting and examination fees | 107 | 120 | 392 | 279 | ||||||||||||
Consulting fees | 14 | 44 | 122 | 161 | ||||||||||||
Acquisition costs | 276 | - | 276 | |||||||||||||
Write-down on real estate owned and other repossessed property | - | - | 45 | - | ||||||||||||
Other noninterest expense | 810 | 875 | 2,475 | 2,388 | ||||||||||||
Total noninterest expense | 7,557 | 7,159 | 22,616 | 20,393 | ||||||||||||
INCOME BEFORE INCOME TAXES | 2,259 | 2,479 | 4,738 | 4,849 | ||||||||||||
Income tax expense (includes ($157) and ($341) for the three months ended September 30, 2017 and 2016, respectively, and $726 and $1,124 for the nine months ended Septemer, 30, 2017 and 2016, respectively related to income tax (benefit) expense from reclassification items) | 538 | 707 | 1,188 | 1,166 | ||||||||||||
NET INCOME | $ | 1,721 | $ | 1,772 | $ | 3,550 | $ | 3,683 | ||||||||
BASIC EARNINGS PER SHARE | $ | 0.45 | $ | 0.46 | $ | 0.93 | $ | 0.97 | ||||||||
DILUTED EARNINGS PER SHARE | $ | 0.45 | $ | 0.46 | $ | 0.92 | $ | 0.95 | ||||||||
WEIGHTED AVERAGE SHARES OUTSTANDING (BASIC EPS) | 3,811,409 | 3,779,464 | 3,811,409 | 3,779,464 | ||||||||||||
WEIGHTED AVERAGE SHARES OUTSTANDING (DILUTED EPS) | 3,863,656 | 3,873,171 | 3,869,695 | 3,873,171 |
Three Months Ended | ||||||||
March 31, | ||||||||
2022 | 2021 | |||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Net increase in deposits | $ | 48,027 | $ | 60,321 | ||||
Payments on long-term FHLB and other borrowings | (5,000 | ) | (5,208 | ) | ||||
Proceeds from issuance of subordinated debentures | 40,000 | 0 | ||||||
Repayment of senior debt | (10,000 | ) | 0 | |||||
Payments for debt issuance costs | (917 | ) | 0 | |||||
Purchase of treasury stock | (2,271 | ) | 0 | |||||
Dividends paid | (849 | ) | (661 | ) | ||||
Net cash provided by financing activities | 68,990 | 54,452 | ||||||
NET INCREASE IN CASH AND CASH EQUIVALENTS | 33,668 | 41,421 | ||||||
CASH AND CASH EQUIVALENTS, beginning of period | 61,434 | 69,802 | ||||||
CASH AND CASH EQUIVALENTS, end of period | $ | 95,102 | $ | 111,223 | ||||
SUPPLEMENTAL CASH FLOW INFORMATION: | ||||||||
Cash paid during the period for interest | $ | 1,092 | $ | 1,415 | ||||
Cash paid during the period for income taxes | 0 | 0 | ||||||
NONCASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
Decrease in fair value of securities available-for-sale | $ | (17,067 | ) | $ | (2,572 | ) | ||
Mortgage servicing rights recognized | 1,148 | 1,532 | ||||||
Right-of-use assets obtained in exchange for lease liabilities | 4 | 0 | ||||||
Loans transferred to real estate and other assets acquired in foreclosure | 328 | 0 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in Thousands)
(Unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
NET INCOME | $ | 1,721 | $ | 1,772 | $ | 3,550 | $ | 3,683 | ||||||||
OTHER ITEMS OF COMPREHENSIVE (LOSS) INCOME: | ||||||||||||||||
Change in fair value of investment securities available-for-sale, before income taxes | (91) | (676) | 1,963 | 2,778 | ||||||||||||
Reclassification for net realized (gains) losses on investment securities included in income, before income tax | - | (110) | 14 | (194) | ||||||||||||
Change in fair value of derivatives designated as cash flow hedges, before income taxes | 364 | 808 | 1,362 | 2,303 | ||||||||||||
Reclassification for net realized gains on derivatives designated as cash flow hedges, before income taxes | (657) | (859) | (1,556) | (2,130) | ||||||||||||
Total other items of comprehensive (loss) income | (384) | (837) | 1,783 | 2,757 | ||||||||||||
Income tax benefit (expense) related to: | ||||||||||||||||
Investment securities | 38 | 320 | (805) | (1,053) | ||||||||||||
Derivatives designated as cash flow hedges | 119 | 21 | 79 | (71) | ||||||||||||
Total income tax benefit (expense) | 157 | 341 | (726) | (1,124) | ||||||||||||
COMPREHENSIVE INCOME | $ | 1,494 | $ | 1,276 | $ | 4,607 | $ | 5,316 |
The accompanying notes are an integral part of these unaudited consolidated financial statements.
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For the Nine Months Ended September 30, 2017 and 2016
(Dollars in Thousands, Except for Per Share Data)
(Unaudited)
ACCUMULATED | ||||||||||||||||||||||||||||||||
UNALLOCATED | OTHER | |||||||||||||||||||||||||||||||
PREFERRED | COMMON | PAID-IN | ESOP | TREASURY | RETAINED | COMPREHENSIVE | ||||||||||||||||||||||||||
STOCK | STOCK | CAPITAL | SHARES | STOCK | EARNINGS | INCOME (LOSS) | TOTAL | |||||||||||||||||||||||||
Balance at January 1, 2016 | $ | - | $ | 41 | $ | 22,152 | $ | (975) | $ | (3,321) | $ | 37,301 | $ | 252 | $ | 55,450 | ||||||||||||||||
Net income | 3,683 | 3,683 | ||||||||||||||||||||||||||||||
Other comprehensive income | 1,633 | 1,633 | ||||||||||||||||||||||||||||||
Dividends paid | (888) | (888) | ||||||||||||||||||||||||||||||
Employee Stock Ownership Plan shares allocated or committed to be released for allocation (12,462 shares) | 32 | 125 | 157 | |||||||||||||||||||||||||||||
Balance at September 30, 2016 | $ | - | $ | 41 | $ | 22,184 | $ | (850) | $ | (3,321) | $ | 40,096 | $ | 1,885 | $ | 60,035 | ||||||||||||||||
Balance at January 1, 2017 | $ | - | $ | 41 | $ | 22,366 | $ | (809) | $ | (2,971) | $ | 41,240 | $ | (411) | $ | 59,456 | ||||||||||||||||
Net income | 3,550 | 3,550 | ||||||||||||||||||||||||||||||
Other comprehensive income | 1,057 | 1,057 | ||||||||||||||||||||||||||||||
Dividends paid | (953) | (953) | ||||||||||||||||||||||||||||||
Employee Stock Ownership Plan shares allocated or committed to be released for allocation (12,462 shares) | 111 | 125 | 236 | |||||||||||||||||||||||||||||
Balance at September 30, 2017 | $ | - | $ | 41 | $ | 22,477 | $ | (684) | $ | (2,971) | $ | 43,837 | $ | 646 | $ | 63,346 |
The accompanying notes are an integral part of these unaudited consolidated financial statements.
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands, Except for Per Share Data)
(Unaudited)
Nine Months Ended | ||||||||
September 30, | ||||||||
2017 | 2016 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net income | $ | 3,550 | $ | 3,683 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Loan loss provision | 934 | 1,381 | ||||||
Write-down on real estate owned and other repossessed assets | 45 | - | ||||||
Depreciation | 712 | 797 | ||||||
Net amortization of investment securities premium and discounts | 1,208 | 1,419 | ||||||
Amortization of mortgage servicing rights | 812 | 839 | ||||||
Amortization of core deposit intangible and tax credits | 321 | 335 | ||||||
Deferred income tax benefit | (110) | (96) | ||||||
Net gain on sale of loans | (6,662) | (7,320) | ||||||
Net loss (gain) on sale of available-for-sale securities | 14 | (194) | ||||||
Net loss (gain) on sale of real estate owned and other repossessed assets | 25 | (6) | ||||||
Net loss on sale/disposal of premises and equipment | - | 6 | ||||||
Net appreciation in cash surrender value of life insurance | (290) | (367) | ||||||
Net change in: | ||||||||
Accrued interest and dividends receivable | (146) | 140 | ||||||
Loans held-for-sale | 15,092 | 6,780 | ||||||
Other assets | 558 | 256 | ||||||
Accrued expenses and other liabilities | 1,371 | 1,470 | ||||||
Net cash provided by operating activities | 17,434 | 9,123 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Activity in available-for-sale securities: | ||||||||
Sales | 2,749 | 20,248 | ||||||
Maturities, principal payments and calls | 6,982 | 8,093 | ||||||
Purchases | (1,307) | (14,998) | ||||||
Federal Home Loan Bank stock purchased | (109) | (473) | ||||||
Federal Reserve Bank stock redeemed | - | 16 | ||||||
Loan origination and principal collection, net | (45,618) | (55,840) | ||||||
Proceeds from Bank owned life insurance | - | 885 | ||||||
Purchase of Bank owned life insurance | - | (2,000) | ||||||
Proceeds from sale of real estate and other repossessed assets acquired in settlement of loans | 262 | 122 | ||||||
Proceeds from sale of premises and equipment | - | 7 | ||||||
Additions to premises and equipment | (2,179) | (2,136) | ||||||
Net cash used in investing activities | (39,220) | (46,076) |
The accompanying notes are an integral part of these unaudited consolidated financial statements.
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Dollars in Thousands, Except for Per Share Data)
(Unaudited)
Nine Months Ended | ||||||||
September 30, | ||||||||
2017 | 2016 | |||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Net increase in deposits | $ | 12,372 | $ | 32,095 | ||||
Net short-term (payments) advances on Federal Home Loan Bank and other borrowings | (35,522) | 9,601 | ||||||
Long-term advances from Federal Home Loan Bank and other borrowings | 46,300 | 5,000 | ||||||
Payments on long-term Federal Home Loan Bank and other borrowings | (9,355) | (8,462) | ||||||
Proceeds from issuance of long-term debt | 10,000 | - | ||||||
Payments for debt issuance costs | (219) | - | ||||||
Dividends paid | (953) | (888) | ||||||
Net cash provided by financing activities | 22,623 | 37,346 | ||||||
NET INCREASE IN CASH AND CASH EQUIVALENTS | 837 | 393 | ||||||
CASH AND CASH EQUIVALENTS, beginning of period | 7,318 | 7,438 | ||||||
CASH AND CASH EQUIVALENTS, end of period | $ | 8,155 | $ | 7,831 | ||||
SUPPLEMENTAL CASH FLOW INFORMATION: | ||||||||
Cash paid during the period for interest | $ | 2,939 | $ | 2,341 | ||||
Cash paid during the period for income taxes | $ | 1,180 | $ | 1,315 | ||||
NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
Increase in market value of securities available-for-sale | $ | 1,977 | $ | 2,584 | ||||
Mortgage servicing rights recognized | $ | 1,357 | $ | 1,310 | ||||
Loans transferred to real estate and other assets acquired in foreclosure | $ | 34 | $ | 34 | ||||
Employee Stock Ownership Plan shares released | $ | 236 | $ | 157 |
The accompanying notes are an integral part of these unaudited consolidated financial statements.
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1.ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NOTE 1. BASIS OF PRESENTATIONOrganization
Eagle Bancorp Montana, Inc. (“Eagle” or the “Company”), is a Delaware corporation that holds 100% of the capital stock of Opportunity Bank of Montana (“OBMT” or the “Bank”), formerly American Federal Savings Bank (“AFSB”). The Bank was founded in 1922 as a Montana chartered building and loan association and has conducted operations and maintained its administrative office in Helena, Montana since that time. In 1975, the Bank adopted a federal thrift charter and in October 2014 converted to a Montana chartered commercial bank and became a member bank in the Federal Reserve System.
In March 2021, the Bank established a subsidiary, Opportunity Housing Fund, LLC ("OHF"), to invest in Low-Income Housing Tax Credit ("LIHTC") projects. The LIHTC program is designed to encourage capital investment in construction and rehabilitation of low-income housing. Tax credits are allowable over a 10-year period. During the year ended December 31, 2021, OHF made initial investments in two LIHTC projects. Investments in LIHTC projects are included in other assets on the statement of financial condition and totaled $1,237,000 and $935,000 as of March 31, 2022 and December 31, 2021, respectively.
In August 2019, the Company entered into an Agreement and Plan of Merger ("Merger Agreement") with Western Holding Company of Wolf Point (“WHC”), a Montana corporation, and WHC’s wholly-owned subsidiary, Western Bank of Wolf Point, a Montana chartered commercial bank (“WB”). The Merger Agreement provided that, upon the terms and subject to the conditions set forth in the Merger Agreement, WHC would merge with and into Eagle, with Eagle continuing as the surviving corporation. The merger closed on January 1, 2020. WB operated one branch in Wolf Point, Montana. In addition, Western Financial Services, Inc. ("WFS") was acquired through the WHC merger. WFS facilitates deferred payment contracts for customers that produce agricultural products.
In August 2018, the Company entered into an Agreement and Plan of Merger with Big Muddy Bancorp, Inc. (“BMB”), a Montana corporation and BMB’s wholly-owned subsidiary, The State Bank of Townsend (“SBOT”), a Montana chartered commercial bank to acquire 100% of BMB’s equity voting interests. On January 1, 2019, BMB merged with and into Eagle, with Eagle continuing as the surviving corporation. SBOT operated four branches in Townsend, Dutton, Denton and Choteau, Montana.
In September 2017, the Company entered into an Agreement and Plan of Merger with TwinCo, Inc. ("TwinCo"), a Montana corporation, and TwinCo’s wholly-owned subsidiary, Ruby Valley Bank, a Montana chartered commercial bank to acquire 100% of TwinCo’s equity voting interests. On January 31, 2018, TwinCo merged with and into Eagle, with Eagle continuing as the surviving corporation. Ruby Valley Bank operated two branches in Madison County, Montana.
The Bank currently has 23 full service branches. The Bank’s principal business is accepting deposits and, together with funds generated from operations and borrowings, investing in various types of loans and securities. The Bank also operated certain branches under the names Dutton State Bank, Farmers State Bank of Denton and The State Bank of Townsend. Effective January 3, 2022, these branches were rebranded and are now only operating as Opportunity Bank of Montana.
Basis of Financial Statement Presentation and Use of Estimates
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10of AmericaRegulation S-X as promulgated by the Securities and Exchange Commission (“SEC”). It is recommended that these unaudited interim condensed consolidated financial statements be read in conjunction with the Company’s Annual Report on Form 10-K with all of the audited information and footnotes required by U.S. GAAP for annualcomplete financial statements. However, such information reflects all adjustments (consisting of normal recurring adjustments) which are, instatements for the year ended December 31, 2021, as filed with the SEC on March 9, 2022. In the opinion of management, all normal adjustments and recurring accruals considered necessary for a fair presentation of ourthe financial position and results of operations changes in comprehensive income and cash flows for the unaudited interim periods.periods presented have been included.
The results of operations for the nine monththree-month period ended September 30, 2017March 31, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2017 2022 or any other period. The unauditedIn preparing condensed consolidated financial statements, management is required to make estimates and notes presented herein should be readassumptions that affect the reported amounts of assets and liabilities as of the date of the condensed consolidated statement of financial condition and reported amounts of revenues and expenses during the reporting period. Actual results could differ from estimates. Material estimates that are particularly susceptible to significant change in conjunction with the auditednear term relate to the determination of the allowance for loan losses, mortgage servicing rights, the fair value of financial instruments, the valuation of goodwill and deferred tax assets and liabilities.
Principles of Consolidation
The condensed consolidated financial statements and related notes thereto included ininclude Eagle, the Bank, OHF, Eagle Bancorp Montana, Inc.’s (“Statutory Trust I (the “Trust”) and WFS. All significant intercompany transactions and balances have been eliminated in consolidation.
Reclassifications
Certain prior period amounts were reclassified to conform to the Company”presentation for 2022. These reclassifications had no impact on net income or “Eagle”) Form 10-K for the year ended December 31, 2016.shareholders’ equity.
Subsequent Events
The Company has evaluated events and transactions subsequent eventsto March 31, 2022 for potential recognition and/or disclosure through November 13, 2017 the date the unaudited consolidated financial statements were issued.disclosure.
NOTE 2.INVESTMENT SECURITIESOn 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. The plan expires on April 21, 2023.
Investment securities In September 2021, the Company entered into an Agreement and Plan of Merger with First Community Bancorp, Inc., a Montana corporation ("FCB") 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 acquisition closed on April 30, 2022. The fair value of assets acquired and liabilities assumed as of April 30, 2022 are summarized as follows:still being determined.
September 30, 2017 | December 31, 2016 | |||||||||||||||||||||||||||||||
Gross | Gross | |||||||||||||||||||||||||||||||
Amortized | Unrealized | Fair | Amortized | Unrealized | Fair | |||||||||||||||||||||||||||
Cost | Gains | (Losses) | Value | Cost | Gains | (Losses) | Value | |||||||||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||||||||||
Available-for-Sale: | ||||||||||||||||||||||||||||||||
U.S. government and agency obligations | $ | 4,049 | $ | 12 | $ | (24 | ) | $ | 4,037 | $ | 5,673 | $ | 7 | $ | (72 | ) | $ | 5,608 | ||||||||||||||
Municipal obligations | 64,748 | 1,032 | (415 | ) | 65,365 | 68,493 | 575 | (1,404 | ) | 67,664 | ||||||||||||||||||||||
Corporate obligations | 9,610 | 33 | (36 | ) | 9,607 | 9,454 | 15 | (162 | ) | 9,307 | ||||||||||||||||||||||
MBSs - government-backed | 26,315 | 444 | (232 | ) | 26,527 | 29,537 | 283 | (308 | ) | 29,512 | ||||||||||||||||||||||
CMOs - government backed | 15,319 | 20 | (108 | ) | 15,231 | 16,530 | 15 | (200 | ) | 16,345 | ||||||||||||||||||||||
Total | $ | 120,041 | $ | 1,541 | $ | (815 | ) | $ | 120,767 | $ | 129,687 | $ | 895 | $ | (2,146 | ) | $ | 128,436 |
NOTE 2.INVESTMENT SECURITIES
Proceeds from salesThe amortized cost and fair values of available-for-sale securities, and the associated gross realizedtogether with unrealized gains and losses, were as follows:
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
(In Thousands) | ||||||||||||||||
Proceeds from sale of available-for-sale securities | $ | - | $ | 17,086 | $ | 2,749 | $ | 20,248 | ||||||||
Gross realized gain on sale of available-for-sale securities | $ | - | $ | 133 | $ | 14 | $ | 217 | ||||||||
Gross realized loss on sale of available-for-sale securities | - | (23 | ) | (28 | ) | (23 | ) | |||||||||
Net realized (loss) gain on sale of available-for-sale securities | $ | - | $ | 110 | $ | (14 | ) | $ | 194 |
March 31, 2022 | December 31, 2021 | |||||||||||||||||||||||||||||||
Gross | Gross | |||||||||||||||||||||||||||||||
Amortized | Unrealized | Fair | Amortized | Unrealized | Fair | |||||||||||||||||||||||||||
Cost | Gains | (Losses) | Value | Cost | Gains | (Losses) | Value | |||||||||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||||||||||
Available-for-Sale: | ||||||||||||||||||||||||||||||||
U.S. government obligations | $ | 1,428 | $ | 2 | $ | (5 | ) | $ | 1,425 | $ | 1,618 | $ | 15 | $ | 0 | $ | 1,633 | |||||||||||||||
U.S. Treasury obligations | 72,848 | 29 | (3,390 | ) | 69,487 | 52,707 | 580 | (104 | ) | 53,183 | ||||||||||||||||||||||
Municipal obligations | 116,530 | 558 | (5,808 | ) | 111,280 | 119,381 | 4,616 | (330 | ) | 123,667 | ||||||||||||||||||||||
Corporate obligations | 6,250 | 65 | (41 | ) | 6,274 | 9,251 | 103 | (18 | ) | 9,336 | ||||||||||||||||||||||
Mortgage-backed securities | 13,770 | 2 | (647 | ) | 13,125 | 14,662 | 92 | (118 | ) | 14,636 | ||||||||||||||||||||||
Collateralized mortgage obligations | 61,959 | 9 | (3,169 | ) | 58,799 | 63,286 | 416 | (635 | ) | 63,067 | ||||||||||||||||||||||
Asset-backed securities | 4,177 | 68 | 0 | 4,245 | 5,617 | 123 | 0 | 5,740 | ||||||||||||||||||||||||
Total | $ | 276,962 | $ | 733 | $ | (13,060 | ) | $ | 264,635 | $ | 266,522 | $ | 5,945 | $ | (1,205 | ) | $ | 271,262 |
For the three months ended March 31, 2022 and 2021, there were 0 sales of available-for-sale securities. As a result, there were 0 associated gross gains or losses.
NOTE 2.INVESTMENT SECURITIES – continued
NOTE 2.INVESTMENT SECURITIES - continued
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.
September 30, 2017 | March 31, 2022 | |||||||||||||||
Amortized | Fair | Amortized | Fair | |||||||||||||
Cost | Value | Cost | Value | |||||||||||||
(In Thousands) | (In Thousands) | |||||||||||||||
Due in one year or less | $ | 3,158 | $ | 3,157 | $ | 21,343 | $ | 21,284 | ||||||||
Due from one to five years | 6,651 | 6,716 | 11,113 | 11,098 | ||||||||||||
Due from five to ten years | 14,281 | 14,369 | 80,534 | 76,056 | ||||||||||||
Due after ten years | 54,317 | 54,767 | 88,243 | 84,273 | ||||||||||||
78,407 | 79,009 | 201,233 | 192,711 | |||||||||||||
MBSs - government-backed | 26,315 | 26,527 | ||||||||||||||
CMOs - government-backed | 15,319 | 15,231 | ||||||||||||||
Mortgage-backed securities | 13,770 | 13,125 | ||||||||||||||
Collateralized mortgage obligations | 61,959 | 58,799 | ||||||||||||||
Total | $ | 120,041 | $ | 120,767 | $ | 276,962 | $ | 264,635 |
As of March 31, 2022 and December 31, 2021, securities with a fair value of $22,175,000 and $22,245,000, respectively, were pledged to secure public deposits and for other purposes required or permitted by law.
Maturities of securities do not reflect repricing opportunities present in adjustable rate securities.
TheThe Company’s investment securities that have been in a continuous unrealized loss position for less than twelve months and those that have been in a continuous unrealized loss position for twelve or more months were as follows:
September 30, 2017 | ||||||||||||||||
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 | $ | 3,036 | $ | (24 | ) | $ | - | $ | - | |||||||
Municipal obligations | 9,022 | (52 | ) | 15,986 | (363 | ) | ||||||||||
Corporate obligations | 1,570 | (1 | ) | 4,486 | (35 | ) | ||||||||||
MBSs and CMOs - government-backed | 13,467 | (108 | ) | 10,682 | (232 | ) | ||||||||||
Total | $ | 27,095 | $ | (185 | ) | $ | 31,154 | $ | (630 | ) |
December 31, 2016 | March 31, 2022 | |||||||||||||||||||||||||||||||
Less Than 12 Months | 12 Months or Longer | Less Than 12 Months | 12 Months or Longer | |||||||||||||||||||||||||||||
Gross | Gross | Gross | Gross | |||||||||||||||||||||||||||||
Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | |||||||||||||||||||||||||
Value | Losses | Value | Losses | Value | Losses | Value | Losses | |||||||||||||||||||||||||
(In Thousands) | (In Thousands) | |||||||||||||||||||||||||||||||
U.S. government and agency | $ | 4,420 | $ | (72 | ) | $ | - | $ | - | |||||||||||||||||||||||
U.S. government obligations | $ | 303 | $ | (5 | ) | $ | 0 | $ | 0 | |||||||||||||||||||||||
U.S. Treasury obligations | 64,255 | (3,390 | ) | 0 | 0 | |||||||||||||||||||||||||||
Municipal obligations | 39,786 | (1,392 | ) | 634 | (12 | ) | 87,226 | (5,808 | ) | 0 | 0 | |||||||||||||||||||||
Corporate obligations | 3,375 | (15 | ) | 4,918 | (147 | ) | 3,959 | (41 | ) | 0 | 0 | |||||||||||||||||||||
MBSs and CMOs - government-backed | 18,113 | (405 | ) | 7,855 | (103 | ) | ||||||||||||||||||||||||||
Mortgage-backed securities and collateralized mortgage obligations | 66,967 | (3,792 | ) | 1,202 | (24 | ) | ||||||||||||||||||||||||||
Total | $ | 65,694 | $ | (1,884 | ) | $ | 13,407 | $ | (262 | ) | $ | 222,710 | $ | (13,036 | ) | $ | 1,202 | $ | (24 | ) |
NOTE 2.INVESTMENT SECURITIES – continued
NOTE 2.INVESTMENT SECURITIES - continued
December 31, 2021 | ||||||||||||||||
Less Than 12 Months | 12 Months or Longer | |||||||||||||||
Gross | Gross | |||||||||||||||
Fair | Unrealized | Fair | Unrealized | |||||||||||||
Value | Losses | Value | Losses | |||||||||||||
(In Thousands) | ||||||||||||||||
U.S. government obligations | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||
U.S. Treasury obligations | 19,301 | (104 | ) | 0 | 0 | |||||||||||
Municipal obligations | 17,973 | (330 | ) | 0 | 0 | |||||||||||
Corporate obligations | 2,982 | (18 | ) | 0 | 0 | |||||||||||
Mortgage-backed securities and collateralized mortgage obligations | 50,002 | (741 | ) | 1,296 | (12 | ) | ||||||||||
Total | $ | 90,258 | $ | (1,193 | ) | $ | 1,296 | $ | (12 | ) |
Management evaluatesUnrealized losses associated with investments are believed to be caused by changes in market interest rates or the widening of market spreads subsequent to the initial purchase of the securities forand not due to concerns regarding the underlying credit of the issuers or the underlying collateral. The Company does not intend to sell the securities, and it is not likely to be required to sell these securities prior to maturity. Based on the Company's evaluation of these securities, 0 other-than-temporary impairment at least quarterly, and more frequently when economicwas recorded for the three months ended March 31, 2022 or market concerns warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.year ended December 31, 2021. As of September 30, 2017March 31, 2022 and December 31, 2016,2021, there were, respectively, 68156 and 9743 securities in an unrealized loss positionpositions that were considered to be temporarily impaired and therefore an impairment charge has not been recorded.
As of September 30, 2017, 44 U.S. government and agency securities and municipal obligations had unrealized losses with aggregate depreciation of approximately 1.54% from the Company’s amortized cost basis of these securities. At December 31, 2016, 70 U.S. government and agency securities and municipal obligations had unrealized losses with aggregate depreciation of approximately 3.19% from the Company’s amortized cost basis of these securities. These unrealized losses are principally due to changes in interest rates and credit spreads. In analyzing an issuer's financial condition, management considers whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred and industry analysts' reports. As management has the ability to hold debt securities until maturity, or for the foreseeable future, no declines are deemed to be other than temporary.
As of September 30, 2017, 10 corporate obligations had unrealized losses of approximately 0.59% from the Company’s amortized cost basis of these securities. At December 31, 2016, 13 corporate obligations had an unrealized loss with aggregate depreciation of approximately 1.92% from the Company's amortized cost basis of these securities. These unrealized losses are principally due to changes in interest rates. No credit issues have been identified that cause management to believe the declines in market value are other than temporary. In analyzing the issuer's financial condition, management considers industry analysts' reports, financial performance and projected target prices of investment analysts within a one-year time frame. As management has the ability to hold debt securities until maturity, or for the foreseeable future, no declines are deemed to be other than temporary.
As of September 30, 2017, 14 mortgage-backed securities (“MBSs”) and collateralized mortgage obligations (“CMOs”) had unrealized losses with aggregate depreciation of approximately 1.39% from the Company’s amortized cost basis of these securities. At December 31, 2016, 14 MBSs and CMOs had unrealized losses with aggregate depreciation of approximately 1.92% from the Company’s amortized cost basis. We believe these unrealized losses are principally due to the credit market’s concerns regarding the stability of the mortgage market, changes in interest rates and credit spreads and uncertainty of future prepayment speeds. Management considers available evidence to assess whether it is more likely-than-not that all amounts due would not be collected. In such assessment, management considers the severity and duration of the impairment, the credit ratings of the security, the overall deal and payment structure, including the Company's position within the structure, underlying obligor, financial condition and near term prospects of the issuer, delinquencies, defaults, loss severities, recoveries, prepayments, cumulative loss projections, discounted cash flows and fair value estimates. There has been no disruption of the scheduled cash flows on any of the securities. Management’s analysis as of September 30, 2017 revealed no expected credit losses on the securities and therefore, declines are not deemed to be other than temporary.
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 3.3.LOANS RECEIVABLE
Loans receivable consistedconsisted of the following:
September 30, | December 31, | |||||||
2017 | 2016 | |||||||
(In Thousands) | ||||||||
First mortgage loans: | ||||||||
Residential mortgage (1-4 family) | $ | 109,250 | $ | 113,262 | ||||
Commercial real estate | 247,501 | 214,927 | ||||||
Real estate construction | 29,760 | 20,540 | ||||||
Other loans: | ||||||||
Home equity | 51,450 | 49,018 | ||||||
Consumer | 14,696 | 14,800 | ||||||
Commercial | 58,554 | 54,706 | ||||||
Total | 511,211 | 467,253 | ||||||
Deferred loan fees, net | (1,027 | ) | (1,092 | ) | ||||
Allowance for loan losses | (5,500 | ) | (4,770 | ) | ||||
Total loans, net | $ | 504,684 | $ | 461,391 |
March 31, | December 31, | |||||||
2022 | 2021 | |||||||
(In Thousands) | ||||||||
Real estate loans: | ||||||||
Residential 1-4 family | $ | 140,210 | $ | 146,815 | ||||
Commercial real estate | 599,093 | 569,976 | ||||||
Other loans: | ||||||||
Home equity | 53,828 | 51,748 | ||||||
Consumer | 18,834 | 18,455 | ||||||
Commercial | 148,307 | 147,870 | ||||||
Total | 960,272 | 934,864 | ||||||
Deferred loan fees, net | (1,591 | ) | (1,725 | ) | ||||
Allowance for loan losses | (12,700 | ) | (12,500 | ) | ||||
Total loans, net | $ | 945,981 | $ | 920,639 |
Within the commercial real estate loan category above, $11,174,000$10,012,000 and $11,586,000$10,232,000 was guaranteed by the United States Department of Agriculture Rural Development at September 30, 2017March 31, 2022 and December 31, 2016,2021, respectively. Also within the loan categories above, $6,270,000 and $7,333,000 was guaranteed by the United States Department of Agriculture Farm Service Agency at March 31, 2022 and December 31, 2021, respectively. In addition, within the commercial loan category above, $527,000$1,570,000 and $1,588,000 were in loans originated through a syndication program where$4,172,000 was guaranteed by the business resides outside of Montana,Small Business Administration ("SBA") under their Payroll Protection Program ("PPP") at September 30, 2017,March 31, 2022 and December 31, 2016,2021, respectively.
The following table Deferred loan fees, net includes information regarding nonperforming assets.$108,000 and $286,000 of remaining deferred fees related to the PPP at March 31, 2022 and December 31, 2021, respectively.
September 30, | December 31, | |||||||
2017 | 2016 | |||||||
(Dollars in Thousands) | ||||||||
Non-accrual loans | $ | 1,396 | $ | 614 | ||||
Accruing loans delinquent 90 days or more | - | 495 | ||||||
Restructured loans, net | - | 43 | ||||||
Total nonperforming loans | 1,396 | 1,152 | ||||||
Real estate owned and other repossessed assets, net | 527 | 825 | ||||||
Total nonperforming assets | $ | 1,923 | $ | 1,977 | ||||
Total nonperforming assets as a percentage of total assets | 0.27 | % | 0.29 | % | ||||
Allowance for loan losses | $ | 5,500 | $ | 4,770 | ||||
Percent of allowance for loan losses to nonperforming loans | 393.98 | % | 414.06 | % | ||||
Percent of allowance for loan losses to nonperforming assets | 286.01 | % | 241.27 | % |
NOTE 3.LOANS RECEIVABLE – continued
NOTE 3.LOANS RECEIVABLE - continued
AllowanceAllowance for loan losses activity was as follows:
Residential | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage | Commercial | Real Estate | Home | Residential | Commercial | Home | ||||||||||||||||||||||||||||||||||||||||||||||
(1-4 Family) | Real Estate | Construction | Equity | Consumer | Commercial | Total | 1-4 Family | Real Estate | Equity | Consumer | Commercial | Total | ||||||||||||||||||||||||||||||||||||||||
(In Thousands) | (In Thousands) | |||||||||||||||||||||||||||||||||||||||||||||||||||
Allowance for loan losses: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Beginning balance, July 1, 2017 | $ | 999 | $ | 2,378 | $ | 252 | $ | 505 | $ | 225 | $ | 866 | $ | 5,225 | ||||||||||||||||||||||||||||||||||||||
Beginning balance, January 1, 2022 | $ | 1,596 | $ | 7,470 | $ | 533 | $ | 365 | $ | 2,536 | $ | 12,500 | ||||||||||||||||||||||||||||||||||||||||
Charge-offs | - | - | - | - | (41 | ) | (19 | ) | (60 | ) | 0 | 0 | 0 | (8 | ) | (84 | ) | (92 | ) | |||||||||||||||||||||||||||||||||
Recoveries | - | - | - | - | 3 | 1 | 4 | 0 | 6 | 0 | 0 | 7 | 13 | |||||||||||||||||||||||||||||||||||||||
Provision | - | 200 | 50 | - | 31 | 50 | 331 | 20 | 183 | 3 | 0 | 73 | 279 | |||||||||||||||||||||||||||||||||||||||
Ending balance, September 30, 2017 | $ | 999 | $ | 2,578 | $ | 302 | $ | 505 | $ | 218 | $ | 898 | $ | 5,500 | ||||||||||||||||||||||||||||||||||||||
Ending balance, March 31, 2022 | $ | 1,616 | $ | 7,659 | $ | 536 | $ | 357 | $ | 2,532 | $ | 12,700 | ||||||||||||||||||||||||||||||||||||||||
Allowance for loan losses: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Beginning balance, January 1, 2017 | $ | 997 | $ | 2,079 | $ | 244 | $ | 460 | $ | 193 | $ | 797 | $ | 4,770 | ||||||||||||||||||||||||||||||||||||||
Charge-offs | - | - | - | - | (140 | ) | (118 | ) | (258 | ) | ||||||||||||||||||||||||||||||||||||||||||
Recoveries | - | - | - | 39 | 14 | 1 | 54 | |||||||||||||||||||||||||||||||||||||||||||||
Provision | 2 | 499 | 58 | 6 | 151 | 218 | 934 | |||||||||||||||||||||||||||||||||||||||||||||
Ending balance, September 30, 2017 | $ | 999 | $ | 2,578 | $ | 302 | $ | 505 | $ | 218 | $ | 898 | $ | 5,500 | ||||||||||||||||||||||||||||||||||||||
Ending balance, March 31, 2022 allocated to loans individually evaluated for impairment | $ | 199 | $ | 0 | $ | 0 | $ | 0 | $ | 300 | $ | 499 | ||||||||||||||||||||||||||||||||||||||||
Ending balance, September 30, 2017 allocated to loans individually evaluated for impairment | $ | - | $ | - | $ | - | $ | - | $ | 32 | $ | - | $ | 32 | ||||||||||||||||||||||||||||||||||||||
Ending balance, September 30, 2017 allocated to loans collectively evaluated for impairment | $ | 999 | $ | 2,578 | $ | 302 | $ | 505 | $ | 186 | $ | 898 | $ | 5,468 | ||||||||||||||||||||||||||||||||||||||
Ending balance, March 31, 2022 allocated to loans collectively evaluated for impairment | $ | 1,417 | $ | 7,659 | $ | 536 | $ | 357 | $ | 2,232 | $ | 12,201 | ||||||||||||||||||||||||||||||||||||||||
Loans receivable: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Ending balance, September 30, 2017 | $ | 109,250 | $ | 247,501 | $ | 29,760 | $ | 51,450 | $ | 14,696 | $ | 58,554 | $ | 511,211 | ||||||||||||||||||||||||||||||||||||||
Ending balance, March 31, 2022 | $ | 140,210 | $ | 599,093 | $ | 53,828 | $ | 18,834 | $ | 148,307 | $ | 960,272 | ||||||||||||||||||||||||||||||||||||||||
Ending balance, September 30, 2017 of loans individually evaluated for impairment | $ | 484 | $ | 451 | $ | - | $ | 242 | $ | 131 | $ | 88 | $ | 1,396 | ||||||||||||||||||||||||||||||||||||||
Ending balance, March 31, 2022 of loans individually evaluated for impairment | $ | 587 | $ | 3,473 | $ | 111 | $ | 44 | $ | 1,775 | $ | 5,990 | ||||||||||||||||||||||||||||||||||||||||
Ending balance, September 30, 2017 of loans collectively evaluated for impairment | $ | 108,766 | $ | 247,050 | $ | 29,760 | $ | 51,208 | $ | 14,565 | $ | 58,466 | $ | 509,815 | ||||||||||||||||||||||||||||||||||||||
Ending balance, March 31, 2022 of loans collectively evaluated for impairment | $ | 139,623 | $ | 595,620 | $ | 53,717 | $ | 18,790 | $ | 146,532 | $ | 954,282 |
Residential | Commercial | Home | ||||||||||||||||||||||
1-4 Family | Real Estate | Equity | Consumer | Commercial | Total | |||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||
Allowance for loan losses: | ||||||||||||||||||||||||
Beginning balance, January 1, 2021 | $ | 1,506 | $ | 6,951 | $ | 515 | $ | 364 | $ | 2,264 | $ | 11,600 | ||||||||||||
Charge-offs | 0 | (10 | ) | 0 | (2 | ) | (6 | ) | (18 | ) | ||||||||||||||
Recoveries | 0 | 2 | 0 | 4 | 13 | 19 | ||||||||||||||||||
Provision | 36 | 188 | 6 | 3 | 66 | 299 | ||||||||||||||||||
Ending balance, March 31, 2021 | $ | 1,542 | $ | 7,131 | $ | 521 | $ | 369 | $ | 2,337 | $ | 11,900 | ||||||||||||
Ending balance, March 31, 2021 allocated to loans individually evaluated for impairment | $ | 296 | $ | 0 | $ | 0 | $ | 0 | $ | 40 | $ | 336 | ||||||||||||
Ending balance, March 31, 2021 allocated to loans collectively evaluated for impairment | $ | 1,246 | $ | 7,131 | $ | 521 | $ | 369 | $ | 2,297 | $ | 11,564 | ||||||||||||
Loans receivable: | ||||||||||||||||||||||||
Ending balance, March 31, 2021 | $ | 136,506 | $ | 464,082 | $ | 53,270 | $ | 19,424 | $ | 158,598 | $ | 831,880 | ||||||||||||
Ending balance, March 31, 2021 of loans individually evaluated for impairment | $ | 1,532 | $ | 4,282 | $ | 109 | $ | 145 | $ | 1,952 | $ | 8,020 | ||||||||||||
Ending balance, March 31, 2021 of loans collectively evaluated for impairment | $ | 134,974 | $ | 459,800 | $ | 53,161 | $ | 19,279 | $ | 156,646 | $ | 823,860 |
NOTE 3.LOANS RECEIVABLE – continued
NOTE 3.LOANS RECEIVABLE - continued
Residential | ||||||||||||||||||||||||||||
Mortgage | Commercial | Real Estate | Home | |||||||||||||||||||||||||
(1-4 Family) | Real Estate | Construction | Equity | Consumer | Commercial | Total | ||||||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||||||
Allowance for loan losses: | ||||||||||||||||||||||||||||
Beginning balance, July 1, 2016 | $ | 981 | $ | 2,007 | $ | 244 | $ | 365 | $ | 174 | $ | 489 | $ | 4,260 | ||||||||||||||
Charge-offs | (4 | ) | - | - | - | (79 | ) | - | (83 | ) | ||||||||||||||||||
Recoveries | - | - | - | - | 1 | - | 1 | |||||||||||||||||||||
Provision | - | 170 | - | 28 | 74 | 200 | 472 | |||||||||||||||||||||
Ending balance, September 30, 2016 | $ | 977 | $ | 2,177 | $ | 244 | $ | 393 | $ | 170 | $ | 689 | $ | 4,650 | ||||||||||||||
Allowance for loan losses: | ||||||||||||||||||||||||||||
Beginning balance, January 1, 2016 | $ | 911 | $ | 1,593 | $ | 184 | $ | 342 | $ | 66 | $ | 454 | $ | 3,550 | ||||||||||||||
Charge-offs | (4 | ) | - | - | (7 | ) | (179 | ) | (104 | ) | (294 | ) | ||||||||||||||||
Recoveries | - | - | - | - | 13 | - | 13 | |||||||||||||||||||||
Provision | 70 | 584 | 60 | 58 | 270 | 339 | 1,381 | |||||||||||||||||||||
Ending balance, September 30, 2016 | $ | 977 | $ | 2,177 | $ | 244 | $ | 393 | $ | 170 | $ | 689 | $ | 4,650 | ||||||||||||||
Ending balance, September 30, 2016 allocated to loans individually evaluated for impairment | $ | - | $ | - | $ | - | $ | - | $ | 14 | $ | 15 | $ | 29 | ||||||||||||||
Ending balance, September 30, 2016 allocated to loans collectively evaluated for impairment | $ | 977 | $ | 2,177 | $ | 244 | $ | 393 | $ | 156 | $ | 674 | $ | 4,621 | ||||||||||||||
Loans receivable: | ||||||||||||||||||||||||||||
Ending balance, September 30, 2016 | $ | 113,287 | $ | 205,819 | $ | 20,649 | $ | 47,694 | $ | 14,867 | $ | 60,102 | $ | 462,418 | ||||||||||||||
Ending balance, September 30, 2016 of loans individually evaluated for impairment | $ | 423 | $ | 374 | $ | - | $ | 339 | $ | 68 | $ | 261 | $ | 1,465 | ||||||||||||||
Ending balance, September 30, 2016 of loans collectively evaluated for impairment | $ | 112,864 | $ | 205,445 | $ | 20,649 | $ | 47,355 | $ | 14,799 | $ | 59,841 | $ | 460,953 |
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 of 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 (UNAUDITED)
NOTE 3.LOANS RECEIVABLE - continued
On an annual basis, or more often if needed, the Company formally reviews the ratings of all commercial real estate, construction, and commercial business loans that have a principal balance of $750,000 or more. Quarterly, the Company reviews the rating of any consumer loan, broadly defined, that is delinquent 90 days or more. Likewise, quarterly, the Company reviews the rating of any commercial loan, broadly defined, that is delinquent 60 days or more. Annually, the Company engages an independent third-party to review a significant portion of loans within these segments. Management uses the results of these reviews as part of its annual review process.
InternalInternal classification of the loan portfolio was as follows:
September 30, 2017 | ||||||||||||||||||||||||||||
Residential | ||||||||||||||||||||||||||||
Mortgage | Commercial | Real Estate | Home | |||||||||||||||||||||||||
(1-4 Family) | Real Estate | Construction | Equity | Consumer | Commercial | Total | ||||||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||||||
Grade: | ||||||||||||||||||||||||||||
Pass | $ | 108,494 | $ | 246,989 | $ | 29,304 | $ | 51,208 | $ | 14,557 | $ | 58,375 | $ | 508,927 | ||||||||||||||
Special mention | - | - | 456 | - | - | - | 456 | |||||||||||||||||||||
Substandard | 756 | 512 | - | 242 | 107 | 179 | 1,796 | |||||||||||||||||||||
Doubtful | - | - | - | - | - | - | - | |||||||||||||||||||||
Loss | - | - | - | - | 32 | - | 32 | |||||||||||||||||||||
Total | $ | 109,250 | $ | 247,501 | $ | 29,760 | $ | 51,450 | $ | 14,696 | $ | 58,554 | $ | 511,211 | ||||||||||||||
Credit risk profile based on payment activity | ||||||||||||||||||||||||||||
Performing | $ | 108,766 | $ | 247,050 | $ | 29,760 | $ | 51,208 | $ | 14,565 | $ | 58,466 | $ | 509,815 | ||||||||||||||
Restructured loans | - | - | - | - | - | - | - | |||||||||||||||||||||
Nonperforming | 484 | 451 | - | 242 | 131 | 88 | 1,396 | |||||||||||||||||||||
Total | $ | 109,250 | $ | 247,501 | $ | 29,760 | $ | 51,450 | $ | 14,696 | $ | 58,554 | $ | 511,211 |
March 31, 2022 | ||||||||||||||||||||||||
Special | ||||||||||||||||||||||||
Pass | Mention | Substandard | Doubtful | Loss | Total | |||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||
Real estate loans: | ||||||||||||||||||||||||
Residential 1-4 family | �� | $ | 98,768 | $ | 0 | $ | 275 | $ | 199 | $ | 0 | $ | 99,242 | |||||||||||
Residential 1-4 family construction | 40,968 | 0 | 0 | 0 | 0 | 40,968 | ||||||||||||||||||
Commercial real estate | 429,481 | 1,498 | 1,997 | 0 | 0 | 432,976 | ||||||||||||||||||
Commercial construction and development | 105,754 | 0 | 0 | 0 | 0 | 105,754 | ||||||||||||||||||
Farmland | 59,114 | 177 | 1,030 | 42 | 0 | 60,363 | ||||||||||||||||||
Other loans: | ||||||||||||||||||||||||
Home equity | 53,699 | 0 | 129 | 0 | 0 | 53,828 | ||||||||||||||||||
Consumer | 18,789 | 0 | 45 | 0 | 0 | 18,834 | ||||||||||||||||||
Commercial | 98,235 | 128 | 108 | 0 | 0 | 98,471 | ||||||||||||||||||
Agricultural | 48,080 | 327 | 1,429 | 0 | 0 | 49,836 | ||||||||||||||||||
Total | $ | 952,888 | $ | 2,130 | $ | 5,013 | $ | 241 | $ | 0 | $ | 960,272 |
December 31, 2016 | ||||||||||||||||||||||||||||
Residential | ||||||||||||||||||||||||||||
Mortgage | Commercial | Real Estate | Home | |||||||||||||||||||||||||
(1-4 Family) | Real Estate | Construction | Equity | Consumer | Commercial | Total | ||||||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||||||
Grade: | ||||||||||||||||||||||||||||
Pass | $ | 112,524 | $ | 214,476 | $ | 20,084 | $ | 48,643 | $ | 14,697 | $ | 54,470 | $ | 464,894 | ||||||||||||||
Special mention | - | - | 456 | - | - | - | 456 | |||||||||||||||||||||
Substandard | 738 | 451 | - | 375 | 95 | 236 | 1,895 | |||||||||||||||||||||
Doubtful | - | - | - | - | - | - | - | |||||||||||||||||||||
Loss | - | - | - | - | 8 | - | 8 | |||||||||||||||||||||
Total | $ | 113,262 | $ | 214,927 | $ | 20,540 | $ | 49,018 | $ | 14,800 | $ | 54,706 | $ | 467,253 | ||||||||||||||
Credit risk profile based on payment activity | ||||||||||||||||||||||||||||
Performing | $ | 112,585 | $ | 214,923 | $ | 20,540 | $ | 48,643 | $ | 14,704 | $ | 54,706 | $ | 466,101 | ||||||||||||||
Restructured loans | - | - | - | 43 | - | - | 43 | |||||||||||||||||||||
Nonperforming | 677 | 4 | - | 332 | 96 | - | 1,109 | |||||||||||||||||||||
Total | $ | 113,262 | $ | 214,927 | $ | 20,540 | $ | 49,018 | $ | 14,800 | $ | 54,706 | $ | 467,253 |
December 31, 2021 | ||||||||||||||||||||||||
Special | ||||||||||||||||||||||||
Pass | Mention | Substandard | Doubtful | Loss | Total | |||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||
Real estate loans: | ||||||||||||||||||||||||
Residential 1-4 family | $ | 100,680 | $ | 0 | $ | 301 | 199 | $ | 0 | $ | 101,180 | |||||||||||||
Residential 1-4 family construction | 45,298 | 0 | 337 | 0 | 0 | 45,635 | ||||||||||||||||||
Commercial real estate | 406,896 | 1,527 | 2,145 | 0 | 0 | 410,568 | ||||||||||||||||||
Commercial construction and development | 92,403 | 0 | 0 | 0 | 0 | 92,403 | ||||||||||||||||||
Farmland | 65,037 | 177 | 1,744 | 47 | 0 | 67,005 | ||||||||||||||||||
Other loans: | ||||||||||||||||||||||||
Home equity | 51,614 | 0 | 134 | 0 | 0 | 51,748 | ||||||||||||||||||
Consumer | 18,392 | 0 | 63 | 0 | 0 | 18,455 | ||||||||||||||||||
Commercial | 100,881 | 130 | 524 | 0 | 0 | 101,535 | ||||||||||||||||||
Agricultural | 44,550 | 332 | 1,444 | 9 | 0 | 46,335 | ||||||||||||||||||
Total | $ | 925,751 | $ | 2,166 | $ | 6,692 | $ | 255 | $ | 0 | $ | 934,864 |
NOTE 3.LOANS RECEIVABLE – continued
NOTE 3.LOANS RECEIVABLE - continued
The following tablestables include information regarding delinquencies within the loan portfolio.
September 30, 2017 | March 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||
Loans Past Due and Still Accruing | Loans Past Due and Still Accruing | |||||||||||||||||||||||||||||||||||||||||||||||
90 Days | 90 Days | |||||||||||||||||||||||||||||||||||||||||||||||
30-89 Days | and | Non-Accrual | Current | Total | 30-89 Days | and | Nonaccrual | Current | Total | |||||||||||||||||||||||||||||||||||||||
Past Due | Greater | Total | Loans | Loans | Loans | Past Due | Greater | Total | Loans | Loans | Loans | |||||||||||||||||||||||||||||||||||||
(In Thousands) | (In Thousands) | |||||||||||||||||||||||||||||||||||||||||||||||
Residential mortgage (1-4 family) | $ | 1,362 | $ | - | $ | 1,362 | $ | 484 | $ | 107,404 | $ | 109,250 | ||||||||||||||||||||||||||||||||||||
Real estate loans: | ||||||||||||||||||||||||||||||||||||||||||||||||
Residential 1-4 family | $ | 0 | $ | 0 | $ | 0 | $ | 587 | $ | 98,655 | $ | 99,242 | ||||||||||||||||||||||||||||||||||||
Residential 1-4 family construction | 0 | 0 | 0 | 0 | 40,968 | 40,968 | ||||||||||||||||||||||||||||||||||||||||||
Commercial real estate | 500 | - | 500 | 451 | 246,550 | 247,501 | 1,005 | 0 | 1,005 | 368 | 431,603 | 432,976 | ||||||||||||||||||||||||||||||||||||
Real estate construction | 296 | - | 296 | - | 29,464 | 29,760 | ||||||||||||||||||||||||||||||||||||||||||
Commercial construction and development | 0 | 0 | 0 | 0 | 105,754 | 105,754 | ||||||||||||||||||||||||||||||||||||||||||
Farmland | 71 | 270 | 341 | 1,607 | 58,415 | 60,363 | ||||||||||||||||||||||||||||||||||||||||||
Other loans: | ||||||||||||||||||||||||||||||||||||||||||||||||
Home equity | 83 | - | 83 | 242 | 51,125 | 51,450 | 0 | 0 | 0 | 111 | 53,717 | 53,828 | ||||||||||||||||||||||||||||||||||||
Consumer | 161 | - | 161 | 131 | 14,404 | 14,696 | 57 | 0 | 57 | 44 | 18,733 | 18,834 | ||||||||||||||||||||||||||||||||||||
Commercial | 177 | - | 177 | 88 | 58,289 | 58,554 | 807 | 0 | 807 | 53 | 97,611 | 98,471 | ||||||||||||||||||||||||||||||||||||
Agricultural | 604 | 0 | 604 | 1,722 | 47,510 | 49,836 | ||||||||||||||||||||||||||||||||||||||||||
Total | $ | 2,579 | $ | - | $ | 2,579 | $ | 1,396 | $ | 507,236 | $ | 511,211 | $ | 2,544 | $ | 270 | $ | 2,814 | $ | 4,492 | $ | 952,966 | $ | 960,272 |
December 31, 2016 | December 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||
Loans Past Due and Still Accruing | Loans Past Due and Still Accruing | |||||||||||||||||||||||||||||||||||||||||||||||
90 Days | 90 Days | |||||||||||||||||||||||||||||||||||||||||||||||
30-89 Days | and | Non-Accrual | Current | Total | 30-89 Days | and | Nonaccrual | Current | Total | |||||||||||||||||||||||||||||||||||||||
Past Due | Greater | Total | Loans | Loans | Loans | Past Due | Greater | Total | Loans | Loans | Loans | |||||||||||||||||||||||||||||||||||||
(In Thousands) | (In Thousands) | |||||||||||||||||||||||||||||||||||||||||||||||
Residential mortgage (1-4 family) | $ | 975 | $ | 456 | $ | 1,431 | $ | 221 | $ | 111,610 | $ | 113,262 | ||||||||||||||||||||||||||||||||||||
Real estate loans: | ||||||||||||||||||||||||||||||||||||||||||||||||
Residential 1-4 family | $ | 21 | $ | 0 | $ | 21 | $ | 616 | $ | 100,543 | $ | 101,180 | ||||||||||||||||||||||||||||||||||||
Residential 1-4 family construction | 0 | 0 | 0 | 337 | 45,298 | 45,635 | ||||||||||||||||||||||||||||||||||||||||||
Commercial real estate | 513 | 4 | 517 | - | 214,410 | 214,927 | 788 | 0 | 788 | 497 | 409,283 | 410,568 | ||||||||||||||||||||||||||||||||||||
Real estate construction | - | - | - | - | 20,540 | 20,540 | ||||||||||||||||||||||||||||||||||||||||||
Commercial construction and development | 0 | 0 | 0 | 0 | 92,403 | 92,403 | ||||||||||||||||||||||||||||||||||||||||||
Farmland | 61 | 0 | 61 | 1,630 | 65,314 | 67,005 | ||||||||||||||||||||||||||||||||||||||||||
Other loans: | ||||||||||||||||||||||||||||||||||||||||||||||||
Home equity | 365 | 35 | 400 | 297 | 48,321 | 49,018 | 0 | 0 | 0 | 115 | 51,633 | 51,748 | ||||||||||||||||||||||||||||||||||||
Consumer | 169 | - | 169 | 96 | 14,535 | 14,800 | 55 | 0 | 55 | 62 | 18,338 | 18,455 | ||||||||||||||||||||||||||||||||||||
Commercial | 249 | - | 249 | - | 54,457 | 54,706 | 6 | 0 | 6 | 516 | 101,013 | 101,535 | ||||||||||||||||||||||||||||||||||||
Agricultural | 0 | 0 | 0 | 1,718 | 44,617 | 46,335 | ||||||||||||||||||||||||||||||||||||||||||
Total | $ | 2,271 | $ | 495 | $ | 2,766 | $ | 614 | $ | 463,873 | $ | 467,253 | $ | 931 | $ | 0 | $ | 931 | $ | 5,491 | $ | 928,442 | $ | 934,864 |
NOTE 3.LOANS RECEIVABLE – continued
NOTE 3.LOANS RECEIVABLE - continued
The following tables include information regarding impaired loans.
September 30, 2017 | March 31, 2022 | |||||||||||||||||||||||
Unpaid | Unpaid | |||||||||||||||||||||||
Recorded | Principal | Related | Recorded | Principal | Related | |||||||||||||||||||
Investment | Balance | Allowance | Investment | Balance | Allowance | |||||||||||||||||||
(In Thousands) | (In Thousands) | |||||||||||||||||||||||
With no related allowance: | ||||||||||||||||||||||||
Residential mortgage (1-4 family) | $ | 484 | $ | 492 | $ | - | ||||||||||||||||||
Real estate loans: | ||||||||||||||||||||||||
Residential 1-4 family | $ | 587 | $ | 675 | $ | 199 | ||||||||||||||||||
Residential 1-4 family construction | 0 | 0 | 0 | |||||||||||||||||||||
Commercial real estate | 451 | 451 | - | 1,866 | 1,925 | 0 | ||||||||||||||||||
Real estate construction | - | - | - | |||||||||||||||||||||
Commercial construction and development | 0 | 0 | 0 | |||||||||||||||||||||
Farmland | 1,607 | 1,720 | 0 | |||||||||||||||||||||
Other loans: | ||||||||||||||||||||||||
Home equity | 242 | 261 | - | 111 | 138 | 0 | ||||||||||||||||||
Consumer | 99 | 148 | - | 44 | 54 | 0 | ||||||||||||||||||
Commercial | 88 | 89 | - | 53 | 63 | 0 | ||||||||||||||||||
With a related allowance: | ||||||||||||||||||||||||
Residential mortgage (1-4 family) | - | - | - | |||||||||||||||||||||
Commercial real estate | - | - | - | |||||||||||||||||||||
Real estate construction | - | - | - | |||||||||||||||||||||
Home equity | - | - | - | |||||||||||||||||||||
Consumer | 32 | 32 | 32 | |||||||||||||||||||||
Commercial | - | - | - | |||||||||||||||||||||
Total: | ||||||||||||||||||||||||
Residential mortgage (1-4 family) | 484 | 492 | - | |||||||||||||||||||||
Commercial real estate | 451 | 451 | - | |||||||||||||||||||||
Real estate construction | - | - | - | |||||||||||||||||||||
Home equity | 242 | 261 | - | |||||||||||||||||||||
Consumer | 131 | 180 | 32 | |||||||||||||||||||||
Commercial | 88 | 89 | - | |||||||||||||||||||||
Agricultural | 1,722 | 1,759 | 300 | |||||||||||||||||||||
Total | $ | 1,396 | $ | 1,473 | $ | 32 | $ | 5,990 | $ | 6,334 | $ | 499 |
December 31, 2021 | ||||||||||||
Unpaid | ||||||||||||
Recorded | Principal | Related | ||||||||||
Investment | Balance | Allowance | ||||||||||
(In Thousands) | ||||||||||||
Real estate loans: | ||||||||||||
Residential 1-4 family | $ | 616 | $ | 703 | $ | 199 | ||||||
Residential 1-4 family construction | 337 | 387 | 0 | |||||||||
Commercial real estate | 2,024 | 2,078 | 0 | |||||||||
Commercial construction and development | 0 | 0 | 0 | |||||||||
Farmland | 1,630 | 1,721 | 0 | |||||||||
Other loans: | ||||||||||||
Home equity | 115 | 139 | 0 | |||||||||
Consumer | 62 | 73 | 0 | |||||||||
Commercial | 516 | 639 | 101 | |||||||||
Agricultural | 1,759 | 1,862 | 300 | |||||||||
Total | $ | 7,059 | $ | 7,602 | $ | 600 |
NOTE 3.LOANS RECEIVABLE – continued
NOTE 3.LOANS RECEIVABLE - continued
December 31, 2016 | Three Months Ended | |||||||||||||||||||
Unpaid | March 31, | |||||||||||||||||||
Recorded | Principal | Related | 2022 | 2021 | ||||||||||||||||
Investment | Balance | Allowance | Average Recorded Investment | |||||||||||||||||
(In Thousands) | (In Thousands) | |||||||||||||||||||
With no related allowance: | ||||||||||||||||||||
Residential mortgage (1-4 family) | $ | 221 | $ | 221 | $ | - | ||||||||||||||
Real estate loans: | ||||||||||||||||||||
Residential 1-4 family | $ | 601 | $ | 1,199 | ||||||||||||||||
Residential 1-4 family construction | 169 | 337 | ||||||||||||||||||
Commercial real estate | - | - | - | 1,945 | 2,340 | |||||||||||||||
Real estate construction | - | - | - | |||||||||||||||||
Commercial construction and development | 0 | 25 | ||||||||||||||||||
Farmland | 1,619 | 2,056 | ||||||||||||||||||
Other loans: | ||||||||||||||||||||
Home equity | 340 | 390 | - | 113 | 110 | |||||||||||||||
Consumer | 88 | 135 | - | 53 | 148 | |||||||||||||||
Commercial | - | - | - | 285 | 542 | |||||||||||||||
With a related allowance: | ||||||||||||||||||||
Residential mortgage (1-4 family) | - | - | - | |||||||||||||||||
Commercial real estate | - | - | - | |||||||||||||||||
Real estate construction | - | - | - | |||||||||||||||||
Home equity | - | - | - | |||||||||||||||||
Consumer | 8 | 8 | 8 | |||||||||||||||||
Commercial | - | - | - | |||||||||||||||||
Total: | ||||||||||||||||||||
Residential mortgage (1-4 family) | 221 | 221 | - | |||||||||||||||||
Commercial real estate | - | - | - | |||||||||||||||||
Real estate construction | - | - | - | |||||||||||||||||
Home equity | 340 | 390 | - | |||||||||||||||||
Consumer | 96 | 143 | 8 | |||||||||||||||||
Commercial | - | - | - | |||||||||||||||||
Agricultural | 1,740 | 1,554 | ||||||||||||||||||
Total | $ | 657 | $ | 754 | $ | 8 | $ | 6,525 | $ | 8,311 |
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Average Recorded Investment | ||||||||||||||||
(In Thousands) | ||||||||||||||||
Residential mortgage (1-4 family) | $ | 492 | $ | 711 | $ | 352 | $ | 576 | ||||||||
Commercial real estate | 451 | 374 | 226 | 521 | ||||||||||||
Construction | - | - | - | - | ||||||||||||
Home equity | 274 | 336 | 291 | 273 | ||||||||||||
Consumer | 137 | 93 | 114 | 107 | ||||||||||||
Commercial | 150 | 261 | 44 | 294 | ||||||||||||
Total | $ | 1,504 | $ | 1,775 | $ | 1,027 | $ | 1,771 |
Interest income recognized on impaired loans for the three and nine months ended September 30, 2017 March 31, 2022 and 2016 are2021 is considered insignificant.
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES Interest payments received on a cash basis related to impaired loans were $344,000 and $405,000 at March 31, 2022 and December 31, 2021, respectively.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 4.TROUBLED DEBT RESTRUCTURINGS
AAs of March 31, 2022 and December 31, 2021, there were troubled debt restructured (“TDR”) loan is a loan in which the Bank grants a concession to the borrower that it would not otherwise consider, for reasons related to a borrower's financial difficulties. The loan terms which have been modified or restructured due to a borrower's financial difficulty, include but are not limited to a reduction in the stated interest rate; an extensionloans of the maturity at an interest rate below current market rates; a reduction in the face amount of the debt; a reduction in the accrued interest; or re-aging, extensions, deferrals, renewals$2,611,000 and rewrites or a combination of these modification methods. A TDR loan would generally be considered impaired in the year of modification and will be assessed periodically for continued impairment.$2,224,000, respectively.
During the three months ended March 31, 2022, there were 2 new TDR loans. The Company offers a varietyrecorded investments for both agricultural loans at the time of modifications to borrowers. The modification categories offered can generally be described inrestructure were $331,000 and $145,000. NaN charge-offs were incurred and the following categories:loans are on nonaccrual status.
Rate Modification – A modification in whichDuring the interest rate is changed.
Term Modification – A modification in which the maturity date, timing of payments, or frequency of payments is changed.
Interest Only Modification – A modification in which the loan is converted to interest only payments for a period of time.
Payment Modification – A modification in which the dollar amount of the payment is changed, other than an interest only modification described above.
Combination Modification – Any other type of modification, including the use of multiple categories above.
The Company previously had onethree months ended March 31, 2021, there was 1 new TDR loan at December 31, 2016 with aloan. The recorded investment of $43,000 and a $34,000 charge-offfor the commercial real estate loan at time of restructure.restructure was $115,000. The loan was a home equity loan and was on accrual status. The remaining recorded investment of $42,000 was paid-offpaid off during the quarterthree months ended JuneSeptember 30, 2017 and the $34,000 charge-off was recovered.2021.
The Bank’s policy is that loans placed on non-accrual will typically remain on non-accrual status until all principal and interest payments are brought current and the prospect for future payment in accordance with the loan agreement appears relatively certain. The Bank’s policy generally refers to nine months of payment performance as sufficient to warrant a return to accrual status.
During the three and nine months ended September 30, 2017 and 2016, thereThere were no new restructured loans.
There were no2 farmland loans modified as a troubled debt restructured loan within the previous nine months for which there was a payment defaultTDRs that defaulted during the ninethree months ended September 30, 2017.
March 31, 2022 where the default occurred within 12 months of restructuring. A default for purposes of this disclosure is a troubled debt restructuredTDR loan in which the borrower is 90 days past due or results in the foreclosure and repossession of the applicable collateral. collateral. The recorded investments for the farmland loans were $374,000 and $70,000 at March 31, 2022 and the Company has initiated foreclosure on these loans.
As of September 30, 2017 and DecemberMarch 31, 2016,2022, the Company had no0 commitments to lend additional funds to loan customers whose terms had been modified in trouble debt restructures.TDRs.
The Company has offered borrowers accommodations due to the impact from COVID-19, including 90-day deferrals, interest only payments and forbearances, which are not considered TDRs as they met the criteria established in the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"). In addition, the Montana Board of Investments ("MBOI") offered 12-months of interest payment assistance to qualified borrowers. As of both March 31, 2022 and December 31, 2021, 1 modified nonresidential loan with an insignificant balance remained.
NOTE 4.MORTGAGE SERVICING RIGHTS
The Company is servicing mortgage loans for the benefit of others which are not included in the condensed consolidated statements of financial condition and have unpaid principal balances of $1,903,450,000 and $1,835,561,000 at March 31, 2022 and December 31, 2021, respectively. Servicing loans for others generally consists of collecting mortgage payments, maintaining escrow accounts, disbursing payments to investors and foreclosure processing. Mortgage loan servicing fees were $1,156,000 and $937,000 for the three months ended March 31, 2022 and 2021, respectively. These fees, net of amortization, are included in mortgage banking, net which is a component of noninterest income on the condensed consolidated statements of income.
Custodial balances maintained in connection with the foregoing loan servicing are included in noninterest checking deposits and were $17,459,000 and $11,613,000 at March 31, 2022 and December 31, 2021, respectively.
The following table is a summary of activity in mortgage servicing rights:
As of or For the | ||||||||
Three Months Ended | ||||||||
March 31, | ||||||||
2022 | 2021 | |||||||
(In Thousands) | ||||||||
Mortgage servicing rights: | ||||||||
Beginning balance | $ | 13,749 | $ | 10,897 | ||||
Mortgage servicing rights capitalized | 1,148 | 1,532 | ||||||
Amortization of mortgage servicing rights | (609 | ) | (994 | ) | ||||
Ending balance | $ | 14,288 | $ | 11,435 | ||||
Valuation allowance: | ||||||||
Beginning balance | (56 | ) | (792 | ) | ||||
Recovery of mortgage servicing rights | 56 | 677 | ||||||
Ending balance | 0 | (115 | ) | |||||
Mortgage servicing rights, net | $ | 14,288 | $ | 11,320 |
Impairment expense on mortgage servicing rights was recording during the year ended December 31, 2020 as a result of increased prepayment speed assumptions. Recoveries of $56,000 and $677,000 were recorded during the three months ended March 31, 2022 and 2021, respectively. Recovery (impairment) of servicing rights is included in other noninterest expense on the condensed consolidated statements of income.
The fair values of these rights were $16,565,000 and $14,686,000 at March 31, 2022 and December 31, 2021, respectively. The fair value of servicing rights was determined at loan level, depending on the interest rate and term of the specific loan, using the following valuation assumptions:
March 31, | December 31, | |||||||
2022 | 2021 | |||||||
Key assumptions: | ||||||||
Discount rate | 12 | % | 12 | % | ||||
Prepayment speed range | 148-249 | % | 184-265 | % | ||||
Weighted average prepayment speed | 163 | % | 204 | % |
NOTE 5.5DEPOSITS.DEPOSITS
Deposits are summarized as follows:
September 30, | December 31, | March 31, | December 31, | |||||||||||||
2017 | 2016 | 2022 | 2021 | |||||||||||||
(In Thousands) | (In Thousands) | |||||||||||||||
Noninterest checking | $ | 104,866 | $ | 82,877 | $ | 371,818 | $ | 368,846 | ||||||||
Interest bearing checking | 97,415 | 93,163 | ||||||||||||||
Interest-bearing checking | 210,247 | 203,410 | ||||||||||||||
Savings | 87,679 | 82,266 | 232,166 | 223,069 | ||||||||||||
Money market | 86,188 | 89,211 | 312,485 | 277,469 | ||||||||||||
Time certificates of deposit | 149,019 | 165,278 | 143,860 | 149,755 | ||||||||||||
Total | $ | 525,167 | $ | 512,795 | $ | 1,270,576 | $ | 1,222,549 |
NOTE 66..OTHER LLONG-TERM DEBTONG-TERM DEBT
Other long-termlong-term debt consisted of the following:
September 30, 2017 | December 31, 2016 | March 31, 2022 | December 31, 2021 | |||||||||||||||||||||||||||||
Unamortized | Unamortized | Unamortized | Unamortized | |||||||||||||||||||||||||||||
Debt | Debt | Debt | Debt | |||||||||||||||||||||||||||||
Principal | Issuance | Principal | Issuance | Principal | Issuance | Principal | Issuance | |||||||||||||||||||||||||
Amount | Costs | Amount | Costs | Amount | Costs | Amount | Costs | |||||||||||||||||||||||||
(In Thousands) | (In Thousands) | |||||||||||||||||||||||||||||||
Senior notes fixed at 5.75%, due 2022 | $ | 10,000 | $ | (191 | ) | $ | - | $ | - | |||||||||||||||||||||||
Subordinated debentures fixed at 6.75%, due 2025 | 10,000 | (169 | ) | 10,000 | (185 | ) | ||||||||||||||||||||||||||
Subordinated debentures variable at 3-Month Libor plus 1.42%, due 2035 | 5,155 | - | 5,155 | - | ||||||||||||||||||||||||||||
Senior notes fixed at 5.75%, due 2022 | $ | 0 | $ | 0 | $ | 10,000 | $ | (4 | ) | |||||||||||||||||||||||
Subordinated debentures fixed at 5.50% to floating, due 2030 | 15,000 | (274 | ) | 15,000 | (282 | ) | ||||||||||||||||||||||||||
Subordinated debentures fixed at 3.50% to floating, due 2032 | 40,000 | (895 | ) | 0 | - | |||||||||||||||||||||||||||
Subordinated debentures variable at 3-Month Libor plus 1.42%, due 2035 | 5,155 | 0 | 5,155 | 0 | ||||||||||||||||||||||||||||
Total other long-term debt | $ | 25,155 | $ | (360 | ) | $ | 15,155 | $ | (185 | ) | $ | 60,155 | $ | (1,169 | ) | $ | 30,155 | $ | (286 | ) |
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 will bear interest at an annual fixed rate of 3.50% payable semi-annually. Starting August 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 due in February 2022.
In 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 will bear interest at an annual fixed rate of 5.50% payable semi-annually. Starting July 1, 2025, interest will accrue at a floating rate per annum equal to a benchmark rate, which is expected to be three-month term SOFR plus a spread of 509.0 basis points, payable quarterly. The notes are subject to redemption at the option of the Company on or after July 1, 2025. The subordinated debentures qualify as Tier 2 capital for regulatory capital purposes.
In February 2017, the Company completed the issuance, through a private placement, of $10,000,000 aggregate principal amount of 5.75% fixed senior unsecured notes due in 2022. The interest will bewas paid semi-annually through maturity date. The notes are were not subject to redemption at the option of the Company. The notes were redeemed on February 15, 2022.
In September 2015, the Company completed the issuance of $10,000,000 in aggregate principal amount of subordinated notes due in 2025 in a private placement transaction to an institutional accredited investor. The notes will bear interest at an annual fixed rate of 6.75% and interest will be paid quarterly through maturity date or earlier redemption.
InSeptember 2005, the Company completed the private placement of $5,155,000 in subordinated debentures to Eagle Bancorp Statutory Trust I (“the Trust”).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 3-Monththree-month LIBOR plus 1.42%, making the rate 2.754%2.38% and 2.418%1.63% as of September 30, 2017March 31, 2022 and December 31, 2016,2021, respectively. 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.
For the three months ended September 30, 2017 and 2016, interest expense on other long-term debt was $350,000 and $195,000, respectively. For the nine months ended September 30, 2017 and 2016, interest expense on other long-term debt was $969,000 and $584,000, respectively. The subordinated debentures qualify as Tier 1 capital for regulatory purposes.
NOTE 7.EARNINGS PER SHARE
Basic earnings per share for the three months ended September 30, 2017 was computed using 3,811,409 weighted average shares outstanding. Basic earnings per share for the three months ended September 30, 2016 was computed using 3,779,464 weighted average shares outstanding. Diluted earnings per share was computed using the treasury stock method by adjusting the number of shares outstanding by the shares purchased. The weighted average shares outstanding for the diluted earnings per share calculations was 3,863,656 for the three months ended September 30, 2017 and 3,873,171 for the three months ended September 30, 2016.
Basic earnings per share for the nine months ended September 30, 2017 was computed using 3,811,409 weighted average shares outstanding. Basic earnings per share for the nine months ended September 30, 2016 was computed using 3,779,464 weighted average shares outstanding. Diluted earnings per share was computed using the treasury stock method by adjusting the number of shares outstanding by the shares purchased. The weighted average shares outstanding for the diluted earnings per share calculations was 3,869,695 for the nine months ended September 30, 2017 and 3,873,171 for the nine months ended September 30, 2016.
NOTE 8.DIVIDENDS AND STOCK REPURCHASE PROGRAM
For the year ended December 31, 2016, Eagle paid dividends of $0.0775 per share for the quarters ended March 31 and June 30, 2016. Eagle paid dividends of $0.08 per share for the quarters ended September 30 and December 31, 2016. A dividend of $0.08 per share was declared on January 26, 2017, and paid March 3, 2017 to shareholders of record on February 10, 2017. A dividend of $0.08 per share was declared on April 20, 2017, payable on June 2, 2017 to shareholders of record on May 12, 2017. A dividend of $0.09 per share was declared on July 20, 2017, payable on September 1, 2017 to shareholders of record on August 11, 2017. A dividend of $0.09 per share was declared on October 19, 2017, payable on December 1, 2017 to shareholders of record on November 10, 2017.
On July 20, 2017, the Board authorized the repurchase of up to 100,000 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. No shares were purchased under this plan during the three months ended September 30, 2017. The plan expires on July 20, 2018.
On July 21, 2016, the Board authorized the repurchase of up to 100,000 shares of its common stock. Under the plan, shares could be purchased by the Company on the open market or in privately negotiated transactions. No shares were purchased under this plan. The plan expired on July 21, 2017.
On July 23, 2015, the Board of Directors authorized the repurchase of up to 100,000 shares of its common stock. Under the plan, shares could be purchased by the Company on the open market or in privately negotiated transactions. During the three months ended December 31, 2015, 15,000 shares were purchased at an average price of $11.75 per share. During the three months ended September 30, 2015, 46,065 shares were purchased at an average price of $11.47 per share. The plan expired on July 23, 2016.
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 9.7. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The following table includes information regarding the activity in accumulated other comprehensive income (loss).
Unrealized | Unrealized | |||||||||||
Gains (Losses) | (Losses) Gains | |||||||||||
on Derivatives | on Investment | |||||||||||
Designated as | Securities | |||||||||||
Cash Flow Hedges | Available for Sale | Total | ||||||||||
(In Thousands) | ||||||||||||
Balance, January 1, 2017 | $ | 330 | $ | (741 | ) | $ | (411 | ) | ||||
Other comprehensive income, before reclassifications and income taxes | 998 | 2,054 | 3,052 | |||||||||
Amounts reclassified from accumulated other comprehensive income (loss), before income taxes | (899 | ) | 14 | (885 | ) | |||||||
Income tax expense | (40 | ) | (843 | ) | (883 | ) | ||||||
Total other comprehensive income | 59 | 1,225 | 1,284 | |||||||||
Balance, June 30, 2017 | 389 | 484 | 873 | |||||||||
Other comprehensive income (loss), before reclassifications and income taxes | 364 | (91 | ) | 273 | ||||||||
Amounts reclassified from accumulated other comprehensive income, before income taxes | (657 | ) | - | (657 | ) | |||||||
Income tax benefit | 119 | 38 | 157 | |||||||||
Total other comprehensive loss | (174 | ) | (53 | ) | (227 | ) | ||||||
Balance, September 30, 2017 | $ | 215 | $ | 431 | $ | 646 | ||||||
Balance, January 1, 2016 | $ | 376 | $ | (124 | ) | $ | 252 | |||||
Other comprehensive income, before reclassifications and income taxes | 1,495 | 3,454 | 4,949 | |||||||||
Amounts reclassified from accumulated other comprehensive income (loss), before income taxes | (1,271 | ) | (84 | ) | (1,355 | ) | ||||||
Income tax expense | (92 | ) | (1,373 | ) | (1,465 | ) | ||||||
Total other comprehensive income | 132 | 1,997 | 2,129 | |||||||||
Balance, June 30, 2016 | 508 | 1,873 | 2,381 | |||||||||
Other comprehensive income (loss), before reclassifications and income taxes | 808 | (676 | ) | 132 | ||||||||
Amounts reclassified from accumulated other comprehensive income, before income taxes | (859 | ) | (110 | ) | (969 | ) | ||||||
Income tax benefit | 21 | 320 | 341 | |||||||||
Total other comprehensive loss | (30 | ) | (466 | ) | (496 | ) | ||||||
Balance, September 30, 2016 | $ | 478 | $ | 1,407 | $ | 1,885 |
Unrealized | ||||
Gains (Losses) | ||||
on Securities | ||||
Available-for-Sale | ||||
(In Thousands) | ||||
Balance, January 1, 2022 | $ | 3,493 | ||
Other comprehensive loss, before reclassifications and income taxes | (17,067 | ) | ||
Amounts reclassified from accumulated other comprehensive income, before income taxes | 0 | |||
Income tax benefit | 4,494 | |||
Total other comprehensive loss | (12,573 | ) | ||
Balance, March 31, 2022 | $ | (9,080 | ) | |
Balance, January 1, 2021 | $ | 5,851 | ||
Other comprehensive loss, before reclassifications and income taxes | (2,572 | ) | ||
Amounts reclassified from accumulated other comprehensive income, before income taxes | 0 | |||
Income tax benefit | 677 | |||
Total other comprehensive loss | (1,895 | ) | ||
Balance, March 31, 2021 | $ | 3,956 |
NOTE 8.EARNINGS PER SHARE
The computations of basic and diluted earnings per share are as follows:
Three Months Ended | ||||||||
March 31, | ||||||||
2022 | 2021 | |||||||
(Dollars in Thousands, Except Per Share Data) | ||||||||
Basic weighted average shares outstanding | 6,506,133 | 6,775,447 | ||||||
Dilutive effect of stock compensation | 12,714 | 13,232 | ||||||
Diluted weighted average shares outstanding | 6,518,847 | 6,788,679 | ||||||
Net income available to common shareholders | $ | 2,216 | $ | 5,265 | ||||
Basic earnings per share | $ | 0.34 | $ | 0.78 | ||||
Diluted earnings per share | $ | 0.34 | $ | 0.78 |
There were 0 anti-dilutive shares at March 31, 2022 and December 31, 2021.
NOTE 9. DERIVATIVES AND HEDGING ACTIVITIES
NOTE 10. DERIVATIVES AND HEDGING ACTIVITIES
Mortgage Loan Commitments
Mortgage loan commitments are referred to as derivative loan commitments if the loan that will result from exercise of the commitment will be held-for-sale upon funding. The Company enters into commitments to fund residentialoriginate and sell mortgage loans at specified times in the future, with the intention that these loans will subsequently be sold in the secondary market. A mortgage loan commitment binds the Companyloans. The Bank uses derivatives to lend funds to a potential borrower at a specified interest rate and within a specified period of time, generally up to 60 days after inception of the rate lock.
Interest Rate Lock Commitments
Outstanding derivative loan commitments expose the Company tohedge the risk that the price of the loans arising from exercise of the loan commitment might decline from inception of the rate lock to funding of the loan due to increaseschanges in mortgage interest rates. If interest rates increase, the value of these loan commitments decreases. Conversely, if interest rates decrease, the value of these loan commitments increases. The notional amountfair values of interest rate lock commitments was $31,933,000 and $19,738,000mortgage loans held-for-sale. An optimal amount of mortgage loans are sold directly into bulk commitments with investors at September 30, 2017the 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 December 31, 2016, respectively. Thethe remaining balance of locked loans are hedged using To-Be-Announced (“TBA”) mortgage-backed securities or bulk mandatory forward loan sale commitments.
Derivatives are accounted for as free-standing or economic derivatives and are measured at fair value. Derivatives are recorded as either other assets or other liabilities on the condensed consolidated statements of condition.
Derivatives are summarized as follows:
March 31, 2022 | December 31, 2021 | |||||||||||||||||||||||
Notional | Fair Value | Notional | Fair Value | |||||||||||||||||||||
Amount | Asset | Liability | Amount | Asset | Liability | |||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||
Interest rate lock commitments | $ | 83,746 | $ | 91 | $ | 0 | $ | 84,674 | $ | 1,218 | $ | 0 | ||||||||||||
Forward TBA mortgage-backed securities | 75,000 | 1,093 | 0 | 51,000 | 0 | 94 |
Changes in the fair value of such commitments was insignificant.the derivatives are recorded in mortgage banking, net within noninterest income on the condensed consolidated statements of income.Net losses of $60,000 and $1,283,000 were recorded for the three months ended March 31, 2022 and 2021, respectively.
NOTE 10. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company has no other off-balance-sheet arrangements or transactions with unconsolidated, special purpose entities that would exposeFair value is the Company to liability that is not reflected on the face of the financial statements.
NOTE 11. FAIR VALUE DISCLOSURES
FASB ASC 820 defines fair value as theexchange price that would be received to sellfor an asset or paid to transfer a liability in an orderly transaction between market participants. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs(exit price) in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. The priceliability in an orderly transaction between market participants on the principal (or most advantageous) market used to measuremeasurement date.
Assets and liabilities that are measured at fair value are grouped in three levels within the fair value of the asset or liability shall not be adjusted for transaction costs. An orderly transaction is a transaction that assumes exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets and liabilities; it is not a forced transaction. Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact and, (iv) willing to transact.
FASB ASC 820 requires the use of valuation techniques that are consistent with the market approach, the income approach and/or the cost approach. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets and liabilities. The income approach uses valuation techniques to convert future amounts, such as cash flows or earnings, to a single present amount on a discounted basis. The cost approach ishierarchy based on the amount that currently would be required to replacemarkets in which the service capacityassets and liabilities are traded and the reliability of an asset (replacement costs). Valuation techniques should be consistently applied.
Inputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability. Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources, or unobservable, meaning those that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. In that regard, FASB ASC 820 establishes aused to determine fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.value.
The fair value hierarchy is as follows:
Level 1 Inputs - Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date, or convert to cash in the short term.
■ | Level 1 Inputs – Valuations are based on unadjusted quoted prices in active markets for identical assets or liabilities. |
Level 2 Inputs - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (for example, interest rates, volatilities, prepayment speeds, loss severities, credit risks and default rates) or inputs that are derived principally from or corroborated by observable market data by correlation or other means.
■ | 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. |
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 11. FAIR VALUE DISCLOSURES – continued
Level 3 Inputs - Significant unobservable inputs that reflect an entity’s own assumptions that market participants would use in pricing the assets or liabilities.
■ | 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.
In general, fair value is based upon quoted market prices, where available. If such quoted market prices are not available, fair value is based upon internally developed models that primarily use, as inputs, observable market-based parameters. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. While management believes the Company’s valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.
Available-for-SaleAvailable-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 theselevel 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, among other things.conditions.
Loans Held-for-Sale – These loans are reported at fair value. Fair value is determined based on expected proceeds based on committed sales contracts and commitments of similar loans if not already committed and are considered Level 2 inputs.
Derivative Instruments – The fair value of the interest rate lock commitments, forward TBA mortgage-backed securities and mandatory forward commitments are estimated using quoted or published market prices for similar instruments and adjusted for factors such as pull-through rate assumptions based on historical information, where appropriate. Interest rate lock commitments are considered Level 3 inputs and forward TBA mortgage-backed securities and mandatory forward commitments are considered Level 2 inputs.
Impaired Loans– Impaired loans are reported at the fair value of the underlying collateral if repayment is expected solely from the collateral.collateral or using a discounted cash flow if the loan is not collateral dependent. Collateral values are estimated using Level 3 inputs based on internally customized discounting criteria.
Loans Held-for-
Sale – These loans are reported at the lower of cost or fair value. Fair value is determined based on expected proceeds based on sales contractsReal Estate and commitments and are considered Level 2 inputs.
Other Repossessed Assets – Fair values are valueddetermined at the time the loan is foreclosed upon and the asset is transferred from loans. The value is based upon primary primarily on third party appraisals, less costs to sell. The appraisalssell and are generally discounted based on management’s historical knowledge, changes in market conditions from the time of valuation, and/or management’s expertise and knowledge of the client and client’s business. Such discounts are typically significant and result inconsidered Level 3 classification of the inputs for determining fair value. Repossessed assets are reviewed and evaluated on at least a quarterly basisperiodically for additional impairment and adjusted accordingly,accordingly.
Mortgage Servicing Rights– The fair value of mortgage servicing rights are estimated using net present value of expected cash flows based on same or similara third party model that incorporates industry assumptions and is adjusted for factors above.such as prepayment speeds and are considered Level 3 inputs.
NOTE 11. 10.FAIR VALUE DISCLOSURES OF FINANCIAL INSTRUMENTS– continued continued
The following tablestables summarize financial assets and financial liabilities measured at fair value on a recurring basis, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value.
September 30, 2017 | March 31, 2022 | |||||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total Fair | Level 1 | Level 2 | Level 3 | Total Fair | |||||||||||||||||||||||||
Inputs | Inputs | Inputs | Value | Inputs | Inputs | Inputs | Value | |||||||||||||||||||||||||
(In Thousands) | (In Thousands) | |||||||||||||||||||||||||||||||
Financial assets: | ||||||||||||||||||||||||||||||||
Available-for-sale securities | ||||||||||||||||||||||||||||||||
U.S. government and agency | $ | - | $ | 4,037 | $ | - | $ | 4,037 | ||||||||||||||||||||||||
U.S. government obligations | $ | 0 | $ | 1,425 | $ | 0 | $ | 1,425 | ||||||||||||||||||||||||
U.S. treasury obligations | 69,487 | 0 | 0 | 69,487 | ||||||||||||||||||||||||||||
Municipal obligations | - | 65,365 | - | 65,365 | 0 | 111,280 | 0 | 111,280 | ||||||||||||||||||||||||
Corporate obligations | - | 9,607 | - | 9,607 | 0 | 6,274 | 0 | 6,274 | ||||||||||||||||||||||||
MBSs - government-backed | - | 26,527 | - | 26,527 | ||||||||||||||||||||||||||||
CMOs - government-backed | - | 15,231 | - | 15,231 | ||||||||||||||||||||||||||||
Mortgage-backed securities | 0 | 13,125 | 0 | 13,125 | ||||||||||||||||||||||||||||
Collateralized mortgage obligations | 0 | 58,799 | 0 | 58,799 | ||||||||||||||||||||||||||||
Asset-backed securities | 0 | 4,245 | 0 | 4,245 | ||||||||||||||||||||||||||||
Loans held-for-sale | - | 9,606 | - | 9,606 | 0 | 22,295 | 0 | 22,295 | ||||||||||||||||||||||||
Interest rate lock commitments | 0 | 0 | 91 | 91 | ||||||||||||||||||||||||||||
Forward TBA mortgage-backed securities | 0 | 1,093 | 0 | 1,093 |
December 31, 2016 | December 31, 2021 | |||||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total Fair | Level 1 | Level 2 | Level 3 | Total Fair | |||||||||||||||||||||||||
Inputs | Inputs | Inputs | Value | Inputs | Inputs | Inputs | Value | |||||||||||||||||||||||||
(In Thousands) | (In Thousands) | |||||||||||||||||||||||||||||||
Financial assets: | ||||||||||||||||||||||||||||||||
Available-for-sale securities | ||||||||||||||||||||||||||||||||
U.S. government and agency | $ | - | $ | 5,608 | $ | - | $ | 5,608 | ||||||||||||||||||||||||
U.S. government obligations | $ | 0 | $ | 1,633 | $ | 0 | $ | 1,633 | ||||||||||||||||||||||||
U.S. treasury obligations | 53,183 | 0 | 0 | 53,183 | ||||||||||||||||||||||||||||
Municipal obligations | - | 67,664 | - | 67,664 | 0 | 123,667 | 0 | 123,667 | ||||||||||||||||||||||||
Corporate obligations | - | 9,307 | - | 9,307 | 0 | 9,336 | 0 | 9,336 | ||||||||||||||||||||||||
MBSs - government-backed | - | 29,512 | - | 29,512 | ||||||||||||||||||||||||||||
CMOs - government-backed | - | 16,345 | - | 16,345 | ||||||||||||||||||||||||||||
Mortgage-backed securities | 0 | 14,636 | 0 | 14,636 | ||||||||||||||||||||||||||||
Collateralized mortgage obligations | 0 | 63,067 | 0 | 63,067 | ||||||||||||||||||||||||||||
Asset-backed securities | 0 | 5,740 | 0 | 5,740 | ||||||||||||||||||||||||||||
Loans held-for-sale | - | 18,230 | - | 18,230 | 0 | 25,819 | 0 | 25,819 | ||||||||||||||||||||||||
Interest rate lock commitments | 0 | 0 | 1,218 | 1,218 | ||||||||||||||||||||||||||||
Financial liabilities: | ||||||||||||||||||||||||||||||||
Forward TBA mortgage-backed securities | 0 | 94 | 0 | 94 |
NOTE 10. FAIR VALUE OF FINANCIAL INSTRUMENTS – continued
NOTE 11. FAIR VALUE DISCLOSURES - continued
Certain financial assets and financial liabilities aremay be measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis butbasis. These assets are subject to fair value adjustments in certain circumstances (for example, when there is evidencethat result from the application of impairment).lower of cost or fair value accounting or write-downs of individual assets, such as impaired loans that are collateral dependent, real estate and other repossessed assets and mortgage servicing rights.
The following table summarizes financial assets and financial liabilities measured at fair value on a nonrecurring basis, segregated by the level of the valuation inputs within the for which a nonrecurring change in fair value hierarchy utilized to measure fair value:has been recorded during the reporting periods presented:
September 30, 2017 | March 31, 2022 | |||||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total Fair | Level 1 | Level 2 | Level 3 | Total Fair | |||||||||||||||||||||||||
Inputs | Inputs | Inputs | Value | Inputs | Inputs | Inputs | Value | |||||||||||||||||||||||||
(In Thousands) | (In Thousands) | |||||||||||||||||||||||||||||||
Impaired loans | $ | - | $ | - | $ | 1,364 | $ | 1,364 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||||||||
Repossessed assets | - | - | 527 | 527 | ||||||||||||||||||||||||||||
Real estate and other repossessed assets | 0 | 0 | 346 | 346 | ||||||||||||||||||||||||||||
Mortgage servicing rights | 0 | 0 | 1,653 | 1,653 |
December 31, 2016 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total Fair | |||||||||||||
Inputs | Inputs | Inputs | Value | |||||||||||||
(In Thousands) | ||||||||||||||||
Impaired loans | $ | - | $ | - | $ | 649 | $ | 649 | ||||||||
Repossessed assets | - | - | 825 | 825 |
As of September 30, 2017, certain impaired loans were remeasured and reported at fair value through a specific valuation allowance allocation of the allowance for possible loan losses based upon the fair value of the underlying collateral. Impaired loans with a carrying value of $1,396,000 were reduced by specific valuation allowance allocations totaling $32,000 to a total reported fair value of $1,364,000 based on collateral valuations utilizing Level 3 valuation inputs.
As of December 31, 2016, certain impaired loans were remeasured and reported at fair value through a specific valuation allowance allocation of the allowance for possible loan losses based upon the fair value of the underlying collateral. Impaired loans with a carrying value of $657,000 were reduced by specific valuation allowance allocations totaling $8,000 to a total reported fair value of $649,000 based on collateral valuations utilizing Level 3 valuation inputs.
December 31, 2021 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total Fair | |||||||||||||
Inputs | Inputs | Inputs | Value | |||||||||||||
(In Thousands) | ||||||||||||||||
Impaired loans | $ | 0 | $ | 0 | $ | 376 | $ | 376 | ||||||||
Real estate and other repossessed assets | 0 | 0 | 4 | $ | 4 | |||||||||||
Mortgage servicing rights | 0 | 0 | 14,686 | $ | 14,686 |
The following table represents the Bank’sBanks’s Level 3 financial assets and liabilities, the valuation techniques used to measure the fair value of those financial assets and liabilities, and the significant unobservable inputs and the ranges of values for those inputs.
Fair Value at | Principal | Significant | Range of | ||||||||||||||
September 30, | December 31, | Valuation | Unobservable | Signficant Input | |||||||||||||
Instrument | 2017 | 2016 | Technique | Inputs | Values | ||||||||||||
(Dollars In Thousands) | |||||||||||||||||
Impaired loans | $ | 1,364 | $ | 649 | Appraisal of collateral(1) | Appraisal adjustments | 10 | - | 30% | ||||||||
Repossessed assets | $ | 527 | $ | 825 | Appraisal of collateral(1)(3) | Liquidation expenses(2) | 10 | - | 30% |