UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

~~[X]~~☒

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

For the quarterly period ended September 30, 2022

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

~~For the quarterly period ended~~ ~~September 30, 2017~~

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

For the transition period from _____ to _____.

Commission file number 1-34682

Eagle Bancorp Montana, Inc.

(Exact name of 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 ~~[X]~~

☒

~~(Do not check if 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

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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

5~~,000,450~~7,980,282 shares outstanding

As of ~~November 13, 2017~~October 31, 2022

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EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

PART I.	~~Financial Information~~FINANCIAL INFORMATION	PAGE

~~Item1.~~Item 1.	Financial Statements (Unaudited)

	Condensed Consolidated Statements of Financial Condition as of September 30, ~~2017~~2022 and December 31, ~~2016~~2021	1

	Condensed Consolidated Statements of Income for the three and nine months ended September 30, ~~2017~~2022 and ~~2016~~2021	3

	Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2022 and 2021	5

	Condensed Consolidated Statements of Changes in Shareholders' Equity for the three and nine months ended September 30, ~~2017~~2022 and ~~2016~~2021	5	6

	~~Consolidated Statements of Changes in Shareholders' Equity for the nine months ended September 30, 2017 and 2016~~	6

	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, ~~2017~~2022 and ~~2016~~2021	7


	Notes to ~~the Unaudited~~Condensed Consolidated Financial Statements (Unaudited)	9	9

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	3126

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4539

Item 4.	Controls and Procedures	4640

~~PART II.~~
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	4741
Item 1A.	Risk Factors	47	41
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4741
Item 3.	Defaults Upon Senior Securities	4841
Item 4.	Mine Safety Disclosures	4841
Item 5.	Other Information	4842
Item 6.	Exhibits	48

~~Signatures~~42	49

~~Exhibit 31.1~~

~~Exhibit 31.2~~Signatures		43

~~Exhibit 32.1~~

~~101.INS XBRL Instance Document~~

~~101.SCH XBRL Taxonomy Extension Schema Document~~

~~101.CAL XBRL Taxonomy Extension Calculation Linkbase Document~~

~~101.DEF XBRL Taxonomy Extension Definition Linkbase Document~~

~~101.LAB XBRL Taxonomy Extension Label Linkbase Document~~

~~101.PRE XBRL Taxonomy Extension Presentation Linkbase Document~~

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EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES

Cautionary Note Regarding Forward-Looking Statements

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

●

statements of our goals, intentions and expectations;

●

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

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

	●	statements regarding the ~~asset quality of our loan and investment portfolios; and~~current global COVID-19 pandemic;
●	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;

	●	~~general~~the negative impacts and disruptions resulting from the ongoing novel coronavirus, or COVID-19, and the steps taken by governmental and other authorities to contain, mitigate and combat the pandemic, on the economies and communities we serve, which may likely have an adverse impact on our credit portfolio, goodwill, stock price, borrowers and the economy as a whole both globally and domestically;
	●	local, regional, national and international economic and market conditions ~~either nationally or in~~and events and the impact they may have on us, our ~~market areas;~~customers and our assets and liabilities;

●

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

●

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

●

~~loss of customers checking and savings account deposits as customers pursue other higher-yielding investments, particularly in a rising rate environment;~~

●

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

●

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

●

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

●

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

●

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

●

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

●

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

●

political developments, uncertainties or instability;

●

our ability to enter new markets successfully and capitalize on growth opportunities;

	●	the need to retain capital for strategic or regulatory reasons;
	●	changes in consumer spending, borrowing and savings habits;
	●	our ability to ~~successfully integrate acquired businesses including~~continue to increase and manage our ~~proposed acquisition of TwinCo, Inc.;~~commercial and residential real estate, multi-family and commercial business loans;

●

~~changes in consumer spending, borrowing~~possible impairments of securities held by us, including those issued by government entities and ~~savings habits;~~government sponsored enterprises;

●

the ~~inability~~level of future deposit insurance premium assessments;

●

our ~~risk management controls~~ability to ~~prevent or detect all errors or fraudulent acts;~~

implement new technologies and maintain secure and reliable technology systems;

●

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

●

~~possible impairments of securities held by us, including those issued by government entities and government sponsored enterprises;~~

●

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

●

~~the level of future deposit insurance premium assessments;~~

●

~~continued low interest rate environment or interest rate volatility;~~

●

~~the Company’s~~ ability to develop and maintain secure and reliable information technology systems, ~~keep pace with technological changes,~~ effectively defend ~~itself~~ourselves against cyberattacks, or recover from breaches to ~~its~~our cybersecurity infrastructure;

●

the ~~impact~~failure of assumptions underlying the ~~restructuring~~establishment of ~~the U.S. financial~~allowance for possible loan losses and ~~regulatory system;~~other estimates;

●

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

●

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

●

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

Because of these and other uncertainties, our actual future results may be materially different from the results indicated by these ~~forward-looking~~forward-looking statements. For a further list and description of various risks, relevant factors and uncertainties that could cause future results or events to differ materially from those expressed or implied in our forward-looking statements, see the Part II, Item 1A, “Risk Factors” and Part I, Item 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.

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EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Dollars in Thousands, Except for Per Share Data)

(Unaudited)

	September 30,		December 31,
	2022		2021
ASSETS:
Cash and due from banks	$	22,154	$	10,938
Interest-bearing deposits in banks		3,043		43,669
Federal funds sold		-		6,827
Total cash and cash equivalents		25,197		61,434

Securities available-for-sale		351,949		271,262
Federal Home Loan Bank ("FHLB") stock		2,939		1,702
Federal Reserve Bank ("FRB") stock		4,206		2,974
Mortgage loans held-for-sale, at fair value		24,408		25,819
Loans receivable, net of allowance for loan losses of $13,850 at September 30, 2022 and $12,500 at December 31, 2021		1,298,304		920,639
Accrued interest and dividends receivable		10,778		5,751
Mortgage servicing rights, net		15,141		13,693
Assets held-for-sale, at fair value		2,041		-
Premises and equipment, net		79,374		67,266
Cash surrender value of life insurance, net		45,845		36,474
Goodwill		34,740		20,798
Core deposit intangible, net		7,895		1,780
Other assets		21,103		6,334

Total assets	$	1,923,920	$	1,435,926

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

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EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Continued)

(Dollars in Thousands, Except for Per Share Data)

(Unaudited)

	September 30,			December 31,
	2022			2021
LIABILITIES:
Deposit accounts:
Noninterest-bearing	$	507,034		$	368,846
Interest-bearing		1,167,216			853,703
Total deposits		1,674,250			1,222,549

Accrued expenses and other liabilities		23,748			21,779
FHLB advances and other borrowings		15,600			5,000
Other long-term debt:
Principal amount		60,155			30,155
Unamortized debt issuance costs		(1,107	)		(286	)
Total other long-term debt, net		59,048			29,869

Total liabilities		1,772,646			1,279,197

SHAREHOLDERS' EQUITY:
Preferred stock (par value $0.01 per share; 1,000,000 shares authorized; no shares issued or outstanding)		-			-
Common stock (par value $0.01 per share; 20,000,000 shares authorized; 8,507,429 and 7,110,833 shares issued; 7,986,890 and 6,794,811 shares outstanding at September 30, 2022 and December 31, 2021, respectively)		85			71
Additional paid-in capital		109,488			80,832
Unallocated common stock held by Employee Stock Ownership Plan ("ESOP")		(5,300	)		(5,729	)
Treasury stock, at cost (520,539 and 316,022 shares at September 30, 2022 and December 31, 2021, respectively)		(11,627	)		(7,321	)
Retained earnings		89,502			85,383
Accumulated other comprehensive (loss) income, net of tax		(30,874	)		3,493
Total shareholders' equity		151,274			156,729

Total liabilities and shareholders' equity	$	1,923,920		$	1,435,926

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

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EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Dollars in Thousands, Except for Per Share Data)

(Unaudited)

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022			2021
INTEREST AND DIVIDEND INCOME:
Interest and fees on loans	$	16,665	$	11,619	$	42,933		$	33,660
Securities available-for-sale		2,555		1,094		5,863			2,989
FHLB and FRB dividends		63		62		160			194
Other interest income		59		32		206			90
Total interest and dividend income		19,342		12,807		49,162			36,933

INTEREST EXPENSE:
Deposits		717		350		1,451			1,118
FHLB advances and other borrowings		136		37		157			152
Other long-term debt		602		389		1,855			1,168
Total interest expense		1,455		776		3,463			2,438

NET INTEREST INCOME		17,887		12,031		45,699			34,495

Loan loss provision		517		255		1,654			576

NET INTEREST INCOME AFTER LOAN LOSS PROVISION		17,370		11,776		44,045			33,919

NONINTEREST INCOME:
Service charges on deposit accounts		498		318		1,223			884
Mortgage banking, net		4,447		11,665		16,183			33,360
Interchange and ATM fees		594		570		1,668			1,489
Appreciation in cash surrender value of life insurance		291		181		748			512
Net gain (loss) on sale of available-for-sale securities		-		11		(6	)		11
Other noninterest income		1,587		608		3,236			1,798
Total noninterest income	$	7,417	$	13,353	$	23,052		$	38,054

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

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EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Continued)

(Dollars in Thousands, Except for Per Share Data)

(Unaudited)

		Three Months Ended				Nine Months Ended
		September 30,				September 30,
		2022		2021		2022		2021
NONINTEREST EXPENSE:
Salaries and employee benefits		$	11,699	$	12,262	$	33,511	$	37,093
Occupancy and equipment expense			1,946		1,665		5,441		4,746
Data processing			1,964		1,171		4,628		3,666
Advertising			464		326		1,052		850
Amortization of core deposit intangible			333		144		895		431
Loan costs			491		654		1,624		2,126
Federal Deposit Insurance Corporation ("FDIC") insurance premiums			93		81		330		243
Professional and examination fees			420		790		1,098		1,400
Acquisition costs			103		35		2,296		35
Other noninterest expense			3,151		1,672		6,783		4,460
Total noninterest expense	��		20,664		18,800		57,658		55,050

INCOME BEFORE PROVISION FOR INCOME TAXES			4,123		6,329		9,439		16,923

Provision for income taxes			1,031		1,583		2,360		4,231

NET INCOME		$	3,092	$	4,746	$	7,079	$	12,692

BASIC EARNINGS PER SHARE		$	0.40	$	0.73	$	0.98	$	1.90

DILUTED EARNINGS PER SHARE		$	0.40	$	0.73	$	0.98	$	1.89

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

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EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Dollars in Thousands)

(Unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2022			2021			2022			2021

NET INCOME	$	3,092		$	4,746		$	7,079		$	12,692

OTHER ITEMS OF COMPREHENSIVE (LOSS) INCOME BEFORE TAX:
Change in fair value of investment securities available-for-sale		(16,009	)		(578	)		(46,657	)		(1,818	)
Reclassification for net realized (gains) losses on investment securities available-for-sale		-			(11	)		6			(11	)
Total other comprehensive loss		(16,009	)		(589	)		(46,651	)		(1,829	)

Income tax benefit related to securities available-for-sale		4,216			155			12,284			482

COMPREHENSIVE (LOSS) INCOME	$	(8,701	)	$	4,312		$	(27,288	)	$	11,345

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

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EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

For the Three and Nine Months Ended September 30, 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.~~

~~-1-~~

																	*ACCUMULATED*
					*ADDITIONAL*			*UNALLOCATED*									*OTHER*
	*PREFERRED*		*COMMON*		*PAID-IN*			*ESOP*			*TREASURY*			*RETAINED*			*COMPREHENSIVE*
	*STOCK*		*STOCK*		*CAPITAL*			*SHARES*			*STOCK*			*EARNINGS*			*(LOSS) INCOME*			*TOTAL*

Balance at July 1, 2022	$	-	$	85	$	109,410		$	(5,443	)	$	(9,691	)	$	87,510		$	(19,081	)	$	162,790
Net income		-		-		-			-			-			3,092			-			3,092
Other comprehensive loss		-		-		-			-			-			-			(11,793	)		(11,793	)
Dividends paid ($0.1375 per share)		-		-		-			-			-			(1,100	)		-			(1,100	)
Stock compensation expense		-		-		135			-			-			-			-			135
ESOP shares allocated (5,997 shares)		-		-		(57	)		143			-			-			-			86
Treasury stock purchased (99,517 shares at $19.45 average cost per share)		-		-		-			-			(1,936	)		-			-			(1,936	)
Balance at September 30, 2022	$	-	$	85	$	109,488		$	(5,300	)	$	(11,627	)	$	89,502		$	(30,874	)	$	151,274

Balance at July 1, 2021	$	-	$	71	$	80,820		$	(6,061	)	$	(7,631	)	$	80,607		$	4,938		$	152,744
Net income		-		-		-			-			-			4,746			-			4,746
Other comprehensive loss		-		-		-			-			-			-			(434	)		(434	)
Dividends paid ($0.1250 per share)		-		-		-			-			-			(848	)		-			(848	)
Stock compensation expense		-		-		90			-			-			-			-			90
ESOP shares allocated (9,831) shares)		-		-		47			178			-			-			-			225
Balance at September 30, 2021	$	-	$	71	$	80,957		$	(5,883	)	$	(7,631	)	$	84,505		$	4,504		$	156,523

Balance at January 1, 2022	$	-	$	71	$	80,832		$	(5,729	)	$	(7,321	)	$	85,383		$	3,493		$	156,729
Net income		-		-		-			-			-			7,079			-			7,079
Other comprehensive loss		-		-		-			-			-			-			(34,367	)		(34,367	)
Dividends paid ($0.3875 per share)		-		-		-			-			-			(2,960	)		-			(2,960	)
Stock issued in connection with First Community Bancorp, Inc. acquisition		-		14		28,337			-			-			-			-			28,351
Stock compensation expense		-		-		405			-			-			-			-			405
ESOP shares allocated (17,991 shares)		-		-		(86	)		429			-			-			-			343
Treasury stock purchased (204,517 shares at $21.05 average cost per share)		-		-		-			-			(4,306	)		-			-			(4,306	)
Balance at September 30, 2022	$	-	$	85	$	109,488		$	(5,300	)	$	(11,627	)	$	89,502		$	(30,874	)	$	151,274

Balance at January 1, 2021	$	-	$	71	$	77,602		$	(145	)	$	(4,423	)	$	73,982		$	5,851		$	152,938
Net income		-		-		-			-			-			12,692			-			12,692
Other comprehensive loss		-		-		-			-			-			-			(1,347	)		(1,347	)
Dividends paid ($0.3200 per share)		-		-		-			-			-			(2,169	)		-			(2,169	)
Stock compensation expense		-		-		270			-			-			-			-			270
ESOP shares allocated (18,139 shares)		-		-		156			262			-			-			-			418
Treasury stock purchased through tender offer (250,000 shares at $25.12 average cost per share)		-		-		-			-			(6,279	)		-			-			(6,279	)
Sale of shares to ESOP (251,256 shares at $23.88 average price per share)		-				2,929			(6,000	)		3,071			-			-			-
Balance at September 30, 2021	$	-	$	71	$	80,957		$	(5,883	)	$	(7,631	)	$	84,505		$	4,504		$	156,523

~~Table of Contents~~

~~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.

~~-2-~~

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Table of Contents

EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF ~~INCOME~~CASH 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

	Nine Months Ended
	September 30,
	2022			2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	7,079		$	12,692
Adjustments to reconcile net income to net cash provided by operating activities:
Loan loss provision		1,654			576
Recovery of mortgage servicing rights		(56	)		(702	)
Depreciation		2,615			2,137
Net amortization of investment securities premiums and discounts		1,182			874
Amortization of mortgage servicing rights		1,710			2,881
Amortization of right-of-use assets		512			457
Amortization of core deposit intangible		895			431
Compensation expense related to restricted stock awards		405			270
ESOP compensation expense for allocated shares		343			418
Net gain on sale of loans		(15,645	)		(36,261	)
Originations of loans held-for-sale		(449,013	)		(814,854	)
Proceeds from sales of loans held-for-sale		466,069			863,671
Net loss (gain) on sale of available-for-sale securities		6			(11	)
Net gain on sale of real estate owned and other repossessed assets		(203	)		-
Net gain on sale/disposal of premises and equipment		(1	)		(70	)
Net appreciation in cash surrender value of life insurance		(748	)		(512	)
Net change in:
Accrued interest and dividends receivable		(2,273	)		(453	)
Other assets		241			1,707
Accrued expenses and other liabilities		891			(429	)
Net cash provided by operating activities		15,663			32,822

CASH FLOWS FROM INVESTING ACTIVITIES:
Activity in available-for-sale securities:
Sales		43,794			3,910
Maturities, principal payments and calls		30,876			8,906
Purchases		(77,073	)		(95,762	)
FHLB stock (purchased) redeemed		(612	)		358
FRB stock purchased		(392	)		-
Net cash received from acquisition		13,397			-
Loan origination and principal collection, net		(191,855	)		(48,901	)
Purchases of bank owned life insurance		-			(8,000	)
Proceeds from sale of real estate and other repossessed assets acquired in settlement of loans		535			16
Proceeds from sale of premises and equipment		5			1,379
Purchases of premises and equipment, net		(10,733	)		(10,538	)
Net cash used in investing activities	$	(192,058	)	$	(148,632	)

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

~~-3-~~

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Table of Contents

EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF ~~INCOME~~CASH 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

	Nine Months Ended
	September 30,
	2022			2021
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits	$	130,594		$	161,466
Net decrease in repurchase agreements		(22,853	)		-
Net short-term advances from FHLB and other borrowings		15,600			-
Payments on long-term FHLB and other borrowings		(5,000	)		(12,070	)
Proceeds from issuance of subordinated debentures		40,000			-
Repayment of senior debt		(10,000	)		-
Payments for debt issuance costs		(917)			-
Purchase of treasury stock		(4,306	)		(6,279	)
Dividends paid		(2,960	)		(2,169	)
Net cash provided by financing activities		140,158			140,948

NET INCREASE IN CASH AND CASH EQUIVALENTS		(36,237	)		25,138

CASH AND CASH EQUIVALENTS, beginning of period		61,434			69,802

CASH AND CASH EQUIVALENTS, end of period	$	25,197		$	94,940


SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for interest	$	3,423		$	3,052
Cash paid during the period for income taxes		2,720			3,940

NONCASH INVESTING AND FINANCING ACTIVITIES:
Decrease in fair value of securities available-for-sale	$	(46,651	)	$	(1,829	)
Mortgage servicing rights recognized		3,102			5,015
Right-of-use assets obtained in exchange for lease liabilities		154			1,140
Loans transferred to real estate and other assets acquired in foreclosure		328			108
Stock issued in connection with acquisitions		28,351			-
Sale of shares from Eagle to ESOP in exchange for loan		-			6,000

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

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

~~-4-~~

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Table of Contents

EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES

~~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.~~

~~-5-~~

~~Table of Contents~~

~~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.~~

~~-6-~~

~~Table of Contents~~

~~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.~~

~~-7-~~

~~Table of Contents~~

~~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.~~

~~-8-~~

~~Table of Contents~~

~~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 PRESENTATION~~Organization

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

In 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 September 30, 2022 and December 31, 2021, respectively.

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

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

The Bank currently has 30 full-service branches. The Bank’s principal business is accepting deposits and, together with funds generated from operations and borrowings, investing in various types of loans and securities. The Bank also operated certain branches under the names Dutton State Bank, Farmers State Bank of Denton and The State Bank of Townsend. Effective January 2022, these branches were rebranded and are now only operating as Opportunity Bank of Montana.

Basis of Financial Statement Presentation and Use of Estimates

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with ~~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 ~~America~~Regulation S-X as promulgated by the Securities and Exchange Commission (“SEC”). It is recommended that these unaudited interim condensed consolidated financial statements be read in conjunction with the Company’s Annual Report on Form 10-K with all of the audited information and footnotes required by U.S. GAAP for ~~annual~~complete financial ~~statements. However, such information reflects all adjustments (consisting of normal recurring adjustments) which are, in~~statements 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 ~~our~~the 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 ~~month~~-month period ended September 30, ~~2017~~2022 are not necessarily indicative of the results to be expected for the year ending December 31, ~~2017~~ 2022 or any other period. ~~The unaudited~~In preparing condensed consolidated financial statements, management is required to make estimates and ~~notes presented herein should be read~~assumptions that affect the reported amounts of assets and liabilities as of the date of the condensed consolidated statement of financial condition and reported amounts of revenues and expenses during the reporting period. Actual results could differ from estimates. Material estimates that are particularly susceptible to significant change in ~~conjunction with~~ the ~~audited~~near term relate to the determination of the allowance for loan losses, mortgage servicing rights, the fair value of financial instruments, the valuation of goodwill and deferred tax assets and liabilities.

Principles of Consolidation

The condensed consolidated financial statements ~~and related notes thereto included in~~include 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~~shareholders’ equity.

- 9 -

Table of Contents

EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 2. MERGERS AND ACQUISITIONS

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

This transaction was accounted for under the ~~year ended December 31, 2016.~~acquisition method of accounting.

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

The ~~Company evaluated subsequent events~~following table summarizes the fair values of the assets acquired and liabilities assumed, consideration paid and the resulting goodwill.

	FCB
	April 30,
	2022
	(In Thousands)
Assets acquired:
Cash and cash equivalents	$	23,623
Securities available-for-sale		126,123
Loans receivable		190,894
Premises and equipment		6,393
Cash surrender value of life insurance		8,638
Core deposit intangible		7,004
Other assets		7,687
Total assets acquired	$	370,362

Liabilities assumed:
Deposits	$	321,107
Accrued expenses and other liabilities		1,767
Other borrowings		22,853
Total liabilities assumed	$	345,727

Net assets acquired	$	24,635

Consideration paid:
Cash	$	10,226
Common stock issued (1,396,596 shares)		28,351
Total consideration paid	$	38,577

Goodwill resulting from acquisition	$	13,942

Goodwill recorded for ~~potential recognition and/or disclosure~~ ~~through November 13, 2017~~the FCB acquisition during the three months ended June 30, 2022 was $13,942,000.

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

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

The total accretable discount on FCB acquired loans was $5,416,000 as of April 30, 2022. During the three and nine months ended September 30, 2022, accretion of the loan discount was $333,000 and $1,060,000, respectively. The remaining accretable loan discount was $4,352,000 as of September 30, 2022. Three impaired loans were acquired through the FCB acquisition with insignificant balances as of April 30, 2022.

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

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

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Table of Contents

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

NOTE 2. MERGERS AND ACQUISITIONS – continued

Direct costs related to the acquisition were expensed as incurred. The Company recorded acquisition costs related to FCB of $103,000 and $2,296,000 during the three and nine months ended September 30, 2022, respectively, and $35,000 during both the three and nine months ended September 30, 2021. Acquisition costs included professional fees and data processing expenses incurred related to the acquisitions.

Operations of acquired entities have been included in the condensed consolidated financial statements ~~were issued.~~since date of acquisition. The Company does not consider them as separate reporting segments and does not track the amount of revenues and net income attributable since acquisition. As such, it is impracticable to determine such amounts for the period from acquisition date through September 30, 2022.

The accompanying consolidated statements of income include the results of operations of FCB since the April 30, 2022 acquisition date. The following table presents unaudited pro forma results of operations for the three and nine months ended September 30, 2021 as if the acquisition had occurred on January 1, 2021. This pro forma information gives the effect to certain adjustments, including purchase accounting fair value adjustments and amortization of the core deposit intangible asset. The pro forma information does not necessarily reflect the results of operations that would have occurred had the Company purchased and assumed the assets and liabilities of FCB on January 1, 2021. Cost savings are also not reflected in the unaudited pro forma amounts for the three and nine months ended September 30, 2021.

	Three Months Ended		Nine Months Ended
	September 30, 2021		September 30, 2021
	(Dollars in Thousands, Except Per Share Data)		(Dollars in Thousands, Except Per Share Data)
Pro forma net income⁽¹⁾
Net interest income after loan loss provision	$	15,110	$	43,921
Noninterest income		14,946		42,833
Noninterest expense		22,104		64,962
Income before provision for income taxes		7,952		21,792
Income tax provision		1,988		5,448
Net income	$	5,964	$	16,344

Pro forma earnings per share⁽¹⁾
Basic earnings per share	$	0.91	$	2.44
Diluted earnings per share	$	0.91	$	2.44

Weighted average shares outstanding, basic		6,525,509		6,691,256
Weighted average shares outstanding, diluted		6,544,044		6,709,376

⁽¹⁾Significant assumptions utilized include the acquisition costs noted above and a 25.00% effective tax rate.

NOTE 3.2.INVESTMENT SECURITIES

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

	September 30, 2017									December 31, 2016									September 30, 2022									December 31, 2021
			Gross									Gross									Gross									Gross
	Amortized		Unrealized					Fair		Amortized		Unrealized					Fair		Amortized		Unrealized					Fair		Amortized		Unrealized					Fair
	Cost		Gains		(Losses)			Value		Cost		Gains		(Losses)			Value		Cost		Gains		(Losses)			Value		Cost		Gains		(Losses)			Value
	(In Thousands)																		(In Thousands)
Available-for-Sale:
U.S. government and agency obligations	$	4,049	$	12	$	(24	)	$	4,037	$	5,673	$	7	$	(72	)	$	5,608	$	2,674	$	3	$	(214	)	$	2,463	$	1,618	$	15	$	-		$	1,633
U.S. Treasury obligations																				63,708		-		(7,639	)		56,069		52,707		580		(104	)		53,183
Municipal obligations		64,748		1,032		(415	)		65,365		68,493		575		(1,404	)		67,664		191,252		9		(22,379	)		168,882		119,381		4,616		(330	)		123,667
Corporate obligations		9,610		33		(36	)		9,607		9,454		15		(162	)		9,307		7,239		2		(212	)		7,029		9,251		103		(18	)		9,336
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
Mortgage-backed securities																				32,729		1		(2,244	)		30,486		14,662		92		(118	)		14,636
Collateralized mortgage obligations																				92,450		-		(9,280	)		83,170		63,286		416		(635	)		63,067
Asset-backed securities																				3,808		46		(4	)		3,850		5,617		123		-			5,740
Total	$	120,041	$	1,541	$	(815	)	$	120,767	$	129,687	$	895	$	(2,146	)	$	128,436	$	393,860	$	61	$	(41,972	)	$	351,949	$	266,522	$	5,945	$	(1,205	)	$	271,262

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

NOTE 3.INVESTMENT SECURITIES – continued

Proceeds from sales of ~~available-for-sale~~available-for sale securities and the associated ~~gross~~ realized 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

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~~Table of Contents~~

~~EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~NOTE 2.~~~~INVESTMENT SECURITIES - continued~~

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022			2021
	(In Thousands)

Proceeds from sale of available-for-sale securities	$	-	$	3,910	$	43,794		$	3,910

Gross realized gain on sale of available-for-sale securities	$	-	$	11	$	-		$	11
Gross realized loss on sale of available-for-sale securities		-		-		(6	)		-
Net realized loss on sale of available-for-sale securities	$	-	$	11	$	(6	)	$	11

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				September 30, 2022
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
	(In Thousands)				(In Thousands)

Due in one year or less	$	3,158	$	3,157	$	18,821	$	18,694
Due from one to five years		6,651		6,716		19,187		18,552
Due from five to ten years		14,281		14,369		90,566		78,291
Due after ten years		54,317		54,767		140,107		122,756
		78,407		79,009		268,681		238,293
MBSs - government-backed		26,315		26,527
CMOs - government-backed		15,319		15,231
Mortgage-backed securities						32,729		30,486
Collateralized mortgage obligations						92,450		83,170
Total	$	120,041	$	120,767	$	393,860	$	351,949

As of September 30, 2022 and December 31, 2021, securities with a fair value of $59,927,000 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										September 30, 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 and agency obligations											$	1,739	$	(214	)	$	-	$	-
U.S. Treasury obligations												39,485		(4,861	)		16,584		(2,778	)
Municipal obligations		39,786		(1,392	)		634		(12	)		152,894		(18,422	)		12,821		(3,957	)
Corporate obligations		3,375		(15	)		4,918		(147	)		6,026		(212	)		-		-
MBSs and CMOs - government-backed		18,113		(405	)		7,855		(103	)
Mortgage-backed securities and collateralized mortgage obligations												80,102		(6,028	)		33,355		(5,496	)
Asset-backed securities												743		(4	)		-		-
Total	$	65,694	$	(1,884	)	$	13,407	$	(262	)	$	280,989	$	(29,741	)	$	62,760	$	(12,231	)

~~-10-~~

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EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 3.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 and agency obligations	$	-	$	-		$	-	$	-
U.S. Treasury obligations		19,301		(104	)		-		-
Municipal obligations		17,973		(330	)		-		-
Corporate obligations		2,982		(18	)		-		-
Mortgage-backed securities and collateralized mortgage obligations		50,002		(741	)		1,296		(12	)
Asset-backed securities		-		-			-		-
Total	$	90,258	$	(1,193	)	$	1,296	$	(12	)

~~Management evaluates~~Unrealized 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 ~~for~~and 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, no other-than-temporary impairment ~~at least quarterly,~~was recorded for the three months ended September 30, 2022 and ~~more frequently when economic~~2021, respectively or ~~market concerns warrant such evaluation. Consideration is given to (1)~~ the ~~length of time~~nine months ended September 30, 2022 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.2021, respectively. As of September 30, ~~2017~~2022 and December 31, ~~2016,~~2021, there were, respectively, 68400 and 9743 securities in an unrealized loss ~~position~~positions that were considered to be temporarily impaired and therefore an impairment charge has not been recorded.

NOTE 4.LOANS RECEIVABLE

AsLoans receivable consisted of the following:

	September 30,			December 31,
	2022			2021
	(In Thousands)
Real estate loans:
Residential 1-4 family	$	195,265		$	146,815
Commercial real estate		781,843			569,976

Other loans:
Home equity		67,409			51,748
Consumer		27,703			18,455
Commercial		241,608			147,870

Total		1,313,828			934,864

Deferred loan fees, net		(1,674	)		(1,725	)
Allowance for loan losses		(13,850	)		(12,500	)
Total loans, net	$	1,298,304		$	920,639

Included in the above are loans guaranteed by U.S. government agencies totaling $26,983,000 and $25,730,000 at September 30, ~~2017, 44 U.S. government~~2022 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.2021, respectively.

~~-11-~~

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EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 4.LOANS RECEIVABLE – continued

Allowance for loan losses activity was as follows:

	Residential		Commercial		Home
	1-4 Family		Real Estate		Equity			Consumer			Commercial			Total
	(In Thousands)
Allowance for loan losses:
Beginning balance, July 1, 2022	$	1,643	$	8,337	$	507		$	361		$	2,477		$	13,325
Charge-offs		-		-		-			(6	)		-			(6	)
Recoveries		-		6		-			3			5			14
Provision		17		400		1			1			98			517
Ending balance, September 30, 2022	$	1,660	$	8,743	$	508		$	359		$	2,580		$	13,850

Allowance for loan losses:
Beginning balance, January 1, 2022	$	1,596	$	7,470	$	533		$	365		$	2,536		$	12,500
Charge-offs		-		-		(32	)		(14	)		(299	)		(345	)
Recoveries		-		20		-			4			17			41
Provision		64		1,253		7			4			326			1,654
Ending balance, September 30, 2022	$	1,660	$	8,743	$	508		$	359		$	2,580		$	13,850

Ending balance, September 30, 2022 allocated to loans individually evaluated for impairment	$	199	$	-	$	-		$	-		$	79		$	278

Ending balance, September 30, 2022 allocated to loans collectively evaluated for impairment	$	1,461	$	8,743	$	508		$	359		$	2,501		$	13,572

Loans receivable:
Ending balance, September 30, 2022	$	195,265	$	781,843	$	67,409		$	27,703		$	241,608		$	1,313,828

Ending balance, September 30, 2022 of loans individually evaluated for impairment	$	687	$	1,173	$	97		$	34		$	1,655		$	3,646

Ending balance, September 30, 2022 of loans collectively evaluated for impairment	$	194,578	$	780,670	$	67,312		$	27,669		$	239,953		$	1,310,182

	Residential		Commercial			Home
	1-4 Family		Real Estate			Equity		Consumer			Commercial			Total
	(In Thousands)
Allowance for loan losses:
Beginning balance, July 1, 2021	$	1,544	$	7,127		$	522	$	363		$	2,344		$	11,900
Charge-offs		-		-			-		(4	)		-			(4	)
Recoveries		-		6			-		1			42			49
Provision		26		155			8		3			63			255
Ending balance, September 30, 2021	$	1,570	$	7,288		$	530	$	363		$	2,449		$	12,200

Allowance for loan losses:
Beginning balance, January 1, 2021	$	1,506	$	6,951		$	515	$	364		$	2,264		$	11,600
Charge-offs		-		(35	)		-		(14	)		(6	)		(55	)
Recoveries		-		15			-		7			57			79
Provision		64		357			15		6			134			576
Ending balance, September 30, 2021	$	1,570	$	7,288		$	530	$	363		$	2,449		$	12,200

Ending balance, September 30, 2021 allocated to loans individually evaluated for impairment	$	199	$	-		$	-	$	-		$	109		$	308

Ending balance, September 30, 2021 allocated to loans collectively evaluated for impairment	$	1,371	$	7,288		$	530	$	363		$	2,340		$	11,892

Loans receivable:
Ending balance, September 30, 2021	$	142,921	$	522,953		$	52,990	$	18,940		$	149,199		$	887,003

Ending balance, September 30, 2021 of loans individually evaluated for impairment	$	1,122	$	4,341		$	121	$	78		$	2,111		$	7,773

Ending balance, September 30, 2021 of loans collectively evaluated for impairment	$	141,799	$	518,612		$	52,869	$	18,862		$	147,088		$	879,230

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EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 4.LOANS RECEIVABLE – continued

Internal classification of the loan portfolio was as follows:

	September 30, 2022
			Special
	Pass		Mention		Substandard		Doubtful		Loss		Total
	(In Thousands)
Real estate loans:
Residential 1-4 family	$	136,505	$	519	$	575	$	199	$	-	$	137,798
Residential 1-4 family construction		57,467		-		-		-		-		57,467
Commercial real estate		491,965		12,954		1,797		-		-		506,716
Commercial construction and development		144,247		1,053		-		-		-		145,300
Farmland		125,169		2,450		2,208		-		-		129,827
Other loans:
Home equity		67,295		-		114		-		-		67,409
Consumer		27,653		2		48		-		-		27,703
Commercial		129,004		1,113		850		8		-		130,975
Agricultural		107,536		610		2,378		109		-		110,633
Total	$	1,286,841	$	18,701	$	7,970	$	316	$	-	$	1,313,828

	December 31, 2021
			Special
	Pass		Mention		Substandard		Doubtful		Loss		Total
	(In Thousands)
Real estate loans:
Residential 1-4 family	$	100,680	$	-	$	301		199	$	-	$	101,180
Residential 1-4 family construction		45,298		-		337		-		-		45,635
Commercial real estate		406,896		1,527		2,145		-		-		410,568
Commercial construction and development		92,403		-		-		-		-		92,403
Farmland		65,037		177		1,744		47		-		67,005
Other loans:
Home equity		51,614		-		134		-		-		51,748
Consumer		18,392		-		63		-		-		18,455
Commercial		100,881		130		524		-		-		101,535
Agricultural		44,550		332		1,444		9		-		46,335
Total	$	925,751	$	2,166	$	6,692	$	255	$	-	$	934,864

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

	September 30, 2022
	Loans Past Due and Still Accruing
			90 Days
	30-89 Days		and				Nonaccrual		Current		Total
	Past Due		Greater		Total		Loans		Loans		Loans
	(In Thousands)
Real estate loans:
Residential 1-4 family	$	452	$	-	$	452	$	687	$	136,659	$	137,798
Residential 1-4 family construction		149		-		149		-		57,318		57,467
Commercial real estate		76		-		76		403		506,237		506,716
Commercial construction and development		109		-		109		-		145,191		145,300
Farmland		31		-		31		770		129,026		129,827
Other loans:
Home equity		62		-		62		97		67,250		67,409
Consumer		121		-		121		34		27,548		27,703
Commercial		324		874		1,198		68		129,709		130,975
Agricultural		35		-		35		1,587		109,011		110,633
Total	$	1,359	$	874	$	2,233	$	3,646	$	1,307,949	$	1,313,828

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EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 3.4.LOANS RECEIVABLE – continued

~~Loans receivable consisted 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

~~Within the commercial real estate loan category above, $~~11,174,000 and $11,586,000 was guaranteed by the United States Department of Agriculture Rural Development, at September 30, 2017 and December 31, 2016, respectively. In addition, within the commercial loan category above, $527,000 and $1,588,000 were in loans originated through a syndication program where the business resides outside of Montana, at September 30, 2017, and December 31, 2016, respectively.

	December 31, 2021
	Loans Past Due and Still Accruing
			90 Days
	30-89 Days		and				Nonaccrual		Current		Total
	Past Due		Greater		Total		Loans		Loans		Loans
	(In Thousands)
Real estate loans:
Residential 1-4 family	$	21	$	-	$	21	$	616	$	100,543	$	101,180
Residential 1-4 family construction		-		-		-		337		45,298		45,635
Commercial real estate		788		-		788		497		409,283		410,568
Commercial construction and development		-		-		-		-		92,403		92,403
Farmland		61		-		61		1,630		65,314		67,005
Other loans:
Home equity		-		-		-		115		51,633		51,748
Consumer		55		-		55		62		18,338		18,455
Commercial		6		-		6		516		101,013		101,535
Agricultural		-		-		-		1,718		44,617		46,335
Total	$	931	$	-	$	931	$	5,491	$	928,442	$	934,864

The following ~~table~~ ~~includes~~tables include information regarding ~~nonperforming assets.~~impaired loans.

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 %

	September 30, 2022
			Unpaid
	Recorded		Principal		Related
	Investment		Balance		Allowance
	(In Thousands)
Real estate loans:
Residential 1-4 family	$	687	$	785	$	199
Residential 1-4 family construction		-		-		-
Commercial real estate		403		486		-
Commercial construction and development		-		-		-
Farmland		770		868		-
Other loans:
Home equity		97		122		-
Consumer		34		40		-
Commercial		68		124		-
Agricultural		1,587		1,686		79
Total	$	3,646	$	4,111	$	278

	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		-
Commercial real estate		2,024		2,078		-
Commercial construction and development		-		-		-
Farmland		1,630		1,721		-
Other loans:
Home equity		115		139		-
Consumer		62		73		-
Commercial		516		639		101
Agricultural		1,759		1,862		300
Total	$	7,059	$	7,602	$	600

~~-12-~~

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Table of Contents

EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 3.4.LOANS RECEIVABLE - – continued

A~~llowance for loan losses activity was as follows:~~

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, 2017
$ 999 $ 2,378 $ 252 $ 505 $ 225 $ 866 $ 5,225
Charge-offs
- - - - (41 ) (19 ) (60 )
Recoveries
- - - - 3 1 4
Provision
- 200 50 - 31 50 331
Ending balance, September 30, 2017
$ 999 $ 2,578 $ 302 $ 505 $ 218 $ 898 $ 5,500

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, 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

Loans receivable:

Ending balance, September 30, 2017
$ 109,250 $ 247,501 $ 29,760 $ 51,450 $ 14,696 $ 58,554 $ 511,211

Ending balance, September 30, 2017 of loans individually evaluated for impairment
$ 484 $ 451 $ - $ 242 $ 131 $ 88 $ 1,396

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

~~-13-~~

~~Table of Contents~~

~~EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES~~

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
	Average Recorded Investment				Average Recorded Investment
	(In Thousands)				(In Thousands)
Real estate loans:
Residential 1-4 family	$	629	$	715	$	652	$	994
Residential 1-4 family construction		-		337		169		337
Commercial real estate		403		2,239		1,213		2,166
Commercial construction and development		-		-		-		25
Farmland		770		2,125		1,200		2,259
Other loans:
Home equity		108		126		106		116
Consumer		35		78		48		114
Commercial		76		536		292		536
Agricultural		1,587		1,366		1,673		1,640
Total	$	3,608	$	7,522	$	5,353	$	8,187

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~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~~ R~~ated 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~~ R~~ated 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~~ R~~ated 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~~ R~~ated 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~~ R~~ated 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.

~~-14-~~

~~Table of Contents~~

~~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.

I~~nternal 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

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

~~-15-~~

~~Table of Contents~~

~~EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~NOTE~~ 3.~~LOANS RECEIVABLE - continued~~

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

September 30, 2017

Loans Past Due and Still Accruing

90 Days

30-89 Days

and

Non-Accrual

Current

Total

Past Due

Greater

Total

Loans

Loans

Loans

(In Thousands)

Residential mortgage (1-4 family)
$ 1,362 $ - $ 1,362 $ 484 $ 107,404 $ 109,250
Commercial real estate
500 - 500 451 246,550 247,501
Real estate construction
296 - 296 - 29,464 29,760
Home equity
83 - 83 242 51,125 51,450
Consumer
161 - 161 131 14,404 14,696
Commercial
177 - 177 88 58,289 58,554
Total
$ 2,579 $ - $ 2,579 $ 1,396 $ 507,236 $ 511,211

December 31, 2016

Loans Past Due and Still Accruing

90 Days

30-89 Days

and

Non-Accrual

Current

Total

Past Due

Greater

Total

Loans

Loans

Loans

(In Thousands)

Residential mortgage (1-4 family)
$ 975 $ 456 $ 1,431 $ 221 $ 111,610 $ 113,262
Commercial real estate
513 4 517 - 214,410 214,927
Real estate construction
- - - - 20,540 20,540
Home equity
365 35 400 297 48,321 49,018
Consumer
169 - 169 96 14,535 14,800
Commercial
249 - 249 - 54,457 54,706
Total
$ 2,271 $ 495 $ 2,766 $ 614 $ 463,873 $ 467,253

~~-16-~~

~~Table of Contents~~

~~EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~NOTE~~ 3.~~LOANS RECEIVABLE~~ - ~~continued~~

~~The following tables~~ ~~include information regarding impaired loans.~~

September 30, 2017

Unpaid

Recorded

Principal

Related

Investment

Balance

Allowance

(In Thousands)

With no related allowance:

Residential mortgage (1-4 family)
$ 484 $ 492 $ -
Commercial real estate
451 451 -
Real estate construction
- - -
Home equity
242 261 -
Consumer
99 148 -
Commercial
88 89 -

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 -
Total
$ 1,396 $ 1,473 $ 32

~~-17-~~

~~Table of Contents~~

~~EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~NOTE~~ 3.~~LOANS RECEIVABLE - continued~~

December 31, 2016

Unpaid

Recorded

Principal

Related

Investment

Balance

Allowance

(In Thousands)

With no related allowance:

Residential mortgage (1-4 family)
$ 221 $ 221 $ -
Commercial real estate
- - -
Real estate construction
- - -
Home equity
340 390 -
Consumer
88 135 -
Commercial
- - -

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
- - -
Total
$ 657 $ 754 $ 8

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~~ 2022 and ~~2016 are~~2021 is considered insignificant.

~~-18-~~

~~Table of Contents~~

~~EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES~~ Interest payments received on a cash basis related to impaired loans were $406,000 and $405,000 at September 30, 2022 and December 31, 2021, respectively.

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~NOTE~~ 4.~~TROUBLE~~D ~~DEBT RESTRUCTURINGS~~

AAs of September 30, 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~~$1,112,000 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 September 30, 2022, there werenonew TDR loans. During the nine months ended September 30, 2022, there were two new TDR loans.The ~~Company offers a variety~~recorded investments for both agricultural loans at the time of ~~modifications to borrowers. The modification categories offered can generally be described in~~restructure were $331,000 and $145,000. No charge-offs were incurred and the ~~following categories:~~loans are on nonaccrual status.

~~Rate Modification~~ ~~– A modification in which~~During the ~~interest rate is changed.~~

~~Term Modification~~ ~~– A modification in which~~three months ended September 30, 2021, there were two new TDR loans. The recorded investments for both farmland loans at the ~~maturity date, timing~~time of ~~payments, or frequency of payments is changed.~~

~~Interest Only Modification~~ ~~– A modification in which~~restructure were $391,000 and $70,000. No charge-offs were incurred and the ~~loan is converted to interest only payments~~loans are on nonaccrual status. During the nine months ended September 30, 2021, there were three new TDR loans. The recorded investments 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 one TDR loan at December 31, 2016 with a recorded investment of $43,000 and a $34,000 charge-off~~two farmland loans at time of ~~restructure.~~restructure as stated above were $391,000 and $70,000. The recorded investment for the commercial real estate loan at time of restructure during the first quarter of 2021 was $115,000. The commercial real estate loan was ~~a home equity loan and was on accrual status. The remaining recorded investment of $42,000 was paid-off~~paid off during the ~~quarter~~nine months ended ~~June~~September 30, ~~2017 and the $34,000 charge-off was recovered.~~2021.

~~The Bank’s policy is~~There were no loans modified as TDR's that ~~loans placed on non-accrual will typically remain on non-accrual status until all principal and interest payments are brought current and~~defaulted during 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, there were no new restructured loans.~~

2022. There ~~were no~~were two farmland loans modified as ~~a troubled debt restructured loan within the previous nine months for which there was a payment default~~TDRs that defaulted during the nine months ended September 30, ~~2017.~~

2022 where the default occurred within 12 months of restructuring. A default for purposes of this disclosure is a ~~troubled debt restructured~~TDR 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 $70,000at September 30, 2022 and the Company has initiated foreclosure on these loans.

As of September 30, ~~2017 and December 31, 2016,~~2022, the Company had no commitments to lend additional funds to loan customers whose terms had been modified in ~~trouble debt restructures.~~TDRs.

NOTE 5.MORTGAGE SERVICING RIGHTS

The Company is servicing mortgage loans for the benefit of others which are not included in the condensed consolidated statements of financial condition and have unpaid principal balances of $1,992,699,000 and $1,835,561,000 at September 30, 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 $1,225,000 and $1,060,000 for the three months ended September 30, 2022 and 2021, respectively. Mortgage loan servicing fees were $3,581,000 and $2,984,000 for the nine months ended September 30, 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 $18,000,000 and $11,613,000 at September 30, 2022 and December 31, 2021, respectively.

~~-19-~~

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Table of Contents

EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 5.5MORTGAGE SERVICING RIGHTS – continued

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

	As of or For the
	Three Months Ended
	September 30,
	2022			2021
	(In Thousands)
Mortgage servicing rights:
Beginning balance	$	14,809		$	12,232
Mortgage servicing rights capitalized		924			1,662
Amortization of mortgage servicing rights		(592	)		(863	)
Ending balance	$	15,141		$	13,031
Valuation allowance:
Beginning balance	$	-		$	(104	)
Recovery of mortgage servicing rights		-			14
Ending balance	$	-		$	(90	)
Mortgage servicing rights, net	$	15,141		$	12,941

	As of or For the
	Nine Months Ended
	September 30,
	2022			2021
	(In Thousands)
Mortgage servicing rights:
Beginning balance	$	13,749		$	10,897
Mortgage servicing rights capitalized		3,102			5,015
Amortization of mortgage servicing rights		(1,710	)		(2,881	)
Ending balance	$	15,141		$	13,031
Valuation allowance:
Beginning balance	$	(56	)	$	(792	)
Recovery of mortgage servicing rights		56			702
Ending balance		-			(90	)
Mortgage servicing rights, net	$	15,141		$	12,941

Impairment expense on mortgage servicing rights was recorded during the year ended December 31, 2020 as a result of increased prepayment speed assumptions. Recoveries of $14,000 and $702,000 were recorded during the three and nine months ended September 30, 2021, respectively. There was no recovery or impairment recorded during the three months ended September 30, 2022. However, a recovery of $56,000 was recorded during the nine months ended September 30, 2022. 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 $19,303,000 and $14,686,000 at September 30, 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:

	September 30,			December 31,
	2022			2021
Key assumptions:
Discount rate		12	%		12	%
Prepayment speed range		111-208	%		184-265	%
Weighted average prepayment speed		123	%		204	%

- 18 -

Table of Contents

EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

.NOTE 6.DEPOSITS

Deposits are summarized as follows:

	September 30,		December 31,		September 30,		December 31,
	2017		2016		2022		2021
	(In Thousands)				(In Thousands)

Noninterest checking	$	104,866	$	82,877	$	507,034	$	368,846
Interest bearing checking		97,415		93,163
Interest-bearing checking						252,258		203,410
Savings		87,679		82,266		284,303		223,069
Money market		86,188		89,211		398,647		277,469
Time certificates of deposit		149,019		165,278		232,008		149,755
Total	$	525,167	$	512,795	$	1,674,250	$	1,222,549

NOTE 67..OTHER LLONG-TERM DEBT~~ONG-TERM~~ ~~DEBT~~

Other l~~ong-term~~long-term debt consisted of the following:

	September 30, 2017					December 31, 2016					September 30, 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											$	-	$	-		$	10,000	$	(4	)
Subordinated debentures fixed at 5.50% to floating, due 2030												15,000		(257	)		15,000		(282	)
Subordinated debentures fixed at 3.50% to floating, due 2032												40,000		(850	)		-		-
Subordinated debentures variable at 3-Month Libor plus 1.42%, due 2035												5,155		-			5,155		-
Total other long-term debt	$	25,155	$	(360	)	$	15,155	$	(185	)	$	60,155	$	(1,107	)	$	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 bear interest at an annual fixed rate of 3.50% payable semi-annually. Starting February 1, 2027, interest will accrue at a floating rate per annum equal to a benchmark rate, which is expected to be three-month term Secured Overnight Financing Rate ("SOFR") plus a spread of 218.0 basis points, payable quarterly. The notes are subject to redemption at the option of the Company on or after February 1, 2027. The subordinated debentures qualify as Tier 2 capital for regulatory capital purposes. A portion of the net proceeds were used to redeem the $10,000,000 senior notes 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 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 be~~was 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-Month~~three-month LIBOR plus 1.42%, making the rate ~~2.754%~~5.17% and ~~2.418%~~1.63% as of September 30, ~~2017~~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.

~~-20-~~

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Table of Contents

EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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.

~~Basi~~c 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 2~~0, 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.

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~~Table of Contents~~

~~EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~NOTE~~ 9.8. 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
	(Losses) Gains
	on Securities
	Available-for-Sale
	(In Thousands)
Balance, July 1, 2022	$	(19,081	)
Other comprehensive loss, before reclassifications and income taxes		(16,009	)
Amounts reclassified from accumulated other comprehensive loss, before income taxes		-
Income tax benefit		4,216
Total other comprehensive loss		(11,793	)
Balance, September 30, 2022	$	(30,874	)

Balance, July 1, 2021	$	4,938
Other comprehensive loss, before reclassifications and income taxes		(578	)
Amounts reclassified from accumulated other comprehensive income, before income taxes		(11	)
Income tax benefit		155
Total other comprehensive loss		(434	)
Balance, September 30, 2021	$	4,504

Balance, January 1, 2022	$	3,493
Other comprehensive loss, before reclassifications and income taxes		(46,657	)
Amounts reclassified from accumulated other comprehensive loss, before income taxes		6
Income tax benefit		12,284
Total other comprehensive loss		(34,367	)
Balance, September 30, 2022	$	(30,874	)

Balance, January 1, 2021	$	5,851
Other comprehensive loss, before reclassifications and income taxes		(1,818	)
Amounts reclassified from accumulated other comprehensive income, before income taxes		(11	)
Income tax benefit		482
Total other comprehensive loss		(1,347	)
Balance, September 30, 2021	$	4,504

NOTE 9.EARNINGS PER SHARE

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

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
	(Dollars in Thousands, Except Per Share Data)

Basic weighted average shares outstanding		7,793,485		6,525,509		7,241,520		6,691,256
Dilutive effect of stock compensation		14,565		18,535		12,722		18,120
Diluted weighted average shares outstanding		7,808,050		6,544,044		7,254,242		6,709,376

Net income available to common shareholders	$	3,092	$	4,746	$	7,079	$	12,692

Basic earnings per share	$	0.40	$	0.73	$	0.98	$	1.90

Diluted earnings per share	$	0.40	$	0.73	$	0.98	$	1.89

There were no anti-dilutive shares at September 30, 2022 and December 31, 2021.

~~-22-~~

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Table of Contents

EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 10. DERIVATIVES AND HEDGING ACTIVITIES

~~NOTE~~ 10. D~~ERIVATIVES 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 residential~~originate 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 Company~~loans. 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 to~~hedge 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 increases~~changes 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 ~~$19,738,000~~mortgage loans held-for-sale. An optimal amount of mortgage loans are sold directly into bulk commitments with investors at ~~September 30, 2017~~the time an interest rate is locked, other loans are sold on an individual best efforts basis at the time an interest rate is locked, and ~~December 31, 2016, respectively. The~~the remaining balance of locked loans are hedged using To-Be-Announced (“TBA”) mortgage-backed securities or bulk mandatory forward loan sale commitments.

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

Derivatives are summarized as follows:

	September 30, 2022						December 31, 2021
	Notional		Fair Value				Notional		Fair Value
	Amount		Asset		Liability		Amount		Asset		Liability
	(In Thousands)
Interest rate lock commitments	$	53,275	$	-	$	772	$	84,674	$	1,218	$	-
Forward TBA mortgage-backed securities		45,000		1,614		-		51,000		-		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 gains of $209,000 and $373,000 were recorded for the three months ended September 30, 2022 and 2021, respectively. Net losses of $282,000 and $1,953,000 were recorded for the nine months ended September 30, 2022 and 2021, respectively.

NOTE 11. FAIR VALUE OF FINANCIAL INSTRUMENTS

~~The Company has no other off-balance-sheet arrangements or transactions with unconsolidated, special purpose entities that would expose~~Fair 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 the~~exchange price that would be received ~~to sell~~for 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 price~~liability in an orderly transaction between market participants on the ~~principal (or most advantageous) market used to measure~~measurement 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 replace~~markets in which the ~~service capacity~~assets 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.

~~-23-~~

~~Table of Contents~~

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

- 21 -

Table of Contents

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

NOTE 11. FAIR VALUE OF FINANCIAL INSTRUMENTS – continued

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 contracts~~Real Estate and ~~commitments and are considered Level 2 inputs.~~

Other Repossessed Assets – Fair values are ~~valued~~determined 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 appraisals~~sell 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 basis~~periodically 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 similar~~a third party model that incorporates industry assumptions and is adjusted for factors ~~above.~~such as prepayment speeds and are considered Level 3 inputs.

~~-24-~~

~~Table of Contents~~

~~EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~NOTE 11.~~ ~~FAIR VALUE DISCLOSURES~~ – ~~continued~~

The following ~~table~~stables 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								September 30, 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									$	-	$	2,463	$	-	$	2,463
U.S. Treasury obligations										56,069		-		-		56,069
Municipal obligations		-		65,365		-		65,365		-		168,882		-		168,882
Corporate obligations		-		9,607		-		9,607		-		7,029		-		7,029
MBSs - government-backed		-		26,527		-		26,527
CMOs - government-backed		-		15,231		-		15,231
Mortgage-backed securities										-		30,486		-		30,486
Collateralized mortgage obligations										-		83,170		-		83,170
Asset-backed securities										-		3,850		-		3,850
Loans held-for-sale		-		9,606		-		9,606		-		24,408		-		24,408
Forward TBA mortgage-backed securities										-		1,614		-		1,614
Financial liabilities:
Interest rate lock commitments										-		-		772		772

	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									$	-	$	1,633	$	-	$	1,633
U.S. Treasury obligations										53,183		-		-		53,183
Municipal obligations		-		67,664		-		67,664		-		123,667		-		123,667
Corporate obligations		-		9,307		-		9,307		-		9,336		-		9,336
MBSs - government-backed		-		29,512		-		29,512
CMOs - government-backed		-		16,345		-		16,345
Mortgage-backed securities										-		14,636		-		14,636
Collateralized mortgage obligations										-		63,067		-		63,067
Asset-backed securities										-		5,740		-		5,740
Loans held-for-sale		-		18,230		-		18,230		-		25,819		-		25,819
Interest rate lock commitments										-		-		1,218		1,218
Financial liabilities:
Forward TBA mortgage-backed securities										-		94		-		94

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EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 11. FAIR VALUE OF FINANCIAL INSTRUMENTS – continued

~~NOTE~~ 11. ~~FAIR VALUE DISCLOSURES - continued~~

Certain financial assets ~~and financial liabilities are~~may be measured at fair value on a nonrecurring ~~basis; that is, the instruments are not measured at fair value on an ongoing basis but~~basis. These assets are subject to fair value adjustments ~~in certain circumstances (for example, when there is evidence~~that 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								September 30, 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	$	-	$	-	$	218	$	218
Repossessed assets		-		-		527		527
Real estate and other repossessed assets										-		-		-		-
Mortgage servicing rights										-		-		1,383		1,383

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	$	-	$	-	$	376	$	376
Real estate and other repossessed assets		-		-		4		4
Mortgage servicing rights		-		-		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%

Principal
Significant
Range of
Valuation
Unobservable
Significant Input
~~(1)~~Instrument
Technique
Inputs
Values
Impaired loans
Fair value ~~is generally determined through independent appraisals~~ of ~~the~~ underlying collateral w~~hich generally include various Level 3 inputs which are not identifiable, less associated allowance.~~
Discount applied to the obtained appraisal
10-30%
~~(2)~~
~~Appraisals may be adjusted for qualitative factors such as economic conditions and estimated liquidation expenses. The range of liquidation expenses~~Real estate and other ~~appraisal adjustments are presented as a percent~~repossessed assets
Fair value of collateral
Discount applied to the ~~appraisal.~~obtained appraisal
10-30%
~~(3)~~Mortgage servicing rights
~~Includes qualitative adjustments by management and estimated liquidation expenses.~~Discounted cash flows
Discount rate
10-15%
Prepayment speeds
110-265%
Interest rate lock commitments
Internal pricing model
Pull-through expectations
80-95%
The following tables provide a reconciliation of assets and liabilities measured at fair value using significant unobservable inputs (Level 3) on a recurring basis during the nine months ended September 30, 2022.

Three Months Ended

Nine Months Ended

September 30,

September 30,

2022

2021

2022

2021

Interest Rate Lock Commitments

Interest Rate Lock Commitments

(In Thousands)

(In Thousands)

Beginning balance
$ 334 $ 2,949 $ 1,218 $ 6,017
Purchases and issuances
(640 ) 4,468 95 10,218
Sales and settlements
(466 ) (5,089 ) (2,085 ) (13,907 )
Ending balance
$ (772 ) $ 2,328 $ (772 ) $ 2,328
Net change in fair value for (losses) gains relating to items held at end of period
$ (1,106 ) $ (621 ) $ (1,990 ) $ (3,689 )

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Table of Contents
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 11. FAIR VALUE OF FINANCIAL INSTRUMENTS – continued

~~NOTE~~ 11. ~~FAIR VALUE DISCLOSURES - continued~~
~~FASB ASC Topic 825~~ requires disclosure of the fair value of financial instruments, both assets and liabilities recognized and not recognized in the statement of financial position, for which it is practicable to estimate fair value. The tables below summarize the estimated fair ~~market~~ values of financial instruments of the Company, whether or not recognized at fair value on the condensed consolidated statements of condition. The tables are followed by methods and assumptions that were used by the Company in estimating the fair value of the classes of financial instruments.

~~The estimated fair value amounts of financial instruments have been determined by the Company using available market information and appropriate valuation methodologies~~. However, considerable judgment is required to interpret data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

September 30, 2022

Total

Level 1

Level 2

Level 3

Estimated

Carrying

Inputs

Inputs

Inputs

Fair Value

Amount

(In Thousands)

Financial assets:

Cash and cash equivalents
$ 25,197 $ - $ - $ 25,197 $ 25,197
FHLB stock
2,939 - - 2,939 2,939
FRB stock
4,206 - - 4,206 4,206
Loans receivable, gross
- - 1,302,575 1,302,575 1,312,154
Accrued interest and dividends receivable
10,778 - - 10,778 10,778
Mortgage servicing rights
- - 19,303 19,303 15,141
Financial liabilities:

Non-maturing interest-bearing deposits
- 935,208 - 935,208 935,208
Noninterest-bearing deposits
507,034 - - 507,034 507,034
Time certificates of deposit
- - 226,649 226,649 232,008
Accrued expenses and other liabilities
22,976 - - 22,976 22,976
FHLB advances and other borrowings
- - 15,580 15,580 15,600
Other long-term debt
- - 55,988 55,988 60,155

September 30, 2017

Total

Level 1

Level 2

Level 3

Estimated

Carrying

Inputs

Inputs

Inputs

Fair Value

Amount

(In Thousands)

Financial assets:

Cash and cash equivalents
$ 8,155 $ - $ - $ 8,155 $ 8,155
Federal Home Loan Bank stock
4,121 - - 4,121 4,121
Federal Reserve Bank stock
871 - - 871 871
Loans receivable, net
- - 506,692 506,692 503,320
Accrued interest and dividends receivable
2,269 - - 2,269 2,269
Mortgage servicing rights
- - 6,787 6,787 6,398
Cash surrender value of life insurance
14,385 - - 14,385 14,385
Financial liabilities:

Non-maturing interest bearing deposits
- 271,282 - 271,282 271,282
Noninterest bearing deposits
104,866 - - 104,866 104,866
Time certificates of deposit
- - 148,661 148,661 149,019
Accrued expenses and other liabilities
5,426 - - 5,426 5,426
Federal Home Loan Bank advances and other borrowings
- - 83,870 83,870 83,836
Other long-term debt
- - 24,574 24,574 25,155
Off-balance-sheet instruments
-
Forward delivery commitments
- - - - -
Commitments to extend credit
- - - - -
Rate lock commitments
- - - - -

December 31, 2021

Total

Level 1

Level 2

Level 3

Estimated

Carrying

Inputs

Inputs

Inputs

Fair Value

Amount

(In Thousands)

Financial assets:

Cash and cash equivalents
$ 61,434 $ - $ - $ 61,434 $ 61,434
FHLB stock
1,702 - - 1,702 1,702
FRB stock
2,974 - - 2,974 2,974
Loans receivable, gross
- - 939,204 939,204 933,139
Accrued interest and dividends receivable
5,751 - - 5,751 5,751
Mortgage servicing rights
- - 14,686 14,686 13,693
Financial liabilities:

Non-maturing interest-bearing deposits
- 703,948 - 703,948 703,948
Noninterest-bearing deposits
368,846 - - 368,846 368,846
Time certificates of deposit
- - 149,605 149,605 149,755
Accrued expenses and other liabilities
21,037 - - 21,037 21,037
FHLB advances and other borrowings
- - 5,003 5,003 5,000
Other long-term debt
- - 29,299 29,299 30,155

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Table of Contents
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1211. ~~FAIR VALUE DISCLOSURES~~ – ~~continued~~

December 31, 2016

Total

Level 1

Level 2

Level 3

Estimated

Carrying

Inputs

Inputs

Inputs

Fair Value

Amount

(In Thousands)

Financial assets:

Cash and cash equivalents
$ 7,318 $ - $ - $ 7,318 $ 7,318
Federal Home Loan Bank stock
4,012 - - 4,012 4,012
Federal Reserve Bank stock
871 - - 871 871
Loans receivable, net
- - 464,797 464,797 460,742
Accrued interest and dividends receivable
2,123 - - 2,123 2,123
Mortgage servicing rights
- - 6,741 6,741 5,853
Cash surrender value of life insurance
14,095 - - 14,095 14,095
Financial liabilities:

Non-maturing interest bearing deposits
- 264,640 - 264,640 264,640
Noninterest bearing deposits
82,877 - - 82,877 82,877
Time certificates of deposit
- - 165,129 165,129 165,278
Accrued expenses and other liabilities
4,291 - - 4,291 4,291
Federal Home Loan Bank advances and other borrowings
- - 82,462 82,462 82,413
Other long-term debt
- - 14,291 14,291 15,155
Off-balance-sheet instruments

Forward delivery commitments
- - - - -
Commitments to extend credit
- - - - -
Rate lock commitments
- - - - -
~~The following methods and assumptions were used by the Company in estimating the fair value of the following classes of financial~~ ~~instruments. However, the Form 10-K for the year ended December 31, 2016 provides additional description of valuation methodologies used in estimating fair value of these financial instruments.~~
~~Cash, Interest B~~~~earing~~ A~~ccounts,~~ ~~Accrued I~~~~nterest and~~ D~~ividend~~ R~~eceivable and~~ A~~ccrued~~ E~~xpenses an~~~~d Other L~~~~iabilities~~ ~~– The carrying amounts approximate fair value due to the relatively short period of time between the origination of these instruments and their expected realization.~~
~~Stock in the F~~~~ederal Home~~ L~~oan~~ B~~ank of Des Moines (“FHLB”)~~ ~~and F~~~~ederal~~ R~~eserve~~ B~~ank (“FRB”)~~ ~~– The fair value of stock approximates redemption value.~~
~~Loans~~ R~~eceivable~~ – Fair values are estimated by stratifying the loan portfolio into groups of loans with similar financial characteristics. Loans are segregated by type such as real estate, commercial, and consumer, with each category further segmented into fixed and adjustable rate interest terms. For mortgage loans, the Company uses the secondary market rates in effect for loans that have similar characteristics. The fair value of other fixed rate loans is calculated by discounting scheduled cash flows through the anticipated maturities adjusted for prepayment estimates. Adjustable interest rate loans are assumed to approximate fair value because they generally reprice within the short term.
~~Fair values are adjusted for credit risk based on assessment of risk identified with specific loans, and risk adjustments on the remaining portfolio based on credit loss experience.~~
~~Assumptions regarding credit risk are judgmentally determined using specific borrower information, internal credit quality analysis, and historical information on segmented loan categories for non-specific borrowers.~~
~~Mortgage~~ S~~ervicing~~ R~~ights~~ – the fair value of servicing rights was determined using discount rates ranging from approximately 13.00% to 15.00%, prepayment speeds ranging from approximately 104.00% to 277.00% PSA, depending on stratification of the specific right. The fair value was also adjusted for the effect of potential past dues and foreclosures.
~~-28-~~
~~Table of Contents~~
~~EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~
~~NOTE~~ 11~~. FAIR VALUE DISCLOSURES - continued~~
~~Cash Surrender Value of Life I~~~~nsurance~~ ~~– The carrying amount for cash surrender value of life insurance approximates fair value as policies are recorded at redemption value.~~
~~Deposits and T~~~~ime C~~~~ertificates of~~ D~~eposit~~ – The fair value of deposits with no stated maturity, such as checking, passbook, and money market, is equal to the amount payable on demand. The fair value of time certificates of deposit is based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered for deposits of similar maturities.
~~Advances from the FHLB~~ ~~and~~ ~~Subordinated Debentures~~ – The fair value of the Company’s advances and debentures are estimated using discounted cash flow analysis based on the interest rate that would be effective September 30, 2017 and December 31, 2016, respectively if the borrowings repriced according to their stated terms.
~~Off-Balance-Sheet I~~~~nstruments~~ – Fair values for off-balance-sheet, credit-related financial instruments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing. The fair values of these financial instruments are considered insignificant. Additionally, those financial instruments have no carrying value.
~~NOTE 12.~~ ~~MERGER~~S ~~AND ACQUISITIONS~~
~~On September 5, 2017, the Company entered into an Agreement and Plan of Merger with TwinCo, Inc., a Montana corporation (“TwinCo”), and TwinCo~~’s wholly-owned subsidiary, Ruby Valley Bank, a Montana chartered commercial bank. The merger agreement provides that Ruby Valley Bank will merge with and into Opportunity Bank of Montana. Ruby Valley Bank operates 2 branches in Madison County, Montana with approximately $92,000,000 in assets, $78,000,000 in deposits and $55,000,000 in gross loans as of June 30, 2017. This acquisition is anticipated to close in the first quarter of 2018, subject to the receipt of approvals from regulatory authorities, the approval of TwinCo shareholders and the satisfaction of other closing conditions.
~~NOTE 1~~3. RECENT ACCOUNTING PRONOUNCEMENTS
Recently Issued Accounting Pronouncements

In ~~May 2014,~~ September 2016, the FASB issued ASU No. ~~2014-~~09, Revenue from Contracts with Customers (Topic 606). This guidance is a comprehensive new revenue recognition standard that will supersede substantially all existing revenue recognition guidance. The new standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under existing guidance. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. On July 9, 2015, the FASB agreed to delay the effective date of the standard by one year. Therefore, the new standard will be effective in the first quarter of 2018. Our revenue is comprised of net interest income on financial assets and financial liabilities, which is explicitly excluded from the scope of ASU 2014-09, and non-interest income. The largest percentage of our non-interest income is derived from the gain on sale of mortgage loans. The gains are recognized at the time of the sale of the loan, when proceeds are sent to us by the investor purchasing the loan. We do not expect to realize a change in the recognition of the revenue on that part of our noninterest income. We will evaluate the impact of this standard on our revenue from our wealth management division; however we do not expect it to have a significant impact on our consolidated financial statements.
~~In January~~ 2016 ~~the FASB issued ASU No. 2016-0~~1, Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities (Subtopic 825-10). The amendment has a number of provisions including the requirements that public business entities use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, a separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e. securities or loans receivables), and eliminating the requirement for public business entities to disclose the methods and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost. The amendment is effective for annual and interim reporting periods beginning after December 15, 2017 and is not expected to have a significant impact to the Company’s consolidated financial statements.
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~~Table of Contents~~
~~EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES~~
~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~
~~NOTE 1~~3~~. RECENT ACCOUNTING PRONOUNCEMENTS~~ - ~~continued~~
~~In February 2016, the FASB issued ASU No. 2016-~~02, Leases (Topic 842) intended to improve financial reporting regarding leasing transactions. The new standard affects all companies and organizations that lease assets. The standard will require organizations to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases if the lease terms are more than 12 months. The guidance also will require qualitative and quantitative disclosures providing additional information about the amounts recorded in the financial statements. The amendments in this update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is evaluating the potential impact of the amendment on the Company’s consolidated financial statements. We currently lease four locations that serve as full-service branches, with the longest running lease expiring in 2021. We are exploring options to use a third party vendor to assist with the implementation of this standard.
In ~~September 2016, the FASB issued ASU No. 2016-13,~~13, Financial Instruments – Credit Losses (Topic ~~326)~~326) intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. The standard requires an organization to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. The standard also requires enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. These disclosures include qualitative and quantitative requirements that provide additional information about the amounts recorded in the financial statements. Additionally, the standard amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration.
In October 2019, the FASB amended the effective date of the standard. The amendments in this update are effective for fiscal years beginning after December 15, ~~2019, including interim periods within those fiscal years. All entities may adopt the amendments in this update earlier as of the fiscal years beginning after December 15, 2018,~~ 2022, including interim periods within those fiscal years. An entity will apply the amendments in this update through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (that is, a modified-retrospective approach).
In February 2022, the FASB issued ASU No.2022-02, an update to ASU No.2016-13. The amendments in the update eliminate TDR recognition and measurement guidance. Instead, entities must evaluate whether the modification represents a new loan or a continuation of an existing loan. Existing disclosure requirements are enhanced and the new requirements are introduced related to certain modifications of receivables made to borrowers experiencing financial difficulty. In addition, for public business entities, the amendments in the update require that entities disclose current-period gross write-offs by year of origination for financing receivables. This information must be included in the vintage disclosures, which require an entity to disclose the amortized cost basis of financing receivables by credit-quality indicator and class of financing receivable by year of origination.
The Company believes the amendments in ~~this update~~these updates will have an impact on the Company’s condensed consolidated financial statements and is ~~working~~continuing to evaluate the significance of that impact. In that regard, we have established a working group ~~under the direction of our Chief Financial Officer and Chief Credit Officer. The group is~~ composed of individuals from the finance and credit administration areas of the Company. We have developed a current expected credit loss model and are ~~currently developing an implementation plan, including assessment of processes, segmentation of the loan portfolio and identifying and adding data fields necessary for analysis. The adoption of~~utilizing this ~~standard is likely to result in an increase in the~~model concurrently with our existing allowance for loan ~~and lease losses as a result of changing from an “incurred loss”~~loss model ~~to an “expected loss” model.~~during 2022. While we currently cannot reasonably estimate the impact of adopting this standard, we expect the impact will be influenced by the composition, characteristics and quality of our loan and securities portfolios, as well as the general economic conditions and forecasts as of the adoption date.

In January 2017, the FASB issued ASU No. ~~2017-04,~~2017-04, Intangibles – Goodwill and Other (Topic ~~350)~~350) to amend and simplify current goodwill impairment testing to eliminate Step 2 from the current provisions. Under the new guidance, an entity should perform the goodwill impairment test by comparing the fair value of a reporting unit with its carrying value and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. An entity still has the option to perform the ~~quantitative~~qualitative assessment for a reporting unit to determine if a quantitative impairment test is necessary. The guidance ~~will be~~is effective for the Company on January 1, 2023 and adoption of the standard is being evaluated to assess the impact on the Company’s condensed consolidated financial statements.
In March 2020,the FASB issued ASU No.2020-04, Reference Rate Reform (Topic 848) which provides temporary optional expedients to ease the financial reporting burdens of the expected market transition from London Interbank Offered Rate (“LIBOR”) to an alternative reference rate such as SOFR. The guidance was effective upon issuance and generally can be applied through December 31, 2022. The Company is currently evaluating this guidance to determine the date of adoption and the potential impact. In January 2021, the FASB issued ASU No.2021-01, Reference Rate Reform (Topic 848), which clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. ASU No.2021-01 was effective upon issuance and generally can be applied through December 31, 2022. ASU No.2021-01 has not had and is not expected to have a significant impact on the ~~Company’s~~Company's consolidated financial statements. ~~We have improved our internal reporting systems as it relates to profitability by divisions and markets within the Company. We expect these systems to help in our evaluation of potential impairment.~~
~~In March 2017, the FASB issued ASU No. 2017-08, Receivables~~–Nonrefundable Fees and Other Costs (Subtopic 310-20) to shorten the amortization period for certain purchased callable debt securities held at a premium to the earliest call date. Currently, entities generally amortize the premium as a yield adjustment over the contractual life of the security. The guidance does not change the accounting for callable debt securities held at a discount. For public business entities, the guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted, including in an interim period. We have currently been following this guidance based on our internal investment policy guidelines. There is little impact on our consolidated financial statements, as we typically do not invest in these types of securities.
~~NOTE 14.~~ ~~SUBSEQUENT EVENTS~~
~~On October 13, 2017, the Company successfully completed a public offering of its common stock, and issued 1,189,041 shares and received approximately $20,100,000 in net cash proceeds.~~

~~-30-~~
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Table of Contents
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
~~MANAGEMENT~~’S
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Item 2. 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

~~Overview~~Introduction
This discussion and analysis provides information that management believes is necessary to understand Eagle's financial condition, changes in financial condition, results of operations, and cash flows for the three and nine months ended September 30, 2022, as compared to 2021. The following should be read in conjunction with the Company's Consolidated Financial Statements, and accompanying Notes thereto, for the year ended December 31, 2021, included in Eagle's Annual Report on Form 10-K filed with the United States Securities and Exchange Commission (SEC) on March 9, 2022, and in conjunction with the Condensed Consolidated Financial Statements, and accompanying Notes thereto, included in Part I - Item 1. Financial Statements. The results of operations for the three and nine months ended September 30, 2022, are not necessarily indicative of the future results that may be attained for the entire year or other interim periods.
Executive Summary

The ~~Company~~’sCompany’s primary business activity is the ownership of its wholly owned subsidiary, Opportunity Bank of Montana (the “Bank”). The Bank is a Montana chartered commercial bank that focuses on both consumer and commercial lending. It engages in typical banking activities: acquiring deposits from local markets and originating loans and investing in securities. ~~Its deposits are insured by the Federal Deposit Insurance Corporation.~~ The Bank’s primary component of earnings is its net interest margin (also called spread or margin), the difference between interest income and interest expense. The net interest margin is managed by management (through the pricing of its products and by the types of products offered and kept in portfolio), and is affected by changes in market interest rates. The Bank also generates noninterest income in the form of fee income and gain on sale of loans.

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

M~~anagement~~Management continues to focus on improving the Bank’s ~~core~~ earnings. ~~Core earnings can be described as income before taxes, with the exclusion of gain on sale of loans and adjustments to the market value of the Bank’s loan servicing portfolio.~~ Management believes ~~that~~ the Bank ~~will need~~needs to continue to concentrate on increasing net interest margin, other areas of fee income and control of operating expenses to achieve earnings growth going forward. Management’s strategy of growing the ~~bank’s~~ loan portfolio and deposit base is expected to help achieve these goals as follows: loans typically earn higher rates of return than investments; a larger deposit base should yield higher fee income; increasing the asset base will reduce the relative impact of fixed operating costs. The biggest challenge to the strategy is funding the growth of the ~~Bank’s balance sheet~~statement of financial condition in an efficient manner. Though deposit growth has been steady, it may become more difficult to maintain due to significant competition and possible reduced customer demand for deposits as customers may shift into other asset classes.

The level and movement of interest rates impacts the ~~Bank~~’sBank’s earnings as well. The Federal Open Market Committee ~~changed~~held the federal funds target rate ~~from 0.5% to 0.75%~~at 0.25% during the ~~three months~~year ended December 31, ~~2016.~~2021. The rate increased ~~from 0.75%~~ to ~~1.0%~~3.25% during the ~~three months ended March 31, 2017. The rate increased again from 1.0% to 1.25% during the three months ended June 30, 2017. The rate remained at 1.25% during the three~~nine months ended September 30, ~~2017.~~2022.
Recent Events
Acquisitions

On September ~~5, 2017, we~~30, 2021, the Company entered into an Agreement and Plan of Merger with ~~TwinCo,~~First Community Bancorp, Inc. ("FCB"), a Montana corporation,and ~~its~~FCB's wholly-owned subsidiary, ~~Ruby Valley~~First Community Bank, a Montana ~~state bank pursuant to which,~~chartered commercial bank. The Merger Agreement provided that, upon the terms and subject to the ~~terms and~~ conditions set forth in the ~~merger agreement, TwinCo will~~Merger Agreement, FCB would merge with and into Eagle, with Eagle continuing as the surviving ~~corporation~~corporation. The transaction closed on April 30, 2022. In the transaction, Eagle acquired nine retail bank branches and two loan production offices in ~~the merger.~~ ~~Immediately following the merger, Ruby Valley will merge with~~Montana. The total consideration paid was $38.58 million and into Opportunity Bank, with Opportunity Bank surviving. The merger, if completed, will allow us to enter the attractive Madison County, Montana market area, which includes the greater Ruby Valley regionincluded cash consideration of ~~Montana.~~
~~Subject to the terms~~$10.23 million and conditions of the merger agreement upon completion of the merger, each outstanding share of TwinCo common stock will be converted into the right to receive a combination of cash and shares of Eagle common stock subject to such shareholders~~’ election to receive all cash or all shares of Eagle common stock. The merger agreement contains customary proration procedures so that the aggregate amount of cash paid and shares of Eagle~~ common stock issued ~~in the merger as a whole will be equal to 55% cash and 45% stock. Based on the number~~ of shares of TwinCo common stock outstanding as of September 5, 2017, we expect to issue approximately 446,773 shares of our common stock and pay approximately $9.9 million in cash to TwinCo shareholders in the aggregate upon completion of the merger.
On October 13, 2017, the Company closed an underwritten public offering, including the exercise in full by the underwriters of their option to purchase additional shares, at the public offering price of $18.25 per share. The exercise of the option to purchase additional shares brought the total number of shares of common stock sold by the Company to 1,189,041 shares and increased the amount of gross proceeds raised in the offering, before underwriting discounts and expenses of the offering, to approximately $20.1 million.$28.35 million.

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

Financial Condition

Comparisons of financial condition in t~~his~~this section are between September 30, ~~2017~~2022 and December 31, ~~2016.~~2021.

Total assets were $~~702.57 million~~1.92 billion at September 30, ~~2017,~~2022, an increase of ~~$28.64~~$487.99 million, or ~~4.2%,~~34.0% from ~~$673.93 million~~$1.44 billion at December 31, ~~2016.~~2021. The increase was largely due to the change in loans ~~receivable.~~receivable and securities available-for-sale which were impacted by the acquisition of FCB in April 2022. Loans receivable, net increased by ~~$43.29~~$377.66 million ~~or 9.4%, to $504.68 million at September 30, 2017,~~ from ~~$461.39 million at~~ December 31, ~~2016.~~2021. Securities available-for-sale increased by $80.69 million from December 31, 2021. Total liabilities were ~~$639.22 million~~$1.77 billion at September 30, ~~2017,~~2022, an increase of ~~$24.75~~$493.45 million, or ~~4.0%~~38.6%, from ~~$614.47 million~~$1.28 billion at December 31, ~~2016.~~2021. The increase was ~~primarily~~mainly due to an increase in deposits ~~as well as, an increase in other long-term debt. Deposits~~which was also impacted by the FCB acquisition. Total deposits increased ~~by $12.37~~$451.70 million ~~to $525.17 million at September 30, 2017. Other long-term debt increased by $9.83 million to $24.80 million at September 30, 2017~~ from ~~$14.97 million at~~ December 31, ~~2016.~~2021 and total borrowings increased $39.78 million from December 31, 2021. Total shareholders’ equity decreased $5.46 million or 3.5% from December 31, 2021.

~~Balance Sheet~~Financial Condition Details

Investment Activities~~Activities~~

The following table summarizes investment activities:

September 30,

December 31,

2017

2016

Fair Value

Percentage of
Total

Fair Value

Percentage of
Total

(Dollars in Thousands)

Securities available-for-sale:

U.S. government and agency
$ 4,037 3.19 % $ 5,608 4.18 %
Municipal obligations
65,365 51.65 % 67,664 50.45 %
Corporate obligations
9,607 7.59 % 9,307 6.94 %
MBSs - government-backed
26,527 20.96 % 29,512 22.01 %
CMOs - government-backed
15,231 12.04 % 16,345 12.19 %

Total securities available-for-sale
120,767 95.43 % 128,436 95.77 %

Interest bearing deposits in banks
784 0.62 % 787 0.59 %

FHLB capital stock, at cost
4,121 3.26 % 4,012 2.99 %

FRB capital stock, at cost
871 0.69 % 871 0.65 %

Total
$ 126,543 100.00 % $ 134,106 100.00 %

September 30,

December 31,

2022

2021

Fair Value

Percentage of Total

Fair Value

Percentage of Total

(Dollars in Thousands)

Securities available-for-sale:

U.S. government obligations
$ 2,463 0.70 % $ 1,633 0.60 %
U.S. Treasury obligations
56,069 15.93 53,183 19.61
Municipal obligations
168,882 47.99 123,667 45.58
Corporate obligations
7,029 2.00 9,336 3.44
Mortgage-backed securities
30,486 8.66 14,636 5.40
Collateralized mortgage obligations
83,170 23.63 63,067 23.25
Asset-backed securities
3,850 1.09 5,740 2.12
Total securities available-for-sale
$ 351,949 100.00 % $ 271,262 100.00 %

Securities available-for-sale were $~~120.77~~$351.95 million at September 30, ~~2017, a decrease~~2022, an increase of ~~$7.67~~$80.69 million, or ~~6.0%~~29.7%, from ~~$128.44~~$271.26 million at December 31, ~~2016. All categories~~2021. Securities were impacted by the FCB acquisition, which included acquired securities of $126.12 million. Excluding securities ~~available-for-sale~~acquired, securities decreased ~~during the period with the exception of corporate obligations.~~by $45.43 million. The ~~decreases in U.S. government and agency and municipal obligations were primarily due to investment sales. The slight increase in corporate securities~~decrease was primarily due to ~~securities purchases~~unrealized losses at September 30, 2022 caused by recent increases in interest rates. In addition, the decrease was impacted by sales and maturity, principal payments and call activity, which were largely offset by ~~calls.~~purchases. Immediately following the acquisition, a restructure of FCB's portfolio was incurred to better align the acquired portfolio with Eagle's investment strategy.
~~-32-~~
- 27 -
Table of Contents
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
~~MANAGEMENT~~’S
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Financial Condition – continued

Lending Activities

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

September 30,

December 31,

September 30,

December 31,

2017

2016

2022

2021

Amount

Percent of Total

Amount

Percent of Total

Amount

Percent of Total

Amount

Percent of Total

(Dollars in thousands)

(Dollars in thousands)

Real estate loans:

Residential mortgage

(1-4 family) ⁽¹⁾
$ 109,250 21.38 % $ 113,262 24.24 %
Residential 1-4 family ⁽¹⁾
$ 137,798 10.49 % $ 101,180 10.82 %
Residential 1-4 family construction
57,467 4.37 45,635 4.88
Total residential 1-4 family
195,265 14.86 146,815 15.70

Commercial real estate
247,501 48.42 % 214,927 46.00 % 506,716 38.57 410,568 43.92
Real estate construction
29,760 5.82 % 20,540 4.40 %
Commercial construction and development
145,300 11.06 92,403 9.88
Farmland
129,827 9.88 67,005 7.17
Total commercial real estate
781,843 59.51 569,976 60.97

Total real estate loans
386,511 75.62 % 348,729 74.64 % 977,108 74.37 716,791 76.67

Other loans:

Home equity
51,450 10.06 % 49,018 10.49 % 67,409 5.13 51,748 5.54
Consumer
14,696 2.87 % 14,800 3.16 % 27,703 2.11 18,455 1.97

Commercial
58,554 11.45 % 54,706 11.71 % 130,975 9.97 101,535 10.86
Agricultural
110,633 8.42 46,335 4.96
Total commercial loans
241,608 18.39 147,870 15.82

Total other loans
124,700 24.38 % 118,524 25.36 % 336,720 25.63 218,073 23.33

Total loans
511,211 100.00 % 467,253 100.00 % 1,313,828 100.00 % 934,864 100.00 %

Deferred loan fees
(1,027 ) (1,092 ) (1,674 ) (1,725 )
Allowance for loan losses
(5,500 ) (4,770 ) (13,850 ) (12,500 )

Total loans, net
$ 504,684 $ 461,391 $ 1,298,304 $ 920,639
⁽¹⁾
Excludes loans held-for-sale.

⁽¹⁾~~Excludes loans held-for-sale.~~
Loans receivable, net increased ~~$43.29~~$377.66 million, or 41.0%, to ~~$504.68 million~~$1.30 billion at September 30, ~~2017.~~2022 from $920.64 million at December 31, 2021. The increase was ~~largely due to an increase in~~impacted by the FCB acquisition, which included $190.89 million of acquired loans. Excluding acquired loans, loans receivable, net increased by $186.77 million. Including acquired loans, total commercial real estate loans ~~of $32.57 million. Real estate construction loans also~~ increased ~~$9.22~~$211.86 million, ~~and~~total commercial loans increased ~~$3.85 million. Home~~$93.74 million, total residential loans increased $48.45 million, home equity loans increased ~~$2.43~~$15.66 million, and consumer loans increased $9.24 million. ~~Residential mortgage decreased slightly by $4.01 million.~~
Total loan originations were ~~$353.65~~$880.15 million for the nine months ended September 30, ~~2017, with~~2022. Total residential ~~mortgage accounting for $220.92~~1-4 family originations were $521.14 million, which includes $449.01 million of ~~the total. Commercial~~loans held-for-sale originations. Total commercial real estate ~~and land~~originations were $236.51 million. Total commercial originations were $84.72 million. Home equity loan originations ~~were $69.94~~totaled $26.19 million. Consumer loan originations ~~were $6.04 million and home equity originations were $14.06~~totaled $11.59 million. Real estate construction loan originations were $19.89 million. Commercial loans originations were $22.80 million, with none originating from loan syndication programs with borrowers residing outside of Montana. Loans held-for-sale decreased by ~~$8.62~~$1.41 million to ~~$9.61~~$24.41 million at September 30, ~~2017~~2022 from ~~$18.23~~$25.82 million at December 31, ~~2016.~~2021.
- 28 -
Table of Contents
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Financial Condition – continued
Lending Activities– continued

~~Nonperforming Assets~~. Generally, our collection procedures provide that when a loan is 15 or more days delinquent, the borrower is sent a past due notice. If the loan becomes 30 days delinquent, the borrower is sent a written delinquency notice requiring payment. If the delinquency continues, subsequent efforts are made to contact the delinquent borrower, including face to face meetings and counseling to resolve the delinquency. All collection actions are undertaken with the objective of compliance with the Fair Debt Collection Act.
~~-33-~~
~~Table of Contents~~
~~EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES~~
~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~
~~Financial Condition~~ ~~– continued~~
~~Lending Activities~~~~– continued~~

For mortgage loans and home equity loans, if the borrower is unable to cure the delinquency or reach a payment agreement, we will institute foreclosure ~~actions~~.actions. If a foreclosure action is taken and the loan is not reinstated, paid in full or refinanced, the property is sold at judicial sale at which we may be the buyer if there are no adequate offers to satisfy the debt. Any property acquired as the result of foreclosure, or by deed in lieu of foreclosure, is classified as real estate owned until such time as it is sold or otherwise disposed of. When real estate owned is acquired, it is recorded at its fair market value less estimated selling costs. The initial recording of any loss is charged to the allowance for loan losses. Subsequent write-downs are recorded as a charge to operations. As of September 30, ~~2017, the Bank had $483,000~~2022 there was no real estate owned and other repossessed property. As of December 31, 2021, there was $4,000 of real estate ~~owned.~~owned and other repossessed property.

The following table sets forth information regarding nonperforming assets:

September 30,

December 31,

September 30,

December 31,

2017

2016

2022

2021

(Dollars in Thousands)

(Dollars in Thousands)

Non-accrual loans

Nonaccrual loans

Real estate loans:

Residential mortgage (1-4 family)
$ 484 $ 221
Residential 1-4 family
$ 687 $ 616
Residential 1-4 family construction
- 337
Commercial real estate
451 - 403 497
Farmland
146 989
Other loans:

Home equity
242 297 85 100
Consumer
131 96 34 62
Commercial
88 - 69 516
Agricultural
1,110 1,718
Accruing loans delinquent 90 days or more

Real estate loans:

Residential mortgage (1-4 family)
- 456
Commercial
874 -
Restructured loans:

Real estate loans:

Commercial real estate
- 4 1,527
Farmland
624 641
Other loans:

Home equity
- 35 12 15
Restructured loans:

Other loans:

Home equity
- 43
Agricultural
476 41
Total nonperforming loans
1,396 1,152 4,520 7,059
Real estate owned and other repossessed property, net
527 825 - 4
Total nonperforming assets
$ 1,923 $ 1,977 $ 4,520 $ 7,063

Total nonperforming loans to total loans
0.27 % 0.25 % 0.34 % 0.76 %
Total nonperforming loans to total assets
0.20 % 0.17 % 0.23 % 0.49 %
Total nonaccrual loans to total loans
0.28 % 0.59 %
Total allowance for loan loss to nonperforming loans
393.98 % 414.06 % 306.42 % 177.08 %
Total nonperforming assets to total assets
0.27 % 0.29 % 0.23 % 0.49 %
Nonaccrual loans as of September 30, 2022 and December 31, 2021 include $603,000 and $492,000, respectively of acquired loans that deteriorated subsequent to the acquisition date.

~~-34-~~
- 29 -
Table of Contents
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
~~MANAGEMENT~~’S
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Financial Condition – continued

~~Financial Condition~~ ~~– continued~~
Deposits and Other Sources of Funds

The following table includes deposit accounts by category:

September 30,

December 31,

September 30,

December 31,

2017

2016

2022

2021

Percent

Percent

Percent

Percent

Amount

of Total

Amount

of Total

Amount

of Total

Amount

of Total

(Dollars in Thousands)

(Dollars in Thousands)

Noninterest checking
$ 104,866 19.96 % $ 82,877 16.16 % $ 507,034 30.28 % $ 368,846 30.16 %
Interest bearing checking
97,415 18.55 % 93,163 18.17 %
Interest-bearing checking
252,258 15.07 203,410 16.64
Savings
87,679 16.70 % 82,266 16.04 % 284,303 16.98 223,069 18.25
Money market accounts
86,188 16.41 % 89,211 17.40 %
Money market
398,647 23.81 277,469 22.70
Total
376,148 71.62 % 347,517 67.77 % 1,442,242 86.14 1,072,794 87.75
Certificates of deposit accounts:

IRA certificates
29,162 5.55 % 31,277 6.10 % 25,384 1.52 25,333 2.07
Brokered certificates
7,601 1.45 % 15,596 3.04 %
Other certificates
112,256 21.38 % 118,405 23.09 % 206,624 12.34 124,422 10.18
Total certificates of deposit
149,019 28.38 % 165,278 32.23 % 232,008 13.86 149,755 12.25
Total deposits
$ 525,167 100.00 % $ 512,795 100.00 % $ 1,674,250 100.00 % $ 1,222,549 100.00 %

Deposits increased by ~~$12.37~~$451.70 million, or ~~2.4%~~36.9%, to ~~$525.17 million~~$1.67 billion at September 30, ~~2017~~2022 from ~~$512.80 million~~$1.22 billion at December 31, ~~2016. Noninterest~~2021. The increase was impacted by the FCB acquisition. Excluding acquired deposits, total deposits increased by $107.74 million. Including acquired deposits, noninterest checking increased by ~~$21.99 million. Savings~~$138.18 million, money market increased by $121.18 million, certificates of deposit increased by $82.25 million, savings increased by $61.24 million, and ~~interest bearing~~interest-bearing checking increased by ~~$5.41 million and $4.25 million, respectively. These increases were partially offset by a decrease in certificates of deposit of $16.26~~$48.85 million. ~~Money market accounts also decreased slightly by $3.02 million.~~

The following table summarizes borrowing activity:

September 30,

December 31,

September 30,

December 31,

2017

2016

2022

2021

Net

Percent

Net

Percent

Net

Percent

Net

Percent

Amount

of Total

Amount

of Total

Amount

of Total

Amount

of Total

(Dollars in Thousands)

(Dollars in Thousands)

FHLB advances and other borrowings
$ 83,836 77.17 % $ 82,413 84.63 % $ 15,600 20.90 % $ 5,000 14.34 %
Other long-term debt:

Senior notes fixed at 5.75%, due 2022
9,809 9.03 % - 0.00 % - - 9,996 28.67
Subordinated debentures fixed at 6.75%, due 2025
9,831 9.05 % 9,815 10.08 %
Subordinated debentures fixed at 3.50% to floating, due 2032
39,150 52.44 - -
Subordinated debentures fixed at 5.50% to floating, due 2030
14,743 19.75 14,718 42.21
Subordinated debentures variable, due 2035
5,155 4.75 % 5,155 5.29 % 5,155 6.91 5,155 14.78
Total other long-term debt
24,795 22.83 % 14,970 15.37 % 59,048 79.10 29,869 85.66
Total borrowings
108,631 100.00 % 97,383 100.00 % $ 74,648 100.00 % $ 34,869 100.00 %

Total borrowings increased by $39.78 million, or 114.1% to $74.65 million at September 30, 2022 from $34.87 million at December 31, 2021. This increase is largely due to an increase in other long-term debt of $29.18 million which primarily resulted from the issuance of $40.00 million of subordinated notes, slightly offset by the redemption of $10.00 million of senior notes. In addition, FHLB advances and other borrowings increased ~~slightly by $1.43~~$10.60 million ~~or 1.7%,~~ to ~~$83.84~~$15.60 million at September 30, ~~2017 from $82.41~~2022 compared to $5.00 million at December 31, ~~2016.~~2021.

~~Long-term debt increased~~Shareholders’ Equity
Total shareholders’ equity decreased by $~~9.83~~$5.46 million, or 3.5%, to ~~$24.80 million~~$151.27 million at September 30, ~~2017~~2022 from ~~$14.97~~$156.73 million at December 31, ~~2016 primarily~~2021. The decrease was largely due to ~~the issuance~~an increase in other comprehensive loss of ~~$10.00~~$34.37 million ~~aggregate principal amount of 5.75% fixed senior unsecured notes due in 2022.~~
~~Shareholders’ Equity~~
~~Total shareholders’ equity increased $3.89 million, or 6.5%,~~related to ~~$63.35 million at September 30, 2017 from $59.46 million at December 31, 2016. This was primarily the~~unrealized losses on securities available-for-sale. These unrealized losses were a result of ~~a net income of $3.55 million and other comprehensive income of $1.06 million, partially~~increased interest rates. The decrease was largely offset by ~~dividends paid~~an increase of ~~$953,000.~~stock issued in connection with the FCB acquisition of $28.35 million.

~~-35-~~
- 30 -
Table of Contents
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
~~MANAGEMENT~~’S
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Analysis of Net Interest Income

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

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

For the Three Months Ended September 30,

For the Three Months Ended September 30,

2017

2016

2022

2021

Average

Interest

Average

Interest

Average

Interest

Average

Interest

Daily

and

Yield/

Daily

and

Yield/

Daily

and

Yield/

Daily

and

Yield/

Balance

Dividends

Cost⁽⁴⁾

Balance

Dividends

Cost⁽⁴⁾

Balance

Dividends

Cost⁽⁴⁾

Balance

Dividends

Cost⁽⁴⁾

(Dollars in Thousands)

(Dollars in Thousands)

Assets:

Interest earning assets:

Interest-earning assets:

Investment securities
$ 121,971 $ 693 2.27 % $ 134,388 $ 709 2.11 % $ 378,680 $ 2,555 2.68 % $ 233,882 $ 1,094 1.86 %
FHLB and FRB stock
5,308 48 3.62 % 4,840 37 3.06 % 6,932 63 3.61 4,812 62 5.11
Loans receivable, net⁽¹⁾
520,603 6,478 4.98 % 471,437 5,461 4.63 %
Loans receivable⁽¹⁾
1,301,358 16,665 5.08 926,748 11,619 4.97
Other earning assets
503 5 3.98 % 390 1 1.03 % 12,057 59 1.94 68,058 32 0.19
Total interest earning assets
648,385 7,224 4.46 % 611,055 6,208 4.06 %
Noninterest earning assets
55,951 53,525
Total interest-earning assets
1,699,027 19,342 4.52 1,233,500 12,807 4.12
Noninterest-earning assets
214,683 148,686
Total assets
$ 704,336 $ 664,580 $ 1,913,710 $ 1,382,186

Liabilities and equity:

Interest bearing liabilities:

Interest-bearing liabilities:

Deposit accounts:

Checking
$ 261,426 $ 68 0.10 % $ 197,245 $ 12 0.02 %
Savings
318,322 25 0.03 204,223 30 0.06
Money market
$ 87,699 $ 36 0.16 % $ 88,513 $ 25 0.11 % 369,216 307 0.33 254,019 146 0.23
Savings
85,596 11 0.05 % 77,689 9 0.05 %
Checking
96,788 8 0.03 % 88,722 7 0.03 %
Certificates of deposit
150,322 331 0.88 % 160,483 342 0.85 % 203,359 317 0.62 155,006 162 0.41
Advances from FHLB and other borrowings including long-term debt
118,240 679 2.30 % 99,245 404 1.63 % 69,870 738 4.19 38,022 426 4.45
Total interest bearing liabilities
538,645 1,065 0.79 % 514,652 787 0.61 %
Total interest-bearing liabilities
1,222,193 1,455 0.47 848,515 776 0.36
Noninterest checking
97,255 84,974 503,905 353,486
Other noninterest bearing liabilities
5,121 4,996
Other noninterest-bearing liabilities
23,020 23,107
Total liabilities
641,021 604,622 1,749,118 1,225,108

Total equity
63,315 59,958 164,592 157,078

Total liabilities and equity
$ 704,336 $ 664,580 $ 1,913,710 $ 1,382,186
Net interest income/interest rate spread⁽²⁾
$ 6,159 3.67 % $ 5,421 3.45 % $ 17,887 4.05 % $ 12,031 3.76 %

Net interest margin⁽³⁾
3.80 % 3.55 % 4.18 % 3.87 %
Total interest earning assets to interest bearing liabilities
120.37 % 118.73 %
Total interest-earning assets to interest-bearing liabilities
139.01 % 145.37 %

⁽¹⁾~~Includes loans held-for-sale.~~
⁽²⁾
⁽¹⁾Includes loans held-for-sale.
⁽²⁾Interest rate spread represents the difference between the average yield on interest-earning assets and the average rate on interest-bearing liabilities.
⁽³⁾~~Net interest margin represents income before the provision for loan losses divided by average interest-earning assets.~~
⁽⁴⁾~~For purposes of this table, tax exempt income is not calculated on a tax equivalent basis.~~
⁽³⁾ Net interest margin represents income before the provision for loan losses divided by average interest-earning assets.
⁽⁴⁾For purposes of this table, tax exempt income is not calculated on a tax equivalent basis.

~~-36-~~
- 31 -
Table of Contents
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
~~MANAGEMENT~~’S
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Analysis of Net Interest Income– continued~~– continued~~

For the Nine Months Ended September 30,

For the Nine Months Ended September 30,

2017

2016

2022

2021

Average

Interest

Average

Interest

Average

Interest

Average

Interest

Daily

and

Yield/

Daily

and

Yield/

Daily

and

Yield/

Daily

and

Yield/

Balance

Dividends

Cost⁽⁴⁾

Balance

Dividends

Cost⁽⁴⁾

Balance

Dividends

Cost⁽⁴⁾

Balance

Dividends

Cost⁽⁴⁾

(Dollars in Thousands)

(Dollars in Thousands)

Assets:

Interest earning assets:

Interest-earning assets:

Investment securities
$ 125,642 $ 2,136 2.27 % $ 141,060 $ 2,196 2.08 % $ 332,950 $ 5,863 2.35 % $ 200,392 $ 2,989 1.99 %
FHLB and FRB stock
4,942 124 3.35 % 4,696 103 2.92 % 5,827 160 3.67 4,880 194 5.32
Loans receivable, net⁽¹⁾
502,563 18,222 4.83 % 449,334 15,253 4.53 %
Loans receivable⁽¹⁾
1,144,459 42,933 5.02 905,478 33,660 4.97
Other earning assets
1,218 7 0.77 % 1,768 5 0.38 % 44,456 206 0.62 77,264 90 0.16
Total interest earning assets
634,365 20,489 4.31 % 596,858 17,557 3.92 %
Noninterest earning assets
55,747 52,345
Total interest-earning assets
1,527,692 49,162 4.30 1,188,014 36,933 4.16
Noninterest-earning assets
186,200 143,974
Total assets
$ 690,112 $ 649,203 $ 1,713,892 $ 1,331,988

Liabilities and equity:

Interest bearing liabilities:

Interest-bearing liabilities:

Deposit accounts:

Checking
$ 238,032 $ 106 0.06 % $ 185,496 $ 34 0.02 %
Savings
268,244 94 0.05 193,943 86 0.06
Money market
$ 91,056 $ 94 0.14 % $ 91,464 $ 77 0.11 % 348,568 759 0.29 234,188 381 0.22
Savings
84,687 31 0.05 % 73,978 24 0.04 %
Checking
95,246 23 0.03 % 88,124 20 0.03 %
Certificates of deposit
154,752 994 0.86 % 155,148 998 0.86 % 171,642 492 0.38 161,521 617 0.51
Advances from FHLB and other borrowings including subordinated debt
108,290 1,825 2.25 % 94,122 1,206 1.71 %
Total interest bearing liabilities
534,031 2,967 0.74 % 502,836 2,325 0.62 %
Advances from FHLB and other borrowings including long-term debt
68,012 2,012 3.96 40,703 1,320 4.34
Total interest-bearing liabilities
1,094,498 3,463 0.42 815,851 2,438 0.40
Noninterest checking
90,453 83,273 440,625 337,961
Other noninterest bearing liabilities
4,532 4,937
Other noninterest-bearing liabilities
22,698 21,560
Total liabilities
629,016 591,046 1,557,821 1,175,372

Total equity
61,096 58,157 156,071 156,616

Total liabilities and equity
$ 690,112 $ 649,203 $ 1,713,892 $ 1,331,988
Net interest income/interest rate spread⁽²⁾
$ 17,522 3.57 % $ 15,232 3.30 % $ 45,699 3.88 % $ 34,495 3.76 %

Net interest margin⁽³⁾
3.68 % 3.40 % 4.00 % 3.88 %
Total interest earning assets to interest bearing liabilities
118.79 % 118.70 %
Total interest-earning assets to interest-bearing liabilities
139.58 % 145.62 %

⁽¹⁾Includes loans held-for-sale.
⁽²⁾Interest rate spread represents the difference between the average yield on interest-earning assets and the average rate on interest-bearing liabilities.
⁽³⁾ Net interest margin represents income before the provision for loan losses divided by average interest-earning assets.
⁽⁴⁾For purposes of this table, tax exempt income is not calculated on a tax equivalent basis.
⁽¹⁾~~Includes loans held-for-sale.~~
⁽²⁾~~Interest rate spread represents the difference between the average yield on interest-earning assets and the average rate on interest-bearing liabilities.~~
⁽³⁾~~Net interest margin represents income before the provision for loan losses divided by average interest-earning assets.~~
⁽⁴⁾~~For purposes of this table, tax exempt income is not calculated on a tax equivalent basis.~~
~~-37-~~
- 32 -
Table of Contents
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
~~MANAGEMENT~~’S
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Rate/Volume Analysis

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

For the Three Months Ended September 30,

For the Three Months Ended September 30,

2017

2016

2022

2021

Due to

Due to

Due to

Due to

Volume

Rate

Net

Volume

Rate

Net

Volume

Rate

Net

Volume

Rate

Net

(In Thousands)

(In Thousands)

Interest earning assets:

Interest-earning assets:

Investment securities
$ (66 ) $ 50 $ (16 ) $ (70 ) $ 20 $ (50 ) $ 677 $ 784 $ 1,461 $ 379 $ (159 ) $ 220
FHLB and FRB stock
4 7 11 3 29 32 27 (26 ) 1 (22 ) (11 ) (33 )
Loans receivable, net
570 447 1,017 995 76 1,071
Loans receivable⁽¹⁾
4,697 349 5,046 304 (25 ) 279
Other earning assets
1 3 4 - 1 1 (26 ) 53 27 17 (15 ) 2
Total interest earning assets
509 507 1,016 928 126 1,054
Total interest-earning assets
5,375 1,160 6,535 678 (210 ) 468

Interest bearing liabilities:

Savings, money market and checking accounts
2 12 14 (1 ) (3 ) (4 )
Interest-bearing liabilities:

Checking
4 52 56 3 (4 ) (1 )
Savings
17 (22 ) (5 ) 9 (12 ) (3 )
Money Market
66 95 161 45 (1 ) 44
Certificates of deposit
(21 ) 10 (11 ) 13 (26 ) (13 ) 51 104 155 (143 ) (326 ) (469 )
Advances from FHLB and other borrowings including long-term debt
77 198 275 204 (121 ) 83 357 (45 ) 312 (508 ) 152 (356 )
Total interest bearing liabilities
58 220 278 216 (150 ) 66
Total interest-bearing liabilities
495 184 679 (594 ) (191 ) (785 )

Change in net interest income
$ 451 $ 287 $ 738 $ 712 $ 276 $ 988 $ 4,880 $ 976 $ 5,856 $ 1,272 $ (19 ) $ 1,253
⁽¹⁾Includes loans held-for-sale.

For the Nine Months Ended September 30,

2022

2021

Due to

Due to

Volume

Rate

Net

Volume

Rate

Net

(In Thousands)

Interest earning assets:

Investment securities
$ 1,977 $ 897 $ 2,874 $ 547 $ (411 ) $ 136
FHLB and FRB stock
38 (72 ) (34 ) (84 ) (6 ) (90 )
Loans receivable(1)
8,884 389 9,273 1,374 (1,546 ) (172 )
Other earning assets
(38 ) 154 116 168 (212 ) (44 )
Total interest earning assets
10,861 1,368 12,229 2,005 (2,175 ) (170 )

Interest bearing liabilities:

Checking
10 62 72 12 (25 ) (13 )
Savings
33 (25 ) 8 36 (68 ) (32 )
Money Market
186 192 378 166 (147 ) 19
Certificates of deposit
39 (164 ) (125 ) (710 ) (1,209 ) (1,919 )
Advances from FHLB and other borrowings including long-term debt
886 (194 ) 692 (1,532 ) 490 (1,042 )
Total interest bearing liabilities
1,154 (129 ) 1,025 (2,028 ) (959 ) (2,987 )

Change in net interest income
$ 9,707 $ 1,497 $ 11,204 $ 4,033 $ (1,216 ) $ 2,817
⁽¹⁾Includes loans held-for-sale.

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Table of Contents
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
~~MANAGEMENT~~’S
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
~~Rate/Volume Analysis~~~~– continued~~

For the Nine Months Ended September 30,

2017

2016

Due to

Due to

Volume

Rate

Net

Volume

Rate

Net

(In Thousands)

Interest earning assets:

Investment securities
$ (240 ) $ 180 $ (60 ) $ (159 ) $ 100 $ (59 )
FHLB and FRB stock
5 16 21 15 63 78
Loans receivable, net
1,806 1,163 2,969 3,069 (423 ) 2,646
Other earning assets
(1 ) 3 2 (4 ) 3 (1 )
Total interest earning assets
1,570 1,362 2,932 2,921 (257 ) 2,664

Interest bearing liabilities:

Savings, money market and checking accounts
5 22 27 3 (4 ) (1 )
Certificates of deposit
(2 ) (2 ) (4 ) 25 2 27
Advances from FHLB and other borrowings including long-term debt
181 438 619 483 68 551
Total interest bearing liabilities
184 458 642 511 66 577

Change in net interest income
$ 1,386 $ 904 $ 2,290 $ 2,410 $ (323 ) $ 2,087
~~Res~~~~ults~~Results of Operations for the Three Months Ended September 30,~~, 201~~7 2022 and ~~201~~20216

Net ~~Income~~Income. . Eagle’s net income for the three months ended September 30, ~~2017~~2022 was ~~$1.72~~$3.09 million compared to ~~$1.77~~$4.75 million for the three months ended September 30, ~~2016.~~2021. The ~~slight~~ decrease of ~~$51,000, or 2.9%,~~$1.66 million was due to a decrease in noninterest income of ~~$701,000~~$5.93 million and an increase in noninterest expense of ~~$398,000,~~$1.86 million. These decreases were largely offset by an increase in net interest income after loan loss provision of ~~$879,000 and a decrease in income tax expense of $169,000.~~$5.59 million. Basic and diluted earnings per share were both ~~$0.45~~$0.40 for the current period. Basic and diluted earnings per share were both ~~$0.46~~$0.73 for the prior year comparable period.

Net Interest ~~Income~~Income. . Net interest income increased to ~~$6.16~~$17.89 million for the three months ended September 30, ~~2017,~~2022, from ~~$5.42~~$12.03 million for the same quarter in the prior year. ~~This~~The increase of ~~$738,000,~~$5.86 million, or ~~13.6%~~48.7%, was primarily the result of an increase in interest and dividend income of ~~$1.01 million, partially offset by an increase in interest expense of $278,000.~~$6.53 million.
Interest and Dividend ~~Income~~Income. . Interest and dividend income was ~~$7.22~~$19.34 million for the three months ended September 30, ~~2017,~~2022 compared to ~~$6.21~~$12.81 million for the three months ended September 30, ~~2016, an increase of $1.01 million, or 16.3%.~~2021. Interest and fees on loans increased to ~~$6.48~~$16.67 million for the three months ended September 30, ~~2017~~2022 from ~~$5.46~~$11.62 million for the three months ended September 30, ~~2016.~~2021. This increase of ~~$1.02~~$5.05 million, or ~~18.7%~~43.5%, was due to an increase in the average balance of loans, as well as an increase in the average yield ~~of loans for the quarter ended September 30, 2017.~~on loans. Average balances for loans receivable, ~~net,~~ including loans held-for-sale, for the three months ended September 30, ~~2017~~2022 were ~~$520.60 million,~~$1.30 billion, compared to ~~$471.44~~$926.75 million for the prior year period. This represents an increase of ~~$49.16~~$374.61 million, or ~~10.4%~~40.4%. The increase was impacted by the FCB acquisition and organic loan growth. The average interest rate earned on loans receivable also increased by 3511 basis points, from ~~4.63%~~4.97% for the three months ended September 30, 2021 to ~~4.98%.~~5.08% for the current period. Interest ~~and dividends~~accretion on purchased loans was $392,000 for the three months ended September 30, 2022 which resulted in a 9 basis point increase in net interest margin compared to $94,000 for the three months ended September 30, 2021 which resulted in a 3 basis point increase in net interest margin. The Small Business Administration’s Payroll Protection Program (“PPP”) fee income on loans was $27,000 for the three months ended September 30, 2022, which resulted in a 1 basis point increase in net interest margin compared to $701,000 for the three months ended September 30, 2021, which resulted in a 23 basis point increase in net interest margin. Interest on investment securities available-for-sale ~~decreased slightly~~increased by $1.47 million period over period. Average ~~interest rates earned on~~balances for investments increased to ~~2.27% from 2.11%. However, average balances for investments decreased to $121.97~~$378.68 million for the three months ended September 30, ~~2017,~~2022 from ~~$134.39~~$233.88 million for the three months ended September 30, ~~2016.~~
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~~Table of Contents~~
~~EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES~~2021. The increase in average investment balances was largely driven by the FCB acquisition. Average interest rates earned on investments also increased to 2.68% for the three months ended September 30, 2022 from 1.86% for the three months ended September 30, 2021.

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~
~~Results of Operations for~~ ~~the Three Months Ended~~ ~~September~~ 30~~, 201~~7 ~~and 201~~6 ~~– continued~~
Interest ~~Expense~~Expense. . Total interest expense was ~~$1.07~~$1.46 million for the three months ended September 30, ~~2017~~2022 compared to ~~$787,000~~$776,000 for the three months ended September 30, ~~2016.~~2021. The increase of ~~$278,000~~$679,000, or ~~35.3%~~87.5%, was ~~primarily~~largely due to an increase of $367,000 in interest expense on ~~FHLB advances and other borrowings including long-term debt.~~deposits, as well as a net increase of $312,000 in interest expense on total borrowings. The average ~~borrowing~~ balance for total deposits was $1.66 billion for the three months ended September 30, 2022 compared to $1.16 for the three months ended September 30, 2021. The increase in average deposits balances was impacted by the FCB acquisition. In addition, the overall average rate on total deposits was up from 0.12% for the three months ended September 30, 2021 compared to 0.17% for the three months ended September 30, 2022. The average balance for total borrowings increased from ~~$99.25~~$38.02 million for the three months ended September 30, ~~2016~~2021 to ~~$118.24~~$69.87 million for the three months ended September 30, ~~2017.~~2022. The increase was impacted by the issuance of $40.00 million of subordinated notes in January 2022. A portion of the net proceeds were used to redeem $10.00 million of senior notes due in February 2022. However, the average rate paid ~~increased~~on total borrowings decreased from ~~1.63%~~4.45% for the three months ended September 30, ~~2016,~~2021, to ~~2.30%~~4.19% for the three months ended September 30, ~~2017. In February 2017,~~2022. The decrease in the ~~Company completed~~average rate paid is due to the ~~issuance~~change in the mix of ~~$10.00 million in aggregate principal amount of 5.75% fixed senior unsecured notes due in 2022.~~the outstanding borrowings.
Loan Loss Provision~~Loss~~ ~~Provision~~. Loan loss provisions are charged to earnings to maintain the total allowance for loan losses at a level considered adequate by ~~management of~~ the Bank to provide for probable loan losses based on prior loss experience, volume and type of lending ~~conducted by the Bank~~we conduct and past due loans in ~~the~~ portfolio. The Bank’s policies require the review of assets on a quarterly basis. The Bank classifies loans ~~as well as other assets~~ if warranted. While management believes it uses the best information available to make a determination with respect to the allowance for loan losses, it recognizes that future adjustments may be necessary. The Bank recorded ~~$331,000~~$517,000 in ~~provision for~~ loan ~~losses~~loss provisions for the three months ended September 30, ~~2017~~2022 and ~~$472,000~~$255,000 for the three months ended September 30, ~~2016.~~2021. The increase in the loan loss provision was primarily related to loan growth. Management believes the level of total allowances is adequate to cover estimated losses inherent in the portfolio. However, if the economic forecast worsens relative to the assumptions we utilized, additional provisions will be necessary in future periods in order to increase our allowance for credit losses.

Noninterest ~~Income~~Income. . Total noninterest income ~~decreased to $3.99~~was $7.42 million for the three months ended September 30, ~~2017, from $4.69~~2022 compared to $13.35 million for the three months ended September 30, ~~2016,~~2021. The decrease of $5.93 million was primarily driven by a decrease in mortgage banking, net of ~~$701,000 or 14.9%. The decrease is primarily due to a decrease in~~$7.22 million. Mortgage banking, net includes net gain on sale of mortgage loans which decreased $7.31 million to ~~$2.57~~$4.19 million for the three months ended September 30, ~~2017 from $3.16~~2022 compared to $11.50 million for the three months ended September 30, ~~2016. Gross~~2021. This change reflects a mortgage market that is returning to more normal levels after record levels were reached in 2021. During the three months ended September 30, 2022, $121.26 million residential mortgage loans were sold compared to $270.84 million in the same period in the prior year. In addition, gross margin on sale of mortgage loans ~~were approximately 3.0%~~ for the three months ended September 30, ~~2017~~2022 was 3.46% compared to ~~approximately 3.3%~~4.25% for the three months ended September 30, ~~2016. During the three months ended September 30, 2017, $85.29 million~~2021. The decrease in mortgage banking, net was slightly offset by an increase of ~~mortgage loans were sold during the current quarter compared to $95.55 million~~$979,000 in the same quarter in the prior year. In addition, the Company incurred a net gain of $110,000 on sale of available-for-sale securities for the three months ended September 30, 2016. There we no securities sales during the three months ended September 30, 2017.
~~Noninterest Expense~~. ~~Noninterest expense~~other noninterest income which was ~~$7.56~~$1.59 million for the three months ended September 30, ~~2017~~2022, compared to ~~$7.16~~$608,000 for the three months ended September 30, 2021. Other noninterest income includes $1.17 million for the three months ended September 30, ~~2016. The increase of $398,000 or 5.6% is largely due~~2022, compared to ~~acquisition costs totaling $276,000 related to the merger agreement with TwinCo, Inc. discussed above.~~
~~Income Tax Expense~~. ~~Income tax expense was $538,000~~$361,000 for the three months ended September 30, ~~2017, compared~~2021 related to ~~$707,000~~commodity sales income from Eagle's subsidiary, Western Financial Services ("WFS"). WFS facilitates deferred payment contracts for customers that produce agricultural products.
Noninterest Expense. Noninterest expense was $20.66 million for the three months ended September 30, ~~2016. The effective tax rate~~2022 compared to $18.80 million for the three months ended September 30, ~~2017~~2021, an increase of $1.86 million or 9.9%. The increase was ~~23.8%.~~largely impacted by an increase in other noninterest expense of $1.48 million incurred during the three months ended September 30, 2022. The commodity sales income for WFS mentioned above has a corresponding sales expense included in other noninterest expense of $1.17 million and $361,000 for the three months ended September 2022 and 2021, respectively. The increase in noninterest was partially offset by a decrease in salaries and employee benefits expense due to lower commissions paid on residential mortgage originations.

Provision for Income Taxes. Provision for income taxes was $1.03 million for the three months ended September 30, 2022, compared to $1.58 million for the three months ended September 30, 2021 due to decreased income before provision for income taxes. The effective tax rate was 25.0% for both the current and prior period.
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Table of Contents
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations for the Nine Months Ended September 30,~~, 201~~7 2022 and ~~201~~20216

Net ~~Income~~Income. . Eagle’s net income for the nine months ended September 30, ~~2017~~2022 was ~~$3.55~~$7.08 million compared to ~~$3.68~~$12.69 million ~~of net income~~ for the nine months ended September 30, ~~2016.~~2021. The ~~slight~~ decrease of ~~$133,000, or 3.6%,~~$5.61 million was primarily due to ~~an increase in noninterest expense of $2.23 million and~~ a decrease in noninterest income of ~~$625,000,~~$15.00 million. This decrease was largely offset by an increase in net interest income after loan loss provision of ~~$2.74~~$10.13 million. Basic and diluted earnings per share were ~~$0.93 and $0.92, respectively,~~both $0.98 for the current period. Basic and diluted earnings per share were ~~$0.97~~$1.90 and ~~$0.95, respectively,~~$1.89 for the prior year comparable ~~period.~~period, respectively.

Net Interest ~~Income~~Income. . Net interest income increased to ~~$17.52~~$45.70 million for the nine months ended September 30, ~~2017,~~2022, from ~~$15.23~~$34.50 million for the ~~previous year’s nine month period. This~~same period in the prior year. The increase of ~~$2.29~~$11.20 million, or ~~15.0%~~32.50%, was primarily the result of an increase in interest and dividend income of ~~$2.93 million partially offset by an increase in interest expense of $642,000.~~$12.23 million.
Interest and Dividend ~~Income~~Income. . Interest and dividend income was ~~$20.49~~$49.16 million for the nine months ended September 30, ~~2017,~~2022 compared to ~~$17.56~~$36.93 million for the nine months ended September 30, ~~2016, an increase of $2.93 million, or 16.7%.~~2021. Interest and fees on loans increased to ~~$18.22~~$42.93 million for the nine months ended September 30, ~~2017~~2022 from ~~$15.25~~$33.66 million for the ~~same period~~nine months ended September 30, ~~2016.~~2021. This increase of ~~$2.97~~$9.27 million, or ~~19.5%~~27.5%, was due to an increase in the average balance of ~~loans, as well as, an increase in the average yield on~~ loans. Average balances for loans receivable, ~~net,~~ including loans held-for-sale, for the nine months ended September 30, ~~2017~~2022 were ~~$502.56 million,~~$1.14 billion, compared to ~~$449.33~~$905.48 million for the prior year period. This represents an increase of ~~$53.23~~$238.98 million, or ~~11.8%~~26.4%. The increase was impacted by the FCB acquisition, as well as organic loan growth. The average interest rate earned on loans receivable increased ~~by 30~~5 basis points, from ~~4.53%~~4.97% for the nine months ended September 30, 2021 to ~~4.83%.~~5.02% for the current period. Interest ~~and dividends~~accretion on ~~investment securities available-for-sale decreased slightly period over period. Average balances for investments decreased to $125.64~~purchased loans was $1.29 million for the nine months ended September 30, ~~2017, from $141.06~~2022 which resulted in a 11 basis point increase in net interest margin compared to $408,000 for the nine months ended September 30, 2021 which resulted in a 4 basis point increase in net interest margin. PPP fee income on loans was $283,000 for the nine months ended September 30, 2022, which resulted in a 3 basis point increase in net interest margin compared to $1.67 million for the nine months ended September 30, ~~2016. However, average~~2021 which resulted in a 19 basis point increase in net interest ~~rates earned~~margin. Interest on investment securities available-for-sale increased by $2.87 million period over period. Average balances for investments increased to ~~2.27% from 2.08%.~~
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~~Table of Contents~~
~~EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES~~
~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~
~~Res~~~~ults of Operations for the~~ ~~Nine~~ ~~Months Ended~~ ~~September~~ 30~~, 201~~7 ~~and 201~~6 ~~– continued~~
~~Interest Expense~~. ~~Total interest expense for the nine months ended September 30, 2017 was $2.97 million compared to $2.33~~$332.95 million for the nine months ended September 30, 2016. The increase of $642,000, or 27.6%, was largely attributable to an increase in interest expense on FHLB advances and other borrowings and other long-term debt. The average borrowing balance increased2022, from ~~$94.12~~$200.39 million for the nine months ended September 30, ~~2016~~2021. The increase in average investment balances was largely driven by the FCB acquisition. Average interest rates earned on investments also increased to ~~$108.29~~2.35% for the nine months ended September 30, 2022 from 1.99% for the nine months ended September 30, 2021.
Interest Expense. Total interest expense was $3.46 million for the nine months ended September 30, ~~2017. The average rate paid increased from 1.71%~~2022 compared to $2.44 million for the nine months ended September 30, ~~2016,~~2021. The increase of $1.02 million, or 41.8%, was due to ~~2.25%~~a net increase of $692,000 in interest expense on total borrowings. The average balance for total borrowings increased from $40.70 million for the nine months ended September 30, ~~2017. In February 2017,~~2021 to $68.01 million for the ~~Company completed~~nine months ended September 30, 2022. The increase was impacted by the issuance of $40.00 million of subordinated notes in January 2022. A portion of the net proceeds were used to redeem $10.00 million ~~in aggregate principal amount~~ of ~~5.75% fixed~~ senior ~~unsecured~~ notes due in February 2022. However, the average rate paid on total borrowings decreased from 4.34% for the nine months ended September 30, 2021, to 3.96% for the nine months ended September 30, 2022. The decrease in the average rate paid was due to the change in the mix of the outstanding borrowings. Interest expense on deposits increased $333,000, or 29.8% compared to prior year period. The average balance for total deposits was $1.47 billion for the nine months ended September 30, 2022 compared to $1.11 billion for the nine months ended September 30, 2021. The increase in avaerage deposit balances was impacted by the FCB acquisition. The overall average rate on total deposits was 0.13% for both the current and prior period.

Loan Loss ~~Provision.~~ Provision. Loan loss provisions are charged to earnings to maintain the total allowance for loan losses at a level considered adequate by ~~management of~~ the Bank to provide for probable loan losses based on prior loss experience, volume and type of lending ~~conducted by the Bank~~we conduct and past due loans in ~~the~~ portfolio. The Bank’s policies require athe review of assets on a quarterly basis. The Bank classifies loans ~~as well as other assets~~ if warranted. While management believes it uses the best information available to make a determination with respect to the allowance for loan losses, it recognizes that future adjustments may be necessary. The Bank recorded ~~$934,000~~$1.65 million in loan loss provisions for the nine months ended September 30, ~~2017~~2022 and ~~$1.38 million in~~$576,000 for the nine months ended September 30, ~~2016. Total nonperforming loans, including restructured loans,~~2021. The increase in the loan loss provision was ~~$1.40 million at September 30, 2017. As~~largely due to loan growth. Management believes the level of ~~September 30, 2017,~~total allowances is adequate to cover estimated losses inherent in the ~~Bank had $527,000~~portfolio. However, if the economic forecast worsens relative to the assumptions we utilized, additional provisions will be necessary in ~~foreclosed real estate property and other repossessed property.~~future periods in order to increase our allowance for credit losses.

Noninterest ~~Income~~Income. . Total noninterest income ~~decreased slightly to $10.77~~was $23.05 million for the nine months ended September 30, ~~2017, from $11.39~~2022 compared to $38.05 million for the nine months ended September 30, ~~2016,~~2021. The decrease of $15.00 million was primarily driven by a decrease in mortgage banking, net of ~~$625,000 or 5.5%. The decrease is due in part to a decrease in~~$17.18 million. Mortgage banking, net includes net gain on sale of mortgage loans which decreased $20.61 million to ~~$6.66~~$15.65 million for the nine months ended September 30, ~~2017 from $7.32~~2022 compared to $36.26 million for the nine months ended September 30, ~~2016. Gross margin on sale of~~2021. This change reflects a mortgage ~~loans~~market that is returning to more normal levels after record levels were ~~approximately 3.1% for the nine months ended September 30, 2017 compared to approximately 3.4% for the three months ended September 30, 2016. The decrease~~reached in ~~gross margin on sale of mortgage loans is due to interest rate movements in the mortgage market.~~2021. During the nine months ended September 30, ~~2017, $215.20~~2022, $443.92 million ofresidential mortgage loans were sold compared to ~~$217.60~~$823.41 million in the same period in the prior year. ~~The change in the net loss/gain~~In addition, gross margin on sale of ~~available-for-sale securities also decreased noninterest income. The Company incurred a net loss on sale of available-for-sale securities of $14,000~~mortgage loans for the nine months ended September 30, ~~2017~~2022 was 3.52% compared to ~~a net gain of $194,000~~4.40% for the nine months ended September 30, ~~2016. These decreases were partially~~2021. There has been some margin compression due to increased competition. The decrease in mortgage banking, net was slightly offset by an increase of $1.44 million in ~~mortgage loan servicing fees of $314,000 due~~other noninterest income to ~~our increased servicing portfolio.~~
~~Noninterest Expense~~. ~~Noninterest expense was $22.62~~$3.24 million for the nine months ended September 30, ~~2017~~2022, compared to ~~$20.39~~$1.8 million for the nine months ended September 30, ~~2016. The increase~~2021. Other noninterest income includes WFS commodity sales income of $2.23 million, or 10.9%, is largely due to increased salaries and employee benefits expense of $1.57 million. The increase in salaries expense is due in part to higher commission-based compensation related to the continued loan growth and additional staff related to compliance with mortgage rules. In addition, the Company incurred acquisition costs totaling $276,000 related to the merger agreement with TwinCo, Inc. discussed above.
~~Income Tax Expense~~. ~~Income tax expense was $1.19~~$2.13 million for the nine months ended September 30, ~~2017,~~2022, compared to ~~$1.17~~$962,000 for the prior period.
Noninterest Expense. Noninterest expense was $57.66 million for the nine months ended September 30, ~~2016. The effective tax rate~~2022 compared to $55.05 million for the nine months ended September 30, ~~2017~~2021, a slight increase of $2.61 million or 4.7%. The increase was ~~25.1%. Income tax~~impacted by an increase in other noninterest expense of $2.32 million. The commodity sales income in other noninterest income has ~~increased with our increased income levels. However, tax free municipal bond income~~a corresponding sales expense included in other noninterest expense of $2.13 million and ~~Bank owned life insurance income help~~$962,000 for the nine months ended September 30, 2022 and 2021, respectively. In addition, $2.30 million of acquisition costs were incurred during the nine months ended September 30, 2022 compared to $35,000 for the same period in the prior period. These increases were largely offset by a decrease in salaries and employee benefits due to lower commissions paid on residential mortgage originations.
Provision for Income Taxes. Provision for income taxes was $2.36 million for the ~~overall effective tax rates.~~nine months ended September 30, 2022, compared to $4.23 million for the nine months ended September 30, 2021 due to decreased income before provision for income taxes. The effective tax rate ~~is further reduced by a tax credit investment entered into by~~was 25.0% for both the Company in 2012. The Bank made an investment in Certified Development Entities which have received allocations of New Markets Tax Credits (“NMTC”). Administered by the Community Development Financial Institutions Fund of the U.S. Department of the Treasury, the NMTC program is aimed at stimulating economiccurrent and ~~community development and job creation in low-income communities. The federal income tax credits received are claimed over an estimated seven-year credit allowance~~prior period.

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

Liquidity and Capital Resources

Liquidity

The Bank is required by regulation to maintain ~~minimum~~sufficient levels of ~~liquid assets as defined in the regulations of the Montana Division of Banking and Financial Institutions and Federal Reserve Bank (“FRB”) regulations. The~~ liquidity ~~requirement is retained~~ for safety and soundness ~~purposes, and appropriate~~purposes. Appropriate levels of liquidity will depend upon the types of activities in which the company engages. For internal reporting purposes, the Bank uses policy minimums of 1.0%, and 8.0% for “basic surplus” and “basic surplus with FHLB” as internally defined. In general, the “basic surplus” is a calculation of the ratio of unencumbered short-term assets reduced by estimated percentages of CD maturities and other deposits that may leave the Bank in the next 90 days divided by total assets. “Basic surplus with FHLB” adds to “basic surplus” the additional borrowing capacity the Bank has with ~~FHLB.~~the FHLB of Des Moines. The Bank exceeded those minimum ratios as of ~~both~~ September 30, ~~2017~~2022 and December 31, ~~2016.~~2021.

The ~~Bank~~’sBank’s primary sources of funds are deposits, repayment of loans and mortgage-backed ~~and collateralized mortgage obligation~~ securities, maturities of investments, funds provided from operations, ~~and~~ advances from the FHLB of Des Moines and other borrowings. In addition, during the year ended December 31, 2021, the Company established a $10.00 million line of credit with a correspondent bank. Scheduled repayments of loans and mortgage-backed ~~and collateralized mortgage obligation~~ securities and maturities of investment securities are generally predictable. However, other sources of funds, such as deposit flows and loan prepayments, can be greatly influenced by the general level of interest rates, economic conditions and competition. The ~~Bank~~Company uses liquidity resources principally to fund existing and future loan commitments. It also uses them to fund maturing certificates of deposit and demand deposit withdrawals, for investment purposes, to meet operating expenses and capital expenditures, for dividend payments and stock repurchases and to ~~invest in other loans and investments,~~ maintain adequate liquidity ~~and meet operating expenses.~~levels.

Liquidity may be adversely affected by unexpected deposit outflows, higher interest rates paid by competitors, and similar matters. Management monitors projected liquidity needs and determines the level desirable based in part on the Bank's commitments to make loans and ~~management~~’smanagement’s assessment of the ~~Bank’s~~Bank's ability to generate funds.
Through the nine months ended September 30, 2022, liquidity levels have remained strong. The Company completed a $40.00 million subordinated debt offering in January 2022. A portion of the net proceeds were used to repay at maturity the $10.00 million of senior notes due in February 2022.

Capital Resources

At ~~August 31, 2017 (the most recent report available for~~As of September 30, ~~2017),~~2022, the Bank’s internally determined measurement of sensitivity to interest rate movements as measured by a 200 basis point rise in interest rates scenario, increased the economic value of equity (“EVE”) by ~~3.9%~~5.20% compared to an increase of ~~2.1%~~8.90% at ~~November 30, 2016 (the most recent report available for~~ December 31, ~~2016).~~2021. The Bank is within the guidelines set forth by the Board of Directors for interest rate risk sensitivity in rising interest rate scenarios.

~~Beginning January 1, 2015, community banking organizations became subject to a new regulatory rule recently adopted by federal banking agencies (commonly referred to as Basel III).~~ The ~~new rule establishes a new regulatory capital framework that incorporates revisions to~~Company's and the Basel capital framework, strengthens the definition of regulatory capital, increases risk-based capital requirements, and amends the methodologies for determining risk-weighted assets. These changes are expected to increase the amount of capital required by community banking organizations~~. Basel III includes a multiyear transition period from January 1, 2015 through December 31, 2019.~~
~~The Banks~~’s Tier I leverage ratio, as measured under State of Montana and FRB rules, increased from 9.23% as of December 31, 2016 to 10.57% as of September 30, 2017. The Bank’s strong capital position helps to mitigate its interest rate risk exposure.
~~As of~~ ~~September 30, 2017, the Bank’s~~Bank's regulatory capital was in excess of all applicable regulatory ~~requirements. As~~requirements and the Bank is deemed "well capitalized" pursuant to State of Montana and FRB rules as of September 30, ~~2017,~~2022. The Company's and the ~~Bank’s total~~Bank's actual capital amounts and ratios as of September 30, 2022 are presented in the table below and all of the ratios, with the exception of the Tier 1 capital ~~common equity Tier 1 capital and Tier 1 leverage ratios were 15.40%, 14.32%, 14.32% and 10.57%~~, ~~respectively, compared to regulatory requirements of 9.25%, 7.25%, 5.75% and 5.25%, respectively. These regulatory requirement ratios~~adjusted total average assets ratio, include the capital conservation buffer of ~~1.25% phased-in beginning January 1, 2017.~~2.50%.

Minimum

To Be Well

Minimum Required

Capitalized Under

for Capital Adequacy

Prompt Corrective

Actual

Purposes

Action Provisions

Amount

Ratio

Amount

Ratio

Amount

Ratio

(Dollars in Thousands)

September 30, 2022:

Total risk-based capital to risk weighted assets

Consolidated
$ 216,561 14.18
%
$ 160,400 10.50
%
N/A N/A
Bank
198,458 13.00 160,282 10.50 152,650 10.00

Tier 1 capital to risk weighted assets

Consolidated
147,711 9.67 129,848 8.50 N/A N/A
Bank
184,608 12.09 129,752 8.50 122,120 8.00

Common equity Tier 1 capital to risk weighted assets

Consolidated
142,711 9.34 106,933 7.00 N/A N/A
Bank
184,608 12.09 106,855 7.00 99,222 6.50

Tier 1 capital to adjusted total average assets

Consolidated
147,711 7.78 75,897 4.00 N/A N/A
Bank
184,608 9.83 75,112 4.00 93,890 5.00

~~-42-~~
- 36 -
Table of Contents
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
~~MANAGEMENT~~’S
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Minimum

To Be Well

Minimum Required

Capitalized Under

for Capital Adequacy

Prompt Corrective

Actual

Purposes

Action Provisions

Amount

Ratio

Amount

Ratio

Amount

Ratio

(Dollars in Thousands)

December 31, 2021:

Total risk-based capital to risk weighted assets

Consolidated
$164,639 15.18 % $ 113,904 10.50 % N/A N/A
Bank
165,786 15.32 113,591 10.50 108,182 10.00

Tier 1 capital to risk weighted assets

Consolidated
137,139 12.64 92,208 8.50 N/A N/A
Bank
153,286 14.17 91,955 8.50 86,546 8.00

Common equity Tier 1 capital to risk weighted assets

Consolidated
132,139 12.18 75,936 7.00 N/A N/A
Bank
153,286 14.17 75,727 7.00 70,318 6.50

Tier 1 capital to adjusted total average assets

Consolidated
137,139 9.75 56,290 4.00 N/A N/A
Bank
153,286 10.96 55,929 4.00 69,911 5.00
- 37 -
Table of Contents
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Impact of Inflation and Changing Prices

~~Liquidity~~Our condensed consolidated financial statements and ~~Capital Resources~~ ~~– continued~~

September 30, 2017

(Unaudited)

Dollar

% of

Amount

Assets

(Dollars in Thousands)

Total risk-based capital to risk weighted assets:

Capital level
$ 78,645 15.40
%
Requirement
47,252 9.25
Excess
$ 31,393 6.15
%

Tier I capital to risk weighted assets:

Capital level
$ 73,145 14.32
%
Requirement
37,036 7.25
Excess
$ 36,109 7.07
%

Common equity tier I capital to risk weighted assets:

Capital level
$ 73,145 14.32
%
Requirement
29,373 5.75
Excess
$ 43,772 8.57
%

Tier I capital to adjusted total average assets:

Capital level
$ 73,145 10.57
%
Requirement
36,343 5.25
Excess
$ 36,802 5.32
%
the accompanying notes, which are found in Part I, Item 1, have been prepared in accordance with generally accepted accounting principles, which require the measurement of financial position and operating results in terms of historical dollars without considering the change in the relative purchasing power of money over time and due to inflation. The impact of inflation is reflected in the increased cost of our operations. Interest rates have a greater impact on our performance than do the general levels of inflation. Interest rates do not necessarily move in the same direction or to the same extent as the prices of goods and services.

Interest Rate Risk

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

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

The ongoing monitoring and management of this risk is an important component of the ~~Company~~’sCompany’s asset/liability committee, which is governed by policies established by the Company’s Board that are reviewed and approved annually. The Board delegates responsibility for carrying out the asset/liability management policies to the Bank’s asset/liability committee. In this capacity, the asset/liability committee develops guidelines and strategies impacting the Company’s asset/liability management related activities based upon estimated market risk sensitivity, policy limits and overall market interest rate levels and trends. The Company’s goal of its asset and liability management practices is to maintain or increase the level of net interest income within an acceptable level of interest rate risk. Our asset and liability policy and strategies are expected to continue as described so long as competitive and regulatory conditions in the financial institution industry and market interest rates continue as they have in recent years.
~~-43-~~
~~Table of Contents~~
~~EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES~~
~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~
~~Interest Rate Risk~~~~– continued~~

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

The following table includes the ~~Banks~~’sBank’s net interest income sensitivity analysis.

Changes in Market

Rate Sensitivity

Interest Rates

As of August 31, 2017

Policy
(Basis Points)

Year 1

Year 2

Limits

+200

0.25%

0.83%

-15.00%
-100

-1.80%

-6.30%

-15.00%

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

Changes in Market

Rate Sensitivity

Interest Rates

As of September 30, 2022

Policy
(Basis Points)

Year 1

Year 2

Limits

+200
1.0% 7.5% -15.0%
+100
0.7% 5.1% -10.0%
-100 -2.3% -3.1% -10.0%
-200 -6.3% -11.1% -15.0%

~~-44-~~
- 38 -
Table of Contents
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~
Quantitative and Qualitative Disclosures About Market Risk

Item 3. 3. Quantitative and Qualitative Disclosures About Market Risk

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

~~-45-~~
- 39 -
Table of Contents
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
CONTROLS AND PROCEDURES

Item 4. 4. Controls and Procedures

As of the end of the period covered by this report, we conducted an evaluation under the supervision and with the participation of our management including our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”) of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange ~~Commission~~’sCommission’s rules and forms, including to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is accumulated and communicated to management to allow timely decisions regarding required disclosure. Based on that evaluation, our CEO and CFO concluded that as of September 30, ~~2017,~~2022, our disclosure controls and procedures were effective. During the last quarter, there were no changes in the Company’s internal control over financial reporting that have materially affected, or were reasonably likely to materially affect, the Company’s internal control over financial reporting.

~~-46-~~
- 40 -
Table of Contents
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES

Part II - OTHER INFORMATION

Item 1.
Legal Proceedings.

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

Item 1A.
Risk ~~Factors.~~Factors

There have not been any material changes in the risk factors previously disclosed in Part I,1, Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2021 and any subsequently filed Quarterly Reports on Form 10-Q.

Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds.

On ~~July 20, 2017, the~~April 21, 2022, Eagle's Board authorized the repurchase of up to ~~100,000~~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. NoDuring the second quarter of 2022, 5,000 shares were purchased under this plan ~~during~~at an average price of $19.75. The following table summarizes the Company's purchase of its common stock for the three months ended September 30, ~~2017.~~2022 under this plan. The plan expires on ~~July 20, 2018.~~April 21, 2023.

Total Number

Maximum

of Shares

Number of

Purchased

Shares that

Total

as Part of

May Yet Be

Number of

Average

Publicly

Purchased

Shares

Price Paid

Announced Plans

Under the Plans

Purchased

Per Share

or Programs

or Programs

July 1, 2022 through July 31, 2022
50,000 $ 19.50 50,000 345,000

August 1, 2022 through August 31, 2022
44,477 19.41 44,477 300,523

September 1, 2022 through September 30, 2022
5,040 19.32 5,040 295,483

Total
99,517 $ 19.45 99,517

On July ~~21, 2016, the~~22, 2021, Eagle's Board authorized the repurchase of up to 100,000 shares of its common stock. ~~Under the plan, shares~~ ~~could be purchased by the Company on the open market or in privately negotiated transactions. 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 extent to which the ~~three months ended December 31, 2015, 15,000~~company repurchases its shares and the timing of such repurchase will depend upon market conditions and other corporate considerations. No shares were purchased during the third or fourth quarter of 2021. However, during the first quarter of 2022, the Company repurchased the total authorized amount of 100,000 shares at an average price of ~~$11.75~~$22.71 per share. The plan expired on July 22, 2022.
On July 23, 2020, Eagle's Board authorized the repurchase of up to 100,000 shares of its common stock. Under the plan, shares could be purchased by the Company on the open market or in privately negotiated transactions. The extent to which the company repurchased its shares and the timing of such repurchases depended upon market conditions and other corporate considerations. During the ~~three months ended September 30, 2015, 46,065~~third quarter of 2020, 41,337 shares were purchased under this plan at an average price of ~~$11.47~~$15.75 per share. However, no shares were purchased during the fourth quarter of 2020 or during 2021. The plan expired on July 23, ~~2016.~~2021.
Item 3.
Defaults Upon Senior Securities.
Not applicable.
Item 4.
Mine Safety Disclosures

Not applicable.

~~-47-~~
- 41 -
Table of Contents
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
Part II - OTHER INFORMATION ~~(CONTINUED)~~- continued

Item 3.5.
~~Defaults Upon Senior Securities.~~Other Information.

~~Not~~ ~~applicable.~~None.

Item 4.6.
~~Mine Safety Disclosures~~Exhibits.

~~Not applicable~~

~~Item 5.~~
~~Other Information.~~
~~None~~.
~~Item 6.~~
~~Exhibits.~~
Exhibit
Number
Description
2.1
Agreement and Plan of Merger, dated as of September ~~5, 2017,~~30, 2021, by and among Eagle Bancorp Montana, Inc., Opportunity Bank of Montana, ~~TwinCo,~~First Community Bancorp, Inc. and ~~Ruby Valley~~First Community Bank (incorporated ~~herein~~ by reference to Exhibit 2.1 of our Current Report on Form 8-K filed on October 1, 2021).
3.1
Amended and Restated Certificate of Incorporation of Eagle Bancorp Montana, Inc. (incorporated by reference to Exhibit 3.1 of our Current Report on Form 8-K filed on February 23, 2010).
3.2
Certificate of Amendment to the Amended and Restated Certificate of Incorporation. (incorporated by reference to Exhibit 3.2 of our Quarterly Report on Form 10-Q filed on May 9, 2019).
3.3
Bylaws of Eagle Bancorp Montana, Inc., amended as of August 20, 2015 (incorporated by reference to 3.1 of our Current Report on Form 8-K filed on August 25, 2015).
10.1 Form of Change in Control Agreement between Opportunity Bank of Montana and executive officers (incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K filed on September ~~6, 2017)~~28, 2022).
10.2 Salary Continuation Agreement between Opportunity Bank of Montana and Miranda Spaulding (filed herewith).

31.1
Certification by Peter J. Johnson, Chief Executive Officer, pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 (a) of the Sarbanes-Oxley Act of 2002.
31.2
Certification by ~~Laura F. Clark,~~Miranda J. Spaulding, Chief Financial Officer, pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 (a) of the Sarbanes-Oxley Act of 2002.
32.1
Certification by Peter J. Johnson, Chief Executive Officer, and ~~Laura F. Clark,~~Miranda J. Spaulding, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS
Inline XBRL Instance Document
(the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)⁽¹⁾

101.SCH
Inline XBRL Taxonomy Extension Schema Document⁽¹⁾
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document⁽¹⁾
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document⁽¹⁾
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document⁽¹⁾
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document⁽¹⁾

~~101.CAL~~
104
Cover Page Interactive Data File (formatted as Inline XBRL ~~Taxonomy Extension Calculation Linkbase Document~~and contained in Exhibit 101)

1~~01.DEF~~
~~XBRL Taxonomy Extension Definition Linkbase Document~~
⁽¹⁾These interactive data files shall not be deemed filed for purposes of Section 11 or 12 of the Securities Act of 1933, as amended, or Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability under those sections.
~~101.LAB~~
~~XBRL Taxonomy Extension Label Linkbase Document~~
~~101.PRE~~
~~XBRL Taxonomy Extension Presentation Linkbase Document~~

~~-48-~~
- 42 -
Table of Contents
~~EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES~~

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

EAGLE BANCORP MONTANA, INC.



Date: November ~~13, 2017~~9, 2022
By:
/s/ Peter J. Johnson
Peter J. Johnson

~~President/~~CEO


Date: November ~~13, 2017~~9, 2022
By:
/s/ ~~Laura F. Clark~~ Miranda J. Spaulding
~~Laura F. Clark~~Miranda J. Spaulding
~~Senior Vice President/~~SVP/CFO

~~-49-~~
- 43 -

	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

													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

	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, 2017	$	999	$	2,378	$	252	$	505	$	225		$	866		$	5,225
Charge-offs		-		-		-		-		(41	)		(19	)		(60	)
Recoveries		-		-		-		-		3			1			4
Provision		-		200		50		-		31			50			331
Ending balance, September 30, 2017	$	999	$	2,578	$	302	$	505	$	218		$	898		$	5,500

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, 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

Loans receivable:
Ending balance, September 30, 2017	$	109,250	$	247,501	$	29,760	$	51,450	$	14,696		$	58,554		$	511,211

Ending balance, September 30, 2017 of loans individually evaluated for impairment	$	484	$	451	$	-	$	242	$	131		$	88		$	1,396

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

	September 30, 2017
	Loans Past Due and Still Accruing
			90 Days
	30-89 Days		and				Non-Accrual		Current		Total
	Past Due		Greater		Total		Loans		Loans		Loans
	(In Thousands)
Residential mortgage (1-4 family)	$	1,362	$	-	$	1,362	$	484	$	107,404	$	109,250
Commercial real estate		500		-		500		451		246,550		247,501
Real estate construction		296		-		296		-		29,464		29,760
Home equity		83		-		83		242		51,125		51,450
Consumer		161		-		161		131		14,404		14,696
Commercial		177		-		177		88		58,289		58,554
Total	$	2,579	$	-	$	2,579	$	1,396	$	507,236	$	511,211

	September 30, 2017
			Unpaid
	Recorded		Principal		Related
	Investment		Balance		Allowance
	(In Thousands)
With no related allowance:
Residential mortgage (1-4 family)	$	484	$	492	$	-
Commercial real estate		451		451		-
Real estate construction		-		-		-
Home equity		242		261		-
Consumer		99		148		-
Commercial		88		89		-

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		-
Total	$	1,396	$	1,473	$	32

	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

	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%