10q10k10q10k.net

What changed in Eagle Bancorp Montana, Inc.'s 10-K — 2022 vs 2023

vs

Paragraph-level year-over-year comparison of Eagle Bancorp Montana, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+248 added−254 removedSource: 10-K (2024-03-06) vs 10-K (2023-03-08)

Top changes in Eagle Bancorp Montana, Inc.'s 2023 10-K

248 paragraphs added · 254 removed · 193 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

47 edited+3 added−3 removed136 unchanged
Biggest changeOur branch managers and loan officers located at our headquarters and in branches, have authority to approve certain types of loans when presented with a completed application. Other loans must be approved at our main offices as disclosed below. Loan consultants or loan brokers are generally not utilized for either residential or commercial lending activities.
Biggest changeOther loans must be approved at our main offices as disclosed below. Loan consultants or loan brokers are generally not utilized for either residential or commercial lending activities. After receiving a loan application from a prospective borrower, a credit report and verifications are obtained to confirm specific information relating to the loan applicant’s employment, income and credit standing.
The following table reflects our deposit market share and ranking by county: County Total Market Share Percentage (1) Deposit Market Share Rank (1) Broadwater, MT 100.00 % 1 Cascade, MT 0.91 9 Fergus, MT 6.35 5 Gallatin, MT 4.84 7 Lewis and Clark, MT 13.34 4 Madison, MT 36.27 2 Missoula, MT 1.81 9 Park, MT 8.83 5 Ravalli, MT 3.29 7 Roosevelt, MT 60.44 1 Rosebud, MT 8.29 3 Silver Bow, MT 11.00 4 Sweet Grass, MT 36.45 2 Teton, MT 18.15 2 Valley, MT 53.71 1 Yellowstone, MT 0.79 9 (1) Source: FDIC.gov-data as o f June 30, 2022. 3 Table of Contents Competition We face strong competition in our primary market areas for retail deposits and the origination of loans from both banks and non-bank competitors.
The following table reflects our deposit market share and ranking by county: County Total Market Share Percentage (1) Deposit Market Share Rank (1) Broadwater, MT 100.00 % 1 Cascade, MT 0.91 9 Fergus, MT 6.35 5 Gallatin, MT 4.84 7 Lewis and Clark, MT 13.34 4 Madison, MT 36.27 2 Missoula, MT 1.81 9 Park, MT 8.83 5 Ravalli, MT 3.29 7 Roosevelt, MT 60.44 1 Rosebud, MT 8.29 3 Silver Bow, MT 11.00 4 Sweet Grass, MT 36.45 2 Teton, MT 18.15 2 Valley, MT 53.71 1 Yellowstone, MT 0.79 9 (1) Source: FDIC.gov-data as o f June 30, 2023. 3 Table of Contents Competition We face strong competition in our primary market areas for retail deposits and the origination of loans from both banks and non-bank competitors.
The rules adopted by the Securities and Exchange Commission under the Sarbanes-Oxley Act have several requirements, including having these officers certify that: they are responsible for establishing, maintaining and regularly evaluating the effectiveness of our internal control over financial reporting; they have made certain disclosures to our auditors and the audit committee of the board of directors about our internal control over financial reporting; and they have included information in our quarterly and annual reports about their evaluation and whether there have been changes in our internal control over financial reporting or in other factors that could materially affect internal control over financial reporting. 13
The rules adopted by the Securities and Exchange Commission under the Sarbanes-Oxley Act have several requirements, including having these officers certify that: they are responsible for establishing, maintaining and regularly evaluating the effectiveness of our internal control over financial reporting; they have made certain disclosures to our auditors and the audit committee of the board of directors about our internal control over financial reporting; and they have included information in our quarterly and annual reports about their evaluation and whether there have been changes in our internal control over financial reporting or in other factors that could materially affect internal control over financial reporting. 13 Table of Contents
Also included in Tier 2 capital is the allowance for loan losses limited to a maximum of 1.25% of risk-weighted assets and, for institutions that have exercised an opt-out election regarding the treatment of accumulated other comprehensive income (“AOCI”), up to 45% of net unrealized gains on available-for-sale equity securities with readily determinable fair market values.
Also included in Tier 2 capital is the allowance for credit losses limited to a maximum of 1.25% of risk-weighted assets and, for institutions that have exercised an opt-out election regarding the treatment of accumulated other comprehensive income (“AOCI”), up to 45% of net unrealized gains on available-for-sale equity securities with readily determinable fair market values.
Market Areas We conduct business through our headquarters in Helena, Montana, in addition to 30 oth er full-service branches located in Ashland, Big Timber, Billings, Bozeman, Butte, Choteau, Culbertson, Denton, Dutton, Froid, Glasgow, Great Falls, Hamilton, Helena, Hinsdale, Livingston, Missoula, Sheridan, Three Forks, Townsend, Twin Bridges, Winifred and Wolf Point, Montana.
Market Areas We conduct business through our headquarters in Helena, Montana, in addition to 27 oth er full-service branches located in Ashland, Big Timber, Billings, Bozeman, Butte, Choteau, Culbertson, Denton, Dutton, Froid, Glasgow, Great Falls, Hamilton, Helena, Hinsdale, Livingston, Missoula, Sheridan, Three Forks, Townsend, Twin Bridges, Winifred and Wolf Point, Montana.
The Federal Reserve may also take any one of a number of discretionary supervisory actions against undercapitalized institutions, including the issuance of a capital directive and the replacement of senior executive officers and directors. The Bank was classified as “well-capitalized” under the prompt corrective action framework as of December 31, 2022.
The Federal Reserve may also take any one of a number of discretionary supervisory actions against undercapitalized institutions, including the issuance of a capital directive and the replacement of senior executive officers and directors. The Bank was classified as “well-capitalized” under the prompt corrective action framework as of December 31, 2023.
The banks also originates commercial real estate, home equity, consumer and commercial loans. Residential 1-4 family loans include residential mortgages and construction of residential properties. Commercial real estate loans include loans on multi-family dwellings, nonresidential property, commercial construction and development and farmland loans. Home equity loans include loans secured by the borrower’s primary residence.
The Bank also originates commercial real estate, home equity, consumer and commercial loans. Residential 1-4 family loans include residential mortgages and construction of residential properties. Commercial real estate loans include loans on multi-family dwellings, nonresidential property, commercial construction and development and farmland loans. Home equity loans include loans secured by the borrower’s primary residence.
At December 31, 2022 , we were in compliance with these regulations. Holding Company Regulation General Eagle is a bank holding company subject to regulatory oversight of the FRB. Eagle is required to register and file reports with the FRB and is subject to regulation and examination by the FRB.
At December 31, 2023 , we were in compliance with these regulations. Holding Company Regulation General Eagle is a bank holding company subject to regulatory oversight of the FRB. Eagle is required to register and file reports with the FRB and is subject to regulation and examination by the FRB.
In the transaction, Eagle acquired one retail branch in Wolf Point, Montana. The total consideration paid was $14.97 million and included cash consideration of $6.50 million and common stock issued of $8.47 million. 2 Table of Contents In January 2019, the Company acquired Big Muddy Bancorp, Inc. (“BMB”).This acquisition included four branches in Townsend, Dutton, Denton and Choteau, Montana.
In the transaction, Eagle acquired one retail branch in Wolf Point, Montana. The total consideration paid was $14.97 million and included cash consideration of $6.50 million and common stock issued of $8.47 million. In January 2019, the Company acquired Big Muddy Bancorp, Inc. (“BMB”).This acquisition included four branches in Townsend, Dutton, Denton and Choteau, Montana.
The regulatory structure also gives the regulatory authorities extensive discretion in connection with their supervisory and enforcement activities and examination policies, including policies with respect to the classification of assets and the establishment of adequate allowance for loan losses for regulatory purposes.
The regulatory structure also gives the regulatory authorities extensive discretion in connection with their supervisory and enforcement activities and examination policies, including policies with respect to the classification of assets and the establishment of adequate allowance for credit losses for regulatory purposes.
In addition, our internship programs, in partnership with state colleges and technical schools, help ensure a steady pipeline of accomplished talent. 8 Table of Contents Health and Safety The safety, health and wellness of our employees is a top priority. Robust wellness initiatives supporting a healthy lifestyle are encouraged through an established employee wellness program.
In addition, our internship programs, in partnership with state colleges and technical schools, help ensure a steady pipeline of accomplished talent. Health and Safety The safety, health and wellness of our employees is a top priority. Robust wellness initiatives supporting a healthy lifestyle are encouraged through an established employee wellness program.
In September 2005, our predecessor entity formed a special purpose subsidiary, Eagle Bancorp Statutory Trust I (the “Trust”), for the purpose of issuing trust preferred securities in the amount of $5.16 million. Our predecessor entity issued subordinated debentures to the Trust, and the coupon on the debentures matches the dividend payment on the trust preferred securities.
In September 2005, the Company formed a special purpose subsidiary, Eagle Bancorp Statutory Trust I (the “Trust”), for the purpose of issuing trust preferred securities in the amount of $5.16 million. The Company issued subordinated debentures to the Trust, and the coupon on the debentures matches the dividend payment on the trust preferred securities.
Fees generated from mortgage loan servicing generally consist of collecting mortgage payments, maintaining escrow accounts, disbursing payments to investors and foreclosure processing for loans held by others. Mortgage loan servicing fees w ere $4.84 mi llion and $4.10 million for the years ended December 31, 2022 and 2021, respectively.
Fees generated from mortgage loan servicing generally consist of collecting mortgage payments, maintaining escrow accounts, disbursing payments to investors and foreclosure processing for loans held by others. Mortgage loan servicing fees w ere $5.09 mi llion and $4.84 million for the years ended December 31, 2023 and 2022, respectively.
While the state’s population is approximately 1.12 million people, there are 45 credit unions in Montana as well as one state-chartered thrift institution and 37 commercial banks as of December 31, 2022.
While the state’s population is approximately 1.12 million people, there are 45 credit unions in Montana as well as one state-chartered thrift institution and 35 commercial banks as of December 31, 2023.
The following are subsidiaries of the Company: Opportunity Bank of Montana, Eagle Bancorp Statutory Trust I, Western Financial Services, Inc. and Opportunity Housing Fund, LLC, which is a subsidiary of the Bank. Employees and Human Capital Resources As of December 31, 2022, we ha d 399 full-time employees and 29 pa rt-time employees.
The following are subsidiaries of the Company: Opportunity Bank of Montana, Eagle Bancorp Statutory Trust I, Opportunity Financial Services, Inc., formerly Western Financial Services and Opportunity Housing Fund, LLC, which is a subsidiary of the Bank. Employees and Human Capital Resources As of December 31, 2023, we ha d 383 full-time employees and 24 pa rt-time employees.
The Bank currently has 31 full-service branches and 44 automated teller machines located in our market areas and we participate in the Money Pass® ATM network. The Bank also operated certain branches under the brand names Dutton State Bank, Farmers State Bank of Denton and The State Bank of Townsend.
The Bank currently has 29 full-service branc hes and 46 automated teller machines located in our market areas and we participate in the Money Pass® ATM network. The Bank also operated certain branches under the brand names Dutton State Bank, Farmers State Bank of Denton and The State Bank of Townsend.
As of December 31, 2022, consumer loans totaled $27.61 million or 2.04% of the Bank’s total loan portfolio. These loans consist primarily of auto loans, RV loans, boat loans, personal loans and credit lines and deposit account loans. Consumer loans are originated in the Bank’s market areas and generally have maturities of up to 7 years.
As of December 31, 2023, consumer loans totaled $30.13 million or 2.03% of the Bank’s total loan portfolio. These loans consist primarily of auto loans, RV loans, boat loans, personal loans and credit lines and deposit account loans. Consumer loans are originated in the Bank’s market areas and generally have maturities of up to 7 years.
Other loan related fee income for late charges and other ancillary fees were $1.01 million a nd $839 ,000 for the years ended December 31, 2022 and 2021, respectively. Residential 1-4 Family Loans The Bank originates residential 1-4 family mortgage loans secured by property located in the Bank’s market areas.
Other loan related fee income for late charges and other ancillary fees we re $1.38 million a nd $1.01 million for the years ended December 31, 2023 and 2022, respectively. Residential 1-4 Family Loans The Bank originates residential 1-4 family mortgage loans secured by property located in the Bank’s market areas.
At December 31, 2022, the Bank's balance of 1-4 family mortgage loans was $135.95 million or 10.03% of total loans. The Bank generally originates residential 1-4 family mortgage loans in amounts of up to 80.0% of the lesser of the appraised value or the selling price of the mortgaged property without requiring private mortgage insurance.
At December 31, 2023, the Bank's balance of 1-4 family mortgage loans was $156.58 million or 10.55% of total loans. The Bank generally originates residential 1-4 family mortgage loans in amounts of up to 80.0% of the lesser of the appraised value or the selling price of the mortgaged property without requiring private mortgage insurance.
This consisted of seven loans: six commercial real estate loans each secured by a single property and one construction loan secured by a single property. The first commercial real estate loan had a principal balance of $1.53 million at December 31, 2022 .
This consisted of six loans: five commercial real estate loans each secured by a single property and one construction loan secured by a single property. The first commercial real estate loan had a principal balance of $1.45 million at December 31, 2023 .
The notes bear interest at an annual fixed rate of 5.50%. Starting July 1, 2025, interest will accrue at a floating rate per annum equal to a benchmark rate, which is expected to be the three-month term SOFR plus a spread of 509.0 basis points.
Starting July 1, 2025, interest will accrue at a floating rate per annum equal to a benchmark rate, which is expected to be the three-month term SOFR plus a spread of 509.0 basis points.
The total consideration paid was $16.44 million of Eagle common stock issued. In January 2018, the Company acquired TwinCo, Inc. (“TwinCo”). This acquisition included two branches in Madison County, Montana. The total consideration paid was $18.93 million and included cash consideration of $9.90 million and common stock issued of $9.03 million.
The total consideration paid was $16.44 million of Eagle common stock issued. In January 2018, the Company acquired TwinCo, Inc. (“TwinCo”). This acquisition included two branches in Madison County, Montana.
As of December 31, 2022 , commercial real estate and commercial business loans constituted approximately 78.04% of total loans; ● Continue to emphasize the attraction and retention of lower cost core deposits; ● Seek opportunities where presented to acquire other institutions or expand our branch network through opening new branches and/or loan production offices; ● Maintain our strong asset quality; and ● Operate as a community-oriented independent financial institution that offers a broad array of financial services with high levels of customer service.
As of December 31, 2023 , commercial real estate and commercial business loans constituted approximately 78.64% of total loans; ● Continue to emphasize the attraction and retention of core deposits; ● Seek opportunities where presented to acquire other institutions or expand our branch network through opening new branches and/or loan production offices; ● Maintain our strong asset quality; and ● Operate as a community-oriented financial institution that offers a broad array of financial products and services with focus on the customer experience.
Agricultural production loans amounted to $104.04 million, or 7.68% of the Bank’s total loan portfolio at December 31, 2022. The Bank’s commercial business loans are traditional business loans and are not secured by real estate. Such loans may be structured as unsecured lines of credit or may be secured by inventory, accounts receivable or other business assets.
Agricultural production loans amounted to $125.30 million, or 8.44% of the Bank’s total loan portfolio at December 31, 2023. The Bank’s commercial business loans are traditional business loans and are not secured by real estate. Such loans may be structured as unsecured lines of credit or may be secured by inventory, accounts receivable or other business assets.
The total amount of loans in process of origination for sale into the secondary market with interest rate lock commitments was $18.60 million as of December 31, 2022.
The total amount of loans in process of origination for sale into the secondary market with interest rate lock commitments was $15.67 million as of December 31, 2023.
Residential 1-4 family construction loans accounted for $59.76 million or 4.41% of the Bank’s total loan portfolio at December 31, 2022. 4 Table of Contents Commercial Real Estate Loans The Bank originates commercial real estate loans including loans on multi-family dwellings.
Residential 1-4 family construction loans accounted for $43.43 million or 2.93% of the Bank’s total loan portfolio at December 31, 2023. 4 Table of Contents Commercial Real Estate Loans The Bank originates commercial real estate loans including loans on multi-family dwellings.
Creditworthiness of the applicant is of primary consideration; however, the underwriting process also includes a comparison of the value of the collateral in relation to the proposed loan amount. 5 Table of Contents Commercial Loans Commercial business loans amounted to $127.26 million, or 9.39% of the Bank’s total loan portfolio at December 31, 2022.
Creditworthiness of the applicant is of primary consideration; however, the underwriting process also includes a comparison of the value of the collateral in relation to the proposed loan amount. 5 Table of Contents Commercial Loans Commercial business loans amounted to $132.71 million, or 8.94% of the Bank’s total loan portfolio at December 31, 2023.
As of December 31, 2022 , the principal balance on the second commercial real estate loan was $209,000. The third commercial real estate loan had a principal balance of $272,000 as of December 31, 2022 . However, another bank is 50.0% participating in this loan for $272,000.
As of December 31, 2023 , the principal balance on the second commercial real estate loan was $705,000. The third commercial real estate loan had a principal balance of $3.80 million as of December 31, 2023 . However, another bank is 50.0% participating in this loan for $3.80 million.
Loan applicants are promptly notified of the decision by a letter setting forth the terms and conditions of the decision. If approved, these terms and conditions include the amount of the loan, interest rate basis, amortization term, a brief description of real estate to be mortgaged, tax escrow and the notice of requirement of insurance coverage to be maintained.
If approved, these terms and conditions include the amount of the loan, interest rate basis, amortization term, a brief description of real estate to be mortgaged, tax escrow and the notice of requirement of insurance coverage to be maintained.
Commercial real estate loans made up 39.76% of the Bank’s total loan portfolio, or $539.07 million at December 31, 2022. The Bank’s commercial real estate loans are primarily permanent loans secured by improved property such as office buildings, retail stores, commercial warehouses and apartment buildings.
Commercial real estate loans made up 40.99% of the Bank’s total loan portfolio, or $608.69 million at December 31, 2023. The Bank’s commercial real estate loans are primarily permanent loans secured by improved property such as office buildings, retail stores, commercial warehouses and apartment buildings.
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 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.
In January 2022, the Company completed the issuance of $40.00 million in aggregate principal amount of subordinated notes due in 2032 in a private placement transaction to certain institutional accredited investors and qualified buyers. The notes bear interest at an annual fixed rate of 3.50% payable semi-annually.
In June 2020, the Company completed the issuance of $15.00 million in aggregate principal amount of subordinated notes due in 2030 in a private placement transaction to certain qualified institutional accredited investors. The notes bear interest at an annual fixed rate of 5.50%.
At December 31, 2022, the Bank had $2.02 bi llion in residential 1-4 family mortgage loans a nd $125.08 million in other loan categories sold with servicing retained. The Bank does not ordinarily purchase home mortgage loans from other financial institutions.
At December 31, 2023, the Bank ha d $2.07 billi on in residential 1-4 family mortgage loans a nd $134.65 million in other loan categories sold with servicing retained. The Bank does not ordinarily purchase home mortgage loans from other financial institutions.
Home Equity Loans The Bank also originates home equity loans. These loans are secured by the borrowers’ primary residence, but are typically subject to a prior lien, which may or may not be held by the Bank. At December 31, 2022, $74.27 million or 5.48% of our total loans were home equity loans.
Farmland loans accounted for $142.59 million or 9.61% of the Bank’s total loan portfolio at December 31, 2023. Home Equity Loans The Bank also originates home equity loans. These loans are secured by the borrowers’ primary residence, but are typically subject to a prior lien, which may or may not be held by the Bank.
We believe that this focus will enable us to continue to grow our franchise, while maintaining our commitment to customer service, high asset quality and sustained net earnings.
We offer mortgage loans, the majority of which are sold on the secondary market with loan servicing retained. We believe that this focus will enable us to continue to grow our franchise, while maintaining our commitment to customer service, high asset quality and sustained net earnings.
In addition, nearly all of our employees are shareholders of the Company through participation in our ESOP, which aligns employee and shareholder interests by providing stock ownership on a tax-deferred basis at no investment cost to our employees.
In addition, nearly all of our employees are shareholders of the Company through participation in our ESOP, which aligns employee and shareholder interests by providing stock ownership on a tax-deferred basis at no investment cost to our employees. 8 Table of Contents Growth and Development We believe that the success of our business is largely due to the quality of our employees, the development of each employee's full potential, and our ability to provide timely and satisfying recognition and rewards.
Borrowers may use the proceeds from the Bank’s home equity loans for many purposes, including home improvement, debt consolidation or other purchasing needs. The Bank offers fixed rate, fixed payment home equity loans as well as variable and fixed rate home equity lines of credit. Fixed rate home equity loans typically have terms of no longer than 15 years.
The Bank offers fixed rate, fixed payment home equity loans as well as variable and fixed rate home equity lines of credit. Fixed rate home equity loans typically have terms of no longer than 15 years.
As of December 31, 2022 , the Bank’s limit to a single borrower was $30.44 million. Our largest aggregation of loans to one borrower was approximately $28.00 million at December 31, 2022 . The total amount subject to the lending limit at December 31, 2022 was $63.82 million.
As of December 31, 2023 , the Bank’s limit to a single borrower was $32.84 million. Our largest aggregation of loans to one borrower was approxima tely $39.23 m illion at December 31, 2023. The total amount subject to the lending limit at December 31, 2023 was $30.40 million.
Commercial construction and development loans accounted for $151.15 million or 11.15% of the Bank’s total loan portfolio at December 31, 2022. In addition, the bank originates loans secured by farm and ranch real estate. Farmland loans accounted for $136.33 million or 10.06% of the Bank’s total loan portfolio at December 31, 2022.
At December 31, 2023 , this loan is performing in accordance with its repayment terms. The Bank also lends funds for commercial construction and development. Commercial construction and development loans accounted for $158.13 million or 10.65% of the Bank’s total loan portfolio at December 31, 2023. In addition, the bank originates loans secured by farm and ranch real estate.
The fourth commercial real estate loan had a principal balance of $12.74 million as of December 31, 2022 . The fifth commercial real estate loan had a principal balance of $3.95 million as of December 31, 2022 .The sixth commercial real estate loan had a principal balance of $9.26 million as of December 31, 2022 .
The fourth commercial real estate loan had a principal balance of $11.25 million as of December 31, 2023 . The fifth commercial real estate loan had a principal balance of $8.17 million as of December 31, 2023 . The sixth construction loan had a principal balance of $5.02 million as of December 31, 2023 .
Business Strategy Our principal strategy is to continue our profitability through building a diversified loan portfolio and operating the Bank as a full-service community bank that offers both retail and commercial loan and deposit products in all of its markets. We offer mortgage loans, the majority of which are sold on the secondary market with loan servicing retained.
The total consideration paid was $18.93 million and included cash consideration of $9.90 million and common stock issued of $9.03 million. 2 Table of Contents Business Strategy Our principal strategy is to continue our profitability through building a diversified loan portfolio and operating the Bank as a full-service community bank that offers both retail and commercial loan and deposit products in all of its markets.
We have established a series of loan committees to approve any loans which may exceed the lending authority of particular officers or branch managers. Three Directors of the Board are required for approval of any loan, or aggregation of loans to a single borrower, that currently exceeds $7.50 million.
Officers and branch managers are granted lending authority based on the nature of the loan and the managers’ level of experience. We have established a series of loan committees to approve any loans which may exceed the lending authority of particular officers or branch managers.
A portion of the net proceeds were used to redeem $10.00 million of senior notes due in February 2022. In June 2020, the Company completed the issuance of $15.00 million in aggregate principal amount of subordinated notes due in 2030 in a private placement transaction to certain qualified institutional accredited investors.
(“PNC”), United Bankers’ Bank (“U BB”) and Texas Independent Bank ("TIB"). In addition, Eagle has a line of credit with Bell Bank. In January 2022, the Company completed the issuance of $40.00 million in aggregate principal amount of subordinated notes due in 2032 in a private placement transaction to certain institutional accredited investors and qualified buyers.
After receiving a loan application from a prospective borrower, a credit report and verifications are obtained to confirm specific information relating to the loan applicant’s employment, income and credit standing. When required by our policies, an appraisal of the real estate intended to secure the proposed loan is undertaken by an independent fee appraiser.
When required by our policies, an appraisal of the real estate intended to secure the proposed loan is undertaken by an independent fee appraiser. In connection with the loan approval process, our staff analyzes the loan applications and the property involved.
The seventh construction loan had a principal balance of $123,000 as of December 31, 2022 . However, another bank is 50.0% participating in this loan for $123,000. At December 31, 2022 , these loans were performing in accordance with their terms. The Bank maintains the servicing for these loans.
However, another bank is 50.0% participating in this loan for $5.02 million. At December 31, 2023 , these loans were performing in accordance with their terms. Th e Bank maintains the servicing for these loans. L oan Solicitation and Processing Our customary sources of mortgage loan applications include repeat customers, walk-ins and referrals from home builders and real estate brokers.
L oan Solicitation and Processing Our customary sources of mortgage loan applications include repeat customers, walk-ins and referrals from home builders and real estate brokers. We also advertise in local newspapers and on local radio and television. We currently have the ability to accept online mortgage loan applications through our website.
We also advertise in local newspapers and on local radio and television. We currently have the ability to accept online mortgage loan applications through our website. Our branch managers and loan officers located at our headquarters and in branches, have authority to approve certain types of loans when presented with a completed application.
T he Bank's largest single commercial real estate loan at December 31, 2022 had an outstanding balance of $12.74 million and is collateralized by commercial real estate located in Helena, Montana. At December 31, 2022 , this loan is performing in accordance with its repayment terms. The Bank also lends funds for commercial construction and development.
T he Bank's largest single commercial real estate loan at December 31, 2023 was originated by the Bank and participated 44.4% to two other banks in Montana, each being participated 22.2%. The Bank's share of the total outstanding loan at December 31, 2023 was $12.55 million and it is collateralized by commercial real estate located in Bozeman, Montana.
Removed
In connection with the loan approval process, our staff analyzes the loan applications and the property involved. Officers and branch managers are granted lending authority based on the nature of the loan and the managers’ level of experience.
Added
At December 31, 2023, $86.93 million or 5.86% of our total loans were home equity loans. Borrowers may use the proceeds from the Bank’s home equity loans for many purposes, including home improvement, debt consolidation or other purchasing needs.
Removed
(“PNC”), United Bankers’ Bank (“U BB”) and Texas Independent Bank ("TIB"). Our Federal funds line of credit with Zions Bank was terminated during 2021. In addition, Eagle has a line of credit with Bell Bank.
Added
Three Directors of the Board are required for approval of any loan, or aggregation of loans to a single borrower, that currently exceeds $7.50 million. Loan applicants are promptly notified of the decision by a letter setting forth the terms and conditions of the decision.
Removed
Growth and Development We believe that the success of our business is largely due to the quality of our employees, the development of each employee's full potential, and our ability to provide timely and satisfying recognition and rewards.
Added
The notes are subject to redemption at the option of the Company on or after February 1, 2027. A portion of the net proceeds were used to redeem $10.00 million of senior notes due in February 2022.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

39 edited+13 added−9 removed104 unchanged
Biggest changeNew regulations, shift in customer behaviors, supply chain collapse or breakthrough technologies that accelerate the transition to a lower carbon economy may negatively affect certain sectors and borrowers in our loan portfolio, impacting their ability to timely repay their loans or decreasing the value of any collateral held by us.
Biggest changeNew regulations, shift in customer behaviors, supply chain collapse or breakthrough technologies that accelerate the transition to a lower carbon economy may negatively affect certain sectors and borrowers in our loan portfolio, impacting their ability to timely repay their loans or decreasing the value of any collateral held by us. 15 Table of Contents The emergence or continuation of widespread health emergencies or pandemics could have a material adverse effect on our business, results of operations and financial condition, and such effects will depend on future developments, which are highly uncertain and are difficult to predict.
Unfavorable market conditions can result in deterioration in the credit quality of our borrowers and the demand for our products and services, an increase in the number of loan delinquencies, defaults and charge-offs, additional provisions for loan losses, adverse asset values and an overall material adverse effect on the quality of our loan portfolio.
Unfavorable market conditions can result in deterioration in the credit quality of our borrowers and the demand for our products and services, an increase in the number of loan delinquencies, defaults and charge-offs, additional provisions for credit losses, adverse asset values and an overall material adverse effect on the quality of our loan portfolio.
We may experience significant loan losses, which may have a material adverse effect on operating results. We make various assumptions and judgments about the collectability of the loan portfolio, including the creditworthiness of borrowers and the value of the real estate and other assets serving as collateral for the repayment of loans.
We may experience significant credit losses, which may have a material adverse effect on operating results. We make various assumptions and judgments about the collectability of the loan portfolio, including the creditworthiness of borrowers and the value of the real estate and other assets serving as collateral for the repayment of loans.
If the allowance for loan losses is not sufficient to cover actual loan losses, our earnings could decrease. Our customers may not repay their loans according to the original terms, and the collateral, if any, securing the payment of these loans may be insufficient to pay any remaining loan balance.
If the allowance for credit losses is not sufficient to cover actual credit losses, our earnings could decrease. Our customers may not repay their loans according to the original terms, and the collateral, if any, securing the payment of these loans may be insufficient to pay any remaining loan balance.
Additionally, financial markets may be adversely affected by the current or anticipated impact of military conflict, including escalating military tension between Russia and Ukraine, terrorism and other geopolitical events. Our success depends, to a certain extent, upon global, domestic and local economic and political conditions, as well as governmental monetary policies.
Additionally, financial markets may be adversely affected by the current or anticipated impact of military conflict, including escalating military tension between Russia and Ukraine, the Middle East, terrorism and other geopolitical events. Our success depends, to a certain extent, upon global, domestic and local economic and political conditions, as well as governmental monetary policies.
Our emphasis on the origination of consumer, commercial real estate and commercial business loans is one of the more significant factors in evaluating the allowance for loan losses. As we continue to increase the amount of such loans, additional or increased provisions for loan losses may be necessary and would decrease earnings.
Our emphasis on the origination of consumer, commercial real estate and commercial business loans is one of the more significant factors in evaluating the allowance for credit losses. As we continue to increase the amount of such loans, additional or increased provisions for credit losses may be necessary and would decrease earnings.
These regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities, including the ability to impose restrictions on a bank’s operations, reclassify assets, determine the adequacy of a bank’s allowance for loan losses and determine the level of deposit insurance premiums assessed.
These regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities, including the ability to impose restrictions on a bank’s operations, reclassify assets, determine the adequacy of a bank’s allowance for credit losses and determine the level of deposit insurance premiums assessed.
The tightening of the Federal Reserve’s monetary policies, including repeated and aggressive increases in target range for the federal funds rate as well as the conclusion of the Federal Reserve’s tapering of asset purchases, together with ongoing economic and geopolitical instability, increases the risk of an economic recession.
The tightening of the Federal Reserve’s monetary policies, including increases in the target range for the federal funds rate as well as the conclusion of the Federal Reserve’s tapering of asset purchases, together with ongoing economic and geopolitical instability, increases the risk of an economic recession.
Even after the COVID-19 outbreak has subsided, we may continue to experience materially adverse impacts to our business as a result of the virus’s global economic impact, including the availability of credit, adverse impacts on our liquidity and any recession that has occurred or may occur in the future.
Even after an outbreak has subsided, we may continue to experience materially adverse impacts to our business as a result of the virus’s global economic impact, including the availability of credit, adverse impacts on our liquidity and any recession that has occurred or may occur in the future.
We could record future losses on our securities portfolio. A number of factors or combinations of factors could require us to conclude in one or more future reporting periods that an unrealized loss exists with respect to our investment securities portfolio that constitutes an impairment that is other than temporary, which could result in material losses to us.
A number of factors or combinations of factors could require us to conclude in one or more future reporting periods that an unrealized loss exists with respect to our investment securities portfolio that constitutes an impairment that is other than temporary, which could result in material losses to us.
While we believe we will have the executive management resources and internal systems in place to successfully manage our future growth, there can be no assurance growth opportunities will be available or that we will successfully manage our growth. We may be unsuccessful in integrating the operations of the business we have acquired or expect to acquire in the future.
While we believe we will have the executive management resources and internal systems in place to successfully manage our future growth, there can be no assurance growth opportunities will be available or that we will successfully manage our growth. 18 Table of Contents We may be unsuccessful in integrating the operations of the business we have acquired or expect to acquire in the future.
In addition, the fair values of securities could decline if the overall economy and the financial condition of some of the issuers deteriorates and there is limited liquidity for these securities. 16 Table of Contents Changes in our accounting policies or in accounting standards could materially affect how we report our financial condition and results of operations.
In addition, the fair values of securities could decline if the overall economy and the financial condition of some of the issuers deteriorates and there is limited liquidity for these securities. Changes in our accounting policies or in accounting standards could materially affect how we report our financial condition and results of operations.
Our consolidated balance sheet at December 31, 2022 included goodwill of $34.74 million. We are required to test our goodwill for impairment on a periodic basis.
Our consolidated balance sheet at December 31, 2023 included goodwill of $34.74 million. We are required to test our goodwill for impairment on a periodic basis.
Changes in interest rates also affect the current fair value of our interest-earning securities portfolio. Generally, the value of securities moves inversely with changes in interest rates. 14 Table of Contents We may be impacted by the retirement of London Interbank Offered Rate (“LIBOR”) as a reference rate.
Changes in interest rates also affect the current fair value of our interest-earning securities portfolio. Generally, the value of securities moves inversely with changes in interest rates. We may be impacted by the retirement of London Interbank Offered Rate (“LIBOR”) as a reference rate.
The combination of these impacts along with other impacts, could cause us to not have sufficient liquidity or capital. At December 31, 2022, our MSR asset had a fair value of $15.41 million. All income related to retained servicing, including changes in the value of the MSR asset, is included in noninterest income.
The combination of these impacts along with other impacts, could cause us to not have sufficient liquidity or capital. At December 31, 2023, our MSR asset had a fair value of $15.85 million. All income related to retained servicing, including changes in the value of the MSR asset, is included in noninterest income.
In additio n, the limited purpose of some agricultural-related collateral affects credit risk because such collateral may have limited or no other uses to support values when loan repayment problems emerge.
In addition, the limited purpose of some agricultural-related collateral affects credit risk because such collateral may have limited or no other uses to support values when loan repayment problems emerge.
If the assumptions prove to be incorrect, the allowance for loan losses may not be sufficient to cover losses inherent in our loan portfolio, resulting in additions to the allowance. Material additions to the allowance would materially decrease net income.
If the assumptions prove to be incorrect, the allowance for credit losses may not be sufficient to cover expected losses in our loan portfolio, resulting in additions to the allowance. Material additions to the allowance would materially decrease net income.
Consumers may decide not to use banks to complete their financial transactions. Technology and other changes are allowing parties to complete financial transactions through alternative methods that historically have involved banks. For example, consumers can now maintain funds that would have historically been held as bank deposits in brokerage accounts, mutual funds or general purpose reloadable prepaid cards.
Technology and other changes are allowing parties to complete financial transactions through alternative methods that historically have involved banks. For example, consumers can now maintain funds that would have historically been held as bank deposits in brokerage accounts, mutual funds or general purpose reloadable prepaid cards.
Declines in the average sale prices of homes in our primary markets could lead to higher loan losses. Changes in interest rates could adversely affect our results of operations and financial condition. Our results of operations and financial condition are significantly affected by changes in interest rates.
Declines in the average sale prices of homes in our primary markets could lead to higher credit losses on loans. Changes in interest rates could adversely affect our results of operations and financial condition. Our results of operations and financial condition are significantly affected by changes in interest rates.
We may not be able to continue paying quarterly dividends commensurate with recent levels given that the ability to pay dividends on our common stock depends on a variety of factors.
There can be no assurance we will be able to continue paying dividends on our common stock at recent levels. We may not be able to continue paying quarterly dividends commensurate with recent levels given that the ability to pay dividends on our common stock depends on a variety of factors.
These factors, as well as recent volatility in certain commodity prices could adversely impact the ability of those to whom we have made farmland and agricultural production loans to perform under the terms of their borrowing arrangements with us, which in turn could result in credit losses and adversely affect our business, financial condition and results of operations.
These factors, as well as recent volatility in certain commodity prices could adversely impact the ability of those to whom we have made farmland and agricultural production loans to perform under the terms of their borrowing arrangements with us, which in turn could result in credit losses and adversely affect our business, financial condition and results of operations. 19 Table of Contents Consumers may decide not to use banks to complete their financial transactions.
Our success depends upon the continued employment of certain members of our senior management team. We also depend upon the continued employment of the individuals that manage several of our key functional areas. The departure of any member of our senior management team may adversely affect our operations.
Our success depends upon the continued employment of certain members of our senior management team. We also depend upon the continued employment of the individuals that manage several of our key functional areas.
If we are unable to continue to sell loans in the secondary market or we experience a period of low mortgage activity, our noninterest income as well as our ability to fund, and thus originate, additional mortgage loans may be adversely affected, which could have a material adverse effect on our business, financial condition or results of operations. 17 Table of Contents There can be no assurance we will be able to continue paying dividends on our common stock at recent levels.
If we are unable to continue to sell loans in the secondary market or we experience a period of low mortgage activity, our noninterest income as well as our ability to fund, and thus originate, additional mortgage loans may be adversely affected, which could have a material adverse effect on our business, financial condition or results of operations.
FHLB common stock is not a marketable security and can only be redeemed by the FHLB. FHLB’s may be subject to accounting rules and asset quality risks that could materially lower their regulatory capital.
The aggregate cost of our FHLB common stock as of December 31, 2023 was $9.19 million. FHLB common stock is not a marketable security and can only be redeemed by the FHLB. FHLB’s may be subject to accounting rules and asset quality risks that could materially lower their regulatory capital.
Our results of operations depend substantially on our net interest income, which is the difference between the interest income we earn on our interest-earning assets, such as loans and securities, and the interest expense we pay on our interest-bearing liabilities, such as deposits, borrowings and trust preferred securities.
Our results of operations depend substantially on our net interest income, which is the difference between the interest income we earn on our interest-earning assets, such as loans and securities, and the interest expense we pay on our interest-bearing liabilities, such as deposits, borrowings and trust preferred securities. 14 Table of Contents Changes in interest rates may also affect the average life of loans and mortgage-related securities.
There is no certainty that such measures would be sufficient to mitigate the risks posed by the virus or will otherwise be satisfactory to government authorities. 15 Table of Contents The extent to which the COVID-19 outbreak impacts our business, results of operations and financial condition will depend on future developments, which are highly uncertain and are difficult to predict, including, but not limited to, the duration and spread of the outbreak and its variants, its severity, the actions to contain the virus or treat its impact, the effectiveness of vaccination programs for the virus, vaccination rates, and how quickly and to what extent normal economic and operating conditions can resume.
The extent to which an outbreak impacts our business, results of operations and financial condition will depend on future developments, which are highly uncertain and are difficult to predict, including, but not limited to, the duration and spread of the outbreak and its variants, its severity, the actions to contain the virus or treat its impact, the effectiveness of vaccination programs for the virus, vaccination rates, and how quickly and to what extent normal economic and operating conditions can resume.
We measure and carry all of our residential MSR assets using the fair value measurement method. Fair value is determined as the present value of estimated future net servicing income, calculated based on a number of variables, including assumptions about the likelihood of prepayment by borrowers.
Fair value is determined as the present value of estimated future net servicing income, calculated based on a number of variables, including assumptions about the likelihood of prepayment by borrowers.
Consequently, we believe that there is a risk that our investment in FHLB of Des Moines common stock could be deemed impaired at some time in the future, and if this occurs, it would cause our earnings and shareholders’ equity to decrease by the amount of the impairment charge.
Consequently, we believe that there is a risk that our investment in FHLB of Des Moines common stock could be deemed impaired at some time in the future, and if this occurs, it would cause our earnings and shareholders’ equity to decrease by the amount of the impairment charge. 20 Table of Contents A continuation of recent turmoil in our industry, and responsive measures to manage it, could have an adverse effect on our financial position or results of operations.
Furthermore, because of the inherent limitations of any system of internal control over financial reporting, including the possibility of human error, the circumvention or overriding of controls and fraud, even effective internal controls may not prevent or detect all misstatements. 18 Table of Contents Changes in interest rates may change the value of our mortgage servicing rights portfolio, which may increase the volatility of our earnings .
Furthermore, because of the inherent limitations of any system of internal control over financial reporting, including the possibility of human error, the circumvention or overriding of controls and fraud, even effective internal controls may not prevent or detect all misstatements.
In particular, interest rates are highly sensitive to many factors that are beyond our control, including global, domestic and local economic conditions and the policies of various governmental and regulatory agencies and, specifically, the Federal Reserve.
In particular, interest rates are highly sensitive to many factors that are beyond our control, including global, domestic and local economic conditions and the policies of various governmental and regulatory agencies and, specifically, the Federal Reserve. Throughout 2023 the Federal Open Market Committee (“FOMC”) raised the target range for the federal funds rate on four separate occasions, citing inflationary pressures.
Bank regulators periodically review our allowance for loan losses and may require an increase to the provision for loan losses or further loan charge-offs. Any increase in our allowance for loan losses or loan charge-offs as required by these regulatory authorities may have a material adverse effect on our results of operations or financial condition.
Any increase in our allowance for credit losses or loan charge-offs as required by these regulatory authorities may have a material adverse effect on our results of operations or financial condition. 16 Table of Contents We could record future losses on our securities portfolio.
As a result, we may experience financial losses due to a number of operational factors impacting us or our borrowers, customers or business partners. These factors may be prevalent for a significant period of time and may adversely affect our business, results of operations and financial condition even after the COVID-19 outbreak has subsided.
These factors may be prevalent for a significant period of time and may adversely affect our business, results of operations and financial condition even after an outbreak has subsided.
Farmland and agriculture production lending presents unique credit risk. As of December 31, 2022, approximatel y 17.73% of our total gross loan portfolio was comprised of farmland and agricultural production loans. As of December 31, 2022, we had $240.37 million in farmland and agricultural production loans, including $136.33 million in farmland loans, and $104.04 million in agricultural production loans.
Farmland and agriculture production lending presents unique credit risk. As of December 31, 2023, approximately 18.05% of our total gross loan portfolio was comprised of farmland and agricultural production loans. As of December 31, 2023, we had $267.89 million in farmland and agricultural production loans, including $142.59 million in farmland loans, and $125.30million in agricultural production loans.
Under these circumstances, we are subject to reinvestment risk to the extent that we are unable to reinvest the cash received from such prepayments at rates that are comparable to the rates on existing loans and securities. Additionally, increases in interest rates may decrease loan demand and make it more difficult for borrowers to repay adjustable rate loans.
Decreases in interest rates can result in increased prepayments of loans and mortgage-related securities, as borrowers refinance to reduce their borrowing costs. Under these circumstances, we are subject to reinvestment risk to the extent that we are unable to reinvest the cash received from such prepayments at rates that are comparable to the rates on existing loans and securities.
New legislation, regulatory reform or policy changes under the current U.S. administration, including financial services regulatory reform, tax reform, and GSE reform, could impact our business.
New legislation, regulatory reform or policy changes under the current U.S. administration, including financial services regulatory reform, tax reform, and GSE reform, could impact our business. At this time, we cannot predict the scope or nature of these changes or assess what the overall effect of such potential changes could be on our results of operations or cash flows.
As a result of our mortgage servicing business, which we may expand in the future, we have a portfolio of mortgage servicing rights (“MSR”) assets. An MSR is the right to service a mortgage loan - collect principal, interest and escrow amounts - for a fee.
Changes in interest rates may change the value of our mortgage servicing rights portfolio, which may increase the volatility of our earnings . As a result of our mortgage servicing business, which we may expand in the future, we have a portfolio of mortgage servicing rights (“MSR”) assets.
We are required to own common stock of FHLB to qualify for membership in the FHLB System and to be eligible to borrow funds under the FHLB’s advance program. The aggregate cost of our FHLB common stock as of December 31, 2022 was $5.09 million.
If our investment in the Federal Home Loan Bank of Des Moines becomes impaired, our earnings and shareholders’ equity could decrease. We are required to own common stock of FHLB to qualify for membership in the FHLB System and to be eligible to borrow funds under the FHLB’s advance program.
Any such downturn, especially domestically and in the regions in which we operate, may adversely affect our asset quality, deposit levels, loan demand and results of operations. As a result of the economic and geopolitical factors discussed above, financial institutions also face heightened credit risk, among other forms of risk.
As a result of the economic and geopolitical factors discussed above, financial institutions also face heightened credit risk, among other forms of risk.
We earn a significant portion of our noninterest income through sales of residential mortgages in the secondary market . We rely on the mortgage secondary market for some of our liquidity. Our mortgage banking activities provide a significant portion of our noninterest income. We originate and sell mortgage loans, includin g $551.02 m illion of mortgage loans sold during 2022.
Our mortgage banking activities provide a significant portion of our noninterest income. We originate and sell mortgage loans, including $344.31 m illion of mortgage loans sold during 2023.
Removed
Throughout 2022 the Federal Open Market Committee (“FOMC”) raised the target range for the federal funds rate on seven separate occasions and-citing factors including the hardships caused by the ongoing Russia-Ukraine conflict, continued global supply chain disruptions and imbalances, and increased inflationary pressure-the FOMC has indicated that ongoing increases may be appropriate.
Added
The last Federal Funds Target rate change occurred on July 26, 2023, and the FOMC has since adopted a cautious approach as inflationary pressures have moderated but remain uncertain. Forecasts for 2024 indicate potential interest rate reductions, but persistent inflation may either delay reductions or may call for further rate increases by the FOMC.
Removed
Although forecasts have varied, many economists are projecting that U.S. economic growth will slow and inflation will remain elevated in the coming quarters, potentially resulting in a contraction of U.S. gross domestic output in 2023.
Added
Although forecasts have varied, the potential of slowing economic growth and persistent inflation could lead to the contraction of the U.S. gross domestic output in 2024. Any such downturn, especially domestically and in the regions in which we operate, may adversely affect our asset quality, deposit levels, loan demand and results of operations.
Removed
Changes in interest rates may also affect the average life of loans and mortgage-related securities. Decreases in interest rates can result in increased prepayments of loans and mortgage-related securities, as borrowers refinance to reduce their borrowing costs.
Added
Additionally, increases in interest rates may decrease loan demand and make it more difficult for borrowers to repay adjustable rate loans.
Removed
The ongoing COVID-19 pandemic and measures intended to prevent its spread could have a material adverse effect on our business, results of operations and financial condition, and such effects will depend on future developments, which are highly uncertain and are difficult to predict.
Added
Pandemics could adversely impact our workforce and operations and the operations of our borrowers, customers and business partners. As a result, we may experience financial losses due to a number of operational factors impacting us or our borrowers, customers or business partners.
Removed
While COVID-19 conditions have improved, past and potential future government actions taken to reduce the spread of the virus have been weighing on the macroeconomic environment, and lingering economic uncertainty and reduced economic activity remains. New strains of the virus could adversely impact our workforce and operations and the operations of our borrowers, customers and business partners.
Added
Bank regulators periodically review our allowance for credit losses and may require an increase to the provision for credit losses or further loan charge-offs.
Removed
Renewed spread of COVID-19 could cause us to modify our business practices (including restricting employee travel, and developing work from home and social distancing plans for our employees), and we may take further actions if required by government authorities or as we determine are in the best interests of our employees, customers and business partners.
Added
The departure of any member of our senior management team may adversely affect our operations. 17 Table of Contents We earn a significant portion of our noninterest income through sales of residential mortgages in the secondary market . We rely on the mortgage secondary market for some of our liquidity.
Removed
There are no comparable recent events that provide guidance as to the effect the spread of COVID-19 as a global pandemic may have, and, as a result, the ultimate impact of the outbreak is highly uncertain and subject to change.
Added
An MSR is the right to service a mortgage loan - collect principal, interest and escrow amounts - for a fee. We measure and carry all of our residential MSR assets using the fair value measurement method.
Removed
We do not yet know the full extent of the impacts on our business, our operations or the global economy as a whole. However, the effects could have a material impact on our results of operations and heighten many of our known risks described herein.
Added
Over the past year, several financial services institutions have failed or required outside liquidity support—in many cases, as a result of the inability of the institutions to obtain needed liquidity.
Removed
At this time, we cannot predict the scope or nature of these changes or assess what the overall effect of such potential changes could be on our results of operations or cash flows. 19 Table of Contents If our investment in the Federal Home Loan Bank of Des Moines becomes impaired, our earnings and shareholders’ equity could decrease.
Added
The impact of this situation has led to risk of additional stress to other financial services institutions and the financial services industry generally as a result of increased lack of confidence in the financial sector.
Added
U.S. regulators have taken action in an effort to strengthen public confidence in the banking system, including the creation of a new Bank Term Funding Program. There can be no assurance that these actions will stabilize the financial services industry and financial markets.
Added
While we currently do not anticipate liquidity constraints of the kind that caused certain other financial services institutions to fail or require external support, constraints on our liquidity could occur as a result of unanticipated deposit withdrawals because of market distress or our inability to access other sources of liquidity, including through the capital markets due to unforeseen market dislocations or interruptions.
Added
Moreover, some of our customers may become less willing to maintain deposits at the Bank because of broader market concerns with the level of insurance available on those deposits.
Added
Our business and our financial condition and results of operations could be adversely affected by continued soundness concerns regarding financial institutions generally and our counterparties specifically and limitations resulting from further governmental action in an effort to stabilize or provide additional regulation of the financial system as impact of excessive deposit withdrawals.

Item 2. Properties

Properties — owned and leased real estate

3 edited+0 added−1 removed0 unchanged
Biggest changeITEM 2. PROPERTIES. The Company's executive office is located at 1400 Prospect Avenue in Helena, Montana. As of December 31, 2022, the Bank conducted its business through 34 locations; including 31 full-service branches and three other buildings l o cated in Helena and Missoula, Mon tana.
Biggest changeITEM 2. PROPERTIES. The Company's executive office is located at 1400 Prospect Avenue in Helena, Montana. The following table provides information on the Company's 32 properties as of December 31, 2023, including locations by city, as well as whether they are owned or leased.
Occupancy Type Locations Owned Leased Total Locations Ashland, Montana 1 - 1 Big Timber, Montana 1 - 1 Billings, Montana 3 - 3 Bozeman, Montana 2 1 3 Butte, Montana 1 - 1 Choteau, Montana 1 - 1 Culbertson, Montana 1 - 1 Denton, Montana 1 - 1 Dutton, Montana 1 - 1 Froid, Montana 1 - 1 Glasgow, Montana 1 - 1 Great Falls, Montana - 1 1 Hamilton, Montana 1 - 1 Helena, Montana 5 1 6 Hinsdale, Montana 1 - 1 Livingston, Montana 1 - 1 Missoula, Montana 1 2 3 Sheridan, Montana 1 - 1 Three Forks, Montana 1 - 1 Townsend, Montana 1 - 1 Twin Bridges, Montana 1 - 1 Winifred, Montana - 1 1 Wolf Point, Montana 1 - 1 Total 28 6 34 Management believes all locations are in good condition and meet the operating needs of the Company.
Occupancy Type Locations Owned Leased Total Locations Ashland, Montana 1 - 1 Big Timber, Montana 1 - 1 Billings, Montana 3 - 3 Bozeman, Montana 2 1 3 Butte, Montana 1 - 1 Choteau, Montana 1 - 1 Culbertson, Montana 1 - 1 Denton, Montana 1 - 1 Dutton, Montana 1 - 1 Froid, Montana 1 - 1 Glasgow, Montana 1 - 1 Great Falls, Montana - 1 1 Hamilton, Montana 1 - 1 Helena, Montana 5 - 5 Hinsdale, Montana 1 - 1 Livingston, Montana 1 - 1 Missoula, Montana 1 1 2 Sheridan, Montana 1 - 1 Three Forks, Montana 1 - 1 Townsend, Montana 1 - 1 Twin Bridges, Montana 1 - 1 Winifred, Montana - 1 1 Wolf Point, Montana 1 - 1 Total 28 4 32 Management believes all locations are in good condition and meet the operating needs of the Company.
For additional information regarding the Company's premises and equipment and lease obligations, see Note 6 to the Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data".
For additional information regarding the Company's premises and equipment and lease obligation s, see Note 6 to th e Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data".
Removed
The following table includes the locations by city, as well as whether they are owned or leased.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

8 edited+2 added−2 removed3 unchanged
Biggest changeUnder 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 repurchase depended upon market conditions and other corporate considerations. No shares were purchased during the year ended December 31, 2021.
Biggest changeThe extent to which the company repurchases its shares and the timing of such repurchase will depend upon market conditions and other corporate considerations. During the second quarter of 2022, 5,000 shares were purchased under this plan at an average price of $19.75.
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.
Under the plan, shares maybe purchased by the Company on the open market or in privately negotiated transactions. The extent to which the company repurchases its shares and the timing of such repurchase will depend on market conditions and other corporate considerations.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Our common stock is traded on the Nasdaq Global Market under the symbol “EBMT.” At the close of business on December 31, 2022, there were 8,006,033 shares of common stock outstanding, held by approximately 997 shareholders of record.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Our common stock is traded on the Nasdaq Global Market under the symbol “EBMT.” At the close of business on December 31, 2023, there were 8,016,784 shares of common stock outstanding, held by approximately 970 shareholders of record.
The present and future dividend policy of our bank subsidiary is subject to the discretion of its Board. Our subsidiary bank is not obligated to pay dividends. On April 21, 2022, Eagle's Board of Directors (the "Board") authorized the repurchase of up to 400,000 shares of its common stock.
The present and future dividend policy of our bank subsidiary is subject to the discretion of its Board. Our subsidiary bank is not obligated to pay dividends. On April 20, 2023, Eagle's Board of Directors authorized the repurchase of up to 400,000 shares of its common stock beginning May 1, 2023.
Under the plan, shares 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 repurchase depended upon market conditions and other corporate considerations.
On July 22, 2021, 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. The extent to which the company repurchased its shares and the timing of such repurchase depended upon market conditions and other corporate considerations.
The closing price of the common stock on December 31, 2022, was $16.16 per share.
The closing price of the common stock on December 31, 2023, was $15.79 per share.
However, during the first quarter of 2022, the Company purchased the total authorized amount of 100,000 shares at an average price of $22.71 per share. The plan expired on July 22, 2022. On July 23, 2020, the Board authorized the repurchase of up to 100,000 shares of its common stock.
No shares were purchased during the year ended December 31, 2021. However, during the first quarter of 2022, the Company purchased the total authorized amount of 100,000 shares at an average price of $22.71 per share. The plan expired on July 22, 2022. 24 Table of Contents ITEM 6. [RESERVED]
During the third quarter of 2020, 41,337 shares were purchased under this plan at an average price of $15.75 per share. However, no shares were purchased during the fourth quarter of 2020 or during 2021. The plan expired on July 23, 2021. 21 Table of Contents ITEM 6. [RESERVED]
During the third quarter of 2022, 99,517 shares were purchased under this plan at an average price of $19.45. During the fourth quarter of 2022, 6,608 shares were purchased under this plan at an average price of $18.80. No shares were purchased during the first quarter of 2023 under this plan. The plan expired on April 21, 2023.
Removed
During the second quarter of 2022, 5,000 shares were purchased under this plan at an average price of $19.75. During the third quarter of 2022, 99,517 shares were purchased under this plan at an average price of $19.45. The following table summarizes the Company's purchase of its common stock for the three months ended December 31, 2022 under this plan.
Added
During the second quarter of 2023, 17,901 shares were purchased under this plan at an average price of $12. 89. No shares were purchased during the third or fourth quarter of 2023 under this plan.
Removed
Total Number Maximum of Shares Number of Purchased Shares that Total as Part of May Yet Be Number of Average Publicly Purchased Shares Price Paid Announced Plans Under the Plans Purchased Per Share or Programs or Programs October 1, 2022 through October 31, 2022 6,608 $ 18.80 6,608 288,875 November 1, 2022 through November 30, 2022 - - - 288,875 December 1, 2022 through December 31, 2022 - - - 288,875 Total 6,608 $ 18.80 6,608 On July 22, 2021, the Board authorized the repurchase of up to 100,000 shares of its common stock.
Added
The pl an expires on May 1, 2024 On April 21, 2022, Eagle's Board of Directors (the "Board") authorized the repurchase of up to 400,000 shares of its common stock. Under the plan, shares may be purchased by the Company on the open market or in privately negotiated transactions.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

1 edited+0 added−11 removed0 unchanged
Biggest changeITEM 6. [ RESERVED ] 22 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 22 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 41 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 41 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 41 ITEM 9A. CONTROLS AND PROCEDURES 42 ITEM 9B.
Biggest changeITEM 6. [ RESERVED ] 25 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 25 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 43 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 43 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 43 ITEM 9A. CONTROLS AND PROCEDURES 44
Removed
OTHER INFORMATION 42 ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS 42 PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 43 ITEM 11. EXECUTIVE COMPENSATION 43 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS 43 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE 43 ITEM 14.
Removed
PRINCIPAL ACCOUNTANT FEES AND SERVICES 43 PART IV ITEM 15. EXHIBIT AND FINANCIAL STATEMENT SCHEDULES 43 ITEM 16.
Removed
FORM 10-K SUMMARY 46 Table of Contents CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This Annual Report on Form 10-K includes “forward-looking statements” within the meaning and protections of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act.
Removed
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.
Removed
These forward-looking statements include, but are not limited to: ● statements of our goals, intentions and expectations; ● statements regarding our business plans, prospects, growth and operating strategies; ● statements regarding the 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.
Removed
These forward-looking statements are based on current beliefs and expectations of the management of Eagle Bancorp Montana, Inc. (“Eagle” or the “Company”) and Opportunity Bank of Montana (“OBMT” or the “Bank”), Eagle’s wholly-owned subsidiary, and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control.
Removed
In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change.
Removed
The following factors, among others, could cause the Company’s actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: ● changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees and capital requirements; ● the potential adverse effects of the ongoing novel coronavirus, or COVID-19, pandemic, or other unusual and infrequently occurring events and any governmental or societal responses thereto; ● local, regional, national and international economic and market conditions and events and the impact they may have on us, our customers and our assets and liabilities; ● competition among depository and other traditional and non-traditional financial services businesses; ● risks related to the concentration of our business in Montana, including risks associated with changes in the prices, values and sales volume of residential and commercial real estate in Montana; ● inflation and changes in the interest rate environment that reduce our margins or reduce the fair value of financial instruments; ● our ability to attract deposits and other sources of funding or liquidity; ● changes or volatility in the securities markets; ● the payment of dividends on our common stock is subject to regulatory supervision as well as the discretion of our Board of Directors, our performance and other factors; ● our ability to implement our growth strategy, including identifying and consummating suitable acquisitions, raising additional capital to finance such transactions, entering new markets, possible failures in realizing the anticipated benefits from such acquisitions and an inability of our personnel, systems and infrastructure to keep pace with such growth; ● the effect of acquisitions we may make, if any, including, without limitation, the failure to achieve expected revenue growth and/or expense savings from such acquisitions; ● risks related to the integration of any businesses we have acquired or expect to acquire, including exposure to potential asset quality and credit quality risks and unknown or contingent liabilities, the time and costs associated with integrating systems, technology platforms, procedures and personnel; ● potential impairment on the goodwill we have recorded or may record in connection with business acquisitions; ● ownership dilution risk associated with potential mergers and acquisitions in which our stock may be issued as consideration for an acquired company; ● political developments, uncertainties or instability; ● our ability to enter new markets successfully and capitalize on growth opportunities; ● the need to retain capital for strategic or regulatory reasons; ● changes in consumer spending, borrowing and savings habits; ● our ability to continue to increase and manage our commercial and residential real estate, multi-family and commercial business loans; ● possible impairments of securities held by us, including those issued by government entities and government sponsored enterprises; ● the level of future deposit insurance premium assessments; ● our ability to develop and maintain secure and reliable information technology systems, effectively defend ourselves against cyberattacks, or recover from breaches to our cybersecurity infrastructure and our dependence on the technology of outside service providers; ● the failure of assumptions underlying the establishment of allowance for possible loan losses and other estimates; ● changes in the financial performance and/or condition of our borrowers and their ability to repay their loans when due; and ● the effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Securities and Exchange Commission, the Public Company Accounting Oversight Board, the Financial Accounting Standards Board and other accounting and auditing standard setters; ● our ability to appropriately address any environmental, social, governmental and sustainability concerns that may arise from our business activities.
Removed
Because of these and other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements.
Removed
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 Item 1A, “Risk Factors” and Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections contained elsewhere in this report, as well as any subsequent Reports on Form 10-Q and Form 8-K, and other filings with the SEC.
Removed
We do not undertake any obligation to publicly update or correct any forward-looking statements to reflect events or circumstances that subsequently occur, or of which we hereafter become aware. We caution that the foregoing list of risk factors is not exclusive and not to place undue reliance on forward-looking statements. 1 Table of Contents PART I

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

95 edited+37 added−35 removed43 unchanged
Biggest changeDecember 31, 2022 One Year or Less One to Five Years Five to Ten Years After Ten Years Total Investment Securities Fair Value Weighted Average Yield Fair Value Weighted Average Yield Fair Value Weighted Average Yield Fair Value Weighted Average Yield Fair Value Approximate Market Value Weighted Average Yield (Dollars in Thousands) Securities available-for-sale: U.S. government and agency obligations $ - 0.00 % $ - 0.00 % $ 2,390 3.94 % $ - 0.00 % $ 2,390 $ 2,390 2.94 % U.S. treasury obligations 6,270 1.20 4,699 2.78 40,982 1.46 - 0.00 51,951 51,951 1.55 Municipal obligations 4,932 2.97 12,890 2.99 34,905 2.86 120,122 3.58 172,849 172,849 3.37 Corporate obligations 2,995 5.59 956 3.00 3,039 4.99 - 0.00 6,990 6,990 3.97 Mortgage-backed securities 1,250 2.39 4,318 3.52 4,046 3.40 20,039 3.79 29,653 29,653 3.14 Collateralized mortgage obligations - 0.00 8,859 3.51 1,168 3.55 72,104 3.33 82,131 82,131 3.36 Asset-backed securities - 0.00 - 0.00 - 0.00 3,531 5.47 3,531 3,531 5.47 Total securities available-for-sale $ 15,447 2.71 % $ 31,722 3.18 % $ 86,530 2.34 % $ 215,796 3.55 % $ 349,495 $ 349,495 3.11 % 26 Table of Contents Lending Activities The following table includes the composition of the Bank’s loan portfolio by loan category: December 31, 2022 2021 2020 2019 2018 Amount Percent of Total Amount Percent of Total Amount Percent of Total Amount Percent of Total Amount Percent of Total (Dollars in thousands) Real estate loans: Residential 1-4 family (1) $ 135,947 10.03 % $ 101,180 10.82 % $ 110,802 13.14 % $ 119,296 15.28 % $ 116,939 18.92 % Residential 1-4 family construction 59,756 4.41 45,635 4.88 46,290 5.49 38,602 4.95 27,168 4.40 Total residential 1-4 family 195,703 14.44 146,815 15.70 157,092 18.63 157,898 20.23 144,107 23.32 Commercial real estate 539,070 39.76 410,568 43.92 316,668 37.56 331,062 42.41 256,784 41.54 Commercial construction and development 151,145 11.15 92,403 9.88 65,281 7.74 52,670 6.75 41,739 6.75 Farmland 136,334 10.06 67,005 7.17 65,918 7.82 50,293 6.44 29,915 4.84 Total commercial real estate 826,549 60.97 569,976 60.97 447,867 53.12 434,025 55.60 328,438 53.13 Total real estate loans 1,022,252 75.41 716,791 76.67 604,959 71.75 591,923 75.83 472,545 76.45 Other loans: Home equity 74,271 5.48 51,748 5.54 56,563 6.71 56,414 7.23 52,159 8.44 Consumer 27,609 2.04 18,455 1.97 20,168 2.39 18,882 2.42 16,565 2.68 Commercial 127,255 9.39 101,535 10.86 109,209 12.95 72,797 9.33 59,053 9.56 Agricultural 104,036 7.68 46,335 4.96 52,242 6.20 40,522 5.19 17,709 2.87 Total commercial loans 231,291 17.07 147,870 15.82 161,451 19.15 113,319 14.52 76,762 12.43 Total other loans 333,171 24.59 218,073 23.33 238,182 28.25 188,615 24.17 145,486 23.55 Total loans 1,355,423 100.00 % 934,864 100.00 % 843,141 100.00 % 780,538 100.00 % 618,031 100.00 % Deferred loan fees (1,745 ) (1,725 ) (2,038 ) (1,303 ) (1,098 ) Allowance for loan losses (14,000 ) (12,500 ) (11,600 ) (8,600 ) (6,600 ) Total loans, net $ 1,339,678 $ 920,639 $ 829,503 $ 770,635 $ 610,333 (1) Excludes loans held-for-sale 27 Table of Contents Loans receivable, net increased $419.04 million, or 45.5%, to $1.34 billion at December 31, 2022 from $920.64 million at December 31, 2021.
Biggest changeDecember 31, 2023 One Year or Less One to Five Years Five to Ten Years After Ten Years Total Investment Securities Fair Value Weighted Average Yield Fair Value Weighted Average Yield Fair Value Weighted Average Yield Fair Value Weighted Average Yield Fair Value Approximate Market Value Weighted Average Yield (Dollars in Thousands) Securities available-for-sale: U.S. government and agency obligations $ - 0.00 % $ - 0.00 % $ 4,298 5.02 % $ 2,245 7.49 % $ 6,543 $ 6,543 5.86 % U.S. treasury obligations - 0.00 31,001 1.45 15,814 1.66 - 0.00 46,815 46,815 1.52 Municipal obligations 2,546 3.19 7,710 2.77 38,809 2.72 88,885 3.13 137,950 137,950 2.93 Corporate obligations - 0.00 975 3.00 2,930 4.99 - 0.00 3,905 3,905 4.49 Mortgage-backed securities 505 3.03 3,052 3.29 3,145 3.37 20,051 4.51 26,753 26,753 4.21 Collateralized mortgage obligations 4,084 2.74 5,347 3.97 763 2.93 76,374 3.89 86,568 86,568 3.84 Asset-backed securities - 0.00 - 0.00 - 0.00 9,745 6.65 9,745 9,745 6.65 Total securities available-for-sale $ 7,135 2.92 % $ 48,085 2.09 % $ 65,759 2.43 % $ 197,300 3.70 % $ 318,279 $ 318,279 3.27 % 28 Table of Contents Lending Activities The following table includes the composition of the Bank’s loan portfolio by loan category: December 31, 2023 2022 2021 2020 2019 Amount Percent of Total Amount Percent of Total Amount Percent of Total Amount Percent of Total Amount Percent of Total (Dollars in thousands) Real estate loans: Residential 1-4 family (1) $ 156,578 10.55 % $ 135,947 10.03 % $ 101,180 10.82 % $ 110,802 13.14 % $ 119,296 15.28 % Residential 1-4 family construction 43,434 2.93 59,756 4.41 45,635 4.88 46,290 5.49 38,602 4.95 Total residential 1-4 family 200,012 13.48 195,703 14.44 146,815 15.70 157,092 18.63 157,898 20.23 Commercial real estate 608,691 40.99 539,070 39.76 410,568 43.92 316,668 37.56 331,062 42.41 Commercial construction and development 158,132 10.65 151,145 11.15 92,403 9.88 65,281 7.74 52,670 6.75 Farmland 142,590 9.61 136,334 10.06 67,005 7.17 65,918 7.82 50,293 6.44 Total commercial real estate 909,413 61.25 826,549 60.97 569,976 60.97 447,867 53.12 434,025 55.60 Total real estate loans 1,109,425 74.73 1,022,252 75.41 716,791 76.67 604,959 71.75 591,923 75.83 Other loans: Home equity 86,932 5.86 74,271 5.48 51,748 5.54 56,563 6.71 56,414 7.23 Consumer 30,125 2.03 27,609 2.04 18,455 1.97 20,168 2.39 18,882 2.42 Commercial 132,709 8.94 127,255 9.39 101,535 10.86 109,209 12.95 72,797 9.33 Agricultural 125,298 8.44 104,036 7.68 46,355 4.96 52,242 6.20 40,522 5.19 Total commercial loans 258,007 17.38 231,291 17.07 147,870 15.82 161,451 19.15 113,319 14.52 Total other loans 375,064 25.27 333,171 24.59 218,073 23.33 238,182 28.25 188,615 24.17 Total loans 1,484,489 100.00 % 1,355,423 100.00 % 934,864 100.00 % 843,141 100.00 % 780,538 100.00 % Deferred loan fees (2) - (1,725 ) (1,725 ) (2,038 ) (1,303 ) Allowance for credit losses (3) (16,440 ) (14,000 ) (12,500 ) (11,600 ) (8,600 ) Total loans, net $ 1,468,049 $ 1,339,678 $ 920,639 $ 829,503 $ 770,635 (1) Excludes loans held-for-sale (2) Deferred loan fees, net included in individual loan buckets above for the year ended December 31, 2023.
While we believe we have established our existing allowance for loan losses in accordance with generally accepted accounting principles, there can be no assurance that bank regulators, in reviewing our loan portfolio, will not request that we significantly increase our allowance for loan losses, or that general economic conditions, a deteriorating real estate market, or other factors will not cause us to significantly increase our allowance for loan losses, therefore negatively affecting our financial condition and earnings.
While we believe we have established our existing allowance for credit losses in accordance with generally accepted accounting principles, there can be no assurance that bank regulators, in reviewing our loan portfolio, will not request that we significantly increase our allowance for credit losses, or that general economic conditions, a deteriorating real estate market, or other factors will not cause us to significantly increase our allowance for credit losses, therefore negatively affecting our financial condition and earnings.
This portion of the allowance is calculated for inherent losses which probably exist as of the evaluation date even though they might not have been identified by the more objective processes used. This is due to the risk of error and/or inherent imprecision in the process.
This portion of the allowance is calculated for expected losses which probably exist as of the evaluation date even though they might not have been identified by the more objective processes used. This is due to the risk of error and/or inherent imprecision in the process.
At least quarterly, the management of the Bank evaluates the need to establish an allowance for losses on specific loans when a finding is made that a loss is estimable and probable.
At least quarterly, the management of the Bank evaluates the need to establish an allowance for credit losses on specific loans when a finding is made that a loss is estimable and probable.
Our investment securities generally include U.S. government and agency obligations, U.S. treasury obligations, Small Business Administration pools, municipal securities, corporate obligations, mortgage-backed securities (“MBSs”), collateralized mortgage obligations (“CMOs”) and asset-backed securities (“ABSs”), all with varying characteristics as to rate, maturity and call provisions. There were no held-to-maturity investment securities included in the investment portfolio at December 31, 2022 or 2021.
Our investment securities generally include U.S. government and agency obligations, U.S. treasury obligations, Small Business Administration pools, municipal securities, corporate obligations, mortgage-backed securities (“MBSs”), collateralized mortgage obligations (“CMOs”) and asset-backed securities (“ABSs”), all with varying characteristics as to rate, maturity and call provisions. There were no held-to-maturity investment securities included in the investment portfolio at December 31, 2023 or 2022.
( 4 ) For purposes of this table, tax exempt income is not calculated on a tax equivalent basis. 36 Table of Contents Rate/Volume Analysis The following table presents the dollar amount of changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities.
( 4 ) For purposes of this table, tax exempt income is not calculated on a tax equivalent basis. 38 Table of Contents Rate/Volume Analysis The following table presents the dollar amount of changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities.
The Bank’s strong capital position helps to mitigate its interest rate risk exposure. As of December 31, 2022, the Company’s regulatory capital was in excess of all applicable regulatory requirements and is deemed “well capitalized” pursuant to State of Montana and FRB rules.
The Bank’s strong capital position helps to mitigate its interest rate risk exposure. As of December 31, 2023, the Company’s regulatory capital was in excess of all applicable regulatory requirements and is deemed “well capitalized” pursuant to State of Montana and FRB rules.
Introduction The following Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") describes Eagle and its subsidiaries' results of operations for the year ended December 31, 2022 as compared to the year ended December 31, 2021, and also analyzes our financial condition as of December 31, 2022 as compared to December 31, 2021.
Introduction The following Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") describes Eagle and its subsidiaries' results of operations for the year ended December 31, 2023 as compared to the year ended December 31, 2022, and also analyzes our financial condition as of December 31, 2023 as compared to December 31, 2022.
The Bank has established acceptable levels of interest rate risk as follows for an instantaneous and permanent shock in rates: Projected net interest income over the next twelve months (i.e. year-1) and the subsequent twelve months (i.e. year-2) will not be reduced by more than 15.0% given an immediate increase or decrease in interest rates of up to 200 basis points or by more than 10.0% given an immediate increase or decrease in interest rates of up to 100 basis points. 40 Table of Contents The following table includes the Banks’s net interest income sensitivity analysis.
The Bank has established acceptable levels of interest rate risk as follows for an instantaneous and permanent shock in rates: Projected net interest income over the next twelve months (i.e. year-1) and the subsequent twelve months (i.e. year-2) will not be reduced by more than 15.0% given an immediate increase or decrease in interest rates of up to 200 basis points or by more than 10.0% given an immediate increase or decrease in interest rates of up to 100 basis points. 42 Table of Contents The following table includes the Bank's net interest income sensitivity analysis.
In addition, available-for-sale securities purchases were $77.07 million during the year ended December 31, 2022, more than offset by available-for sale securities sales and maturities, principal payments and calls of $82.95 million. Investing activities was also impacted by net cash received from acquisitions of $13.40 million. Available-for-sale securities purchases were $132.18 million during the year ended December 31, 2021.
In addition, available-for-sale securities purchases were $77.07 million during the year ended December 31, 2022, more than offset by available-for sale securities sales and maturities, principal payments and calls of $82.95 million. Investing activities was also impacted by net cash received from acquisitions of $13.40 million.
Net interest income and noninterest income are offset by provisions for loan losses, general administrative and other expenses, including salaries and employee benefits and occupancy and equipment costs, as well as by state and federal income tax expense.
Net interest income and noninterest income are offset by provisions for credit losses, general administrative and other expenses, including salaries and employee benefits and occupancy and equipment costs, as well as by state and federal income tax expense.
“Basic surplus with FHLB” adds to “basic surplus” the additional borrowing capacity the Bank has with the FHLB of Des Moin es. The Bank exceeded those minimum ratios as of December 31, 2022 and 2021.
“Basic surplus with FHLB” adds to “basic surplus” the additional borrowing capacity the Bank has with the FHLB of Des Moin es. The Bank exceeded those minimum ratios as of December 31, 2023 and 2022.
Changes in Market EVE as a % Change from 0 Shock Interest Rates As of December 31, 2022 Board Policy (Basis Points) Projected EVE Limit Maximum % change: +400 4.4% -40.0% +300 4.1% -35.0% +200 3.2% -30.0% +100 2.4% -20.0% 0 0.0% 0.0% -100 -5.4% -20.0% Off-Balance Sheet Arrangements As a financial services provider, we routinely are a party to various financial instruments with off-balance-sheet risks, such as commitments to extend credit and unused lines of credit.
Changes in Market EVE as a % Change from 0 Shock Interest Rates As of December 31, 2023 Board Policy (Basis Points) Projected EVE Limit Maximum % change: +400 -3.1% -40.0% +300 -1.9% -35.0% +200 -1.3% -30.0% +100 0.4% -20.0% 0 0.0% 0.0% -100 -3.1% -20.0% Off-Balance Sheet Arrangements As a financial services provider, we routinely are a party to various financial instruments with off-balance-sheet risks, such as commitments to extend credit and unused lines of credit.
Changes in Market Rate Sensitivity Interest Rates As of December 31, 2022 Policy (Basis Points) Year 1 Year 2 Limits +200 -2.3% 8.2% -15.0% +100 -0.9% 7.8% -10.0% -100 -0.2% 3.9% -10.0% -200 -0.7% 0.6% -15.0% The following table discloses how the Bank’s economic value of equity (“EVE”) would react to interest rate changes.
Changes in Market Rate Sensitivity Interest Rates As of December 31, 2023 Policy (Basis Points) Year 1 Year 2 Limits +200 -8.4% 6.3% -15.0% +100 -3.8% 9.0% -10.0% -100 4.0% 12.0% -10.0% -200 7.7% 12.6% -15.0% The following table discloses how the Bank’s economic value of equity (“EVE”) would react to interest rate changes.
There was one write-up on real estate owned and other repossessed assets for a gain of $18,000 during the year ended December 31, 2022 . During the year ended December 31, 2021 , the Bank sold three real estate owned and other repossessed assets resulting in a net gain of $12,000.
During the year ended December 31, 2022, the Bank sold three real estate owned and other repossessed assets resulting in a net gain of $185,000. There was one subsequent write-up on real estate owned and other repossessed assets for a gain of $18,000 during the year ended December 31, 2022.
The Bank’s management recognizes that fee income will also enable it to be less dependent on specialized lending and it maintains a significant loan serviced portfolio, which provides a steady source of fee income. As of December 31, 2022, we had mortgage servicing rights , net of $15.41 million compared to $13.69 million as of December 31, 2021.
The Bank’s management recognizes that fee income will also enable it to be less dependent on specialized lending and it maintains a significant loan serviced portfolio, which provides a steady source of fee income. As of December 31, 2023, we had mortgage servicing rights , net of $15.85 m illion compared to $15.41 million as of December 31, 2022.
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. 22 Table of Contents Fee income is also supplemented with fees generated from deposit accounts.
Gain on sale of loans also provides significant noninterest income in periods of high mortgage loan origination volumes. Such income will be, and has recently been, adversely affected in periods of lower mortgage activity. 25 Table of Contents Fee income is also supplemented with fees generated from deposit accounts.
Net cash used in the Company’s investing activities, which is primarily comprised of cash transactions related to activity in the loan portfolio and investment securities, was $235.04 million for the year ended December 31, 2022 compared to $232.92 million for the year ended December 31, 2021.
Net cash used in the Company’s investing activities, which is primarily comprised of cash transactions related to activity in the loan portfolio and investment securities, was $108.21 million for the year ended December 31, 2023 compared to $235.04 million for the year ended December 31, 2022.
The effective tax rate was 22.7% f or the year ended December 31, 2022 compared to 25.2% for the prior year. 38 Table of Contents Liquidity and Capital Resources Liquidity The Bank is required by regulation to maintain sufficient levels of liquidity for safety and soundness purposes.
The effective tax rate was 13.7% f or the year ended December 31, 2023 compared to 22.7% for the prior year. 40 Table of Contents Liquidity and Capital Resources Liquidity The Bank is required by regulation to maintain sufficient levels of liquidity for safety and soundness purposes.
However, other sources of funds, such as deposit flows and loan prepayments, can be greatly influenced by the general level of interest rates, economic conditions and competition. The Company uses liquidity resources principally to fund existing and future loan commitments. It also uses them to fund maturing certificates of deposit and demand deposit withdrawals.
However, other sources of funds, such as deposit flows and loan prepayments, can be greatly influenced by the general level of interest rates, economic conditions and competition. The Company uses liquidity resources principally to fund existing and future loan commitments.
The Bank is within the guidelines set forth by the Board of Directors for interest rate sensitivity. The Bank’s Tier 1 leverage ratio, as measured under State of Montana and FRB rule s, decreased from 10.96 % a s of December 31, 2021 to 9.82% as of December 31, 2022.
The Bank is within the guidelines set forth by the Board of Directors for interest rate sensitivity. The Bank’s Tier 1 leverage ratio, as measured under State of Montana and FRB ru les, decreased from 9.82% as of December 31, 2022 to 9.75% a s of December 31, 2023.
Acquisitions The Bank has used growth through mergers or acquisition, in addition to its strategy of organic growth. In April 2022, Eagle acquired First Community Bancorp, Inc. ("FCB"), a Montana corporation, and FCB's wholly-owned subsidiary, First Community Bank, a Montana chartered commercial bank. In the transaction, Eagle acquired nine retail bank branches and two loan production offices in Montana.
Acquisitions The Bank has used growth through mergers or acquisition, in addition to its strategy of organic growth. In April 2022, Eagle acquired First Community Bancorp, Inc. ("FCB"), a Montana corporation, and FCB's wholly-owned subsidiary, First Community Bank, a Montana chartered commercial bank.
Net interest income is affected by (i) the difference between rates of interest earned on loans and investments and rates paid on interest-bearing deposits and borrowings (the “interest rate spread”) and (ii) the relative amounts of loans and investments and interest-bearing deposits and borrowings.
It is the single largest component of Eagle’s operating income. Net interest income is affected by (i) the difference between rates of interest earned on loans and investments and rates paid on interest-bearing deposits and borrowings (the “interest rate spread”) and (ii) the relative amounts of loans and investments and interest-bearing deposits and borrowings.
The Bank has Federal funds lines of credit with PCBB, PNC, TIB and UBB. Eagle has a line of credit with Bell Bank. Advances from FHLB and other borrowi ngs increased by $64.39 million to $69.39 million at December 31, 2022 from $5.00 million at December 31, 2021. The increase was related to funding loan growth.
The Bank has Federal funds lines of credit with PCBB, PNC, TIB and UBB. Eagle has a line of credit with Bell Bank. Advances from FHLB and other borrowi ngs increased by $106.35 million to $175.74 million at December 31, 2023 from $69.39 million at December 31, 2022. The increase was related to funding loan growth.
The level and movement of interest rates impacts the Bank’s earnings as well. The Federal Open Market Committee held the federal funds target rate at 0.25% during the year ended December 31, 2021. The rate increased to 4.50% during the year ended December 31, 2022.
The level and movement of interest rates impacts the Bank’s earnings as well. The Federal Open Market Committee increased the federal funds target rate to 4.50% during the year ended December 31, 2022. The rate increased to 5.50% during the year ended December 31, 2023.
All investment securities included in the investment portfolio are available-for-sale. Eagle also has interest-bearing deposits in other banks and federal funds sold, as well as stock in FHLB and FRB. FHLB stock was $5.09 million and $1.70 million at December 31, 2022 and 2021, respectively.
All investment securities included in the investment portfolio are available-for-sale. Eagle also has interest-bearing deposits in other banks and federal funds sold, as well as stock in FHLB and FRB. FHLB stock was $9.19 million and $5.09 million at December 31, 2023 and 2022, respectively. FRB stock was $4.13 million for both at December 31, 2023 and 2022.
Interest accretion on purchased loans was $1.56 million for the year ended December 31, 2022 , which resulted in a 10 basis point increase in net interest margin compared to $579,000 for the year ended December 31, 2021 , which resulted in a 5 basis point increase in net interest margin.
Interest accretion on purchased loans was $1.01 million for the year ended December 31, 2023 , which resulted in a 6 basis point increase in net interest margin compared to $1.56 million for the year ended December 31, 2022 , which resulted in a 10 basis point increase in net interest margin.
It is our policy to review our loan portfolio, in accordance with regulatory classification procedures, on at least a quarterly basis. 32 Table of Contents The following table includes information for allowance for loan losses: Years Ended December 31, 2022 2021 2020 (Dollars in Thousands) Beginning balance $ 12,500 $ 11,600 $ 8,600 Provision for loan losses 2,001 861 3,130 Charge-offs Residential 1-4 Family (199 ) - - Commercial real estate - (35 ) (18 ) Home equity (32 ) - - Consumer (31 ) (16 ) (36 ) Commercial (299 ) (6 ) (173 ) Recoveries Residential 1-4 Family 4 - - Commercial real estate 30 21 12 Home equity - - - Consumer 4 8 16 Commercial 22 67 69 Net loan (recoveries) charge-offs s (501 ) 39 (130 ) Ending balance $ 14,000 $ 12,500 $ 11,600 Allowance for loan losses to total loans excluding loans held-for-sale 1.03 % 1.34 % 1.38 % Allowance for loan losses to total nonperforming loans 179.99 % 177.08 % 136.91 % Allowance for loan losses to nonaccrual loans 424.50 % 227.65 % 184.89 % Net (recoveries) charge-offs to average loans outstanding during the period -0.04 % 0.00 % -0.01 % Net charge-offs to average loans outstanding for each loan category are considered insignificant for the periods presented in the table above.
It is our policy to review our loan portfolio, in accordance with regulatory classification procedures, on at least a quarterly basis. 34 Table of Contents The following table includes information for allowance for credit losses: Years Ended December 31, 2023 2022 2021 (Dollars in Thousands) Beginning balance $ 14,000 $ 12,500 $ 11,600 Impact of adopting ASC 326 700 - - Provision for credit losses 1,666 2,001 861 Charge-offs Residential 1-4 Family - (199 ) - Commercial real estate - - (35 ) Home equity - (32 ) - Consumer (50 ) (31 ) (16 ) Commercial (129 ) (299 ) (6 ) Recoveries Residential 1-4 Family 195 4 - Commercial real estate 23 30 21 Home equity 13 - - Consumer 3 4 8 Commercial 19 22 67 Net loan charge-offs (recoveries) 74 (501 ) 39 Ending balance $ 16,440 $ 14,000 $ 12,500 Allowance for credit losses to total loans excluding loans held-for-sale 1.11 % 1.03 % 1.34 % Allowance for credit losses to total nonperforming loans 195.23 % 179.99 % 177.08 % Allowance for credit losses to nonaccrual loans 249.96 % 424.50 % 199.23 % Net charge-offs (recoveries) to average loans outstanding during the period 0.01 % -0.04 % 0.00 % Net charge-offs to average loans outstanding for each loan category are considered insignificant for the periods presented in the table above.
The weighted average rate for borrowings was 4.52% as of December 31, 2022, compared to 1.81% at December 31, 2021. Other Long-Term Debt.
The weighted average rate for borrowings was 5.48% as of December 31, 2023, compared to 4.52% at December 31, 2022. Other Long-Term Debt.
The Bank has also focused on adding commercial loans to our portfolio, both real estate and non-real estate. We have made significant progress in this initiative. As of December 31, 2022, commercial real estate and commercial business loans represen ted 60.97% and 17.07% o f the total loan portfolio, respectively.
The Bank has also focused on adding commercial loans to our portfolio, both real estate and non-real estate. We have made significant progress in this initiative over the past decade. As of December 31, 2023, commercial real estate and commercial business loans represen ted 61.25% and 17.39% o f the total loan portfolio, respectively.
In addition, the average interest rate earned on loans receivable increased by 12 basis points, from 4.93% for the year ended December 31, 2021, to 5.05% for the year ended December 31, 2022.
In addition, the average interest rate earned on loans receivable increased by 48 basis points, from 5.05% for the year ended December 31, 2022, to 5.53% for the year ended December 31, 2023.
( 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.
( 2 ) Interest rate spread represents the difference between the average yield on interest-earning assets and the average rate on interest-bearing liabilities. ( 3 ) Net interest margin represents income before the provision for credit losses (for year ended December 31, 2023) or provision for loan losses (for the year ended December 31, 2022) divided by average interest-earning assets.
The presence of a high percentage of core deposits and, in particular, transaction accounts reflects in part of our strategy to restructure our liabilities to more closely resemble the lower cost of liabilities of a commercial bank. However, a significant portion of our deposits remains in certificate of deposit form.
The presence of a high percentage of core deposits and, in particular, transaction accounts reflects in part due to our strategy to restructure our liabilities to more closely resemble the lower cost of liabilities of a commercial bank. However, a significant portion of our deposits is in certificate of deposit form and there was growth in this area during 2023.
At December 31, 2022, the Bank’s total capital, Tier 1 capital, common equity Tier 1 capital and Tier 1 leverage ratios amounted to 13.04%, 12.14%, 12.14% and 9.82%, respectively, compared to regulatory requirements of 10.50%, 8.50%, 7.00% and 4.00%, respectively.
At December 31, 2023, the Bank’s total capital, Tier 1 capital, common equity Tier 1 capital and Tier 1 leverage ratios amounted to 13.01%, 11.96%, 11.96% and 9.75%, respectively, compared to regulatory requirements of 10.50%, 8.50%, 7.00% and 4.00%, respectively.
Maturities are based on the final contractual payment dates and do not reflect the impact of prepayments or early redemptions that may occur.
The yields have been computed on a tax equivalent basis. Maturities are based on the final contractual payment dates and do not reflect the impact of prepayments or early redemptions that may occur.
The following table sets forth information regarding nonperforming assets: December 31, 2022 2021 2020 2019 2018 (Dollars in Thousands) Non-accrual loans Real estate loans: Residential 1-4 family $ 483 $ 616 $ 684 $ 618 $ 253 Residential 1-4 family construction - 337 337 337 634 Commercial real estate 350 497 631 583 432 Commercial construction and development - - 36 50 13 Farmland 143 989 2,245 323 - Other loans: Home equity 96 100 94 78 469 Consumer 25 62 151 156 127 Commercial 44 516 537 750 308 Agricultural 1,059 1,718 1,542 499 32 Accruing loans delinquent 90 days or more Real estate loans: Residential 1-4 family 330 - 34 4 130 Residential 1-4 family construction - - 170 - - Commercial real estate - - - - 1,347 Other loans: Commercial 746 - 6 - - Agricultural - - 182 1,805 - Restructured loans Real estate loans: Commercial real estate 3,264 1,527 1,633 - - Commercial construction and development - - 14 - - Farmland 611 641 - 153 - Other loans: Home equity 11 15 17 20 22 Commercial 140 - - 74 - Agricultural 476 41 160 - - Total nonperforming loans 7,778 7,059 8,473 5,450 3,767 Real estate owned and other repossessed property, net - 4 25 26 107 Total nonperforming assets $ 7,778 $ 7,063 $ 8,498 $ 5,476 $ 3,874 Total nonperforming loans to total loans 0.57 % 0.76 % 1.00 % 0.70 % 0.61 % Total nonperforming loans to total assets 0.40 % 0.49 % 0.67 % 0.52 % 0.44 % Total nonaccrual loans to total loans 0.24 % 0.59 % 0.74 % 0.47 % 0.37 % Total nonperforming assets to total assets 0.40 % 0.49 % 0.68 % 0.52 % 0.45 % Nonaccrual loans as of December 31, 2022 and 2021 inclu de $694,000 and $492,000, respectively of acquired loans that deteriorated subsequent to the acquisition date.
The following table sets forth information regarding nonperforming assets: December 31, 2023 2022 2021 2020 2019 (Dollars in Thousands) Non-accrual loans Real estate loans: Residential 1-4 family $ 297 $ 483 $ 616 $ 684 $ 618 Residential 1-4 family construction 757 - 337 337 337 Commercial real estate 340 350 497 631 583 Commercial construction and development - - - 36 50 Farmland 3,716 143 989 2,245 323 Other loans: Home equity 182 96 100 94 78 Consumer 60 25 62 151 156 Commercial 27 44 516 537 750 Agricultural 3,016 1,059 1,718 1,542 499 Accruing loans delinquent 90 days or more Real estate loans: Residential 1-4 family - 330 - 34 4 Residential 1-4 family construction - - - 170 - Farmland 26 - - - - Other loans: Commercial - 746 - 6 - Agricultural - - - 182 1,805 Restructured loans - 4,502 2,224 1,824 247 Total nonperforming loans 8,421 7,778 7,059 8,473 5,450 Real estate owned and other repossessed property, net 5 - 4 25 26 Total nonperforming assets $ 8,426 $ 7,778 $ 7,063 $ 8,498 $ 5,476 Total nonperforming loans to total loans 0.57 % 0.57 % 0.76 % 1.00 % 0.70 % Total nonperforming loans to total assets 0.41 % 0.40 % 0.49 % 0.67 % 0.52 % Total nonaccrual loans to total loans 0.57 % 0.24 % 0.59 % 0.74 % 0.47 % Total nonperforming assets to total assets 0.41 % 0.40 % 0.49 % 0.68 % 0.52 % Nonaccrual loans as of December 31, 2023 and 2022 inclu de $1,681,000 and $694,000, respectively of acquired loans that deteriorated subsequent to the acquisition date.
We also utilize a third-party review as part of our loan classification process. In addition, on an annual basis or more often if needed, the Company formally reviews the ratings of all commercial real estate, real estate construction, and commercial business loans that have a principal balance of $750,000 or more.
In addition, on an annual basis or more often if needed, the Company formally reviews the ratings of all commercial real estate, real estate construction, and commercial business loans that have a principal balance of $750,000 or more.
The following table presents allocation of the allowance for loan losses by loan category and the percentage of loans in each category to total loans: December 31, 2022 2021 2020 Amount Percentage of Allowance to Total Allowance Loan Category to Total Loans Amount Percentage of Allowance to Total Allowance Loan Category to Total Loans Amount Percentage of Allowance to Total Allowance Loan Category to Total Loans (Dollars in Thousands) Real estate loans: Residential 1-4 family $ 1,472 10.51 % 14.44 % $ 1,596 12.77 % 15.70 % $ 1,506 12.98 % 18.63 % Commercial real estate 9,037 64.55 60.97 7,470 59.76 60.97 6,951 59.92 53.12 Total real estate loans 10,509 75.06 75.41 9,066 72.53 76.67 8,457 72.90 71.75 Other loans: Home equity 509 3.64 5.48 533 4.26 5.54 515 4.44 6.71 Consumer 342 2.44 2.04 365 2.92 1.97 364 3.14 2.39 Commercial 2,640 18.86 17.07 2,536 20.29 15.82 2,264 19.52 19.15 Total other loans 3,491 24.94 24.59 3,434 27.47 23.33 3,143 27.10 28.25 Total $ 14,000 100.00 % 100.00 % $ 12,500 100.00 % 100.00 % $ 11,600 100.00 % 100.00 % 33 Table of Contents Deposits and Other Sources of Funds Deposits .
The following table presents allocation of the allowance for credit losses by loan category and the percentage of loans in each category to total loans: December 31, 2023 2022 2021 Amount Percentage of Allowance to Total Allowance Loan Category to Total Loans Amount Percentage of Allowance to Total Allowance Loan Category to Total Loans Amount Percentage of Allowance to Total Allowance Loan Category to Total Loans (Dollars in Thousands) Real estate loans: Residential 1-4 family $ 1,866 11.35 % 13.48 % $ 1,472 10.51 % 14.44 % $ 1,596 12.77 % 15.70 % Commercial real estate 10,691 65.03 61.25 9,037 64.55 60.97 7,470 59.76 60.97 Total real estate loans 12,557 76.38 74.73 10,509 75.06 75.41 9,066 72.53 76.67 Other loans: Home equity 540 3.28 5.86 509 3.64 5.48 533 4.26 5.54 Consumer 304 1.85 2.03 342 2.44 2.04 365 2.92 1.97 Commercial 3,039 18.49 17.38 2,640 18.86 17.07 2,536 20.29 15.82 Total other loans 3,883 23.62 25.27 3,491 24.94 24.59 3,434 27.47 23.33 Total $ 16,440 100.00 % 100.00 % $ 14,000 100.00 % 100.00 % $ 12,500 100.00 % 100.00 % 35 Table of Contents Deposits and Other Sources of Funds Deposits .
In addition, the Bank uses liquidity resources for investment purposes, to meet operating expenses and capital expenditures, for dividend payments and stock repurchases and to maintain adequate liquidity levels. Liquidity may be adversely affected by unexpected deposit outflows, higher interest rates paid by competitors, and similar matters.
It also uses them to fund maturing certificates of deposit and demand deposit withdrawals, for investment purposes, to meet operating expenses and capital expenditures, for dividend payments, for stock repurchases and to maintain adequate liquidity levels. Liquidity may be adversely affected by unexpected deposit outflows, higher interest rates paid by competitors, and similar matters.
Mortgage banking, net includes net gain on sale of mortgage loans which decreased $ 27.48 million to $18.61 million for the year ended December 31, 2022 , compared to $46.09 million for the year ended December 31, 2021 .
Mortgage banking, net includes net gain on sale of mortgage loans which decreased $ 7.21 million to $11.40 million for the year ended December 31, 2023 , compared to $18.61 million for the year ended December 31, 2022 .
The following table shows the amount of certificates of deposit with balances of $250,000 and greater by time remaining until maturity as of December 31, 2022: Balance $250,000 and Greater (In Thousands) 3 months or less $ 33,410 Over 3 to 6 months 4,550 Over 6 to 12 months 11,557 Over 12 months 15,686 Total $ 65,203 Our depositors are primarily residents of the state of Montana. 34 Table of Contents Borrowings .
The following table shows the amount of certificates of deposit with balances of $250,000 and greater by time remaining until maturity as of December 31, 2023: Balance $250,000 and Greater (In Thousands) 3 months or less $ 104,172 Over 3 to 6 months 39,107 Over 6 to 12 months 33,343 Over 12 months 3,988 Total $ 180,610 Our depositors are primarily residents of the state of Montana. 36 Table of Contents Borrowings .
Net cash provided by operating activities was lower for the year ended December 31, 2022 primarily due to changes in loans held-for-sale activity.
Net cash provided by operating activities was lower for the year ended December 31, 2023 primarily due to changes in loans held-for-sale activity. Mortgage volumes have been impacted by the current interest rate environment.
FRB stock was $4.13 million and $2.97 million at December 31, 2022 and 2021, respectively. 25 Table of Contents The following table summarizes investment activities: December 31, 2022 2021 2020 Fair Value Percentage of Total Fair Value Percentage of Total Fair Value Percentage of Total (Dollars in Thousands) Securities available-for-sale: U.S. government and agency obligations $ 2,390 0.68 % $ 1,633 0.60 % $ 2,245 1.38 % U.S. treasury obligations 51,951 14.86 % 53,183 19.61 5,657 3.47 Municipal obligations 172,849 49.47 % 123,667 45.58 99,088 60.81 Corporate obligations 6,990 2.00 % 9,336 3.44 10,663 6.54 Mortgage-backed securities 29,653 8.48 % 14,636 5.40 7,669 4.71 Collateralized mortgage obligations 82,131 23.50 % 63,067 23.25 31,189 19.14 Asset-backed securities 3,531 1.01 % 5,740 2.12 6,435 3.95 Total securities available-for-sale $ 349,495 100.00 % $ 271,262 100.00 % $ 162,946 100.00 % Securities available-for-sale were $349.50 million at December 31, 2022, a n increase o f $78.24 million, or 28.8%, from $ 271.26 mill ion at December 31, 2021.
The following table summarizes investment activities: December 31, 2023 2022 2021 Fair Value Percentage of Total Fair Value Percentage of Total Fair Value Percentage of Total (Dollars in Thousands) Securities available-for-sale: U.S. government and agency obligations $ 6,543 2.06 % $ 2,390 0.68 % $ 1,633 0.60 % U.S. treasury obligations 46,815 14.71 % 51,951 14.86 53,183 19.61 Municipal obligations 137,950 43.33 % 172,849 49.47 123,667 45.58 Corporate obligations 3,905 1.23 % 6,990 2.00 9,336 3.44 Mortgage-backed securities 26,753 8.41 % 29,653 8.48 14,636 5.40 Collateralized mortgage obligations 86,568 27.20 % 82,131 23.50 63,067 23.25 Asset-backed securities 9,745 3.06 % 3,531 1.01 5,740 2.12 Total securities available-for-sale $ 318,279 100.00 % $ 349,495 100.00 % $ 271,262 100.00 % Securities available-for-sale were $318.28 million at December 31, 2023, a decrease o f $31.22 million, or 8.9%, from $ 349.50 mill ion at December 31, 2022.
Interest and fees on loans increased to $ 60.35 million for the year ended December 31, 2022 from $45.13 million for the same period ended December 31, 2021 . This increase of $15.22 million, or 33.7% , was largely due to an increase in the average balance of loans.
Interest and fees on loans increased to $ 79.42 million for the year ended December 31, 2023 from $60.35 million for the same period ended December 31, 2022 . This increase of $19.07 million, or 31.6% , was due in part to an increase in the average balance of loans.
The net change in fair value of loans held-for-sale and derivatives was a loss of $1.84 million for the year ended December 31, 2022 compared to a loss of $5.44 million for the year ended December 31, 2021 .
Mortgage banking, net also includes the impact of fair value changes of loans held-for sale and derivatives. The net change in fair value of loans held-for-sale and derivatives was a gain of $194,000 million for the year ended December 31, 2023 compared to a loss of $1.84 million for the year ended December 31, 2022 .
Net cash used in investing activities for the year ended December 31, 2021, was also impacted by loan originations being higher than loan pay-off and principal payments during the year. Loan origination and principal collection, net was $98.67 million for the year ended December 31, 2021.
Net cash used in investing activities for the year ended December 31, 2023, was impacted by loan originations being higher than loan pay-off and principal payments during the year. Loan origination and principal collection, net was $130.74 million for the year ended December 31, 2023. Pay-off activity has slowed with current interest rate levels.
Commitments are summarized as follows: December 31, 2022 2021 (In Thousands) Commitments to extend credit $ 367,494 $ 252,485 Letters of credit 10,563 4,129
Commitments are summarized as follows: December 31, 2023 2022 (In Thousands) Commitments to extend credit $ 271,552 $ 367,494 Letters of credit 9,457 10,563
The following table summarizes other long-term debt activity: December 31, December 31, 2022 2021 Net Percent Net Percent Amount of Total Amount of Total (Dollars in Thousands) Senior notes fixed at 5.75%, due 2022 $ - 0.00 % $ 9,996 33.47 % Subordinated debentures fixed at 5.50% to floating, due 2030 14,751 25.07 14,718 49.27 Subordinated debentures fixed at 3.50% to floating, due 2032 38,938 66.17 - 0.00 Subordinated debentures variable at 3-Month Libor plus 1.42%, due 2035 5,155 8.76 5,155 17.26 Total other long-term debt, net $ 58,844 100.00 % $ 29,869 100.00 % Total other long-term de bt was $58.84 million at December 31, 2022 compared t o $29.87 million at December 31, 2021.
The following table summarizes other long-term debt activity: December 31, December 31, 2023 2022 Net Percent Net Percent Amount of Total Amount of Total (Dollars in Thousands) Subordinated debentures fixed at 5.50% to floating, due 2030 $ 14,781 $ 25.05 $ 14,751 $ 25.07 Subordinated debentures fixed at 3.50% to floating, due 2032 39,063 66.21 38,938 66.17 Subordinated debentures variable at 3-Month Secured Overnight Financing Rate plus 1.68%, due 2035 5,155 8.74 5,155 8.76 Total other long-term debt, net $ 58,999 100.00 % $ 58,844 100.00 % Total other long-term de bt was $59.00 million at December 31, 2023 compared t o $58.84 million at December 31, 2022.
Year Ended December 31, 2022 Year Ended December 31, 2021 Year Ended December 31, 2020 Average Interest Average Interest Average Interest Daily and Yield/ Daily and Yield/ Daily and Yield/ Balance Dividends Cost(4) Balance Dividends Cost(4) Balance Dividends Cost(4) (Dollars in Thousands) Assets: Interest earning assets: Investment securities $ 336,779 $ 8,579 2.55 % $ 215,978 $ 4,238 1.96 % $ 166,577 $ 3,742 2.24 % FHLB and FRB stock 6,369 302 4.74 4,831 255 5.28 6,534 370 5.65 Loans receivable (1) 1,194,788 60,353 5.05 914,804 45,134 4.93 874,669 45,381 5.17 Other earning assets 34,170 228 0.67 74,102 120 0.16 44,771 161 0.36 Total interest earning assets 1,572,106 69,462 4.42 1,209,715 49,747 4.11 1,092,551 49,654 4.54 Noninterest earning assets 196,813 147,534 127,339 Total assets $ 1,768,919 $ 1,357,249 $ 1,219,890 Liabilities and equity: Interest-bearing liabilities: Deposit accounts: Checking $ 244,208 $ 173 0.07 % $ 190,645 $ 47 0.02 % $ 151,745 $ 58 0.04 % Savings 269,033 128 0.05 198,648 117 0.06 154,224 145 0.09 Money market 358,122 1,711 0.48 244,113 545 0.22 169,531 473 0.28 Certificates of deposit 188,954 1,112 0.59 158,959 765 0.48 213,696 2,938 1.37 FHLB advances and other borrowings 14,627 514 3.51 9,411 175 1.86 76,119 1,183 1.55 Other long-term debt 59,807 2,512 4.20 29,834 1,558 5.22 28,593 1,687 5.88 Total interest-bearing liabilities 1,134,751 6,150 0.54 831,610 3,207 0.39 793,908 6,484 0.81 Noninterest checking 453,841 346,243 265,304 Other noninterest-bearing liabilities 24,672 22,382 19,518 Total liabilities 1,613,264 1,200,235 1,078,730 Total equity 155,655 157,014 141,160 Total liabilities and equity $ 1,768,919 $ 1,357,249 $ 1,219,890 Net interest income/interest rate spread (2) $ 63,312 3.88 % $ 46,540 3.72 % $ 43,170 3.73 % Net interest margin (3) 4.03 % 3.85 % 3.94 % Total interest earning assets to interest-bearing liabilities 138.54 % 145.47 % 137.62 % (1) Includes loans held-for-sale.
Year Ended December 31, 2023 Year Ended December 31, 2022 Year Ended December 31, 2021 Average Interest Average Interest Average Interest Daily and Yield/ Daily and Yield/ Daily and Yield/ Balance Dividends Cost (4) Balance Dividends Cost (4) Balance Dividends Cost (4) (Dollars in Thousands) Assets: Interest earning assets: Investment securities $ 328,533 $ 11,376 3.46 % $ 336,779 $ 8,579 2.55 % $ 215,978 $ 4,238 1.96 % FHLB and FRB stock 12,851 727 5.66 6,369 302 4.74 4,831 255 5.28 Loans receivable (1) 1,436,672 79,423 5.53 1,194,788 60,353 5.05 914,804 45,134 4.93 Other earning assets 2,671 89 3.33 34,170 228 0.67 74,102 120 0.16 Total interest earning assets 1,780,727 91,615 5.14 1,572,106 69,462 4.42 1,209,715 49,747 4.11 Noninterest earning assets 234,859 196,813 147,534 Total assets $ 2,015,586 $ 1,768,919 $ 1,357,249 Liabilities and equity: Interest-bearing liabilities: Deposit accounts: Checking $ 237,006 $ 595 0.25 % $ 244,208 $ 173 0.07 % $ 190,645 $ 47 0.02 % Savings 238,695 146 0.06 269,033 128 0.05 198,648 117 0.06 Money market 331,199 5,548 1.68 358,122 1,711 0.48 244,113 545 0.22 Certificates of deposit 357,573 11,568 3.24 188,954 1,112 0.59 158,959 765 0.48 FHLB advances and other borrowings 159,667 8,562 5.36 14,627 514 3.51 9,411 175 1.86 Other long-term debt 58,930 2,719 4.61 59,807 2,512 4.2 29,834 1,558 5.22 Total interest-bearing liabilities 1,383,070 29,138 2.11 1,134,751 6,150 0.54 831,610 3,207 0.39 Noninterest checking 439,388 453,841 346,243 Other noninterest-bearing liabilities 34,321 24,672 22,382 Total liabilities 1,856,779 1,613,264 1,200,235 Total equity 158,807 155,655 157,014 Total liabilities and equity $ 2,015,586 $ 1,768,919 $ 1,357,249 Net interest income/interest rate spread (2) $ 62,477 3.04 % $ 63,312 3.88 % $ 46,540 3.72 % Net interest margin (3) 3.51 % 4.03 % 3.85 % Total interest earning assets to interest-bearing liabilities 128.75 % 138.54 % 145.47 % (1) Includes loans held-for-sale.
The Bank provides for a general allowance for losses inherent in the portfolio in the categories referenced above. General loss percentages which are calculated based on historical analyses and other factors such as volume and severity of delinquencies, local and national economy, underwriting standards and other factors.
General loss percentages which are calculated based on historical analyses and other factors such as volume and severity of delinquencies, local and national economy, underwriting standards and other factors.
In addition, net short-term advances from FHLB and other borrowings increased by $69.39 million and subordinated debentures of $40.00 million were issued. These increases were partially offset by a net decrease in repurchase agreements of $22.85 million and the repayment of $10.00 million of subordinated debentures.
These increases were partially offset by a net decrease in repurchase agreements of $22.85 million and the repayment of $10.00 million of subordinated debentures.
Results of Operations Comparison of Operating Results for the Years Ended December 31, 2022 and 2021 Net Income Eagle’s net income for the year ended December 31, 2022 was $10.70 million compared to $14.42 million for the year ended December 31, 2021 . The decrease of $3.72 million was primarily due to a decrease in noninterest income of $19.96 million.
Results of Operations Comparison of Operating Results for the Years Ended December 31, 2023 and 2022 Net Income Eagle’s net income for the year ended December 31, 2023 was $10.06 million compared to $10.70 million for the year ended December 31, 2022 . The decrease of $645,000 of 6.0% was driven by a decrease in noninterest income of $3.50 million.
Noninterest Income Total noninterest income was $ 26.22 million for the year ended December 31, 2022 , compared to $46.18 million for the year ended December 31, 2021 . The decrease of $19.96 million, or 43.2% was primarily due to a decrease in a mortgage banking, net of $21.55 million for the year ended December 31, 2022 .
Noninterest Income Total noninterest income was $ 22.72 million for the year ended December 31, 2023 , compared to $26.22 million for the year ended December 31, 2022 . The decrease of $3.50 million, or 13.3% was primarily due to a decrease in a mortgage banking, net of $4.52 million for the year ended December 31, 2023 .
The following table includes deposit accounts and associated weighted average interest rates for each category of deposits: December 31, 2022 2021 2020 Weighted Weighted Weighted Percent Average Percent Average Percent Average Amount of Total Rate Amount of Total Rate Amount of Total Rate (Dollars in Thousands) Noninterest checking $ 468,955 28.68 % 0.00 % $ 368,846 30.16 % 0.00 % $ 318,389 30.82 % 0.00 % Interest-bearing checking 252,922 15.47 0.11 203,410 16.64 0.02 160,614 15.55 0.02 Savings 273,790 16.74 0.06 223,069 18.25 0.06 179,868 17.41 0.06 Money market 387,947 23.72 1.12 277,469 22.7 0.25 202,407 19.59 0.24 Total 1,383,614 84.61 0.34 1,072,794 87.75 0.08 861,278 83.37 0.07 Certificates of deposit accounts: IRA certificates 24,907 1.52 0.48 25,333 2.07 0.44 24,693 2.39 0.50 Brokered certificates - - 0.00 - 0.00 0.00 495 0.05 1.35 Other certificates 226,751 13.87 1.51 124,422 10.18 0.38 146,617 14.19 0.71 Total certificates of deposit 251,658 15.39 1.41 149,755 12.25 0.39 171,805 16.63 0.68 Total deposits $ 1,635,272 100.00 % 0.50 % $ 1,222,549 100.00 % 0.12 % $ 1,033,083 100.00 % 0.18 % Depo sits increased b y $412.72 million, or 33.8%, to $1.64 billion at December 31, 2022 from $1.22 billion at December 31, 2021.
The following table includes deposit accounts and associated weighted average interest rates for each category of deposits: December 31, 2023 2022 2021 Weighted Weighted Weighted Percent Average Percent Average Percent Average Amount of Total Rate Amount of Total Rate Amount of Total Rate (Dollars in Thousands) Noninterest checking $ 418,727 25.61 % 0.00 % $ 468,955 28.68 % 0.00 % $ 368,846 30.16 % 0.00 % Interest-bearing checking 211,101 12.91 0.05 252,922 15.47 0.11 203,410 16.64 0.02 Savings 230,711 14.11 0.06 273,790 16.74 0.06 223,069 18.25 0.06 Money market 330,274 20.20 1.66 387,947 23.7 1.12 277,469 22.7 0.25 Total 1,190,813 72.83 0.40 1,383,614 84.61 0.34 1,072,794 87.75 0.08 Certificates of deposit accounts: IRA certificates 22,960 1.40 0.75 24,907 1.52 0.48 25,333 2.07 0.44 Brokered certificates 72,168 4.41 5.28 - 0.00 0.00 - 0.00 0.00 Other certificates 349,254 21.36 4.04 226,751 13.87 1.51 134,422 10.18 0.38 Total certificates of deposit 444,382 27.17 4.08 251,658 15.39 1.41 149,755 12.25 0.39 Total deposits $ 1,635,195 100.00 % 1.45 % $ 1,635,272 100.00 % 0.50 % $ 1,222,549 100.00 % 0.12 % Overall depo sit s remained consistent year over year at $1.64 billion.
Provision for Income Tax es Provision for income taxes was $3.15 million for the year ended December 31, 2022, compared to $4.86 m illion for th e year ended December 31, 2021 due to decreased income before provision for income taxes.
Provision for Income Tax es Provision for income taxes was $1.60 million for the year ended December 31, 2023, compared to $3.15 m illion for th e year ended December 31, 2022 due to the increase in proportion of tax-exempt income compared to pretax earnings.
This decrease was largely offset by an increase in net interest income after loan loss provision of $15.63 million. Basic and diluted earnings per common share were both $1.45 for the year ended December 31, 2022 . Basic and diluted earnings per common share were both $2.17 for the prior period.
This decrease was largely offset by a decrease in noninterest expense of $1.59 million and a decrease in provision for income taxes of $1.55 million. Basic and diluted earnings per common share were both $1.29 for the year ended December 31, 2023 . Basic and diluted earnings per common share were both $1.45 for the prior period.
Management monitors projected liquidity needs and determines the level desirable based in part on Eagle’s commitments to make loans and management’s assessment of Eagle’s ability to generate funds.
Management monitors projected liquidity needs and determines the level desirable based in part on Eagle’s commitments to make loans and management’s assessment of Eagle’s ability to generate funds. The Bank's available borrowing capacity was approximately $398.50 milli on as of December 31, 2023 and $419.20 million as of December 31, 2022.
Scheduled principal repayments of loans do not necessarily reflect the actual life of such assets. The average life of a loan is typically substantially less than its contractual terms because of prepayments.
The average life of a loan is typically substantially less than its contractual terms because of prepayments.
Other intangible assets are assigned useful lives and amortized. The determination of useful lives is subjective. See Note 2 and 7 to the Consolidated Financial Statements in “Item 8. Financial Statements and Supplementary Data” for further information. The Company's accounting policies and discussion of recent accounting pronouncements is included in Note 1 to the Consolidated Financial Statements in "Item 8.
Management will continue to monitor events that could influence this conclusion in the future. See Note 2 and 7 to the Consolidated Financial Statements in “Item 8. Financial Statements and Supplementary Data” for further information. The Company's accounting policies and discussion of recent accounting pronouncements is included in Note 1 to the Consolidated Financial Statements in "Item 8.
This was slightly offset by net payment on FHLB and other borrowings of $12.07 million. 39 Table of Contents Capital Resources At December 31, 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, decreased the economic value of equity (“EVE”) by 12.6% compared to an increase of 8.90% a t December 31, 2021.
Capital Resources At December 31, 2023, the Bank’s internally determined measurement of sensitivity to interest rate movements as measured by a 200-basis point rise in interest rates scenario, decreased the economic value of equity (“EV E”) by 1.3% compared to an decrease of 12.6% a t December 31, 2022.
Year Ended December 31, 2022 Year Ended December 31, 2021 Due to Due to Volume Rate Net Volume Rate Net (In Thousands) Interest earning assets: Investment securities $ 2,370 $ 1,971 $ 4,341 $ 1,110 $ (614 ) $ 496 FHLB and FRB stock 81 (34 ) 47 (96 ) (19 ) (115 ) Loans receivable (1) 13,814 1,405 15,219 2,082 (2,329 ) (247 ) Other earning assets (65 ) 173 108 105 (146 ) (41 ) Total interest earning assets 16,200 3,515 19,715 3,201 (3,108 ) 93 Interest-bearing liabilities: Checking 13 113 126 15 (26) (11) Savings 41 (30) 11 42 (70) (28) Money market 255 911 1,166 208 (136) 72 Certificates of deposit 144 203 347 (753 ) (1,420 ) (2,173 ) FHLB advances and other borrowings 97 242 339 (1,037 ) 29 (1,008 ) Other long-term debt 1,565 (611 ) 954 73 (202 ) (129 ) Total interest-bearing liabilities 2,115 828 2,943 (1,452 ) (1,825 ) (3,277 ) Change in net interest income $ 14,085 $ 2,687 $ 16,772 $ 4,653 $ (1,283 ) $ 3,370 (1) Includes loans held-for-sale.
Year Ended December 31, 2023 Year Ended December 31, 2022 Due to Due to Volume Rate Net Volume Rate Net (In Thousands) Interest earning assets: Investment securities $ (210 ) $ 3,007 $ 2,797 $ 2,370 $ 1,971 $ 4,341 FHLB and FRB stock 307 118 425 81 (34 ) 47 Loans receivable (1) 12,218 6,852 19,070 13,814 1,405 15,219 Other earning assets (210 ) 71 (139 ) (65 ) 173 108 Total interest earning assets 12,105 10,048 22,153 16,200 3,515 19,715 Interest-bearing liabilities: Checking (5) 427 422 13 113 126 Savings (14) 32 18 41 (30) 11 Money market (129) 3,966 3,837 255 911 1,166 Certificates of deposit 992 9,464 10,456 144 203 347 FHLB advances and other borrowings 5,097 2,951 8,048 97 242 339 Other long-term debt (37 ) 244 207 1,565 (611 ) 954 Total interest-bearing liabilities 5,904 17,084 22,988 2,115 828 2,943 Change in net interest income $ 6,201 $ (7,036 ) $ (835 ) $ 14,085 $ 2,687 $ 16,772 (1) Includes loans held-for-sale.
The increase of $2.94 million, or 91.6%, was due to an increase of $1.65 million in interest expense on deposits and a net increase of $1.28 million in interest expense on total borrowings. The average balance for total deposits was $1.51 million for the year ended December 31, 2022, compared to $1.14 million for the year ended December 31, 2021.
The increase of $22.99 million, was due to an increase of $14.74 million in interest expense on deposits and a net increase of $8.26 million in interest expense on total borrowings. The overall average rate on total deposits was 1.11% for the year ended December 31, 2023, compared to 0.21% for the year ended December 31, 2022.
The methodology for determining the allowance for loan losses is considered a critical accounting policy by management due to the high degree of judgment involved, the subjectivity of the assumptions utilized and the potential for changes in the economic environment that could result in changes to the amount of the recorded allowance for loan losses.
The methodology for determining the adequacy of the allowance for credit losses is considered a critical accounting policy by management due to its complexity and the high degree of judgment involved.
Noninterest Expense Noninterest expense was $ 73.68 million for the year ended December 31, 2022 , compared to $72.58 million for the year ended December 31, 2021 , a slight increase of $ 1.10 million, or 1.5% . Acquisition costs were $2.30 million during the year ended December 31, 2022, compared to $761,000 during the prior year.
Noninterest Expense Noninterest expense was $ 72.09 million for the year ended December 31, 2023 , compared to $73.68 million for the year ended December 31, 2022 , a decrease of $1.59 million, or 2.2%.
The following table provides information regarding the Bank’s delinquent loans: December 31, 2022 30-89 Days 90 Days and Greater Number Amount Percentage of Total Number Amount Percentage of Total (Dollars in Thousands) (Dollars in Thousands) Loan type: Real estate loans: Residential 1-4 family 7 $ 1,798 32.02 % 1 $ 330 30.67 % Residential 1-4 family construction 2 500 8.91 - - 0.00 Commercial real estate 2 780 13.89 - - 0.00 Farmland 6 1,620 28.86 - - 0.00 Other loans: Home equity 4 226 4.03 - - 0.00 Consumer 58 93 1.66 - - 0.00 Commercial 8 597 10.63 2 746 69.33 Total 87 $ 5,614 100.00 % 3 $ 1,076 100.00 % 29 Table of Contents Nonperforming Assets.
The following table provides information regarding the Bank’s delinquent loans: December 31, 2023 30-89 Days 90 Days and Greater Number Amount Percentage of Total Number Amount Percentage of Total (Dollars in Thousands) (Dollars in Thousands) Loan type: Real estate loans: Residential 1-4 family 3 $ 305 16.74 % - $ - 0.00 % Commercial real estate 1 697 38.28 - - 0.00 Commercial construction and development 1 194 10.65 - - 0.00 Farmland 1 404 22.19 1 26 100.00 Other loans: Home equity 1 32 1.76 - - 0.00 Consumer 57 115 6.32 - - 0.00 Agricultural 2 74 4.06 0.00 Total 66 $ 1,821 100.00 % 1 $ 26 100.00 % 31 Table of Contents Nonperforming Assets.
Core deposits were $1.41 billi on or 86.1% of the Bank’s total deposits at December 31, 2022 ( $1.38 billion or 84.4% excluding IRA certificates of deposit).
Core deposits were $1.21 billion or 74.2% of the Bank’s total deposits at December 31, 2023 ($1.19 billion or 72.8% excluding IRA certificates of deposit).
FHLB advances and other borrowin gs also increased $64.39 mi llion from December 31, 2021. Total shareholders’ equit y increased b y $1.69 million from December 31, 2021. Financial Condition Details Investment Activities We maintain a portfolio of investment securities, classified as either available-for-sale or held-to-maturity to enhance total return on investments.
Financial Condition Details Investment Activities We maintain a portfolio of investment securities, classified as either available-for-sale or held-to-maturity to enhance total return on investments.
Interest on investment securities available-for-sale increased by $4.34 million or 102.4% period over period. Average balances for investments increased to $336.78 million for the year ended December 31, 2022 , from $215.98 million for the year ended December 31, 2021 . The increase in average investment balances was largely driven by the FCB acquisition.
Interest on investment securities available-for-sale increased by $2.80 million or 32.6% period over period. This was driven by an increase in average interest rates earned on investments from 2.55% for the year ended December 31, 2022, to 3.46% for the year ended December 31, 2023.
At December 31, 2022, we h ad $14.00 mil lion in allowances for loan losses.
At December 31, 2023, w e had $16.44 mil lion in allowance for credit losses. At December 31, 2022, we had $14.00 million in allowance for loan losses.
Changes in factors underlying the assessment could have a material impact on the amount of the allowance that is necessary and the amount of provision to be charged against earnings. Such changes could impact future results. For the year ended December 31, 2022, we followed the incurred loss methodology for determining our allowance for loan losses.
The allowance is based on information known at the time of the review. Changes in factors underlying the assessment for subsequent evaluations of the loan portfolio could have a material impact on the amount of the allowance that is necessary and the amount of provision to be charged against earnings.
This increase was offset by an increase in interest expense of $2.94 million. Interest and Dividend Income Interest and dividend income was $ 69.46 million for the year ended December 31, 2022 , compared to $49.75 million for the year ended December 31, 2021 , an increase of $19.71 million, or 39.6% .
Interest and Dividend Income Interest and dividend income was $ 91.62 million for the year ended December 31, 2023 , compared to $69.46 million for the year ended December 31, 2022 , an increase of $22.16 million, or 31.9% .
Average balances for loans receivable, including loans held-for-sale, for the year ended December 31, 2022 were $1.19 billion, compared to $914.80 million for the year ended December 31, 2021. This increase of $279.99 million, or 30.6% was impacted by the FCB acquisition, as well as organic growth.
Average balances for loans receivable, including loans held-for-sale, for the year ended December 31, 2023 were $1.44 billion, compared to $1.19 billion for the year ended December 31, 2022. This represents an increase of $241.88 million, or 20.2%.
At December 31, 2022 and 2021, the Company he ld $642.02 million and $444.89 million, respectively, in deposit accounts that met or exceeded the Federal Deposit Insurance Corporation ("FDIC") requirements of $250,000 and greater.
There was migration during the year from lower yielding deposit accounts to certificates of deposit as consumers shifted funds to higher yielding deposits. At December 31, 2023 and 2022, the Company held $618.78 mi llion and $642.02 million, respectively, in deposit accounts that met or exceeded the Federal Deposit Insurance Corporation ("FDIC") requirements of $250,000 and greater.
In addition, the decrease was impacted by sales, maturity, principal payments and call activity, which were largely offset by purchases. The following table sets forth information regarding fair values, weighted average yields and maturities of investments. The yields have been computed on a tax equivalent basis.
The decrease was due to sales of $34.02 million and maturity, principal payments and call activity of $32.70 million. These decreases were partially offset by $28.13 million in investment purchases. In addition, unrealized losses on securities improved from prior year, decreasing by $8.70 million. The following table sets forth information regarding fair values, weighted average yields and maturities of investments.
The allowance for loan losses is composed of an allowance for both inherent risk associated with lending activities and specific problem assets. 30 Table of Contents Management’s evaluation of classification of assets and adequacy of the allowance for loan losses is reviewed by the Board on a regular basis and by regulatory agencies as part of their examination process.
Collateral-dependent loans and nonperforming loans will generally be evaluated individually. 32 Table of Contents Management’s evaluation of classification of assets and adequacy of the allowance for credit losses is reviewed by the Board on a regular basis and by regulatory agencies as part of their examination process. We also utilize a third-party review as part of our loan classification process.
Financial Statements and Supplementary Data". 24 Table of Contents Financial Condition December 31, 2022 compared to December 31, 2021 Total assets were $1.95 billion at December 31, 2022, an increase of $512.45 million, or 35.7% from $1.44 billion at December 31, 2021. The increase was largely due to the FCB acquisition in April 2022, primarily reflected in loans receivable.
Financial Statements and Supplementary Data". 27 Table of Contents Financial Condition December 31, 2023 compared to December 31, 2022 Total assets were $2.08 billion at December 31, 2023, an increase of $127.29 million, or 6.5% from $1.95 billion at December 31, 2022.
Net cash provided by the Company’s financing activities was $153.51 million for the year ended December 31, 2022 compared to $168.10 million for the year ended December 31, 2021. Net cash provided by financing activities for the year ended December 31, 2022 was largely impacted by a net increase in deposits of $91.62 million.
Net cash provided by financing activities for the year ended December 31, 2022 was largely impacted by a net increase in deposits of $91.62 million. In addition, net short-term advances from FHLB and other borrowings increased by $69.39 million and subordinated debentures of $40.00 million were issued.
Average interest rates earned on investments also increased to 2.55% for the year ended December 31, 2022 from 1.96% for the year ended December 31, 2021 . 37 Table of Contents Interest Expense Total interest expense was $6.15 million for the year ended December 31, 2022 , increasing from $3.21 million for the year ended December 31, 2021 .
Average balances for investments decreased modestly from $336.78 million for the year ended December 31, 2022, to $328.53 million for the year ended December 31, 2023 . 39 Table of Contents Interest Expense Total interest expense was $29.14 million for the year ended December 31, 2023 , increasing from $6.15 million for the year ended December 31, 2022 .
Analysis of Net Interest Income The Bank’s earnings have historically depended primarily upon net interest income, which is the difference between interest income earned on loans and investments and interest paid on deposits and any borrowed funds. It is the single largest component of Eagle’s operating income.
These increases were partially offset by dividends paid of $4.44 million and a net of tax cumulative adjustment of $1.62 million related to the adoption of the CECL standard. 37 Table of Contents Analysis of Net Interest Income The Bank’s earnings have historically depended primarily upon net interest income, which is the difference between interest income earned on loans and investments and interest paid on deposits and any borrowed funds.
The average balance for total borrowings increased from $39.25 million for the year ended December 31, 2021 to $74.43 million for the year ended December 31, 2022 . The increase was impacted by the issuance of $40.00 million of subordinated notes in January 2022.
In addition, the average balance for total deposits was $1.60 billion for the year ended December 31, 2023, compared to $1.51 billion for the year ended December 31, 2022. The average balance for total borrowings increased from $74.43 million for the year ended December 31, 2022 to $218.60 million for the year ended December 31, 2023 .

… 87 more changes not shown on this page.

Other EBMT 10-K year-over-year comparisons