NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1
.
BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements. However, such information reflects all adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of our financial position, results of operations, changes in comprehensive income and cash flows for the unaudited interim periods.
The results of operations for the three month period ended March 31, 2017 are not necessarily indicative of the results to be expected for the year ending December 31, 2017 or any other period. The unaudited consolidated financial statements and notes presented herein should be read in conjunction with the audited consolidated financial statements and related notes thereto included in Eagle’s Form 10-K for the year ended December 31, 2016.
The Company evaluated subsequent events for potential recognition and/or disclosure through May 9, 2017 the date the unaudited consolidated financial statements were issued.
NOTE 2. INVESTMENT SECURITIES
Investment securities are summarized as follows:
|
|
March 31, 2017
|
|
|
December 31, 2016
|
|
|
|
|
|
|
|
Gross
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
|
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Gains
|
|
|
(Losses)
|
|
|
Value
|
|
|
Cost
|
|
|
Gains
|
|
|
(Losses)
|
|
|
Value
|
|
|
|
(In Thousands)
|
|
Available-for-Sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government and
agency obligations
|
|
$
|
5,357
|
|
|
$
|
10
|
|
|
$
|
(61
|
)
|
|
$
|
5,306
|
|
|
$
|
5,673
|
|
|
$
|
7
|
|
|
$
|
(72
|
)
|
|
$
|
5,608
|
|
Municipal obligations
|
|
|
67,611
|
|
|
|
592
|
|
|
|
(1,293
|
)
|
|
|
66,910
|
|
|
|
68,493
|
|
|
|
575
|
|
|
|
(1,404
|
)
|
|
|
67,664
|
|
Corporate obligations
|
|
|
10,415
|
|
|
|
22
|
|
|
|
(93
|
)
|
|
|
10,344
|
|
|
|
9,454
|
|
|
|
15
|
|
|
|
(162
|
)
|
|
|
9,307
|
|
MBSs - government-backed
|
|
|
28,685
|
|
|
|
312
|
|
|
|
(305
|
)
|
|
|
28,692
|
|
|
|
29,537
|
|
|
|
283
|
|
|
|
(308
|
)
|
|
|
29,512
|
|
CMOs - government backed
|
|
|
16,116
|
|
|
|
14
|
|
|
|
(170
|
)
|
|
|
15,960
|
|
|
|
16,530
|
|
|
|
15
|
|
|
|
(200
|
)
|
|
|
16,345
|
|
Total
|
|
$
|
128,184
|
|
|
$
|
950
|
|
|
$
|
(1,922
|
)
|
|
$
|
127,212
|
|
|
$
|
129,687
|
|
|
$
|
895
|
|
|
$
|
(2,146
|
)
|
|
$
|
128,436
|
|
There were no sales of securities available-for-sale during the three months ended March 31, 2017 or 2016.
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 2. INVESTMENT SECURITIES - continued
The amortized cost and fair value of securities by contractual maturity are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
|
|
March 31, 2017
|
|
|
|
Amortized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Value
|
|
|
|
(In Thousands)
|
|
|
|
|
|
|
|
|
|
|
Due in one year or less
|
|
$
|
2,049
|
|
|
$
|
2,046
|
|
Due from one to five years
|
|
|
9,064
|
|
|
|
9,078
|
|
Due from five to ten years
|
|
|
14,256
|
|
|
|
14,104
|
|
Due after ten years
|
|
|
58,014
|
|
|
|
57,332
|
|
|
|
|
83,383
|
|
|
|
82,560
|
|
MBSs - government-backed
|
|
|
28,685
|
|
|
|
28,692
|
|
CMOs - government-backed
|
|
|
16,116
|
|
|
|
15,960
|
|
Total
|
|
$
|
128,184
|
|
|
$
|
127,212
|
|
Maturities of securities do not reflect repricing opportunities present in adjustable rate securities.
The Company’s investment securities that have been in a continuous unrealized loss position for less than twelve months and those that have been in a continuous unrealized loss position for twelve or more months were as follows:
|
|
March 31, 2017
|
|
|
|
Less Than 12 Months
|
|
|
12 Months or Longer
|
|
|
|
|
|
|
|
Gross
|
|
|
|
|
|
|
Gross
|
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
|
Value
|
|
|
Losses
|
|
|
Value
|
|
|
Losses
|
|
|
|
(In Thousands)
|
|
U.S. government and agency
|
|
$
|
4,238
|
|
|
$
|
(61
|
)
|
|
$
|
-
|
|
|
$
|
-
|
|
Municipal obligations
|
|
|
38,485
|
|
|
|
(1,286
|
)
|
|
|
550
|
|
|
|
(7
|
)
|
Corporate obligations
|
|
|
4,099
|
|
|
|
(6
|
)
|
|
|
4,451
|
|
|
|
(87
|
)
|
MBSs and CMOs - government-backed
|
|
|
18,770
|
|
|
|
(383
|
)
|
|
|
7,445
|
|
|
|
(92
|
)
|
Total
|
|
$
|
65,592
|
|
|
$
|
(1,736
|
)
|
|
$
|
12,446
|
|
|
$
|
(186
|
)
|
|
|
December 31, 2016
|
|
|
|
Less Than 12 Months
|
|
|
12 Months or Longer
|
|
|
|
|
|
|
|
Gross
|
|
|
|
|
|
|
Gross
|
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
|
Value
|
|
|
Losses
|
|
|
Value
|
|
|
Losses
|
|
|
|
(In Thousands)
|
|
U.S. government and agency
|
|
$
|
4,420
|
|
|
$
|
(72
|
)
|
|
$
|
-
|
|
|
$
|
-
|
|
Municipal obligations
|
|
|
39,786
|
|
|
|
(1,392
|
)
|
|
|
634
|
|
|
|
(12
|
)
|
Corporate obligations
|
|
|
3,375
|
|
|
|
(15
|
)
|
|
|
4,918
|
|
|
|
(147
|
)
|
MBSs and CMOs - government-backed
|
|
|
18,113
|
|
|
|
(405
|
)
|
|
|
7,855
|
|
|
|
(103
|
)
|
Total
|
|
$
|
65,694
|
|
|
$
|
(1,884
|
)
|
|
$
|
13,407
|
|
|
$
|
(262
|
)
|
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 2. INVESTMENT SECURITIES - continued
Management evaluates securities for other-than-temporary impairment at least quarterly, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. As of March 31, 2017 and December 31, 2016, there were, respectively, 93 and 97 securities in unrealized loss positions that were considered to be temporarily impaired and therefore an impairment charge has not been recorded.
As of March 31, 2017, 66 U.S. government and agency securities and municipal obligations had unrealized losses with aggregate depreciation of approximately 3.03% from the Company’s amortized cost basis of these securities. At December 31, 2016, 70 U.S. government and agency securities and municipal obligations had unrealized losses with aggregate depreciation of approximately 3.19% from the Company’s amortized cost basis of these securities. These unrealized losses are principally due to changes in interest rates and credit spreads. In analyzing an issuer's financial condition, management considers whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred and industry analysts' reports. As management has the ability to hold debt securities until maturity, or for the foreseeable future, no declines are deemed to be other than temporary.
As of March 31, 2017, 12 corporate obligations had unrealized losses of approximately 1.08% from the Company’s amortized cost basis of these securities. At December 31, 2016, 13 corporate obligations had an unrealized loss with aggregate depreciation of approximately 1.92% from the Company's amortized cost basis of these securities. These unrealized losses are principally due to changes in interest rates. No credit issues have been identified that cause management to believe the declines in market value are other than temporary. In analyzing the issuer's financial condition, management considers industry analysts' reports, financial performance and projected target prices of investment analysts within a one-year time frame. As management has the ability to hold debt securities until maturity, or for the foreseeable future, no declines are deemed to be other than temporary.
As of March 31, 2017, 15 mortgage-backed securities (“MBSs”) and collateralized mortgage obligations (“CMOs”) had unrealized losses with aggregate depreciation of approximately 1.78% from the Company’s amortized cost basis of these securities. At December 31, 2016, 14 MBSs and CMOs had unrealized losses with aggregate depreciation of approximately 1.92% from the Company’s amortized cost basis. We believe these unrealized losses are principally due to the credit market’s concerns regarding the stability of the mortgage market, changes in interest rates and credit spreads and uncertainty of future prepayment speeds. Management considers available evidence to assess whether it is more likely-than-not that all amounts due would not be collected. In such assessment, management considers the severity and duration of the impairment, the credit ratings of the security, the overall deal and payment structure, including the Company's position within the structure, underlying obligor, financial condition and near term prospects of the issuer, delinquencies, defaults, loss severities, recoveries, prepayments, cumulative loss projections, discounted cash flows and fair value estimates. There has been no disruption of the scheduled cash flows on any of the securities. Management’s analysis as of March 31, 2017 revealed no expected credit losses on the securities and therefore, declines are not deemed to be other than temporary.
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 3
.
LOANS RECEIVABLE
Loans receivable consisted of the following:
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
(In Thousands)
|
|
First mortgage loans:
|
|
|
|
|
|
|
|
|
Residential mortgage (1-4 family)
|
|
$
|
112,872
|
|
|
$
|
113,262
|
|
Commercial real estate
|
|
|
234,467
|
|
|
|
214,927
|
|
Real estate construction
|
|
|
24,118
|
|
|
|
20,540
|
|
|
|
|
|
|
|
|
|
|
Other loans:
|
|
|
|
|
|
|
|
|
Home equity
|
|
|
49,037
|
|
|
|
49,018
|
|
Consumer
|
|
|
14,786
|
|
|
|
14,800
|
|
Commercial
|
|
|
54,614
|
|
|
|
54,706
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
489,894
|
|
|
|
467,253
|
|
|
|
|
|
|
|
|
|
|
Deferred loan fees, net
|
|
|
(1,036
|
)
|
|
|
(1,092
|
)
|
Allowance for loan losses
|
|
|
(5,075
|
)
|
|
|
(4,770
|
)
|
Total loans, net
|
|
$
|
483,783
|
|
|
$
|
461,391
|
|
Within the commercial real estate loan category above, $11,450,000 and $11,586,000 was guaranteed by the United States Department of Agriculture Rural Development, at March 31, 2017 and December 31, 2016, respectively. In addition, within the commercial loan category above, $1,553,000 and $1,588,000 were in loans originated through a syndication program where the business resides outside of Montana, at March 31, 2017, and December 31, 2016, respectively.
The following table includes information regarding nonperforming assets.
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
(Dollars in Thousands)
|
|
|
|
|
|
|
|
|
|
|
Non-accrual loans
|
|
$
|
651
|
|
|
$
|
614
|
|
Accruing loans delinquent 90 days or more
|
|
|
998
|
|
|
|
495
|
|
Restructured loans, net
|
|
|
42
|
|
|
|
43
|
|
Total nonperforming loans
|
|
|
1,691
|
|
|
|
1,152
|
|
Real estate owned and other repossessed assets, net
|
|
|
668
|
|
|
|
825
|
|
Total nonperforming assets
|
|
$
|
2,359
|
|
|
$
|
1,977
|
|
|
|
|
|
|
|
|
|
|
Total nonperforming assets as a percentage of total assets
|
|
|
0.35
|
%
|
|
|
0.29
|
%
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses
|
|
$
|
5,075
|
|
|
$
|
4,770
|
|
|
|
|
|
|
|
|
|
|
Percent of allowance for loan losses to nonperforming loans
|
|
|
300.12
|
%
|
|
|
414.06
|
%
|
|
|
|
|
|
|
|
|
|
Percent of allowance for loan losses to nonperforming assets
|
|
|
215.13
|
%
|
|
|
241.27
|
%
|
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 3
.
LOANS RECEIVABLE - continued
Allowance for loan losses activity was as follows:
|
|
Residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage
|
|
|
Commercial
|
|
|
Real Estate
|
|
|
Home
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1-4 Family)
|
|
|
Real Estate
|
|
|
Construction
|
|
|
Equity
|
|
|
Consumer
|
|
|
Commercial
|
|
|
Total
|
|
|
|
(In Thousands)
|
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance, January 1, 2017
|
|
$
|
997
|
|
|
$
|
2,079
|
|
|
$
|
244
|
|
|
$
|
460
|
|
|
$
|
193
|
|
|
$
|
797
|
|
|
$
|
4,770
|
|
Charge-offs
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(9
|
)
|
|
|
-
|
|
|
|
(9
|
)
|
Recoveries
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5
|
|
|
|
8
|
|
|
|
-
|
|
|
|
13
|
|
Provision
|
|
|
2
|
|
|
|
199
|
|
|
|
8
|
|
|
|
6
|
|
|
|
18
|
|
|
|
68
|
|
|
|
301
|
|
Ending balance, March 31, 2017
|
|
$
|
999
|
|
|
$
|
2,278
|
|
|
$
|
252
|
|
|
$
|
471
|
|
|
$
|
210
|
|
|
$
|
865
|
|
|
$
|
5,075
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance, March 31, 2017 allocated to
loans individually evaluated for impairment
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
16
|
|
|
$
|
46
|
|
|
$
|
62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance, March 31, 2017 allocated to
loans collectively evaluated for impairment
|
|
$
|
999
|
|
|
$
|
2,278
|
|
|
$
|
252
|
|
|
$
|
471
|
|
|
$
|
194
|
|
|
$
|
819
|
|
|
$
|
5,013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance, March 31, 2017
|
|
$
|
112,872
|
|
|
$
|
234,467
|
|
|
$
|
24,118
|
|
|
$
|
49,037
|
|
|
$
|
14,786
|
|
|
$
|
54,614
|
|
|
$
|
489,894
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance, March 31, 2017 of loans
individually evaluated for impairment
|
|
$
|
221
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
336
|
|
|
$
|
136
|
|
|
$
|
146
|
|
|
$
|
839
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance, March 31, 2017 of loans
collectively evaluated for impairment
|
|
$
|
112,651
|
|
|
$
|
234,467
|
|
|
$
|
24,118
|
|
|
$
|
48,701
|
|
|
$
|
14,650
|
|
|
$
|
54,468
|
|
|
$
|
489,055
|
|
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 3
.
LOANS RECEIVABLE - continued
|
|
Residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage
|
|
|
Commercial
|
|
|
Real Estate
|
|
|
Home
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1-4 Family)
|
|
|
Real Estate
|
|
|
Construction
|
|
|
Equity
|
|
|
Consumer
|
|
|
Commercial
|
|
|
Total
|
|
|
|
(In Thousands)
|
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance, January 1, 2016
|
|
$
|
911
|
|
|
$
|
1,593
|
|
|
$
|
184
|
|
|
$
|
342
|
|
|
$
|
66
|
|
|
$
|
454
|
|
|
$
|
3,550
|
|
Charge-offs
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(7
|
)
|
|
|
(24
|
)
|
|
|
(32
|
)
|
|
|
(63
|
)
|
Recoveries
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3
|
|
|
|
-
|
|
|
|
3
|
|
Provision
|
|
|
70
|
|
|
|
142
|
|
|
|
60
|
|
|
|
30
|
|
|
|
120
|
|
|
|
28
|
|
|
|
450
|
|
Ending balance, March 31, 2016
|
|
$
|
981
|
|
|
$
|
1,735
|
|
|
$
|
244
|
|
|
$
|
365
|
|
|
$
|
165
|
|
|
$
|
450
|
|
|
$
|
3,940
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance, March 31, 2016 allocated to
loans individually evaluated for impairment
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
76
|
|
|
$
|
5
|
|
|
$
|
81
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance, March 31, 2016 allocated to
loans collectively evaluated for impairment
|
|
$
|
981
|
|
|
$
|
1,735
|
|
|
$
|
244
|
|
|
$
|
365
|
|
|
$
|
89
|
|
|
$
|
445
|
|
|
$
|
3,859
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance, March 31, 2016
|
|
$
|
113,364
|
|
|
$
|
194,479
|
|
|
$
|
15,673
|
|
|
$
|
45,404
|
|
|
$
|
14,229
|
|
|
$
|
40,614
|
|
|
$
|
423,763
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance, March 31, 2016 of loans
individually evaluated for impairment
|
|
$
|
605
|
|
|
$
|
658
|
|
|
$
|
-
|
|
|
$
|
265
|
|
|
$
|
92
|
|
|
$
|
5
|
|
|
$
|
1,625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance, March 31, 2016 of loans
collectively evaluated for impairment
|
|
$
|
112,759
|
|
|
$
|
193,821
|
|
|
$
|
15,673
|
|
|
$
|
45,139
|
|
|
$
|
14,137
|
|
|
$
|
40,609
|
|
|
$
|
422,138
|
|
The Company utilizes an 8 point internal loan rating system, largely based on regulatory classifications, as follows:
Loans
R
ated Pass
– these are loans in categories 1 – 5 that are considered to be protected by the current net worth and paying capacity of the obligor, or by the value of the asset or the underlying collateral.
Loans
R
ated Special Mention
– these loans in category 6 have potential weaknesses and are watched closely by management. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset at some future date.
Loans
R
ated Substandard
– these loans in category 7 are inadequately protected by the current net worth and paying capacity of the obligor of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.
Loans
R
ated Doubtful
– these loans in category 8 have all the weaknesses inherent in those classified Substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable.
Loans
R
ated Loss
– these loans are considered uncollectible and are not part of the 8 point rating system. They are of such small value that their continuance as assets without establishment of a specific reserve is not warranted. This classification does not mean that an asset has absolutely no recovery or salvage value, but, rather, that it is not practical or desirable to defer writing off a basically worthless asset even though practical recovery may be affected in the future.
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 3
.
LOANS RECEIVABLE - continued
On an annual basis, or more often if needed, the Company formally reviews the ratings of all commercial real estate, construction, and commercial business loans that have a principal balance of $750,000 or more. Quarterly, the Company reviews the rating of any consumer loan, broadly defined, that is delinquent 90 days or more. Likewise, quarterly, the Company reviews the rating of any commercial loan, broadly defined, that is delinquent 60 days or more. Annually, the Company engages an independent third-party to review a significant portion of loans within these segments. Management uses the results of these reviews as part of its annual review process.
Internal classification of the loan portfolio was as follows:
|
|
March 31, 2017
|
|
|
|
Residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage
|
|
|
Commercial
|
|
|
Real Estate
|
|
|
Home
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1-4 Family)
|
|
|
Real Estate
|
|
|
Construction
|
|
|
Equity
|
|
|
Consumer
|
|
|
Commercial
|
|
|
Total
|
|
|
|
(In Thousands)
|
|
Grade:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass
|
|
$
|
112,020
|
|
|
$
|
234,012
|
|
|
$
|
23,662
|
|
|
$
|
48,666
|
|
|
$
|
14,644
|
|
|
$
|
53,894
|
|
|
$
|
486,898
|
|
Special mention
|
|
|
-
|
|
|
|
-
|
|
|
|
456
|
|
|
|
-
|
|
|
|
32
|
|
|
|
191
|
|
|
|
679
|
|
Substandard
|
|
|
852
|
|
|
|
455
|
|
|
|
-
|
|
|
|
371
|
|
|
|
94
|
|
|
|
483
|
|
|
|
2,255
|
|
Doubtful
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
46
|
|
|
|
46
|
|
Loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
16
|
|
|
|
-
|
|
|
|
16
|
|
Total
|
|
$
|
112,872
|
|
|
$
|
234,467
|
|
|
$
|
24,118
|
|
|
$
|
49,037
|
|
|
$
|
14,786
|
|
|
$
|
54,614
|
|
|
$
|
489,894
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit risk profile based on payment activity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performing
|
|
$
|
112,369
|
|
|
$
|
234,012
|
|
|
$
|
24,118
|
|
|
$
|
48,666
|
|
|
$
|
14,650
|
|
|
$
|
54,388
|
|
|
$
|
488,203
|
|
Restructured loans
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
42
|
|
|
|
-
|
|
|
|
-
|
|
|
|
42
|
|
Nonperforming
|
|
|
503
|
|
|
|
455
|
|
|
|
-
|
|
|
|
329
|
|
|
|
136
|
|
|
|
226
|
|
|
|
1,649
|
|
Total
|
|
$
|
112,872
|
|
|
$
|
234,467
|
|
|
$
|
24,118
|
|
|
$
|
49,037
|
|
|
$
|
14,786
|
|
|
$
|
54,614
|
|
|
$
|
489,894
|
|
|
|
December 31, 2016
|
|
|
|
Residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage
|
|
|
Commercial
|
|
|
|
|
|
|
Home
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1-4 Family)
|
|
|
Real Estate
|
|
|
Construction
|
|
|
Equity
|
|
|
Consumer
|
|
|
Commercial
|
|
|
Total
|
|
|
|
(In Thousands)
|
|
Grade:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass
|
|
$
|
112,524
|
|
|
$
|
214,476
|
|
|
$
|
20,084
|
|
|
$
|
48,643
|
|
|
$
|
14,697
|
|
|
$
|
54,470
|
|
|
$
|
464,894
|
|
Special mention
|
|
|
-
|
|
|
|
-
|
|
|
|
456
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
456
|
|
Substandard
|
|
|
738
|
|
|
|
451
|
|
|
|
-
|
|
|
|
375
|
|
|
|
95
|
|
|
|
236
|
|
|
|
1,895
|
|
Doubtful
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
8
|
|
|
|
-
|
|
|
|
8
|
|
Total
|
|
$
|
113,262
|
|
|
$
|
214,927
|
|
|
$
|
20,540
|
|
|
$
|
49,018
|
|
|
$
|
14,800
|
|
|
$
|
54,706
|
|
|
$
|
467,253
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit risk profile based on payment activity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performing
|
|
$
|
112,585
|
|
|
$
|
214,923
|
|
|
$
|
20,540
|
|
|
$
|
48,643
|
|
|
$
|
14,704
|
|
|
$
|
54,706
|
|
|
$
|
466,101
|
|
Restructured loans
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
43
|
|
|
|
-
|
|
|
|
-
|
|
|
|
43
|
|
Nonperforming
|
|
|
677
|
|
|
|
4
|
|
|
|
-
|
|
|
|
332
|
|
|
|
96
|
|
|
|
-
|
|
|
|
1,109
|
|
Total
|
|
$
|
113,262
|
|
|
$
|
214,927
|
|
|
$
|
20,540
|
|
|
$
|
49,018
|
|
|
$
|
14,800
|
|
|
$
|
54,706
|
|
|
$
|
467,253
|
|
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 3
.
LOANS RECEIVABLE - continued
The following tables include information regarding delinquencies within the loan portfolio.
|
|
March 31, 2017
|
|
|
|
Loans Past Due and Still Accruing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90 Days
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30-89 Days
|
|
|
and
|
|
|
|
|
|
|
Non-Accrual
|
|
|
Current
|
|
|
Total
|
|
|
|
Past Due
|
|
|
Greater
|
|
|
Total
|
|
|
Loans
|
|
|
Loans
|
|
|
Loans
|
|
|
|
(In Thousands)
|
|
Residential mortgage (1-4 family)
|
|
$
|
1,987
|
|
|
$
|
282
|
|
|
$
|
2,269
|
|
|
$
|
221
|
|
|
$
|
110,382
|
|
|
$
|
112,872
|
|
Commercial real estate
|
|
|
1,133
|
|
|
|
455
|
|
|
|
1,588
|
|
|
|
-
|
|
|
|
232,879
|
|
|
|
234,467
|
|
Real estate construction
|
|
|
474
|
|
|
|
-
|
|
|
|
474
|
|
|
|
-
|
|
|
|
23,644
|
|
|
|
24,118
|
|
Home equity
|
|
|
248
|
|
|
|
35
|
|
|
|
283
|
|
|
|
294
|
|
|
|
48,460
|
|
|
|
49,037
|
|
Consumer
|
|
|
219
|
|
|
|
-
|
|
|
|
219
|
|
|
|
136
|
|
|
|
14,431
|
|
|
|
14,786
|
|
Commercial
|
|
|
610
|
|
|
|
226
|
|
|
|
836
|
|
|
|
-
|
|
|
|
53,778
|
|
|
|
54,614
|
|
Total
|
|
$
|
4,671
|
|
|
$
|
998
|
|
|
$
|
5,669
|
|
|
$
|
651
|
|
|
$
|
483,574
|
|
|
$
|
489,894
|
|
|
|
December 31, 2016
|
|
|
|
Loans Past Due and Still Accruing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90 Days
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30-89 Days
|
|
|
and
|
|
|
|
|
|
|
Non-Accrual
|
|
|
Current
|
|
|
Total
|
|
|
|
Past Due
|
|
|
Greater
|
|
|
Total
|
|
|
Loans
|
|
|
Loans
|
|
|
Loans
|
|
|
|
(In Thousands)
|
|
Residential mortgage (1-4 family)
|
|
$
|
975
|
|
|
$
|
456
|
|
|
$
|
1,431
|
|
|
$
|
221
|
|
|
$
|
111,610
|
|
|
$
|
113,262
|
|
Commercial real estate
|
|
|
513
|
|
|
|
4
|
|
|
|
517
|
|
|
|
-
|
|
|
|
214,410
|
|
|
|
214,927
|
|
Real estate construction
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
20,540
|
|
|
|
20,540
|
|
Home equity
|
|
|
365
|
|
|
|
35
|
|
|
|
400
|
|
|
|
297
|
|
|
|
48,321
|
|
|
|
49,018
|
|
Consumer
|
|
|
169
|
|
|
|
-
|
|
|
|
169
|
|
|
|
96
|
|
|
|
14,535
|
|
|
|
14,800
|
|
Commercial
|
|
|
249
|
|
|
|
-
|
|
|
|
249
|
|
|
|
-
|
|
|
|
54,457
|
|
|
|
54,706
|
|
Total
|
|
$
|
2,271
|
|
|
$
|
495
|
|
|
$
|
2,766
|
|
|
$
|
614
|
|
|
$
|
463,873
|
|
|
$
|
467,253
|
|
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 3
.
LOANS RECEIVABLE
-
continued
The following tables include information regarding impaired loans.
|
|
March 31, 2017
|
|
|
|
|
|
|
|
Unpaid
|
|
|
|
|
|
|
|
Recorded
|
|
|
Principal
|
|
|
Related
|
|
|
|
Investment
|
|
|
Balance
|
|
|
Allowance
|
|
|
|
(In Thousands)
|
|
With no related allowance:
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage (1-4 family)
|
|
$
|
221
|
|
|
$
|
221
|
|
|
$
|
-
|
|
Commercial real estate
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Construction
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Home equity
|
|
|
336
|
|
|
|
388
|
|
|
|
-
|
|
Consumer
|
|
|
120
|
|
|
|
169
|
|
|
|
-
|
|
Commercial
|
|
|
100
|
|
|
|
100
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With a related allowance:
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage (1-4 family)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Commercial real estate
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Construction
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Home equity
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Consumer
|
|
|
16
|
|
|
|
16
|
|
|
|
16
|
|
Commercial
|
|
|
46
|
|
|
|
46
|
|
|
|
46
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage (1-4 family)
|
|
|
221
|
|
|
|
221
|
|
|
|
-
|
|
Commercial real estate
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Construction
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Home equity
|
|
|
336
|
|
|
|
388
|
|
|
|
-
|
|
Consumer
|
|
|
136
|
|
|
|
185
|
|
|
|
16
|
|
Commercial
|
|
|
146
|
|
|
|
146
|
|
|
|
46
|
|
Total
|
|
$
|
839
|
|
|
$
|
940
|
|
|
$
|
62
|
|
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 3
.
LOANS RECEIVABLE - continued
|
|
December 31, 2016
|
|
|
|
|
|
|
|
Unpaid
|
|
|
|
|
|
|
|
Recorded
|
|
|
Principal
|
|
|
Related
|
|
|
|
Investment
|
|
|
Balance
|
|
|
Allowance
|
|
|
|
(In Thousands)
|
|
With no related allowance:
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage (1-4 family)
|
|
$
|
221
|
|
|
$
|
221
|
|
|
$
|
-
|
|
Commercial real estate
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Construction
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Home equity
|
|
|
340
|
|
|
|
390
|
|
|
|
-
|
|
Consumer
|
|
|
88
|
|
|
|
135
|
|
|
|
-
|
|
Commercial
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With a related allowance:
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage (1-4 family)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Commercial real estate
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Construction
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Home equity
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Consumer
|
|
|
8
|
|
|
|
8
|
|
|
|
8
|
|
Commercial
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage (1-4 family)
|
|
|
221
|
|
|
|
221
|
|
|
|
-
|
|
Commercial real estate
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Construction
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Home equity
|
|
|
340
|
|
|
|
390
|
|
|
|
-
|
|
Consumer
|
|
|
96
|
|
|
|
143
|
|
|
|
8
|
|
Commercial
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
657
|
|
|
$
|
754
|
|
|
$
|
8
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
Average Recorded Investment
|
|
|
|
(In Thousands)
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage (1-4 family)
|
|
$
|
221
|
|
|
$
|
668
|
|
Commercial real estate
|
|
|
-
|
|
|
|
662
|
|
Construction
|
|
|
-
|
|
|
|
-
|
|
Home equity
|
|
|
338
|
|
|
|
236
|
|
Consumer
|
|
|
116
|
|
|
|
119
|
|
Commercial
|
|
|
73
|
|
|
|
166
|
|
Total
|
|
$
|
748
|
|
|
$
|
1,851
|
|
Interest income recognized on impaired loans for the three months ended March 31, 2017 and 2016 are considered insignificant.
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 4
.
TROUBLED DEBT RESTRUCTURINGS
The Company adopted the amendments in Accounting Standards Update No. 2011-02 (ASC Topic 310) during the quarter ended September 30, 2011. As required, the Company reassessed all restructurings that occurred on or after the beginning of the previous fiscal year (July 1, 2011) for identification as troubled debt restructurings. The Company identified as troubled debt restructurings certain receivables for which the allowance for credit losses had previously been measured under a general allowance for credit losses methodology (ASC Subtopic 450-20). Upon identifying the reassessed receivables as troubled debt restructurings, the Company also identified them as impaired under the guidance in ASC Subtopic 310-10-35. The amendments in the guidance require prospective application of the impairment measurement guidance in Section 310-10-35 for those receivables newly identified as impaired.
As of March 31, 2017, the recorded investment in receivables for which the allowance for credit losses was previously measured under a general allowance for credit losses methodology and are now impaired under ASC Subtopic 310-10-35 was $42,000 (ASC Subtopic 310-40-65-1(b)), and there was no allowance for credit losses associated with these receivables, on the basis of a current evaluation of loss (ASC Subtopic 310-40-65-1(b)). There was $34,000 charged-off at the time of restructure related to these receivables.
The Company offers a variety of modifications to borrowers. The modification categories offered can generally be described in the following categories:
Rate Modification
– A modification in which the interest rate is changed.
Term Modification
– A modification in which the maturity date, timing of payments, or frequency of payments is changed.
Interest Only Modification
– A modification in which the loan is converted to interest only payments for a period of time.
Payment Modification
– A modification in which the dollar amount of the payment is changed, other than an interest only modification described above.
Combination Modification
– Any other type of modification, including the use of multiple categories above.
The following tables present troubled debt restructurings.
|
|
March 31, 2017
|
|
|
|
Accrual
|
|
|
Non-Accrual
|
|
|
Total
|
|
|
|
Status
|
|
|
Status
|
|
|
Modification
|
|
|
|
(In Thousands)
|
|
Residential mortgage (1-4 family)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Commercial real estate
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Real estate construction
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Home equity
|
|
|
42
|
|
|
|
-
|
|
|
|
42
|
|
Consumer
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Commercial
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
42
|
|
|
$
|
-
|
|
|
$
|
42
|
|
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 4.
TROUBLE
D
DEBT RESTRUCTURINGS
- continued
The following tables present troubled debt restructurings.
|
|
December 31, 2016
|
|
|
|
Accrual
|
|
|
Non-Accrual
|
|
|
Total
|
|
|
|
Status
|
|
|
Status
|
|
|
Modification
|
|
|
|
(In Thousands)
|
|
Residential mortgage (1-4 family)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Commercial real estate
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Real estate construction
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Home equity
|
|
|
43
|
|
|
|
-
|
|
|
|
43
|
|
Consumer
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Commercial
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
43
|
|
|
$
|
-
|
|
|
$
|
43
|
|
The Bank’s policy is that loans placed on non-accrual will typically remain on non-accrual status until all principal and interest payments are brought current and the prospect for future payment in accordance with the loan agreement appears relatively certain. The Bank’s policy generally refers to six months of payment performance as sufficient to warrant a return to accrual status.
During the three months ended March 31, 2017 and 2016, there were no new restructured loans.
There were no loans modified as a troubled debt restructured loan within the previous three months for which there was a payment default during the three months ended March 31, 2017.
A default for purposes of this disclosure is a troubled debt restructured loan in which the borrower is 90 days past due or results in the foreclosure and repossession of the applicable collateral. As of March 31, 2017 and December 31, 2016, the Company had no commitments to lend additional funds to loan customers whose terms had been modified in trouble debt restructures.
NOTE 5
.
DEPOSITS
Deposits are summarized as follows:
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
(In Thousands)
|
|
|
|
|
|
|
|
|
|
|
Noninterest checking
|
|
$
|
95,737
|
|
|
$
|
82,877
|
|
Interest bearing checking
|
|
|
93,519
|
|
|
|
93,163
|
|
Savings
|
|
|
85,054
|
|
|
|
82,266
|
|
Money market
|
|
|
93,634
|
|
|
|
89,211
|
|
Time certificates of deposit
|
|
|
158,341
|
|
|
|
165,278
|
|
Total
|
|
$
|
526,285
|
|
|
$
|
512,795
|
|
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 6
. LONG-TERM DEBT
Long-term debt consisted of the following:
|
|
March 31, 2017
|
|
|
December 31, 2016
|
|
|
|
|
|
|
|
Unamortized
|
|
|
|
|
|
|
Unamortized
|
|
|
|
|
|
|
|
Debt
|
|
|
|
|
|
|
Debt
|
|
|
|
Principal
|
|
|
Issuance
|
|
|
Principal
|
|
|
Issuance
|
|
|
|
Amount
|
|
|
Costs
|
|
|
Amount
|
|
|
Costs
|
|
|
|
(In Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior notes fixed at 5.75%, due 2022
|
|
$
|
10,000
|
|
|
$
|
(193
|
)
|
|
$
|
-
|
|
|
$
|
-
|
|
Subordinated debentures fixed at 6.75%, due 2025
|
|
|
10,000
|
|
|
|
(180
|
)
|
|
|
10,000
|
|
|
|
(185
|
)
|
Subordinated debentures variable at 3-Month Libor plus 1.42%, due 2035
|
|
|
5,155
|
|
|
|
-
|
|
|
|
5,155
|
|
|
|
-
|
|
Total long-term debt
|
|
$
|
25,155
|
|
|
$
|
(373
|
)
|
|
$
|
15,155
|
|
|
$
|
(185
|
)
|
In February 2017, the Company completed the issuance, through a private placement, of $10,000,000 aggregate principal amount of 5.75% fixed senior unsecured notes due in 2022. The interest will be paid semi-annually through maturity date. The notes are not subject to redemption at the option of the Company.
In June 2015, the Company completed the issuance of $10,000,000 in aggregate principal amount of subordinated notes due in 2025 in a private placement transaction to an institutional accredited investor. The notes will bear interest at an annual fixed rate of 6.75% and interest will be paid quarterly through maturity date or earlier redemption.
In September 2005, the Company completed the private placement of $5,155,000 in subordinated debentures to Eagle Bancorp Statutory Trust I (“the Trust”). The Trust funded the purchase of the subordinated debentures through the sale of trust preferred securities to First Tennessee Bank, N.A. with a liquidation value of $5,155,000. Using interest payments made by the Company on the debentures, the Trust began paying quarterly dividends to preferred security holders in December 2005. The annual percentage rate of the interest payable on the subordinated debentures and distributions payable on the preferred securities was fixed at 6.02% until December 2010 then became variable at 3-Month LIBOR plus 1.42%, making the rate 2.916% and 2.418% as of March 31, 2017 and December 31, 2016, respectively. Dividends on the preferred securities are cumulative and the Trust may defer the payments for up to five years. The preferred securities mature in December 2035 unless the Company elects and obtains regulatory approval to accelerate the maturity date.
For the three months ended March 31, 2017 and 2016, interest expense on long-term debt was $272,000 and $194,000, respectively.
NOTE
7.
EARNINGS PER SHARE
Basic earnings per share for the three months ended March 31, 2017 was computed using 3,811,409 weighted average shares outstanding. Basic earnings per share for the three months ended March 31, 2016 was computed using 3,779,464 weighted average shares outstanding. Diluted earnings per share was computed using the treasury stock method by adjusting the number of shares outstanding by the shares purchased. The weighted average shares outstanding for the diluted earnings per share calculations was 3,875,677 for the three months ended March 31, 2017 and 3,873,171 for the three months ended March 31, 2016.
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE
8.
DIVIDENDS AND STOCK REPURCHASE PROGRAM
For the year ended December 31, 2016, Eagle paid dividends of $0.0775 per share for the quarters ended March 31 and June 30, 2016. Eagle paid dividends of $0.08 per share for the quarters ended September 30 and December 31, 2016. A dividend of $0.08 per share was declared on January 26, 2017, and paid March 3, 2017 to shareholders of record on February 10, 2017. A dividend of $0.08 per share was declared on April 20, 2017, payable on June 2, 2017 to shareholders of record on May 12, 2017.
On July 21, 2016, the Board authorized the repurchase of up to 100,000 shares of its common stock. Under the plan, shares may be purchased by the Company on the open market or in privately negotiated transactions. The extent to which the company repurchases its shares and the timing of such repurchase will depend upon market conditions and other corporate considerations. No shares were purchased under this plan during the year ended December 31, 2016 or the three months ended March 31, 2017. The plan expires on July 21, 2017.
On July 23, 2015, the Board of Directors authorized the repurchase of up to 100,000 shares of its common stock. Under the plan, shares may be purchased by the Company on the open market or in privately negotiated transactions. During the three months ended December 31, 2015, 15,000 shares were purchased at an average price of $11.75 per share. During the three months ended September 30, 2015, 46,065 shares were purchased at an average price of $11.47 per share. The plan expired on July 23, 2016.
NOTE 9.
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The following table includes information regarding the activity in accumulated other comprehensive income (loss).
|
|
Unrealized
|
|
|
Unrealized
|
|
|
|
|
|
|
|
Gains (Losses)
|
|
|
(Losses) Gains
|
|
|
|
|
|
|
|
on Derivatives
|
|
|
on Investment
|
|
|
|
|
|
|
|
Designated as
|
|
|
Securities
|
|
|
|
|
|
|
|
Cash Flow Hedges
|
|
|
Available-for-Sale
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 1, 2017
|
|
$
|
330
|
|
|
$
|
(741
|
)
|
|
$
|
(411
|
)
|
Other comprehensive income,
before reclassifications and income taxes
|
|
|
341
|
|
|
|
279
|
|
|
|
620
|
|
Amounts reclassified from accumulated other
comprehensive income (loss), before income taxes
|
|
|
(558
|
)
|
|
|
-
|
|
|
|
(558
|
)
|
Income tax benefit (expense)
|
|
|
88
|
|
|
|
(113
|
)
|
|
|
(25
|
)
|
Total other comprehensive (loss) income
|
|
|
(129
|
)
|
|
|
166
|
|
|
|
37
|
|
Balance, March 31, 2017
|
|
$
|
201
|
|
|
$
|
(575
|
)
|
|
$
|
(374
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 1, 2016
|
|
$
|
376
|
|
|
$
|
(124
|
)
|
|
$
|
252
|
|
Other comprehensive income,
before reclassifications and income taxes
|
|
|
636
|
|
|
|
1,127
|
|
|
|
1,763
|
|
Amounts reclassified from accumulated other
comprehensive income (loss), before income taxes
|
|
|
(635
|
)
|
|
|
-
|
|
|
|
(635
|
)
|
Income tax expense
|
|
|
-
|
|
|
|
(460
|
)
|
|
|
(460
|
)
|
Total other comprehensive income
|
|
|
1
|
|
|
|
667
|
|
|
|
668
|
|
Balance, March 31, 2016
|
|
$
|
377
|
|
|
$
|
543
|
|
|
$
|
920
|
|
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 10.
D
ERIVATIVES AND HEDGING ACTIVITIES
Mortgage Loan Commitments
Mortgage loan commitments are referred to as derivative loan commitments if the loan that will result from exercise of the commitment will be held-for-sale upon funding. The Company enters into commitments to fund residential mortgage loans at specified times in the future, with the intention that these loans will subsequently be sold in the secondary market. A mortgage loan commitment binds the Company to lend funds to a potential borrower at a specified interest rate and within a specified period of time, generally up to 60 days after inception of the rate lock.
Interest Rate Lock Commitments
Outstanding derivative loan commitments expose the Company to the risk that the price of the loans arising from exercise of the loan commitment might decline from inception of the rate lock to funding of the loan due to increases in mortgage interest rates. If interest rates increase, the value of these loan commitments decreases. Conversely, if interest rates decrease, the value of these loan commitments increases. The notional amount of interest rate lock commitments was $33,961,000 and $19,738,000 at March 31, 2017 and December 31, 2016, respectively. The fair value of such commitments was insignificant.
The Company has no other off-balance-sheet arrangements or transactions with unconsolidated, special purpose entities that would expose the Company to liability that is not reflected on the face of the financial statements.
NOTE
11.
FAIR VALUE DISCLOSURES
FASB ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. The price in the principal (or most advantageous) market used to measure the fair value of the asset or liability shall
not be adjusted for transaction costs. An orderly transaction is a transaction that assumes exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets and liabilities; it is not a forced transaction. Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact and, (iv) willing to transact.
FASB ASC 820 requires the use of valuation techniques that are consistent with the market approach, the income approach and/or the cost approach. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets and liabilities. The income approach uses valuation techniques to convert future amounts, such as cash flows or earnings, to a single present amount on a discounted basis. The cost approach is based on the amount that currently would be required to replace the service capacity of an asset (replacement costs). Valuation techniques should be consistently applied.
Inputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability. Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources, or unobservable, meaning those that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. In that regard, FASB ASC 820 establishes a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.
The fair value hierarchy is as follows:
Level 1 Inputs
–
Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date, or convert to cash in the short term.
Level 2 Inputs
–
Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (for example, interest rates, volatilities, prepayment speeds, loss severities, credit risks and default rates) or inputs that are derived principally from or corroborated by observable market data by correlation or other means.
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 11.
FAIR VALUE DISCLOSURES
–
continued
Level 3 Inputs
–
Significant unobservable inputs that reflect an entity’s own assumptions that market participants would use in pricing the assets or liabilities.
A description of the valuation methodologies used for assets and liabilities measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below.
In general, fair value is based upon quoted market prices, where available. If such quoted market prices are not available, fair value is based upon internally developed models that primarily use, as inputs, observable market-based parameters. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. While management believes the Company’s valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.
Available-for-Sale Securities
– Securities classified as available-for-sale are reported at fair value utilizing Level 1 and Level 2 inputs. For these securities, the Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U. S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayments speeds, credit information and the bond’s terms and conditions, among other things.
Impaired Loans
– Impaired loans are reported at the fair value of the underlying collateral if repayment is expected solely from the collateral. Collateral values are estimated using Level 3 inputs based on internally customized discounting criteria.
Loans Held-for-Sale
– These loans are reported at the lower of cost or fair value. Fair value is determined based on expected proceeds based on sales contracts and commitments and are considered Level 2 inputs.
Repossessed Assets
– Fair values are valued at the time the loan is foreclosed upon and the asset is transferred from loans. The value is based upon primary third party appraisals, less costs to sell. The appraisals are generally discounted based on management’s historical knowledge, changes in market conditions from the time of valuation, and/or management’s expertise and knowledge of the client and client’s business. Such discounts are typically significant and result in Level 3 classification of the inputs for determining fair value. Repossessed assets are reviewed and evaluated on at least a quarterly basis for additional impairment and adjusted accordingly, based on same or similar factors above.
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 11.
FAIR VALUE DISCLOSURES
–
continued
The following tables summarize financial assets and financial liabilities measured at fair value on a recurring basis, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value.
|
|
March 31, 2017
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total Fair
|
|
|
|
Inputs
|
|
|
Inputs
|
|
|
Inputs
|
|
|
Value
|
|
|
|
(In Thousands)
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government and agency
|
|
$
|
-
|
|
|
$
|
5,306
|
|
|
$
|
-
|
|
|
$
|
5,306
|
|
Municipal obligations
|
|
|
-
|
|
|
|
66,910
|
|
|
|
-
|
|
|
|
66,910
|
|
Corporate obligations
|
|
|
-
|
|
|
|
10,344
|
|
|
|
-
|
|
|
|
10,344
|
|
MBSs - government-backed
|
|
|
-
|
|
|
|
28,692
|
|
|
|
-
|
|
|
|
28,692
|
|
CMOs - government-backed
|
|
|
-
|
|
|
|
15,960
|
|
|
|
-
|
|
|
|
15,960
|
|
Loans held-for-sale
|
|
|
-
|
|
|
|
8,432
|
|
|
|
-
|
|
|
|
8,432
|
|
|
|
December 31, 2016
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total Fair
|
|
|
|
Inputs
|
|
|
Inputs
|
|
|
Inputs
|
|
|
Value
|
|
|
|
(In Thousands)
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government and agency
|
|
$
|
-
|
|
|
$
|
5,608
|
|
|
$
|
-
|
|
|
$
|
5,608
|
|
Municipal obligations
|
|
|
-
|
|
|
|
67,664
|
|
|
|
-
|
|
|
|
67,664
|
|
Corporate obligations
|
|
|
-
|
|
|
|
9,307
|
|
|
|
-
|
|
|
|
9,307
|
|
MBSs - government-backed
|
|
|
-
|
|
|
|
29,512
|
|
|
|
-
|
|
|
|
29,512
|
|
CMOs - government-backed
|
|
|
-
|
|
|
|
16,345
|
|
|
|
-
|
|
|
|
16,345
|
|
Loans held-for-sale
|
|
|
-
|
|
|
|
18,230
|
|
|
|
-
|
|
|
|
18,230
|
|
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 11.
FAIR VALUE DISCLOSURES - continued
Certain financial assets and financial liabilities are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment).
The following table summarizes financial assets and financial liabilities measured at fair value on a nonrecurring basis, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:
|
|
March 31, 2017
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total Fair
|
|
|
|
Inputs
|
|
|
Inputs
|
|
|
Inputs
|
|
|
Value
|
|
|
|
(In Thousands)
|
|
Impaired loans
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
777
|
|
|
$
|
777
|
|
Repossessed assets
|
|
|
-
|
|
|
|
-
|
|
|
|
668
|
|
|
|
668
|
|
|
|
December 31, 2016
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total Fair
|
|
|
|
Inputs
|
|
|
Inputs
|
|
|
Inputs
|
|
|
Value
|
|
|
|
(In Thousands)
|
|
Impaired loans
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
649
|
|
|
$
|
649
|
|
Repossessed assets
|
|
|
-
|
|
|
|
-
|
|
|
|
825
|
|
|
|
825
|
|
As of March 31, 2017, certain impaired loans were remeasured and reported at fair value through a specific valuation allowance allocation of the allowance for possible loan losses based upon the fair value of the underlying collateral. Impaired loans with a carrying value of $839,000 were reduced by specific valuation allowance allocations totaling $62,000 to a total reported fair value of $777,000 based on collateral valuations utilizing Level 3 valuation inputs.
As of December 31, 2016, certain impaired loans were remeasured and reported at fair value through a specific valuation allowance allocation of the allowance for possible loan losses based upon the fair value of the underlying collateral. Impaired loans with a carrying value of $657,000 were reduced by specific valuation allowance allocations totaling $8,000 to a total reported fair value of $649,000 based on collateral valuations utilizing Level 3 valuation inputs.
The following table represents the Banks’s Level 3 financial assets and liabilities, the valuation techniques used to measure the fair value of those financial assets and liabilities, and the significant unobservable inputs and the ranges of values for those inputs.
|
|
Fair Value at
|
|
Principal
|
|
Significant
|
|
Range of
|
|
|
|
March 31,
|
|
|
December 31,
|
|
Valuation
|
|
Unobservable
|
|
Signficant Input
|
|
Instrument
|
|
2017
|
|
|
2016
|
|
Technique
|
|
Inputs
|
|
Values
|
|
(Dollars In Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans
|
|
$
|
777
|
|
|
$
|
649
|
|
Appraisal of collateral
(1)
|
|
Appraisal adjustments
|
|
|
10
|
-
|
30%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repossessed assets
|
|
$
|
668
|
|
|
$
|
825
|
|
Appraisal of collateral
(1)(3)
|
|
Liquidation expenses
(2)
|
|
|
10
|
-
|
30%
|
|
|
(1)
|
Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various Level 3 inputs which are not identifiable, less associated allowance.
|
|
(2)
|
Appraisals may be adjusted for qualitative factors such as economic conditions and estimated liquidation expenses. The range of liquidation expenses and other appraisal adjustments are presented as a percent of the appraisal.
|
|
(3)
|
Includes qualitative adjustments by management and estimated liquidation expenses.
|
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 11.
FAIR VALUE DISCLOSURES - continued
FASB ASC Topic 825 requires disclosure of the fair value of financial instruments, both assets and liabilities recognized and not recognized in the statement of financial position, for which it is practicable to estimate fair value. Below is a table that summarizes the fair market values of all financial instruments of the Company at March 31, 2017 and December 31, 2016, followed by methods and assumptions that were used by the Company in estimating the fair value of the classes of financial instruments.
The fair value amounts of financial instruments have been determined by the Company using available market information and appropriate valuation methodologies. However, considerable judgment is required to interpret data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.
|
|
March 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Estimated
|
|
|
Carrying
|
|
|
|
Inputs
|
|
|
Inputs
|
|
|
Inputs
|
|
|
Fair Value
|
|
|
Amount
|
|
|
|
(In Thousands)
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
6,166
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
6,166
|
|
|
$
|
6,166
|
|
Federal Home Loan Bank stock
|
|
|
3,344
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,344
|
|
|
|
3,344
|
|
Federal Reserve Bank stock
|
|
|
871
|
|
|
|
-
|
|
|
|
-
|
|
|
|
871
|
|
|
|
871
|
|
Loans receivable, net
|
|
|
-
|
|
|
|
-
|
|
|
|
485,566
|
|
|
|
485,566
|
|
|
|
483,006
|
|
Accrued interest and dividends
receivable
|
|
|
2,101
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,101
|
|
|
|
2,101
|
|
Mortgage servicing rights
|
|
|
-
|
|
|
|
-
|
|
|
|
6,534
|
|
|
|
6,534
|
|
|
|
5,892
|
|
Cash surrender value of life insurance
|
|
|
14,191
|
|
|
|
-
|
|
|
|
-
|
|
|
|
14,191
|
|
|
|
14,191
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-maturing interest bearing deposits
|
|
|
-
|
|
|
|
272,207
|
|
|
|
-
|
|
|
|
272,207
|
|
|
|
272,207
|
|
Noninterest bearing deposits
|
|
|
95,737
|
|
|
|
-
|
|
|
|
-
|
|
|
|
95,737
|
|
|
|
95,737
|
|
Time certificates of deposit
|
|
|
-
|
|
|
|
-
|
|
|
|
158,103
|
|
|
|
158,103
|
|
|
|
158,341
|
|
Accrued expenses and other liabilities
|
|
|
4,309
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,309
|
|
|
|
4,309
|
|
Federal Home Loan Bank advances
and other borrowings
|
|
|
-
|
|
|
|
-
|
|
|
|
68,307
|
|
|
|
68,307
|
|
|
|
68,266
|
|
Long-term debt
|
|
|
-
|
|
|
|
-
|
|
|
|
24,258
|
|
|
|
24,258
|
|
|
|
25,155
|
|
Off-balance-sheet instruments
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward delivery commitments
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Commitments to extend credit
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Rate lock commitments
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 11.
FAIR VALUE DISCLOSURES
–
continued
|
|
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Estimated
|
|
|
Carrying
|
|
|
|
Inputs
|
|
|
Inputs
|
|
|
Inputs
|
|
|
Fair Value
|
|
|
Amount
|
|
|
|
(In Thousands)
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
7,318
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
7,318
|
|
|
$
|
7,318
|
|
Federal Home Loan Bank stock
|
|
|
4,012
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,012
|
|
|
|
4,012
|
|
Federal Reserve Bank stock
|
|
|
871
|
|
|
|
-
|
|
|
|
-
|
|
|
|
871
|
|
|
|
871
|
|
Loans receivable, net
|
|
|
-
|
|
|
|
-
|
|
|
|
464,797
|
|
|
|
464,797
|
|
|
|
460,742
|
|
Accrued interest and dividends
receivable
|
|
|
2,123
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,123
|
|
|
|
2,123
|
|
Mortgage servicing rights
|
|
|
-
|
|
|
|
-
|
|
|
|
6,741
|
|
|
|
6,741
|
|
|
|
5,853
|
|
Cash surrender value of life insurance
|
|
|
14,095
|
|
|
|
-
|
|
|
|
-
|
|
|
|
14,095
|
|
|
|
14,095
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-maturing interest bearing deposits
|
|
|
-
|
|
|
|
264,640
|
|
|
|
-
|
|
|
|
264,640
|
|
|
|
264,640
|
|
Noninterest bearing deposits
|
|
|
82,877
|
|
|
|
-
|
|
|
|
-
|
|
|
|
82,877
|
|
|
|
82,877
|
|
Time certificates of deposit
|
|
|
-
|
|
|
|
-
|
|
|
|
165,129
|
|
|
|
165,129
|
|
|
|
165,278
|
|
Accrued expenses and other liabilities
|
|
|
4,291
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,291
|
|
|
|
4,291
|
|
Federal Home Loan Bank advances
and other borrowings
|
|
|
-
|
|
|
|
-
|
|
|
|
82,462
|
|
|
|
82,462
|
|
|
|
82,413
|
|
Long-term debt
|
|
|
-
|
|
|
|
-
|
|
|
|
14,291
|
|
|
|
14,291
|
|
|
|
15,155
|
|
Off-balance-sheet instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward delivery commitments
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Commitments to extend credit
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Rate lock commitments
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
The following methods and assumptions were used by the Company in estimating the fair value of the following classes of financial instruments. However, the Form 10-K for the year ended December 31, 2016 provides additional description of valuation methodologies used in estimating fair value of these financial instruments.
Cash,
I
nterest
B
earing
A
ccounts,
A
ccrued
I
nterest and
D
ividend
R
eceivable and
A
ccrued
E
xpenses and
O
ther
L
iabilities
– The carrying amounts approximate fair value due to the relatively short period of time between the origination of these instruments and their expected realization.
Stock in the F
ederal Home
L
oan
B
ank of Des Moines (“FHLB”)
and F
ederal
R
eserve
B
ank (“FRB”)
– The fair value of stock approximates redemption value.
Loans
R
eceivable
– Fair values are estimated by stratifying the loan portfolio into groups of loans with similar financial characteristics. Loans are segregated by type such as real estate, commercial, and consumer, with each category further segmented into fixed and adjustable rate interest terms. For mortgage loans, the Company uses the secondary market rates in effect for loans that have similar characteristics. The fair value of other fixed rate loans is calculated by discounting scheduled cash flows through the anticipated maturities adjusted for prepayment estimates. Adjustable interest rate loans are assumed to approximate fair value because they generally reprice within the short term.
Fair values are adjusted for credit risk based on assessment of risk identified with specific loans, and risk adjustments on the remaining portfolio based on credit loss experience.
Assumptions regarding credit risk are judgmentally determined using specific borrower information, internal credit quality analysis, and historical information on segmented loan categories for non-specific borrowers.
Mortgage
S
ervicing
R
ights
– the fair value of servicing rights was determined using discount rates ranging from approximately 13.00% to 15.00%, prepayment speeds ranging from approximately 104.00% to 277.00% PSA, depending on stratification of the specific right. The fair value was also adjusted for the effect of potential past dues and foreclosures.
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE
11.
FAIR VALUE DISCLOSURES - continued
Cash Surrender Value of Life I
nsurance
– The carrying amount for cash surrender value of life insurance approximates fair value as policies are recorded at redemption value.
Deposits and Time C
ertificates of
D
eposit
– The fair value of deposits with no stated maturity, such as checking, passbook, and money market, is equal to the amount payable on demand. The fair value of time certificates of deposit is based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered for deposits of similar maturities.
Advances from the FHLB
and
Subordinated Debentures
– The fair value of the Company’s advances and debentures are estimated using discounted cash flow analysis based on the interest rate that would be effective March 31, 2017 and December 31, 2016, respectively if the borrowings repriced according to their stated terms.
Off-
B
alance-
S
heet
I
nstruments
- Fair values for off-balance-sheet, credit-related financial instruments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing. The fair values of these financial instruments are considered insignificant. Additionally, those financial instruments have no carrying value.
NOTE 1
2.
RECENT ACCOUNTING PRONOUNCEMENTS
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). This guidance is a comprehensive new revenue recognition standard that will supersede substantially all existing revenue recognition guidance. The new standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under existing guidance. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. On July 9, 2015, the FASB agreed to delay the effective date of the standard by one year. Therefore, the new standard will be effective in the first quarter of 2018 and is not expected to have a significant impact to the Company’s consolidated financial statements.
In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities (Subtopic 825-10). The amendment has a number of provisions including the requirements that public business entities use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, a separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e. securities or loans receivables), and eliminating the requirement for public business entities to disclose the methods and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost. The amendment is effective for annual and interim reporting periods beginning after December 15, 2017 and is not expected to have a significant impact to the Company’s consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) intended to improve financial reporting regarding leasing transactions. The new standard affects all companies and organizations that lease assets. The standard will require organizations to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases if the lease terms are more than 12 months. The guidance also will require qualitative and quantitative disclosures providing additional information about the amounts recorded in the financial statements. The amendments in this update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is evaluating the potential impact of the amendment on the Company’s consolidated financial statements.
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1
2.
RECENT ACCOUNTING PRONOUNCEMENTS
- continued
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326) intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. The standard requires an organization to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. The standard also requires enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. These disclosures include qualitative and
quantitative requirements that provide additional information about the amounts recorded in the financial statements. Additionally, the standard amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. The amendments in this update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. All entities may adopt the amendments in this update earlier as of the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. An entity will apply the amendments in this update through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (that is, a modified-retrospective approach). The Company believes the amendments in this update will have an impact on the Company’s consolidated financial statements and is working to evaluate the significance of that impact.
In March 2017, the FASB issued ASU No. 2017-08, Receivables–Nonrefundable Fees and Other Costs (Subtopic 310-20) to shorten the amortization period for certain purchased callable debt securities held at a premium to the earliest call date. Currently, entities generally amortize the premium as a yield adjustment over the contractual life of the security. The guidance does not change the accounting for callable debt securities held at a discount. For public business entities, the guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted, including in an interim period. The Company is evaluating the potential impact of the amendment on the Company’s consolidated financial statements.
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES