Eagle Bancorp Montana Inc

Previous wording

This discussion and analysis provides information that management believes is necessary to understand Eagle's financial condition, changes in financial condition, results of operations, and cash flows for the three and six months ended June 30, 2024, as compared to 2023. The following should be read in conjunction with the Company's Consolidated Financial Statements, and accompanying Notes thereto, for the year ended December 31, 2023, included in Eagle's Annual Report on Form 10-K filed with the United States Securities and Exchange Commission (SEC) on March 6, 2024, and in conjunction with the Condensed Consolidated Financial Statements, and accompanying Notes thereto, included in Part I - Item 1. Financial Statements. The results of operations for the three and six months ended June 30, 2024, are not necessarily indicative of the future results that may be attained for the entire year or other interim periods.

Current wording

This discussion and analysis provides information that management believes is necessary to understand Eagle's financial condition, changes in financial condition, results of operations, and cash flows for the three and nine months ended September 30, 2024, as compared to 2023. The following should be read in conjunction with the Company's Consolidated Financial Statements, and accompanying Notes thereto, for the year ended December 31, 2023, included in Eagle's Annual Report on Form 10-K filed with the United States Securities and Exchange Commission (SEC) on March 6, 2024, and in conjunction with the Condensed Consolidated Financial Statements, and accompanying Notes thereto, included in Part I - Item 1. Financial Statements. The results of operations for the three and nine months ended September 30, 2024, are not necessarily indicative of the future results that may be attained for the entire year or other interim periods.

Previous wording

The Company’s primary business activity is the ownership of its wholly owned subsidiary, Opportunity Bank of Montana (the “Bank”). The Bank is a Montana chartered commercial bank that focuses on consumer, commercial, and agricultural lending. It engages in typical banking activities: acquiring deposits from local markets and originating loans and investing in securities. Our earnings depend primarily on our level of net interest income, which is the difference between interest earned on our interest-earning assets, consisting primarily of loans and investment securities, and the interest paid on interest-bearing liabilities, consisting primarily of deposits, borrowed funds, and trust-preferred securities. Net interest income is a function of our interest rate spread, which is the difference between the average yield earned on our interest-earning assets and the average rate paid on our interest-bearing liabilities, as well as a function of the average balance of interest-earning assets compared to interest-bearing liabilities. Also contributing to our earnings is noninterest income, which consists primarily of service charges and fees on loan and deposit products and services, net gains and losses on sale of assets, and mortgage loan service fees. Net interest income and noninterest income are offset by provisions for 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.

Current wording

The Company’s primary business activity is the ownership of the Bank. The Bank focuses on consumer, commercial, and agricultural lending. It engages in typical banking activities: acquiring deposits from local markets and originating loans and investing in securities. Our earnings depend primarily on our level of net interest income, which is the difference between interest earned on our interest-earning assets, consisting primarily of loans and investment securities, and the interest paid on interest-bearing liabilities, consisting primarily of deposits, borrowed funds, and trust-preferred securities. Net interest income is a function of our interest rate spread, which is the difference between the average yield earned on our interest-earning assets and the average rate paid on our interest-bearing liabilities, as well as a function of the average balance of interest-earning assets compared to interest-bearing liabilities. Also contributing to our earnings is noninterest income, which consists primarily of service charges and fees on loan and deposit products and services, net gains and losses on sale of assets, and mortgage loan service fees. Net interest income and noninterest income are offset by provisions for credit losses, general administrative and other expenses, including salaries and employee benefits and occupancy and equipment costs, as well as by state and federal income tax expense.

Previous wording

The level and movement of interest rates impacts the Bank’s earningsas well. The Federal Open Market Committee increased the federal funds target rate to 5.50% during the year ended December 31, 2023. The rate remained at 5.50% during the six months ended June 30, 2024.

Current wording

The level and movement of interest rates impacts the Bank’s earningsas well. The Federal Open Market Committee increased the federal funds target rate to 5.50% during the year ended December 31, 2023. The rate was decreased to 5.00% during the nine months ended September 30, 2024.

Previous wording

Total assets were$2.10 billion at June 30, 2024, an increase of $23.29 million, or 1.1% from $2.08 billion at December 31, 2023. Loans receivable, net increased by $32.61 million from December 31, 2023. However, securities available-for-sale decreased $11.41 million, or 3.6% from December 31, 2023. Total liabilities were $1.93 billion at June 30, 2024, an increase of $22.40 million, or 1.2% from $1.91 billion at December 31, 2023. The increase was largely due to an increase in FHLB advances and other borrowings, partially offset by a reduction in deposits. Total borrowings increased $39.38 million from December 31, 2023, and total deposits decreased $16.33 million from December 31, 2023. Total shareholders’ equity increased $889,000 from December 31, 2023.

Current wording

Total assets were$2.15 billion at September 30, 2024, an increase of $69.44 million, or 3.3% from $2.08 billion at December 31, 2023. Loans receivable, net increased by $49.47 million or 3.4% from December 31, 2023. Total cash and cash equivalents also increased $17.64 million or 71.9% from December 31, 2023. However, securities available-for-sale decreased $11.30 million, or 3.6% from December 31, 2023. Total liabilities were $1.97 billion at September 30, 2024, an increase of $60.99 million, or 3.2% from $1.91 billion at December 31, 2023. The increase was largely due to an increase in FHLB advances and other borrowings and an increase in total deposits. Total borrowings increased $43.54 million from December 31, 2023, and total deposits increased $15.31 million from December 31, 2023. Total shareholders’ equity increased $8.46 million, or 5.0% from December 31, 2023.

Previous wording

Securities available-for-sale were$306.87 million at June 30, 2024, a decrease of $11.41 million, or 3.6%, from$318.28 million at December 31, 2023. The decrease was due to maturity, principal payments and call activity of $9.34 million and a decrease in fair value of $1.27 million.

Current wording

Securities available-for-sale were$306.98 million at September 30, 2024, a decrease of $11.30 million, or 3.6%, from$318.28 million at December 31, 2023. The decrease was primarily due to maturity, principal payments and call activity of $17.13 million offset by an increase in fair value of $6.58 million.

Previous wording

Loans receivable, netincreased $32.61 million, or 2.2%, to $1.50 billion at June 30, 2024 from $1.47 billion at December 31, 2023. The increase was largely driven by an increase in total commercial loans of$22.77 million in addition to increases in total residential loans of $7.27 million and home equity loans of $6.28 million. The increase was slightly offset by decreases in total commercial real estate loans of $2.30 million and consumer loans of $1.01 million.

Current wording

Loans receivable, netincreased $49.47 million, or 3.4%, to $1.52 billion at September 30, 2024 from $1.47 billion at December 31, 2023. The increase was largely driven by an increase in total commercial loans of$29.83 million in addition to increases in total residential loans of $9.02 million, home equity loans of $6.72 million and commercial real estate loans of $5.29 million. The increase was slightly offset by a decrease of $680,000 in consumer loans.

Previous wording

Total loan originations were $251.56 million for thesix months ended June 30, 2024. Total residential 1-4 family originations were $122.99 million, which includes $96.31 million of loans held-for-sale originations. Total commercial originations were $61.06 million. Total commercial real estate originations were $48.53 million. Home equity loan originations totaled $12.66 million. Consumer loan originations totaled $6.32 million. Loans held-for-sale decreased by $914,000 to$10.52 million at June 30, 2024 from$11.43 million at December 31, 2023.

Current wording

Total loan originations were $398.50 million for thenine months ended September 30, 2024. Total residential 1-4 family originations were $191.03 million, which includes $150.24 million of loans held-for-sale originations. Total commercial real estate originations were $90.70 million. Total commercial originations were $83.94 million. Home equity loan originations totaled $22.33 million. Consumer loan originations totaled $10.50 million. Loans held-for-sale increased by $2.00 million to$13.43 million at September 30, 2024 from$11.43 million at December 31, 2023.

Previous wording

Nonaccrual loans as of June 30, 2024 and December 31, 2023 include $1.86 million and $1.68 million, respectively of acquired loans that deteriorated subsequent to the acquisition date.

Current wording

Nonaccrual loans as of September 30, 2024 and December 31, 2023 include $1.34 million and $1.68 million, respectively of acquired loans that deteriorated subsequent to the acquisition date.

Previous wording

The following table includes the composition of the commercial real estate loan category:

Current wording

The following tables include the composition of the commercial real estate loan category:

Previous wording

Deposits decreased by $16.33 million, or 1.0%, from December 31, 2023 to June 30, 2024. Money market deposits increased by $29.48 million. Noninterest checking decreased by $18.61 million, total certificates of deposits decreased $15.80 million, savings decreased $10.58 million and interest-bearing checking decreased $824,000. Brokered certificates decreased by $45.98 million and IRA certificates decreased by $506,000. These decreases were offset by an increase in other certificates of deposits of $30.69 million.

Current wording

Deposits increased by $15.31 million, or 0.9%, from December 31, 2023 to September 30, 2024. Money market deposits increased $20.82 million, time certificates of deposit increased $13.97 million, and noninterest checking increased $1.03 million. These increases were partially offset by decreases in savings of $18.47 million and interest-bearing checking of $2.04 million. Brokered certificates decreased by $50.07 million and IRA certificates decreased by $1.03 million. These decreases were offset by an increase in other certificates of deposit of $65.08 million.

Previous wording

The estimated amount of uninsured deposits was approxima tely $284.00 million or 18% of total deposits at June 30, 2024 compared to approximately $275.00 million or 17% of total deposits at December 31, 2023.

Current wording

The estimated amount of uninsured deposits was approxima tely $307.00 million or 18% of total deposits at September 30, 2024 compared to approximately $275.00 million or 17% of total deposits at December 31, 2023.

Previous wording

Total borrowings increased by $39.38 million, or 16.8%, to $274.12 million at June 30, 2024 from $234.74 million at December 31, 2023. The increase is due to an increase in FHLB advances and other borrowings and continues to be a source to help fund loan growth.

Current wording

Total borrowings increased by $43.54 million, or 18.5%, to $278.28 million at September 30, 2024 from $234.74 million at December 31, 2023. The increase is due to an increase in FHLB advances and other borrowings and continues to be a source to help fund loan growth.

Previous wording

Total shareholders’ equity increased by $889,000, or 0.5%, to $170.16 million at June 30, 2024 from $169.27 million at December 31, 2023. The increase was primarily attributed to net income of $3.64 million, offset by an increase in unrealized losses of securities available for sale of $932,000 and dividends paid of $2.24 million.

Current wording

Total shareholders’ equity increased by $8.46 million, or 5.0%, to $177.73 million at September 30, 2024 from $169.27 million at December 31, 2023. The increase was primarily attributed to net income of $6.35 million and a decrease in unrealized losses of securities available for sale of $4.85 million. These were offset by an increase in dividends paid of $3.39 million.

Previous wording

*Net Income.*Eagle’s net income for the three months ended June 30, 2024 was $1.74 million compared to $2.02 million for the three months ended June 30, 2023. The decrease of $277,000 was due to a decrease in noninterest income of $1.93 million and an increase in the provision for income taxes of $100,000. These were partially offset by a decrease in noninterest expense of $1.48 million and an increase in net interest income after provision for credit losses of $275,000. Basic and diluted earnings per common share were both $0.22 for the current period. Basic and diluted earnings per common share were both $0.26 for the prior year comparable period.

Current wording

*Net Income.*Eagle’s net income for the three months ended September 30, 2024 was $2.71 million compared to $2.64 million for the three months ended September 30, 2023. The increase of $74,000 was due to a decrease in noninterest expense of $605,000 and an increase in net interest income after provision for credit losses of $526,000. These were largely offset by a decrease in noninterest income of $1.06 million and an increase in provision for income taxes of $5,000. For the current period, basic earnings per common share was $0.35 and diluted earnings per common share was $0.34. Basic and diluted earnings per common share were both $0.34 for the prior year comparable period.

Previous wording

*Net Interest Income.*Net interest income increased to $15.63 million for the three months ended June 30, 2024, from $15.26 million for the same quarter in the prior year. The increase of $368,000, or 2.4%, was the result of an increase in interest and dividend income of $3.55 million largely offset by an increase in interest expense of $3.18 million.

Current wording

*Net Interest Income.*Net interest income increased to $15.80 million for the three months ended September 30, 2024, from $15.59 million for the same quarter in the prior year. The increase of $215,000, or 1.4%, was the result of an increase in interest and dividend income of $2.67 million largely offset by an increase in interest expense of $2.45 million.

Previous wording

*Interest and Dividend Income.*Interest and dividend income was $25.82 million for the three months ended June 30, 2024, compared to $22.27 million for the three months ended June 30, 2023. The increase of $3.55 million, or 15.9% was driven by interest and fees on loans, which increased to $22.78 million for the three months ended June 30, 2024, from $19.14 million for the three months ended June 30, 2023. The increase in interest and fees on loans was due to an increase in the average yield on loans, as well as an increase in the average balance of loans. The average interest rate earned on loans receivable increased by 59 basis points, from 5.45% for the three months ended June 30, 2023, to 6.04% for the current period. Interest accretion on purchased loans was $304,000 for the three months ended June 30, 2024, which resulted in a 7 basis point increase in net interest margin compared to $309,000 for the three months ended June 30, 2023, which also resulted in a 7 basis point increase in net interest margin. Average balances for loans receivable, including loans held-for-sale, for the three months ended June 30, 2024 were $1.51 billion compared to $1.41 billion for the prior year period. This represents an increase of $105.99 million, or 7.5% and was impacted by organic growth. Interest on investment securities available-for-sale decreased by $318,000 period over period, primarily due to the decrease in average balances for investments from $343.63 million for the three months ended June 30, 2023 to $306.21 million for the three months ended June 30, 2024.

Current wording

*Interest and Dividend Income.*Interest and dividend income was $26.76 million for the three months ended September 30, 2024, compared to $24.09 million for the three months ended September 30, 2023. The increase of $2.67 million, or 11.1% was driven by interest and fees on loans, which increased to $23.80 million for the three months ended September 30, 2024, from $21.07 million for the three months ended September 30, 2023. The increase in interest and fees on loans was due to an increase in the average yield on loans, as well as an increase in the average balance of loans. The average interest rate earned on loans receivable increased by 44 basis points, from 5.66% for the three months ended September 30, 2023, to 6.10% for the current period. Interest accretion on purchased loans was $167,000 for the three months ended September 30, 2024, which resulted in a 3 basis point increase in net interest margin compared to $175,000 for the three months ended September 30, 2023, which resulted in a 4 basis point increase in net interest margin. Average balances for loans receivable, including loans held-for-sale, for the three months ended September 30, 2024 were $1.55 billion compared to $1.48 billion for the prior year period. This represents an increase of $70.67 million, or 4.8% and was due to organic growth. Interest on investment securities available-for-sale decreased by $196,000 period over period, primarily due to the decrease in average balances for investments from $319.31 million for the three months ended September 30, 2023 to $305.73 million for the three months ended September 30, 2024.

Previous wording

*Interest Expense.*Total interest expense was $10.19 million for the three months ended June 30, 2024, compared to $7.01 million for the three months ended June 30, 2023. The increase of $3.18 million was due to an increase of $2.72 million in interest expense on deposits, as well as a net increase of $453,000 in interest expense on total borrowings. The overall average rate on total deposits was up from 1.05% for the three months ended June 30, 2023, compared to 1.70% for the three months ended June 30, 2024. In addition, the average balance for total deposits was $1.63 billion for the three months ended June 30, 2024, compared to $1.58 billion for the three months ended June 30, 2023. The increase in interest expense on total borrowings was driven by the average rate paid on FHLB advances and other borrowings, increasing from 5.30% for the three months ended June 30, 2023, to 5.47% for the three months ended June 30, 2024. In addition, the average balance of FHLB advances and other borrowings increased from $164.99 million for the three months ended June 30, 2023, to $192.35 million for the three months ended June 30, 2024. Short-term borrowings have increased to fund loan growth.

Current wording

*Interest Expense.*Total interest expense was $10.96 million for the three months ended September 30, 2024, compared to $8.51 million for the three months ended September 30, 2023. The increase of $2.45 million was due to an increase of $2.04 million in interest expense on deposits, as well as a net increase of $413,000 in interest expense on total borrowings. The overall average rate on total deposits was up from 1.28% for the three months ended September 30, 2023, compared to 1.76% for the three months ended September 30, 2024. In addition, the average balance for total deposits was $1.62 billion for the three months ended September 30, 2024, compared to $1.60 billion for the three months ended September 30, 2023. The increase in interest expense on total borrowings was driven by the average balance of FHLB advances and other borrowings, increasing from $192.88 million for the three months ended September 30, 2023, to $228.47 million for the three months ended September 30, 2024. Short-term borrowings have increased to fund loan growth. However, the average rate paid on FHLB advances and other borrowings decreased from 5.50% for the three months ended September 30, 2023, to 5.36% for the three months ended September 30, 2024.

Previous wording

*Provision for Credit Losses.*Provision for credit losses was $412,000 for the three months ended June 30, 2024, compared to $319,000 in provision for credit losses for the three months ended June 30, 2023. The provision for credit losses for three months ended June 30, 2024 includes a provision for credit losses on loans of $422,000 and a decrease in the provision for unfunded commitments of $10,000.

Current wording

*Provision for Credit Losses.*Provision for credit losses was $277,000 for the three months ended September 30, 2024, compared to $588,000 in provision for credit losses for the three months ended September 30, 2023. The provision for credit losses for the three months ended September 30, 2024 includes a provision for credit losses on loans of $317,000 and a decrease in the provision for unfunded commitments of $40,000.

Previous wording

*Noninterest Income.*Total noninterest income was $4.27 million for the three months ended June 30, 2024, compared to $6.20 million for the three months ended June 30, 2023. The decrease of $1.93 million, or 31.1%, was largely due to a decrease in mortgage banking, net, of $1.44 million. Mortgage banking, net, includes net gain on sale of mortgage loans which decreased to $1.60 million for the three months ended June 30, 2024, compared to $2.76 million for the three months ended June 30, 2023. During the three months ended June 30, 2024, $53.23 million residential mortgage loans were sold compared to $84.76 million in the same period in the prior year. Mortgage volumes continue to be impacted by the current interest rate environment. Gross margin levels decreased 24 basis points from 3.25% for the three months ended June 30, 2023, to 3.01% for the three months ended June 30, 2024.

Current wording

*Noninterest Income.*Total noninterest income was $4.98 million for the three months ended September 30, 2024, compared to $6.04 million for the three months ended September 30, 2023. The decrease of $1.06 million, or 17.5%, was primarily due to a decrease in mortgage banking, net, of $1.74 million. Mortgage banking, net, includes net gain on sale of mortgage loans which decreased to $1.69 million for the three months ended September 30, 2024, compared to $3.59 million for the three months ended September 30, 2023. During the three months ended September 30, 2024, $51.02 million residential mortgage loans were sold compared to $109.02 million in the same period in the prior year. Mortgage volumes continued to be impacted by the interest rate environment. Gross margin levels increased 2 basis points from 3.29% for the three months ended September 30, 2023, to 3.31% for the three months ended September 30, 2024. The decrease in mortgage banking, net, was partially offset by an increase in income from bank owned life insurance of $656,000, increasing to $1.04 million for the three months ended September 30, 2024, compared to $382,000 for the three months ended September 30, 2023.

Previous wording

*Noninterest Expense.*Noninterest expense was $17.31 million for the three months ended June 30, 2024, compared to $18.79 million for the three months ended June 30, 2023, a decrease of $1.48 million or 7.9%. The largest driver of the decrease was salaries and employee benefits, decreasing 7.3% from $11.08 million for the three months ended June 30, 2023, compared to $10.27 million for the three months ended June 30, 2024.

Current wording

*Noninterest Expense.*Noninterest expense was $17.27 million for the three months ended September 30, 2024, compared to $17.88 million for the three months ended September 30, 2023, a decrease of $605,000 or 3.4%. The largest driver of the decrease was salaries and employee benefits, decreasing 8.7% from $9.89 million for the three months ended September 30, 2023, compared to $10.84 million for the three months ended September 30, 2024.

Previous wording

*Provision for Income Taxes.*Provision for income taxes was $444,000 for the three months ended June 30, 2024, compared to $344,000 for the three months ended June 30, 2023. The effective tax rate was 20.3% for the current period compared to 14.6% for the prior period.

Current wording

*Provision for Income Taxes.*Provision for income taxes was $529,000 for the three months ended September 30, 2024, compared to $524,000 for the three months ended September 30, 2023. The effective tax rate was 16.3% for the current period compared to 16.6% for the prior period.

Previous wording

Net Income. Eagle’s net income for the six months ended June 30, 2024 was $3.64 million compared to $5.26 million for the six months ended June 30, 2023. The decrease of $1.62 million was primarily due to a decrease in noninterest income of $2.66 million and a decrease in net interest income of $846,000. These decreases were partially offset by a decrease in noninterest expense of $983,000. Basic and diluted earnings per common share were both $0.46 for the current period. Basic and diluted earnings per common share were both $0.67 for the prior year comparable period.

Current wording

Net Income. Eagle’s net income for the nine months ended September 30, 2024 was $6.35 million compared to $7.89 million for the nine months ended September 30, 2023. The decrease of $1.54 million was due to a decrease in noninterest income of $3.71 million. This decrease was partially offset by a decrease in noninterest expense of $1.59 million, decrease in provision for income taxes of $570,000 and a decrease in net interest income after provision for credit losses of $1,000. Basic and diluted earnings per common share were both $0.81 for the current period. Basic and diluted earnings per common share were both $1.01 for the prior year comparable period.

Previous wording

Net Interest Income. Net interest income decreased to $30.85 million for the six months ended June 30, 2024, from $31.69 million for the six months ended June 30, 2023. The decrease of $846,000 was the result of an increase in interest expense of $8.63 million partially offset by an increase in interest and dividend income of $7.78 million.

Current wording

Net Interest Income. Net interest income decreased to $46.65 million for the nine months ended September 30, 2024, from $47.28 million for the nine months ended September 30, 2023. The decrease of $631,000 was the result of an increase in interest expense of $11.08 million partially offset by an increase in interest and dividend income of $10.45 million.

Previous wording

Interest and Dividend Income. Interest and dividend income was $50.76 million for the six months ended June 30, 2024, compared to $42.98 million for the six months ended June 30, 2023. Interest and fees on loans increased to $44.72 million for the six months ended June 30, 2024, from $36.87 million for the six months ended June 30, 2023. This increase of $8.63 million, or 21.3%, was due to an increase in the average yield on loans and the average balance of loans. The average interest rate earned on loans receivable increased by 59 basis points from 5.36% for the six months ended June 30, 2023, to 5.95% for the six months ended June 30, 2024. Interest accretion on purchased loans was $423,000 for the six months ended June 30, 2024, which resulted in a 5 basis point increase in net interest margin, compared to $663,000 for the six months ended June 30, 2023, which resulted in an 8 basis point increase in net interest margin. Average balances for loans receivable, including loans held-for-sale, for the six months ended June 30, 2024 were $1.51 billion compared to $1.39 billion for the prior year period. This represents an increase of $119.15 million, or 8.6%, and was impacted by organic growth. Interest on investment securities available-for-sale decreased by $437,000 period over period. Average balances for investments decreased to $310.17 million for the six months ended June 30, 2024, from $344.33 million for the six months ended June 30, 2023. However, interest rates earned on investments increased to 3.46% for the six months ended June 30, 2024, from 3.39% for the six months ended June 30, 2023.

Current wording

Interest and Dividend Income. Interest and dividend income was $77.52 million for the nine months ended September 30, 2024, compared to $67.07 million for the nine months ended September 30, 2023. Interest and fees on loans increased to $68.53 million for the nine months ended September 30, 2024, from $57.94 million for the nine months ended September 30, 2023. This increase of $10.59 million, or 18.3%, was due to an increase in the average yield on loans and the average balance of loans. The average interest rate earned on loans receivable increased by 54 basis points from 5.47% for the nine months ended September 30, 2023, to 6.01% for the nine months ended September 30, 2024. Interest accretion on purchased loans was $590,000 for the nine months ended September 30, 2024, which resulted in a 4 basis point increase in net interest margin, compared to $838,000 for the nine months ended September 30, 2023, which resulted in an 6 basis point increase in net interest margin. Average balances for loans receivable, including loans held-for-sale, for the nine months ended September 30, 2024 were $1.52 billion compared to $1.42 billion for the prior year period. This represents an increase of $102.66 million, or 7.2%, and due to organic growth. Interest on investment securities available-for-sale decreased by $633,000 period over period. Average balances for investments decreased to $308.69 million for the nine months ended September 30, 2024, from $335.90 million for the nine months ended September 30, 2023. Interest rates earned on investments increased slightly to 3.43% for the nine months ended September 30, 2024, from 3.42% for the nine months ended September 30, 2023.

Previous wording

Interest Expense. Total interest expense was $19.92 million for the six months ended June 30, 2024, compared to $11.29 million for the six months ended June 30, 2023. The increase of $8.63 million, or 76.4%, was primarily due to an increase of $6.81 million in interest expense on deposits, in addition to a net increase of $1.81 million in interest expense on total borrowings. The overall average rate on total deposits was up from 0.84% for the six months ended June 30, 2023, compared to 1.66% for the six months ended June 30, 2024. In addition, the average balance for total deposits was $1.63 billion for the six months ended June 30, 2024, compared to $1.59 billion for the six months ended June 30, 2023. The increase in the interest expense on total borrowings was largely due to an increase in the average balance for FHLB advances and other borrowings, which increased to $186.77 million for the six months ended June 30, 2024, from $130.95 million for the six months ended June 30, 2023. Short-term borrowings have increased to fund loan growth. In addition, the average rate paid on FHLB advances and other borrowings increased from 5.11% for the six months ended June 30, 2023, to 5.50% for the six months ended June 30, 2024.

Current wording

Interest Expense. Total interest expense was $30.88 million for the nine months ended September 30, 2024, compared to $19.80 million for the nine months ended September 30, 2023. The increase of $11.08 million, or 56.0%, was primarily due to an increase of $8.85 million in interest expense on deposits, in addition to a net increase of $2.23 million in interest expense on total borrowings. The overall average rate on total deposits was up from 0.99% for the nine months ended September 30, 2023, compared to 1.69% for the nine months ended September 30, 2024. In addition, the average balance for total deposits was $1.62 billion for the nine months ended September 30, 2024, compared to $1.60 billion for the nine months ended September 30, 2023. The increase in the interest expense on total borrowings was largely due to an increase in the average balance for FHLB advances and other borrowings, which increased to $200.67 million for the nine months ended September 30, 2024, from $151.82 million for the nine months ended September 30, 2023. Short-term borrowings have increased to fund loan growth. In addition, the average rate paid on FHLB advances and other borrowings increased from 5.28% for the nine months ended September 30, 2023, to 5.45% for the nine months ended September 30, 2024.

Previous wording

Provision for Credit Losses. Provision for credit losses was $277,000 for the six months ended June 30, 2024, compared to $598,000 for the six months ended June 30, 2023. The provision for credit losses for the six months ended June 30, 2024, includes a provision for credit losses on loans of $327,000 and a decrease in the provision for unfunded commitments of $50,000.

Current wording

Provision for Credit Losses. Provision for credit losses was $554,000 for the nine months ended September 30, 2024, compared to $1.19 million for the nine months ended September 30, 2023. The provision for credit losses for the nine months ended September 30, 2024 includes a provision for credit losses on loans of $644,000 and a decrease in the provision for unfunded commitments of $90,000

Previous wording

Noninterest Income. Total noninterest income was $8.22 million for the six months ended June 30, 2024, compared to $10.88 million for the six months ended June 30, 2023. The decrease of $2.66 million was primarily due to a decrease in mortgage banking, net of $2.32 million. Mortgage banking, net includes net gain on sale of mortgage loans which decreased to $3.01 million for the six months ended June 30, 2024, compared to $4.96 million for the six months ended June 30, 2023. During the six months ended June 30, 2024, $96.79 million residential mortgage loans were sold compared to $147.15 million in the same period in the prior year. Mortgage volumes have been impacted by the current interest rate environment. Gross margin levels decreased 26 basis points from 3.37% for the six months ended June 30, 2023, to 3.11% for the six months ended June 30, 2024.

Current wording

Noninterest Income. Total noninterest income was $13.20 million for the nine months ended September 30, 2024 compared to $16.91 million for the nine months ended September 30, 2023. The decrease of $3.71 million was primarily due to a decrease in mortgage banking, net of $4.05 million. Mortgage banking, net includes net gain on sale of mortgage loans which decreased to $4.71 million for the nine months ended September 30, 2024, compared to $8.55 million for the nine months ended September 30, 2023. During the nine months ended September 30, 2024, $147.81 million residential mortgage loans were sold compared to $256.17 million in the same period in the prior year. Mortgage volumes continued to be impacted by the interest rate environment. Gross margin levels decreased 16 basis points from 3.34% for the nine months ended September 30, 2023, to 3.18% for the nine months ended September 30, 2024. The decrease in mortgage banking, net, was partially offset by an increase in income from bank owned life insurance of $481,000, increasing from $1.17 million for the nine months ended September 30, 2023, compared to $1.65 million for the nine months ended September 30, 2024.

Previous wording

Noninterest Expense. Noninterest expense was $34.34 million for the six months ended June 30, 2024, compared to $35.32 million for the six months ended June 30, 2023, a slight decrease of $983,000 or 2.8%. The decrease was primarily related to lower salaries and employee benefits, decreasing 3.8% from $20.78 million for the six months ended June 30, 2023, to $19.99 million for the six months ended June 30, 2024.

Current wording

Noninterest Expense. Noninterest expense was $51.61 million for the nine months ended September 30, 2024, compared to $53.20 million for the nine months ended September 30, 2023, a decrease of $1.59 million or 3.0%. The decrease was primarily related to lower salaries and employee benefits, decreasing 5.4% from $31.61 million for the nine months ended September 30, 2023, to $29.89 million for the nine months ended September 30, 2024.

Previous wording

Provision for Income Taxes. Provision for income taxes was $814,000 for the six months ended June 30, 2024, compared to $1.39 million for the six months ended June 30, 2023, due to the increase in proportion of tax-exempt income compared to pretax earnings. In addition, the effective tax rate for the current period includes tax credits and other benefits related to investments in low-income housing tax credit projects. The year-to-date effective tax rate was 18.3% for the current period compared to 20.9% for same period in 2023.

Current wording

Provision for Income Taxes. Provision for income taxes was $1.34 million for the nine months ended September 30, 2024, compared to $1.91 million for the nine months ended September 30, 2023, due to the decrease in proportion of tax-exempt income compared to pretax earnings. In addition, the effective tax rate for the current period includes tax credits and other benefits related to investments in low-income housing tax credit projects. The year-to-date effective tax rate was 17.5% for the current period compared to 19.5% for same period in 2023.

Previous wording

The Company's available borrowing capacity was approximately $374.55 million as of June 30, 2024 and $398.50 million as of December 31, 2023.

Current wording

The Company's available borrowing capacity was approximately $348.10 million as of September 30, 2024 and $398.50 million as of December 31, 2023.

Previous wording

During the first quarter of 2023, the FRB offered a new Bank Term Funding Program ("BTFP") for eligible depository institutions. The BTFP offers loans of up to one year in length to institutions pledging collateral eligible for purchase by FRB such as U.S. treasuries, agency securities, and mortgage-backed securities. These assets will be valued at par. In March of 2024, the Company accessed borrowings through the BTFP.

Current wording

During the first quarter of 2023, the FRB offered a new Bank Term Funding Program ("BTFP") for eligible depository institutions. The BTFP offered loans of up to one year in length to institutions pledging collateral eligible for purchase by FRB such as U.S. treasuries, agency securities, and mortgage-backed securities. These assets were valued at par. In March of 2024, the Company accessed borrowings through the BTFP. In September of 2024, the Company paid off the borrowings.

Previous wording

As of June 30, 2024, the Bank’s internally determined measurement of sensitivity to interest rate movements as measured by a 300 basis point rise in interest rates scenario, decreased the economic value of equity (“EVE”) by 1.4%compared to a decrease of 1.9% at December 31, 2023. A 300 basis point decrease in interest rates scenario, decreased EVE by 11.2%compared to a decrease of 18.2% at December 31, 2023. The Bank is within the guidelines set forth by the Board of Directors for interest rate risk sensitivity in rising interest rate scenarios.

Current wording

As of September 30, 2024, the Bank’s internally determined measurement of sensitivity to interest rate movements as measured by a 300 basis point rise in interest rates scenario, increased the economic value of equity (“EVE”) by 2.3%compared to a decrease of 1.9% at December 31, 2023. A 300 basis point decrease in interest rates scenario decreased EVE by 17.0%compared to a decrease of 18.2% at December 31, 2023. The Bank is within the guidelines set forth by the Board of Directors for interest rate risk sensitivity in rising interest rate scenarios.

Previous wording

The accounting and financial reporting policies of Eagle are in accordance with generally accepted accounting principles ("GAAP") and conform to the accounting and reporting guidelines prescribed by bank regulatory authorities. Eagle has identified certain of its accounting policies as “critical accounting policies,” consisting of those related to the allowance for credit losses and business combinations. In determining which accounting policies are critical in nature, Eagle has identified the policies that require significant judgment or involve complex estimates. It is management's practice to discuss critical accounting policies with the Board of Directors' Audit Committee on a periodic basis, including the development, selection, implementation, and disclosure of the critical accounting policies. The application of these policies has a significant impact on Eagle’s unaudited interim consolidated financial statements. Eagle’s financial results could differ significantly if different judgments or estimates are used in the application of these policies. All accounting policies described in "Part II - Item 8. Financial Statements and Supplementary Data - Note 1 – Organization and Summary of Significant Accounting Policies" in Eagle’s 2023 Form 10-K should be reviewed for a greater understanding of how we record and report our financial performance. There have been no significant changes to the accounting policies, estimates, and assumptions, or the judgments affecting the application of these estimates and assumptions from those disclosed in Eagle’s 2023 Form 10-K.

Current wording

The accounting and financial reporting policies of Eagle are in accordance with generally accepted accounting principles ("GAAP") and conform to the accounting and reporting guidelines prescribed by bank regulatory authorities. Eagle has identified certain of its accounting policies as “critical accounting policies,” consisting of those related to the allowance for credit losses and business combinations. In determining which accounting policies are critical in nature, Eagle has identified the policies that require significant judgment or involve complex estimates. It is management's practice to discuss critical accounting policies with the Board of Directors' Audit Committee on a periodic basis, including the development, selection, implementation, and disclosure of the critical accounting policies. The application of these policies has a significant impact on Eagle’s unaudited interim consolidated financial statements. Eagle’s financial results could differ significantly if different judgments or estimates are used in the application of these policies. All accounting policies described in "Part II - Item 8. Financial Statements and Supplementary Data - Note 1 – Organization and Summary of Significant Accounting Policies" in Eagle’s 2023 Form 10-K should be reviewed for a greater understanding of how we record and report our financial performance. There have been no significant changes to the accounting policies, estimates, and assumptions, or the judgments affecting the application of these estimates and assumptions from those disclosed in Eagle’s 2023 Form 10-K, other than the following: