Key Highlights

  • Third-quarter net income was $3.014 million, or $0.38 per diluted share, versus $0.47 in the second quarter and $0.46 a year earlier.
  • Total loans reached $1.717 billion, up $159.0 million from June 30, which the company called record loan growth.
  • Net interest margin was 4.12%, down 3 basis points from the second quarter and up 18 basis points from a year earlier.
  • Nonperforming loans rose to $8.7 million, or 0.51% of loans, from $4.2 million, or 0.27%, at June 30.
  • The quarterly dividend of $0.1475 per share is payable on December 4.

Eagle Bancorp Montana Earnings: Why Did Profit Fall Even as the Balance Sheet Grew?

Eagle Bancorp Montana (NASDAQ:EBMT) reported third-quarter net income of $3.014 million, or $0.38 per diluted share, in its release on Tuesday, October 27. That compares with $3.715 million, or $0.47, in the second quarter and $3.630 million, or $0.46, a year earlier. The earnings screen showed an estimate of $0.54, a surprise of negative 29.19% as screened.

The company reported no adjusted EPS and gave no numerical guidance, though management said it enters the fourth quarter with positive momentum. Return on assets was 0.55% and return on equity 6.06%.

Eagle Bancorp Montana is the holding company for a Montana community bank with mortgage banking, commercial real estate, agricultural and consumer lending.

EBMT Net Interest Margin: Did Record Loan Growth Come With a Higher Funding Cost?

Net interest income was $19.987 million, up 4.4% from the second quarter and 7.0% from a year earlier. Net interest margin was 4.12%, against 4.15% in June and 3.94% a year ago, with acquired-loan accretion adding 3 basis points. Yield on earning assets held at 5.77%, while cost of funds edged up to 2.14% from 2.12%.

Total loans rose $159.0 million in the quarter. Commercial real estate loans reached $784.7 million, up 17.0% from a year earlier, and commercial loans grew 22.4% to $175.0 million.

Deposits rose only $11.9 million to $1.802 billion, so short-term Federal Home Loan Bank advances funded much of the growth. Borrowings climbed to $196.8 million from $52.1 million in June.

Provision and Nonperforming Loans: How Much Did Credit Costs Change?

The provision for credit losses was $1.859 million, compared with $343,000 in the second quarter and $62,000 a year earlier. The company attributed the provision mainly to record loan growth and said borrower-specific deterioration did not meaningfully affect it.

Nonaccrual loans rose to $6.8 million from $3.0 million, and total nonperforming loans reached $8.7 million, or 0.51% of loans. Management said the increase was mainly due to well-collateralized agricultural loans. The allowance was $19.5 million, or 1.13% of loans, and net charge-offs were only $29,000.

Noninterest income was $5.097 million, up from $4.717 million a year earlier, and noninterest expense was $19.380 million. The GAAP efficiency ratio improved to 77.26% from 78.63%.

What Should Investors Watch After the Tangible Book Value Decline?

Book value per share fell to $24.12 from $24.78, and tangible book value per share was $19.44 against $20.07, as accumulated other comprehensive loss widened to $20.8 million from $13.3 million. The bank's Tier 1 capital to adjusted average assets was 10.62%.

Total assets grew to $2.282 billion. The company announced no buyback or acquisition, and management said it will focus on loan and deposit pricing to protect the margin. Next are the December 4 dividend payment and whether funding costs and the nonperforming loan trend stabilise.