Eagle Bancorp Montana, Inc. 10-Q

ebmt20200331_10q.htm   Table of Contents   UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549   FORM 10-Q   ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934   For the quarterly period ended September 30, 2020   ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934   For the transition period from _____ to _____.   Commission file number 1-34682   Eagle Bancorp Montana, Inc.   (Exact name of small business issuer as specified in its charter)   Delaware 27-1449820 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)   1400 Prospect Avenue , Helena , MT 59601 (Address of principal executive offices)   ( 406 ) 442-3080 (Issuer's telephone number)   Website address: www.opportunitybank.com   Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐   Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐   Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer     ☐ Accelerated filer       ☒ Non-accelerated filer       ☐ Smaller reporting company   ☒   Emerging growth company   ☐   If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐   Indicate by check mark whether the registrant is a shell company (defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒   Securities registered pursuant to Section 12(b) of the Act:   Title of each class Trading symbol(s) Name of each exchange on which registered Common Stock par value $0.01 per share EBMT Nasdaq Global Market     Table of Contents   APPLICABLE ONLY TO CORPORATE ISSUERS   Indicate the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date:   Common stock, par value $0.01 per share 6,756,107 shares outstanding As of October 30, 2020     Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES       TABLE OF CONTENTS   PART I. FINANCIAL INFORMATION PAGE       Item 1. Financial Statements (Unaudited)           Consolidated Statements of Financial Condition as of September 30, 2020 and December 31, 2019 1         Consolidated Statements of Income for the three and nine months ended September 30, 2020 and 2019 3         Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2020 and 2019 5         Consolidated Statements of Changes in Shareholders' Equity for the three and nine months ended September 30, 2020 and 2019 6         Consolidated Statements of Cash Flows for the nine months ended September 30, 2020 and 2019 7         Notes to the Unaudited Consolidated Financial Statements 9       Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 35       Item 3. Quantitative and Qualitative Disclosures About Market Risk 51       Item 4. Controls and Procedures 52       PART II. OTHER INFORMATION   Item 1. Legal Proceedings 53 Item 1A. Risk Factors 53 Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds 53 Item 3. Defaults Upon Senior Securities 53 Item 4.  Mine Safety Disclosures 53 Item 5. Other Information 54 Item 6.  Exhibits 54       Signatures 55     Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES     Note Regarding Forward-Looking Statements     This report includes “forward-looking statements” within the meaning and protections of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. All statements other than statements of historical fact are statements that could be forward-looking statements. You can identify these forward-looking statements through our use of words such as “may,” “will,” “anticipate,” “assume,” “should,” “indicate,” “would,” “believe,” “contemplate,” “expect,” “estimate,” “continue,” “plan,” “project,” “could,” “intend,” “target” and other similar words and expressions of the future. These forward-looking statements include, but are not limited to: ● statements of our goals, intentions and expectations; ● statements regarding our business plans, prospects, growth and operating strategies; ● statements regarding the current global COVID-19 pandemic; ● statements regarding the asset quality of our loan and investment portfolios; and ● estimates of our risks and future costs and benefits.   These forward-looking statements are based on current beliefs and expectations of the management of Eagle Bancorp Montana, Inc. (“Eagle” or the “Company”) and Opportunity Bank of Montana (“OBMT” or the “Bank”), Eagle’s wholly-owned subsidiary, and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change.   The following factors, among others, could cause the Company’s actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:   ● changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees and capital requirements;   ● the negative impacts and disruptions resulting from the continuing outbreak of the novel coronavirus, or COVID-19, and the steps taken by governmental and other authorities to contain, mitigate and combat the pandemic, on the economies and communities we serve, which may likely have an adverse impact on our credit portfolio, goodwill, stock price, borrowers and the economy as a whole both globally and domestically;   ● local, regional, national and international economic and market conditions and events and the impact they may have on us, our customers and our assets and liabilities;   ● competition among depository and other financial institutions;   ● risks related to the concentration of our business in Montana, including risks associated with changes in the prices, values and sales volume of residential and commercial real estate in Montana;   ● inflation and changes in the interest rate environment that reduce our margins or reduce the fair value of financial instruments;   ● our ability to attract deposits and other sources of funding or liquidity;   ● changes or volatility in the securities markets;   ● our ability to implement our growth strategy, including identifying and consummating suitable acquisitions, raising additional capital to finance such transactions, entering new markets, possible failures in realizing the anticipated benefits from such acquisitions and an inability of our personnel, systems and infrastructure to keep pace with such growth;   ● the effect of acquisitions we may make, if any, including, without limitation, the failure to achieve expected revenue growth and/or expense savings from such acquisitions;   ● risks related to the integration of any businesses we have acquired or expect to acquire, including exposure to potential asset quality and credit quality risks and unknown or contingent liabilities, the time and costs associated with integrating systems, technology platforms, procedures and personnel;   ● potential impairment on the goodwill we have recorded or may record in connection with business acquisitions;   ● political developments, uncertainties or instability;   ● our ability to enter new markets successfully and capitalize on growth opportunities;   ● changes in consumer spending, borrowing and savings habits;   ● our ability to continue to increase and manage our commercial and residential real estate, multi-family and commercial business loans;   ● possible impairments of securities held by us, including those issued by government entities and government sponsored enterprises;   ● the level of future deposit insurance premium assessments;   ● our ability to develop and maintain secure and reliable information technology systems, effectively defend ourselves against cyberattacks, or recover from breaches to our cybersecurity infrastructure;   ● the failure of assumptions underlying the establishment of allowance for possible loan losses and other estimates;   ● changes in the financial performance and/or condition of our borrowers and their ability to repay their loans when due; and   ● the effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Securities and Exchange Commission, the Public Company Accounting Oversight Board, the Financial Accounting Standards Board and other accounting standard setters.   Because of these and other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements. For a further list and description of various risks, relevant factors and uncertainties that could cause future results or events to differ materially from those expressed or implied in our forward-looking statements, see the Item 1A, “Risk Factors” and Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections contained elsewhere in this report, as well as our Annual Report on Form 10-K for the year ended December 31, 2019, any subsequent Reports on Form 10-Q and Form 8-K, and other filings with the SEC. We do not undertake any obligation to publicly update or correct any forward-looking statements to reflect events or circumstances that subsequently occur, or of which we hereafter become aware.     Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES       CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Dollars in Thousands, Except for Per Share Data) (Unaudited)       September 30,     December 31,       2020     2019   ASSETS:                 Cash and due from banks   $ 19,879     $ 18,094   Interest bearing deposits in banks     7,672       4,284   Federal funds sold     45,260       2,540   Total cash and cash equivalents     72,811       24,918                     Securities available-for-sale, at fair value     165,353       126,875   Federal Home Loan Bank ("FHLB") stock     2,817       4,683   Federal Reserve Bank ("FRB") stock     2,974       2,526   Mortgage loans held-for-sale, at fair value     41,484       25,612   Loans receivable, net of allowance for loan losses of $ 11,300 at September 30, 2020 and $ 8,600 at December 31, 2019     837,178       770,635   Accrued interest and dividends receivable     6,615       4,577   Mortgage servicing rights, net     9,518       8,739   Premises and equipment, net     54,450       40,082   Cash surrender value of life insurance, net     27,064       23,608   Goodwill     20,798       15,836   Core deposit intangible, net     2,505       2,786   Other assets     11,461       3,383                     Total assets   $ 1,255,028     $ 1,054,260     The accompanying notes are an integral part of these unaudited consolidated financial statements.   - 1 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES   CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Continued) (Dollars in Thousands, Except for Per Share Data) (Unaudited)       September 30,     December 31,       2020     2019   LIABILITIES:                 Deposit accounts:                 Noninterest bearing   $ 295,058     $ 200,035   Interest bearing     703,272       608,958   Total deposits     998,330       808,993                     Accrued expenses and other liabilities     18,419       9,825   Deferred tax liability, net     1,367       492   FHLB advances and other borrowings     59,777       88,350   Other long-term debt:                 Principal amount     30,155       25,155   Unamortized debt issuance costs     ( 383 )     ( 214 ) Total other long-term debt, net     29,772       24,941                     Total liabilities     1,107,665       932,601                     SHAREHOLDERS' EQUITY:                 Preferred stock (par value $ 0.01 per share; 1,000,000 shares authorized; no shares issued or outstanding)     -       -   Common stock (par value $ 0.01 per share; 20,000,000 shares authorized; 7,110,833 and 6,714,983 shares issued; 6,756,107 and 6,423,033 shares outstanding at September 30, 2020 and December 31, 2019, respectively)     71       67   Additional paid-in capital     77,612       68,826   Unallocated common stock held by Employee Stock Ownership Plan ("ESOP")     ( 185 )     ( 311 ) Treasury stock, at cost     ( 4,630 )     ( 3,643 ) Retained earnings     69,478       55,391   Accumulated other comprehensive income, net of tax     5,017       1,329   Total shareholders' equity     147,363       121,659                     Total liabilities and shareholders' equity   $ 1,255,028     $ 1,054,260     The accompanying notes are an integral part of these unaudited consolidated financial statements.   - 2 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES     CONSOLIDATED STATEMENTS OF INCOME  (Dollars in Thousands, Except for Per Share Data) (Unaudited)       Three Months Ended     Nine Months Ended       September 30,     September 30,       2020     2019     2020     2019   INTEREST AND DIVIDEND INCOME:                                 Interest and fees on loans   $ 11,340     $ 10,731     $ 33,832     $ 31,378   Securities available-for-sale     874       916       2,853       2,802   FHLB and FRB dividends     95       107       284       297   Other interest income     30       19       134       55   Total interest and dividend income     12,339       11,773       37,103       34,532                                     INTEREST EXPENSE:                                 Deposits     779       1,022       3,063       2,733   FHLB advances and other borrowings     261       692       1,066       1,942   Other long-term debt     521       360       1,296       1,089   Total interest expense     1,561       2,074       5,425       5,764                                     NET INTEREST INCOME     10,778       9,699       31,678       28,768                                     Loan loss provision     854       694       2,751       1,995                                     NET INTEREST INCOME AFTER LOAN LOSS PROVISION     9,924       9,005       28,927       26,773                                     NONINTEREST INCOME:                                 Service charges on deposit accounts     282       329       814       882   Net gain on sale of loans     11,101       5,492       24,432       11,451   Mortgage banking, net     2,204       1,390       7,164       2,477   Interchange and ATM fees     407       364       1,123       977   Appreciation in cash surrender value of life insurance     160       254       480       571   Net gain on sale of available-for-sale securities     -       -       1,068       49   Net gain on sale/disposal of premises and equipment     -       438       4       438   Other noninterest income     817       153       1,888       772   Total noninterest income     14,971       8,420       36,973       17,617     The accompanying notes are an integral part of these unaudited consolidated financial statements.   - 3 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES   CONSOLIDATED STATEMENTS OF INCOME (Continued) (Dollars in Thousands, Except for Per Share Data) (Unaudited)       Three Months Ended     Nine Months Ended       September 30,     September 30,       2020     2019     2020     2019   NONINTEREST EXPENSE:                                 Salaries and employee benefits   $ 11,325     $ 7,555     $ 28,274     $ 20,057   Occupancy and equipment expense     1,280       1,152       3,677       3,229   Data processing     1,168       933       3,507       2,715   Advertising     208       320       624       800   Amortization     165       254       495       761   Loan costs     566       242       1,211       554   Federal Deposit Insurance Corporation ("FDIC") insurance premiums     75       ( 36 )     147       79   Postage     76       90       260       237   Professional and examination fees     389       182       1,081       767   Acquisition costs     -       517       157       1,693   Other noninterest expense     1,093       1,015       4,893       2,826   Total noninterest expense     16,345       12,224       44,326       33,718                                     INCOME BEFORE PROVISION FOR INCOME TAXES     8,550       5,201       21,574       10,672                                     Provision for income taxes     2,170       1,096       5,532       2,137                                     NET INCOME   $ 6,380     $ 4,105     $ 16,042     $ 8,535                                     BASIC EARNINGS PER COMMON SHARE   $ 0.94     $ 0.64     $ 2.36     $ 1.33                                     DILUTED EARNINGS PER COMMON SHARE   $ 0.94     $ 0.63     $ 2.35     $ 1.32     The accompanying notes are an integral part of these unaudited consolidated financial statements.   - 4 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES     CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Dollars in Thousands) (Unaudited)       Three Months Ended     Nine Months Ended       September 30,     September 30,       2020     2019     2020     2019                                     NET INCOME   $ 6,380     $ 4,105     $ 16,042     $ 8,535                                     OTHER COMPREHENSIVE INCOME (LOSS):                                 Change in fair value of investment securities available-for-sale     1,263       1,166       6,074       4,617   Reclassification for net realized gains on investment securities available-for-sale     -       -       ( 1,068 )     ( 49 ) Change in fair value of loans held-for-sale     -       -       -       296   Reclassification for net realized gains on loans held-for-sale     -       -       -       ( 605 ) Total other comprehensive income     1,263       1,166       5,006       4,259                                     Income tax (provision) benefit related to:                                 Investment securities     ( 332 )     ( 307 )     ( 1,318 )     ( 1,203 ) Loans held-for-sale     -       -       -       82   Total income tax provision     ( 332 )     ( 307 )     ( 1,318 )     ( 1,121 )                                   COMPREHENSIVE INCOME   $ 7,311     $ 4,964     $ 19,730     $ 11,673     The accompanying notes are an integral part of these unaudited consolidated financial statements.   - 5 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES     CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY For the Three and Nine Months Ended September 30, 2020 and 2019 (Dollars in Thousands, Except for Per Share Data) (Unaudited)                                                       ACCUMULATED                               ADDITIONAL     UNALLOCATED                     OTHER               PREFERRED     COMMON     PAID-IN     ESOP     TREASURY     RETAINED     COMPREHENSIVE               STOCK     STOCK     CAPITAL     SHARES     STOCK     EARNINGS     INCOME (LOSS)     TOTAL                                                                     Balance, July, 1 2020   $ -     $ 71     $ 77,506     $ ( 227 )   $ ( 3,664 )   $ 63,757     $ 4,086     $ 141,529   Net income     -       -       -       -       -       6,380       -       6,380   Other comprehensive income     -       -       -       -       -       -       931       931   Dividends paid ($ 0.0975 per share)     -       -       -       -       -       ( 659 )     -       ( 659 ) Stock compensation expense     -       -       78       -       -       -       -       78   ESOP shares allocated ( 4,154 shares)     -       -       28       42       -       -       -       70   Treasury stock purchased ( 61,495 shares at $ 15.70 average cost per share)     -       -       -       -       ( 966 )     -       -       ( 966 ) Balance, September 30, 2020   $ -     $ 71     $ 77,612     $ ( 185 )   $ ( 4,630 )   $ 69,478     $ 5,017     $ 147,363                                                                     Balance, July, 1 2019   $ -     $ 67     $ 68,535     $ ( 393 )   $ ( 3,850 )   $ 50,167     $ 1,168     $ 115,694   Net income     -       -       -       -       -       4,105       -       4,105   Other comprehensive income     -       -       -       -       -       -       859       859   Dividends paid ($ 0.095 per share)     -       -       -       -       -       ( 608 )     -       ( 608 ) Stock compensation expense     -       -       330       -       -       -       -       330   ESOP shares allocated ( 4,154 shares)     -       -       29       41       -       -       -       70   Balance, September 30, 2019   $ -     $ 67     $ 68,894     $ ( 352 )   $ ( 3,850 )   $ 53,664     $ 2,027     $ 120,450                                                                     Balance, January 1, 2020   $ -     $ 67     $ 68,826     $ ( 311 )   $ ( 3,643 )   $ 55,391     $ 1,329     $ 121,659   Net income     -       -       -       -       -       16,042       -       16,042   Other comprehensive income     -       -       -       -       -       -       3,688       3,688   Dividends paid     -       -       -       -       -       ( 1,955 )     -       ( 1,955 ) Stock issued in connection with Western Holding Company of Wolf Point acquisition     -       4       8,463       -       -       -       -       8,467   Stock compensation expense     -       -       226       -       -       -       -       226   ESOP shares allocated (12,462 shares)     -       -       97       126       -       -       -       223   Treasury stock purchased ( 62,776 shares at $ 15.73 average cost per share)     -       -       -       -       ( 987 )     -       -       ( 987 ) Balance, September 30, 2020   $ -     $ 71     $ 77,612     $ ( 185 )   $ ( 4,630 )   $ 69,478     $ 5,017     $ 147,363                                                                     Balance, January 1, 2019   $ -     $ 57     $ 52,051     $ ( 477 )   $ ( 2,640 )   $ 46,926     $ ( 1,111 )   $ 94,806   Net income     -       -       -       -       -       8,535       -       8,535   Other comprehensive income     -       -       -       -       -       -       3,138       3,138   Dividends paid     -       -       -       -       -       ( 1,797 )     -       ( 1,797 ) Stock issued in connection with Big Muddy Bancorp, Inc. acquisition     -       10       16,425       -       -       -       -       16,435   Stock compensation expense     -       -       330       -       -       -       -       330   ESOP shares allocated ( 12,462 shares)     -       -       88       125       -       -       -       213   Treasury stock purchased ( 70,000 shares at $ 17.29 average cost per share)     -       -       -       -       ( 1,210 )     -       -       ( 1,210 ) Balance, September 30, 2019   $ -     $ 67     $ 68,894     $ ( 352 )   $ ( 3,850 )   $ 53,664     $ 2,027     $ 120,450     The accompanying notes are an integral part of these unaudited consolidated financial statements.   - 6 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES     CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in Thousands) (Unaudited)       Nine Months Ended       September 30,       2020     2019   CASH FLOWS FROM OPERATING ACTIVITIES:                 Net income   $ 16,042     $ 8,535   Adjustments to reconcile net income to net cash provided by (used in) operating activities:                 Loan loss provision     2,751       1,995   Impairment of servicing rights     878       -   Depreciation     1,813       1,308   Net amortization of investment securities premiums and discounts     749       704   Amortization of mortgage servicing rights     2,476       1,113   Amortization of right-of-use assets     347       354   Amortization of core deposit intangible and tax credits     495       761   Compensation expense related to restricted stock awards     226       330   ESOP compensation expense for allocated shares     223       213   Deferred income tax provision     22       417   Net gain on sale of loans     ( 24,432 )     ( 11,451 ) Originations of loans held-for-sale     ( 636,767 )     ( 345,699 ) Proceeds from sales of loans held-for-sale     645,327       339,245   Net gain on sale of available-for-sale securities     ( 1,068 )     ( 49 ) Net loss on sale of real estate owned and other repossessed assets     9       18   Net gain on sale/disposal of premises and equipment     ( 4 )     ( 438 ) Net appreciation in cash surrender value of life insurance     ( 480 )     ( 572 ) Net change in:                 Accrued interest and dividends receivable     ( 1,030 )     ( 583 ) Other assets     ( 7,807 )     ( 571 ) Accrued expenses and other liabilities     3,936       741   Net cash provided by (used in) operating activities     3,706       ( 3,629 )                   CASH FLOWS FROM INVESTING ACTIVITIES:                 Activity in available-for-sale securities:                 Sales     18,149       53,257   Maturities, principal payments and calls     32,553       9,998   Purchases     ( 40,145 )     ( 51,464 ) FHLB stock redeemed     2,081       1,108   FRB stock purchased     ( 373 )     ( 493 ) Net cash received from acquisitions     5,044       6,901   Loan origination and principal collection, net     ( 30,040 )     ( 50,189 ) Proceeds from bank owned life insurance     -       519   Purchases of bank owned life insurance     ( 845 )     -   Proceeds from sale of real estate and other repossessed assets acquired in settlement of loans     28       352   Proceeds from sale of premises and equipment     13       2,500   Purchases of premises and equipment, net     ( 15,693 )     ( 8,389 ) Net cash used in investing activities     ( 29,228 )     ( 35,900 )   The accompanying notes are an integral part of these unaudited consolidated financial statements.   - 7 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES   CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) (Dollars in Thousands) (Unaudited)       Nine Months Ended       September 30,       2020     2019   CASH FLOWS FROM FINANCING ACTIVITIES:                 Net increase in deposits   $ 102,765     $ 70,144   Net advances from FRB borrowings     23,786       -   Net short-term payments on FHLB and other borrowings     ( 27,000 )     ( 29,687 ) Long-term advances from FHLB and other borrowings     10,000       33,000   Payments on long-term FHLB and other borrowings     ( 37,859 )     ( 28,836 ) Proceeds from issuance of subordinated debentures     15,000       -   Repayment of subordinated debentures     ( 10,000 )     -   Payments for debt issuance costs     ( 335 )     -   Purchase of treasury stock     ( 987 )     ( 1,210 ) Dividends paid     ( 1,955 )     ( 1,797 ) Net cash provided by financing activities     73,415       41,614                     NET INCREASE IN CASH AND CASH EQUIVALENTS     47,893       2,085                     CASH AND CASH EQUIVALENTS, beginning of period     24,918       11,201                     CASH AND CASH EQUIVALENTS, end of period   $ 72,811     $ 13,286                                       SUPPLEMENTAL CASH FLOW INFORMATION:                 Cash paid during the period for interest   $ 5,652     $ 5,245   Cash paid during the period for income taxes   $ 5,200     $ 1,131                     NON-CASH INVESTING AND FINANCING ACTIVITIES:                 Increase in fair value of securities available-for-sale   $ 5,006     $ 4,568   Mortgage servicing rights recognized   $ 4,133     $ 2,231   Right-of-use assets obtained in exchange for lease liabilities   $ 104     $ 2,374   Loans transferred to real estate and other assets acquired in foreclosure   $ 37     $ 131   Stock issued in connection with acquisitions   $ 8,467     $ 16,435     See Note 2. Mergers and Acquisitions for additional information related to assets acquired and liabilities assumed in acquisitions.   The accompanying notes are an integral part of these unaudited consolidated financial statements.   - 8 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)     NOTE 1.   ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES   Organization   Eagle Bancorp Montana, Inc. (“Eagle” or the “Company”), is a Delaware corporation that holds 100 % of the capital stock of Opportunity Bank of Montana (“OBMT” or the “Bank”). The Bank was founded in 1922 as a Montana-chartered building and loan association and has conducted operations and maintained its administrative office in Helena, Montana since that time. In 1975, the Bank adopted a federal thrift charter and in October 2014 converted to a Montana chartered commercial bank and became a member bank in the Federal Reserve System.   In September 2017, the Company entered into an Agreement and Plan of Merger with TwinCo, Inc. ("TwinCo"), a Montana corporation, and TwinCo’s wholly-owned subsidiary, Ruby Valley Bank, a Montana chartered commercial bank to acquire 100 % of TwinCo’s equity voting interests. On January 31, 2018, TwinCo merged with and into Eagle, with Eagle continuing as the surviving corporation. Ruby Valley Bank operated two branches in Madison County, Montana.   In August 2018, Eagle entered into an Agreement and Plan of Merger with Big Muddy Bancorp, Inc. (“BMB”), a Montana corporation and BMB’s wholly-owned subsidiary, The State Bank of Townsend (“SBOT”), a Montana chartered commercial bank to acquire 100 % of BMB’s equity voting interests. On January 1, 2019, BMB merged with and into Eagle, with Eagle continuing as the surviving corporation. SBOT operated four branches in Townsend, Dutton, Denton and Choteau, Montana.   In August 2019, Eagle and OBMT, entered into an Agreement and Plan of Merger with Western Holding Company of Wolf Point (“WHC”), a Montana corporation, and WHC’s wholly-owned subsidiary, Western Bank of Wolf Point (“WB”), a Montana chartered commercial bank. The Merger Agreement provided that, upon the terms and subject to the conditions set forth in the Merger Agreement, WHC would merge with and into Eagle, with Eagle continuing as the surviving corporation. The merger closed on January 1, 2020. WB operated one branch in Wolf Point, Montana.   The Bank currently has 23  full service branches. The Bank’s principal business is accepting deposits and, together with funds generated from operations and borrowings, investing in various types of loans and securities. The Bank also operates certain branches under the names Dutton State Bank, Farmers State Bank of Denton and The State Bank of Townsend.   Basis of Financial Statement Presentation and Use of Estimates   The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and in accordance with the instructions to Form 10 -Q and Article 10 of Regulation S- X as promulgated by the Securities and Exchange Commission (“SEC”). It is recommended that these unaudited interim consolidated financial statements be read in conjunction with the Company’s Annual Report on Form 10 -K with all of the audited information and footnotes required by U.S. GAAP for complete financial statements for the year ended December 31, 2019 , as filed with the SEC on March 11, 2020. In the opinion of management, all normal adjustments and recurring accruals considered necessary for a fair presentation of the financial position and results of operations for the periods presented have been included.   The results of operations for the nine -month period ended September 30, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2020  or any other period. In preparing consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated statement of financial condition and reported amounts of revenues and expenses during the reporting period. Actual results could differ from estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, mortgage servicing rights, the fair value of financial instruments, the valuation of goodwill and deferred tax assets and liabilities.   Principles of Consolidation   The consolidated financial statements include Eagle, the Bank, Eagle Bancorp Statutory Trust I (the “Trust”) and Western Financial Services, Inc. (“WFS”). WFS was acquired through the WHC merger. WFS was a wholly owned subsidiary of WB and was acquired through the merger. All significant intercompany transactions and balances have been eliminated in consolidation.    - 9 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)   NOTE 1.  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued   Reclassifications     Certain prior period amounts were reclassified to conform to the presentation for 2020 . These reclassifications had no impact on net income or shareholders’ equity.   Subsequent Events     The Company has evaluated events and transactions subsequent to September 30, 2020 for recognition and/or disclosure.     NOTE 2.  MERGERS AND ACQUISITIONS   Effective January 1, 2019, Eagle completed its merger with BMB. The transaction provided an opportunity to expand market presence and lending activities throughout the state. The acquisition closed after receipt of approvals from regulatory authorities, approval of BMB shareholders and the satisfaction of other closing conditions. The total consideration paid was $ 16,436,000 and included cash consideration of $ 1,000 and common stock issued of $ 16,435,000 .   Effective January 1, 2020, Eagle completed its previously announced merger with WHC. At the effective time of the Merger, WHC merged with and into Eagle, with Eagle continuing as the surviving corporation. The acquisition closed after receipt of approvals from regulatory authorities, approval of WHC shareholders and the satisfaction of other closing conditions. The total consideration paid was $ 14,967,000 and included cash consideration of $ 6,500,000 and common stock issued of $ 8,467,000 .   These transactions were accounted for under the acquisition method of accounting.   - 10 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)   NOTE 2.  MERGERS AND ACQUISITIONS – continued   All of the assets acquired and liabilities assumed were recognized at their acquisition-date fair value, while transaction costs and restructuring costs associated with the business combinations were expensed as incurred. Determining the fair value of assets and liabilities is a complicated process involving significant judgement regarding methods and assumptions used to calculate estimated fair values. The excess of the acquisition consideration over the fair value of assets acquired and liabilities assumed, if any, is allocated to goodwill. The goodwill recorded is not deductible for federal income tax purposes.   The following table summarizes the fair values of the assets acquired and liabilities assumed, consideration paid and the resulting goodwill.       WHC     BMB       January 1,     January 1,       2020     2019       (In Thousands)   Assets acquired:                 Cash and cash equivalents   $ 11,544     $ 6,902   Securities available-for-sale     43,710       2,096   Loans receivable     43,424       89,204   Premises and equipment     740       2,246   Cash surrender value of life insurance     2,131       2,862   Other real estate owned     -       223   Core deposit intangible     208       1,988   Other assets     1,874       1,995   Total assets acquired   $ 103,631     $ 107,516                     Liabilities assumed:                 Deposits   $ 86,572     $ 92,706   Accrued expenses and other liabilities     4,554       1,960   Other borrowings     2,500       -   Total liabilities assumed   $ 93,626     $ 94,666                     Net assets acquired   $ 10,005     $ 12,850                     Consideration paid:                 Cash   $ 6,500     $ 1   Common stock issued ( 395,850 shares WHC and 996,041 shares BMB)     8,467       16,435   Total consideration paid   $ 14,967     $ 16,436                     Goodwill resulting from acquisition   $ 4,962     $ 3,586     Goodwill recorded for the WHC acquisition during the three months ended March 31, 2020  was $ 4,962,000 . Goodwill recorded for the BMB acquisition during the three months ended March 31, 2019  was $ 3,586,000 . Certain estimates that existed at January 1, 2019 were realized and a final true up of $ 126,000 was recorded to goodwill during the three months ended December 31, 2019. The final goodwill recorded related to the BMB acquisition was $ 3,712,000 .   WHC investments were written up $ 425,000 to fair value on the date of acquisition based on market prices obtained from an independent third party. BMB investment fair value adjustments were considered insignificant.   - 11 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)   NOTE 2.  MERGERS AND ACQUISITIONS – continued   For acquisitions, the fair value analysis of the loan portfolios resulted in a valuation adjustment for each loan based on an amortization schedule of expected cash flow. Individual amortization schedules were used for each loan over a certain amount and those with specifically identified loss exposure. The remainder of the loans were grouped by type and risk rating into loan pools (based on loan type, fixed or variable interest rate, revolving or term payments and risk rating). Yield inputs for the amortization schedules included contractual interest rates, estimated prepayment speeds, liquidity adjustments and market yields. Credit inputs for the amortization schedules included probability of payment default, loss given default rates and individually identified loss exposure.                 The total accretable discount on WHC acquired loans was $ 1,166,000 as of January 1, 2020. During the three and  nine  months ended September 30, 2020 , accretion of the loan discount was $ 264,000  and $ 512,000 , respectively. The remaining accretable loan discount was $ 654,000  as of September 30, 2020 .   The total accretable discount on BMB acquired loans was $ 2,813,000 as of January 1, 2019. During the year ended December 31, 2019, accretion of the loan discount was $ 1,480,000 . During the three and  nine  months ended September 30, 2020 , accretion of the loan discount was $ 182,000  and $ 513,000 , respectively. The remaining accretable loan discount was $ 820,000  as of September 30, 2020 .   One impaired loan was acquired through the WHC acquisition with an insignificant balance as of January 1, 2020. Four impaired loans were acquired through the BMB acquisition with a net balance of $ 556,000 as of January 1, 2019. The remaining balance of the acquired impaired loans as of September 30, 2020 was $ 129,000 .   Fair value adjustments of $ 590,000 and $ 276,000 were recorded for WHC and BMB, respectively, related to premises and equipment. The Company used independent third party appraisals in the determination of the fair value of acquired assets.   Core deposit intangible assets of $ 208,000 were recorded for WHC and are being amortized using an accelerated method over the estimated useful lives of the related deposits of 10 years from date of acquisition. Core deposit intangible assets of $ 1,988,000 were recorded for BMB and are being amortized using an accelerated method over the estimated useful lives of the related deposits of 10 years from date of acquisition.   For acquisitions, the core deposit intangible value is a function of the difference between the cost of the acquired core deposits and the alternative cost of funds. These cash flow streams were discounted to present value. The fair value of other deposit accounts acquired were valued by estimating future cash flows to be received or paid from individual or homogenous groups of assets and liabilities and then discounting those cash flows to a present value using rates of return that were available in financial markets for similar financial instruments on or near the acquisition date.   Direct costs related to the acquisitions were expensed as incurred. There were no acquisition costs recorded during the three months ended September 30, 2020. The Company recorded acquisition costs related to WHC of $ 157,000  during the  nine  months ended September 30, 2020  and $ 818,000 during the year ended December 31, 2019. The Company recorded acquisition costs related to BMB of $ 1,380,000 during the year ended December 31, 2019. Acquisition costs included professional fees and data processing expenses incurred related to the acquisitions.   Operations of acquired entities have been included in the consolidated financial statements since date of acquisition. The Company does not consider them as separate reporting segments and does not track the amount of revenues and net income attributable since acquisition. As such, it is impracticable to determine such amounts for the period from acquisition date through September 30, 2020 .   - 12 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)   NOTE 2.  MERGERS AND ACQUISITIONS – continued   The accompanying consolidated statements of income include the results of operations of WHC since the January 1, 2020 acquisition date. The following table presents unaudited pro forma results of operations for the three and nine  months ended September 30, 2019 as if the acquisition had occurred on January 1, 2019. This pro forma information gives effect to certain adjustments, including purchase accounting fair value adjustments and amortization of the core deposit intangible asset. The pro forma information does not necessarily reflect the results of operations that would have occurred had the Company purchased and assumed the assets and liabilities of WHC on January 1, 2019. Cost savings are also not reflected in the unaudited pro forma amounts for the three and nine  months ended September 30, 2019 .       Three Months Ended     Nine Months Ended       September 30, 2019     September 30, 2019       (Dollars in Thousands, Except Per Share Data)     (Dollars in Thousands, Except Per Share Data)   Pro forma net income (1)                 Net interest income after loan loss provision   $ 9,720     $ 28,918   Noninterest income     8,709       18,484   Noninterest expense     12,913       35,785   Income before provision for income taxes     5,516       11,617   Income tax provision     1,103       2,323   Net income   $ 4,413     $ 9,294                     Pro forma earnings per share (1)                 Basic earnings per share   $ 0.69     $ 1.45   Diluted earnings per share   $ 0.68     $ 1.44                     Basic weighted average shares outstanding     6,403,693       6,420,711   Diluted weighted average shares outstanding     6,425,380       6,442,934     ( 1 ) Significant assumptions utilized include the acquisition cost noted above and a 20.00 % effective tax rate.   - 13 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)     NOTE 3.   INVESTMENT SECURITIES   Investment securities are summarized as follows:       September 30, 2020     December 31, 2019               Gross                     Gross               Amortized     Unrealized     Fair     Amortized     Unrealized     Fair       Cost     Gains     (Losses)     Value     Cost     Gains     (Losses)     Value       (In Thousands)   Available-for-Sale:                                                                 U.S. government obligations   $ 2,269     $ 39     $ -     $ 2,308     $ 686     $ 9     $ -     $ 695   U.S. treasury obligations     5,144       544       -       5,688       12,632       270       -       12,902   Municipal obligations     90,182       5,495       ( 6 )     95,671       50,699       1,616       ( 93 )     52,222   Corporate obligations     10,586       87       ( 9 )     10,664       8,356       40       ( 8 )     8,388   Mortgage-backed securities     8,156       146       ( 6 )     8,296       9,460       56       ( 21 )     9,495   Collateralized mortgage obligations     25,041       884       ( 3 )     25,922       33,129       297       ( 92 )     33,334   Asset-backed securities     17,166       15       ( 377 )     16,804       10,110       -       ( 271 )     9,839   Total   $ 158,544     $ 7,210     $ ( 401 )   $ 165,353     $ 125,072     $ 2,288     $ ( 485 )   $ 126,875     Proceeds from sales of available-for-sale securities and the associated gross realized gains and losses were as follows:       Three Months Ended     Nine Months Ended       September 30,     September 30,       2020     2019     2020     2019       (In Thousands)                                                     Proceeds from sale of available-for-sale securities   $ -     $ -     $ 18,149     $ 53,257                                     Gross realized gain on sale of available-for-sale securities   $ -     $ -     $ 1,068     $ 549   Gross realized loss on sale of available-for-sale securities     -       -       -       ( 500 ) Net realized gain on sale of available-for-sale securities   $ -     $ -     $ 1,068     $ 49     - 14 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)   NOTE 3.   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.       September 30, 2020       Amortized     Fair       Cost     Value       (In Thousands)                     Due in one year or less   $ 1,976     $ 1,987   Due from one to five years     16,793       17,517   Due from five to ten years     17,892       18,572   Due after ten years     88,686       93,059         125,347       131,135   Mortgage-backed securities     8,156       8,296   Collateralized mortgage obligations     25,041       25,922   Total   $ 158,544     $ 165,353     As of September 30, 2020 and December 31, 2019 securities with a fair value of $ 21,238,000  and $ 18,897,000 , respectively were pledged to secure public deposits and for other purposes required or permitted by law.   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:       September 30, 2020       Less Than 12 Months     12 Months or Longer               Gross             Gross       Fair     Unrealized     Fair     Unrealized       Value     Losses     Value     Losses       (In Thousands)   U.S. government obligations   $ -     $ -     $ -     $ -   U.S. treasury obligations     -       -       -       -   Municipal obligations     950       ( 6 )     -       -   Corporate obligations     3,241       ( 9 )     -       -   Mortgage-backed securities and collateralized mortgage obligations     1,748       ( 3 )     1,614       ( 6 ) Asset-backed securities     2,476       ( 14 )     9,555       ( 363 ) Total   $ 8,415     $ ( 32 )   $ 11,169     $ ( 369 )   - 15 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)   NOTE 3.   INVESTMENT SECURITIES – continued       December 31, 2019       Less Than 12 Months     12 Months or Longer               Gross             Gross       Fair     Unrealized     Fair     Unrealized       Value     Losses     Value     Losses       (In Thousands)   U.S. government obligations   $ -     $ -     $ -     $ -   U.S. treasury obligations     -       -       -       -   Municipal obligations     11,142       ( 93 )     -       -   Corporate obligations     -       -       992       ( 8 ) Mortgage-backed securities and collateralized mortgage obligations     9,868       ( 35 )     7,968       ( 78 ) Asset-backed securities     940       ( 33 )     8,900       ( 238 ) Total   $ 21,950     $ ( 161 )   $ 17,860     $ ( 324 )   Unrealized losses associated with investments are believed to be caused by changing market conditions, primarily spreads related to U.S. treasuries, that are considered to be temporary and the Company does not intend to sell the securities, and it is not likely to be required to sell these securities prior to maturity. Based on the Company’s evaluation of these securities, no other-than-temporary impairment was recorded for the three and   nine  months ended September 30, 2020 , or 2019 . As of September 30, 2020 and December 31, 2019 , there were, respectively, 21  and 28  securities in unrealized loss positions that were considered to be temporarily impaired and therefore an impairment charge has not been recorded.   As of September 30, 2020  and  December 31, 2019 , there were no U.S. government or U.S. treasury obligations with unrealized losses. As of September 30, 2020 ,  8  municipal obligations had unrealized losses of approximately 0.63 % of the amortized cost associated with these securities. At December 31, 2019 , 10  municipal obligations had unrealized losses of approximately 0.83 % of the amortized cost associated with these securities. As of September 30, 2020 , 3  corporate obligations had unrealized losses of approximately 0.28 % of the amortized cost associated with these securities. At December 31, 2019 , 1  corporate obligation had an unrealized loss of approximately 0.80 % of the amortized cost associated with these securities. As management has the ability to hold debt securities until maturity, or for the foreseeable future, no declines are deemed to be other than temporary.   As of September 30, 2020 , 2  mortgage-backed securities (“MBSs”) and collateralized mortgage obligations (“CMOs”) had unrealized losses of approximately 0.27 % of the amortized cost associated with these securities. At December 31, 2019 , 12  MBSs and CMOs had unrealized losses of approximately 0.63 % of the amortized cost associated with these securities. Management believes that these securities are only temporarily impaired due to changes in market interest rates or the widening of market spreads subsequent to the initial purchase of the securities, and not due to concerns regarding the underlying credit of the issuers or the underlying collateral.    As of September 30, 2020 , 8  asset-backed securities (“ABSs”) had unrealized losses of approximately 3.04 % of the amortized cost associated with these securities. At December 31, 2019 , 5  ABSs had unrealized losses of approximately 2.68 % of the amortized cost associated with these securities. Management believes that these securities are only temporarily impaired due to changes in market interest rates or the widening of market spreads subsequent to the initial purchase of the securities, and not due to concerns regarding the underlying credit of the issuers or the underlying collateral.    - 16 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)     NOTE 4.   LOANS RECEIVABLE   Loans receivable consisted of the following:       September 30,     December 31,       2020     2019       (In Thousands)   Real estate loans:                 Residential 1-4 family   $ 152,835     $ 157,898   Commercial real estate     432,473       434,025                     Other loans:                 Home equity     61,460       56,414   Consumer     20,694       18,882   Commercial     183,611       113,319                     Total     851,073       780,538                     Deferred loan fees, net     ( 2,595 )     ( 1,303 ) Allowance for loan losses     ( 11,300 )     ( 8,600 ) Total loans, net   $ 837,178     $ 770,635     Within the loan categories above, $ 11,274,000  and $ 13,602,000  was guaranteed by the United States Department of Agriculture Rural Development at September 30, 2020 and December 31, 2019 , respectively. Also within the loan categories above, $ 9,460,000  and $ 5,701,000  was guaranteed by the United States Department of Agriculture Farm Service Agency at September 30, 2020 and December 31, 2019 , respectively. In addition, $ 45,216,000  was guaranteed by the Small Business Administration ("SBA") under their Payroll Protection Program ("PPP") at September 30, 2020 . Deferred loan fees, net includes $ 1,207,000 of remaining deferred fees related to the PPP at September 30, 2020.    - 17 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)   NOTE 4.   LOANS RECEIVABLE – continued   Allowance for loan losses activity was as follows:       Residential     Commercial     Home                               1-4 Family     Real Estate     Equity     Consumer     Commercial     Total       (In Thousands)   Allowance for loan losses:                                                 Balance, July, 1 2020   $ 1,369     $ 6,096     $ 491     $ 371     $ 2,173     $ 10,500   Charge-offs     -       -       -       ( 14 )     ( 67 )     ( 81 ) Recoveries     -       2       -       2       23       27   Provision     92       623       13       9       117       854   Balance, September 30, 2020   $ 1,461     $ 6,721     $ 504     $ 368     $ 2,246     $ 11,300                                                     Allowance for loan losses:                                                 Balance, January 1, 2020   $ 1,301     $ 4,826     $ 477     $ 284     $ 1,712     $ 8,600   Charge-offs     -       ( 18 )     -       ( 25 )     ( 85 )     ( 128 ) Recoveries     -       10       -       13       54       77   Provision     160       1,903       27       96       565       2,751   Balance, September 30, 2020   $ 1,461     $ 6,721     $ 504     $ 368     $ 2,246     $ 11,300                                                     Balance, September 30, 2020 allocated to loans individually evaluated for impairment   $ 296     $ -     $ -     $ -     $ -     $ 296                                                     Balance, September 30, 2020 allocated to loans collectively evaluated for impairment   $ 1,165     $ 6,721     $ 504     $ 368     $ 2,246     $ 11,004                                                     Loans receivable:                                                 Balance, September 30, 2020   $ 152,835     $ 432,473     $ 61,460     $ 20,694     $ 183,611     $ 851,073                                                     Balance, September 30, 2020 of loans individually evaluated for impairment   $ 1,128     $ 3,998     $ 115     $ 163     $ 2,118     $ 7,522                                                     Balance, September 30, 2020 of loans collectively evaluated for impairment   $ 151,707     $ 428,475     $ 61,345     $ 20,531     $ 181,493     $ 843,551         Residential     Commercial     Home                               1-4 Family     Real Estate     Equity     Consumer     Commercial     Total       (In Thousands)   Allowance for loan losses:                                                 Balance, July, 1 2019   $ 1,301     $ 4,276     $ 477     $ 224     $ 1,472     $ 7,750   Charge-offs     -       -       -       ( 44 )     ( 208 )     ( 252 ) Recoveries     -       4       -       3       1       8   Provision     -       380       -       44       270       694   Balance, September 30, 2019   $ 1,301     $ 4,660     $ 477     $ 227     $ 1,535     $ 8,200                                                     Allowance for loan losses:                                                 Balance, January 1, 2019   $ 1,301     $ 3,593     $ 477     $ 190     $ 1,039     $ 6,600   Charge-offs     -       ( 20 )     ( 75 )     ( 57 )     ( 305 )     ( 457 ) Recoveries     -       13       -       18       31       62   Provision     -       1,074       75       76       770       1,995   Balance, September 30, 2019   $ 1,301     $ 4,660     $ 477     $ 227     $ 1,535     $ 8,200                                                     Balance, September 30, 2019 allocated to loans individually evaluated for impairment   $ -     $ -     $ -     $ -     $ -     $ -                                                     Balance, September 30, 2019 allocated to loans collectively evaluated for impairment   $ 1,301     $ 4,660     $ 477     $ 227     $ 1,535     $ 8,200                                                     Loans receivable:                                                 Balance, September 30, 2019   $ 143,067     $ 416,157     $ 56,537     $ 19,012     $ 119,952     $ 754,725                                                     Balance, September 30, 2019 of loans individually evaluated for impairment   $ 795     $ 1,370     $ 99     $ 142     $ 1,305     $ 3,711                                                     Balance, September 30, 2019 of loans collectively evaluated for impairment   $ 142,272     $ 414,787     $ 56,438     $ 18,870     $ 118,647     $ 751,014     - 18 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)   NOTE 4.   LOANS RECEIVABLE – continued   Internal classification of the loan portfolio was as follows:       September 30, 2020               Special                                       Pass     Mention     Substandard     Doubtful     Loss     Total       (In Thousands)   Real estate loans:                                                 Residential 1-4 family   $ 108,957     $ -     $ 865     $ 199     $ -     $ 110,021   Residential 1-4 family construction     42,477       -       337       -       -       42,814   Commercial real estate     304,205       1,633       2,647       -       -       308,485   Commercial construction and development     56,913       14       -       -       -       56,927   Farmland     65,399       136       1,473       53       -       67,061   Other loans:                                                 Home equity     61,345       -       115       -       -       61,460   Consumer     20,531       -       163       -       -       20,694   Commercial     121,769       829       705       -       -       123,303   Agricultural     58,617       446       814       431       -       60,308   Total   $ 840,213     $ 3,058     $ 7,119     $ 683     $ -     $ 851,073         December 31, 2019               Special                                       Pass     Mention     Substandard     Doubtful     Loss     Total       (In Thousands)   Real estate loans:                                                 Residential 1-4 family   $ 118,116     $ -     $ 1,180     $ -     $ -     $ 119,296   Residential 1-4 family construction     38,265       -       337       -       -       38,602   Commercial real estate     328,750       -       2,312       -       -       331,062   Commercial construction and development     52,620       -       50       -       -       52,670   Farmland     49,959       108       168       58       -       50,293   Other loans:                                                 Home equity     56,039       78       297       -       -       56,414   Consumer     18,694       -       188       -       -       18,882   Commercial     71,868       159       707       63       -       72,797   Agricultural     39,347       138       570       467       -       40,522   Total   $ 773,658     $ 483     $ 5,809     $ 588     $ -     $ 780,538     - 19 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)   NOTE 4.   LOANS RECEIVABLE – continued   The following tables include information regarding delinquencies within the loan portfolio.       September 30, 2020       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)   Real estate loans:                                                 Residential 1-4 family   $ 115     $ -     $ 115     $ 694     $ 109,212     $ 110,021   Residential 1-4 family construction     952       -       952       337       41,525       42,814   Commercial real estate     919       57       976       916       306,593       308,485   Commercial construction and development     -       -       -       -       56,927       56,927   Farmland     41       -       41       1,435       65,585       67,061   Other loans:                                                 Home equity     67       -       67       115       61,278       61,460   Consumer     43       -       43       163       20,488       20,694   Commercial     57       -       57       668       122,578       123,303   Agricultural     29       -       29       1,290       58,989       60,308   Total   $ 2,223     $ 57     $ 2,280     $ 5,618     $ 843,175     $ 851,073         December 31, 2019       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)   Real estate loans:                                                 Residential 1-4 family   $ 702     $ 4     $ 706     $ 618     $ 117,972     $ 119,296   Residential 1-4 family construction     260       -       260       337       38,005       38,602   Commercial real estate     793       -       793       583       329,686       331,062   Commercial construction and development     72       -       72       50       52,548       52,670   Farmland     1,039       -       1,039       476       48,778       50,293   Other loans:                                                 Home equity     420       -       420       98       55,896       56,414   Consumer     128       -       128       156       18,598       18,882   Commercial     484       -       484       824       71,489       72,797   Agricultural     702       1,805       2,507       499       37,516       40,522   Total   $ 4,600     $ 1,809     $ 6,409     $ 3,641     $ 770,488     $ 780,538     - 20 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)   NOTE 4.   LOANS RECEIVABLE – continued   The following tables include information regarding impaired loans.       September 30, 2020               Unpaid               Recorded     Principal     Related       Investment     Balance     Allowance       (In Thousands)   Real estate loans:                         Residential 1-4 family   $ 791     $ 850     $ 296   Residential 1-4 family construction     337       387       -   Commercial real estate     2,549       2,789       -   Commercial construction and development     14       14       -   Farmland     1,435       1,451       -   Other loans:                         Home equity     115       138       -   Consumer     163       191       -   Commercial     668       796       -   Agricultural     1,450       1,707       -   Total   $ 7,522     $ 8,323     $ 296         December 31, 2019               Unpaid               Recorded     Principal     Related       Investment     Balance     Allowance       (In Thousands)   Real estate loans:                         Residential 1-4 family   $ 618     $ 657     $ -   Residential 1-4 family construction     337       387       -   Commercial real estate     583       766       -   Commercial construction and development     50       225       -   Farmland     476       513       -   Other loans:                         Home equity     98       115       -   Consumer     156       169       -   Commercial     824       887       74   Agricultural     499       756       -   Total   $ 3,641     $ 4,475     $ 74     - 21 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)   NOTE 4.   LOANS RECEIVABLE – continued       Three Months Ended     Nine Months Ended       September 30,     September 30,       2020     2019     2020     2019       Average Recorded Investment     Average Recorded Investment       (In Thousands)     (In Thousands)   Real estate loans:                                 Residential 1-4 family   $ 860     $ 401     $ 704     $ 355   Residential 1-4 family construction     337       337       337       486   Commercial real estate     2,561       787       1,565       663   Commercial construction and development     54       -       32       7   Farmland     1,345       476       956       238   Other loans:                                 Home equity     153       149       107       295   Consumer     181       137       160       134   Commercial     731       768       746       551   Agricultural     1,470       615       975       272   Total   $ 7,692     $ 3,670     $ 5,582     $ 3,001     Interest income recognized on impaired loans for the three and nine months ended September 30, 2020 and 2019  is considered insignificant. Interest payments received on a cash basis related to impaired loans were $ 485,000  and $ 394,000  for September 30, 2020 and December 31, 2019 , respectively.   As of September 30, 2020 and December 31, 2019 , there were troubled debt restructured (“TDR”) loans of $ 1,825,000  and $ 246,000 , respectively.   During the three months ended September 30, 2020 , there were no new TDR loans. During the nine  months ended September 30, 2020 there were a total of three new TDR loans. The recorded investment at time of restructure was $ 94,000 for a commercial construction and development loan, $ 1,633,000 for a commercial real estate loan and $ 160,000 for an agricultural loan. No charge-offs were incurred and the loans are on accrual status. The recorded investments were $ 14,000 , $ 1,633,000 and $ 160,000 , respectively at September 30, 2020 . There were no new TDR loans during the three or nine  months ended September 30, 2019 .    There was  one  loan modified as a TDR that defaulted during the three and nine months ended September 30, 2020 where the default occurred within 12 months of restructuring. As a result, a charge-off of $ 67,000 was incurred on this loan during the third quarter bringing the net book balance to $ 0 . A default for purposes of this disclosure is a TDR loan in which the borrower is 90 days past due or results in the foreclosure and repossession of the applicable collateral.   As of September 30, 2020 , the Company had no commitments to lend additional funds to loan customers whose terms had been modified in troubled debt restructures.   The Company has offered borrowers accommodations due to the impact from COVID- 19, including 90 -day deferrals, interest only payments and forbearances, which are not considered TDR's as they met the criteria established in the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"). In addition, during the three months ended September 30, 2020, the Montana Board of Investments ("MBOI") began offering 12 -months of interest payment assistance to 26 qualified borrowers. As of September 30, 2020 , loan modifications for 90 -day deferrals, interest only payments and the MBOI program included 66 borrowers representing $ 55,210,000 in loans compared to 315 borrowers representing $ 125,713,000 as of June 30, 2020. As of September 30, 2020, there were approximately 76 forbearances approved for residential mortgage loans, of which 68 are sold and serviced.   - 22 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)     NOTE 5 .   MORTGAGE SERVICING RIGHTS   The Company is servicing mortgage loans for the benefit of others which are not included in the consolidated statements of financial condition and have unpaid principal balances of $ 1,395,326,000  and $ 1,169,869,000  at September 30, 2020 and December 31, 2019 , respectively. Servicing loans for others generally consists of collecting mortgage payments, maintaining escrow accounts, disbursing payments to investors and foreclosure processing. Mortgage loan servicing fees were $ 815,000  and $ 671,000  for the three months ended September 30, 2020 and 2019 , respectively. Mortgage loan servicing fees were $ 2,320,000  and $ 1,918,000  for the nine  months ended September 30, 2020 and 2019 , respectively. These fees, net of amortization, are included in mortgage banking, net which is a component of noninterest income on the consolidated statements of income.   Custodial balances maintained in connection with the foregoing loan servicing, and included in noninterest checking deposits, were $ 16,253,000  and $ 8,402,000  at September 30, 2020 and December 31, 2019 , respectively.   The following table is a summary of activity in mortgage servicing rights:       As of or For the       Three Months Ended       September 30,       2020     2019       (In Thousands)   Mortgage servicing rights:                 Beginning balance   $ 9,550     $ 7,666   Mortgage servicing rights capitalized     1,700       1,030   Amortization of mortgage servicing rights     ( 854 )     ( 478 ) Ending balance   $ 10,396     $ 8,218   Valuation allowance:                 Beginning balance     ( 1,216 )     -   Recovery of servicing rights     338       -   Ending balance     ( 878 )     -   Mortgage servicing rights, net   $ 9,518     $ 8,218         As of or For the       Nine Months Ended       September 30,       2020     2019       (In Thousands)   Mortgage servicing rights:                 Beginning balance   $ 8,739     $ 7,100   Mortgage servicing rights capitalized     4,133       2,231   Amortization of mortgage servicing rights     ( 2,476 )     ( 1,113 ) Ending balance   $ 10,396     $ 8,218   Valuation allowance:                 Beginning balance     -       -   Impairment of servicing rights     ( 878 )     -   Ending balance     ( 878 )     -   Mortgage servicing rights, net   $ 9,518     $ 8,218     After an impairment expense on mortgage servicing rights assets of $ 1,216,000 was recorded for the six  months ended June 30, 2020, a recovery of $ 338,000 was recorded for the three months ended  September 30, 2020  as a result of slower than expected prepayment speed assumptions. Impairment of servicing rights is included in other noninterest expense on the consolidated statements of income.    The fair values of these rights were $ 9,518,000  and $ 9,835,000  at September 30, 2020 and December 31, 2019 , respectively. The fair value of servicing rights was determined at loan level, depending on the interest rate and term of the specific loan, using the following valuation assumptions:       September 30,     December 31,       2020     2019   Key assumptions:             Discount rate   12 %     12 %   Prepayment speed range   234 - 337 %     110 - 246 %   Weighted average prepayment speed   289 %     171 %     - 23 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)     NOTE 6 .   DEPOSITS   Deposits are summarized as follows:       September 30,     December 31,       2020     2019       (In Thousands)                     Noninterest checking   $ 295,058     $ 200,035   Interest bearing checking     155,671       116,397   Savings     169,981       126,991   Money market     187,245       132,506   Time certificates of deposit     190,375       233,064   Total   $ 998,330     $ 808,993     Time certificates of deposits include $ 495,000  and $ 10,180,000  related to fixed rate brokered CDs at September 30, 2020 and December 31, 2019 , respectively. In addition, time certificates of deposits include $ 0  and $ 16,000,000  related to fixed rate brokered certificates through the Certificate of Deposit Account Registry Service (“CDARS”) at September 30, 2020 and December 31, 2019 , respectively.     NOTE 7 .   OTHER LONG-TERM DEBT   Other long-term debt consisted of the following:       September 30, 2020     December 31, 2019               Unamortized             Unamortized               Debt             Debt       Principal     Issuance     Principal     Issuance       Amount     Costs     Amount     Costs       (In Thousands)                                     Senior notes fixed at 5.75% , due 2022   $ 10,000     $ ( 59 )   $ 10,000     $ ( 92 ) Subordinated debentures fixed at 6.75% , due 2025     -       -       10,000       ( 122 ) Subordinated debentures fixed at 5.50% to floating, due 2030     15,000       ( 324 )     -       -   Subordinated debentures variable at 3-Month Libor plus 1.42% , due 2035     5,155       -       5,155       -   Total other long-term debt   $ 30,155     $ ( 383 )   $ 25,155     $ ( 214 )   In June 2020, the Company completed the issuance of $ 15,000,000 in aggregate principal amount of subordinated notes due in 2030  in a private placement transaction to certain qualified institutional accredited investors. The notes will bear interest at an annual fixed rate of 5.50 % payable semi-annually. Starting July 1, 2025,  interest will accrue at a floating rate per annum equal to a benchmark rate, which is expected to be three -month term Secured Overnight Financing Rate ("SOFR") plus a spread of 509.0 basis points, payable quarterly. The notes are subject to redemption at the option of the Company on or after July 1, 2025.   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 had an annual fixed interest rate of 6.75% and interest was paid quarterly through redemption. The notes were subject to redemption at the option of the Company on or after June 19, 2020.  The notes were redeemed on July 10, 2020.   - 24 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)   NOTE 7.   OTHER LONG-TERM DEBT – continued   In September 2005, the Company completed the private placement of $ 5,155,000 in subordinated debentures to 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 three -month LIBOR plus 1.42%, making the rate 1.654 % and 3.328 % as of September 30, 2020 and December 31, 2019 , 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.     NOTE 8. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)   The following table includes information regarding the activity in accumulated other comprehensive income (loss).               Unrealized               Unrealized     Gains (Losses)               Gains (Losses)     on Investment               on Loans     Securities               Held-for-Sale     Available-for-Sale     Total               (In Thousands)           Balance, January 1, 2020   $ -     $ 1,329     $ 1,329   Other comprehensive income, before reclassifications and income taxes     -       4,811       4,811   Amounts reclassified from accumulated other comprehensive income, before income taxes     -       ( 1,068 )     ( 1,068 ) Income tax provision     -       ( 986 )     ( 986 ) Total other comprehensive income     -       2,757       2,757   Balance, June 30, 2020     -       4,086       4,086   Other comprehensive income, before reclassifications and income taxes     -       1,263       1,263   Amounts reclassified from accumulated other comprehensive income, before income taxes     -       -       -   Income tax provision     -       ( 332 )     ( 332 ) Total other comprehensive income     -       931       931   Balance, September 30, 2020   $ -     $ 5,017     $ 5,017                             Balance, January 1, 2019   $ 227     $ ( 1,338 )   $ ( 1,111 ) Other comprehensive income, before reclassifications and income taxes     296       3,451       3,747   Amounts reclassified from accumulated other comprehensive income (loss), before income taxes     ( 605 )     ( 49 )     ( 654 ) Income tax benefit (provision)     82       ( 896 )     ( 814 ) Total other comprehensive (loss) income     ( 227 )     2,506       2,279   Balance, June 30, 2019     -       1,168       1,168   Other comprehensive income, before reclassifications and income taxes     -       1,166       1,166   Amounts reclassified from accumulated other comprehensive income, before income taxes     -       -       -   Income tax provision     -       ( 307 )     ( 307 ) Total other comprehensive income     -       859       859   Balance, September 30, 2019   $ -     $ 2,027     $ 2,027     - 25 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)     NOTE 9.   EARNINGS PER SHARE   The computations of basic and diluted earnings per share are as follows:       Three Months Ended     Nine Months Ended       September 30,     September 30,       2020     2019     2020     2019       (Dollars in Thousands, Except Per Share Data)                                     Basic weighted average shares outstanding     6,776,417       6,403,693       6,804,495       6,420,711   Dilutive effect of stock compensation     37,322       21,687       29,434       22,223   Diluted weighted average shares outstanding     6,813,739       6,425,380       6,833,929       6,442,934                                     Net income available to common shareholders   $ 6,380     $ 4,105     $ 16,042     $ 8,535                                     Basic earnings per common share   $ 0.94     $ 0.64     $ 2.36     $ 1.33                                     Diluted earnings per common share   $ 0.94     $ 0.63     $ 2.35     $ 1.32     There were no anti-dilutive shares at September 30, 2020 and December 31, 2019 .     NOTE 10.   DIVIDENDS AND STOCK REPURCHASE PROGRAM   Dividends   For the year ended December 31, 2019 , Eagle paid dividends of $ 0.0925  per share for the quarters ended March 31 and June 30, 2019. Eagle paid dividends of $ 0.0950  per share for the quarters ended September 30 and December 31, 2019 . A dividend of $ 0.0950  per share was declared on January 23, 2020  and paid on March 6, 2020  to shareholders of record on February 14, 2020 . A dividend of $0.0950  per share was declared on April 23, 2020  and paid on  June 5, 2020  to shareholders of record on May 15, 2020 . A dividend of $ 0.0975  per share was declared on July 23, 2020  and paid on  September 4, 2020  to shareholders of record on August 14, 2020 . A dividend of  $0.0975  per share was declared on  October 22, 2020 , payable on  December 4, 2020 to shareholders of record on November 13, 2020 .   Stock Repurchase Program   On July 23, 2020 , Eagle's Board of Directors (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. During the third quarter of  2020 , the Company purchased 41,337  shares at an average price of $ 15.75  under this repurchase plan. The plan expires on July 23, 2021 .   On July 18, 2019, the Board authorized the repurchase of up to 100,000 shares of its common stock. Under the plan, shares could be purchased by the Company on the open market or in privately negotiated transactions. The extent to which the company repurchased its shares and the timing of such repurchase depended upon market conditions and other corporate considerations. No shares were purchased under this plan during the year ended December 31, 2019 or the first quarter of 2020 . However, during the second quarter of 2020 , 1,281  shares were purchased at an average price of $ 16.95  per share. In addition, during the third quarter of 2020, 20,158 shares were purchased at an average price of $ 15.60 per share. This plan expired on July 18, 2020.   On July 19, 2018, the Board authorized the repurchase of up to 100,000 shares of its common stock. Under the plan, shares could be purchased by the Company on the open market or in privately negotiated transactions. The extent to which the company repurchased its shares and the timing of such repurchase depended upon market conditions and other corporate considerations. No shares were purchased under this plan during the year ended December 31, 2018 . However, during the first quarter of 2019 , 42,000 shares were purchased at an average price of $ 17.43 per share. In addition, 28,000 shares were purchased during the second quarter of 2019 at an average price of $ 17.09 per share. This plan expired on July 19, 2019.   - 26 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)     NOTE 11. DERIVATIVES AND HEDGING ACTIVITIES     The Company enters into commitments to originate and sell mortgage loans. The Bank uses derivatives to hedge the risk of changes in fair values of interest rate lock commitments and mortgage loans held-for-sale. An optimal amount of mortgage loans are sold directly into bulk commitments with investors at the time an interest rate is locked, other loans are sold on an individual best efforts basis at the time an interest rate is locked, and the remaining balance of locked loans are hedged using To-Be-Announced (“TBA”) mortgage-backed securities or bulk mandatory forward loan sale commitments.   Derivatives are accounted for as free-standing or economic derivatives and are measured at fair value. Derivatives are recorded as either other assets or other liabilities on the consolidated statements of condition.   Derivatives are summarized as follows:       September 30, 2020     December 31, 2019       Notional     Fair Value     Notional     Fair Value       Amount     Asset     Liability     Amount     Asset     Liability       (In Thousands)   Interest rate lock commitments   $ 280,492     $ 7,148     $ -     $ 48,303     $ 554     $ -   Forward TBA mortgage-backed securities     226,000       -       432       67,000       -       201     Changes in the fair value of the derivatives are recorded in mortgage banking, net within noninterest income on the consolidated statements of income. Net gains of $ 2,961,000  and $ 1,393,000  were recorded for the three months ended September 30, 2020 and 2019 , respectively. Net gains of $ 6,363,000  and $ 864,000  were recorded for the nine  months ended September 30, 2020 and 2019 , respectively.   - 27 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)     NOTE 1 2 . FAIR VALUE OF FINANCIAL INSTRUMENTS   Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.    Assets and liabilities that are measured at fair value are grouped in three levels within the fair value hierarchy based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.   The fair value hierarchy is as follows:   ■ Level 1 Inputs – Valuations are based on unadjusted quoted prices in active markets for identical assets or liabilities.   ■ Level 2 Inputs – Valuations are based on quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuations for which all significant assumptions are observable or can be corroborated by observable market data.   ■ Level 3 Inputs – Valuations are based on unobservable inputs that may include significant management judgment and estimation.   A description of the valuation methodologies used for assets and liabilities measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy at the reporting date, is set forth below.   Available-for-Sale Securities – Securities classified as available-for-sale are reported at fair value utilizing Level 1 (nationally recognized securities exchanges) and Level 2 inputs. For level 2 securities, the Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include but is not limited to dealer quotes, market spreads, cash flows, the U. S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayments speeds, credit information and the bond’s terms and conditions.   Loans Held-for-Sale – These loans are reported at fair value. Fair value is determined based on expected proceeds based on committed sales contracts and commitments of similar loans if not already committed and are considered Level 2 inputs.   Derivative Instruments  – The fair value of the interest rate lock commitments, forward TBA mortgage-backed securities and mandatory forward commitments are estimated using quoted or published market prices for similar instruments and adjusted for factors such as pull-through rate assumptions based on historical information, where appropriate. Interest rate lock commitments are considered Level 3 inputs and forward TBA mortgage-backed securities and mandatory forward commitments are considered Level 2 inputs.   Impaired Loans – Impaired loans are reported at the fair value of the underlying collateral if repayment is expected solely from the collateral or using a discounted cash flow if the loan is not collateral dependent. Collateral values are estimated using Level 3 inputs based on internally customized discounting criteria.   Real Estate and Other Repossessed Assets – Fair values are determined at the time the loan is foreclosed upon and the asset is transferred from loans. The value is based primarily on third party appraisals, less costs to sell and are considered Level 3 inputs for determining fair value. Repossessed assets are reviewed and evaluated periodically for additional impairment and adjusted accordingly.   Mortgage Servicing Rights – The fair value of mortgage servicing rights are estimated using net present value of expected cash flows based on a third party model that incorporates industry assumptions and is adjusted for factors such as prepayments speeds and are considered level 3 inputs.   - 28 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)   NOTE 12. FAIR VALUE OF FINANCIAL INSTRUMENTS – 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.       September 30, 2020       Level 1     Level 2     Level 3     Total Fair       Inputs     Inputs     Inputs     Value       (In Thousands)   Financial assets:                                 Available-for-sale securities                                 U.S. government obligations     -     $ 2,308     $ -     $ 2,308   U.S. treasury obligations     5,688       -       -       5,688   Municipal obligations     -       95,671       -       95,671   Corporate obligations     -       10,664       -       10,664   Mortgage-backed securities     -       8,296       -       8,296   Collateralized mortgage obligations     -       25,922       -       25,922   Asset-backed securities     -       16,804       -       16,804   Loans held-for-sale     -       41,484       -       41,484   Interest rate lock commitments     -       -       7,148       7,148   Financial liabilities:                                 Forward TBA mortgage-backed securities     -       432       -       432         December 31, 2019       Level 1     Level 2     Level 3     Total Fair       Inputs     Inputs     Inputs     Value       (In Thousands)   Financial assets:                                 Available-for-sale securities                                 U.S. government obligations     -     $ 695     $ -     $ 695   U.S. treasury obligations     12,902       -       -       12,902   Municipal obligations     -       52,222       -       52,222   Corporate obligations     -       8,388       -       8,388   Mortgage-backed securities     -       9,495       -       9,495   Collateralized mortgage obligations     -       33,334       -       33,334   Asset-backed securities     -       9,839       -       9,839   Loans held-for-sale     -       25,612       -       25,612   Interest rate lock commitments     -       -       554       554   Financial liabilities:                                 Forward TBA mortgage-backed securities     -       201       -       201     - 29 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)   NOTE 12. FAIR VALUE OF FINANCIAL INSTRUMENTS – continued   Certain financial assets may be measured at fair value on a nonrecurring basis. These assets are subject to fair value adjustments that result from the application of lower of cost or fair value accounting or write-downs of individual assets, such as impaired loans that are collateral dependent, real estate and other repossessed assets and mortgage servicing rights.   The following table summarizes financial assets measured at fair value on a nonrecurring basis for which a nonrecurring change in fair value has been recorded during the reporting periods presented:       September 30, 2020       Level 1     Level 2     Level 3     Total Fair       Inputs     Inputs     Inputs     Value       (In Thousands)   Impaired loans   $ -     $ -     $ 482     $ 482   Real estate and other repossessed assets     -       -       -       -   Mortgage servicing rights     -       -       9,518       9,518           December 31, 2019       Level 1     Level 2     Level 3     Total Fair       Inputs     Inputs     Inputs     Value       (In Thousands)   Impaired loans   $ -     $ -     $ 491     $ 491   Real estate and other repossessed assets     -       -       25       25   Mortgage servicing rights     -       -       -       -     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.       Principal   Significant   Range of     Valuation   Unobservable   Signficant Input Instrument   Technique   Inputs   Values               Impaired loans   Fair value of underlying collateral   Discount applied to the obtained appraisal   10 - 30 % Real estate and other repossessed assets   Fair value of collateral   Discount applied to the obtained appraisal   10 - 30 % Mortgage servicing rights   Discounted cash flows   Discount rate   10 - 15 %         Prepayment speeds   100 - 350 % Interest rate lock commitments   Internal pricing model   Pull-through expectations   80 - 90 %   - 30 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)   NOTE 12. FAIR VALUE OF FINANCIAL INSTRUMENTS – continued   The following tables provide a reconciliation of assets and liabilities measured at fair value using significant unobservable inputs (Level 3 ) on a recurring basis during the three and nine  months ended September 30, 2020 .       Interest       Rate Lock       Commitments       (In Thousands)   Balance, July, 1 2020   $ 5,501   Purchases and issuances     8,360   Sales and settlements     ( 6,713 ) Balance, September 30, 2020   $ 7,148             Net change in unrealized gains relating to items held at end of period   $ 1,647         Interest       Rate Lock       Commitments       (In Thousands)   Balance, January 1, 2020   $ 554   Purchases and issuances     21,061   Sales and settlements     ( 14,467 ) Balance, September 30, 2020   $ 7,148             Net change in unrealized gains relating to items held at end of period   $ 6,594     - 31 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)   NOTE 12. FAIR VALUE OF FINANCIAL INSTRUMENTS – continued   The tables below summarize the estimated fair values of financial instruments of the Company, whether or not recognized at fair value on the consolidated statements of condition. The tables are followed by methods and assumptions that were used by the Company in estimating the fair value of the classes of financial instruments.       September 30, 2020                               Total               Level 1     Level 2     Level 3     Estimated     Carrying       Inputs     Inputs     Inputs     Fair Value     Amount       (In Thousands)   Financial assets:                                         Cash and cash equivalents   $ 72,811     $ -     $ -     $ 72,811     $ 72,811   FHLB stock     2,817       -       -       2,817       2,817   FRB stock     2,974       -       -       2,974       2,974   Loans receivable, gross     -       -       857,472       857,472       848,478   Accrued interest and dividends receivable     6,615       -       -       6,615       6,615   Mortgage servicing rights     -       -       9,518       9,518       9,518   Financial liabilities:                                         Non-maturing interest bearing deposits     -       512,897       -       512,897       512,897   Noninterest bearing deposits     295,058       -       -       295,058       295,058   Time certificates of deposit     -       -       191,384       191,384       190,375   Accrued expenses and other liabilities     17,987       -       -       17,987       17,987   FHLB advances and other borrowings     -       -       59,998       59,998       59,777   Other long-term debt     -       -       29,323       29,323       30,155         December 31, 2019                               Total               Level 1     Level 2     Level 3     Estimated     Carrying       Inputs     Inputs     Inputs     Fair Value     Amount       (In Thousands)   Financial assets:                                         Cash and cash equivalents   $ 24,918     $ -     $ -     $ 24,918     $ 24,918   FHLB stock     4,683       -       -       4,683       4,683   FRB stock     2,526       -       -       2,526       2,526   Loans receivable, gross     -       -       778,923       778,923       779,235   Accrued interest and dividends receivable     4,577       -       -       4,577       4,577   Mortgage servicing rights     -       -       9,835       9,835       8,739   Financial liabilities:                                         Non-maturing interest bearing deposits     -       375,894       -       375,894       375,894   Noninterest bearing deposits     200,035       -       -       200,035       200,035   Time certificates of deposit     -       -       233,041       233,041       233,064   Accrued expenses and other liabilities     9,624       -       -       9,624       9,624   FHLB advances and other borrowings     -       -       88,447       88,447       88,350   Other long-term debt     -       -       24,661       24,661       25,155     - 32 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)     NOTE 1 3 . RECENT ACCOUNTING PRONOUNCEMENTS   Recently Adopted Accounting Pronouncements   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 requires 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 requires qualitative and quantitative disclosures providing additional information about the amounts recorded in the financial statements. The amendments in this update were effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years and was adopted by the Company in the first quarter of 2019. The adoption of the standard did not have a significant impact on our consolidated financial statements. The Company’s operating leases primarily relate to branch locations. We currently lease six locations that are full-service branches and one mortgage lending branch. The leases expire on various dates through 2028. As a result of adopting the lease standard on January 1, 2019, the Company recorded right-of-use assets of $ 2,374,000 and corresponding lease liabilities. The right-of-use assets are included in premises and equipment, net and the lease liabilities are included in accrued expenses and other liabilities on the consolidated statement of financial condition.   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. The adoption of this standard in the first quarter of 2019  did not have a significant impact on our consolidated financial statements, as we typically do not invest in these types of securities.   In August 2018, the FASB issued ASU No. 2018 - 13,  Fair Value Measurement (Topic 820 ) to remove disclosure requirements that no longer are considered cost beneficial, modify/clarify specific requirements of certain disclosures and add disclosure requirements identified as relevant. The amendment became effective for the Company on January 1, 2020 and did not have a significant impact on the consolidated financial statements.   Recently Issued Accounting Pronouncements     In September 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.   In October 2019, the FASB amended the effective date of the standard. The amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. An entity will apply the amendments in this update through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (that is, a modified-retrospective approach).   - 33 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)   NOTE 13.  RECENT ACCOUNTING PRONOUNCEMENTS – continued   The Company believes the amendments in this update will have an impact on the Company’s consolidated financial statements and is continuing to evaluate the significance of that impact, even though the adoption date has been deferred. In that regard, we have established a working group composed of individuals from the finance and credit administration areas of the Company. We are currently developing an implementation plan, including assessment of processes, segmentation of the loan portfolio and identifying and adding data fields necessary for analysis. The adoption of this standard is likely to result in an increase in the allowance for loan and lease losses as a result of changing from an “incurred loss” model to an “expected loss” model. While we currently cannot reasonably estimate the impact of adopting this standard, we expect the impact will be influenced by the composition, characteristics and quality of our loan and securities portfolios, as well as the general economic conditions and forecasts as of the adoption date.   In January 2017, the FASB issued ASU No. 2017 - 04, Intangibles – Goodwill and Other (Topic 350 ) to amend and simplify current goodwill impairment testing to eliminate Step 2 from the current provisions. Under the new guidance, an entity should perform the goodwill impairment test by comparing the fair value of a reporting unit with its carrying value and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if a quantitative impairment test is necessary. The guidance is effective for the Company on January 1, 2023 and adoption of the standard is being evaluated to assess the impact on the Company’s consolidated financial statements.   In March 2020, the FASB issued ASU No. 2020 - 04, Reference Rate Reform (Topic 848 ) which provides temporary optional expedients to ease the financial reporting burdens of the expected market transition from London Interbank Offered Rate (“LIBOR”) to an alternative reference rate such as SOFR. The guidance was effective upon issuance and generally can be applied through December 31, 2022. The Bank is currently evaluating this guidance to determine the date of adoption and the potential impact.   - 34 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS     Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations   Overview     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 both consumer and commercial lending. It engages in typical banking activities: acquiring deposits from local markets and originating loans and investing in securities. The Bank’s primary component of earnings is its net interest margin (also called spread or margin), the difference between interest income and interest expense. The net interest margin is managed by management (through the pricing of its products and by the types of products offered and kept in portfolio), and is affected by changes in market interest rates. The Bank also generates noninterest income in the form of fee income and gain on sale of loans.   The Bank has a strong mortgage lending focus, with a large portion of its loan originations represented by single-family residential mortgages, which has enabled it to successfully market home equity loans, as well as a wide range of shorter term consumer loans for various personal needs (automobiles, recreational vehicles, etc.). In recent years, the Bank has also focused on adding commercial loans to its portfolio, both real estate and non-real estate. We have made significant progress in this initiative. The purpose of this diversification is to mitigate the Bank’s dependence on the residential mortgage market, as well as to improve its ability to manage its spread. Recent acquisitions have added to our agricultural loans, which generally have shorter maturities and nominally higher interest rates. This has provided additional interest income and improved interest rate sensitivity. The Bank’s management recognizes that fee income will also enable it to be less dependent on specialized lending and it now maintains a significant loan serviced portfolio which provides a steady source of fee income. Fee income is also supplemented with fees generated from the Bank’s deposit accounts. The Bank has a high percentage of non-maturity deposits, such as checking accounts and savings accounts, which allows management flexibility in managing its spread. Non-maturity deposits and certificates of deposits do not automatically reprice as interest rates rise. Gain on sale of loans also provides significant noninterest income in periods of high mortgage loan origination volumes. Such income will be adversely affected in periods of lower mortgage activity.   The Company previously offered wealth management services through financial advisors employed by the Bank. Income from wealth management services was included in noninterest income on the consolidated statement of income. The company discontinued its wealth management services during July of 2019.   Management continues to focus on improving the Bank’s earnings. Management believes the Bank needs to continue to concentrate on increasing net interest margin, other areas of fee income and control of operating expenses to achieve earnings growth going forward. Management’s strategy of growing the bank’s loan portfolio and deposit base is expected to help achieve these goals as follows: loans typically earn higher rates of return than investments; a larger deposit base should yield higher fee income; increasing the asset base will reduce the relative impact of fixed operating costs. The biggest challenge to the strategy is funding the growth of the Bank’s balance sheet in an efficient manner. Though deposit growth has been steady, it may become more difficult to maintain due to significant competition and possible reduced customer demand for deposits as customers may shift into other asset classes.   The level and movement of interest rates impacts the Bank’s earnings as well. The Federal Open Market Committee changed the federal funds target rate from 2.50% to 1.75% during the year ended December 31, 2019. The rate decreased from 1.75% to 0.25% during the nine months ended September 30, 2020. The rate reductions add continued pressure on loan yields.   Recent Events   COVID-19   The third quarter performance was strong due to higher mortgage banking operations, as a result of a historically low interest rate environment, and substantial gains from loan sales. However, the Company also continues to see the impact of the COVID-19 pandemic and its consequences on our Montana communities. The Bank is focused on supporting our customers, communities and employees while prudently managing risk. The Bank is closely monitoring borrowers and businesses serviced and is providing debt service relief for those that have been impacted.   Health care and social assistance, hotels and lodging, bars and restaurants, schools and childcare, farmers and ranchers, casinos, and nursing homes, among others, have seen dramatic changes in revenues for their business. The Bank evaluates exposure in the most affected industries. The Bank continues to reach out to specific borrowers to assess the risks and understand their needs.   - 35 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS   Recent Events – continued   COVID-19 – continued   The Bank has offered multiple accommodation options to its clients, including 90-day deferrals, forbearances and interest only payments. In addition, during the three months ended September 30, 2020, the Montana Board of Investments ("MBOI") began offering 12-months of interest payment assistance to qualified borrowers. As of September 30, 2020, loan modifications for 66 borrowers represented $55.21 million in loans compared to 315 borrowers representing $125.71 million as of June 30, 2020. The Bank qualified 26 borrowers for the MBOI program representing $23.68 million in loans, which are included in the third quarter modifications. As of September 30, 2020 there were approximately 76 forbearances approved for residential mortgage loans, of which 68 are sold and serviced. Our interest income in future periods could be reduced as a result of such measures. In addition, it is possible that our asset quality measures could worsen at future measurement periods if the effects of COVID-19 are prolonged. Utilization of credit lines were 83.4% at the end of the third quarter and were consistent with the previous quarter and historical usage. The Paycheck Protection Program has provided some temporary relief to small business customers of Eagle but the extent of the impact the pandemic will have on businesses’ ability to sustain operations is unclear at this point. Eagle will continue to closely monitor each of its loans for risk.   Our fee income could be reduced due to COVID-19. In keeping with guidance from regulators, we are actively working with COVID-19 affected customers to waive fees from a variety of sources, such as, but not limited to, insufficient funds and overdraft fees, early withdrawal fees, ATM fees, account maintenance fees, etc. These reductions in fees are thought, at this time, to be temporary in conjunction with the length of the expected COVID-19 related economic crisis. At this time, we are unable to project the materiality of such an impact, but recognize the breadth of the economic impact is likely to impact our fee income in future periods.   On March 27, 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) providing economic relief for the country, including the $349 billion Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”) to fund short-term loans for small businesses. In April 2020, additional funding was approved for the PPP. Eagle began taking loan applications from its small business clients immediately after the program was implemented, and as of September 30, 2020, had helped 758 customers receive $45.22 million in SBA PPP loans. The Bank has started to process applications for PPP loan forgiveness for customers, with 569 loans representing $9.92 million of the total SBA PPP loans qualifying for the streamlined PPP loan forgiveness application.   As of September 30, 2020, all of our capital ratios, and our subsidiary bank’s capital ratios, were in excess of all regulatory requirements. While we believe that we have sufficient capital to withstand an extended economic recession brought about by COVID-19, our reported and regulatory capital ratios could be adversely impacted by further credit losses. We rely on cash on hand as well as dividends from our subsidiary bank to service our debt. If our capital deteriorates such that our subsidiary bank is unable to pay dividends to us for an extended period of time, we may not be able to service our debt.   While certain valuation assumptions and judgments will change to account for pandemic-related circumstances such as widening credit spreads, we do not anticipate significant changes in methodology used to determine the fair value of assets measured in accordance with GAAP.   As of September 30, 2020, our goodwill was not impaired. COVID-19 could cause a further and sustained decline in our stock price or the occurrence of what management would deem to be a triggering event that could, under certain circumstances, cause us to perform a goodwill impairment test and result in an impairment charge being recorded for that period. In the event that we conclude that all or a portion of our goodwill is impaired, a non-cash charge for the amount of such impairment would be recorded to earnings. Such a charge would have no impact on tangible capital or regulatory capital. At September 30, 2020 we had goodwill of $20.80 million.   While all industries have and will continue to experience adverse impacts as a result of the COVID-19 pandemic, we had exposures in the following impacted industries, as a percentage of loans as of September 30, 2020:  health and social assistance (2.9%), hotels and lodging (4.2%), bars and restaurants (2.5%), casinos (1.2%) and nursing homes (0.4%).     The Company is committed to assisting our customers and communities in this time of need. The State of Montana entered its Phase 2 reopening on June 1, 2020 and Eagle reopened branch lobbies. However, due to increased COVID-19 cases throughout the state, branch lobbies were closed again. In addition, effective July 16, 2020, a mandatory mask directive for indoor areas open to the public was implemented for the State of Montana. Accommodations have been made for employees to work from home when feasible while keeping drive-ups open and scheduling in-person appointments.   - 36 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS   Recent Events – continued   Acquisitions   The Bank has used growth through mergers or acquisition in addition to its strategy of organic growth. In August 2018, the Company entered into an Agreement and Plan of Merger with Big Muddy Bancorp, Inc. (“BMB”), a Montana corporation, and BMB’s wholly-owned subsidiary, The State Bank of Townsend, a Montana chartered commercial bank (“SBOT”). SBOT operated four branches in Townsend, Dutton, Denton and Choteau, Montana. The transaction provided an opportunity to expand market presence and lending activities, throughout the state. On January 1, 2019, BMB merged with and into Eagle, with Eagle continuing as the surviving corporation. The total consideration paid was $16.44 million and it was primarily related to common stock issued.   On August 8, 2019, Eagle and OBMT, entered into an Agreement and Plan of Merger with Western Holding Company of Wolf Point (“WHC”), a Montana corporation, and WHC’s wholly-owned subsidiary, Western Bank of Wolf Point (“WB”), a Montana chartered commercial bank. The Merger Agreement provided that, upon the terms and subject to the conditions set forth in the Merger Agreement, WHC would merge with and into Eagle, with Eagle continuing as the surviving corporation. The deal closed on January 1, 2020 after receipt of approvals from regulatory authorities, approval of WHC shareholders and the satisfaction of other closing conditions. In the transaction, Eagle acquired one retail bank branch in Wolf Point, Montana. The total consideration paid was $14.97 million and included cash consideration of $6.50 million and common stock issued of $8.47 million.   - 37 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS   Financial Condition   Comparisons of financial condition in this section are between September 30, 2020 and December 31, 2019.   Total assets were $1.26 billion at September 30, 2020, an increase of $200.77 million, or 19.0% from $1.05 billion at December 31, 2019. The increase was largely due to the change in securities available-for sale and loans receivable. Securities available-for-sale increased by $38.47 million from December 31, 2019. Loans receivable increased by $66.54 million from December 31, 2019. In addition, total cash and cash equivalents increased by $47.89 from December 31, 2019 and has been impacted by PPP funds deposited by borrowers and FRB's Payroll Protection Program Loan Funding ("PPPLF") facility. Total liabilities were $1.11 billion at September 30, 2020, an increase of $175.07 million, or 18.8%, from $932.60 million at December 31, 2019. The increase was largely due to an increase in deposits partially offset by a reduction in FHLB advances and other borrowings. Total deposits increased by $189.34 million from December 31, 2019. Total shareholders’ equity increased by $25.70 million from December 31, 2019.   Financial Condition Details   Investment Activities   The following table summarizes investment activities:       September 30,     December 31,       2020     2019       Fair Value     Percentage of Total     Fair Value     Percentage of Total       (Dollars in Thousands)   Securities available-for-sale:                                 U.S. government obligations   $ 2,308       1.40 %   $ 695       0.55 % U.S. treasury obligations     5,688       3.44 %     12,902       10.17 % Municipal obligations     95,671       57.85 %     52,222       41.17 % Corporate obligations     10,664       6.45 %     8,388       6.61 % Mortgage-backed securities     8,296       5.02 %     9,495       7.48 % Collateralized mortgage obligations     25,922       15.68 %     33,334       26.27 % Asset-backed securities     16,804       10.16 %     9,839       7.75 % Total securities available-for-sale   $ 165,353       100.00 %   $ 126,875       100.00 %   Securities available-for-sale were $165.35 million at September 30, 2020, an increase of $38.47 million, or 30.3%, from $126.88 million at December 31, 2019. Securities increased during the period due to the WHC acquisition, which included acquired securities of $43.71 million. Excluding securities acquired, securities decreased by $5.23 million. Sales and maturities of securities were largely offset by purchases during the period.   - 38 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS   Financial Condition – continued   Lending Activities   The following table includes the composition of the Bank’s loan portfolio by loan category:       September 30,     December 31,       2020     2019       Amount     Percent of Total     Amount     Percent of Total       (Dollars in thousands)   Real estate loans:                                 Residential 1-4 family (1)   $ 110,021       12.93 %   $ 119,296       15.28 % Residential 1-4 family construction     42,814       5.03 %     38,602       4.95 % Total residential 1-4 family     152,835       17.96 %     157,898       20.23 %                                   Commercial real estate     308,485       36.24 %     331,062       42.41 % Commercial construction and development     56,927       6.69 %     52,670       6.75 % Farmland     67,061       7.88 %     50,293       6.44 % Total commercial real estate     432,473       50.81 %     434,025       55.60 %                                   Total real estate loans     585,308       68.77 %     591,923       75.83 %                                   Other loans:                                 Home equity     61,460       7.22 %     56,414       7.23 % Consumer     20,694       2.43 %     18,882       2.42 %                                   Commercial     123,303       14.49 %     72,797       9.33 % Agricultural     60,308       7.09 %     40,522       5.19 % Total commercial     183,611       21.58 %     113,319       14.52 %                                   Total other loans     265,765       31.23 %     188,615       24.17 %                                   Total loans     851,073       100.00 %     780,538       100.00 %                                   Deferred loan fees     (2,595 )             (1,303 )         Allowance for loan losses     (11,300 )             (8,600 )         Total loans, net   $ 837,178             $ 770,635               (1) Excludes loans held-for-sale.   Loans receivable, net increased $66.54 million, or 8.6%, to $837.18 million at September 30, 2020 from $770.64 million at December 31, 2019. The increase was impacted by the WHC acquisition. The WHC acquisition included $43.42 million of acquired loans. Excluding acquired loans, loans receivable increased by $23.12 million. Including acquired loans, total commercial loans increased $70.29 million, total commercial real estate loans decreased $1.56 million, total residential loans decreased $5.06 million, home equity loans increased $5.05 million and consumer loans increased $1.81 million.   - 39 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS   Financial Condition – continued   Lending Activities– continued   Total loan originations were $928.87 million for the nine months ended September 30, 2020. Total residential 1-4 family originations were $678.24 million, which includes $636.77 million of loans held-for-sale originations. Total commercial real estate originations were $101.58 million. Total commercial originations were $115.63 million, which includes $45.71 million of SBA PPP loans. Home equity loan originations totaled $23.93 million. Consumer loan originations totaled $9.49 million. Loans held-for-sale increased by $15.87 million to $41.48 million at September 30, 2020 from $25.61 million at December 31, 2019.   Generally, our collection procedures provide that when a loan is 15 or more days delinquent, the borrower is sent a past due notice. If the loan becomes 30 days delinquent, the borrower is sent a written delinquency notice requiring payment. If the delinquency continues, subsequent efforts are made to contact the delinquent borrower, including face to face meetings and counseling to resolve the delinquency. All collection actions are undertaken with the objective of compliance with the Fair Debt Collection Act.   For mortgage loans and home equity loans, if the borrower is unable to cure the delinquency or reach a payment agreement, we will institute foreclosure actions. If a foreclosure action is taken and the loan is not reinstated, paid in full or refinanced, the property is sold at judicial sale at which we may be the buyer if there are no adequate offers to satisfy the debt. Any property acquired as the result of foreclosure, or by deed in lieu of foreclosure, is classified as real estate owned until such time as it is sold or otherwise disposed of. When real estate owned is acquired, it is recorded at its fair market value less estimated selling costs. The initial recording of any loss is charged to the allowance for loan losses. Subsequent write-downs are recorded as a charge to operations. As of September 30, 2020 and December 31, 2019, the Bank had $25,000 and $26,000, respectively, of real estate owned and other repossessed property.   The State of Montana placed a freeze on foreclosures on March 28, 2020. Subsequently it released the freeze effective May 24, 2020 with the exception of continued protection for those individuals deemed vulnerable to the coronavirus. The Bank has had minimal impact due to foreclosures affected by this freeze.   - 40 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS   Financial Condition – continued   Lending Activities– continued   The following table sets forth information regarding nonperforming assets:       September 30,     December 31,       2020     2019       (Dollars in Thousands)   Non-accrual loans                 Real estate loans:                 Residential 1-4 family   $ 694     $ 618   Residential 1-4 family construction     337       337   Commercial real estate     916       583   Commercial construction and development     -       50   Farmland     1,435       323   Other loans:                 Home equity     97       78   Consumer     163       156   Commercial     668       750   Agricultural     1,290       499   Accruing loans delinquent 90 days or more                 Real estate loans:                 Residential 1-4 family     -       4   Commercial real estate     57       -   Other loans:                 Agricultural     -       1,805   Restructured loans:                 Real estate loans:                 Commercial real estate     1,633       -   Commercial construction and development     14       -   Farmland     -       153   Other loans:                 Home equity     18       20   Commercial     -       74   Agricultural     160       -   Total nonperforming loans     7,482       5,450   Real estate owned and other repossessed property, net     25       26   Total nonperforming assets   $ 7,507     $ 5,476                     Total nonperforming loans to total loans     0.88 %     0.70 % Total nonperforming loans to total assets     0.60 %     0.52 % Total allowance for loan loss to nonperforming loans     151.03 %     157.80 % Total nonperforming assets to total assets     0.60 %     0.52 %   Non-accrual loans as of September 30, 2020 and December 31, 2019 include $1.97 million and $1.05 million, respectively of acquired loans that deteriorated subsequent to the acquisition date.    As of September 30, 2020, loan modifications for 66 borrowers represented $55.21 million in loans compared to 315 borrowers representing $125.71 million as of June 30, 2020. As of September 30, 2020 there are approximately 76 forbearances approved for residential mortgage loans, of which 68 are sold and serviced.     - 41 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS   Financial Condition – continued   Deposits and Other Sources of Funds   The following table includes deposit accounts by category:       September 30,     December 31,       2020     2019               Percent             Percent       Amount     of Total     Amount     of Total       (Dollars in Thousands)   Noninterest checking   $ 295,058       29.55 %   $ 200,035       24.72 % Interest bearing checking     155,671       15.59 %     116,397       14.39 % Savings     169,981       17.03 %     126,991       15.70 % Money market     187,245       18.76 %     132,506       16.38 % Total     807,955       80.93 %     575,929       71.19 % Certificates of deposit accounts:                                 IRA certificates     24,756       2.48 %     25,240       3.12 % Brokered certificates     495       0.05 %     10,180       1.26 % Other certificates     165,124       16.54 %     197,644       24.43 % Total certificates of deposit     190,375       19.07 %     233,064       28.81 % Total deposits   $ 998,330       100.00 %   $ 808,993       100.00 %   Deposits increased by $189.34 million, or 23.4%, to $998.33 million at September 30, 2020 from $808.99 million at December 31, 2019. The increase was due in part to the WHC acquisition. Excluding acquired deposits, total deposits increased by $102.77 million. Including acquired deposits, noninterest checking increased by $95.02 million, money market increased by $54.74 million, savings increased by $42.99 million and interest bearing checking increased by $39.27 million. Certificates of deposit decreased by $42.68 million. The decrease in time certificates of deposit was impacted by a decrease of $9.68 million in fixed rate brokered CDs, as well as a decrease in other certificates of $32.52 million.     The following table summarizes borrowing activity:       September 30,     December 31,       2020     2019       Net     Percent     Net     Percent       Amount     of Total     Amount     of Total       (Dollars in Thousands)   FHLB advances and other borrowings   $ 59,777       66.75 %   $ 88,350       77.99 % Other long-term debt:                                 Senior notes fixed at 5.75%, due 2022     9,941       11.10 %     9,908       8.74 % Subordinated debentures fixed at 6.75%, due 2025     -       0.00 %     9,878       8.72 % Subordinated debentures fixed at 5.50% to floating, due 2030     14,676       16.39 %     -       0.00 % Subordinated debentures variable, due 2035     5,155       5.76 %     5,155       4.55 % Total other long-term debt     29,772       33.25 %     24,941       22.01 % Total borrowings   $ 89,549       100.00 %   $ 113,291       100.00 %   FHLB advances and other borrowings decreased by $28.57 million, or 32.3%, to $59.78 million at September 30, 2020 from $88.35 million at December 31, 2019. The FHLB advances and other borrowings at September 30, 2020 include $23.79 million of FRB borrowings as Eagle used the FRB's "PPPLF" facility as a partial source of funding for its SBA PPP loans. Excluding FRB borrowings, FHLB advances decreased by $52.36 million from December 31, 2019. This decrease is due to slower than expected loan growth coupled with increased liquidity resulting from the WHC acquisition and growth in non-maturity deposits fueled by PPP funding and economic stimulus. Total other long-term debt increased by $4.83 million primarily due to the issuance in June 2020 of $15.00 million in subordinated notes due 2030, partially offset by the redemption in July 2020 of $10.00 million, 6.75% subordinated notes due 2025.   Shareholders’ Equity   Total shareholders’ equity increased $25.70 million, or 21.1%, to $147.36 million at September 30, 2020 from $121.66 million at December 31, 2019. This was primarily the result of stock issued in connection with the WHC acquisition of $8.47 million, net income of $16.04 million and other comprehensive income of $3.69 million. These increases were slightly offset by dividends paid of $1.96 million and stock repurchases of $987,000.   - 42 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS   Analysis of Net Interest Income   The Bank’s earnings have historically depended primarily upon net interest income, which is the difference between interest income earned on loans and investments and interest paid on deposits and any borrowed funds. It is the single largest component of Eagle’s operating income. Net interest income is affected by (i) the difference between rates of interest earned on loans and investments and rates paid on interest bearing deposits and borrowings (the “interest rate spread”) and (ii) the relative amounts of loans and investments and interest bearing deposits and borrowings.   The following table includes average balances for balance sheet items, as well as, interest and dividends and average yields related to the average balances. All average balances are daily average balances. Non-accrual loans were included in the computation of average balances, but have been reflected in the table as loans carrying a zero yield. The yields include the effect of deferred fees and discounts and premiums that are amortized or accreted to interest income or expense.        For the Three Months Ended September 30,       2020     2019       Average     Interest             Average     Interest               Daily     and     Yield/     Daily     and     Yield/       Balance     Dividends     Cost (4)     Balance     Dividends     Cost (4)       (Dollars in Thousands)   Assets:                                                 Interest earning assets:                                                 Investment securities   $ 163,102     $ 874       2.13 %   $ 134,980     $ 916       2.69 % FHLB and FRB stock     6,299       95       5.98 %     8,049       107       5.27 % Loans receivable (1)     902,543       11,340       4.98 %     779,770       10,731       5.46 % Other earning assets     43,662       30       0.27 %     4,188       19       1.80 % Total interest earning assets     1,115,606       12,339       4.39 %     926,987       11,773       5.04 % Noninterest earning assets     129,312                       100,911                   Total assets   $ 1,244,918                     $ 1,027,898                                                                     Liabilities and equity:                                                 Interest bearing liabilities:                                                 Deposit accounts:                                                 Checking   $ 157,542     $ 13       0.03 %   $ 114,820     $ 11       0.04 % Savings     160,118       33       0.08 %     119,555       24       0.08 % Money market     176,276       102       0.23 %     121,588       109       0.36 % Certificates of deposit     200,527       631       1.25 %     213,073       878       1.63 % Advances from FHLB and other borrowings including long-term debt     108,427       782       2.86 %     136,306       1,052       3.06 % Total interest bearing liabilities     802,890       1,561       0.77 %     705,342       2,074       1.17 % Noninterest checking     276,580                       188,291                   Other noninterest bearing liabilities     21,840                       15,753                   Total liabilities     1,101,310                       909,386                                                                     Total equity     143,608                       118,512                                                                     Total liabilities and equity   $ 1,244,918                     $ 1,027,898                   Net interest income/interest rate spread (2)           $ 10,778       3.62 %           $ 9,699       3.87 %                                                   Net interest margin (3)                     3.83 %                     4.15 % Total interest earning assets to interest bearing liabilities                     138.95 %                     131.42 %   (1) Includes loans held-for-sale. (2) Interest rate spread represents the difference between the average yield on interest earning assets and the average rate on interest bearing liabilities. (3) Net interest margin represents income before the provision for loan losses divided by average interest earning assets. (4) For purposes of this table, tax exempt income is not calculated on a tax equivalent basis.   - 43 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS   Analysis of Net Interest Income – continued       For the Nine Months Ended September 30,       2020     2019       Average     Interest             Average     Interest               Daily     and     Yield/     Daily     and     Yield/       Balance     Dividends     Cost (4)     Balance     Dividends     Cost (4)       (Dollars in Thousands)   Assets:                                                 Interest earning assets:                                                 Investment securities   $ 168,170     $ 2,853       2.26 %   $ 137,533     $ 2,802       2.72 % FHLB and FRB stock     6,934       284       5.46 %     7,582       297       5.24 % Loans receivable (1)     870,114       33,832       5.18 %     753,541       31,378       5.57 % Other earning assets     34,309       134       0.52 %     3,984       55       1.85 % Total interest earning assets     1,079,527       37,103       4.58 %     902,640       34,532       5.11 % Noninterest earning assets     124,192                       95,835                   Total assets   $ 1,203,719                     $ 998,475                                                                     Liabilities and equity:                                                 Interest bearing liabilities:                                                 Deposit accounts:                                                 Checking   $ 147,054     $ 47       0.04 %   $ 115,549     $ 33       0.04 % Savings     149,129       118       0.11 %     118,972       61       0.07 % Money market     160,477       362       0.30 %     121,907       305       0.33 % Certificates of deposit     224,251       2,536       1.51 %     205,396       2,334       1.52 % Advances from FHLB and other borrowings including long-term debt     115,861       2,362       2.72 %     131,011       3,031       3.09 % Total interest bearing liabilities     796,772       5,425       0.91 %     692,835       5,764       1.11 % Noninterest checking     250,132                       179,539                   Other noninterest bearing liabilities     18,935                       12,487                   Total liabilities     1,065,839                       884,861                                                                     Total equity     137,880                       113,614                                                                     Total liabilities and equity   $ 1,203,719                     $ 998,475                   Net interest income/interest rate spread (2)           $ 31,678       3.67 %           $ 28,768       4.00 %                                                   Net interest margin (3)                     3.91 %                     4.26 % Total interest earning assets to interest bearing liabilities                     135.49 %                     130.28 %   (1) Includes loans held-for-sale. (2) Interest rate spread represents the difference between the average yield on interest earning assets and the average rate on interest bearing liabilities. (3) Net interest margin represents income before the provision for loan losses divided by average interest earning assets. (4) For purposes of this table, tax exempt income is not calculated on a tax equivalent basis.   - 44 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS   Rate/Volume Analysis   The following tables present the dollar amount of changes in interest income and interest expense for major components of interest earning assets and interest bearing liabilities. For each category of interest earning assets and interest bearing liabilities, information is provided on changes attributable to: (1) changes in volume multiplied by the old rate; (2) changes in rate, which are changes in rate multiplied by the old volume; and (3) changes not solely attributable to rate or volume, which have been allocated proportionately to the change due to volume and the change due to rate.       For the Three Months Ended September 30,       2020     2019               Due to                     Due to               Volume     Rate     Net     Volume     Rate     Net       (In Thousands)   Interest earning assets:                                                 Investment securities   $ 191     $ (233 )   $ (42 )   $ (114 )   $ (6 )   $ (120 ) FHLB and FRB stock     (24 )     12       (12 )     19       8       27   Loans receivable (1)     1,690       (1,081 )     609       2,452       578       3,030   Other earning assets     179       (168 )     11       25       (14 )     11   Total interest earning assets     2,036       (1,470 )     566       2,382       566       2,948                                                     Interest bearing liabilities:                                                 Checking, savings and money market accounts     61       (57 )     4       11       60       71   Certificates of deposit     (52 )     (195 )     (247 )     142       275       417   Advances from FHLB and other borrowings including long-term debt     (215 )     (55 )     (270 )     156       82       238   Total interest bearing liabilities     (206 )     (307 )     (513 )     309       417       726                                                     Change in net interest income   $ 2,242     $ (1,163 )   $ 1,079     $ 2,073     $ 149     $ 2,222     (1) Includes loans held-for-sale.   - 45 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS   Rate/Volume Analysis – continued       For the Nine Months Ended September 30,       2020     2019               Due to                     Due to               Volume     Rate     Net     Volume     Rate     Net       (In Thousands)   Interest earning assets:                                                 Investment securities   $ 624     $ (573 )   $ 51     $ (300 )   $ 56     $ (244 ) FHLB and FRB stock     (25 )     12       (13 )     54       10       64   Loans receivable (1)     4,854       (2,400 )     2,454       6,549       2,394       8,943   Other earning assets     419       (340 )     79       7       4       11   Total interest earning assets     5,872       (3,301 )     2,571       6,310       2,464       8,774                                                     Interest bearing liabilities:                                                 Savings, money market and checking accounts     121       7       128       29       147       176   Certificates of deposit     214       (12 )     202       311       792       1,103   Advances from FHLB and other borrowings including long-term debt     (351 )     (318 )     (669 )     451       410       861   Total interest bearing liabilities     (16 )     (323 )     (339 )     791       1,349       2,140                                                     Change in net interest income   $ 5,888     $ (2,978 )   $ 2,910     $ 5,519     $ 1,115     $ 6,634     (1) Includes loans held-for-sale.   Results of Operations for the Three Months Ended September 30, 2020 and 2019   Net Income. Eagle’s net income for the three months ended September 30, 2020 was $6.38 million compared to $4.11 million for the three months ended September 30, 2019. The increase of $2.27 million was due to an increase in noninterest income of $6.55 million, partially offset by an increase in noninterest expense of $4.13 million and an increase in provision for income taxes of $1.07 million. Basic and diluted earnings per share were both $0.94 for the current period. Basic earnings per share was $0.64 and diluted earnings per share was $0.63 for the prior year comparable period.   Net Interest Income. Net interest income increased to $10.78 million for the three months ended September 30, 2020, from $9.70 million for the same quarter in the prior year. The increase of $1.08 million, or 11.1%, was the result of an increase in interest and dividend income of $566,000 and a decrease in interest expense of $513,000.   Interest and Dividend Income. Interest and dividend income was $12.34 million for the three months ended September 30, 2020, compared to $11.77 million for the three months ended September 30, 2019, an increase of $566,000, or 4.8%. Interest and fees on loans increased to $11.34 million for the three months ended September 30, 2020 from $10.73 million for the three months ended September 30, 2019. This increase of $609,000, or 5.7%, was due to an increase in the average balance of loans partially offset by a decrease in the average yield of loans for the quarter ended September 30, 2020. Net fee income of $431,000 earned on PPP loans for the three months ended September 30, 2020, along with the 1.0% contractual rate on PPP loans contributed to the downward push on loan yield. Average balances for loans receivable, including loans held-for-sale, for the three months ended September 30, 2020 were $902.54 million, compared to $779.77 million for the prior year period. This represents an increase of $122.77 million, or 15.7% and was impacted by the WHC acquisition, as well as organic growth. The average interest rate earned on loans receivable decreased by 48 basis points, from 5.46% to 4.98%. Interest accretion on purchased loans was $468,000 for the three months ended September 30, 2020 which resulted in a 17 basis point increase in net interest margin compared to $289,000 for the three months ended September 30, 2019 which resulted in a 12 basis point increase in net interest margin. Interest and dividends on investment securities available-for-sale decreased by $42,000, or 4.6% period over period. Average balances for investments increased to $163.10 million for the three months ended September 30, 2020, from $134.98 million for the three months ended September 30, 2019. The increase in average investments is primarily due to the WHC acquisition. However, average interest rates earned on investments decreased to 2.13% for the three months ended September 30, 2020 from 2.69% for the three months ended September 30, 2019.   - 46 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS   Results of Operations for the Three Months Ended September 30, 2020 and 2019 – continued   Interest Expense. Total interest expense was $1.56 million for the three months ended September 30, 2020 compared to $2.07 million for the three months ended September 30, 2019. The decrease of $513,000 or 24.7% was due to a decrease in interest expense on deposits of $243,000, as well as a decrease in interest expense on total borrowings of $270,000. The average balance for total deposits was $971.04 million for three months ended September 30, 2020 compared to $757.33 million for the three months ended September 30, 2019. This increase was impacted by the WHC acquisition. However, the overall average rate on total deposits was 0.32% for the three months ended September 30, 2020 compared to 0.54% for the three months ended September 30, 2019. The average balance for total borrowings decreased from $136.31 million for the three months ended September 30, 2019 to $108.43 million for the three months ended September 30, 2020. The average rate paid on total borrowings also decreased from 3.06% for the three months ended September 30, 2019, to 2.86% for the three months ended September 30, 2020.   Loan Loss Provision . Loan loss provisions are charged to earnings to maintain the total allowance for loan losses at a level considered adequate by the Bank to provide for probable loan losses based on prior loss experience, volume and type of lending we conduct and past due loans in portfolio. The Bank’s policies require the review of assets on a quarterly basis. The Bank classifies loans if warranted. While management believes it uses the best information available to make a determination with respect to the allowance for loan losses, it recognizes that future adjustments may be necessary. Using this methodology, the Bank recorded $450,000 in loan loss provisions for the three months ended September 30, 2020. Additionally, management considered the potential impact of COVID-19. Due to the economic slowdown, an increase in the related economic factors was included in the allowance for loan losses analysis and the loan loss reserves was increased by approximately $404,000. Therefore, the total loan loss provision for the three months ended September 30, 2020 was $854,000. Loan loss provisions were $694,000 for the three months ended September 30, 2019. Management believes the level of total allowances is adequate to cover estimated losses inherent in the portfolio. However, if the economic forecast worsens relative to the assumptions we utilized, our allowance for credit losses will increase accordingly in future periods   Noninterest Income. Total noninterest income was $14.97 million for the three months ended September 30, 2020, compared to $8.42 million for the three months ended September 30, 2019. The increase of $6.55 million is largely due to an increase in net gain on sale of loans which increased to $11.10 million for the three months ended September 30, 2020 from $5.49 million for the three months ended September 30, 2019. This increase was impacted by increased mortgage originations and higher margins on mortgage loans sold. During the three months ended September 30, 2020, $266.76 million residential mortgage loans were sold compared to $155.37 million in the same period in the prior year. In addition, gross margin on sale of mortgage loans for the three months ended September 30, 2020 was 4.17% compared to 3.53% for the three months ended September 30, 2019.    Noninterest Expense. Noninterest expense was $16.35 million for the three months ended September 30, 2020 compared to $12.22 million for the three months ended September 30, 2019. The increase of $4.13 million or 33.8% is primarily due to increased salaries and employee benefits expense of $3.77 million. The increase in salaries expense is due in part to higher commission-based compensation related to mortgage loan growth and additional staff related to compliance with mortgage rules. Mortgage compensation and benefits increased $1.64 million for the three months ended September 30, 2020 compared to the same period in the prior year. Salaries and employee benefits expense was also impacted by the addition of staff partly due to the WHC acquisition.   Provision for Income Taxes . Provision for income taxes was $2.17 million for the three months ended September 30, 2020, compared to $1.10 million for the three months ended September 30, 2019 due to increased income before provision for income taxes. The effective tax rate for the three months ended September 30, 2020 was 25.4% compared to 21.1% for the three months ended September 30, 2019.   Results of Operations for the Nine Months Ended September 30, 2020 and 2019   Net Income. Eagle’s net income for the nine months ended September 30, 2020 was $16.04 million compared to $8.54 million for the nine months ended September 30, 2019. The increase of $7.50 million was due to an increase in net interest income after loan loss provision of $2.16 million and noninterest income of $17.62 million, partially offset by an increase in noninterest expense of $10.61 million and an increase in provision for income taxes of $3.39 million. Basic earnings per share was $2.36 and diluted earnings per share was $2.35 for the current period. Basic earnings per share was $1.33 and diluted earnings per share was $1.32 for the prior year comparable period.   Net Interest Income. Net interest income increased to $31.68 million for the nine months ended September 30, 2020, from $28.77 million for the same period in the prior year. The increase of $2.91 million, or 10.1%, was the result of an increase in interest and dividend income of $2.57 million and a decrease in interest expense of $339,000.   Interest and Dividend Income. Interest and dividend income was $37.10 million for the nine months ended September 30, 2020, compared to $34.53 million for the nine months ended September 30, 2019, an increase of $2.57 million, or 7.4%. Interest and fees on loans increased to $33.83 million for the nine months ended September 30, 2020 from $31.38 million for the nine months ended September 30, 2019. This increase of $2.45 million, or 7.8%, was due to an increase in the average balance of loans partially offset by a decrease in the average yield of loans for the nine months ended September 30, 2020. Net fee income of $509,000 earned on PPP loans for the nine months ended September 30, 2020, along with the 1.0% contractual rate on PPP loans contributed to the downward push on loan yield. Average balances for loans receivable, including loans held-for-sale, for the nine months ended September 30, 2020 were $870.11 million, compared to $753.54 million for the prior year period. This represents an increase of $116.57 million, or 15.5% and was impacted by the WHC acquisition, as well as organic growth and PPP funding. However, the average interest rate earned on loans receivable decreased by 39 basis points, from 5.57% for the nine months ended September 30, 2019 to 5.18% for the nine months ended September 30, 2020. Interest accretion on purchased loans was $1.38 million for the nine months ended September 30, 2020 which resulted in a 17 basis point increase in net interest margin compared to $1.35 million for the nine months ended September 30, 2019 which resulted in a 20 basis point increase in net interest margin. Interest and dividends on investment securities available-for-sale increased by $51,000, or 1.8% period over period. Average balances for investments increased to $168.17 million for the nine months ended September 30, 2020, from $137.53 million for the nine months ended September 30, 2019. The increase in average investments is primarily due to the WHC acquisition. However, average interest rates earned on investments decreased to 2.26% for the nine months ended September 30, 2020 from 2.72% for the nine months ended September 30, 2019.   - 47 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS   Results of Operations for the Nine Months Ended September 30, 2020 and 2019   – continued   Interest Expense. Total interest expense was $5.43 million for the nine months ended September 30, 2020 compared to $5.76 million for the nine months ended September 30, 2019. The decrease of $339,000 or 5.9% was due to a decrease in interest expense on total borrowings of $669,000, partially offset by an increase in interest expense on deposits of $330,000. The average balance for total deposits was $931.04 million for nine months ended September 30, 2020 compared to $741.36 million for the nine months ended September 30, 2019. This increase was impacted by the WHC acquisition and also increased non-maturing deposits due to PPP funding and economic stimulus. However, the overall average rate on total deposits decreased to 0.44% for the nine months ended September 30, 2020 compared to 0.49% for the nine months ended September 30, 2019. The average balance for total borrowings decreased from $131.01 million for the nine months ended September 30, 2019 to $115.86 million for the nine months ended September 30, 2020. The average rate paid on total borrowings also decreased from 3.09% for the nine months ended September 30, 2019, to 2.72% for the nine months ended September 30, 2020.   Loan Loss Provision . Loan loss provisions are charged to earnings to maintain the total allowance for loan losses at a level considered adequate by the Bank to provide for probable loan losses based on prior loss experience, volume and type of lending we conduct and past due loans in portfolio. The Bank’s policies require the review of assets on a quarterly basis. The Bank classifies loans if warranted. While management believes it uses the best information available to make a determination with respect to the allowance for loan losses, it recognizes that future adjustments may be necessary. Using this methodology, the Bank recorded $1.35 million in loan loss provisions for the nine months ended September 30, 2020. Additionally, management considered the potential impact of COVID-19. Due to the economic slowdown, an increase in the related economic factors was included in the allowance for loan losses analysis and the loan loss reserves was increased by approximately $1.40 million. Therefore, the total loan loss provision for the nine months ended September 30, 2020 was $2.75 million. Loan loss provisions were $2.00 million for the nine months ended September 30, 2019. Management believes the level of total allowances is adequate to cover estimated losses inherent in the portfolio. However, if the economic forecast worsens relative to the assumptions we utilized, our allowance for credit losses will increase accordingly in future periods. Total nonperforming loans, including restructured loans, net, was $7.48 million at September 30, 2020 compared to $5.45 million at December 31, 2019. The Bank had $25,000 in other real estate owned and other repossessed assets at September 30, 2020 compared to $26,000 at December 31, 2019.   Noninterest Income. Total noninterest income was $36.97 million for the nine months ended September 30, 2020, compared to $17.62 million for the nine months ended September 30, 2019. The increase of $19.35 million is largely due to an increase in net gain on sale of loans which increased to $24.43 million for the nine months ended September 30, 2020 from $11.45 million for the nine months ended September 30, 2019. This increase was impacted by increased mortgage originations and higher margins on mortgage loans sold. During the nine months ended September 30, 2020, $621.11 million residential mortgage loans were sold compared to $329.05 million in the same period in the prior year. In addition, gross margin on sale of mortgage loans for the nine months ended September 30, 2020 was 3.93% compared to 3.48% for the nine months ended September 30, 2019. The increase in noninterest income was also impacted by mortgage banking activity of $7.16 million for the nine months ended September 30, 2020 compared to $2.48 million for the nine months ended September 30, 2019.   Noninterest Expense. Noninterest expense was $44.33 million for the nine months ended September 30, 2020 compared to $33.72 million for the nine months ended September 30, 2019. The increase of $10.61 million or 31.5% is largely due to increased salaries and employee benefits expense of $8.21 million. The increase in salaries expense is due in part to higher commission-based compensation related to mortgage loan growth and additional staff related to compliance with mortgage rules. Mortgage compensation and benefits increased $4.28 million for the nine months ended September 30, 2020 compared to the same period in the prior year. Salaries and employee benefits expense was also impacted by the addition of staff partly due to the WHC acquisition. Other noninterest expense includes $878,000 of impairment of servicing rights incurred during the nine months ended September 30, 2020.   Provision for Income Taxes . Provision for income taxes was $5.53 million for the nine months ended September 30, 2020, compared to $2.14 million for the nine months ended September 30, 2019 due to increased income before provision for income taxes. The effective tax rate for the nine months ended September 30, 2020 was 25.6% compared to 20.0% for the nine months ended September 30, 2019.   Liquidity and Capital Resources     Liquidity   The Bank is required to maintain minimum levels of liquid assets as defined by the Montana Division of Banking and FRB regulations. The liquidity requirement is retained for safety and soundness purposes, and that appropriate levels of liquidity will depend upon the types of activities in which the company engages. For internal reporting purposes, the Bank uses policy minimums of 1.0%, and 8.0% for “basic surplus” and “basic surplus with FHLB” as internally defined. In general, the “basic surplus” is a calculation of the ratio of unencumbered short-term assets reduced by estimated percentages of CD maturities and other deposits that may leave the Bank in the next 90 days divided by total assets. “Basic surplus with FHLB” adds to “basic surplus” the additional borrowing capacity the Bank has with the FHLB of Des Moines. The Bank exceeded those minimum ratios as of September 30, 2020 and December 31, 2019.   - 48 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS   Liquidity and Capital Resources - continued   The Bank’s primary sources of funds are deposits, repayment of loans and mortgage-backed securities, maturities of investments, funds provided from operations, advances from the FHLB of Des Moines and other borrowings. Scheduled repayments of loans and mortgage-backed securities and maturities of investment securities are generally predictable. However, other sources of funds, such as deposit flows and loan prepayments, can be greatly influenced by the general level of interest rates, economic conditions and competition. The Bank uses liquidity resources principally to fund existing and future loan commitments. It also uses them to fund maturing certificates of deposit, demand deposit withdrawals and to invest in other loans and investments, maintain liquidity, and meet operating expenses.   Liquidity may be adversely affected by unexpected deposit outflows, higher interest rates paid by competitors, and similar matters. Management monitors projected liquidity needs and determines the level desirable based in part on Eagle’s commitments to make loans and management’s assessment of Eagle’s ability to generate funds.   Through the quarter ended September 30, 2020, liquidity levels remained relatively consistent with the prior quarters. Despite significant liquidity events during the quarter ended September 30, 2020, liquidity levels remained stable. Elevated cash levels from deposit growth sparked by PPP funds deposited, tax refunds, economic stimulus money and flight to quality was only partially offset by the increase in PPP loans. Subsequent to the end of the first quarter, and in coordination with the roll out of the PPP, Eagle was approved for short-term funding through the FRB Discount Window. The discount window has not been utilized; however, Eagle has utilized the FRB's PPPLF facility as a partial source for its SBA PPP loans. As of September 30, 2020, the Bank had $23.79 million in PPPLF borrowings secured by $23.79 million PPP loans at a rate of 0.35%. As the PPP loans are repaid, it is currently anticipated Eagle will repay Federal Reserve borrowings. The Company closed a $15.00 million subordinated debt offering in June of 2020, adding to borrowings. In July, $10.00 million in callable subordinated debt was paid off, reducing overall borrowings.   Capital Resources As of September 30, 2020, the Bank’s internally determined measurement of sensitivity to interest rate movements as measured by a 200 basis point rise in interest rates scenario, increased the economic value of equity (“EVE”) by 34.0% compared to an increase of 10.6% at December 31, 2019. The Bank is within the guidelines set forth by the Board of Directors for interest rate risk sensitivity in rising interest rate scenarios.   The Banks’s regulatory capital was in excess of all applicable regulatory requirements and the Bank is deemed "well capitalized" pursuant to State of Montana and FRB rules as of September 30, 2020. The Bank's Tier I leverage ratio increased slightly from 11.08% as of December 31, 2019 to 11.54% as of September 30, 2020, compared to a regulatory requirement of 4.00%. The Bank’s total capital, Tier 1 capital and common equity Tier 1 capital leverage ratios were 16.17%, 14.93% and 14.93% ,  respectively, compared to regulatory requirements of 10.50%, 8.50% and 7.00%, respectively. All of these ratios with the exception of the Tier 1 leverage ratio include the capital conservation buffer of 2.50%. The Bank’s capital position helps to mitigate its interest rate risk exposure.       September 30, 2020       (Unaudited)       Dollar     % of       Amount     Assets       (Dollars in Thousands)   Total risk-based capital to risk weighted assets:                 Actual capital level   $ 147,332       16.17 % Minimum required for capital adequacy purposes     95,660       10.50 % Excess capital   $ 51,672       5.67 %                   Tier I capital to risk weighted assets:                 Actual capital level   $ 136,032       14.93 % Minimum required for capital adequacy purposes     77,439       8.50 % Excess capital   $ 58,593       6.43 %                   Common equity tier I capital to risk weighted assets:                 Actual capital level   $ 136,032       14.93 % Minimum required for capital adequacy purposes     63,773       7.00 % Excess capital   $ 72,259       7.93 %                   Tier I capital to adjusted total average assets:                 Actual capital level   $ 136,032       11.54 % Minimum required for capital adequacy purposes     47,138       4.00 % Excess capital   $ 88,894       7.54 %   - 49 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS   Impact of Inflation and Changing Prices   Our consolidated financial statements and the accompanying notes, which are found in Part I, Item 1, have been prepared in accordance with generally accepted accounting principles, which require the measurement of financial position and operating results in terms of historical dollars without considering the change in the relative purchasing power of money over time and due to inflation. The impact of inflation is reflected in the increased cost of our operations. Interest rates have a greater impact on our performance than do the general levels of inflation. Interest rates do not necessarily move in the same direction or to the same extent as the prices of goods and services.   Interest Rate Risk   Interest rate risk is the potential for loss of future earnings resulting from adverse changes in the level of interest rates. Interest rate risk results from several factors and could have a significant impact on the Company’s net interest income, which is the Company primary source of net income. Net interest income is affected by changes in interest rates, the relationship between rates on interest bearing assets and liabilities, the impact of interest fluctuations on asset prepayments and the mix of interest bearing assets and liabilities.   Although interest rate risk is inherent in the banking industry, banks are expected to have sound risk management practices in place to measure, monitor and control interest rate exposures. The objective of interest rate risk management is to contain the risks associated with interest rate fluctuations. The process involves identification and management of the sensitivity of net interest income to changing interest rates.   The ongoing monitoring and management of this risk is an important component of the Company’s asset/liability committee, which is governed by policies established by the Company’s Board that are reviewed and approved annually. The Board delegates responsibility for carrying out the asset/liability management policies to the Bank’s asset/liability committee. In this capacity, the asset/liability committee develops guidelines and strategies impacting the Company’s asset/liability management related activities based upon estimated market risk sensitivity, policy limits and overall market interest rate levels and trends. The Company’s goal of its asset and liability management practices is to maintain or increase the level of net interest income within an acceptable level of interest rate risk. Our asset and liability policy and strategies are expected to continue as described so long as competitive and regulatory conditions in the financial institution industry and market interest rates continue as they have in recent years.   The Bank has established acceptable levels of interest rate risk as follows for an instantaneous and permanent shock in rates: Projected net interest income over the next twelve months (i.e. year-1) and the subsequent twelve months (i.e. year-2) will not be reduced by more than 15.0% given an immediate increase in interest rates of up to 200 basis points or by more than 10.0% given an immediate decrease in interest rates of up to 100 basis points.   The following table includes the Bank’s net interest income sensitivity analysis.                 Changes in Market   Rate Sensitivity     Interest Rates   As of September 30, 2020   Policy (Basis Points)   Year 1   Year 2   Limits               +200   4.70%   9.20%   -15.00% -100   -1.10%   -3.00%   -10.00%   - 50 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES   Quantitative and Qualitative Disclosures About Market Risk   Item 3. Quantitative and Qualitative Disclosures About Market Risk   This item has been omitted based on Eagle’s status as a smaller reporting company.   - 51 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES   CONTROLS AND PROCEDURES   Item 4. Controls and Procedures     As of the end of the period covered by this report, we conducted an evaluation under the supervision and with the participation of our management including our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”) of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms, including to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is accumulated and communicated to management to allow timely decisions regarding required disclosure. Based on that evaluation, our CEO and CFO concluded that as of September 30, 2020, our disclosure controls and procedures were effective. During the last quarter, there were no changes in the Company’s internal control over financial reporting that have materially affected, or were reasonably likely to materially affect, the Company’s internal control over financial reporting.     - 52 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES   Part II - OTHER INFORMATION   Item 1. Legal Proceedings.   Neither the Company nor the Bank is involved in any pending legal proceeding other than non-material legal proceedings occurring in the ordinary course of business.   Item 1A. Risk Factors   There have not been any material changes in the risk factors previously disclosed in Part 1, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2019 and any subsequently filed Quarterly Reports on Form 10-Q.   Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.   On July 23, 2020, Eagle's Board of Directors (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. The plan expires on July 23, 2021. The following table summarizes the Company's purchase of its common stock for the three months ended September 30, 2020 under this plan.                       Total Number     Maximum                       of Shares     Number of                       Purchased     Shares that       Total             as Part of     May Yet Be       Number of     Average     Publicly     Purchased       Shares     Price Paid     Announced Plans     Under the Plans       Purchased     Per Share     or Programs     or Programs                                     July 1, 2020 through July 31, 2020     1,696     $ 16.00       1,696       98,304                                     August 1, 2020 through August 31, 2020     39,041       15.72       39,041       59,263                                     September 1, 2020 through September 30, 2020     600       16.95       600       58,663                                     Total     41,337     $ 15.75       41,337             On July 18, 2019, the Board authorized the repurchase of up to 100,000 shares of its common stock. Under the plan, shares could be purchased by the Company on the open market or in privately negotiated transactions. The extent to which the company repurchased its shares and the timing of such repurchase depended upon market conditions and other corporate considerations. No shares were purchased under this plan during the year ended December 31, 2019 or the first quarter of 2020. However, during the second quarter of 2020, 1,281 shares were purchased at an average price of $16.95 per share. The following table summarizes the Company's purchase of its common stock for the three months ended September 30, 2020 under this plan. The plan expired on July 18, 2020.                       Total Number     Maximum                       of Shares     Number of                       Purchased     Shares that       Total             as Part of     May Yet Be       Number of     Average     Publicly     Purchased       Shares     Price Paid     Announced Plans     Under the Plans       Purchased     Per Share     or Programs     or Programs                                     July 1, 2020 through July 31, 2020     20,158     $ 15.60       20,158       78,561                                     August 1, 2020 through August 31, 2020     -       -       -       78,561                                     September 1, 2020 through September 30, 2020     -       -       -       78,561                                     Total     20,158     $ 15.60       20,158             On July 19, 2018, the Board authorized the repurchase of up to 100,000 shares of its common stock. Under the plan, shares could be purchased by the Company on the open market or in privately negotiated transactions. The extent to which the company repurchased its shares and the timing of such repurchase depended upon market conditions and other corporate considerations. No shares were purchased under this plan during the year ended December 31, 2018. However, during the first quarter of 2019, 42,000 shares were purchased at an average price of $17.43 per share. In addition, 28,000 shares were purchased during the second quarter of 2019 at an average price of $17.09 per share. The plan expired on July 19, 2019.   Item 3. Defaults Upon Senior Securities.   Not applicable.   Item 4. Mine Safety Disclosures Not applicable.   - 53 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES   Part II - OTHER INFORMATION - continued       Item 5. Other Information.   None.   Item 6. Exhibits.     Exhibit Number Description         3.1 Amended and Restated Certificate of Incorporation of Eagle Bancorp Montana, Inc. (incorporated by reference to Exhibit 3.1 of our Current Report on Form 8-K filed on February 23, 2010).     3.2 Certificate of Amendment to the Amended and Restated Certificate of Incorporation. (incorporated by reference to Exhibit 3.2 of our Quarterly Report on Form 10-Q filed on May 9, 2019).     3.3 Bylaws of Eagle Bancorp Montana, Inc., amended as of August 20, 2015 (incorporated by reference to 3.1 of our Current Report on Form 8-K filed on August 25, 2015).     10.1 Salary Continuation Agreement between Opportunity Bank of Montana and Linda Chilton (filed herewith).     10.2 Third Amendment to Salary Continuation Agreement between Opportunity Bank of Montana and Laura F. Clark, dated September 21, 2020 (incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K filed on September 22, 2020).     31.1 Certification by Peter J. Johnson, Chief Executive Officer, pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 (a) of the Sarbanes-Oxley Act of 2002.     31.2 Certification by Laura F. Clark, Chief Financial Officer, pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 (a) of the Sarbanes-Oxley Act of 2002.     32.1 Certification by Peter J. Johnson, Chief Executive Officer, and Laura F. Clark, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.     101.INS Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)     101.SCH Inline XBRL Taxonomy Extension Schema Document     101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document     101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document     101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document     101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document     104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)   - 54 - Table of Contents                   SIGNATURES   Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.             EAGLE BANCORP MONTANA, INC.                Date: November 5, 2020 By:   /s/ Peter J. Johnson   Peter J. Johnson   President/CEO                          Date: November 5, 2020 By:   /s/ Laura F. Clark   Laura F. Clark   Executive Vice President/CFO/COO       - 55 -