Eagle Bancorp Montana, Inc. 10-Q

ebmt20230331_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  March 31, 2023   ☐ 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 registrant 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) (Zip code)   ( 406 ) 442-3080 (Registrant's telephone number, including area code)   Not Applicable (Former name, former address and former fiscal year, if changed since last report)     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 ☒       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 8,006,033 shares outstanding As of April 28, 2023     Table of Contents       EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES TABLE OF CONTENTS   PART I. FINANCIAL INFORMATION PAGE       Item 1. Financial Statements (Unaudited)           Condensed Consolidated Statements of Financial Condition as of March 31, 2023 and December 31, 2022 1         Condensed Consolidated Statements of Income for the three months ended March 31, 2023 and 2022 3         Condensed Consolidated Statements of Comprehensive Income ( Loss) for   the three months ended March 31, 2023 and 2022 5         Condensed Consolidated Statements of Changes in Shareholders' Equity for the three months ended March 31, 2023 and 2022 6         Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and 2022 7         Notes to Condensed Consolidated Financial Statements (Unaudited) 9         Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 27       Item 3. Quantitative and Qualitative Disclosures About Market Risk 38       Item 4. Controls and Procedures 39       PART II. OTHER INFORMATION   Item 1. Legal Proceedings 40 Item 1A. Risk Factors 40 Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds 40 Item 3. Defaults Upon Senior Securities 40 Item 4.  Mine Safety Disclosures 40 Item 5. Other Information 41 Item 6.  Exhibits 41       Signatures 42     Table of Contents   EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES   Cautionary 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 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 emergence or continuation of widespread health emergencies or pandemics, including the magnitude and duration of the ongoing novel coronavirus, or COVID-19, and its impacts 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 traditional and non-traditional financial service providers;   ● 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;   ● the impact of adverse developments affecting the U.S. banking industry, including bank failures and liquidity concerns, which could cause continued or worsening economic and market volatility, and regulatory responses thereto;   ● the possibility that future credit losses may be higher than currently expected due to changes in economic assumptions, customer behavior, adverse developments with respect to U.S. or global economic conditions and other uncertainties, including the impact of supply chain disruptions, inflationary pressures and labor shortages on economic conditions and our business;   ● an inability to access capital markets or maintain deposits or borrowing costs;   ● uncertainty regarding the content, timing and impact of regulatory capital and liquidity requirements;   ● the risks related to the transition and physical impacts of climate change;   ● our ability to achieve environmental, social and governance goals and commitments or the impact of any changes in the Company’s sustainability strategy or commitments generally;   ● changes or volatility in the securities markets that lead to impairment in the value of our investment securities and goodwill;   ● 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, including our recent acquisition of First Community Bancorp, Inc.;   ● 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, including our recent acquisition of First Community Bancorp, Inc.;   ● 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;   ● the need to retain capital for strategic or regulatory reasons;   ● changes in consumer spending, borrowing and savings habits;   ● our ability to continue to increase and manage our commercial and residential real estate, multi-family and commercial business loans;   ● possible impairments of securities held by us, including those issued by government entities and government sponsored enterprises;   ● the level of future deposit insurance premium assessments;   ● our ability to implement new technologies and maintain secure and reliable technology systems;   ● 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 Part II, Item 1A, “Risk Factors” and Part I, Item 2, “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, 2022, 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 CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Dollars in Thousands, Except for Per Share Data) (Unaudited)       March 31,     December 31,       2023     2022   ASSETS:                 Cash and due from banks   $ 18,087     $ 19,321   Interest-bearing deposits in banks     1,348       2,490   Total cash and cash equivalents     19,435       21,811                     Securities available-for-sale     349,423       349,495   Federal Home Loan Bank ("FHLB") stock     7,360       5,089   Federal Reserve Bank ("FRB") stock     4,131       4,131   Mortgage loans held-for-sale, at fair value     9,927       8,250   Loans receivable, net of allowance for credit losses of $ 15,000 at March 31, 2023 and $ 14,000 at December 31, 2022 (1)     1,362,423       1,339,678   Accrued interest and dividends receivable     10,427       11,284   Mortgage servicing rights, net     15,875       15,412   Assets held-for-sale, at fair value     1,305       1,305   Premises and equipment, net     86,614       84,323   Cash surrender value of life insurance, net     47,985       47,724   Goodwill     34,740       34,740   Core deposit intangible, net     7,043       7,459   Other assets     26,048       17,683                     Total assets   $ 1,982,736     $ 1,948,384                     (1) Allowance for credit losses at March 31, 2023; allowance for loan losses for prior periods.                   The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.     - 1 - Table of Contents   EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Continued) (Dollars in Thousands, Except for Per Share Data) (Unaudited)       March 31,     December 31,       2023     2022   LIABILITIES:                 Deposit accounts:                 Noninterest-bearing   $ 460,195     $ 468,955   Interest-bearing     1,147,343       1,166,317   Total deposits     1,607,538       1,635,272                     Accrued expenses and other liabilities     30,765       26,458   FHLB advances and other borrowings     122,530       69,394   Other long-term debt:                 Principal amount     60,155       60,155   Unamortized debt issuance costs     ( 1,268 )     ( 1,311 ) Total other long-term debt, net     58,887       58,844                     Total liabilities     1,819,720       1,789,968                     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; 8,507,429 shares issued at March 31, 2023 and December 31, 2022; 8,006,033 shares outstanding at March 31, 2023 and December 31, 2022)     85       85   Additional paid-in capital     109,265       109,164   Unallocated common stock held by Employee Stock Ownership Plan ("ESOP")     ( 5,013 )     ( 5,156 ) Treasury stock, at cost ( 501,396 shares at March 31, 2023 and December 31, 2022)     ( 11,343 )     ( 11,343 ) Retained earnings     92,547       92,023   Accumulated other comprehensive loss, net of tax     ( 22,525 )     ( 26,357 ) Total shareholders' equity     163,016       158,416                     Total liabilities and shareholders' equity   $ 1,982,736     $ 1,948,384     The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.   - 2 - Table of Contents     EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME  (Dollars in Thousands, Except for Per Share Data) (Unaudited)       Three Months Ended       March 31,       2023     2022   INTEREST AND DIVIDEND INCOME:                 Interest and fees on loans   $ 17,737     $ 11,373   Securities available-for-sale     2,843       1,297   FHLB and FRB dividends     107       59   Other interest income     21       39   Total interest and dividend income     20,708       12,768                     INTEREST EXPENSE:                 Deposits     2,460       312   FHLB advances and other borrowings     1,142       6   Other long-term debt     678       605   Total interest expense     4,280       923                     NET INTEREST INCOME     16,428       11,845                     Provision for credit losses (1)     279       279                     NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSS     16,149       11,566                     NONINTEREST INCOME:                 Service charges on deposit accounts     339       331   Mortgage banking, net     3,050       6,245   Interchange and ATM fees     577       453   Appreciation in cash surrender value of life insurance     280       207   Net loss on sale of available-for-sale securities     ( 224 )     -   Other noninterest income     649       372   Total noninterest income   $ 4,671     $ 7,608                     (1) Provision for credit losses for the quarter ended March 31, 2023; provision for loan losses for prior periods.                   The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.   - 3 - Table of Contents   EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Continued) (Dollars in Thousands, Except for Per Share Data) (Unaudited)       Three Months Ended       March 31,       2023     2022   NONINTEREST EXPENSE:                 Salaries and employee benefits   $ 9,693     $ 10,381   Occupancy and equipment expense     2,073       1,678   Data processing     1,212       1,251   Advertising     281       285   Amortization     418       122   Loan costs     445       546   Federal Deposit Insurance Corporation ("FDIC") insurance premiums     168       93   Professional and examination fees     484       322   Acquisition costs     -       317   Other noninterest expense     1,759       1,628   Total noninterest expense     16,533       16,623                     INCOME BEFORE PROVISION FOR INCOME TAXES     4,287       2,911                     Provision for income taxes     1,045       695                     NET INCOME   $ 3,242     $ 2,216                     BASIC EARNINGS PER COMMON SHARE   $ 0.42     $ 0.34                     DILUTED EARNINGS PER COMMON SHARE   $ 0.42     $ 0.34       The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.   - 4 - Table of Contents   EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Dollars in Thousands) (Unaudited)       Three Months Ended       March 31,       2023     2022                     NET INCOME   $ 3,242     $ 2,216                     OTHER ITEMS OF COMPREHENSIVE INCOME (LOSS) BEFORE TAX:                 Change in fair value of investment securities available-for-sale     4,977       ( 17,067 ) Reclassification for net realized loss on investment securities available-for-sale     224       -   Total other comprehensive income (loss)     5,201       ( 17,067 )                   Income tax (provision) benefit related to securities available-for-sale     ( 1,369 )     4,494                     COMPREHENSIVE INCOME (LOSS)   $ 7,074     $ ( 10,357 )   The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.   - 5 - Table of Contents     EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES  CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY For the Three Months Ended March 31, 2023 and 2022 (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 at December 31, 2022   $ -     $ 85     $ 109,164     $ ( 5,156 )   $ ( 11,343 )   $ 92,023     $ ( 26,357 )   $ 158,416   Net income     -       -       -       -       -       3,242       -       3,242   New credit standard (Topic 326) - impact in year of adoption     -       -       -       -       -       ( 1,616 )     -       ( 1,616 ) Other comprehensive income     -       -       -       -       -       -       3,832       3,832   Dividends paid ($ 0.1375 per share)     -       -       -       -       -       ( 1,102 )     -       ( 1,102 ) Stock compensation expense     -       -       145       -       -       -       -       145   ESOP shares allocated ( 5,997 shares)     -       -       ( 44 )     143       -       -       -       99   Balance at March 31, 2023   $ -     $ 85     $ 109,265     $ ( 5,013 )   $ ( 11,343 )   $ 92,547     $ ( 22,525 )   $ 163,016                                                                     Balance at December 31, 2021   $ -     $ 71     $ 80,832     $ ( 5,729 )   $ ( 7,321 )   $ 85,383     $ 3,493     $ 156,729   Net income     -       -       -       -       -       2,216       -       2,216   Other comprehensive loss     -       -       -       -       -       -       ( 12,573 )     ( 12,573 ) Dividends paid ($ 0.125 per share)     -       -       -       -       -       ( 849 )     -       ( 849 ) Stock compensation expense     -       -       135       -       -       -       -       135   ESOP shares allocated ( 5,997 shares)     -       -       ( 7 )     143       -       -       -       136   Treasury stock purchased ( 100,000 shares at $ 22.71 average cost per share)     -       -       -       -       ( 2,271 )     -       -       ( 2,271 ) Balance at March 31, 2022   $ -     $ 71     $ 80,960     $ ( 5,586 )   $ ( 9,592 )   $ 86,750     $ ( 9,080 )   $ 143,523     The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.   - 6 - Table of Contents     EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  (Dollars in Thousands) (Unaudited)         Three Months Ended       March 31,       2023     2022   CASH FLOWS FROM OPERATING ACTIVITIES:                 Net income   $ 3,242     $ 2,216   Adjustments to reconcile net income to net cash provided by operating activities:                 Provision for credit losses (1)     279       279   Recovery of mortgage servicing rights     -       ( 56 ) Depreciation     948       842   Net amortization of investment securities premiums and discounts     272       380   Amortization of mortgage servicing rights     400       609   Amortization of right-of-use assets     170       172   Amortization     418       122   Compensation expense related to restricted stock awards     145       135   ESOP compensation expense for allocated shares     99       136   Deferred income tax (benefit) provision     ( 820 )     71   Net gain on sale of loans     ( 2,203 )     ( 6,233 ) Originations of loans held-for-sale     ( 64,839 )     ( 170,074 ) Proceeds from sales of loans held-for-sale     65,365       179,831   Net gain on sale of real estate owned and other repossessed assets     -       ( 14 ) Net gain on sale/disposal of premises and equipment     ( 13 )     ( 1 ) Net realized loss on sales of available-for-sale securities     224       -   Net appreciation in cash surrender value of life insurance     ( 280 )     ( 207 ) Net change in:                 Accrued interest and dividends receivable     857       ( 1 ) Other assets     ( 2,386 )     ( 145 ) Accrued expenses and other liabilities     ( 3,039 )     ( 2,168 ) Net cash (used in) provided by operating activities     ( 1,161 )     5,894                     CASH FLOWS FROM INVESTING ACTIVITIES:                 Activity in available-for-sale securities:                 Sales     22,773       -   Maturities, principal payments and calls     10,089       9,338   Purchases     ( 28,126 )     ( 20,158 ) FHLB stock purchased     ( 2,271 )     ( 21 ) Loan origination and principal collection, net     ( 24,587 )     ( 27,096 ) Proceeds from sale of real estate and other repossessed assets acquired in settlement of loans     17       5   Purchases of premises and equipment, net     ( 3,410 )     ( 3,284 ) Net cash used in investing activities   $ ( 25,515 )   $ ( 41,216 )                   (1) Provision for credit losses for the quarter ended March 31, 2023; provision for loan losses for prior periods.                   The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.   - 7 - Table of Contents   EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) (Dollars in Thousands) (Unaudited)     Three Months Ended     March 31,     2023   2022   CASH FLOWS FROM FINANCING ACTIVITIES:             Net (decrease) increase in deposits $ ( 27,734 ) $ 48,027   Advances (payments) on long-term FHLB and other borrowings   53,136     ( 5,000 ) Proceeds from issuance of subordinated debentures   -     40,000   Repayment of senior debt   -     ( 10,000 ) Payments for debt issuance costs   -     (917)   Purchase of treasury stock   -     ( 2,271 ) Dividends paid   ( 1,102 )   ( 849 ) Net cash provided by financing activities   24,300     68,990                 NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS   ( 2,376 )   33,668                 CASH AND CASH EQUIVALENTS, beginning of period   21,811     61,434                 CASH AND CASH EQUIVALENTS, end of period $ 19,435   $ 95,102                               SUPPLEMENTAL CASH FLOW INFORMATION:             Cash paid during the period for interest $ 4,539   $ 1,092                 NONCASH INVESTING AND FINANCING ACTIVITIES:             Increase (decrease) in fair value of securities available-for-sale $ 5,201   $ ( 17,067 ) Mortgage servicing rights recognized   863     1,148   Right-of-use assets obtained in exchange for lease liabilities   3     4   Loans transferred to real estate and other assets acquired in foreclosure   -     328   Commitments to invest in Low-Income Housing Tax Credit projects   6,012     -   Cumulative effect adjustment to retained earnings due to adoption of Topic 326   ( 1,616 )   -     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 condensed consolidated financial statements.     - 8 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES NOTES TO CONDENSED 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”), formerly American Federal Savings Bank (“AFSB”). 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 2021, the Company entered into an Agreement and Plan of Merger ("Merger Agreement") with First Community Bancorp, Inc. ("FCB"), a Montana corporation, and FCB's wholly-owned subsidiary, First Community Bank, a Montana chartered commercial bank. The Merger Agreement provided that, upon the terms and subject to the conditions set forth in the Merger Agreement, FCB would merge with and into Eagle, with Eagle continuing as the surviving corporation. The merger closed on April 30, 2022. First Community Bank operated nine branches in Ashland, Culbertson, Froid, Glasgow, Helena, Hinsdale, Three Forks and Wolf Point, Montana.    In March 2021, the Bank established a subsidiary, Opportunity Housing Fund, LLC ("OHF"), to invest in Low-Income Housing Tax Credit ("LIHTC") projects. The LIHTC program is designed to encourage capital investment in construction and rehabilitation of low-income housing. Tax credits are allowable over a 10 -year period. Investments in LIHTC projects are included in other assets on the consolidated statements of financial condition and totaled $ 8,886,000 and $ 1,237,000 as of March 31, 2023 and December 31, 2022, respectively. The Company's remaining capital commitments to these LIHTC projects were $ 6,012,000 as of March 31, 2023 and are included in accrued expenses and other liabilities on the consolidated statements of financial condition.    On January 1, 2020, the Company acquired 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 acquisition included one branch in Wolf Point, Montana. In addition, Western Financial Services, Inc. ("WFS") was acquired through the WHC merger. WFS facilitates deferred payment contracts for customers that produce agricultural products.     The Bank currently has 31  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 operated certain branches under the names Dutton State Bank, Farmers State Bank of Denton and The State Bank of Townsend. Effective January  2022, these branches were rebranded and are now only operating as Opportunity Bank of Montana.    Basis of Financial Statement Presentation and Use of Estimates   The accompanying unaudited condensed 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 condensed 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, 2022 , as filed with the SEC on March 8, 2023. 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 three -month period ended  March 31, 2023 are not necessarily indicative of the results to be expected for the year ending  December 31, 2022  or any other period. In preparing condensed 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 condensed 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 condensed consolidated financial statements include Eagle, th e Bank, OHF, Eagle Bancorp Statutory Trust I (the “Trust”) and WFS.  All significant intercompany transactions and balances have been eliminated in consolidation.   Reclassifications     Certain prior period amounts were reclassified to conform to the presentation for 2023 . These reclassifications had no impact on net income or shareholders’ equity.   Subsequent Events   The Company has evaluated events and transactions subsequent to March 31, 2023 for recognition and/or disclosure.   On April 20, 2023, Eagle's Board of Directors (the "Board") authorized the repurchase of up to 400,000 shares of its common stock beginning May 1, 2023. 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 on market conditions and other corporate considerations. The plan expires May 1, 2024.   - 9 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)   NOTE 1.  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued   Recently Adopted Accounting Pronouncements    On January 1, 2023, the Company adopted Accounting Standards Update ("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 adoption of ASU No. 2017 - 04 did not have a material impact on the consolidated financial statements.   Application of New Accounting Guidance Adopted in 2023     On January 1, 2023, the Company adopted 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. This guidance is commonly referred to as Current Expected Credit Losses ("CECL"), and the CECL model is based on expected credit losses rather than the model used for periods prior to January 1, 2023, which was based on incurred losses. The allowance for credit losses is established for current expected credit losses on the Company's loan portfolio, including unfunded loan commitments, 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 estimate their credit losses. 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, Topic 326 amends the accounting for credit losses on available-for-sale debt securities, requiring credit losses on available-for-sale debt securities to be presented as an allowance rather than a write-down for those securities management does not intend to sell or is not likely to be required to sell.   The Company adopted Topic 326 using the modified retrospective basis with the cumulative effect of initially applying the amendments recognized in retained earnings. Results for reporting periods beginning after January 1, 2023 are presented under ASC 326. Results from periods prior to January 1, 2023 are presented using previously applicable U.S. GAAP. The adoption resulted in an increase of $ 700,000  to our allowance for credit losses ("ACL"), an increase of $ 1,500,000  to our allowance for unfunded loan commitments, and a net-of-tax cumulative effect adjustment of $ 1,616,000  to decrease the beginning balance of retained earnings.     The adoption of this guidance did not have an impact on the Company's available-for-sale securities. However, any subsequent estimated credit losses are required to be recognized through an allowance for credit losses associated with the applicable securities.   The Company finalized the adoption of ASC 326 as of January 1, 2023 as detailed in the following table:       January 1, 2023 As Reported Under Topic 326     January 1, 2023 Pre-Topic 326 Adoption     Impact of Topic 326 Adoption   Assets                         Real estate loans:                         Residential 1-4 family   $ 1,493     $ 1,472     $ 21   Commercial real estate     9,571       9,037       534                             Other loans:                         Home equity     512       509       3   Consumer     343       342       1   Commercial     2,781       2,640       141   Allowance for credit losses on loans   $ 14,700     $ 14,000     $ 700                             Liabilities                         Allowance for credit losses on unfunded loan commitments   $ 1,500     $ -     $ 1,500                             Total                   $ 2,200       Allowance for Credit Losses  – The allowance for credit losses on loans is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans. The Company has elected to exclude accrued interest receivable from the amortized cost basis of loans, and accrued interest is reported separately on the consolidated statements of financial condition. Loans are charged off against the allowance when management believes the uncollectability of a loan balance is confirmed and recoveries are credited to the allowance when received. The Company may also account for expected recoveries should information of an anticipated recovery become available. In the case of actual or expected recoveries, amounts may not exceed the aggregate of amounts previously charged off.   Management utilizes relevant available information, from internal and external sources, relating to past events, current conditions, historical loss experience, and reasonable and supportable forecasts. The lookback period in the analysis includes historical data from 2014 to present. Adjustments to historical loss information are made when management determines historical data is not likely reflective of the current portfolio such as limited data sets or lack of default or loss history. Management may selectively apply external market data to subjectively adjust the Company’s own loss history including index or peer data.    Collective Assessment  – The allowance for credit losses on loans is measured on a collective cohort basis when similar risk characteristics exist. Generally, collectively assessed loans are grouped first by call report code, then by similar risk characteristics.   The Company has elected to use the Weighted Average Remaining Maturity (WARM) methodology for all cohorts. The WARM methodology looks at historical quarterly loss rates for each loan cohort over the established “look back” period to determine an average loss rate for each cohort. Each cohort is analyzed to determine the remaining life using amortization schedules, including prepayments.   - 10 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)   NOTE 1.  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued   Historical charge off and recovery activity is compared to loan balances in each cohort quarterly and is averaged to determine an estimated annual charge off rate. The average loss rate over this look-back period is applied annually over the remaining life of the cohort to determine an expected loss percentage.   The Company utilizes reasonable and supportable forecasted losses based on current economic conditions when estimating the allowance for credit losses on loans. Forecasts are based on regression and matrix models that compare national economic indicators to peer charge off rates and local economic indicators to the Company’s charge off rates. The expected loss rates for each cohort are compared to forecasted loss rates and are adjusted by the difference between the calculated expected loss rates and forecasted loss rates. The forecasting models are updated and compared to loss rates quarterly.   The Company recognizes that all significant factors that affect the collectability of the loan portfolio must be considered to determine the estimated credit losses as of the evaluation date. Furthermore, the methodology, in and of itself and even when selectively adjusted by comparison to market and peer data, does not provide a sufficient basis to determine the estimated credit losses. The Company adjusts the modeled expected losses by qualitative adjustments to incorporate significant risks to form a sufficient basis to estimate the credit losses.   Individual Assessment –   Loans classified as Nonaccrual will be reviewed quarterly for potential individual assessment.   The Company has elected the collateral-dependent practical expedient for its collateral-dependent loans, where estimated credit losses are based upon the fair value of the collateral, less costs to sell if applicable. This practical expedient can be applied to a loan if the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the sale or operation of the collateral. If it is probable that the Company will foreclose on the collateral, the use of the fair value of the collateral to calculate an allowance for credit loss is required. Estimates of future collateral proceeds will be based upon available appraisals, reference to recent valuations of comparable properties, and any other sources of information believed appropriate by management under the specific circumstances. When appraisals are ordered to support the analysis of a collateral-dependent loan, the appraisal is reviewed internally.   Where the primary and/or expected source of repayment of a specific loan is believed to be the receipt of principal and interest payments from the borrower and/or the refinancing of the loan by another creditor, impairment will generally be measured based upon the present value of expected proceeds discounted at the contractual interest rate. Expected refinancing proceeds may be estimated from review of term sheets actually received by the borrower from other creditors and/or from the Company’s knowledge of terms generally available from other banks.   Determining the Contractual Life  – Expected credit losses are estimated over the contractual life of the loans, adjusted for expected prepayments when appropriate. The contractual life excludes expected extensions, renewals and modifications. Prepayment assumptions will be determined by analysis of historical behavior by loan cohort.   Restructured Loans  – On January 1, 2023, the Company also adopted ASU No. 2022 - 02, Financial Instruments – Credit Losses (Topic 326 ), Troubled Debt Restructurings and Vintage Disclosures. This guidance was an update to ASU No. 2016 - 13, and the Company adopted using the modified retrospective transition method. The amendments in this update eliminated the accounting guidance for troubled debt restructure ("TDR") loans and enhanced the disclosure requirements for certain loan modifications of receivables made to borrowers experiencing financial difficulty. The allowance for credit losses on loans that are considered modifications to borrowers experiencing financial difficulty are measured using the same method as all other loans held for investment.  In addition, for public business entities, the amendments in the update require that entities disclose current-period gross charge-offs by year of origination for financing receivables. This information must be included in the vintage disclosures, which require an entity to disclose the amortized cost basis of loans by credit-quality indicator and the loan category by year of origination.   Allowance for Credit Losses on Unfunded Commitments  – The Company estimates expected credit losses over the period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The allowance for credit losses on unfunded commitments is adjusted through a provision for credit loss expense. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life. The estimate utilizes the same factors and assumptions as the allowance for credit losses on loans and is applied at the same collective cohort level.   Recently Issued Accounting Pronouncements     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, 2024. The Company evaluated the guidance and identified substitution rates for impacted loans. In January 2021, the FASB issued ASU No. 2021 - 01, Reference Rate Reform (Topic 848 ), which clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. ASU No. 2021 - 01 was effective upon issuance and generally can be applied through December 31, 2024. ASU No. 2021 - 01 has not had and is not expected to have a significant impact on the Company's consolidated financial statements.   - 11 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)     NOTE 2.  MERGERS AND ACQUISITIONS   Effective April 30, 2022, Eagle completed its previously announced merger with FCB. The acquisition closed after receipt of approvals from regulatory authorities, approval of FCB shareholders and the satisfaction of other closing conditions. The total consideration paid was $ 38,577,000 and included cash consideration of $ 10,226,000 and common stock issued of $ 28,351,000 .   This transaction was accounted for under the acquisition method of accounting.   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 judgment 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.       FCB       April 30,       2022       (In Thousands)   Assets acquired:         Cash and cash equivalents   $ 23,623   Securities available-for-sale     126,123   Loans receivable     190,894   Premises and equipment     6,393   Cash surrender value of life insurance     8,638   Core deposit intangible     7,004   Other assets     7,687   Total assets acquired   $ 370,362             Liabilities assumed:         Deposits   $ 321,107   Accrued expenses and other liabilities     1,767   Other borrowings     22,853   Total liabilities assumed   $ 345,727             Net assets acquired   $ 24,635             Consideration paid:         Cash   $ 10,226   Common stock issued ( 1,396,596 shares)     28,351   Total consideration paid   $ 38,577             Goodwill resulting from acquisition   $ 13,942     FCB investments were written down an additional $ 4,559,000  to fair value on the date of acquisition based on market prices obtained from an independent third party.   - 12 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES NOTES TO CONDENSED 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 FCB acquired loans was $ 5,416,000  as of April 30, 2022. During the three months ended March 31, 2023 , accretion of the loan discount w as  $ 296,000 . T he remaining accretable loan discount w as  $ 3,824,000 a s of March 31, 2023 . Three impaired loans were acquired through the FCB acquisition with insignificant balances as of April 30, 2022.   Fair value adjustments recorded for FCB related to premises and equipment were insignificant overall. The Company used independent third party appraisals in the determination of the fair value of acquired properties.   Core deposit intangible assets of $ 7,004,000  were recorded for FCB 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 acquisition were expensed as incurred. The Company recorded  no acquisition costs related to FCB  dur ing the  three months ended March 31, 2023 , an d $ 2,296,000 during the year ended December 31, 2022.  Acquisition costs included professional fees and data processing expenses incurred related to the acquisition.   Operations of acquired entities have been included in the condensed 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 March 31, 2023 .      NOTE 3.   INVESTMENT SECURITIES   The amortized cost and fair values of securities, together with unrealized gains and losses, were as follows:       March 31, 2023     December 31, 2022               Gross                     Gross               Amortized     Unrealized     Fair     Amortized     Unrealized     Fair       Cost     Gains     (Losses)     Value     Cost     Gains     (Losses)     Value       (In Thousands)   Available-for-Sale:                                                                 U.S. government and agency obligations   $ 7,825     $ 183     $ ( 181 )   $ 7,827     $ 2,575     $ 2     $ ( 187 )   $ 2,390   U.S. Treasury obligations     53,738       -       ( 5,856 )     47,882       58,715       -       ( 6,764 )     51,951   Municipal obligations     166,973       352       ( 14,181 )     153,144       190,811       77       ( 18,039 )     172,849   Corporate obligations     6,241       -       ( 248 )     5,993       7,240       1       ( 251 )     6,990   Mortgage-backed securities     32,659       1       ( 1,617 )     31,043       31,553       -       ( 1,900 )     29,653   Collateralized mortgage obligations     99,493       -       ( 8,905 )     90,588       90,812       -       ( 8,681 )     82,131   Asset-backed securities     13,073       -       ( 127 )     12,946       3,569       -       ( 38 )     3,531   Total   $ 380,002     $ 536     $ ( 31,115 )   $ 349,423     $ 385,275     $ 80     $ ( 35,860 )   $ 349,495     - 13 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)   NOTE 3.   INVESTMENT SECURITIES – continued   Proceeds from sale of available-for sale securities and the associated realized gains and losses were as follows:       Three Months Ended       March 31,       2023     2022       (In Thousands)   Proceeds from sale of available-for-sale securities   $ 22,773     $ -                     Gross realized gain on sale of available-for-sale securities   $ -     $ -   Gross realized loss on sale of available-for-sale securities     ( 224 )     -   Net realized loss on sale of available-for-sale securities   $ ( 224 )   $ -     The amortized cost and fair value of securities by contractual maturity are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.       March 31, 2023       Amortized     Fair       Cost     Value       (In Thousands)   Due in one year or less   $ 8,427     $ 8,407   Due from one to five years     28,123       26,339   Due from five to ten years     73,238       65,176   Due after ten years     138,062       127,870         247,850       227,792   Mortgage-backed securities     32,659       31,043   Collateralized mortgage obligations     99,493       90,588   Total   $ 380,002     $ 349,423     As of  March 31, 2023 and December 31, 2022 , securities with a fair value of $ 39,298,000   and $ 58,942,000 , 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:       March 31, 2023       Less Than 12 Months     12 Months or Longer               Gross             Gross       Fair     Unrealized     Fair     Unrealized       Value     Losses     Value     Losses       (In Thousands)   U.S. government and agency obligations   $ 1,564     $ ( 169 )   $ 198     $ ( 12 ) U.S. Treasury obligations     6,040       ( 138 )     41,842       ( 5,718 ) Municipal obligations     43,710       ( 1,005 )     81,141       ( 13,176 ) Corporate obligations     3,156       ( 85 )     2,837       ( 163 ) Mortgage-backed securities and collateralized mortgage obligations     66,949       ( 3,356 )     54,071       ( 7,166 ) Asset-backed securities     12,946       ( 127 )     -       -   Total   $ 134,365     $ ( 4,880 )   $ 180,089     $ ( 26,235 )   - 14 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)   NOTE 3.   INVESTMENT SECURITIES – continued       December 31, 2022       Less Than 12 Months     12 Months or Longer               Gross             Gross       Fair     Unrealized     Fair     Unrealized       Value     Losses     Value     Losses       (In Thousands)   U.S. government and agency obligations   $ 1,773     $ ( 187 )   $ -     $ -   U.S. Treasury obligations     10,969       ( 196 )     40,982       ( 6,568 ) Municipal obligations     128,036       ( 8,781 )     33,092       ( 9,258 ) Corporate obligations     4,994       ( 246 )     995       ( 5 ) Mortgage-backed securities and collateralized mortgage obligations     67,310       ( 3,647 )     44,444       ( 6,934 ) Asset-backed securities     3,531       ( 38 )     -       -   Total   $ 216,613     $ ( 13,095 )   $ 119,513     $ ( 22,765 )   As of  March 31, 2023 and December 31, 2022 , there were, respectively, 329  and 388  securities in unrealized loss positions. Based on analysis of available-for-sale debt securities with unrealized losses as of March 31, 2023, the Company determined the decline in value was unrelated to credit losses and was primarily caused by changes in interest rates and market spreads subsequent to the initial purchase of the securities. The Company does not intend to sell the securities, and it is not likely to be required to sell these securities prior to maturity. As a result, no ACL was recorded on available-for-sale securities at March 31, 2023. As part of this determination, consideration was given to the extent to which fair value was less than amortized cost, adverse security ratings by a rating agency and other factors.    NOTE 4.   LOANS RECEIVABLE      Loans receivable consisted of the following:       March 31,     December 31,       2023     2022       (In Thousands)   Real estate loans:                 Residential 1-4 family   $ 196,805     $ 195,703   Commercial real estate     849,440       826,549                     Other loans:                 Home equity     78,321       74,271   Consumer     28,996       27,609   Commercial     223,861       231,291                     Total     1,377,423       1,355,423                     Deferred loan fees, net (1)     -       ( 1,745 ) Allowance for credit losses (2)     ( 15,000 )     ( 14,000 ) Total loans, net   $ 1,362,423     $ 1,339,678                     (1) Deferred loan fees, net are included in individual loan categories above and totaled $ 1.67 million as of March 31, 2023.                 (2) Allowance for credit losses for the quarter ended March 31, 2023; allowance for loan losses for prior periods.                   Included in the above are loans guaranteed by U.S. government agencies totaling $ 24,294,000  and $ 24,605,000 at March 31, 2023  and  December 31, 2022 , respectively.    - 15 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)   NOTE 4.   LOANS RECEIVABLE – continued   The following table provides allowance for credit losses activity for the three months ended March 31, 2023.       Residential     Commercial     Home                               1-4 Family     Real Estate     Equity     Consumer     Commercial     Total       (In Thousands)   Allowance for credit losses on loans:                                                 Beginning balance, December 31, 2022, prior to adoption of ASC 326   $ 1,472     $ 9,037     $ 509     $ 342     $ 2,640     $ 14,000   Impact of adopting ASC 326     21       534       3       1       141       700   Charge-offs     -       -       -       ( 1 )     -       ( 1 ) Recoveries     6       5       -       1       10       22   Provision     81       156       1       1       40       279   Total ending allowance balance, March 31, 2023   $ 1,580     $ 9,732     $ 513     $ 344     $ 2,831     $ 15,000     The following table provides allowance for loan losses activity for the three months ended March 31, 2022.       Residential     Commercial     Home                               1-4 Family     Real Estate     Equity     Consumer     Commercial     Total       (In Thousands)   Allowance for loan losses:                                                 Beginning balance, December 31, 2021   $ 1,596     $ 7,470     $ 533     $ 365     $ 2,536     $ 12,500   Charge-offs     -       -       -       ( 8 )     ( 84 )     ( 92 ) Recoveries     -       6       -       -       7       13   Provision     20       183       3       -       73       279   Ending balance, March 31, 2022   $ 1,616     $ 7,659     $ 536     $ 357     $ 2,532     $ 12,700                                                     Ending balance, March 31, 2022 allocated to loans individually evaluated for impairment   $ 199     $ -     $ -     $ -     $ 300     $ 499                                                     Ending balance, March 31, 2022 allocated to loans collectively evaluated for impairment   $ 1,417     $ 7,659     $ 536     $ 357     $ 2,232     $ 12,201                                                     Loans receivable:                                                 Ending balance, March 31, 2022   $ 140,210     $ 599,093     $ 53,828     $ 18,834     $ 148,307     $ 960,272                                                     Ending balance, March 31, 2022 of loans individually evaluated for impairment   $ 587     $ 3,473     $ 111     $ 44     $ 1,775     $ 5,990                                                     Ending balance, March 31, 2022 of loans collectively evaluated for impairment   $ 139,623     $ 595,620     $ 53,717     $ 18,790     $ 146,532     $ 954,282     - 16 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)   NOTE 4.   LOANS RECEIVABLE – continued   Internal classification of the loan portfolio by amortized cost and based on year originated was as follows:       March 31, 2023       2023     2022     2021     2020     2019     Prior     Revolving Loans     Total Loans       (In Thousands)   RESIDENTIAL 1-4 FAMILY                                                                 Pass   $ 3,869     $ 38,503     $ 26,027     $ 16,419     $ 12,222     $ 35,910     $ 1,152     $ 134,102   Special Mention     -       -       -       -       -       374       -       374   Substandard     -       -       603       -       -       537       -       1,140   Total Residential 1-4 family     3,869       38,503       26,630       16,419       12,222       36,821       1,152       135,616   RESIDENTIAL 1-4 FAMILY CONSTRUCTION                                                                 Pass     1,172       35,647       16,969       -       -       301       1,414       55,503   Special Mention     -       -       5,686       -       -       -       -       5,686   Total Residential 1-4 family construction     1,172       35,647       22,655       -       -       301       1,414       61,189   COMMERCIAL REAL ESTATE                                                                 Pass     21,416       116,742       133,817       56,900       58,376       117,663       30,729       535,643   Special Mention     554       -       -       -       4,028       2,689       -       7,271   Substandard     -       -       -       -       -       1,702       -       1,702   Total Commercial real estate     21,970       116,742       133,817       56,900       62,404       122,054       30,729       544,616   COMMERCIAL CONSTRUCTION AND DEVELOPMENT                                                                 Pass     5,608       81,451       56,300       7,284       7,083       4,294       2,882       164,902   Special Mention     -       -       -       -       -       1,012       -       1,012   Total Commercial construction and development     5,608       81,451       56,300       7,284       7,083       5,306       2,882       165,914   FARMLAND                                                                 Pass     4,305       37,136       26,200       23,735       9,928       30,214       2,205       133,723   Special Mention     -       -       -       1,026       -       1,744       -       2,770   Substandard     -       407       -       65       245       1,700       -       2,417   Total Farmland     4,305       37,543       26,200       24,826       10,173       33,658       2,205       138,910   HOME EQUITY                                                                 Pass     225       5,201       394       608       687       2,906       68,185       78,206   Substandard     -       -       -       -       -       115       -       115   Total Home Equity     225       5,201       394       608       687       3,021       68,185       78,321   CONSUMER                                                                 Pass     4,754       11,358       5,100       3,021       945       1,681       2,037       28,896   Special Mention     -       10       -       -       -       -       1       11   Substandard     -       24       1       10       -       11       43       89   Total Consumer     4,754       11,392       5,101       3,031       945       1,692       2,081       28,996   COMMERCIAL                                                                 Pass     7,468       30,144       27,394       23,739       4,211       10,850       26,577       130,383   Special Mention     -       72       -       149       19       146       419       805   Substandard     -       -       49       ( 14 )     -       -       21       56   Doubtful     -       -       -       -       -       8       -       8   Total Commercial     7,468       30,216       27,443       23,874       4,230       11,004       27,017       131,252   AGRICULTURAL                                                                 Pass     7,700       27,948       10,030       7,889       2,146       2,144       31,549       89,406   Special Mention     -       187       60       -       119       -       525       891   Substandard     -       211       186       55       870       559       331       2,212   Doubtful     -       -       -       -       -       100       -       100   Total Agricultural     7,700       28,346       10,276       7,944       3,135       2,803       32,405       92,609   TOTAL LOANS                                                                 Pass     56,517       384,130       302,231       139,595       95,598       205,963       166,730       1,350,764   Special Mention     554       269       5,746       1,175       4,166       5,965       945       18,820   Substandard     -       642       839       116       1,115       4,624       395       7,731   Doubtful     -       -       -       -       -       108       -       108   Total   $ 57,071     $ 385,041     $ 308,816     $ 140,886     $ 100,879     $ 216,660     $ 168,070     $ 1,377,423       - 17 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)   NOTE 4.   LOANS RECEIVABLE – continued   Internal classification of the loan portfolio was as follows (prior to the adoption of ASU No. 2016 - 13 ):       December 31, 2022               Special                                       Pass     Mention     Substandard     Doubtful     Loss     Total       (In Thousands)   Real estate loans:                                                 Residential 1-4 family   $ 135,079     $ 515     $ 353       -     $ -     $ 135,947   Residential 1-4 family construction     59,756       -       -       -       -       59,756   Commercial real estate     520,505       16,833       1,732       -       -       539,070   Commercial construction and development     150,101       1,044       -       -       -       151,145   Farmland     131,646       2,232       2,456       -       -       136,334   Other loans:                                                 Home equity     74,147       -       124       -       -       74,271   Consumer     27,560       10       39       -       -       27,609   Commercial     125,035       1,476       736       8       -       127,255   Agricultural     101,441       311       2,182       102       -       104,036   Total   $ 1,325,270     $ 22,421     $ 7,622     $ 110     $ -     $ 1,355,423     The following tables include information regarding delinquencies within the loan portfolio.       March 31, 2023       Loans Past Due and Still Accruing                                                           Nonaccrual                         30-89 Days Past Due     90 Days and Greater     Total     Loans with no ACL     Nonaccrual Loans with ACL     Current Loans     Total Loans       (In Thousands)   Real estate loans:                                                         Residential 1-4 family   $ 186     $ 330     $ 516     $ 939     $ -     $ 134,161     $ 135,616   Residential 1-4 family construction     -       -       -       -       -       61,189       61,189   Commercial real estate     3       774       777       339       -       543,500       544,616   Commercial construction and development     105       -       105       -       -       165,809       165,914   Farmland     2,084       -       2,084       2,132       -       134,694       138,910   Other loans:     -                                                    Home equity     210       -       210       99       -       78,012       78,321   Consumer     85       -       85       51       -       28,860       28,996   Commercial     319       137       456       43       -       130,753       131,252   Agricultural     1,433       -       1,433       2,099       180       88,897       92,609   Total   $ 4,425     $ 1,241     $ 5,666     $ 5,702     $ 180     $ 1,365,875     $ 1,377,423     - 18 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)   NOTE 4. LOANS RECEIVABLE – continued       December 31, 2022       Loans Past Due and Still Accruing                                       90 Days                                       30-89 Days     and             Nonaccrual     Current     Total       Past Due     Greater     Total     Loans     Loans     Loans       (In Thousands)   Real estate loans:                                                 Residential 1-4 family   $ 1,798     $ 330     $ 2,128     $ 483     $ 133,336     $ 135,947   Residential 1-4 family construction     500       -       500       -       59,256       59,756   Commercial real estate     780       -       780       350       537,940       539,070   Commercial construction and development     -       -       -       -       151,145       151,145   Farmland     1,620       -       1,620       754       133,960       136,334   Other loans:                                                 Home equity     226       -       226       107       73,938       74,271   Consumer     93       -       93       25       27,491       27,609   Commercial     597       746       1,343       44       125,868       127,255   Agricultural     -       -       -       1,535       102,501       104,036   Total   $ 5,614     $ 1,076     $ 6,690     $ 3,298     $ 1,345,435     $ 1,355,423       The following table presents the amortized cost basis of collateral-dependent loans by class of loans.       March 31, 2023       Real Estate     Business Assets       (In Thousands)   Real estate loans:                 Residential 1-4 family   $ 887     $ -   Commercial real estate     39       1,075   Farmland     3,666       -   Other loans:                 Home equity     68       -   Commercial     -       217   Agricultural     -       2,486   Total   $ 4,660     $ 3,778       Prior to the implementation of ASU No. 2016 - 13, Financial Instruments – Credit Losses (Topic 326 ) on January 1, 2023, a loan was considered impaired when the Company determined it was probable that it would be unable to collect all amounts due to the contractual terms of the loan agreement, including scheduled interest payments. Various factors determined impairment such as the financial condition of the borrower, value of the underlying collateral, and general economic conditions.   The following table provides additional information on impaired loans with and without related allowance reserves at December 31, 2022:        December 31, 2022               Unpaid               Recorded     Principal     Related       Investment     Balance     Allowance       (In Thousands)   Real estate loans:                         Residential 1-4 family   $ 483     $ 585     $ -   Residential 1-4 family construction     -       -       -   Commercial real estate     3,614       3,697       -   Commercial construction and development     -       -       -   Farmland     754       866       -   Other loans:                         Home equity     107       133       -   Consumer     25       30       -   Commercial     184       232       35   Agricultural     1,535       1,633       115   Total   $ 6,702     $ 7,176     $ 150     - 19 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)   NOTE 4. LOANS RECEIVABLE – continued       Three Months Ended       March 31,       2022       Average Recorded Investment       (In Thousands)   Real estate loans:         Residential 1-4 family   $ 601   Residential 1-4 family construction     169   Commercial real estate     1,945   Commercial construction and development     -   Farmland     1,619   Other loans:         Home equity     113   Consumer     53   Commercial     285   Agricultural     1,740   Total   $ 6,525     Interest income recognized on impaired loans for the  three months ended March 31, 2022 is considered insignificant. Interest payments received on a cash basis related to impaired loans w ere $ 415,000 at   December 31, 2022 .   Effective January 1, 2023, the Company adopted ASU No.   2022 - 02, Financial Instruments - Credit Losses (Topic 326 ) Troubled Debt Restructurings and Vintage Disclosures. The update eliminated the recognitions and measure of TDRs while expanding loan modification and vintage disclosures for borrowers experiencing financial difficulty. Due to the removal of the TDR designation, the Company evaluates all loan restructurings according to accounting guidance for loan modifications. Modifications to borrowers experiencing financial difficulties are considered modifications if the creditor grants a concession to the debtor, for economic or legal reasons related to the debtor's financial difficulties, that it would not otherwise consider. Loan modifications that result in a change in the timing or amount of contractual cash flows include situations where there are interest rate reductions, term extensions, other than insignificant payment delays, and combinations of the listed modifications.   As of  March 31, 2023 , the Company modified one commercial real estate loan with an amortized cost basis of $ 554,000 for a borrower experiencing financial difficulty by consolidating two lines of credit and refinancing into one long term loan for ten years. There was no forgiveness of principal and the loan was current with its modified terms as of March 31, 2023.    Prior to the adoption of ASU No. 2022 - 02, during the three months ended March  31, 2022, there were two  new TDR loans. The recorded investments for both agricultural loans at the time of restructure were $ 331,000 and $ 145,000 . No charge-offs were incurred and the loans continue to be on nonaccrual status.     NOTE 5.   MORTGAGE SERVICING RIGHTS   The Company is servicing mortgage loans for the benefit of others which are not included in the condensed consolidated statements of financial condition and have unpaid principal balances of $ 2,025,944,000  and $ 2,022,066,000 at  March 31, 2023 and December 31, 2022 , 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 $ 1,266,000  and $ 1,156,000 for the three months ended March 31, 2023 and 2022 , respectively. These fees, net of amortization, are included in mortgage banking, net which is a component of noninterest income on the condensed consolidated statements of income.   Custodial balances maintained in connection with the foregoing loan servicing are included in noninterest checking deposits and were $ 18,726,000  and $ 11,912,000 at  March 31, 2023 and December 31, 2022 , respectively.   - 20 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)   NOTE 5.   MORTGAGE SERVICING RIGHTS – continued   The following table is a summary of activity in mortgage servicing rights:       As of or For the       Three Months Ended       March 31,       2023     2022       (In Thousands)   Mortgage servicing rights:                 Beginning balance   $ 15,412     $ 13,749   Mortgage servicing rights capitalized     863       1,148   Amortization of mortgage servicing rights     ( 400 )     ( 609 ) Ending balance   $ 15,875     $ 14,288   Valuation allowance:                 Beginning balance     -       ( 56 ) Recovery of mortgage servicing rights     -       56   Ending balance     -       -   Mortgage servicing rights, net   $ 15,875     $ 14,288     Recovery of servicing rights is included in other noninterest expense on the condensed consolidated statements of income.    The fair values of these rights were $ 19,337,000  and $ 19,288,000 at  March 31, 2023 and December 31, 2022 , 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:       March 31,     December 31,       2023     2022   Key assumptions:                 Discount rate     12%       12 %   Prepayment speed range     118 - 402 %       116 - 210 %   Weighted average prepayment speed     130 %       131 %       NOTE 6.   DEPOSITS   Deposits are summarized as follows:       March 31,     December 31,       2023     2022       (In Thousands)   Noninterest checking   $ 460,195     $ 468,955   Interest-bearing checking     237,365       252,922   Savings     258,225       273,790   Money market     334,746       387,947   Time certificates of deposit     317,007       251,658   Total   $ 1,607,538     $ 1,635,272       NOTE 7.   OTHER LONG-TERM DEBT   Other long-term debt consisted of the following:       March 31, 2023     December 31, 2022               Unamortized             Unamortized               Debt             Debt       Principal     Issuance     Principal     Issuance       Amount     Costs     Amount     Costs       (In Thousands)   Subordinated debentures fixed at 5.50 % to floating, due 2030     15,000       ( 244 )     15,000       ( 249 ) Subordinated debentures fixed at 3.50 % to floating, due 2032     40,000       ( 1,024 )     40,000       ( 1,062 ) Subordinated debentures variable at 3-Month Libor plus 1.42 %, due 2035     5,155       -       5,155       -   Total other long-term debt   $ 60,155     $ ( 1,268 )   $ 60,155     $ ( 1,311 )   In January 2022, the Company completed the issuance of $ 40,000,000 in aggregate principal amount of subordinated notes due in 2032 in a private placement transaction to certain institutional accredited investors and qualified buyers. The notes bear interest at an annual fixed rate of 3.50 % payable semi-annually. Starting February 1, 2027, interest will accrue at a floating rate per annum equal to a benchmark rate, which is expected to be three -month term Secured Overnight Financing Rate ("SOFR") plus a spread of 218.0 basis points, payable quarterly. The notes are subject to redemption at the option of the Company on or after February 1, 2027. The subordinated debentures qualify as Tier 2 capital for regulatory capital purposes.    - 21 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)   NOTE 7.   OTHER LONG-TERM DEBT – continued   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 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 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. The subordinated debentures qualify as Tier 2 capital for regulatory capital purposes.    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 was paid semi-annually through maturity date. The notes were not subject to redemption at the option of the Company. The notes were redeemed on February 15, 2022.   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 6.61 % and 6.20 % as of March 31, 2023 and December 31, 2022 , 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. The subordinated debentures qualify as Tier 1 capital for regulatory purposes.      NOTE 8. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)   The following table includes information regarding the activity in accumulated other comprehensive income (loss).       Unrealized       (Losses) Gains       on Securities       Available-for-Sale       (In Thousands)   Balance, December 31, 2022   $ ( 26,357 ) Other comprehensive income, before reclassifications and income taxes     4,977   Amounts reclassified from accumulated other comprehensive loss, before income taxes     224   Income tax provision     ( 1,369 ) Total other comprehensive income     3,832   Balance, March 31, 2023   $ ( 22,525 )           Balance, December 31, 2021   $ 3,493   Other comprehensive loss, before reclassifications and income taxes     ( 17,067 ) Amounts reclassified from accumulated other comprehensive income, before income taxes     -   Income tax benefit     4,494   Total other comprehensive loss     ( 12,573 ) Balance, March 31, 2022   $ ( 9,080 )     NOTE 9.   EARNINGS PER COMMON SHARE     The computations of basic and diluted earnings per common share are as follows:       Three Months Ended       March 31,       2023     2022       (Dollars in Thousands, Except Per Share Data)   Basic weighted average shares outstanding     7,790,188       6,506,133   Dilutive effect of stock compensation     2,279       12,714   Diluted weighted average shares outstanding     7,792,467       6,518,847                     Net income available to common shareholders   $ 3,242     $ 2,216                     Basic earnings common per share   $ 0.42     $ 0.34                     Diluted earnings per common share   $ 0.42     $ 0.34     There were 11,625 weighted average shares outstanding for the three months ended March 31, 2023 that were not included in the computation of diluted earnings per common share because their effect would be anti-dilutive. There were no anti-dilutive shares for the three months ended March 31, 2022.     - 22 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)     NOTE 10. 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 condensed consolidated statements of condition.   Derivatives are summarized as follows:       March 31, 2023     December 31, 2022       Notional     Fair Value     Notional     Fair Value       Amount     Asset     Liability     Amount     Asset     Liability       (In Thousands)   Interest rate lock commitments   $ 30,962     $ 130     $ -     $ 18,603     $ -     $ 81   Forward TBA mortgage-backed securities     21,000       -       317       13,000       11       -     Changes in the fair value of the derivatives are recorded in mortgage banking, net within noninterest income on the condensed consolidated statements of income .  A net loss  of $ 117,000  and $ 60,000 was recorded for the three months ended March 31, 2023  and 2022, respectively.    NOTE 11 . 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.   - 23 - Table of Contents           EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)   NOTE 11. FAIR VALUE OF FINANCIAL INSTRUMENTS – continued   Collateral-Dependent Loans  – Individually reviewed collateral-dependent loans are reported at the fair value of the underlying collateral less costs to sell. Collateral-dependent loans are considered Level 3 inputs. 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 prepayment speeds and are considered Level 3 inputs.   The following tables summarize financial assets and financial liabilities measured at fair value on a recurring basis, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value.       March 31, 2023       Level 1     Level 2     Level 3     Total Fair       Inputs     Inputs     Inputs     Value       (In Thousands)   Financial assets:                                 Available-for-sale securities                                 U.S. government and agency obligations   $ -     $ 7,827     $ -     $ 7,827   U.S. treasury obligations     47,882       -       -       47,882   Municipal obligations     -       153,144       -       153,144   Corporate obligations     -       5,993       -       5,993   Mortgage-backed securities     -       31,043       -       31,043   Collateralized mortgage obligations     -       90,588       -       90,588   Asset-backed securities     -       12,946       -       12,946   Loans held-for-sale     -       9,927       -       9,927   Interest rate lock commitments     -       -       130       130   Financial liabilities:                                 Forward TBA mortgage-backed securities     -       317       -       317         December 31, 2022       Level 1     Level 2     Level 3     Total Fair       Inputs     Inputs     Inputs     Value       (In Thousands)   Financial assets:                                 Available-for-sale securities                                 U.S. government and agency obligations   $ -     $ 2,390     $ -     $ 2,390   U.S. treasury obligations     51,951       -       -       51,951   Municipal obligations     -       172,849       -       172,849   Corporate obligations     -       6,990       -       6,990   Mortgage-backed securities     -       29,653       -       29,653   Collateralized mortgage obligations     -       82,131       -       82,131   Asset-backed securities     -       3,531       -       3,531   Loans held-for-sale     -       8,250       -       8,250   Forward TBA mortgage-backed securities     -       11       -       11   Financial liabilities:                                 Interest rate lock commitments     -       -       81       81     - 24 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)   NOTE 11. 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:         March 31, 2023       Level 1     Level 2     Level 3     Total Fair       Inputs     Inputs     Inputs     Value       (In Thousands)   Collateral-dependent loans individually evaluated, net of ACL (1)   $ -     $ -     $ 52     $ 52   Mortgage servicing rights     -       -       -       -         December 31, 2022       Level 1     Level 2     Level 3     Total Fair       Inputs     Inputs     Inputs     Value       (In Thousands)   Impaired loans (1)   $ -     $ -     $ 281     $ 281   Mortgage servicing rights     -       -       1,346     $ 1,346     ( 1 )  The Company adopted ASU No. 2016 - 13 as of January 1, 2023, which changes the methodology for impaired loans. The comparable period presents impaired loans under previously applicable GAAP.   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   Significant Input   Instrument   Technique   Inputs   Values                   Collateral-dependent 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   110 - 405 %   Interest rate lock commitments   Internal pricing model   Pull-through expectations   80 - 95 %     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  months ended March 31, 2023.       Three Months Ended       March 31,       2023     2022       Interest Rate Lock Commitments       (In Thousands)   Balance, January 1, 2023   $ ( 81 )   $ 1,218   Purchases and issuances     37       287   Sales and settlements     174       ( 1,414 ) Balance, March 31, 2023   $ 130     $ 91   Unrealized gains (losses) relating to items held at end of period   $ 211     $ ( 1,127 )   - 25 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)   NOTE 11. 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 condensed 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.       March 31, 2023                               Total               Level 1     Level 2     Level 3     Estimated     Carrying       Inputs     Inputs     Inputs     Fair Value     Amount       (In Thousands)   Financial assets:                                         Cash and cash equivalents   $ 19,435     $ -     $ -     $ 19,435     $ 19,435   FHLB stock     -       7,360       -       7,360       7,360   FRB stock     -       4,131       -       4,131       4,131   Loans receivable, gross     -       -       1,335,963       1,335,963       1,377,423   Accrued interest and dividends receivable     10,427       -       -       10,427       10,427   Mortgage servicing rights     -       -       19,337       19,337       15,875   Financial liabilities:                                         Non-maturing interest-bearing deposits     -       830,336       -       830,336       830,336   Noninterest-bearing deposits     460,195       -       -       460,195       460,195   Time certificates of deposit     -       -       312,727       312,727       317,007   Accrued expenses and other liabilities     30,448       -       -       30,448       30,448   FHLB advances and other borrowings     -       -       122,481       122,481       122,530   Other long-term debt     -       -       57,888       57,888       60,155         December 31, 2022                               Total               Level 1     Level 2     Level 3     Estimated     Carrying       Inputs     Inputs     Inputs     Fair Value     Amount       (In Thousands)   Financial assets:                                         Cash and cash equivalents   $ 21,811     $ -     $ -     $ 21,811     $ 21,811   FHLB stock     -       5,089       -       5,089       5,089   FRB stock     -       4,131       -       4,131       4,131   Loans receivable, gross     -       -       1,322,814       1,322,814       1,353,678   Accrued interest and dividends receivable     11,284       -       -       11,284       11,284   Mortgage servicing rights     -       -       19,288       19,288       15,412   Financial liabilities:                                         Non-maturing interest-bearing deposits     -       914,659       -       914,659       914,659   Noninterest-bearing deposits     468,955       -       -       468,955       468,955   Time certificates of deposit     -       -       246,348       246,348       251,658   Accrued expenses and other liabilities     26,377       -       -       26,377       26,377   FHLB advances and other borrowings     -       -       69,373       69,373       69,394   Other long-term debt     -       -       56,721       56,721       60,155       - 26 - 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   Introduction     This discussion and analysis provides information that management believes is necessary to understand Eagle's financial condition, changes in financial condition, results of operations, and cash flows for the three months ended March 31, 2023, as compared to 2022. The following should be read in conjunction with the Company's Consolidated Financial Statements, and accompanying Notes thereto, for the year ended December 31, 2022, included in Eagle's Annual Report on Form 10-K filed with the United States Securities and Exchange Commission (SEC) on March 8, 2023, and in conjunction with the Condensed Consolidated Financial Statements, and accompanying Notes thereto, included in Part I - Item 1. Financial Statements. The results of operations for the three months ended March 31, 2023, are not necessarily indicative of the future results that may be attained for the entire year or other interim periods.    Executive Summary   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. Our earnings depend primarily on our level of net interest income, which is the difference between interest earned on our interest-earning assets, consisting primarily of loans and investment securities, and the interest paid on interest-bearing liabilities, consisting primarily of deposits, borrowed funds, and trust-preferred securities. Net interest income is a function of our interest rate spread, which is the difference between the average yield earned on our interest-earning assets and the average rate paid on our interest-bearing liabilities, as well as a function of the average balance of interest-earning assets compared to interest-bearing liabilities. Also contributing to our earnings is noninterest income, which consists primarily of service charges and fees on loan and deposit products and services, net gains and losses on sale of assets, and mortgage loan service fees. Net interest income and noninterest income are offset by provisions for loan losses, general administrative and other expenses, including salaries and employee benefits and occupancy and equipment costs, as well as by state and federal income tax expense.     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.). 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 our ability to manage our interest rate 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 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.   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 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 statement of financial condition in an efficient manner. It may become more difficult to maintain deposit growth due to significant competition, the current conditions in the banking industry 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 increased the federal funds target rate to 4.50% during the year ended December 31, 2022. The rate increased to 5.00% during the three months ended March 31, 2023 .    Recent Events   Acquisitions   On September 30, 2021, the Company entered into an Agreement and Plan of Merger with First Community Bancorp, Inc. ("FCB"), a Montana corporation, and FCB's wholly-owned subsidiary, First Community Bank, a Montana chartered commercial bank. The Merger Agreement provided that, upon the terms and subject to the conditions set forth in the Merger Agreement, FCB would merge with and into Eagle, with Eagle continuing as the surviving corporation. The transaction closed on April 30, 2022.  In the transaction, Eagle acquired nine retail bank branches and two loan production offices in Montana. The total consideration paid was $38.58 million and included cash consideration of $10.23 million and common stock issued of $28.35 mi llion.   - 27 - 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 March 31, 2023 and December 31, 2022.   Total assets were $1.98  billion at March 31, 2023 , an increase of $34.36 million, or 1.8% from $1.95  billion at December 31, 2022 .  Loans receivable, net increasedby $22.74 million from December 31, 2022 .  Total liabilities were $1.82 billion at March 31, 2023 , an increase of $29.75 million, or 1.7%, from $1.79  billion at December 31, 2022 . Total borrowings increased $53.19 million from December 31, 2022 and total deposits decreased  $27.73  million from December 31, 2022.  Total shareholders’ equity increased $4.60 million or 2.9% from December 31, 2022 .   Financial Condition Details   Investment Activities   The following table summarizes investment activities:       March 31,     December 31,       2023     2022       Fair Value     Percentage of Total     Fair Value     Percentage of Total       (Dollars in Thousands)   Securities available-for-sale:                                 U.S. government and agency obligations   $ 7,827       2.24 %   $ 2,390       0.68 % U.S. Treasury obligations     47,882       13.70       51,951       14.86   Municipal obligations     153,144       43.83       172,849       49.47   Corporate obligations     5,993       1.72       6,990       2.00   Mortgage-backed securities     31,043       8.88       29,653       8.48   Collateralized mortgage obligations     90,588       25.93       82,131       23.50   Asset-backed securities     12,946       3.70       3,531       1.01   Total securities available-for-sale   $ 349,423       100.00 %   $ 349,495       100.00 %   Securities available-for-sale were $349.42  million at March 31, 2023 , a decrease  of $72,000 , from $349.50 million at December 31, 2022 . The decrease was due to sales of $22.77 million and maturity, principal payments and call activity of $10.09 million. These decreases were largely offset by $28.13 million in investment purchases. In addition, the unrealized losses on securities improved from year end, decreasing by $5.20 million.    - 28 - 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:        March 31,     December 31,       2023     2022       Amount     Percent of Total     Amount     Percent of Total       (Dollars in thousands)   Real estate loans:                                 Residential 1-4 family (1)   $ 135,615       9.85 %   $ 135,947       10.03 % Residential 1-4 family construction     61,190       4.44       59,756       4.41   Total residential 1-4 family     196,805       14.29       195,703       14.44                                     Commercial real estate     544,618       39.53       539,070       39.76   Commercial construction and development     165,912       12.05       151,145       11.15   Farmland     138,910       10.08       136,334       10.06   Total commercial real estate     849,440       61.66       826,549       60.97                                     Total real estate loans     1,046,245       75.95       1,022,252       75.41                                     Other loans:                                 Home equity     78,321       5.69       74,271       5.48   Consumer     28,996       2.11       27,609       2.04                                     Commercial     131,252       9.53       127,255       9.39   Agricultural     92,609       6.72       104,036       7.68   Total commercial loans     223,861       16.25       231,291       17.07                                     Total other loans     331,178       24.05       333,171       24.59                                     Total loans     1,377,423       100.00 %     1,355,423       100.00 %                                   Deferred loan fees (2)     -               (1,745 )         Allowance for credit losses (3)     (15,000 )             (14,000 )         Total loans, net   $ 1,362,423             $ 1,339,678               (1)  Excludes loans held-for-sale.   (2) Deferred loan fees, net included in individual loan categories above for the quarter ended March 31, 2023.   (3) Allowance for credit losses for the quarter ended March 31, 2023; allowance for loan losses for prior periods.    Loans receivable, net increased $22.74 million , or 1.7%, to $1.36 billion at March 31, 2023 from $1.34  billion at December 31, 2022 . Total commercial real estate loans increased $22.89  million, total home equity loans increased $4.05 million, total residential loans increased $1.11  million, consumer loans increased $1.39 million, and commercial loans decreased $7.43 million.   Total loan originations were $144.52  million for the three months ended March 31, 2023 . Total residential 1-4 family originations were $71.47  million, which includes $64.84  million of loans held-for-sale originations. Total commercial real estate originations were $35.18  million. Total commercial originations were $29.08 million. Consumer loan originations totaled $5.11  million. Home equity loan originations totaled $3.68 million.  Loans held-for-sale increased by $1.68  million to $9.93  million at March 31, 2023 from $8.25  million at December 31, 2022 .   - 29 - 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   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 credit losses. Subsequent write-downs are recorded as a charge to operations. As of March 31, 2023 and December 31, 2022  there was no real estate owned and other repossessed property.    The following table sets forth information regarding nonperforming assets:       March 31,     December 31,       2023     2022       (Dollars in Thousands)   Nonaccrual loans                 Real estate loans:                 Residential 1-4 family   $ 939     $ 483   Commercial real estate     339       350   Farmland     2,132       143   Other loans:                 Home equity     99       96   Consumer     51       25   Commercial     43       44   Agricultural     2,279       1,059   Accruing loans delinquent 90 days or more                 Real estate loans:                 Residential 1-4 family     330       330   Commercial real estate     774       -   Other loans:                 Commercial     137       746   Restructured loans:     -       4,502   Total nonperforming loans     7,123       7,778   Real estate owned and other repossessed property, net     -       -   Total nonperforming assets   $ 7,123     $ 7,778                     Total nonperforming loans to total loans     0.52 %     0.57 % Total nonperforming loans to total assets     0.36 %     0.40 % Total nonaccrual loans to total loans     0.43 %     0.24 % Total nonperforming assets to total assets     0.36 %     0.40 %   Nonaccrual loans as of March 31, 2023 and  December 31, 2022 include $589,000 and $694,000, respectively of acquired loans that deteriorated subsequent to the acquisition date.    Effective January 1, 2023, the Company adopted ASU No. 2022-02, Financial Instruments - Credit Losses (Topic 326) Troubled Debt Restructurings ("TDRs") and Vintage Disclosures. The update eliminated the recognition and measurement of TDRs, therefore, TDRs are not included in nonperforming assets as of March 31, 2023.      - 30 - 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:       March 31,     December 31,       2023     2022               Percent             Percent       Amount     of Total     Amount     of Total       (Dollars in Thousands)   Noninterest checking   $ 460,195       28.63 %   $ 468,955       28.68 % Interest-bearing checking     237,365       14.77       252,922       15.47   Savings     258,225       16.06       273,790       16.74   Money market     334,746       20.82       387,947       23.72   Total     1,290,531       80.28       1,383,614       84.61   Certificates of deposit accounts:                                 IRA certificates     24,521       1.53       24,907       1.52   Brokered certificates     19,574       1.22       -       0.00   Other certificates     272,912       16.97       226,751       13.87   Total certificates of deposit     317,007       19.72       251,658       15.39   Total deposits   $ 1,607,538       100.00 %   $ 1,635,272       100.00 %   Deposits slightly decreased by $27.73 million, or 1.7%, to $1.61  billion at March 31, 2023 from $1.64  billion at  December 31, 2022 .  M oney market decreased by $53.21  million , savings decreased by $15.56 million, interest-bearing checking decreased by $15.55  million, and noninterest checking decreased by  $8.76 million. However, these decreases were largely offset by increases in certificates of deposits of $65.35 million.    The estimated amount of uninsured deposits was $292.05 million or 18% of total deposits at March 31, 2023.   The following table summarizes borrowing activity:       March 31,     December 31,       2023     2022       Net     Percent     Net     Percent       Amount     of Total     Amount     of Total       (Dollars in Thousands)   FHLB advances and other borrowings   $ 122,530       67.55 %   $ 69,394       54.11 % Other long-term debt:                                 Subordinated debentures fixed at 5.50% to floating, due 2030     14,756       8.13       14,751       11.50   Subordinated debentures fixed at 3.50% to floating, due 2032     38,976       21.48       38,938       30.37   Subordinated debentures variable, due 2035     5,155       2.84       5,155       4.02   Total other long-term debt     58,887       32.45       58,844       45.89   Total borrowings   $ 181,417       100.00 %   $ 128,238       100.00 %   Total borrowings increased by $53.18 million, or 41.5% to $181.42 million at March 31, 2023  from $128.24 million at December 31, 2022 . This increase is largely due to an increase in FHLB advances and other borrowings related to funding loan growth.    Shareholders’ Equity   Total shareholders’ equ ity increased by $4.60 million, or 2.9%, to $163.02 million at March 31, 2023 from $158.42 million at December 31, 2022 . The increase was impacted by net income of $3.24 million and a decrease in unrealized losses on securities available-for-sale of $3.83 million. These increases were offset by a net of tax cumulative adjustment of $1.62 million related to the adoption of the Current Expected Credit Losses standard and dividends paid of $1.10 million.    - 31 - 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 financial condition items, as well as interest and dividends and average yields related to the average balances. All average balances are daily average balances. Nonaccrual 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 March 31,       2023     2022       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   $ 345,033     $ 2,843       3.34 %   $ 273,004     $ 1,297       1.93 % FHLB and FRB stock     10,303       107       4.21       4,540       59       5.27   Loans receivable (1)     1,366,766       17,737       5.26       974,177       11,373       4.73   Other earning assets     2,700       21       3.15       68,278       39       0.23   Total interest-earning assets     1,724,802       20,708       4.87       1,319,999       12,768       3.92   Noninterest-earning assets     222,289                       155,050                   Total assets   $ 1,947,091                     $ 1,475,049                                                                     Liabilities and equity:                                                 Interest-bearing liabilities:                                                 Deposit accounts:                                                 Checking   $ 252,667     $ 186       0.30 %   $ 207,239     $ 13       0.03 % Savings     259,565       35       0.05       221,531       31       0.06   Money market     353,748       946       1.08       294,136       192       0.27   Certificates of deposit     283,433       1,293       1.85       146,211       76       0.21   FHLB advances and other borrowings     96,525       1,142       4.80       1,278       6       1.90   Other long-term debt     58,873       678       4.67       62,350       605       3.94   Total interest-bearing liabilities     1,304,811       4,280       1.33       932,745       923       0.40   Noninterest checking     456,153                       368,223                   Other noninterest-bearing liabilities     23,849                       20,879                   Total liabilities     1,784,813                       1,321,847                                                                     Total equity     162,278                       153,202                                                                     Total liabilities and equity   $ 1,947,091                     $ 1,475,049                   Net interest income/interest rate spread (2)           $ 16,428       3.54 %           $ 11,845       3.52 %                                                   Net interest margin (3)                     3.86 %                     3.64 % Total interest-earning assets to interest-bearing liabilities                     132.19 %                     141.52 %   (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.   - 32 - 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 March 31,       2023     2022               Due to                     Due to               Volume     Rate     Net     Volume     Rate     Net       (In Thousands)   Interest-earning assets:                                                 Investment securities   $ 342     $ 1,204     $ 1,546     $ 588     $ (168 )   $ 420   FHLB and FRB stock     75       (27 )     48       (6 )     (4 )     (10 ) Loans receivable (1)     4,583       1,781       6,364       1,043       (699 )     344   Other earning assets     (37 )     19       (18 )     (4 )     17       13   Total interest-earning assets     4,963       2,977       7,940       1,621       (854 )     767                                                     Interest-bearing liabilities:                                                 Checking     3       170       173       2       1       3   Savings     5       (1 )     4       6       (2 )     4   Money Market     39       715       754       40       42       82   Certificates of deposit     71       1,146       1,217       (33 )     (146 )     (179 ) FHLB advances and other borrowings     447       689       1,136       (64 )     -       (64 ) Other long-term debt     (34 )     107       73       426       (211 )     215   Total interest-bearing liabilities     531       2,826       3,357       377       (316 )     61                                                     Change in net interest income   $ 4,432     $ 151     $ 4,583     $ 1,244     $ (538 )   $ 706     (1)  Includes loans held-for-sale.   - 33 - 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  March 31, 2023 and 2022   Net Income. Eagle’s net income for the three months ended  March 31, 2023 was $3.24 million compared to $2.22  million for the three months ended March 31, 2022 . The increase of $1.02 million was primarily due to an increase in net interest income of $4.58 million partially offset by a decrease in noninterest income of $2.94 million.  Basic and diluted earnings per common share were both $0.42 for the current period. Basic and diluted earnings per common share were both $0.34 for the prior year comparable period.   Net Interest Income. Net interest income increased to $16.43 million for the three months ended March 31, 2023 , from $11.85  million for the same quarter in the prior year. The increase of $4.58 million, or 38.6%, was the result of an increase in interest and dividend income of $7.94 million partially offset by an increase in interest expense of $3.36 million.   Interest and Dividend Income. Interest and dividend income was $20.71 million for the three months ended  March 31, 2023 compared to $12.77 million for the three months ended  March 31, 2022 . Interest and fees on loans increased to $17.74 million for the three months ended March 31, 2023  from $11.37 million for the three months ended March 31, 2022. This increase of $6.37 million, or 56.0%, was due to an increase in the average balance of loans, as well as an increase in the average yield on loans. Average balances for loans receivable, including loans held-for-sale, for the three months ended March 31, 2023 were $1.37 billion, compared to $974.18 million for the prior year period. This represents an increase of $392.59 million, or 40.3% and was impacted by the FCB acquisition, as well as organic growth. The average interest rate earned on loans receivable also increased by 53 basis points, from 4.73% for the three months ended March 31, 2022 to 5.26% for the current period. Interest accretion on purchased loans was $354,000 for the three months ended March 31, 2023 which resulted in a 8 basis point increase in net interest margin compared to $108,000 for the three months ended March 31, 2022 which resulted in a 3 basis point increase in net interest margin.  Interest on investment securities available-for-sale increased by $1.54 million period over period. Average balances for investments increased to $345.03  million for the three months ended March 31, 2023  from $273.00  million for the three months ended March 31, 2022 .  The increase in average investment balances was largely driven by the FCB acquisition. Average interest rates earned on investments also increased to 3.34% for the three months ended  March 31, 2023  from 1.93% for the three months ended March 31, 2022 .   Interest Expense. Total interest expense was $4.28 million for the three months ended March 31, 2023 compared to $923,000 for the three months ended March 31, 2022 . The increase of $3.36 million, or 365.2%, was largely due to an increase of $2.15 million in interest expense on deposits, as well as a net increase of $1.20 million in interest expense on total borrowings. The average balance for total deposits was $1.61 billion for the three months ended March 31, 2023 compared to $1.24 billion for the three months ended March 31, 2022. Deposits were acquired through the FCB merger but also increased due to organic growth. In addition, the overall average rate on total deposits was up from 0.10% for the three months ended March 31, 2022 compared to 0.62% for the three months ended March 31, 2023. The average balance for total borrowings increased from $63.63 million for the three months ended  March 31, 2022  to $155.40 million for the three months ended  March 31, 2023 . T he average rate paid on total borrowings also increased from 3.89% for the three months ended March 31, 2022 , to 4.75% for the three months ended March 31, 2023 . Short-term borrowings have increased to fund loan growth.    Credit Loss Provision.  Credit loss provisions are charged to earnings to maintain the total allowance for credit 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 credit losses, it recognizes that future adjustments may be necessary. The Bank recorded $279,000 in credit loss provisions for the three months ended  March 31, 2023  and $279,000 in loan loss provisions for the three months ended March 31, 2022 . 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, additional provisions will be necessary in future periods in order to increase our allowance for credit losses.    Noninterest Income. Total noninterest income was $4.67 million for the three months ended March 31, 2023  compared to $7.61 million for the three months ended March 31, 2022 . The decrease of $2.94 million was primarily due to a decrease in mortgage banking, net of $3.20 million. Mortgage banking, net includes net gain on sale of mortgage loans which decreased to $2.20 million for the three months ended  March 31, 2023  compared to $6.23 million for the three months ended  March 31, 2022 .   During the three months ended  March 31, 2023 , $62.39 million residential mortgage loans were sold compared to $172.14 million in the same period in the prior year. Mortgage volumes have been impacted by the current interest rate environment. However, gross margin levels remained fairly consistent only decreasing 9 basis points from 3.62% for the three months ended March 31, 2022 to 3.53% for the three months ended  March 31, 2023 .   Noninterest Expense. Noninterest expense was $16.53  million for the three months ended March 31, 2023 compared to $16.26  million for the three months ended March 31, 2022 , a slight increase of $270,000 or 1.7%. Occupancy and equipment increased $395,000 due to office expansion and the corresponding depreciation expense, as well as utilization and maintenance costs. However, salaries and employee benefits expense was lower quarter over quarter due to decreased commissions paid for residential mortgage originations.    Provision for Income Taxes . Provision for income taxes was $1.05 million for the three months ended March 31, 2023 , compared to $695,000 for the three months ended March 31, 2022 due to increased income before provision for income taxes. The effective tax rate was 24.4% for the current period and 23.9% for the prior period.           - 34 - 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     Liquidity   The Bank is required by regulation to maintain sufficient levels of liquidity for safety and soundness purposes. 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 March 31, 2023 and December 31, 2022 .   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 Company uses liquidity resources principally to fund existing and future loan commitments. It also uses them to fund maturing certificates of deposit and demand deposit withdrawals, for investment purposes, to meet operating expenses and capital expenditures, for dividend payments and stock repurchases and to maintain adequate liquidity levels.   Liquidity may be adversely affected by unexpected deposit outflows, higher interest rates paid by competitors, and similar matters. Management monitors projected liquidity needs and determines the level desirable based in part on the Bank's commitments to make loans and management’s assessment of the Bank's ability to generate funds.   The Bank's available borrowing capacity was approximately $367.10 million as of March 31, 2023 and $419.20 million as of December 31, 2022.       March 31,     December 31,       2023     2022       Borrowings     Remaining Borrowing     Borrowings     Remaining Borrowing       Outstanding     Capacity     Outstanding     Capacity       (Dollars in Thousands)   Federal Home Loan Bank advances   $ 122,530     $ 249,100     $ 69,394     $ 296,200   Federal Reserve Bank discount window     -       33,000       -       38,000   Correspondent bank lines of credit     -       85,000       -       85,000   Total   $ 122,530     $ 367,100     $ 69,394     $ 419,200     During the first quarter of 2023, the FRB offered a new Bank Term Funding Program ("BTFP") for eligible depository institutions. The BTFP offers loans of up to one year in length to institutions pledging collateral eligible for purchase by FRB such as U.S. treasuries, agency securities, and mortgage-backed securities. These assets will be valued at par. The Company is not currently utilizing the program; however, this is an additional available funding source.   In addition to bank level liquidity management, Eagle must manage liquidity at the parent company level for various operating needs, including the servicing of debt, the payment of dividends on our common stock, share repurchases, payment of general corporate expense, and potential capital infusions into subsidiaries. The primary source of liquidity for Eagle consists of dividends from the Bank, which is governed by certain rules and regulations of the Montana Division of Banking and Financial Institutions and the Federal Reserve, and access to capital markets. Eagle also has a $10.00 million line of credit with a correspondent bank. There was no outstanding balance for this line of credit at both March 31, 2023 and December 31, 2022. Eagle's ability to receive dividends from the Bank in future periods will depend on several factors, including, without limitation, the Bank's future profits, asset quality, liquidity, and overall condition. In addition, both the Montana Division of Banking and Financial Institutions and Federal Reserve may require approval to pay dividends, based on certain regulatory statutes and limitations.   Eagle presently believes that the sources of liquidity discussed above, including existing liquid funds on hand, are sufficient to meet its anticipated funding needs. However, if economic conditions were to significantly deteriorate, regulatory capital requirements for Eagle or the Bank were to increase as the result of regulatory directives or otherwise, or Eagle were to believe it is prudent to enhance current liquidity levels, then Eagle may seek additional liquidity from external sources.   Capital Resources   As of March 31, 2023 , the Bank’s internally determined measurement of sensitivity to interest rate movements as measured by a 200 basis point rise in interest rates scenario, increased the economic value of equity (“EVE”) by 6.2% compared to a decrease of 12.60% at December 31, 2022 . The Bank is within the guidelines set forth by the Board of Directors for interest rate risk sensitivity in rising interest rate scenarios.   - 35 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS   The Company's and the Bank'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 March 31, 2023. The Company's and the Bank's actual capital amounts and ratios as of March 31, 2023  are presented in the table below and all of the ratios, with the exception of the Tier 1 capital adjusted total average assets ratio, include the capital conservation buffer of 2.50%.                                        Minimum                                       To Be Well                       Minimum Required     Capitalized Under                       for Capital Adequacy     Prompt Corrective       Actual     Purposes     Action Provisions       Amount     Ratio     Amount     Ratio     Amount     Ratio       (Dollars in Thousands)   March 31, 2023:                                                 Total risk-based capital to risk weighted assets                                                 Consolidated   $ 223,061       13.92 %   $ 168,234       10.50 %     N/A       N/A   Bank     207,995       12.99       168,093       10.50       160,088       10.00 %                                                   Tier 1 capital to risk weighted assets                                                 Consolidated     151,561       9.46       136,189       8.50       N/A       N/A   Bank     191,495       11.96       136,075       8.50       128,070       8.00                                                     Common equity Tier 1 capital to risk weighted assets                                                 Consolidated     146,561       9.15       112,156       7.00       N/A       N/A   Bank     191,495       11.96       112,062       7.00       104,057       6.50                                                     Tier 1 capital to adjusted total average assets                                                 Consolidated     151,561       7.81       77,630       4.00       N/A       N/A   Bank     191,495       9.87       77,613       4.00       97,016       5.00                                         Minimum                                       To Be Well                       Minimum Required     Capitalized Under                       for Capital Adequacy     Prompt Corrective       Actual     Purposes     Action Provisions       Amount     Ratio     Amount     Ratio     Amount     Ratio       (Dollars in Thousands)   December 31, 2022:                                                 Total risk-based capital to risk weighted assets                                                 Consolidated   $ 219,595       14.10 %   $ 163,560       10.50 %     N/A       N/A   Bank     202,905       13.04       163,444       10.50       155,661       10.00 %                                                   Tier 1 capital to risk weighted assets                                                 Consolidated     150,595       9.67       132,406       8.50       N/A       N/A   Bank     188,905       12.14       132,312       8.50       124,529       8.00                                                     Common equity Tier 1 capital to risk weighted assets                                                 Consolidated     145,594       9.35       109,040       7.00       N/A       N/A   Bank     188,905       12.14       108,962       7.00       101,179       6.50                                                     Tier 1 capital to adjusted total average assets                                                 Consolidated     150,595       7.78       77,422       4.00       N/A       N/A   Bank     188,905       9.82       76,947       4.00       96,184       5.00     - 36 - 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 condensed 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's primary source of revenue. 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 or decrease in interest rates of up to 200 basis points or by more than 10.0% given an immediate increase or decrease in interest rates of up to 100 basis points.    The following table includes the Bank’s net interest income sensitivity analysis.                       Changes in Market     Rate Sensitivity       Interest Rates     As of March 31, 2023     Policy (Basis Points)     Year 1     Year 2     Limits                     +200     -3.2%     5.7%     -15.0% +100     -1.4%     6.5%     -10.0% -100     0.2%     5.4%     -10.0% -200     -0.2%     3.4%     -15.0%   Critical Acc ounting Policies and Estimates   The accounting and financial reporting policies of Eagle are in accordance with generally accepted accounting principles ("GAAP") and conform to the accounting and reporting guidelines prescribed by bank regulatory authorities. Eagle has identified certain of its accounting policies as “critical accounting policies,” consisting of those related to the allowance for credit losses and business combinations. In determining which accounting policies are critical in nature, Eagle has identified the policies that require significant judgment or involve complex estimates. It is management's practice to discuss critical accounting policies with the Board of Directors' Audit Committee on a periodic basis, including the development, selection, implementation, and disclosure of the critical accounting policies. The application of these policies has a significant impact on Eagle’s unaudited interim consolidated financial statements. Eagle’s financial results could differ significantly if different judgments or estimates are used in the application of these policies. All accounting policies described in "Part II - Item 8. Financial Statements and Supplementary Data - Note 1 – Organization and Summary of Significant Accounting Policies" in Eagle’s 2022 Form 10-K should be reviewed for a greater understanding of how we record and report our financial performance. There have been no significant changes to the accounting policies, estimates, and assumptions, or the judgments affecting the application of these estimates and assumptions from those disclosed in Eagle’s 2022 Form 10-K, other than the adoption of Accounting Standards Update ("ASU") No. 2016-13 Financial Instruments - Credit Losses, referred to as the Current Expected Credit Losses ("CECL") model on January 1, 2023 and ASU No. 2022-02 Financial Instruments - Credit Losses, Troubled Debt Restructurings and Vintage Disclosures, an update to ASU No. 2016-13. For additional information on CECL, see Note 1. Organization and Summary of Significant Accounting Policies included in Part I. Item 1 of this report.      - 37 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS   Item 3. Quantitative and Qualitative Disclosures About Market Risk   This item has been omitted based on Eagle’s status as a smaller reporting company.   - 38 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS   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 March 31, 2023, 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.     - 39 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS   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, 2022 other than the addition of the following risk factor:    A continuation of recent turmoil in our industry, and responsive measures to manage it, could have an adverse effect on our financial position or results of operations.   In recent months, several financial services institutions have failed or required outside liquidity support—in many cases, as a result of the inability of the institutions to obtain needed liquidity. The impact of this situation has led to risk of additional stress to other financial services institutions and the financial services industry generally as a result of increased lack of confidence in the financial sector. U.S. regulators have taken action in an effort to strengthen public confidence in the banking system, including the creation of a new Bank Term Funding Program. There can be no assurance that these actions will stabilize the financial services industry and financial markets. While we currently do not anticipate liquidity constraints of the kind that caused certain other financial services institutions to fail or require external support, constraints on our liquidity could occur as a result of unanticipated deposit withdrawals because of market distress or our inability to access other sources of liquidity, including through the capital markets due to unforeseen market dislocations or interruptions. Moreover, some of our customers may become less willing to maintain deposits at the Bank because of broader market concerns with the level of insurance available on those deposits. Our business and our financial condition and results of operations could be adversely affected by continued soundness concerns regarding financial institutions generally and our counterparties specifically and limitations resulting from further governmental action in an effort to stabilize or provide additional regulation of the financial system as impact of excessive deposit withdrawals.     Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.   On April 20, 2023, Eagle's Board of Directors authorized the repurchase of up to 400,000 shares of its common stock beginning May 1, 2023. Under the plan, shares 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 on market conditions and other corporate considerations. The plan expires on May 1, 2024.    On April 21, 2022, Eagle's Board authorized the repurchase of up to 400,000 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 repurchases depended on market conditions and other corporate considerations. During the second quarter of 2022, 5,000 shares were purchased under this plan at an average price of $19.75. During the third quarter of 2022, 99,517 shares were purchased under this plan at an average price of $19.45. During the fourth quarter of 2022, 6,608 shares were purchased under this plan at an average price of $18.80. No shares were purchased during the first quarter of 2023 under this plan. The plan expired on April 21, 2023.   On July 22, 2021, Eagle's 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 repurchases depended on market conditions and other corporate considerations.  No shares were purchased during the third or fourth quarter of 2021. However, during the first quarter of 2022, the Company repurchased the total authorized amount of 100,000 shares at an average price of $22.71 per share. The plan expired on July 22, 2022.    Item 3. Defaults Upon Senior Securities.   Not applicable.   Item 4. Mine Safety Disclosures Not applicable.   - 40 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS   Part II - OTHER INFORMATION - continued       Item 5. Other Information.   None.   Item 6. Exhibits.     Exhibit Number Description     2.1 Agreement and Plan of Merger, dated as of September 30, 2021, by and among Eagle Bancorp Montana, Inc., Opportunity Bank of Montana, First Community Bancorp, Inc. and First Community Bank (incorporated by reference to Exhibit 2.1 of our Current Report on Form 8-K filed on October 1, 2021).     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 Amendment No. 1 to the 2020 Non-Employee Director Award Plan (incorporated by reference herein to Exhibit 10.1 of our Current Report on Form 8-K filed on April 26, 2023).     31.1 Certification by Laura F. Clark, 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 Miranda J. Spaulding, 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 Laura F. Clark, Chief Executive Officer, and Miranda J. Spaulding, 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) (1)     101.SCH Inline XBRL Taxonomy Extension Schema Document (1)     101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document (1)     101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document (1)     101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document (1)     101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document (1)     104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)     (1) These interactive data files shall not be deemed filed for purposes of Section 11 or 12 of the Securities Act of 1933, as amended, or Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability under those sections.    - 41 - Table of Contents EAGLE BANCORP MONTANA, INC. AND SUBSIDIARIES MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS   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: May 12, 2023 By:   /s/ Laura F. Clark   Laura F. Clark   President/CEO                          Date: May 12, 2023 By:   /s/ Miranda J. Spaulding   Miranda J. Spaulding   SVP/CFO     - 42 -