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Item 7. Management’s Discussion and Analysis

2025-03-14 compared with 2024-03-06 · 123 added, 95 removed, 530 unchanged (29% of the section changed)

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The financial review is provided as a supplement to, and should be read in conjunction with the Consolidated Financial Statements and the related Notes included elsewhere in this report.

Eagle Bancorp Montana, Inc.

is a bank holding company registered under the Bank Holding Company Act, is incorporated under the laws of Delaware and headquartered in Helena, Montana.

Through its wholly-owned subsidiary, Opportunity Bank of Montana, a Montana state-chartered bank that is a member of the Federal Reserve System, the Company provides commercial and consumer banking services.

The following Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") describes Eagle and its subsidiaries' results of operations for the year ended December 31, 2024 as compared to the year ended December 31, 2023, and also analyzes our financial condition as of December 31, 2024 as compared to December 31, 2023.

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We have made significant progress in this initiative over the past decade.

As of December 31, 2023, commercial real estate and commercial business loans represen ted 61.25% and 17.39% o f the total loan portfolio, respectively.

As of December 31, 2024, commercial real estate loans represented 60.3% of the total loan portfolio, including farmland loans representing 9.6% of the total loan portfolio.

Commercial business loans represented 18.3% of the total loan portfolio, including agricultural loans representing 8.8% of the total loan portfolio.

The purpose of this diversification is to mitigate our dependence on the residential mortgage market, as well as to improve our ability to manage our interest rate spread.

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The Federal Open Market Committee increased the federal funds target rate to 5.50% during the year ended December 31, 2023.

The rate increased to 5.50% during the year ended December 31, 2023.

The Bank has used growth through mergers or acquisition, in addition to its strategy of organic growth.

In April 2022, Eagle acquired First Community Bancorp, Inc.

("FCB"), a Montana corporation, and FCB's wholly-owned subsidiary, First Community Bank, a Montana chartered commercial bank.

In the transaction, Eagle acquired nine retail bank branches and two loan production offices in Montana.

The rate decreased to 4.50% during the year ended December 31, 2024.

Critical Accounting Policies and Estimates

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An impairment charge is recorded for the amount by which the carrying amount exceeds the reporting unit's fair value.

A blend of both the market and income approaches is used in valuing the reporting unit’s fair value.

A weighted average of both the market and income approaches is used in valuing the reporting unit’s fair value.

Weightings are assigned to the approaches regarding fair value and the sensitivity of other weighting scenarios is considered.

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The income approach consists of discounting projected future cash flows, which are derived from internal forecasts and economic expectations for the reporting unit.

The significant inputs and assumptions for the income approach include projected earnings of the Company in future years for which there is inherent uncertainty and the discount rate.

The significant inputs and assumptions for the income approach include a discount rate and projected earnings of the Company in future years for which there is inherent uncertainty.

The sensitivity of a range of reasonable discount rates based on the current economic environment is considered.

During the quarter ended September 30, 2023, Management determined that a triggering event had occurred because of a decrease in the Company's stock price and a revision in the earnings outlook in comparison to budget.

These conditions were primarily due to economic uncertainty and market volatility from the rising interest rate environment.

As a result, the Company performed an interim goodwill impairment assessment as of August 31, 2023, and concluded that goodwill was not impaired.

Our annual impairment tests as of October 31, 2023 and 2022 also did not result in impairment.

During the quarter ended September 30, 2024, management performed a quantitative goodwill impairment test with assistance from a third-party valuation specialist.

The interim determination was primarily driven by a revision in the Company's earnings outlook in comparison to budget.

The interim goodwill impairment assessment as of August 31, 2024 concluded that goodwill was not impaired.

Our quantitative annual impairment tests as of October 31, 2024 and 2023 also did not result in impairment.

However, changing economic conditions that may adversely affect the Company's performance, the fair value of its assets and liabilities, or its stock price could result in future impairment.

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Management will continue to monitor events that could influence this conclusion in the future.

See Note 2 and 7 to the Consolidated Financial Statements in “Item 8.

See Note 7 to the Consolidated Financial Statements in “Item 8.

Financial Statements and Supplementary Data” for further information.

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However, securities available-for -sale decreased by $ 25.69 million or 8.1% fro m December 31, 2023.

Total borrowings increased $106.50 million to $234.74 million at December 31, 2023, from $128.24 million at December 31, 2022.

Total borrowings decreased $34.66 million to $200.08 million at December 31, 2024, from $234.74 million at December 31, 2023.

Total liabilities were $1.93 billion at December 31, 2024, an increase of $21.94 million, or 1.2%, from $1.91 billion at December 31, 2023.

Total deposit s decreased slightly b y $77,000 from December 31, 2022.

Total shareholders’ equ ity increased b y $10.85 million or 6.8% from December 31, 2022.

Total deposit s increased by $46.03 million or 2.8% to $1.68 billion from $1.64 billion at December 31, 2023.

Total shareholders’ equ ity increased by $5.50 million or 3.2% from December 31, 2023.

Financial Condition Details

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Total securities available-for-sale

Securities available-for-sale were $318.28 million at December 31, 2023, a decrease o f $31.22 million, or 8.9%, from $ 349.50 mill ion at December 31, 2022.

Securities available-for-sale were $292.59 million at December 31, 2024, a decrease o f $25.69 million, or 8.1%, from $318.28 million at December 31, 2023.

The decrease was due to sales of $14.12 million and maturity, principal payments and call activity of $21.45 million.

These decreases were partially offset by $10.98 million in investment purchases.

In addition, unrealized losses on securities improved from prior year, decreasing by $8.70 million.

In addition, unrealized losses on securities increased from prior year by $273,000.

The following table sets forth information regarding fair values, weighted average yields and maturities of investments.

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(1) Excludes loans held-for-sale.

(2) Deferred loan fees, net included in individual loan buckets above for the year ended December 31, 2023.

(3) Allowance for credit losses for the year ended December 31, 2023;

allowance for loan losses for the year ended December 31, 2022.

Loans receivable, net increased $128.37 million, or 9.6%, to $1.47 b illion at December 31, 2023 from $1.34 billion at December 31, 2022.

Total commercial real estate loans increased $82.86 million, total commercial loans increased $26.72 million, home equity loans increased $12.66 million, total residential loans increased $4.31 million, and consumer loans increased $2.52 million.

Total loan originations w ere $750.68 million for the year ended December 31, 2023 .

(2) Deferred loan fees, net included in individual loan buckets above for the years ended December 31, 2024 and 2023.

(3) Allowance for credit losses for the years ended December 31, 2024 and 2023;

allowance for loan losses for the years ended December 31, 2022, 2021 and 2020.

Loans receivable, net increased $35.75 million, or 2.4%, to $1.50 billion at December 31, 2024 from $1.47 billion at December 31, 2023.

Total commercial loans increased $20.38 million, total home equity loans increased $10.61 million, and total commercial real estate loans increased $7.37 million.

These increases were slightly offset by decreases in consumer loans of $1.62 million and residential loans of $590,000.

Total loan originations were $607.73 million for the year ended December 31, 2024 .

Total residential 1-4 family originations were $271.79 million, which includes $214.32 million of originations of loans held-for-sale.

Total commercial originations were $155.11 million.

Total commercial real estate originations we re $140.60 million.

Total commercial real estate originations were $135.55 million.

Home equity loan originations totaled $31.63 million.

Consumer loan originations totaled $13.65 million.

L oans held-for -sale increased by $3.18 million, to $11.43 million at December 31, 2023 from $8.25 million at December 31, 2022.

Loans held-for-sale increased by $1.94 million, to $13.37 million at December 31, 2024 from $11.43 million at December 31, 2023 .

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

December 31, 2024

(In Thousands)

Non-Owner Occupied

Industrial/warehouse

Lessors of nonresidential buildings

Hotels and other traveler accommodations

Owner Occupied

Percent of Total CRE

Automotive related

Bars and restaurants

Construction and related industries

Wholesale and retail trade

Lessors of mini warehouses and self-storage units

Healthcare and social assistance

Hospitality industry related

Hotels and other traveler accommodations

Industrial/warehouse

Lessors of mini warehouses and self-storage units

Lessors of nonresidential buildings

Lessors of other real estate property

Bars and restaurants

Other real estate rental and leasing

Total CRE non-owner occupied

Owner occupied:

Real estate leasing activities

Wholesale and retail trade

Total commercial real estate

December 31, 2023

(In Thousands)

Non-Owner Occupied

Owner Occupied

Percent of Total CRE

Automotive related

Healthcare and social assistance

Bars and restaurants

Construction and related industries

Healthcare and social assistance

Hospitality industry related

Hotels and other traveler accommodations

Industrial/warehouse

Lessors of mini warehouses and self-storage units

Lessors of nonresidential buildings

Lessors of other real estate property

Other real estate rental and leasing

Real estate leasing activities

Wholesale and retail trade

Construction and related

Total CRE owner occupied

Deferred loan fees

Total commercial real estate

(1) Deferred loan fees, net included in individual loan categories above for the year ended December 31, 2023.

Commercial real estate loans made up $645.96 million or 42.5% of the Bank's total loan portfolio at December 31, 2024, compared to $608.69 million or 41.0% at December 31, 2023.

The Bank's commercial real estate loans are primarily permanent loans secured by improved property such as office buildings, retail stores, commercial warehouses, and apartment buildings.

The terms and conditions of each loan are tailored to the needs of the borrower and based on the financial strength of the project and any guarantors.

Generally, commercial real estate loans originated by the Bank will not exceed 80.0% of the appraised value or the selling price of the property, whichever is less.

The Bank's commercial real estate portfolio's average loan-to-value ratio range was 26% to 51% as of December 31, 2024.

The Bank's asset quality with respect to commercial real estate loans has remained strong despite recent economic and market conditions.

The Bank has limited exposure in the office space sector, none of which is located in central business districts.

Management believes that the Bank has implemented appropriate risk management practices, including regular and ongoing loan reviews, stress tests, and sensitivity analysis.

Loan reviews include monitoring past due rates, non-performing trends, concentrations, loan to values, and other qualitative factors.

The Bank's loan policy is robust and is updated annually or as needed to meet the risk mitigation and strategic goals of the bank.

Loan Maturit ies .

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Nonaccrual loans as of December 31, 2024 and 2023 inclu de $591,000 and $1,681,000, respectively of acquired loans that deteriorated subsequent to the acquisition date.

During the year ended December 31, 2023 , the Bank had one real estate owned and other repossessed asset.

During the year ended December 31, 2024 , the Bank sold two real estate owned and other repossessed assets resulting in a net loss of $6,000.

There were no subsequent write-downs on real estate owned or other repossessed assets during the year ended December 31, 2024.

During the year ended December 31, 2022, the Bank sold three real estate owned and other repossessed assets resulting in a net gain of $185,000.

There was one subsequent write-up on real estate owned and other repossessed assets for a gain of $18,000 during the year ended December 31, 2022.

During the year ended December 31, 2023, the Bank sold one real estate owned and other repossessed asset.

There were no subsequent write-up on real estate owned and other repossessed assets during the year ended December 31, 2023.

Management, in compliance with regulatory guidelines, conducts an internal loan review program, whereby loans are placed or classified in categories depending upon the level of risk of nonpayment or loss.

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Total deposits

Overall depo sit s remained consistent year over year at $1.64 billion.

Certificates of deposits increased $192.72 million and includes $72.17 million in brokered certificates.

All other categories of deposits decreased as follows:

money market decreased by $57.67 million, noninterest checking decreased by $50.23 million, savings decreased $43.08 million and interest-bearing checking decreased $41.82 million.

Overall deposits increased year over year by $46.03 million.

Certificates of deposits increased $18.49 million while savings decreased by $20.14 million.

All other categories of deposits increased as follows:

money market increased by $36.82 million, interest-bearing checking increased $10.38 million, and noninterest checking increased by $484,000.

There was migration during the year from lower yielding deposit accounts to certificates of deposit as consumers shifted funds to higher yielding deposits.

At December 31, 2023 and 2022, the Company held $618.78 mi llion and $642.02 million, respectively, in deposit accounts that met or exceeded the Federal Deposit Insurance Corporation ("FDIC") requirements of $250,000 and greater.

However, the estimated amount of uninsured deposits was approximately $275.00 million or 17% of total deposits at December 31, 2023 considering other factors su ch as joint accounts, deposits collateralized by Bank securities and deposit sharing programs like Intrafi Cash Service.

At December 31, 2024 and 2023, the Company held $632.95 million and $618.78 million, respectively, in deposit accounts that met or exceeded the Federal Deposit Insurance Corporation ("FDIC") requirements of $250,000 and greater.

However, the estimated amount of uninsured deposits was approximately $323.12 million or 18.9% of total deposits at December 31, 2024 considering other factors such as joint accounts, deposits collateralized by Bank securities and deposit sharing programs like Intrafi Cash Service.

The following table shows the amount of certificates of deposit with balances of $250,000 and greater by time remaining until maturity as of December 31, 2024:

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Eagle has a line of credit with Bell Bank.

Advances from FHLB and other borrowi ngs increased by $106.35 million to $175.74 million at December 31, 2023 from $69.39 million at December 31, 2022.

The increase was related to funding loan growth.

Advances from FHLB and other borrowings decreased by $34.81 million to $140.93 million at December 31, 2024 from $175.74 million at December 31, 2023.

The decrease was related to an increase in deposits.

The weighted average rate for borrowings was 4.72% as of December 31, 2024, compared to 5.48% at December 31, 2023.

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Subordinated debentures fixed at 3.50% to floating, due 2032

Subordinated debentures variable at 3-Month Secured Overnight Financing Rate plus 1.68%, due 2035

Subordinated debentures variable at 3-Month SOFR plus 1.68%, due 2035

Total other long-term debt, net

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Shareholders’ Equity

Total shareholders’ equ ity increased by $10.85 million or 6.8% , to $169.27 million at December 31, 2023 from $158.42 million a t December 31, 2022 .

This increase was primarily the result of net income of $10.06 million and other comprehensive income of $6.41 million.

These increases were partially offset by dividends paid of $4.44 million and a net of tax cumulative adjustment of $1.62 million related to the adoption of the CECL standard.

Total shareholders’ equity increased by $5.50 million or 3.2%, to $174.77 million at December 31, 2024 from $169.27 million at December 31, 2023.

This increase was primarily the result of net income of $9.78 million.

This increase was partially offset by dividends paid of $4.54 million.

Analysis of Net Interest Income

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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 statement of financial position items, as well as, interest and dividends and average yields related to the average balances.

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.

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( 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 credit losses (for year ended December 31, 2023) or provision for loan losses (for the year ended December 31, 2022) divided by average interest-earning assets.

( 3 ) Net interest margin represents income before the provision for credit losses (for years ended December 31, 2024 and December 31, 2023) or provision for loan losses (for the year ended December 31, 2022) divided by average interest-earning assets.

( 4 ) For purposes of this table, tax exempt income is not calculated on a tax equivalent basis.

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Eagle’s net income for the year ended December 31, 2024 was $9.78 million compared to $10.06 million for the year ended December 31, 2023.

The decrease of $645,000 of 6.0% was driven by a decrease in noninterest income of $3.50 million.

This decrease was largely offset by a decrease in noninterest expense of $1.59 million and a decrease in provision for income taxes of $1.55 million.

The decrease of $278,000 or 2.8% was driven by a decrease in noninterest income of $4.94 million.

This decrease was largely offset by decrease in noninterest expense of $2.78 million and an increase in net interest income after provision for credit losses of $1.90 million.

Basic and diluted earnings per common share were $1.25 and $1.24, respectively, for the year ended December 31, 2024.

Basic and diluted earnings per common share were both $1.29 for the year ended December 31, 2023.

Basic and diluted earnings per common share were both $1.45 for the prior period.

Net Interest Income

Net interest inco me decreased slightly to $62.48 million for the year ended December 31, 2023, from $63.31 million for t he year ended December 31, 2022.

This de crease of $835,000 , or 1.3%, was primarily the result of an increase in interest expense of $22.99 million largely offset by an increase in interest and dividend income of $22.16 million.

Net interest income increased slightly to $63.44 million for the year ended December 31, 2024, from $62.48 million for the year ended December 31, 2023.

This increase of $961,000, or 1.5%, was primarily the result of an increase in interest and dividend income of $12.59 million largely offset by an increase in interest expense of $11.63 million.

Interest and Dividend Income

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Interest and fees on loans increased to $92.28 million for the year ended December 31, 2024 from $79.42 million for the same period ended December 31, 2023.

This increase of $19.07 million, or 31.6% , was due in part to an increase in the average balance of loans.

Average balances for loans receivable, including loans held-for-sale, for the year ended December 31, 2023 were $1.44 billion, compared to $1.19 billion for the year ended December 31, 2022.

This represents an increase of $241.88 million, or 20.2%.

In addition, the average interest rate earned on loans receivable increased by 48 basis points, from 5.05% for the year ended December 31, 2022, to 5.53% for the year ended December 31, 2023.

Interest accretion on purchased loans was $1.01 million for the year ended December 31, 2023 , which resulted in a 6 basis point increase in net interest margin compared to $1.56 million for the year ended December 31, 2022 , which resulted in a 10 basis point increase in net interest margin.

Interest on investment securities available-for-sale increased by $2.80 million or 32.6% period over period.

This was driven by an increase in average interest rates earned on investments from 2.55% for the year ended December 31, 2022, to 3.46% for the year ended December 31, 2023.

Average balances for investments decreased modestly from $336.78 million for the year ended December 31, 2022, to $328.53 million for the year ended December 31, 2023 .

This increase of $12.86 million, or 16.2%, was due in part to an increase in the average yield of loans.

The average interest rate earned on loans receivable increased by 51 basis points, from 5.53% for the year ended December 31, 2023, to 6.04% for the year ended December 31, 2024.

Interest accretion on purchased loans was $751,000 for the year ended December 31, 2024, which resulted in a 4 basis point increase in net interest margin, compared to $1.01 million for the year ended December 31, 2023, which resulted in a 6 basis point increase in net interest margin.

In addition, average balances for loans receivable, including loans-held-for-sale, for the year ended December 31, 2024 were $1.52 billion, compared to $1.44 billion for the year ended December 31, 2023.

This represents an increase of $86.71 million, or 6.00% and was due to organic growth.

Interest on investment securities available-for-sale decreased by $948,000 or 8.3% period over period, primarily due to the decrease in average balances for investments from $328.53 million for the year ended December 31, 2023, to $306.54 million for the year ended December 31, 2024.

In addition, average interest rates earned on investments decreased from 3.46% for the year ended December 31, 2023, to 3.39% for the year ended December 31, 2024.

Interest Expense

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The increase was due to FHLB advances and other borrowings being deployed to fund loan growth.

The average rate paid on total borrowings also increased from 4.07% for the year ended December 31, 2022 , to 5.16% for the year ended December 31, 2023 due to FHLB advances and other borrowings.

The average rate paid on total borrowings also increased from 5.16% for the year ended December 31, 2023, to 5.18% for the year ended December 31, 2024.

Provision for Credit Losses

Provision for credit losses was $1.46 million for the year ended December 31, 2023, compared to $2.00 million in loan loss provisions, prior to the adoption of the Current Expected Credit Losses standard, for the year ended December 31, 2022.

The provision for credit losses for the year ended December 31, 2023 includes a provision for credit losses on loans of $1.67 million and a decrease in the provision for unfunded commitments of $210,000.

Provision for credit losses was $518,000 for the year ended December 31, 2024, compared to $1.46 million in loan loss provisions for the year ended December 31, 2023.

The provision for credit losses for the year ended December 31, 2024 includes a provision for credit losses on loans of $408,000 and a provision for unfunded commitments of $110,000.

Noninterest Income

Total noninterest income was $ 17.78 million for the year ended December 31, 2024 , compared to $22.72 million for the year ended December 31, 2023.

The decrease of $3.50 million, or 13.3% was primarily due to a decrease in a mortgage banking, net of $4.52 million for the year ended December 31, 2023 .

The decrease of $4.94 million, or 21.7% was primarily due to a decrease in mortgage banking, net of $4.96 million for the year ended December 31, 2024.

Mortgage banking, net includes net gain on sale of mortgage loans which decreased $4.66 million to $6.74 million for the year ended December 31, 2024 , compared to $11.40 million for the year ended December 31, 2023 .

During the year ended December 31, 2024 , $211.78 million residential mortgage loans were sold compared to $344.31 million in the prior year.

Gross margin on sale of mortgage loans remained relatively consistent year over year.

Gross margin was 3.31% for the year ended December 31, 2023 compa red to 3.38% for the year ended December 31, 2022.

Mortgage banking, net also includes the impact of fair value changes of loans held-for sale and derivatives.

The net change in fair value of loans held-for-sale and derivatives was a gain of $194,000 million for the year ended December 31, 2023 compared to a loss of $1.84 million for the year ended December 31, 2022 .

In addition, gross margin on sale of mortgage loans has compressed due to increased competition and less volume.

For the year ended December 31, 2024, gross margin was 3.18% compared to 3.31% for the year ended December 31, 2023.

Noninterest Expense

Noninterest expense was $ 69.31 million for the year ended December 31, 2024 , compared to $72.09 million for the year ended December 31, 2023 , a decrease of $2.78 million, or 3.9%.

The largest driver of the decrease was a cquisition costs of $2.30 million incurred during the year ended December 31, 2022 related to the completed merger with FCB.

In addition, salaries and employee benefits decreased $1.55 million due to lower commissions paid on residential mortgage originations.

The largest driver of the decrease was salaries and employee benefits, decreasing 7.6% or $3.25 million to $39.72 million for the year ended December 31, 2024 compared to $42.97 million for the year ended December 31, 2023.

This decrease was due to fewer full-time employees in 2024, resulting in lower salaries and lower group health insurance costs.

In addition, commissions paid decreased due to lower commissions paid on residential mortgage originations.

Provision for Income Tax es

Provision for income taxes was $1.60 million for the year ended December 31, 2023, compared to $3.15 m illion for th e year ended December 31, 2022 due to the increase in proportion of tax-exempt income compared to pretax earnings.

In addition, during the year ended December 31, 2023, the Company recorded tax credits and other tax benefits related to Low-Income Housing Tax Credit ("LIHTC") projects.

The effective tax rate was 13.7% f or the year ended December 31, 2023 compared to 22.7% for the prior year.

Provision for income taxes was $1.61 million for the year ended December 31, 2024, compared to $1.60 million for the year ended December 31, 2023.

The effective tax rate was 14.2% for the year ended December 31, 2024 compared to 13.7% for the prior year and is due to the increase in proportion of tax-exempt income compared to pretax earnings, as well as tax credits from investments in low-income housing tax projects.

Liquidity and Capital Resources

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The Bank exceeded those minimum ratios as of December 31, 2024 and 2023.

The Company’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.

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.

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These assets are valued at par.

The Company did not utilize the program during 2023; however, this is another available funding source.

The Company did not utilize the program during 2023.

In March of 2024, the Company accessed borrowings through the BTFP.

In September of 2024, the Company paid off the borrowings.

Brokered deposits are another source of funding the Bank may utilize from time to time.

As of December 31, 2024, the Bank had no brokered certificates and $5.57 m illion in brokered money market deposits.

As of December 31, 2023, the Bank had $72.17 million in brokered certificates and $5.28 million in brokered money market deposits.

As of December 31, 2022, the Bank had no brokered certificates and $5.3 million in brokered money market deposits.

Policy limits for brokered deposits are set at 10% of assets.

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Net cash provided by the Company’s operating activities, which is primarily comprised of cash transactions affecting net income, was $28.54 million for the year ended December 31, 2024 compared to $9.35 million for the prior year.

Net cash provided by operating activities was lower for the year ended December 31, 2023 primarily due to changes in loans held-for-sale activity.

Net cash provided by operating activities was higher for the year ended December 31, 2024 primarily due to changes in loans held-for-sale activity.

Mortgage volumes have been impacted by the current interest rate environment.

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In addition, available-for-sale securities purchases were $28.13 million during the year ended December 31, 2023, more than offset by available-for sale securities sales and maturities, principal payments and calls of $66.72 million.

Investing activities was also impacted by net cash received from acquisitions of $13.40 million.

Net cash provided by the Company’s financing activities was $6.27 million for the year ended December 31, 2024 compared to $101.59 million for the year ended December 31, 2023.

Net cash provided by financing activities for the year ended December 31, 2023 was driven by borrowings of $106.34 million utilized to fund continued loan growth.

Net cash provided by financing activities for the year ended December 31, 2022 was largely impacted by a net increase in deposits of $91.62 million.

In addition, net short-term advances from FHLB and other borrowings increased by $69.39 million and subordinated debentures of $40.00 million were issued.

These increases were partially offset by a net decrease in repurchase agreements of $22.85 million and the repayment of $10.00 million of subordinated debentures.

Net cash provided by financing activities for the year ended December 31, 2024 was driven by an increase in deposits of $46.03 million, largely offset by a decrease in borrowings of $34.81 million.

Net cash provided by financing activities for the year ended December 31, 2023 was largely impacted by borrowings of $106.34 million utilized to fund continued loan growth.

During the third quarter of 2024, net borrowing activity of $43.43 million was presented in the Form 10-Q statement of cash flows for the nine months ended September 30, 2024.

The total amount for net borrowing activity was reported correctly;

however, the specific borrowing line items in the cash flows from financing activities were incorrect.

The borrowing activity was presented as follows:

$14.26 million net short-term advances on FHLB and other borrowings, $29.17 million advances on long-term FHLB and other borrowings and no payments on long-term FHLB and other borrowings.

The correct amounts are as follows:

$40.74 million net short-term payments on FHLB and other borrowings, $105.00 million advances on long-term FHLB and other borrowings and $20.83 million payments on long-term FHLB and other borrowings.

Controls and Procedures for additional information regarding this matter.

Capital Resources

At December 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, decreased the economic value of equity (“EV E”) by 1.3% compared to an decrease of 12.6% a t December 31, 2022.

At December 31, 2024 , 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 1.7% compared to a decrease of 1.3% at December 31, 2023 .

The Bank is within the guidelines set forth by the Board of Directors for interest rate sensitivity.

The Bank’s Tier 1 leverage ratio, as measured under State of Montana and FRB ru les, decreased from 9.82% as of December 31, 2022 to 9.75% a s of December 31, 2023.

The Bank’s Tier 1 leverage ratio, as measured under State of Montana and FRB rules, increased from 9.75% as of December 31, 2023 to 10.07% as of December 31, 2024 .

The Bank’s strong capital position helps to mitigate its interest rate risk exposure.

20 unchanged sentences

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.

year-1) will not be reduced by more than 20.0% given an immediate increase or decrease in interest rates of up to 400 basis points, and the subsequent twelve months (i.e.

year-2) will not be reduced by more than 25.0% given an immediate increase or decrease in interest rates of up to 400 basis points.

The following table includes the Bank's net interest income sensitivity analysis.

23 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis