Eagle Bancorp Montana(US:EBMT)2019-03-12 19:26Acquisition Details - The total consideration for the acquisition of Ruby Valley Bank was $18.93 million, consisting of $9.90 million in cash and $9.03 million in common stock[16]. - The total consideration for the acquisition of Big Muddy Bancorp was $16.4 million, paid entirely in Eagle common stock[20]. - The company completed a merger with Big Muddy Bancorp, acquiring approximately $108.00 million in assets, $92.00 million in deposits, and $92.00 million in gross loans[194]. Loan Portfolio Composition - As of December 31, 2018, commercial real estate and commercial business loans constituted approximately 65.56% of total loans[23]. - The Bank's residential 1-4 family mortgage loans amounted to $116.94 million, representing 18.92% of the total loan portfolio as of December 31, 2018[43]. - Residential 1-4 family construction loans accounted for $27.17 million, or 4.40% of the total loan portfolio at December 31, 2018[46]. - Commercial real estate loans constituted 41.54% of the Bank's total loan portfolio, amounting to $256.78 million as of December 31, 2018[48]. - Commercial construction and development loans accounted for $41.74 million, or 6.75% of the total loan portfolio at the same date[49]. - Home equity loans represented $52.16 million, or 8.44% of total loans as of December 31, 2018[50]. - Consumer loans totaled $16.57 million, making up 2.68% of the Bank's total loan portfolio as of December 31, 2018[52]. - Commercial business loans amounted to $59.05 million, or 9.56% of the total loan portfolio at December 31, 2018[56]. - Commercial real estate and commercial business loans represented 53.13% and 12.43% of the total loan portfolio, respectively, as of December 31, 2018[187]. Financial Performance and Income - The Bank's noninterest income from mortgage loan servicing was $2.30 million for the year ended December 31, 2018, compared to $2.13 million in 2017[42]. - Wealth management services income was $536,000 in 2018, down from $624,000 in 2017, representing a decrease of approximately 14.1%[79]. - The company recorded $279.74 million in mortgage loans sold during 2018, indicating significant growth in noninterest income from mortgage banking activities[150]. - The Bank's earnings depend primarily on net interest income, which is influenced by the interest rate spread and the average balance of interest-earning assets[186]. Regulatory Compliance and Capital Requirements - The Dodd-Frank Act has increased regulatory compliance costs and burdens for the company, affecting its operational activities[85]. - The company is required to maintain a minimum Tier 1 capital ratio of 7.875% and a total capital ratio of 9.875% as per regulatory standards[102]. - The Dodd-Frank Act established a minimum reserve ratio of 1.35% for the Deposit Insurance Fund, which the FDIC achieved in 2018 with a ratio of 1.36%[100]. - The company must comply with new capital ratio requirements phased in between January 1, 2015, and January 1, 2019, including a common equity Tier 1 capital ratio of 6.375%[106]. - The capital conservation buffer, when fully phased-in, will require a minimum of 2.5% of common equity Tier 1 capital to total risk-weighted assets[107]. - The FDIC assesses deposit insurance premiums based on an institution's average total assets minus its average tangible equity, with rates ranging from 2.5 to 45 basis points[99]. - The company is subject to extensive regulation by the Montana Division of Banking and the FDIC, ensuring compliance with safety and soundness standards[84]. - As of December 31, 2018, the Company and the Bank met all capital adequacy requirements under the Basel III Capital rules, including a common equity Tier 1 capital ratio of 6.5%, a Tier 1 capital ratio of 8.0%, and a total capital ratio of 10.0%[108]. - The Bank's capital ratios met the "well capitalized" standards, indicating a strong financial position[109]. Risk Factors - The Company faces risks associated with economic conditions that could adversely affect borrowers' ability to repay loans, impacting financial performance[128]. - A decline in home values could lead to decreased loan originations and increased delinquencies and defaults, adversely impacting operational results[142]. - Changes in interest rates significantly affect the company's net interest income, which is the difference between interest income earned and interest expense paid[146]. - The allowance for credit losses may not be sufficient to cover actual loan losses, potentially leading to decreased earnings[132]. Operational Strategy and Growth - The Bank operates 22 branch offices and 19 ATMs across Montana, enhancing its market presence[15]. - The Bank's strategy includes diversifying its portfolio and maintaining strong asset quality to ensure sustained net earnings[22]. - The company plans to pursue an organic growth strategy while regularly evaluating potential acquisitions and expansion opportunities[154]. - The company intends to continue emphasizing the origination of commercial real estate and commercial business loans, which generally carry more risk than residential loans[141]. Employee and Workforce Information - As of December 31, 2018, the company employed 235 full-time and 14 part-time employees, indicating a stable workforce[82]. Shareholder Information - The closing price of the common stock on December 31, 2018, was $16.50 per share, with 5,477,652 shares outstanding[177]. - The Bank paid dividends of $0.0925 per share for the quarter ended December 31, 2018[178]. - The Board authorized the repurchase of up to 100,000 shares of common stock on July 19, 2018, with 36,000 shares purchased in 2019 at an average price of $17.49 per share[179]. - Future dividends on common stock may be affected by various factors, including regulatory requirements and the bank's earnings level[151].