Analyst Summary
- Eagle Bancorp Montana’s 2024 net income decreased slightly to $9.78 million from $10.06 million in 2023.
- Total assets increased modestly to $2.10 billion in 2024 from $2.08 billion in 2023.
- Loans receivable, net, grew to $1.50 billion in 2024 from $1.47 billion in 2023, driven by commercial real estate and commercial loans.
- Total deposits increased to $1.68 billion in 2024 from $1.64 billion in 2023, but a shift towards higher-cost certificates of deposit could impact future profitability.
- Net Interest Margin (NIM) experienced a slight decrease, indicating increasing pressure on profitability due to rising deposit costs.
- Nonperforming loans decreased, indicating improved asset quality.
- A material weakness was identified in internal control related to the classification of borrowings, requiring remediation.
- The company’s strategy includes diversification of the loan portfolio, attraction of core deposits, and strategic acquisitions.
- Basic EPS decreased from $1.29 in 2023 to $1.25 in 2024, a change of -3.10%. Diluted EPS decreased from $1.29 in 2023 to $1.24 in 2024, a change of -3.88%.
- The debt-to-equity ratio of 11.03 is relatively high, indicating that EBMT relies heavily on debt financing compared to equity.
- The interest coverage ratio of 1.28 is low, indicating that EBMT’s earnings barely cover its interest expenses.
Opportunities and Risks
- Strategic Acquisitions: Potential acquisitions could enhance market share and expand the company’s footprint.
- Core Deposit Growth: Continued emphasis on attracting and retaining core deposits could improve funding costs.
- Technological Advancements: Effective implementation of new technologies could enhance efficiency and customer service.
- Economic Conditions: Dependence on the Montana economy makes the company vulnerable to regional economic downturns.
- Interest Rate Risk: Changes in interest rates could negatively impact net interest income and the value of the securities portfolio.
- Competition: Intense competition in the banking and financial services industry could limit growth and profitability.
- Cybersecurity: Increasing cybersecurity threats pose a risk to the company’s systems and data.
- Credit Risk: Increased commercial real estate and commercial business loan originations elevate credit risk.
- Climate Change: Physical and financial risks associated with climate change and natural disasters.
Potential Implications
Company Performance
- Addressing the material weakness in internal control is crucial for maintaining investor confidence and regulatory compliance.
- Managing credit risk in the commercial real estate and agricultural loan portfolios is essential to mitigate potential losses during economic downturns.
- Mitigating the impact of interest rate fluctuations on net interest income and the securities portfolio is necessary to maintain profitability.
- Diversifying the loan portfolio and revenue streams can reduce the company’s vulnerability to specific sectors and economic conditions.
Stock Price
- Successful remediation of the material weakness in internal control could positively impact the stock price.
- Effective management of credit risk and interest rate risk could enhance investor confidence and support the stock price.
- Strategic acquisitions and core deposit growth could drive long-term value creation and positively influence the stock price.
- Negative economic conditions in Montana or adverse interest rate movements could negatively impact the stock price.
Executive Summary
Eagle Bancorp Montana, Inc.’s 2024 10-K filing reveals a mixed performance. While the company demonstrates growth in its loan portfolio and deposit base, a decrease in noninterest income and a material weakness in internal control over financial reporting raise concerns. The company’s reliance on commercial real estate lending and exposure to the agricultural sector present specific risks. Overall, a cautious approach is warranted. Recommendation: Hold.
Company Overview
Eagle Bancorp Montana, Inc. (EBMT) is a bank holding company operating primarily in Montana. The company focuses on providing community banking services, including retail and commercial loan and deposit products. Recent acquisitions have expanded its market presence, particularly in agricultural-dependent regions. The company’s strategy emphasizes diversified lending, core deposit growth, and strategic acquisitions.
Detailed Financial Analysis
Key Financial Data
- Total Assets: $2.10 billion (2024) vs. $2.08 billion (2023) – A modest increase.
- Net Income: $9.78 million (2024) vs. $10.06 million (2023) – Slight decrease.
- Loans Receivable, Net: $1.50 billion (2024) vs. $1.47 billion (2023) – Positive growth.
- Total Deposits: $1.68 billion (2024) vs. $1.64 billion (2023) – Positive growth.
Key Ratios
| Ratio |
2024 |
2023 |
Trend |
| Net Interest Margin |
3.42% |
3.51% |
Slight Decrease |
| Nonperforming Loans to Total Loans |
0.25% |
0.57% |
Decrease |
| Tier 1 Leverage Ratio |
10.07% |
9.75% |
Increase |
Analysis of Key Trends
- Loan Portfolio Growth: The increase in loans is a positive sign, driven by commercial real estate and commercial loans. However, the concentration in these sectors requires careful monitoring.
- Deposit Growth: The increase in deposits is favorable, but the shift towards higher-cost certificates of deposit could impact future profitability.
- Net Interest Margin Compression: The slight decrease in NIM suggests increasing pressure on profitability due to rising deposit costs.
- Asset Quality: The decrease in nonperforming loans is a positive indicator of asset quality.
Management’s Discussion and Analysis (MD&A) Insights
- Management emphasizes diversification of the loan portfolio and attraction of core deposits as key strategies.
- The MD&A acknowledges the impact of interest rate changes and competition on the company’s performance.
- The company’s growth strategy includes both organic growth and strategic acquisitions.
Red Flags & Uncommon Metrics
- Material Weakness in Internal Control: The identified material weakness related to the classification of borrowings in the statement of cash flows is a significant concern. Remediation efforts are crucial.
- Reliance on Commercial Real Estate: The high concentration in commercial real estate lending exposes the company to risks associated with this sector.
- Exposure to Agricultural Sector: Lending to the agricultural sector presents unique risks related to commodity prices, weather conditions, and government regulations.
Risk & Opportunity Assessment
Risks
- Economic Conditions: Dependence on the Montana economy makes the company vulnerable to regional economic downturns.
- Interest Rate Risk: Changes in interest rates could negatively impact net interest income and the value of the securities portfolio.
- Competition: Intense competition in the banking and financial services industry could limit growth and profitability.
- Cybersecurity: Increasing cybersecurity threats pose a risk to the company’s systems and data.
- Credit Risk: Increased commercial real estate and commercial business loan originations elevate credit risk.
- Climate Change: Physical and financial risks associated with climate change and natural disasters.
Opportunities
- Strategic Acquisitions: Potential acquisitions could enhance market share and expand the company’s footprint.
- Core Deposit Growth: Continued emphasis on attracting and retaining core deposits could improve funding costs.
- Technological Advancements: Effective implementation of new technologies could enhance efficiency and customer service.
Conclusion & Actionable Insights
Eagle Bancorp Montana faces both opportunities and challenges. While the company is growing its loan portfolio and deposit base, it must address the material weakness in internal control and manage its exposure to specific sectors. The company’s performance is heavily influenced by economic conditions and interest rate movements.
Actionable Insights
- Monitor Remediation Efforts: Closely track the company’s progress in addressing the material weakness in internal control over financial reporting.
- Assess Loan Portfolio Risk: Evaluate the credit quality of the commercial real estate and agricultural loan portfolios, considering potential economic downturns.
- Manage Interest Rate Sensitivity: Implement strategies to mitigate the impact of interest rate fluctuations on net interest income and the securities portfolio.
- Evaluate Diversification Strategies: Assess the effectiveness of the company’s efforts to diversify its loan portfolio and revenue streams.
Overall Assessment: Hold. The company’s mixed performance and identified risks warrant a cautious approach. Further monitoring of the company’s remediation efforts and risk management strategies is necessary before considering a more positive outlook.
Commentary
Eagle Bancorp Montana, Inc. (EBMT) reported a mixed financial performance for the year ended December 31, 2024. Net income decreased slightly compared to the previous year, while total assets increased. The bank continues to focus on diversifying its loan portfolio and maintaining strong asset quality, with commercial real estate and commercial business loans representing a significant portion of total loans. Prudent management of credit risk and interest rate risk remains crucial for EBMT’s future performance.
Financial Ratio and Metric Analysis
Profitability
Gross Profit Margin
Unable to calculate. Information not available.
Operating Profit Margin
Unable to calculate. Information not available.
Net Profit Margin
Unable to calculate. Information not available.
Return on Assets (ROA)
Unable to calculate. Information not available.
Return on Equity (ROE)
Unable to calculate. Information not available.
Earnings Per Share (EPS) – Basic and Diluted
Metric: Basic EPS: $1.25, Diluted EPS: $1.24
Trend: Basic EPS decreased from $1.29 in 2023 to $1.25 in 2024, a change of -3.10%. Diluted EPS decreased from $1.29 in 2023 to $1.24 in 2024, a change of -3.88%.
Industry: Industry averages for community banks typically range from 8-12. A lower P/E ratio may indicate that the stock is undervalued, while a higher P/E ratio may indicate that the stock is overvalued.
Liquidity
Current Ratio
Unable to calculate. Information not available.
Quick Ratio (Acid-Test Ratio)
Unable to calculate. Information not available.
Cash Ratio
Metric: (Cash and Due from Banks) / Total Current Liabilities = $29,824 / $1,928,325 = 0.0155
Industry: A cash ratio of 0.0155 is generally considered low, suggesting the bank has limited immediate liquidity to cover its current liabilities. Banks typically aim for a cash ratio above 0.10 to ensure sufficient liquidity.
Solvency/Leverage
Debt-to-Equity Ratio
Metric: Total Liabilities / Total Equity = $1,928,325 / $174,765 = 11.03
Industry: A debt-to-equity ratio of 11.03 is relatively high, indicating that EBMT relies heavily on debt financing compared to equity. The industry average for banks is typically below 10, suggesting EBMT is more leveraged than its peers.
Debt-to-Assets Ratio
Metric: Total Liabilities / Total Assets = $1,928,325 / $2,103,090 = 0.917
Industry: A debt-to-assets ratio of 0.917 indicates that 91.7% of EBMT’s assets are financed by debt. This is a high ratio, suggesting the bank has a significant amount of leverage. Banks generally aim for a debt-to-assets ratio below 0.90.
Interest Coverage Ratio (Times Interest Earned)
Metric: Earnings Before Interest and Taxes (EBIT) / Interest Expense = ($9,778 + $1,612 + $40,773) / $40,773 = 1.28
Industry: An interest coverage ratio of 1.28 is low, indicating that EBMT’s earnings barely cover its interest expenses. A healthy interest coverage ratio for banks is typically above 3.0, suggesting EBMT may face challenges in meeting its debt obligations.
Activity/Efficiency
Inventory Turnover
Not applicable for banks.
Days Sales Outstanding (DSO)
Not applicable for banks.
Days Payable Outstanding (DPO)
Not applicable for banks.
Asset Turnover
Unable to calculate. Information not available.
Valuation
Price-to-Earnings Ratio (P/E)
Metric: Stock Price / EPS = $16.85 / $1.24 = 13.59
Industry: The P/E ratio of 13.59 is within the typical range for community banks, which is 10-15. A lower P/E ratio may indicate that the stock is undervalued, while a higher P/E ratio may indicate that the stock is overvalued.
Price-to-Book Ratio (P/B)
Metric: Market Cap / Book Value of Equity = (8,027,177 * $16.85) / $174,765,000 = 0.77
Industry: A P/B ratio of 0.77 is below 1, which may suggest that the stock is undervalued relative to its book value. However, it could also indicate underlying issues with the bank’s performance or asset quality.
Price-to-Sales Ratio (P/S)
Unable to calculate. Information not available.
Enterprise Value to EBITDA (EV/EBITDA)
Unable to calculate. Information not available.
Growth Rates
Revenue Growth
Unable to calculate. Information not available.
Net Income Growth
Metric: (Net Income 2024 – Net Income 2023) / Net Income 2023 = ($9,778 – $10,056) / $10,056 = -0.0276 or -2.76%
Industry: A net income growth of -2.76% indicates a slight decrease in profitability compared to the previous year. The industry average for community banks varies depending on economic conditions, but a positive growth rate is generally preferred.
EPS Growth
Metric: (EPS 2024 – EPS 2023) / EPS 2023 = ($1.24 – $1.29) / $1.29 = -0.0388 or -3.88%
Industry: An EPS growth of -3.88% indicates a decrease in earnings per share compared to the previous year. The industry average for community banks varies depending on economic conditions, but a positive growth rate is generally preferred.
Other Relevant Metrics
No company-specific KPIs or non-GAAP metrics were provided in the filing.
⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️