Eagle Bancorp Montana, Inc.: Form 10-Q for the period ended Sep 30, 2025

Introduction

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. Its wholly-owned subsidiary, Opportunity Bank of Montana (the "Bank"), is a Montana-state-chartered bank that is a member of the Federal Reserve System.

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 and nine months ended September 30, 2025, as compared to the same period of 2024. The following should be read in conjunction with the Company's Consolidated Financial Statements, and accompanying Notes thereto, for the year ended December 31, 2024, included in Eagle's Annual Report on Form 10-K filed with the United States Securities and Exchange Commission ("SEC") on March 14, 2025, and in conjunction with the Condensed Consolidated Financial Statements, and accompanying Notes thereto, included in Part I - Item 1. Financial Statements of this report. The results of operations for the three and nine months ended September 30, 2025, 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 the Bank. The Bank focuses on consumer, commercial, and agricultural 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 credit 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 focused on diversifying the loan portfolio over the past decade, adding commercial and agricultural loans to the strong mortgage lending proficiency. Loan originations represented by single-family residential mortgages enabled the Bank 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 grown the commercial loan portfolio in both real estate and non-real estate, and further added agricultural loans, which have a shorter term and slightly higher interest rate, through acquisitions. The purpose of diversification is to mitigate the Bank’s exposure to specific market segments, as well as to improve our ability to manage our interest rate spread. 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, and has recently been, 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 this strategy is funding growth 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 decreased the federal funds target rate to 4.50% during the year ended December 31, 2024. The rate was decreased to 4.25% during the nine months ended September 30, 2025.

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Financial Condition

Comparisons of financial condition in this section are between September 30, 2025 and December 31, 2024.

Total assets were $2.12 billion at September 30, 2025, an increase of $16.72 million, or 0.8% from $2.10 billion at December 31, 2024. Loans receivable, net increased by $36.23 million, or 2.4% from December 31, 2024. However, securities available-for-sale decreased $12.67 million, or 4.3% from December 31, 2024. Total liabilities were $1.93 billion at September 30, 2025, an increase of $4.99 million, or 0.3% from $1.93 billion at December 31, 2024. The increase was largely due to an increase in total deposits, offset by a decrease in FHLB advances. Total deposits increased $70.95 million from December 31, 2024 and total borrowings decreased $61.65 million from December 31, 2024. Total shareholders’ equity increased $11.72 million, or 6.7% from December 31, 2024.

Financial Condition Details

Investment Activities

The following table summarizes investment activities:

(Dollars in Thousands)

Securities available-for-sale were $279.92 million at September 30, 2025, a decrease of $12.67 million, or 4.3% from $292.59 million at December 31, 2024. The decrease was primarily due to maturity, principal payments and call activity of $22.36 million offset by a security purchase of $3.02 million and an increase in fair value of $7.31 million.

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Financial Condition – continued

Lending Activities

The following table includes the composition of the Bank’s loan portfolio by loan category:

(Dollars in Thousands)

(1) Excludes loans held-for-sale.

Loans receivable, net increased $36.23 million, or 2.4%, to $1.54 billion at September 30, 2025 from $1.50 billion at December 31, 2024. The increase was largely driven by an increase in commercial real estate loans of $26.36 million, an increase in total commercial loans of $19.50 million and an increase of $9.11 million in home equity loans. The increases were slightly offset by a decrease of $14.88 million in total residential loans and a decrease of $2.95 million in consumer loans.

Total loan originations were $433.43 million for the nine months ended September 30, 2025. Total residential 1-4 family originations were $203.48 million, which includes $163.16 million of loans held-for-sale originations. Total commercial originations were $99.35 million. Total commercial real estate originations were $96.99 million. Home equity loan originations totaled $23.56 million. Consumer loan originations totaled $10.05 million. Loans held-for-sale decreased by $3.01 million to $10.36 million at September 30, 2025 from $13.37 million at December 31, 2024.

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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 September 30, 2025 and December 31, 2024 there was $86,000 and $45,000, respectively, of real estate owned and other repossessed property.

The following table sets forth information regarding nonperforming assets:

(Dollars in Thousands)

Nonaccrual loans as of September 30, 2025 and December 31, 2024 include $470,000 and $591,000, respectively of acquired loans that deteriorated subsequent to the acquisition date.

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The following tables include the composition of the commercial real estate loan category:

(Dollars In Thousands)

(Dollars In Thousands)

Commercial real estate loans made up $670.40 million or 43.0% of the Bank's total loan portfolio at September 30, 2025, compared to $645.96 million or 42.5% at December 31, 2024. 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 32% to 48% as of September 30, 2025.

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 value ratios, 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.

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Financial Condition – continued

Deposits and Other Sources of Funds

The following table includes deposit accounts by category:

(Dollars in Thousands)

Deposits increased by $70.95 million, or 4.2%, from December 31, 2024 to September 30, 2025. Money market deposits increased by $83.70 million and noninterest checking increased by $9.85 million. These increases were partially offset by decreases in certificates of deposits of $10.05 million, interest-bearing checking of $6.35 million and savings of $6.20 million.

The estimated amount of uninsured deposits was approximately $339.7 million or 19% of total deposits at September 30, 2025 compared to approximately $323.0 million or 19% of total deposits at December 31, 2024.

The following table summarizes borrowing activity:

(Dollars in Thousands)

Total borrowings decreased by $61.65 million, or 30.8%, to $138.43 million at September 30, 2025 from $200.08 million at December 31, 2024, due to a decrease in FHLB advances and other borrowings.

On October 1, 2025, the Company redeemed all of the 5.50% fixed-to-floating rate subordinated notes due July 1, 2030, having an aggregate principal amount of $15.00 million. The Company utilized its line of credit with a correspondent bank to finance the redemption payment. The Company has drawn $15.00 million on the line of credit, which has a two-year maturity and has a variable interest rate equal to 0.50% below the prime rate as published in the Wall Street Journal.

Shareholders’ Equity

Total shareholders’ equity increased by $11.72 million, or 6.7%, to $186.49 million at September 30, 2025 from $174.77 million at December 31, 2024. The increase was primarily attributed to net income of $10.11 million and a decrease in unrealized losses of securities available for sale of $5.38 million. These increases were partially offset by dividends paid of $3.42 million and treasury stock repurchases of $1.16 million.

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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.

(Dollars in Thousands)

(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.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in Thousands)

(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.

Net Interest Margin (NIM). Net interest margin for the three months ended September 30, 2025 was 3.94%, an increase of 60 basis points compared to September 30, 2024. For the nine months ended September 30, 2025, net interest margin was 3.86%, an increase of 50 basis points compared to the nine months ended September 30, 2024. The change in NIM reflects the increase in yields on interest-earning assets and the decrease in the average rate on interest-bearing liabilities.

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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.

(In Thousands)

(In Thousands)

(1) Includes loans held-for-sale.

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Results of Operations

The following compares the results of operations for the three months ended September 30, 2025 and 2024.

(Dollars in Thousands)

Net Income. Eagle’s net income for the three months ended September 30, 2025 was $3.63 million compared to $2.71 million for the three months ended September 30, 2024. The increase of $921,000 was due to an increase in net interest income after provision for credit losses of $3.10 million, partially offset by an increase in noninterest expense of $1.12 million and an increase in provision for income taxes of $797,000. For the current period, basic earnings per common share was $0.47 and diluted earnings per common share was $0.46. Basic earning per common share was $0.35 and diluted earnings per common share was $0.34 for the three months ended September 30, 2024.

Net Interest Income. Net interest income increased to $18.69 million for the three months ended September 30, 2025, from $15.80 million for the three months ended September 30, 2024. The increase of $2.89 million, or 18.3% was primarily the result of an increase in interest and dividend income of $1.07 million and a decrease in interest expense of $1.81 million.

Interest and Dividend Income. Interest and dividend income was $27.83 million for the three months ended September 30, 2025, compared to $26.76 million for the three months ended September 30, 2024. The increase of $1.07 million, or 4.0% was driven by interest and fees on loans, which increased to $25.21 million for the three months ended September 30, 2025, from $23.80 million for the three months ended September 30, 2024. The increase in interest and fees on loans was due to an increase in the average yield on loans, as well as an increase in the average balance of loans. The average interest rate earned on loans receivable increased by 22 basis points, from 6.10% for the three months ended September 30, 2024, to 6.32% for the current period. Interest accretion on purchased loans was $234,000 for the three months ended September 30, 2025, which resulted in a five basis point increase in net interest margin compared to $167,000 for the three months ended September 30, 2024, which resulted in a three basis point increase in net interest margin. Average balances for loans receivable, including loans held-for-sale, for the three months ended September 30, 2025 were $1.58 billion compared to $1.55 billion for the three months ended September 30, 2024. This represents an increase of $34.26 million, or 2.2% and was due to organic growth. Interest on investment securities available-for-sale decreased by $276,000 period over period due to a decrease in average balances for investments from $305.73 million for the three months ended September 30, 2024 to $280.68 million for the three months ended September 30, 2025. In addition, average interest rates earned on investments decreased from 3.37% for the three months ended September 30, 2024 to 3.28% for the three months ended September 30, 2025.

Interest Expense. Total interest expense was $9.15 million for the three months ended September 30, 2025, compared to $10.96 million for the three months ended September 30, 2024. The decrease of $1.81 million, or 16.5% was due to a net decrease of $1.80 million in interest expense on total borrowings. The decrease in interest expense on total borrowings was driven by the average balance of FHLB advances and other borrowings decreasing from $228.47 million for the three months ended September 30, 2024, to $99.27 million for the three months ended September 30, 2025. The average rate paid on FHLB advances and other borrowings also decreased from 5.36% for the three months ended September 30, 2024, to 4.57% for the three months ended September 30, 2025. The overall average rate on total deposits was also down from 1.76% for the three months ended September 30, 2024, compared to 1.63% for the three months ended September 30, 2025. However, the average balance for total deposits was $1.62 billion for the three months ended September 30, 2024, compared to $1.75 billion for the three months ended September 30, 2025.

Provision for Credit Losses. Provision for credit losses was $62,000 for the three months ended September 30, 2025, compared to $277,000 for the three months ended September 30, 2024. The provision for credit losses for the three months ended September 30, 2025, included a decrease in the provision for credit losses on loans to $82,000, offset slightly by a recapture of the provision for unfunded commitments of $20,000.

Noninterest Income. Total noninterest income was $4.72 million for the three months ended September 30, 2025, compared to $4.98 million for the three months ended September 30, 2024. The decrease of $266,000, or 5.3% was primarily due to a decrease in appreciation in cash surrender value of life insurance of $654,000 due to a death benefit for bank owned life insurance in 2024. The decrease was partially offset by an increase in mortgage banking, net, of $324,000. Mortgage banking, net, includes net gain on sale of mortgage loans which increased to $2.23 million for the three months ended September 30, 2025, compared to $1.69 million for the three months ended September 30, 2024. During the three months ended September 30, 2025, $68.26 million residential mortgage loans were sold compared to $51.02 million in the three months ended September 30, 2024. However, gross margin levels decreased slightly from 3.31% for the three months ended September 30, 2024, to 3.27% for the three months ended September 30, 2025.

Noninterest Expense. Noninterest expense was $18.39 million for the three months ended September 30, 2025, compared to $17.27 million for the three months ended September 30, 2024, an increase of $1.12 million, or 6.5%. The driver of the increase was salaries and employee benefits which increased $1.30 million.

Provision for Income Taxes. Provision for income taxes was $1.33 million for the three months ended September 30, 2025, compared to $529,000 for the three months ended September 30, 2024. The effective tax rate was 26.8% for the current period compared to 16.3% for the three months ended September 30, 2024. The effective tax rate has started to rise as the Company’s pretax earnings have increased at a faster pace than tax-exempt income.

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The following compares the results of operations for the nine months ended September 30, 2025 and 2024.

(Dollars in Thousands)

Net Income. Eagle’s net income for the nine months ended September 30, 2025 was $10.11 million compared to $6.35 million for the nine months ended September 30, 2024. The increase of $3.76 million was due to an increase in net interest income after provision for credit losses of $6.50 million, partially offset by an increase in noninterest expense of $1.71 million and an increase in provision for income taxes of $1.37 million. For the current period, basic earnings per common share was $1.30 and diluted earnings per common share was $1.29. Basic and diluted earnings per common share were both $0.81 for the nine months ended September 30, 2024.

Net Interest Income. Net interest income increased to $53.74 million for the nine months ended September 30, 2025, from $46.65 million for the nine months ended September 30, 2024. The increase of $7.09 million, or 15.2% was primarily the result of an increase in interest and dividend income of $3.53 million and a decrease in interest expense of $3.56 million.

Interest and Dividend Income. Interest and dividend income was $81.05 million for the nine months ended September 30, 2025, compared to $77.52 million for the nine months ended September 30, 2024. The increase of $3.53 million, or 4.6% was driven by interest and fees on loans, which increased to $72.98 million for the nine months ended September 30, 2025, from $68.53 million for the nine months ended September 30, 2024. The increase in interest and fees on loans was due to an increase in the average yield on loans, as well as an increase in the average balance of loans. The average interest rate earned on loans receivable increased by 27 basis points, from 6.01% for the nine months ended September 30, 2024, to 6.28% for the current period. Interest accretion on purchased loans was $1.01 million for the nine months ended September 30, 2025, which resulted in an seven basis point increase in net interest margin compared to $590,000 for the nine months ended September 30, 2024, which resulted in a four basis point increase in net interest margin. Average balances for loans receivable, including loans held-for-sale, for the nine months ended September 30, 2025 were $1.55 billion compared to $1.52 billion for the nine months ended September 30, 2024. This represents an increase of $34.60 million, or 2.3% and was due to organic growth. Interest on investment securities available-for-sale decreased by $783,000 period over period, due to the decrease in average balances for investments from $308.69 million for the nine months ended September 30, 2024 to $287.18 million for the nine months ended September 30, 2025. In addition, average interest rates earned on investments decreased from 3.43% for the nine months ended September 30, 2024, to 3.34% for the nine months ended September 30, 2025.

Interest Expense. Total interest expense was $27.32 million for the nine months ended September 30, 2025, compared to $30.88 million for the nine months ended September 30, 2024. The decrease of $3.56 million, or 11.5% was primarily due to a net decrease of $3.87 million in interest expense on total borrowings. The decrease in interest expense on total borrowings was driven by the average balance of FHLB advances and other borrowings decreasing from $200.67 million for the nine months ended September 30, 2024, to $121.15 million for the nine months ended September 30, 2025. The average rate paid on FHLB advances and other borrowings also decreased from 5.45% for the nine months ended September 30, 2024, to 4.67% for the nine months ended September 30, 2025. The overall average rate on total deposits was down from 1.69% for the nine months ended September 30, 2024, compared to 1.64% for the nine months ended September 30, 2025. However, the average balance for total deposits was $1.62 billion for the nine months ended September 30, 2024, compared to $1.71 billion for the nine months ended September 30, 2025.

Provision for Credit Losses. Provision for credit losses was $1.14 million for the nine months ended September 30, 2025, compared to $554,000 for the nine months ended September 30, 2024. The increase in the provision was largely driven by loan growth. The provision for credit losses for the nine months ended September 30, 2025, included an increase in the provision for credit losses on loans to $1.01 million and an increase in the provision for unfunded commitments to $130,000.

Noninterest Income. Total noninterest income was $13.54 million for the nine months ended September 30, 2025, compared to $13.20 million for the nine months ended September 30, 2024. The increase of $336,000, or 2.5% was primarily due to an increase in mortgage banking, net, of $781,000, partially offset by a decrease in appreciation in cash surrender value of life insurance of $519,000 due to a death benefit for bank owned life insurance in 2024. Mortgage banking, net, includes net gain on sale of mortgage loans which increased to $5.66 million for the nine months ended September 30, 2025, compared to $4.70 million for the nine months ended September 30, 2024. During the nine months ended September 30, 2025, $165.65 million residential mortgage loans were sold compared to $147.81 million in the nine months ended September 30, 2024. Gross margin levels increased from 3.18% for the nine months ended September 30, 2024, to 3.42% for the nine months ended September 30, 2025.

Noninterest Expense. Noninterest expense was $53.32 million for the nine months ended September 30, 2025, compared to $51.61 million for the nine months ended September 30, 2024, an increase of $1.71 million, or 3.3%. Salaries and employee benefits increased by $1.62 million. Software subscriptions also increased by $503,000 due to new system implementations. However, contract changes led to lower data processing expense which decreased $533,000.

Provision for Income Taxes. Provision for income taxes was $2.71million for the nine months ended September 30, 2025, compared to $1.34 million for the nine months ended September 30, 2024. The effective tax rate was 21.1% for the current period and 17.5% for the nine months ended September 30, 2024. The effective tax rate has started to rise as the Company’s pretax earnings have increased at a faster pace than tax-exempt income.

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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 September 30, 2025 and December 31, 2024.

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 for stock repurchases 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 Company's available borrowing capacity was approximately $508.00 million as of September 30, 2025 and $404.00 million as of December 31, 2024.

(In Thousands)

On October 1, 2025, the Company redeemed all of its outstanding 5.50% fixed-to-floating rate subordinated notes due July 1, 2030, having an aggregate principal amount of $15.00 million.

During the first quarter of 2023, the FRB offered a new Bank Term Funding Program ("BTFP") for eligible depository institutions. The BTFP offered 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 were valued at par. 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 September 30, 2025, the Bank had no brokered certificates and $5.53 million in brokered money market deposits. As of December 31, 2024, the Bank had no brokered certificates and $5.57 million in brokered money market deposits. Policy limits for brokered deposits are set at 10% of assets.

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 has a $15.00 million line of credit with a correspondent bank. There was no outstanding balance for this line of credit at September 30, 2025 or December 31, 2024. However, the Company utilized this line of credit on October 1, 2025 to finance the redemption payment for the subordinated notes of $15.00 million. The line of credit has a two-year maturity and a variable interest rate equal to 0.50% below the prime rate as published in the Wall Street Journal. The draw is secured by the assets of the Company and includes certain financial covenants and negative covenants. Outstanding draws on the line impact remaining borrowing capacity for the Company’s correspondent bank lines of credit included above

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 in the short and long term. 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.

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Capital Resources

As of September 30, 2025, 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 2.4% compared to an increase of 1.7% at December 31, 2024. A 200-basis point decrease in interest rates scenario decreased EVE by 8.3% compared to a decrease of 7.9% at December 31, 2024. The Bank is within the guidelines set forth by the Board of Directors for interest rate risk sensitivity in rising interest rate scenarios.

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 September 30, 2025. The Bank's actual capital amounts and ratios as of September 30, 2025 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%.

(Dollars in Thousands)

(Dollars in Thousands)

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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 rate 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.

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) will not be reduced by more than 15.0% given an immediate increase or decrease in interest rates of up to 300 basis points, and the subsequent twelve months (i.e. year-2) will not be reduced by more than 20.0% given an immediate increase or decrease in interest rates of up to 300 basis points.

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

Critical Accounting 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 2024 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 2024 Form 10-K, other than the following:

The excess of consideration paid over fair value of net assets acquired is recorded as goodwill. Goodwill is not amortized but is tested at least annually for impairment or more frequently if events occur or circumstances change that indicate impairment may exist. A goodwill impairment test is performed by comparing the fair value of the reporting unit with its carrying value. An impairment charge is recorded for the amount by which the carrying amount exceeds the reporting unit’s fair value. Estimating the fair value of the reporting unit requires the use of inputs and assumptions including projected earnings of the Company in future years for which there is inherent uncertainty.

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. A weighted average of both the market and income approaches was used in valuing the reporting unit’s fair value. The interim goodwill impairment assessment as of August 31, 2024 concluded that goodwill was not impaired. Our quantitative annual impairment test as of October 31, 2024 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. Any resulting impairment loss could have a material adverse impact on the Company’s financial condition and results of operations. Management will continue to monitor events that could influence this conclusion in the future and will perform its annual goodwill impairment test as of October 31, 2025.

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As of the end of the period covered by this report, we conducted an evaluation under the supervision and with the participation of our management including our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”) of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms, including to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is accumulated and communicated to management to allow timely decisions regarding required disclosure. Based on that evaluation, our CEO and CFO concluded that as of September 30, 2025, our disclosure controls and procedures were not effective as of such date due to ongoing remediation of a material weakness in internal control over financial reporting as of December 31, 2024 described below.

We identified a material weakness in internal control over financial reporting related to the design of controls over preparation of the statement of cash flows. Specifically, the Company’s controls were not designed at a sufficient level of precision to ensure the proper classification of borrowings as short-term or long-term so that the borrowings from and repayments to were appropriately presented either on a net basis or a gross basis within the financing section of the statement of cash flows. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. The control deficiency created a reasonable possibility that a material misstatement to the consolidated financial statements would not be prevented or detected on a timely basis.

Management, with oversight from the Audit Committee, has implemented and continues to implement measures designed to ensure that the control deficiency contributing to the material weakness is remediated so that controls are designed, implemented and operating effectively. The remediation action included restructuring the design of control activities, including consideration of system impacts, surrounding the classification of borrowing activities in order to facilitate appropriate presentation in the financial statements. We believe this action has remediated the material weakness.

Except as noted above, 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.

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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, 2024.