XNAS:EBMT Eagle Bancorp Montana Inc Quarterly Report 10-Q Filing - 3/31/2012

Effective Date 3/31/2012

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
For the quarterly period ended March 31, 2012
 
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 
For the transition period from _____ to _____.

Commission file number 1-34682
 
Eagle Bancorp Montana, Inc.
(Exact name of small business issuer as specified in its charter)
   
Delaware
27-1449820
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
   
1400 Prospect Avenue, Helena, MT 59601
(Address of principal executive offices)
 
(406) 442-3080
(Issuer's telephone number)

Website address: www.americanfederalsavingsbank.com

 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
  Large accelerated filer      o Accelerated filer      o
  Non-accelerated filer        o Smaller reporting company      x
 
(Do not check if smaller 
reporting company)
 
 
Indicate by check mark whether the registrant is a shell company (defined in Rule 12b-2 of the Exchange Act).   Yes o No x

APPLICABLE ONLY TO CORPORATE ISSUERS
 
Indicate the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date:
 
Common stock, par value $0.01 per share
3,878,971  shares outstanding
As of May 14, 2012
 
 
 

 
 
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARY
 
TABLE OF CONTENTS
 

 
   
   
 
   
   
1
   
   
3
   
   
5
   
   
6
   
   
7
   
 
9
   
32
   
39
   
40
 
 
LegalProceedings
41
41
41
42
42
42
42
   
43
   
Exhibit 31.1
 
   
Exhibit 31.2
 
   
Exhibit 32.1
 
   
101.INS XBRL      Instance Document  
   
101.SCH XBRL    Taxonomy Extension Schema Document  
   
101.CAL XBRL    Taxonomy Extension Calculation Linkbase Document  
   
101.DEF XBRL     Taxonomy Extension Definition Linkbase Document  
   
101.LAB XBRL    Taxonomy Extension Label Linkbase Document  
   
101.PRE XBRL     Taxonomy Extension Presentation Linkbase Document  
 
 
 

 
 
 
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in Thousands, Except for Per Share Data)
 
   
March 31,
   
June 30,
 
   
2012
   
2011
 
   
(Unaudited)
   
(Audited)
 
ASSETS
           
Cash and due from banks
  $ 3,889     $ 2,703  
Interest-bearing deposits with banks
    6,714       1,837  
Federal funds sold
    5,001       5,000  
Total cash and cash equivalents
    15,604       9,540  
                 
Securities available-for-sale,
               
at market value
    94,019       102,700  
Federal Home Loan Bank stock, at cost
    2,003       2,003  
Investment in Eagle Bancorp Statutory Trust I
    155       155  
Mortgage loans held-for-sale
    11,885       1,784  
Loans receivable, net of deferred loan expenses
               
and allowance for loan losses of $1,700 at
               
March 31, 2012 and $1,800 at June 30, 2011
    177,283       185,471  
Accrued interest and dividends receivable
    1,451       1,558  
Mortgage servicing rights, net
    2,135       2,142  
Premises and equipment, net
    15,700       16,151  
Cash surrender value of life insurance
    9,101       6,900  
Real estate & other repossessed assets acquired in settlement of loans,
               
net of allowance for losses
    1,872       1,181  
Other assets
    960       1,508  
                 
Total assets
  $ 332,168     $ 331,093  

See accompanying notes to consolidated financial statements.
 
 
-1-

 
 
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARY
 
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Continued)
(Dollars in Thousands, Except for Per Share Data)
 
   
March 31,
   
June 30,
 
   
2012
   
2011
 
   
(Unaudited)
   
(Audited)
 
LIABILITIES
           
Deposit accounts:
           
Noninterest bearing
  $ 24,353     $ 19,052  
Interest bearing
    195,801       190,134  
     Total deposits
    220,154       209,186  
                 
Accrued expenses and other liabilities
    4,652       3,371  
Federal funds purchased
    -       -  
FHLB advances and other borrowings
    48,746       60,896  
Subordinated debentures
    5,155       5,155  
     Total liabilities
    278,707       278,608  
                 
                 
EQUITY
               
Preferred stock (no par value, 1,000,000 shares
               
  authorized, none issued or outstanding)
    -       -  
Common stock (par value $0.01 per share;
               
    8,000,000 shares authorized; 4,083,127 shares issued;
               
    3,878,971 and 3,918,687 shares oustanding
               
    at March 31, 2012 and June 30, 2011, respectively)
    41       41  
Additional paid-in capital
    22,111       22,110  
Unallocated common stock held by employee
               
   stock ownership plan ("ESOP")
    (1,598 )     (1,722 )
Treasury stock, at cost
    (2,210 )     (1,796 )
Retained earnings
    32,661       31,918  
Accumulated other comprehensive income
    2,456       1,934  
     Total equity
    53,461       52,485  
                 
     Total liabilities and equity
  $ 332,168     $ 331,093  

See accompanying notes to consolidated financial statements.
 
 
-2-

 
 
 
CONSOLIDATED STATEMENTS OF INCOME
 (Dollars in Thousands, Except for Per Share Data)
 
   
Three Months Ended
   
Nine Months Ended
 
   
March 31,
   
March 31,
 
   
2012
   
2011
   
2012
   
2011
 
   
(Unaudited)
   
(Unaudited)
 
Interest and Dividend Income:
                       
Interest and fees on loans
  $ 2,744     $ 2,877     $ 8,349     $ 8,494  
Securities available-for-sale
    778       890       2,477       2,754  
Interest on deposits with banks
    4       6       13       15  
Total interest and dividend income
    3,526       3,773       10,839       11,263  
                                 
Interest Expense:
                               
Deposits
    260       326       822       1,090  
FHLB advances & other borrowings
    481       626       1,596       1,909  
Subordinated debentures
    25       22       70       164  
Total interest expense
    766       974       2,488       3,163  
                                 
Net Interest Income
    2,760       2,799       8,351       8,100  
Loan loss provision
    258       276       841       793  
Net interest income after loan loss provision
    2,502       2,523       7,510       7,307  
                                 
Noninterest income:
                               
Service charges on deposit accounts
    141       156       511       553  
Net gain on sale of loans
    522       333       1,161       1,962  
Mortgage loan servicing fees
    214       215       666       603  
Net gain on sale of available for sale securities
    115       -       281       -  
Net loss on sale of OREO
    (12 )     (2 )     (12 )     (2 )
Net gain (loss) on fair value hedge FASB ASC 815
    94       39       (280 )     237  
Other
    230       203       621       485  
Total noninterest income
    1,304       944       2,948       3,838  
 
See accompanying notes to consolidated financial statements.
 
 
-3-

 

EAGLE BANCORP MONTANA, INC. AND SUBSIDIARY
 
CONSOLIDATED STATEMENTS OF INCOME (Continued)
 (Dollars in Thousands, Except for Per Share Data)
 
   
Three Months Ended
   
Nine Months Ended
 
   
March 31,
   
March 31,
 
   
2012
   
2011
   
2012
   
2011
 
   
(Unaudited)
   
(Unaudited)
 
Noninterest expense:
                       
Salaries and employee benefits
    1,367       1,322       3,737       3,740  
Occupancy and equipment expense
    350       342       1,032       1,005  
Data processing
    170       213       456       458  
Advertising
    92       127       354       374  
Amortization of mortgage servicing rights
    201       334       468       1,033  
Federal insurance premiums
    51       66       137       193  
Postage
    23       26       86       96  
Legal, accounting, and examination fees
    71       67       263       276  
Consulting fees
    55       36       450       94  
Provision for valuation loss on OREO
    165       -       165       62  
Other
    361       330       1,093       1,039  
Total noninterest expense
    2,906       2,863       8,241       8,370  
                                 
Income before provision for income taxes
    900       604       2,217       2,775  
                                 
Provision for income taxes
    242       196       644       847  
                                 
Net income
  $ 658     $ 408     $ 1,573     $ 1,928  
                                 
                                 
Basic earnings per common share
  $ 0.18     $ 0.10     $ 0.42     $ 0.49  
                                 
Diluted earnings per common share
  $ 0.17     $ 0.10     $ 0.40     $ 0.49  
                                 
Weighted average shares outstanding (basic eps)
    3,716,480       3,904,017       3,726,453       3,899,808  
                                 
Weighted average shares outstanding (diluted eps)
    3,920,636       3,904,017       3,916,486       3,899,808  
 
See accompanying notes to consolidated financial statements.

 
-4-

 
 
 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS
 (Dollars in Thousands)
 
   
Three Months  Ended
   
Nine Months Ended
 
   
March 31,
   
March 31,
 
   
2012
   
2011
   
2012
   
2011
 
   
(Unaudited)
   
(Unaudited)
 
                         
NET EARNINGS
  $ 658     $ 408     $ 1,573     $ 1,928  
                                 
OTHER ITEMS OF COMPREHENSIVE EARNINGS:
                               
Change in unrealized gain(loss) on investment securities
                               
available for sale, before income taxes
    (112 )     68       765       (633 )
Reclassification adjustment for realized gains on investment
                               
securities included in net earnings, before income tax
    (108 )     -       (147 )     -  
Change in unrealized gain on loans held for sale,
                               
before income taxes
    2       (41 )     128       (333 )
Total other items of comprehensive earnings
    (218 )     27       746       (966 )
                                 
Income tax (expense) benefit related to
                               
other items of comprehensive earnings
    65       (8 )     (224 )     290  
                                 
COMPREHENSIVE EARNINGS
  $ 505     $ 427     $ 2,095     $ 1,252  
 
See accompanying notes to consolidated financial statements.
 
 
-5-

 
 
 
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
For the Nine Months Ended March 31, 2012 and 2011
(Dollars in Thousands, Except for Per Share Data)
 
                            ACCUMULATED      
            ADDITIONAL   UNALLOCATED           OTHER      
    PREFERRED  
COMMON
 
PAID-IN
 
ESOP
 
TREASURY
 
RETAINED
 
COMPREHENSIVE
     
   
STOCK
 
STOCK
 
CAPITAL
 
SHARES
 
STOCK
 
EARNINGS
 
INCOME(LOSS)
 
TOTAL
                                                 
Balance, June 30, 2010
  $ -     $ 41     $ 22,104     $ (1,889 )   $ -     $ 30,652     $ 1,524     $ 52,432  
                                                                 
Net income
                                            1,928               1,928  
Other comprehensive income                                                   (676 )     (676 )
                                                                 
Total comprehensive income                                                           1,252  
                                                                 
Dividends paid ($0.07 per share)                                           (858 )             (858 )
                                                                 
ESOP shares allocated or committed to be released for allocation (12,462 shares)                     (1 )     125                               124  
                                                                 
Balance, March 31, 2011
  $ -     $ 41     $ 22,103     $ (1,764 )   $ -     $ 31,722     $ 848     $ 52,950  
 
 
 
                                                 
Balance, June 30, 2011
  $ -     $ 41     $ 22,110     $ (1,722 )   $ (1,796 )   $ 31,918     $ 1,934     $ 52,485  
                                                                 
Net income
                                            1,573               1,573  
Other comprehensive income                                                   522       522  
                                                                 
Total comprehensive income                                                           2,095  
                                                                 
Dividends paid ($0.07125 per share)                                           (830 )             (830 )
                                                                 
Treasury stock purchased
                                    (414 )                     (414 )
                                                                 
ESOP shares allocated or committed to be released for allocation (12,462 shares)           1       124                               125  
                                                                 
Balance, March 31, 2012
  $ -     $ 41     $ 22,111     $ (1,598 )   $ (2,210 )   $ 32,661     $ 2,456     $ 53,461  
 
See accompanying notes to consolidated financial statements.
 
 
-6-

 
 
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands, Except for Per Share Data)
 
   
Nine Months Ended
 
   
March 31,
 
   
2012
   
2011
 
   
(Unaudited)
 
CASH FLOWS FROM OPERATING ACTIVITIES:
           
Net income
  $ 1,573     $ 1,928  
Adjustments to reconcile net income to net cash from operating activities:
               
Provision for loan losses
    841       793  
Provision for OREO valuation losses
    165       62  
Depreciation
    572       548  
Net amortization of marketable securities premium and discounts
    292       450  
Amortization of capitalized mortgage servicing rights
    468       1,033  
Gain on sale of loans
    (1,161 )     (1,962 )
Net realized (gain) loss on sale of available-for-sale securities
    (281 )     -  
Increase in cash surrender value of life insurance
    (201 )     (158 )
(Gain)/Loss on sale of property & equipment
    -       84  
Loss on sale of OREO
    12       2  
Loss (gain) fair value hedge, FASB ASC 815
    280       -  
Change in assets and liabilities:
               
(Increase) decrease in assets:
               
Accrued interest and dividends receivable
    107       36  
Loans held-for-sale
    (8,812 )     8,399  
Other assets
    549       (856 )
Increase (decrease) in liabilities:
               
Accrued expenses and other liabilities
    902       297  
     Net cash provided by (used in) operating activities
    (4,694 )     10,656  
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
               
Purchase of securities:
               
Investment securities available-for-sale
    (4,426 )     (9,983 )
Proceeds from maturities, calls and principal payments:
               
Investment securities held-to-maturity
    -       125  
Investment securities available-for-sale
    9,023       21,726  
Purchase of bank owned life insurance
    (2,000 )     -  
Proceeds from sale of securities available-for-sale
    4,689       -  
Proceeds from sale of property and equipment
    -       1  
Net (increase) decrease in loan receivable, excludes transfers to real estate
               
acquired in settlement of loans
    5,910       (18,954 )
Proceeds from the sale of real estate acquired in the settlement of loans
    110       166  
Purchase of property and equipment
    (122 )     (780 )
     Net cash  provided by (used in) investing activities
    13,184       (7,699 )
 
See accompanying notes to consolidated financial statements.
 
 
-7-

 

EAGLE BANCORP MONTANA, INC. AND SUBSIDIARY
 
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Dollars in Thousands, Except for Per Share Data)
 
   
Nine Months Ended
 
   
March 31,
 
   
2012
   
2011
 
   
(Unaudited)
 
CASH FLOWS FROM FINANCING ACTIVITIES:
           
Net increase in checking and savings accounts
  $ 10,968     $ 12,737  
Net increase in federal funds purchased
    -       -  
Payments on FHLB advances
    (12,150 )     (4,278 )
FHLB advances
    -       -  
Purchase of Treasury Stock
    (414 )     -  
Dividends paid
    (830 )     (858 )
     Net cash provided by (used in) financing activities
    (2,426 )     7,601  
                 
Net increase (decrease) in cash
    6,064       10,558  
                 
CASH AND CASH EQUIVALENTS, beginning of period
    9,540       3,509  
                 
CASH AND CASH EQUIVALENTS, end of period
  $ 15,604     $ 14,067  
                 
                 
SUPPLEMENTAL CASH FLOW INFORMATION:
               
Cash paid during the period for interest
  $ 2,551     $ 3,182  
                 
Cash paid during the period for income taxes
  $ 208     $ 792  
                 
Assets acquired through foreclosure
  $ 1,213     $ 1,204  
                 
NON-CASH INVESTING ACTIVITIES:
               
Decrease (increase) in market value of securities available-for-sale
  $ (616 )   $ 631  
                 
Mortgage servicing rights capitalized
  $ 461     $ 869  
                 
See accompanying notes to consolidated financial statements.
               
 
 
-8-

 

 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1. BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission.  Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.  However, such information reflects all adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of results for the unaudited interim periods.

The results of operations for the nine month period ended March 31, 2012 are not necessarily indicative of the results to be expected for the fiscal year ending June 30, 2012 or any other period.  The unaudited consolidated financial statements and notes presented herein should be read in conjunction with the audited consolidated financial statements and related notes thereto included in Eagle’s Form 10-K for the fiscal year ended June 30, 2011.

The Company evaluated subsequent events for potential recognition and/or disclosure through May 14, 2012 the date the consolidated financial statements were issued.

On April 5, 2010, the Company completed its second-step conversion from the partially-public mutual holding company structure to the fully publicly-owned stock holding company structure.  As part of that transaction it also completed a related offering of its common stock.  As a result of the conversion and offering, the Company became the stock holding company for American Federal Savings Bank, and Eagle Financial MHC and Eagle Bancorp ceased to exist.  The Company sold a total of 2,464,274 shares of common stock at a purchase price of $10.00 per share in the offering for gross proceeds of $24.6 million.  Concurrent with the completion of the offering, shares of Eagle Bancorp common stock owned by the public were exchanged.  Stockholders of Eagle Bancorp received 3.800 shares of the Company's common stock for each share of Eagle Bancorp common stock that they owned immediately prior to completion of the transaction. Accordingly, as of April 5, 2010, the Company had 8,000,000 shares of common stock authorized and 4,083,127 issued and outstanding.

NOTE 2. INVESTMENT SECURITIES

Investment securities are summarized as follows:
(Dollars in thousands)
 
   
March 31, 2012
   
June 30, 2011
 
   
(Unaudited)
   
(Audited)
 
         
Gross
               
Gross
       
   
Amortized
   
Unrealized
   
Fair
   
Amortized
   
Unrealized
   
Fair
 
   
Cost
   
Gains
   
(Losses)
   
Value
   
Cost
   
Gains
   
(Losses)
   
Value
 
Available-for-sale:
                                               
U.S. government and
                                               
  agency obligations
  $ 23,286     $ 544     $ (7 )   $ 23,823     $ 25,566     $ 648     $ (6 )   $ 26,208  
Municipal obligations
    36,531       2,296       (189 )     38,638       38,450       1,342       (606 )     39,186  
Corporate obligations
    4,949       84       (60 )     4,973       5,987       230       (1 )     6,216  
Mortgage-backed securities -
                                                         
  government backed
    7,030       220       (2 )     7,248       6,189       183       -       6,372  
CMOs - private label
    230       -       (39 )     191       305       -       (14 )     291  
CMOs - government backed
    18,630       544       (28 )     19,146       23,458       971       (2 )     24,427  
                                                                 
Total
  $ 90,656     $ 3,688     $ (325 )   $ 94,019     $ 99,955     $ 3,374     $ (629 )   $ 102,700  
 
 
-9-

 
 
 EAGLE BANCORP MONTANA, INC. AND SUBSIDIARY
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 
NOTE 2. INVESTMENT SECURITIES - continued

The following table discloses, as of March 31, 2012 and June 30, 2011, the Company’s investment securities that have been in a continuous unrealized-loss position for less than twelve months and those that have been in a continuous unrealized-loss position for twelve or more months:
 
   
March 31, 2012
 
   
Less Than 12 Months
   
12 Months or Longer
 
   
(In thousands)
 
   
Estimated
   
Gross
   
Estimated
   
Gross
 
   
Market
   
Unrealized
   
Market
   
Unrealized
 
   
Value
   
Losses
   
Value
   
Losses
 
                         
U.S. government and agency
  $ 843     $ 6     $ 356     $ 1  
Corporate obligations
    895       60       -       -  
Municipal obligations
    1,248       13       1,320       176  
CMOs - private label
    -       -       176       39  
Mortgage-backed and CMOs
    5,223       30       -       -  
                                 
Total
  $ 8,209     $ 109     $ 1,852     $ 216  
                                 
   
June 30, 2011
 
   
Less Than 12 Months
   
12 Months or Longer
 
   
(In thousands)
 
   
Estimated
   
Gross
   
Estimated
   
Gross
 
   
Market
   
Unrealized
   
Market
   
Unrealized
 
   
Value
   
Losses
   
Value
   
Losses
 
                                 
U.S. government and agency
  $ 916     $ 2     $ 1,789     $ 4  
Corporate obligations
    944       1       -       -  
Municipal obligations
    4,412       194       1,714       412  
CMOs - private label
    216       14       -       -  
Mortgage-backed & CMOs
    1,151       2       -       -  
                                 
Total
  $ 7,639     $ 213     $ 3,503     $ 416  
 
In evaluating debt securities for other-than-temporary impairment losses, management assesses whether the Company intends to sell or if it is more likely than not that it will be required to sell impaired debt securities.  In so doing, management considers contractual constraints, liquidity, capital, asset/liability management and securities portfolio objectives.  With respect to its impaired debt securities at March 31, 2012 and June 30, 2011, management determined that it does not intend to sell and that there is no expected requirement to sell any of its impaired debt securities.

As of March 31, 2012 and June 30, 2011, there were, respectively, 32 and 37 securities in an unrealized loss position and were considered to be temporarily impaired and therefore an impairment charge has not been recorded.  All of such temporarily impaired investments are debt securities.

 
-10-

 
 
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARY
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 2. INVESTMENT SECURITIES - continued

At March 31, 2012, 11 U.S. government and agency obligations had unrealized losses with aggregate depreciation of less than 0.59% from the Company’s amortized cost basis of these securities.  We believe these unrealized losses are principally due to interest rate movements.  As such, the Company determined that none of such securities had other-than-temporary impairment.

At March 31, 2012, 9 municipal obligations had unrealized losses with aggregate depreciation of less than 6.86% from the Company’s amortized cost basis of these securities.  We believe these unrealized losses are principally due to interest rate movements and recent credit concerns in the overall municipal bond market.  As such, the Company determined that none of such securities had other-than-temporary impairment.

At March 31, 2012, 1 corporate obligation had an unrealized loss with aggregate depreciation of less than 6.29% from the Company's cost basis.  This unrealized loss is principally due to changes in interest rates and some concern the issuer may have exposure to Europe.  No credit issues have been identified that cause management to believe the declines in market value are other than temporary.  In analyzing the issuer's financial condition, management considers industry analysts' reports, financial performance and if available projected target prices of investment analysts within a one-year time frame.  As management has the ability to hold debt securities until maturity, or for the foreseeable future if classified as available for sale, no declines are deemed to be other than temporary.

At March 31, 2012, 11 mortgage backed and CMO securities had unrealized losses with aggregate depreciation of less than 1.27% from the Company’s cost basis of these securities.  We believe these unrealized losses are principally due to the credit market’s concerns regarding the stability of the mortgage market.  One of the CMO securities are non-agency securities.  At March 31, 2012 the fair value of this non-agency security was $191,000 with an unrealized loss of $39,000, or 16.96% of the Company’s amortized cost basis.  Management considers available evidence to assess whether it is more likely than not that all amounts due would not be collected.  In such assessment, management considers the severity and duration of the impairment, the credit ratings of the security, the overall deal and payment structure, including the Company's position within the structure, underlying obligor, financial condition and near term prospects of the issuer, delinquencies, defaults, loss severities, recoveries, prepayments, cumulative loss projections, discounted cash flows and fair value estimates.  There has been no disruption of the scheduled cash flows on any of the securities.  Management’s analysis as of March 31, 2012 revealed no expected credit losses on these securities.

NOTE 3. LOANS RECEIVABLE

Loans receivable consist of the following:
 
   
March 31,
   
June 30,
 
   
2012
   
2011
 
   
(Unaudited)
   
(Audited)
 
   
(In thousands)
 
First mortgage loans:
           
  Residential mortgage (1-4 family)
  $ 63,225     $ 70,003  
  Commercial real estate
    65,820       64,701  
  Real estate construction
    1,935       5,020  
                 
Other loans:
               
  Home equity
    24,336       27,816  
  Consumer
    8,798       9,343  
  Commercial
    15,014       10,564  
                 
Total
    179,128       187,447  
                 
Less:  Allowance for loan losses
    (1,700 )     (1,800 )
Add:   Deferred loan expenses
    (145 )     (176 )
                 
Total
  $ 177,283     $ 185,471  
 
 
-11-

 
 
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARY
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 
NOTE 3. LOANS RECEIVABLE - continued

Within the commercial real estate loan category above, $21,757,000 and $18,878,000 was guaranteed by the United States Department of Agriculture Rural Development, at March 31, 2012 and June 30, 2011, respectively.

The following is a summary of changes in the allowance for loan losses:
 
   
Nine Months
   
Nine Months
   
Twelve Months
 
   
Ended
   
Ended
   
Ended
 
   
March 31,
   
March 31,
   
June 30,
 
   
2012
   
2011
   
2011
 
   
(Unaudited)
   
(Unaudited)
   
(Audited)
 
   
(In thousands)
 
                   
Balance, beginning of period
  $ 1,800       1,100     $ 1,100  
  Provision charged to operations
    841       793       948  
  Charge-offs
    (950 )     (245 )     (252 )
  Recoveries
    9       2       4  
Balance, end of period
  $ 1,700     $ 1,650     $ 1,800  
 
Non-Performing Assets – The following table sets forth information regarding non-performing assets as of the dates indicated.

   
March 31,
   
June 30,
 
   
2012
   
2011
 
   
(Unaudited)
   
(Audited)
 
   
(Dollars in Thousands)
 
             
Non-accrual loans
  $ 3,286     $ 2,939  
Accruing loans delinquent 90 days or more
    -       -  
Restructured loans, net
    213       -  
Real estate owned and other repossessed assets, net
    1,872       1,181  
   Total non performing assets
  $ 5,371     $ 4,120  
                 
Total non-performing assets as a percentage of total assets
    1.62 %     1.24 %
                 
Allowance for loan losses
  $ 1,700     $ 1,800  
                 
Percent of allowance for loan losses to non-performing assets
    31.7 %     43.7 %
 
 
-12-

 
 
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARY
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 
NOTE 3. LOANS RECEIVABLE - continued
The following table sets forth information regarding loans and non-performing assets by geographical location as of the dates indicated (dollars in thousands).
 
    March 31, 2012  
   
Helena
   
Bozeman
   
Butte
   
Townsend
   
Total
 
                               
Non-accrual loans
  $ 977     $ 2,286     $ 23     $ -     $ 3,286  
Accruing loans delinquent 90 days or more
    -       -       -       -       -  
Restructured loans
    123       90       -       -       213  
Real estate owned and other repossessed assets, net
    678       1,132       -       62       1,872  
Total non performing assets   $ 1,778     $ 3,508     $ 23     $ 62     $ 5,371  
                                         
Total loans, net
  $ 97,209     $ 37,005     $ 41,856     $ 1,213     $ 177,283  
                                         
Percent of non-performing assets to loans
    1.83 %     9.48 %     0.05 %     5.11 %     3.03 %
                                         
   
June 30, 2011
 
                                         
Non-accrual loans
  $ 1,773     $ 1,138     $ -     $ 28     $ 2,939  
Accruing loans delinquent 90 days or more
    -       -       -       -       -  
Real estate owned and other repossessed assets, net
    306       794       -       81       1,181  
    $ 2,079     $ 1,932     $ -     $ 109     $ 4,120  
                                         
Total loans, net
  $ 96,816     $ 41,916     $ 45,811     $ 928     $ 185,471  
                                         
Percent of non-performing assets to loans
    2.15 %     4.61 %     0.00 %     11.75 %     2.22 %
 
 
-13-

 
 
 
EAGLE BANCORP MONTANA, INC. AND SUBSIDIARY
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 3. LOANS RECEIVABLE - continued

The following tables set forth information regarding the activity in the allowance for loan losses for the dates as indicated (dollars in thousands):
 
   
Nine Months Ended
 
   
March 31, 2012
 
   
1-4 Family
   
Commercial
         
Home
                   
   
Real Estate
   
Real Estate
   
Construction
   
Equity
   
Consumer
   
Commercial
   
Total
 
Allowance for credit losses:
                                         
Beginning balance, June 30, 2011
  $ 369     $ 652     $ 18     $ 481     $ 57     $ 223     $ 1,800  
Charge-offs
    (125 )     (250 )     -       (351 )     (27 )     (197 )     (950 )
Recoveries
    -       -       -       -       9       -       9  
Provision
    97       301       231       1       30       181       841  
Ending balance, March 31, 2012
  $ 341     $ 703     $ 249     $ 131     $ 69     $ 207     $ 1,700  
                                                         
Ending balance allocated to loans
                                                       
individually evaluated for impairment
  $ -     $ 59     $ 239     $ -     $ 5     $ -     $ 303  
                                                         
Ending balance allocated to loans
                                                       
collectively evaluated for impairment
  $ 341     $ 644     $ 10     $ 131     $ 64     $ 207     $ 1,397  
                                                         
Loans receivable:
                                                       
Ending balance March 31, 2012
  $ 63,225     $ 65,820     $ 1,935     $ 24,336     $ 8,798     $ 15,014     $ 179,128  
                                                         
Ending balance of loans individually