Eagle Bancorp Montana – EBMT ($12.15)
EBMT is a tiny but well run Montana based bank, experiencing solid growth and building a valuable
franchise in an attractive market area, yet priced below tangible book value. I think EBMT is worth a
modest premium to TBV today and a substantial premium in the (eventual) event of a strategic
transaction.
The bank is well positioned to capitalize on the solid growth outlook for the State of Montana and
should eventually attract strategic interest. At 1.5X TBV a takeout price of $19 is conceivable, (would be
a 5% deposit premium).
Until then, EBMT is growing into its equity (and expense) base and bringing its efficiency ratio down
from 90% to the low 80s and eventually the 70% range as the bank grows per branch revenue and adds
branches organically or via acquisition of the few remaining smaller players. This growth (and continued
progress on efficiency ratio) will lift ROA and investing the balance sheet in loans versus investment
securities will also lift ROE. Continued ROA/ROE progress should further support public market
valuation relative to TBV.
Today, EBMT has total assets of $630M, equity of $55.5M (TE of $48M) and a market cap of $46.8M.
Deposits $483M (+9.5%)
Loans $407M (+28%), Investment Securities $146M (-10%), so still some latent earnings power.
TBV/share is $12.67
Tangible Equity Ratio is 10.07% at 12/31/15.
NIM is 3.38%
Credit Stats are solid with NPLs at 0.63% of portfolio loans and allowance @ 139% of NPLs.
The 31c div yields 2.5%.
Third Time’s a Charm?
EBMT has been written up for VIC in 2011 ($11.25) and 2013 ($10.27).
So what’s changed…..almost everything: Charter, Name, Asset size, Balance Sheet, Buyback, even some
new board members.
Eagle Bancorp Montana is the holding company of Opportunity Bank of Montana. In the last 2 years the
bank changed its charter from a federal thrift charter to a Montana State Chartered Bank and its name
from American Federal Savings Bank to Opportunity Bank. Other changes have been more subtle; the
company has been buying stock and the balance sheet now includes subordinated debt.
