April 02, 2016 - 5:10pm EST by
2016 2017
Price: 12.15 EPS 0 0
Shares Out. (in M): 4 P/E 0 0
Market Cap (in $M): 47 P/FCF 0 0
Net Debt (in $M): 0 EBIT 0 0
TEV ($): 47 TEV/EBIT 0 0

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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
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.
Stealth buyback: In Q4 EBMT repurchased 15k (0.4%) for an avg price of $11.75 and for the year
repurchased 61.1K (1.6%) for an avg price of $11.54. Under the prior repurchase plan the bank
repurchased 111K shares (at $10.84) in the 12 months ended June 30, 2015.
Debt: In Q2 -15 EBMT issued $10M of sub debt. This 10 year 6.75% debt qualifies as Tier 2 capital for
regulatory purposes and is intended to support organic growth and potentially branch or (tiny) bank
acquisitions. $10M may not sound like much but the short term earnings drag would be 10c on an
annual (fully taxed) basis prior to reinvestment.
EBMT operates statewide in Montana offering commercial, residential and consumer loans. The bank
has its HQ and 2 other branches in Helena along with branches in Billings, Big Timber, Bozeman(2),
Butte, Hamilton, Livingston, Missoula(2) and Townsend.
Montana’s economy is projected to grow at rates somewhat above the national economy over the next
several years. Caveat: one study the bank cites comes from the University of Montana and may have a
home state bias!
Organic loan growth
Improving profitability metrics (ROA/ROE)as EBMT grows into its expense and equity base.
Eventual strategic event at premium to TBV/Deposits.


I do not hold a position with the issuer such as employment, directorship, or consultancy.
I and/or others I advise hold a material investment in the issuer's securities.



Organic loan growth

Improving profitability metrics (ROA/ROE) as EBMT grows into its expense and equity base.

Eventual strategic event at premium to TBV/Deposits.

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