**UNITED
STATES**


**SECURITIES
AND EXCHANGE COMMISSION**


**Washington,
D.C. 20549**





**FORM
10-QSB**





x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE
ACT OF 1934





For the
quarterly period ended March 31, 2005





o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT





For the
transition period
from to.





Commission
file number 0-29687




Eagle
Bancorp


(Exact
name of small business issuer as specified in its charter)


United
      States
    
    81-0531318(State
      or other jurisdiction of incorporation
    
    (I.R.S.
      Employeror
      organization)
    
    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





**APPLICABLE
ONLY TO ISSUERS INVOLVED IN BANKRUPTCY**


**PROCEEDINGS
DURING THE PRECEDING FIVE YEARS**





Check
whether the registrant filed all documents and reports required to be filed by
Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities
under a plan confirmed by a court. Yes o No
o





**APPLICABLE
ONLY TO CORPORATE ISSUERS**





State 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 1,103,972 shares outstanding


As of May
10, 2005





Transitional
Small Business Disclosure Format (Check one): Yes o No x











EAGLE
BANCORP AND SUBSIDIARY





TABLE OF
CONTENTS


PagePART
      I.
    FINANCIAL
      INFORMATIONItem
      1.
    Financial
      StatementsConsolidated
      Statements of Financial Condition as ofMarch
      31, 2005 (unaudited) and June 30, 2004
    1
      and 2Consolidated
      Statements of Income for the three andnine
      months ended March 31, 2005 and 2004 (unaudited)
    3
      and 4Consolidated
      Statements of Changes in Stockholders’ Equityfor
      the nine months ended March 31, 2005 (unaudited)
    5Consolidated
      Statements of Cash Flows for the ninemonths
      ended March 31, 2005 and 2004 (unaudited)
    6
      and 7Notes
      to Consolidated Financial Statements
    8
      to 12Item
      2.
    Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
    13 to 22Item
      3.
    Controls
      and Procedures
    23PART
      II.
    OTHER
      INFORMATIONItem
      1.
    Legal
      Proceedings
    24Item
      2.
    Unregistered
      Sales of Equity Securities and Use of Proceeds
    24Item
      3.
    Defaults
      Upon Senior Securities
    24Item
      4.
    Submission
      of Matters to a Vote of Security-Holders
    24Item
      5.
    Other
      Information
    25Item
      6.
    Exhibits
      and Reports on Form 8-K
    25Signatures
    
    25Exhibit
      31.1
    
    26Exhibit
      31.2
    
    27Exhibit
      32.1
    
    28




EAGLE BANCORP AND SUBSIDIARY


CONSOLIDATED
STATEMENTS OF FINANCIAL CONDITION





March
      31,
    
    June
      30,2005
    
    2004(Unaudited)
    
    (Audited)ASSETSCash
      and due from banks
    
    $
    2,731,654
    
    $
    3,587,145Interest-bearing
      deposits with banks
    
    
    114,290
    
    
    759,621Total
      cash and cash equivalents
    
    
    2,845,944
    
    
    4,346,766Investment
      securities available-for-sale,at
      market value
    
    
    77,464,006
    
    
    88,547,458Investment
      securities held-to-maturity,at
      amortized cost
    
    
    1,265,004
    
    
    1,565,692Federal
      Home Loan Bank stock, at cost
    
    
    1,315,400
    
    
    1,672,200Mortgage
      loans held-for-sale
    
    
    1,072,329
    
    
    1,436,747Loans
      receivable, net of deferred loan feesand
      allowance for loan losses
    
    
    99,409,881
    
    
    92,456,589Accrued
      interest and dividends receivable
    
    
    1,092,999
    
    
    1,079,815Mortgage
      servicing rights, net
    
    
    1,966,728
    
    
    2,003,258Property
      and equipment, net
    
    
    6,321,159
    
    
    6,557,883Cash
      surrender value of life insurance
    
    
    5,004,296
    
    
    2,476,842Real
      estate acquired in settlement of loans,net
      of allowance for losses
    
    
    -
    
    
    -Other
      assets
    
    
    433,289
    
    
    870,001Total
      assets
    
    $
    198,191,035
    
    $
    203,013,251







See
accompanying notes to consolidated financial statements.




-1-





EAGLE
BANCORP AND SUBSIDIARY


CONSOLIDATED
STATEMENTS OF FINANCIAL CONDITION


(Continued)




March
      31,
    
    June
      30,2005
    
    2004(Unaudited)
    
    (Audited)LIABILITIES
      AND STOCKHOLDERS' EQUITYLiabilities:Deposit
      accounts:Noninterest
      bearing
    
    $
    10,446,639
    
    $
    9,267,458Interest
      bearing
    
    
    160,349,425
    
    
    160,801,422Advances
      from Federal Home Loan Bank
    
    
    4,276,852
    
    
    7,450,000Accrued
      expenses and other liabilities
    
    
    1,596,642
    
    
    1,469,832Total
      liabilities
    
    
    176,669,558
    
    
    178,988,712Stockholders'
      Equity:Preferred
      stock (no par value, 1,000,000 sharesauthorized,
      none issued or outstanding)
    
    
    -
    
    
    -Common
      stock (par value $0.01 per share;9,000,000
      shares authorized; 1,223,572 sharesissued;
      1,103,972 and 1,212,372 outstanding atMarch
      31, 2005 and June 30, 2004, respectively)
    
    
    12,236
    
    
    12,236Additional
      paid-in capital
    
    
    4,161,278
    
    
    4,072,947Unallocated
      common stock held by employeestock
      ownership plan ("ESOP")
    
    
    (174,848
    )
    
    (202,448
    )Treasury
      stock, at cost (119,600 and 11,200 shares atMarch
      31, 2005 and June 30, 2004, respectively)
    
    
    (4,047,890
    )
    
    (198,665
    )Retained
      earnings
    
    
    22,341,619
    
    
    21,250,088Accumulated
      other comprehensive income (loss)
    
    
    (770,918
    )
    
    (909,619
    )Total
      stockholders' equity
    
    
    21,521,477
    
    
    24,024,539Total
      liabilities and stockholders' equity
    
    $
    198,191,035
    
    $
    203,013,251


See
accompanying notes to consolidated financial statements.




-2-





EAGLE
BANCORP AND SUBSIDIARY




QUARTERLY
CONSOLIDATED STATEMENTS OF INCOME





Three
      Months Ended
    
    Nine
      Months EndedMarch
      31,
    
    March
      31,2005
    
    2004
    
    2005
    
    2004(Unaudited)
    
    (Unaudited)Interest
      and Dividend Income:Interest
      and fees on loans
    
    $
    1,526,271
    
    $
    1,535,153
    
    $
    4,497,917
    
    $
    4,821,029Interest
      on deposits with banks
    
    
    4,420
    
    
    7,612
    
    
    29,158
    
    
    37,039FHLB
      Stock dividends
    
    
    6,250
    
    
    17,206
    
    
    27,215
    
    
    61,053Securities
      available-for-sale
    
    
    708,456
    
    
    802,101
    
    
    2,137,339
    
    
    2,068,928Securities
      held-to-maturity
    
    
    15,640
    
    
    21,567
    
    
    49,953
    
    
    71,173Total
      interest and dividend income
    
    
    2,261,037
    
    
    2,383,639
    
    
    6,741,582
    
    
    7,059,222Interest
      Expense:Deposits
    
    
    597,321
    
    
    610,833
    
    
    1,763,711
    
    
    2,052,755FHLB
      Advances
    
    
    31,423
    
    
    142,979
    
    
    124,580
    
    
    433,473Total
      interest expense
    
    
    628,744
    
    
    753,812
    
    
    1,888,291
    
    
    2,486,228Net
      Interest Income
    
    
    1,632,293
    
    
    1,629,827
    
    
    4,853,291
    
    
    4,572,994Loan
      loss provision
    
    
    -
    
    
    -
    
    
    -
    
    
    -Net
      interest income after loan loss provision
    
    
    1,632,293
    
    
    1,629,827
    
    
    4,853,291
    
    
    4,572,994Noninterest
      income:Net
      gain on sale of loans
    
    
    119,210
    
    
    195,440
    
    
    344,286
    
    
    1,001,983Demand
      deposit service charges
    
    
    126,733
    
    
    149,460
    
    
    410,649
    
    
    475,596Mortgage
      loan servicing fees
    
    
    157,784
    
    
    46,883
    
    
    493,499
    
    
    880,015Net
      gain on sale of available-for-sale securities
    
    
    (372
    )
    
    11,070
    
    
    9,399
    
    
    12,372Other
    
    
    144,579
    
    
    94,132
    
    
    344,858
    
    
    274,404Total
      noninterest income
    
    
    547,934
    
    
    496,985
    
    
    1,602,691
    
    
    2,644,370


See
accompanying notes to consolidated financial statements.




-3-





EAGLE
BANCORP AND SUBSIDIARY


QUARTERLY
CONSOLIDATED STATEMENTS OF INCOME


(Continued)




Three
      Months Ended
    
    Nine
      Months EndedMarch
      31,
    
    March
      31,2005
    
    2004
    
    2005
    
    2004(Unaudited)
    
    (Unaudited)Noninterest
      expense:Salaries
      and employee benefits
    
    
    868,151
    
    
    823,683
    
    
    2,484,386
    
    
    2,360,528Occupancy
      expenses
    
    
    130,093
    
    
    132,299
    
    
    378,210
    
    
    364,926Furniture
      and equipment depreciation
    
    
    76,959
    
    
    58,960
    
    
    234,869
    
    
    180,797In-house
      computer expense
    
    
    67,916
    
    
    63,339
    
    
    195,468
    
    
    179,391Advertising
      expense
    
    
    44,114
    
    
    32,716
    
    
    131,130
    
    
    106,943Amortization
      of mtg servicing fees
    
    
    87,103
    
    
    118,753
    
    
    276,229
    
    
    506,561Federal
      insurance premiums
    
    
    6,138
    
    
    6,607
    
    
    18,471
    
    
    19,401Postage
    
    
    28,072
    
    
    33,926
    
    
    76,327
    
    
    93,325Legal,
      accounting, and examination fees
    
    
    36,375
    
    
    45,425
    
    
    119,953
    
    
    117,368Consulting
      fees
    
    
    14,750
    
    
    1,200
    
    
    37,414
    
    
    12,540ATM
      processing
    
    
    12,260
    
    
    12,287
    
    
    35,742
    
    
    38,984Other
    
    
    187,324
    
    
    234,417
    
    
    628,314
    
    
    707,331Total
      noninterest expense
    
    
    1,559,255
    
    
    1,563,612
    
    
    4,616,513
    
    
    4,688,095Income
      before provision for income taxes
    
    
    620,972
    
    
    563,200
    
    
    1,839,469
    
    
    2,529,269Provision
      for income taxes
    
    
    176,396
    
    
    167,041
    
    
    466,556
    
    
    783,555Net
      income
    
    $
    444,576
    
    $
    396,159
    
    $
    1,372,913
    
    $
    1,745,714Basic
      earnings per share
    
    $
    0.40
    
    $
    0.33
    
    $
    1.20
    
    $
    1.48Diluted
      earnings per share
    
    $
    0.37
    
    $
    0.33
    
    $
    1.14
    
    $
    1.46Weighted
      average shares outstanding (basic eps)
    
    
    1,106,049
    
    
    1,186,202
    
    
    1,141,231
    
    
    1,182,624Weighted
      average shares outstanding (diluted eps)
    
    
    1,200,962
    
    
    1,196,362
    
    
    1,199,811
    
    
    1,195,210


See
accompanying notes to consolidated financial statements.




-4-





EAGLE
BANCORP AND SUBSIDIARY


CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY


For the
Nine Months Ended March 31, 2005


ACCUMULATEDADDITIONAL
    
    UNALLOCATED
    
    
    
    
    
    OTHERPREFERRED
    
    COMMON
    
    PAID-IN
    
    ESOP
    
    TREASURY
    
    RETAINED
    
    COMPREHENSIVESTOCK
    
    STOCK
    
    CAPITAL
    
    SHARES
    
    STOCK
    
    EARNINGS
    
    INCOME
    
    TOTALBalance,
      June 30, 2004
    
    $
    -
    
    $
    12,236
    
    $
    4,072,947
    
    $
    (202,448
    )
    $
    (198,665
    )
    $
    21,250,088
    
    $
    (909,619
    )
    $
    24,024,539Net
      income (unaudited)
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    1,372,913
    
    
    -
    
    
    1,372,913Other
      comprehensive income (unaudited)
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    138,701
    
    
    138,701Total
      comprehensive income (unaudited)
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    1,511,614Dividends
      paid ($.54 per share) (unaudited)
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    (281,382
    )
    
    -
    
    
    (281,382
    )Restricted
      stock plan shares allocated(4,600
      shares)(unaudited)
    
    
    -
    
    
    -
    
    
    (1,150
    )
    
    -
    
    
    54,050
    
    
    -
    
    
    -
    
    
    52,900Treasury
      stock purchased (22,000 shares @ $32.55)(33,500
      shares @ $34.55, 57,500 shares @$35.30)(unaudited)
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    (3,903,275
    )
    
    -
    
    
    -
    
    
    (3,903,275
    )ESOP
      shares allocated or committed to bereleased
      for allocation (3,450 shares)(unaudited)
    
    
    -
    
    
    -
    
    
    89,481
    
    
    27,600
    
    
    -
    
    
    -
    
    
    -
    
    
    117,081Balance,
      March 31, 2005 (unaudited)
    
    $
    -
    
    $
    12,236
    
    $
    4,161,278
    
    $
    (174,848
    )
    $
    (4,047,890
    )
    $
    22,341,619
    
    $
    (770,918
    )
    $
    21,521,477
 
 See
accompanying notes to consolidated financial statements.
  -5-
 
 EAGLE
BANCORP AND SUBSIDIARY


CONSOLIDATED
STATEMENTS OF CASH FLOWS




Nine
      Months EndedMarch
      31,2005
    
    2004(Unaudited)CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      income
    
    $
    1,372,913
    
    $
    1,745,714Adjustments
      to reconcile net income to net cashfrom
      operating activities:Provision
      for mortgage servicing rights valuation losses
    
    
    (60,348
    )
    
    (478,411
    )Depreciation
    
    
    382,350
    
    
    332,624Net
      amortization of marketable securities premiumand
      discounts
    
    
    1,026,655
    
    
    1,166,940Amortization
      of capitalized mortgage servicing rights
    
    
    276,229
    
    
    506,561Gain
      on sale of loans
    
    
    (344,286
    )
    
    (1,001,983
    )Gain
      on sale of real estate owned
    
    
    -
    
    
    (596
    )Net
      realized (gain) loss on sale of available-for-sale
    securities
    
    
    (9,376
    )
    
    (12,372
    )FHLB
      & other dividends reinvested
    
    
    (19,700
    )
    
    (96,895
    )Increase
      in cash surrender value of life insurance
    
    
    (127,454
    )
    
    (107,317
    )Restricted
      stock award
    
    
    52,900
    
    
    52,900Change
      in assets and liabilities:(Increase)
      decrease in assets:Accrued
      interest and dividends receivable
    
    
    (13,184
    )
    
    (282,835
    )Loans
      held-for-sale
    
    
    695,915
    
    
    6,919,026Other
      assets
    
    
    78,208
    
    
    94,847Increase
      (decrease) in liabilities:Accrued
      expenses and other liabilities
    
    
    522,209
    
    
    224,006Net
      cash provided by operating activities
    
    
    3,833,031
    
    
    9,062,209CASH
      FLOWS FROM INVESTING ACTIVITIES:Purchase
      of securities:Investment
      securities available-for-sale
    
    
    (7,679,187
    )
    
    (47,125,951
    )Proceeds
      from maturities, calls and principal payments:Investment
      securities held-to-maturity
    
    
    298,219
    
    
    597,147Investment
      securities available-for-sale
    
    
    14,285,100
    
    
    23,643,785Proceeds
      from sales of investment securities available-for-sale
    
    
    3,698,331
    
    
    6,679,310Proceeds
      from the sale of real estate acquired settlement of loans
    
    
    -
    
    
    70,606Purchase
      of bank owned life insurance
    
    
    (2,400,000
    )
    
    -


See
accompanying notes to consolidated financial statements.




-6-





EAGLE
BANCORP AND SUBSIDIARY


CONSOLIDATED
STATEMENTS OF CASH FLOWS


(Continued)


March
      31,2005
    
    2004(Unaudited)CASH
      FLOWS FROM INVESTING ACTIVITIES (CONTINUED):FHLB
      stock redeemed
    
    
    376,500
    
    
    -Net
      (increase) decrease in loan receivable, excludes transfersto
      real estate acquired in settlement of loans
    
    
    (7,136,569
    )
    
    3,922,403Purchase
      of property and equipment
    
    
    (145,626
    )
    
    (387,080
    )Net
      cash used in investing activities
    
    
    1,296,768
    
    
    (12,599,780
    )CASH
      FLOWS FROM FINANCING ACTIVITIES:Net
      increase in checking and savings accounts
    
    
    727,184
    
    
    1,878,739Net
      increase (decrease) in federal funds
    
    
    (350,000
    )
    
    -FHLB
      advances
    
    
    -
    
    
    1,050,000Payments
      on FHLB advances
    
    
    (2,823,148
    )
    
    (1,125,000
    )Sale
      (Purchase) of Treasury Stock
    
    
    (3,903,275
    )
    
    -Dividends
      paid
    
    
    (281,382
    )
    
    (270,150
    )Net
      cash provided by financing activities
    
    
    (6,630,621
    )
    
    1,533,589Net
      increase (decrease) in cash and cash equivalents
    
    
    (1,500,822
    )
    
    (2,003,982
    )CASH
      AND CASH EQUIVALENTS, beginning of period
    
    
    4,346,766
    
    
    10,230,043CASH
      AND CASH EQUIVALENTS, end of period
    
    $
    2,845,944
    
    $
    8,226,061SUPPLEMENTAL
      CASH FLOW INFORMATION:Cash
      paid during the period for interest
    
    $
    1,890,491
    
    $
    2,496,741Cash
      paid during the period for income taxes
    
    $
    183,000
    
    $
    442,650NON-CASH
      INVESTING ACTIVITIES:(Increase)
      decrease in market value of securities available-for-sale
    
    $
    (235,601
    )
    $
    (84,510
    )Mortgage
      servicing rights capitalized
    
    $
    179,351
    
    $
    568,112





See
accompanying notes to consolidated financial statements.




-7-





EAGLE BANCORP AND SUBSIDIARY


NOTES TO CONSOLDIATED FINANCIAL STATEMENTS
(UNAUDITED)


****


**NOTE
1.** **BASIS
OF PRESENTATION**





The
accompanying unaudited consolidated financial statements have been prepared in
accordance with instructions for Form 10-QSB. 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 three month and nine month periods ended March 31,
2005 are not necessarily indicative of the results to be expected for the fiscal
year ending June 30, 2005 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-KSB dated June 30, 2004.







-8-


EAGLE BANCORP AND SUBSIDIARY
NOTES TO CONSOLDIATED FINANCIAL STATEMENTS
(UNAUDITED)NOTE
      2. INVESTMENT SECURITIESInvestment
      securities are summarized as follows:March
      31, 2005 (Unaudited)
    
    June
      30, 2004 (Audited)GROSS
    
    
    
    
    
    GROSSAMORTIZED
    
    UNREALIZED
    
    FAIR
    
    AMORTIZED
    
    UNREALIZED
    
    FAIRCOST
    
    GAINS
      (LOSSES)
    
    VALUE
    
    COST
    
    GAINS
      (LOSSES)
    
    VALUE**Available-for-sale:**U.S.
      government andagency
      obligations
    
    $
    7,988,151
    
    $
    (118,391
    )
    $
    7,869,760
    
    $
    11,071,378
    
    $
    (159,926
    )
    $
    10,911,452Municipal
      obligations
    
    
    11,343,739
    
    
    (2,214
    )
    
    11,341,525
    
    
    9,267,086
    
    
    (194,580
    )
    
    9,072,506Corporate
      obligations
    
    
    17,133,996
    
    
    (396,743
    )
    
    16,737,253
    
    
    17,934,087
    
    
    (338,757
    )
    
    17,595,330Mortgage-backedsecurities
    
    
    12,498,619
    
    
    (129,580
    )
    
    12,369,039
    
    
    16,755,411
    
    
    (174,212
    )
    
    16,581,199Mutual
      Funds
    
    
    -
    
    
    -
    
    
    -
    
    
    99,693
    
    
    477
    
    
    100,170Collateralizedmortgage
      obligations
    
    
    27,944,054
    
    
    (407,249
    )
    
    27,536,805
    
    
    32,821,048
    
    
    (405,785
    )
    
    32,415,263Common
      stock
    
    
    -
    
    
    -
    
    
    -
    
    
    128,908
    
    
    (1,872
    )
    
    127,036Corporate
      preferredstock
    
    
    1,800,000
    
    
    (190,376
    )
    
    1,609,624
    
    
    1,950,000
    
    
    (205,498
    )
    
    1,744,502Total
    
    $
    78,708,559
    
    $
    (1,244,553
    )
    $
    77,464,006
    
    $
    90,027,611
    
    $
    (1,480,153
    )
    $
    88,547,458**Held-to-maturity:**Municipal
      obligations
    
    $
    829,382
    
    $
    33,639
    
    $
    863,021
    
    $
    930,422
    
    $
    35,999
    
    $
    966,421Mortgage-backedsecurities
    
    
    435,622
    
    
    13,916
    
    
    449,538
    
    
    635,270
    
    
    28,849
    
    
    664,119Total
    
    $
    1,265,004
    
    $
    47,555
    
    $
    1,312,559
    
    $
    1,565,692
    
    $
    64,848
    
    $
    1,630,540


-9-





EAGLE BANCORP AND SUBSIDIARY
 NOTES TO CONSOLDIATED FINANCIAL STATEMENTS
(UNAUDITED)


**NOTE
3.** **LOANS
RECEIVABLE**
 
 Loans
receivable consist of the following:
 
 March
      31,
    
    June
      30,2005
    
    2004(Unaudited)
    
    (Audited)First
      mortgage loans:Residential
      mortgage (1-4 family)
    
    $
    55,037,898
    
    $
    49,044,832Commercial
      real estate
    
    
    12,357,979
    
    
    9,336,336Real
      estate construction
    
    
    1,678,508
    
    
    5,101,591Other
      loans:Home
      equity
    
    
    15,551,587
    
    
    14,874,279Consumer
    
    
    10,607,216
    
    
    9,801,698Commercial
    
    
    4,697,723
    
    
    4,840,045Total
    
    
    99,930,911
    
    
    92,998,781Less:  
      Allowance for loan losses
    
    
    (577,764
    )
    
    (627,733
    )Deferred
      loan fees
    
    
    56,734
    
    
    85,541Total
    
    $
    99,409,881
    
    $
    92,456,589
 
 Loans net
of related allowance for loan losses on which the accrual of interest has been
discontinued were $569,000 and $497,000 at March 31, 2005 and June 30, 2004,
respectively. Classified assets, including real estate owned, totaled $875,000
and $924,000 at March 31, 2005 and June 30, 2004 respectively.
 
 The
following is a summary of changes in the allowance for loan losses:
  Nine
      Months Ended
    
    Year
      endedMarch
      31,
    
    June
      30,2005
    
    2004(Unaudited)
    
    (Audited)Balance,
      beginning of period
    
    $
    627,733
    
    $
    672,841Reclassification
      to repossessedproperty
      reserve
    
    
    (10,587
    )
    
    (8,671
    )Provision
      charged to operations
    
    
    -
    
    
    -Charge-offs
    
    
    (46,403
    )
    
    (45,431
    )Recoveries
    
    
    7,021
    
    
    8,994Balance,
      end of period
    
    $
    577,764
    
    $
    627,733
  -10-
 
 EAGLE BANCORP AND SUBSIDIARY
NOTES TO CONSOLDIATED FINANCIAL STATEMENTS
(UNAUDITED)
 
 **NOTE
4.** **DEPOSITS**
  Deposits
are summarized as follows:


March
      31,
    
    June
      30,2005
    
    2004(Unaudited)
    
    (Audited)Noninterest
      checking
    
    $
    10,446,639
    
    $
    9,267,458Interest-bearing
      checking
    
    
    29,284,211
    
    
    29,370,347Passbook
    
    
    26,517,724
    
    
    25,862,734Money
      market
    
    
    28,166,795
    
    
    30,332,871Time
      certificates of deposit
    
    
    76,380,695
    
    
    75,235,470Total
    
    $
    170,796,064
    
    $
    170,068,880
 **NOTE
5. E** **ARNINGS
PER SHARE**
  Basic
earnings per share for the three months ended March 31, 2005 is computed using
1,106,049 weighted average shares outstanding. Earnings per share for the nine
months ended March 31, 2005 is computed using 1,141,231 weighted average shares
outstanding. Basic earnings per share for the three months ended March 31, 2004
is computed using 1,186,202 weighted average shares outstanding. Earnings per
share for the nine months ended March 31, 2004 is computed using 1,182,624
weighted average shares outstanding. Diluted earnings per share is computed
using the treasury stock method by adjusting the number of shares outstanding by
the shares purchased. The weighted average shares outstanding for the diluted
earnings per share calculations are 1,200,962 for the three months ended March
31, 2005 and 1,199,811 for the nine months ended March 31, 2005. Diluted
earnings per share for the three months and nine months ended March 31, 2004 is
computed using 1,196,362 and 1,195,210 weighted average shares outstanding,
respectively.
  **NOTE
6.** **DIVIDENDS
AND STOCK REPURCHASE PROGRAM**
  This
fiscal year Eagle has paid three dividends of $0.18 per share, on August 27,
2004, November 19, 2004 and February 11, 2005. A dividend of $0.18 per share was
declared on April 21, 2005, payable May 20, 2005 to stockholders of record on
May 6, 2005. Eagle Financial MHC, Eagle’s mutual holding company, has waived the
receipt of dividends on its 648,493 shares.
 
 At their
regular meeting of January 20, 2005, the Company’s Board of Directors approved a
stock repurchase program for up to 57,500 shares. This represented approximately
11% of the outstanding common stock held by the public. The repurchased shares
will be held as treasury stock and will be held for general corporate purposes
and/or issuance pursuant to Eagle’s benefit plans. All shares were purchased
under this program on February 10, 2005.
 -11-
 EAGLE BANCORP AND SUBSIDIARY
NOTES TO CONSOLDIATED FINANCIAL STATEMENTS
(UNAUDITED)
  **NOTE
7.** **MORTGAGE
SERVICING RIGHTS**
  The Bank
allocates its total cost in mortgage loans between mortgage servicing rights and
loans, based upon their relative fair values, when loans are subsequently sold
or securitized, with the servicing rights retained. Fair values are generally
obtained from an independent third party. Impairment of mortgage servicing
rights is measured based upon the characteristics of the individual loans,
including note rate, term, underlying collateral, current market conditions, and
estimates of net servicing income. If the carrying value of the mortgage
servicing rights exceeds the estimated fair market value, a valuation allowance
is established for any decline, which is viewed to be temporary. Charges to the
valuation allowance are charged against or credited to mortgage servicing
income. Periodic independent valuations of the mortgage servicing rights are
performed. As a result of the most recent valuation, no temporary decline in the
fair value was determined to have occurred, and no valuation allowance has been
established. The following schedules show the activity in the mortgage servicing
rights and the valuation allowance.


Nine
      months
    
    Twelve
      monthsended
    
    endedMarch
      31,
    
    June
      30,2005
    
    2004(Unaudited)
    
    (Audited)Mortgage
      Servicing RightsBeginning
      balance
    
    $
    2,063,606
    
    $
    2,048,334Servicing
      rights capitalized
    
    
    179,351
    
    
    643,798Servicing
      rights amortized
    
    
    (276,229
    )
    
    (628,526
    )Ending
      balance
    
    
    1,966,728
    
    
    2,063,606Valuation
      AllowanceBeginning
      balance
    
    
    60,348
    
    
    756,720Provision
    
    
    (60,348
    )
    
    (696,372
    )Adjustments
    
    
    -
    
    
    -Ending
      balance
    
    
    -
    
    
    60,348Net
      Mortgage Servicing Rights
    
    $
    1,966,728
    
    $
    2,003,258


-12-





EAGLE
BANCORP AND SUBSIDIARY


MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL


CONDITION
AND RESULTS OF OPERATIONS




**Note
Regarding Forward-Looking Statements**




This
report contains certain “forward-looking statements.” Eagle Bancorp (“Eagle” or
the “Company”) desires to take advantage of the “safe harbor” provisions of the
Private Securities Litigation Reform Act of 1995 and is including this statement
for the express purpose of availing itself of the protections of the safe harbor
with respect to all such forward-looking statements. These forward-looking
statements, which are included in Management’s Discussion and Analysis, describe
future plans or strategies and include Eagle’s expectations of future financial
results. The words “believe,” “expect,” “anticipate,” “estimate,” “project,” and
similar expressions identify forward-looking statements. Eagle’s ability to
predict results or the effect of future plans or strategies or qualitative or
quantitative changes based on market risk is inherently uncertain. Factors which
could affect actual results but are not limited to include (i) change in general
market interest rates, (ii) general economic conditions, (iii) local economic
conditions, (iv) legislative/regulatory changes, (v) monetary and fiscal
policies of the U.S. Treasury and Federal Reserve, (vi) changes in the quality
or composition of Eagle’s loan and investment portfolios, (vii) demand for loan
products, (viii) deposit flows, (ix) competition, and (x) demand for financial
services in Eagle’s markets. These factors should be considered in evaluating
the forward-looking statements. You are cautioned not to place undue reliance on
these forward-looking statements which speak only as of their
dates.




**Overview**




The
Company’s primary activity is its ownership of its wholly owned subsidiary,
American Federal Savings Bank (the “Bank”). The Bank is a federally chartered
savings bank, engaging in typical banking activities: acquiring deposits from
local markets and investing in loans and investment securities. The Bank’s
primary component of earnings is its net interest margin (also called spread or
margin), the difference between interest income and interest expense. The net
interest margin is managed by management (through the pricing of its products
and by the types of products offered and kept in portfolio), and is affected by
moves in interest rates. Noninterest income in the form of fee income and gain
on sale of loans adds to the Bank’s income.





The Bank
has a strong mortgage lending focus, with the majority of its loans in
single-family residential mortgages. This has led to successfully marketing home
equity loans to its customers, as well as a wide range of shorter term consumer
loans for various personal needs (automobiles, recreational vehicles, etc.). In
recent years the Bank has focused on adding commercial loans to its portfolio,
both real estate and non-real estate. The purpose of this diversification is to
mitigate the Bank’s dependence on the mortgage market, as well as to improve its
ability to manage its spread. The Bank’s management recognizes the need for
sources of fee income to complement its margin, and the Bank now maintains a
significant loan servicing portfolio, which provides a steady source of fee
income. Gains on sale of loans also provide significant fee income in periods of
high mortgage loan origination volumes. Fee income is also supplemented with
fees generated from the Bank’s 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 do
not automatically reprice as interest rates rise, as do certificates of
deposit.





-13-







EAGLE
BANCORP AND SUBSIDIARY
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION
AND RESULTS OF OPERATIONS





**Overview
(continued)**





For the
past year, management’s focus has been on improving the Bank’s core earnings.
Core earnings can be described as income before taxes, with the exclusion of
gain on sale of loans and adjustments to the market value of the Bank’s loan
serviced portfolio. In the previous two fiscal years, the Bank experienced very
strong mortgage loan origination volume due to low interest rates and large
refinancing activity. If, as expected, interest rates rise, mortgage volume will
likely decrease (as has already been the case in the current fiscal year),
reducing this component of income. Management believes that the Bank will need
to focus on increasing net interest margin, other areas of fee income, and
controlling operating expenses to achieve earnings growth going forward.
Management’s strategy of growing the bank’s loan portfolio, reducing the
investment portfolio and growing the deposit base is expected to help achieve
these goals: loans typically earn higher rates of return than investments; a
larger deposit base will yield higher fee income; increasing the asset base will
reduce the relative impact of fixed operating costs.





The level
and movement of interest rates impacts the Bank’s earnings as well. In the past
year, the yield curve has flattened dramatically, i.e. short-term interest rates
have risen much more than long-term interest rates, with some long-term rates
actually declining in the past year. This can have a negative impact on the
Bank’s net interest margin as its deposits are typically priced relative to
short-term rates, while the majority of its loan products are priced relative to
long-term rates. The Bank has been able to partially offset this effect by
reinvesting investment proceeds in the loan portfolio, because as noted earlier,
loans typically earn higher rates of return than investments.





Another
factor which has impacted recent earnings has been the volatility in the value
of the Bank’s mortgage servicing rights. The value declined significantly in
fiscal year 2003, only to recover almost the entire amount in fiscal year 2004.
As short-term interest rates have risen over the last year, accompanied by the
expectation of increases in long-term interest rates, the value of the servicing
rights has risen to the point where no valuation allowance is required at the
present time. Comparisons of fiscal year 2005 to fiscal year 2004 will still be
affected by the large recovery of the valuation allowance that occurred in 2004.




**Financial
Condition**





Comparisons
in this section are between the nine months ended March 31, 2005 and June 30,
2004.





Total
assets decreased by $4.82 million, or 2.37%, to $198.19 million at March 31,
2005, from $203.01 million at June 30, 2004. Total liabilities decreased by
$2.32 million to $176.67 million at March 31, 2005, from $178.99 million at June
30, 2004. Total equity decreased $2.50 million to $21.52 million at March 31,
2005 from $24.02 million at June 30, 2004.





-14-





EAGLE
BANCORP AND SUBSIDIARY
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION
AND RESULTS OF OPERATIONS


**Financial
Condition (continued)**





Investment
securities available-for-sale (AFS) decreased $11.09 million, or 12.52%, to
$77.46 million at March 31, 2005 from $88.55 million at June 30, 2004. The
investment category with the largest decrease was collateralized mortgage
obligations, which decreased $4.88 million. Loans receivable increased $6.95
million, or 7.52%, to $99.41 million at March 31, 2005 from $92.46 million at
June 30, 2004. Most loan categories showed an increase. Construction loans
declined $3.42 million since June 30, 2004 due to completion of a large
commercial construction project, while single family mortgages increased $5.99
million in the same time period. Total loan originations were $62.08 million for
the nine months ended March 31, 2005, with single family mortgages (including
$3.23 million of construction loans) accounting for $41.73 million of the total.
Home equity and consumer loan originations totaled $7.46 million and $4.97
million, respectively, for the same period. Commercial real estate and land loan
originations totaled $5.56 million. Loans held for sale decreased to $1.07
million at March 31, 2005 from $1.44 million at June 30, 2004.





Advances
from the Federal Home Loan Bank of Seattle (FHLB) decreased $3.17 million, to
$4.28 million from $7.45 million, while deposits were up slightly. Noninterest
checking accounts and certificates of deposit showed the largest increases in
deposit accounts.





Total
equity declined as a result of $3.90 million in treasury stock purchased during
the period, earnings for the nine months of $1.37 million, a decrease in other
comprehensive loss of $139,000 (due to a reduction in net unrealized loss on
securities available-for-sale) and the payment of three quarterly $0.18 per
share regular cash dividends.




**Results
of Operations for the Three Months Ended March 31, 2005 and
2004**





*Net
Income.* Eagle’s
net income was $445,000 and $396,000 for the three months ended March 31, 2005,
and 2004, respectively. The increase of $49,000, or 12.37%, was primarily due to
an increase in noninterest income of $51,000, a decrease in noninterest expense
of $4,000, and an increase in net interest income of $3,000. Eagle’s tax
provision was $9,000 higher in the current quarter. Basic earnings per share
were $0.40 for the current period, compared to $0.33 for the previous year’s
period.





*Net
Interest Income.* Net
interest income increased $3,000 for the current quarter. Total interest and
dividend income decreased $122,000, which was offset by the decrease in interest
expense of $125,000.





*Interest
and Dividend Income.* Total
interest and dividend income was $2.261 million for the quarter ended March 31,
2005, compared to $2.383 million for the quarter ended March 31, 2004,
representing a decrease of $122,000, or 5.12%. Interest and fees on loans
decreased to $1.526 million for the three months ended March 31, 2005 from
$1.535 million for the same period ended March 31, 2004. This decrease of only
$9,000, or 0.59%, was due to the decline in the average




-15-


EAGLE
BANCORP AND SUBSIDIARY
 MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL
 CONDITION
AND RESULTS OF OPERATIONS


**Results
of Operations for the Three Months Ended March 31, 2005 and 2004
(continued)**





interest
rate earned on loans, partially offset by higher average balances. The average
interest rate earned on loans receivable decreased by 29 basis points, from
6.51% at March 31, 2004 to 6.22% at March 31, 2005. Average balances for loans
receivable, net, increased for the quarter ended March 31, 2005 to $98.13
million, compared to $94.34 million for the previous year. This represents an
increase of $3.79 million, or 4.02%. The categories with the largest increases
since last year are commercial real estate and residential mortgage loans.





Interest
and dividends on investment securities available-for-sale (AFS) decreased to
$708,000 for the quarter ended March 31, 2005 from $802,000 for the same quarter
last year. Average balances on investments decreased to $81.46 million for the
quarter ended March 31, 2005, compared to $91.38 million for the quarter ended
March 31, 2004. The average interest rate earned on investments dropped to 3.56%
from 3.61%. Interest on securities held-to-maturity (HTM) decreased from $22,000
to $16,000, as new purchases are placed in the AFS portfolio. Dividends on FHLB
stock decreased to $6,000 for the quarter ended March 31, 2005 from $17,000 for
the quarter ended March 31, 2004, due to the FHLB lowering their dividend rate.





*Interest
Expense.* Total
interest expense decreased to $629,000 for the quarter ended March 31, 2005,
from $754,000 for the quarter ended March 31, 2004, a decrease of $125,000, or
16.58%, primarily due to a decrease in interest paid on FHLB advances. A
decrease in the average balance of borrowings from the FHLB, as well as a
decrease in the average rate paid, resulted in a decrease in interest paid on
borrowings to $31,000 in the current quarter compared to $143,000 in the
previous year’s quarter. The Bank has paid off higher rate borrowings since
March 2004. Interest on deposits decreased to $598,000 for the quarter ended
March 31, 2005. This decrease of $13,000, or 2.13%, was the result of slight
decreases in average rates paid and average balances. Average balances in
interest-bearing deposit accounts decreased to $160.03 million for the quarter
ended March 31, 2005, compared to $160.91 million for the same quarter in the
previous year. The average rate paid on liabilities declined 24 basis points
from the quarter ended March 31, 2004 to the quarter ended March 31, 2005.





*Provision
for Loan Losses.* Provisions for loan losses are charged to earnings to maintain the total
allowance for loan losses at a level considered adequate by the Bank, to provide
for probable loan losses based on prior loss experience, volume and type of
lending conducted by the Bank, available peer group information, and past due
loans in portfolio. The Bank’s policies require the review of assets on a
quarterly basis. The Bank classifies loans as well as other assets if warranted.
While the Bank believes it uses the best information available to make a
determination with respect to the allowance for loan losses, it recognizes that
future adjustments may be necessary. No provision was made for loan losses for
either the quarter ended March 31, 2005 or the quarter ended March 31, 2004.
This is a reflection of the continued strong asset quality of the Bank’s loan
portfolio. Total classified assets decreased slightly from $924,000 at June 30,
2004 to $875,000 at March 31, 2005. The Bank currently has no foreclosed real
estate.




-16-
 
 
 EAGLE
BANCORP AND SUBSIDIARY


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




**Results
of Operations for the Three Months Ended March 31, 2005 and 2004
(continued)**





*Noninterest
Income.* Total
noninterest income increased to $548,000 for the quarter ended March 31, 2005,
from $497,000 for the quarter ended March 31, 2004, an increase of $51,000 or
10.26%. This was primarily due to increases in mortgage loan servicing fees and
“other” noninterest income, which more than offset a decline in net gain on sale
of loans. Mortgage loan origination volume is lower due principally to a decline
in mortgage loan refinancing activity. Mortgage loan servicing fees increased by
$111,000 due primarily to a decrease in the value of the Bank’s mortgage
servicing rights in last year’s quarter of $89,000. “Other” noninterest income
increased $50,000 from the previous year’s quarter due to increased income on
Bank Owned Life Insurance (BOLI) (additional BOLI was purchased in the quarter
ended December 31, 2004) and higher fee income on credit cards and ATM related
fees. Demand deposit service charges decreased $23,000 for the quarter ended
March 31, 2005 to $126,000 from $149,000 for the quarter ended March 31, 2004.
This was due to decreased income on overdraft fees.





*Noninterest
Expense.* Noninterest expense decreased by $4,000, or 0.26%, to $1.559 million for the
quarter ended March 31, 2005, from $1.563 million for the quarter ended March
31, 2004. This decrease was primarily due to decreases in “other” noninterest
expense of $47,000 and amortization of mortgage servicing fees of $32,000,
partially offset by increases in salaries and benefits (merit raises and higher
benefit costs) of $44,000 and furniture and equipment depreciation (new computer
equipment) of $18,000. The decrease in “other” noninterest expense was due to
decreases in several categories. The decrease in the amortization of mortgage
servicing fees was related to decreased prepayment activity on mortgage loans.
Other expense categories showed minor changes.





*Income
Tax Expense.* Eagle’s
income tax expense was $176,000 for the quarter ended March 31, 2005, compared
to $167,000 for the quarter ended March 31, 2004. The effective tax rate for the
quarter ended March 31, 2005 was 28.41% and was 29.66% for the quarter ended
March 31, 2004. Management expects Eagle’s effective tax rate to be
approximately 31%.


**Results
of Operations for the Nine Months Ended March 31, 2005 and
2004**





*Net
Income.* Eagle’s
net income was $1.373 million and $1.746 million for the nine months ended March
31, 2005 and 2004, respectively. The decrease of $373,000, or 21.36%, was
primarily due to a decrease in noninterest income of $1.042 million, offset by
an increase in net interest income of $280,000, and a decrease in noninterest
expense of $72,000. Eagle’s tax provision was $317,000 lower in the current nine
month period. Basic earnings per share were $1.20, compared to $1.48 per share
for the period ended March 31, 2004.





*Net
Interest Income.* Net
interest income increased to $4.853 million for the nine months ended March 31,
2005 from $4.573 million for the nine months ended March 31, 2004. This increase
of $280,000 was the result of a decrease in interest expense of $598,000,
partially offset by a decrease in interest and dividend income of
$318,000.




-17-


EAGLE
BANCORP AND SUBSIDIARY
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION
AND RESULTS OF OPERATIONS




**Results
of Operations for the Nine Months Ended March 31, 2005 and 2004
(continued)**





*Interest
and Dividend Income.* Total
interest and dividend income was $6.741 million for the nine months ended March
31, 2005, compared to $7.059 million for the same period ended March 31, 2004,
representing a decrease of $318,000, or 4.50%. Interest and fees on loans
decreased to $4.498 million for 2005 from $4.821 million for 2004. This decrease
of $323,000, or 6.70%, was due to a decline in the average interest rate earned
on loans. Average balances for loans receivable, net, declined less than 1%, to
$95.81 million, compared to $96.00 million for the previous year. The average
interest rate earned on loans receivable decreased by 44 basis points, to 6.26%
from 6.70%. Interest and dividends on securities available-for-sale (AFS)
increased to $2.137 million for the nine months ended March 31, 2005 from $2.069
million for the nine months ended March 31, 2004. Average balances on investment
securities actually decreased to $85.13 million for the nine months ended March
31, 2005 compared to $89.20 million for the same period ended March 31, 2004.
The average interest rate earned on investments increased 23 basis points, to
3.43% from 3.20%. As mentioned in the Overview section above, management is
reinvesting proceeds from investment principal payments into the loan portfolio,
which has caused the investment balances to decline. A slowdown in prepayment
activity on mortgage-backed securities and collateralized mortgage obligations
has slowed amortization of premiums, which has contributed to the higher average
yield on investments. Dividends on FHLB stock decreased to $27,000 for the nine
months ended March 31, 2005 from $61,000 for the nine months ended March 31,
2004 due to the lower dividend rate.





*Interest
Expense.* Total
interest expense decreased to $1.888 million for the nine months ended March 31,
2005 from $2.486 million for the nine months ended March 31, 2004, a decrease of
$598,000, or 24.05%. Interest on deposits decreased to $1.764 million for the
nine months ended March 31, 2005 from $2.053 million for the nine months ended
March 31, 2004. This decrease of $289,000, or 14.08%, was the result of a
decrease in average rates paid on deposit accounts and a decline in average
balances in deposit accounts. Average rates paid on all interest-bearing
deposits declined from 2004 to 2005 with the average rate paid on all
liabilities dropping by 41 basis points from the nine month period ended March
31, 2004 to the nine month period ended March 31, 2005. Average balances in
interest-bearing deposits decreased to $160.87 million for the nine month period
ended March 31, 2005 compared to $162.69 million for the same period in the
previous year. Interest paid on borrowings decreased to $124,000 for the nine
months ended March 31, 2005 from $433,000 for the same period ended March 31,
2004. The decrease in borrowing costs was due to decreases in both the average
rate paid and the average balance of Federal Home Loan Bank
advances.





*Provision
for Loan Losses.* Provisions for loan losses are charged to earnings to maintain the total
allowance for loan losses at a level considered adequate by the Bank, to provide
for probable loan losses based on prior loss experience, volume and type of
lending conducted by the Bank, available peer group information, and past due
loans in portfolio. The Bank’s policies require the review of assets on a
quarterly basis. The Bank classifies loans as well as other assets if warranted.
While the Bank believes it uses the best information available to make a
determination with respect to the allowance for loan losses, it recognizes that
future adjustments may be necessary. No provision was made for loan losses for
either of the nine month periods ended March 31, 2005 or March 31, 2004.




-18-





EAGLE
BANCORP AND SUBSIDIARY
 MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL
 CONDITION
AND RESULTS OF OPERATIONS




**Results
of Operations for the Nine Months Ended March 31, 2005 and 2004
(continued)**





This is a
reflection of the continued strong asset quality of the Bank’s loan portfolio.
Total classified assets decreased to $875,000 at March 31, 2005 from $924,000 at
June 30, 2004. The Bank currently has no foreclosed property.





*Noninterest
Income.* Total
noninterest income decreased to $1.602 million for the nine months ended March
31, 2005, from $2.644 million for the nine months ended March 31, 2004, a
decrease of $1.042 million, or 39.41%. This was primarily due to the significant
decline in net gain on sale of loans and to larger increases in the value of the
Bank’s mortgage servicing rights in the previous year’s period. Net gain on sale
of loans declined to $344,000 for the nine months ended March 31, 2005, compared
to $1.002 million for the same period ended March 31, 2004. This decrease was
due to a decline in mortgage originations, caused by a slowdown in mortgage
refinance activity. Mortgage loan servicing fees declined to $493,000 in 2005
from $880,000 in 2004. In the nine month period ended March 31, 2004, the value
of the Bank’s mortgage servicing rights increased by $478,000. In the current
nine month period, the value of the mortgage servicing rights increased by
$60,000. Demand deposit service charges decreased to $411,000 for the nine month
period ended March 31, 2005 from $476,000 for the same period ended March 31,
2004. This was due to decreased income on overdraft charges. “Other” noninterest
income increased to $345,000 for the nine month period ended March 31, 2005 from
$274,000 for the same period a year ago, primarily due to increased income on
Bank Owned Life Insurance and credit card and ATM related fees.





*Noninterest
Expense.* Noninterest expense decreased by $72,000, or 1.54%, to $4.616 million for the
nine months ended March 31, 2005, from $4.688 million for the nine months ended
March 31, 2004. This decrease was primarily due to decreases in the amortization
of mortgage servicing fees of $230,000 and “other” noninterest expense of
$79,000. The decrease in amortization of mortgage servicing fees was related to
decreased prepayment activity on mortgage loans for the nine month period. The
decrease in “other” noninterest expense was due to decreases in several
categories. Salaries and benefit expenses increased $124,000 due to merit
increases and to a reduction in the amount of salaries capitalized for SFAS 91
(as loan originations decline, the amount of capitalized salary expense
declines, thereby increasing salary expense). Furniture and equipment
depreciation expense increased $54,000 due to the purchase of new computer
equipment for check imaging. Other categories of noninterest expense showed
modest changes.





*Income
Tax Expense.* Eagle’s
income tax expense was $467,000 for the nine months ended March 31, 2005,
compared to $784,000 for the nine months ended March 31, 2004. The effective tax
rate for the nine months ended March 31, 2005 was 25.36% and was 30.98% for the
nine months ended March 31, 2004.





-19-





EAGLE
BANCORP AND SUBSIDIARY
 MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL
 CONDITION
AND RESULTS OF OPERATIONS





**Liquidity,
Interest Rate Sensitivity and Capital Resources**





The
Company’s subsidiary, American Federal Savings Bank (the Bank), is required to
maintain minimum levels of liquid assets as defined by the Office of Thrift
Supervision (OTS) regulations. The OTS has eliminated the statutory requirement
based upon a percentage of deposits and short-term borrowings. The OTS states
that the liquidity requirement is retained for safety and soundness purposes,
and that appropriate levels of liquidity will depend upon the types of
activities in which the company engages. For internal reporting purposes, the
Bank uses the previous regulatory definitions of liquidity. The Bank’s average
liquidity ratio was 15.21% and 24.07% for the one month periods ended March 31,
2005 and March 31, 2004, respectively. Liquidity decreased due to decreased
investment balances and the pledging of certain securities as collateral for
FHLB borrowings.





The
Bank’s primary sources of funds are deposits, repayment of loans and
mortgage-backed securities, maturities of investments, funds provided from
operations, and advances from the Federal Home Loan Bank of Seattle. 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 Bank uses
liquidity resources principally to fund existing and future loan commitments. It
also uses them to fund maturing certificates of deposit, demand deposit
withdrawals and to invest in other loans and investments, maintain liquidity,
and meet operating expenses.





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 commitments
to make loans and management’s assessment of the bank’s ability to generate
funds.





At
December 31, 2004 (the most recent report available), the Bank’s measure of
sensitivity to interest rate movements, as measured by the OTS, improved
slightly from the previous quarter. The Bank’s capital ratio as measured by the
OTS increased during the same period. The Bank is well within the guidelines set
forth by the Board of Directors for interest rate risk sensitivity.





As of
March 31, 2005, the Bank’s regulatory capital was in excess of all applicable
regulatory requirements. At March 31, 2005, the Bank’s tangible, core, and
risk-based capital ratios amounted to 12.06%, 12.06%, and 18.40%, respectively,
compared to regulatory requirements of 1.5%, 3.0%, and 8.0%, respectively. See
the following table (amounts in thousands):




-20-





EAGLE
BANCORP AND SUBSIDIARY


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





**Liquidity,
Interest Rate Sensitivity and Capital Resources
(continued)**


At
      March 31, 2005For
      CapitalAdequacyDollar
    
    PurposesAmount
    
    %
      of AssetsTangible
      capital:Capital
      level
    
    $
    24,319
    
    
    12.06
    %Requirement
    
    
    3,025
    
    
    1.50Excess
    
    $
    21,294
    
    
    10.56
    %Core
      capital:Capital
      level
    
    $
    24,319
    
    
    12.06
    %Requirement
    
    
    6,050
    
    
    3.00Excess
    
    $
    18,269
    
    
    9.06
    %Risk-based
      capital:Capital
      level
    
    $
    24,879
    
    
    18.40
    %Requirement
    
    
    10,817
    
    
    8.00Excess
    
    $
    14,062
    
    
    10.45
    %


**Impact
of Inflation and Changing Prices**





Our
financial statements and the accompanying notes 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.




**Application
of Critical Accounting Policies**





There are
a number of accounting estimates performed by the Company in preparing its
financial statements. Some of the estimates are developed internally, while
others are obtained from independent third parties. Examples of estimates using
external sources are the fair market value of investment securities, fair value
of mortgage servicing rights, deferred compensation, and appraised value of
foreclosed properties. It is management’s assertion that the external sources
have access to resources, methodologies, and markets that provide adequate
assurances that no material impact would occur due to changes in assumptions.
The following accounting estimates are performed internally:




-21-




EAGLE
BANCORP AND SUBSIDIARY
 MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL
 CONDITION
AND RESULTS OF OPERATIONS


**Application
of Critical Accounting Policies (continued)**





*Allowance
for Loan and Lease Losses (ALLL) –* Management applies its knowledge of current local economic and real estate
market conditions, historical experience, loan portfolio composition, and the
assessment of delinquent borrowers’ situations, to determine the adequacy of its
ALLL reserve. These factors are reviewed by the Bank’s federal banking regulator
and the Company’s external auditors on a regular basis. The current level of the
ALLL reserve is deemed to be more than adequate given the above factors, with no
material impact expected due to a difference in the assumptions.





*Deferred
Loan Fees* *–*
Management applies time study and statistical analysis to determine loan
origination costs to be capitalized under FAS 91. The analysis is reviewed by
the Company’s external auditors for reasonableness. No material impact is
expected if different assumptions are used, as many of our loans have a short
duration.





*Deferred
Tax Assets* *–*
Management expects to realize the deferred tax assets due to the continue
profitability of the Company.





*Fair
Value of Other Financial Instruments* *–*
Management uses an internal model to determine fair value for its loan portfolio
and certificates of deposit. The assumptions entail spreads over the Treasury
yield curve at appropriate maturity benchmarks. Assumptions incorporating
different spreads would naturally deliver varying results, however due to
short-term nature of the loan portfolio and certificates of deposit, changes in
the results would be mitigated. Currently, the fair value is only presented as
footnote information, and changes due to new assumptions would not, in
management’s opinion, affect the reader’s opinion of the Company’s financial
condition.





*Economic
Life of Fixed Assets* *–*
Management determines the useful life of its buildings, furniture, and equipment
for depreciation purposes. These estimates are reviewed by the Company’s
external auditors for reasonableness. No material impact is expected if
different assumptions were to be used.




-22-





EAGLE
BANCORP AND SUBSIDIARY
EAGLE
BANCORP AND SUBSIDIARY
CONTROLS
AND PROCEDURES


Based on
their evaluation, the company’s Chief Executive Officer, Larry A. Dreyer, and
Chief Financial Officer, Peter J. Johnson, have concluded the company’s
disclosure controls and procedures are effective as of March 31, 2004 to ensure
that information required to be disclosed in the reports that the company files
or submits under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commission’s rules and forms. During the last fiscal quarter, there
have been no significant changes in the company’s internal control over
financial reporting that have materially affected, or are reasonably likely to
materially affect, the company’s internal control over financial
reporting.





-23-





EAGLE
BANCORP AND
SUBSIDIARY




**Part
II - OTHER INFORMATION**





Item 1. Legal
Proceedings.





Neither
the Company nor the Bank is involved in any pending legal proceedings  other
than non-material legal proceedings occurring in the ordinary course of
business.





Item
2.  Unregistered
Sales of Equity Securities and Use of Proceeds.




c.)  Small
Business Issuer Purchases of Equity Securities.




Total
      Number
    
    Maximumof
      Shares
    
    Number
      ofPurchased
    
    Shares
      thatTotal
    
    
    
    as
      Part of
    
    May
      Yet BeNumber
      of
    
    Average
    
    Publicly
    
    PurchasedShares
    
    Price
      Paid
    
    Announced
      Plans
    
    Under
      the PlansPeriod
    
    Purchased*
    
    Per
      Share
    
    or
      Programs
    
    or
      ProgramsJanuary
      2005
    
    
    None
    
    
    N/A
    
    
    N/A1-1-05
      to1-31-05February
      2005
    
    
    57,500
    
    
    $35.30
    
    
    57,500
    
    
    -2-1-05
      to2-28-05March
      2005
    
    
    None
    
    
    N/A
    
    
    N/A3-1-05
      to3-31-05Total
    
    
    57,500
    
    
    $35.30
    
    
    57,500
    
    
    -




*The
Company publicly announced a stock repurchase program on January 20, 2005. The
Company is authorized to acquire up to 57,500 shares of common stock with the
price subject to market conditions. The purchases in February 2005 completed the
program.





Item
3.  Defaults
Upon Senior Securities.





Not
applicable.





Item
4.  Submission
of Matters to a Vote of Security Holders.





Not
applicable.




-24-





EAGLE
BANCORP AND SUBSIDIARY





**Part
II - OTHER INFORMATION (CONTINUED)**








Item
5.  Other
Information.





None.





Item 6.
Exhibits.





31.1
Certification by Larry A. Dreyer, Chief Executive Officer, pursuant to Rule
13a-  14(a)
under the Securities Exchange Act of 1934, as adopted pursuant to Section 302
(a)  of the
Sarbanes-Oxley Act of 2002.





31.2
Certification by Peter J. Johnson, Chief Financial Officer, pursuant to Rule
13a-  14(a)
under the Securities Exchange Act of 1934, as adopted pursuant to Section 302
(a)  of the
Sarbanes-Oxley Act of 2002.





32.1
Certification by Larry A. Dreyer, Chief Executive Officer, and Peter J. Johnson,  Chief
Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to  Section
906 of the Sarbanes-Oxley Act of 2002.





a.)
    Reports
      on Form 8-K
 
 On January 20, 2005, the registrant furnished under Item
      2.02 of Form 8-K a press release announcing its earnings for the second
      quarter of the 2005 fiscal year, and under Item 8.01 an announcement of a
      stock buyback program of 57,500 shares.







**SIGNATURES**





In
accordance with the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.





EAGLE
  BANCORPDate: May 12, 2005
    By:
    /s/ Larry A. DreyerLarry A. DreyerPresident/CEO
 Date: May 12, 2005
    By:
    /s/ Peter J. JohnsonPeter J. JohnsonSr.
VP/CFO




-25-