**UNITED
        STATES**
 **SECURITIES
        AND EXCHANGE COMMISSION**
 **WASHINGTON,
        D.C. 20549**
 
 **FORM
        10-Q**
  x
              QUARTERLY
                  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
                  OF
                  1934
  For
                  the quarterly period ended September 30,
                  2008
   ̈
              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 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
  Check
        whether the issuer (1) filed all reports to be filed by Section 13 or 15(d)
        of
        the Exchange Act during the past 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  ̈
 
 Indicate
        by a 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 ̈
              Accelerated
                  filer ̈Non-accelerated
                  filer ̈
              Smaller
                  reporting companyx(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  ̈ No x
  **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
              1,075,312
                  shares outstanding
 As
        of
        November 10, 2008
  
  EAGLE
        BANCORP AND SUBSIDIARY
 
 TABLE
        OF
        CONTENTS
 
 PAGEPART
                  I.
              FINANCIAL
                  INFORMATIONItem
                  1.
              Financial
                  StatementsConsolidated
                  Statements of Financial Condition as of September 30, 2008 (unaudited)
                  and
                  June 30, 2008
              1
                  and 2Consolidated
                  Statements of Income for the three months ended September 30, 2008
                  and
                  2007 (unaudited)
              3
                  and 4Consolidated
                  Statements of Changes in Stockholders' Equity for the three months
                  ended
                  September 30, 2008 and September 30, 2007(unaudited)
              5Consolidated
                  Statements of Cash Flows for the three months ended September 30,
                  2008 and
                  2007 (unaudited)
              6
                  and 7Notes
                  to Consolidated Financial Statements
              8
                  to 15Item
                  2.
              Management's
                  Discussion and Analysis of Financial Condition or Plan of
                  Operations
              16
                  to 20Item
                  3.
              Quantitative
                  and Qualitative Disclosures About Market Risk
              21Item
                  4.
              Controls
                  and Procedures
              22PART
                  II.
              OTHER
                  INFORMATIONItem
                  1.
              Legal
                  Proceedings
              23Item
                  1A.
              Risk
                  Factors
              23Item
                  2.
              Unregistered
                  Sales of Equity Securities and Use of Proceeds
              23Item
                  3.
              Defaults
                  Upon Senior Securities
              23Item
                  4.
              Submission
                  of Matters to a Vote of Security-Holders
              24Item
                  5.
              Other
                  Information
              24Item
                  6.
              Exhibits
              24Signatures
              
              25Exhibit
                  31.1Exhibit
                  31.2Exhibit
                  32.1
  
 
 EAGLE
        BANCORP AND SUBSIDIARY
 
 CONSOLIDATED
        STATEMENTS OF FINANCIAL CONDITION
 (Dollars
        in Thousands, Except for Per Share Data)
 
 September 30,
              
              June 30,2008
              
              2008(Unaudited)
              
              (Audited)ASSETSCash
                  and due from banks
              
              $
              2,380
              
              $
              3,541Interest-bearing
                  deposits with banks
              
              
              1,807
              
              
              549549Total
                  cash and cash equivalents
              
              
              4,187
              
              
              4,090Preferred
                  stock - SFAS 159, at market value
              
              
              82
              
              
              1,321Securities
                  available-for-sale, at market value
              
              
              77,278
              
              
              78,417Securities
                  held-to-maturity, at cost (fair value approximates $399 at September
                  30,
                  2008 and
                $708
                  at June 30, 2008)
              
              
              389
              
              
              697Investment
                  in Eagle Bancorp Statutory Trust I
              
              
              155
              
              
              155Federal
                  Home Loan Bank stock, at cost
              
              
              1,881
              
              
              1,715Mortgage
                  loans held-for-sale
              
              
              1,239
              
              
              7,370Loans
                    receivable, net of deferred loan fees and allowance for loan
                    losses
                    of  $300 at September 30, 2008 and $300 at June 30,
                    2008
              
              
              179,125
              
              
              168,149Accrued
                  interest and dividends receivable
              
              
              1,494
              
              
              1,426Mortgage
                  servicing rights, net
              
              
              1,661
              
              
              1,652Premises
                  and equipment, net
              
              
              9,097
              
              
              8,080Cash
                  surrender value of life insurance
              
              
              6,346
              
              
              6,285Other
                  assets
              
              
              1,102
              
              
              550Total
                  assets
              
              $
              284,036
              
              $
              279,907
 
 See
        accompanying notes to consolidated financial statements.
  -
            1
            -
  EAGLE
        BANCORP AND SUBSIDIARY
 
 CONSOLIDATED
        STATEMENTS OF FINANCIAL CONDITION (Continued)
 (Dollars
        in Thousands, Except for Per Share Data)
 
 September 30,
              
              June 30,2008
              
              2008(Unaudited)
              
              (Audited)LIABILITIES AND
                  STOCKHOLDERS' EQUITYLiabilities:Deposit
                  accounts:Noninterest
                  bearing
              
              $
              15,178
              
              $
              14,617Interest
                  bearing
              
              
              167,917
              
              
              164,234Federal
                  funds purchased
              
              
              -
              
              
              3,000Advances
                  from Federal Home Loan Bank and other borrowings
              
              
              68,919
              
              
              65,222Subordinated
                  debentures
              
              
              5,155
              
              
              5,155Accrued
                  expenses and other liabilities
              
              
              2,696
              
              
              2,045Total
                  liabilities
              
              
              259,865
              
              
              254,273Stockholders'
                  Equity:Preferred
                  stock (no par value, 1,000,000 shares authorized, none issued or
                  outstanding)
              
              
              -
              
              
              -Common
                  stock (par value $0.01 per share; 9,000,000 shares authorized;
                  1,223,572
                  shares issued; 1,075,312 and 1,076,072 outstanding at September
                  30, 2008
                  and June 30, 2008, respectively)
              
              
              12
              
              
              12Additional
                  paid-in capital
              
              
              4,508
              
              
              4,487Unallocated
                  common stock held by employee stock ownership plan
                  ("ESOP")
              
              
              (46
              )
              
              (55
              )Treasury
                  stock, at cost (148,260 and 147,500 shares at September 30, 2008
                  andJune
                  30, 2008, respectively
              
              
              (5,034
              )
              
              (5,013
              )Retained
                  earnings
              
              
              26,687
              
              
              27,025Accumulated
                  other comprehensive loss
              
              
              (1,956
              )
              
              (822
              )Total
                  stockholders' equity
              
              
              24,171
              
              
              25,634Total
                  liabilities and stockholders' equity
              
              $
              284,036
              
              $
              279,907
  See
        accompanying notes to consolidated financial statements.
  -
            2
            -
  EAGLE
        BANCORP AND SUBSIDIARY
 
 QUARTERLY
        CONSOLIDATED STATEMENTS OF INCOME
 (Dollars
        in Thousands, Except for Per Share Data)
 
 Three Months EndedSeptember 30,2008
              
              2007(Unaudited)Interest
                  and Dividend Income:Interest
                  and fees on loans
              
              $
              2,837
              
              $
              2,668Interest
                  on deposits with banks
              
              
              4
              
              
              7Securities
                  held-to-maturity
              
              
              5
              
              
              9Securities
                  available-for-sale
              
              
              963
              
              
              722FHLB
                  dividends
              
              
              7
              
              
              2Total
                  interest and dividend income
              
              
              3,816
              
              
              3,408Interest
                  Expense:Deposits
              
              
              862
              
              
              1,185FHLB
                  advances and other borrowings
              
              
              643
              
              
              439Subordinated
                  debentures
              
              
              75
              
              
              75Total
                  interest expense
              
              
              1,580
              
              
              1,699Net
                  interest income
              
              
              2,236
              
              
              1,709Loan
                  loss provision
              
              
              -
              
              
              -Net
                  interest income after loan loss provision
              
              
              2,236
              
              
              1,709Noninterest
                  income:Net
                  gain on sale of loans
              
              
              183
              
              
              199Service
                  charges on deposit accounts
              
              
              190
              
              
              166Mortgage
                  loan servicing fees
              
              
              140
              
              
              133Net
                  gain on sale of available-for-sale securities
              
              
              57
              
              
              -Net
                  loss on preferred stock - SFAS 159
              
              
              (1,239
              )
              
              (41
              )Other
              
              
              165
              
              
              127Total
                  noninterest income
              
              
              (504
              )
              
              584
 
 See
        accompanying notes to consolidated financial statements.
  -
            3
            -
  EAGLE
        BANCORP AND SUBSIDIARY
 
 QUARTERLY
        CONSOLIDATED STATEMENTS OF INCOME (Continued)
 (Dollars
        in Thousands, Except for Per Share Data)
 
 Three Months EndedSeptember 30,2008
              
              2007(Unaudited)Noninterest
                  expense:Salaries
                  and employee benefits
              
              
              1,046
              
              
              946Occupancy
                  expenses
              
              
              149
              
              
              135Furniture
                  and equipment depreciation
              
              
              67
              
              
              71In-house
                  computer expense
              
              
              73
              
              
              74Advertising
                  expense
              
              
              91
              
              
              63Amortization
                  of mortgage servicing fees
              
              
              71
              
              
              66Federal
                  insurance premiums
              
              
              7
              
              
              5Postage
              
              
              33
              
              
              23Legal,
                  accounting, and examination fees
              
              
              48
              
              
              56Consulting
                  fees
              
              
              43
              
              
              15ATM
                  processing
              
              
              14
              
              
              14Other
              
              
              207
              
              
              200Total
                  noninterest expense
              
              
              1,849
              
              
              1,668(Loss)
                  income before provision for income taxes
              
              
              (117
              )
              
              625(Benefit)
                  provision for income taxes
              
              
              (17
              )
              
              161Net
                  (Loss) income
              
              $
              (100
              )
              $
              464Basic
                  (loss) earnings per share
              
              $
              (0.09
              )
              $
              0.43Diluted
                  (loss) earnings per share
              
              $
              (0.08
              )
              $
              0.38Weighted
                  average shares outstanding (basic eps)
              
              
              1,069,211
              
              
              1,072,441Weighted
                  average shares outstanding (diluted eps)
              
              
              1,217,058
              
              
              1,212,458
 
 See
        accompanying notes to consolidated financial statements.
  -
            4
            -
 
 EAGLE
        BANCORP AND SUBSIDIARY
 
 QUARTERLY
        CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
 For
        the
        Three Months Ended September 30, 2008 and 2007
 (Dollars
        in Thousands, Except for Per Share Data)
 
 ACCUMULATEDADDITIONAL
              
              UNALLOCATED
              
              
              
              
              
              OTHERPREFERRED
              
              COMMON
              
              PAID-IN
              
              ESOP
              
              TREASURY
              
              RETAINED
              
              COMPREHENSIVESTOCK
              
              STOCK
              
              CAPITAL
              
              SHARES
              
              STOCK
              
              EARNINGS
              
              INCOME
              
              TOTALBalance,
                  June 30, 2007
              
              $
              -
              
              $
              12
              
              $
              4,387
              
              $
              (92
              )
              $
              (4,759
              )
              $
              25,448
              
              $
              (908
              )
              $
              24,088Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              464
              
              
              -
              
              
              464Other
                  comprehensive income
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              556
              
              
              556Total
                  comprehensive income
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (1,020
              )Dividends
                  paid ($.24 per share)
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (105
              )
              
              -
              
              
              (105
              )Treasury
                  stock purchased ; (1,250 shares @ $33.00)
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (42
              )
              
              -
              
              
              -
              
              
              (42
              )FAS
                  159 Adjustment
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (103
              )
              
              
              
              
              (103
              )ESOP
                  shares allocated or committed to be released for allocation (1,150
                  shares)
              
              
              -
              
              
              -
              
              
              27
              
              
              10
              
              
              -
              
              
              -
              
              
              -
              
              
              37Balance,
                  September 30, 2007
              
              $
              -
              
              $
              12
              
              $
              4,414
              
              $
              (82
              )
              $
              (4,801
              )
              $
              25,704
              
              $
              (352
              )
              $
              24,895Balance,
                  June 30, 2008
              
              $
              -
              
              $
              12
              
              $
              4,487
              
              $
              (55
              )
              $
              (5,013
              )
              $
              27,025
              
              $
              (822
              )
              $
              25,634Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (100
              )
              
              -
              
              
              (100
              )Other
                  comprehensive income
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (1,134
              )
              
              (1,134
              )Total
                  comprehensive income
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (1,234
              )Dividends
                  paid ($.255 per share)
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (109
              )
              
              -
              
              
              (109
              )Treasury
                  stock purchased ; (760 shares @ $27.00)
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (21
              )
              
              -
              
              
              -
              
              
              (21
              )EITF
                  No. 06-4 & 06-10
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (129
              )
              
              
              
              
              (129
              )ESOP
                  shares allocated or committed to be released for allocation (1,150
                  shares)
              
              
              -
              
              
              -
              
              
              21
              
              
              9
              
              
              -
              
              
              -
              
              
              -
              
              
              30Balance,
                  September 30, 2008
              
              $
              -
              
              $
              12
              
              $
              4,508
              
              $
              (46
              )
              $
              (5,034
              )
              $
              26,687
              
              $
              (1,956
              )
              $
              24,171
  See
        accompanying notes to consolidated financial statements.
  -
            5
            -
 
 EAGLE
        BANCORP AND SUBSIDIARY
 
 CONSOLIDATED
        STATEMENTS OF CASH FLOWS
 (Dollars
        in Thousands, Except for Per Share Data)
 
 Three Months EndedSeptember 30,2008
              
              2007(Unaudited)CASH
                  FLOWS FROM OPERATING ACTIVITIES:Net
                  (loss) income
              
              $
              (100
              )
              $
              464Adjustments
                  to reconcile net income to net cash from operating
                  activities:Loan
                  loss provision
              
              
              -Provision
                  for mortgage servicing rights valuation losses
              
              
              -Depreciation
              
              
              112
              
              
              116Net
                  amortization of marketable securities premium and
                  discounts
              
              
              50
              
              
              64Amortization
                  of capitalized mortgage servicing rights
              
              
              71
              
              
              66Gain
                  on sale of loans
              
              
              (183
              )
              
              (199
              )Loss
                  on sale of real estate owned
              
              
              -
              
              
              -Net
                  realized loss (gain) on sale of available-for-sale
                  securities
              
              
              (57
              )
              
              -Increase
                  in cash surrender value of life insurance
              
              
              (60
              )
              
              (49
              )Loss
                  on preferred stock - SFAS 159
              
              
              1,239
              
              
              41Change
                  in assets and liabilities:(Increase)
                  decrease in assets:Accrued
                  interest and dividends receivable
              
              
              (67
              )
              
              (3
              )Loans
                  held-for-sale
              
              
              6,131
              
              
              (1,327
              )Other
                  assets
              
              
              (552
              )
              
              210Increase
                  (decrease) in liabilities:Accrued
                  expenses and other liabilities
              
              
              1,038
              
              
              372Net
                  cash provided by (used in) operating activities
              
              
              7,622
              
              
              (245
              )CASH
                  FLOWS FROM INVESTING ACTIVITIES:Purchase
                  of securities:Investment
                  securities available-for-sale
              
              
              (8,152
              )
              
              (1,858
              )Proceeds
                  from maturities, calls and principal payments:Investment
                  securities held-to-maturity
              
              
              308
              
              
              173Investment
                  securities available-for-sale
              
              
              3,649
              
              
              4,168Proceeds
                  from sales of investment securities available-for-sale
              
              
              4,062
              
              
              -FHLB
                  stock (purchased) redeemed
              
              
              (166
              )
              
              -Net
                  increase in loans receivable, excludes transfers to real estate
                  acquired
                  in settlement of loans
              
              
              (10,908
              )
              
              (3,886
              )Purchase
                  of property and equipment
              
              
              (1,128
              )
              
              (91
              )Net
                  cash used in investing activities
              
              
              (12,335
              )
              
              (1,494
              )
 
 See
        accompanying notes to consolidated financial statements.
  -
            6
            -
  EAGLE
        BANCORP AND SUBSIDIARY
 
 CONSOLIDATED
        STATEMENTS OF CASH FLOWS (Continued)
 (Dollars
        in Thousands, Except for Per Share Data)
 
 Three Months EndedSeptember 30,2008
              
              2007(Unaudited)CASH
                  FLOWS FROM FINANCING ACTIVITIES:Net
                  (decrease) increase in checking and savings accounts
              
              $
              $4,244
              
              $
              $1,836Net
                  decrease in federal funds
              
              
              (3,000
              )
              
              (3,800
              )Payments
                  on FHLB advances and other borrowings
              
              
              (5,917
              )
              
              (5,000
              )FHLB
                  advances and other borrowings
              
              
              9,613
              
              
              9,000Purchase
                  of treasury stock
              
              
              (21
              )
              
              (42
              )Dividends
                  paid
              
              
              (109
              )
              
              (105
              )Net
                  cash provided by financing activities
              
              
              4,810
              
              
              1,889Net
                  increase in cash and cash equivalents
              
              
              97
              
              
              150CASH
                  AND CASH EQUIVALENTS, beginning of period
              
              
              4,090
              
              
              3,069CASH
                  AND CASH EQUIVALENTS, end of period
              
              $
              4,187
              
              $
              3,219SUPPLEMENTAL
                  CASH FLOW INFORMATION:Cash
                  paid during the period for interest
              
              $
              1,562
              
              $
              1,640Cash
                  paid during the period for income taxes
              
              $
              321
              
              $
              109NON-CASH
                  INVESTING ACTIVITIES:Decrease
                  (increase) in market value of securities
                  available-for-sale
              
              $
              1,587
              
              $
              (708
              )Mortgage
                  servicing rights capitalized
              
              $
              80
              
              $
              83
  See
        accompanying notes to consolidated financial statements.
  -
            7
            -
 
 EAGLE
        BANCORP AND SUBSIDIARY
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 
 **NOTE
        1.**  **BASIS
        OF PRESENTATION**
 
 The
        accompanying unaudited consolidated financial statements have been prepared
        in
        accordance with instructions for Form 10-Q. 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 period ended September 30, 2008
        are
        not necessarily indicative of the results to be expected for the fiscal year
        ending June 30, 2009 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, 2008.
 
 **NOTE
        2.**  **INVESTMENT
        SECURITIES**
 
 Investment
        securities are summarized as follows:
 (Dollars
        in thousands)
 
 September 30, 2008
              
              June 30, 2008AMORTIZED
                COST
              
              GROSS
                UNREALIZED
                GAINS/
                (LOSSES)
              
              FAIR
                VALUE
              
              AMORTIZED
                COST
              
              GROSS
                UNREALIZED
                GAINS/
                (LOSSES)
              
              FAIR
                VALUE**Available-for-sale:**U.S.
                  government and agency obligations
              
              $
              2,217
              
              $
              (10
              )
              $
              2,207
              
              $
              2,242
              
              $
              (10
              )
              $
              2,232Municipal
                  obligations
              
              
              23,096
              
              
              (1,527
              )
              
              21,569
              
              
              22,790
              
              
              (699
              )
              
              22,190Corporate
                  obligations
              
              
              12,802
              
              
              (1,026
              )
              
              11,776
              
              
              12,811
              
              
              (89
              )
              
              12,722Mortgage-backed
                  securities
              
              
              10,174
              
              
              95
              
              
              10,269
              
              
              13,135
              
              
              (119
              )
              
              13,016Collateralized
                  mortgage obligations
              
              
              31,796
              
              
              (339
              )
              
              31,457
              
              
              28580
              
              
              (356
              )
              
              28,224Common
                  stock
              
              
              -
              
              
              -
              
              
              -
              
              
              82
              
              
              (49
              )
              
              33Total
              
              $
              80,085
              
              $
              (2,807
              )
              $
              77,278
              
              $
              79,640
              
              $
              (1,233
              )
              $
              78,417**Held-to-maturity:**Municipal
                  obligations
              
              $
              375
              
              $
              10
              
              $
              385
              
              $
              675
              
              $
              11
              
              $
              686Mortgage-backed
                  securities
              
              
              14
              
              
              -
              
              
              14
              
              
              22
              
              
              -
              
              
              22Total
              
              $
              389
              
              $
              10
              
              $
              399
              
              $
              697
              
              $
              11
              
              $
              708
 
 Beginning
        July 1, 2007 the Company elected to account for its preferred stock under
        SFAS
        No. 159 *Fair
        Value Option for Financial Assets and Financial Liabilities* ,
        which
        allows an entity the irrevocable option to elect fair value for the initial
        and
        subsequent measurement for certain financial assets and liabilities on a
        contract-by-contract basis. Subsequent changes in fair value of these assets
        are
        recognized in earnings when incurred. The market value of preferred stock
        was
        $82,000 and $1,321,000 at September 30, 2008, and June 30, 2008, respectively,
        resulting in a loss in value of $1,239,000 for the three month period ended
        September 30, 2008 and is included in noninterest income.
  -
            8
            -
 
 EAGLE
        BANCORP AND SUBSIDIARY
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 
 **NOTE
        3.**  **LOANS
        RECEIVABLE**
 
 Loans
        receivable consist of the following:
 
 September 30,
              
              June 30,2008
              
              2008(Unaudited)
              
              (Audited)*(Dollars in Thousands)*First mortgage
                  loans:Residential
                  mortgage (1-4 family)
              
              $
              90,038
              
              $
              86,751Commercial
                  real estate
              
              
              33,442
              
              
              28,197Real
                  estate construction
              
              
              7,080
              
              
              7,317Other
                  loans:Home
                  equity
              
              
              29,433
              
              
              28,034Consumer
              
              
              12,884
              
              
              11,558Commercial
              
              
              6,463
              
              
              6,502Total
              
              
              179,340
              
              
              168,359Less:
                  Allowance for loan losses
              
              
              (300
              )
              
              (300
              )Add:
                  Deferred loan fees, net
              
              
              85
              
              
              90Total
              
              $
              179,125
              
              $
              168,149
  Loans,
        net of related allowance for loan losses, on which the accrual of interest
        has
        been discontinued were $13 and $0 at September 30, 2008 and June 30, 2008,
        respectively. Classified assets, including real estate owned, totaled $148
        and
        $106 at September 30, 2008 and June 30, 2008, respectively.
 
 The
        following is a summary of changes in the allowance for loan losses:
 
 Three Months
                Ended
              
              Year EndedSeptember 30,
              
              June 30,2008
              
              2008(Unaudited)
              
              (Audited)*(Dollars in Thousands)*Balance, beginning of period
              
              $
              300
              
              $
              518Reclassification
                  to repossessed property reserve
              
              
              (3
              )
              
              -Provision
                  charged to operations
              
              
              -
              
              
              (175
              )Charge-offs
              
              
              -
              
              
              (54
              )Recoveries
              
              
              3
              
              
              11Balance,
                  end of period
              
              $
              300
              
              $
              300
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            9
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EAGLE
        BANCORP AND SUBSIDIARY
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)




**NOTE
      4.**  **DEPOSITS**




Deposits
      are summarized as follows:





September 30,
            
            June
                30,2008
            
            2008(Unaudited)
            
            (Audited)*(Dollars
                in Thousands)*Noninterest
                checking
            
            $
            15,178
            
            $
            14,617Interest-bearing
                checking
            
            
            32,611
            
            
            30,720Passbook
            
            
            23,609
            
            
            23,906Money
                market
            
            
            26,190
            
            
            25,275Time
                certificates of deposit
            
            
            85,507
            
            
            84,333Total
            
            $
            183,095
            
            $
            178,851




**NOTE
      5.**  **EARNINGS
      PER SHARE**





Basic
      earnings per share for the three months ended September 30, 2008 is computed
      using 1,069,211 weighted average shares outstanding. Basic earnings per share
      for the three months ended September 30, 2007 is computed using 1,072,411
      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 1,217,058 for the three months ended
      September 30, 2008 and 1,212,458 for the three months ended September 30, 2007.





**NOTE
      6.**  **DIVIDENDS
      AND STOCK REPURCHASE PROGRAM**




This
      fiscal year Eagle has paid a dividend of $0.255 per share on August 22, 2008.
      A
      dividend of $0.255 per share was declared on October 16, 2008, payable November
      21, 2008 to stockholders of record on October 31, 2008. 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 17, 2008, the Company’s Board of Directors announced
      a stock repurchase program for up to 28,750 shares. This represented
      approximately 6.7% 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. 4,510
      shares have been purchased under this program.


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          10
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EAGLE
        BANCORP AND SUBSIDIARY
 NOTES
        TO
        CONSOLIDATED 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.


(Dollar
      amounts in thousands)





September
                30,
            
            June
                30,2008
            
            2008(Unaudited)
            
            (Audited)*(Dollars
                in Thousands)*Mortgage
                Servicing RightsBeginning
                balance
            
            $
            1,652
            
            $
            1,628Servicing
                rights capitalized
            
            
            80
            
            
            337Servicing
                rights amortized
            
            
            (71
            )
            
            (313
            )Ending
                balance
            
            
            1,661
            
            
            1,652Valuation
                AllowanceBeginning
                balance
            
            
            -
            
            
            -Provision
            
            
            (-
            )
            
            (-
            )Adjustments
            
            
            -
            
            
            -Ending
                balance
            
            
            -
            
            
            -Net
                Mortgage Servicing Rights
            
            $
            1,661
            
            $
            1,652





**NOTE
      8. FAIR VALUE DISCLOSURES**





SFAS
      157
      defines fair value as the price that would be received to sell an asset or
      paid
      to transfer a liability in an orderly transaction between market participants.
      A
      fair value measurement assumes that the transaction to sell the asset or
      transfer the liability occurs in the principal market for the asset or liability
      or, in the absence of a principal market, the most advantageous market for
      the
      asset or liability. The price in the principal (or most advantageous) market
      used to measure the fair value of the asset or liability shall not be adjusted
      for transaction costs. An orderly transaction is a transaction that assumes
      exposure to the market for a period prior to the measurement date to allow
      for
      marketing activities that are usual and customary for transactions involving
      such assets and liabilities; it is not a forced transaction. Market participants
      are buyers and sellers in the principal market that are (i) independent,
      (ii) knowledgeable, (iii) able to transact and (iv) willing to
      transact.





SFAS
      157
      requires the use of valuation techniques that are consistent with the market
      approach, the income approach and/or the cost approach. The market approach
      uses
      prices and other relevant information generated by market transactions involving
      identical or comparable assets and liabilities. The income approach uses
      valuation techniques to convert future amounts, such as cash flows or earnings,
      to a single present amount on a discounted basis. The cost approach is based
      on
      the amount that currently would be required to replace the service capacity
      of
      an asset (replacement costs). Valuation techniques should be consistently
      applied. Inputs to valuation techniques refer to the assumptions that market
      participants would use in pricing the asset or liability. Inputs may be
      observable, meaning those that reflect the assumptions market participants
      would
      use in pricing the asset or liability developed based on market data obtained
      from independent sources, or unobservable, meaning those that reflect the
      reporting entity’s own assumptions about the assumptions market participants
      would use in pricing the asset or liability developed based on the best
      information available in the circumstances. In that regard, SFAS 157 establishes
      a fair value hierarchy for valuation inputs that gives the highest priority
      to
      quoted prices in active markets for identical assets or liabilities and the
      lowest priority to unobservable inputs. The fair value hierarchy is as
      follows:


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          BANCORP AND SUBSIDIARY
 NOTES
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          CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)




**NOTE
      8. FAIR VALUE DISCLOSURES - continued**





·
            Level
                1 Inputs - Unadjusted quoted prices in active markets for identical
                assets
                or liabilities that the reporting entity has the ability to access
                at the
                measurement date.





·
            Level
                2 Inputs - Inputs other than quoted prices included in Level 1 that
                are
                observable for the asset or liability, either directly or indirectly.
                These include quoted prices for similar assets or liabilities in
                active
                markets, quoted prices for identical or similar assets or liabilities
                in
                markets that are not active, inputs other than quoted prices that
                are
                observable for the asset or liability (for example, interest rates,
                volatilities, prepayment speeds, loss severities, credit risks and
                default
                rates) or inputs that are derived principally from or corroborated
                by
                observable market data by correlation or other
                means.





·
            Level
                3 Inputs - Significant unobservable inputs that reflect an entity’s own
                assumptions that market participants would use in pricing the assets
                or
                liabilities.





A
      description of the valuation methodologies used for assets and liabilities
      measured at fair value, as well as the general classification of such
      instruments pursuant to the valuation hierarchy, is set forth
      below.


In
      general, fair value is based upon quoted market prices, where available. If
      such
      quoted market prices are not available, fair value is based upon internally
      developed models that primarily use, as inputs, observable market-based
      parameters. Valuation adjustments may be made to ensure that financial
      instruments are recorded at fair value.





While
      management believes the Company’s valuation methodologies are appropriate and
      consistent with other market participants, the use of different methodologies
      or
      assumptions to determine the fair value of certain financial instruments could
      result in a different estimate of fair value at the reporting date.





Investment
      Securities Available for Sale - Securities classified as available for sale
      are
      reported at fair value utilizing Level 1 and Level 2 inputs. For these
      securities, the Company obtains fair value measurements from an independent
      pricing service. The fair value measurements consider observable data that
      may
      include dealer quotes, market spreads, cash flows, the U. S. Treasury yield
      curve, live trading levels, trade execution data, market consensus prepayments
      speeds, credit information and the bond’s terms and conditions, among other
      things.





Preferred
      Stock - SFAS 159 - Freddie Mac and Fannie Mae preferred stock are reported
      at
      fair value utilizing Level 1 and Level 2 inputs. For these securities, the
      Company obtains fair value measurements from an independent pricing service.
      The
      fair value measurements consider observable data that may include dealer quotes,
      market spreads, cash flows, the U. S. Treasury yield curve, live trading levels,
      trade execution data, market consensus prepayments speeds, credit information
      and the bond’s terms and conditions, among other things.





Mortgage
      Servicing Rights - These assets are reported at the lower of cost or fair value.
      Fair values are estimated by stratifying the mortgage serving portfolio into
      groups of loans with similar financial characteristics, such as loan type,
      interest rate, and expected maturity. The Company obtains market survey data
      estimates and bid quotations from secondary market investors who regularly
      purchase mortgage servicing rights. Assumptions regarding loan payoffs are
      determined using historical information on segmented loan categories for
      nonspecific borrowers.





Loans
      Held for Sale - These loans are reported at fair value. Fair value is determined
      based on expected proceeds based on sales contracts and commitments and are
      considered Level 2 inputs.





Real
      Estate Owned - These assets are reported at the lower of the loan carrying
      amount at foreclosure or fair value. Fair value is based on third party or
      internally developed appraisals considering the assumptions in the valuation
      and
      is considered Level 2 or Level 3 inputs.





Impaired
      Loans - Impaired loans are reported at the fair value of the underlying
      collateral if repayment is expected solely from the collateral. Collateral
      values are estimated using Level 3 inputs based on internally customized
      discounting criteria.





The
      following table summarizes financial assets and financial liabilities measured
      at fair value on a recurring basis as of September 30, 2008, segregated by
      the level of the valuation inputs within the fair value hierarchy utilized
      to
      measure fair value (dollars in thousands):


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          12
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EAGLE
        BANCORP AND SUBSIDIARY
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


**NOTE
      8. FAIR VALUE DISCLOSURES - continued**





Level
                1
            
            Level
                2
            
            Level
                3
            
            Total
                FairInputs
            
            Inputs
            
            Inputs
            
            ValueInvestment
                securities available for sale
            
            $
            -
            
            $
            77,278
            
            $
            -
            
            $
            77,278Preferred
                stock - SFAS 159
            
            
            -
            
            
            82
            
            
            -
            
            
            82Mortgage
                servicing rights
            
            
            -
            
            
            2,026
            
            
            -
            
            
            2,026Loans
                held for sale
            
            
            -
            
            
            1,239
            
            
            -
            
            
            1,239Real
                estate owned
            
            
            -
            
            
            -
            
            
            -
            
            
            -Impaired
                loans
            
            
            -
            
            
            -
            
            
            -
            
            
            -





Certain
      financial assets and financial liabilities are measured at fair value on a
      nonrecurring basis, that is, the instruments are not measured at fair value
      on
      an ongoing basis but are subject to fair value adjustments in certain
      circumstances (for example, when there is evidence of impairment). Financial
      assets and financial liabilities measured at fair value on a non-recurring
      basis
      were not significant at September 30, 2008.





**NOTE
      9. RECENTLY ISSUED PRONOUNCEMENTS**





In
      September 2006, the FASB's Emerging Issues Task Force issued EITF Issue No
      06-4,
      "Accounting for Deferred Compensation and Postretirement Benefit Aspects of
      Endorsement Split Dollar Life Insurance Arrangements" ("EITF 06-4"). EITF 06-4
      requires the recognition of a liability related to the postretirement benefits
      covered by an endorsement split-dollar life insurance arrangement. The consensus
      highlights that the employer (who is also the policyholder) has a liability
      for
      the benefit it is providing to its employee. As such, if the policyholder has
      agreed to maintain the insurance policy in force for the employee's benefit
      during his or her retirement, then the liability recognized during the
      employee's active service period should be based on the future cost of insurance
      to be incurred during the employee's retirement.





Alternatively,
      if the policy holder has agreed to provide the employee with a death benefit,
      then the liability for the future death benefit should be recognized by
      following the guidance in SFAS No. 106 or Accounting Principles Board (APB)
      Opinion No. 12, as appropriate. For transition, an entity can choose to apply
      the guidance using either of the following approaches: (a) a change in
      accounting principle through retrospective application to all periods presented
      or (b) a change in accounting principle through a cumulative-effect adjustment
      to the balance in retained earnings at the beginning of the year of adoption.
      The disclosures are required in fiscal years beginning after December 15, 2007,
      with early adoption permitted.





In
      March
      2007, the FASB ratified Emerging Issues Task Force Issue No. 06-10 "Accounting
      for Collateral Assignment Split-Dollar Life Insurance Agreements" ("EITF
      06-10"). EITF 06-10 provides guidance for determining a liability for the
      postretirement benefit obligation as well as recognition and measurement of
      the
      associated asset on the basis of the terms of the collateral assignment
      agreement. EITF 06-10 is effective for fiscal years beginning after December
      15,
      2007.





The
      Company assessed the impact of EITF 06-4 and EITF 06-10 on its consolidated
      financial position and results of operations and during the quarter ended
      September 30, 2008 recorded a $129,000 liability and reduced retained earnings
      by the same amount.





In
      September 2006, the FASB issued SFAS No. 157, *Fair
      Value Measurements.* SFAS
      No.
      157 establishes a framework for measuring fair value and expands disclosures
      about fair value measurements. SFAS No. 157 clarifies the definition of exchange
      price as the price between market participants in an orderly transaction to
      sell
      an asset or transfer a liability in the market in which the reporting entity
      would transact for the asset or liability, that is, the principal or most
      advantageous market for the asset or liability. The changes to current practice
      resulting from the application of this statement relate to the definition of
      fair value, the methods used to measure fair value, and the expanded disclosures
      about fair value measurements. SFAS No. 157 is effective for fiscal years
      beginning after November 15, 2007 and interim periods within those fiscal years.
      The Company adopted SFAS No. 157 on July 1, 2008 and the adoption did not have
      a
      material effect on its financial position, results of operations or cash flows.
      (See Note 8.)




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          13
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EAGLE
        BANCORP AND SUBSIDIARY
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


**NOTE
      9. RECENTLY ISSUED PRONOUNCEMENTS - continued**





On
      September 7, 2006, the Task Force reached a conclusion on Emerging Issues Task
      Force No. 06-5, "Accounting for Purchases of Life Insurance - Determining the
      Amount That Could Be Realized in Accordance with FASB Technical Bulletin No.
      85-4, Accounting for Purchases of Life Insurance" ("EITF 06-5"). The scope
      of
      EITF 06-5 consists of six separate issues relating to accounting for life
      insurance policies purchases by entities protecting against the loss of "key
      persons." The six issues are clarifications of previously issued guidance on
      FASB Technical Bulleting No. 85-4. EITF 06-5 is effective for fiscal years
      beginning after December 15, 2006. The adoption of EITF 06-5 did not have a
      material impact on the Company's consolidated financial statements.





In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option
      for Financial Assets and Financial Liabilities”, which permits entities to
      choose to measure many financial instruments and certain other items at fair
      value. The objective of the new pronouncement is to improve financial reporting
      by providing companies with the opportunity to mitigate volatility in reported
      earnings caused by measuring related assets and liabilities differently without
      having to apply complex hedge accounting provisions. SFAS No. 159 is
      effective for the Bank July 1, 2007. See Note 2 for information on the impact
      of
      the adoption of this statement.





In
      November 2007, the Securities and Exchange Commission issued Staff Accounting
      Bulletin No. 109, “Written Loan Commitments Recorded at Fair Value Through
      Earnings” (SAB 109). SAB No. 109 supersedes SAB 105, “Application of Accounting
      Principles to Loan Commitments,” and indicates that the expected net future cash
      flows related to the associated servicing of the loan should be included in
      the
      measurement of all written loan commitments that are accounted for at fair
      value
      through earnings. The guidance in SAB 109 is applied on a prospective basis
      to
      derivative loan commitments issued or modified in fiscal quarters beginning
      after December 15, 2007. SAB 109 is not expected to have a material impact
      on
      the Company’s financial position, results of operations or cash flows.





In
      December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
      Consolidated Financial Statements” - an amendment of ARB No. 51. SFAS No. 160
      (a) amends ARB 51 to establish accounting and reporting standards for the
      noncontrolling interest in a subsidiary and the deconsolidation of a subsidiary;
      (b) changes the way the consolidated income statement is presented; (c)
      establishes a single method of accounting for changes in a parent company’s
      ownership interest in a subsidiary that do not result in deconsolidation; (d)
      requires that a parent recognize a gain or loss in net income when a subsidiary
      is deconsolidated; and (e) requires expanded disclosures in the consolidated
      financial statements that clearly identify and distinguish between the interests
      of the parent company’s owners and the interests of the noncontrolling owners of
      a subsidiary. SFAS No. 160 must be applied prospectively but to apply the
      presentation and disclosure requirements must be applied retrospectively to
      provide comparability in the financial statements. Early adoption is prohibited.
      SFAS No. 160 is effective for fiscal years, and interim periods within those
      fiscal years, beginning on or after December 15, 2008. The Company is in the
      process of determining the impact of adopting this new accounting principle
      on
      its consolidated financial position, results of operations and cash
      flows.





In
      December 2007, the FASB issued SFAS No. 141(R), “Business Combinations-a
      replacement of FASB No. 141.” SFAS No. 141(R) requires (a) a company to
      recognize the assets acquired, the liabilities assumed, and any noncontrolling
      interest in the acquiree at fair value as of the acquisition date; and (b)
      an
      acquirer in preacquisition periods to expense all acquisition-related costs.
      SFAS No. 141(R) requires that any adjustments to an acquired entity’s deferred
      tax asset and liability balance that occur after the measurement period be
      recorded as a component of income tax expense. This accounting treatment is
      required for business combinations consummated before the effective date of
      SFAS
      No. 141(R) (non-prospective) otherwise SFAS No. 141(R) must be applied
      prospectively. The presentation and disclosure requirements must be applied
      retrospectively to provide comparability in the financial statements. Early
      adoption is prohibited. SFAS No. 141(R) is effective for fiscal years, and
      interim periods within those fiscal years, beginning on or after December 15,
      2008. SFAS No. 141(R) is expected to have a significant impact on accounting
      for
      business combinations closing on or after January 1, 2009.





In
      March
      2008, the FASB issued SFAS No. 161, “ *Disclosures
      about Derivative Instruments and Hedging Activities—an amendment of FASB
      Statement No. 133”* (“SFAS
      No. 161”). SFAS No. 161 changes the disclosure requirements for derivative
      instruments and hedging activities. Entities are required to provide enhanced
      disclosures about (a) how and why an entity uses derivative instruments, (b)
      how
      derivative instruments and related hedged items are accounted for under
      Statement 133 and its related interpretations, and (c) how derivative
      instruments and related hedged items affect an entity’s financial position,
      financial performance, and cash flows. The guidance in SFAS No. 161 is effective
      for financial statements issued for fiscal years and interim periods beginning
      after November 15, 2008, with early application encouraged. This Statement
      encourages, but does not require, comparative disclosures for earlier periods
      at
      initial adoption. The Company is currently assessing the impact of SFAS No.
      161.


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          BANCORP AND SUBSIDIARY
 NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)




**NOTE
      9. RECENTLY ISSUED PRONOUNCEMENTS - continued**





In
      May
      2008, the FASB issued SFAS No. 162, “ *The
      Hierarchy of Generally Accepted Accounting Principles”* (“SFAS
      No. 162”). SFAS No. 162 identifies the sources of accounting principles and the
      framework for selecting the principles used in the preparation of financial
      statements that are presented in conformity with generally accepted accounting
      principles. SFAS No. 162 is effective 60 days following approval by the
      Securities and Exchange Commission of the Public Company Accounting Oversight
      Board’s amendments to AU Section 411, “ *The
      Meaning of Present Fairly in Conformity with Generally Accepted Accounting
      Principles* .”
The
      adoption of SFAS No. 162 will not affect the consolidated financial
      statements.


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          15
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EAGLE
      BANCORP AND SUBSIDIARY


MANAGEMENT
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF
      OPERATION


**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 serviced portfolio, which provides a steady source of fee
      income. The gain on sale of loans also provides 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.




For
      the
      past three years, 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. Management believes that the Bank will need to
      continue to focus on increasing net interest margin, other areas of fee income,
      and control operating expenses to achieve earnings growth going forward.
      Management’s strategy of growing the bank’s loan portfolio and 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 biggest challenge to the strategy is funding the growth of the Bank’s
      balance sheet in an efficient manner. Deposit growth will be difficult to
      maintain due to fierce competition and wholesale funding (which is usually
      more
      expensive than retail deposits) will likely be needed to supplement
      it.





The
      level
      and movement of interest rates impacts the Bank’s earnings as well. The Federal
      Reserve’s Federal Open Market Committee (FOMC) did not change the federal funds
      target rate during the quarter ended September 30, 2008. As such it ended at
      2.00%. However, they did lower it by 50 basis points on October 8, 2008 and
      again on October 29, 2008 making a new federal funds target rate of 1.00%.
      As a
      result short-term interest rates fell resulting in a more upward sloping yield
      curve. If this continues, the Bank’s funding costs are likely to decrease and
      provide for a larger 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 continued to reinvest investment
      proceeds in the loan portfolio, because as noted earlier, loans typically earn
      higher rates of return than investments. Additionally, many of the Bank’s
      investments which mature in the coming year are at low (below current market)
      interest rates, affording an opportunity to reinvest the proceeds at the current
      higher rates and increasing interest income in the coming
      quarters.


-
          16
          -


EAGLE
        BANCORP AND SUBSIDIARY
 MANAGEMENT
        DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF
        OPERATION




**Financial
      Condition**





Comparisons
      in this section are for the three month period ended September 30,
      2008.





Total
      assets increased by $4.13 million, or 1.48%, to $284.06 million at September
      30,
      2008, from $279.91 million at June 30, 2008. Total liabilities increased by
      $5.60 million to $259.87 million at September 30, 2008, from $254.27 million
      at
      June 30, 2008. Total equity decreased $1.46 million to $24.17 million at
      September 30, 2008 from $25.63 million at June 30, 2008.





Loans
      receivable increased $10.98 million, or 6.53%, to $179.13 million at September
      30, 2008 from $168.15 million at June 30, 2008. Commercial Real Estate loans
      were the loan category with the largest increase, $5.25 million, while real
      estate construction loans decreased $237,000. Most other loan categories showed
      modest increases. Total loan originations were $36.71 million for the three
      months ended September 30, 2008, with single family mortgages accounting for
      $17 **.** 98
      million of the total. Home equity and construction loan originations totaled
      $4.86 million and $1.93 million, respectively, for the same period. Commercial
      real estate and land loan originations totaled $9.04 million. Loans
      held-for-sale decreased to $1.24 million at September 30, 2008 from $7.37
      million at June 30, 2008.





Deposits
      grew $4.24 million, or 2.37%, to $183.10 million at September 30, 2008 from
      $178.85 million at June 30, 2008. Growth in certificates of deposit and
      non-interest checking, interest-bearing checking accounts, and money market
      accounts contributed to the increase in deposits. Statement savings accounts
      declined. As stated above in the Overview section, deposit growth is expected
      to
      continue to be difficult to achieve due to the fierce competition among
      financial institutions in our markets. Advances from the Federal Home Loan
      Bank
      and other borrowings increased $3.70 million, or 5.67%, to $69.0 million from
      $65.22 million.





The
      decline in total equity was the result of net loss for the three months of
      $100,000 and an increase in other comprehensive loss of $1.13 million (mainly
      due to an increase in net unrealized losses on securities available-for-sale),
      as well as dividends paid of a $0.255 per share regular cash dividend and
      treasury stock purchases.





**Results
      of Operations for the Three Months Ending September 30, 2008 and
      2007**





*Net
      Income.* Eagle’s
      net loss was $100,000 for the three months ended September 30, 2008. Eagle’s net
      income was $464,000 for the three months ended September 30, 2007. The decrease
      of $564,000, or 121.6%, was due to a loss in value in the Company’s
      holdings of Fannie Mae and Freddie Mac preferred stock of $1.24 million. As
      noted in Mr. Johnson’s President’s letter to stockholders dated September 15,
      2008 which accompanied Eagle’s annual report for the year ended June 30, 2008,
      the Federal Housing Finance Agency working with the U.S. Treasury placed Fannie
      Mae and Freddie Mac in a conservatorship of unspecified duration and suspended
      the preferred stock dividend. These actions contributed to the steep decrease
      in
      value of the preferred shares since June 30, 2008. At September 30, 2008 the
      Company’s holdings of Fannie Mae and Freddie Mac preferred stock was valued at
      $82,000. This represents the potential maximum exposure Eagle could incur in
      future periods if those securities become completely valueless. Eagle’s tax
      provision was $178,000 lower in the current quarter. Basic earnings per share
      were a negative $0.09 for the current period, compared to a positive $0.43
      for
      the previous year’s period.





*Net
      Interest Income.* Net
      interest income increased to $2.236 million for the quarter ended September
      30,
      2008 from $1.709 million for the quarter ended September 30, 2007. This increase
      of $527,000 was the result of an increase in interest and dividend income of
      $408,000, and by a decrease in interest expense of $119,000.





*Interest
      and Dividend Income.* Total
      interest and dividend income was $3.816 million for the quarter ended September
      30, 2008, compared to $3.408 million for the quarter ended September 30, 2007,
      representing an increase of $408,000, or 11.97%. Interest and fees on loans
      increased to $2.837 million for the three months ended September 30, 2008 from
      $2.668 million for the same period ended September 30, 2007. This increase
      of
      $169,000, or 6.33%, was due to the increase in the average balances of loans
      receivable for the quarter ended September 30, 2008. Average balances for loans
      receivable, net, for the quarter ended September 30, 2008 were $174.37 million,
      compared to $162.68 million for the previous year. This represents an increase
      of $11.69 million, or 7.19%. The average interest rate earned on loans
      receivable decreased by 6 basis points, from 6.56% at September 30, 2007 to
      6.50% at September 30, 2008. Interest and dividends on investment securities
      available-for-sale (AFS) increased to $963,000 for the quarter ended September
      30, 2008 from $722,000 for the same quarter last year. Average balances on
      investments increased to $79.00 million for the quarter ended September 30,
      2008, compared to $64.78 million for the quarter ended September 30, 2007.
      The
      average interest rate earned on investments increased to 4.91% from 4.53%.


-
          17
          -


EAGLE
        BANCORP AND SUBSIDIARY
 MANAGEMENT
        DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF
        OPERATION




**Results
      of Operations for the Three Months Ending September 30, 2008 and 2007 -
      continued**





*Interest
      Expense.* Total
      interest expense decreased to $1.580 million for the quarter ended September
      30,
      2008, from $1.699 million for the quarter ended September 30, 2007, a decrease
      of $119,000, or 7.00%. Interest on deposits decreased to $862,000 for the
      quarter ended September 30, 2008, from $1.185 million for the quarter ended
      September 30, 2007. This decrease of $323,000, or 27.26%, was the result of
      a
      decrease in average rates paid on deposit accounts from 2.86% at September
      30,
      2007 to 2.09% at September 30, 2008. Certificates of deposit and money market
      accounts showed decreases in average rates paid while rates on checking accounts
      slightly increased. The rate on statement savings accounts remained unchanged
      at
      0.65%. Average balances in interest-bearing deposit accounts decreased slightly
      to $165.16 million for the quarter ended September 30, 2008, compared to $165.47
      million for the same quarter in the previous year. The significant increase
      in
      the average balance of FHLB and other borrowings resulted in an increase in
      interest paid on borrowings to $643,000 in the current quarter compared to
      $439,000 in the previous year’s quarter. The average rate paid on borrowings
      decreased from 5.09% last year to 4.21% this year. The average rate paid on
      all
      liabilities decreased 59 basis points from the quarter ended September 30,
      2007
      to the quarter ended September 30, 2008.





*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 Eagle’s subsidiary,
      American Federal Savings Bank (the Bank), to provide for probable loan losses
      based on prior loss experience, volume and type of lending conducted by the
      Bank, national and local economic conditions, 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
      September 30, 2008 or the quarter ended September 30, 2007. This is a reflection
      of the continued strong asset quality of the Bank’s loan portfolio, as
      non-performing loan ratios continue to be below peer averages. Total classified
      assets increased slightly from $106,000 at June 30, 2008 to $148,000 at
      September 30, 2008 and total less than 0.09% of the total loan portfolio. At
      quarter end, the Bank had no other real estate owned.





*Noninterest
      Income.* Total
      noninterest income decreased to negative $504,000 for the quarter ended
      September 30, 2008, from a positive $584,000 for the quarter ended September
      30,
      2007, a decrease of $1.088 million. This was the result of an adjustment of
      $1.239 million to the valuation of the Company’s Fannie Mae and Freddie Mac
      preferred stock, as described above, which is accounted for under Statement
      of
      Financial Accounting Standard (SFAS) No.159 *Fair
      Value Option for Financial Assets and Financial Liabilities* .





Income
      from sale of loans decreased to $183,000 from $199,000 due to $1.019 million
      less in mortgage loan sales. Demand deposit service charges increased to
      $190,000 from $166,000 due to increased overdraft fees. Other noninterest income
      increased to $165,000 for the quarter ended September 30, 2008 from $127,000
      for
      the quarter ended September 30, 2007. The prior period had incurred a $24,000
      decline in value of the $15 million notional amount ($32,000 contract amount)
      interest rate cap originally purchased in February 2007, while the current
      period did not.





*Noninterest
      Expense.* Noninterest expense increased by $181,000 or 10.85% to $1.849 million for the
      quarter ended September 30, 2008, from $1.668 million for the quarter ended
      September 30, 2007. This increase was primarily due to increases in salaries
      and
      employee benefits of $100,000, increases in advertising expense of $28,000,
      and
      occupancy expense of $14,000. Advertising expense was higher due to increased
      promotion of checking products that occurred during the quarter ending September
      30, 2008. Postage increased $10,000 as a result of higher postage costs along
      with more promotional mailings. Consulting fees increased $28,000. This was
      due
      to engaging outside firms to assist the Bank with developing new checking
      account products and target marketing. Other expense categories showed minor
      changes.




*Income
      Tax Expense/Benefit.* Eagle’s
      income tax benefit was $17,000 for the quarter ended September 30, 2008,
      compared to an expense of $161,000 for the quarter ended September 30, 2007.
      The
      effective tax rate for the quarter ended September 30, 2008 was 14.53% and
      was
      25.76% for the quarter ended September 30, 2007.


-
          18
          -


EAGLE
      BANCORP AND SUBSIDIARY


MANAGEMENT
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF
      OPERATION


**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 6.87% and 8.83% for the months ended September 30, 2008
      and
      September 30, 2007, respectively.





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
      June
      30, 2008 (the most recent report available), the Bank’s measure of sensitivity
      to interest rate movements, as measured by the OTS, worsened from the previous
      quarter. The Bank’s capital ratio as measured by the OTS decreased from the
      previous quarter. The Bank’s strong capital position mitigates its interest rate
      risk exposure. The Bank is well within the guidelines set forth by the Board
      of
      Directors for interest rate risk sensitivity.





As
      of
      September 30, 2008, the Bank’s regulatory capital was in excess of all
      applicable regulatory requirements. At September 30, 2008, the Bank’s tangible,
      core, and risk-based capital ratios amounted to 8.88%, 8.88%, and 12.61%,
      respectively, compared to regulatory requirements of 1.5%, 3.0%, and 8.0%,
      respectively. See the following table (amounts in thousands):




(Unaudited)At
                September 30, 2008For
                CapitalAdequacyDollar
            
            PurposesAmount
            
            % of AssetsTangible
                capital:Capital
                level
            
            $
            24,962
            
            
            8.88
            %Requirement
            
            
            4,218
            
            
            1.50Excess
            
            $
            20,744
            
            
            7.38
            %Core
                capital:Capital
                level
            
            $
            24,962
            
            
            8.88
            %Requirement
            
            
            8,435
            
            
            3.00Excess
            
            $
            16,527
            
            
            5.88
            %Risk-based
                capital:Capital
                level
            
            $
            25,229
            
            
            12.61
            %Requirement
            
            
            16,012
            
            
            8.00Excess
            
            $
            9,217
            
            
            4.61
            %


-
          19
          -


EAGLE
      BANCORP AND SUBSIDIARY


MANAGEMENT
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF
      OPERATION


**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.


-
          20
          -


EAGLE
      BANCORP AND SUBSIDIARY


QUANTITATIVE
      AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK


**QUANTITATIVE
      AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK**





Not
      applicable.


-
          21
          -




EAGLE
      BANCORP AND SUBSIDIARYCONTROLS AND PROCEDURES




**CONTROLS
      AND PROCEDURES**





The
      Company’s Chief Executive Officer, Peter J. Johnson, and Chief Financial
      Officer, Clint J. Morrison, evaluated the effectiveness of the Company’s
      disclosure controls and procedures (as defined in Exchange Act rules 13a-15(e)
      and 15d-15(e)) as of September 30, 2008, and based on this review, have
      concluded the Company’s disclosure controls and procedures are effective as of
      September 30, 2008 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 (as defined in Exchange Act rules
      13a-15(f) and 15d-15(f)) that have materially affected, or are reasonably likely
      to materially affect, the Company’s internal control over financial
      reporting.


-
          22
          -




EAGLE
      BANCORP AND SUBSIDIARY




**Part
      II - OTHER INFORMATION**




Item
                1.
            Legal
                Proceedings.





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





Item
      1A.  Risk
      Factors





Not
      applicable.





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





c)
            Small
                Business Issuer Purchases of Equity Securities.


The
      following table summarizes the Company’s purchase of its common stock for the
      three months ended September 30, 2008.




(a)
            
            (b)
            
            (c)
            
            (d)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
                ProgramsJuly
                2008
            
            
            None
            
            
            N/A
            
            
            N/A
            
            
            N/A07-01-08
                to07-31-08August
                2008
            
            
            760
            
            $
            27.00
            
            
            760
            
            
            24,24008-01-0808-31-08September
                2008
            
            
            None
            
            
            N/A
            
            
            N/A
            
            
            N/A09-01-0809-30-08Total
            
            
            760
            
            $
            27.00
            
            
            760
            
            
            24,240




*The
      Company publicly announced a stock repurchase program on January 17, 2008.
      The
      Company was authorized to acquire up to 28,750 shares of common stock with
      the
      price subject to market conditions. No expiration date was set for the
      repurchase program. As of September 30, 2008, 4,510 shares had been repurchased
      under this plan.





Item
                3.
            Defaults
                Upon Senior Securities.





Not
      applicable.


-
          23
          -




EAGLE
      BANCORP AND SUBSIDIARY




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





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





The
      proxy
      statement for the Annual Meeting of Stockholders was mailed on September 15,
      2008. The following matters were voted on at the meeting held on October 16,
      2008:




1.
            Election
                of directors for three-year terms expiring in
                2011:





For
            
            AgainstLarry
                A. Dreyer
            
            
            990,911
            
            
            507Lynn
                E. Dickey
            
            
            989,411
            
            
            2,007





2.  Ratification
      of appointment of Davis, Kinard & Co., P.C. as auditors for the fiscal year
      ended June 30, 2009:





For
            
            Against
            
            Abstain988,703
            
            
            115
            
            
            2,600





Item
                5.
            Other
                Information.





None.





Item
                6.
            Exhibits.





31.1
      Certification by Peter J. Johnson, 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 Clint J. Morrison, 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 Peter J. Johnson, Chief Executive Officer, and Clint J.
      Morrison, 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
      October 16, 2008, the registrant furnished under Item 2.02 of Form 8-K a press
      release announcing its earnings for the first quarter of the 2009 fiscal
      year.


-
          24
          -




EAGLE
      BANCORP AND SUBSIDIARY




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: 
                November 12, 2008
            By:
            /s/ Peter
                J. JohnsonPeter
                J. JohnsonPresident/CEODate: 
                November 12, 2008
            By:
            /s/ Clint
                J. MorrisonClint
                J. MorrisonSenior
                Vice President/CFO




-
          25
          -