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UNITED STATES
            SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549


|           |           | 
|---------- | --------- | 
|(Mark One) | FORM 10-K | 

|  |                                                                                      
|- | -------------------------------------------------------------------------------------
|x | ANNUAL REPORT PURSUANT
 TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

|                          |              
|------------------------- | -------------
|For the fiscal year ended | June 30, 2010
|                          |              
|or                       

|  |                                                                                         
|- | ----------------------------------------------------------------------------------------
|o | TRANSITION REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

|For the transition period from                         |         | to | 
|------------------------------------------------------ | ------- | -- | 
|                                                       |         |    | 
|Commission file number                                 | 1-34682 |    | 
|                                                       |         |    | 
|Eagle Bancorp Montana, Inc.                           
|(Exact name of registrant
as specified in its charter)

|                               |  |                    
|------------------------------ |  | -------------------
|Delaware                       |  | 27-1449820         
|State or other jurisdiction of |  | (I.R.S. Employer   
|incorporation or organization  |  | Identification No.)

|                                         |  |           
|---------------------------------------- |  | ----------
|1400 Prospect Avenue, Helena, MT         |  | 59601     
|(Address of principal executive offices) |  | (Zip Code)

|                                                   |             
|-------------------------------------------------- | ------------
|Registrant’s telephone number, including area code | 406-442-3080

Securities registered pursuant to Section 12(b) of the Act:

|                                                            |  |                                          
|----------------------------------------------------------- |  | -----------------------------------------
|Title of each class                                         |  | Name of each exchange on which registered
|                                                            |  |                                          
|Common stock, par value $0.01                               |  | The NASDAQ Stock Market LLC              
|                                                            |  |                                          
|                                                            |  |                                          
|Securities registered pursuant
to section 12(g) of the Act:
|                                                           
|(Title of Class)                                           
|                                                           
|(Title of Class)                                           
|                                                           

Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities Act.


o Yes x No


Indicate by check mark if the registrant is not required
to file reports pursuant to Section 13 or Section 15(d) of the Act.


o Yes x No


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Indicate by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports),
 and (2) has been subject to such filing requirements for the past 90 days.


x Yes o No


Indicate by check mark whether the registrant has submitted electronically and posted on
its corporate Website, if any, every Interactive Data File required to be submitted and
posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).


o Yes o No


Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§229.405 of this chapter) is not contained herein, and will not
be contained, to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form
            10-K. x


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,
a non-accelerated filer, or a smaller reporting company. See the definitions of “large
accelerated filer,” “accelerated filer” and “smaller reporting
company” in Rule 12b-2 of the Exchange Act.

| |                                                                       |                            
| | --------------------------------------------------------------------- | ---------------------------
| | Large accelerated filer o                                             | Accelerated filer o        
| |                                                                       |                            
| | Non-accelerated filer o
(Do not check if a smaller reporting company) | Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).o Yes x No

The aggregate market value of the common stock held by non-affiliates of Eagle, computed by reference
to the closing price at which the stock was sold as of December 31, 2009 was $11,481,000. The outstanding
number of shares of common stock of Eagle as of August 31, 2010, was 4,083,127.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Company’s definitive Proxy Statement to be filed with the Securities and Exchange
Commission within 120 days after the Company’s fiscal year end is incorporated by reference into Part III of this Form 10-K.

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TABLE OF CONTENTS

| |  |  |     
| |  |  | ----
| |  |  | Page
| |  |  |     

|             |  |                                                                                                                |  |   
|------------ |  | -------------------------------------------------------------------------------------------------------------- |  | --
|             |  | PART I                                                                                                         |  |   
|            
|ITEM
 1.     |  | DESCRIPTION
 OF BUSINESS                                                                                       |  | 2 
|            
|ITEM
 1A.    |  | RISK
 FACTORS                                                                                                  |  | 28
|            
|ITEM
 1B.    |  | UNRESOLVED
 STAFF COMMENTS                                                                                     |  | 32
|            
|ITEM
 2.     |  | PROPERTIES                                                                                                     |  | 32
|            
|ITEM
 3.     |  | LEGAL
 PROCEEDINGS                                                                                             |  | 32
|            
|ITEM
 4.     |  | (REMOVED
 AND RESERVED)                                                                                        |  | 33
|            
|             |  | PART II                                                                                                        |  |   
|            
|ITEM
 5.     |  | MARKET
 FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
 PURCHASES OF EQUITY SECURITIES |  | 34
|            
|ITEM
 6.     |  | SELECTED
 FINANCIAL DATA                                                                                       |  | 35
|            
|ITEM
 7.     |  | MANAGEMENTS
 DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS                         |  | 35
|            
|ITEM
 7A.    |  | QUANTITATIVE
 AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                                    |  | 44
|            
|ITEM
 8.     |  | FINANCIAL
 STATEMENTS AND SUPPLEMENTARY DATA                                                                   |  | 44
|            
|ITEM
 9.     |  | CHANGES
 IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE                          |  | 44
|            
|ITEM
 9A(T). |  | CONTROLS
 AND PROCEDURES                                                                                       |  | 44
|            
|ITEM
 9B.    |  | OTHER
 INFORMATION                                                                                             |  | 45
|            
|             |  | PART III                                                                                                       |  |   
|            
|ITEM
 10.    |  | DIRECTORS,
 EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE                                                        |  | 46
|            
|ITEM
 11.    |  | EXECUTIVE
 COMPENSATION                                                                                        |  | 46
|            
|ITEM
 12.    |  | SECURITY
 OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
 MATTERS               |  | 47
|            
|ITEM
 13.    |  | CERTAIN
 RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE                                     |  | 47
|            
|ITEM
 14.    |  | PRINCIPAL
 ACCOUNTING FEES AND SERVICES                                                                        |  | 47
|            
|ITEM
 15.    |  | EXHIBITS,
 FINANCIAL STATEMENT SCHEDULES                                                                       |  | 47

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CAUTIONARY LANGUAGE ABOUT FORWARD-LOOKING STATEMENTS

This
Annual Report on Form 10-K includes forward-looking statements within the
meaning and protections of Section 27A of the Securities Act of 1933, as
amended, or the Securities Act, and Section 21E of the Securities Exchange Act
of 1934, as amended, or the Exchange Act. All statements other than statements
of historical fact are statements that could be forward-looking statements. You
can identify these forward-looking statements through our use of words such as
may, will, anticipate, assume, should, indicate, would,
believe, contemplate, expect, estimate, continue, plan, project,
could, intend, target and other similar words and expressions of the
future. These forward-looking statements include, but are not limited to: (i)
statements of our goals, intentions and expectations; (ii) statements regarding
our business plans, prospects, growth and operating strategies; (iii)
statements regarding the asset quality of our loan and investment portfolios;
and (iv) estimates of our risks and future costs and benefits.

These
forward-looking statements are based on current beliefs and expectations of our
management and are inherently subject to significant business, economic and
competitive uncertainties and contingencies, many of which are beyond our
control. In addition, these forward-looking statements are subject to
assumptions with respect to future business strategies and decisions that are
subject to change. The following factors, among others, could cause actual
results to differ materially from the anticipated results or other expectations
expressed in the forward-looking statements:

| |   |                                                                                                                                                                                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | changes
 in laws or government regulations or policies affecting financial
 institutions, including changes in regulatory fees and capital requirements;                                                                                                                                       
| |   |                                                                                                                                                                                                                                                                                                
| |  | general
 economic conditions, either nationally or in our market areas, that are worse
 than expected;                                                                                                                                                                                         
| |   |                                                                                                                                                                                                                                                                                                
| |  | competition
 among depository and other financial institutions;                                                                                                                                                                                                                                
| |   |                                                                                                                                                                                                                                                                                                
| |  | changes
 in the prices, values and sales volume of residential and commercial real
 estate in Montana;                                                                                                                                                                                         
| |   |                                                                                                                                                                                                                                                                                                
| |  | inflation
 and changes in the interest rate environment that reduce our margins or
 reduce the fair value of financial instruments;                                                                                                                                                            
| |   |                                                                                                                                                                                                                                                                                                
| |  | adverse
 changes in the securities markets;                                                                                                                                                                                                                                                    
| |   |                                                                                                                                                                                                                                                                                                
| |  | our
 ability to enter new markets successfully and capitalize on growth
 opportunities;                                                                                                                                                                                                        
| |   |                                                                                                                                                                                                                                                                                                
| |  | our
 ability to successfully integrate acquired entities, if any;                                                                                                                                                                                                                              
| |   |                                                                                                                                                                                                                                                                                                
| |  | changes
 in consumer spending, borrowing and savings habits;                                                                                                                                                                                                                                   
| |   |                                                                                                                                                                                                                                                                                                
| |  | changes
 in our organization, compensation and benefit plans;                                                                                                                                                                                                                                  
| |   |                                                                                                                                                                                                                                                                                                
| |  | our
 ability to continue to increase and manage our commercial and residential
 real estate, multi-family, and commercial business loans;                                                                                                                                                      
| |   |                                                                                                                                                                                                                                                                                                
| |  | possible
 impairments of securities held by us, including those issued by government
 entities and government sponsored enterprises;                                                                                                                                                           
| |   |                                                                                                                                                                                                                                                                                                
| |  | the
 level of future deposit premium assessments;                                                                                                                                                                                                                                              
| |   |                                                                                                                                                                                                                                                                                                
| |  | the
 impact of the current recession on our loan portfolio (including cash flow
 and collateral values), investment portfolio, customers and capital market
 activities;                                                                                                                       
| |   |                                                                                                                                                                                                                                                                                                
| |  | the
 impact of the current restructuring of the U.S. financial and regulatory
 system;                                                                                                                                                                                                         
| |   |                                                                                                                                                                                                                                                                                                
| |  | the
 failure of assumptions underlying the establishment of allowance for possible
 loan losses and other estimates;                                                                                                                                                                           
| |   |                                                                                                                                                                                                                                                                                                
| |  | changes
 in the financial performance and/or condition of our borrowers and their
 ability to repay their loans when due; and                                                                                                                                                                  
| |   |                                                                                                                                                                                                                                                                                                
| |  | the
 effect of changes in accounting policies and practices, as may be adopted by
 the regulatory agencies, as well as the Securities and Exchange Commission,
 the Public Company Accounting Oversight Board, the Financial Accounting
 Standards Board and other accounting standard setters.

Because
of these and other uncertainties, our actual future results may be materially
different from the results indicated by these forward-looking statements. For a
further list and description of various risks, relevant factors and uncertainties
that could cause future results or events to differ materially from those
expressed or implied in our forward-looking statements, see the Item 1A, Risk
Factors and Item 7, Managements Discussion and Analysis of Financial
Condition and Results of Operations sections contained elsewhere in this
report, as well as other reports that we file with the SEC.

1

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PART I

|        |                         
|------- | ------------------------
|ITEM 1. | DESCRIPTION OF BUSINESS.

General

Eagle
Bancorp Montana, Inc. (Eagle or the Company), is a Delaware corporation
that holds 100% of the capital stock of American Federal Savings Bank
(American Federal or the Bank), a federally chartered stock savings bank
headquartered in Helena, Montana. Eagles principal business is to hold the
capital stock of American Federal. On April 5, 2010, Eagle completed a
second-step conversion from the partially-public mutual holding company
structure to the fully publicly-owned stock holding company structure. As part
of that transaction it also completed a related stock offering. As a result of
the conversion and offering, the Company became the stock holding company for
American Federal Savings Bank, and Eagle Financial MHC and Eagle Bancorp ceased
to exist. The Company sold a total of 2,464,274 shares of common stock at a
purchase price of $10.00 per share in the offering for gross proceeds of $24.6
million. Concurrent with the completion of the offering, each share of Eagle
Bancorp common stock owned by the public was exchanged for 3.800 shares of the
Companys common stock owned immediately prior to completion of the
transaction.

American
Federal was founded in 1922 as a Montana chartered building and loan
association and has conducted operations in Helena since that time. In 1975,
the Bank adopted a federal thrift charter. The Bank currently has six full
service offices. We also have six automated teller machines located in our
market area and we participate in the CashCard® and Money Pass® ATM networks.
The Banks website can be found at www.americanfederalsavingsbank.com.

Business Strategy

Our
strategy is to continue our profitability through building a diversified loan
portfolio and positioning the Bank as a full-service community bank that offers
both retail and commercial loan and deposit products in all of its markets. We
believe that this focus will enable us to continue to grow our franchise, while
maintaining our commitment to customer service, high asset quality, and
sustained net earnings. The following are the key elements of our business
strategy:

| |   |                                                                                                                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Continue
 to diversify our portfolio by emphasizing our recent growth in commercial
 real estate and commercial business loans as a complement to our traditional
 single family residential real estate lending;
| |   |                                                                                                                                                                                                                  
| |  | Continue
 to emphasize the attraction and retention of lower cost long-term core
 deposits;                                                                                                                      
| |   |                                                                                                                                                                                                                  
| |  | Seek
 opportunities where presented to acquire other institutions or expand our
 branch structure;                                                                                                               
| |   |                                                                                                                                                                                                                  
| |  | Maintain
 our high asset quality levels; and                                                                                                                                                                     
| |   |                                                                                                                                                                                                                  
| |  | Operate
 as a community-oriented independent financial institution that offers a broad
 array of financial services with high levels of customer service.                                                        

Our
results of operations may be significantly affected by our ability to
effectively implement our business strategy including our plans for expansion
through strategic acquisitions. If we are unable to effectively integrate and
manage acquired or merged businesses or attract significant new business
through our branching efforts, our financial performance may be negatively
affected.

Market Area

From
our headquarters in Helena, Montana, we operate six full service retail banking
offices, including our main office. Our other full service branches are located
in Helena  Neill (opened 1987), Helena - Skyway (opened 2009), Bozeman (opened
1980, relocated 2009), Butte (opened 1979) and Townsend (opened 1979), Montana.
The original Bozeman branch opened in 1980 was closed August 1, 2010 due to
reduced use by customers as a result of the new location opened in October 2009
approximately one mile away.

Montana
is one of the largest states in terms of land mass but ranks as one of the
least populated states. According to U.S. Census Bureau data for 2008, it had a
population of 967,440. Helena, where we are headquartered, is the county seat
of Lewis and Clark County, which has a population of approximately 59,300 and
is located within 120 miles of four of Montanas other five largest cities:
Missoula, Great Falls, Bozeman and Butte. It is approximately midway between
Yellowstone and Glacier National Parks. Helena is also Montanas state capital.
Its economy has shown moderate growth,

2

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in
terms of both employment and income. State government and the numerous offices
of the federal government comprise the largest employment sector. Helena also
has significant employment in the service industries. Specifically, it has
evolved into a central health care center with employment in the medical and
the supporting professions as well as the medical insurance industry. The local
economy is also dependent to a lesser extent upon ranching and agriculture.
These have been more cyclical in nature and remain vulnerable to severe weather
conditions, increased competition, both domestic and international, as well as
commodity prices.

Bozeman
is approximately 95 miles southeast of Helena. It is located in Gallatin
County, which has a population of approximately 80,900. Bozeman is home to
Montana State University and experienced fairly significant growth from 1990 to
2007, in part due to the growth of the University as well as the increased
tourism for resort areas in and near Bozeman. Agriculture, however, remains an
important part of Bozemans economy. Bozeman has also become an attractive
location for retirees, primarily from the West Coast, owing to its many winter
and summer recreational opportunities and the presence of the University. Of
our four communities that we serve, Bozeman has experienced the largest impact
of the national and global economic downturn.

Butte,
Montana is approximately 64 miles southwest of Helena. Butte and the
surrounding Silver-Bow County have a population of approximately 32,800.
Buttes economy is somewhat reliant on the mining industry. Buttes economy has
been volatile from the fluctuations in metal and mineral commodity prices.

Townsend
is the smallest community in which we operate. It has a population of about
2,000. Many of its residents commute to other Montana locations for work. Other
employment in Townsend is primarily in agriculture and services. Townsend is
approximately 32 miles southeast of Helena.

Competition

We
face strong competition in our primary market area for the attraction of retail
deposits and the origination of loans. Historically, Montana was a unit banking
state. This means that the ability of Montana state banks to create branches
was either prohibited or significantly restricted. As a result of unit banking,
Montana has a significant number of independent financial institutions serving
a single community in a single location. While the states population is
approximately 967,440 people, there are 62 credit unions in Montana as well as
two federally chartered thrift institutions, and 75 commercial banks as of June
30, 2010. Our most direct competition for depositors has historically come from
locally owned and out-of-state commercial banks, thrift institutions and credit
unions operating in our primary market area. The number of such competitor
locations has increased significantly in recent years. Our competition for
loans also comes from banks, thrifts and credit unions in addition to mortgage
bankers and brokers. Our principal market areas can be characterized as markets
with moderately increasing incomes, relatively low unemployment, increasing
wealth (particularly in the growing resort areas such as Bozeman), and moderate
population growth.

Lending Activities

General.

American
Federal Savings Bank primarily originates one- to four-family residential real
estate loans and, to a lesser extent, commercial real estate loans, real estate
construction loans, home equity loans, consumer loans and commercial business
loans. Commercial real estate loans include loans on multi-family dwellings,
loans on nonresidential property and loans on developed and undeveloped land.
Home equity loans include loans secured by the borrowers primary residence.
Typically, the property securing such loans is subject to a prior lien.
Consumer loans consist of loans secured by collateral other than real estate,
such as automobiles, recreational vehicles and boats. Personal loans and lines
of credit are made on deposits held by the Bank and on an unsecured basis.
Commercial business loans consist of business loans and lines of credit on a
secured and unsecured basis.

3

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Loan Portfolio Composition.

The
following table analyzes the composition of the Banks loan portfolio by loan
category at the dates indicated:

|                                                |  |                        |         |                   |  |        |   |                   |         |   |  |        |  
|----------------------------------------------- |  | ---------------------- | ------- | ----------------- |  | ------ | - | ----------------- | ------- | - |  | ------ | -
|                                                |  | At June 30,            |        
|                                                |  |                        |        
|                                                |  | 2010                   |         | 2009              | 
|                                                |  |                        |         |                   | 
|                                                |  | (Dollars in thousands) |        
|                                                |  | Amount                 |         | Percent of
 Total |  | Amount |   | Percent of
 Total |        
|Real estate loans:                              |  |                        |         |                   |  |        |   |                   |         |   |  |        |  
|Residential mortgage (one-
 to four-family) (1) |  | $                      | 73,010  |                   |  | 42.81  | % | $                 | 79,216  |   |  | 47.26  | %
|Commercial real estate                          |  |                        | 41,677  |                   |  | 24.44  | % |                   | 36,713  |   |  | 21.90  | %
|Real estate construction                        |  |                        | 7,016   |                   |  | 4.11   | % |                   | 4,642   |   |  | 2.77   | %
|                                                |  |                        |         |                   |  |        |   |                   |         |   |  |        |  
|Total real estate loans                         |  |                        | 121,703 |                   |  | 71.36  | % |                   | 120,571 |   |  | 71.93  | %
|                                                |  |                        |         |                   |  |        |   |                   |         |   |  |        |  
|Other loans:                                    |  |                        |         |                   |  |        |   |                   |         |   |  |        |  
|Home equity                                     |  |                        | 29,795  |                   |  | 17.46  | % |                   | 28,676  |   |  | 17.11  | %
|Consumer                                        |  |                        | 9,613   |                   |  | 5.64   | % |                   | 10,835  |   |  | 6.46   | %
|Commercial                                      |  |                        | 9,452   |                   |  | 5.54   | % |                   | 7,541   |   |  | 4.50   | %
|                                                |  |                        |         |                   |  |        |   |                   |         |   |  |        |  
|Total other loans                               |  |                        | 48,860  |                   |  | 28.64  | % |                   | 47,052  |   |  | 28.07  | %
|                                                |  |                        |         |                   |  |        |   |                   |         |   |  |        |  
|Total loans                                     |  |                        | 170,563 |                   |  | 100.00 | % |                   | 167,623 |   |  | 100.00 | %
|                                                |  |                        |         |                   |  |        |   |                   |         |   |  |        |  
|                                                |  |                        |         |                   |  |        |   |                   |         |   |  |        |  
|Less:                                           |  |                        |         |                   |  |        |   |                   |         |   |  |        |  
|Deferred loan fees                              |  |                        | (39     | )                 |  |        |   |                   | (99     | ) |  |        |  
|Allowance for loan losses                       |  |                        | 1,100   |                   |  |        |   |                   | 525     |   |  |        |  
|                                                |  |                        |         |                   |  |        |   |                   |         |   |  |        |  
|                                                |  |                        |         |                   |  |        |   |                   |         |   |  |        |  
|Total loans, net                                |  | $                      | 169,502 |                   |  |        |   | $                 | 167,197 |   |  |        |  
|                                                |  |                        |         |                   |  |        |   |                   |         |   |  |        |  

|    |                               
|--- | ------------------------------
|(1) | Excludes loans held for
 sale.

Fee Income.

American
Federal Savings Bank receives lending related fee income from a variety of
sources. Its principal source of this income is from the origination and
servicing of sold mortgage loans. Fees generated from mortgage loan servicing,
which generally consists of collecting mortgage payments, maintaining escrow
accounts, disbursing payments to investors and foreclosure processing for loans
held by others, were $770,000 and $628,000 for the years ended June 30, 2010
and 2009, respectively. Other loan related fee income for contract collections,
late charges, credit life commissions and credit card fees were $73,000 and
$78,000 for the years ended June 30, 2010 and 2009, respectively.

Loan Maturity Schedule.

The
following table sets forth the estimated maturity of the loan portfolio of the
Bank at June 30, 2010. Balances exclude deferred loan fees and allowance for
loan losses. Scheduled principal repayments of loans do not necessarily reflect
the actual life of such assets. The average life of a loan is typically
substantially less than its contractual terms because of prepayments. In
addition, due on sale clauses on loans generally give American Federal Savings
Bank the right to declare loans immediately due and payable in the event, among
other things, that the borrower sells the real property, subject to the
mortgage, and the loan is not paid off. All mortgage loans are shown to be
maturing based on the date of the last payment required by the loan agreement,
except as noted.

4

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Loans
having no stated maturity, those without a scheduled payment, demand loans and
matured loans, are shown as due within six months.

|                                                |  |                  |       |                 |   |                             |  |                            |       |              |   |        |  |   |         |  |   |         | 
|----------------------------------------------- |  | ---------------- | ----- | --------------- | - | --------------------------- |  | -------------------------- | ----- | ------------ | - | ------ |  | - | ------- |  | - | ------- | 
|                                                |  | Within 6
 Months |       | 6 to 12
 Months |   | More than1 year to 2
 years |  | More than2 years to5 years |       | Over 5 years |   | Total  | 
|                                                |  |                  |       |                 |   |                             |  |                            |       |              |   |        | 
|                                                |  | (In thousands)   |      
|Residential
 mortgage (one- to four-family) (1) |  | $                |      |                 | $ | 46                          |  | $                          | 253   |              | $ | 2,557  |  | $ | 73,615  |  | $ | 76,471  | 
|Commercial
 real estate and land (1)            |  |                  | 429   |                 |   | 6,582                       |  |                            | 2,278 |              |   | 5,665  |  |   | 30,957  |  |   | 45,911  | 
|Real
 estate construction                       |  |                  | 2,899 |                 |   | 4,117                       |  |                            |      |              |   |       |  |   |        |  |   | 7,016   | 
|Home
 equity                                    |  |                  | 334   |                 |   | 3,881                       |  |                            | 3,666 |              |   | 11,671 |  |   | 10,243  |  |   | 29,795  | 
|Consumer                                        |  |                  | 336   |                 |   | 738                         |  |                            | 786   |              |   | 5,654  |  |   | 2,099   |  |   | 9,613   | 
|Commercial                                      |  |                  | 235   |                 |   | 4,793                       |  |                            | 204   |              |   | 2,014  |  |   | 2,206   |  |   | 9,452   | 
|                                               
|                                                |  |                  |       |                 |   |                             |  |                            |       |              |   |        |  |   |         |  |   |         | 
|Total
 loans (1)                                |  | $                | 4,233 |                 | $ | 20,157                      |  | $                          | 7,187 |              | $ | 27,561 |  | $ | 119,120 |  | $ | 178,258 | 
|                                                |  |                  |       |                 |   |                             |  |                            |       |              |   |        |  |   |         |  |   |         | 

|    |                               
|--- | ------------------------------
|(1) | Includes loans held for
 sale.

The
following table sets forth the dollar amount of all loans, at June 30, 2010,
due after June 30, 2011, which have fixed interest rates and which have
floating or adjustable interest rates:

|                                            |  |                        |         |            |   |        |   |   |         |  
|------------------------------------------- |  | ---------------------- | ------- | ---------- | - | ------ | - | - | ------- | -
|                                            |  | Fixed                  |         | Adjustable |   | Total  |  
|                                            |  |                        |         |            |   |        |  
|                                            |  | (Dollars in thousands) |        
|                                            |  |                        |         |            |   |        |   |   |         |  
|Residential mortgage (one-
 to four-family) |  | $                      | 58,367  |            | $ | 18,058 |   | $ | 76,425  |  
|Commercial real estate and
 land            |  |                        | 38,259  |            |   | 641    |   |   | 38,900  |  
|Home equity                                 |  |                        | 21,469  |            |   | 4,111  |   |   | 25,580  |  
|Consumer                                    |  |                        | 7,864   |            |   | 675    |   |   | 8,539   |  
|Commercial                                  |  |                        | 3,999   |            |   | 425    |   |   | 4,424   |  
|                                           
|                                            |  |                        |         |            |   |        |   |   |         |  
|Total loans (1)                             |  | $                      | 129,958 |            | $ | 23,910 |   | $ | 153,868 |  
|                                            |  |                        |         |            |   |        |   |   |         |  
|                                            |  |                        |         |            |   |        |   |   |         |  
|Percent of total                            |  |                        | 84.46   | %          |   | 15.54  | % |   | 100.00  | %

|    |                         
|--- | ------------------------
|(1) | Due after June 30, 2011.

5

---



The following
table sets forth information with respect to our loan originations, purchases
and sales activity for the periods indicated:

|                                                |  |                |         |      |   |         |  
|----------------------------------------------- |  | -------------- | ------- | ---- | - | ------- | -
|                                                |  | Ended June 30, |        
|                                                |  | 2010           |         | 2009 |  
|                                                |  |                |         |      |  
|                                                |  | (In thousands) |        
|                                                |  |                |         |      |   |         |  
|Net loans receivable at beginning of period (1) |  | $              | 172,546 |      | $ | 175,519 |  
|                                                |  |                |         |      |   |         |  
|Loans originated:                               |  |                |         |      |   |         |  
|Residential mortgage (one- to four-family)      |  |                | 89,428  |      |   | 164,657 |  
|Commercial real estate and land                 |  |                | 15,573  |      |   | 21,500  |  
|Real estate construction                        |  |                | 9,193   |      |   | 4,672   |  
|Home equity                                     |  |                | 18,438  |      |   | 20,043  |  
|Consumer                                        |  |                | 6,685   |      |   | 8,341   |  
|Commercial                                      |  |                | 10,354  |      |   | 8,789   |  
|                                                |  |                |         |      |   |         |  
|                                                |  |                |         |      |   |         |  
|Total loans originated                          |  |                | 149,671 |      |   | 228,002 |  
|                                                |  |                |         |      |   |         |  
|                                                |  |                |         |      |   |         |  
|Loans sold:                                     |  |                |         |      |   |         |  
|Whole loans                                     |  |                | 76,925  |      |   | 125,232 |  
|Commercial construction                         |  |                |        |      |   | 6,000   |  
|                                                |  |                |         |      |   |         |  
|                                                |  |                |         |      |   |         |  
|Total loans sold                                |  |                | 76,925  |      |   | 131,232 |  
|                                                |  |                |         |      |   |         |  
|                                                |  |                |         |      |   |         |  
|Principal repayments and
 loan refinancings     |  |                | 67,440  |      |   | 99,509  |  
|                                                |  |                |         |      |   |         |  
|Deferred loan fees decrease
 (increase)         |  |                | 60      |      |   | (9      | )
|                                                |  |                |         |      |   |         |  
|Allowance for losses
 decrease (increase)       |  |                | (715    | )    |   | (225    | )
|                                                |  |                |         |      |   |         |  
|Net loan increase
 (decrease)                   |  |                | 4,651   |      |   | (2,973  | )
|                                                |  |                |         |      |   |         |  
|                                                |  |                |         |      |   |         |  
|Net loans receivable at end
 of period (1)      |  | $              | 177,197 |      | $ | 172,546 |  
|                                                |  |                |         |      |   |         |  

| |     |                               
| | --- | ------------------------------
| | (1) | Includes loans held for
 sale.

Residential Lending.

The Banks primary lending activity consists of the origination of one-
to four-family residential mortgage loans secured by property located in the
Banks market area. Approximately 42.81% of the banks loans as of June 30,
2010 were comprised of such loans. American Federal generally originates one-
to four-family residential mortgage loans in amounts up to 80% of the lesser of
the appraised value or the selling price of the mortgaged property without
requiring private mortgage insurance. A mortgage loan originated by the Bank,
whether fixed rate or adjustable rate, can have a term of up to 30 years. The
Bank holds substantially all of its adjustable rate and its 8, 10 and 12-year
fixed rate loans in portfolio. Adjustable rate loans limit the periodic
interest rate adjustment and the minimum and maximum rates that may be charged
over the term of the loan. The Banks fixed rate 15-year and 20-year loans are
held in portfolio or sold in the secondary market depending on market
conditions. Generally, all 30-year fixed rate loans are sold in the secondary
market. The volume of loan sales is dependent on the volume, type and term of
loan originations.

6

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The Bank obtains a significant portion of its noninterest income from
servicing loans sold. The Bank offers many of the fixed rate loans it
originates for sale in the secondary market on a servicing retained basis. This
means that we process the borrowers payments and send them to the purchaser of
the loan. This retention of servicing enables the Bank to increase fee income
and maintain a relationship with the borrower. Servicing income was $770,000
for the year ended June 30, 2010. At June 30, 2010, American Federal Savings
Bank had $285.51 million in residential mortgage loans and $11.91 million in
commercial real estate loans sold with servicing retained. American Federal
Savings Bank does not ordinarily purchase home mortgage loans from other
financial institutions.

Property appraisals on real estate securing the Banks single-family
residential loans are made by state certified and licensed independent
appraisers who are approved annually by the board of directors. Appraisals are
performed in accordance with applicable regulations and policies. American
Federal Savings Bank generally obtains title insurance policies on all first
mortgage real estate loans originated. On occasion, refinancings of mortgage
loans are approved using title reports instead of title insurance. Title
reports are also allowed on home equity loans. Borrowers generally remit funds
with each monthly payment of principal and interest, to a loan escrow account
from which American Federal Savings Bank makes disbursements for such items as
real estate taxes and hazard and mortgage insurance premiums as they become
due.

Home Equity Loans.

American Federal Savings Bank also originates home equity loans. These
loans are secured by the borrowers primary residence, but are typically
subject to a prior lien, which may or may not be held by the Bank. At June 30,
2010, $29.80 million or 17.47% of our total loans were home equity loans.
Borrowers may use the proceeds from the Banks home equity loans for many
purposes, including home improvement, debt consolidation, or other purchasing
needs. The Bank offers fixed rate, fixed payment home equity loans as well as
variable and fixed rate home equity lines of credit. Fixed rate home equity
loans typically have terms of no longer than 15 years.

Although home equity loans are secured by real estate, they carry a
greater risk than first lien residential mortgages because of the existence of
a prior lien on the property securing the loan, as well as the flexibility the
borrower has with respect to the loan proceeds. American Federal Savings Bank
attempts to minimize this risk by maintaining conservative underwriting
policies on such loans. We generally make home equity loans for up to only 85%
of appraised value of the underlying real estate collateral, less the amount of
any existing prior liens on the property securing the loan.

Commercial Real Estate and Land Loans.

American Federal Savings Bank originates commercial real estate
mortgage and land loans, including both developed and undeveloped land loans,
and loans on multi-family dwellings. Commercial real estate and land loans made
up 24.44% of the Banks total loan portfolio, or $41.68 million at June 30,
2010. The majority of these loans are non-residential commercial real estate
loans. American Federal Savings Banks commercial real estate mortgage loans
are primarily permanent loans secured by improved property such as office buildings,
retail stores, commercial warehouses and apartment buildings. The terms and
conditions of each loan are tailored to the needs of the borrower and based on
the financial strength of the project and any guarantors. Generally, commercial
real estate loans originated by the Bank will not exceed 75% of the appraised
value or the selling price of the property, whichever is less. The average loan
size is approximately $196,000 and is typically made with fixed rates of
interest and 5- to 15-year maturities. Upon maturity, the loan is repaid or the
terms and conditions are renegotiated. Generally, all originated commercial
real estate loans are within the market area of the Bank and all are within the
state of Montana. American Federal Savings Banks largest single commercial
real estate loan had a balance of approximately $1.42 million (net of $5.68
million sold to the Montana Board of Investments) on June 30, 2010, and is
secured by a professional office building.

Real Estate Construction Lending.

American Federal Savings Bank also lends funds for the construction of
one- to-four-family homes and commercial real estate. Real estate construction
loans are made both to individual homeowners for the construction of their
primary residence and, to a lesser extent, to local builders for the
construction of pre-sold houses or houses that are being built for sale in the
future. Real estate construction loans accounted for $7.02 million or 4.11% of
the Banks loan portfolio at June 30, 2010.

Consumer Loans.

As part of its strategy to invest in higher yielding shorter term
loans, American Federal Savings Bank emphasized growth of its consumer lending
portfolio in recent years. This portfolio includes personal loans secured by
collateral other than real estate, unsecured personal loans and lines of
credit, and loans secured by deposits held by the Bank. As of June 30, 2010,
consumer loans totaled $9.6 million or 5.64% of the Banks total loan
portfolio. These loans consist primarily of auto loans, RV loans, boat loans,
personal loans and credit lines and deposit account loans. Consumer loans are
originated in the Banks market area and generally have maturities of up to 7
years. For loans secured by savings accounts, American

7

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Federal Savings Bank will lend up to 90% of the account balance on
single payment loans and up to 100% for monthly payment loans.

Consumer loans have a shorter term and generally provide higher
interest rates than residential loans. Consumer loans can be helpful in
improving the spread between average loan yield and cost of funds and at the
same time improve the matching of the maturities of rate sensitive assets and
liabilities. Increasing its consumer loans has been a major part of the Banks
strategy of operating more like a commercial bank than a traditional savings
bank.

The underwriting standards employed by American Federal Savings Bank
for consumer loans include a determination of the applicants credit history
and an assessment of the applicants ability to meet existing obligations and
payments on the proposed loan. The stability of the applicants monthly income
may be determined by verification of gross monthly income from primary
employment, and additionally from any verifiable secondary income.
Creditworthiness of the applicant is of primary consideration; however, the
underwriting process also includes a comparison of the value of the collateral
in relation to the proposed loan amount.

Commercial Business Loans.

Commercial business loans amounted to $9.45 million, or 5.54% of the
Banks total loan portfolio at June 30, 2010. American Federal Savings Banks
commercial business loans are traditional business loans and are not secured by
real estate. Such loans may be structured as unsecured lines of credit or may
be secured by inventory, accounts receivable or other business assets. While
the commercial business loan portfolio amounted to only 5.54% of the total
portfolio at June 30, 2010, American Federal Savings Bank intends to increase
such lending by focusing on market segments which it has not previously
emphasized, such as business loans to doctors, lawyers, architects and other
professionals as well as to small businesses within its market area. Our
management believes that this strategy provides opportunities for growth, without
significant additional cost outlays for staff and infrastructure.

Commercial business loans of this nature usually involve greater credit
risk than one- to four-family residential mortgage loans. The collateral we
receive is typically related directly to the performance of the borrowers
business which means that repayment of commercial business loans is dependent
on the successful operations and income stream of the borrowers business. Such
risks can be significantly affected by economic conditions. In addition,
commercial lending generally requires substantially greater oversight efforts
compared to residential real estate lending.

Loans to One Borrower.

Under federal law, savings institutions have, subject to certain
exemptions, lending limits to one borrower in an amount equal to the greater of
$500,000 or 15% of the institutions unimpaired capital and surplus. As of June
30, 2010, our largest aggregation of loans to one borrower was approximately
$3.69 million. This consisted of one commercial real estate loan secured by a
detention facility and one commercial real estate construction loan secured by
a separate detention facility. The commercial real estate loan has a principal
balance of $6.93 million, and 90%, or $6.23 million, of it was sold to the
Montana Board of Investments, leaving the net balance to the Bank of $0.69
million. The commercial real estate construction loan is to the same borrower
for the construction of another detention facility. As of June 30, 2010, the
Banks portion of the construction loan had a principal balance of $3.0
million, and the remaining $9.10 million of the loan was held by another bank.
The construction was completed in August 2010, and the Bank refinanced the
entire loan into $12.10 million of permanent financing with 90% of the loan
guaranteed by the USDA Rural Development. Due to the USDA Rural Development
guarantee, 90% of this loan, or $10.89 million, is not included in the
limitations to a single borrower. The Bank entered into an interest rate swap
with a third party to change the underlying cash flows to be a variable market
rate tied to one-month LIBOR. At June 30, 2010, these loans were performing in
accordance with their terms. The Bank maintains the servicing for both these
loans.

Loan Solicitation and Processing.

Our customary sources of mortgage loan applications include repeat
customers, walk-ins, and referrals from home builders and real estate brokers.
We also advertise in local newspapers and on local radio and television. We
currently have the ability to accept online mortgage loan applications and
provide pre-approvals through our website. Our branch managers and loan
officers located at our headquarters and in branches, have authority to approve
certain types of loans when presented with a completed application. Other loans
must be approved at our main offices as disclosed below. No loan consultants or
loan brokers are currently used by us for either residential or commercial
lending activities.

After receiving a loan application from a prospective borrower, a
credit report and verifications are obtained to confirm specific information
relating to the loan applicants employment, income and credit standing. When
required by our policies, an appraisal of the real estate intended to secure the
proposed loan is undertaken by an independent fee appraiser. In connection with
the loan approval process, our staff analyze the loan applications and the
property involved. Officers and branch managers are granted lending authority
based on the kind of loan types where they possess expertise and their

8

---



level of experience. We have established a series of loan committees to
approve any loans which may exceed the lending authority of particular officers
or branch managers. A quorum (five directors) of the board of directors is
required for approval of any loan, or aggregation of loans to a single
borrower, that exceeds $1,250,000.

Loan applicants are promptly notified of the decision by a letter
setting forth the terms and conditions of the decision. If approved, these
terms and conditions include the amount of the loan, interest rate basis,
amortization term, a brief description of real estate to be mortgaged, tax
escrow and the notice of requirement of insurance coverage to be maintained. We
generally require title insurance on first mortgage loans and fire and casualty
insurance on all properties securing loans, which insurance must be maintained
during the entire term of the loan.

Loan Commitments.

We generally provide commitments to fund fixed and adjustable-rate
single-family mortgage loans for periods up to 60 days at a specified term and
interest rate, and other loan categories for shorter time periods. The total
amount of our commitments to extend credit as of June 30, 2010, was
approximately $9.03 million, $5.58 million of which was for residential
mortgage loans.

Nonperforming Loans and Problem Assets

Collection Procedures.

Generally, our collection procedures provide that when a loan is 15 or
more days delinquent, the borrower is sent a past due notice. If the loan
becomes 30 days delinquent, the borrower is sent a written delinquency notice
requiring payment. If the delinquency continues, subsequent efforts are made to
contact the delinquent borrower, including face to face meetings and counseling
to resolve the delinquency. All collection actions are undertaken with the
objective of compliance with the Fair Debt Collection Act.

For mortgage loans and home equity loans, if the borrower is unable to
cure the delinquency or reach a payment agreement, we will institute
foreclosure actions. If a foreclosure action is taken and the loan is not
reinstated, paid in full or refinanced, the property is sold at judicial sale
at which we may be the buyer if there are no adequate offers to satisfy the debt.
Any property acquired as the result of foreclosure or by deed in lieu of
foreclosure is classified as real estate owned until such time as it is sold or
otherwise disposed of. When real estate owned is acquired, it is recorded at
its fair market value less estimated selling costs. The initial recording of
any loss is charged to the allowance for loan losses. As of June 30, 2010,
American Federal Savings Bank had $618,000 of real estate owned.

Loans are reviewed on a quarterly basis and are placed on non-accrual
status when they are more than 90 days delinquent. Loans may be placed on
non-accrual status at any time if, in the opinion of management, the collection
of additional interest is doubtful. Interest accrued and unpaid at the time a
loan is placed on non-accrual status is charged against interest income.
Subsequent payments are either applied to the outstanding principal balance or
recorded as interest income, depending on the assessment of the ultimate
collectibility of the loan. At June 30, 2010, we had $2.81 million ($2.40
million net of specific reserves for loan losses) of loans that were
nonperforming and held on non-accrual status.

9

---



Delinquent Loans.

The following
table provides information regarding the Banks loans that are delinquent 30 to
89 days at June 30, 2010:

|                                           |  |                        |    |        |   |                                         |  |  |        |  
|------------------------------------------ |  | ---------------------- | -- | ------ | - | --------------------------------------- |  |  | ------ | -
|                                           |  | Number                 |    | Amount |   | Percentage of
 Total
 Delinquent
 Loans | 
|                                           |  |                        |    |        |   |                                         | 
|                                           |  | (Dollars in thousands) |   
|                                           |  |                        |    |        |   |                                         |  |  |        |  
|Loan type:                                 |  |                        |    |        |   |                                         |  |  |        |  
|Residential mortgage (one- to four-family) |  |                        | 7  |        | $ | 596                                     |  |  | 41.85  | %
|Real estate construction                   |  |                        |    |        |   |                                         |  |  |        |  
|Commercial real estate and land            |  |                        | 2  |        |   | 230                                     |  |  | 16.15  | %
|Home equity                                |  |                        | 9  |        |   | 447                                     |  |  | 31.39  | %
|Consumer                                   |  |                        | 14 |        |   | 117                                     |  |  | 8.22   | %
|Commercial business                        |  |                        | 2  |        |   | 34                                      |  |  | 2.39   | %
|                                           |  |                        |    |        |   |                                         |  |  |        |  
|Total                                      |  |                        | 34 |        | $ | 1,424                                   |  |  | 100.00 | %
|                                           |  |                        |    |        |   |                                         |  |  |        |  

Nonperforming Assets.

The following
table sets forth information regarding American Federal Savings Banks
nonperforming assets as of the dates indicated. As of June 30, 2010, the Bank
had no loans considered to be a troubled debt restructuring within the meaning
of FASB ASC 310 Receivables.

|                                              |  |                        |       |      |   |       |  
|--------------------------------------------- |  | ---------------------- | ----- | ---- | - | ----- | -
|                                              |  | At June 30,            |      
|                                              |  | 2010                   |       | 2009 |  
|                                              |  |                        |       |      |  
|                                              |  | (Dollars in thousands) |      
|                                              |  |                        |       |      |   |       |  
|Non-accrual loans                             |  |                        |       |      |   |       |  
|Real estate loans:                            |  |                        |       |      |   |       |  
|Residential mortgage (one- to four-family)    |  | $                      | 754   |      | $ | 265   |  
|Real estate construction                      |  |                        | 650   |      |   |      |  
|Commercial real estate and land               |  |                        | 1,316 |      |   | 527   |  
|Home equity                                   |  |                        | 40    |      |   |      |  
|Consumer                                      |  |                        | 12    |      |   | 26    |  
|Commercial business                           |  |                        | 10    |      |   | 184   |  
|Accuring loans delinquent 90 days or more     |  |                        | 29    |      |   | 251   |  
|                                              |  |                        |       |      |   |       |  
|Total nonperforming loans                     |  |                        | 2,811 |      |   | 1,253 |  
|Real estate owned and other repossed property |  |                        | 619   |      |   |      |  
|                                              |  |                        |       |      |   |       |  
|Total nonperforming assets                    |  | $                      | 3,430 |      | $ | 1,253 |  
|                                              |  |                        |       |      |   |       |  
|                                              |  |                        |       |      |   |       |  
|Total nonperforming loans
 to net loans       |  |                        | 1.65  | %    |   | 0.75  | %
|Total nonperforming loans
 to total assets    |  |                        | 0.86  | %    |   | 0.43  | %
|Total nonperforming assets
 to total assets   |  |                        | 1.05  | %    |   | 0.43  | %

During the year ended June 30, 2010, the Bank had no foreclosed real
estate resulting in a loss. During the year ended June 30, 2010, a minimal
amount of interest was recorded on loans previously accounted for on a
non-accrual basis.

10

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Classified Assets.

Management, in compliance with regulatory guidelines, conducts an
internal loan review program, whereby loans are placed or classified in
categories depending upon the level of risk of nonpayment or loss. These
categories are special mention, substandard, doubtful or loss. When a loan is
classified as substandard or doubtful, management is required to establish an
allowance for loan losses in an amount that is deemed prudent. When management
classifies a loan as a loss asset, an allowance equal up to 100% of the loan
balance is required to be established or the loan is required to be
charged-off. The allowance for loan losses is composed of an allowance for both
inherent risk associated with lending activities and specific problem assets.

Managements evaluation of the classification of assets and the
adequacy of the allowance for loan losses is reviewed by the Board on a regular
basis and by the regulatory agencies as part of their examination process. In
addition, each loan that exceeds $500,000 and each group of loans that exceeds
$500,000 is monitored more closely. The following table reflects our classified
assets as of the dates indicated:

11

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|                                              |  |                        |       |      |   |       | 
|--------------------------------------------- |  | ---------------------- | ----- | ---- | - | ----- | 
|                                              |  | At June 30,            |      
|                                              |  |                        |       |      |  
|                                              |  | 2010                   |       | 2009 |  
|                                              |  |                        |       |      |  
|                                              |  | (Dollars in thousands) |      
|                                              |  |                        |       |      |   |       | 
|Residential mortgage (one- to four-family):   |  |                        |       |      |   |       | 
|Special Mention                               |  | $                      | 536   |      | $ |      | 
|Substandard                                   |  |                        | 782   |      |   | 392   | 
|Doubtful                                      |  |                        |      |      |   |      | 
|Loss                                          |  |                        | 90    |      |   |      | 
|                                              |  |                        |       |      |   |       | 
|Commercial Real Estate and Land:              |  |                        |       |      |   |       | 
|Special Mention                               |  |                        |      |      |   |      | 
|Substandard                                   |  |                        | 1,787 |      |   | 488   | 
|Doubtful                                      |  |                        |      |      |   |      | 
|Loss                                          |  |                        | 311   |      |   |      | 
|                                              |  |                        |       |      |   |       | 
|Home equity loans:                            |  |                        |       |      |   |       | 
|Special Mention                               |  |                        | 84    |      |   |      | 
|Substandard                                   |  |                        | 214   |      |   | 131   | 
|Doubtful                                      |  |                        |      |      |   |      | 
|Loss                                          |  |                        | 5     |      |   |      | 
|                                              |  |                        |       |      |   |       | 
|Consumer loans:                               |  |                        |       |      |   |       | 
|Special Mention                               |  |                        |      |      |   |      | 
|Substandard                                   |  |                        | 79    |      |   | 40    | 
|Doubtful                                      |  |                        |      |      |   |      | 
|Loss                                          |  |                        | 10    |      |   | 12    | 
|                                              |  |                        |       |      |   |       | 
|Commercial loans:                             |  |                        |       |      |   |       | 
|Special Mention                               |  |                        |      |      |   |      | 
|Substandard                                   |  |                        | 97    |      |   | 551   | 
|Doubtful                                      |  |                        |      |      |   |      | 
|Loss                                          |  |                        |      |      |   |      | 
|                                              |  |                        |       |      |   |       | 
|Real estate owned/repossessed property:       |  |                        |       |      |   |       | 
|Special Mention                               |  |                        |      |      |   |      | 
|Substandard                                   |  |                        | 619   |      |   |      | 
|Doubtful                                      |  |                        |      |      |   |      | 
|Loss                                          |  |                        |      |      |   |      | 
|                                              |  |                        |       |      |   |       | 
|                                              |  |                        |       |      |   |       | 
|Total
 classified loans and real estate owned |  | $                      | 4,614 |      | $ | 1,614 | 
|                                              |  |                        |       |      |   |       | 

12

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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Allowance for Loan Losses and Real Estate Owned.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|The Bank segregates its loan portfolio for loan losses into the
 following broad categories: real estate loans (residential mortgages (one- to
 four-family), real estate construction, commercial real estate and land) home
 equity loans, consumer loans, and commercial business loans. The Bank
 provides for a general allowance for losses inherent in the portfolio by the
 above categories, which consists of two components. General loss percentages
 are calculated based on historical analyses and other factors such as volume
 and severity of delinquencies, local and national economy, underwriting
 standards, and other factors. A supplemental portion of the allowance is
 calculated for inherent losses which probably exist as of the evaluation date
 even though they might not have been identified by the more objective
 processes used. This is due to the risk of error and/or inherent imprecision
 in the process.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|This portion of the allowance is particularly subjective and requires
 judgments based on qualitative factors which do not lend themselves to exact
 mathematical calculations such as: trends in delinquencies and non-accruals;
 trends in volume; terms and portfolio mix; new credit products; changes in
 lending policies and procedures; and changes in the outlook for the local,
 regional and national economy.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|At least quarterly, the management of the Bank evaluates the need to
 establish an allowance against losses on loans and other assets based on
 estimated losses on specific loans and on any real estate owned when a
 finding is made that a loss is estimable and probable. Such evaluation
 includes a review of all loans for which full collectibility may not be
 reasonably assured and considers, among other matters: the estimated market
 value of the underlying collateral of problem loans; prior loss experience;
 economic conditions; and overall portfolio quality.                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|Provisions for, or adjustments to, estimated losses are included in
 earnings in the period they are established. We had $1,100,000 in allowances
 for loan losses at June 30, 2010.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|While we believe we have established our existing allowance for loan
 losses in accordance with generally accepted accounting principles, there can
 be no assurance that bank regulators, in reviewing our loan portfolio, will
 not request that we significantly increase our allowance for loan losses, or
 that general economic conditions, a deteriorating real estate market, or
 other factors will not cause us to significantly increase our allowance for
 loan losses, therefore negatively affecting our financial condition and
 earnings.                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|In making loans, we recognize that credit losses will be experienced
 and that the risk of loss will vary with, among other things, the type of
 loan being made, the creditworthiness of the borrower over the term of the
 loan and, in the case of a secured loan, the quality of the security for the
 loan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|It is our policy to review our loan portfolio, in accordance with
 regulatory classification procedures, on at least a quarterly basis.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

13

---



The following table sets forth information with respect to our
allowance for loan losses at the dates and for the periods indicated:

|                                                                             |  |                                |       |      |   |       |  
|---------------------------------------------------------------------------- |  | ------------------------------ | ----- | ---- | - | ----- | -
|                                                                             |  | For the Years Ended 
 June 30, |      
|                                                                             |  | 2010                           |       | 2009 |  
|                                                                             |  |                                |       |      |  
|                                                                             |  | (Dollars in thousands)         |      
|                                                                             |  |                                |      
|Balance at beginning of
 period                                              |  | $                              | 525   |      | $ | 300   |  
|                                                                             |  |                                |       |      |   |       |  
|Provision for loan losses                                                    |  |                                | 715   |      |   | 257   |  
|Loans charged-off                                                            |  |                                |       |      |   |       |  
|Real estate loans                                                            |  |                                | (50   | )    |   |      |  
|Home equity                                                                  |  |                                |      |      |   |      |  
|Consumer                                                                     |  |                                | (71   | )    |   | (47   | )
|Commercial business loans                                                    |  |                                | (22   | )    |   |      |  
|Recoveries                                                                   |  |                                |       |      |   |       |  
|Real estate loans                                                            |  |                                |      |      |   |      |  
|Home equity                                                                  |  |                                |      |      |   |      |  
|Consumer                                                                     |  |                                | 3     |      |   | 15    |  
|Commercial business loans                                                    |  |                                |      |      |   |      |  
|                                                                             |  |                                |       |      |   |       |  
|Net loans charged-off                                                        |  |                                | (140  | )    |   | (32   | )
|                                                                             |  |                                |       |      |   |       |  
|                                                                             |  |                                |       |      |   |       |  
|Balance at end of period                                                     |  | $                              | 1,100 |      | $ | 525   |  
|                                                                             |  |                                |       |      |   |       |  
|                                                                             |  |                                |       |      |   |       |  
|Allowance for loan losses
 to total loans                                    |  |                                | 0.64  | %    |   | 0.31  | %
|                                                                             |  |                                |       |      |   |       |  
|Allowance for loan losses to total non-performing loans                      |  |                                | 32.09 | %    |   | 41.90 | %
|                                                                             |  |                                |       |      |   |       |  
|Net recoveries (charge-offs) to average loans outstanding during the
 period |  |                                | -0.08 | %    |   | -0.02 | %

14

---



The following table presents our allocation of the allowance for loan
losses by loan category and the percentage of loans in each category to total
loans at the periods indicated:

|                                            |  |                        |       |                                                |  |                                  |   |        |        |                                                |   |                                  |  |  |        |   |  |        |  
|------------------------------------------- |  | ---------------------- | ----- | ---------------------------------------------- |  | -------------------------------- | - | ------ | ------ | ---------------------------------------------- | - | -------------------------------- |  |  | ------ | - |  | ------ | -
|                                            |  | At June 30,            |      
|                                            |  |                        |       |                                                | 
|                                            |  | 2010                   |       | 2009                                           | 
|                                            |  |                        |       |                                                | 
|                                            |  | (Dollars in thousands) |      
|                                            |  | Amount                 |       | Percentage
 of
 Allowance
 to Total
 Allowance |  | Loans
 Category
 to Total
 Loans |   | Amount |        | Percentage
 of
 Allowance
 to Total
 Allowance |   | Loans
 Category
 to Total
 Loans | 
|                                            |  |                        |       |                                                |  |                                  |   |        |        |                                                |   |                                  | 
|Real estate loans:                          |  |                        |       |                                                |  |                                  |   |        |        |                                                |   |                                  |  |  |        |   |  |        |  
|Residential mortgage (one-
 to four-family) |  | $                      | 391   |                                                |  | 35.55                            | % |        | 42.81  | %                                              | $ | 190                              |  |  | 36.19  | % |  | 47.26  | %
|Commercial real estate and
 land            |  |                        | 447   |                                                |  | 40.62                            | % |        | 24.43  | %                                              |   | 158                              |  |  | 30.10  | % |  | 21.90  | %
|Real estate construction                    |  |                        | 110   |                                                |  | 10.00                            | % |        | 4.11   | %                                              |   | 10                               |  |  | 1.90   | % |  | 2.77   | %
|                                            |  |                        |       |                                                |  |                                  |   |        |        |                                                |   |                                  |  |  |        |   |  |        |  
|Total real estate loans                     |  |                        | 948   |                                                |  | 86.17                            | % |        | 71.35  | %                                              |   | 358                              |  |  | 68.19  | % |  | 71.93  | %
|                                            |  |                        |       |                                                |  |                                  |   |        |        |                                                |   |                                  |  |  |        |   |  |        |  
|                                            |  |                        |       |                                                |  |                                  |   |        |        |                                                |   |                                  |  |  |        |   |  |        |  
|Other loans:                                |  |                        |       |                                                |  |                                  |   |        |        |                                                |   |                                  |  |  |        |   |  |        |  
|Home equity                                 |  |                        | 6     |                                                |  | 0.55                             | % |        | 17.47  | %                                              |   | 67                               |  |  | 12.76  | % |  | 17.11  | %
|Consumer                                    |  |                        | 78    |                                                |  | 7.10                             | % |        | 5.64   | %                                              |   | 68                               |  |  | 12.95  | % |  | 6.46   | %
|Commercial business                         |  |                        | 68    |                                                |  | 6.18                             | % |        | 5.54   | %                                              |   | 32                               |  |  | 6.10   | % |  | 4.50   | %
|                                            |  |                        |       |                                                |  |                                  |   |        |        |                                                |   |                                  |  |  |        |   |  |        |  
|Total other loans                           |  |                        | 152   |                                                |  | 13.83                            | % |        | 28.65  | %                                              |   | 167                              |  |  | 31.81  | % |  | 28.07  | %
|                                            |  |                        |       |                                                |  |                                  |   |        |        |                                                |   |                                  |  |  |        |   |  |        |  
|                                            |  |                        |       |                                                |  |                                  |   |        |        |                                                |   |                                  |  |  |        |   |  |        |  
|Total                                       |  | $                      | 1,100 |                                                |  | 100.00                           | % |        | 100.00 | %                                              | $ | 525                              |  |  | 100.00 | % |  | 100.00 | %
|                                            |  |                        |       |                                                |  |                                  |   |        |        |                                                |   |                                  |  |  |        |   |  |        |  

15

---



INVESTMENT ACTIVITIES

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|General.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|Federally chartered savings banks such as American Federal Savings
 Bank have the authority to invest in various types of investment securities,
 including United States Treasury obligations, securities of various Federal
 agencies (including securities collateralized by mortgages), certificates of
 deposits of insured banks and savings institutions, municipal securities,
 corporate debt securities and loans to other banking institutions.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|Eagle maintains liquid assets that may be invested in specified
 short-term securities and other investments. Liquidity levels may be
 increased or decreased depending on the yields on investment alternatives. They
 may also be increased based on managements judgment as to the attractiveness
 of the yields then available in relation to other opportunities. Liquidity
 levels can also change based on managements expectation of future yield
 levels, as well as managements projections as to the short-term demand for
 funds to be used in the Banks loan origination and other activities. Eagle
 maintains an investment securities portfolio and a mortgage-backed securities
 portfolio as part of its investment portfolio.                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|Investment Policies.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|The investment policy of Eagle, which is established by the board of
 directors, is designed to foster earnings and liquidity within prudent
 interest rate risk guidelines, while complementing American Federals lending
 activities. The policy provides for available-for-sale (including those
 accounted for under FASB ASC 825), held-to-maturity, and trading
 classifications. However, Eagle does not hold any securities for purposes of
 trading. The policy permits investments in high credit quality instruments
 with diversified cash flows while permitting us to maximize total return
 within the guidelines set forth in our interest rate risk and liquidity
 management policies. Permitted investments include but are not limited to
 U.S. government obligations, government agency or government-sponsored agency
 obligations, state, county and municipal obligations, and mortgage-backed
 securities. Collateralized mortgage obligations, investment grade corporate
 debt securities, and commercial paper are also included. We also invest in
 Federal Home Loan Bank (FHLB) overnight deposits and federal funds, but these
 instruments are not considered part of the investment portfolio.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|Our investment policy also includes several specific guidelines and
 restrictions to insure adherence with safe and sound activities. The policy
 prohibits investments in high-risk mortgage derivative products (as defined
 within the policy) without prior approval from the board of directors.
 Management must demonstrate the business advantage of such investments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|We do not participate in the use of off-balance sheet derivative
 financial instruments, except interest rate caps and certain financial
 instruments designated as cash flow hedges related to loans committed to be
 sold in the secondary market. Further, Eagle does not invest in securities
 which are not rated investment grade.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|The Board, through its asset liability committee, has charged the
 President and CEO to implement the investment policy. All transactions are
 reported to the board of directors monthly, as well as the current
 composition of the portfolio, including market values and unrealized gains
 and losses.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|Investment Securities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|We maintain a portfolio of investment securities, classified as
 either available-for-sale (including those accounted for under FASB ASC 825)
 or held-to-maturity to enhance total return on investments. At June 30, 2010,
 our investment securities included U.S. government and agency obligations,
 Small Business Administration pools, municipal securities, mortgage-backed
 securities, collateralized mortgage obligations and corporate obligations,
 all with varying characteristics as to rate, maturity and call provisions.
 Investment securities held-to-maturity represented 0.11% of Eagles total
 investment portfolio. Securities available-for-sale totaled 97.37% of Eagles
 total investment portfolio. The remaining percentage is comprised of
 interest-bearing deposits in banks and stock in the FHLB of Seattle.                                                                                                                                                                                                                                                                                                                                                                                

16

---



The following
table sets forth the carrying value of our investment securities portfolio at
the dates indicated:

|                                               |  |                        |         |                      |  |                 |   |                      |        |  |  |        |  
|---------------------------------------------- |  | ---------------------- | ------- | -------------------- |  | --------------- | - | -------------------- | ------ |  |  | ------ | -
|                                               |  | At June 30,            |        
|                                               |  | 2010                   |         | 2009                 | 
|                                               |  |                        |         |                      | 
|                                               |  | (Dollars in Thousands) |        
|                                               |  | Carrying
 Value        |         | Percentage
 of Total |  | Carrying
 Value |   | Percentage
 of Total |       
|                                               |  |                        |         |                      |  |                 |   |                      |       
|Securities available-for-sale, at fair
 value: |  |                        |         |                      |  |                 |   |                      |        |  |  |        |  
|U.S. Government and agency obligations         |  | $                      | 32,241  |                      |  | 27.41           | % | $                    | 3,882  |  |  | 4.57   | %
|Corporate obligations                          |  |                        | 7,451   |                      |  | 6.33            | % |                      | 9,493  |  |  | 11.18  | %
|Municipal obligations                          |  |                        | 35,412  |                      |  | 30.11           | % |                      | 28,893 |  |  | 34.04  | %
|Collateralized mortgage obligations            |  |                        | 37,669  |                      |  | 32.03           | % |                      | 31,551 |  |  | 37.17  | %
|Mortgage-backed securities                     |  |                        | 1,755   |                      |  | 1.49            | % |                      | 8,444  |  |  | 9.95   | %
|                                               |  |                        |         |                      |  |                 |   |                      |        |  |  |        |  
|Total securities available for sale            |  |                        | 114,528 |                      |  | 97.37           | % |                      | 82,263 |  |  | 96.91  | %
|                                               |  |                        |         |                      |  |                 |   |                      |        |  |  |        |  
|                                               |  |                        |         |                      |  |                 |   |                      |        |  |  |        |  
|Securities held to maturity, at book value:    |  |                        |         |                      |  |                 |   |                      |        |  |  |        |  
|Municipal obligations                          |  |                        | 125     |                      |  | 0.11            | % |                      | 375    |  |  | 0.44   | %
|                                               |  |                        |         |                      |  |                 |   |                      |        |  |  |        |  
|Total securities held to maturity              |  |                        | 125     |                      |  | 0.11            | % |                      | 375    |  |  | 0.44   | %
|                                               |  |                        |         |                      |  |                 |   |                      |        |  |  |        |  
|Preferred stock - FASB ASC 825                 |  |                        |        |                      |  |                 |   |                      | 25     |  |  | 0.03   | %
|                                               |  |                        |         |                      |  |                 |   |                      |        |  |  |        |  
|                                               |  |                        |         |                      |  |                 |   |                      |        |  |  |        |  
|Total securities                               |  |                        | 114,653 |                      |  | 97.48           | % |                      | 82,663 |  |  | 97.38  | %
|                                               |  |                        |         |                      |  |                 |   |                      |        |  |  |        |  
|Interest-bearing deposits                      |  |                        | 966     |                      |  | 0.82            | % |                      | 224    |  |  | 0.26   | %
|Federal Home Loan Bank capital stock, at
 cost |  |                        | 2,003   |                      |  | 1.70            | % |                      | 2,000  |  |  | 2.36   | %
|                                               |  |                        |         |                      |  |                 |   |                      |        |  |  |        |  
|Total                                          |  | $                      | 117,622 |                      |  | 100.00          | % | $                    | 84,887 |  |  | 100.00 | %
|                                               |  |                        |         |                      |  |                 |   |                      |        |  |  |        |  

17

---



The following
table sets forth information regarding the carrying values, weighted average
yields and maturities of our investment securities portfolio at June 30, 2010:

|                                            |  |                  |       |                                      |      |                             |   |                                      |  |                             |   |                                     |        |                 |      |                                     |   |                 |  |                           |   |                                     |         |  |   |         |  |       |  
|------------------------------------------- |  | ---------------- | ----- | ------------------------------------ | ---- | --------------------------- | - | ------------------------------------ |  | --------------------------- | - | ----------------------------------- | ------ | --------------- | ---- | ----------------------------------- | - | --------------- |  | ------------------------- | - | ----------------------------------- | ------- |  | - | ------- |  | ----- | -
|                                            |  | At June 30, 2010 |      
|                                            |  |                  |      
|                                            |  | One Year or Less |       | One to Five Years                    |      | More than Five to Ten Years |   | More than Ten Years                  |  | Total Investment Securities |  
|                                            |  |                  |       |                                      |      |                             |   |                                      |  |                             |  
|                                            |  | Carrying
 Value  |       | Annualized
 Weighted
 Average
 Yield |      | Carrying
 Value             |   | Annualized
 Weighted
 Average
 Yield |  | Carrying Value              |   | Annualized
 Weighted
 Average Yield |        | Carrying
 Value |      | Annualized
 Weighted
 Average Yield |   | Carrying
 Value |  | Approximate
 Market Value |   | Annualized
 Weighted
 Average Yield |        
|                                            |  |                  |       |                                      |      |                             |   |                                      |  |                             |   |                                     |        |                 |      |                                     |   |                 |  |                           |   |                                     |        
|Securities available-for-sale:              |  |                  |       |                                      |      |                             |   |                                      |  |                             |   |                                     |        |                 |      |                                     |   |                 |  |                           |   |                                     |         |  |   |         |  |       |  
|U.S. Government and agency obligations      |  | $                | 4,174 |                                      | 0.99 | %                           | $ | 23,396                               |  | 2.06                        | % | $                                   | 4,132  |                 | 1.19 | %                                   | $ | 539             |  | 1.13                      | % | $                                   | 32,241  |  | $ | 32,241  |  | 1.79  | %
|Corporate obligations                       |  |                  | 1,023 |                                      | 5.15 |                             |   | 6,428                                |  | 4.89                        |   |                                     |       |                 |     |                                     |   |                |  |                          |   |                                     | 7,451   |  |   | 7,451   |  | 4.93  |  
|Municipal obligations                       |  |                  | 1,117 |                                      | 1.32 |                             |   | 2,694                                |  | 4.59                        |   |                                     | 7,974  |                 | 5.56 |                                     |   | 23,627          |  | 6.49                      |   |                                     | 35,412  |  |   | 35,412  |  | 5.97  |  
|Private collateralized mortgage obligations |  |                  |      |                                      |     |                             |   |                                     |  |                            |   |                                     |       |                 |     |                                     |   | 842             |  | 10.77                     |   |                                     | 842     |  |   | 842     |  | 10.77 |  
|Collateralized mortgage obligations         |  |                  |      |                                      |     |                             |   |                                     |  |                            |   |                                     | 4,146  |                 | 3.60 |                                     |   | 32,681          |  | 3.80                      |   |                                     | 36,827  |  |   | 36,827  |  | 3.78  |  
|Mortgage-backed securities                  |  |                  | 119   |                                      | 2.85 |                             |   | 121                                  |  | 4.11                        |   |                                     | 81     |                 | 5.38 |                                     |   | 1,434           |  | 3.89                      |   |                                     | 1,755   |  |   | 1,755   |  | 3.90  |  
|                                            |  |                  |       |                                      |      |                             |   |                                      |  |                             |   |                                     |        |                 |      |                                     |   |                 |  |                           |   |                                     |         |  |   |         |  |       |  
|                                            |  |                  |       |                                      |      |                             |   |                                      |  |                             |   |                                     |        |                 |      |                                     |   |                 |  |                           |   |                                     |         |  |   |         |  |       |  
|Total securities available for sale         |  |                  | 6,433 |                                      | 1.74 |                             |   | 32,639                               |  | 2.83                        |   |                                     | 16,333 |                 | 3.96 |                                     |   | 59,123          |  | 4.80                      |   |                                     | 114,528 |  |   | 114,528 |  | 4.03  |  
|                                            |  |                  |       |                                      |      |                             |   |                                      |  |                             |   |                                     |        |                 |      |                                     |   |                 |  |                           |   |                                     |         |  |   |         |  |       |  
|                                            |  |                  |       |                                      |      |                             |   |                                      |  |                             |   |                                     |        |                 |      |                                     |   |                 |  |                           |   |                                     |         |  |   |         |  |       |  
|Securities held to maturity:                |  |                  |       |                                      |      |                             |   |                                      |  |                             |   |                                     |        |                 |      |                                     |   |                 |  |                           |   |                                     |         |  |   |         |  |       |  
|Municipal obligations                       |  |                  | 125   |                                      | 7.50 |                             |   |                                     |  |                            |   |                                     |       |                 |     |                                     |   |                |  |                          |   |                                     | 125     |  |   | 125     |  | 7.50  |  
|                                            |  |                  |       |                                      |      |                             |   |                                      |  |                             |   |                                     |        |                 |      |                                     |   |                 |  |                           |   |                                     |         |  |   |         |  |       |  
|                                            |  |                  |       |                                      |      |                             |   |                                      |  |                             |   |                                     |        |                 |      |                                     |   |                 |  |                           |   |                                     |         |  |   |         |  |       |  
|Total securities held to maturity           |  |                  | 125   |                                      | 7.50 |                             |   |                                     |  |                            |   |                                     |       |                 |     |                                     |   |                |  |                          |   |                                     | 125     |  |   | 125     |  | 7.50  |  
|                                            |  |                  |       |                                      |      |                             |   |                                      |  |                             |   |                                     |        |                 |      |                                     |   |                 |  |                           |   |                                     |         |  |   |         |  |       |  
|                                            |  |                  |       |                                      |      |                             |   |                                      |  |                             |   |                                     |        |                 |      |                                     |   |                 |  |                           |   |                                     |         |  |   |         |  |       |  
|Total securities                            |  |                  | 6,558 |                                      | 1.85 |                             |   | 32,639                               |  | 2.83                        |   |                                     | 16,333 |                 | 3.96 |                                     |   | 59,123          |  | 4.80                      |   |                                     | 114,653 |  |   | 114,653 |  | 4.03  |  
|                                            |  |                  |       |                                      |      |                             |   |                                      |  |                             |   |                                     |        |                 |      |                                     |   |                 |  |                           |   |                                     |         |  |   |         |  |       |  
|                                            |  |                  |       |                                      |      |                             |   |                                      |  |                             |   |                                     |        |                 |      |                                     |   |                 |  |                           |   |                                     |         |  |   |         |  |       |  
|Interest-bearing deposits                   |  |                  | 966   |                                      | 1.56 |                             |   |                                     |  |                            |   |                                     |       |                 |     |                                     |   |                |  |                          |   |                                     | 966     |  |   | 966     |  | 1.56  |  
|                                            |  |                  |       |                                      |      |                             |   |                                      |  |                             |   |                                     |        |                 |      |                                     |   |                 |  |                           |   |                                     |         |  |   |         |  |       |  
|                                            |  |                  |       |                                      |      |                             |   |                                      |  |                             |   |                                     |        |                 |      |                                     |   |                 |  |                           |   |                                     |         |  |   |         |  |       |  
|Federal Home Loan Bank capital stock        |  |                  |      |                                      |     |                             |   |                                     |  |                            |   |                                     | 2,003  |                 |     |                                     |   |                |  |                          |   |                                     | 2,003   |  |   | 2,003   |  |      |  
|                                            |  |                  |       |                                      |      |                             |   |                                      |  |                             |   |                                     |        |                 |      |                                     |   |                 |  |                           |   |                                     |         |  |   |         |  |       |  
|                                            |  |                  |       |                                      |      |                             |   |                                      |  |                             |   |                                     |        |                 |      |                                     |   |                 |  |                           |   |                                     |         |  |   |         |  |       |  
|Total                                       |  | $                | 7,524 |                                      | 1.82 | %                           | $ | 32,639                               |  | 2.83                        | % | $                                   | 18,336 |                 | 3.52 | %                                   | $ | 59,123          |  | 4.80                      | % | $                                   | 117,622 |  | $ | 117,622 |  | 3.94  | %
|                                            |  |                  |       |                                      |      |                             |   |                                      |  |                             |   |                                     |        |                 |      |                                     |   |                 |  |                           |   |                                     |         |  |   |         |  |       |  

18

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SOURCES OF FUNDS

General.

Deposits are the major source of our funds for lending and other
investment purposes. Borrowings (principally from the FHLB of Seattle) are also
used to compensate for reductions in the availability of funds from other
sources. In addition to deposits and borrowings, we derive funds from loan and
mortgage-backed securities principal repayments, and proceeds from the
maturity, call and sale of mortgage-backed securities and investment securities
and from the sale of loans. Loan and mortgage-backed securities payments are a
relatively stable source of funds, while loan prepayments and deposit inflows
are significantly influenced by general interest rates and financial market conditions.

Deposits.

We offer a variety of deposit accounts. Deposit account terms vary,
primarily as to the required minimum balance amount, the amount of time that
the funds must remain on deposit and the applicable interest rate.

Our current deposit products include certificates of deposit accounts
ranging in terms from 90 days to five years as well as checking, savings and
money market accounts. Individual retirement accounts (IRAs) are included in
certificates of deposit.

Deposits are obtained primarily from residents of Helena, Bozeman,
Butte and Townsend. We believe we are able to attract deposit accounts by
offering outstanding service, competitive interest rates and convenient
locations and service hours. We use traditional methods of advertising to
attract new customers and deposits, including radio, television, print media
advertising and sales training and incentive programs for employees. Management
believes that non-residents of Montana hold an insignificant number and amount
of deposit accounts.

We pay interest rates on deposits which are competitive in our market.
Interest rates on deposits are set by senior management, based on a number of
factors, including: projected cash flow; a current survey of a selected group
of competitors rates for similar products; external data which may influence
interest rates; investment opportunities and loan demand; and scheduled
certificate maturities and loan and investment repayments.

Core deposits are deposits that are more stable and somewhat less
sensitive to rate changes. They also represent a lower cost source of funds
than rate sensitive, more volatile accounts such as certificates of deposit. We
believe that our core deposits are our checking, as well as NOW accounts,
statement savings accounts, money market accounts and IRA accounts. Based on
our historical experience, we include IRA accounts funded by certificates of
deposit as core deposits because they exhibit the principal features of core
deposits in that they are stable and generally are not rate sensitive. Core
deposits amounted to $139.29 million or 70.37% of the Banks deposits at June
30, 2010 ($112.93 million or 57.05% if IRA certificates of deposit are
excluded). The presence of a high percentage of core deposits and, in
particular, transaction accounts, is part of our strategy to restructure our
liabilities to more closely resemble the lower cost liabilities of a commercial
bank. However, a significant portion of our deposits remains in certificate of
deposit form. These certificates of deposit, should they mature and be renewed
at higher rates, would result in an increase in our cost of funds.

19

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The following table sets forth American Federals distribution of
deposit accounts at the dates indicated and the weighted average interest rate
on each category of deposit represented:

|                                      |  |                        |         |                   |        |                         |      |        |   |                   |  |                         |   |      |  
|------------------------------------- |  | ---------------------- | ------- | ----------------- | ------ | ----------------------- | ---- | ------ | - | ----------------- |  | ----------------------- | - | ---- | -
|                                      |  | At June 30,            |        
|                                      |  |                        |        
|                                      |  | 2010                   |         | 2009              |       
|                                      |  |                        |         |                   |        |                        
|                                      |  | (Dollars in thousands) |        
|                                      |  | Amount                 |         | Percent
 of Total |        | Weighted
 Average
 Rate |      | Amount |   | Percent
 of Total |  | Weighted
 Average
 Rate |  
|                                      |  |                        |         |                   |        |                         |      |        |   |                   |  |                         |  
|                                     
|Noninterest checking                  |  | $                      | 18,376  |                   | 9.28   | %                       | 0.00 | %      | $ | 15,002            |  | 8.01                    | % | 0.00 | %
|Statement savings                     |  |                        | 30,875  |                   | 15.60  | %                       | 0.21 | %      |   | 26,445            |  | 14.13                   | % | 0.41 | %
|NOW account/Interest bearing checking |  |                        | 34,658  |                   | 17.51  | %                       | 0.15 | %      |   | 32,664            |  | 17.45                   | % | 0.33 | %
|Money market accounts                 |  |                        | 29,021  |                   | 14.65  | %                       | 0.24 | %      |   | 26,886            |  | 14.36                   | % | 0.64 | %
|                                      |  |                        |         |                   |        |                         |      |        |   |                   |  |                         |   |      |  
|                                      |  |                        |         |                   |        |                         |      |        |   |                   |  |                         |   |      |  
|Total                                 |  |                        | 112,930 |                   | 57.05  | %                       | 0.16 | %      |   | 100,997           |  | 53.95                   | % | 0.38 | %
|                                      |  |                        |         |                   |        |                         |      |        |   |                   |  |                         |   |      |  
|Certificates of deposit accounts:     |  |                        |         |                   |        |                         |      |        |   |                   |  |                         |   |      |  
|IRA certificates                      |  |                        | 26,358  |                   | 13.32  | %                       | 2.10 | %      |   | 23,121            |  | 12.35                   | % | 2.96 | %
|Brokered certificates                 |  |                        |        |                   | 0.00   | %                       | 0.00 | %      |   |                  |  | 0.00                    | % | 0.00 | %
|Other certificates                    |  |                        | 58,651  |                   | 29.63  | %                       | 1.61 | %      |   | 63,081            |  | 33.70                   | % | 2.41 | %
|                                      |  |                        |         |                   |        |                         |      |        |   |                   |  |                         |   |      |  
|Total certificates of deposit         |  |                        | 85,009  |                   | 42.95  | %                       | 1.76 | %      |   | 86,202            |  | 46.05                   | % | 2.56 | %
|                                      |  |                        |         |                   |        |                         |      |        |   |                   |  |                         |   |      |  
|                                      |  |                        |         |                   |        |                         |      |        |   |                   |  |                         |   |      |  
|Total deposits                        |  | $                      | 197,939 |                   | 100.00 | %                       | 0.85 | %      | $ | 187,199           |  | 100.00                  | % | 1.38 | %
|                                      |  |                        |         |                   |        |                         |      |        |   |                   |  |                         |   |      |  

The following
table sets forth the amounts and maturities of our certificates of deposit as
of June 30, 2010, for the maturity dates indicated:

|            |  |                |        |                |   |                |  |                        |       |       |   |       |  |   |        | 
|----------- |  | -------------- | ------ | -------------- | - | -------------- |  | ---------------------- | ----- | ----- | - | ----- |  | - | ------ | 
|            |  | June 30,
 2011 |        | June 30,
 2012 |   | June 30,
 2013 |  | After 
 June 30,
 2014 |       | Total |  
|            |  |                |        |                |   |                |  |                        |       |       |  
|under 1.01% |  | $              | 23,234 |                | $ |               |  | $                      |      |       | $ |      |  | $ | 23,234 | 
|1.01-2.00%  |  |                | 25,624 |                |   | 13,290         |  |                        | 50    |       |   | 47    |  |   | 39,011 | 
|2.01-3.00%  |  |                | 5,490  |                |   | 236            |  |                        | 3,367 |       |   | 1,510 |  |   | 10,603 | 
|3.01-4.00%  |  |                | 5,913  |                |   | 1,516          |  |                        | 299   |       |   | 1,997 |  |   | 9,725  | 
|4.01-5.00%  |  |                | 701    |                |   | 834            |  |                        | 831   |       |   | 27    |  |   | 2,393  | 
|5.01-6.00%  |  |                | 43     |                |   |               |  |                        |      |       |   |      |  |   | 43     | 
|6.01-7.00%  |  |                |       |                |   |               |  |                        |      |       |   |      |  |   |       | 
|            |  |                |        |                |   |                |  |                        |       |       |   |       |  |   |        | 
|            |  |                |        |                |   |                |  |                        |       |       |   |       |  |   |        | 
|Total       |  | $              | 61,005 |                | $ | 15,876         |  | $                      | 4,547 |       | $ | 3,581 |  | $ | 85,009 | 
|            |  |                |        |                |   |                |  |                        |       |       |   |       |  |   |        | 

20

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The following
table shows the amount of certificates of deposit of more than $100,000 by time
remaining until maturity as of June 30, 2010:

|                    |  |                |        | 
|------------------- |  | -------------- | ------ | 
|                    |  | (In thousands) |       
|                    |  |                |        | 
|3 months or less    |  | $              | 6,473  | 
|Over 3 to 6 months  |  |                | 5,755  | 
|Over 6 to 12 months |  |                | 5,928  | 
|Over 12 months      |  |                | 8,045  | 
|                    |  |                |        | 
|                    |  |                |        | 
|Total               |  | $              | 26,201 | 
|                    |  |                |        | 

The following
table sets forth the net changes in deposit accounts for the periods indicated:

|                                                     |  |                        |         |      |   |         |  
|---------------------------------------------------- |  | ---------------------- | ------- | ---- | - | ------- | -
|                                                     |  | Year Ended June 30,    |        
|                                                     |  |                        |        
|                                                     |  | 2010                   |         | 2009 |  
|                                                     |  |                        |         |      |  
|                                                     |  | (Dollars in thousands) |        
|                                                     |  |                        |         |      |   |         |  
|Opening balance                                      |  | $                      | 187,199 |      | $ | 178,851 |  
|Deposits, net                                        |  |                        | 8,592   |      |   | 5,265   |  
|Interest credited                                    |  |                        | 2,148   |      |   | 3,083   |  
|                                                     |  |                        |         |      |   |         |  
|                                                     |  |                        |         |      |   |         |  
|Ending balance                                       |  | $                      | 197,939 |      | $ | 187,199 |  
|                                                     |  |                        |         |      |   |         |  
|                                                     |  |                        |         |      |   |         |  
|Net increase                                         |  | $                      | 10,740  |      | $ | 8,348   |  
|                                                     |  |                        |         |      |   |         |  
|Percent increase                                     |  |                        | 5.74    | %    |   | 4.67    | %
|                                                     |  |                        |         |      |   |         |  
|Weighted average cost of
 deposits during the period |  |                        | 1.19    | %    |   | 1.86    | %
|                                                     |  |                        |         |      |   |         |  
|Weighted average cost of
 deposits at end of period  |  |                        | 0.85    | %    |   | 1.38    | %

Our depositors are primarily residents of the state of Montana.

Borrowings.

Deposits are the primary source of funds for our lending and investment
activities and for general business purposes. However, as the need arises, or
in order to take advantage of funding opportunities, we also borrow funds in
the form of advances from the FHLB of Seattle and other borrowings from PNC
Financial Services, Inc. (PNC) to supplement our supply of lendable funds and
to meet deposit withdrawal requirements.

During the fiscal year ended June 30, 2006, our predecessor entity
formed a special purpose subsidiary, Eagle Bancorp Statutory Trust I (the
Trust), for the purpose of issuing trust preferred securities in the amount
of $5.0 million. Our predecessor entity has issued subordinated debentures to
the Trust, and the coupon on the debentures matches the dividend payment on the
trust preferred securities. Upon the closing of the second-step conversion, we
assumed the obligations of our predecessor in connection with the subordinated
debentures and trust preferred securities. For regulatory purposes, the
securities qualify as Tier 1 Capital, while for accounting purposes they are
recorded as long term debt. The securities have a 30 year maturity and carry a
fixed coupon of 6.02% for the first five years, at which time the coupon
becomes variable, at a spread of 142 basis points over 3 month LIBOR.

21

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The following table sets forth information concerning our borrowing
from the FHLB of Seattle and PNC at the end of, and during, the periods
indicated:

|                                                 |  |                        |        |      |   |        |  
|------------------------------------------------ |  | ---------------------- | ------ | ---- | - | ------ | -
|                                                 |  | Ended June 30,         |       
|                                                 |  |                        |       
|                                                 |  | 2010                   |        | 2009 |  
|                                                 |  |                        |        |      |  
|                                                 |  | (Dollars in thousands) |       
|FHLB Advances:                                   |  |                        |        |      |   |        |  
|Average balance                                  |  | $                      | 43,090 |      | $ | 44,144 |  
|Maximum balance at any month-end                 |  |                        | 45,500 |      |   | 46,889 |  
|Balance at period end                            |  |                        | 44,224 |      |   | 44,056 |  
|Weighted average interest rate during the period |  |                        | 3.95   | %    |   | 3.54   | %
|Weighted average interest rate at period end     |  |                        | 3.32   | %    |   | 3.69   | %
|                                                 |  |                        |        |      |   |        |  
|Repurchase Agreements:                           |  |                        |        |      |   |        |  
|Average balance                                  |  | $                      | 23,000 |      | $ | 23,000 |  
|Maximum balance at any month-end                 |  |                        | 23,000 |      |   | 23,000 |  
|Balance at period end                            |  |                        | 23,000 |      |   | 23,000 |  
|Weighted average interest rate during the period |  |                        | 4.66   | %    |   | 4.66   | %
|Weighted average interest rate at period end     |  |                        | 4.66   | %    |   | 4.66   | %
|                                                 |  |                        |        |      |   |        |  
|Other:                                           |  |                        |        |      |   |        |  
|Average balance                                  |  | $                      |       |      | $ | 628    |  
|Maximum balance at any month-end                 |  |                        |       |      |   | 3,900  |  
|Balance at period end                            |  |                        |       |      |   |       |  
|Weighted average interest rate during the period |  |                        | n/a    |      |   | 1.28   | %
|Weighted average interest rate at period end     |  |                        | n/a    |      |   | n/a    |  
|                                                 |  |                        |        |      |   |        |  
|Total borrowings:                                |  |                        |        |      |   |        |  
|Average balance                                  |  | $                      | 66,090 |      | $ | 67,772 |  
|Maximum balance at any month-end                 |  |                        | 68,500 |      |   | 73,789 |  
|Balance at period end                            |  |                        | 67,224 |      |   | 67,056 |  
|Weighted average interest rate during the period |  |                        | 4.13   | %    |   | 3.90   | %
|Weighted average interest rate at period end     |  |                        | 3.78   | %    |   | 4.02   | %

SUBSIDIARY ACTIVITY

We are permitted to invest in the capital stock of, or originate
secured or unsecured loans to, subsidiary corporations. We do not have any
subsidiaries, except for American Federal Savings Bank and Eagle Bancorp
Statutory Trust I.

Personnel

As of June 30, 2010, we had 81 full-time employees and 8 part-time
employees. The employees are not represented by a collective bargaining unit.
We believe our relationship with our employees to be good.

22

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REGULATION

General

As a federally-chartered savings institution, American Federal is
subject to extensive regulation, examination and supervision by the Office of
Thrift Supervision as its primary federal regulator, and the FDIC, as the
insurer of its deposits. American Federal is a member of the Federal Home Loan
Bank, or FHLB, System and its deposit accounts are insured up to applicable limits
by the Deposit Insurance Fund, which is administered by the FDIC. American
Federal must file reports with the Office of Thrift Supervision and the FDIC
concerning its activities and financial condition in addition to obtaining
regulatory approvals prior to entering into certain transactions such as
mergers with, or acquisitions of, other financial institutions. There are
periodic examinations by the Office of Thrift Supervision to evaluate American
Federals safety and soundness and compliance with various regulatory
requirements. Under certain circumstances, the FDIC may also examine American
Federal. This regulatory structure is intended primarily for the protection of
the insurance fund and depositors. The regulatory structure also gives the
regulatory authorities extensive discretion in connection with their
supervisory and enforcement activities and examination policies, including
policies with respect to the classification of assets and the establishment of
adequate allowance for loan losses for regulatory purposes. Any change in such
policies, whether by the Office of Thrift Supervision, the FDIC or Congress,
could have a material adverse impact on Eagle and American Federal and their
operations. Eagle, as a savings and loan holding company, is required to file
certain reports with, is subject to examination by, and otherwise comply with
the rules and regulations of the Office of Thrift Supervision. Eagle is also
subject to the rules and regulations of the SEC under the federal securities
laws. See Holding Company Regulation.

Dodd-Frank Act

On July 21,
2010, the President signed into law the Dodd-Frank Wall Street Reform and
Consumer Protection Act. The Dodd-Frank Act will significantly change the
current bank regulatory structure and affect the lending, investment, trading
and operating activities of financial institutions and their holding companies.
Regulations implementing the changes described below have not been promulgated
by the federal banking agencies, so we cannot determine the full impact on our
business and operations at this time.

The Dodd-Frank
Act will eliminate our current primary federal regulator, the Office of Thrift
Supervision, and will require American Federal Savings Bank to be regulated by
the Office of the Comptroller of the Currency (the primary federal regulator
for national banks). The Dodd-Frank Act also authorizes the Board of Governors
of the Federal Reserve System to supervise and regulate all savings and loan
holding companies like Eagle, in addition to bank holding companies which it
currently regulates. As a result, the Federal Reserve Boards current
regulations applicable to bank holding companies, including holding company
capital requirements, will apply to savings and loan holding companies like
Eagle. These capital requirements are substantially similar to the capital
requirements currently applicable to American Federal Savings Bank, as
described in Federal Regulation of Savings InstitutionsCapital
Requirements. The Dodd-Frank Act also requires the Federal Reserve Board to
set minimum capital levels for depository institution holding companies that
are as stringent as those required for the insured depository subsidiaries, and
the components of Tier 1 capital would be restricted to capital instruments that
are currently considered to be Tier 1 capital for insured depository
institutions. Under the Dodd-Frank Act, the proceeds of trust preferred
securities are excluded from Tier 1 capital unless such securities were issued
prior to May 19, 2010 by bank or savings and loan holding companies with less
than $15 billion of assets. The legislation also establishes a floor for
capital of insured depository institutions that cannot be lower than the
standards in effect today, and directs the federal banking regulators to
implement new leverage and capital requirements within 18 months that take into
account off-balance sheet activities and other risks, including risks relating
to securitized products and derivatives.

The Dodd-Frank
Act also creates a new Consumer Financial Protection Bureau with broad powers
to supervise and enforce consumer protection laws. The Consumer Financial
Protection Bureau has broad rule-making authority for a wide range of consumer
protection laws that apply to all banks and savings institutions such as
American Federal Savings Bank, including the authority to prohibit unfair,
deceptive or abusive acts and practices. The Consumer Financial Protection
Bureau has examination and enforcement authority over all banks and savings
institutions with more than $10 billion in assets. Banks and savings
institutions with $10 billion or less in assets will be examined by their
applicable bank regulators. The new legislation also weakens the federal
preemption available for national banks and federal savings associations, and
gives state attorneys general the ability to enforce applicable federal
consumer protection laws.

The
legislation also broadens the base for Federal Deposit Insurance Corporation
insurance assessments. Assessments will now be based on the average
consolidated total assets less tangible equity capital of a financial
institution. The Dodd-Frank Act also permanently increases the maximum amount
of deposit insurance for banks, savings institutions and credit unions to
$250,000 per depositor, retroactive to January 1, 2009, and non-interest
bearing transaction accounts have unlimited deposit insurance through December
31, 2013. Lastly, the Dodd-Frank Act directs the Federal Reserve Board to
promulgate rules prohibiting excessive compensation paid to bank holding
company executives, regardless of whether the company is publicly traded or
not.

23

---



Federal Regulation of Savings Institutions

Office of Thrift Supervision.
The Office of Thrift Supervision has extensive authority over the operations of
savings institutions. As part of this authority, American Federal is required
to file periodic reports with the Office of Thrift Supervision and is subject
to periodic examinations by the Office of Thrift Supervision. The Office of
Thrift Supervision also has extensive enforcement authority over all savings
institutions and their holding companies, including American Federal and Eagle.
This enforcement authority includes, among other things, the ability to assess
civil money penalties, issue cease-and-desist or removal orders and initiate
prompt corrective action orders. In general, these enforcement actions may be
initiated for violations of laws and regulations and unsafe or unsound
practices. Other actions or inactions may provide the basis for enforcement
action, including misleading or untimely reports filed with the Office of
Thrift Supervision. Except under certain circumstances, public disclosure of
final enforcement actions by the Office of Thrift Supervision is required.

In addition, the investment, lending and branching authority of
American Federal also are prescribed by federal laws, which prohibit American
Federal from engaging in any activities not permitted by these laws. For
example, no savings institution may invest in non-investment grade corporate
debt securities. In addition, the permissible level of investment by federal
institutions in loans secured by non-residential real property may not exceed
400% of total capital, except with approval of the Office of Thrift Supervision.
Federal savings institutions are generally authorized to branch nationwide.
American Federal is in compliance with the noted restrictions.

All savings institutions are required to pay assessments to the Office
of Thrift Supervision to fund the agencys operations. The general assessments,
paid on a semi-annual basis, are determined based on the savings institutions
total assets, including consolidated subsidiaries.

American Federals general permissible lending limit for
loans-to-one-borrower is equal to the greater of $500,000 or 15% of unimpaired
capital and surplus (except for loans fully secured by certain readily
marketable collateral, in which case this limit is increased to 25% of
unimpaired capital and surplus).

The Office of Thrift Supervision, as well as the other federal banking
agencies, has adopted guidelines establishing safety and soundness standards on
such matters as loan underwriting and documentation, asset quality, earnings
standards, internal controls and audit systems, interest rate risk exposure and
compensation and other employee benefits. Any institution that fails to comply
with these standards must submit a compliance plan.

Federal Home Loan Bank System.
American Federal is a member of the FHLB of Seattle, which is one of 12 regional
FHLBs that administer the home financing credit function of savings
institutions. Each FHLB serves as a reserve or central bank for its members
within its assigned region. It is funded primarily from proceeds derived from
the sale of consolidated obligations of the FHLB System. It makes loans or
advances to members in accordance with policies and procedures, established by
the Board of Directors of the FHLB, which are subject to the oversight of the
Federal Housing Finance Board. All advances from the FHLB are required to be
fully secured by sufficient collateral as determined by the FHLB. In addition,
all long-term advances are required to provide funds for residential home
financing. As a member, American Federal is required to purchase and maintain
stock in the FHLB of Seattle.

The FHLBs have continued and continue to contribute to low- and
moderately-priced housing programs through direct loans or interest subsidies
on advances targeted for community investment and low- and moderate-income
housing projects. These contributions have affected adversely the level of FHLB
dividends paid and could continue to do so in the future. These contributions
could also have an adverse effect on the value of FHLB stock in the future. A
reduction in value of American Federals FHLB stock may result in a
corresponding reduction in American Federals capital.

Federal Reserve System.
The Federal Reserve System requires all depository institutions to maintain
noninterest-bearing reserves at specified levels against their checking, NOW
and Super NOW checking accounts and non-personal time deposits. The balances
maintained to meet the reserve requirements imposed by the Federal Reserve
System may be used to satisfy the Office of Thrift Supervision liquidity
requirements.

Savings institutions have authority to borrow from the Federal Reserve
System discount window. American Federal maintains a primary credit
facility at the Federal Reserves discount window.

Insurance of Deposit Accounts.
Deposit accounts at American Federal are insured by the Federal Deposit
Insurance Corporation, generally up to a maximum of $100,000 per separately
insured depositor and up to a maximum of $250,000 for self-directed retirement
accounts. American Federals deposits, therefore, are subject to Federal
Deposit Insurance

24

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Corporation deposit insurance assessments. Effective July 22, 2010, the
Dodd-Frank Act raised the basic limit on federal deposit insurance coverage
from $100,000 to $250,000 per depositor.

The Federal Deposit Insurance Corporation imposes an assessment against
all depository institutions for deposit insurance. This assessment is based on
the risk category of the institution and, prior to 2009, ranged from five to 43
basis points of the institutions deposits. On December 22, 2008, the Federal
Deposit Insurance Corporation issued a final rule that raises the current
deposit insurance assessment rates uniformly by seven basis points (to a range
from 12 to 50 basis points) effective for the first quarter 2009. On February
27, 2009 the Federal Deposit Insurance Corporation issued a final rule that
will alter the way the Federal Deposit Insurance Corporation calculate federal
deposit insurance assessment rates beginning in the second quarter at 2009.
Under the rule, the Federal Deposit Insurance Corporation first establishes an
institutions initial base assessment rate. This initial base assessment rate
would range, depending on the risk category of the institution, from 12 to 45
basis points. The Federal Deposit Insurance Corporation then adjusts the
initial base assessment (higher or lower) to obtain the total base assessment
rate. The adjustment to the initial base assessment rate is based upon an
institutions levels of unsecured debt, secured liabilities, and brokered deposits.
The total base assessment rate would range from seven to 77.5 basis points of
the institutions deposits.

On May 22, 2009, the Federal Deposit Insurance Corporation adopted a
final rule levying a five basis point special assessment on each insured
depository institutions assets minus Tier 1 capital as of June 30, 2009. The
special assessment was payable on September 30, 2009. We recorded an expense of
$128,295 during the quarter ended June 30, 2009, to reflect the special
assessment. Any further special assessments that the Federal Deposit Insurance
Corporation levies will be recorded as an expense during the appropriate
period. In addition, the Federal Deposit Insurance Corporation materially
increased the general assessment rate and, therefore, our Federal Deposit
Insurance Corporation general insurance premium expense will increase
substantially compared to prior periods.

On November 12, 2009, the Federal Deposit Insurance Corporation adopted
a final rule pursuant to which all insured depository institutions are required
to prepay their estimated assessments for the fourth quarter of 2009, and for
all of 2010, 2011 and 2012. Under the rule, this pre-payment was due on
December 30, 2009. Under the rule, the assessment rate for the fourth quarter of
2009 and for 2010 will be based on each institutions total base assessment
rate for the third quarter of 2009, modified to assume that the assessment rate
in effect on September 30, 2009 had been in effect for the entire third
quarter, and the assessment rate for 2011 and 2012 will be equal to the
modified third quarter assessment rate plus an additional 3 basis points. In
addition, each institutions base assessment rate for each period will be
calculated using its third quarter assessment base, adjusted quarterly for an
estimated 5% annual growth rate in the assessment base through the end of 2012.
Under this new rule, we made a payment of approximately $1.0 million to the
Federal Deposit Insurance Corporation on December 30, 2009, and recorded the payment
as a prepaid expense, which will be amortized to expense over three years.

In addition to Federal Deposit Insurance Corporation premiums, the
Financing Corporation is authorized to impose and collect, with the approval of
the Federal Deposit Insurance Corporation, assessments for anticipated
payments, issuance cost and custodial fees on bonds issued by the Financing
Corporation in the 1980s to recapitalize the Federal Savings and Loan Insurance
Corporation. The bonds issued by the Financing Corporation are due to mature in
2017 through 2019. For the quarter ended December 31, 2008, the annualized
Financing Corporation assessment was equal to 1.14% for each $100 in domestic
deposits maintained at an institution.

Temporary Liquidity Guarantee Program. In October 2008,
the Federal Deposit Insurance Corporation introduced the Temporary Liquidity
Guarantee Program. This program has two components. One guarantees newly issued
senior unsecured debt of a participating organization, up to certain limits
established for each institution, issued between October 14, 2008 and June 30,
2009. The Federal Deposit Insurance Corporation will pay the unpaid principal
and interest on a Federal Deposit Insurance Corporation-guaranteed debt
instrument upon the uncured failure of the participating entity to make a
timely payment of principal or interest in accordance with the terms of the
instrument. The guarantee will remain in effect until June 30, 2012. In return
for the Federal Deposit Insurance Corporations guarantee, participating
institutions will pay the Federal Deposit Insurance Corporation a fee based on
the amount and maturity of the debt. American Federal has opted not to
participate in this component of the Temporary Liquidity Guarantee Program.

The other component of the program provides full federal deposit
insurance coverage for non-interest bearing transaction deposit accounts,
regardless of dollar amount, until June 30, 2010. An annualized 10 basis point
assessment on balances in noninterest-bearing transaction accounts that exceed
the existing deposit insurance limit of $250,000 will be assessed on a
quarterly basis to insured depository institutions that have not opted out of
this component of the Temporary Liquidity Guarantee Program. American Federal
has opted to participate in this component of the Temporary Liquidity Guarantee
Program.

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Capital Requirements.
Federally insured savings institutions, such as American Federal, are required
by the Office of Thrift Supervision to maintain minimum levels of regulatory
capital. These minimum capital standards include: a 1.5% tangible capital to
total assets ratio, a 4% leverage ratio (3% for institutions receiving the
highest rating on the CAMELS examination rating system) and an 8% risk-based
capital ratio. In addition, the prompt corrective action standards, discussed
below, also establish, in effect, a minimum 2% tangible capital standard, a 4%
leverage ratio (3% for institutions receiving the highest rating on the CAMELS
system) and, together with the risk-based capital standard itself, a 4% Tier 1
risk-based capital standard. The Office of Thrift Supervision regulations also
require that, in meeting the tangible, leverage and risk-based capital
standards, institutions must generally deduct investments in and loans to
subsidiaries engaged in activities as principal that are not permissible for a
national bank.

The risk-based capital standard requires federal savings institutions
to maintain Tier 1 (core) and total capital (which is defined as core capital and
supplementary capital) to risk-weighted assets of at least 4% and 8%,
respectively. In determining the amount of risk-weighted assets, all assets,
including certain off-balance sheet assets, recourse obligations, residual
interests and direct credit substitutes, are multiplied by a risk-weight factor
of 0% to 100%, assigned by the Office of Thrift Supervision capital regulation
based on the risks believed inherent in the type of asset. Tier 1 (core)
capital is defined as common stockholders equity (including retained
earnings), certain noncumulative perpetual preferred stock and related surplus
and minority interests in equity accounts of consolidated subsidiaries, less
intangibles other than certain mortgage servicing rights and credit card
relationships. The components of supplementary capital currently include
cumulative preferred stock, long-term perpetual preferred stock, mandatory
convertible securities, subordinated debt and intermediate preferred stock, the
allowance for loan and lease losses limited to a maximum of 1.25% of
risk-weighted assets and up to 45% of unrealized gains on available-for-sale
equity securities with readily determinable fair market values. Overall, the
amount of supplementary capital included as part of total capital cannot exceed
100% of core capital. The Office of Thrift Supervision also has authority to
establish individual minimum capital requirements for financial institutions.

Prompt Corrective Action.
The Office of Thrift Supervision is required to take certain supervisory
actions against undercapitalized savings institutions, the severity of which
depends upon the institutions degree of undercapitalization. Generally, an
institution that has a ratio of total capital to risk-weighted assets of less
than 8%, a ratio of Tier 1 (core) capital to risk-weighted assets of less than
4%, or a ratio of core capital to total assets of less than 4% (3% or less for
institutions with the highest examination rating) is considered to be
undercapitalized. An institution that has a total risk-based capital ratio
less than 6%, a Tier 1 capital ratio of less than 3% or a leverage ratio that
is less than 3% is considered to be significantly undercapitalized and an
institution that has a tangible capital to assets ratio equal to or less than
2% is deemed to be critically undercapitalized. Subject to a narrow
exception, the Office of Thrift Supervision is required to appoint a receiver
or conservator for a savings institution that is critically undercapitalized.
Office of Thrift Supervision regulations also require that a capital
restoration plan be filed with the Office of Thrift Supervision within 45 days
of the date a savings institution receives notice that it is
undercapitalized, significantly undercapitalized or critically undercapitalized.
In addition, numerous mandatory supervisory actions become immediately
applicable to an undercapitalized institution, including, but not limited to,
increased monitoring by regulators and restrictions on growth, capital
distributions and expansion. Significantly undercapitalized and critically
undercapitalized institutions are subject to more extensive mandatory
regulatory actions. The Office of Thrift Supervision also could take any one of
a number of discretionary supervisory actions, including the issuance of a
capital directive and the replacement of senior executive officers and
directors. At June 30, 2010, American Federals capital ratios met the well
capitalized standards. See Historical and Pro Forma Regulatory Capital Compliance.

Limitations on Capital Distributions.
Office of Thrift Supervision regulations impose various restrictions on savings
institutions with respect to their ability to make distributions of capital,
which include dividends, stock redemptions or repurchases, cash-out mergers and
other transactions charged to the capital account. Generally, savings
institutions, such as American Federal, that before and after the proposed
distribution are well-capitalized, may make capital distributions during any
calendar year equal to up to 100% of net income for the year-to-date plus
retained net income for the two preceding years. However, an institution deemed
to be in need of more than normal supervision by the Office of Thrift
Supervision may have its dividend authority restricted by the Office of Thrift
Supervision.

Generally, savings institutions proposing to make any capital
distribution need not submit written notice to the Office of Thrift Supervision
prior to such distribution unless they are a subsidiary of a holding company or
would not remain well capitalized following the distribution. Savings
institutions that do not, or would not meet their current minimum capital
requirements following a proposed capital distribution or propose to exceed
these net income limitations, must obtain Office of Thrift Supervision approval
prior to making such distribution. The Office of Thrift Supervision may object
to the distribution during that 30-day period based on safety and soundness
concerns.

Qualified Thrift Lender Test.
All savings institutions, including American Federal, are required to meet a
qualified thrift lender (QTL) test to avoid certain restrictions on their
operations. This test requires a savings institution to have at least

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65% of its total assets, as defined by regulation, in qualified thrift
investments on a monthly average for nine out of every 12 months on a rolling
basis. As an alternative, the savings institution may maintain 60% of its
assets in those assets specified in Section 7701(a)(19) of the Internal Revenue
Code (Code). Under either test, such assets primarily consist of residential
housing related loans and investments.

A savings institution that fails to meet the QTL is subject to certain
operating restrictions and may be required to convert to a national bank
charter. As of June 30, 2010, American Federal met the qualified thrift lender
test.

Activities of Associations and their
Subsidiaries. When a savings institution establishes
or acquires a subsidiary or elects to conduct any new activity through a
subsidiary that the association controls, the savings institution must file a
notice or application with the FDIC and the Office of Thrift Supervision at
least 30 days in advance and receive regulatory approval or non-objection. Savings
institutions also must conduct the activities of subsidiaries in accordance
with existing regulations and orders.

The Office of Thrift Supervision may determine that the continuation by
a savings institution of its ownership control of, or its relationship to, the
subsidiary constitutes a serious risk to the safety, soundness or stability of
the association or is inconsistent with sound banking practices or with the
purposes of the FDIC. Based upon that determination, the FDIC or the Office of
Thrift Supervision has the authority to order the savings institution to divest
itself of control of the subsidiary. The FDIC also may determine by regulation
or order that any specific activity poses a serious threat to the Deposit
Insurance Fund. If so, it may require that no FDIC insured institution engage
in that activity directly.

Transactions with Affiliates.
American Federals authority to engage in transactions with affiliates is
limited by Office of Thrift Supervision regulations and by Sections 23A and 23B
of the Federal Reserve Act as implemented by the Federal Reserve Boards
Regulation W. The term affiliates for these purposes generally means any
company that controls or is under common control with an institution. Eagle is
an affiliate of American Federal. In general, transactions with affiliates must
be on terms that are as favorable to the institution as comparable transactions
with non-affiliates. In addition, certain types of transactions are restricted
to an aggregate percentage of the institutions capital. Collateral in
specified amounts must be provided by affiliates in order to receive loans from
an institution. In addition, savings institutions are prohibited from lending
to any affiliate that is engaged in activities that are not permissible for
bank holding companies and no savings institution may purchase the securities
of any affiliate other than a subsidiary.

The Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley Act) generally
prohibits a company from making loans to its executive officers and directors.
However, that act contains a specific exception for loans by a depository
institution to its executive officers and directors in compliance with federal
banking laws. Under such laws, American Federals authority to extend credit to
executive officers, directors and 10% stockholders of American Federal and its
affiliates (insiders), as well as entities such persons control is limited.
The law restricts both the individual and aggregate amount of loans American
Federal may make to insiders based, in part, on American Federals capital
position and requires certain Board approval procedures to be followed. Such
loans must be made on terms substantially the same as those offered to
unaffiliated individuals and not involve more than the normal risk of
repayment. There is an exception for loans made pursuant to a benefit or
compensation program that is widely available to all employees of the
institution and does not give preference to insiders over other employees.
There are additional restrictions applicable to loans to executive officers.

The USA PATRIOT Act.
The USA Patriot Act gives the federal government powers to address terrorist
threats through enhanced domestic security measures, expanded surveillance
powers, increased information sharing and broadened anti-money laundering
requirements. The USA Patriot Act also requires the federal banking agencies to
take into consideration the effectiveness of controls designed to combat
money-laundering activities in determining whether to approve a merger or other
acquisition application of a member institution. Accordingly, if we engage in a
merger or other acquisition, our controls designed to combat money laundering
would be considered as part of the application process. We have established policies,
procedures and systems designed to comply with these regulations.

Holding Company Regulation

General. Eagle
is a unitary savings and loan holding company subject to regulatory oversight
of the Office of Thrift Supervision. Accordingly, Eagle is required to register
and file reports with the Office of Thrift Supervision and is subject to
regulation and examination by the Office of Thrift Supervision. In addition,
the Office of Thrift Supervision has enforcement authority over Eagle and its
non-savings institution subsidiaries which also permits the Office of Thrift
Supervision to restrict or prohibit activities that are determined to present a
serious risk to the subsidiary savings institution.

Activities Restrictions.
The Gramm-Leach-Bliley Financial Services Modernization Act of 1999, or GLBA,
provides that no company may acquire control of a savings association after May
4, 1999 unless it engages only in the financial activities permitted for
financial holding companies under the law or for multiple savings and loan
holding companies as described

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below. Upon any non-supervisory acquisition by Eagle of another savings
association as a separate subsidiary, Eagle would become a multiple savings and
loan holding company and would be limited to activities permitted multiple
holding companies by Office of Thrift Supervision regulation. Office of Thrift
Supervision has issued an interpretation concluding that multiple savings and
loan holding companies may also engage in activities permitted for financial
holding companies, including lending, trust services, insurance activities and
underwriting, investment banking and real estate investments.

Mergers and Acquisitions.
Eagle must obtain approval from the Office of Thrift Supervision before
acquiring more than 5% of the voting stock of another savings institution or
savings and loan holding company or acquiring such an institution or holding
company by merger, consolidation or purchase of its assets. In evaluating an
application for Eagle to acquire control of a savings institution, the Office
of Thrift Supervision would consider the financial and managerial resources and
future prospects of Eagle and the target institution, the effect of the
acquisition on the risk to the Deposit Insurance Fund, the convenience and the
needs of the community and competitive factors.

The Office of Thrift Supervision may not approve any acquisition that
would result in a multiple savings and loan holding company controlling savings
institutions in more than one state, subject to two exceptions; (i) the
approval of interstate supervisory acquisitions by savings and loan holding
companies and (ii) the acquisition of a savings institution in another state if
the laws of the state of the target savings institution specifically permit
such acquisitions. The states vary in the extent to which they permit
interstate savings and loan holding company acquisitions.

Acquisition of Eagle.
Under the Savings and Loan Holding Company Act and the Change in Bank Control
Act, a notice or application must be submitted to the Office of Thrift
Supervision if any person (including a company), or a group acting in concert,
seeks to acquire 10% or more of Eagles outstanding voting stock, unless the
Office of Thrift Supervision has found that the acquisition will not result in
a change in control of Eagle. In acting on such a notice or application, the
Office of Thrift Supervision must take into consideration certain factors,
including the financial and managerial resources of the acquirer and the anti-trust
effect of the acquisition. Any company that acquires control will be subject to
regulation as a savings and loan holding company.

Federal Securities Laws

Eagles common stock is registered with the Securities and Exchange
Commission under the Exchange Act. We are subject to the information, proxy
solicitation, insider trading restrictions and other requirements under the
Exchange Act.

Sarbanes-Oxley Act of 2002

The Sarbanes-Oxley Act addresses, among other issues, corporate
governance, auditing and accounting, executive compensation, and enhanced and
timely disclosure of corporate information. As directed by the Sarbanes-Oxley
Act, our Chief Executive Officer and Chief Financial Officer are required to
certify that our quarterly and annual reports do not contain any untrue
statement of a material fact. The rules adopted by the Securities and Exchange
Commission under the Sarbanes-Oxley Act have several requirements, including
having these officers certify that: they are responsible for establishing,
maintaining and regularly evaluating the effectiveness of our internal control
over financial reporting; they have made certain disclosures to our auditors
and the audit committee of the board of directors about our internal control
over financial reporting; and they have included information in our quarterly
and annual reports about their evaluation and whether there have been changes
in our internal control over financial reporting or in other factors that could
materially affect internal control over financial reporting.

Regulatory Enforcement Authority

Federal law provides federal banking regulators with substantial
enforcement powers. This enforcement authority includes, among other things,
the ability to assess civil money penalties, to issue cease-and-desist or
removal orders, and to initiate injunctive actions against banking
organizations and institution-affiliated parties, as defined. In general, these
enforcement actions may be initiated for violations of laws and regulations and
unsafe or unsound practices. Other actions or inactions may provide the basis
for enforcement action, including misleading or untimely reports filed with
regulatory authorities.

|         |              
|-------- | -------------
|ITEM 1A. | RISK FACTORS.

We cannot accurately predict the effect of
the current economic downturn on our future results of operations or market
price of our stock.

The national economy and the financial services sector in particular,
are currently facing challenges of a scope unprecedented in recent history. We
cannot accurately predict the severity or duration of the current economic
downturn, which has adversely impacted the markets we serve. Any further
deterioration in the economies of the nation as a whole or in our markets would
have an adverse effect, which could be material, on our business, financial
condition, results of operations and prospects, and could also cause the market
price of our stock to decline. While it is impossible to predict

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how long adverse economic conditions may exist, the recent recession
and a slow or fragile recovery could continue to present risks for some time
for the industry and our company.

If the allowance for credit losses is not
sufficient to cover actual loan losses, our earnings could decrease.

Our customers may not repay their loans according to the original
terms, and the collateral, if any, securing the payment of these loans may be
insufficient to pay any remaining loan balance. We may experience significant
loan losses, which may have a material adverse effect on operating results. We
make various assumptions and judgments about the collectability of the loan
portfolio, including the creditworthiness of borrowers and the value of the
real estate and other assets serving as collateral for the repayment of loans.
If the assumptions prove to be incorrect, the allowance for credit losses may
not be sufficient to cover losses inherent in our loan portfolio, resulting in
additions to the allowance. Material additions to the allowance would
materially decrease net income.

Our emphasis on the origination of consumer, commercial real estate and
commercial business loans is one of the more significant factors in evaluating
the allowance for loan losses. As we continue to increase the amount of such
loans, additional or increased provisions for loan losses may be necessary and
would decrease earnings.

Bank regulators periodically review our allowance for loan losses and
may require an increase to the provision for loan losses or further loan
charge-offs. Any increase in our allowance for loan losses or loan charge-offs
as required by these regulatory authorities may have a material adverse effect
on our results of operations or financial condition.

We could record future losses on our
securities portfolio.

A number of factors or combinations of factors could require us to
conclude in one or more future reporting periods that an unrealized loss exists
with respect to our investment securities portfolio that constitutes an
impairment that is other than temporary, which could result in material losses to
us. These factors include, but are not limited to, continued failure by the
issuer to make scheduled interest payments, an increase in the severity of the
unrealized loss on a particular security, an increase in the continuous
duration of the unrealized loss without an improvement in value or changes in
market conditions and/or industry or issuer specific factors that would render
us unable to forecast a full recovery in value. In addition, the fair values of
securities could decline if the overall economy and the financial condition of
some of the issuers continues to deteriorate and there remains limited
liquidity for these securities.

A prolonged economic downturn, especially one
affecting our geographic market area, will adversely affect our business and
financial results.

The United States and many industrial nations are experiencing a severe
economic recession which is expected to continue in 2010. Loan portfolio
quality has deteriorated at many institutions, reflecting in part, the
deteriorating U.S. economy and rising unemployment. In addition, the values of
real estate collateral supporting many commercial loans and home mortgages have
declined and may continue to decline. The continuing real estate downturn also
has resulted in reduced demand for the construction of new housing and
increased delinquencies in construction, residential and commercial mortgage
loans. Financial institution stock prices have declined substantially, and it
is significantly more difficult for financial institutions to raise capital or
borrow in the debt markets.

Continued negative developments in the financial services industry and
the domestic and international credit markets may significantly affect the
markets in which we do business, the market for and value of our loans and
investments, and our ongoing operations, costs and profitability. Moreover,
continued declines in the stock market in general, or stock values of financial
institutions and their holding companies, could adversely affect our stock
performance.

As a savings bank, pursuant to the Home
Owners Loan Act, or HOLA, American Federal Savings Bank is required to
maintain a certain percentage of its total assets in HOLA-qualifying loans and
investments, which limits our asset mix and could significantly restrict our
ability to diversify our loan portfolio.

A savings bank or thrift differs from a commercial bank in that it is
required to maintain at least 65% of its total assets in HOLA-qualifying loans
and investments, such as loans for the purchase, refinance, construction,
improvement, or repair of residential real estate, home equity loans,
educational loans and small business loans. To maintain our thrift charter we
have to pass the Qualified Thrift Lender test, or QTL test, in nine out of 12
of the immediately preceding months. The QTL test limits the extent to which we
can grow our commercial loan portfolio. However, a loan that does not exceed $2
million (including a group of loans to one borrower) and is for commercial,
corporate, business, or agricultural purposes is not so limited. We may be
limited in our ability to change our asset mix and increase the yield on our
earning assets by growing our commercial loan portfolio.

In addition, if we continue to grow our commercial loan portfolio and
our single-family loan portfolio declines, it is possible that in order to
maintain our QTL status, we could be forced to buy mortgage-backed securities
or other HOLA-

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qualifying assets at times when the terms might not be attractive.
Alternatively, we could find it necessary to pursue different structures,
including converting American Federal Savings Banks thrift charter to a
commercial bank charter.

Because we intend to increase our commercial
real estate and commercial business loan originations, our credit risk will
increase and continued downturns in the local real estate market or economy
could adversely affect our earnings.

We intend to continue our recent emphasis on originating commercial
real estate and commercial business loans. Commercial real estate and
commercial business loans generally have more risk than the one- to four-family
residential real estate loans we originate. Because the repayment of commercial
real estate and commercial business loans depends on the successful management
and operation of the borrowers properties or related businesses, repayment of
such loans can be affected by adverse conditions in the local real estate
market or economy. Commercial real estate and commercial business loans may
also involve relatively large loan balances to individual borrowers or groups
of related borrowers. A downturn in the real estate market or the local economy
could adversely affect the value of properties securing the loan or the
revenues from the borrowers business, thereby increasing the risk of
nonperforming loans. As our commercial real estate and commercial business loan
portfolios increase, the corresponding risks and potential for losses from
these loans may also increase.

Declines in home values could decrease our
loan originations and increase delinquencies and defaults.

Declines in home values in our markets could adversely impact results
from operations. Like all financial institutions, we are subject to the effects
of any economic downturn, and in particular, a significant decline in home
values would likely lead to a decrease in new home equity loan originations and
increased delinquencies and defaults in both the consumer home equity loan and
residential real estate loan portfolios and result in increased losses in these
portfolios. Declines in the average sale prices of homes in our primary markets
could lead to higher loan losses.

We depend on the services of our executive
officers and other key employees.

Our success depends upon the continued employment of certain members of
our senior management team. We also depend upon the continued employment of the
individuals that manage several of our key functional areas. The departure of
any member of our senior management team may adversely affect our operations.

Changes in interest rates could adversely
affect our results of operations and financial condition.

Our results of operations and financial condition are significantly
affected by changes in interest rates. Our results of operations depend
substantially on our net interest income, which is the difference between the
interest income we earn on our interest-earning assets, such as loans and
securities, and the interest expense we pay on our interest-bearing
liabilities, such as deposits, borrowings and trust preferred securities.
Because our interest-bearing liabilities generally reprice or mature more
quickly than our interest-earning assets, an increase in interest rates
generally would tend to result in a decrease in net interest income.

Changes in interest rates may also affect the average life of loans and
mortgage-related securities. Decreases in interest rates can result in
increased prepayments of loans and mortgage-related securities, as borrowers
refinance to reduce their borrowing costs. Under these circumstances, we are
subject to reinvestment risk to the extent that we are unable to reinvest the
cash received from such prepayments at rates that are comparable to the rates
on existing loans and securities. Additionally, increases in interest rates may
decrease loan demand and make it more difficult for borrowers to repay
adjustable rate loans. Also, increases in interest rates may extend the life of
fixed rate assets, which would restrict our ability to reinvest in higher
yielding alternatives, and may result in customers withdrawing certificates of
deposit early so long as the early withdrawal penalty is less than the interest
they could receive as a result of the higher interest rates.

Changes in interest rates also affect the current fair value of our
interest-earning securities portfolio. Generally, the value of securities moves
inversely with changes in interest rates.

Strong competition may limit growth and
profitability.

Competition in the banking and financial services industry is intense.
We compete with commercial banks, savings institutions, mortgage brokerage
firms, credit unions, finance companies, mutual funds, insurance companies, and
brokerage and investment banking firms operating locally and elsewhere. Many of
these competitors (whether regional or national institutions) have
substantially greater resources and lending limits than we have and may offer
certain services that we do not or cannot provide. Our profitability depends
upon our ability to successfully compete in our market areas.

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We operate in a highly regulated environment
and may be adversely affected by changes in laws and regulations.

We are subject to extensive regulation, supervision and examination by
the Office of Thrift Supervision. The federal banking laws and regulations
govern the activities in which we may engage, and are primarily for the
protection of depositors and the Deposit Insurance Fund at the Federal Deposit
Insurance Corporation. These regulatory authorities have extensive discretion
in connection with their supervisory and enforcement activities, including the
ability to impose restrictions on a banks operations, reclassify assets,
determine the adequacy of a banks allowance for loan losses and determine the
level of deposit insurance premiums assessed. Any change in such regulation and
oversight, whether in the form of regulatory policy, new regulations or
legislation or additional deposit insurance premiums could have a material
impact on our operations. Because our business is highly regulated, the laws and
applicable regulations are subject to frequent change. Any new laws, rules and
regulations could make compliance more difficult or expensive or otherwise
adversely affect our business, financial condition or prospects.

Financial reform legislation recently enacted
by Congress will, among other things, eliminate the Office of Thrift
Supervision, tighten capital standards, create a new Consumer Financial
Protection Bureau and result in new laws and regulations that are expected to
increase our costs of operations.

Congress recently enacted the Dodd-Frank Wall Street Reform and
Consumer Protection Act (the Dodd-Frank Act). This new law will significantly
change the current bank regulatory structure and affect the lending, deposit,
investment, trading and operating activities of financial institutions and
their holding companies. The Dodd-Frank Act requires various federal agencies
to adopt a broad range of new implementing rules and regulations, and to
prepare numerous studies and reports for Congress. The federal agencies are
given significant discretion in drafting the implementing rules and
regulations, and consequently, many of the details and much of the impact of
the Dodd-Frank Act may not be known for many months or years.

Certain provisions of the Dodd-Frank Act are expected to have a near
term impact on us. For example, the new law provides that the Office of Thrift
Supervision, currently our primary federal regulator, will cease to exist one
year from the date of the new laws enactment. The Board of Governors of the
Federal Reserve System will supervise and regulate all savings and loan holding
companies that were formerly regulated by the Office of Thrift Supervision,
including the Company and the Office of the Comptroller of the Currency will regulate
the Bank.

Also effective one year after the date of enactment is a provision of
the Dodd-Frank Act that eliminates the federal prohibitions on paying interest
on demand deposits, thus allowing businesses to have interest bearing checking
accounts. Depending on competitive responses, this significant change to
existing law could have an adverse impact on our interest expense.

The Dodd-Frank Act creates a new Consumer Financial Protection Bureau
with broad powers to supervise and enforce consumer protection laws. The
Consumer Financial Protection Bureau has broad rule-making authority for a wide
range of consumer protection laws that apply to all banks and savings
institutions, including the authority to prohibit unfair, deceptive or
abusive acts and practices. The Consumer Financial Protection Bureau has
examination and enforcement authority over all banks and savings institutions
with more than $10 billion in assets. Savings institutions such as American
Federal Savings Bank with $10 billion or less in assets will continued to be
examined for compliance with the consumer laws by their primary bank
regulators.

It is difficult to predict at this time what specific impact the
Dodd-Frank Act and the yet to be written implementing rules and regulations
will have on community banks. However, it is expected that at a minimum they
will increase our operating and compliance costs and could increase our
interest expense.

If our investment in the Federal Home Loan
Bank of Seattle becomes impaired, our earnings and stockholders equity could
decrease.

We are required to own common stock of the Federal Home Loan Bank of
Seattle to qualify for membership in the Federal Home Loan Bank System and to
be eligible to borrow funds under the Federal Home Loan Banks advance program.
The aggregate cost of our Federal Home Loan Bank common stock as of June 30,
2010 was $2.0 million. Federal Home Loan Bank common stock is not a marketable
security and can only be redeemed by the Federal Home Loan Bank.

Federal Home Loan Banks may be subject to accounting rules and asset
quality risks that could materially lower their regulatory capital. In an
extreme situation, it is possible that the capitalization of a Federal Home
Loan Bank, including the Federal Home Loan Bank of Seattle, could be
substantially diminished or reduced to zero. Consequently, we believe that
there is a risk that our investment in Federal Home Loan Bank of Seattle common
stock could be deemed impaired at some time in the future, and if this occurs,
it would cause our earnings and stockholders equity to decrease by the amount
of the impairment charge.

31

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Future legislative or regulatory actions
responding to perceived financial and market problems could impair our ability
to foreclose on collateral.

There have been proposals made by members of Congress and others that
would reduce the amount distressed borrowers are otherwise contractually
obligated to pay under their mortgage loans and limit an institutions ability
to foreclose on mortgage collateral. Were proposals such as these, or other
proposals limiting our rights as a creditor, to be implemented, we could
experience increased credit losses or increased expense in pursuing our
remedies as a creditor. In addition, there have been legislative proposals to
create a federal consumer protection agency that may, among other powers, have
the ability to limit our rights as a creditor.

|         |                           
|-------- | --------------------------
|ITEM 1B. | UNRESOLVED STAFF COMMENTS.
|         |                           
|None.    |                           
|         |                           
|ITEM 2.  | PROPERTIES.               

The Companys business activities consist of its ownership of 100% of
the common stock of the Bank. Eagles and the Banks executive office is
located at 1400 Prospect Avenue in Helena, Montana. American Federal conducts
its business through six offices, which are located in Helena, Bozeman, Butte,
and Townsend, Montana. All of its offices are owned. Its principal banking
office in Helena also serves as its executive headquarters and operations
center. This office houses over 50% of American Federals full-time employees.
The following table sets forth the location of each of American Federals
offices, the year the office was opened, and the net book value including land,
buildings, computer software and its related equipment and furniture. The
square footage at each location is also shown.

|                           |  |                                       |  |                               |  |                                         |       |                 |  |        | 
|-------------------------- |  | ------------------------------------- |  | ----------------------------- |  | --------------------------------------- | ----- | --------------- |  | ------ | 
|Location                   |  | Address                               |  | Opened                        |  | Value At
 June 30, 2010
 (In thousands) |       | Square
 Footage | 
|                           |  |                                       |  |                               |  |                                         |       |                 | 
|                           |  |                                       |  |                               |  |                                         |       |                 |  |        | 
|Helena Main Office         |  | 1400 Prospect Ave.
 Helena, MT 59601  |  | 1997                          |  | $                                       | 3,871 |                 |  | 32,304 | 
|                           |  |                                       |  |                               |  |                                         |       |                 |  |        | 
|Helena Neill Avenue Branch |  | 28 Neill Ave.
 Helena, MT 59601       |  | 1987                          |  | $                                       | 325   |                 |  | 1,391  | 
|                           |  |                                       |  |                               |  |                                         |       |                 |  |        | 
|Helena Skyway Branch       |  | 2090 Cromwell Dixon
 Helena, MT 59602 |  | 2009                          |  | $                                       | 2,381 |                 |  | 4,643  | 
|                           |  |                                       |  |                               |  |                                         |       |                 |  |        | 
|Butte Office               |  | 3401 Harrison Ave.
 Butte, MT 59701   |  | 1979                          |  | $                                       | 524   |                 |  | 3,890  | 
|                           |  |                                       |  |                               |  |                                         |       |                 |  |        | 
|Bozeman Office             |  | 606 North Seventh
 Bozeman, MT 59715  |  | 1980
 (closed August 1, 2010) |  | $                                       | 430   |                 |  | 5,886  | 
|                           |  |                                       |  |                               |  |                                         |       |                 |  |        | 
|Bozeman Branch             |  | 1455 Oak St
 Bozeman, MT 59715        |  | 2009                          |  | $                                       | 8,098 |                 |  | 19,818 | 
|                           |  |                                       |  |                               |  |                                         |       |                 |  |        | 
|Townsend Office            |  | 416 Broadway
 Townsend, MT 59644      |  | 1979                          |  | $                                       | 219   |                 |  | 1,973  | 

As of June 30,
2010, the net book value of land, buildings, furniture, and equipment owned by
American Federal, less accumulated depreciation, totaled $15.85 million.

|        |                   
|------- | ------------------
|ITEM 3. | LEGAL PROCEEDINGS.

American Federal, from time to time, is a party to routine litigation,
which arises in the normal course of business, such as claims to enforce liens,
condemnation proceedings on properties in which American Federal Savings Bank
holds security interests, claims involving the making and servicing of real
property loans, and other issues incident to the business of

32

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American Federal. There were no lawsuits pending or known to be
contemplated against Eagle or American Federal as of June 30, 2010.

|        |                        
|------- | -----------------------
|ITEM 4. | (REMOVED AND RESERVED).

33

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PART II

|        |                                                                                                               
|------- | --------------------------------------------------------------------------------------------------------------
|ITEM 5. | MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
 AND ISSUER PURCHASES OF EQUITY SECURITIES.

The common stock is traded on the NASDAQ Global Market under the symbol
EBMT. At the close of business on June 30, 2010, there were 4,083,127 shares
of common stock outstanding, held by approximately 1,000 shareholders of
record. The closing price of the common stock on June 30, 2010, was $9.75 per
share.

On April 5, 2010, Eagle completed a second-step conversion from the partially-public
mutual holding company structure to the fully publicly-owned stock holding
company. Prior to April 5, 2010, our predecessors common stock was traded on
the OTC Bulletin Board. The prices below before April 5, 2010 have been
adjusted for the 3.8 to 1.0 exchange ratio in the second-step conversion.

|                   |  |          |       |         |   |      | 
|------------------ |  | -------- | ----- | ------- | - | ---- | 
|Quarter
Ended      |  | High
Bid |       | Low
Bid |  
|                   |  |          |       |         |  
|Fiscal Year 2010   |  |          |       |         |   |      | 
|June 30, 2010      |  | $        | 10.79 |         | $ | 9.70 | 
|March 31, 2010     |  | $        | 11.58 |         | $ | 8.59 | 
|December 31, 2009  |  | $        | 9.21  |         | $ | 7.50 | 
|September 30, 2009 |  | $        | 8.64  |         | $ | 7.11 | 
|Fiscal Year 2009   |  |          |       |         |   |      | 
|June 30, 2009      |  | $        | 7.37  |         | $ | 6.05 | 
|March 31, 2009     |  | $        | 6.05  |         | $ | 5.53 | 
|December 31, 2008  |  | $        | 6.84  |         | $ | 6.05 | 
|September 30, 2008 |  | $        | 7.37  |         | $ | 6.72 | 

The Company paid four quarterly dividends during the year ended June
30, 2010 in the amount of $0.06842 per share (adjusted for the 3.8 to 1.0
exchange on April 5, 2010). The Company paid four quarterly dividends during
the year ended June 30, 2009 in the amount of $0.06711 per share (adjusted for
the 3.8 to 1.0 exchange on April 5, 2010). Our predecessor, Eagle Financial
MHC, waived receipt of its dividends during the year prior to April 5, 2010
when it ceased to exist.

Payment of dividends on our shares of common stock is subject to
determination and declaration by the Board of Directors and will depend upon a
number of factors, including capital requirements, regulatory limitations on
the payment of dividends, our results of operations and financial condition,
tax considerations and general economic conditions. No assurance can be given
that dividends will be declared or, if declared, what the amount of dividends
will be, or whether such dividends, once declared, will continue.

34

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The following table provides information regarding our purchases of our
common stock during the fiscal year ended June 30, 2010:

|                                              |  |                                    |     |                               |   |                                                                                        |  |                                                                                      |     |  |  |        | 
|--------------------------------------------- |  | ---------------------------------- | --- | ----------------------------- | - | -------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------ | --- |  |  | ------ | 
|Period                                        |  | Total number
 of shares
 purchased |     | Average price
 paid per share |   | Total number
 of shares
 purchased as
 part of publicly
 announced
 plans or
 programs |  | Maximum
 number of
 shares that may
 yet be
 purchased
 under the plans
 or programs |    
|                                              |  |                                    |     |                               |   |                                                                                        |  |                                                                                      |    
|July 1, 2009
 through July 31, 2009           |  |                                    |    |                               |   |                                                                                       |  |                                                                                      |    |  |  | 24,240 | 
|August 1,
 2009 through August 31, 2009       |  |                                    | 805 |                               | $ | 28.25                                                                                  |  |                                                                                      | 805 |  |  | 23,435 | 
|September 1,
 2009 through September 30, 2009 |  |                                    |    |                               |   |                                                                                       |  |                                                                                      |    |  |  | 23,435 | 
|October 1, 2009
 through October 31, 2009     |  |                                    |    |                               |   |                                                                                       |  |                                                                                      |    |  |  | 23,435 | 
|November 1,
 2009 through November 30, 2009   |  |                                    |    |                               |   |                                                                                       |  |                                                                                      |    |  |  | 23,435 | 
|December 1,
 2009 through December 31, 2009   |  |                                    |    |                               |   |                                                                                       |  |                                                                                      |    |  |  | 23,435 | 
|January 1,
 2010 through January 31, 2010     |  |                                    |    |                               |   |                                                                                       |  |                                                                                      |    |  |  | 23,435 | 
|February 1,
 2010 through February 28, 2010   |  |                                    |    |                               |   |                                                                                       |  |                                                                                      |    |  |  | 23,435 | 
|March 1,
 2010 through March 31, 2010         |  |                                    |    |                               |   |                                                                                       |  |                                                                                      |    |  |  | 23,435 | 
|April 1,
 2010 through April 30, 2010         |  |                                    |    |                               |   |                                                                                       |  |                                                                                      |    |  |  | 23,435 | 
|May 1, 2010
 through May 31, 2010             |  |                                    |    |                               |   |                                                                                       |  |                                                                                      |    |  |  |       | 
|June 1, 2010
 through June 30, 2010           |  |                                    |    |                               |   |                                                                                       |  |                                                                                      |    |  |  |       | 
|                                              |  |                                    |     |                               |   |                                                                                        |  |                                                                                      |     |  |  |        | 
|Total                                         |  |                                    | 805 |                               | $ | 28.25                                                                                  |  |                                                                                      | 805 |  |  |       | 

*      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. This repurchase program expired on April 5, 2010 upon the
completion of the conversion and reorganization. As of June 30, 2010, 5,315
shares were repurchased under this plan.

|        |                         
|------- | ------------------------
|ITEM 6. | SELECTED FINANCIAL DATA.

This item has been omitted based on Eagles status as a smaller
reporting company.

|        |                                                                                        
|------- | ---------------------------------------------------------------------------------------
|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
 RESULTS OF OPERATIONS.

The following discussion and analysis of the financial condition and
results of operations of Eagle is intended to help investors understand our
company and our operations. The financial review is provided as a supplement
to, and should be read in conjunction with the Consolidated Financial
Statements and the related Notes included elsewhere in this report.

Overview

Historically, our principal business has consisted of attracting
deposits from the general public and the business community and making loans
secured by various types of collateral, including real estate and other
consumer assets. We are significantly affected by prevailing economic
conditions, particularly interest rates, as well as government policies
concerning, among other things, monetary and fiscal affairs, housing and
financial institutions and regulations regarding lending and other operations,
privacy and consumer disclosure. Attracting and maintaining deposits is
influenced by a number of factors, including interest rates paid on competing
investments offered by other financial and non-financial institutions, account
maturities, fee structures, and levels of personal income and savings. Lending
activities are affected by the demand for funds and thus are influenced by
interest rates, the number and quality of lenders and regional economic
conditions. Sources of funds for lending activities include deposits,
borrowings, repayments on loans, cash flows from maturities of investment
securities and income provided from operations.

Our earnings depend primarily on our level of net interest income,
which is the difference between interest earned on our interest-earning assets,
consisting primarily of loans, mortgage-backed securities and other investment
securities, and the interest paid on interest-bearing liabilities, consisting
primarily of deposits, borrowed funds, and trust-preferred securities. Net
interest income is a function of our interest rate spread, which is the
difference between the average yield earned on our interest-earning assets and
the average rate paid on our interest- bearing liabilities, as well as a function
of the average balance of interest-earning assets compared to interest-bearing
liabilities. Also contributing to our earnings is noninterest income, which
consists primarily of service charges and fees on loan and deposit products and
services, net gains and

35

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losses on sale of assets, and mortgage loan service fees. Net interest
income and noninterest income are offset by provisions for loan losses, general
administrative and other expenses, including salaries and employee benefits and
occupancy and equipment costs, as well as by state and federal income tax
expense.

American Federal Savings Bank has a strong mortgage lending focus, with
the majority of its loans in single-family residential mortgages, which has
enabled it to successfully market home equity loans, as well as a wide range of
shorter term consumer loans for various personal needs (automobiles,
recreational vehicles, etc.). In recent years we have also focused on adding
commercial loans to our portfolio, both real estate and non-real estate. We
have made some progress in this initiative. As of June 30, 2010, commercial
real estate and land loans and commercial business loans represented 24.44% and
5.54% of the total loan portfolio, respectively, which represented increases
from the 21.90% and 4.50% amounts at June 30, 2009, respectively. The purpose
of this diversification is to mitigate our dependence on the mortgage market,
as well as to improve our ability to manage our interest rate spread. American
Federal Savings Banks management recognizes that fee income will also enable
it to be less dependent on specialized lending and it now maintains a
significant loan serviced portfolio, which provides a steady source of fee
income. As of June 30, 2010, we had mortgage servicing rights, net of $2.337
million compared to $2.208 million as of June 30, 2009. 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
our deposit accounts. American Federal Savings 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 our
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 our
loans serviced portfolio. Management believes that we 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 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 managements strategy is funding the growth of our balance sheet in an
efficient manner. Deposit growth will be difficult to maintain due to
significant competition and higher cost wholesale funding (which is usually
more expensive than retail deposits) will likely be needed to supplement it. As
did many financial institutions, we invested in certain securities that were
impacted by the current financial crisis. As a result, some of those instruments
were no longer performing, and in the first quarter of the 2008 fiscal year, we
elected to apply Financial Accounting Standards Board (FASB) Accounting
Standards Codification (ASC) 825 Financial
Instruments to certain preferred stock issued by Freddie Mac and
Fannie Mae. FASB ASC 825 election had a significant impact on earnings in the
first quarter of the 2009 fiscal year, resulting in an earnings charge for that
period of $1.24 million.

Other than in limited circumstances for certain high-credit-quality
customers, we do not offer interest only mortgage loans on one- to
four-family residential properties (where the borrower pays interest but no
principal for an initial period, after which the loan converts to a fully
amortizing loan). We also do not offer loans that provide for negative
amortization of principal, such as Option ARM loans, where the borrower can
pay less than the interest owed on their loan, resulting in an increased
principal balance during the life of the loan. We do not offer subprime loans
(loans that generally target borrowers with weakened credit histories typically
characterized by payment delinquencies, previous charge-offs, judgments,
bankruptcies, or borrowers with questionable repayment capacity as evidenced by
low credit scores or high debt-burden ratios) or Alt-A loans (traditionally
defined as loans having less than full documentation).

The level and movement of interest rates impacts the Banks earnings as
well. For the 2010 fiscal year the yield curve began to flatten as the Federal
Open Market Committee maintained the fed funds rate at a target of 0 to 25
basis points and the long end of the curve lowered.

RECENT ACCOUNTING PRONOUNCEMENTS

GAAP Codification  On July 1, 2009, the FASBs GAAP Codification
became effective as the sole authoritative source of GAAP. This codification
reorganizes current GAAP for non-governmental entities into a topical index to
facilitate accounting research and to provide users additional assurance that
they have referenced all related literature pertaining to a given topic.
Existing GAAP prior to the Codification was not altered in the compilation of
the GAAP Codification. The GAAP Codification encompasses all FASB Statements of
Financial Accounting Standards, Emerging Issues Task Force statements, FASB
Staff Positions, FASB Interpretations, FASB Derivative Implementation Guides,
American Institute of Certified Public Accountants Statement of Positions,
Accounting Principles Board Opinions and Accounting Research Bulletins along
with the remaining body of GAAP effective as of June 30, 2009. Financial
Statements issued for all interim and annual periods ending after September 15,
2009, will need to reference accounting guidance embodied in the Codification
as opposed to referencing the previously authoritative pronouncements.

36

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On November 14, 2008, the Securities and Exchange Commission (SEC)
issued its long-anticipated proposed International Financial Reporting
Standards (IFRS) roadmap outlining milestones that, if achieved, could lead
to mandatory transition to IFRS for U.S. domestic registrants starting in 2014.
IFRS is a comprehensive series of accounting standards published by the
International Accounting Standards Board (IASB). Under the proposed roadmap,
the Company could be required through its parent company to prepare financial
statements in accordance with IFRS, and the SEC will make a determination in
2011 regarding the mandatory adoption of IFRS for U.S. domestic registrants.
Management is currently assessing the impact that this potential change would
have on the Companys consolidated financial statements, and will continue to
monitor the development of the potential implementation of IFRS.

In April 2009, the FASB issued new guidance impacting ASC Topic 820,Fair Value Measurements and Disclosures.
This ASC provides additional guidance in determining fair values when there is
no active market or where the price inputs being used represent distressed
sales. It reaffirms the need to use judgment to ascertain if a formerly active
market has become inactive and in determining fair values when markets have
become inactive. The adoption of this new guidance did not have a material
effect on Companys results of operations or financial position.

In April 2009, the FASB issued new guidance impacting ASC 825-10-50,Financial Instruments, which relates to
fair value disclosures for any financial instruments that are not currently
reflected on the balance sheet of companies at fair value. This guidance
amended existing GAAP to require disclosures about fair value of financial
instruments for interim reporting periods of publicly traded companies as well
as in annual financial statements. This guidance is effective for interim and
annual periods ending after June 15, 2009. The Company has presented the
necessary disclosures in Note 18 to the financial statements.

In June 2009, the FASB issued new authoritative accounting guidance
under ASC Topic 810,Consolidation,
which amends prior guidance to change how a company determines when an entity
that is insufficiently capitalized or is not controlled through voting (or
similar rights) should be consolidated. The determination of whether a company
is required to consolidate an entity is based on, among other things, an
entitys purpose and design and a companys ability to direct the activities of
the entity that most significantly impact the entitys economic performance.
The new authoritative accounting guidance requires additional disclosures about
the reporting entitys involvement with variable-interest entities and any
significant changes in risk exposure due to that involvement as well as its
affect on the entitys financial statements. The new authoritative accounting
guidance under ASC Topic 810 will be effective January 1, 2010. The adoption of
the guidance did not have a material effect on the Companys consolidated
financial position or results of operations.

In June 2009, the FASB issued ASC 860, Transfers
and Servicing, to improve the information included in an entitys
financial statements about a transfer of financial assets and the effects of a
transfer on its financial position, financial performance and cash flows. The
guidance eliminates the exceptions for qualifying special-purpose entities from
the consolidation guidance and the exception that permitted sale accounting for
certain mortgage securitizations when a transferor has not surrendered control
over the transferred financial assets. In addition, the amendments require
enhanced disclosures about the risks that a transferor continues to be exposed
to because of its continuing involvement in transferred financial assets. The
guidance is effective for the first reporting period (including interim
periods) that begins after November 15, 2009. The adoption of the guidance did
not have a material effect on the Companys consolidated financial position or
results of operations.

In August 2009, the FASB issued ASU No. 2009-05,Fair Value Measurements and Disclosures (Topic 820)
-Measuring Liabilities at Fair Value.
This ASU provides amendments for fair value measurements of liabilities. It
provides clarification that in circumstances in which a quoted price in an
active market for the identical liability is not available, a reporting entity
is required to measure fair value using one or more techniques. ASU 2009-05
also clarifies that when estimating a fair value of a liability, a reporting
entity is not required to include a separate input or adjustment to other
inputs relating to the existence of a restriction that prevents the transfer of
the liability. ASU 2009-05 is effective for the first reporting period
(including interim periods) beginning after issuance or fourth quarter 2009.
The adoption of the guidance did not have a material effect on the Companys
consolidated financial position or results of operations.

The FASB issued new authoritative accounting guidance under ASC Topic
855,Subsequent Events, which
established general standards of accounting for and disclosure of events that
occur after the balance sheet date but before financial statements are issued
or available to be issued. This guidance sets forth (i) the period after the
balance sheet date during which management of a reporting entity should
evaluate events or transactions that may occur for potential recognition or
disclosure in the financial statements, (ii) the circumstances under which an
entity should recognize events or transactions occurring after the balance
sheet date in its financial statements and (iii) the disclosures that an entity
should make about events or transactions that occurred after the balance sheet
date. This new guidance was effective for the period ended June 30, 2010 and
did not have a significant impact on the Companys consolidated financial
statements

37

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Critical Accounting Policies

Certain accounting policies are important to the understanding of our
financial condition, since they require management to make difficult, complex
or subjective judgments, some of which may relate to matters that are
inherently uncertain. Estimates associated with these policies are susceptible
to material changes as a result of changes in facts and circumstances,
including, but without limitation, changes in interest rates, performance of
the economy, financial condition of borrowers and laws and regulations. The
following are the accounting policies we believe are critical.

Allowance for Loan Losses.We
recognize that losses will be experienced on loans and that the risk of loss
will vary with, among other things, the type of loan, the creditworthiness of
the borrower, general economic conditions and the quality of the collateral for
the loan. We maintain an allowance for loan losses to absorb losses inherent in
the loan portfolio. The allowance for loan losses represents managements estimate
of probable losses based on all available information. The allowance for loan
losses is based on managements evaluation of the collectability of the loan
portfolio, including past loan loss experience, known and inherent losses,
information about specific borrower situations and estimated collateral values,
and current economic conditions. The loan portfolio and other credit exposures
are regularly reviewed by management in its determination of the allowance for
loan losses. The methodology for assessing the appropriateness of the allowance
includes a review of historical losses, peer group comparisons, industry data
and economic conditions.

As an integral part of their examination process, the Office of Thrift
Supervision periodically reviews our allowance for loan losses and may require
us to make additional provisions for estimated losses based upon judgments
different from those of management. In establishing the allowance for loan
losses, loss factors are applied to various pools of outstanding loans. Loss
factors are derived using our historical loss experience and may be adjusted
for factors that affect the collectability of the portfolio as of the
evaluation date. Commercial business loans that are criticized are evaluated
individually to determine the required allowance for loan losses and to
evaluate the potential impairment of such loans under FASB ASC 310 Receivables. Although management believes
that it uses the best information available to establish the allowance for loan
losses, future adjustments to the allowance for loan losses may be necessary
and results of operations could be adversely affected if circumstances differ
substantially from the assumptions used in making the determinations. Because
future events affecting borrowers and collateral cannot be predicted with
certainty, there can be no assurance that the existing allowance for loan
losses is adequate or that increases will not be necessary should the quality
of loans deteriorate as a result of the factors discussed previously. Any
material increase in the allowance for loan losses may adversely affect our
financial condition and results of operations. The allowance is based on
information known at the time of the review. Changes in factors underlying the
assessment could have a material impact on the amount of the allowance that is
necessary and the amount of provision to be charged against earnings. Such
changes could impact future results.

Valuation of Investment Securities.Substantially
all of our investment securities are classified as available-for-sale and
recorded at current fair value. Unrealized gains or losses, net of deferred
taxes, are reported in other comprehensive income as a separate component of
stockholders equity. In general, fair value is based upon quoted market prices
of identical assets, when available. If quoted market prices are not available,
fair value is based upon valuation models that use cash flow, security
structure and other observable information. Where sufficient data is not
available to produce a fair valuation, fair value is based on broker quotes for
similar assets. Broker quotes may be adjusted to ensure that financial
instruments are recorded at fair value. Adjustments may include unobservable
parameters, among other things. No adjustments were made to any broker quotes
received by us.

We conduct a quarterly review and evaluation of our investment
securities to determine if any declines in fair value are other than temporary.
In making this determination, we consider the period of time the securities
were in a loss position, the percentage decline in comparison to the
securities amortized cost, the financial condition of the issuer, if
applicable, and the delinquency or default rates of underlying collateral. We
consider our intent to sell the investment securities and the likelihood that
we will not have to sell the investment securities before recovery of their
cost basis. If impairment exists, credit related impairment losses are recorded
in earnings while noncredit related impairment losses are recorded in
accumulated other comprehensive income.

Deferred Income Taxes.We
use the asset and liability method of accounting for income taxes as prescribed
in Statement of FASB ASC 740 Income Taxes.
Using this method, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. If current available information raises doubt as to the realization
of the deferred tax assets, a valuation allowance is established. Deferred tax
assets and liabilities are measured using enacted tax rates expected to be
applied to taxable income in the years in which those temporary differences are
expected to be recovered or settled. We exercise significant judgment in
evaluating the amount and timing of recognition of the resulting tax
liabilities and assets. These judgments require us to make projections of
future taxable income. The judgments and estimates we make in determining our
deferred tax assets, which are inherently subjective, are reviewed on an
ongoing basis as regulatory and business factors change. A reduction in
estimated future taxable income could require us to record a valuation
allowance.

38

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Changes in levels of valuation allowances could result in increased
income tax expense, and could negatively affect earnings.

FINANCIAL CONDITION

Introduction.Total assets increased $36.03 million, or 12.44%, to
$325.74 million at June 30, 2010, compared to $289.71 million at June 30, 2009.
Total liabilities increased by $11.39 million, or 4.35%, to $273.31 million at
June 30, 2010, from $261.92 million at June 30, 2009. The loan portfolio
increased $2.31 million during the year. Total deposits increased $10.74
million. Noninterest checking increased $3.37 million or 22.49%, to $18.38
million at June 30, 2010, and money market accounts increased $2.14 million, or
7.94%. Interest bearing checking accounts increased $1.99 million, or 6.10%, to
$34.66 million at June 30, 2010. Certificates of deposits decreased $1.19
million, or 1.38%, to $85.00 million at June 30, 2010. Much of the asset growth
was funded by these increased deposits in addition to the increase in capital
resulting from the stock issuance in the fourth quarter of the fiscal year.

Balance Sheet Details.Loans receivable increased $2.31 million, or 1.38% to
$169.50 million from $167.20 million. Though loan originations were relatively
strong, much of the loan origination volume was in 30 and 15 year fixed rate
one- to four-family residential mortgages which were primarily sold in the
secondary market. We sold $76.93 million in loans during fiscal year 2010, a
decrease of $54.30 million from $131.23 million sold in fiscal year 2009. The
amount of loans sold in fiscal year 2009 was exceptionally high as the Bank
experienced a drastic increase in refinance volume of one- to four-family
residential mortgages. Origination activity on most loan categories, with the
exception of real estate construction loans and commercial business loans,
decreased in the current fiscal year. Commercial real estate and land loans
increased $4.96 million during the year, and residential mortgage loans
decreased $6.21 million. The available-for-sale investment portfolio increased
$32.27 million, or 39.22%, to $114.53 million at June 30, 2010 from $82.26
million at June 30, 2009. The investment category with the largest increase was
U.S. Government and agency bonds, which increased $28.36 million. Premises and
equipment increased $2.09 million, which was primarily due to the completion of
our new branch in Bozeman, Montana. The majority of the costs of this project
was included as construction in process within premises and equipment as of
June 30, 2009 with the exception of the remaining costs, approximately $2.00
million, which were incurred during the first quarter of fiscal year 2010. This
branch was opened in October, 2009, and is located approximately one mile away
from our prior Bozeman location. Due to its proximity to the existing location,
customer usage of the old location was closely monitored. Management elected to
close the existing Bozeman location on August 1, 2010. All employees at that
location have been transferred to the new location and the facility is
currently for sale.

Total deposits increased $10.74 million as we experienced significant
growth in deposits, notwithstanding generally lower rates on deposits. The
growth was attributable to consumers seeking additional safety and the
protection afforded by increased federal deposit insurance. Of that amount
certificates of deposit decreased $1.19 million, to $85.00 million at June 30,
2010 from $86.20 million at June 30, 2009. The Bank had no brokered deposits as
of June 30, 2010. Interest-earning checking accounts increased $1.99 million
and noninterest checking increased $3.37 million. Money market accounts
increased $2.14 million and savings accounts increased $4.43 million. A portion
of the deposit growth the Bank has experienced over the last two fiscal years
has likely been the result of a flight to quality by individual investors
during the financial crisis and ensuing economic downturn. As such, as the
financial crisis appears to subside, we believe deposit growth in the future
will be difficult to achieve on a long-term basis due to fierce competition
among financial institutions in our markets. Advances from the FHLB and other
borrowings were relatively unchanged increasing to $67.22 million at year-end
2010 from $67.06 million at year-end 2009, an increase of $168,000.

Total shareholders equity was $52.43 million at June 30, 2010, an
increase of $24.64 million. This increase was largely due to the $24.64 million
of gross proceeds from issuance of common stock on April 5, 2010. Net income
for the year and an accumulated other comprehensive gain of $1.52 million
(mainly due to an increase in net unrealized gain on securities
available-for-sale) also contributed to the increase in equity. These were
partially offset by the purchase of treasury stock and dividends paid during
the year.

39

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Analysis of Net Interest Income

The Banks earnings have historically depended primarily upon net
interest income, which is the difference between interest income earned on
loans and investments and interest paid on deposits and any borrowed funds. It
is the single largest component of Eagles operating income. Net interest
income is affected by (i) the difference between rates of interest earned on
loans and investments and rates paid on interest-bearing deposits and
borrowings (the interest rate spread) and (ii) the relative amounts of loans
and investments and interest-bearing deposits and borrowings.

The following tables set forth average balance sheets, average yields
and costs, and certain other information at and for the periods indicated. All
average balances are daily average balances. Non-accrual loans were included in
the computation of average balances, but have been reflected in the table as
loans carrying a zero yield. The yields set forth below include the effect of
deferred fees, discounts and premiums that are amortized or accreted to
interest income or expense.

|                                                              |  |                                       |         |                          |   |                 |  |                         |        |                          |   |                 |  |   |        |  |  |        |  
|------------------------------------------------------------- |  | ------------------------------------- | ------- | ------------------------ | - | --------------- |  | ----------------------- | ------ | ------------------------ | - | --------------- |  | - | ------ |  |  | ------ | -
|                                                              |  | For the
 twelve months ended June 30, |        
|                                                              |  |                                       |        
|                                                              |  | 2010                                  |         | 2009                     |  
|                                                              |  |                                       |         |                          |  
|                                                              |  | (Dollars
 in thousands)               |        
|                                                              |  | Average
 Daily
 Balance               |         | Interest
 and
 Dividends |   | Yield/
 Cost(3) |  | Average
 Daily
 Balance |        | Interest
 and
 Dividends |   | Yield/
 Cost(3) | 
|                                                              |  |                                       |         |                          |   |                 |  |                         |        |                          |   |                 | 
|Assets:                                                       |  |                                       |         |                          |   |                 |  |                         |        |                          |   |                 |  |   |        |  |  |        |  
|Interest-earning assets:                                      |  |                                       |         |                          |   |                 |  |                         |        |                          |   |                 |  |   |        |  |  |        |  
|FHLB stock                                                    |  | $                                     | 2,002   |                          | $ |                |  |                         | 0.00   | %                        | $ | 1,891           |  | $ |       |  |  | 0.00   | %
|Loans receivable, net                                         |  |                                       | 172,338 |                          |   | 10,857          |  |                         | 6.30   | %                        |   | 177,354         |  |   | 11,411 |  |  | 6.43   | %
|Investment securities                                         |  |                                       | 97,077  |                          |   | 4,023           |  |                         | 4.14   | %                        |   | 79,432          |  |   | 3,922  |  |  | 4.94   | %
|Interest-bearing deposits with banks                          |  |                                       | 7,151   |                          |   | 27              |  |                         | 0.38   | %                        |   | 3,271           |  |   | 15     |  |  | 0.46   | %
|                                                              |  |                                       |         |                          |   |                 |  |                         |        |                          |   |                 |  |   |        |  |  |        |  
|Total interest-earning assets                                 |  |                                       | 278,568 |                          |   | 14,907          |  |                         | 5.35   | %                        |   | 261,948         |  |   | 15,348 |  |  | 5.86   | %
|Noninterest-earning assets                                    |  |                                       | 30,315  |                          |   |                 |  |                         |        |                          |   | 23,642          |  |   |        |  |  |        |  
|                                                              |  |                                       |         |                          |   |                 |  |                         |        |                          |   |                 |  |   |        |  |  |        |  
|Total assets                                                  |  | $                                     | 308,883 |                          |   |                 |  |                         |        |                          | $ | 285,590         |  |   |        |  |  |        |  
|                                                              |  |                                       |         |                          |   |                 |  |                         |        |                          |   |                 |  |   |        |  |  |        |  
|                                                              |  |                                       |         |                          |   |                 |  |                         |        |                          |   |                 |  |   |        |  |  |        |  
|Liabilities and Equity:                                       |  |                                       |         |                          |   |                 |  |                         |        |                          |   |                 |  |   |        |  |  |        |  
|Interest-bearing liabilities:                                 |  |                                       |         |                          |   |                 |  |                         |        |                          |   |                 |  |   |        |  |  |        |  
|Deposit accounts:                                             |  |                                       |         |                          |   |                 |  |                         |        |                          |   |                 |  |   |        |  |  |        |  
|Money market                                                  |  | $                                     | 27,420  |                          | $ | 111             |  |                         | 0.40   | %                        | $ | 26,344          |  | $ | 308    |  |  | 1.17   | %
|Statement Savings                                             |  |                                       | 28,226  |                          |   | 92              |  |                         | 0.33   | %                        |   | 24,069          |  |   | 131    |  |  | 0.54   | %
|Checking                                                      |  |                                       | 36,125  |                          |   | 72              |  |                         | 0.20   | %                        |   | 32,994          |  |   | 114    |  |  | 0.35   | %
|Certificates of deposit                                       |  |                                       | 89,197  |                          |   | 1,886           |  |                         | 2.11   | %                        |   | 86,666          |  |   | 2,608  |  |  | 3.01   | %
|Advances from FHLB & subordinated debt                        |  |                                       | 71,245  |                          |   | 2,944           |  |                         | 4.13   | %                        |   | 72,927          |  |   | 2,954  |  |  | 4.05   | %
|                                                              |  |                                       |         |                          |   |                 |  |                         |        |                          |   |                 |  |   |        |  |  |        |  
|Total interest-bearing liabilities                            |  |                                       | 252,213 |                          |   | 5,105           |  |                         | 2.02   | %                        |   | 243,000         |  |   | 6,115  |  |  | 2.52   | %
|Non-interest checking                                         |  |                                       | 17,551  |                          |   |                 |  |                         |        |                          |   | 14,502          |  |   |        |  |  |        |  
|Other noninterest-bearing liabilities                         |  |                                       | 3,549   |                          |   |                 |  |                         |        |                          |   | 2,117           |  |   |        |  |  |        |  
|                                                              |  |                                       |         |                          |   |                 |  |                         |        |                          |   |                 |  |   |        |  |  |        |  
|Total liabilities                                             |  |                                       | 273,313 |                          |   |                 |  |                         |        |                          |   | 259,619         |  |   |        |  |  |        |  
|                                                              |  |                                       |         |                          |   |                 |  |                         |        |                          |   |                 |  |   |        |  |  |        |  
|Total equity                                                  |  |                                       | 35,570  |                          |   |                 |  |                         |        |                          |   | 25,971          |  |   |        |  |  |        |  
|                                                              |  |                                       |         |                          |   |                 |  |                         |        |                          |   |                 |  |   |        |  |  |        |  
|                                                              |  |                                       |         |                          |   |                 |  |                         |        |                          |   |                 |  |   |        |  |  |        |  
|Total liabilities and equity                                  |  | $                                     | 308,883 |                          |   |                 |  |                         |        |                          | $ | 285,590         |  |   |        |  |  |        |  
|                                                              |  |                                       |         |                          |   |                 |  |                         |        |                          |   |                 |  |   |        |  |  |        |  
|Net interest income/interest rate spread(1)                   |  |                                       |         |                          | $ | 9,802           |  |                         | 3.33   | %                        |   |                 |  | $ | 9,233  |  |  | 3.34   | %
|                                                              |  |                                       |         |                          |   |                 |  |                         |        |                          |   |                 |  |   |        |  |  |        |  
|                                                              |  |                                       |         |                          |   |                 |  |                         |        |                          |   |                 |  |   |        |  |  |        |  
|Net interest margin(2)                                        |  |                                       |         |                          |   |                 |  |                         | 3.52   | %                        |   |                 |  |   |        |  |  | 3.52   | %
|                                                              |  |                                       |         |                          |   |                 |  |                         |        |                          |   |                 |  |   |        |  |  |        |  
|Total interest-earning assets to interest-bearing liabilities |  |                                       |         |                          |   |                 |  |                         | 110.45 | %                        |   |                 |  |   |        |  |  | 107.80 | %
|                                                              |  |                                       |         |                          |   |                 |  |                         |        |                          |   |                 |  |   |        |  |  |        |  

|    |                                                                                                                                                            
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Interest
 rate spread represents the difference between the average yield on
 interest-earning assets and the average rate on interest-bearing liabilities.
|    |                                                                                                                                                            
|(2) | Net interest
 margin represents income before the provision for loan losses divided by
 average interest-earning assets.                                   
|    |                                                                                                                                                            
|(3) | For purposes
 of this table, tax exempt income is not calculated on a tax equivalent basis.                                                                

40

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Rate/Volume Analysis

The following table presents the dollar amount of changes in interest
income and interest expense for major components of interest-earning assets and
interest-bearing liabilities for the periods indicated. For each category of
interest-earning assets and interest-bearing liabilities, information is
provided on changes attributable to: (1) changes in volume multiplied by the
old rate; (2) changes in rate, which are changes in rate multiplied by the old
volume; and (3) changes not solely attributable to rate or volume, which have
been allocated proportionately to the change due to volume and the change due
to rate.

|                                             |  |                                                   |      |              |   |        |   |        |        |              |   |       |   |   |        |   |   |        |  
|-------------------------------------------- |  | ------------------------------------------------- | ---- | ------------ | - | ------ | - | ------ | ------ | ------------ | - | ----- | - | - | ------ | - | - | ------ | -
|                                             |  | For the Years Ended June 30,
 Increase (Decrease) |     
|                                             |  |                                                   |     
|                                             |  | (In thousands)                                    |     
|                                             |  | 2010 vs 2009                                      |      | 2009 vs 2008 |  
|                                             |  |                                                   |      |              |  
|                                             |  | Volume                                            |      | Due to
 Rate |   | Net    |   | Volume |        | Due to
 Rate |   | Net   |  
|                                             |  |                                                   |      |              |   |        |   |        |        |              |   |       |  
|Interest earning assets:                     |  |                                                   |      |              |   |        |   |        |        |              |   |       |   |   |        |   |   |        |  
|Loans receivable, net                        |  | $                                                 | (323 | )            | $ | (231   | ) | $      | (554   | )            | $ | 783   |   | $ | (277   | ) | $ | 506    |  
|Investment securities                        |  |                                                   | 871  |              |   | (770   | ) |        | 101    |              |   | 538   |   |   | 263    |   |   | 801    |  
|Interest-bearing deposits with banks         |  |                                                   | 18   |              |   | (6     | ) |        | 12     |              |   | 67    |   |   | (115   | ) |   | (48    | )
|Other earning assets                         |  |                                                   |     |              |   |       |   |        |       |              |   |      |   |   |       |   |   |       |  
|                                             |  |                                                   |      |              |   |        |   |        |        |              |   |       |   |   |        |   |   |        |  
|Total interest earning assets                |  |                                                   | 566  |              |   | (1,007 | ) |        | (441   | )            |   | 1,388 |   |   | (129   | ) |   | 1,259  |  
|                                             |  |                                                   |      |              |   |        |   |        |        |              |   |       |   |   |        |   |   |        |  
|Interest-bearing liabilities:                |  |                                                   |      |              |   |        |   |        |        |              |   |       |   |   |        |   |   |        |  
|Passbook, money market and checking accounts |  |                                                   | 47   |              |   | (325   | ) |        | (278   | )            |   | 96    |   |   | (184   | ) |   | (88    | )
|Certificates of deposit                      |  |                                                   | 76   |              |   | (798   | ) |        | (722   | )            |   | (94   | ) |   | (1,044 | ) |   | (1,138 | )
|Borrowings                                   |  |                                                   | (68  | )            |   | 58     |   |        | (10    | )            |   | 1,116 |   |   | (428   | ) |   | 688    |  
|                                             |  |                                                   |      |              |   |        |   |        |        |              |   |       |   |   |        |   |   |        |  
|Total interest-bearing liabilities           |  |                                                   | 55   |              |   | (1,065 | ) |        | (1,010 | )            |   | 1,118 |   |   | (1,656 | ) |   | (538   | )
|                                             |  |                                                   |      |              |   |        |   |        |        |              |   |       |   |   |        |   |   |        |  
|Change in net interest income                |  | $                                                 | 511  |              | $ | 58     |   | $      | 569    |              | $ | 270   |   | $ | 1,527  |   | $ | 1,797  |  
|                                             |  |                                                   |      |              |   |        |   |        |        |              |   |       |   |   |        |   |   |        |  

Comparison of Operating Results for the Years
Ended June 30, 2010 and 2009

Net Income.Eagles net income was $2.414 million and $2.388
million for the years ended June 30, 2010 and 2009, respectively. This increase
of $26,000, or 1.09%, was the result of an increase in net interest income of
$569,000 and an increase in net noninterest income of $594,000, offset by
increases in noninterest expense of $668,000 and the provision for loan losses
of $458,000. Eagles tax provision was $11,000 higher in 2010. Basic earnings
per share for the year ended June 30, 2010 were $0.60, compared to $0.59 (as
adjusted) for the year ended June 30, 2009. Diluted earnings per share were
$0.54 and $0.52 (as adjusted) for 2010 and 2009, respectively.

Net Interest Income.Net interest income increased to $9.802 million for
the year ended June 30, 2010, from $9.233 million for the previous year. This
increase of $569,000, or 6.16%, was the result of a larger decrease in interest
expense of $1.01 million than decrease in interest income of $441,000. As shown
in the Rate/Volume Analysis, this increase is mainly attributable a larger
average balance of investments and lower rates on deposits.

Interest and Dividend Income.Total interest and dividend income was $14.907 million
for the year ended June 30, 2010, compared to $15.348 million for the year
ended June 30, 2009, a decrease of $441,000, or 2.87%. Interest and fees on
loans decreased to $10.857 million for 2010 from $11.411 million for 2009. This
decrease of $554,000, or 4.85%, was due to both the decrease in the average
balances on loans receivable and the decrease in average rate, for the year
ended June 30, 2010. The average interest rate earned on loans receivable
decreased by 13 basis points, to 6.30% from 6.43%. Average balances for loans
receivable, net, for the year ended June 30, 2010 were $172.34 million,
compared to $177.35 million for the previous year. This represents a decrease
of $5.01 million, or 2.82%. Interest and dividends on investment securities
available-for-sale increased to $4.003 million for the year ended June 30, 2010
from $3.893 million for the year ended June 30, 2009, an increase of $110,000,
or 2.83%. This increase was the result of higher average interest rates on the
AFS portfolio during the year,

41

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partially offset by a lower average balance. Interest earned from
deposits at other banks increased slightly for the year ended June 30, 2010 due
to a higher average balance. Interest and dividends on investments
held-to-maturity (HTM) also experienced a slight decline.

Interest Expense.Total interest expense decreased to $5.105 million for
the year ended June 30, 2010 from $6.115 million for the year ended June 30,
2009, a decrease of $1.01 million, or 16.52%. Interest on deposits decreased to
$2.161 million for the year ended June 30, 2010 from $3.161 million for the
year ended June 30, 2009. This decrease of $1.0 million, or 31.64%, was due
primarily to a decrease on average rates paid. The average cost of deposits
decreased 67 basis points, to 1.19% in 2010 from 1.86% in 2009. All deposit
categories showed an increase in average balances in 2010. A decrease in the
average balance of borrowings was partially offset by an increase in the
average rate paid and resulted in a decrease in interest paid on borrowings to
$2.944 million for the year ended June 30, 2010 from $2.954 million for the
year ended June 30, 2009. The average balance of borrowings decreased to
$71.245 million for the year ended June 30, 2010, compared to $72.927 million
for the year ended June 30, 2009 and resulted principally from a decrease in
FHLB borrowings. The average rate paid on borrowings increased to 4.13% in 2010
from 4.05% in 2009.

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 American
Federal Savings Bank to provide for probable loan losses based on prior loss
experience, volume and type of lending conducted by American Federal, 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 management 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. Using this methodology, a
provision to increase the allowance for loan loss by $715,000 was made for the
year ended June 30, 2010 while a provision of $257,000 was made for the year
ended June 30, 2009. This, management determined, adequately reflected a level
of total allowances considered adequate. Total classified assets increased to
$4.614 million at June 30, 2010 from $1.614 million at June 30, 2009. Total
nonperforming loans as a percentage of the total loan portfolio was 1.65% at
June 30, 2010, up from 0.75% at June 30, 2009. As of June 30, 2010, American
Federal Savings Bank had $619,000 real estate owned and none at June 30, 2009.

Noninterest Income.Total noninterest income increased to $3.593 million
for the year ended June 30, 2010, from $2.999 million for the year ended June
30, 2009, an increase of $594,000 or 19.81%. This increase was primarily due to
recognized losses of $1.296 million on Freddie Mac and Fannie Mae preferred
stock that was accounted for under FASB ASC 825, Fair Value Option for Financial Assets and Financial Liabilities
in fiscal year 2009. These shares of preferred stock were sold during the
second quarter of the fiscal year 2010 resulting in a gain of $84,000 based on
their then carrying value. Net gain on sale of loans decreased $936,000 due to
a reduction in refinance activity as noted above in the Balance Sheet Details section. Service
charges on deposit accounts increased $20,000 to $765,000 for the year ended
June 30, 2010 from $745,000 for the year ended June 30, 2009. This was
primarily due to an increase in overdraft fees. Other noninterest income
increased $9,000 to $661,000. The single largest item in other noninterest
income is earnings from bank owned life insurance of $253,000.

Noninterest Expense.Noninterest expense increased by $668,000 or 7.80% to
$9.231 million for the year ended June 30, 2010 from $8.563 million for the
year ended June 30, 2009. This increase was primarily due to increases in
salaries and benefits of $339,000, occupancy and equipment expense of $277,000,
and legal, accounting, and examination fees of $87,000. The increase in
salaries and benefits was due to normal pay raises and a slightly larger staff.
The increase in occupancy and equipment expense was primarily due to a full
year of operation of the new Helena, Skyway branch opened in January 2009, and
the opening of the new Bozeman, Oak Street branch opened in October 2009. The
increase in legal, accounting, and examination fees was primarily due to work
performed by a certified public accounting firm on internal controls for
complying with the Sarbanes Oxley Act. An exemption from Section 404 of the
Sarbanes Oxley Act is included in the Frank-Dodd Wall Street Reform and
Consumer Protection Act that was signed into law on July 21, 2010 for public
companies with a public float of less than $75 million. Currently, Eagle falls
below this threshold and will be exempt from those requirements. As such, we
anticipate the accounting costs associated with these internal controls will be
eliminated. Other categories of noninterest expense showed modest changes.

Income Tax Expense.Eagles income tax expense was $1.035 million for the
year ended June 30, 2010, compared to $1.024 million for the year ended June
30, 2009. The effective tax rate was 30.0% for both years ended June 30, 2010
and 2009.

42

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Liquidity and Capital Resources

Eagles subsidiary, American Federal Savings 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 policy minimums of 1.0%, and 8.0% for basic surplus and basic
surplus with FHLB as internally defined. In general, the basic surplus is a
calculation of the ratio of unencumbered short-term assets reduced by estimated
percentages of CD maturities and other deposits that may leave the Bank in the
next 90 days divided by total assets. Basic surplus with FHLB adds to basic
surplus the additional borrowing capacity the Bank has with the FHLB of
Seattle. The Bank exceeded those minimum ratios as of both June 30, 2010 and
June 30, 2009.

The Banks primary sources of funds are deposits, repayment of loans
and mortgage-backed securities, maturities of investments, funds provided from
operations, advances from the FHLB of Seattle and other borrowings. 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.

Net cash provided by the Companys operating activities, which is
primarily comprised of cash transactions affecting net income, was $2.402
million for the year ended June 30, 2010 and $5.730 million for the year ended
June 30, 2009. The change was primarily a result of an increase in the amount
of loans held for sale in 2010.

Net cash used in the Companys investing activities, which is primarily
comprised of cash transactions from the investment securities and
mortgage-backed securities portfolios and the loan portfolio, was $36.098
million for the year ended June 30, 2010, and $10.218 million for the year
ended June 30, 2009. The increase in cash used was primarily due to more
investment purchases in available-for-sale securities in 2010 compared to 2009.

Net cash provided by the Companys financing activities was $30.877
million for the year ended June 30, 2010, and $6.726 million for the year ended
June 30, 2009. The increase in cash was primarily a result of cash transactions
from net increases in deposits and net increases in FHLB advances and other
borrowings, and the issuance of common stock in our conversion and
reorganization.

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 Eagles commitments to make loans and managements assessment of
Eagles ability to generate funds.

At March 31, 2010 (the most recent report available), the Banks
measure of sensitivity to interest rate movements, as measured by the OTS,
decreased slightly from the previous quarter. The market value of the Banks
capital position has increased significantly from the previous year due to the
common stock issuance. The Bank is well within the guidelines set forth by the
Board of Directors for interest rate sensitivity.

As of June 30, 2010, the Banks regulatory capital was in excess of all
applicable regulatory requirements and the Bank is deemed well capitalized
pursuant to FDIC rules. At June 30, 2010, the Banks tangible, core, and
risk-based capital ratios amounted to 13.10%, 13.10%, and 19.63%, respectively,
compared to regulatory requirements of 1.5%, 3.0%, and 8.0%, respectively.

Impact of Inflation and Changing Prices

Our financial statements and the accompanying notes, which are found in
Item 8, 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.

Interest Rate Risk Analysis

In addition to the asset/liability committee, the board of directors
reviews our asset and liability policies. The board of directors reviews
interest rate risk and interest rate trends quarterly, as well as liquidity and
capital ratio requirements. Management administers the policies and
determinations of the board of directors with respect to our asset and
liability

43

---



goals and strategies. Our asset and liability policy and strategies are
expected to continue as described so long as competitive and regulatory
conditions in the financial institution industry and market interest rates
continue as they have in recent years.

The following table discloses how the Banks net portfolio value
(NPV) would react to interest rate changes. Given the current relatively low
level of market interest rates, an NPV calculation for an interest rate
decrease of greater than 100 basis points has not been prepared.

|                                                  |                                 |                                          |                                     |   |                   |       |  
|------------------------------------------------- | ------------------------------- | ---------------------------------------- | ----------------------------------- | - | ----------------- | ----- | -
|Changes in Market
 Interest Rates
 (Basis Points) |                                 | Net Portfolio Value as % of PV of Assets |                                    
|                                                  |                                 |                                         
|                                                  | At June 30, 2010
 Projected NPV |                                          | Board Policy Limit
 (if applicable) |  
|                                                  |                                 |                                          |                                     |   |                  
|                                                  |                                 |                                          |                                     |   | Must be at least: |      
|                                                  |                                 |                                          |                                     |   |                   |       |  
|+300                                              |                                 |                                          | 14.75                               | % |                   | 7.00  | %
|+200                                              |                                 |                                          | 16.23                               | % |                   | 8.00  | %
|+100                                              |                                 |                                          | 17.41                               | % |                   | 9.00  | %
|0                                                 |                                 |                                          | 18.27                               | % |                   |      |  
|-100                                              |                                 |                                          | 18.78                               | % |                   | 10.00 | %

Off-Balance Sheet Arrangements

As a financial services provider, we routinely are a party to various
financial instruments with off-balance-sheet risks, such as commitments to
extend credit and unused lines of credit. While these contractual obligations
represent our future cash requirements, a significant portion of commitments to
extend credit may expire without being drawn upon. Such commitments are subject
to the same credit policies and approval process accorded to loans we make. In
addition, we use mandatory sell forward delivery commitments to sell whole
loans to the secondary markets. These commitments are also used as a hedge
against exposure to interest rate risks relating from rate locked loan
origination commitments on certain mortgage loans held-for-sale.

|         |                                                            
|-------- | -----------------------------------------------------------
|ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

This item has
been omitted based on Eagles status as a smaller reporting company.

|        |                                             
|------- | --------------------------------------------
|ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Eagles
audited financial statements, notes thereto, and auditors reports are found
immediately following Part III of this report.

|        |                                                                                       
|------- | --------------------------------------------------------------------------------------
|ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
 FINANCIAL DISCLOSURE.

None.

|            |                         
|----------- | ------------------------
|ITEM 9A(T). | CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

We conducted an evaluation under the supervision and with the
participation of our management including our Chief Executive Officer (CEO)
and our Chief Financial Officer (CFO) of the effectiveness of the design and
operation of our disclosure controls and procedures, as defined in Rules
13a-15(e) and 15d-15(e) under the Exchange Act, as amended, as of June 30,
2010, to ensure that information required to be disclosed by us in the reports
filed or submitted by us under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the Securities
Exchange Commissions rules and forms, including to ensure that information
required to be disclosed by us in the reports filed or submitted by us under
the Exchange Act is accumulated and communicated to management to allow timely
decisions regarding required disclosure. Based on that evaluation, our CEO and
CFO concluded that as of June 30, 2010, our disclosure controls and procedures
were effective.

44

---



Management Annual Report on Internal Control
over Financial Reporting

Our management is responsible for establishing and maintaining adequate
internal control over financial reporting, as such term is defined in Exchange
Act Rules 13a-15(f) and 15d-15(f). Our management conducted an assessment of
the effectiveness of our internal control over financial reporting. This
assessment was based upon the criteria for effective internal control over
financial reporting established in Internal
Control - Integrated Framework, issued by the Committee of
Sponsoring Organizations of the Treadway Commission.

The Companys internal control over financial reporting involves a
process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles. Internal
control over financial reporting includes the controls themselves, as well as
monitoring of the controls and internal auditing practices and actions to correct
deficiencies identified. Because of its inherent limitations, internal control
over financial reporting may not prevent or detect all misstatements.

Management assessed the effectiveness of the Companys internal control
over financial reporting as of June 30, 2010. Based on this assessment,
management concluded that, as of June 30, 2010, the Companys internal control
over financial reporting was effective.

Changes in Internal Control over Financial
Reporting

There were no changes in the Companys internal control over financial
reporting identified in connection with the evaluation required by paragraph
(d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during the quarter
ended June 30, 2010 that have materially affected, or were reasonably likely to
materially affect, the Companys internal control over financial reporting.

|         |                   
|-------- | ------------------
|ITEM 9B. | OTHER INFORMATION.

None.

45

---



PART III

Except as provided below, the information required by Items 10, 11, 12,
13 and 14 is hereby incorporated by reference to our definitive proxy statement
to be filed with the Securities and Exchange Commission within 120 days after
the close of our fiscal year.

|         |                                                        
|-------- | -------------------------------------------------------
|ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

Information about our directors may be found under the caption
Proposal I  Election of Directors in our Proxy Statement for the 2010 Annual
Meeting of Shareholders (the Proxy Statement). The information in the Proxy
Statement set forth under the captions of Section 16 (a) Beneficial Ownership
Reporting Compliance, Board Meetings and Committees, Structure of the Board
of Directors, The Boards Role in Risk Oversight, and Code of Ethics is
incorporated herein by reference.

Executive Officers of the RegistrantThe following is a list of the names and ages of our
executive officers, all positions and offices held by each person and each
persons principal occupations or employment during the past five years. There
are no family relationships between any executive officers and directors.

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |       
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------
|Peter J. Johnson, President & Chief Executive Officer                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | Age 53
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|Mr. Johnson has served as President of the Bank and Eagle since July
 2007 and CEO since November 2007. Prior to being named President, he had
 served as the Companys Executive Vice President and Chief Financial Officer.
 He joined the Bank in 1981. He currently serves on the Montana Independent
 Bankers Association board of directors and the Federal Reserve Boards Thrift
 Institution Advisory Council. He is a past chairman of both the Helena Area
 Chamber of Commerce and the Diocese of Helena Finance Council. He is also a
 member of the Rotary Club of Helena, and serves on the board of trustees of
 St. Peters Hospital.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |       
|Clinton J. Morrison, Senior Vice President & Chief Financial
 Officer                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | Age 40
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|Mr. Morrison has served as the Chief Financial Officer of the Bank
 and Eagle since July 2007. Prior to being named the Chief Financial Officer,
 he had served as the Companys treasurer and compliance officer. He joined
 the Bank in 2001. Mr. Morrison maintains a certified public accountants
 license in the State of Montana. He currently is a member of the Montana
 Society of CPAs and the American Institute of CPAs. Mr. Morrison currently is
 a member of the Helena Downtown Kiwanis Club and previously served terms as
 President and Treasurer of that organization.                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |       
|Michael C. Mundt, Senior Vice President & Chief Lending Officer                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | Age 56
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|Mr. Mundt has served as the Chief Lending Officer of the Bank since
 April 1994. Prior to being named the Chief Lending Officer, he served as Vice
 President of Consumer and Commercial Lending. He joined the bank in 1988. He
 currently serves on the Montana Bankers Associations board of directors, and
 also currently serves as the immediate Past-President of the Montana Business
 Assistance Connection, a local economic development non-profit organization.                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |       
|Robert M. Evans, Senior Vice President & Chief Information
 Officer                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | Age 62
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|Mr. Evans has served as the Chief Information Officer of the Bank
 since January 2008. Prior to being named Chief Information Officer, he served
 as the Banks Vice President of Information Services. Mr. Evans also serves
 as the Banks Security Officer. He joined the Bank in 1986.                                                                                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |       
|Rachel R. Amdahl, Senior Vice President/Operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | Age 41
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|Mrs. Amdahl has served as Senior Vice President/Operations of the
 Bank since February 2006. Prior to being named the Senior Vice
 President/Operations, she served as Vice President/Operations since 2000. She
 joined the Bank in 1987. She currently serves on the Lewis and Clark County
 United Way board of directors. She also is a member of the Womens Leadership
 Network.                                                                                                                                                                                                                                                                

Code of Ethics

We have a code of ethics that applies to all of our employees,
including our principal executive officer, principal financial officer,
principal accounting officer and our Board. Our Code of Ethics and Conflict of
Interest Policy is available on our website at
www.americanfederalsavingsbank.com. We will disclose on our website any
amendments to or waivers from any provision of our Code of Ethics and Conflict
of Interest Policy that applies to any of the directors or officers.

|         |                        
|-------- | -----------------------
|ITEM 11. | EXECUTIVE COMPENSATION.

The information in the Proxy Statement set forth under the captions of
Directors Compensation and Executive Compensation is incorporated herein
by reference.

46

---



|                                                                                                                                                                                    |                                                                                                 
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------
|ITEM 12.                                                                                                                                                                            | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
 RELATED STOCKHOLDER MATTERS.
|                                                                                                                                                                                   
|The
 information in the Proxy Statement set forth under the captions of
 Beneficial Ownership of Common Stock is incorporated herein by reference.                               
|                                                                                                                                                                                   
|ITEM 13.                                                                                                                                                                            | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
 INDEPENDENCE.                     
|                                                                                                                                                                                    |                                                                                                 
|The
 information in the Proxy Statement set forth under the captions of
 Transactions with Certain Related Persons and Board Independence is
 incorporated herein by reference.
|                                                                                                                                                                                   
|ITEM 14.                                                                                                                                                                            | PRINCIPAL ACCOUNTING FEES AND SERVICES.                                                         
|                                                                                                                                                                                    |                                                                                                 
|The
 information in the Proxy Statement set forth under the captions of Proposal
 II  Ratification of Appointment of Independent Auditors is incorporated
 herein by reference. 
|                                                                                                                                                                                   
|ITEM 15.                                                                                                                                                                            | EXHIBITS, FINANCIAL STATEMENT SCHEDULES.                                                        

|                                                                                              |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--------------------------------------------------------------------------------------------- | ----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a)                                                                                           | (1)   | The
 following documents are filed as part of this report: The audited
 Consolidated Statements of Financial Condition of Eagle Bancorp Montana, Inc.
 and subsidiary as of June 30, 2010 and June 30, 2009 and the
 related Consolidated Statements of Income, Consolidated Statements of Changes
 in Stockholder Equity and Consolidated Statements of Cash Flows for the years
 then ended, together with the related notes and independent auditors
 reports.
|                                                                                              |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                              | (2)   | Schedules
 omitted as they are not applicable.                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                                                              |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                              | (3)   | Exhibits.                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                              |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Exhibits
 10.1 through 10.20 are management contracts or compensatory plans or
 arrangements.
|                                                                                              |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|**                                                                                            | 3.1   | Amended and
 Restated Certificate of Incorporation of Eagle Bancorp Montana, Inc.                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                              |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|*                                                                                             | 3.2   | Bylaws of
 Eagle Bancorp Montana, Inc.                                                                                                                                                                                                                                                                                                                                                                                                                            
|                                                                                              |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|*                                                                                             | 4     | Form of
 Common Stock Certificate of Eagle Bancorp Montana, Inc.                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                              |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|***                                                                                           | 10.1  | Employee
 Stock Ownership Plan.                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                              |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|****                                                                                          | 10.2  | Eagle
 Bancorp 2000 Stock Incentive Plan.                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                              |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|*                                                                                             | 10.3  | Employment
 Contract, effective as of October 1, 2009, between Peter J. Johnson and
 American Federal Savings Bank.                                                                                                                                                                                                                                                                                                                                               
|                                                                                              |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|*                                                                                             | 10.4  | Form of
 Change in Control Agreement between Clinton J. Morrison and American Federal
 Savings Bank.                                                                                                                                                                                                                                                                                                                                                              
|                                                                                              |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|*                                                                                             | 10.5  | Form of
 Change in Control Agreement between Michael C. Mundt and American Federal
 Savings Bank.                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                              |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|*                                                                                             | 10.6  | Form of
 Change in Control Agreement between Robert M. Evans and American Federal
 Savings Bank.                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                              |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|*                                                                                             | 10.7  | Form of
 Change in Control Agreement between Rachel R. Amdahl and American Federal
 Savings Bank.                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                              |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|*                                                                                             | 10.8  | Amendment
 No. 1 to Employment Contract, effective as of January 22, 2010, between Peter
 J. Johnson and American Federal Savings Bank.                                                                                                                                                                                                                                                                                                                           
|                                                                                              |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|*                                                                                             | 10.9  | Salary
 Continuation Agreement, dated April 18, 2002, between Larry A. Dreyer and American
 Federal Savings Bank.                                                                                                                                                                                                                                                                                                                                                 
|                                                                                              |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|*                                                                                             | 10.10 | First
 Amendment to Salary Continuation Agreement, dated December 31, 2006, between
 Larry A. Dreyer and American Federal Savings Bank.                                                                                                                                                                                                                                                                                                                           
|                                                                                              |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|*                                                                                             | 10.11 | Salary
 Continuation Agreement, dated April 18, 2002, between Peter J. Johnson and
 American Federal Savings Bank.                                                                                                                                                                                                                                                                                                                                                

47

---



|    |                                        |                                                                                                                                                                                                                          
|--- | -------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*   | 10.12                                  | First
 Amendment to Salary Continuation Agreement, dated December 31, 2006, between
 Peter J. Johnson and American Federal Savings Bank.                                                                                 
|    |                                        |                                                                                                                                                                                                                          
|*   | 10.13                                  | Salary
 Continuation Agreement, dated November 15, 2007, between Clinton J. Morrison
 and American Federal Savings Bank.                                                                                                 
|    |                                        |                                                                                                                                                                                                                          
|*   | 10.14                                  | Salary
 Continuation Agreement, dated April 18, 2002, between Michael C. Mundt and
 American Federal Savings Bank.                                                                                                       
|    |                                        |                                                                                                                                                                                                                          
|*   | 10.15                                  | First
 Amendment to Salary Continuation Agreement, dated December 31, 2006, between
 Michael C. Mundt and American Federal Savings Bank.                                                                                 
|    |                                        |                                                                                                                                                                                                                          
|*   | 10.16                                  | Salary
 Continuation Agreement, dated April 18, 2002, between Robert M. Evans and
 American Federal Savings Bank.                                                                                                        
|    |                                        |                                                                                                                                                                                                                          
|*   | 10.17                                  | First
 Amendment to Salary Continuation Agreement, dated December 31, 2006, between
 Robert M. Evans and American Federal Savings Bank.                                                                                  
|    |                                        |                                                                                                                                                                                                                          
|*   | 10.18                                  | Salary
 Continuation Agreement, dated November 16, 2006, between Rachel R. Amdahl and
 American Federal Savings Bank.                                                                                                    
|    |                                        |                                                                                                                                                                                                                          
|*   | 10.19                                  | American
 Federal Savings Bank Split-Dollar Plan, effective October 21, 2004.                                                                                                                                            
|    |                                        |                                                                                                                                                                                                                          
|*   | 10.20                                  | Summary of
 American Federal Savings Bank Bonus Plan.                                                                                                                                                                    
|    |                                        |                                                                                                                                                                                                                          
|*   | 21.1                                   | Subsidiaries
 of Registrant.                                                                                                                                                                                             
|    |                                        |                                                                                                                                                                                                                          
|    | 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
 of the Sarbanes-Oxley Act of 2002.               
|    |                                        |                                                                                                                                                                                                                          
|    | 31.2                                   | Certification
 by Clinton J. Morrison, Chief Financial Officer, pursuant to Rule 13a-14(a)
 under the Securities Exchange Act of 1934, as adopted pursuant to Section 302
 of the Sarbanes-Oxley Act of 2002.            
|    |                                        |                                                                                                                                                                                                                          
|    | 32.1                                   | Certification
 by Peter J. Johnson, Chief Executive Officer and Clinton 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.
|    |                                        |                                                                                                                                                                                                                          
|    | *                                      | Incorporated
 by reference to the identically numbered exhibit of the Registration
 Statement on Form S-1 (File No. 333-163790) filed with the SEC on December
 17, 2009.                                                
|    |                                        |                                                                                                                                                                                                                          
|    | **                                     | Incorporated
 by reference to the identically numbered exhibit of the Current Report on
 Form 8-K filed with the SEC on February 23, 2010.                                                                               
|    |                                        |                                                                                                                                                                                                                          
|    | ***                                    | Incorporated
 by reference to the Registration Statement on Form SB-2 filed with the SEC on
 December 20, 1999.                                                                                                          
|    |                                        |                                                                                                                                                                                                                          
|    | ****                                   | Incorporated
 by reference to the proxy statement for the 2000 Annual Meeting filed with
 the SEC on September 19, 2000.                                                                                                 
|    |                                        |                                                                                                                                                                                                                          
|   
|    |                                        |                                                                                                                                                                                                                          
|(b) | See item
 15(a)(3) above.             
|    |                                        |                                                                                                                                                                                                                          
|(c) | See Item
 15(a)(1) and 15(a)(2) above.

48

---



SIGNATURES

Pursuant to
the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

| |                                      | 
| | ------------------------------------ | 
| | EAGLE
 BANCORP MONTANA, INC.        
| |                                      | 
| | /s/ Peter J. Johnson                 | 
| |                                      | 
| | Peter J.
 Johnson                    | 
| | President
 & Chief Executive Officer | 

Pursuant to
the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.

|                        |  |                                                                                   |  |          
|----------------------- |  | --------------------------------------------------------------------------------- |  | ---------
|Signatures              |  | Title                                                                             |  | Date     
|                        |  |                                                                                   |  |          
|/s/ Peter J. Johnson    |  | President
 & Chief Executive Officer                                              |  | 9/20/2010
|                        |  | Director
 (Principal Executive Officer)                                           |  |          
|Peter J.
 Johnson       |  |                                                                                   |  |          
|                        |  |                                                                                   |  |          
|/s/ Clinton J. Morrison |  | Senior Vice
 President and Chief                                                  |  | 9/20/2010
|                        |  | Financial
 Officer (Principal Financial Officer and Principal Accounting Officer) |  |          
|Clinton J.
 Morrison    |  |                                                                                   | 
|                        |  |                                                                                   |  |          
|/s/ Larry A. Dreyer     |  | Chairman                                                                          |  | 9/20/2010
|                        |  |                                                                                   |  |          
|Larry A.
 Dreyer        |  |                                                                                   |  |          
|                        |  |                                                                                   |  |          
|/s/ Don O. Campbell     |  | Vice
 Chairman                                                                    |  | 9/20/2010
|                        |  |                                                                                   |  |          
|Don O. Campbell         |  |                                                                                   |  |          
|                        |  |                                                                                   |  |          
|/s/ Rick F. Hays        |  | Director                                                                          |  | 9/20/2010
|                        |  |                                                                                   |  |          
|Rick F. Hays            |  |                                                                                   |  |          
|                        |  |                                                                                   |  |          
|/s/ Lynn E. Dickey      |  | Director                                                                          |  | 9/20/2010
|                        |  |                                                                                   |  |          
|Lynn E.
 Dickey         |  |                                                                                   |  |          
|                        |  |                                                                                   |  |          
|/s/ James A. Maierle    |  | Director                                                                          |  | 9/20/2010
|                        |  |                                                                                   |  |          
|James A.
 Maierle       |  |                                                                                   |  |          
|                        |  |                                                                                   |  |          
|/s/ Thomas J. McCarvel  |  | Director                                                                          |  | 9/20/2010
|                        |  |                                                                                   |  |          
|Thomas J.
 McCarvel     |  |                                                                                   |  |          

49

---



|                                                       
|-------------------------------------------------------
|(EAGLE BANCORP MONTANA, INC. LOGO)                     
|                                                       
|AND SUBSIDIARY                                         
|                                                       
|                                                       
|                                                       
|CONSOLIDATED FINANCIAL STATEMENTS                      
|                                                       
|and                                                    
|                                                       
|REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|                                                       
|June 30, 2010 and 2009                                 
|                                                       
|                                                       

---



EAGLE BANCORP MONTANA, INC. AND SUBSIDIARY

Contents

|                                                            |  |      | 
|----------------------------------------------------------- |  | ---- | 
|                                                            |  | Page
|                                                            |  |     
|                                                            |  |      | 
|Report of Independent Registered Public Accounting Firm     |  | 1    | 
|                                                            |  |      | 
|Financial
 Statements                                       |  |      | 
|                                                            |  |      | 
|Consolidated
 Statements of Financial Condition             |  | 2    | 
|                                                            |  |      | 
|Consolidated
 Statements of Income                          |  | 3    | 
|                                                            |  |      | 
|Consolidated
 Statements of Changes in Stockholders Equity |  | 4    | 
|                                                            |  |      | 
|Consolidated
 Statements of Cash Flows                      |  | 5    | 
|                                                            |  |      | 
|Notes to Consolidated
 Financial Statements                 |  | 6    | 

---



(DAVIS KINARD & CO, PC LOGO)

Report of Independent Registered Public
Accounting Firm

|                                              
|----------------------------------------------
|To the Board
 of Directors and Stockholders of
|Eagle Bancorp Montana, Inc. and Subsidiary    

We have audited the accompanying consolidated statements of financial
condition of Eagle Bancorp Montana, Inc. and
Subsidiary as of June 30, 2010 and 2009 and the related consolidated
statements of income, stockholders equity and cash flows for years then ended.
These financial statements are the responsibility of the Companys management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audits to obtain reasonable assurance about
whether the financial statements are free of material misstatement. The Company
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the Companys internal control
over financial reporting. Accordingly, we express no such opinion. An audit
also includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the 2010 and 2009 financial statements referred to
above present fairly, in all material respects, the financial position of Eagle Bancorp Montana, Inc. and Subsidiary
as of June 30, 2010 and 2009, and the results of its operations and its cash
flows for years then ended in conformity with accounting principles generally
accepted in the United States of America.

| |                          
| | -------------------------
| | -s- DAVIS KINARD & CO, PC
| |                          
| | DAVIS KINARD & CO, PC    

Abilene, Texas

July 29, 2010

-1-

---



|                                                 
|-------------------------------------------------
|EAGLE BANCORP MONTANA, INC. AND SUBSIDIARY       
|Consolidated Statements of Financial Condition   
|June
 30, 2010 and 2009                          
|(Dollars in Thousands, Except for Per Share Data)

|                                                                                                                                                                                                                                          |  |      |         |      |   |         |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ------- | ---- | - | ------- | -
|                                                                                                                                                                                                                                          |  | 2010 |         | 2009 |  
|                                                                                                                                                                                                                                          |  |      |         |      |  
|Assets                                                                                                                                                                                                                                    |  |      |         |      |   |         |  
|                                                                                                                                                                                                                                          |  |      |         |      |   |         |  
|Cash and due from banks                                                                                                                                                                                                                   |  | $    | 2,543   |      | $ | 2,487   |  
|Interest bearing deposits in banks                                                                                                                                                                                                        |  |      | 966     |      |   | 224     |  
|Federal funds sold                                                                                                                                                                                                                        |  |      |        |      |   | 3,617   |  
|                                                                                                                                                                                                                                          |  |      |         |      |   |         |  
|Cash and cash equivalents                                                                                                                                                                                                                 |  |      | 3,509   |      |   | 6,328   |  
|                                                                                                                                                                                                                                          |  |      |         |      |   |         |  
|Securities available-for-sale                                                                                                                                                                                                             |  |      | 114,528 |      |   | 82,263  |  
|Securities held-to-maturity (fair value approximates $125 in 2010 and
 $384 in 2009)                                                                                                                                                      |  |      | 125     |      |   | 375     |  
|Preferred stock - FASB ASC 825, at market value                                                                                                                                                                                           |  |      |        |      |   | 25      |  
|FHLB stock restricted, at cost                                                                                                                                                                                                            |  |      | 2,003   |      |   | 2,000   |  
|Investment in Eagle Bancorp Statutory Trust I                                                                                                                                                                                             |  |      | 155     |      |   | 155     |  
|Mortgage loans held for sale                                                                                                                                                                                                              |  |      | 7,695   |      |   | 5,349   |  
|Loans receivable, net of deferred loan fees and allowance for loan
 losses of $1,100 in 2010 and $525 in 2009                                                                                                                             |  |      | 169,502 |      |   | 167,197 |  
|Accrued interest and dividend receivable                                                                                                                                                                                                  |  |      | 1,610   |      |   | 1,399   |  
|Mortgage servicing rights, net                                                                                                                                                                                                            |  |      | 2,337   |      |   | 2,208   |  
|Premises and equipment, net                                                                                                                                                                                                               |  |      | 15,848  |      |   | 13,761  |  
|Cash surrender value of life insurance                                                                                                                                                                                                    |  |      | 6,691   |      |   | 6,496   |  
|Real estate and other assets aquired in settlement of loans                                                                                                                                                                               |  |      | 619     |      |   |        |  
|Other assets                                                                                                                                                                                                                              |  |      | 1,117   |      |   | 2,153   |  
|                                                                                                                                                                                                                                          |  |      |         |      |   |         |  
|                                                                                                                                                                                                                                          |  |      |         |      |   |         |  
|                                                                                                                                                                                                                                          |  | $    | 325,739 |      | $ | 289,709 |  
|                                                                                                                                                                                                                                          |  |      |         |      |   |         |  
|Liabilities and Shareholders Equity                                                                                                                                                                                                      |  |      |         |      |   |         |  
|                                                                                                                                                                                                                                          |  |      |         |      |   |         |  
|Noninterest bearing                                                                                                                                                                                                                       |  | $    | 18,376  |      | $ | 15,002  |  
|Interest bearing                                                                                                                                                                                                                          |  |      | 179,563 |      |   | 172,197 |  
|                                                                                                                                                                                                                                          |  |      |         |      |   |         |  
|Total deposits                                                                                                                                                                                                                            |  |      | 197,939 |      |   | 187,199 |  
|                                                                                                                                                                                                                                          |  |      |         |      |   |         |  
|Accrued expenses and other liabilities                                                                                                                                                                                                    |  |      | 2,989   |      |   | 2,507   |  
|FHLB advances and other borrowings                                                                                                                                                                                                        |  |      | 67,224  |      |   | 67,056  |  
|Subordinated debentures                                                                                                                                                                                                                   |  |      | 5,155   |      |   | 5,155   |  
|                                                                                                                                                                                                                                          |  |      |         |      |   |         |  
|Total liabilities                                                                                                                                                                                                                         |  |      | 273,307 |      |   | 261,917 |  
|                                                                                                                                                                                                                                          |  |      |         |      |   |         |  
|Shareholders equity                                                                                                                                                                                                                      |  |      |         |      |   |         |  
|                                                                                                                                                                                                                                          |  |      |         |      |   |         |  
|Preferred stock, no par value; 1,000,000 shares authorized, no shares
 issued or outstanding                                                                                                                                              |  |      |        |      |   |        |  
|Common stock, $0.01 par value; 8,000,000 shares authorized June 30,
 2010; 9,000,000 authorized June 30, 2009 4,083,127 shares issued and
 outstanding June 30, 2010 1,223,572 shares issued, 1,076,072 shares
 outstanding June 30, 2009 |  |      | 41      |      |   | 12      |  
|Capital surplus                                                                                                                                                                                                                           |  |      | 22,104  |      |   | 4,564   |  
|Unallocated common stock held by ESOP                                                                                                                                                                                                     |  |      | (1,889  | )    |   | (18     | )
|Treasury stock, at cost                                                                                                                                                                                                                   |  |      |        |      |   | (5,034  | )
|Retained earnings                                                                                                                                                                                                                         |  |      | 30,652  |      |   | 28,850  |  
|Net accumulated other comprehensive gain/(loss)                                                                                                                                                                                           |  |      | 1,524   |      |   | (582    | )
|                                                                                                                                                                                                                                          |  |      |         |      |   |         |  
|Total shareholders equity                                                                                                                                                                                                                |  |      | 52,432  |      |   | 27,792  |  
|                                                                                                                                                                                                                                          |  |      |         |      |   |         |  
|                                                                                                                                                                                                                                          |  | $    | 325,739 |      | $ | 289,709 |  
|                                                                                                                                                                                                                                          |  |      |         |      |   |         |  

The accompanying notes are an integral part of these consolidated financial statements.

-2-

---



|                                                  
|--------------------------------------------------
|EAGLE BANCORP MONTANA, INC. AND SUBSIDIARY        
|Consolidated Statements of Income                 
|Years
 Ended June 30, 2010 and 2009               
|(Dollars in Thousands, Except for Per Share
 Data)

|                                                             |  |      |        |      |   |        |  
|------------------------------------------------------------ |  | ---- | ------ | ---- | - | ------ | -
|                                                             |  | 2010 |        | 2009 |  
|                                                             |  |      |        |      |  
|Interest and dividend income                                 |  |      |        |      |   |        |  
|Loans, including fees                                        |  | $    | 10,857 |      | $ | 11,411 |  
|Securities available-for-sale                                |  |      | 4,003  |      |   | 3,893  |  
|Securities held-to-maturity                                  |  |      | 11     |      |   | 20     |  
|Trust preferred securities                                   |  |      | 9      |      |   | 9      |  
|Deposits with banks                                          |  |      | 27     |      |   | 15     |  
|                                                             |  |      |        |      |   |        |  
|Total interest income                                        |  |      | 14,907 |      |   | 15,348 |  
|Interest expense                                             |  |      |        |      |   |        |  
|Deposits                                                     |  |      | 2,161  |      |   | 3,161  |  
|FHLB advances and other borrowings                           |  |      | 2,635  |      |   | 2,645  |  
|Subordinated debentures                                      |  |      | 309    |      |   | 309    |  
|                                                             |  |      |        |      |   |        |  
|Total interest expense                                       |  |      | 5,105  |      |   | 6,115  |  
|                                                             |  |      |        |      |   |        |  
|Net interest income                                          |  |      | 9,802  |      |   | 9,233  |  
|                                                             |  |      |        |      |   |        |  
|Provision for loan losses                                    |  |      | 715    |      |   | 257    |  
|                                                             |  |      |        |      |   |        |  
|Net interest income after provision for
 loan losses         |  |      | 9,087  |      |   | 8,976  |  
|                                                             |  |      |        |      |   |        |  
|Noninterest income                                           |  |      |        |      |   |        |  
|Service charges on deposit accounts                          |  |      | 765    |      |   | 745    |  
|Net gain on sale of loans                                    |  |      | 1,280  |      |   | 2,216  |  
|Mortgage loan service fees                                   |  |      | 770    |      |   | 628    |  
|Net realized gain on sales of available for
 sale securities |  |      | 33     |      |   | 54     |  
|Net gain (loss) on preferred stock - FASB
 ASC 825           |  |      | 84     |      |   | (1,296 | )
|Other income                                                 |  |      | 661    |      |   | 652    |  
|                                                             |  |      |        |      |   |        |  
|Total noninterest income                                     |  |      | 3,593  |      |   | 2,999  |  
|Noninterest expenses                                         |  |      |        |      |   |        |  
|Salaries and employee benefits                               |  |      | 4,750  |      |   | 4,411  |  
|Occupancy and equipment expense                              |  |      | 1,177  |      |   | 900    |  
|Data processing                                              |  |      | 407    |      |   | 370    |  
|Advertising                                                  |  |      | 438    |      |   | 394    |  
|Amortization of mortgage servicing rights                    |  |      | 487    |      |   | 598    |  
|Federal insurance premiums                                   |  |      | 275    |      |   | 307    |  
|Postage                                                      |  |      | 144    |      |   | 151    |  
|Legal, accounting, and examination fees                      |  |      | 318    |      |   | 231    |  
|Consulting fees                                              |  |      | 170    |      |   | 114    |  
|ATM processing                                               |  |      | 69     |      |   | 62     |  
|Other expense                                                |  |      | 996    |      |   | 1,025  |  
|                                                             |  |      |        |      |   |        |  
|Total noninterest expenses                                   |  |      | 9,231  |      |   | 8,563  |  
|                                                             |  |      |        |      |   |        |  
|Income before income taxes                                   |  |      | 3,449  |      |   | 3,412  |  
|                                                             | 
|Income tax expense                                           |  |      | 1,035  |      |   | 1,024  |  
|                                                             |  |      |        |      |   |        |  
|                                                             | 
|Net income                                                   |  | $    | 2,414  |      | $ | 2,388  |  
|                                                             |  |      |        |      |   |        |  
|                                                             | 
|Basic earnings per share*                                    |  | $    | 0.60   |      | $ | 0.59   |  
|                                                             |  |      |        |      |   |        |  
|                                                             | 
|Diluted earnings per share *                                 |  | $    | 0.54   |      | $ | 0.52   |  
|                                                             |  |      |        |      |   |        |  

* per share
data is calculated on a converted basis using a 3.8 to 1.0 exchange ratio

The
accompanying notes are an integral part of these consolidated financial statements.

-3-

---



EAGLE BANCORP MONTANA, INC. AND SUBSIDIARYConsolidated Statements
of Changes in Stockholders Equity
Years Ended June 30, 2010 and 2009(Dollars in Thousands, Except for Per Share
Data)

|                                                                                                  |  |                  |   |               |   |                              |   |                           |        |                 |   |                    |   |                                         |        |       |   |        |   |   |       |   |   |        |  
|------------------------------------------------------------------------------------------------- |  | ---------------- | - | ------------- | - | ---------------------------- | - | ------------------------- | ------ | --------------- | - | ------------------ | - | --------------------------------------- | ------ | ----- | - | ------ | - | - | ----- | - | - | ------ | -
|                                                                                                  |  | Preferred
 Stock |   | Common
 Stock |   | Additional
 Paid-In
 Capital |   | Unallocated
 ESOP
 Shares |        | Treasury
 Stock |   | Retained
 Earnings |   | Accumulated
 Other
 Comprehensive
 Loss |        | Total |  
|                                                                                                  |  |                  |   |               |   |                              |   |                           |        |                 |   |                    |   |                                         |        |       |  
|                                                                                                  |  |                  |   |               |   |                              |   |                           |        |                 |   |                    |   |                                         |        |       |   |        |   |   |       |   |   |        |  
|Balance at June 30, 2008                                                                          |  | $                |  |               | $ | 12                           |   | $                         | 4,487  |                 | $ | (55                | ) | $                                       | (5,013 | )     | $ | 27,025 |   | $ | (822  | ) | $ | 25,634 |  
|                                                                                                  |  |                  |   |               |   |                              |   |                           |        |                 |   |                    |   |                                         |        |       |   |        |   |   |       |   |   |        |  
|Net income                                                                                        |  |                  |   |               |   |                              |   |                           |        |                 |   |                    |   |                                         |        |       |   | 2,388  |   |   |       |   |   | 2,388  |  
|                                                                                                  |  |                  |   |               |   |                              |   |                           |        |                 |   |                    |   |                                         |        |       |   |        |   |   |       |   |   |        |  
|Change in net unrealized depreciation on available for sale
 securities and cash flow hedges, net |  |                  |   |               |   |                              |   |                           |        |                 |   |                    |   |                                         |        |       |   |        |   |   | 240   |   |   | 240    |  
|                                                                                                  |  |                  |   |               |   |                              |   |                           |        |                 |   |                    |   |                                         |        |       |   |        |   |   |       |   |   |        |  
|                                                                                                  |  |                  |   |               |   |                              |   |                           |        |                 |   |                    |   |                                         |        |       |   |        |   |   |       |   |   |        |  
|Total comprehensive income                                                                        |  |                  |   |               |   |                              |   |                           |        |                 |   |                    |   |                                         |        |       |   |        |   |   |       |   |   | 2,628  |  
|                                                                                                  |  |                  |   |               |   |                              |   |                           |        |                 |   |                    |   |                                         |        |       |   |        |   |   |       |   |   |        |  
|Dividends paid ($1.02 per share)                                                                  |  |                  |   |               |   |                              |   |                           |        |                 |   |                    |   |                                         |        |       |   | (435   | ) |   |       |   |   | (435   | )
|                                                                                                  |  |                  |   |               |   |                              |   |                           |        |                 |   |                    |   |                                         |        |       |   |        |   |   |       |   |   |        |  
|Treasury stock purchased (760 shares @ $27.00)                                                    |  |                  |   |               |   |                              |   |                           |        |                 |   |                    |   |                                         | (21    | )     |   |        |   |   |       |   |   | (21    | )
|                                                                                                  |  |                  |   |               |   |                              |   |                           |        |                 |   |                    |   |                                         |        |       |   |        |   |   |       |   |   |        |  
|EITF No. 06-4 & 06-10                                                                             |  |                  |   |               |   |                              |   |                           |        |                 |   |                    |   |                                         |        |       |   | (128   | ) |   |       |   |   | (128   | )
|                                                                                                  |  |                  |   |               |   |                              |   |                           |        |                 |   |                    |   |                                         |        |       |   |        |   |   |       |   |   |        |  
|ESOP shares allocated or committed to be released for allocation
 (4,600) shares                  |  |                  |   |               |   |                              |   |                           | 77     |                 |   | 37                 |   |                                         |        |       |   |        |   |   |       |   |   | 114    |  
|                                                                                                  |  |                  |   |               |   |                              |   |                           |        |                 |   |                    |   |                                         |        |       |   |        |   |   |       |   |   |        |  
|                                                                                                  |  |                  |   |               |   |                              |   |                           |        |                 |   |                    |   |                                         |        |       |   |        |   |   |       |   |   |        |  
|Balance at June 30, 2009                                                                          |  | $                |  |               | $ | 12                           |   | $                         | 4,564  |                 | $ | (18                | ) | $                                       | (5,034 | )     | $ | 28,850 |   | $ | (582  | ) | $ | 27,792 |  
|                                                                                                  |  |                  |   |               |   |                              |   |                           |        |                 |   |                    |   |                                         |        |       |   |        |   |   |       |   |   |        |  
|Net income                                                                                        |  |                  |   |               |   |                              |   |                           |        |                 |   |                    |   |                                         |        |       |   | 2,414  |   |   |       |   |   | 2,414  |  
|                                                                                                  |  |                  |   |               |   |                              |   |                           |        |                 |   |                    |   |                                         |        |       |   |        |   |   |       |   |   |        |  
|Change in net unrealized depreciation on available for sale
 securities and cash flow hedges, net |  |                  |   |               |   |                              |   |                           |        |                 |   |                    |   |                                         |        |       |   |        |   |   | 2,106 |   |   | 2,106  |  
|                                                                                                  |  |                  |   |               |   |                              |   |                           |        |                 |   |                    |   |                                         |        |       |   |        |   |   |       |   |   |        |  
|                                                                                                  |  |                  |   |               |   |                              |   |                           |        |                 |   |                    |   |                                         |        |       |   |        |   |   |       |   |   |        |  
|Total comprehensive income                                                                        |  |                  |   |               |   |                              |   |                           |        |                 |   |                    |   |                                         |        |       |   |        |   |   |       |   |   | 4,520  |  
|                                                                                                  |  |                  |   |               |   |                              |   |                           |        |                 |   |                    |   |                                         |        |       |   |        |   |   |       |   |   |        |  
|                                                                                                  |  |                  |   |               |   |                              |   |                           |        |                 |   |                    |   |                                         |        |       |   |        |   |   |       |   |   |        |  
|Dividends paid                                                                                    |  |                  |   |               |   |                              |   |                           |        |                 |   |                    |   |                                         |        |       |   | (612   | ) |   |       |   |   | (612   | )
|                                                                                                  |  |                  |   |               |   |                              |   |                           |        |                 |   |                    |   |                                         |        |       |   |        |   |   |       |   |   |        |  
|Treasury stock purchased (805 shares @ $28.25)                                                    |  |                  |   |               |   |                              |   |                           |        |                 |   |                    |   |                                         | (22    | )     |   |        |   |   |       |   |   | (22    | )
|                                                                                                  |  |                  |   |               |   |                              |   |                           |        |                 |   |                    |   |                                         |        |       |   |        |   |   |       |   |   |        |  
|Stock conversion                                                                                  |  |                  |   |               |   | (12                          | ) |                           | (4,564 | )               |   |                    |   |                                         | 5,056  |       |   |        |   |   |       |   |   | 480    |  
|                                                                                                  |  |                  |   |               |   |                              |   |                           |        |                 |   |                    |   |                                         |        |       |   |        |   |   |       |   |   |        |  
|Stock sold/issued                                                                                 |  |                  |   |               |   | 41                           |   |                           | 22,053 |                 |   | (1,971             | ) |                                         |        |       |   |        |   |   |       |   |   | 20,123 |  
|                                                                                                  |  |                  |   |               |   |                              |   |                           |        |                 |   |                    |   |                                         |        |       |   |        |   |   |       |   |   |        |  
|ESOP allocated prior to conversion                                                                |  |                  |   |               |   |                              |   |                           | 50     |                 |   | 18                 |   |                                         |        |       |   |        |   |   |       |   |   | 68     |  
|                                                                                                  |  |                  |   |               |   |                              |   |                           |        |                 |   |                    |   |                                         |        |       |   |        |   |   |       |   |   |        |  
|ESOP shares allocated or committed to be released for allocation
 (8,214) shares                  |  |                  |   |               |   |                              |   |                           | 1      |                 |   | 82                 |   |                                         |        |       |   |        |   |   |       |   |   | 83     |  
|                                                                                                  |  |                  |   |               |   |                              |   |                           |        |                 |   |                    |   |                                         |        |       |   |        |   |   |       |   |   |        |  
|                                                                                                  |  |                  |   |               |   |                              |   |                           |        |                 |   |                    |   |                                         |        |       |   |        |   |   |       |   |   |        |  
|Balance at June 30, 2010                                                                          |  | $                |  |               | $ | 41                           |   | $                         | 22,104 |                 | $ | (1,889             | ) | $                                       |       |       | $ | 30,652 |   | $ | 1,524 |   | $ | 52,432 |  
|                                                                                                  |  |                  |   |               |   |                              |   |                           |        |                 |   |                    |   |                                         |        |       |   |        |   |   |       |   |   |        |  

The
accompanying notes are an integral part of these consolidated financial
statements.

-4-

---



EAGLE BANCORP MONTANA, INC.
AND SUBSIDIARYConsolidated
Statements of Cash Flows
Years Ended June 30, 2010 and 2009(Dollars in Thousands, Except for Per Share
Data)

|                                                                                            |  |      |         |      |   |         |  
|------------------------------------------------------------------------------------------- |  | ---- | ------- | ---- | - | ------- | -
|                                                                                            |  | 2010 |         | 2009 |  
|                                                                                            |  |      |         |      |  
|Cash flows from operating activities                                                        |  |      |         |      |   |         |  
|Net income                                                                                  |  | $    | 2,414   |      | $ | 2,388   |  
|Adjustments to reconcile net income to net cash provided by (used in)
 operating activities |  |      |         |      |   |         |  
|Provision for loan losses                                                                   |  |      | 715     |      |   | 257     |  
|Depreciation                                                                                |  |      | 651     |      |   | 482     |  
|Net amortization of securities premium & discounts                                          |  |      | 393     |      |   | 163     |  
|Amortization of capitalized mortgage servicing rights                                       |  |      | 487     |      |   | 598     |  
|Net gain on sale of loans                                                                   |  |      | (1,280  | )    |   | (2,216  | )
|Net realized gain on sales of available-for-sale securities                                 |  |      | (33     | )    |   | (54     | )
|Net recognized (gain) loss on preferred stock - FASB ASC 825                                |  |      | (84     | )    |   | 1,296   |  
|Net loss on sale of foreclosed real estate                                                  |  |      |        |      |   | 2       |  
|Net loss on sale/disposal of fixed assets                                                   |  |      | 2       |      |   |        |  
|Appreciation in cash surrender value of life insurance, net                                 |  |      | (195    | )    |   | (211    | )
|Net change in                                                                               |  |      |         |      |   |         |  
|Loans
 held for sale                                                                        |  |      | (793    | )    |   | 4,257   |  
|Accrued
 interest receivable                                                                |  |      | (211    | )    |   | 27      |  
|Other
 assets                                                                               |  |      | 1,084   |      |   | (1,603  | )
|Accrued
 expenses and other liabilities                                                     |  |      | (748    | )    |   | 344     |  
|                                                                                            |  |      |         |      |   |         |  
|Net cash provided by operating activities                                                   |  |      | 2,402   |      |   | 5,730   |  
|                                                                                            |  |      |         |      |   |         |  
|Cash
 flows from investing activities                                                       |  |      |         |      |   |         |  
|Activity in available-for-sale securities                                                   |  |      |         |      |   |         |  
|Sales                                                                                       |  |      | 8,928   |      |   | 5,298   |  
|Maturities, prepayments and calls                                                           |  |      | 11,556  |      |   | 11,182  |  
|Purchases                                                                                   |  |      | (50,266 | )    |   | (20,114 | )
|Activity in held to maturity securities                                                     |  |      |         |      |   |         |  
|Maturities, prepayments and calls                                                           |  |      | 250     |      |   | 322     |  
|FHLB stock purchased                                                                        |  |      | (3      | )    |   | (285    | )
|Loan originations and principal collections, net                                            |  |      | (3,820  | )    |   | (471    | )
|Proceeds from sale of foreclosed real estate                                                |  |      | 28      |      |   | 13      |  
|Additions to premises and equipment                                                         |  |      | (2,771  | )    |   | (6,163  | )
|                                                                                            |  |      |         |      |   |         |  
|Net cash used in investing activities                                                       |  |      | (36,098 | )    |   | (10,218 | )
|                                                                                            |  |      |         |      |   |         |  
|Cash
 flows from financing activities                                                       |  |      |         |      |   |         |  
|Net increase in deposits                                                                    |  |      | 10,740  |      |   | 8,348   |  
|Net change in federal funds purchased                                                       |  |      |        |      |   | (3,000  | )
|Net change in advances from the FHLB and other borrowings                                   |  |      | 168     |      |   | 1,834   |  
|Purchase of treasury stock, at cost                                                         |  |      | (22     | )    |   | (21     | )
|Issuance of common stock                                                                    |  |      | 22,574  |      |   |        |  
|Purchase ESOP shares                                                                        |  |      | (1,971  | )    |   |        |  
|Dividends paid                                                                              |  |      | (612    | )    |   | (435    | )
|                                                                                            |  |      |         |      |   |         |  
|Net cash provided by financing activities                                                   |  |      | 30,877  |      |   | 6,726   |  
|                                                                                            |  |      |         |      |   |         |  
|                                                                                            |  |      |         |      |   |         |  
|Net
 change in cash and cash equivalents                                                    |  |      | (2,819  | )    |   | 2,238   |  
|                                                                                            |  |      |         |      |   |         |  
|Cash and cash equivalents
 at beginning of year                                             |  |      | 6,328   |      |   | 4,090   |  
|                                                                                            |  |      |         |      |   |         |  
|                                                                                            |  |      |         |      |   |         |  
|Cash and
 cash equivalents at end of year                                                   |  | $    | 3,509   |      | $ | 6,328   |  
|                                                                                            |  |      |         |      |   |         |  

The accompanying notes are
an integral part of these consolidated financial statements.

-5-

---



EAGLE BANCORP MONTANA, INC. AND SUBSIDIARYNotes to Consolidated Financial Statements
June 30, 2010 and 2009

|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NOTE 1: | Summary of Significant Accounting Policies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        | Nature of
 Operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        | On April 5, 2010, Eagle Bancorp completed its second-step conversion
 from the partially-public mutual holding company structure to the fully
 publicly-owned stock holding company structure. As part of that transaction
 it also completed a related stock offering. As a result of the conversion and
 offering, Eagle Bancorp Montana, Inc. (the Company, or Eagle) became the
 stock holding company for American Federal Savings Bank (the Bank), and
 Eagle Financial MHC and Eagle Bancorp ceased to exist. The Company sold a
 total of 2,464,274 shares of common stock at a purchase price of $10.00 per
 share in the offering for gross proceeds of $24.6 million. Concurrent with
 the completion of the offering, shares of Eagle Bancorp common stock owned by
 the public were exchanged. Stockholders of Eagle Bancorp received 3.800
 shares of the Companys common stock for each share of Eagle Bancorp common
 stock that they owned immediately prior to completion of the transaction.
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        | The Companys Employee Stock Ownership Plan (ESOP), which purchased
 shares in the Offering, was authorized to purchase up to 12% of the shares
 sold in the Offering, or 197,142 shares. The ESOP completed its purchase of
 all such authorized shares in the Offering, at a total cost of $1,971,420.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        | The Bank is a federally chartered savings bank subject to the
 regulations of the Office of Thrift Supervision (OTS). The Bank is a member
 of the Federal Home Loan Bank System and its deposit accounts are insured to
 the applicable limits by the Federal Deposit Insurance Corporation (FDIC).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        | The Bank is headquartered in Helena, Montana, and operates additional
 branches in Butte, Bozeman, and Townsend, Montana. The Banks market area is
 concentrated in south central Montana, to which it primarily offers
 commercial, residential, and consumer loans. The Banks principal business is
 accepting deposits and, together with funds generated from operations and
 borrowings, investing in various types of loans and securities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        | Collectively, Eagle Bancorp Montana Inc., and the Bank are referred
 to herein as the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        | Principles of
 Consolidation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        | The consolidated financial statements include the accounts of Eagle
 Bancorp Montana Inc. and the Bank. All significant intercompany transactions
 and balances have been eliminated in consolidation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        | Use of Estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        | In preparing financial statements in conformity with U.S. generally
 accepted accounting principles, management is required to make estimates and
 assumptions that affect the reported amounts of assets and liabilities as of
 the date of the balance sheet and reported amounts of revenues and expenses
 during the reporting period. Actual results could differ from those
 estimates. Material estimates that are particularly susceptible to
 significant change in the near term relate to the determination of the
 allowance for loan losses, mortgage servicing rights, and the valuation of
 foreclosed assets. In connection with the determination of the estimated
 losses on loans, foreclosed assets, and valuation of mortgage servicing
 rights, management obtains independent appraisals and valuations.                                                                                                                                                                                       

-6-

---



EAGLE BANCORP MONTANA, INC. AND SUBSIDIARYNotes to Consolidated Financial Statements
June 30, 2010 and 2009

|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NOTE 1: | Summary of Significant Accounting Policies
  continued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|        | Significant Group Concentrations of Credit
Risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|        | Most of the Companys business activity is with customers located
 within the south-central Montana area. Note 3 discusses the types of
 securities that the Company invests in. Note 4 discusses the types of lending
 that the Company engages in. The Company does not have any significant
 concentrations to any one industry or customer.                                                                                                                                                                                                                                                                                            
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|        | The Company carries certain assets with other financial institutions
 which are subject to credit risk by the amount such assets exceed federal
 deposit insurance limits. At June 30, 2010 and June 30, 2009, no account
 balances were held with correspondent banks that were in excess of FDIC
 insured levels. Also, from time to time, the Company is due amounts in excess
 of FDIC insurance limits for checks and transit items. Management monitors
 the financial stability of correspondent banks and considers amounts advanced
 in excess of FDIC insurance limits to present no significant additional risk
 to the Company.
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|        | Cash and Cash
 Equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|        | For the purpose of presentation in the consolidated statements of
 cash flows, cash and cash equivalents are defined as those amounts included
 in the balance sheet captions cash and due from banks, interest bearing
 deposits in banks, and federal funds sold all of which mature within
 ninety days.                                                                                                                                                                                                                                                                                                                          
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|        | The Bank is required to maintain a reserve balance with the Federal
 Reserve Bank. The Bank properly maintained amounts in excess of required
 reserves of $50,000 as of June 30, 2010 and 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                           
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|        | Investment
 Securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|        | The Company designates debt and equity securities as
 held-to-maturity, available-for-sale, or trading.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|        | Held-to-maturity 
 Debt investment securities that management has the positive intent and
 ability to hold until maturity are classified as held-to-maturity and are
 carried at their remaining unpaid principal balance, net of unamortized
 premiums or unaccreted discounts. Premiums are amortized and discounts are
 accreted using the interest method over the period remaining until maturity.                                                                                                                                                                                                                                   
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|        | Available-for-sale
  Investment securities that will be held for indefinite periods of time,
 including securities that may be sold in response to changes in market
 interest or prepayment rates, need for liquidity, and changes in the
 availability of and the yield of alternative investments, are classified as
 available-for-sale. These assets are carried at fair value. Unrealized gains
 and losses, net of tax, are reported as other comprehensive income. Gains and
 losses on the sale of available-for-sale securities are recorded on the trade
 date and determined using the specific identification method.        
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|        | Declines in the fair value of individual held-to-maturity and
 available-for-sale securities below their cost that are other than temporary
 are recognized by write-downs of the individual securities to their fair
 value. Such write-downs would be included in earnings as realized losses.                                                                                                                                                                                                                                                                                                                                           

-7-

---



EAGLE BANCORP MONTANA, INC. AND SUBSIDIARYNotes to Consolidated Financial Statements
June 30, 2010 and 2009

|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NOTE 1: | Summary of Significant Accounting Policies
  continued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | Trading  No
 investment securities were designated as trading at June 30, 2010 and 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | Securities  FASB ASC 825 Beginning
 fiscal year, July 1, 2007 the Company elected to account for its preferred
 stock under, FASB ASC 825 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 earning when incurred.
 On July 1, 2007 a charge to retained earnings for $118,000 was recorded in
 accordance with the implementation of FASB ASC 825 to record the unrealized loss (net of
 taxes) on preferred stock at that date.
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | Federal Home Loan
 Bank Stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | The Companys investment in Federal Home Loan Bank (FHLB) stock is
 a restricted investment carried at cost ($100 per share par value), which
 approximates its fair value. As a member of the FHLB system, the Company is
 required to maintain a minimum level of investment in FHLB stock based on
 specific percentages of its outstanding FHLB advances. The Company may
 request redemption at par value of any stock in excess of the amount it is
 required to hold. Stock redemptions are made at the discretion of the FHLB.
 The Bank redeemed no FHLB shares during the years ended June 30, 2010 and
 2009.                        
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | Mortgage Loans
 Held-for-Sale                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | Mortgage loans originated and intended for sale in the secondary
 market are carried at the lower of cost or estimated market value, determined
 in aggregate, plus the fair value of associated derivative financial
 instruments. Net unrealized losses, if any, are recognized in a valuation
 allowance by a charge to income.                                                                                                                                                                                                                                                                                                                
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | Loans                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | The Company grants mortgage, commercial and consumer loans to
 customers. A substantial portion of the loan portfolio is represented by
 mortgage loans in south central Montana. The ability of the Companys debtors
 to honor their contracts is dependent upon the general economic conditions in
 this area.                                                                                                                                                                                                                                                                                                                                 
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | Loans receivable that management has the intent and ability to hold
 until maturity are reported at the outstanding principal balance adjusted for
 any charge-offs, allowance for loan losses, and any deferred fees or costs on
 originated loans and unamortized premiums or unaccreted discounts on
 purchased loans. Loan origination fees, net of certain direct origination
 costs are deferred and amortized over the contractual life of the loan, as an
 adjustment of the yield, using the interest method.                                                                                                                            
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | The accrual of interest on loans is discontinued at the time the loan
 is 90 days delinquent unless the credit is well secured and in process of
 collection. Personal loans are typically charged off no later than 180 days
 past due. Past due status is based on the contractual terms of the loan. In
 all cases, loans are placed on nonaccrual or charged off at an earlier date
 if collection of principal or interest is considered doubtful.                                                                                                                                                                                           

-8-

---



EAGLE BANCORP MONTANA, INC. AND SUBSIDIARYNotes to Consolidated Financial Statements
June 30, 2010 and 2009

|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NOTE 1: | Summary of Significant Accounting Policies
  continued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|        | Loans  continued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|        | All interest accrued but not collected for loans that are placed on
 nonaccrual or charged off is reversed against interest income. The interest
 on these loans is accounted for on the cash-basis or cost-recovery method,
 until qualifying for return to accrual. Loans are returned to accrual status
 when all the principal and interest amounts contractually due are brought
 current and future payments are reasonably assured.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|        | Allowance for Loan
 Losses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|        | The allowance for loan losses is established as losses are estimated
 to have occurred through a provision for loan losses charged to earnings.
 Loan losses are charged against the allowance when management believes the
 uncollectibility of a loan balance is confirmed. Subsequent recoveries, if
 any, are credited to the allowance.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|        | The allowance for loan losses is evaluated on a regular basis by
 management and is based upon managements periodic review of the
 collectibility of the loans in light of historical experience, the nature and
 volume of the loan portfolio, adverse situations that may affect the
 borrowers ability to repay, estimated value of any underlying collateral and
 prevailing economic conditions. This evaluation is inherently subjective as
 it requires estimates that are susceptible to significant revisions as more
 information becomes available.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|        | The allowance consists of specific, general and unallocated
 components. For such loans that are classified as impaired, an allowance is
 established when the discounted cash flows (or collateral value or observable
 market price) of the impaired loan is lower than the carrying value of that
 loan. The general component covers non-classified loans and is based on
 historical loss experience adjusted for qualitative factors. An unallocated
 component is maintained to cover uncertainties that could affect managements
 estimate of probable losses. The unallocated component of the allowance
 reflects the margin of imprecision inherent in the underlying assumptions
 used in the methodologies for estimating specific and general losses in the
 portfolio.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|        | A loan is considered impaired when, based on current information and
 events, it is probable that the Company will be unable to collect the
 scheduled payments of principal or interest when due according to the
 contractual terms of the loan agreement. Factors considered by management in
 determining impairment include payment status, collateral value, and the
 probability of collecting scheduled principal and interest payments when due.
 Loans that experience insignificant payment delays and payment shortfalls
 generally are not classified as impaired. Management determines the
 significance of payment delays and payment shortfalls on a case-by-case
 basis, taking into consideration all the circumstances surrounding the loan
 and the borrower, including the length of delay, the reasons for the delay,
 the borrowers prior payment record, and the amount of the shortfall in
 relation to the principal and interest owed. Impairment is measured on a loan
 by loan basis for commercial and construction loans by either the present
 value of expected future cash flows discounted at the loans effective
 interest rate, the loans obtainable market price, or the fair value of the
 collateral if the loan is collateral dependent.
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|        | Large groups of smaller balance homogeneous loans are collectively
 evaluated for impairment. Accordingly, the Company does not separately
 identify individual consumer and residential loans for impairment
 disclosures, unless such loans are subject of a restructuring agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

-9-

---



EAGLE BANCORP MONTANA, INC. AND SUBSIDIARYNotes to Consolidated Financial Statements
June 30, 2010 and 2009

|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NOTE 1: | Summary of Significant Accounting Policies
  continued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|        | Mortgage Servicing
 Rights                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|        | Servicing assets are recognized as separate assets when rights are
 acquired through purchase or through sale of financial assets. Generally,
 purchased servicing rights are capitalized at the cost to acquire the rights.
 For sales of mortgage loans, a portion of the cost of originating the loan is
 allocated to the servicing right based on relative fair value. Fair value is
 based on a market price valuation model that calculates the present value of
 estimated future net servicing income. The valuation model incorporates
 assumptions that market participants would use in estimating future net
 servicing income, such as the cost to service, the discount rate, the
 custodial earnings rate, an inflation rate, ancillary income, prepayment
 speeds and default rates and losses.                                                                                
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|        | Servicing assets are evaluated for impairment based upon the fair
 value of the rights as compared to amortized cost. Impairment is determined
 by stratifying rights into tranches based on predominant characteristics,
 such as interest rate, loan type and investor type. Impairment is recognized
 through a valuation allowance for an individual tranche, to the extent that
 the fair value is less than the capitalized amount for the tranches. If the
 Bank later determines that all or a portion of the impairment no longer
 exists for a particular tranche, a reduction of the allowance may be recorded
 as an increase to income. Capitalized servicing rights are reported in other
 assets and are amortized into noninterest income in proportion to, and over
 the period of, the estimated future net servicing income of the underlying
 financial assets.             
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|        | Servicing fee income is recorded for fees earned for servicing loans.
 The fees are based on a contractual percentage of the outstanding principal
 and are recorded as income when earned. The amortization of mortgage
 servicing rights is netted against loan servicing fee income.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|        | Cash Surrender
 Value of Life Insurance                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|        | Life insurance policies are initially recorded at cost at the date of
 purchase. Subsequent to purchase, the policies are periodically adjusted for
 fair value. The adjustment to fair value increases or decreases the carrying
 value of the policies and is recorded as an income or expense on the
 consolidated statement of income. For the years ended June 30, 2010 and 2009
 there were no adjustments to fair value that were outside the normal
 appreciation in cash surrender value.                                                                                                                                                                                                                                                                                                                                                                                              
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|        | Foreclosed Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|        | Assets acquired through, or in lieu of, loan foreclosure are
 initially recorded fair value less estimated selling cost at the date of
 foreclosure. All write-downs based on the assets fair value at the date of
 acquisition are charged to the allowance for loan losses. After foreclosure,
 property held for sale is carried at fair value less cost to sell. Impairment
 losses on property to be held and used are measured as the amount by which
 the carrying amount of a property exceeds its fair value. Costs of
 significant property improvements are capitalized, whereas costs relating to
 holding property are expensed. Valuations are periodically performed by
 management, and any subsequent write-downs are recorded as a charge to
 operations, if necessary, to reduce the carrying value of a property to the
 lower of its cost or fair value less cost to sell.

-10-

---



EAGLE BANCORP MONTANA, INC. AND SUBSIDIARYNotes to Consolidated Financial Statements
June 30, 2010 and 2009

|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NOTE 1: | Summary of Significant Accounting Policies
  continued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        | Premises and
 Equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        | Land is carried at cost. Property and equipment is recorded at cost
 less accumulated depreciation. Depreciation is computed using the
 straight-line method over the expected useful lives of the assets, ranging
 from 3 to 35 years. The costs of maintenance and repairs are expensed as
 incurred, while major expenditures for renewals and betterments are
 capitalized.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        | Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        | Income taxes are accounted for under the asset and liability method.
 Accordingly, deferred taxes are recognized for the estimated future tax
 effects attributable to temporary differences between the financial
 statement carrying amounts and the tax basis of existing assets and
 liabilities. Deferred tax assets and liabilities are measured using enacted
 tax rates expected to apply to taxable income in the years in which the
 temporary differences are expected to be recovered or settled. The effect on
 deferred tax assets and liabilities of a change in tax laws or rates is recognized
 in income tax expense in the period that includes the enactment date of the
 change. A deferred tax liability is recognized for all temporary differences
 that will result in future taxable income. A deferred tax asset is recognized
 for all temporary differences that will result in future tax deductions,
 subject to reduction of the asset by a valuation allowance in certain
 circumstances. This valuation allowance is recognized if, based on an
 analysis of available evidence, management determines that it is more likely
 than not that some portion or all of the deferred tax asset will not be
 realized. The valuation allowance is subject to ongoing adjustment based on
 changes in circumstances that affect managements judgment about the
 realizability of the deferred tax asset. Adjustments to increase or decrease
 the valuation allowance are charged or credited, respectively, to income tax
 expense.
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        | Treasury Stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        | Treasury stock is accounted for on the cost method and consists of no
 shares in 2010 and 148,260 shares in 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        | Advertising Costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        | The Company expenses advertising costs as they are incurred.
 Advertising costs were approximately $438,000 and $394,000 for the years
 ended June 30, 2010 and 2009, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        | Employee Stock Ownership
 Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        | Compensation expense recognized for the Companys ESOP equals the
 fair value of shares that have been allocated or committed to be released for
 allocation to participants. Any difference between the fair value of the
 shares at the time and the ESOPs original acquisition cost is charged or
 credited to stockholders equity (capital surplus). The cost of ESOP shares
 that have not yet been allocated or committed to be released is deducted from
 stockholders equity.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

-11-

---



EAGLE BANCORP MONTANA, INC. AND SUBSIDIARYNotes to Consolidated Financial Statements
June 30, 2010 and 2009

|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NOTE 1: | Summary of Significant Accounting Policies
  continued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|        | Earnings Per Share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|        | Basic earnings per share (EPS) is calculated by dividing net income
 by the weighted average number of common shares outstanding for the period.
 Diluted EPS is calculated by dividing net income by the weighted average
 number of common shares used to compute basic EPS plus the incremental amount
 of potential common stock determined by the treasury stock method. For
 purposes of computing EPS, outstanding common shares include all shares
 issued to the Mutual Holding Company but exclude ESOP shares that have not
 been allocated or committed to be released for allocation to participants.
 Due to the conversion and related stock offering occurring on April 5, 2010
 all EPS calculations are prepared using a 3.8 to 1.0 exchange ratio.                                                                                                                                                                                                                                                                                                                                                                                                                          
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|        | Financial
 Instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|        | All derivative financial instruments that qualify for hedge accounting
 are recognized in the financial statements and measured at fair value
 regardless of the purpose or intent for holding them. Changes in the fair
 value of derivative financial instruments used as cash flow hedges are
 recognized as a component of comprehensive income. At June 30, 2010 and 2009,
 the Company was holding forward delivery commitments that qualify as
 derivative financial instruments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|        | The carrying value of the Companys financial instruments
 approximates fair value. The fair value of the Companys financial
 instruments is generally determined by a third partys valuation of the
 underlying asset.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|        | Recent Accounting
 Pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|        | GAAP Codification  On July 1, 2009, the FASBs GAAP Codification
 became effective as the sole authoritative source of GAAP. This codification
 reorganizes current GAAP for non-governmental entities into a topical index to
 facilitate accounting research and to provide users additional assurance that
 they have referenced all related literature pertaining to a given topic.
 Existing GAAP prior to the Codification was not altered in the compilation of
 the GAAP Codification. The GAAP Codification encompasses all FASB Statements
 of Financial Accounting Standards, Emerging Issues Task Force statements,
 FASB Staff Positions, FASB Interpretations, FASB Derivative Implementation
 Guides, American Institute of Certified Public Accountants Statement of
 Positions, Accounting Principles Board Opinions and Accounting Research
 Bulletins along with the remaining body of GAAP effective as of June 30,
 2009. Financial Statements issued for all interim and annual periods ending
 after September 15, 2009, will need to reference accounting guidance embodied
 in the Codification as opposed to referencing the previously authoritative
 pronouncements.
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|        | On November 14, 2008, the Securities and Exchange Commission (SEC)
 issued its long-anticipated proposed International Financial Reporting
 Standards (IFRS) roadmap outlining milestones that, if achieved, could lead
 to mandatory transition to IFRS for U.S. domestic registrants starting in
 2014. IFRS is a comprehensive series of accounting standards published by the
 International Accounting Standards Board (IASB). Under the proposed
 roadmap, the Company could be required through its parent company to prepare
 financial statements in accordance with IFRS, and the SEC will make a
 determination in 2011 regarding the mandatory adoption of IFRS for U.S.
 domestic registrants. Management is currently assessing the impact that this
 potential change would have on the Companys consolidated financial
 statements, and will continue to monitor the development of the potential
 implementation of IFRS.                                                                                                                                                                                                                                                

-12-

---



EAGLE BANCORP MONTANA, INC. AND SUBSIDIARYNotes to Consolidated Financial Statements
June 30, 2010 and 2009

|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NOTE 1: | Summary of Significant Accounting Policies
  continued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|        | Recent Accounting
 Pronouncements  continued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|        | In April 2009, the FASB issued new guidance impacting ASC Topic 820,Fair Value Measurements and Disclosures.
 This ASC provides additional guidance in determining fair values when there
 is no active market or where the price inputs being used represent distressed
 sales. It reaffirms the need to use judgment to ascertain if a formerly
 active market has become inactive and in determining fair values when markets
 have become inactive. The adoption of this new guidance did not have a
 material effect on Companys results of operations or financial position.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|        | In April 2009, the FASB issued new guidance impacting ASC 825-10-50,Financial Instruments, which relates to
 fair value disclosures for any financial instruments that are not currently
 reflected on the balance sheet of companies at fair value. This guidance
 amended existing GAAP to require disclosures about fair value of financial
 instruments for interim reporting periods of publicly traded companies as
 well as in annual financial statements. This guidance is effective for
 interim and annual periods ending after June 15, 2009. The Company has
 presented the necessary disclosures in Note 18 herein.                                                                                                                                                                                                                                                                                                                                                                                                                                            
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|        | In June 2009, the FASB issued new authoritative accounting guidance
 under ASC Topic 810,Consolidation, which amends prior guidance to change how a company determines when an
 entity that is insufficiently capitalized or is not controlled through voting
 (or similar rights) should be consolidated. The determination of whether a
 company is required to consolidate an entity is based on, among other things,
 an entitys purpose and design and a companys ability to direct the activities
 of the entity that most significantly impact the entitys economic
 performance. The new authoritative accounting guidance requires additional
 disclosures about the reporting entitys involvement with variable-interest
 entities and any significant changes in risk exposure due to that involvement
 as well as its affect on the entitys financial statements. The new
 authoritative accounting guidance under ASC Topic 810 will be effective
 January 1, 2010 and is not expected to have a significant impact on the
 Companys financial statements.
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|        | In June 2009, the FASB issued
 ASC 860, Transfers and Servicing,
 to improve the information included in an entitys financial statements about
 a transfer of financial assets and the effects of a transfer on its financial
 position, financial performance and cash flows. The guidance eliminates the
 exceptions for qualifying special-purpose entities from the consolidation
 guidance and the exception that permitted sale accounting for certain
 mortgage securitizations when a transferor has not surrendered control over
 the transferred financial assets. In addition, the amendments require
 enhanced disclosures about the risks that a transferor continues to be
 exposed to because of its continuing involvement in transferred financial
 assets. The guidance is effective for the first reporting period (including
 interim periods) that begins after November 15, 2009. The Company does not
 expect that the adoption of this guidance will have a material effect on its
 financial position, results of operations or cash flows.        

-13-

---



EAGLE BANCORP MONTANA, INC. AND SUBSIDIARYNotes to Consolidated Financial Statements
June 30, 2010 and 2009

|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NOTE 1: | Summary of Significant Accounting Policies  continued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|        | Recent Accounting Pronouncements 
 continued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|        | In August
 2009, the FASB issued ASU No. 2009-05,Fair Value Measurements and Disclosures (Topic 820) -Measuring Liabilities at Fair Value.
 This ASU provides amendments for fair value measurements of liabilities. It
 provides clarification that in circumstances in which a quoted price in an
 active market for the identical liability is not available, a reporting
 entity is required to measure fair value using one or more techniques. ASU
 2009-05 also clarifies that when estimating a fair value of a liability, a
 reporting entity is not required to include a separate input or adjustment to
 other inputs relating to the existence of a restriction that prevents the
 transfer of the liability. ASU 2009-05 is effective for the first reporting
 period (including interim periods) beginning after issuance or fourth quarter
 2009. The adoption of the guidance did not have a material effect on the
 Companys consolidated financial position or results of operations.
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|        | The FASB
 issued new authoritative accounting guidance under ASC Topic 855,Subsequent Events, which established
 general standards of accounting for and disclosure of events that occur after
 the balance sheet date but before financial statements are issued or
 available to be issued. This guidance sets forth (i) the period after the
 balance sheet date during which management of a reporting entity should
 evaluate events or transactions that may occur for potential recognition or
 disclosure in the financial statements, (ii) the circumstances under which an
 entity should recognize events or transactions occurring after the balance
 sheet date in its financial statements and (iii) the disclosures that an
 entity should make about events or transactions that occurred after the
 balance sheet date. This new guidance was effective for the period ended June
 30, 2010 and did not have a significant impact on the Companys consolidated
 financial statements   
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|        | Reclassifications                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|        | Certain 2009
 amounts have been reclassified to conform to the 2010 presentation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|NOTE 2: | Earnings Per Share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|        | The
 following table sets forth the computation of basic and diluted earnings per
 share for the years ended June 30:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

|                                                                                                     |  |      |           |      |   |           | 
|---------------------------------------------------------------------------------------------------- |  | ---- | --------- | ---- | - | --------- | 
|                                                                                                     |  | 2010 |           | 2009 |  
|                                                                                                     |  |      |           |      |  
|(In
Thousands)                                                                                       |  |      |           |      |   |           | 
|Weighted average shares outstanding during
 the year on which basic earnings per share is calculated |  |      | 4,035,183 |      |   | 4,074,556 | 
|Add: weighted average of stock held in
 treasury                                                     |  |      | 430,778   |      |   | 563,388   | 
|                                                                                                     |  |      |           |      |   |           | 
|Average outstanding shares on which diluted
 earnings per share is calculated                        |  |      | 4,465,961 |      |   | 4,637,944 | 
|                                                                                                     |  |      |           |      |   |           | 
|                                                                                                     |  |      |           |      |   |           | 
|Net income applicable to common
 stockholders                                                        |  | $    | 2,414     |      | $ | 2,338     | 
|                                                                                                     |  |      |           |      |   |           | 
|Basic earnings per share                                                                             |  | $    | 0.60      |      | $ | 0.59      | 
|                                                                                                     |  |      |           |      |   |           | 
|Diluted earnings per share                                                                           |  | $    | 0.54      |      | $ | 0.52      | 
|                                                                                                     |  |      |           |      |   |           | 

-14-

---



EAGLE BANCORP MONTANA, INC. AND SUBSIDIARYNotes to Consolidated Financial Statements
June 30, 2010 and 2009

|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NOTE 3: | Securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        | The Companys investment policy requires that the Company purchase
 only high-grade investment securities. Most municipal obligations are categorized
 as AAA or better by a nationally recognized statistical rating
 organization. These ratings are achieved because the securities are backed by
 the full faith and credit of the municipality and also supported by
 third-party credit insurance policies. Mortgage backed securities and
 collateralized mortgage obligations are issued by government sponsored
 corporations, including Federal Home Loan Mortgage Corporation, Fannie Mae,
 and the Guaranteed National Mortgage Association. The amortized cost and estimated
 fair values of securities, together with unrealized gains and losses, are as
 follows:

-15-

---



|                                          
|------------------------------------------
|EAGLE BANCORP MONTANA, INC. AND SUBSIDIARY
|Notes to Consolidated Financial Statements
|June 30, 2010 and 2009                    

|        |                       
|------- | ----------------------
|NOTE 3: | Securities  continued

|                                              |  |                 |         |                          |   |                           |  |                           |        |   |   |         | 
|--------------------------------------------- |  | --------------- | ------- | ------------------------ | - | ------------------------- |  | ------------------------- | ------ | - | - | ------- | 
|                                              |  | June 30, 2010   |        
|                                              |  |                 |        
|                                             
|(Dollars in Thousands)                        |  | Amortized
 Cost |         | Gross
 Unrealized
 Gains |   | Gross
 Unrealized
 Losses |  | Estimated
 Market
 Value  |       
|                                              |  |                 |         |                          |   |                           |  |                           |       
|Available
 for Sale                           |  |                 |         |                          |   |                           |  |                           |        |   |   |         | 
|                                              |  |                 |         |                          |   |                           |  |                           |        |   |   |         | 
|U.S. Government and agency                    |  | $               | 31,852  |                          | $ | 418                       |  | $                         | (29    | ) | $ | 32,241  | 
|Municipal obligations                         |  |                 | 35,181  |                          |   | 752                       |  |                           | (521   | ) |   | 35,412  | 
|Corporate obligations                         |  |                 | 7,110   |                          |   | 341                       |  |                           |       |   |   | 7,451   | 
|Mortgage-backed securites - government-backed |  |                 | 1,690   |                          |   | 65                        |  |                           |       |   |   | 1,755   | 
|Private lable CMOs                            |  |                 | 957     |                          |   |                          |  |                           | (115   | ) |   | 842     | 
|CMOs - government backed                      |  |                 | 35,902  |                          |   | 963                       |  |                           | (38    | ) |   | 36,827  | 
|                                              |  |                 |         |                          |   |                           |  |                           |        |   |   |         | 
|                                              |  |                 |         |                          |   |                           |  |                           |        |   |   |         | 
|Total securities available for sale           |  | $               | 112,692 |                          | $ | 2,539                     |  | $                         | (703   | ) | $ | 114,528 | 
|                                              |  |                 |         |                          |   |                           |  |                           |        |   |   |         | 
|Held to Maturity                              |  |                 |         |                          |   |                           |  |                           |        |   |   |         | 
|                                              |  |                 |         |                          |   |                           |  |                           |        |   |   |         | 
|Municipal obligations                         |  | $               | 125     |                          | $ |                          |  | $                         |       |   | $ | 125     | 
|                                              |  |                 |         |                          |   |                           |  |                           |        |   |   |         | 
|                                              |  |                 |         |                          |   |                           |  |                           |        |   |   |         | 
|Total securities held to maturity             |  | $               | 125     |                          | $ |                          |  | $                         |       |   | $ | 125     | 
|                                              |  |                 |         |                          |   |                           |  |                           |        |   |   |         | 
|Securities ASC 825                            |  |                 |         |                          |   |                           |  |                           |        |   |   |         | 
|Preferred stock                               |  | $               |        |                          | $ |                          |  | $                         |       |   | $ |        | 
|                                              |  |                 |         |                          |   |                           |  |                           |        |   |   |         | 
|                                              |  |                 |         |                          |   |                           |  |                           |        |   |   |         | 
|                                              |  | $               |        |                          | $ |                          |  | $                         |       |   | $ |        | 
|                                              |  |                 |         |                          |   |                           |  |                           |        |   |   |         | 
|                                              |  |                 |         |                          |   |                           |  |                           |        |   |   |         | 
|                                              |  | June 30, 2009   |        
|                                              |  |                 |        
|                                             
|(Dollars in Thousands)                        |  | Amortized
 Cost |         | Gross
 Unrealized
 Gains |   | Gross
 Unrealized
 Losses |  | Estimated 
 Market
 Value |       
|                                              |  |                 |         |                          |   |                           |  |                           |       
|Available for Sale                            |  |                 |         |                          |   |                           |  |                           |        |   |   |         | 
|                                              |  |                 |         |                          |   |                           |  |                           |        |   |   |         | 
|U.S. Government and agency                    |  | $               | 3,893   |                          | $ | 14                        |  | $                         | (25    | ) | $ | 3,882   | 
|Municipal obligations                         |  |                 | 29,747  |                          |   | 202                       |  |                           | (1,056 | ) |   | 28,893  | 
|Corporate obligations                         |  |                 | 9,963   |                          |   | 149                       |  |                           | (619   | ) |   | 9,493   | 
|Mortgage-backed securites - government-backed |  |                 | 8,287   |                          |   | 162                       |  |                           | (5     | ) |   | 8,444   | 
|Private label CMOs                            |  |                 | 2,226   |                          |   |                          |  |                           | (382   | ) |   | 1,844   | 
|CMOs - government backed                      |  |                 | 29,048  |                          |   | 663                       |  |                           | (4     | ) |   | 29,707  | 
|                                              |  |                 |         |                          |   |                           |  |                           |        |   |   |         | 
|                                              |  |                 |         |                          |   |                           |  |                           |        |   |   |         | 
|Total securities available for sale           |  | $               | 83,164  |                          | $ | 1,190                     |  | $                         | (2,091 | ) | $ | 82,263  | 
|                                              |  |                 |         |                          |   |                           |  |                           |        |   |   |         | 
|Held to Maturity                              |  |                 |         |                          |   |                           |  |                           |        |   |   |         | 
|                                              |  |                 |         |                          |   |                           |  |                           |        |   |   |         | 
|Municpal obligations                          |  | $               | 375     |                          | $ | 9                         |  | $                         |       |   | $ | 384     | 
|                                              |  |                 |         |                          |   |                           |  |                           |        |   |   |         | 
|                                              |  |                 |         |                          |   |                           |  |                           |        |   |   |         | 
|Total securities held to maturity             |  | $               | 375     |                          | $ | 9                         |  | $                         |       |   | $ | 384     | 
|                                              |  |                 |         |                          |   |                           |  |                           |        |   |   |         | 
|Securities ASC 825                            |  |                 |         |                          |   |                           |  |                           |        |   |   |         | 
|Preferred stock                               |  | $               | 2,000   |                          | $ |                          |  | $                         | (1,975 | ) | $ | 25      | 
|                                              |  |                 |         |                          |   |                           |  |                           |        |   |   |         | 
|                                              |  |                 |         |                          |   |                           |  |                           |        |   |   |         | 
|                                              |  | $               | 2,000   |                          | $ |                          |  | $                         | (1,975 | ) | $ | 25      | 
|                                              |  |                 |         |                          |   |                           |  |                           |        |   |   |         | 

-16-

---



EAGLE BANCORP MONTANA, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements 
June 30, 2010 and 2009

|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NOTE 3: | Securities  continued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|        | Beginning July 1, 2007 the Company elected to account for its FHLMC
 and FNMA preferred stock under FASB ASC 825, 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. Management elected to invoke the
 option to carry its preferred stock at fair value to more accurately reflect
 the estimated realizability of the preferred stock at each financial
 reporting date. The market value of preferred stock was $0 and $25,000 at
 June 30, 2010 and 2009, respectively. These securities were sold during the
 second quarter of fiscal year 2010 resulting in a loss on sale of $64,000
 from their then carrying value. The gain and (loss) in market value of
 $84,000 and ($1,296,000) for the years ending June 30, 2010 and 2009,
 respectively, is included in noninterest income.
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|        | The Company has not entered into any interest rate swaps, options, or
 futures contracts relating to investment securities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|        | Gross recognized gains on securities available-for-sale were $250,000
 and $113,000 for the years ended June 30, 2010 and 2009, respectively. Gross
 realized losses on securities available-for-sale were $217,000, and $59,000
 for the years ended June 30, 2010 and 2009, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|        | The amortized cost and estimated fair value of securities at June 30,
 2010 by contractual maturity are shown below. Expected maturities will differ
 from contractual maturities because borrowers may have the right to call or
 prepay obligations with or without call or prepayment penalties.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

June 30, 2010Held to Maturity
 
 Available for Sale(Dollars in Thousands)
 
 Amortized
 Cost
 
 Estimated
 Market
 Value
 
 Amortized
 Cost
 
 Estimated
 Market
 ValueDue in one
 year or less
 
 $
 125
 
 $
 125
 
 $
 6,270
 
 $
 6,314Due from one
 to five years
 
 
 
 
 
 
 
 
 31,695
 
 
 32,518Due from
 five to ten years
 
 
 
 
 
 
 
 
 11,918
 
 
 12,106Due after
 ten years
 
 
 
 
 
 
 
 
 24,260
 
 
 24,166125
 
 
 125
 
 
 74,143
 
 
 75,104Mortgage-backed
 securites -government-backed
 
 
 
 
 
 
 
 
 1,690
 
 
 1,755Private
 lable CMOs
 
 
 
 
 
 
 
 
 957
 
 
 842CMOs -
 government backed
 
 
 
 
 
 
 
 
 35,902
 
 
 36,827Total
 
 $
 125
 
 $
 125
 
 $
 112,692
 
 $
 114,528 Maturities of
securities do not reflect repricing opportunities present in adjustable rate
securities.


-17-

---



EAGLE BANCORP MONTANA, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements 
June 30, 2010 and 2009

|        |                                                                                                                                                                                                                                                                             
|------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NOTE 3: | Securities  continued                                                                                                                                                                                                                                                      
|        |                                                                                                                                                                                                                                                                             
|        | At June 30, 2010 and 2009, securities with a carrying value of
 $35,760,000 and $36,651,000, respectively, were pledged to secure public
 deposits and for other purposes required or permitted by law.                                                                     
|        |                                                                                                                                                                                                                                                                             
|        | The following table discloses, as of June 30, 2010 and 2009, the
 Companys investment securities that have been in a continuous
 unrealized-loss position for less than 12 months and those that have been in
 a continuous unrealized loss position for 12 or more months:

Less than 12 months
 
 12 months or longerJune 30, 2010(Dollars in Thousands)
 
 Estimated
 Market
 Value
 
 Gross
 Unrealized
 Losses
 
 Estimated
 Market
 Value
 
 Gross
 Unrealized
 LossesU.S.
 Government and agency
 
 $
 3,679
 
 $
 27
 
 $
 872
 
 $
 2Municipal
 obligations
 
 
 5,712
 
 
 129
 
 
 3,884
 
 
 392Private
 label CMOs
 
 
 467
 
 
 14
 
 
 374
 
 
 101Mortgage-backed
 & CMOs
 
 
 6,729
 
 
 38
 
 
 
 
 
 Total
 
 $
 16,587
 
 $
 208
 
 $
 5,130
 
 $
 495June 30, 2009U.S.
 Government and agency
 
 $
 1,686
 
 $
 18
 
 $
 458
 
 $
 7Municipal
 obligations
 
 
 11,529
 
 
 422
 
 
 5,732
 
 
 634Corporate
 obligations
 
 
 1,193
 
 
 49
 
 
 1,961
 
 
 570Private
 label CMOs
 
 
 1,339
 
 
 192
 
 
 504
 
 
 190Mortgage-backed
 & CMOs
 
 
 1,416
 
 
 4
 
 
 558
 
 
 5Total
 
 $
 17,163
 
 $
 685
 
 $
 9,213
 
 $
 1,406 The table above shows the Companys investment gross unrealized losses
and fair values, aggregated by investment category and length of time that the
individual securities have been in a continuous unrealized loss position at
June 30, 2010 and 2009. 48 and 97 securities are in an unrealized loss position
as of June 30, 2010 and 2009, respectively. Management evaluates securities for other-than-temporary impairment at
least on a quarterly basis, and more frequently when economic or market
concerns warrant such evaluation. Consideration is given to (1) the length of
time and the extent to which the fair value has been less than cost, (2) the
financial condition and near-term prospects of the issuer, and (3) the intent
and ability of the Bank to retain its investment in the issuer for a period of
time sufficient to allow for any anticipated recovery in fair value.


-18-

---



EAGLE BANCORP MONTANA, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements 
June 30, 2010 and 2009

|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NOTE 3: | Securities  continued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        | At June 30, 2010, 41 U.S. Government and agency securities and
 municipal obligations have unrealized losses with aggregate depreciation of
 less than 0.82% from the Companys amortized cost basis. These unrealized
 losses are principally due to changes in interest rates and credit spreads.
 In analyzing an issuers financial condition, management considers whether
 the securities are issued by the federal government or its agencies, whether
 downgrades by bond rating agencies have occurred, and industry analysts
 reports. As management has the ability to hold debt securities until
 maturity, or for the foreseeable future if classified as available for sale,
 no declines are deemed to be other than temporary.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        | At June 30, 2010, 7 mortgage backed and CMO securities have
 unrealized losses with aggregate depreciation of less than 0.4% from the
 Companys cost basis. We believe these unrealized losses are principally due
 to the credit markets concerns regarding the stability of the mortgage
 market. Management considers available evidence to assess whether it is more
 likely-than-not that all amounts due would not be collected. In such
 assessment, management considers the severity and duration of the impairment,
 the credit ratings of the security, the overall deal and payment structure,
 including the Companys position within the structure, underlying obligor,
 financial condition and near term prospects of the issuer, delinquencies,
 defaults, loss severities, recoveries, prepayments, cumulative loss
 projections, discounted cash flows and fair value estimates. There has been
 no disruption of the scheduled cash flows on any of the securities.
 Managements analysis as of June 30, 2010 revealed no expected credit losses
 on the securities. Two of the CMO securities are non-agency securities
 (backed by Alt-A collateral) which have ratings below investment grade from
 the credit rating agencies. The fair value of these two securities represents
 less than 0.65% of the total fair value of all securities available for sale
 and their unrealized loss is $108,000 as of June 30, 2010.

-19-

---



|                                          
|------------------------------------------
|EAGLE BANCORP MONTANA, INC. AND SUBSIDIARY
|Notes to Consolidated Financial Statements
|June 30, 2010 and 2009                    

|        |                                             
|------- | --------------------------------------------
|NOTE 4: | Loans                                       
|        |                                             
|        | A summary of
 the balances of loans follows:

June 30,2010
 
 2009(Dollars in Thousands)First
 mortgage loans:Residential mortgage (1-4 family)
 
 $
 73,010
 
 $
 79,216Commercial real estate
 
 
 41,677
 
 
 36,713Real estate construction
 
 
 7,016
 
 
 4,642Other loans:Home equity
 
 
 29,795
 
 
 28,676Consumer
 
 
 9,613
 
 
 10,835Commercial
 
 
 9,452
 
 
 7,541Subtotal
 
 
 170,563
 
 
 167,623Less:
 Allowance for loan losses
 
 
 (1,100
 )
 
 (525
 )Deferred loan fees, net
 
 
 39
 
 
 99Total loans,
 net
 
 $
 169,502
 
 $
 167,197 Loans net of
related allowance for loan losses on which the accrual of interest has been
discontinued were $2,402,000 and $990,000 at June 30, 2010 and 2009,
respectively. Interest income not accrued on these loans and cash interest
income was immaterial for the years ended June 30, 2010 and 2009. The allowance
for loan losses on nonaccrual loans as of June 30, 2010 and 2009 was $380,000
and $12,000, respectively. The Company expects to collect all amounts due on
nonaccrual loans, including interest accrued at contractual rates. There were
$2,104,000 ($1,688,000 net of loss reserves of $416,000) of and $15,000 ($3,000
net of loss reserves of $12,000) loans considered impaired at June 30, 2010 and
2009, respectively. As of June 30, 2010 and 2009, the Company had $29,000 and
$251,000, respectively, of loans past due greater than ninety days that were
still accruing interest. The following
is a summary of changes in the allowance for loan losses: June 30,2010
 
 2009(Dollars in Thousands)Balance at
 beginning of period
 
 $
 525
 
 $
 300Provision (credit) for loan losses
 
 
 715
 
 
 257Loans charged off
 
 
 (143
 )
 
 (47
 )Recoveries of loans previously charged off
 
 
 3
 
 
 15Balance at
 end of period
 
 $
 1,100
 
 $
 525


-20-

---



EAGLE BANCORP MONTANA, INC. AND SUBSIDIARYNotes to Consolidated Financial Statements 
June 30, 2010 and 2009

|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NOTE 4: | Loans  continued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|        | Loans are granted to directors and officers of the Company in the
 ordinary course of business. Such loans are made in accordance with policies
 established for all loans of the Company, except that directors, officers,
 and employees may be eligible to receive discounts on loan origination costs.                                                                                                                                                                                                                                                                                               
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|        | Loans receivable from directors and senior officers, and their related
 parties, of the Company at June 30, 2010 and 2009, were $1,865,000 and
 $1,761,000, respectively. During the year ended June 30, 2010, total
 principal additions amounted to $284,000 and total principal payments
 amounted to $176,000. Interest income from all these loans was $117,000 and
 $140,000 for the years ended June 30, 2010 and 2009, respectively. The Bank
 serviced, for the benefit of others, $6,633,000 and $6,832,000 at June 30,
 2010 and 2009, respectively, loans from directors and senior officers.
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|NOTE 5: | Mortgage Servicing Rights                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|        | The Company is servicing loans for the benefit of others totaling
 approximately $297,423,000 and $270,508,000 at June 30, 2010 and 2009,
 respectively. Servicing loans for others generally consists of collecting
 mortgage payments, maintaining escrow accounts, disbursing payments to
 investors, and foreclosure processing.                                                                                                                                                                                                                                                                     
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|        | Custodial escrow balances maintained in connection with the foregoing
 loan servicing, and included in demand deposits, were approximately
 $2,260,000 and $2,668,000 at June 30, 2010 and 2009, respectively.                                                                                                                                                                                                                                                                                                                                                                                           
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|        | The following is a summary of activity in mortgage servicing rights
 and the valuation allowance:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

| |                                           |  |                      |       |      |   |       |  
| | ----------------------------------------- |  | -------------------- | ----- | ---- | - | ----- | -
| |                                           |  | Years Ended June 30, |      
| |                                           |  |                      |      
| |                                           |  |                      |       |      |  
| |                                           |  | 2010                 |       | 2009 |  
| |                                           |  |                      |       |      |  
| | (Dollars in Thousands)                    |  |                      |       |      |   |       |  
| | Mortgage
 servicing rights                |  |                      |       |      |   |       |  
| | Balance at beginning of period            |  | $                    | 2,208 |      | $ | 1,652 |  
| | Mortgage servicing rights capitalized     |  |                      | 616   |      |   | 1,154 |  
| | Amortization of mortgage servicing rights |  |                      | (487  | )    |   | (598  | )
| |                                           |  |                      |       |      |   |       |  
| | Balance at end of period                  |  |                      | 2,337 |      |   | 2,208 |  
| | Valuation
 allowance                      |  |                      |       |      |   |       |  
| | Balance at beginning of period            |  |                      |      |      |   |      |  
| | Provision (credited) to operations        |  |                      |      |      |   |      |  
| |                                           |  |                      |       |      |   |       |  
| | Balance at end of period                  |  |                      |      |      |   |      |  
| |                                           |  |                      |       |      |   |       |  
| |                                           |  |                      |       |      |   |       |  
| | Net mortgage
 servicing rights            |  | $                    | 2,337 |      | $ | 2,208 |  
| |                                           |  |                      |       |      |   |       |  

-21-

---



EAGLE BANCORP MONTANA, INC. AND SUBSIDIARYNotes to Consolidated Financial Statements 
June 30, 2010 and 2009

|        |                                                                                                                                                                                                                                                                                                                                                                                                                  
|------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NOTE 5: | Mortgage Servicing Rights  continued                                                                                                                                                                                                                                                                                                                                                                            
|        |                                                                                                                                                                                                                                                                                                                                                                                                                  
|        | The fair values of these rights were $2,400,000 and $2,389,000 at
 June 30, 2010 and June 30, 2009, respectively. The fair value of servicing
 rights was determined using discount rates ranging from 9.0% to 20.0%,
 prepayment speeds ranging from 213% to 405%, depending on stratification of
 the specific right. The fair value was also adjusted for the affect of
 potential past dues and foreclosures.
|        |                                                                                                                                                                                                                                                                                                                                                                                                                  
|NOTE 6: | Premises and Equipment                                                                                                                                                                                                                                                                                                                                                                                           
|        |                                                                                                                                                                                                                                                                                                                                                                                                                  
|        | A summary of the cost and accumulated depreciation of premises and
 equipment follows:                                                                                                                                                                                                                                                                                                                           

| |                                    |  |          |        |      |   |        |  
| | ---------------------------------- |  | -------- | ------ | ---- | - | ------ | -
| |                                    |  | June 30, |       
| |                                    |  |          |       
| |                                    |  |          |        |      |  
| |                                    |  | 2010     |        | 2009 |  
| |                                    |  |          |        |      |  
| | (Dollars in Thousands)             |  |          |        |      |   |        |  
| | Land,
 buildings, and improvements |  | $        | 18,504 |      | $ | 16,380 |  
| | Furniture
 and equipment           |  |          | 4,369  |      |   | 3,757  |  
| |                                    |  |          |        |      |   |        |  
| |                                    |  |          | 22,873 |      |   | 20,137 |  
| | Accumulated
 depreciation          |  |          | (7,025 | )    |   | (6,376 | )
| |                                    |  |          |        |      |   |        |  
| |                                    |  |          |        |      |   |        |  
| |                                    |  | $        | 15,848 |      | $ | 13,761 |  
| |                                    |  |          |        |      |   |        |  

|        |                                                                                                              
|------- | -------------------------------------------------------------------------------------------------------------
|        | Depreciation expense totaled $586,000 and $482,000 for the years
 ended June 30, 2010 and 2009, respectively.
|        |                                                                                                              
|NOTE 7: | Deposits                                                                                                     
|        |                                                                                                              
|        | The composition of deposits is summarized as follows:                                                        

| |                                                                                                         |  |          |         |      |   |         | 
| | ------------------------------------------------------------------------------------------------------- |  | -------- | ------- | ---- | - | ------- | 
| |                                                                                                         |  | June 30, |        
| |                                                                                                         |  |          |        
| |                                                                                                         |  |          |         |      |  
| |                                                                                                         |  | 2010     |         | 2009 |  
| |                                                                                                         |  |          |         |      |  
| | (Dollars in Thousands)                                                                                  |  |          |         |      |   |         | 
| | Noninterest
 checking                                                                                   |  | $        | 18,376  |      | $ | 15,002  | 
| | Interest
 bearing checking (0.15%, 0.33%)                                                               |  |          | 34,658  |      |   | 32,664  | 
| | Passbook
 savings (0.21%, 0.41%)                                                                        |  |          | 30,875  |      |   | 26,445  | 
| | Money market
 accounts (.24%, .64%)                                                                     |  |          | 29,021  |      |   | 26,886  | 
| |                                                                                                         |  |          |         |      |   |         | 
| | Time
 certificates of deposits (2010 - .50% - 4.64%, 2009 - .75% - 5.35%)                               |  |          | 85,009  |      |   | 86,202  | 
| |                                                                                                         |  |          |         |      |   |         | 
| |                                                                                                         |  |          |         |      |   |         | 
| |                                                                                                         |  | $        | 197,939 |      | $ | 187,199 | 
| |                                                                                                         |  |          |         |      |   |         | 
| |                                                                                                         |  |          |         |      |   |         | 
| | The weighted average cost of deposit funds was .85% and 1.38% at June
 30, 2010 and 2009, respectively. | 

-22-

---



EAGLE BANCORP MONTANA, INC. AND SUBSIDIARYNotes to Consolidated Financial Statements 
June 30, 2010 and 2009

|        |                                                                             
|------- | ----------------------------------------------------------------------------
|NOTE 7: | Deposits  continued                                                        
|        |                                                                             
|        | At June 30,
 2010, the scheduled maturities of time deposits are as follows:

|                       |  |   |        | 
|---------------------- |  | - | ------ | 
|(Dollars in Thousands) |  |   |        | 
|Within one
 year       |  | $ | 61,005 | 
|One to two
 years      |  |   | 15,876 | 
|Two to three
 years    |  |   | 4,547  | 
|Three to
 four years   |  |   | 2,850  | 
|Thereafter             |  |   | 731    | 
|                       |  |   |        | 
|                       |  |   |        | 
|Total                  |  | $ | 85,009 | 
|                       |  |   |        | 

| |                                                        
| | -------------------------------------------------------
| | Interest
 expense on deposits is summarized as follows:

|                               |  |                      |       |      |   |       | 
|------------------------------ |  | -------------------- | ----- | ---- | - | ----- | 
|                               |  | Years Ended June 30, |      
|                               |  |                      |      
|                               |  |                      |       |      |   |       | 
|                               |  | 2010                 |       | 2009 |  
|                               |  |                      |       |      |  
|(Dollars in Thousands)         |  |                      |       |      |   |       | 
|Checking                       |  | $                    | 72    |      | $ | 114   | 
|Passbook
 savings              |  |                      | 92    |      |   | 131   | 
|Money market
 accounts         |  |                      | 117   |      |   | 322   | 
|Time
 certificates of deposits |  |                      | 1,880 |      |   | 2,594 | 
|                               |  |                      |       |      |   |       | 
|                               |  |                      |       |      |   |       | 
|                               |  | $                    | 2,161 |      | $ | 3,161 | 
|                               |  |                      |       |      |   |       | 

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | As of May
 20, 2009 FDIC insurance covers deposits up to $250,000 through December 31,
 2013. On July 21, 2010, this coverage was made permanent with the passage of
 the Frank-Dodd Wall Street Reform and Consumer Protection Act. At June 30,
 2010 the Company held $17,787,000 in deposit accounts that included balances
 of $250,000 or more. The Bank is a participant in the FDICs Transactional
 Account Gaurantee Program, and as such noninterest bearing accounts are fully
 insured until December 31, 2010 when the program expires. At June 30, 2010
 the Company held $18,376,000, in noninterest bearing accounts.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | At June 30,
 2010 and 2009, the Company reclassified $53,000 and $148,000, respectively,
 in overdrawn deposits as loans.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | Directors
 and senior officers deposit accounts at June 30, 2010 and 2009, were
 $235,000 and $299,000, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

-23-

---



EAGLE BANCORP MONTANA, INC. AND SUBSIDIARYNotes to Consolidated Financial Statements 
June 30, 2010 and 2009

|        |                                                                                              
|------- | ---------------------------------------------------------------------------------------------
|NOTE 8: | Advances from the Federal Home Loan Bank and other borrowings                                
|        |                                                                                              
|        | Advances
 from the Federal Home Loan Bank of Seattle and other borrowings mature as
 follows:

|                       |  |          |        |      |   |        | 
|---------------------- |  | -------- | ------ | ---- | - | ------ | 
|                       |  | June 30, |       
|                       |  |          |       
|                       |  |          |        |      |  
|                       |  | 2010     |        | 2009 |  
|                       |  |          |        |      |  
|(Dollars in Thousands) |  |          |        |      |   |        | 
|Within one
 year       |  | $        | 13,224 |      | $ | 10,667 | 
|One to two
 years      |  |          | 18,000 |      |   | 8,389  | 
|Two to three
 years    |  |          | 16,000 |      |   | 18,000 | 
|Three to
 four years   |  |          | 9,000  |      |   | 16,000 | 
|Four to five
 years    |  |          | 9,000  |      |   | 9,000  | 
|Thereafter             |  |          | 2,000  |      |   | 5,000  | 
|                       |  |          |        |      |   |        | 
|                       |  |          |        |      |   |        | 
|Total                  |  | $        | 67,224 |      | $ | 67,056 | 
|                       |  |          |        |      |   |        | 

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Federal Home Loan Advances                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | The advances are due at maturity, with the exception of two advances,
 totaling, $10,000,000, that are callable at the FHLB of Seattles option. The
 advances are subject to prepayment penalties. The interest rates on advances
 are fixed. The advances are collateralized by investment securities pledged
 to the FHLB of Seattle and a blanket pledge of the Banks 1-4 family
 residential mortgage portfolio. The carrying value of the securities
 collateralized for these advances was $1,135,081 as of June 30, 2009. At June
 30, 2010 and 2009, the Company exceeded the collateral requirements of the
 FHLB. The Companys investment in FHLB stock is also pledged as collateral on
 these advances. The total FHLB funding line available to the Company at June
 30, 2010, was 30% of total Bank assets, or approximately $93.17 million. The
 balance of advances was $44,224,000 and $44,056,000 at June 30, 2010 and
 2009, respectively.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | Other Borrowings                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | The Bank had $23,000,000 in structured repurchase agreements with PNC
 Financial Service Group, Inc. (PNC) at June 30, 2010, and 2009. These
 agreements are collateralized by corporate and municipal securities. The
 carrying value of these securities was $28,515,000 as of June 30, 2010. These
 agreements include terms, under certain conditions, which allow PNC to
 exercise a call option.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | Federal Funds Purchased                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | The Bank has a $7,000,000 Federal Funds line of credit with PNC. The
 balance was $0 as of June 30, 2010 and 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | The Bank has a $6,500,000 Federal Funds line of credit with Zions
 Bank. The balance was $0 as of June 30, 2010 and 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

-24-

---



EAGLE BANCORP MONTANA, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements 
June 30, 2010 and 2009

|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|-------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NOTE 8:  | Advances from the Federal Home Loan Bank and other borrowings 
 continued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|         | Federal Reserve Bank Discount Window                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|         | For additional liquidity sources, the Bank has a credit facility at
 the Federal Reserve Banks Discount Window. The amount available to the Bank
 is limited by various collateral requirements. The Bank has pledged one
 Agency security and one collateralized mortgage obligation security at the
 Federal Reserve Bank that had a total carrying value of $5,547,000 as of June
 30, 2010. The account had $0 balance as of June 30, 2010 and 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|         | For all borrowings outstanding the weighted average interest rate for
 advances at June 30, 2010 and 2009 was 3.78% and 4.02% respectively. The
 weighted average amount outstanding was $66,090,000 and $67,772,000 for the
 years ended June 30, 2010 and 2009, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|         | The maximum amount outstanding at any month-end was $68,500,000 and
 $73,789,000 during the years ended June 30, 2010 and 2009, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|NOTE 9:  | Subordinated Debentures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|         | On September 28, 2005, the Company completed the private placement of
 $5,155,000 in subordinated debentures to Eagle Bancorp Statutory Trust I
 (the Trust). The Trust funded the purchase of the subordinated debentures
 through the sale of trust preferred securities to First Tennessee Bank, N.A.
 with a liquidation value of $5,155,000. Using interest payments made by the
 Company on the debentures, the Trust began paying quarterly dividends to
 preferred security holders on December 15, 2005. The annual percentage rate
 of the interest payable on the subordinated debentures and distributions
 payable on the preferred securities is fixed at 6.02% until December 15, 2010
 then becomes variable at 3-Month LIBOR plus 1.42%. Dividends on the preferred
 securities are cumulative and the Trust may defer the payments for up to five
 years. The preferred securities mature in December 15, 2035 unless the
 Company elects and obtains regulatory approval to accelerate the maturity
 date to as early as December 15, 2010.
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|         | For the years ended June 30, 2010 and June 30, 2009, interest expense
 on the subordinated debentures was $309,000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|         | Subordinated debt may be included in regulatory Tier 1 capital
 subject to a limitation that such amounts not exceed 25% of Tier 1 capital.
 The remainder of subordinated debt is included in Tier II capital. There is
 no limitation for inclusion of subordinated debt in total risk-based capital
 and, as such, all subordinated debt was included in total risk-based capital.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|NOTE 10: | Legal Contingencies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|         | Various legal claims also arise from time to time in the normal
 course of business which, in the opinion of management, will have no material
 effect on the Companys financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

-25-

---



EAGLE BANCORP MONTANA, INC. AND SUBSIDIARYNotes to Consolidated Financial Statements 
June 30, 2010 and 2009

|         |                                                                      
|-------- | ---------------------------------------------------------------------
|NOTE 11: | Income Taxes                                                         
|         |                                                                      
|         | The
 components of the Companys income tax provision are as follows:

|                       |  |                      |        |      |   |       |  
|---------------------- |  | -------------------- | ------ | ---- | - | ----- | -
|                       |  | Years Ended June 30, |       
|                       |  |                      |       
|                       |  |                      |        |      |   |       |  
|                       |  | 2010                 |        | 2009 |  
|                       |  |                      |        |      |  
|(Dollars in Thousands) |  |                      |        |      |   |       |  
|Current                |  |                      |        |      |   |       |  
|U.S. federal           |  | $                    | (894   | )    | $ | 975   |  
|Montana                |  |                      | (247   | )    |   | 270   |  
|                       |  |                      |        |      |   |       |  
|                       |  |                      | (1,141 | )    |   | 1,245 |  
|                       |  |                      |        |      |   |       |  
|Deferred               |  |                      |        |      |   |       |  
|U.S. federal           |  |                      | 1,697  |      |   | (149  | )
|Montana                |  |                      | 479    |      |   | (72   | )
|                       |  |                      |        |      |   |       |  
|                       |  |                      | 2,176  |      |   | (221  | )
|                       |  |                      |        |      |   |       |  
|                       |  |                      |        |      |   |       |  
|Total                  |  | $                    | 1,035  |      | $ | 1,024 |  
|                       |  |                      |        |      |   |       |  

| |                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The nature and components of deferred tax assets and liabilities,
 which are a component of other liabilities in 2010 and other assets in 2009
 in the accompanying statement of financial condition, are as follows:

|                                                              |  |          |        |      |   |       | 
|------------------------------------------------------------- |  | -------- | ------ | ---- | - | ----- | 
|                                                              |  | June 30, |       
|                                                              |  |          |       
|                                                              |  |          |        |      |   |       | 
|                                                              |  | 2010     |        | 2009 |  
|                                                              |  |          |        |      |  
|(Dollars in Thousands)                                        |  |          |        |      |   |       | 
|Deferred tax assets:                                          |  |          |        |      |   |       | 
|Deferred compensation                                         |  | $        | 278    |      | $ | 272   | 
|Loans receivable                                              |  |          | 130    |      |   | 34    | 
|Deferred loan fees                                            |  |          | 13     |      |   |      | 
|Securities available-for-sale & preferred
 stock FASB ASC 825 |  |          |       |      |   | 862   | 
|Other                                                         |  |          | 17     |      |   | 16    | 
|                                                              |  |          |        |      |   |       | 
|Total deferred tax assets                                     |  |          | 438    |      |   | 1,184 | 
|                                                              |  |          |        |      |   |       | 
|Deferred tax liabilities:                                     |  |          |        |      |   |       | 
|Premises and equipment                                        |  |          | 1,017  |      |   | 210   | 
|Deferred loan fees                                            |  |          |       |      |   | 11    | 
|FHLB stock                                                    |  |          | 389    |      |   | 389   | 
|Securities available-for-sale &
 preferred stock FASB ASC 825 |  |          | 551    |      |   |      | 
|Unrealized gain on hedging                                    |  |          | 102    |      |   | 20    | 
|Other                                                         |  |          |        |      |   |      | 
|                                                              |  |          |        |      |   |       | 
|Total deferred tax liabilities                                |  |          | 2,059  |      |   | 630   | 
|                                                              |  |          |        |      |   |       | 
|                                                              |  |          |        |      |   |       | 
|Net deferred tax (liability) asset                            |  | $        | (1,621 | )    | $ | 554   | 
|                                                              |  |          |        |      |   |       | 

| |                                                                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Company believes, based upon the available evidence, that all
 deferred tax assets will be realized in the normal course of operations.
 Accordingly, these assets have not been reduced by a valuation allowance.

-26-

---



EAGLE BANCORP MONTANA, INC. AND SUBSIDIARYNotes to Consolidated Financial Statements 
June 30, 2010 and 2009

|         |                                                                                                                           
|-------- | --------------------------------------------------------------------------------------------------------------------------
|NOTE 11: | Income Taxes  continued                                                                                                  
|         |                                                                                                                           
|         | A
 reconciliation of the Companys effective income tax provision to the
 statutory federal income tax rate is as follows:

| |                                                    |  |                      |       |      |   |       |  
| | -------------------------------------------------- |  | -------------------- | ----- | ---- | - | ----- | -
| |                                                    |  | Years Ended June 30, |      
| |                                                    |  |                      |      
| |                                                    |  | 2010                 |       | 2009 |  
| |                                                    |  |                      |       |      |  
| | (Dollars in Thousands)                             |  |                      |       |      |   |       |  
| |                                                    |  |                      |       |      |   |       |  
| | Federal income taxes at the statutory rate
 of 34% |  | $                    | 1,173 |      | $ | 1,160 |  
| | State income taxes                                 |  |                      | 233   |      |   | 230   |  
| | Nontaxable income                                  |  |                      | (541  | )    |   | (451  | )
| | Other, net                                         |  |                      | 170   |      |   | 85    |  
| |                                                    |  |                      |       |      |   |       |  
| |                                                    |  |                      |       |      |   |       |  
| | Income tax expense                                 |  | $                    | 1,035 |      | $ | 1,024 |  
| |                                                    |  |                      |       |      |   |       |  
| |                                                    |  |                      |       |      |   |       |  
| | Effective tax rate                                 |  |                      | 30.0  | %    |   | 30.0  | %
| |                                                    |  |                      |       |      |   |       |  

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Prior to
 January 1, 1987, the Company was allowed a special bad debt deduction limited
 generally in the current year to 32% (net of preference tax) of otherwise
 taxable income and subject to certain limitations based on aggregate loans
 and savings account balances at the end of the year. If the amounts that
 qualified as deductions for federal income tax purposes are later used for
 purposes other than for bad debt losses, they will be subject to federal
 income tax at the then current corporate rate. Retained earnings include
 approximately $852,000 and $525,000 at June 30, 2010 and 2009, respectively,
 for which federal income tax has not been provided.

-27-

---



EAGLE BANCORP MONTANA, INC. AND SUBSIDIARYNotes to Consolidated Financial Statements 
June 30, 2010 and 2009

|         |                                                                                                                                                                                                                                                                           
|-------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NOTE 12: | Comprehensive Income                                                                                                                                                                                                                                                      
|         |                                                                                                                                                                                                                                                                           
|         | Comprehensive income represents the sum of net income and items of
 other comprehensive income that are reported directly in stockholders
 equity, such as the change during the period in the after-tax net unrealized
 gain or loss on securities available-for-sale.
|         |                                                                                                                                                                                                                                                                           
|         | The Companys other comprehensive income is summarized as follows for
 the years ended June 30:                                                                                                                                                                           

| |                                                                                                                                           |  |      |       |      |   |     |  
| | ----------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ----- | ---- | - | --- | -
| |                                                                                                                                           |  | 2010 |       | 2009 |  
| |                                                                                                                                           |  |      |       |      |  
| | (Dollars in Thousands)                                                                                                                    |  |      |       |      |   |     |  
| | Net unrealized holding loss arising during
 the year:                                                                                     |  |      |       |      |   |     |  
| | Available for sale securities, net of
 related income tax (expense) benefit of ($831) and $112, respectively                              |  | $    | 1,938 |      | $ | 263 |  
| |                                                                                                                                           |  |      |       |      |   |     |  
| | Forward delivery commitments, net of
 related income tax expense of $82 and $6, respectively                                              |  |      | 191   |      |   | 15  |  
| |                                                                                                                                           |  |      |       |      |   |     |  
| | Reclassification adjustment for net
 realized gain included in net income, net of related income tax expense of $9
 and $16, respectively |  |      | (23   | )    |   | (38 | )
| |                                                                                                                                           |  |      |       |      |   |     |  
| |                                                                                                                                           |  |      |       |      |   |     |  
| | Other comprehensive income                                                                                                                |  | $    | 2,106 |      | $ | 240 |  
| |                                                                                                                                           |  |      |       |      |   |     |  

-28-

---



EAGLE BANCORP MONTANA, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2010 and 2009

|         |                                   
|-------- | ----------------------------------
|NOTE 13: | Supplemental Cash Flow Information

|                                                          |  |                      |        |      |   |       |  
|--------------------------------------------------------- |  | -------------------- | ------ | ---- | - | ----- | -
|                                                          |  | Years Ended June 30, |       
|                                                          |  |                      |       
|                                                          |  |                      |       
|                                                          |  | 2010                 |        | 2009 |  
|                                                          |  |                      |        |      |  
|(Dollars in Thousands)                                    |  |                      |        |      |  
|Supplemental Cash Flow Information                        |  |                      |        |      |   |       |  
|Cash paid during the year for interest                    |  | $                    | 5,115  |      | $ | 6,127 |  
|Cash paid during the year for income taxes                |  |                      | 603    |      |   | 1,475 |  
|Non-Cash Investing Activities                             |  |                      |        |      |   |       |  
|Increase in market value of securities available for sale |  | $                    | (2,737 | )    | $ | (321  | )
|Mortgage servicing rights capitalized                     |  |                      | 617    |      |   | 1,154 |  
|ESOP shares released                                      |  |                      | 101    |      |   | 114   |  

|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|-------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NOTE 14: | Regulatory Capital Requirements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|         | The Bank is subject to various regulatory capital requirements
 administered by federal banking agencies. Failure to meet minimum capital
 requirements can initiate certain mandatory  and possibly additional
 discretionary  actions by regulators that, if undertaken, could have a
 direct material effect on the Banks financial statements. Under capital adequacy
 guidelines and the regulatory framework for prompt corrective action, the
 Bank must meet specific capital guidelines that involve quantitative measures
 of the Banks assets, liabilities, and certain off-balance-sheet items as
 calculated under regulatory accounting practices. The Banks capital amounts
 and classifications are also subject to qualitative judgments by the
 regulators about components, risk weightings, and other factors.
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|         | Quantitative measures established by regulation to ensure capital
 adequacy require the Bank to maintain minimum amounts and ratios (set forth
 in the table below) of tangible and core capital (as defined in the
 regulations) to total adjusted assets (as defined), and of risk-based capital
 (as defined) to risk-weighted assets (as defined). Management believes, as of
 June 30, 2010 and 2009, that the Bank meets all capital adequacy requirements
 to which it is subject.                                                                                                                                                                                                                                                                                                                                              
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|         | The most recent notification from the Office of Thrift Supervision
 (OTS) (as of January 5, 2009) categorized the Bank as well capitalized
 under the regulatory framework for prompt corrective action. To be
 categorized as well-capitalized, the Bank must maintain minimum tangible,
 core, and risk-based ratios as set forth in the table below. The Banks actual
 capital amounts (in thousands) and ratios are presented in the table below:                                                                                                                                                                                                                                                                                                                                                                               

-29-

---



EAGLE BANCORP MONTANA, INC. AND SUBSIDIARYNotes to Consolidated Financial Statements
June 30, 2010 and 2009

|         |                                            
|-------- | -------------------------------------------
|NOTE 14: | Regulatory Capital Requirements  continued

|                                                 |  |        |        |                               |  |                                                                              |   |       |        |        |  |       |   |   |        |  |  |       |  
|------------------------------------------------ |  | ------ | ------ | ----------------------------- |  | ---------------------------------------------------------------------------- | - | ----- | ------ | ------ |  | ----- | - | - | ------ |  |  | ----- | -
|(Dollars in Thousands)                           |  | Actual |        | Minimum
 Capital
 Requirement |  | Minimum
 To Be Well
 Capitalized Under
 Prompt Corrective
 Action Provisions |  
|                                                 |  |        |        |                               |  |                                                                              |  
|                                                 |  |        |        |                               |  |                                                                              |  
|                                                 |  | Amount |        | Ratio                         |  | Amount                                                                       |   | Ratio |        | Amount |  | Ratio |  
|                                                 |  |        |        |                               |  |                                                                              |   |       |        |        |  |       |  
|June 30,
 2010:                                  |  |        |        |                               |  |                                                                              |   |       |        |        |  |       |   |   |        |  |  |       |  
|                                                 |  |        |        |                               |  |                                                                              |   |       |        |        |  |       |   |   |        |  |  |       |  
|Total Risk-based Capital to Risk Weighted Assets |  |        |        |                               |  |                                                                              |   |       |        |        |  |       |   |   |        |  |  |       |  
|Consolidated                                     |  | $      | 56,591 |                               |  | 26.47                                                                        | % | $     | 17,103 |        |  | 8.00  | % | $ | N/A    |  |  | N/A   | %
|Bank                                             |  |        | 41,223 |                               |  | 19.63                                                                        |   |       | 16,799 |        |  | 8.00  |   |   | 20,999 |  |  | 10.00 |  
|                                                 |  |        |        |                               |  |                                                                              |   |       |        |        |  |       |   |   |        |  |  |       |  
|Tier I Capital to Risk Weighted Assets           |  |        |        |                               |  |                                                                              |   |       |        |        |  |       |   |   |        |  |  |       |  
|Consolidated                                     |  |        | 55,908 |                               |  | 26.15                                                                        |   |       | 8,551  |        |  | 4.00  |   |   | N/A    |  |  | N/A   |  
|Bank                                             |  |        | 40,539 |                               |  | 19.31                                                                        |   |       | 8,400  |        |  | 4.00  |   |   | 12,599 |  |  | 6.00  |  
|                                                 |  |        |        |                               |  |                                                                              |   |       |        |        |  |       |   |   |        |  |  |       |  
|Tier I Capital to Adjusted Total Assets          |  |        |        |                               |  |                                                                              |   |       |        |        |  |       |   |   |        |  |  |       |  
|Consolidated                                     |  |        | 55,908 |                               |  | 17.12                                                                        |   |       | 9,798  |        |  | 3.00  |   |   | N/A    |  |  | N/A   |  
|Bank                                             |  |        | 40,539 |                               |  | 13.10                                                                        |   |       | 9,282  |        |  | 3.00  |   |   | 15,471 |  |  | 5.00  |  
|                                                 |  |        |        |                               |  |                                                                              |   |       |        |        |  |       |   |   |        |  |  |       |  
|Tangible Capital to Adjusted Total Assets        |  |        |        |                               |  |                                                                              |   |       |        |        |  |       |   |   |        |  |  |       |  
|Consolidated                                     |  |        | 55,908 |                               |  | 17.12                                                                        |   |       | 4,899  |        |  | 1.50  |   |   | N/A    |  |  | N/A   |  
|Bank                                             |  |        | 40,539 |                               |  | 13.10                                                                        |   |       | 4,641  |        |  | 1.50  |   |   | N/A    |  |  | N/A   |  
|                                                 |  |        |        |                               |  |                                                                              |   |       |        |        |  |       |   |   |        |  |  |       |  
|June 30, 2009:                                   |  |        |        |                               |  |                                                                              |   |       |        |        |  |       |   |   |        |  |  |       |  
|                                                 |  |        |        |                               |  |                                                                              |   |       |        |        |  |       |   |   |        |  |  |       |  
|Total Risk-based Capital to Risk Weighted Assets |  |        |        |                               |  |                                                                              |   |       |        |        |  |       |   |   |        |  |  |       |  
|Consolidated                                     |  | $      | 33,886 |                               |  | 16.61                                                                        | % | $     | 16,318 |        |  | 8.00  | % | $ | N/A    |  |  | N/A   | %
|Bank                                             |  |        | 27,592 |                               |  | 13.66                                                                        |   |       | 16,157 |        |  | 8.00  |   |   | 20,196 |  |  | 10.00 |  
|                                                 |  |        |        |                               |  |                                                                              |   |       |        |        |  |       |   |   |        |  |  |       |  
|Tier I Capital to Risk Weighted Assets           |  |        |        |                               |  |                                                                              |   |       |        |        |  |       |   |   |        |  |  |       |  
|Consolidated                                     |  |        | 33,374 |                               |  | 16.36                                                                        |   |       | 8,159  |        |  | 4.00  |   |   | N/A    |  |  | N/A   |  
|Bank                                             |  |        | 27,079 |                               |  | 13.41                                                                        |   |       | 8,078  |        |  | 4.00  |   |   | 12,118 |  |  | 6.00  |  
|                                                 |  |        |        |                               |  |                                                                              |   |       |        |        |  |       |   |   |        |  |  |       |  
|Tier I Capital to Adjusted Total Assets          |  |        |        |                               |  |                                                                              |   |       |        |        |  |       |   |   |        |  |  |       |  
|Consolidated                                     |  |        | 33,374 |                               |  | 11.50                                                                        |   |       | 8,709  |        |  | 3.00  |   |   | N/A    |  |  | N/A   |  
|Bank                                             |  |        | 27,079 |                               |  | 9.53                                                                         |   |       | 8,522  |        |  | 3.00  |   |   | 14,203 |  |  | 5.00  |  
|                                                 |  |        |        |                               |  |                                                                              |   |       |        |        |  |       |   |   |        |  |  |       |  
|Tangible Capital to Adjusted Total Assets        |  |        |        |                               |  |                                                                              |   |       |        |        |  |       |   |   |        |  |  |       |  
|Consolidated                                     |  |        | 33,374 |                               |  | 11.50                                                                        |   |       | 4,354  |        |  | 1.50  |   |   | N/A    |  |  | N/A   |  
|Bank                                             |  |        | 27,079 |                               |  | 9.53                                                                         |   |       | 4,261  |        |  | 1.50  |   |   | N/A    |  |  | N/A   |  

-30-

---



EAGLE BANCORP MONTANA, INC. AND SUBSIDIARYNotes to Consolidated Financial Statements
June 30, 2010 and 2009

|         |                                                                                                                                                                          
|-------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NOTE 14: | Regulatory Capital Requirements  continued                                                                                                                              
|         |                                                                                                                                                                          
|         | A reconciliation of the Banks capital (in thousands) determined by
 generally accepted accounting principles to capital defined for regulatory
 purposes, is as follows:

|                                                                |  |      |        |      |   |        |  
|--------------------------------------------------------------- |  | ---- | ------ | ---- | - | ------ | -
|                                                                |  | 2010 |        | 2009 |  
|                                                                |  |      |        |      |  
|(Dollars in Thousands)                                          |  |      |        |      |  
|Capital determined by generally accepted
 accounting principles |  | $    | 42,009 |      | $ | 26,687 |  
|Unrealized (gain) loss on securities
 available-for-sale        |  |      | (1,232 | )    |   | 439    |  
|Unrealized gain on forward delivery
 commitments                |  |      | (238   | )    |   | (47    | )
|                                                                |  |      |        |      |   |        |  
|Tier I (core) capital                                           |  |      | 40,539 |      |   | 27,079 |  
|General allowance for loan losses                               |  |      | 684    |      |   | 513    |  
|                                                                |  |      |        |      |   |        |  
|                                                                |  |      |        |      |   |        |  
|Total risk based capital                                        |  | $    | 41,223 |      | $ | 27,592 |  
|                                                                |  |      |        |      |   |        |  

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Dividend Limitations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | Under OTS regulations that became effective April 1, 1999, savings
 associations such as the Bank generally may declare annual cash dividends up
 to an amount equal to net income for the current year plus net income
 retained for the two preceding years. Dividends in excess of such amount
 require OTS approval. The Bank has paid dividends totaling $1,000,000 and
 $1,552,000 to the Company during the years ended June 30, 2010, and 2009,
 respectively. The Company had paid quarterly dividends of $0.26 per share for
 the first three fiscal quarters of fiscal year ended June 30, 2010. For its
 fourth quarter fiscal year ended June 30, 2010, the Company paid a dividend
 of $0.06842 per share ($0.26 on a converted basis with regards to the
 conversion that occurred on April 5, 2010) to its shareholders. The Company
 paid four quarterly dividends of $.255 per share to its shareholders for the
 year ended June 30, 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | Liquidation Rights                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | Eagle Bancorp Montana, Inc. holds a liquidation account for the
 benefit of certain depositors of American Federal Savings Bank who remain
 depositors of the Bank at the time of liquidation. The liquidation account is
 designed to provide payments to these depositors of their liquidation
 interests in the event of a liquidation of Eagle and the Bank, or the Bank
 alone. In the unlikely event that Eagle and the Bank were to liquidate in the
 future, all claims of creditors, including those of depositors, would be paid
 first, followed by distribution to depositors as of November 30, 2008 (who
 continue to be the Banks depositors) of the liquidation account maintained
 by Eagle. Also, in a complete liquidation of both entities, or of just the
 Bank, when Eagle has insufficient assets to fund the liquidation account
 distribution due to depositors and the Bank has positive net worth, the Bank
 would immediately pay amounts necessary to fund Eagles remaining obligations
 under the liquidation account. If Eagle is completely liquidated or sold
 apart from a sale or liquidation of the Bank, then the rights of such
 depositors in the liquidation account maintained by Eagle would be
 surrendered and treated as a liquidation account in the Bank, the bank
 liquidation account and these depositors shall have an equivalent interest
 in the bank liquidation account and the same rights and terms as the
 liquidation account.

-31-

---



EAGLE BANCORP MONTANA, INC. AND SUBSIDIARYNotes to Consolidated Financial Statements
June 30, 2010 and 2009

|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|-------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NOTE 14: | Regulatory Capital Requirements  continued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|         | Liquidation Rights  continued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|         | After two years from the date of conversion and upon the written
 request of the OTS, Eagle will eliminate or transfer the liquidation account
 and the interests in such account to the Bank and the liquidation account
 would become the liquidation account of the Bank and not subject in any
 manner or amount to Eagles creditors. Also, under the rules and regulations
 of the OTS, no post-conversion merger, consolidation, or similar combination
 or transaction with another depository institution in which Eagle or the Bank
 is not the surviving institution would be considered a liquidation and, in
 such a transaction, the liquidation account would be assumed by the surviving
 institution.
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|NOTE 15: | Related Party Transactions                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|         | The Bank has contracted with a subsidiary of a company which is
 partially owned by one of the Companys directors. The Bank paid $103,000
 during the year ended June 30, 2010 for support services, and an additional
 $157,000 for computer hardware and software used by the Bank for its computer
 network. For the year ended June 30, 2009, expenditures were $54,000 for
 support services and $83,000 for computer hardware and software.                                                                                                                                                                                                                                                                    
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|         | In 2007, the Bank also made a construction loan, in the normal course
 of lending, to this same affiliated entity for the construction of an office
 building. In fiscal 2008 the construction was completed and the loan was
 refinanced into $7,500,000 permanent financing. On July 9, 2008, 80 percent,
 or $6.0 million was sold to the Montana Board of Investments. As of June 30,
 2010 this loans principal balance was $7,102,000 ($1,420,000 net of
 participation sold). The Bank maintains the servicing for this loan and the
 loan is current.                                                                                                                                                        
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|NOTE 16: | Employee Benefits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|         | Profit Sharing Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|         | The Company provides a noncontributory profit sharing plan for
 eligible employees who have completed one year of service. The amount of the
 Companys annual contribution, limited to a maximum of 15% of qualified
 employees salaries, is determined by the Board of Directors. Profit sharing
 expense was $169,000 and $182,000 for the years ended June 30, 2010 and 2009,
 respectively.                                                                                                                                                                                                                                                                                                                     
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|         | The Companys profit sharing plan includes a 401(k) feature. At the
 discretion of the Board of Directors, the Company may match up to 50% of
 participants contributions up to a maximum of 4% of participants salaries.
 For the years ended June 30, 2010 and 2009, the Companys match totaled
 $48,000 and $47,000, respectively.                                                                                                                                                                                                                                                                                                                                                                              

-32-

---



EAGLE BANCORP MONTANA, INC. AND SUBSIDIARYNotes to Consolidated Financial Statements
June 30, 2010 and 2009

|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|-------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NOTE 16: | Employee Benefits  continued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|         | Deferred Compensation Plans  continued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|         | The Company has entered into deferred compensation contracts with
 current key employees. The contracts provide fixed benefits payable in equal
 annual installments upon retirement. The Company purchased life insurance
 contracts that may be used to fund the payments. The charge to expense is
 based on the present value computations of anticipated liabilities. For the
 years ended June 30, 2010 and 2009, the total expense was $106,000 and
 $102,000, respectively. The Company has recorded a liability for the deferred
 compensation plan of $926,000 and $908,000 at June 30, 2010 and 2009,
 respectively, which is included in the balance of accrued expenses and other
 liabilities.                                                                                                                                                                                              
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|         | Employee Stock Ownership Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|         | The Company has established an ESOP for eligible employees who meet
 certain age and service requirements. At inception, in April 2000, the ESOP
 borrowed $368,000 from Eagle Bancorp and used the funds to purchase 46,006
 shares of common stock, at $8 per share, in the initial offering. This
 borrowing was fully paid on December 31, 2009. Again, in conjunction with the
 subsequent offering in April 2010, the ESOP borrowed $1,971,420 from Eagle
 Bancorp Montana, Inc. and used the funds to purchase 197,142 shares of common
 stock, at $10 per share. The Bank makes periodic contributions to the ESOP
 sufficient to satisfy the debt service requirements of the loan that has a
 twelve-year term and bears interest at 8%. The ESOP uses these contributions,
 and any dividends received by the ESOP on unallocated shares, to make
 principal and interest payments on the loan.
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|         | Shares purchased by the ESOP are held in a suspense account by the
 plan trustee until allocated to participant accounts. Shares released from
 the suspense account are allocated to participants on the basis of their
 relative compensation in the year of allocation. Participants become vested
 in the allocated shares over a period not to exceed seven years. Any
 forfeited shares are allocated to other participants in the same proportion
 as contributions.                                                                                                                                                                                                                                                                                                                                                                                                                               
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|         | Total ESOP expenses of $123,000 and $107,000 were recognized in
 fiscal 2010 and 2009, respectively. 4600 shares were released and allocated
 to participants during the year ended June 30, 2009. 2,300 shares, prior to
 the April 5, 2010 conversion, were released and allocated to participants
 during the year ended June 30, 2010. 8,214 shares, subsequent to the
 conversion on April 5, 2010, were allocated to participants during the year
 ended June 30, 2010.The cost of the 188,928 ESOP shares ($1,889,280 at June
 30, 2010) that have not yet been allocated or committed to be released to
 participants is deducted from stockholders equity. The fair value of these
 shares was approximately $1,842,048 at that date.                                                                                                                                                           
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|         | Stock Incentive Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|         | The Company adopted the Stock Incentive Plan (the Plan) on October
 19, 2000. The Plan provides for different types of awards including stock
 options, restricted stock and performance shares. Under the Plan, 23,000
 shares of restricted stock were granted to directors and certain officers
 during fiscal 2001. These shares of restricted stock vest in equal
 installments over five years beginning one year from the grant date.                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|         | There were no stock options granted under the Plan as of June 30,
 2010.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

-33-

---



EAGLE BANCORP MONTANA, INC. AND SUBSIDIARYNotes to Consolidated Financial Statements
June 30, 2010 and 2009

|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|-------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NOTE 17: | Financial Instruments and Off-Balance-Sheet Activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|         | All financial instruments held or issued by the Company are held or
 issued for purposes other than trading. In the ordinary course of business,
 the Company enters into off-balance-sheet financial instruments consisting of
 commitments to extend credit and forward delivery commitments for the sale of
 whole loans to the secondary market.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|         | Commitments to extend credit
  In response to marketplace demands, the Company routinely makes commitments
 to extend credit for fixed rate and variable rate loans with or without rate
 lock guarantees. When rate lock guarantees are made to customers, the Company
 becomes subject to market risk for changes in interest rates that occur
 between the rate lock date and the date that a firm commitment to purchase
 the loan is made by a secondary market investor.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|         | Generally, as interest rates increase, the market value of the loan
 commitment goes down. The opposite effect takes place when interest rates
 decline.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|         | Commitments to extend credit are agreements to lend to a customer as
 long as the borrower satisfies the Companys underwriting standards and
 related provisions of the borrowing agreements. Commitments generally have
 fixed expiration dates or other termination clauses and may require payment
 of a fee. The Company uses the same credit policies in making commitments to
 extend credit as it does for on-balance-sheet instruments. Collateral is
 required for substantially all loans, and normally consists of real property.
 The Companys experience has been that substantially all loan commitments are
 completed or terminated by the borrower within 3 to 12 months.                                                                                                                                                                                                                                                                                                                   
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|         | The notional amounts of the Companys commitments to extend credit at
 fixed and variable interest rates were approximately $9,029,000 and
 $12,440,000 at June 30, 2010 and 2009, respectively. Fixed rate commitments
 are extended at rates ranging from 4.00% to 8.00% and 4.50% to 8.0% at June
 30, 2010 and 2009, respectively. The Company has lines of credit representing
 credit risk of approximately $59,373,000 and $52,288,000 at June 30, 2010 and
 2009, respectively, of which approximately $32,012,000 and $26,838,000 had
 been drawn at June 30, 2010 and 2009, respectively. The Company has credit
 cards issued representing credit risk of approximately $727,000 and $675,000
 at June 30, 2010 and 2009, respectively, of which approximately $30,000 and
 $21,000 had been drawn at June 30, 2010 and 2009, respectively. The Company
 has letters of credits issued representing credit risk of approximately
 $2,432,000 and $1,347,000 at June 30, 2010 and 2009, respectively.
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|         | Forward delivery commitments
  The Company uses mandatory sell forward delivery commitments to sell whole
 loans. These commitments are also used as a hedge against exposure to
 interest-rate risks resulting from rate locked loan origination commitments
 on certain mortgage loans held-for-sale. Gains and losses in the items hedged
 are deferred and recognized in other comprehensive income until the
 commitments are completed. At the completion of the commitments the gains and
 losses are recognized in the Companys income statement.                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|         | As of June 30, 2010 and 2009, the Company had entered into
 commitments to deliver approximately $7,437,000 and $5,344,000 respectively,
 in loans to various investors, all at fixed interest rates ranging from 2.75%
 to 7.125% and 4.25% to 5.63%, at June 30, 2010 and 2009, respectively. The
 Company had approximately $340,000 and $68,000 of gains deferred as a result
 of the forward delivery commitments entered into as of June 30, 2010 and
 2009, respectively. The total amount of the gain is expected to be taken into
 income within the next twelve months.                                                                                                                                                                                                                                                                                                                                                                                                                              

-34-

---



EAGLE BANCORP MONTANA, INC. AND SUBSIDIARYNotes to Consolidated Financial Statements
June 30, 2010 and 2009

|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|-------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NOTE 17: | Financial Instruments and Off-Balance-Sheet Activities  continued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|         | The Company did not have any gains or losses reclassified into
 earnings as a result of the ineffectiveness of its hedging activities. The
 Company considers its hedging activities to be highly effective.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|         | The Company did not have any gains or losses reclassified into
 earnings as a result of the discontinuance of cash flow hedges because it was
 probable that the original forecasted transaction would not occur by the end
 of the originally specified time frame as of June 30, 2010.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|         | The Company has no other off-balance-sheet arrangements or
 transactions with unconsolidated, special purpose entities that would expose
 the Company to liability that is not reflected on the face of the financial
 statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|NOTE 18: | Fair Value Disclosures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|         | FASB ASC 820 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|         | FASB ASC 820 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, FASB ASC 820
 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:

-35-

---



EAGLE BANCORP MONTANA, INC. AND SUBSIDIARYNotes to Consolidated Financial Statements
June 30, 2010 and 2009

|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|-------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NOTE 18: | 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.
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|         | Available for Sale Securities 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.                                                                                                                
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|         | 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.                                                                                                                                                                                                                                                                                                                                                                                                                        
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|         | Preferred Stock  FASB ASC
 825 Freddie Mac and Fannie Mae preferred stock are reported at
 fair value utilizing Level 1 and Level 2inputs. 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.                                                                                                                 
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|         | Loans Held for Sale
  These loans are reported at the lower of cost or fair value. Fair value is
 determined based on expected proceeds based on sales contracts and
 commitments and are considered Level 2 inputs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

-36-

---



EAGLE BANCORP MONTANA, INC. AND SUBSIDIARYNotes to Consolidated Financial Statements
June 30, 2010 and 2009

|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|-------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NOTE 18: | Fair Value Disclosures  continued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|         | Repossessed Assets
  Fair values are valued at the time the loan is foreclosed upon and the asset
 is transferred from loans. The value is based upon primary third party
 appraisals, less costs to sell. The appraisals are generally discounted based
 on managements historical knowledge, changes in market conditions from the
 time of valuation, and/or managements expertise and knowledge of the client
 and clients business. Such discounts are typically significant and result in
 Level 3 classification of the inputs for determining fair value. Repossessed
 assets are reviewed and evaluated on at least a quarterly basis for
 additional impairment and adjusted accordingly, based on same or similar
 factors above.
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|         | The following table summarizes financial assets and financial
 liabilities measured at fair value on a recurring basis as of June 30, 2010
 and 2009, segregated by the level of the valuation inputs within the fair
 value hierarchy utilized to measure fair value (dollars in thousands):                                                                                                                                                                                                                                                                                                                                                                                                                                                   

|                                |  |                 |   |                 |   |                 |  |                   |   |  |   |         | 
|------------------------------- |  | --------------- | - | --------------- | - | --------------- |  | ----------------- | - |  | - | ------- | 
|                                |  | June 30, 2010   |  
|                                |  |                 |  
|                                |  | Level 1
 Inputs |   | Level 2
 Inputs |   | Level 3
 Inputs |  | Total Fair
 Value |  
|                                |  |                 |   |                 |   |                 |  |                   |  
|Available
 for sale securities  |  | $               |  |                 | $ | 114,528         |  | $                 |  |  | $ | 114,528 | 
|Loans
 held-for-sale            |  |                 |  |                 |   | 7,695           |  |                   |  |  |   | 7,695   | 
|                                |  |                 |   |                 |   |                 |  |                   |   |  |   |         | 
|                                |  | June 30, 2009   |  
|                                |  |                 |  
|                                |  | Level 1
 Inputs |   | Level 2
 Inputs |   | Level 3
 Inputs |  | Total Fair
 Value |  
|                                |  |                 |   |                 |   |                 |  |                   |  
|Available
 for sale securities  |  | $               |  |                 | $ | 82,263          |  | $                 |  |  | $ | 82,263  | 
|Preferred
 stock - FASB ASC 825 |  |                 |  |                 |   | 25              |  |                   |  |  |   | 25      | 
|Loans
 held-for-sale            |  |                 |  |                 |   | 5,349           |  |                   |  |  |   | 5,349   | 

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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).
 The following table summarizes financial assets and financial liabilities
 measured at fair value on a nonrecurring basis as of June 30, 2010 and 2009,
 segregated by the level of the valuation inputs within the fair value
 hierarchy utilized to measure fair value (dollars in thousands):

-37-

---



EAGLE BANCORP MONTANA, INC. AND SUBSIDIARYNotes to Consolidated Financial Statements
June 30, 2010 and 2009

|         |                                   
|-------- | ----------------------------------
|NOTE 18: | Fair Value Disclosures  continued

|                           |  |                 |   |                 |   |                 |  |                   |       |  |   |       | 
|-------------------------- |  | --------------- | - | --------------- | - | --------------- |  | ----------------- | ----- |  | - | ----- | 
|                           |  | June 30, 2010   |  
|                           |  |                 |  
|                           |  | Level 1
 Inputs |   | Level 2
 Inputs |   | Level 3
 Inputs |  | Total Fair
 Value |      
|                           |  |                 |   |                 |   |                 |  |                   |      
|Impaired
 loans            |  | $               |  |                 | $ |                |  | $                 | 1,688 |  | $ | 1,688 | 
|Mortgage
 servicing rights |  |                 |  |                 |   | 2,400           |  |                   |      |  |   | 2,400 | 
|Repossessed
 assets        |  |                 |  |                 |   |                |  |                   | 619   |  |   | 619   | 
|                           |  |                 |   |                 |   |                 |  |                   |       |  |   |       | 
|                           |  | June 30, 2009   |  
|                           |  |                 |  
|                           |  | Level 1
 Inputs |   | Level 2
 Inputs |   | Level 3
 Inputs |  | Total Fair
 Value |      
|                           |  |                 |   |                 |   |                 |  |                   |      
|Impaired
 loans            |  | $               |  |                 | $ |                |  | $                 | 3     |  | $ | 3     | 
|Mortgage
 servicing rights |  |                 |  |                 |   | 2,389           |  |                   |      |  |   | 2,389 | 
|Repossessed
 assets        |  |                 |  |                 |   |                |  |                   |      |  |   |      | 

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | During the year ended June 30, 2010, certain impaired loans were
 remeasured and reported at fair value through a specific valuation allowance
 allocation of the allowance for possible loan losses based upon the fair
 value of the underlying collateral. Impaired loans with a carrying value of
 $2,101,000 were reduced by specific valuation allowance allocations totaling
 $416,000 to a total reported fair value of $1,685,000 based on collateral
 valuations utilizing Level 3 valuation inputs.                                                                                                                         
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | As of June 30, 2010, mortgage servicing rights were remeasured and
 reported at the lower of cost or fair value through a valuation allowance
 based upon the fair value of the calculated servicing rights. Servicing
 rights with a carrying value of $2,337,000 were lower than fair value of
 $2,400,000 based on collateral valuations utilizing Level 2 valuation inputs,
 and as such are reported at the lower value of cost.                                                                                                                                                                                                  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | Certain non-financial assets and non-financial liabilities measured
 at fair value on a recurring and non-recurring basis include goodwill, other
 intangible assets and other non-financial long-lived assets. As stated above,
 FASB ASC 820 will be applicable to these fair value measurements that began
 on January 1, 2009.                                                                                                                                                                                                                                                                                                     
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | Those financial instruments not subject to the initial implementation
 of FASB ASC 820 are required under SFAS 107 to disclose the fair value of
 financial instruments, both assets and liabilities recognized and not
 recognized in the statement of financial position, for which it is
 practicable to estimate fair value. Below is a table that summarizes the fair
 market values of all financial instruments of the Company at June 30, 2010
 and 2009, followed by methods and assumptions that were used by the Company
 in estimating the fair value of the classes of financial instruments not
 covered by FASB ASC 820.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | The estimated fair value amounts of financial instruments have been
 determined by the Company using available market information and appropriate
 valuation methodologies. However, considerable judgment is required to
 interpret data to develop the estimates of fair value. Accordingly, the
 estimates presented herein are not necessarily indicative of the amounts the
 Company could realize in a current market exchange. The use of different
 market assumptions and/or estimation methodologies may have a material effect
 on the estimated fair value amounts.                                                        

-38-

---



EAGLE BANCORP MONTANA, INC. AND SUBSIDIARYNotes to Consolidated Financial Statements
June 30, 2010 and 2009

|         |                                   
|-------- | ----------------------------------
|NOTE 18: | Fair Value Disclosures  continued

|                                          |  |                  |         |                        |   |                  |  |                        |         |  |   |         | 
|----------------------------------------- |  | ---------------- | ------- | ---------------------- | - | ---------------- |  | ---------------------- | ------- |  | - | ------- | 
|                                          |  | June 30,         |        
|                                          |  |                  |        
|                                          |  |                  |         |                        |  
|                                          |  | 2010             |         | 2009                   |  
|                                          |  |                  |         |                        |  
|                                          |  |                  |         |                        |   |                  |  |                        |        
|(Dollars in Thousands)                    |  | Carrying
 Amount |         | Estimated
 Fair
 Value |   | Carrying
 Amount |  | Estimated
 Fair
 Value |        
|                                          |  |                  |         |                        |   |                  |  |                        |        
|                                          | 
|Financial Assets:                         |  |                  |         |                        |   |                  |  |                        |         |  |   |         | 
|Cash and cash equivalents                 |  | $                | 3,509   |                        | $ | 3,509            |  | $                      | 6,328   |  | $ | 6,328   | 
|Securities held-to-maturity               |  |                  | 125     |                        |   | 125              |  |                        | 375     |  |   | 384     | 
|FHLB stock                                |  |                  | 2,003   |                        |   | 2,003            |  |                        | 2,000   |  |   | 2,000   | 
|Loans receivable, net                     |  |                  | 169,502 |                        |   | 176,037          |  |                        | 167,197 |  |   | 172,408 | 
|Cash value of life insurance              |  |                  | 6,691   |                        |   | 6,691            |  |                        | 6,496   |  |   | 6,496   | 
|Financial Liabilities:                    |  |                  |         |                        |   |                  |  |                        |         |  |   |         | 
|Deposits                                  |  |                  | 112,930 |                        |   | 112,930          |  |                        | 100,997 |  |   | 100,997 | 
|Time certificates of deposit              |  |                  | 85,009  |                        |   | 86,770           |  |                        | 86,202  |  |   | 88,284  | 
|Advances from the FHLB & other borrowings |  |                  | 67,224  |                        |   | 66,117           |  |                        | 67,056  |  |   | 70,524  | 
|Subordinated debentures                   |  |                  | 5,155   |                        |   | 3,872            |  |                        | 5,155   |  |   | 3,899   | 

| |                                                                                                                                                                                                                                                                                                                                                                                                                        
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The following methods and assumptions were used by the Company in
 estimating the fair value of the following classes of financial instruments.                                                                                                                                                                                                                                                                        
| |                                                                                                                                                                                                                                                                                                                                                                                                                        
| | Cash and interest-bearing accounts
  The carrying amounts approximate fair value due to the relatively short
 period of time between the origination of these instruments and their
 expected realization.                                                                                                                                                                                                            
| |                                                                                                                                                                                                                                                                                                                                                                                                                        
| | Stock in the FHLB
  The fair value of stock in the FHLB approximates redemption value.                                                                                                                                                                                                                                                                                                                                
| |                                                                                                                                                                                                                                                                                                                                                                                                                        
| | Loans receivable Fair
 values are estimated by stratifying the loan portfolio into groups of loans
 with similar financial characteristics. Loans are segregated by type such as
 real estate, commercial, and consumer, with each category further segmented
 into fixed and adjustable rate interest terms.                                                                                                         
| |                                                                                                                                                                                                                                                                                                                                                                                                                        
| | For mortgage loans, the Company uses the secondary market rates in effect
 for loans that have similar characteristics. The fair value of other fixed
 rate loans is calculated by discounting scheduled cash flows through the
 anticipated maturities adjusted for prepayment estimates. Adjustable interest
 rate loans are assumed to approximate fair value because they generally
 reprice within the short term.
| |                                                                                                                                                                                                                                                                                                                                                                                                                        
| | Fair values are adjusted for credit risk based on assessment of risk
 identified with specific loans, and risk adjustments on the remaining
 portfolio based on credit loss experience.                                                                                                                                                                                                                                
| |                                                                                                                                                                                                                                                                                                                                                                                                                        
| | Assumptions regarding credit risk are judgmentally determined using
 specific borrower information, internal credit quality analysis, and
 historical information on segmented loan categories for non-specific
 borrowers.                                                                                                                                                                                            

-39-

---



EAGLE BANCORP MONTANA, INC. AND SUBSIDIARYNotes to Consolidated Financial Statements 
June 30, 2010 and 2009

|         |                                                                                                                                                                                                                                                                                                                                                                                                             
|-------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NOTE 18: | Fair Value Disclosures  continued                                                                                                                                                                                                                                                                                                                                                                          
|         |                                                                                                                                                                                                                                                                                                                                                                                                             
|         | Cash surrender value of life insurance The carrying amount for cash surrender
 value of life insurance approximates fair value as policies are recorded at
 redemption value.                                                                                                                                                                                                                              
|         |                                                                                                                                                                                                                                                                                                                                                                                                             
|         | Deposits and time certificates of deposit 
 The fair value of deposits with no stated maturity, such as checking,
 passbook, and money market, is equal to the amount payable on demand. The
 fair value of time certificates of deposit is based on the discounted value
 of contractual cash flows. The discount rate is estimated using the rates
 currently offered for deposits of similar maturities.
|         |                                                                                                                                                                                                                                                                                                                                                                                                             
|         | Advances from the FHLB & Subordinated Debentures
  The fair value of the Companys advances and debentures are estimated using
 discounted cash flow analysis based on the interest rate that would be
 effective June 30, 2010 and 2009, respectively if the borrowings repriced
 according to their stated terms.                                                                                        

|         |                                                                                                                                                                                                                                         
|-------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NOTE 19: | Condensed Parent Company Financial Statements                                                                                                                                                                                           
|         |                                                                                                                                                                                                                                         
|         | Set forth
 below is the condensed statements of financial condition as of June 30, 2010
 and 2009, of Eagle Bancorp together with the related condensed statements of
 income and cash flows for the years ended June 30, 2010 and 2009.

-40-

---



EAGLE BANCORP MONTANA, INC. AND SUBSIDIARYNotes to Consolidated Financial Statements 
June 30, 2010 and 2009

|         |                                                          
|-------- | ---------------------------------------------------------
|NOTE 19: | Condensed Parent Company Financial
Statements  continued

Condensed Statements of Financial Condition(Dollars in Thousands)

|                                                                               |  |      |        |      |   |        |  
|------------------------------------------------------------------------------ |  | ---- | ------ | ---- | - | ------ | -
|                                                                               |  | 2010 |        | 2009 |  
|                                                                               |  |      |        |      |  
|                                                                               |  |      |        |      |   |        |  
|Assets                                                                         |  |      |        |      |   |        |  
|Cash and cash equivalents                                                      |  | $    | 301    |      | $ | 318    |  
|Securities available for sale                                                  |  |      | 14,892 |      |   | 5,491  |  
|Preferred stock - FASB ASC 825                                                 |  |      |       |      |   | 25     |  
|Investment in Eagle Bancorp Statutory Trust
 I                                 |  |      | 155    |      |   | 155    |  
|Investment in American Federal Savings Bank                                    |  |      | 42,010 |      |   | 26,688 |  
|Other assets                                                                   |  |      | 242    |      |   | 283    |  
|                                                                               |  |      |        |      |   |        |  
|                                                                               |  |      |        |      |   |        |  
|Total assets                                                                   |  | $    | 57,600 |      | $ | 32,960 |  
|                                                                               |  |      |        |      |   |        |  
|                                                                               |  |      |        |      |   |        |  
|Liabilities and stockholders equity                                           |  |      |        |      |   |        |  
|Accounts payable and accrued expenses                                          |  |      | 13     |      |   | 13     |  
|Long-term subordinated debt                                                    |  |      | 5,155  |      |   | 5,155  |  
|Stockholders Equity                                                           |  |      | 52,432 |      |   | 27,792 |  
|                                                                               |  |      |        |      |   |        |  
|                                                                               |  |      |        |      |   |        |  
|Total liabilities and stockholders equity                                     |  | $    | 57,600 |      | $ | 32,960 |  
|                                                                               |  |      |        |      |   |        |  
|                                                                               |  |      |        |      |   |        |  
|Condensed Statements of Income                                                
|(Dollars in Thousands)                                                        
|                                                                               |  |      |        |      |   |        |  
|                                                                               |  | 2010 |        | 2009 |  
|                                                                               |  |      |        |      |  
|                                                                               |  |      |        |      |   |        |  
|Interest income                                                                |  | $    | 387    |      | $ | 146    |  
|Interest expense                                                               |  |      | (310   | )    |   | (310   | )
|Noninterest expense                                                            |  |      | (144   | )    |   | (114   | )
|                                                                               |  |      |        |      |   |        |  
|Loss before income taxes                                                       |  |      | (67    | )    |   | (278   | )
|Income tax benefit                                                             |  |      | (20    | )    |   | (83    | )
|                                                                               |  |      |        |      |   |        |  
|Loss before equity in undistributed
 earnings of American Federal Savings Bank |  |      | (47    | )    |   | (195   | )
|Equity in undistributed earnings of
 American Federal Savings Bank             |  |      | 2,461  |      |   | 2,583  |  
|                                                                               |  |      |        |      |   |        |  
|                                                                               |  |      |        |      |   |        |  
|Net income                                                                     |  | $    | 2,414  |      | $ | 2,388  |  
|                                                                               |  |      |        |      |   |        |  

-41-

---



EAGLE BANCORP MONTANA, INC. AND SUBSIDIARYNotes to Consolidated Financial Statements
June 30, 2010 and 2009

|         |                                                          
|-------- | ---------------------------------------------------------
|NOTE 19: | Condensed Parent Company Financial Statements  continued

Condensed Statements of Cash Flow(Dollars in Thousands)

|                                                                               |  |      |         |      |   |        |  
|------------------------------------------------------------------------------ |  | ---- | ------- | ---- | - | ------ | -
|                                                                               |  | 2010 |         | 2009 |  
|                                                                               |  |      |         |      |  
|                                                                               |  |      |         |      |   |        |  
|Cash flows from operating activities                                           |  |      |         |      |   |        |  
|Net income                                                                     |  | $    | 2,414   |      | $ | 2,388  |  
|Adjustments to reconcile net income to net
 cash used in operating activities: |  |      |         |      |   |        |  
|Equity in undistributed earnings of
 American Federal Savings Bank             |  |      | (2,461  | )    |   | (2,583 | )
|Other adjustments, net                                                         |  |      | (165    | )    |   | 94     |  
|                                                                               |  |      |         |      |   |        |  
|Net cash used in operating activities                                          |  |      | (212    | )    |   | (101   | )
|                                                                               |  |      |         |      |   |        |  
|Cash flows from investing activities                                           |  |      |         |      |   |        |  
|Cash contribution from American Federal
 Savings Bank                          |  |      | 1,000   |      |   | 1,302  |  
|Cash contribution to American Federal
 Savings Bank                            |  |      | (12,000 | )    |   |       |  
|Activity in available for sale securities                                      |  |      |         |      |   |        |  
|Sales                                                                          |  |      | 8       |      |   | 89     |  
|Maturities, prepayments and calls                                              |  |      | 912     |      |   | 279    |  
|Purchases                                                                      |  |      | (9,830  | )    |   | (1,152 | )
|                                                                               |  |      |         |      |   |        |  
|Net cash provided by investing activities                                      |  |      | (19,910 | )    |   | 518    |  
|                                                                               |  |      |         |      |   |        |  
|Cash flows from financing activities                                           |  |      |         |      |   |        |  
|Common stock issued                                                            |  |      | 22,574  |      |   |       |  
|ESOP payments and dividends                                                    |  |      | 136     |      |   | 120    |  
|ESOP shares purchased                                                          |  |      | (1,971  | )    |   |       |  
|Payments to purchase treasury stock                                            |  |      | (22     | )    |   | (21    | )
|Dividends paid                                                                 |  |      | (612    | )    |   | (435   | )
|                                                                               |  |      |         |      |   |        |  
|Net cash used in financing activities                                          |  |      | 20,105  |      |   | (336   | )
|                                                                               |  |      |         |      |   |        |  
|Net change in cash and cash equivalents                                        |  |      | (17     | )    |   | 81     |  
|Cash and cash equivalents at beginning of
 period                              |  |      | 318     |      |   | 237    |  
|                                                                               |  |      |         |      |   |        |  
|                                                                               |  |      |         |      |   |        |  
|Cash and cash equivalents at end of period                                     |  | $    | 301     |      | $ | 318    |  
|                                                                               |  |      |         |      |   |        |  

-42-

---



EAGLE BANCORP MONTANA, INC. AND SUBSIDIARYNotes to Consolidated Financial Statements 
June 30, 2010 and 2009

|         |                                                                                                                      
|-------- | ---------------------------------------------------------------------------------------------------------------------
|NOTE 20: | Quarterly Results of Operations (Unaudited)                                                                          
|         |                                                                                                                      
|         | The
 following is a condensed summary of quarterly results of operations for the
 years ended June 30, 2010 and 2009:

|                                                                    |  |                          |       |                 |   |                |   |                 |       |  |   |       |  
|------------------------------------------------------------------- |  | ------------------------ | ----- | --------------- | - | -------------- | - | --------------- | ----- |  | - | ----- | -
|                                                                    |  | Year ended June 30, 2010 |      
|                                                                    |  |                          |      
|                                                                    |  |                          |       |                 |   |                |   |                 |      
|                                                                    |  | First
 Quarter           |       | Second
 Quarter |   | Third
 Quarter |   | Fourth
 Quarter |      
|                                                                    |  |                          |       |                 |   |                |   |                 |      
|(Dollars in Thousands, except per share data)                       |  |                          |       |                 |   |                |   |                 |      
|Interest and dividend income                                        |  | $                        | 3,724 |                 | $ | 3,798          |   | $               | 3,686 |  | $ | 3,690 |  
|Interest expense                                                    |  |                          | 1,341 |                 |   | 1,353          |   |                 | 1,216 |  |   | 1,186 |  
|                                                                    |  |                          |       |                 |   |                |   |                 |       |  |   |       |  
|Net interest income                                                 |  |                          | 2,383 |                 |   | 2,445          |   |                 | 2,470 |  |   | 2,504 |  
|Loan loss provision                                                 |  |                          | 135   |                 |   | 107            |   |                 | 214   |  |   | 259   |  
|Net interest income after loan loss provision                       |  |                          | 2,248 |                 |   | 2,338          |   |                 | 2,256 |  |   | 2,245 |  
|Non interest income                                                 |  |                          | 1,061 |                 |   | 937            |   |                 | 722   |  |   | 873   |  
|Non interest expense                                                |  |                          | 2,103 |                 |   | 2,485          |   |                 | 2,254 |  |   | 2,389 |  
|                                                                    |  |                          |       |                 |   |                |   |                 |       |  |   |       |  
|Income before income tax expense                                    |  |                          | 1,206 |                 |   | 790            |   |                 | 724   |  |   | 729   |  
|Income tax expense                                                  |  |                          | 362   |                 |   | 237            |   |                 | 244   |  |   | 192   |  
|                                                                    |  |                          |       |                 |   |                |   |                 |       |  |   |       |  
|Net income                                                          |  | $                        | 844   |                 | $ | 553            |   | $               | 480   |  | $ | 537   |  
|                                                                    |  |                          |       |                 |   |                |   |                 |       |  |   |       |  
|                                                                    |  |                          |       |                 |   |                |   |                 |       |  |   |       |  
|Comprehensive income
 (loss)                                        |  | $                        | 1,890 |                 | $ | (624           | ) | $               | 216   |  | $ | 624   |  
|                                                                    |  |                          |       |                 |   |                |   |                 |       |  |   |       |  
|Basic earnings per common
 share *                                  |  | $                        | 0.21  |                 | $ | 0.14           |   | $               | 0.12  |  | $ | 0.14  |  
|                                                                    |  |                          |       |                 |   |                |   |                 |       |  |   |       |  
|Diluted earnings per
 common share *                                |  | $                        | 0.18  |                 | $ | 0.12           |   | $               | 0.10  |  | $ | 0.14  |  
|                                                                    |  |                          |       |                 |   |                |   |                 |       |  |   |       |  
|                                                                    |  |                          |       |                 |   |                |   |                 |       |  |   |       |  
|*calculated on a converted
 basis using a 3.8 to 1.0 exchange ratio |  |                          |       |                 |   |               
|                                                                    |  |                          |       |                 |   |                |   |                 |       |  |   |       |  
|                                                                    |  | Year ended June 30, 2009 |      
|                                                                    |  |                          |      
|                                                                    |  |                          |       |                 |   |                |   |                 |       |  |   |       |  
|Interest and dividend income                                        |  | $                        | 3,816 |                 | $ | 3,943          |   | $               | 3,822 |  | $ | 3,760 |  
|Interest expense                                                    |  |                          | 1,580 |                 |   | 1,575          |   |                 | 1,512 |  |   | 1,441 |  
|                                                                    |  |                          |       |                 |   |                |   |                 |       |  |   |       |  
|Net interest income                                                 |  |                          | 2,236 |                 |   | 2,368          |   |                 | 2,310 |  |   | 2,319 |  
|Loan loss provision                                                 |  |                          |      |                 |   | 34             |   |                 | 72    |  |   | 151   |  
|Net interest income after loan loss provision                       |  |                          | 2,236 |                 |   | 2,334          |   |                 | 2,238 |  |   | 2,168 |  
|Non interest income                                                 |  |                          | (504  | )               |   | 444            |   |                 | 1,526 |  |   | 1,533 |  
|Non interest expense                                                |  |                          | 1,849 |                 |   | 2,056          |   |                 | 2,251 |  |   | 2,407 |  
|                                                                    |  |                          |       |                 |   |                |   |                 |       |  |   |       |  
|Income before income tax expense                                    |  |                          | (117  | )               |   | 722            |   |                 | 1,513 |  |   | 1,294 |  
|Income tax expense                                                  |  |                          | (17   | )               |   | 198            |   |                 | 454   |  |   | 389   |  
|                                                                    |  |                          |       |                 |   |                |   |                 |       |  |   |       |  
|Net income                                                          |  | $                        | (100  | )               | $ | 524            |   | $               | 1,059 |  | $ | 905   |  
|                                                                    |  |                          |       |                 |   |                |   |                 |       |  |   |       |  
|                                                                    |  |                          |       |                 |   |                |   |                 |       |  |   |       |  
|Comprehensive income
 (loss)                                        |  | $                        | 556   |                 | $ | 215            |   | $               | 236   |  | $ | (921  | )
|                                                                    |  |                          |       |                 |   |                |   |                 |       |  |   |       |  
|Basic earnings per common
 share                                    |  | $                        | 0.43  |                 | $ | 0.20           |   | $               | 0.50  |  | $ | 0.083 |  
|                                                                    |  |                          |       |                 |   |                |   |                 |       |  |   |       |  
|Diluted earnings per
 common share                                  |  | $                        | 0.38  |                 | $ | 0.18           |   | $               | 0.44  |  | $ | 0.73  |  
|                                                                    |  |                          |       |                 |   |                |   |                 |       |  |   |       |  

-43-

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