UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-QSB
 
x
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended December 31, 2006
 
o
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from _____ to _____.

Commission file number 0-29687

Eagle Bancorp
(Exact name of small business issuer as specified in its charter)
 
United States
81-0531318
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
 
1400 Prospect Avenue, Helena, MT 59601
(Address of principal executive offices)
 
(406) 442-3080
(Issuer's telephone number)

Website address: www.americanfederalsavingsbank.com
 
Check whether the issuer (1) filed all reports to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
 
Indicate by check mark whether the registrant is a shell company (defined in Rule 12b-2 of the Exchange Act). Yes o No x

APPLICABLE ONLY TO CORPORATE ISSUERS
 
State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date:
 
Common stock, par value $0.01 per share
1,085,357 shares outstanding
As of February 1, 2007

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

EAGLE BANCORP AND SUBSIDIARY

TABLE OF CONTENTS

       
PAGE
PART I.
  
FINANCIAL INFORMATION
    
         
Item 1.
  
Financial Statements
  
 
 
  
 
  
 
 
  
Consolidated Statements of Financial Condition as of December 31, 2006 (unaudited) and June 30, 2006
  
1 and 2
 
  
 
  
 
 
  
Consolidated Statements of Income for the three months ended December 31, 2006 and 2005 (unaudited) and the six months ended December 31, 2006 and 2005 (unaudited)
  
3 and 4
 
  
 
  
 
 
  
Consolidated Statements of Changes in Stockholders' Equity for the six months ended December 31, 2006
 
5
 
  
 
  
 
 
  
Consolidated Statements of Cash Flows for the six months ended December 31, 2006 and 2005 (unaudited)
  
6 and 7
 
  
 
  
 
 
  
Notes to Consolidated Financial Statements
  
8 to 11
 
  
 
  
 
Item 2.
  
Management's Discussion and Analysis of Financial Condition and Results of Operations
  
12 to 17
 
  
 
  
 
Item 3.
  
Controls and Procedures
  
18
         
PART II.
  
OTHER INFORMATION
    
         
Item 1.
  
Legal Proceedings
  
19
Item 2.
  
Unregistered Sales of Equity Securities and Use of Proceeds
  
19
Item 3.
  
Defaults Upon Senior Securities
  
19
Item 4.
  
Submission of Matters to a Vote of Security-Holders
  
19
Item 5.
  
Other Information
  
20
Item 6.
  
Exhibits
  
20
 
  
 
  
 
Signatures
  
 
  
21
 
  
 
  
 
Exhibit 31.1
  
 
  
 
  
 
    
Exhibit 31.2
  
 
  
 
  
 
    
Exhibit 32.1
  
 
  


 
EAGLE BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in Thousands, Except for Per Share Data)
 
 
  
December 31,
2006
  
June 30,
2006
  
 
  
(Unaudited)
  
(Audited)
  
ASSETS
  
 
  
 
  
Cash and due from banks
  
$
4,421
  
$
2,844
  
Interest-bearing deposits with banks
    
509
    
27
  
Total cash and cash equivalents
    
4,930
    
2,871
  
 
          
Investment securities available-for-sale, at market value
    
66,446
    
64,198
  
Investment securities held-to-maturity, at amortized cost
    
977
    
1,018
  
Investment in Eagle Bancorp Statutory Trust I
    
155
    
155
  
Federal Home Loan Bank stock, at cost
    
1,315
    
1,315
  
Mortgage loans held-for-sale
    
2,063
    
918
  
Loans receivable, net of deferred loan fees and allowance for loan losses of $520 at December 31, 2006 and $535 at June 30, 2006
    
147,331
    
140,858
  
Accrued interest and dividends receivable
    
1,280
    
1,211
  
Mortgage servicing rights, net
    
1,682
    
1,722
  
Property and equipment, net
    
5,938
    
5,962
  
Cash surrender value of life insurance
    
5,664
    
5,230
  
Real estate acquired in settlement of loans, net of allowance for losses
    
—
    
—
 
Other assets
    
304
    
720
  
               
Total assets
  
$
238,085
  
$
226,178
  
 
See accompanying notes to consolidated financial statements.

1

EAGLE BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Continued)
(Dollars in Thousands, Except for Per Share Data)

 
  
December 31,
2006
  
June 30,
2006
  
 
  
(Unaudited)
  
(Audited)
  
LIABILITIES AND STOCKHOLDERS' EQUITY
  
 
  
 
  
Liabilities:
  
 
  
 
  
Deposit accounts:
  
 
  
 
  
Noninterest bearing
  
$
12,575
  
$
12,575
  
Interest bearing
    
162,760
    
161,767
  
Advances from Federal Home Loan Bank and Other Borrowings
    
31,863
    
22,371
  
Long-term subordinated debentures
    
5,155
    
5,155
  
Accrued expenses and other liabilities
    
1,863
    
1,765
  
Total liabilities
    
214,216
    
203,633
  
Stockholders' Equity:
          
Preferred stock (no par value, 1,000,000 shares authorized, none issued or outstanding)
    
—
    
—
  
Common stock (par value $0.01 per share; 9,000,000 shares authorized; 1,223,572 shares issued; 1,086,557 and 1,091,722 shares outstanding at December 31, 2006 and June 30, 2006, respectively)
    
12
    
12
  
Additional paid-in capital
    
4,330
    
4,274
  
Unallocated common stock held by employee stock ownership plan ("ESOP")
    
(110
)
  
(129
)
Treasury stock, at cost
    
(4,687
)
  
(4,521
)
Retained earnings
    
24,746
    
24,056
  
Accumulated other comprehensive income (loss)
    
(422
)
  
(1,147
)
Total stockholders' equity
    
23,869
    
22,545
  
 
          
Total liabilities and stockholders' equity
  
$
238,085
  
$
226,178
  
 
See accompanying notes to consolidated financial statements.
 
2

EAGLE BANCORP AND SUBSIDIARY
QUARTERLY CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands, Except for Per Share Data) 
 
   
Three Months Ended
December 31, 
  
Six Months Ended
December 31, 
  
   
2006 
  
2005 
  
2006 
  
2005 
  
   
(Unaudited) 
  
(Unaudited)
  
Interest and Dividend Income:
  
 
  
 
  
 
  
 
  
Interest and fees on loans
  
$
2,378
  
$
1,897
  
$
4,689
  
$
3,687
  
Interest on deposits with banks
    
16
    
36
    
28
    
47
  
FHLB stock dividends
    
1
    
—
    
1
    
—
  
Securities available-for-sale
    
696
    
640
    
1,356
    
1,263
  
Securities held-to-maturity
    
11
    
13
    
22
    
27
  
Total interest and dividend income
    
3,102
    
2,586
    
6,096
    
5,024
  
 
                  
Interest Expense:
                  
Deposits
    
1,042
    
717
    
1,976
    
1,383
  
Advances and other borrowings
    
355
    
104
    
686
    
204
  
Subordinated debentures
    
75
    
75
    
150
    
77
  
Total interest expense
    
1,472
    
896
    
2,812
    
1,664
  
 
                  
Net interest income
    
1,630
    
1,690
    
3,284
    
3,360
  
Loan loss provision
    
—
    
—
    
—
    
—
  
Net interest income after loan loss provision
    
1,630
    
1,690
    
3,284
    
3,360
  
 
                  
Noninterest income:
                  
Net gain on sale of loans
    
190
    
128
    
309
    
301
  
Demand deposit service charges
    
128
    
136
    
263
    
279
  
Mortgage loan servicing fees
    
133
    
130
    
271
    
321
  
Net gain on sale of available-for-sale securities
    
1
    
—
    
1
    
1
  
Other
    
140
    
123
    
285
    
258
  
Total noninterest income
    
592
    
517
    
1,129
    
1,160
  
 
See accompanying notes to consolidated financial statements.
 
3

EAGLE BANCORP AND SUBSIDIARY
QUARTERLY CONSOLIDATED STATEMENTS OF INCOME (Continued)
(Dollars in Thousands, Except for Per Share Data) 
 
   
Three Months Ended
December 31, 
  
Six Months Ended
December 31,
  
   
2006 
  
2005 
  
2006 
  
2005
  
   
(Unaudited) 
  
(Unaudited) 
  
Noninterest expense:
  
 
  
 
  
 
  
 
  
Salaries and employee benefits
    
914
    
906
    
1,752
    
1,738
  
Occupancy expenses
    
133
    
133
    
275
    
258
  
Furniture and equipment depreciation
    
68
    
78
    
147
    
157
  
In-house computer expense
    
70
    
68
    
141
    
135
  
Advertising expense
    
60
    
46
    
153
    
116
  
Amortization of mtg servicing fees
    
73
    
92
    
149
    
198
  
Federal insurance premiums
    
5
    
6
    
11
    
12
  
Postage
    
21
    
19
    
39
    
42
  
Legal, accounting, and examination fees
    
66
    
61
    
124
    
95
  
Consulting fees
    
20
    
12
    
36
    
30
  
ATM processing
    
10
    
12
    
22
    
24
  
Other
    
221
    
204
    
428
    
424
  
Total noninterest expense
    
1,661
    
1,637
    
3,277
    
3,229
  
 
                  
Income before provision for income taxes
    
561
    
570
    
1,136
    
1,291
  
 
                  
Provision for income taxes
    
100
    
125
    
253
    
347
  
 
                  
Net income
  
$
461
  
$
445
  
$
883
  
$
944
  
 
                  
Basic earnings per share
  
$
0.43
  
$
0.41
  
$
0.82
  
$
0.87
  
 
                  
Diluted earnings per share
  
$
0.38
  
$
0.37
  
$
0.73
  
$
0.78
  
 
                  
Weighted average shares outstanding (basic eps)
    
1,072,540
    
1,077,640
    
1,073,100
    
1,079,122
  
 
                  
Weighted average shares outstanding (diluted eps)
    
1,209,012
    
1,204,412
    
1,208,435
    
1,203,835
  
 
See accompanying notes to consolidated financial statements.
 
4

EAGLE BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the Six Months Ended December 31, 2006
(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
INCOME
  
TOTAL
  
Balance, June 30, 2006
  
$
—
  
$
12
  
$
4,274
  
$
(129
)
$
(4,521
)
$
24,056
  
$
(1,147
)
$
22,545
  
 
                                  
Net income
    
—
    
—
    
—
    
—
    
—
    
883
    
—
    
883
  
Other comprehensive income
    
—
    
—
    
—
    
—
    
—
    
—
    
725
    
725
  
 
                                  
Total comprehensive income
                                
1,608
  
 
                                  
Dividends paid ($.44 per share)
    
—
    
—
    
—
    
—
    
—
    
(193
)
  
—
    
(193
)
 
                                  
Treasury stock purchased (3,100 shares @
$31.90; 1,065 shares @ $32.00; 1,000 shares @ $32.60
    
—
    
—
    
—
    
—
    
(166
)
  
—
    
—
    
(166
)
 
                                  
ESOP shares allocated or
committed to be released for allocation (2,300 shares)
    
—
    
—
    
56
    
19
    
—
    
—
    
—
    
75
  
 
                                  
Balance, December 31, 2006
  
$
—
  
$
12
  
$
4,330
  
$
(110
)
$
(4,687
)
$
24,746
  
$
(422
)
$
23,869
  
 
See accompanying notes to consolidated financial statements.
 
5
 
EAGLE BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands, Except for Per Share Data)

 
  
Six Months Ended
December 31,
  
 
  
2006
  
2005
  
 
  
 (Unaudited)
  
CASH FLOWS FROM OPERATING ACTIVITIES:
  
 
  
 
  
Net income
  
$
883
  
$
944
  
Adjustments to reconcile net income to net cash from operating activities:
            
Provision for mortgage servicing rights valuation losses
    
—
    
(46
)
Depreciation
    
249
    
256
  
Net amortization of marketable securities premium and discounts
    
318
    
546
  
Amortization of capitalized mortgage servicing rights
    
149
    
198
  
Gain on sale of loans
    
(309
)
  
(301
)
Net realized (gain) loss on sale of available-for-sale securities
    
(1
)
  
(1
)
FHLB & other dividends reinvested
    
—
    
—
  
Increase in cash surrender value of life insurance
    
(91
)
  
(92
)
Loss on sale of real estate owned
    
—
    
6
  
Change in assets and liabilities:
            
(Increase) decrease in assets:
            
Accrued interest and dividends receivable
    
(68
)
  
(41
)
Loans held-for-sale
    
(825
)
  
1,622
  
Other assets
    
432
    
31
  
Increase (decrease) in liabilities:
            
Accrued expenses and other liabilities
    
(254
)
  
199
  
Net cash provided by operating activities
    
483
    
3,321
  
 
          
CASH FLOWS FROM INVESTING ACTIVITIES:
          
Purchase of securities:
          
Investment securities held-to-maturity
    
—
    
—
  
Investment securities available-for-sale
    
(13,720
)
  
(4,269
)
Proceeds from maturities, calls and principal payments:
            
Investment securities held-to-maturity
    
56
    
90
  
Investment securities available-for-sale
    
8,977
    
9,836
  
FHLB stock redeemed
    
—
    
—
  
Proceeds from sales of investment securities available-for-sale
    
3,316
    
505
  
Net increase in loans receivable, excludes transfers to real estate acquired in settlement of loans
    
(6,610
)
  
(15,426
)
Purchase of stock in non-consolidated subsidiaries
    
—
    
(155
)
 
See accompanying notes to consolidated financial statements.
 
6

EAGLE BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Dollars in Thousands, Except for Per Share Data)
 
 
  
 Six Months Ended
December 31,
  
 
  
2006
  
2005
  
 
  
 (Unaudited)
  
CASH FLOWS FROM INVESTING ACTIVITIES (CONTINUED):
  
 
  
 
  
Purchase of property and equipment
    
(225
)
  
(138
)
Purchase of bank owned life insurance
    
(342
)
  
—
  
Proceeds from the sale of real estate acquired in the settlement of loans
    
—
    
69
  
Net cash used in investing activities
    
(8,548
)
  
(9,488
)
 
            
CASH FLOWS FROM FINANCING ACTIVITIES:
            
Net increase (decrease) in checking and savings accounts
    
993
    
(394
)
Net (decrease) increase in federal funds
    
(2,175
)
  
1,400
  
Payments on FHLB advances
    
(9,334
)
  
(584
)
FHLB advances
    
21,000
    
1,000
  
Issue of subordinated debentures
    
—
    
5,155
  
Sale (purchase) of treasury stock
    
(166
)
  
(285
)
Dividends paid
    
(194
)
  
(180
)
Net cash provided by financing activities
    
10,124
    
6,112
  
 
            
Net increase (decrease) in cash and cash equivalents
    
2,059
    
(55
)
 
            
CASH AND CASH EQUIVALENTS, beginning of period
    
2,871
    
4,966
  
 
            
CASH AND CASH EQUIVALENTS, end of period
  
$
4,930
  
$
4,911
  
 
          
SUPPLEMENTAL CASH FLOW INFORMATION:
          
Cash paid during the period for interest
  
$
2,926
  
$
1,724
  
 
            
Cash paid during the period for income taxes
  
$
322
  
$
387
  
 
            
NON-CASH INVESTING ACTIVITIES:
            
(Increase) decrease in market value of securities available-for-sale
  
$
(957
)
$
642
  
 
            
Mortgage servicing rights capitalized
  
$
108
  
$
109
  
 
See accompanying notes to consolidated financial statements.
 
7
 
EAGLE BANCORP AND SUBSIDIARY
NOTES TO CONSOLDIATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1: BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements have been prepared in accordance with instructions for Form 10-QSB. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. However, such information reflects all adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of results for the unaudited interim periods.

The results of operations for the three and six month periods ended December 31, 2006 are not necessarily indicative of the results to be expected for the fiscal year ending June 30, 2007 or any other period. The unaudited consolidated financial statements and notes presented herein should be read in conjunction with the audited consolidated financial statements and related notes thereto included in Eagle’s Form 10-KSB dated June 30, 2006.
 
NOTE 2: INVESTMENT SECURITIES
 
Investment securities are summarized as follows:
(Dollars in Thousands, Except for Per Share Data)
 
      December 31, 2006 (Unaudited)      
June 30, 2006 (Audited)    
  
 
  
AMORTIZED
COST
  
GROSS
UNREALIZED
GAINS/(LOSSES)
  
FAIR
VALUE
  
AMORTIZED
COST
  
GROSS
UNREALIZED
GAINS/(LOSSES)
  
FAIR
VALUE
  
Available-for-sale:
  
 
  
 
  
 
  
 
  
 
  
 
  
U.S. government and
                          
agency obligations
  
$
4,145
  
$
(54
)
$
4,091
  
$
7,448
  
$
(152
)
$
7,296
  
Municipal obligations
    
18,237
    
89
    
18,326
    
17,471
    
(328
)
  
17,143
  
Corporate obligations
    
14,986
    
(200
)
  
14,786
    
16,059
    
(442
)
  
15,617
  
Mortgage-backed
                          
securities
    
8,066
    
(106
)
  
7,960
    
6,949
    
(202
)
  
6,747
  
Collateralized
                          
mortgage obligations
    
19,917
    
(239
)
  
19,678
    
16,330
    
(513
)
  
15,817
  
Corporate preferred
                          
stock
    
1,800
    
(195
)
  
1,605
    
1,800
    
(222
)
  
1,578
  
Total
  
$
67,151
  
$
(705
)
$
66,446
  
$
66,057
  
$
(1,859
)
$
64,198
  
Held-to-maturity:
                          
Municipal obligations
  
$
827
  
$
15
  
$
842
  
$
828
  
$
12
  
$
840
  
Mortgage-backed
                          
securities
    
150
    
1
    
151
    
190
    
-
    
190
  
Total
  
$
977
  
$
16
  
$
993
  
$
1,018
  
$
12
  
$
1,030
  
 
 
8

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

NOTE 3:  LOANS RECEIVABLE

Loans receivable consist of the following:
 
 
  
December 31,
2006
  
June 30,
2006
  
 
  
(Unaudited)
  
(Audited)
  
(Dollars in Thousands)
  
 
  
 
  
First mortgage loans:
  
 
  
 
  
Residential mortgage (1-4 family)
  
$
78,665
  
$
75,913
  
Commercial real estate
    
20,395
    
18,648
  
Real estate construction
    
6,671
    
6,901
  
 
              
Other loans:
              
Home equity
    
23,836
    
20,191
  
Consumer
    
10,339
    
11,820
  
Commercial
    
7,877
    
7,861
  
 
              
Total
    
147,783
    
141,334
  
 
              
Less:   Allowance for loan losses
    
(520
)
  
(535
)
    Deferred loan fees
    
68
    
59
  
 
              
Total
  
$
147,331
  
$
140,858
  
 
Loans net of related allowance for loan losses on which the accrual of interest has been discontinued were $382 and $345 at December 31, 2006 and June 30, 2006, respectively. Classified assets, including real estate owned, totaled $692 and $700 at December 31, 2006 and June 30, 2006, respectively.

The following is a summary of changes in the allowance for loan losses: 
 
   
Six Months Ended
December 31,
2006 
  
Year Ended
June 30,
2006 
  
   
(Unaudited) 
  
(Audited)
  
(Dollars in Thousands)
  
 
  
 
  
Balance, beginning of period
  
$
535
  
$
573
  
Reclassification to repossessed property reserve
    
—
    
(15
)
Provision charged to operations
    
—
    
—
  
Charge-offs
    
(22
)
  
(48
)
Recoveries
    
7
    
25
  
Balance, end of period
  
$
520
  
$
535
  
 

9

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

NOTE 4:  DEPOSITS
 
Deposits are summarized as follows:
 
 
  
December 31,
2006
  
June 30, 
2006
  
 
  
(Unaudited) 
  
(Audited)
  
(Dollars in Thousands)
  
 
  
 
  
Noninterest checking
  
$
12,575
  
$
12,575
  
Interest-bearing checking
    
31,149
    
29,571
  
Passbook
    
22,400
    
24,438
  
Money market
    
26,205
    
29,129
  
Time certificates of deposit
    
83,006
    
78,629
  
Total
  
$
175,335
  
$
174,342
  
 
NOTE 5: EARNINGS PER SHARE

Basic earnings per share for the three months ended December 31, 2006 is computed using 1,072,540 weighted average shares outstanding. Earnings per share for the six months ended December 31, 2006 is computed using 1,073,100 weighted average shares outstanding. Basic earnings per share for the three months ended December 31, 2005 is computed using 1,077,640 weighted average shares outstanding. Earnings per share for the six months ended December 31, 2005 is computed using 1,079,122 weighted average shares outstanding. Diluted earnings per share is computed using the treasury stock method by adjusting the number of shares outstanding by the shares purchased. The weighted average shares outstanding for the diluted earnings per share calculations are 1,209,012 for the three months ended December 31, 2006 and 1,208,435 for the six months ended December 31, 2006. Diluted earnings per share for the three months and six months ended December 31, 2005 is computed using 1,204,412 and 1,203,835 weighted average shares outstanding, respectively.
 
NOTE 6: DIVIDENDS AND STOCK REPURCHASE PROGRAM

This fiscal year Eagle has paid two dividends of $0.22 per share, on August 25, 2006 and November 17, 2006. A dividend of $0.22 per share was declared on January 18, 2007, payable February 9, 2007 to stockholders of record on January 26, 2007. Eagle Financial MHC, Eagle’s mutual holding company, has waived the receipt of dividends on its 648,493 shares.

At their regular meeting of July 21, 2005, the Company’s Board of Directors approved a stock repurchase program for up to 28,750 shares. This represents approximately 6% of the outstanding common stock held by the public. The repurchased shares will be held as treasury stock and will be held for general corporate purposes and/or issuance pursuant to Eagle’s benefit plans. As of February 1, 2007, 23,215 shares have been purchased under this program.

10

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

NOTE 7: MORTGAGE SERVICING RIGHTS

The Bank allocates its total cost in mortgage loans between mortgage servicing rights and loans, based upon their relative fair values, when loans are subsequently sold or securitized, with the servicing rights retained. Fair values are generally obtained from an independent third party. Impairment of mortgage servicing rights is measured based upon the characteristics of the individual loans, including note rate, term, underlying collateral, current market conditions, and estimates of net servicing income. If the carrying value of the mortgage servicing rights exceeds the estimated fair market value, a valuation allowance is established for any decline, which is viewed to be temporary. Charges to the valuation allowance are charged against or credited to mortgage servicing income. Periodic independent valuations of the mortgage servicing rights are performed. As a result of the most recent valuation, no temporary decline in the fair value was determined to have occurred, and no valuation allowance has been established. The following schedules show the activity in the mortgage servicing rights and the valuation allowance.

(Dollar amounts in thousands)
 
 
  
Six months
ended
December 31,
2006
  
Twelve months
ended
June 30,
2006
  
 
  
(Unaudited)
  
(Audited)
  
(Dollars in Thousands)
  
 
  
 
  
Mortgage Servicing Rights
  
 
  
 
  
Beginning balance
  
$
1,722
  
$
1,903
  
Servicing rights capitalized
    
109
    
174
  
Servicing rights amortized
    
(149
)
  
(355
)
Ending balance
    
1,682
    
1,722
  
 
            
Valuation Allowance
            
Beginning balance
    
—
    
46
  
Provision
    
—
    
(46
)
Adjustments
    
—
    
—
  
Ending balance
    
—
    
—
  
 
            
Net Mortgage Servicing Rights
  
$
1,682
  
$
1,722
  

11

EAGLE BANCORP AND SUBSIDIARY

ITEM 2: MANAGEMENT’S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Note Regarding Forward-Looking Statements

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

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

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

For the past two years, management’s focus has been on improving the Bank’s core earnings. Core earnings can be described as income before taxes, with the exclusion of gain on sale of loans and adjustments to the market value of the Bank’s loan serviced portfolio. Management believes that the Bank will need to continue to focus on increasing net interest margin, other areas of fee income, and control operating expenses to achieve earnings growth going forward. Management’s strategy of growing the bank’s loan portfolio and deposit base is expected to help achieve these goals: loans typically earn higher rates of return than investments; a larger deposit base will yield higher fee income; increasing the asset base will reduce the relative impact of fixed operating costs. The biggest challenge to the strategy is funding the growth of the Bank’s balance sheet in an efficient manner. Deposit growth will be difficult to maintain due to fierce competition and wholesale funding (which is usually more expensive than retail deposits) will likely be needed to supplement deposit growth.

The level and movement of interest rates impacts the Bank’s earnings as well. The yield curve continues to be flat, i.e. short-term interest rates are approximately at the same level as long-term interest rates. This can have a negative impact on the Bank’s net interest margin as its deposits are typically priced relative to short-term rates, while the majority of its loan products are priced relative to long-term rates. The Bank has been able to partially offset this effect by reinvesting investment proceeds in the loan portfolio, because as noted earlier, loans typically earn higher rates of return than investments. Additionally, many of the Bank’s investments which mature in the coming year are at low (below current market) interest rates, affording an opportunity to reinvest the proceeds at the current higher rates and increasing interest income in the coming quarters.
 
12

EAGLE BANCORP AND SUBSIDIARY

Financial Condition

Comparisons of results in this section are between the six months ended December 31, 2006 and June 30, 2006.

Total assets increased by $11.91 million, or 5.27%, to $238.09 million at December 31, 2006, from $226.18 million at June 30, 2006. Total liabilities increased by $10.59 million to $214.22 million at December 31, 2006, from $203.63 million at June 30, 2006. Total equity increased $1.32 million to $23.87 million at December 31, 2006 from $22.55 million at June 30, 2006.

Loans receivable increased $6.47 million, or 4.59%, to $147.33 million at December 31, 2006 from $140.86 million at June 30, 2006. Home equity loans were the category with the largest increase, $3.65 million, and most other loan categories showed increases in the six month period. Total loan originations were $57.18 million for the six months ended December 31, 2006, with single family mortgages accounting for $32.28 million of the total. Home equity loan and construction loan originations totaled $9.75 million and $5.99 million, respectively, for the same period. Commercial real estate and land development loan originations totaled $4.75 million. Loans held for sale increased to $2.06 million at December 31, 2006 from $918,000 at June 30, 2006. Investment securities available-for-sale (AFS) increased $2.25 million, or 3.50%, to $66.45 million at December 31, 2006 from $64.20 million at June 30, 2006. The investment category with the largest increase was collateralized mortgage obligations, which increased $3.86 million.

Advances and other borrowings increased $9.49 million, to $31.86 million from $22.37 million, while deposits increased $1.00 million. Certificates of deposit and interest-bearing checking accounts showed the largest increases in deposit accounts, while money market and passbook savings accounts showed the largest decreases.

Total equity increased as a result of net income of $883,000, and a decrease in other comprehensive loss of $725,000 (due to a decrease in net unrealized loss on securities available-for-sale) offset by purchases of treasury stock and the payment of two quarterly $0.22 per share regular cash dividends.
 
Results of Operations for the Three Months Ended December 31, 2006 and 2005

Net Income. Eagle’s net income was $461,000 and $445,000 for the three months ended December 31, 2006, and 2005, respectively. The increase of $16,000, or 3.60%, was due to an increase in noninterest income of $75,000, offset by a decrease in net interest income of $60,000 and an increase in noninterest expense of $24,000. Eagle’s tax provision was $25,000 lower in the current quarter. Basic earnings per share were $0.43 for the current period, compared to $0.41 for the previous year’s period.

Net Interest Income. Net interest income decreased to $1.630 million for the quarter ended December 31, 2006, from $1.690 million for the previous year’s quarter. This decrease of $60,000 was the result of an increase in interest expense of $576,000 partially offset by the increase in interest and dividend income of $516,000.

Interest and Dividend Income. Total interest and dividend income was $3.102 million for the quarter ended December 31, 2006, compared to $2.586 million for the quarter ended December 31, 2005, representing an increase of $516,000, or 19.95%. Interest and fees on loans increased to $2.378 million for the three months ended December 31, 2006 from $1.897 million for the same period ended December 31, 2005. This increase of $481,000, or 25.36%, was due primarily to the increase in the average balances on loans for the quarter ended December 31, 2006. Average balances for loans receivable, net, for the quarter ended December 31, 2006 were $147.86 million, compared to $120.50 million for the previous year. This represents an increase of $27.36 million, or 22.71%. The average interest rate earned on loans receivable increased by 13 basis points, from 6.30% to 6.43%. Interest and dividends on investment securities available-for-sale (AFS) increased to $696,000 for the quarter ended December 31, 2006 from $640,000 for the same quarter last year. Average balances on investments decreased to $67.06 million for the quarter ended December 31, 2006, compared to $70.39 million for the quarter ended December 31, 2005. The average interest rate earned on investments increased to 4.22% from 3.71%. Interest on deposits with banks decreased to $16,000 from $36,000, due to decreases in average balances.

13
 
EAGLE BANCORP AND SUBSIDIARY
 
Results of Operations for the Three Months Ended December 31, 2006 and 2005 - continued

Interest Expense. Total interest expense increased to $1.472 million for the quarter ended December 31, 2006, from $896,000 for the quarter ended December 31, 2005, an increase of $576,000, or 64.29%, due to increases in interest paid on borrowings and deposits. Interest on deposits increased to $1.042 million for the quarter ended December 31, 2006, from $717,000 for the quarter ended December 31, 2005. This increase of $325,000, or 45.33%, was the result of an increase in average rates paid on deposit accounts. Money market accounts and certificates of deposit showed increases in average rates paid, while passbook savings and checking accounts remained the same. Average balances in interest-bearing deposit accounts increased slightly to $163.02 million for the quarter ended December 31, 2006, compared to $161.40 million for the same quarter in the previous year. A significant increase in the average balance of borrowings, as well as an increase in the average rate paid, resulted in an increase in interest paid on borrowings to $430,000 in the current quarter compared to $179,000 in the previous year’s quarter. The average rate paid on borrowings increased from 4.68% last year to 5.20% this year. The average rate paid on liabilities increased 97 basis points from the quarter ended December 31, 2005 to the quarter ended December 31, 2006.

Provision for Loan Losses. Provisions for loan losses are charged to earnings to maintain the total allowance for loan losses at a level considered adequate by Eagle’s subsidiary, American Federal Savings Bank (the Bank), to provide for probable loan losses based on prior loss experience, volume and type of lending conducted by the Bank, available peer group information, and past due loans in portfolio. The Bank’s policies require the review of assets on a quarterly basis. The Bank classifies loans as well as other assets if warranted. While the Bank believes it uses the best information available to make a determination with respect to the allowance for loan losses, it recognizes that future adjustments may be necessary. No provision was made for loan losses for either the quarter ended December 31, 2006 or the quarter ended December 31, 2005. This is a reflection of the continued strong asset quality of the Bank’s loan portfolio. Total classified assets decreased slightly from $700,000 at June 30, 2006 to $692,000 at December 31, 2006, and total less than 1% of total loans. The Bank currently has no foreclosed real estate.

Noninterest Income. Total noninterest income increased to $592,000 for the quarter ended December 31, 2006, from $517,000 for the quarter ended December 31, 2005, an increase of $75,000 or 14.51%. This was the result of the increase in net gain on sale of loan income of $62,000, as the Bank chose to sell a higher percentage of its mortgage originations this quarter. Other noninterest income increased to $140,000 for the quarter ended December 31, 2006 from $123,000 for the quarter ended December 31, 2005. This was primarily due to increased fee income on electronic payments. The other categories of noninterest income had small changes.

Noninterest Expense. Noninterest expense increased by $24,000 or 1.47% to $1.661 million for the quarter ended December 31, 2006, from $1.637 million for the quarter ended December 31, 2005. This increase was primarily due to increases in other noninterest expense of $17,000 and advertising expense of $14,000. The increase in other noninterest expense was due to higher loan expenses and expenses related to checking accounts. Advertising expense was higher due to increased promotions. These were partially offset by a decrease in the amortization of mortgage servicing fees of $19,000, due to a slowdown in mortgage loan prepayments. Other expense categories showed minor changes.
 
Income Tax Expense. Eagle’s income tax expense was $100,000 for the quarter ended December 31, 2006, compared to $125,000 for the quarter ended December 31, 2005. The effective tax rate for the quarter ended December 31, 2006 was 17.83% and was 21.93% for the quarter ended December 31, 2005. Tax refunds received during each quarter lowered the effective tax rates.
 
Results of Operations for the Six Months Ended December 31, 2006 and 2005

Net Income. Eagle’s net income was $883,000 and $944,000 for the six months ended December 31, 2006 and 2005, respectively. The decrease of $61,000, or 6.46%, was the result of decreases in net interest income of $76,000 and noninterest income of $31,000, along with an increase in noninterest expense of $48,000. Eagle’s tax provision was $94,000 lower in the current period. Basic earnings per share for the period ended December 31, 2006 were $0.82 compared to $0.87 per share for the period ended December 31, 2005.

Net Interest Income. Net interest income decreased to $3.284 million for the six months ended December 31, 2006 from $3.360 million for the six months ended December 31, 2005. This decrease of $76,000 was the result of an increase in interest expense of $1.148 million, partially offset by an increase in interest and dividend income of $1.072 million.

14
 
EAGLE BANCORP AND SUBSIDIARY
 
Results of Operations for the Six Months Ended December 31, 2006 and 2005 - continued

Interest and Dividend Income. Total interest and dividend income was $6.096 million for the six months ended December 31, 2006, compared to $5.024 million for the same period ended December 31, 2005, representing an increase of $1.072 million, or 21.34%. Interest and fees on loans increased to $4.689 million for 2006 from $3.687 million for 2005. This increase of $1.002 million, or 27.18%, was due to an increase in the average balances of loans receivable for the six months ended December 31, 2006. Average balances for loans receivable, net, for this period were $146.11 million, compared to $117.12 million for the previous year. This is an increase of $28.99 million, or 24.75%. The average interest rate earned on loans receivable increased by 12 basis points, to 6.42% from 6.30%. Interest and dividends on investment securities available-for-sale (AFS) increased to $1.356 million for the six months ended December 31, 2006 from $1.263 million for the same period ended December 31, 2005. Interest on deposits with banks decreased to $28,000 from $47,000.

Interest Expense. Total interest expense increased to $2.812 million for the six months ended December 31, 2006 from $1.664 million for the six months ended December 31, 2005, an increase of $1.148 million, or 68.99%. Interest on deposits increased to $1.976 million for the six months ended December 31, 2006 from $1.383 million for the six months ended December 31, 2005. This increase of $593,000, or 42.88%, was the result of an increase in average rates paid on deposit accounts accompanied by a small increase in average balances in deposit accounts. Average rates paid on money market accounts and certificates of deposit increased from 2005 to 2006, while the average rate paid on all liabilities increased by 99 basis points from the six month period ended December 31, 2005 to the six month period ended December 31, 2006. Average balances in interest-bearing deposits increased to $162.04 million for the six month period ended December 31, 2006 compared to $161.01 million for the same period in the previous year. Interest paid on borrowings increased to $836,000 for the six months ended December 31, 2006 from $281,000 for the same period ended December 31, 2005. The increase in borrowing costs was due to increases in the average balances as well as an increase in the average rate paid. Average balances of borrowings increased to $31.94 million in 2006 compared to $12.84 million in 2005. The average rate paid on borrowings increased 86 basis points from 2005 to 2006.

Provision for Loan Losses. Provisions for loan losses are charged to earnings to maintain the total allowance for loan losses at a level considered adequate by the Bank, to provide for probable loan losses based on prior loss experience, volume and type of lending conducted by the Bank, available peer group information, and past due loans in portfolio. The Bank’s policies require the review of assets on a quarterly basis. The Bank classifies loans as well as other assets if warranted. While the Bank believes it uses the best information available to make a determination with respect to the allowance for loan losses, it recognizes that future adjustments may be necessary. No provision was made for loan losses for either of the six month periods ended December 31, 2006 or December 31, 2005. This is a reflection of the continued strong asset quality of the Bank’s loan portfolio. Total classified assets decreased slightly to $692,000 at December 31, 2006 from $700,000 at June 30, 2006. The Bank currently has no foreclosed real estate.

Noninterest Income. Total noninterest income decreased to $1.129 million for the six months ended December 31, 2006, from $1.160 million for the six months ended December 31, 2005, a decrease of $31,000, or 2.67%. Mortgage loan servicing fees declined $50,000 due to an adjustment in 2005 to the valuation of Eagle’s mortgage servicing rights in the amount of $46,000. Other categories of noninterest income showed minor changes.

Noninterest Expense. Noninterest expense increased by $48,000, or 1.49% to $3.277 million for the six months ended December 31, 2006, from $3.229 million for the six months ended December 31, 2005. This increase was primarily due to increases in advertising expense of $37,000 and legal and accounting fees of $29,000. Advertising expenses were higher due to increased promotion of deposit products. Legal and accounting fees were higher due to the outsourcing of the Bank’s internal audit function and higher legal fees at the holding company level. The amortization of mortgage servicing fees declined $49,000 due to the slowdown of mortgage loan prepayments compared to a year ago. Other categories of noninterest expense showed modest changes.

Income Tax Expense. Eagle’s income tax expense was $253,000 for the six months ended December 31, 2006, compared to $347,000 for the six months ended December 31, 2005. The effective tax rate for the six months ended December 31, 2006 was 22.27% and was 26.88% for the six months ended December 31, 2005.

15
 
EAGLE BANCORP AND SUBSIDIARY
 
Liquidity, Interest Rate Sensitivity and Capital Resources

The company’s subsidiary, American Federal Savings Bank (the Bank), is required to maintain minimum levels of liquid assets as defined by the Office of Thrift Supervision (OTS) regulations. The OTS has eliminated the statutory requirement based upon a percentage of deposits and short-term borrowings. The OTS states that the liquidity requirement is retained for safety and soundness purposes, and that appropriate levels of liquidity will depend upon the types of activities in which the company engages. For internal reporting purposes, the Bank uses the previous regulatory definitions of liquidity. The Bank’s average liquidity ratio was 15.23% and 16.09% for the months ended December 31, 2006 and December 31, 2005, respectively.

The Bank’s primary sources of funds are deposits, repayment of loans and mortgage-backed securities, maturities of investments, funds provided from operations, and advances from the Federal Home Loan Bank of Seattle. Scheduled repayments of loans and mortgage-backed securities and maturities of investment securities are generally predictable. However, other sources of funds, such as deposit flows and loan prepayments, can be greatly influenced by the general level of interest rates, economic conditions and competition. The Bank uses liquidity resources principally to fund existing and future loan commitments. It also uses them to fund maturing certificates of deposit, demand deposit withdrawals and to invest in other loans and investments, maintain liquidity, and meet operating expenses.

Liquidity may be adversely affected by unexpected deposit outflows, higher interest rates paid by competitors, and similar matters. Management monitors projected liquidity needs and determines the level desirable, based in part on commitments to make loans and management’s assessment of the bank’s ability to generate funds.

At September 30, 2006 (the most recent report available), the Bank’s measure of sensitivity to interest rate movements, as measured by the OTS, improved from the previous quarter. The Bank’s capital ratio as measured by the OTS decreased slightly during the same period. The Bank is well within the guidelines set forth by the Board of Directors for interest rate risk sensitivity.

As of December 31, 2006, the Bank’s regulatory capital was in excess of all applicable regulatory requirements. At December 31, 2006, the Bank’s tangible, core, and risk-based capital ratios amounted to 10.73%, 10.73%, and 15.34%, respectively, compared to regulatory requirements of 1.5%, 3.0%, and 8.0%, respectively. See the following table (amounts in thousands):

 
  
(Unaudited)
At December 31, 2006
  
 
  
Dollar
Amount
  
For Capital
Adequacy
Purposes
% of Assets
  
Tangible capital:
  
 
  
 
  
Capital level
  
$
25,227
    
10.73
%
Requirement
    
3,528
    
1.50
  
Excess
  
$
21,699
    
9.23
%
Core capital:
              
Capital level
  
$
25,227
    
10.73
%
Requirement
    
7,055
    
3.00
  
Excess
  
$
18,172
    
7.73
%
Risk-based capital:
              
Capital level
  
$
25,711
    
15.34
%
Requirement
    
13,413
    
8.00
  
Excess
  
$
12,298
    
7.34
%
 
16
 
EAGLE BANCORP AND SUBSIDIARY
 
Impact of Inflation and Changing Prices

Our financial statements and the accompanying notes have been prepared in accordance with generally accepted accounting principles, which require the measurement of financial position and operating results in terms of historical dollars without considering the change in the relative purchasing power of money over time and due to inflation. The impact of inflation is reflected in the increased cost of our operations. Interest rates have a greater impact on our performance than do the general levels of inflation. Interest rates do not necessarily move in the same direction or to the same extent as the prices of goods and services.
 
Application of Critical Accounting Policies

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

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

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

Deferred Tax Assets - Management expects to realize the deferred tax assets due to the continued profitability of the Company.

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

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

17
 
EAGLE BANCORP AND SUBSIDIARY
 
ITEM 3: CONTROLS AND PROCEDURES

Based on their evaluation, the Company’s Chief Executive Officer, Larry A. Dreyer, and Chief Financial Officer, Peter J. Johnson, have concluded the Company’s disclosure controls and procedures are effective as of December 31, 2006 to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. During the last fiscal quarter, there have been no significant changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

18
 
EAGLE BANCORP AND SUBSIDIARY
 
Part II - OTHER INFORMATION
 
Item 1.    Legal Proceedings.
 
Neither the Company nor the Bank is involved in any pending legal proceedings other than non-material legal proceedings occurring in the ordinary course of business.
 
Item 2.   Unregistered Sales of Equity Securities Use of Proceeds.
 
      c.) 
Issuer Purchases of Equity Securities.
 
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
  
October 2006
10-1-06 to
10-31-06
    
None
    
N/A
    
N/A
    
N/A
  
                           
November 2006
11-1-06 to
11-30-06
    
1,000
  
$
32.60
    
1,000
    
6,735
  
                           
December 2006
12-1-06 to
12-31-6
    
None
    
N/A
    
N/A
    
N/A
  
                           
Total
    
1,000
  
$
32.60
    
1,000
    
N/A
  
 
*The Company publicly announced a stock repurchase program on July 21, 2005. The Company is authorized to acquire up to 28,750 shares of common stock with the price subject to market conditions. No expiration date was set for the repurchase program. As of February 1, 2007, 23,215 shares had been repurchased.
 
Item 3.    Defaults Upon Senior Securities.
 
Not applicable.
 
Item 4.   Submission of Matters to a Vote of Security Holders.
 
The following matters were voted on at the annual meeting held on October 19, 2006:

a.)  
Election of directors for three-year terms expiring in 2009:
 
 
  
 For:
  
 Against:
  
 James A. Maierle
    
1,028,303
    
3,202
  
Thomas J. McCarvel
    
1,027,303
    
4,202
  
 

b.)  
Ratification of appointment of Davis, Kinard & Co., P.C. as auditors
for the fiscal year ended June 30, 2007:
 
 
 For:
  
Against:
  
Abstain:
 
1,029,028
  
60
  
2,417
 
 
19
 
EAGLE BANCORP AND SUBSIDIARY
 
Part II - OTHER INFORMATION (continued)

Item 5.   Other Information.
 
None.
 
Item 6.   Exhibits.
 
31.1 Certification by Larry A. Dreyer, Chief Executive Officer, pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 (a) of the Sarbanes-Oxley Act of 2002.

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

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

20
 
EAGLE BANCORP AND SUBSIDIARY
 
SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
     
 
EAGLE BANCORP
 
 		  
 		  
 
Date: February 8, 2007
 By:  
/s/ Larry A. Dreyer
 
Larry A. Dreyer
 
Title: President/CEO
 
     
Date: February 8, 2007
 By:  
/s/ Peter J. Johnson
 
Peter J. Johnson
 
Title: Executive Vice President/CFO
 
 
21