SUMMARY

The following summary explains the material aspects of the conversion, the offering and the exchange of existing shares of Eagle Bancorp common stock for new shares of Eagle Bancorp Montana, Inc. common stock. It may not contain all of the information that is important to you. For additional information before making an investment decision, you should read this prospectus carefully, including the consolidated financial statements, the notes to the consolidated financial statements, and the section entitled “Risk Factors.”

The Companies

Eagle Bancorp Montana, Inc.

Eagle Bancorp Montana, Inc., or Eagle Montana, is a newly-formed Delaware corporation that was incorporated in December 2009 to be the successor corporation to Eagle Bancorp upon completion of the conversion. Eagle Montana will own all of the outstanding shares of common stock of American Federal Savings Bank upon completion of the conversion.

Eagle Montana’s executive offices are located at 1400 Prospect Avenue, Helena, Montana 59601. Our telephone number at this address is (406) 442-3080.

Eagle Financial MHC

Eagle Financial MHC is the federally-chartered mutual holding company that was created on April 4, 2000 upon the conversion of American Federal Savings Bank to a federal stock savings bank. Eagle Financial MHC’s principal business activity is the ownership of 648,493 shares of common stock of Eagle Bancorp, or 60.4% of the outstanding shares as of September 30, 2009. The remaining 426,014 shares of Eagle Bancorp common stock outstanding as of September 30, 2009 were held by the public. After the completion of the conversion, Eagle Financial MHC will cease to exist.

Eagle Bancorp

Eagle Bancorp is a federally-chartered stock holding company that owns all of the outstanding common stock of American Federal Savings Bank. Eagle Bancorp’s charter was approved on April 4, 2000, when it became the mid-tier stock holding company of American Federal Savings Bank. At September 30, 2009, Eagle Bancorp had consolidated assets of $300.7 million, deposits of $195.1 million and shareholders’ equity of $30.4 million. After the completion of the conversion, Eagle Bancorp will cease to exist, and will be succeeded by Eagle Montana, a new Delaware corporation, which will own 100% of the capital shares of American Federal Savings Bank. As of September 30, 2009, Eagle Bancorp had 1,074,507 shares of common stock outstanding, of which 648,493 shares were owned by Eagle Financial MHC and the remaining shares were held by the public.

American Federal Savings Bank

American Federal Savings Bank is a federally-chartered savings bank headquartered in Helena, Montana. It was originally founded in 1922 as a Montana-chartered building and loan association. In 1975, it adopted a federal thrift charter and, in 2000, converted from the mutual (meaning no stockholders) structure into the mutual holding company structure. American Federal Savings Bank became the wholly owned subsidiary of Eagle Bancorp, a federal corporation, in 2000.

Our Business

We are a full service retail banking institution and our operations have been profitable in each of the past five fiscal years. Our primary business lines involve gathering funds from deposits and borrowings, and investing these funds in loans and investment securities. Our principal focus is residential mortgage related lending but we have successfully diversified into commercial lending in recent years. We currently operate seven retail banking locations and seven automated teller machines in south central Montana.

Our primary lines of business are:

 

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Retail Lending. We originate residential mortgage loans, home equity loans, and consumer loans primarily through our community banking office network. We also offer our customers the choice of submitting online mortgage loan applications and receiving pre-approvals through our website. Retail lending constituted 69.1% of our total loan portfolio as of September 30, 2009.

 

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Commercial Lending. We continue to place an emphasis on growing our commercial business and commercial real estate loan portfolios. In addition to commercial real estate loans, we offer traditional business loans structured as unsecured lines of credit or loans secured by inventory, accounts receivable or other business assets. We seek to provide exceptional service with local decision-making and personal attention. Commercial lending constituted 27.3% of our total loan portfolio as of September 30, 2009.

 

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Deposit Products and Services. We offer a full range of traditional deposit products such as checking accounts, savings accounts, money market accounts, retirement accounts, and certificates of deposit. These products can have additional features such as direct deposit, ATM and check card services, overdraft protection, telephone banking and Internet banking, thereby providing our customers multiple channels to access their accounts.

 

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Mortgage Servicing. We provide loan servicing for other institutions. These services generally consist of collecting mortgage payments, maintaining escrow accounts, disbursing payments to investors and foreclosure processing.

Market Area and Our Customer Base

We are headquartered in Helena, Montana, which is located in south central Montana. We have retail banking offices in Helena, Bozeman, Butte and Townsend, Montana. Montana has a total population of approximately 967,440 and total households of approximately 359,000. The median household income in Montana was $40,864 as of September 30, 2009, compared to the nationwide median income level of $54,719 according to estimates from SNL Securities. Helena is Montana’s state capital and its economy has shown moderate growth, 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.

Our Competitive Strengths

We believe that our growth and success have largely been due to the following strengths that have given us a competitive advantage in our markets:

 

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Maintaining a strong and experienced management team, and attracting and retaining dedicated and qualified personnel to support the growth of our franchise. Achieving our strategic objectives requires an experienced and dedicated management team, which we have developed and maintained over the years. Our management team has been an integral part of the continued growth and success of American Federal Savings Bank, including its transition to being a fully public company.

 

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Creating value for our stockholders. As a publicly traded mutual holding company, we have strived to create value for our stockholders while meeting the needs of our banking customers. During each of the last five fiscal years since 2005, we have been profitable. Common stock purchased in our initial offering in 2000 has appreciated 264% in value as of November 30, 2009. We will continue to focus on enhancing shareholder value as we transition to a fully converted stock holding company.

 

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Attracting and retaining core deposits. Our core deposits to total deposits ratio enables us to maintain a relatively low cost and stable funding source for our loans and other assets. Our core deposits include checking, NOW accounts, statement savings accounts, money market accounts, IRA accounts and business checking. Based on our historical experience, core deposits are longer term funding sources and unlikely to decline significantly as interest rates change. At September 30, 2009, core deposits represented 67.07% of total deposits. Excluding IRA funds, core deposits were 55.05%. We had no brokered funds as of September 30, 2009.

 

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Maintaining strong asset quality. We have maintained superior asset quality by focusing on lower risk loan products, operating in economically diverse and growing markets, and applying conservative underwriting standards. As of September 30, 2009, our ratio of non-performing assets to total assets was 0.52%, as compared to average ratios of 2.72% for all Montana banks and 8.33% for all Nasdaq-listed banks and thrifts based in the region (including Montana, Idaho, Washington, Oregon, Wyoming, Utah, and Colorado).By maintaining strong asset quality, we are able to minimize the reversal or non-accrual of interest on our loans, reduce our exposure to loan charge-offs or material additions to our loan loss reserve, manage costs related to asset recovery and keep our management team focused on serving our customers and growing our business.

 

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Operating in a relatively healthy economic climate. The Montana market in which we operate has not experienced significant increases in unemployment rates or loan foreclosures similar to those that have adversely impacted banks in many regions of the country. In Montana, unemployment as of October 31, 2009, based on information released by the United States Bureau of Labor Statistics, was 6.4% versus 10.2% for the nation. Furthermore, the primary markets we serve in south central Montana (consisting of Lewis and Clark, Silver Bow and Gallatin counties) have also experienced favorable growth in population and average household incomes. According to estimates from SNL Securities, from 2000 to 2009 the total population in our primary markets increased 16.7% from approximately 158,000 to 185,000, and the average household income increased 25.0% from $35,292 to $44,095. The relatively low rate of unemployment and solid growth rates are important indicators of the economic health of our market and have enabled us to dedicate capital resources to growth and revenue enhancement as opposed to resolution of troubled assets.

 

Our Business Strategy

Our strategy is to continue our profitability through building a diversified loan portfolio and positioning American Federal Savings 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:

 

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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;

 

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Continue to emphasize the attraction and retention of lower cost long-term core deposits;

 

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Seek opportunities where presented to acquire other institutions or expand our branch structure;

 

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Maintain our high asset quality levels; and

 

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Operate as a community-oriented independent financial institution that offers a broad array of financial services with high levels of customer service.

A full description of our products and services begins on page 51 under the heading “Business of Eagle Bancorp and American Federal Savings Bank.”

These strategies are intended to guide our investment of the net proceeds of the offering. We intend to continue to pursue our business strategy after the offering, subject to changes necessitated by future market conditions and other factors. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Our Business Strategy,” for a further discussion of our business strategy.

Our Current Organizational Structure

Eagle Bancorp, a federally-chartered stock holding company, holds 100% of the stock of American Federal Savings Bank, a federally-chartered savings bank. In 2000, Eagle Bancorp became the mid-tier stock holding company of American Federal Savings Bank and conducted an initial public offering by selling a minority of its common stock to the public. The majority of the outstanding shares of common stock of Eagle Bancorp are owned by Eagle Financial MHC, which is a federally-chartered mutual (meaning no stockholders) holding company.

Pursuant to the terms of Eagle Financial MHC’s plan of conversion and reorganization, Eagle Financial MHC will convert from the mutual holding company to the stock holding company corporate structure. As part of the conversion, we are offering for sale in a subscription offering, and possibly in a community and/or a syndicated community offering, shares of common stock that represent the majority ownership interest in Eagle Bancorp that is currently held by Eagle Financial MHC. Upon the completion of the offering, Eagle Bancorp and Eagle Financial MHC will cease to exist, and we will complete the transition from partial to full public stock ownership. Upon completion of the conversion, existing public stockholders of Eagle Bancorp will receive shares of common stock of Eagle Montana in exchange for their shares of Eagle Bancorp common stock in order to maintain the public stockholders’ existing percentage ownership in our organization (excluding any new shares purchased by them in the offering and their receipt of cash in lieu of fractional exchange shares).

The following diagram shows our current organizational structure:

 

Our Organizational Structure Following the Conversion

After the conversion and offering are completed, we will be organized as a fully public stock holding company, as follows:

Reasons for the Conversion and the Offering

Our primary reasons for converting to the stock holding company structure and raising additional capital through the offering are:

 

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to support internal growth through lending in the communities we serve;

 

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to improve our capital position during a period of significant economic uncertainty, especially for the financial services industry (as of September 30, 2009, American Federal Savings Bank was considered “well capitalized” for regulatory purposes and is not subject to any directive or recommendation from the Office of Thrift Supervision or the Federal Deposit Insurance Corporation to raise capital);

 

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to finance, where opportunities are presented, the acquisition of financial institutions, branches of financial institutions or other financial service companies primarily in, or adjacent to, south central Montana, although we do not currently have any understandings or agreements regarding any specific acquisition transaction;

 

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to enhance existing products and services, and support the development of new products and services by investing, for example, in technology to support growth and enhanced customer service;

 

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to improve the liquidity of our shares of common stock and stockholder returns through higher earnings and more flexible capital management strategies; and

 

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to use the additional capital for other general corporate purposes.

Terms of the Offering

Pursuant to Eagle Financial MHC’s plan of conversion and reorganization, our organization will convert to a fully public stock holding company structure. In connection with the conversion, we are offering between 2,040,000 and 2,760,000 shares of common stock to eligible depositors and borrowers of American Federal Savings Bank, to our tax-qualified employee benefit plans, including our employee stock ownership plan and 401(k) plan and, to the extent shares remain available, to natural persons residing in the State of Montana, to our existing public stockholders and to the general public. The number of shares of common stock to be sold may be increased to up to 3,174,000 as a result of demand for our shares, or changes in the market for financial institution stocks. Unless the number of shares of common stock to be offered is increased to more than 3,174,000 shares or decreased to fewer than 2,040,000 shares, or the offering is extended beyond [extension date], purchasers will not have the opportunity to modify or cancel their stock orders once submitted. If the number of shares of common stock to be sold is increased to more than 3,174,000 shares or decreased to fewer than 2,040,000 shares, or if the offering is extended beyond [extension date], purchasers will have the opportunity to maintain, cancel or change their orders for shares of common stock during a designated resolicitation period. If you do not provide us with written indication of your intent, your stock order will be canceled, your funds will be returned to you with interest calculated at American Federal Savings Bank’s statement savings rate and any deposit account withdrawal authorizations will be canceled.

 

The purchase price of each share of common stock to be offered for sale in the offering is $10.00. All investors will pay the same purchase price per share. Investors will not be charged a commission to purchase shares of common stock in the offering. Stifel, Nicolaus & Company, Incorporated, our conversion advisor and marketing agent in the offering, will use its best efforts to assist us in selling shares of our common stock. Stifel, Nicolaus & Company, Incorporated is not obligated to purchase any shares of common stock in the offering.

We are also offering for sale to the general public in a syndicated offering through a syndicate of selected dealers shares of our common stock not purchased in the subscription offering or the community offering. We may begin the syndicated community offering at any time following the commencement of the subscription offering. Stifel, Nicolaus & Company, Incorporated is acting as sole book-running manager and D.A. Davidson & Co. is acting as co-manager for the syndicated community offering, which is also being conducted on a best efforts basis. Neither Stifel, Nicolaus & Company, Incorporated, D.A. Davidson & Co. nor any other member of the syndicate is required to purchase any shares in the syndicated community offering. Alternatively, we may sell remaining shares in an underwritten public offering, which would be conducted on a firm commitment basis.

How We Determined the Offering Range, the Exchange Ratio and the $10.00 Per Share Stock Price

The offering range and exchange ratio are based on an independent appraisal of the estimated market value of Eagle Montana, assuming the conversion, the exchange and the offering are completed. Feldman Financial Advisors, Inc., an appraisal firm experienced in appraisals of financial institutions, has estimated that, as of December 3, 2009, this estimated pro forma market value ranged from $33.8 million to $45.7 million, with a midpoint of $39.8 million. Based on this valuation, the 60.4% ownership interest of Eagle Financial MHC being sold in the offering and the $10.00 per share price, the number of shares of common stock being offered for sale by Eagle Montana will range from 2,040,000 shares to 2,760,000 shares. The $10.00 per share price was selected primarily because it is the price most commonly used in mutual-to-stock conversions of financial institutions. The exchange ratio will range from 3.1458 shares at the minimum of the offering range to 4.2560 shares at the maximum of the offering range in order to approximately preserve the existing percentage ownership of public stockholders of Eagle Bancorp (excluding any new shares purchased by them in the offering and their receipt of cash in lieu of fractional exchange shares). If market conditions warrant or there is excess demand for the shares, the appraisal can be increased by 15%. At this adjusted maximum of the offering range, the pro forma market value is $52.6 million, the number of shares of common stock offered for sale will be 3,174,000 and the exchange ratio will be 4.8944 shares.

The independent appraisal is based in part on Eagle Bancorp’s financial condition and results of operations, the pro forma impact of the additional capital raised by the sale of shares of common stock in the offering, and an analysis of a peer group of 10 publicly traded savings bank and thrift holding companies that Feldman Financial Advisors, Inc. considered comparable to Eagle Bancorp.

The appraisal peer group consists of the following companies. Total assets are as of September 30, 2009.

 

Company Name and Ticker Symbol				Exchange		Headquarters		Total Assets
								(in thousands)
Elmira Savings Bank, FSB		ESBK		NASDAQ		Elmira, NY		$	505,896
Home Bancorp, Inc.		HBCP		NASDAQ		Lafayette, LA		$	533,410
Home Federal Bancorp, Inc.		HOME		NASDAQ		Nampa, ID		$	827,899
Liberty Bancorp, Inc.		LBCP		NASDAQ		Liberty, MO		$	384,243
Louisiana Bancorp, Inc.		LABC		NASDAQ		Metairie, LA		$	332,237
LSB Corporation		LSBX		NASDAQ		North Andover, MA		$	806,953
Rome Bancorp, Inc.		ROME		NASDAQ		Rome, NY		$	338,035
Teche Holding Company		TSH		NYSE Amex		New Iberia, LA		$	765,071
TF Financial Corporation		THRD		NASDAQ		Newtown, PA		$	711,849
WVS Financial Corp.		WVFC		NASDAQ		Pittsburgh, PA		$	369,989

The independent appraisal does not indicate actual market value. Do not assume or expect that the estimated valuation as indicated above means that, after the offering, the shares of our common stock will trade at or above the $10.00 purchase price.

The following table presents a summary of selected pricing ratios for the peer group companies, Eagle Montana (on a pro forma basis) and Eagle Bancorp (on a historical basis). The pricing ratios are based on earnings and other information as of and for the twelve months ended September 30, 2009 and stock price information as of December 3, 2009, as reflected in Feldman Financial Advisors, Inc.’s appraisal report, dated December 3, 2009. Compared to the average pricing of the peer group, our pro forma pricing ratios at the maximum of the offering range indicated a premium of 1.4% on a price-to-book value basis, a discount of 5.2% on a price-to-tangible book value basis, and a discount of 6.4% on a price-to-core earnings basis.

 

Our board of directors, in reviewing and approving the independent appraisal, considered the range of price-to-core earnings multiples, the range of price-to-book value and price-to-tangible book value ratios at the different ranges of shares of common stock to be sold in the offering, and did not consider one valuation approach to be more important than the other. Instead, in approving the independent appraisal, the board of directors concluded that these ranges represented the appropriate balance of the three approaches to establishing our estimated valuation range, and the number of shares of common stock to be sold, in comparison to the peer group institutions. Specifically, in approving the independent appraisal, the board of directors believed that we would not be able to sell our shares at a price-to-book value and price-to-tangible book value that was in line with the peer group without unreasonably exceeding the peer group on a price-to-core earnings basis. The estimated appraised value and the resulting discounts took into consideration the potential financial impact of the offering as well as the trading price of Eagle Bancorp common stock, which increased from $29.15 per share on December 1, 2009, the closing price on the last trading day immediately preceding the announcement of the conversion, to $30.75 per share, the closing price on December 3, 2009, the effective date of the independent appraisal.

 

		Price-to-core earnings multiple (1)		Price-to-book value ratio			Price-to-tangible book value ratio
Eagle Montana (on a pro forma basis, assuming completion of the conversion)
Minimum		9.8x		72.31	%		72.31	%
Midpoint		11.6x		79.94	%		79.94	%
Maximum		13.5x		86.66	%		86.66	%
Maximum, as adjusted		15.6x		93.55	%		93.55	%
Valuation of peer group companies, as of December 3, 2009
Averages		14.4x		85.48	%		91.38	%
Medians		13.3x		88.71	%		94.00	%

 

(1)	Information derived from the Feldman Financial Advisors, Inc. appraisal report and are based upon estimated core earnings for the twelve months ended September 30, 2009. These ratios are different than the “Pro Forma Data.”

Feldman Financial Advisors, Inc. will update the independent appraisal prior to the completion of the conversion. If the estimated appraised value, including offering shares and exchange shares, changes to either below $33.8 million or above $52.6 million, we will resolicit persons who submitted stock orders. See “The Conversion and Offering — Stock Pricing and Number of Shares to be Issued.”

The Exchange of Existing Shares of Eagle Bancorp Common Stock

At the conclusion of the conversion, shares held by existing public stockholders of Eagle Bancorp will be canceled and exchanged for shares of common stock of Eagle Montana. The number of shares of common stock received will be based on an exchange ratio determined as of the conclusion of the conversion and offering, which will depend upon our final appraised value. The number of shares received will not be based on the market price of Eagle Bancorp outstanding shares at that time. Instead, the exchange ratio will ensure that existing public stockholders of Eagle Bancorp will retain the same approximate percentage ownership of our organization after the offering, exclusive of their purchase of any additional shares of common stock in the offering and their receipt of cash in lieu of fractional exchange shares.

The following table shows how the exchange ratio will adjust, based on the valuation of Eagle Montana and the number of shares of common stock issued in the offering. The table also shows the number of whole shares of Eagle Montana common stock a hypothetical owner of Eagle Bancorp common stock would receive in exchange for 100 shares of Eagle Bancorp common stock owned at the completion of the conversion, depending on the number of shares of common stock sold in the offering.

 

 

		New Shares to be Sold in This Offering				New Shares to be Exchanged for Existing Shares of Eagle Bancorp				Total Shares of Common Stock to be Outstanding After the Offering		Exchange Ratio		Equival ent Per Share Current Market Price (1)			New Shares That Would be Received for Existing 100 Shares
		Amount		Percent		Amount		Percent
Minimum		2,040,000		60.4%		1,340,136		39.6%		3,380,136		3.1458		$	31.45		314
Midpoint		2,400,000		60.4%		1,576,630		39.6%		3,976,630		3.7009			37.00		370
Maximum		2,760,000		60.4%		1,813,125		39.6%		4,573,125		4.2560			42.56		425
Adjusted Maximum		3,174,000		60.4%		2,085,093		39.6%		5,259,093		4.8944			48.94		489

 

(1)	Represents the value of shares of Eagle Montana common stock received in the conversion by a holder of one share of Eagle Bancorp at the exchange ratio, assuming the market price of $10.00 per share.

No fractional shares of Eagle Montana common stock will be issued to any public stockholder of Eagle Bancorp. For each fractional share that would otherwise be issued, Eagle Montana will pay in cash an amount equal to the product obtained by multiplying the fractional share interest to which the holder would otherwise be entitled by the $10.00 per share purchase price of the common stock in the offering.

How We Intend to Use the Proceeds From the Offering

Assuming we sell 2,400,000 shares of common stock in the stock offering, and we have net proceeds of $22.2 million, we intend to distribute the net proceeds as follows:

 

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$11.1 million (50.0% of the net proceeds) will be invested in American Federal Savings Bank;

 

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$1.9 million (8.7% of the net proceeds) will be loaned to our employee stock ownership plan to fund its purchase of our shares of common stock; and

 

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$9.2 million (41.3% of the net proceeds) will be retained by us.

We may use the funds that we retain for investments, to pay cash dividends, to repurchase shares of common stock and for other general corporate purposes. American Federal Savings Bank, whose capital will be increased by $11.1 million, may use the proceeds it receives to support increased lending and other products and services. The net proceeds retained also may be used for future business expansion through acquisitions of banks, thrifts and other financial services companies, and acquiring branch offices. We have no current arrangements or agreements with respect to any such acquisitions. Initially, a substantial portion of the net proceeds will be invested in short-term investments and mortgage-backed securities consistent with our investment policy.

Please see “How We Intend to Use the Proceeds from the Offering” for more information on the proposed use of the proceeds from the offering.

Our Dividend Policy

It is our current intention to maintain dividends after the conversion at current equivalent levels. As of September 30, 2009, Eagle Bancorp paid a quarterly cash dividend of $0.26 per share, which equals $1.04 per share on an annualized basis. After the conversion and subject to the authority of the board of directors to do so, we intend to continue to pay cash dividends on a quarterly basis. Eagle Montana expects the annual dividends following our conversion to equal $0.33, $0.28, $0.24 and $0.21 per share at the minimum, midpoint, maximum and adjusted maximum of the offering range, respectively, which represents an annual dividend yield of 3.3%, 2.8%, 2.4% and 2.1%, at the minimum, midpoint, maximum and adjusted maximum of the offering range, respectively, based upon a price of $10.00 per share. The amount of dividends that we intend to pay after the conversion will preserve the dividend amount that Eagle Bancorp stockholders currently receive, as adjusted to reflect the exchange ratio. However, the dividend rate and the continued payment of dividends following our conversion and the completion of this offering will depend on a number of factors, including our capital requirements, our financial condition and results of operations, tax considerations, statutory and regulatory limitations, and general economic conditions. No assurance can be given that we will continue to pay dividends or that they will not be reduced or eliminated in the future.

See “Selected Consolidated Financial and Other Data of Eagle Bancorp and Subsidiaries” and “Market for the Common Stock” for information regarding our historical dividend payments.

 

Purchases and Ownership by our Officers and Directors

We expect our directors, executive officers and their associates, to purchase approximately 71,800 shares of common stock in the offering. The purchase price paid by them will be the same $10.00 per share price paid by all other persons who purchase shares of common stock in the offering. After the conversion, as a result of purchases in the offering and the shares they will receive in exchange for shares of Eagle Bancorp that they currently own, our directors and executive officers, together with their associates, are expected to own approximately 303,807 shares and 385,688 shares of common stock, or 8.99% and 8.43% of our total outstanding shares of common stock at the minimum and the maximum of the offering range, respectively.

Benefits to Management and Potential Dilution to Stockholders Resulting from the Conversion

Employee Stock Ownership Plan. Our tax-qualified employee stock ownership plan expects to purchase up to 8% of the shares of common stock we sell in the offering, or 253,920 shares of common stock, assuming we sell the maximum as adjusted number of the shares proposed to be sold. If we receive orders for more shares of common stock than the maximum of the offering range, the employee stock ownership plan will have first priority to purchase shares over this maximum, up to a total of 8% of the shares of common stock sold in the offering. We reserve the right to purchase shares of common stock in the open market following the offering in order to fund all or a portion of the employee stock ownership plan. Assuming the employee stock ownership plan purchases 192,000 shares in the offering, the midpoint of the offering range, we will recognize additional compensation expense of approximately $184,000 annually (or approximately $112,240 after tax) over a 12-year period, assuming the loan to the employee stock ownership plan has a 12-year term and the shares of common stock have a fair market value of $10.00 per share for the full 12-year period. If, in the future, the shares of common stock have a fair market value greater or less than $10.00, the compensation expense will increase or decrease accordingly.

Stock-Based Incentive Plan. We also intend to implement a new stock-based incentive plan no earlier than six months after completion of the conversion. Stockholder approval of this plan will be required. If adopted within 12 months following the completion of the conversion, the stock-based incentive plan will reserve a number of shares up to 4% of the shares of common stock sold in the offering, or up to 126,960 shares of common stock at the maximum as adjusted of the offering range (reduced by amounts purchased in the stock offering by our 401(k) plan using its purchase priority in the stock offering), for awards of restricted stock to key employees and directors, at no cost to the recipients, subject to adjustment as may be required by Office of Thrift Supervision regulations or policy to reflect restricted stock awards previously made by Eagle Bancorp or American Federal Savings Bank. If the shares of common stock awarded under the stock-based incentive plan come from authorized but unissued shares of common stock, stockholders would experience dilution of up to approximately 2.4% in their ownership interest in Eagle Montana. If adopted within 12 months following the completion of the conversion, the stock-based incentive plan will also reserve a number of shares up to 10% of the shares of common stock sold in the offering, or up to 317,400 shares of common stock at the maximum as adjusted of the offering range, for issuance pursuant to grants of stock options to key employees and directors. If the shares of common stock issued upon the exercise of options come from authorized but unissued shares of common stock, stockholders would experience dilution of up to 5.7% in their ownership interest in Eagle Montana. Restricted stock awards and stock option grants made under this plan would be subject to vesting over a period of not less than five years. If the stock-based incentive plan is adopted more than one year after the completion of the conversion, awards of restricted stock or grants of stock options under the plan may exceed the percentages set forth above of the shares sold in the offering and have a shorter vesting period. For a description of our current stock benefit plans, see “Management — Executive Compensation — Long-Term Stock-Based Compensation.”

The following table summarizes the number of shares of common stock and the aggregate dollar value of grants that are expected under the new stock-based incentive plan as a result of the conversion. The table also shows the dilution to stockholders if all such shares are issued from authorized but unissued shares, instead of shares purchased in the open market. A portion of the stock grants shown in the table below may be made to non-management employees.

 

		Number of Shares to be Granted or Purchased (1)								Value of Grants (2)
		At Minimum of Offering Range		At Maximum as adjusted of Offering Range		As a Percentage of Common Stock to be Sold in the Offering		Dilution Resulting From Issuance of Shares for Stock Benefit Plans (3)		At Minimum of Offering Range			At Maximum as adjusted of Offering Range
		(Dollars in thousands)
Employee stock ownership plan		163,200		253,920		8.00%		—  %		$	1,632		$	2,539
Restricted stock awards		81,600		126,960		4.00%		2.36%			816			1,270
Stock options		204,000		317,400		10.00%		5.69%			406			632
Total		448,800		698,280		22.00%		7.79%		$	2,854		$	4,441

(footnotes on following page)

 

 

(1)

The table assumes that the stock-based incentive plan awards a number of options and restricted stock equal to 10% and 4% of the shares of common stock sold in the offering, respectively, as if the plan is implemented within one year after the completion of the conversion and offering. If the stock-based incentive plan is implemented more than one year following the completion of the conversion and offering, grants of options and restricted stock may exceed these percentage limitations.

(2)

The actual value of restricted stock awards will be determined based on their fair value as of the date grants are made. For purposes of this table, fair value for stock awards is assumed to be the same as the offering price of $10.00 per share. The fair value of stock options has been estimated at $1.99 per option using the Black-Scholes option pricing model with the following assumptions: a grant-date share price and option exercise price of $10.00; an expected option life of 10 years; a dividend yield of 3.3%; an interest rate of 3.31%; and a volatility rate of 22.35% based on an index of publicly traded thrift institutions. The actual value of option grants will be determined by the grant-date fair value of the options, which will depend on a number of factors, including the valuation assumptions used in the option pricing model ultimately adopted.

(3)	Represents the dilution of stock ownership interest. No dilution is reflected for the employee stock ownership plan because such shares are assumed to be purchased in the offering.

We may fund our plans through open market purchases, as opposed to new issuances of common stock. Office of Thrift Supervision regulations do not permit us to repurchase our shares during the first year following the completion of this offering except to fund the grants of restricted stock under the stock-based incentive plan or under extraordinary circumstances. The Office of Thrift Supervision has previously advised that the exercise of outstanding options and cancellation of treasury shares in the conversion will not constitute an extraordinary circumstance or a compelling business purpose for satisfying this test.

The following table presents the total value of all shares that would be available for award and issuance under the new stock-based incentive plan, assuming the shares are awarded when the market price of our common stock ranges from $8.00 per share to $14.00 per share.

 

Share Price			81,600 Shares Awarded at Minimum of Range			96,000 Shares Awarded at Midpoint of Range			110,400 Shares Awarded at Maximum of Range			126,960 Shares Awarded at Maximum, As Adjusted, of Range
(Dollars in thousands, except per share amounts)
$	8.00		$	653		$	768		$	883		$	1,016
	10.00			816			960			1,104			1,270
	12.00			979			1,152			1,325			1,524
	14.00			1,142			1,344			1,546			1,777

The grant-date fair value of the options granted under the new stock-based incentive plan will be based in part on the price of shares of common stock of Eagle Montana at the time the options are granted. The value will also depend on the various assumptions used in the option pricing model ultimately adopted. The following table presents the total estimated value of the options to be available for grant under the stock-based incentive plan, assuming the market price and exercise price for the stock options are equal and the range of market prices for the shares is $8.00 per share to $14.00 per share.

 

Exercise Price			Grant-Date Fair Value Per Option			204,000 Options at Minimum of Range			240,000 Options at Midpoint of Range			276,000 Options at Maximum of Range			317,400 Options at Maximum, As Adjusted, of Range
(Dollars in thousands, except per share and per option amounts)
$	8.00		$	1.59		$	324		$	382		$	439		$	505
	10.00			1.99			406			478			549			632
	12.00			2.39			488			574			660			759
	14.00			2.78			567			667			767			882

The tables presented above are provided for informational purposes only. Our shares of common stock may trade below $10.00 per share. Before you make an investment decision, we urge you to read this entire prospectus carefully, including, but not limited to, the section entitled “Risk Factors” beginning on page 14.

Limits on How Much Common Stock You May Purchase

The minimum number of shares of common stock that may be purchased in the offering is 25.

The maximum number of shares of common stock that may be purchased by a person is $250,000 (25,000 shares). If any of the following persons purchase shares of common stock, their purchases, in all categories of the offering combined, when aggregated with your purchases, cannot exceed $500,000 (50,000 shares) of common stock:

 

•

your spouse or relatives of you or your spouse living in your house;

 

•

companies, trusts or other entities in which you are a trustee, have a controlling beneficial interest or hold a senior position; or

 

•

other persons who may be your associates or persons acting in concert with you.

Unless we determine otherwise, persons and persons exercising subscription rights through a single qualifying deposit account held jointly will be subject to the overall purchase limitation of $500,000 (50,000 shares) in all categories of the offering combined.

Subject to Office of Thrift Supervision approval, we may increase or decrease the purchase limitations at any time. In the event the maximum purchase limitation is increased to 5% of the shares sold in the offering, such limitation may be further increased to 9.99%, provided that orders for Eagle Montana common stock exceeding 5% of the shares sold in the offering shall not exceed in the aggregate 10% of the total shares sold in the offering.

See the detailed description of purchase limitations and definitions of “acting in concert” and “associate” in “The Conversion and Offering — Limitations on Common Stock Purchases.”

Steps We May Take if We Do Not Receive Orders for the Minimum Number of Shares

If we do not receive orders for at least 2,040,000 shares of common stock in the subscription, community and/or syndicated community offering, we may take several steps in order to issue the minimum number of shares of common stock in the offering range. Specifically, we may:

 

•

increase the purchase limitations; and/or

 

•

seek regulatory approval to extend the offering beyond [extension date], provided that any such extension will require us to resolicit subscriptions received in the offering.

Alternatively, we may terminate the offering, return funds with interest and cancel deposit account withdrawal authorizations.

Conditions to Completion of the Conversion

The Office of Thrift Supervision has conditionally approved the plan of conversion and reorganization; however, such approval does not constitute a recommendation or endorsement of the plan of conversion and reorganization by that agency.

We cannot complete the conversion unless:

 

•

The plan of conversion and reorganization is approved by at least a majority of votes eligible to be cast by members of Eagle Financial MHC as of [voting record date] (comprised of American Federal Savings Bank depositors as of [voting record date] and borrowers as of April 4, 2000 whose borrowings remain outstanding as of [voting record date]);

 

•

The plan of conversion and reorganization is approved by a vote of at least two-thirds of the outstanding shares of common stock of Eagle Bancorp as of [voting record date], including shares held by Eagle Financial MHC (because Eagle Financial MHC owns 60.4% of the outstanding shares of Eagle Bancorp common stock, we expect that Eagle Financial MHC and our directors and executive officers will control the outcome of this vote.);

 

•

The plan of conversion and reorganization is approved by a vote of at least a majority of the outstanding shares of common stock of Eagle Bancorp as of [voting record date], excluding those shares held by Eagle Financial MHC;

 

•

We sell at least the minimum number of shares of common stock offered; and

 

•

We receive the final approval of the Office of Thrift Supervision to complete the conversion; however, such approval does not constitute a recommendation or endorsement of the plan of conversion and reorganization by that agency.

Eagle Financial MHC intends to vote its ownership interest in favor of the plan of conversion and reorganization. At [stockholder record date], Eagle Financial MHC owned 60.4% of the outstanding shares of common stock of Eagle Bancorp. The directors and executive officers of Eagle Bancorp and their affiliates owned                  shares of Eagle Bancorp, or              % of the outstanding shares of common stock as of [stockholder record date]. They have indicated their intention to vote those shares in favor of the plan of conversion and reorganization.

Market for Common Stock

Publicly held shares of Eagle Bancorp’s common stock currently trade on the Over-the-Counter Bulletin Board, or OTCBB, under the symbol “EBMT.” Upon completion of the conversion and offering, the shares of common stock of Eagle Bancorp will be cancelled and will cease trading. It is currently expected that Eagle Montana common stock will then commence trading on the Nasdaq Global Market. We intend to apply to list Eagle Montana’s shares of common stock on the Nasdaq Global

 

Market under the trading symbol “EBMT.” However, for the first 20 trading days, shares of Eagle Montana common stock will trade under the symbol “EBMTD” and thereafter, our trading symbol will be “EBMT.” In order to list our common stock on the Nasdaq Global Market, we are required to have at least three broker-dealers who will make a market in our common stock. Eagle Bancorp currently has nine registered market makers. Persons purchasing shares of common stock in the offering may not be able to sell their shares at or above the $10.00 price per share.

Tax Consequences

As a general matter, implementing the plan of conversion and reorganization will not result in a taxable transaction for federal or state income tax purposes to Eagle Financial MHC, Eagle Bancorp, American Federal Savings Bank, Eagle Montana, persons eligible to subscribe in the subscription offering, or existing stockholders of Eagle Bancorp. Existing stockholders of Eagle Bancorp who receive cash in lieu of fractional share interests in shares of Eagle Montana common stock will recognize a gain or loss equal to the difference between the cash received and the tax basis of the fractional share.

Persons Who May Order Shares of Common Stock in the Offering

Subscription rights to purchase shares of common stock in a “subscription offering” have been granted in the following descending order of priority:

 

(i)

First, to depositors with accounts at American Federal Savings Bank with aggregate balances of at least $50.00 at the close of business on November 30, 2008.

 

(ii)

Second, to our tax-qualified employee benefit plans, including our employee stock ownership plan and 401(k) plan, which will receive nontransferable subscription rights to purchase in the aggregate up to 10% of the shares of common stock sold in the offering.

 

(iii)

Third, to depositors with accounts at American Federal Savings Bank with aggregate balances of at least $50.00 at the close of business on [supplemental date].

 

(iv)

Fourth, to depositors of American Federal Savings Bank at the close of business on [voting record date] and to borrowers of American Federal Savings Bank as of April 4, 2000 whose borrowings remain outstanding as of [voting record date].

Shares of common stock not purchased in the subscription offering may be offered for sale to the general public in a “community offering,” with a preference given first to natural persons residing in the State of Montana, and then to Eagle Bancorp public stockholders as of [stockholder record date]. The community offering, if held, may begin concurrently with, during or promptly after the subscription offering, as we may determine at any time. We have the right to accept or reject, in our sole discretion, orders received in the community offering or syndicated community offering. Any determination to accept or reject purchase orders in the community offering and the syndicated community offering will be based on the facts and circumstances available to management at the time of the determination.

We may also offer any shares of our common stock not purchased in the subscription offering or community offering for sale to the general public in a syndicated community offering through a syndicate of selected dealers. We may begin the syndicated community offering at any time following the commencement of the subscription offering. Stifel, Nicolaus & Company, Incorporated will act as sole book-running manager and D.A. Davidson & Co. will act as co-manager for the syndicated community offering, which will be conducted on a best efforts basis. The syndicated community offering will terminate no later than 45 days after the expiration of the subscription offering, unless extended by us with approval of the Office of Thrift Supervision. Neither Stifel, Nicolaus & Company, Incorporated, D.A. Davidson & Co. nor any other member of the syndicate is required to purchase any shares in the syndicated community offering. Alternatively, we may sell any remaining shares in an underwritten public offering, which would be conducted on a firm commitment basis. See “The Conversion and Offering — Syndicated Community Offering.”

If we receive orders for more shares than we are offering, we may not be able to fully or partially fill your order. Shares will be allocated first to categories in the subscription offering in accordance with Eagle Financial MHC’s plan of conversion and reorganization. A detailed description of share allocation procedures can be found in the section of this prospectus entitled “The Conversion and Offering.”

How You May Purchase Shares of Common Stock

In the subscription offering and community offerings, you may pay for your shares only by:

 

(i)

personal check, bank check or money order made payable directly to Eagle Bancorp Montana, Inc.; or

 

(ii)

authorizing us to withdraw funds from the types of American Federal Savings Bank deposit accounts designated on the stock order form.

American Federal Savings Bank is not permitted to lend funds to anyone for the purpose of purchasing shares of common stock in the offering. Additionally, you may not use a American Federal Savings Bank line of credit check or any type of third party check or wire transfer to pay for shares of common stock. Please do not submit cash.

You may purchase shares of common stock in the offering by delivering to the Stock Information Center a signed and completed original stock order form, together with full payment payable to Eagle Bancorp Montana, Inc. or authorization to withdraw funds from one or more of your American Federal Savings Bank deposit accounts, provided that we receive the stock order form before 4:00 p.m., Mountain Time, on [expiration date], which is the end of the offering period. Checks and money orders will be immediately deposited in a segregated account with American Federal Savings Bank or another insured depository institution upon receipt. We will pay interest calculated at American Federal Savings Bank’s statement savings rate from the date funds are processed until completion or termination of the conversion at which time interest checks will be mailed to subscribers. On your stock order form, you may not authorize direct withdrawal from a American Federal Savings Bank individual retirement account. If you wish to use funds in an individual retirement account to purchase shares of our common stock, please see “ — Using Individual Retirement Account Funds to Purchase Shares” below. You may not designate a withdrawal from American Federal Savings Bank accounts with check-writing privileges. Please provide a check instead.

Withdrawals from certificates of deposit to purchase shares of common stock in the offering may be made without incurring an early withdrawal penalty. If a withdrawal results in a certificate of deposit account with a balance less than the applicable minimum balance requirement, the certificate of deposit will be canceled at the time of withdrawal without penalty and the remaining balance will earn interest at the current statement savings rate subsequent to the withdrawal. All funds authorized for withdrawal from deposit accounts at American Federal Savings Bank must be available in the accounts at the time the stock order is received. A hold will be placed on those funds when your stock order is received, making the designated funds unavailable to you during the offering period. Funds will not be withdrawn from an account until the completion of the offering and will earn interest within the account at the applicable deposit account rate until that time.

We are not required to accept copies or facsimiles of stock order forms. By signing the stock order form, you are acknowledging both receipt of this prospectus and that the shares of common stock are not deposits or savings accounts that are federally insured or otherwise guaranteed by American Federal Savings Bank, Eagle Montana or the federal or state governments.

Submitting Your Order in the Subscription and Community Offerings

You may submit your stock order form and payment by mail using the order reply envelope provided, by overnight courier to the indicated address on the stock order form, or by delivery to our Stock Information Center, which is located at [stock information center address]. Stock order forms may not be delivered to American Federal Savings Bank offices.

Deadline for Orders of Common Stock in the Subscription or Community Offerings

If you wish to purchase shares of common stock, a properly completed and signed original stock order form, together with full payment for the shares of common stock, must be received (not postmarked) by the Stock Information Center no later than 4:00 p.m., Mountain Time, on [expiration date].

Once submitted, your order is irrevocable unless the offering is terminated or extended beyond [extension date] or the number of shares to be issued increases to more than 3,174,000 shares or decreases to less than 2,040,000 shares. We may extend the [expiration date] expiration date, without notice to you, until [extension date]. If the offering is extended beyond [extension date] or if the offering range is increased or decreased, we will be required to resolicit purchasers before proceeding with the offering. In either of these cases, purchasers will have the right to maintain, change or cancel their orders. If we do not receive a written response from a purchaser regarding any resolicitation, the purchaser’s order will be canceled and all funds received will be returned promptly with interest, and deposit account withdrawal authorizations will be canceled. No extension may last longer than 90 days. All extensions, in the aggregate, may not last beyond [final expiration date].

Although we will make reasonable attempts to provide this prospectus and offering materials to holders of subscription rights, the subscription offering and all subscription rights will expire at 4:00 p.m., Mountain Time, on [expiration date], whether or not we have been able to locate each person entitled to subscription rights.

TO ENSURE THAT EACH PERSON RECEIVES A PROSPECTUS AT LEAST 48 HOURS PRIOR TO THE EXPIRATION DATE OF THE OFFERING IN ACCORDANCE WITH FEDERAL LAW, NO PROSPECTUS WILL BE MAILED ANY LATER THAN FIVE DAYS PRIOR TO THE OFFERING EXPIRATION DATE OR HAND-DELIVERED ANY LATER THAN TWO DAYS PRIOR TO THE OFFERING EXPIRATION DATE.

 

Using Individual Retirement Account Funds to Purchase Shares

You may be able to subscribe for shares of common stock using funds in your individual retirement account. However, shares of common stock must be held in a self-directed retirement account, such as those offered by a brokerage firm. By regulation, American Federal Savings Bank’s individual retirement accounts are not self-directed, so they cannot be invested in our common stock. If you wish to use some or all of the funds in your American Federal Savings Bank individual retirement account, the applicable funds must be transferred to a self-directed account maintained by an independent trustee or custodian, such as another bank or a brokerage firm. If you do not have such an account, you will need to establish one before placing your stock order. An annual administrative fee may be payable to the independent trustee or custodian. Because individual circumstances differ and processing of retirement fund orders takes additional time, we recommend that you contact our Stock Information Center promptly, preferably at least two weeks before the [expiration date] offering deadline, for assistance with purchases using funds in your individual retirement account or other retirement account held at American Federal Savings Bank or elsewhere. Whether you may use such funds for the purchase of shares in the offering may depend on timing constraints and, possibly, limitations imposed by the institution where the funds are held.

Delivery of Stock Certificates

Certificates representing shares of common stock sold in the subscription and community offerings will be mailed by regular mail to the persons entitled thereto at the certificate registration address noted by them on the stock order form, as soon as practicable following consummation of the offering. It is possible that, until certificates for the common stock are delivered, purchasers may not be able to sell the shares of common stock that they ordered, even though the common stock will have begun trading.

If you are currently a stockholder of Eagle Bancorp, see “The Conversion and Offering — Exchange of Existing Stockholders’ Stock Certificates.”

You May Not Sell or Transfer Your Subscription Rights

Office of Thrift Supervision regulations prohibit you from transferring your subscription rights. If you order shares of common stock in the subscription offering, you will be required to state that you are purchasing the common stock for yourself and that you have no agreement or understanding to sell or transfer your subscription rights. We intend to take legal action, including reporting persons to federal agencies, against anyone who we believe has sold or transferred his or her subscription rights. We will not accept your order if we have reason to believe that you have sold or transferred your subscription rights. On the stock order form, you may not add the names of others for joint stock registration who do not have subscription rights or who qualify only in a lower subscription offering priority than you do. You may add only those who were eligible to purchase shares of common stock in the subscription offering at your date of eligibility. In addition, the stock order form requires that you list all deposit accounts, giving all names on each account and the account number at the applicable eligibility date. Failure to provide this information, or providing incomplete or incorrect information, may result in a loss of part or all of your share allocation, in the event of an oversubscription.

How You Can Obtain Additional Information — Stock Information Center

Our banking office personnel may not, by law, assist with investment-related questions about the offering. If you have any questions regarding the conversion or offering, please call our Stock Information Center. The toll-free telephone number is 1-(877)                   . The Stock Information Center is open Monday through Friday between 10:00 a.m. and 4:00 p.m., Mountain Time. The Stock Information Center will be closed weekends and bank holidays. American Federal Savings Bank offices will not have offering materials and will not accept stock order forms or proxy cards.