As filed with the Securities and Exchange Commission on December 20, 1999
Registration No. 333-______
================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

--------------------------------

FORM SB-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933

--------------------------------

EAGLE BANCORP
(Name of small business issuer in its charter)

United States of America 6035 Applied For
------------------------ ---- -----------
(State or other (Primary standard (I.R.S. employer
jurisdiction of incorporation industrial classification identification
or organization) code number) number)

1400 Prospect Avenue, Helena, MT 59601
(406) 442-3080
------------------------------------------------------------
(Address and telephone number of
principal executive offices and principal place of business)

Mr. Larry A. Dreyer
President and Chief Executive Officer
American Federal Savings Bank
1400 Prospect Avenue
Helena, Montana 59601
(406) 442-3080
------------------------------------------------------------
(Name, address, and telephone number of agent for service)

Please send copies of all communications to:

Raymond J. Gustini, Esquire
Jeremy J. Sher, Esquire
Nixon Peabody LLP
1255 23rd Street, N.W., Suite 800
Washington, D.C. 20037

Approximate date of commencement of proposed sale to the public:
As soon as practicable after this registration statement becomes effective.

If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

CALCULATION OF REGISTRATION FEE

- ------------------------------------------------------------------------------------------------------------------------
Title of each Class of Amount to be Proposed Maximum Offering Proposed Maximum Amount of
Securities to be Registered Registered Price Per Security Aggregate Offering Price (1) Registration Fee
- --------------------------- ------------ ------------------------- ---------------------------- ----------------

Common Stock, par value
$.01 per share 1,010,059 $8.00 $8,080,472 $2,384
- ------------------------------------------------------------------------------------------------------------------------

(1) Estimated solely for the purpose of calculating the registration fee.

The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.

[LOGO]

EAGLE BANCORP
Proposed Holding Company for
American Federal Savings Bank

Up to 1,010,059 Shares of Common Stock

Eagle Bancorp is being formed to own all the stock of American Federal
Savings Bank and to offer its shares to the public. The shares we are offering
to the public represent less than half of the outstanding common stock of Eagle
Bancorp. More than half of the outstanding common stock of Eagle Bancorp will be
owned by Eagle Financial MHC, a mutual savings bank holding company controlled
by the members of American Federal. The common stock of Eagle Bancorp is
expected to be quoted for trading on the OTC Bulletin Board.

---------------------------

TERMS OF THE OFFERING

Price: $8.00 Per Share

Minimum Maximum
---------- ----------
Number of Shares ................................... 649,188 878,313
Underwriting commissions and expenses .............. $ 550,000 $ 550,000
---------- ----------
Net proceeds to Eagle Bancorp ...................... $4,643,504 $6,476,504
---------- ----------
Net proceeds per share to Eagle Bancorp ............ $7.15 $7.37
---------- ----------

We are offering a minimum of 649,188 shares and a maximum of 878,313 shares.
The maximum can be increased to 1,010,059 shares with regulatory approval.

---------------------------

Please read the Risk Factors beginning on Page ___.

These securities are not deposits or savings accounts and are not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.

None of the Securities and Exchange Commission, the Office of Thrift
Supervision, nor any state securities regulator has approved or disapproved
these securities or determined whether this prospectus is accurate or complete.
Any representation to the contrary is a criminal offense.

RYAN, BECK & CO.

February __, 2000

[BANK LOGO]

AMERICAN FEDERAL SAVINGS BANK

Office Locations

[TO COME]

SUMMARY

This summary highlights selected information from this document and may not
contain all the information that is important to you. To understand the
reorganization and stock offering fully, you should read this entire document
carefully, including the financial statements and notes to the financial
statements. The references in this document to American Federal, the Bank, "we,"
"us," and "our," refer to American Federal Savings Bank. In certain instances,
where appropriate, "we," "us," and "our" refers to American Federal Savings
Bank, Eagle Bancorp and Eagle Financial MHC, either individually or in the
aggregate.

The Reorganization and Stock Offering

Pursuant to a Plan of Reorganization and Stock Issuance, American
Federal will reorganize from a mutual savings bank to a stock savings bank, and,
in the process, create Eagle Financial MHC, a mutual holding company, and Eagle
Bancorp, a federal stock holding company. American Federal's stock will be owned
by Eagle. Public stockholders will own 47% of Eagle's outstanding shares of
common stock, and the remaining shares, which are a majority of the outstanding
shares of common stock, will be owned by Eagle Financial MHC, which will not
have any stockholders.

The Companies

Eagle Bancorp
1400 Prospect Avenue
Helena, MT 59604-4999

Eagle Bancorp, or Eagle, a newly formed federally chartered
corporation, will be the holding company for American Federal Savings Bank when
the reorganization is complete. It is not currently an operating company and has
not engaged in any business to date.

American Federal Savings Bank
1400 Prospect Avenue
Helena, MT 59604-4999

American Federal Savings Bank has served the financial needs of its
community since its founding in 1922. It operates as a federal mutual savings
bank. At September 30, 1999, American Federal had total assets of $148.38
million, deposits of $123.80 million, and equity of $14.08 million. We are
currently changing our structure by reorganizing into a stock savings bank to be
wholly-owned by Eagle. We are a community-oriented, full service, federal
savings bank, serving Helena, Bozeman, Butte, and Townsend, Montana with four
full service offices and one drive-in facility. Our business strategy is
influenced by our desire to operate more like a

commercial bank than traditional thrifts which have primarily offered
residential loans and generally have a higher concentration of certificate of
deposit accounts.

Business Strategies:

o Emphasis on core deposits. We have a high percentage of core
deposits, which, including IRA certificates of deposit, were
68.93% of our total deposits, at September 30, 1999. Core
deposits are a stable source of funds, and are less sensitive to
withdrawal when rates fluctuate than are certificates of deposit.
Our employees are actively encouraged through our sales culture
to promote our core deposit products. We include as core deposits
transaction accounts, checking accounts, passbook and statement
savings accounts, money market accounts and IRA accounts funded
by certificates of deposit.

o Customer Service. We believe that successful banking in our
community begins with strong personal relationship with our
customers and providing those customers with outstanding customer
service. In that connection, in 1997 we opened a new, larger
headquarters building in Helena. Our headquarters building is
also our largest branch facility. It has four drive-through
banking lanes, and a larger, more convenient parking area. We are
committed to customer service in other ways as well by promoting
convenient operating hours, the tenure and continuity of our
branch managers and senior staff, automated voice response
systems for customer inquiries and promotion of our new loan and
deposit products and services to suit our customers' needs and
objectives. We have emphasized and trained our staff in the
development of a sales culture to make customers aware of these
products and services.

o Increasing noninterest income. We believe we have a relatively
high amount of noninterest income. Our noninterest income to
average assets ratio was .80% for the three months ended
September 30, 1999, and 1.15% for the year ended June 30, 1999.
We have emphasized both core deposit growth, loan sales growth
and loan servicing as methods of achieving additional fee income.

o Maintaining asset quality. Our high asset quality is reflected in
our ratio of non-performing assets to total assets, which was
.59% for the three months ended September 30, 1999, and .54% for
the year ended June 30, 1999. Our ratio of non-performing loans
to total loans, was .88% for the three months ended September 30,
1999; and .83% for the year ended June 30, 1999. We have achieved
these levels of high asset quality through conservative
underwriting, local lending, the experience of our senior lending
officers and a strong awareness of business and economic trends
in our market area.

o Lending Diversification. We are committed to offering additional
loans in addition to being a home mortgage lender. This strategy
began in the early 1980's and has gradually enabled us to
supplement our mortgage lending with

consumer loans, business loans and commercial real estate
lending. We expect to continue to emphasize customer service,
commercial and consumer loans following our reorganization.

Eagle Financial MHC
1400 Prospect Avenue
Helena, MT 59604-4999

Upon completion of the reorganization and stock offering, Eagle
Financial MHC or, the Mutual Holding Company, will own more than half of the
outstanding shares of Eagle. Persons who had membership rights in American
Federal as of the date of the reorganization will have these rights
automatically exchanged for substantially similar rights in the Mutual Holding
Company. The members of American Federal consist of its depositors, as well as
borrowers whose loans were outstanding on April 18, 1991, and remain
outstanding.

The Mutual Holding Company will not initially engage in any business
activity other than holding more than half of the shares of Eagle.

Our New Structure

The following chart shows our new structure, after the reorganization
and stock offering. This new structure is commonly referred to as a mutual
holding company structure.

[GRAPHIC OMITTED]

The Stock Offering

We are offering between 649,188 and 878,313 shares of common stock, par
value $0.01 per share, of Eagle. The common stock is being offered on a best
efforts basis at $8.00 per share. As a result of changes in market and financial
conditions prior to the completion of the reorganization, or to fill the order
of our employee stock ownership plan, and subject to Office of Thrift
Supervision ("OTS") approval, the offering may be increased up to 1,010,059
shares without further notice to you. If this occurs, you will not have a chance
to cancel your stock order.

How We Determined the Offering Range and the $8.00 Per Share Offering Price

The independent appraisal of $13,000,000, by Feldman Financial
Advisors, dated as of December __, 1999, was the basis of our offering range.
The appraisal was based on our financial condition and results of operations and
the effect of the additional capital raised in this offering. According to OTS
regulations, the number of shares to be outstanding and the offering range of
the shares to be issued must be based on the appraisal. The board of directors
established a price per share of $8.00. Therefore, between 649,188 and 878,313
shares will be outstanding, subject to a 15% increase to 1,010,059 shares, under
certain circumstances. The offering range must also be based on the appraisal.
The board of directors has decided to offer for sale 47% of Eagle's to-be
outstanding shares. The rest will be owned by the Mutual Holding Company.

Feldman Financial Advisors , which will provide an independent
appraisal, will be updated at the conclusion of the offering. If the estimated
valuation range, or EVR, is either below $11,050,000 or above $17,193,000, or if
the offering is extended beyond _________, 2000, we will notify you and give you
the opportunity to modify or cancel your order.

Persons Who May Purchase in the Offering

We are offering the shares of common stock to those with subscription
rights in the following order of priority:

o Depositors who held aggregate deposit accounts of at least $50
dollars with us on June 30, 1998 (Eligible Account Holders);

o The American Federal employee plans, including the American
Federal employee stock ownership plan or ESOP;

o Depositors who are not Eligible Account Holders and who held
aggregate deposit accounts of at least $50 dollars with us on
December 31, 1999 (Supplemental Eligible Account Holders); and

o Other members of American Federal Savings Bank on ________, 2000,
including borrowers as of December 31, 1999, with a continuous
borrowing relationship and whose borrowing was also outstanding
on April 18, 1991 (Other Members).

Shares of common stock not subscribed for in the subscription offering
will be offered on a priority basis to members of our community, residents of
Montana, the general public in a community offering and, if necessary, in a
syndicated community offering.

Ryan, Beck & Co., Inc., our financial and marketing advisor in
connection with the reorganization and the stock offering, will use its best
efforts to assist us in selling our stock.

Termination of the Offering

The offering is expected to end on March ______, 2000, but if necessary
may be extended. If at least 649,188 shares of common stock are not subscribed
for in the Subscription Offering, the Community Offering and the Syndicated
Community Offering by _______, 2000, we will either terminate the offering and
return any payment you made to us, or extend the offering if permitted by the
Office of Thrift Supervision and give you notice of the extension and of your
rights to cancel or change your order.

How We Will Use the Proceeds Raised by the Sale of Our Common Stock

Assuming we sell 763,750 shares, the midpoint of the estimated
valuation range, or EVR, Eagle intends to use the net proceeds received from the
stock offering as follows:

Loan to the American Federal employee stock ownership plan .... $ 488,000
Investment in stock of American Federal ....................... 2,780,000
Working Capital for Eagle Bancorp ............................. 2,291,200
----------
Total ......................................................... $5,560,000
==========

We intend to use the working capital initially to invest in securities.
Subsequently, we may use a portion of the proceeds to finance possible
acquisitions, to pay dividends, if declared, to repurchase our common stock or
for other general corporate purposes. American Federal may use the proceeds it
receives for expansion of its business activities.

Dividends

We currently anticipate that we will pay a quarterly cash dividend
after the completion of the reorganization. However, we have not determined the
initial amount or timing, and we do not guarantee that dividends will be paid
or, if paid, that we will not reduce or eliminate them in

the future. We will not pay or take any steps to pay a tax-free dividend which
qualifies as a return of capital for at least one year following the
consummation of the reorganization.

Market For Common Stock

We expect our common stock to be quoted in the over-the-counter market
on the OTC Bulletin Board. However, a liquid market in our stock may not develop
or be maintained. Ryan, Beck & Co., Inc. intends to make a market in our common
stock, but is under no obligation to do so.

Benefit to Management From the Offering

Our full-time employees will participate in the offering through
purchases of stock by American Federal's employee stock ownership plan, which is
a form of employee ownership and retirement plan. The employee stock ownership
plan intends to purchase 8% of the shares sold in our offering. Not less than
six months following the completion of the reorganization, we intend to adopt a
stock option plan pursuant to which we may award stock options to key employees
and directors. The number of options available under this plan will be equal to
not more than 10% of the number of shares sold in the reorganization. This would
range from 64,919 shares, assuming 649,188 shares are sold in the
reorganization, to 87,831 shares, assuming 878,313 shares are sold in the
reorganization. The plan will require stockholder approval. We also intend to
implement a management recognition plan, or MRP, which will award restricted
shares of our common stock at no cost to the recipient. The number of shares of
restricted stock available under the MRP will be equal to not more than 4% of
the number of shares sold in the reorganization. This would range from 25,968
shares, assuming 649,188 shares sold in the reorganization, to 35,133 shares,
assuming 878,313 shares are sold in the reorganization. However, the MRP and
option plan cannot be adopted until at least the six month anniversary of the
completion of the reorganization. Further, both plans are subject to stockholder
approval.

The following table presents the dollar value of the shares to be
granted pursuant to the ESOP, option plan and MRP and the percentage of the
outstanding common stock which will be represented by these shares. This table
assumes that (i) we sell 763,750 shares, the midpoint of the estimated valuation
range; (ii) the ESOP will purchase 8% of the shares sold in the offering and
(iii) 4% of the shares issued pursuant to the offering shall be awarded pursuant
to the MRP.

Percentage of
Value of Shares Outstanding
Benefit Plan Granted (1) Common Stock
------------ --------------- -------------
ESOP ......................... $488,800 3.59%
Option Plan .................. 0(2) 4.49
MRP .......................... 244,400 1.80
-------- ----
$733,200 9.88%
======== ====

(1) Assumes shares are granted at $8.00 per share and that shares are sold in
the offering at the midpoint of the offering range.

(2) Recipients of stock options realize value only after the date shares are
exercised and only in the event of an increase in the price of the common
stock in comparison to the price at the grant date.

Stock Information Center

If you have any questions regarding the offering or our reorganization,
please call the stock information center at (800) ___________, Monday to Friday,
9:00 a.m. to 4:00 p.m., Montana time.

Important Risks in Owning Eagle Financial Common Stock

To help you decide whether to purchase stock in the offering, you
should read the Risk Factors section on pages ___ to ___ of this Prospectus.

RISK FACTORS

- --------------------------------------------------------------------------------
In addition to the other information in this document, you should consider
carefully the following risk factors in evaluating an investment in our stock.
- --------------------------------------------------------------------------------

Competition in Montana makes it difficult to achieve desired levels of
profitability.

While most banks operate in markets with significant competition, we
believe that Montana poses unique competitive challenges which exist due to
numerous competitors we have and Montana's low total population. Montana has one
of the largest land areas of any state but has a population of only 882,000.
However, approximately 89 separately chartered banks, five thrift institutions
and 79 credit unions operate in Montana. A number of out-of-state banks also
have Montana operations.

The presence of numerous competitors, particularly in Montana's larger
cities such as Helena, Bozeman and Butte, may make it very difficult to increase
our market share and to achieve returns which are typical in markets with fewer
banks and credit unions or with larger populations. If we are not able over time
to invest the proceeds of the offering in loans, we will invest those funds in
lower yielding instruments such as fixed income or mortgage-backed securities.

Our low growth rate may affect the price of our stock after the
reorganization.

Our history has been characterized by relatively low growth. Our total
assets at June 30, 1998, and September 30, 1999, were $144.43 million and
$148.38 million, respectively. The areas of Montana in which we operate have not
enjoyed the recent economic expansion prevalent in some other portions of the
U.S. We do not anticipate that our franchise will achieve significant internal
growth, even though we will be raising up to $8.08 million, before expenses, in
additional capital in the offering. Our ability to grow will be dependent on
Montana's employment levels, real estate markets, level of interest rates,
competition for loans and deposits, and availability of suitable acquisition
opportunities.

Our loans are concentrated in a relatively small regional market.

Substantially all of American Federal's real estate mortgage loans are
secured by properties located in our market area of southcentral Montana. We
currently believe our loans are adequately secured. Our loan portfolio is not
geographically diverse, so if economic conditions in our market area
deteriorate, even if conditions in other parts of Montana or the United States
as a whole do not deteriorate, the collectibility and the value of the
collateral securing our loans could be adversely affected.

The mutual holding company structure may preclude a transaction you and
other minority stockholders might favor.

The board of directors intends that American Federal remain an
independent financial institution. This is one reason why we chose to reorganize
into the mutual holding company structure instead of conducting a full
mutual-to-stock conversion. Under this structure the Mutual Holding Company must
own a majority of Eagle's stock for as long as the Mutual Holding Company
exists. The Mutual Holding Company will at all times own at least 51% of Eagle's
common stock. In turn, Eagle will own all the stock of American Federal. As the
majority owner of Eagle, the Mutual Holding Company will elect the directors of
Eagle and control its affairs and business operations. The directors of the
Mutual Holding Company will also be the directors of Eagle and American Federal.
The Mutual Holding Company has no stockholders. Accordingly, the public
stockholders of Eagle will be minority stockholders and, as a result, will have
no control in electing directors or controlling the affairs of Eagle. In
addition, the public stockholders will have no control over the affairs of the
Mutual Holding Company except to the extent they are also members of the Mutual
Holding Company. There is no assurance that the Mutual Holding Company will not
take actions which the public stockholders believe are against their interests.
For example, the Mutual Holding Company could: (1) prevent the sale of Eagle to
another financial institution; (2) defeat a candidate proposed by a public
stockholder for election to the board of directors of Eagle; (3) prevent
conversion to stock form; or (4) defeat any other proposals submitted by the
public stockholders. You should not purchase our stock in anticipation of a sale
of American Federal or Eagle.

Expenses from our stock-based benefit plans will reduce our earnings.

We intend to adopt an employee stock ownership plan, or ESOP, as part
of the reorganization. Upon receiving stockholder approval, we also intend to
adopt other stock-based benefit plans in the future including a stock option
plan and a management recognition plan, or MRP. We will not be able to invest
the money that we use to buy stock to fund our ESOP or MRP. Also, our future
salary and benefit expenses will increase as a result of our adopting these
benefit plans. These factors will cause our earnings to be lower than they would
be if we chose not to adopt stock-based benefit plans. In addition, in the event
newly issued shares are used to support the stock option plan and the MRP, and
the newly issued shares are issued pursuant to these plans, stockholders will
experience a reduction in their ownership interest. See "Pro Forma Data" and
"Management - Executive Compensation - Employee Stock Ownership Plan."

If the Mutual Holding Company converts to stock form in the future, our
public stockholders will have their ownership interest reduced.

If the Mutual Holding Company converts from a mutual company to a stock
company in the future, Eagle shares will cease trading and our stockholders will
exchange their Eagle shares for shares in the converted Mutual Holding Company
pursuant to an exchange ratio. The exchange ratio ensures that the public
stockholders will own the same percentage of the issued shares of the converted
Mutual Holding Company as they owned in Eagle. However, the Office of Thrift
Supervision requires that the exchange ratio be reduced for: (1) any dividends
which we paid but the Mutual Holding Company elected not to receive; and (2) the
value of any assets

owned by the Mutual Holding Company, such as dividends received by it, which
will be transferred to the stock company. The greater the amount of dividends
declared but not paid to the Mutual Holding Company, the greater the reduction
in the exchange ratio will be. For example, a stockholder who owned 1% of the
total issued shares of Eagle could own less than 1% of the shares issued by the
converted Mutual Holding Company, even if the Mutual Holding Company elects to
waive the receipt of dividends.

Future changes in interest rates may reduce our profits.

Our ability to be profitable largely depends on our net interest
income. Net interest income is the difference between:

o the interest income we earn on our interest-earning assets,
primarily mortgage and consumer loans and investment securities;
and

o the interest expense we pay on our interest-bearing liabilities,
primarily deposits and amounts we borrow.

Most of our mortgage loans have terms which are significantly longer
than the terms of our deposit accounts. Because our interest-earning assets
generally have fixed rates of interest and have longer effective maturities than
our interest-bearing liabilities, the yield on our interest-earning assets
generally will adjust more slowly to changes in interest rates than the cost of
our interest-bearing liabilities. As a result, our net interest income may be
reduced when interest rates increase significantly for long periods of time. In
addition, rising interest rates may reduce our earnings because in such an
environment there may be reduced customer demand for loans. Also, such an
environment would reduce the value of our mortgage backed and investment
securities. Declining interest rates may also reduce our net interest income if
adjustable rate or fixed rate mortgage loans are refinanced at lower rates.
These loans could also be prepaid, resulting in our reinvestment of those funds
in assets which earn lower rates of interest. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Management of
Interest Rate Risk and Market Risk."

The small amount of stock being issued to the public may make it
difficult to buy or sell our stock in the future.

Due to the relatively small size of the offering to the public, our
stock will likely be quoted on the OTC Bulletin Board. This means you have no
assurance that an active market for the stock will exist after the offering.
This may affect your ability to sell all of your shares on short notice and the
sale of a large number of shares at one time could temporarily depress the
market price. See "Market for the Stock."

Recent stock market volatility may adversely affect the price of your
stock.

Publicly traded stocks, including stocks of financial institutions,
have recently experienced substantial market price volatility. These market
fluctuations may be unrelated to the operating performance of particular
companies whose shares are traded. In several cases,

common stock issued by recently converted financial institutions has traded at a
price that is below the price at which such shares were sold in the initial
offerings of those companies. The purchase price of our common stock in the
offering is based on the independent appraisal by Feldman Financial Advisors.
After our shares begin trading, the trading price of our common stock will be
determined by the marketplace, and may be influenced by many factors, including
prevailing interest rates, investor perceptions of Eagle, and general industry
and economic conditions. Due to possible continued market volatility, we cannot
assure you that, following the conversion, the trading price of our common stock
will be at or above the $8.00 per share initial offering price.

SELECTED FINANCIAL DATA

The following summary of selected financial data is only a summary and
does not purport to be complete and is qualified in its entirety by the detailed
information including financial statements and accompanying notes beginning on
page F-___. The selected financial information at September 30, 1999, and for
the three months ended September 30, 1999, and 1998 have been derived from
unaudited financial statements. In our opinion, such financial data reflects all
adjustments (which consist of only normal recurring adjustments) necessary for
the presentation of the selected financial information and other data. The
results of operations for the three months ended September 30, 1999, are not
necessarily indicative of the results which may be expected for any other
period. Our asset quality ratios and performance ratios are calculated using end
of period balances. Except where indicated, all other asset quality and
performance ratios are based on the average daily balances and are annualized
where appropriate.

Selected Financial Data
-----------------------

At September 30, At June 30,
---------------- -------------------
1999 1999 1998
-------- -------- --------
(In thousands)
Interest-bearing deposits with banks ...... $ 550 $ 4,175 $ 4,400
Loans receivable, net ..................... 99,864 97,036 95,049
Investment securities available-for-sale .. 16,349 16,590 15,880
Investment securities held-to-maturity .... 14,601 14,498 11,366
FHLB stock ................................ 1,325 1,301 1,207
Property and equipment, net ............... 7,242 7,361 7,168
Total assets .............................. 148,379 148,891 144,425
Deposit accounts .......................... 123,804 120,822 114,729
Advances from FHLB ........................ 8,508 12,574 14,841

Total liabilities ......................... 134,303 134,998 131,570

Total equity .............................. 14,075 13,894 12,855

Summary Of Operations
---------------------

For the Three Months Ended For the Years Ended
September 30, June 30,
-------------------------- -------------------
1999 1998 1999 1998
------ ------ ------- -------
(In thousands)

Total interest and dividend income .... $2,508 $2,583 $10,022 $10,267
Total interest expense ................ 1,288 1,345 5,193 5,439
------ ------ ------- -------
Net interest income ................. 1,220 1,238 4,829 4,828
Provision for loan losses ............. 15 15 60 60
------ ------ ------- -------
Net interest income after provision
for loan losses ................... 1,205 1,223 4,769 4,768
Total noninterest income .............. 296 428 1,653 1,587
Total noninterest expense ............. 1,172 1,109 4,462 4,198
Income before provision for income
taxes ............................. 329 542 1,960 2,157
Provision for income taxes ............ 120 202 708 915
------ ------ ------- -------
Net income .......................... $ 209 $ 340 $ 1,252 $ 1,242
====== ====== ======= =======

Key Operating Ratios
------------------------------------
At or for the At or for the
Three Months Ended Years Ended
September 30, June 30,
------------------ ---------------
1999 1998 1999 1998
------ ------ ------ ------
Performance Ratios:
Return on average assets .............. 0.56% 0.95% 0.85% 0.88%
Return on average equity .............. 5.98 10.44 9.36 10.15
Ratio of average interest-earning
assets to average interest-bearing
liabilities ......................... 106.32 105.68 106.11 104.41
Average equity to average assets ...... 9.41 9.05 9.12 8.69
Net interest rate spread(1) ........... 3.36 3.55 3.42 3.56
Net interest margin(2) ................ 3.61 3.78 3.67 3.74
Noninterest income to average assets .. .80 1.19 1.15 1.14
Ratio of noninterest expense to average
total assets ........................ 3.15 3.08 3.04 2.98

Efficiency ratio(3) ................... 77.31 66.57 68.84 65.44

Asset Quality Ratios:
Non-performing loans to total assets .. 0.59 0.20 0.54 0.18
Non-performing loans to total loans ... 0.88 0.30 0.83 0.28
Allowance for loan losses to total
loans ............................... 0.75 0.74 0.76 0.71
Allowance for loan losses to
non-performing loans ................ 85.19 240.10 91.55 253.93

Capital Ratios:
Equity to total assets at end of period 9.49 9.33 9.33 8.90
Average equity to average assets ...... 9.50 9.28 9.56 8.82

Other Data:
Number of full service offices ........ 4 4 4 4

- ----------
(1) The net interest rate spread represents the difference between the weighted
average yield on interest-earning assets and the weighted average cost of
interest-bearing liabilities during the period.

(2) The net interest margin represents net interest income as a percentage of
average interest-earning assets for the period.

(3) The efficiency ratio represents noninterest expense divided by the sum of
net interest income and noninterest income.

RECENT DEVELOPMENTS

[TO COME]

HOW WE INTEND TO USE THE PROCEEDS OF THE OFFERING

We cannot determine the actual amount of proceeds from the sale of the
shares of common stock until we complete the reorganization and stock offering.
We estimate that we will receive net proceeds from the sale of the common stock
of between $4,644,000 at the minimum of the offering range and $6,477,000 at the
maximum, of the offering range. See "Pro Forma Data" and "The Reorganization."
Assuming the sale of $6,110,000 of common stock at the midpoint of the offering
range and the purchase of 8% of the shares by the employee stock ownership plan,
the following table shows the manner in which we will use the net proceeds:

Loan to employee stock ownership plan ................... $ 488,800
Investment in stock of American Federal ................. $2,780,000
Working capital for Eagle Bancorp ....................... $2,291,200
----------
Total ................................................... $5,560,000
==========

The working capital will be initially invested by us in U.S. government
and federal agency securities, marketable securities, or a combination of both.
These funds may also be used to finance possible acquisitions among the various
financial institutions located in Montana as well as to pay dividends to
stockholders. However, there are no current agreements or arrangements regarding
such acquisitions, nor has the payment, or amount of any dividend been decided.
We may also use the net proceeds to repurchase our stock.

The funds received by American Federal from us in return for the
purchase of all of American Federal's stock will be used for general corporate
purposes, including lending and investing in securities. These funds will
increase American Federal's total capital to expand investment and support
lending and internal growth.

The net proceeds may vary because total expenses of the reorganization
may be more or less than those estimated. Payments for shares made through
withdrawals from existing American Federal deposit accounts will not result in
the receipt of new funds for investment by American Federal but will result in a
reduction of American Federal's deposits and interestexpense as funds are
transferred from interest-bearing certificates or other deposit accounts.

OUR POLICY REGARDING DIVIDENDS

We will have the authority to declare dividends on our common stock
upon completion of the offering. While we currently anticipate we will pay a
cash dividend on our common stock,

neither the amount nor the initial timing have been established and we have not
made a final determination if we will in fact declare a dividend or the amount
of any dividend. Therefore, we cannot guarantee we will in fact pay a dividend
or that we will not reduce or eliminate any dividends in the future. Dividends
will be subject to determination and declaration by our board of directors. In
making its decision, the board of directors will consider several factors,
including:

o Eagle's financial condition and results of operations;
o Eagle's long-term business plan;
o tax considerations;
o industry standards; and
o economic conditions.

The Mutual Holding Company, as a stockholder of Eagle, is entitled to
receive dividends from Eagle when and if Eagle declares dividends. The board of
directors of the Mutual Holding Company may decide to waive the receipt of
dividends in order to pay a higher dividend to the public stockholders of Eagle.
If the Mutual Holding Company elects not to waive receipt of dividends from
Eagle or if the OTS does not approve such a waiver, the amount of dividends may
be adversely affected. See "Waiver of Dividends by the Mutual Holding Company."
There can be no assurance that dividends will in fact be paid on the stock or
that, if paid, such dividends will not be reduced or eliminated in future
periods.

Eagle's ability to pay dividends also depends on the receipt of
dividends from American Federal, which is subject to a variety of regulatory
limitations on the payment of dividends. See "Regulation -- Regulation of
American Federal --Dividend and Other Capital Distribution Limitations."
Furthermore, as a condition to OTS approval of the reorganization, we have
agreed that we will not initiate any action within one year of completion of the
reorganization to pay a special distribution or a return of capital to
stockholders of Eagle. See also "Waiver of Dividends by the Mutual Holding
Company."

In addition, earnings of American Federal appropriated to bad debt
reserves and deducted for federal income tax purposes are not available for
payment of cash dividends or other distributions to stockholders without payment
of taxes at the then-current tax rate by American Federal on the amount of
earnings deemed to be removed from the reserves for such distribution. See
"Taxation" and Note 11 of American Federal's financial statements. American
Federal does not contemplate any distribution out of its bad debt reserve which
would cause such tax liability.

WAIVER OF DIVIDENDS BY THE MUTUAL HOLDING COMPANY

The board of directors of the Mutual Holding Company, prior to the
declaration of any dividends by Eagle Bancorp, will decide whether to apply to
the OTS for permission to waive the receipt of its portion of any dividends each
time Eagle Bancorp declares a dividend. Any waiver of dividends, if approved by
the OTS, will be subject to various conditions. There can be, however, no
assurances that the OTS will approve such application or if such approval is
obtained, that the Mutual Holding Company will continue to waive dividends. In
waiving

dividends, the board of directors must conclude, among other things, that a
dividend waiver by the Mutual Holding Company, which permits retention of
capital by Eagle Bancorp and American Federal, is in the best interest of the
Mutual Holding Company because, among other reasons:

o The Mutual Holding Company has no need for cash for its business
operations;

o The cash that would be received by the Mutual Holding Company
could be invested by Eagle Bancorp at a more favorable rate of
return;

o The waiver preserves the capital of American Federal and enhances
American Federal's business; and

o The waiver preserves the net worth of the Mutual Holding Company
through its principal asset (Eagle's common stock), which would
be available for distribution in the unlikely event of a
voluntary liquidation of American Federal after satisfaction of
claims of depositors, other creditors and minority stockholders.

If the Mutual Holding Company determines that the waiver of dividends
is in the best interest of the parties involved:

o The Mutual Holding Company will make prior application to the OTS
for approval to waive any dividends declared on our common stock.
An application will be made on an annual basis with respect to
any year in which the Mutual Holding Company intends to waive
such dividends.

o Dividends waived by the Mutual Holding Company will not be
available for payment to minority stockholders and will be
excluded from the capital accounts of American Federal for
purposes of calculating any dividend payments by Eagle to
minority stockholders.

o American Federal will, so long as the Mutual Holding Company
remains in existence , establish a restricted capital account in
the cumulative amount of any dividends waived by the Mutual
Holding Company for the benefit of the members of the Mutual
Holding Company. The restricted capital account would be senior
to the claims of minority stockholders of Eagle and would not
decrease even if American Federal's deposits decrease. This
restricted capital account would be added to any liquidation
account in American Federal established in connection with a
conversion of the Mutual Holding Company to stock form and would
not be available for distribution to minority stockholders.

Immediately after the reorganization, it is expected that the Mutual
Holding Company's operations will consist of activities relating to its
investment in a majority of Eagle's common stock and the investment of its
initial capitalization. In the future, the Mutual Holding Company

may accept dividends paid by Eagle to be used for other purposes, including
purchasing common stock from time to time in the open market or from Eagle, if
permitted.

MUTUAL HOLDING COMPANY CONVERSION TO STOCK FORM

Following completion of the reorganization, the Mutual Holding Company
may elect to convert to stock form in accordance with applicable laws and
regulations. The Mutual Holding Company's current directors, who will be the
initial directors of American Federal and Eagle, have no current plans to
convert the Mutual Holding Company to stock form. The terms of any conversion
cannot be determined at this time and there is no assurance when, if ever, a
conversion will occur. If the Mutual Holding Company converts to stock form,
minority stockholders will be entitled to exchange their shares of common stock
for shares of the newly converted mutual holding company in a way that is fair
and reasonable to both minority stockholders and the Mutual Holding Company. The
OTS requires that this exchange include a downward adjustment in the exchange
ratio to account for:

o the amount of waived, dividends if any; and

o assets received by the Mutual Holding Company, such as dividends
received, which will be transferred to the newly converted
company.

Further, if the Mutual Holding Company converts to stock form, any options or
other convertible securities held by any director, officer, or employee of ours,
will be convertible into the right to acquire shares of the newly converted
mutual holding company, or its successor, on the same basis as outstanding
common stock pursuant to applicable exchange ratios; provided, however, that if
these shares cannot be so converted, the holders of the options or other
convertible securities shall be entitled to receive cash equal to the fair value
of such options or convertible securities. Any exchange or redemption will be
subject to the approval of the OTS and the OTS has made no determination as to
the permissibility of any such exchange or redemption.

Although the plan of reorganization allows for such an event and other
institutions have elected to convert, there can be no assurances when, if ever,
a conversion will occur, or what conditions may be imposed by the OTS. If a
conversion does not occur, the Mutual Holding Company will always own a majority
of our common stock.

MARKET FOR THE COMMON STOCK

Neither American Federal nor Eagle have previously issued capital
stock, so we have no stockholders at this time. We anticipate that our common
stock will be quoted in the over-the-counter market on the OTC Bulletin Board,
an electronic inter-dealer market that displays real-time quotes, last sale
price and volume information, after the reorganization. A requirement for
inclusion on the OTC Bulletin board is that there be at least one market maker.
Making a market involves maintaining bid and asked quotations, being able as
principal to effect transactions in reasonable quantities at these quoted
prices, subject to various securities laws, and other regulatory requirements.
Although it is under no obligation to do so, Ryan, Beck & Co., Inc. has

stated its intention to use its best efforts to make a market in our common
stock, so long as the volume of trading and certain other market-making
conditions justify such activity. We also intend to encourage other brokerage
firms to make a market in the common stock; however, there can be no assurance
that any other firm will do so. A public trading market for the securities of
any issuer, having the desirable characteristics of depth, liquidity and
orderliness, depends upon the presence in the marketplace of both willing buyers
and willing sellers of the securities at any given time. The presence in the
marketplace of a sufficient number of buyers and sellers at any given time is a
factor over which neither Eagle nor any market marker has any control. An active
and liquid market for the stock may not develop or be maintained. Under such
circumstances, you may have difficulty selling shares on short notice.
Therefore, you should not consider the stock as a short-term investment. Trying
to sell a large number of shares at one time may also temporarily depress the
market price of the stock.

The aggregate price of the stock is based on an independent appraisal
of the pro forma market value of the stock. However, there can be no assurance
that an investor will be able to sell the stock purchased in the offering at
prices in the range of the pro forma book values of the stock or at or above the
initial purchase price of $8.00. See "Pro Forma Data" and "The Offering -- Stock
Pricing and Number of Shares to be Offered."

CAPITALIZATION

Set forth below is the historical capitalization of American Federal as
of September 30, 1999, and the pro forma capitalization of Eagle after giving
effect to the offering. The table also gives effect to the assumptions set forth
under "Pro Forma Data." A change in the number of shares sold in the offering
may materially affect the pro forma capitalization.

Eagle Bancorp Pro Forma Consolidated Capitalization
at September 30, 1999 Based On The Sale Of:
American Federal -------------------------------------------------------------------
Historical 649,188 Shares 763,750 Shares 878,313 Shares 1,010,059 Shares
Capitalization (Minimum of (Midpoint (Maximum (Maximum, as
September 30, 1999 Range) of Range) of Range) adjusted)(1)
------------------ -------------- -------------- -------------- ----------------
(In thousands)

Deposits (2) .............................. $123,804 $123,804 $123,804 $123,804 $123,804
Borrowings:
FHLB advances ........................... 8,508 8,508 8,508 8,508 8,508
Advances from borrowers
for taxes and insurance ............... 635 635 635 635 635
-------- -------- -------- -------- --------
Total deposits and borrowings ............. $132,947 $132,947 $132,947 $132,947 $132,947
======== ======== ======== ======== ========
Stockholders' equity:
Preferred stock, par value $.01,
1,000,000 shares authorized;
none issued ............................. 0 0 0 0 0
Common stock, par value $.01 per share,
10,000,000 shares authorized; shares
to be issued as reflected(3)(4) ......... 0 6 8 9 10
Additional paid-in capital(3)(5) .......... 0 5,187 6,102 7,017 8,070
Retained earnings (substantially
restricted) ............................. 14,308 14,308 14,308 14,308 14,308

Unrealized loss on available
for sale securities ..................... (233) (233) (233) (233) (233)

Less:
Common stock acquired by ESOP(3) ........ 0 (415) (489) (562) (646)
Common stock acquired by the MRP(3) ..... 0 (208) (244) (281) (323)
-------- -------- -------- -------- --------
Total stockholders' equity ................ $ 14,075 $ 18,646 $ 19,452 $ 20,259 $ 21,186
======== ======== ======== ======== ========

- ----------

(1) As adjusted to give effect to an increase in the number of shares that
could occur due to an increase in the estimated valuation range, or EVR, of
up to 15% to reflect changes in market and financial conditions prior to
the completion of the reorganization or to fill the order of the ESOP.

(2) No effect is given to possible withdrawals from deposit accounts to
purchase the common stock. Any such withdrawals will reduce pro forma
deposits by the amounts thereof.

(3) Assumes that 8% and 4% of the shares sold in the reorganization will be
purchased by the ESOP and the MRP, respectively. No shares will be
purchased by the MRP as of, or at, the time of the reorganization. It is
assumed on a pro forma basis that our MRP will be adopted by the board of
directors, approved by the stockholders at a special or annual meeting no
earlier than six months after completion of our reorganization and reviewed
by the OTS. It is assumed that the MRP will purchase common stock in the
open market in order to give an indication of its effects on
capitalization. The pro forma presentation does not show the impact of: (i)
results of operations after the reorganization; (ii) changes in market
prices of shares of the common stock after the reorganization; or (iii) a
smaller than 4% purchase by the MRP. The pro forma assumes that the funds
used to acquire the ESOP shares will be borrowed from Eagle for a ten year
term at the prime rate as published in The Wall Street Journal. For an
estimate of the impact of the ESOP on earnings, see "Pro Forma Data." We
intend to make contributions to the ESOP sufficient to service and
ultimately retire its debt. The amount of shares to be acquired by the ESOP
and the MRP is reflected as a reduction in stockholder equity. The issuance
of authorized but unissued shares for the MRP in an amount equal to 4% of
the outstanding shares of common stock will have the effect of diluting
existing stockholders' interests by 2.7%. There can be no assurance that
approval of the MRP will be obtained. See "Management of American Federal
-- Proposed Future Stock Benefit Plans."

(4) Does not reflect additional shares of common stock that possibly could be
purchased by participants in the stock option plan if implemented under
which the directors, executive officers and other employees could be
granted options to purchase an aggregate amount of common stock equal to
10% of the shares sold in the reorganization (76,375 shares at the midpoint
of the estimated value range) at exercise prices equal to the market price
of the common stock on the date of grant. Implementation of the stock
option plan will require regulatory and stockholder approval. See
"Management Of American Federal -- Proposed Future Stock Benefit Plans."

(5) Based upon estimated net proceeds of $4.64 million at the minimum of the
range, $5.56 million at the midpoint of the range, $6.48 million and the
maximum of the range and $7.53 million at the maximum of the range, as
adjusted, , less the par value of the shares sold. See "Pro Forma Data" for
assumptions used in calculating the net proceeds. Pro forma information
gives effect to the Mutual Holding Company's retention of $10,000 of net
proceeds.

-------------

HISTORICAL AND PRO FORMA CAPITAL COMPLIANCE

The following table presents American Federal's historical and pro
forma capital position relative to its capital requirements as of September 30,
1999. Pro forma capital levels assume receipt by American Federal of 50% of the
net proceeds of the offering. Pro forma capital levels are then reduced by
employee stock ownership plan purchases of stock and the MRP expected to be
adopted. For a discussion of the assumptions underlying the pro forma capital
calculations presented below, see "How We Intend to Use the Proceeds of the
Offering," "Capitalization" and "Pro Forma Data." The definitions of the terms
used in the table are those provided in the capital regulations issued by the
Office of Thrift Supervision. For a discussion of the capital standards
applicable to American Federal, see "Regulation -- Regulation of American
Federal -- Regulatory Capital Requirements."

Pro Forma at September 30, 1999
-------------------------------------------------------------------------------
1,010,059 Shares
Historical 649,188 Shares 763,750 Shares 878,313 Shares (15% above
at September 30, 1999 (Minimum of Range) (Midpoint of Range) (Maximum of Range) Maximum of Range)
--------------------- ------------------ ------------------- ------------------ ------------------
Percent Percent Percent Percent Percent
of of of of of
Amount Assets Amount(1) Assets Amount(1) Assets Amount(1) Assets Amount(1) Assets
------- ------- --------- ------- --------- ------- --------- ------- --------- -------
(Dollars in thousands)

GAAP capital ............... $14,075 9.45% $18,086 11.83% $18,892 12.29% $19,699 12.75% $20,626 13.27%

Tangible capital:
Capital level ............ $14,308 9.61 $18,319 11.98 $19,125 12.44 $19,932 12.90 $20,859 13.42
Requirement .............. 2,233 1.50 2,294 1.50 2,306 1.50 2,318 1.50 2,332 1.50
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Excess ................... $12,075 8.11% $16,025 10.48% $16,819 10.94% $17,614 11.40% $18,527 11.92%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====

Core capital:
Capital level ............ $14,308 9.61 $18,319 11.98 $19,125 12.44 $19,932 12.90 $20,859 13.42
Requirement .............. 4,467 3.00 4,587 3.00 4,611 3.00 4,635 3.00 4,663 3.00
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Excess ................... $ 9,841 6.61% $13,732 8.98% $14,514 9.44% $15,297 9.90% $16,196 10.42%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====-

Risk capital:
Capital level ............ $15,056 17.63 $19,067 22.12 $19,873 23.01 $20,680 23.90 $21,607 24.92
Requirement(2) ........... 6,833 8.00 6,897 8.00 6,910 8.00 6,923 8.00 6,938 8.00
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Excess ................... $ 8,223 9.63% $12,170 14.12% $12,963 15.01% $13,757 15.90% $14,669 16.92%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====

(1) Pro forma capital levels include the impact of the ESOP, MRP and assume
receipt by us of the net proceeds of the reorganization and the retention
of 50% of the proceeds by American Federal.

(2) Assumes reinvestment of proceeds with 20% risk weighted assets as if such
proceeds had been received and applied on September 30, 1999.

-------------

PRO FORMA DATA

The actual net proceeds from the sale of the common stock cannot be
determined until the offering is completed. However, our net proceeds are
currently estimated to be between $4.64 million and $6.48 million (or $7.53
million if the independent valuation is increased by 15%) based on the following
assumptions:

o an amount equal to 4% of the shares offered will be awarded
pursuant to the restricted stock program or, MRP adopted no
sooner than six months following the offering, through open
market purchases;

o Ryan, Beck & Co., Inc. will receive an advisory and marketing fee
of $165,000 in connection with the sale of stock in the offering.

o all shares will be sold in the subscription and community
offering.

o expenses of the offering are estimated to be $385,000, excluding
the fee paid to Ryan, Beck & Co., Inc.; and

o the Mutual Holding Company will be capitalized at approximately
$10,000, which will not be included in the assets and equity of
Eagle and American Federal.

We have prepared the following table, which sets forth American
Federal's historical net income and equity prior to the reorganization and our
pro forma consolidated net income and stockholders' equity following the
reorganization. In preparing this table and in calculating pro forma data, we
have made the following assumptions:

o Pro forma earnings have been calculated assuming the stock had
been sold at the beginning of the period and 100% of the net
proceeds had been invested at an average yield of 5.19% for the
three months ended September 30, 1999, and 5.09% for the year
ended June 30, 1999, which approximates the yield on a one-year
U.S. Treasury bill for these periods. We have used the yield on a
one-year U.S. Treasury bill, rather than an arithmetic average of
the average yield on interest-earning assets and average rate
paid on deposits to estimate income on net proceeds because we
believe that the one-year U.S. Treasury bill rate more accurately
reflects the estimate of the rate that would be obtained on an
investment of net proceeds from the offering.

o We assumed a pro forma after-tax yield on the net proceeds of
3.21% for the three months ended September 30, 1999, and 3.16%
for the year ended June 30, 1999. This was based on our effective
tax rate of 38%.

o We did not reflect any withdrawals from deposit accounts to
purchase shares in the offering.

o We calculated historical and pro forma per share amounts by
dividing historical and pro forma amounts by the indicated number
of shares of stock, as adjusted in the pro forma net earnings per
share to give effect to the purchase of shares by the employee
stock ownership plan and the anticipated issuance of shares to
the MRP.

o We calculated pro forma stockholders' equity amounts as if the
stock had been sold on September 30, 1999 and June 30, 1999.

The following pro forma data relies on the assumptions we outlined
above, and this data does not represent the fair market value of the common
stock or the current value of assets or liabilities. The pro forma data does not
predict how much we will earn in the future.

The following tables summarize historical data of American Federal and
pro forma data of Eagle at or for the three months ended September 30, 1999 and
at or for the year ended June 30, 1999, based on the assumptions set forth above
and in the tables and should not be used as a basis for projections of market
value of the stock following the reorganization. No effect has been given in the
tables to the possible issuance of additional stock pursuant to a stock option
plan that may be adopted by our board of directors and approved by the
stockholders no earlier than six months following the reorganization, nor does
book value give any effect to the bad debt reserve in liquidation. See "The
Reorganization -- Effects of Reorganization -- Liquidation Rights" and
"Management of American Federal -- Potential Stock Benefit Plans -- Stock Option
Plans."

At or for the Three Months Ended September 30, 1999
-------------------------------------------------------------------
1,010,059 Shares
649,188 Shares 763,750 Shares 878,313 Shares (Super Maximum
(Minimum of (Midpoint of (Maximum of of Range),
Range) Range) Range) as adjusted
-------------- -------------- -------------- ----------------
(Dollars in thousands, except per share amounts)

Gross proceeds ................................. $ 5,194 $ 6,110 $ 7,027 $ 8,080
Less: Estimated expenses ..................... (550) (550) (550) (550)
------- ------- ------- -------
Estimated net proceeds ......................... 4,644 5,560 6,477 7,530
Less: Common stock acquired by ESOP(1) ....... (415) (489) (562) (646)
Common stock acquired by MRP(2) ........ (208) (244) (281) (323)
------- ------- ------- -------
Net investable proceeds ........................ 4,021 4,827 5,634 6,561

Consolidated net income:
Historical ................................... 209 209 209 209
Pro forma income on net investable proceeds .. 32 39 45 53
Pro forma ESOP adjustments(1) ................ (7) (8) (9) (10)
------- ------- ------- -------
Pro forma MRP adjustments(2) ................. (7) (8) (9) (10)
------- ------- ------- -------
Pro forma net income ........................... 228 232 236 241
------- ------- ------- -------
Consolidated net income per share:
Historical ................................... 0.16 0.13 0.12 0.10
Pro forma income on net investable proceeds .. 0.02 0.02 0.03 0.03
Pro forma ESOP adjustments(1) ................ (0.00) (0.00) (0.00) (0.00)
Pro forma MRP adjustment(2) .................. (0.00) (0.00) (0.00) (0.00)
------- ------- ------- -------
Pro forma net income per share ................. 0.17 0.15 0.13 0.12
------- ------- ------- -------

Consolidated stockholders' equity:
Historical ................................... 14,065 14,065 14,065 14,065
Estimated net investable proceeds(2) ......... 4,644 5,560 6,477 7,530
Less: Common stock acquired by ESOP(1) ....... (415) (489) (562) (646)
Common stock acquired by MRP(2) ........ (208) (244) (281) (323)
------- ------- ------- -------
Pro forma stockholders' equity(3) .............. 18,086 18,892 19,699 20,627

Consolidated stockholders' equity per share:
Historical ................................... 10.18 8.66 7.53 6.54
Estimated net investable proceeds(2) ......... 3.36 3.42 3.47 3.50
Less: Common stock acquired by ESOP(1) ....... (0.30) (0.30) (0.30) (0.30)
Common stock acquired by MRP(2) ........ (0.15) (0.15) (0.15) (0.15)
------- ------- ------- -------
Pro forma stockholders' equity per share(3) .... 13.09 11.63 10.54 9.60

Offering price as a percentage of pro forma
stockholders' equity per share(4) ............ 61.10% 68.81% 75.89% 83.35%
Offering price as a multiple of pro forma
net income per share(4) ...................... 11.71 13.53 15.30 17.23

(1) Assumes 8% of the shares sold in the reorganization are purchased by the
ESOP, and that the funds used to purchase such shares are borrowed from
Eagle. The approximate amount expected to be borrowed by the ESOP is not
reflected as a liability but is reflected as a reduction of capital. We
intend to make annual contributions to the ESOP over a ten year period in
an amount at least equal to the principal and interest requirement of the
debt. The pro forma net income assumes: (i) that 51,935, 61,100, 70,265 and
80,805 shares at the minimum, mid-point, maximum and maximum, as adjusted,
of the estimated value range, or EVR, were committed to be released during
the three months ended September 30, 1999, at an average fair value of
$8.00 per share in accordance with Statement of Position ("SOP") 93-6 of
the American Institute of Certified Public Accountants; (ii) the effective
tax rate was 38% for the period; and (iii) only the ESOP shares committed
to be released were considered outstanding for purposes of the per share
net earnings. The pro forma stockholders' equity per share calculation
assumes all ESOP shares were outstanding, regardless of whether such shares
would have been released. Because we will be providing the ESOP loan, only
principal payments on the ESOP loan are reflected as employee compensation
and benefits expense. As a result, to the extent the value of the shares
appreciates over time, compensation expense related to the ESOP will
increase. For purposes of the preceding tables, it was assumed that a
ratable portion of the ESOP shares purchased in the reorganization were
committed to be released during the periods ended September 30, 1999. If it
is assumed that all of the ESOP shares were included in the calculation of
earnings per share for the period ended September 30, 1999, earnings per
share would have been $0.17, $0.15, $0.13 and $0.12 for the period then
ended, based on the sale of shares at the minimum, midpoint, maximum and
the maximum, as adjusted, of the EVR. See "Management -- Employee Stock
Ownership Plan."

(2) Assumes issuance to the MRP of 25,968, 30,550, 35,133, and 40,402 at the
minimum, mid-point, maximum, and maximum, as adjusted, of the EVR. The
assumption in the pro forma calculation is that (i) shares were purchased
by us following the reorganization, (ii) the purchase price for the shares
purchased by the MRP was equal to the purchase price of $8.00 per share and
(iii) 20% of the amount contributed was an amortized expense during such
period. Such amount does not reflect possible increases or decreases in the
value of such stock relative to the purchase price. As we accrue
compensation expense to reflect the five year vesting period of such shares
pursuant to the MRP, the charge against capital will be reduced
accordingly. Implementation of the MRP within one year of reorganization
will require regulatory and stockholder approval at a meeting of our
stockholders to be held no earlier than six months after the
reorganization. For purposes of this table, it is assumed that the MRP will
be adopted by the board of directors, reviewed by the OTS, and approved by
the stockholders, and that the MRP will purchase the shares in the open
market within the year following the reorganization. If the shares to be
purchased by the MRP are assumed at October 1, 1999, to be newly issued
shares purchased from us by the MRP at $8.00, at the minimum, midpoint,
maximum and maximum, as adjusted, of the EVR, pro forma stockholders'
equity per share would have been $12.66, $11.19, 10.11 and $9.17 and pro
forma earnings per share would have been $0.17, $0.14, $0.13 and $0.11, for
the three months ended September 30, 1999. As a result of the MRP,
stockholders' interests will be diluted by approximately 2.7%. See
"Management -- Proposed Future Stock Benefit Plans."

(3) No effect has been given to the stock option plan. We intend to adopt the
option plan, which if implemented within one year of reorganization would
be subject to regulatory review and Board of Director and stockholder
approval, and that such plan would be considered and voted upon at a
meeting of our stockholders to be held no earlier than six months after the
reorganization. Under the stock option plan, employees and directors could
be granted options to purchase an aggregate amount of shares equal to 10%
of the shares issued in the reorganization at an exercise price equal to
the market price of the shares on the date of grant. In the event the
shares issued under the stock option plan were awarded and exercised, the
interests of existing stockholders would be diluted.

(4) Assuming 100% of the outstanding common stock of Eagle Bancorp is issued to
the public rather than 47% the offering price, as a percentage of pro forma
stockholders' equity per share, would be 47.53% at the minimum of the EVR,
52.07% at the midpoint of the EVR, 56.03% at the maximum of the EVR, and
60.00% at 15% above the maximum of the EVR, and the ratio of the offering
price as a multiple of pro forma net income per share would be 10.05 at the
minimum of the EVR, 11.42 at the midpoint of the EVR range, 12.70 at the
maximum of the EVR, and 14.09 at 15% above the maximum of the EVR.

At or for the Year Ended June 30, 1999
-------------------------------------------------------------------
1,010,059 Shares
649,188 Shares 763,750 Shares 878,313 Shares (Super Maximum
(Minimum of (Midpoint of (Maximum of of Range),
Range) Range) Range) as adjusted
-------------- -------------- -------------- ----------------
(Dollars in thousands, except per share amounts)

Consolidated net income:
Historical ................................... 1,252 1,252 1,252 1,252
Pro forma income on net investable proceeds .. 127 153 178 207
Pro forma ESOP adjustments(1) ................ (26) (30) (35) (40)
Pro forma MRP adjustments(2) ................. (26) (30) (35) (40)
------- ------- ------- -------
Pro forma net income ........................... 1,327 1,345 1,360 1,379
------- ------- ------- -------
Consolidated net income per share:
Historical ................................... 0.94 0.80 0.69 0.60
Pro forma income on net investable proceeds .. 0.10 0.10 0.10 0.10
Pro forma ESOP adjustments(1) ................ (0.02) (0.02) (0.02) (0.02)
Pro forma MRP adjustment(2) .................. (0.02) (0.02) (0.02) (0.02)
------- ------- ------- -------
Pro forma net income per share ................. 0.99 0.86 0.75 0.66
------- ------- ------- -------

Consolidated stockholders' equity:(3)
Historical ................................... 13,884 13,884 13,884 13,884
Estimated net investable proceeds(2) ......... 4,644 5,560 6,477 7,530
Less: Common stock acquired by ESOP(1) ....... (415) (489) (562) (646)
Common stock acquired by MRP(2) ........ (208) (244) (281) (323)
------- ------- ------- -------
Pro forma stockholders' equity(3) .............. 17,905 18,711 19,518 20,445

Consolidated stockholders' equity per share:(3)
Historical ................................... 10.05 8.54 7.43 6.46
Estimated net investable proceeds(2) ......... 3.36 3.42 3.47 3.50
Less: Common stock acquired by ESOP(1) ....... (0.30) (0.30) (0.30) (0.30)
Common stock acquired by MRP(2) ........ (0.15) (0.15) (0.15) (0.15)
------- ------- ------- -------
Pro forma stockholders' equity per share(3) .... 12.96 11.51 10.44 9.51

Offering price as a percentage of pro forma
stockholders' equity per share(4) ............ 61.71% 69.48% 76.60% 84.09%
Offering price as a multiple of pro forma
net income per share(4) ...................... 8.05 9.34 10.62 12.05

(1) Assumes 8% of the shares sold in the reorganization are purchased by the
ESOP, and that the funds used to purchase such shares are borrowed from
Eagle. The approximate amount expected to be borrowed by the ESOP is not
reflected as a liability but is reflected as a reduction of capital. We
intend to make annual contributions to the ESOP over a ten year period in
an amount at least equal to the principal and interest requirement of the
debt. The pro forma net income assumes: (i) that 51,935, 61,100, 70,265 and
80,805 shares at the minimum, mid-point, maximum and maximum, as adjusted,
of the estimated valuation range, or EVR, were committed to be released
during the year ended June 30, 1999, , at an average fair value of $8.00
per share in accordance with Statement of Position ("SOP") 93-6 of the
American Institute of Certified Public Accountants; (ii) the effective tax
rate was 38% for the period; and (iii) only the ESOP shares committed to be
released were considered outstanding for purposes of the per share net
earnings. The pro forma stockholders' equity per share calculation assumes
all ESOP shares were outstanding, regardless of whether such shares would
have been released. Because we will be providing the ESOP loan, only
principal payments on the ESOP loan are reflected as employee compensation
and benefits expense. As a result, to the extent the value of the shares
appreciates over time, compensation expense related to the ESOP will
increase. For purposes of the preceding tables, it was assumed that a
ratable portion of the ESOP shares purchased in the reorganization were
committed to be released during the period ended June 30, 1999. If it is
assumed that all of the ESOP shares were included in the calculation of
earnings per share for the period ended June 30, 1999, earnings per share
would have been $0.99, $0.85, $0.75, and $0.66, for the period then ended,
based on the sale of shares at the minimum, midpoint, maximum and the
maximum, as adjusted, of the EVR. See "Management --Employee Stock
Ownership Plan."

(2) Assumes issuance to the MRP of 25,968, 30,550, 35,133 and 40,402 at the
minimum, mid-point, maximum, and maximum, as adjusted, of the EVR. The
assumption in the pro forma calculation is that (i) shares were purchased
by us following the reorganization, (ii) the purchase price for the shares
purchased by the MRP was equal to the purchase price of $8.00 per share and
(iii) 20% of the amount contributed was an amortized expense during such
period. Such amount does not reflect possible increases or decreases in the
value of such stock relative to the purchase price. As we accrue
compensation expense to reflect the five year vesting period of such shares
pursuant to the MRP, the charge against capital will be reduced
accordingly. Implementation of the MRP within one year of reorganization
will require regulatory and stockholder approval at a meeting of our
stockholders to be held no earlier than six months after the
reorganization. For purposes of this table, it is assumed that the MRP will
be adopted by the board of directors, reviewed by the OTS, and approved by
the stockholders, and that the MRP will purchase the shares in the open
market within the year following the reorganization. If the shares to be
purchased by the MRP are assumed at October 1, 1999, to be newly issued
shares purchased from us by the MRP at $8.00, at the minimum, midpoint,
maximum and maximum, as adjusted, of the EVR, pro forma stockholders'
equity per share would have been $12.53, $11.09, $10.00 and $9.09, and pro
forma earnings per share would have been $0.96, $0.82, $0.72 and $0.64 for
the year ended June 30, 1999. As a result of the MRP, stockholders'
interests will be diluted by approximately 2.7%. See "Management --
Proposed Future Stock Benefit Plans."

(4) Assuming 100% of the outstanding common stock of Eagle Bancorp is issued to
the public rather than 47%, the offering price, as a percentage of pro
forma stockholders' equity per share, would be 47.55% at the minimum of the
EVR, 52.09% at the midpoint of the EVR, 56.05% at the maximum of the EVR,
and 60.02% at 15% above the maximum of the EVR, and the ratio of the
offering price as a multiple of pro forma net income per share would be
7.16 at the minimum at the EVR, 8.22 at the midpoint of the EVR, 9.24 at
the maximum of the EVR, and 10.34 at 15% above the maximum of the EVR.

-------------

THE REORGANIZATION

The board of directors of American Federal has adopted a plan
authorizing the reorganization and the offering, subject to the approval of the
OTS and by a majority of the votes cast by the members (depositors and certain
borrowers) of American Federal as of the voting record date ______________,
2000, at a special meeting of members to be held on _______________ and the
satisfaction of certain other conditions. OTS approval, however, does not mean
the OTS recommends or endorses American Federal's plan to reorganize.

General

On September 16, 1999, the board of directors of American Federal
adopted the plan of reorganization and stock issuance, pursuant to which
American Federal plans to reorganize from a federally-chartered mutual savings
bank to a federally-chartered stock savings bank. American Federal will be a
wholly owned subsidiary of Eagle, the majority of whose common stock will be
owned by the Mutual Holding Company. The plan was approved in amended and
restated form on December 7, 1999, by the board of directors of American
Federal. Concurrently with the reorganization, Eagle will sell a minority
percentage of its common stock in the offering to American Federal's members and
the general public. The board of directors unanimously adopted the plan after
considering the advantages and disadvantages of the reorganization, the offering
and alternative transactions, including a full conversion from the mutual to the
stock form of organization.

After receipt of all the required regulatory approvals, the approval of
the plan by American Federal's members and the satisfaction of all other
conditions precedent to the reorganization, American Federal will effect the
reorganization as follows or in any other manner that is consistent with
applicable federal law and regulations and the intent of the plan of
reorganization.

o by exchanging its federal mutual savings bank charter for a
federal stock savings bank charter and becoming a 100% owned
subsidiary of Eagle. Eagle will then become a majority owned
subsidiary of the Mutual Holding Company, and the depositors of
American Federal will receive liquidation interests in the Mutual
Holding Company similar to their liquidation interests in
American Federal before the reorganization; or

o in any other manner consistent with the plan of reorganization
and applicable regulations. See "-- Description of the
Reorganization."

When the reorganization and the offering are complete, Eagle will begin
business as a savings bank holding company, American Federal will continue its
business in its new form, as a federally-chartered stock savings bank, and the
Mutual Holding Company will begin business as

the 53% owner of Eagle's outstanding stock. The reorganization will be completed
according to American Federal's plan, applicable laws and regulations, and the
policies of the OTS. For additional information concerning the offering, see
"The Offering."

Purposes of the Reorganization

The board of directors of American Federal determined the
reorganization to be in the best interests of American Federal and has several
business purposes for the reorganization, including, but not limited to the
following:

o the reorganization will convert American Federal to the stock
form, a structure which is used by commercial banks, most major
business corporations and an increasing number of savings
institutions.

o the reorganization will allow Eagle to issue stock, which is a
source of capital for our organization. This source of capital is
not available to mutual savings institutions and will increase
our strong capital base to support increased lending and
investments.

o the reorganization will enable American Federal to achieve
certain benefits of a stock company without the loss of control
that sometimes follows full mutual to stock conversions. The
benefits of American Federal's mutual form of ownership will be
preserved in the Mutual Holding Company. The Mutual Holding
Company must continue to control at least a majority of Eagle's
outstanding stock so long as it remains a mutual institution.

o American Federal is committed to being an independent,
community-oriented institution, and the board of directors
believes that the mutual holding company structure is best suited
for this purpose. Unlike a full mutual-to-stock conversion, the
reorganization will not result in our organization becoming a
fully public company. The Mutual Holding Company must own at
least a majority of Eagle's outstanding voting stock, as long as
it remains a mutual institution, meaning that it has no
stockholders. As a result of the Mutual Holding Company's
majority ownership, Eagle can remain independent. Following a
full conversion, some locally based, independent savings
institutions have been acquired by larger, regional financial
institutions. Acquisitions can result in closed branches, fewer
choices for consumers, employee layoffs and the loss of community
support and involvement by a financial institution.

o because of the Mutual Holding Company's required ownership
interest, only a minority of our to-be outstanding shares must be
offered for sale, whereas, in a full conversion, all shares must
be sold. Selling all of our to-be outstanding shares would
substantially increase net proceeds and, because we would have
much more capital, would make it more difficult to achieve a
desirable return

on equity. Subject to the Mutual Holding Company's required
majority ownership interest, Eagle will have the flexibility to
sell additional common stock in the future.

o the reorganization will not preclude the Mutual Holding Company
from converting to the fully public stock form in the future
subject to member and regulatory approvals.

o the mutual holding company structure will provide the additional
flexibility to allow American Federal to diversify its business
activities through newly formed subsidiaries, holding company
activities, or through acquisitions of, or mergers with other
financial institutions, as well as other companies. Although
American Federal has no current arrangements, understandings or
agreements regarding any such opportunities, Eagle will be in a
position after the reorganization and offering, subject to
regulatory limitations and Eagle's financial position, to take
advantage of any such opportunities that may arise.

o reorganization will enable American Federal to achieve certain
benefits of a stock company, such as stock-related benefit plans,
which will help us to attract and retain qualified personnel.

Eagle is offering for sale up to 47% of its to be issued common stock
at an aggregate dollar amount based on an independent appraisal. Proceeds from
the sale of common stock of Eagle will provide American Federal with new equity
capital, which will support future growth and expanded operations. While
American Federal currently exceeds all regulatory capital requirements, new
equity capital, coupled with the accumulation of future earnings from year to
year, represents a means for the orderly preservation and expansion of American
Federal's capital base, and allows flexibility to respond to sudden and
unanticipated capital needs. The investment of the net proceeds of the offering
also will provide additional income.

The ability of Eagle to issue stock also will enable it to establish
stock benefit plans for management and employees of Eagle and American Federal,
including incentive stock option plans, stock award plans, and an employee stock
ownership plan.

The board of directors believes that these advantages outweigh the
potential disadvantages of the mutual holding company structure, which include:

o the inability of Eagle to sell to the public shares of common
stock representing 50% or more of its total outstanding shares so
long as the Mutual Holding Company remains in existence;

o the more limited liquidity of the stock, as compared to a full
mutual-to-stock conversion where all shares are sold to the
public; and

o the inability of public stockholders to obtain a majority
ownership of Eagle, which may result in the perpetuation of the
existing management

and board of directors of Eagle and American Federal and may
prevent minority stockholders from participating in transactions
such as the acquisition of Eagle by another financial institution
that they would approve.

The Mutual Holding Company will be able to elect all members of the
board of directors of Eagle, and will be able to control the outcome of all
matters presented to the stockholders of Eagle for resolution by vote, except
for matters which by regulation must be approved by a majority of the shares
owned by persons other than the Mutual Holding Company, including certain
matters relating to stock compensation plans and certain votes regarding a
conversion to stock form by the Mutual Holding Company. No assurance can be
given that Eagle will not take action adverse to the interests of the minority
stockholders. For example, Eagle can revise the dividend policy, prevent the
sale of control of Eagle or defeat a candidate for the board of directors of
Eagle or other proposals made by the minority stockholders.

Description of the Reorganization

After receiving all of the required approvals from the government
agencies that regulate us and the approval of the plan of reorganization by
American Federal's members, the reorganization will be completed in a manner
approved by the OTS that is consistent with the purposes of the plan of
reorganization as amended and applicable laws and regulations. American
Federal's intention is to complete the reorganization using a series of mergers,
although it may elect to use any method consistent with applicable regulations,
subject to OTS approval.

For a detailed description of the merger structure, see "-- Federal and
State Tax Consequences of the Reorganization." After the reorganization, the
legal existence of American Federal will not terminate, the converted stock bank
will be a continuation of American Federal and all property of American Federal,
including its right, title, and interest in and to all property of any kind and
nature, interest and asset of every conceivable value or benefit then existing
or pertaining to American Federal, or which would inure to American Federal
immediately by operation of law and without the necessity of any conveyance or
transfer and without any further act or deed, will continue to be owned by
American Federal as the survivor of the merger. American Federal will possess,
hold and enjoy the same in its right and fully and to the same extent as the
same was possessed, held and enjoyed by American Federal. American Federal will
continue to have, succeed to, and be responsible for all the rights,
liabilities, and obligations of American Federal and will maintain its
headquarters operations at American Federal's present location.

The foregoing description of the reorganization is qualified in its
entirety by reference to the plan and the charter and bylaws of American
Federal, the Mutual Holding Company and Eagle to be effective after the
reorganization.

Effects of the Reorganization

General. The reorganization will not have any effect on American
Federal's present business of accepting deposits and investing its funds in
loans and other investments permitted by law. The reorganization will not result
in any change in the existing services provided to depositors and borrowers, or
in existing offices, management, and staff. After the reorganization, American
Federal will continue to be subject to regulation, supervision, and examination
by the OTS and the FDIC.

Deposits and Loans. Each holder of a deposit account in American
Federal at the time of the reorganization will continue as an account holder in
American Federal after the reorganization, and the reorganization will not
affect the deposit balance, interest rate, or other terms of such accounts. Each
such account will be insured by the FDIC to the same extent as before the
reorganization. Depositors will continue to hold their existing certificates,
passbooks, checkbooks, and other evidence of their accounts. The reorganization
will not affect the loans of any borrower from American Federal. The amount,
interest rate, maturity, security for, and obligations under each loan will
remain contractually fixed as they existed prior to the reorganization. See "--
Voting Rights" and "-- Liquidation Rights" below for a discussion of the effects
of the reorganization on the voting and liquidation rights of the depositors and
borrowers of American Federal.

Voting Rights. As a federally chartered mutual savings bank, American
Federal has no authority to issue capital stock and thus it has no stockholders.
Control of American Federal in its mutual form is vested in the board of
directors of American Federal. The directors are elected by American Federal's
members. Holders of deposits in American Federal and borrowers of American
Federal whose loans were outstanding on April 18, 1991, which remain outstanding
are members of American Federal. In the consideration of all questions requiring
action by members of American Federal, each holder of a qualifying deposit is
permitted to cast one vote for each $100, or fraction thereof, of the withdrawal
value of the voting depositor's account. Voting borrowers are entitled to cast
one vote. No member may cast more than 1,000 votes.

After the reorganization and stock issuance, depositor and certain
borrower members of American Federal will have no voting rights in American
Federal or Eagle. For this reason, they will be unable to elect directors of
American Federal or Eagle or to control their affairs. After the reorganization,
the affairs of American Federal will still be under the direction of the board
of directors of American Federal but all voting rights as to American Federal
will be vested exclusively in Eagle, the holder of all the outstanding voting
capital stock of American Federal. Eagle will elect American Federal's board of
directors who will direct the business of American Federal. By virtue of its
ownership of a majority of the outstanding shares of common stock of Eagle, the
Mutual Holding Company will be able to elect all members of the board of
directors of Eagle and generally will be able to control the outcome of most
matters presented to the stockholders of Eagle for resolution by vote, excluding
certain matters where shares held by the Mutual Holding Company are not counted.
The common stock of Eagle held by the Mutual Holding Company and public
stockholders is separate and apart from any deposit accounts in American
Federal, and cannot be and is not insured by the FDIC or any other government
agency.

The Mutual Holding Company will be controlled by its board of
directors, which will initially consist of the current directors of American
Federal. The Mutual Holding Company will have no stockholders. All members of
American Federal at the time of the reorganization will become members of and
have voting rights transferred to the Mutual Holding Company. The directors of
the Mutual Holding Company will be elected by its members, which could allow the
current management of the Mutual Holding Company, Eagle and American Federal to
maintain control over these companies indefinitely.

Liquidation Rights. In the unlikely event of a complete liquidation of
American Federal in its present mutual form, existing holders of deposit
accounts of American Federal would be entitled to share in a liquidating
distribution of any assets of American Federal remaining after the payment of
claims of all creditors, including the claims of all deposit account holders,
are satisfied. Each account holder's pro rata share of such liquidating
distribution would be in the same proportion as the value of his or her deposit
accounts was to the total value of all deposit accounts in American Federal at
the time of liquidation.

After a complete liquidation of American Federal following the
reorganization, Eagle, as holder of American Federal's common stock, would be
entitled to any assets remaining after a liquidation or dissolution of American
Federal. No depositor, except as discussed below, would have a claim to the
assets of American Federal. However, after a voluntary or involuntary
liquidation, dissolution or winding up of the Mutual Holding Company after the
reorganization, each depositor would have a claim up to the pro rata value of
his or her accounts, in the assets of the Mutual Holding Company remaining after
the claims of the creditors of the Mutual Holding Company are satisfied.
Depositors who have liquidation rights in American Federal immediately prior to
the reorganization will continue to have such rights in the Mutual Holding
Company after the reorganization for so long as they maintain deposit accounts
in American Federal after the reorganization.

After a complete liquidation of Eagle, each holder of shares of the
common stock would be entitled to receive a pro rata share of Eagle's assets,
following payment of all debts, liabilities and claims of greater priority of or
against Eagle.

Stockholders of Eagle would have no liquidation or other rights with
respect to the Mutual Holding Company unless they are also depositors of
American Federal.

Federal and State Tax Consequences of the Reorganization

The reorganization may be completed in any manner approved by the OTS
that is consistent with the purposes of the plan and applicable laws,
regulations, and policies. However, American Federal intends to complete the
reorganization using a series of mergers as described below. This structure
allows American Federal to retain all of its historical tax attributes and
produces significant savings to American Federal because it simplifies
regulatory approvals and conditions associated with the reorganization.

The reorganization will be completed as follows:

o American Federal will organize the Mutual Holding Company
initially as a temporary federal stock institution;

o the Mutual Holding Company will then organize a stock corporation
under federal law (i.e., Eagle) as its 100% owned subsidiary; and

o the Mutual Holding Company will also organize a temporary federal
stock institution as its 100% owned subsidiary;

The following transactions will then occur simultaneously:

o American Federal will exchange its charter for a federal stock
savings institution charter;

o the Mutual Holding Company's 100% owned temporary federal stock
institution will merge with and into American Federal, with
American Federal surviving;

o the initially issued stock of American Federal, which will be
constructively received by former members of American Federal
when American Federal becomes a stock institution, will initially
be issued to the Mutual Holding Company in exchange for
liquidation interests in the Mutual Holding Company which will be
held by American Federal's members;

o the Mutual Holding Company will then contribute 100% of the stock
of American Federal to Eagle which will be a wholly owned
subsidiary of the Mutual Holding Company; and

o Eagle will subsequently offer for sale 47% of its common stock
pursuant to the plan of reorganization.

As a result of these transactions: (a) American Federal will be a
wholly owned subsidiary of Eagle; (b) Eagle will be a majority-owned subsidiary
of the Mutual Holding Company; and (c) the former depositors of American Federal
will hold liquidation interests in the Mutual Holding Company.

Under this structure: (1) the reorganization is intended to be a
tax-free reorganization under Code section 368(a)(1)(F); and (2) the exchange of
the shares of American Federal's initial common stock deemed constructively
received by American Federal's depositors for liquidation interests in the
Mutual Holding Company is intended to be a tax-free exchange under Code section
351.

The reorganization is conditioned on, among other things, the prior
receipt by American Federal of either a private letter ruling from the IRS and
from the federal taxing authorities or an opinion of American Federal's counsel
as to the federal and Montana income tax consequences of the reorganization to
American Federal (in both its mutual and stock form), Eagle and the Eligible
Account Holders and Supplemental Account Holders. In Revenue Procedure 99-3, the
IRS announced that it will not rule on whether a transaction qualifies as a
tax-free reorganization under Code section 368(a)(1)(F) or as a tax-free
exchange of stock for stock in the formation of a holding company under Code
section 351, but that it will rule on significant sub-issues that must be
resolved to determine whether the transaction qualifies under either of these
Code sections.

Nixon Peabody LLP has issued its opinion regarding certain federal
income tax consequences of the reorganization. In the following discussion,
"Mutual Bank" refers to American Federal before the reorganization and "Stock
Bank" refers to American Federal after the reorganization.

With regard to the reorganization, Nixon Peabody LLP has issued an
opinion that:

o the reorganization will constitute a reorganization under Code
section 368(a)(1)(F), and American Federal (in either its status
as Mutual Bank or Stock Bank) will recognize no gain or loss as a
result of the reorganization;

o the basis of each asset of Mutual Bank received by Stock Bank in
the reorganization will be the same as Mutual Bank's basis for
such asset immediately prior to the reorganization;

o the holding period of each asset of Mutual Bank received by Stock
Bank in the reorganization will include the period during which
such asset was held by Mutual Bank prior to the reorganization;

o for purposes of Code section 381(b), Stock Bank will be treated
as if there had been no reorganization and, accordingly, the
taxable year of the Mutual Bank will not end on the effective
date of the reorganization and the tax attributes of Mutual Bank
(subject to application of Code sections 381, 382, and 384) will
be taken into account by Stock Bank as if the reorganization had
not occurred;

o Mutual Bank's qualifying depositors will recognize no gain or
loss upon their constructive receipt of shares of Stock Bank
common stock solely in exchange for their interest (i.e.,
liquidation rights) in Mutual Bank; and no gain or loss will be
recognized by depositors of Mutual Bank upon the issuance to them
of deposits in Stock Bank in the same dollar amount as their
deposits in the Mutual Bank.

Unlike private rulings of the IRS, an opinion of counsel is not binding
on the IRS and the IRS could disagree with conclusions reached therein. Further,
the opinion is based on the

Internal Revenue Code, regulations now in effect or proposed, current
administrative rulings and practice and judicial authority, all of which are
subject to change and any change may be made with retroactive effect.
Additionally, if the IRS disagrees with our attorney's opinion, there is no
guarantee that the IRS would not prevail in a judicial or administrative
proceeding.

Anderson ZurMuehlen & Co., P.C. has issued an opinion, subject to the
limitations and qualifications in its opinion, that, for purposes of the Montana
corporate income tax, the reorganization will not become a taxable transaction
to American Federal (in either its status as Mutual Bank or Stock Bank), the
Mutual Holding Company, Eagle, the stockholders of the Stock Bank or the
depositors of American Federal. This opinion is not binding on the Montana
taxing authorities and these taxing authorities could disagree with the
conclusions reached in the opinion of Anderson ZurMuehlen & Co., P.C.

Eagle and American Federal have received a letter from Feldman
Financial Advisors, stating its belief that the subscription rights to be
received by members of American Federal do not have any value, based on the fact
that these rights are acquired by the recipients without cost, are
nontransferable and of short duration, and give the recipients the right only to
purchase the common stock at a price equal to its estimated fair market value,
which will be the same price as the purchase price for the unsubscribed shares
of common stock. If the subscription rights granted to eligible subscribers are
deemed to have an ascertainable value, receipt of these rights would be taxable
only to those eligible subscribers who exercise the subscription rights, either
as a capital gain or ordinary income, in an amount equal to such value, and
Eagle and American Federal could recognize gain on any distribution. Eligible
subscribers are encouraged to consult with their own tax advisor as to the tax
consequence in the event that subscription rights are deemed to have an
ascertainable value. Unlike private rulings, the letter of Feldman Financial
Advisors is not binding on the IRS, and the IRS could disagree with conclusions
reached in the letter. In the event of any disagreement, there can be no
assurance that the IRS would not prevail in judicial or administrative
proceeding.

Accounting Consequences

The reorganization will be accounted for in a manner similar to a
pooling-of-interests under Generally Accepted Accounting Principles or GAAP.
Accordingly, the carrying value of American Federal's assets, liabilities, and
capital will be unaffected by the reorganization and will be reflected in
Eagle's and American Federal's consolidated financial statements based on their
historical amounts.

Conditions to the Reorganization

Before we can complete the reorganization, Eagle and American Federal
must receive all the required approvals from the government agencies that
regulate us, including various approvals or non-objections from the OTS. The
receipt of such approvals or non-objections from the OTS does not constitute a
recommendation or endorsement of the plan of reorganization by the OTS.
Consummation of the reorganization also is subject to approval of the plan by a
majority of the total votes of members cast at a special meeting called for the

purpose of approving the plan, as well as the receipt of satisfactory rulings or
opinions with respect to the tax consequences of the reorganization, as
discussed under "-- Federal and State Tax Consequences" above. The board of
directors may decide to consummate the reorganization even if the offering is
terminated. If this happens the Mutual Holding Company will own all the stock of
Eagle and Eagle will own all the stock of American Federal. Eagle, subject to
regulatory approvals, would have the right to hold a new offering in the future.

Capital and Financial Resources of the Mutual Holding Company

The Mutual Holding Company will be capitalized with up to $200,000 in
the reorganization. After the reorganization, the Mutual Holding Company's
capital and financial resources will initially depend on the earnings from the
investment of its initial capitalization and future dividends from Eagle. The
payment of dividends by Eagle will be subject to declaration by Eagle's board of
directors. See "Our Policy Regarding Dividends."

Additional financial resources also may be available to the Mutual
Holding Company through Eagle's additional stock or debt offerings, or from
borrowings from an unaffiliated lender or lenders. In connection with any such
borrowings, the Mutual Holding Company could grant a security interest in the
assets of the Mutual Holding Company, including the common stock held by the
Mutual Holding Company. However, a mutual holding company generally may not
pledge the stock of a subsidiary savings bank and may not be able to pledge the
stock of Eagle unless the proceeds of the loan secured by the pledge are infused
into the institution whose stock is pledged and the OTS is notified of such
pledge within 10 days thereafter. Any borrowings of the Mutual Holding Company
would be serviced with available resources, which initially will consist of
dividends from Eagle, subject to applicable regulatory and tax considerations.

Amendment or Termination of the Plan of Reorganization

If deemed necessary or desirable by the board of directors of American
Federal, the plan may be amended by a vote of American Federal's board of
directors, with the concurrence of the OTS, at any time prior to or after
submission of the plan to members of American Federal for approval. The plan may
be terminated by the board of directors of American Federal at any time prior to
or after approval by the members, by a vote with the concurrence of the OTS.

Management of the Mutual Holding Company

After the reorganization, the Mutual Holding Company will operate under
essentially the same mutual organization structure as was previously applicable
to American Federal. Directors of the Mutual Holding Company will be classified
into three classes as equal in size as is possible, with one of such classes
being elected on an annual basis for three-year terms by the board of directors
of the Mutual Holding Company. All current members of the board of directors of
American Federal will be the initial members of the board of directors of the
Mutual

Holding Company. For information about these persons, whose terms as directors
of the Mutual Holding Company will be the same as their terms as directors of
American Federal, see "Management." The initial executive officers of Eagle will
be persons who are executive officers of American Federal immediately before the
reorganization.

It is not anticipated that the directors and executive officers of the
Mutual Holding Company will receive separate compensation in their capacities as
such until such time as such persons devote significant time to the separate
management of the Mutual Holding Company's affairs, which is not expected to
occur unless the Mutual Holding Company becomes actively involved in other
investments. The Mutual Holding Company, however, may determine that such
compensation is appropriate in the future.

THE OFFERING

General. Concurrently with the reorganization, we, are offering shares
of common stock to persons other than the Mutual Holding Company. We are
offering between a minimum of 649,188 shares and an anticipated maximum of
878,313 shares of common stock in the offering (subject to adjustment to up to
1,010,059 shares if our estimated pro forma market value has increased at the
conclusion of the offering). The offering will expire at _______ p.m., Montana
time, on March ___________, 2000, unless extended. The shares of common stock
that will be sold in the offering will constitute 47% of the shares that will be
outstanding after completion of the offering. The minimum purchase is 25 shares
of common stock (minimum investment of $200). Our common stock is being offered
at a fixed price of $8.00 per share in the offering.

Subscription funds may be held by American Federal for up to 45 days
after the last day of the subscription offering in order to consummate the
reorganization and offering and thus, all orders will be irrevocable until May
____, 2000. The reorganization and offering may not be completed until American
Federal receives approval from the OTS. If the OTS does not issue a letter of
approval within 45 days after the last day of the subscription offering, or in
the event the OTS requires a material change to the offering prior to the
issuance of its approval or we have not received orders for at least ___________
shares by May ____, 2000, we may decide to extend the offering. In that case, we
will resolicit subscribers giving them the right to modify or rescind their
subscriptions and to have their subscription funds returned with interest at
American Federal's passbook rate and withdrawal authorizations from deposit
accounts will be canceled.

We may cancel the offering at any time, in which case, we will return
funds and cancel withdrawal authorizations and subscriptions, as described
above.

Conduct of the Offering

Subject to the limitations of the plan, shares of common stock are
being offered in descending order of priority in the subscription offering to:

o Depositors who held aggregate deposit accounts of at least $50
dollars with us on June 30, 1998 (Eligible Account Holders);

o The American Federal employee stock ownership plan;

o Depositors who are not Eligible Account Holders and who held
aggregate deposit accounts of at least $50 dollars with us on
December 31, 1999 (Supplemental Eligible Account Holders); and

o Other members of American Federal Savings Bank on ________, 2000,
including borrowers as of ____________, 1999, whose borrowing was
also outstanding on April 18, 1991 (Other Members).

To the extent that shares remain available and subject to market
conditions during or at the completion of the subscription offering, we will
conduct a community and/or syndicated community offering.

Subscription Offering

Subscription Rights. Non-transferable rights to subscribe for the
purchase of common stock have been granted under the plan of reorganization to
the following persons:

Priority 1: Eligible Account Holders. Each Eligible Account Holder
shall be given the opportunity to purchase up to 17,500 shares, or $140,000, of
common stock ; subject to the overall limitations described under" - Limitations
on Purchases of Common Stock." If there are insufficient shares available to
satisfy all subscriptions of Eligible Account Holders, shares will be allocated
so as to permit each subscribing Eligible Account Holder to purchase a number of
shares sufficient to make his total allocation equal to the lesser of 100 shares
or the number of shares ordered. Thereafter, unallocated shares will be
allocated to remaining subscribing Eligible Account Holders whose subscriptions
remain unfilled in the same proportion that each such subscriber's qualifying
deposit bears to the total dollar amount of qualifying deposits of all
subscribing Eligible Account Holders, whose subscriptions remain unfilled.
Subscription rights received by executive officers and directors and their
associates, based on their increased deposits in American Federal in the one
year preceding the eligibility record date will be subordinated to the
subscription rights of other Eligible Account Holders. To ensure proper
allocation of stock, each Eligible Account Holder must list on his order form
all accounts in which he had an ownership interest as of June 30, 1998, the
Eligibility Record Date.

Priority 2: The Employee Plans. The employee plans, including the
employee stock ownership plan, will be given the opportunity to receive, without
payment therefor, the right to purchase up to 10% of the common stock issued in
the offering. It is expected that the employee stock ownership plan will
purchase 8% of the common stock issued in the offering.

Subscription rights received pursuant to this category shall be
subordinated to all rights received by Eligible Account Holders to purchase
shares pursuant to Priority No. 1; provided,

however, that notwithstanding any other provision of the plan of reorganization
to the contrary, the employee plans shall have a first priority subscription
right to the extent that the total number of shares of common stock sold in the
offering is increased up to 15% above the maximum of the estimated valuation
range as set forth in this prospectus. In the event that the total number of
shares in the offering is so increased, the employee stock ownership plan will
have a priority right to purchase the additional shares in order to fill its
order for stock.

Priority 3: Supplemental Eligible Account Holders. If any stock is
available after satisfaction of subscriptions by Eligible Account Holders and
the employee stock ownership plan, each Supplemental Eligible Account Holder
shall have the opportunity to purchase up to 17,500 shares, or $140,000, of
common stock, subject to the overall limitations described under "Limitations on
Purchases of Common Stock." If Supplemental Eligible Account Holders subscribe
for a number of shares which, when added to the shares subscribed for by
Eligible Account Holders and the employee stock ownership plan, is in excess of
the total number of shares offered in the offering, the shares of common stock
will be allocated among subscribing Supplemental Eligible Account Holders first
so as to permit each subscribing Supplemental Eligible Account Holder to
purchase a number of shares sufficient to make his total allocation equal to the
lesser of 100 shares or the number of shares ordered. Thereafter, unallocated
shares will be allocated to each subscribing Supplemental Eligible account
Holder whose subscription remains unfilled in the same proportion that each
subscriber's qualifying deposit bears to the total dollar amount of qualifying
deposits of all subscribing Supplemental Eligible Account Holders, in each case
on December 31, 1999, whose subscriptions remain unfilled. To ensure proper
allocation of stock each Supplemental Eligible Account Holder must list on his
order form all deposit accounts in which he had an ownership interest as of
December 31, 1999.

Priority 4: Other Members. If any stock is available after satisfaction
of all subscriptions by the Eligible Account Holders, the employee plans, and
Supplemental Eligible Account Holders, each Other Member, who is not an Eligible
or Supplemental Eligible Account Holder shall have the opportunity to purchase
up to 17,500 shares, or $140,000, of common stock, subject to the overall
limitation described under "Limitations on Purchases of Common Stock." If Other
Members subscribe for a number of shares which, when added to the shares
subscribed for by in the preceding categories, is in excess of the total number
of shares offered in the offering, available shares will be allocated among
subscribing Other Members so as to permit each subscribing Other Member, to the
extent possible, to purchase a number of shares sufficient to make his total
allocation of common stock equal to the lesser of 100 shares or the number of
shares ordered. Any shares remaining will be allocated among the subscribing
Other Members whose subscriptions remain unsatisfied on a 100 share (or whatever
lesser amount is available) per order basis until the remaining shares have been
allocated.

State Securities Laws. We will make reasonable efforts to comply with
the securities laws of any state in the United States in which American Federal
members reside, and will only offer and sell the common stock in states in which
the offers and sales comply with state securities laws. However, we are not
required to offer stock to a person who resides in a foreign country or resides
in a state of the United States with respect to which:

o the number of persons otherwise eligible to subscribe for shares
under the plan is small;

o the offer or sale of shares of common stock to such persons would
require us or American Federal or our employees to register,
under the securities laws of such state, as a broker or dealer or
to register or otherwise qualify its securities for sale in such
jurisdiction; and

o such registration or qualification in the sole judgment of Eagle
would be impracticable or unduly burdensome for reasons of cost
or otherwise.

Where the number of persons eligible to subscribe for shares in one
state is small, we will base our decision as to whether or not to offer the
common stock in that state on a number of factors, including but not limited to
the size of accounts held by account holders in the state, the cost of
registering or qualifying the shares or the need to register Eagle or American
Federal, its officers, directors or employees as brokers, dealers or salesmen.

Restrictions Against Transfer of Subscription Rights and Shares. The
plan prohibits any person with subscription rights, including Eligible Account
Holders, Supplemental Eligible Account Holders, and Other Members, from
transferring or entering into any agreement or understanding to transfer the
legal or beneficial ownership of the subscription rights issued under the plan
or the shares of common stock to be issued when they are exercised. Such rights
may be exercised only by the person to whom they are granted and only for his or
her account. Each person subscribing for shares will be required to certify that
such person is purchasing shares solely for his or her own account and that such
person has no agreement or understanding regarding the sale or transfer of such
shares. The regulations also prohibit any person from offering or making an
announcement of an offer or intent to make an offer to purchase such
subscription rights or shares of common stock. We will pursue any and all legal
and equitable remedies in the event we become aware of the transfer of
subscription rights and will not honor orders which we determine involve the
transfer of such rights.

Expiration Date. The subscription offering will expire at ___________
p.m., Montana time, on March ________________, 2000, unless it is extended, up
to an additional 45 days with the approval of the OTS, if necessary, but without
additional notice to subscribers. Extensions after such date will require
resolicitation of subscribers. Subscription rights will become void if not
exercised prior to the extended expiration date.

Community Offering

If less than the total number of shares of common stock offered are
subscribed for in the subscription offering, shares remaining unsubscribed may
be made available for purchase in the community offering to certain members of
the public. The maximum amount of common stock that any person may purchase in
the community offering is 17,500 shares, or $140,000, subject to the overall
limitation of $200,000 described in "Limitations on Purchases of Common Stock."
In the community offering, if any, shares will be available for purchase, with
preference given

first, to borrowers of American Federal as of December 31, 1999; second to
natural persons residing in Lewis and Clark, Gallatin, Jefferson, Silverbow and
Broadwater counties in Montana and third, to natural persons residing in the
State of Montana. We will attempt to issue common stock in such a manner as to
promote a wide distribution of common stock.

If purchasers in the community offering, whose orders would otherwise
be accepted, subscribe for more shares than are available for purchase, the
shares available to them will be allocated among persons submitting orders in
the community offering in an equitable manner to be determined by us. Such
allocations will be made giving priority to natural persons residing in Lewis
and Clark, Gallatin, Jefferson, Silverbow and Broadwater counties, Montana. To
the extent the person is a corporation or other business entity, the principal
place of business or headquarters shall be in these counties. We may utilize
depositor loan records or such other evidence to make a determination as to
whether a person is a resident. In all cases, the determination of resident
status will be made by us in our sole discretion.

The community offering, if any, may commence simultaneously with,
during or subsequent to the completion of the subscription offering. The
community offering must be completed within 45 days after the completion of the
subscription offering unless otherwise extended by the OTS. We may conclude the
community offering as soon as we receive orders for at least the minimum number
of shares available for sale.

We, in our absolute discretion, reserve the right to reject any or all
community offering orders in whole or in part in our sole discretion , at the
time of receipt or as soon as practicable following the completion of the
community offering.

Syndicated Community Offering

To the extent that shares remain available and subject to market
conditions at or near the completion of the subscription offering, we may offer
shares in a syndicated community offering on a best-efforts basis through a
group of broker dealers to be managed by Ryan, Beck & Co., Inc. in a manner
which will promote a wide distribution of the common stock. Orders received in
connection with the syndicated community offering, if any, will receive a lower
priority than orders received in the subscription offering and community
offering. Common stock sold in the syndicated community offering will be sold at
the same price as all other shares in the subscription offering. We have the
right to reject orders, in whole or in part, in our sole discretion in the
syndicated community offering. No person will be permitted to purchase more than
17,500 shares, or $140,000, of common stock in the syndicated community
offering. Neither Ryan, Beck & Co, Inc. nor any other broker-dealer will be
obligated to purchase any shares in the syndicated community offering. The
syndicated community offering may commence during or after the community
offering, if any. It must be completed within 45 days of the completion of the
subscription offering unless extended by the OTS. If a syndicated community
offering cannot be effected or is deemed inadvisable, we will seek to make other
arrangements for distribution of the shares.

Limitations on Purchases of Common Stock

The following limitations have been imposed on purchases of shares of
common stock:

o The aggregate amount of our outstanding common stock owned or
controlled by persons other than the Mutual Holding Company at
the close of the offering will be less than 50% of Eagle's total
outstanding common stock.

o The maximum number of shares of common stock which may be
purchased in the subscription offering by any person in the
first, third and fourth priorities shall not exceed 17,500
shares, or $140,000.

o The maximum number of shares of common stock which may be
purchased in the community offering by any person shall not
exceed 17,500 or $140,000.

o The maximum number of shares of common stock which may be
purchased in the syndicated community offering by any person
shall not exceed 17,500 shares, or $140,000.

o The maximum number of shares of common stock which may be
subscribed for or purchased in all categories in the offering by
any person together with any associate or group of persons acting
in concert shall not exceed 25,000 shares, or $200,000, except
for our employee plans, which may subscribe for up to 10% of the
common stock issued in the offering, although the employee stock
ownership plan currently intends to purchase only 8% of such
shares.

o The maximum number of shares of common stock which may be
purchased in all categories in the offering by officers and
directors of American Federal and their associates in the
aggregate shall not exceed 33% of the total number of shares of
common stock issued in the offering

o A minimum of 25 shares of common stock must be subscribed for
each person ordering shares in the offering.

o If the number of shares of common stock otherwise allocable to
any person or that person's associates would be in excess of the
maximum number of shares permitted as set forth above, the number
of shares of common stock allocated to each such person will be
reduced to the lowest limitation applicable to that person, and
then the number of shares allocated to each group consisting of a
person and that person's associates will be reduced so that the
aggregate allocation to that person and his associates complies
with the above maximums, and such maximum number of shares shall
be reallocated among that person and his associates in proportion
to the shares subscribed by each (after first applying the
maximums applicable to each person, separately).

o Depending on market or financial conditions, the board of
directors of American Federal, may decrease or increase the
maximum purchase limitations in the plan, provided that the
purchase limitations may not be increased to a percentage in
excess of 5% of the offering or 50,503 shares. If we increase the
maximum purchase limitations, we are only required to resolicit
persons who subscribed for the maximum purchase amount in the
subscription offering and may, in our sole discretion, resolicit
certain other large subscribers.

o If the total number of shares offered increases in the offering
due to an increase in the maximum of the estimated valuation
range to up to 1,010,059 shares the additional shares will be
allocated in the following order of priority: (i) to fill the
employee plan's subscription; (ii) if there is an
oversubscription at the Eligible Account Holder level, to fill
unfilled subscriptions of Eligible Account Holders; (iii) if
there is an oversubscription at the Supplemental Eligible Account
Holder level, to fill unfilled subscriptions of Supplemental
Eligible Account Holders; (iv) if there is an oversubscription at
the Other Member level, to fill unfilled subscriptions of Other
Members; and (v) to fill unfilled subscriptions in the community
offering.

o No person shall be entitled to purchase any common stock to the
extent such purchase would be illegal under any federal law or
state law or regulation or would violate regulations or policies
of the National Association of Securities Dealers, particularly
those regarding free riding and withholding. Eagle or American
Federal and or its agents may ask for an acceptable legal opinion
from any purchaser as to the legality of such purchase and may
refuse to honor any purchase order if such opinion is not timely
furnished.

o The board of directors has the right to reject any order
submitted by a person whose representations the board of
directors believes to be false or who the Board otherwise
believes is violating, circumventing, or intends to violate,
evade, or circumvent the terms and conditions of the plan.

o The foregoing restrictions on purchases by any person also apply
to purchases by persons acting in concert under applicable
regulations of the OTS. Under regulations of the OTS, directors
of American Federal are not deemed to be affiliates or a group
acting in concert with other directors solely as a result of
membership on the board of directors of American Federal.

The term "associate" of a person is defined in the plan to mean (1) any
corporation or organization other than American Federal or a majority-owned
subsidiary of American Federal of which such person is an officer or partner or
is, directly or indirectly, the beneficial owner of 10% or more of any class of
equity securities, (2) any trust or other estate in which such person has a
substantial beneficial interest or as to which such person serves as trustee or
in a similar fiduciary capacity, excluding tax-qualified employee stock benefit
plans or tax-qualified employee stock benefit plans in which a person has a
substantial beneficial interest or serves as a

trustee or in a similar fiduciary capacity and except that, for purposes of
aggregating total shares that may be held by officers and directors, the term
"associate" does not include any tax-qualified employee stock benefit plan, and
(3) any relative or spouse of such person or any relative of such spouse, who
has the same home as such person or who is a trustee or officer of American
Federal, or any of its parents or subsidiaries. For example, a corporation of
which a person serves as an officer would be an associate of such person, and
therefore, all shares purchased by such corporation would be included with the
number of shares which such person individually could purchase under the above
limitations. We have the right, in our sole discretion, to determine whether
prospective purchasers are "associates" or "acting in concert." All such
determinations are in our sole discretion and may be based on whatever evidence
we believe to be relevant.

Each person purchasing shares of the common stock in the offering will
be deemed to confirm that such purchase does not conflict with the maximum
purchase limitation. If this purchase limitation is violated by any person or
any associate or group of persons affiliated or otherwise acting in concert with
such persons, we will have the right to purchase from such person at the
purchase price per share all shares acquired by such person in excess of such
purchase limitation or, if such excess shares have been sold by such person, to
receive the difference between the purchase price per share paid for such excess
shares and the price at which such excess shares were sold by such person. Our
right to purchase these excess shares will be assignable.

Common stock purchased in the offering will be freely transferable,
except for shares purchased by directors and officers of American Federal. For
certain restrictions on the common stock purchased by directors and officers,
see "-- Restrictions on Transferability by Directors and Officers."

Ordering and Receiving Common Stock

Use of Order Forms. Rights to subscribe may only be exercised by
completion of an order form. Any person receiving an order form who desires to
subscribe for shares of common stock must do so prior to the applicable
expiration date by delivering a properly executed order form and payment by mail
or overnight courier to the address designated on the order form or may deliver
the order form in person to any office of American Federal. If the employee
stock ownership plan subscribes for shares during the subscription offering, it
will not be required to pay for the shares until the completion of the offering.
Once tendered, subscription orders cannot be revoked without the consent of
American Federal unless the reorganization is not completed within 45 days of
the expiration date.

If a stock order form:

o is not delivered and is returned to American Federal by the U.S.
Postal Service;

o is not received or is received after the applicable expiration
date;

o is not completed correctly or executed;

o is not accompanied by the full payment in the manner described on
the order form including instances where account or certificate
balance withdrawal is authorized; or

o is not mailed pursuant to a "no mail" order placed in effect by
the account holder,

the subscription rights for the person to whom the rights have been granted will
lapse as though such person failed to return the completed order form within the
time period specified.

However, we may, but will not be required to, waive any irregularity on
any order form or require the submission of corrected order forms or the
remittance of full payment for subscribed shares by such date as we may
otherwise specify. The waiver of an irregularity on an order form in no way
obligates us to waive any other irregularity on any other order form. Waivers
will be considered on a case by case basis. We reserve the right in our sole
discretion to accept or reject orders received on photocopies or facsimile order
forms, or whose payment is to be made by wire transfer or payment from private
third parties. Our interpretation of the terms and conditions of the plan and of
the acceptability of the order forms will be final, subject to the authority of
the OTS.

To ensure that each purchaser receives a prospectus at least 48 hours
before the applicable expiration date, in accordance with Rule 15c2-8 of the
Securities Exchange Act of 1934, no prospectus will be mailed any later than
five days prior to such date or hand delivered any later than two days prior to
such date. Execution of the order form will confirm receipt or delivery in
accordance with Rule 15c2-8. Order forms will only be distributed with a
prospectus.

Payment for Shares. For subscriptions to be valid, payment and all
properly completed and executed order forms, must be received by us on or prior
to the expiration date specified on the order form unless we extend the date.
Payment for shares of common stock may be made

o by check, bank draft or money order, or

o by authorization on the order form of withdrawal from deposit
accounts maintained with American Federal.

Appropriate means by which such withdrawals may be authorized are provided in
the order form. Once a subscriber authorizes a withdrawal, the subscriber may
not use any of the withdrawal amount for any purpose other than to purchase the
common stock for which he or she has subscribed until the offering has been
completed or terminated. In the case of payments authorized to be made through
withdrawal from savings accounts, all sums authorized for withdrawal will
continue to earn interest at the contract rate until the offering has been
completed. Interest penalties for early withdrawal applicable to certificate
accounts will not apply to withdrawals authorized for the purchase of shares,
however, if a partial withdrawal

results in a certificate account with a balance less than the applicable minimum
balance requirement, the certificate shall be canceled at the time of
withdrawal, without penalty, and the remaining balance will earn interest at the
passbook savings account rate subsequent to the withdrawal. In the case of
payments made by check, bank draft or money order, such funds will be placed in
a segregated account and interest will be paid at the passbook savings account
rate from the date payment is received until the offering is completed. An
executed order form, once we receive it, may not be modified, amended, or
rescinded without our consent, unless the offering is not completed within 45
days after the conclusion of the subscription offering, in which event
subscribers will be given the opportunity to maintain, increase, decrease, or
rescind their subscription for a specified period of time. If a response is not
received, a subscriber will be deemed to have rescinded his order. If the
offering is not completed for any reason, all funds submitted pursuant to the
offerings will be promptly refunded with interest as described above.

Owners of self-directed IRAs may use the assets of such IRAs to
purchase shares of common stock in the offering. Persons with IRAs maintained at
American Federal must have their accounts transferred to an entity such as a
broker-dealer able to administer self-directed IRAs and to transact the purchase
of shares of common stock in the offering. There will be no early withdrawal or
IRS interest penalties for such transfers. Assistance on how to purchase stock
in the offering through an IRA can be obtained from our stock information
center. Depositors interested in using funds in an American Federal IRA to
purchase common stock should contact the stock information center as soon as
possible because IRA purchases take time.

Federal regulations prohibit American Federal from lending funds or
extending credit to any person to purchase the common stock in the
reorganization.

Stock Information Center. The stock information center is located at
1400 Prospect Avenue, Helena, Montana. Its phone number is (____) _____________.

Delivery of Stock Certificates. Certificates representing common stock
issued in the offering will be mailed to the persons entitled thereto at the
address noted on the order form, as soon as practicable following consummation
of the offering. Any certificates returned as undeliverable will be held until
claimed by persons legally entitled thereto or otherwise disposed of in
accordance with applicable law. Until certificates for the common stock are
available and delivered to subscribers, subscribers may not be able to sell the
shares of stock for which they subscribed.

Restriction on Sales Activities

Our directors and executive officers may participate in the
solicitation of offers to purchase common stock in jurisdictions where such
participation is not prohibited. Other employees of American Federal may
participate in the offering in ministerial capacities. Such other employees have
been instructed not to solicit offers to purchase common stock or provide advice
regarding the purchase of common stock. Questions of prospective purchasers will
be directed to executive officers of American Federal or registered
representatives of Ryan, Beck & Co., Inc. No officer, director or employee of
American Federal will be compensated in

connection with the person's solicitations or other participation in the
offering by the payment of commissions or other remuneration based either
directly or indirectly on transactions in the common stock.

Restrictions on Repurchase of Shares

Generally, during the first six months following the reorganization,
Eagle may not repurchase its shares. During each of the second six months,
second and third years following the reorganization, Eagle may repurchase up to
five percent of the outstanding shares provided they are purchased in
open-market transactions. Repurchases must not cause us to become
undercapitalized and at least 10 days prior notice of the repurchase must be
provided to the OTS. The OTS may disapprove a repurchase program after it
determines that:

o the repurchase program would adversely affect our financial
condition and capital position;

o the information submitted is not enough to base a conclusion as
to whether our financial condition and capital position would be
adversely affected; or

o a valid business purpose was not demonstrated.

In addition, SEC rules also govern the method, time, price, and number of shares
of common stock that may be repurchased by Eagle and affiliated purchasers. If,
in the future, the rules and regulations regarding the repurchase of stock are
liberalized, Eagle may utilize the rules and regulations then in effect.

Stock Pricing and the Number of Shares to be Offered

Feldman Financial, which is experienced in the valuation and appraisal
of business entities, including savings institutions, has been retained to
prepare an appraisal of the estimated pro forma market value of the common
stock. This independent valuation will express our pro forma market value in
terms of an aggregate dollar amount. Feldman Financial will receive fees of
$17,500 for its appraisal services, including preparing and issuing the
independent valuation and subsequent updates, and $5,000 for assistance in
preparation of our business plan, plus its reasonable out-of-pocket expenses
incurred in connection with the independent valuation and business plan.
American Federal has agreed to indemnify Feldman Financial under certain
circumstances against liabilities and expenses arising out of or based on any
misstatement or untrue statement of a material fact contained in the information
supplied by American Federal to Feldman Financial, except where Feldman
Financial is determined to have been negligent or failed to exercise due
diligence in the preparation of the independent valuation.

Feldman Financial has determined that as of __________, 1999, the
estimated aggregate pro forma market value of our common stock was $13 million.
Pursuant to

regulations, this estimate must be included within a range with a minimum of
$11.05 million and a maximum of $14.95 million. The board of directors reviewed
and approved Feldman Financial's appraisal. The board also reviewed the
methodology and the assumptions used by Feldman Financial in preparing its
appraisal. In particular, the board considered (i) American Federal's financial
condition and results of operations for the year ended June 30, 1999, and three
months ended September 30, 1999, (ii) financial comparisons of American Federal
in relation to financial institutions of similar size and asset quality and
(iii) stock market conditions generally and in particular for financial
institutions, all of which are set forth in the appraisal. The number of shares,
and the minority ownership interest, are subject to change if the independent
valuation changes at the conclusion of the offering.

The appraisal was approved by the board of directors. In accordance
with regulations, the number of shares of Eagle common stock to be outstanding
after the reorganization must be based on the valuation. The board of directors
established a price per share of $8.00. Therefore, between 649,188 and 878,313
shares will be outstanding, subject to a 15% increase to 1,010,059 shares, under
certain circumstances. The offering range must also be based on the valuation.
The board of directors has decided to offer for sale 47% of Eagle's to-be
outstanding shares. The remaining shares will be owned by the Mutual Holding
Company. The total number of shares of common stock that may be sold to persons
other than the mutual holding company in the offering may not exceed 49.99% of
our issued and outstanding voting stock.

The minority ownership may increase or decrease. If the updated
estimate of the pro forma market value of American Federal immediately after the
offering changes, there will be no corresponding change to the number of shares
issued to the Mutual Holding Company in the reorganization and sold to
subscribers in the offering. If, however, the updated valuation exceeds
$8,080,472 or is less than $4,643,504, we may:

o terminate the offering, return all subscription funds promptly,
paying interest at the savings rate and cancel all account
withdrawal authorizations;

o establish a new estimated valuation range and either

(a) hold new subscription and community offerings; or

(b) provide subscribers the opportunity to change or cancel
their orders (a "resoliciatation"), or

o take such other actions as permitted by the OTS in order to
complete the offering.

The independent valuation is not intended, and must not be construed,
as a recommendation of any kind as to the advisability of purchasing the common
stock. In preparing the independent valuation, Feldman Financial has relied on
and assumed the accuracy and completeness of financial and statistical
information provided by American Federal. Feldman Financial did not
independently verify the financial statements and other information provided

by American Federal, nor did Feldman Financial value independently the assets
and liabilities of American Federal. The independent valuation considers
American Federal only as a going concern and should not be considered as a
indication of the liquidation value of American Federal. Moreover, because such
independent valuation is based on estimates and projections, all of which are
subject to change from time to time, no assurance can be given that persons
purchasing the common stock will be able to sell such shares at a price equal to
or greater than the $8.00 per share purchase price.

No sale of shares of common stock may be consummated unless Feldman
Financial confirms that, to the best of its knowledge, nothing of a material
nature has occurred that, taking into account all relevant factors, would cause
Feldman Financial to conclude that the independent valuation is incompatible
with its estimate of our pro forma market value at the conclusion of the
offering. Any change that would result in an aggregate value that is below
$11.05 million or above $17.19 million would be subject to OTS approval. If
confirmation from Feldman Financial is not received, American Federal may
terminate the offering, or commence a new offering, or establish a new offering
range and resolicit all purchasers with the approval of the OTS, or take such
other action as permitted by the OTS based on a revised valuation.

Plan of Distribution and Marketing Arrangements

The common stock will be offered in the offering principally by the
distribution of this prospectus. It is expected that a registered representative
employed by Ryan, Beck & Co., Inc. will be working at, and supervising the
operation of, the stock information center. Ryan, Beck & Co., Inc. will be
responsible for responding to questions regarding the reorganization and the
offering.

American Federal and Eagle have entered into an agency agreement with
Ryan, Beck & Co., Inc. under which Ryan, Beck & Co., Inc. will provide advisory
assistance and assist, on a best-efforts basis, in the solicitation of
subscriptions for the common stock in the offering. Ryan, Beck & Co., Inc. is a
broker-dealer registered with the National Association of Securities Dealers,
Inc. As the in the offering, Ryan, Beck & Co., Inc. will: (i) assist in the
design and implementation of a marketing strategy for the offering; (ii) provide
such other general advice and assistance as may be requested to promote the
successful completion of the offering; and (iii) manage a group of
broker-dealers if they conduct a best efforts syndicated community offering.

Ryan, Beck & Co., Inc. will receive as compensation, an advisory and
marketing fee of $165,000. If common stock is sold in a syndicated community
offering through broker-dealers, we will pay the broker-dealers, including Ryan,
Beck & Co., Inc., a sales commission of 6% of the aggregate price of shares sold
by the broker-dealers. Ryan, Beck & Co., Inc. will also be reimbursed for its
legal fees and out-of-pocket expenses, not to exceed $50,000. American Federal
has agreed to indemnify Ryan, Beck & Co., Inc., to the extent allowed by law,
for reasonable costs and expenses in connection with certain claims or
liabilities, including certain liabilities under the Securities Act of 1933, as
amended. See "Pro Forma Data" for further information regarding expenses of the
offering.

Restrictions on Transferability by Directors and Officers

Shares of the common stock purchased by directors or officers of
American Federal cannot be sold for a period of one year following completion of
the reorganization, except for a disposition of shares after the death of a
stockholder. Accordingly, stock certificates issued to directors and officers
and their associates will bear a legend restricting their sale. Any shares
issued to directors and officers as a stock dividend, stock split, or otherwise
with respect to restricted stock will be subject to the same restriction.

For a period of three years following the reorganization, no director
or officer of American Federal or their associates may sell our common stock
except through a broker or dealer registered with the SEC. This prohibition does
not apply to negotiated transactions including more than 1% of our common stock
or purchases made for tax qualified or non-tax qualified employee stock benefit
plans which may be attributable to individual officers or directors.

Restrictions on Agreements or Understandings Regarding Transfer of Common Stock
to be Purchased in the Offering

Before the completion of the reorganization and offering, no depositor
may transfer or enter into an agreement or understanding to transfer any
subscription rights or the legal or beneficial ownership of the shares of common
stock to be purchased by such person in the offering. Depositors who submit an
order form will be required to certify that their purchase of common stock is
solely for their own account and there is no agreement or understanding
regarding the sale or transfer of their shares. We intend to pursue any and all
legal and equitable remedies if we become aware of any such agreement or
understanding, and will not honor orders we reasonably believe to involve such
an agreement or understanding.

Completion of the offering is subject to:

o completion of the reorganization, which requires approvals from
certain government agencies, the ratification of American
Federal's voting depositor and borrower members, and the receipt
of rulings and or opinions of counsel as to the tax consequences
of the reorganization;

o the receipt of all the required approvals for the issuance of
common stock in the offering, including the approval of the OTS;
and

o the sale of a minimum of 649,188 shares of common stock.

If the first two conditions are not met before we complete the offering, all
funds received will be promptly returned with interest at American Federal's
passbook rate and withdrawal authorizations from deposit accounts will be
canceled.

AMERICAN FEDERAL SAVINGS BANK
STATEMENTS OF INCOME

- --------------------------------------------------------------------------------
The following statements of income of American Federal for the fiscal years
ended June 30, 1999 and 1998, have been audited by Moss Adams LLP and Anderson
ZurMuehlen & Co., P.C., independent auditors, respectively, whose reports
thereon appear elsewhere in this prospectus. The statements of income for the
three months ended September 30, 1999 and 1998, were not audited by either firm,
but, in the opinion of management, reflect all adjustments (none of which are
other than normal recurring entries) necessary for a fair presentation. The
results of operations for the three months ended September 30, 1999, are not
necessarily indicative of the results of operations that may be expected for the
entire fiscal year. These statements should be read in conjunction with the June
30, 1999 and 1998 financial statements and related notes included elsewhere
herein. The following statements of income of American Federal for the fiscal
years ended June 30, 1999 and 1998, have been audited by Moss Adams LLP and
Anderson ZurMuehlen & Co., P.C., independent auditors, respectively, whose
reports thereon appear elsewhere in this prospectus. The statements of income
for the three months ended September 30, 1999 and 1998, were not audited by
either firm, but, in the opinion of management, reflect all adjustments (none of
which are other than normal recurring entries) necessary for a fair
presentation. The results of operations for the three months ended September 30,
1999, are not necessarily indicative of the results of operations that may be
expected for the entire fiscal year. These statements should be read in
conjunction with the June 30, 1999 and 1998 financial statements and related
notes included elsewhere herein.
- --------------------------------------------------------------------------------

Three Months Ended
September 30, Years Ended June 30,
------------------------ ------------------------
1999 1998 1999 1998
---------- ---------- ---------- -----------
(unaudited) (unaudited)

Interest and Dividend Income:
Interest and fees on loans ..................... $1,982,300 $2,074,220 $8,048,779 $8,494,705
Interest on deposits with banks ................ 41,466 90,086 381,255 225,143
Federal Home Loan Bank stock dividends ......... 23,778 22,825 93,925 90,603
Securities available-for-sale .................. 245,610 210,408 728,099 687,596
Securities held to-maturity .................... 214,820 184,838 769,918 769,027
---------- ---------- ---------- ----------
Total interest and dividend income ......... 2,507,974 2,582,377 10,021,976 10,267,074
---------- ---------- ---------- ----------
Interest Expense:
Deposits ....................................... 1,119,214 1,122,197 4,355,392 4,504,605
Federal Home Loan Bank advances ................ 168,790 222,591 837,692 934,863
---------- ---------- ---------- ----------
Total interest expense ..................... 1,288,004 1,344,788 5,193,084 5,439,468
---------- ---------- ---------- ----------
Net Interest Income .............................. 1,219,970 1,237,589 4,828,892 4,827,606
Loan loss provision .............................. 15,000 15,000 60,000 60,000
---------- ---------- ---------- ----------
Net interest income after loan loss provision .. 1,204,970 1,222,589 4,768,892 4,767,606
---------- ---------- ---------- ----------
Noninterest income:
Net gain on sale of loans ...................... 88,337 187,901 714,369 629,244
Demand deposit service charges ................. 118,605 119,388 463,320 469,377
Mortgage loan servicing fees ................... 37,347 31,832 115,113 129,535

Net gain (loss) on sale of available-for-sale
securities ................................... (30,355) (6,039) (6,039) 4,903

Other .......................................... 81,678 95,272 365,808 354,232
---------- ---------- ---------- ----------
Total other income ......................... 295,612 428,354 1,652,571 1,587,291
---------- ---------- ---------- ----------
Noninterest expense:
Salaries and employee benefits ................. 642,073 603,604 2,421,586 2,370,471
Occupancy expenses ............................. 106,670 107,302 430,805 425,858
Furniture and equipment depreciation ........... 79,466 61,838 289,246 245,282
In-house computer expense ...................... 38,843 42,065 164,454 132,973
Advertising expense ............................ 40,521 34,265 160,297 145,068
Federal insurance premiums ..................... 16,866 17,360 68,384 69,450
Postage ........................................ 23,636 25,920 98,709 87,952
Legal, accounting, & examination fees .......... 17,909 19,931 78,861 84,672
Consulting fees ................................ 16,620 0 40,168 2,100
ATM processing ................................. 19,674 15,050 69,407 60,743
Other .......................................... 169,625 181,863 639,723 573,590
---------- ---------- ---------- ----------
Total noninterest expense .................. 1,171,903 1,109,198 4,461,640 4,198,159
---------- ---------- ---------- ----------
Income before provision for income taxes ......... 328,679 541,745 1,959,823 2,156,738
---------- ---------- ---------- ----------
Provision for income taxes ....................... 120,117 201,800 707,571 914,474
---------- ---------- ---------- ----------
Net income ....................................... $ 208,562 $ 339,945 $1,252,252 $1,242,264
========== ========== ========== ==========

See accompanying notes to consolidated financial statements.

MANAGEMENT'S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management's discussion and analysis of financial condition and results of
operations is intended to assist you in understanding American Federal's
financial condition and results of operations. The information in this section
should also be read in conjunction with American Federal's financial statements
and notes to the financial statements beginning at page F-_______. Management's
discussion and analysis of financial condition and results of operations is
intended to assist you in understanding American Federal's financial condition
and results of operations. The information in this section should also be read
in conjunction with American Federal's financial statements and notes to the
financial statements beginning at page F-_______.

General

Eagle is a recently formed company and accordingly, has no results of
operations. The following discussion relates only to the financial condition and
results of operations of American Federal. After the reorganization, Eagle will
own all of the stock of American Federal.

American Federal has operated as a community savings bank. We raise
money by offering FDIC-insured deposit products and lending this money primarily
for the purpose of home financing. As of September 30, 1999, 67.88% of our total
loans were residential mortgage loans with fixed rates and 3.68% were
residential mortgage loans with adjustable rates. Total first mortgage loans at
September 30, 1999, were $80.68 million or 80.08% of our loan portfolio. Our
other loan products include home equity loans, consumer and commercial loans.
These loans totaled $20.07 million or 19.92% of our total loan portfolio.

Our results of operations depend primarily on net interest income,
which is determined by (i) the difference between rates of interest we earn on
our interest-earning assets and the rates we pay on interest-bearing liabilities
("interest rate spread"), and (ii) the relative amounts of interest-earning
assets and interest-bearing liabilities. Our results of operations are also
affected by (i) noninterest income, which includes income from customer deposit
account service charges, loan servicing fee income and gains and losses from the
sale of loans and (ii) noninterest expense, which includes salary and employee
benefits, federal deposit insurance premiums, office occupancy costs and
advertising and data processing. Our results of operations also are affected
significantly by general economic and competitive conditions, particularly
changes in market interest rates and government policies and actions of
regulatory authorities, all of which are beyond our control.

Note Concerning Forward-Looking Statements

This document contains forward-looking statements which are identified
by the use of words such as "believe," "expect," "anticipate," "should,"
"planned," "estimated," and "potential." Example of forward-looking statements
include, but are not limited to, estimates with respect to our financial
condition, results of operations and business. They are subject to

various factors which could cause actual results to differ materially from these
estimates. These factors include, but are not limited to, general and local
economic conditions, changes in interest rates, deposit flows, demand for
mortgage or other loans, real estate values and competition; changes in
accounting principles, policies or guidelines; changes in legislation or
regulation; and other economic, competitive, governmental, regulatory and
technological factors affecting our operations, pricing, products and services.
You are cautioned not to place undue reliance on these forward-looking
statements which speak only as of their dates.

Management Strategy

American Federal was founded in 1922 and has operated continuously in Helena
since that time. Our primary management strategy has been to offer a variety of
savings deposits, including checking and NOW accounts as well as residential
loans, consumer loans and commercial loans, to generate earnings and expand our
customer base in the Montana counties in which we operate. We believe we provide
competitive rates and services to individuals and businesses which we have
served since 1922. We do this by:

o Emphasizing core deposits. We have a high percentage of core deposits,
which, including IRA certificates of deposit, were 68.93% of our total
deposits, at September 30, 1999. Core deposits are a stable source of
funds, and are less sensitive to withdrawal when rates fluctuate than
are certificates of deposit. Our employees are actively encouraged
through our sales culture to promote our core deposit products. We
include as core deposits, transaction accounts, checking accounts, NOW
accounts, passbook and statement savings accounts, money market
accounts and IRA accounts funded by certificates of deposit.

o Increasing customer service. We believe that successful banking in our
community begins with customer service. In that connection, in 1997 we
opened a new, larger headquarters building in Helena. Our headquarters
building is also our largest branch facility. It has four
drive-through banking lanes, and a larger, more convenient parking
area. We are committed to customer service in other ways as well, by
promoting convenient operating hours, assuring the tenure and
continuity of our branch managers and senior staff, offering automated
voice response systems for customer inquiries and developing and
promoting new loan and deposit products to suit our customers' needs
and objectives. We have emphasized and trained our staff in the
development of a sales culture to make customers aware of our
customer-driven products and services.

o Increasing noninterest income. We believe we have a relatively high
amount of noninterest income. Our noninterest income to average assets
ratio was .80% for the three months ended September 30, 1999, and
1.15% for the year ended June 30, 1999.. We have emphasized both core
deposit growth and loan sales growth as methods of achieving
additional fee income.

o Maintaining asset quality. Our high asset quality is reflected in our
ratio of non-performing loans to total assets, which was .59% for the
three months ended September 30, 1999, and .54% for the year ended
June 30, 1999. Our ratio of non-performing loans to total loans, was
.88% for the three months ended September 30, 1999; and .83% for the
year ended June 30, 1999. We have achieved these levels through
conservative underwriting, local lending, the experience of our senior
lending officers and a strong awareness of business and economic
trends in our market area.

o Lending Diversification. We are committed to expanding our loan
product offerings in addition to being a home mortgage lender. This
strategy began in the early 1980's and has gradually enabled us to
supplement our mortgage lending with consumer related and business
loans and commercial real estate lending. We expect to continue to
emphasize customer service, commercial and consumer loans following
our reorganization.

Asset/Liability Management

Our assets and liabilities may be analyzed by examining the extent to
which they are interest rate sensitive and by evaluating the expected effects of
interest rate changes on our net portfolio value. The ability to maintain
consistent net interest income is largely dependent upon the achievement of a
positive interest rate spread that can be sustained during fluctuations in
prevailing interest rates.

Our lending activities have historically emphasized long-term fixed and
adjustable rate mortgage loans secured by one-to-four family residences.. Our
deposits mature or are subject to repricing within a relatively short period of
time. The combination of long term fixed rate loans and shorter term repricing
of deposits has historically caused the income earned by us on our
interest-earning assets to adjust more slowly to changes in interest rates than
the interest we pay on our deposits.

We typically sell a significant portion of our residential loan
originations to the secondary market and prefer to sell residential loans to
investors on a servicing retained basis. This allows us to increase our fee
income and provide a high degree of localized service to our customers. To
accomplish this, we became an approved Seller/Servicer for both the Federal Home
Loan Mortgage Corporation ("FHLMC") and Federal National Mortgage Association
("FNMA"). A significant amount of our conforming loan sales are to FHLMC. These
loans are sold for cash on a "Flow" basis with servicing retained. To a much
lesser extent, we occasionally sell loans (primarily FHA, Veteran's
Administration or Rural Development insured or guaranteed loans) to other
investors with servicing released. All loans are sold without recourse. We
expect to continue our present practice of selling most of our conforming loans
to FHLMC for the foreseeable future. We were servicing $112.23 million in loans
for the benefit of others at September 30, 1999.

Management of Interest Rate Risk and Market Risk

Qualitative Analysis. The majority of our assets and liabilities are
sensitive to changes in interest rates. Therefore, our most significant form of
market risk is interest rate risk, or the effect on net interest income of
changes in interest rates. Our lending activities have historically emphasized
the origination of long-term, fixed rate loans secured by single-family
residences. The primary source of funds has been deposits with substantially
shorter maturities. While having interest-bearing liabilities that reprice more
frequently than interest-earning assets is generally beneficial to net interest
income during a period of declining interest rates, it is generally detrimental
during periods of rising interest rates.

The board of directors has established an asset/liability committee
which consists of senior officers and the Chairman of the Board. The committee
meets on an as needed basis, but at least quarterly, to review loan and deposit
pricing and production volumes, interest rate risk analysis, liquidity and
borrowing needs, and a variety of other asset and liability management topics.

To reduce the effect of interest rate changes on net interest income,
we have adopted various strategies to enable us to improve matching of
interest-earning asset maturities to interest-bearing liabilities. The principal
elements of these strategies include seeking to: (a) originate and retain loans
with adjustable rate features or fixed rate loans with short maturities; (b)
sell 30 year fixed rate mortgage loans in the secondary market; (c) lengthen the
maturities of our liabilities when deemed cost effective through the pricing and
promotion of certificates of deposit and utilization of FHLB advances; (d)
attract NOW accounts and noninterest checking accounts which are less interest
rate sensitive when interest rates rise; (e) originate and hold in our portfolio
adjustable rate loans which have annual interest rate adjustments when market
conditions permit; and (f) purchase securities with adjustable rates and
short-term maturities.

Quantitative Analysis. Exposure to interest rate risk is actively
monitored by management. Our objective is to maintain a consistent level of
profitability within acceptable risk tolerances across a broad range of
potential interest rate environments. We use a variety of tools, including the
OTS Net Portfolio Value ("NPV") Model to monitor its exposure to interest rate
risk, which calculates changes in net portfolio value. The OTS measures an
institution's interest rate risk by the changes in its NPV as a result of a
hypothetical change in market interest rates.

The following table presents our NPV as of September 30, 1999. This
table is calculated by the OTS based on information provided by us.

Net Portfolio Value
-----------------------------------------------------
Change in Board
Interest Rates Estimated Increase Approved
(basis points)(1) Amount (Decrease) in NPV Limit(2)
- ----------------- ------ ----------------------- --------
+300 bp $12,459 $(6,118) (33)% (50)%
+200 bp 14,668 (3,909) (21) (35)
+100 bp 16,781 (1,795) (10) (20)
0 bp 18,577 0 0 0
-100 bp 19,761 1,184 6 (10)
-200 bp 20,855 2,278 12 (15)
-300 bp 22,238 3,661 20 (20)

(1) Assumes an instantaneous uniform change in interest rates at all
maturities.

(2) Represents maximum change pursuant to policy set by board of directors.

Future interest rates or their effects on NPV or net interest income
are not predictable. Computations of prospective effects of hypothetical
interest rate changes are based on numerous assumptions, including relative
levels of market interest rates, loan prepayments, and deposit run-offs, and
should not be relied upon as indicative of actual results. Certain shortcomings
are inherent in such computations. Although certain assets and liabilities may
have similar maturity or periods of repricing, they may react at different times
and in different degrees to changes in the market interest rates. The interest
rate on certain types of assets and liabilities may fluctuate in advance of
changes in market interest rates, while rates on other types of assets and
liabilities may lag behind changes in market interest rates. Certain assets such
as adjustable rate mortgages, generally have features which restrict making
adjustments to a borrower's interest rate on a short-term basis and over the
life of the loan. After a change in interest rates, prepayments and early
withdrawal levels could deviate significantly from those assumed in making
calculations set forth above. Additionally, an increased credit risk may result
if our borrowers are unable to meet their repayment obligations as interest
rates increase.

Interest Rate Risk Analysis. In addition to the asset/liability
committee, the board of directors reviews our asset and liability policies. The
board of directors reviews interest rate risk and interest rate trends
quarterly, as well as liquidity and capital ratio requirements. Management
administers the policies and determinations of the board of directors with
respect to our asset and liability goals and strategies. We expect that our
asset and liability policy and strategies will continue as described so long as
competitive and regulatory conditions in the financial institution industry and
market interest rates continue as they have in recent years.

Analysis of Net Interest Income

Our earnings have historically depended upon our net interest income,
which is the difference between interest income earned on loans and investments
(the "interest-earning assets") and interest paid on deposits and any borrowed
funds (the "interest-bearing liabilities"). It is the single largest component
of our operating income. Net interest income is affected by (i) the difference
between rates of interest earned on our interest-earning assets and rates paid
on

our interest-bearing liabilities (the "interest rate spread") and (ii) the
relative amounts of our interest-earning assets and interest-bearing
liabilities.

The following tables present an analysis of certain aspects of our
operations during the recent periods indicated. The first table presents the
average balances of and the interest and dividends earned or paid on each major
class of our interest-earning assets and interest-bearing liabilities. Average
balances are daily average balances. The yields and costs include fees, which
are considered adjustments to yields.

For the Three Months Ended September 30,
-----------------------------------------------------------------
At September 30, 1999 1999 1998
--------------------- ----------------------------- ------------------------------
Average Interest Average Interest
Yield/ Daily and Yield/ Daily and Yield/
Balance Rate Balance Dividends Rate Balance Dividends Rate
------- ---- ------- --------- ---- ------- --------- ----
(Dollars in thousands)

Assets:
Interest-earning assets:
FHLB Stock........................ $ 1,325 7.25% $ 1,301 $ 24 7.38% $ 1,208 $ 23 7.62%
Loans receivable, net............. 100,449 7.89 98,917 1,982 8.01 97,210 2,074 8.53
Investment securities............. 30,950 5.88 31,863 460 5.75 26,157 395 6.04
--------
Interest-bearing deposits with
banks............................ 550 5.53 3,239 42 5.19 6,437 90 5.59
-------- -------- ------ -------- -----
Total interest-earning assets.......... 133,274 7.41 135,320 2,508 7.41 131,012 2,582 7.85
Noninterest-earning assets............. 15,105 14,517 13,174
-------- -------- --------
Total assets........................... $148,379 $149,837 $144,186
======== ======== ========
Liabilities and Retained Earnings:
Interest-bearing liabilities:
Deposit accounts:
Money market...................... $ 15,906 3.71 $ 15,294 $ 142 3.71 $ 11,448 $ 98 3.42
Passbooks......................... 21,030 3.00 21,264 161 3.03 20,156 153 3.04
Checking.......................... 21,990 1.50 21,827 75 1.37 21,449 81 1.51
Certificates of deposit........... 58,917 5.02 58,501 741 5.07 57,261 790 5.52
Advances from Federal Home Loan
Bank............................. 8,508 6.32 10,389 169 6.51 13,572 223 6.57
-------- -------- ------ -------- ------
Total interest-bearing liabilities..... 126,351 3.99 127,275 1,288 4.05 123,886 1,345 4.30
Noninterest-bearing liabilities........ 1,992 2,317 2,393
Noninterest checking................... 5,961 6,011 4,532
-------- --------- --------
Total liabilities...................... 134,304 135,603 130,811
Total equity........................... 14,075 14,234 13,375
-------- -------- --------
Total liabilities and equity........... $148,379 $149,837 $144,186
======== ======== ========
Net interest rate spread(1)............ 3.42% $1,220 3.36% $1,237 3.55%
==== ====== ==== ====== ====
Net interest margin(2)................. 3.61% 3.78%
==== ====
Total interest-earning assets to total
interest-bearing liabilities........... 105.55% 106.32% 105.68%
====== ====== ======

- -----------

(1) Interest rate spread represents the difference between the average yield on
interest-earnings assets and the average rate on interest-bearing
liabilities.

(2) Net interest margin represents income before the provision for loan losses
divided by average interest-earning assets.

For the Years Ended June 30,
-----------------------------------------------------------------------
1999 1998
---------------------------------- --------------------------------
(Dollars in thousands)
Average Interest Average Interest
Daily and Yield/ Daily and Yield/
Balance Dividends Rate Balance Dividends Rate
------- --------- ---- ------- --------- ----

Assets:
Interest-earning assets:
FHLB Stock............................ $ 1,243 $ 94 7.56% $ 1,151 $ 91 7.91%
Loans receivable, net................. 97,392 8,049 8.26 99,884 8,495 8.50
Investment securities................. 25,362 1,498 5.91 23,967 1,457 6.08
Interest-bearing deposits with banks.. 7,661 381 4.97 4,026 225 5.59
-------- ------- -------- -------
Total interest-earning assets............ 131,658 10,022 7.61 129,028 10,268 7.96
=======
Noninterest-earning assets............... 13,472 13,150
-------- --------
Total assets............................. $145,130 $142,178
======== ========
Liabilities and Retained Earnings:
Interest-bearing liabilities:
Deposit accounts:
Money market........................ $ 12,441 $ 434 3.49 $ 11,423 $ 386 3.38
Passbooks........................... 20,393 614 3.01 20,027 603 3.01
Checking............................ 21,406 298 1.39 21,117 363 1.72
Certificates of deposit............. 56,926 3,009 5.29 56,521 3,153 5.58
--------
Advances from Federal Home Loan Bank 12,892 838 6.50 14,463 935 6.46
-------- ------- -------- ------- ------
Total interes-bearing liabilities........ 124,058 5,193 4.19 123,551 5,440 4.40
Other noninterest-bearing liabilities.... 2,380 2,360
Noninterest checking..................... 4,818 3,725
-------- --------
Total liabilities........................ 131,256 129,636
Total equity............................. 13,874 12,542
-------- --------
Total liabilities and equity............. $145,130 $142,178
======== ========
Net interest income/interest rate
spread(1).............................. $ 4,829 3.42% $ 4,828 3.56%
======= ====== ======= ======
Net interest margin(2)................... 3.67% 3.74%
====== ======
Total interest-earning assets to total
interest-bearing liabilities........... 106.11% 104.41%
====== ======

- ---------
(1) Interest rate spread represents the difference between the average yield on
interest-earnings assets and the average rate on interest-bearing
liabilities.

(2) Net interest margin represents income before the provision for loan losses
divided by average interest-earning assets.

Rate/Volume Analysis

The following table sets forth certain information regarding changes in
our interest income and interest expense for the periods indicated. For each
category of interest-earning assets and interest-bearing liabilities,
information is provided on changes attributable to: (i) change in volume (change
in volume multiplied by the old rate) and (ii) change in rate (changes in rate
multiplied by old volume). The combined effects of changes in both rate and
volume which have been allocated proportionately to the change due to rate and
the change due to volume.

For the Three For the
Months Ended September 30, Years Ended June 30,
Increase (Decrease) Increase (Decrease)
------------------------- ------------------------
1999 vs. 1998 1999 vs. 1998
------------------------- -------------------------
Due to Due to
------------------------- -------------------------
Volume Rate Net Volume Rate Net
------ ---- --- ------ ---- ---
(In thousands)
Interest Earning Assets:

Loans receivable, net .......... $ 205 $(297) $(92) $(209) $(237) $(446)
Investment securities(1) ....... 168 (103) 65 85 (44) 41
Interest-bearing deposits
with banks ................... (41) (7) (48) 183 (27) 156
Other earning assets ........... 5 (4) 1 7 (4) 3
----- ----- ---- ----- ----- -----
Total interest earning assets .... 337 (411) (74) 66 (312) (246)
----- ----- ---- ----- ----- -----
Interest-bearing liabilities:
Passbook, money market
and checking accounts ............ 34 12 46 41 (47) (6)
Certificates of deposit ........ 96 (145) (49) 23 (167) (144)
Borrowings(2) .................. (52) (2) (54) (97) 0 (97)
----- ----- ---- ----- ----- -----
Total interest-bearing liabilities 78 (135) (57) (33) (214) (247)
----- ----- ---- ----- ----- -----
Net interest income .............. $ 259 $(276) $(17) $ 99 $ (98) $ 1
===== ===== ==== ===== ===== =====

- ----------
(1) Includes FHLB stock

(2) Includes advances from FHLB

Financial Condition

Total assets increased by $4.46 million, or 3.09%, from $144.43 million
at June 30, 1998, to $148.89 million at June 30, 1999. At September 30, 1999,
total assets were $148.38 million. Total liabilities increased by $3.43 million
or 2.61% from $131.57 million at June 30, 1998, to $135.00 million at June 30,
1999. At September 30, 1999, total liabilities were $134.30 million. The
consistency in asset size reflects the relatively moderate growth in the economy
in American Federal's market area.

Comparison of Operating Results for the Three Months Ended September 30, 1999
and 1998

Net Income. The operations of American Federal are impacted by a wide
variety of economic and business factors. See "Business of American Federal --
Current Operations." American Federal had net income of $209,000 for the three
months ended September 30, 1999, compared to net income of $340,000 for the
three months ended September 30, 1998. This decrease of 38.53% was due primarily
to an increase in noninterest expense from $1.11 million for the three months
ended September 30, 1998, to $1.17 million for the three months ended September
30, 1999 and a decrease in noninterest income from $428,000 for the three months
ended September 30, 1998, to $296,000 for the three months ended September 30,
1999.

Net Interest Income. Net interest income for the three months ended
September 30, 1999, and September 30, 1998, was nearly identical. Such income
was $1.22 million in 1999 versus $1.24 million in 1998. The ratio of average
interest earning assets to average interest bearing liabilities increased from
105.68% as of September 30, 1998, to 106.32% as of September 30, 1999.

Interest and Dividend Income. Total interest and dividend income was
$2.51 million for the three months ended September 30, 1999, compared to $2.58
million for the three months ended September 30, 1998, representing a small
decrease of $74,000 or 2.87%. This decrease was due to a decrease in average
yield on loans, partially offset by an increase in average loan and investment
securities volumes.

Interest Expense. Total interest expense, which consists primarily of
interest on savings deposits, decreased slightly from $1.34 million for the
three months ended September 30, 1998, to $1.29 million for the three months
ended September 30, 1999, a decrease of $57,000 or 4.23%. This decrease was
primarily the result of a decrease in average rates paid, slightly offset by
increased retail deposit volume.

Provision for Loan Losses. Provisions for loan losses are charged to
earnings to maintain the total allowance for loan losses at a level considered
adequate by American Federal to provide for probable loan losses based on prior
loss experience, volume and type of lending conducted by American Federal,
available peer group information, and past due loans in the loan portfolio. Our
policies require the review of assets on a quarterly basis. We appropriately
classify loans as well as other assets if warranted. See "Business -- Lending
Activity." While we believe we use the best information available to make a
determination with respect to the allowance for loan losses, we recognize that
future adjustments may be necessary. We provided $15,000 for loan losses for the
three months ended September 30, 1999 and 1998, The amount provided did not
increase even though there was an increase in loans originated. This was
primarily due to the fact that the economy in our market has been stable,
interest rates have not risen materially and employment conditions appeared
stable as well. We continue to monitor our loan portfolio and will increase or
decrease the provision for loan losses as our portfolio size and composition
changes or we note an increase in non-performing loans or economic conditions
which may cause an increase in non-performing loans.

Noninterest Income. Total noninterest income decreased from $428,000
for the three months ended September 30, 1998 to $296,000, or 30.84%, for the
three months ended September 30, 1999. This decrease in noninterest income was
primarily attributable to a decrease in net gain on sale of loans from $188,000
for the three months ended September 30, 1998, to $88,000 for the three months
ended September 30, 1999, because of a decline in mortgage loan originations and
an increase in the net loss on the sale of available for sale securities from a
loss of $6,000 for the three months ended September 30, 1998, to $30,000 for the
three months ended September 30, 1999 because of the sale of low yielding
corporate debt obligations.

Noninterest Expense. Noninterest expense increased from $1.11 million
for the three months ended September 30, 1998, to $1.17 million for the three
months ended September 30, 1999, an increase of $63,000 or 5.68%. This increase
was the result of a 6.29% increase in salaries and employee benefits from
$604,000 for the three months ended September 30, 1998, to $642,000 for the
three months ended September 30, 1999, and an increase in furniture and
equipment depreciation of $17,000, or 27.42% from $62,000 for the three months
ended September 30, 1998, to $79,000 for the three months ended September 30,
1999 because of the installation of a new Windows NT system and an increase in
consulting fees from none for the three months ended September 30, 1998, to
$17,000 for the three months ended September 30, 1999. The consulting fees in
1999 represented payments to a consultant in connection with our installation of
new computer software to support the Windows NT system.

Income Taxes. Our income tax expense was $202,000 for the three months
ended September 30, 1998, compared to $120,000 for the three months ended
September 30, 1999. The effective tax rate was 37.3% for the three months ended
September 30, 1998, and was 36.5% for the three months ended September 30, 1999.
The decrease was attributable to a decrease in net income which was $542,000
before the provision for income taxes for the three months ended September 30,
1998, to $329,000 for the three months ended September 30, 1999.

Comparison of Operating Results for the Years Ending June 30, 1998 and 1999

Net Income. American Federal had net income of $1.25 million for the
year ended June 30, 1999, compared to net income of $1.24 million for the year
ended June 30, 1998. Income before the provision for income taxes decreased from
$2.16 million for the year ended June 30, 1998, to $1.96 million for the year
ended June 30, 1999, a decrease of $197,000, or 9.13%. This decrease occurred
primarily because noninterest expense increased from $4.20 million for the year
ended June 30, 1998, to $4.46 million for the year ended June 30, 1999, and
noninterest income increased from $1.59 million to $1.65 million.

Net Interest Income. Net interest income was approximately $4.83
million for both of the years ended June 30, 1998 and 1999. The ratio of average
interest-earning assets to average interest-bearing liabilities increased from
104.41% to 106.11%.

Interest and Dividend Income. Total interest and dividend income was
$10.02 million for the year ended June 30, 1999, compared to $10.27 million for
the year ended June 30, 1998,

representing a decrease of $245,000, or 2.39%. Interest on loans decreased from
$8.49 million for the year ended June 30, 1998, to $8.05 million for the year
ended June 30, 1999. This decrease of $446,000, or 5.25%, was due primarily to a
decrease in the average yield on loans from 8.50% for the year ended June 30,
1998, to 8.26% for the year ended June 30, 1999 as well as a decline in the
balance of loans receivable. This was somewhat offset by interest earned from
deposits held at other banks which increased from $225,000 for the year ended
June 30, 1998, to $381,000 for the year ended June 30, 1999. This increase
reflected an increase in the average balances partially offset by a decreased
yield.

Interest Expense. Total interest expense decreased from $5.44 million
for the year ended June 30, 1998, to $5.19 million for the year ended June 30,
1999, a decrease of $246,000 or 4.53%. Interest on deposits decreased $150,000
or 3.31% from $4.50 million for the year ended June 30, 1998, to $4.36 million
for the year ended June 30, 1999. This decrease was due primarily to a decrease
in the average rates paid. Total interest expense also decreased as a result of
a decrease in borrowings from the FHLB of Seattle. The increase in our retail
deposits enabled us to reduce the amount of advances we borrowed from the FHLB.
Interest on borrowings from the FHLB of Seattle decreased from $935,000 for the
year ended June 30, 1998, to $838,000 for the year ended June 30, 1999.

Provision for Loan Losses. We provided $60,000 for loan losses for both
years ended June 30, 1998 and 1999, respectively. In establishing such
provision, management considered the stability of the loan portfolio and general
economic conditions in our market area. In monitoring our loan portfolio, we may
increase or decrease the provision for the loan losses as we consider necessary.
Increases are based on our management's review of such factors as employment
rates, delinquency trends, loan growth and portfolio composition. Total loans,
as of June 30, 1999, grew by about $2 million and this growth was accompanied by
relatively favorable conditions in other areas such as employment rates and
interest rates. Loans in certain higher risk areas such as consumer lending
increased by $783,000 and home equity loans by $1.76 million. Conversely,
commercial lending and commercial real estate lending decreased by $1.50 million
as of June 30, 1999.

Noninterest Income. Total noninterest income increased from $1.59
million for the year ended June 30, 1998, to $1.65 million for the year ended
June 30, 1999, an increase of $65,000 or 4.11%. This change was the result of an
increase in gains on sales of loans from $630,000 for the year ended June 30,
1998, to $715,000 for the year ended June 30, 1999, a gain of $85,000 or 13.49%.
This increase was attributable to increased loan originations during the year
ended June 30, 1999. Noninterest income was reduced by a slight decrease in the
net gain on sale of available securities from $5,000 for the year ended June 30,
1998, to a loss of $6,000 for the year ended June 30, 1999.

Noninterest Expense. Noninterest expense increased by $263,000 or 6.28%
from $4.20 million for the year ended June 30, 1998, to $4.46 million for the
year ended June 30, 1999. This increase was primarily due to a slight increase
in salaries and employee benefits from $2.37 million for the year ended June 30,
1998, to $2.42 million for the year ended June 30, 1999, an increase of $51,000
or 2.15%, as well as an increase in furniture and equipment depreciation from
$245,000 for the year ended June 30, 1998, to $289,000 for the year ended

June 30, 1999, an increase of $44,000 or 17.96%. This increase was attributable
to installation of a new Windows NT system. In-house computer expense increased
from $133,000 for the year ended June 30, 1998 to $164,000 for the year ended
June 30, 1999, an increase of $31,000 or 23.67%. This increase, as well as an
increase in consulting fees from $2,000 for the year ended June 30, 1998, to
$40,000 for the year ended June 30, 1999, was primarily due to our decision to
install a new computer network designed to operate all of our computer system
based on the Windows NT operating system. Other expenses also increased from
$574,000 for the year ended June 30, 1998, to $640,000 for the year ended June
30, 1999. This increase was primarily the result of charitable contributions
which increased by $18,000, loan related expenses which increased by $18,000,
office supplies which increased by $13,000 and travel and entertainment-related
expenses which increased by $12,800.

Income tax expense. American Federal's income tax expense was $914,000
for the year ended June 30, 1998, as compared to $708,000 for the year ended
June 30, 1999. The effective tax rate for the year ended June 30, 1998, was
42.40% and was 36.10% for the year ended June 30, 1999. During the year ended
June 30, 1999, American Federal recognized a deferred tax benefit of $62,000 for
an increase in deferred tax assets due primarily to the recognition of an
additional provision for loan losses for federal tax purposes.

Liquidity and Capital Resources

We are required to maintain minimum levels of liquid assets as defined
by OTS regulations. This requirement, which varies from time to time depending
upon economic conditions and deposit flows, is based upon a percentage of our
deposits and short-term borrowings. The required ratio currently is 5.0%. Our
liquidity ratio average was 20.82%, 20.27% and 18.06% at June 30, 1998, June 30,
1999, and September 30, 1999, respectively. It is our belief that upon
completion of the reorganization our liquidity ratio will initially increase.

Our primary sources of funds are deposits, repayment of loans and
mortgage-backed securities, maturities of investments and interest-bearing
deposits, funds provided from operations and advances from the FHLB of Seattle.
While scheduled repayments of loans and mortgage-backed securities and
maturities of investment securities are predictable, 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. We use our
liquidity resources principally to fund existing and future loan commitments. We
also use them to fund maturing certificates of deposit, demand deposit
withdrawals and to invest in other interest-earning assets, maintain liquidity,
and meet operating expenses.

Net cash provided by our operating activities which is primarily
comprised of. cash transactions affecting net income for the three months ended
September 30, 1999, was $1.26 million. Net cash provided by our operating
activities for the year ended June 30, 1999, was $2.90 million and $1.06 million
for the year ended June 30, 1998. The increase was the result of a liquidation
in loans held for sale portfolio.

Net cash used in our investing activities which is primarily comprised
of cash receipts, from our investment securities and mortgage-backed securities
portfolios and our loan portfolio for the three months ended September 30, 1999,
was $2.99 million. Net cash used in our investing activities was $6.60 million
for the year ended June 30, 1999, and $2.06 million for the year ended June 30,
1998.

For the three months ended September 30, 1999, net cash used by our
financing activities which is primarily cash receipts from net increases in
deposits and net FHLB advances was $1.08 million. Net cash provided by our
financing activities totaled $3.66 million for the year ended June 30, 1999, and
$5.46 million for the year ended June 30, 1998. This decrease was the result of
the payment of advances from the FHLB of Seattle.

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 our commitments to make loans and management's assessment of our ability
to generate funds.

We are subject to federal regulations that impose certain minimum
capital requirements. For a discussion on such capital levels, see "Historical
and Pro Forma Capital Compliance" and "Regulation Regulatory Capital
Requirements."

Financial Services Modernization Bill

On November 12, 1999, President Clinton signed into law the
Gramm-Leach-Bliley Financial Services Modernization Act of 1999, federal
legislation intended to modernize the financial services industry by
establishing a comprehensive framework to permit affiliations among commercial
banks, insurance companies, securities firms and other financial service
providers. Generally, the Act:

o repeals the historical restrictions and eliminates many federal and
state law barriers to affiliations among banks, securities firms,
insurance companies and other financial service providers;

o provides a uniform framework for the functional regulation of the
activities of banks, savings institutions and their holding companies;

o broadens the activities that may be conducted by national banks,
banking subsidiaries of bank holding companies and their financial
subsidiaries;

o provides an enhanced framework for protecting the privacy of consumer
information;

o adopts a number of provisions related to the capitalization,
membership, corporate governance and other measures designed to
modernize the Federal Home Loan Bank system;

o modifies the laws governing the implementation of the Community
Reinvestment Act; and

o addresses a variety of other legal and regulatory issues affecting
day-to-day operations and long-term activities of financial
institutions.

Thrift holding companies such as Eagle and mutual holding companies
such as Eagle Financial MHC will be permitted to engage in financial activities
in the same manner as bank holding companies with respect to insurance and
securities activities. In addition, in a change from prior law, thrift holding
companies can be owned, controlled or acquired only by companies engaged in
financially-related activities.

We do not believe that the Act will have a material adverse effect on
our operations in the near-term. However, to the extent that it permits banks,
securities firms and insurance companies to affiliate, the financial services
industry may experience further consolidation. This could result in a growing
number of larger financial institutions that can offer a wider variety of
financial services that we currently offer and that can aggressively compete in
the markets we currently serve.

Impact of Inflation and Changing Prices

Our financial statements and the accompanying notes presented elsewhere
in this prospectus, 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 effects of
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.

Recent Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities"
("SFAS No. 133") which, when originally issued, was required to be adopted by
the Bank as of July 1, 1999. However, in June 1999, FASB issued SFAS No. 137
which defers the effective date of this statement by one year to July 1, 2000.
SFAS No. 133 establishes accounting and reporting standards for derivative
financial instruments and for hedging activities. Upon adoption of SFAS No. 133,
all derivatives must be recognized at fair value as either assets or liabilities
in the statement of financial position. Changes in the fair value of derivatives
not designed as hedging instruments are to be recognized currently in earnings
or are to be recognized as a component of other comprehensive income, depending
on the intended use of the derivatives and the resulting designations. Upon
adoption, retroactive application of this statement to

financial statements of prior periods is not permitted. We are currently in the
process of evaluating the impact of SFAS No. 133 on our consolidated financial
position and results of operations.

In October 1998, the FASB issued SFAS No. 134, "Accounting for
Mortgage-Backed Securities Retained After the Securitization of Mortgage Loans
Held-for-Sale by a Mortgage Banking Enterprise, an amendment of FASB No. 65."
This statement amends SFAS No. 65 to require that after the securitization of
mortgage loans held-for-sale, an entity engaged in mortgage banking activities
classify the resulting mortgage-backed securities or other retained interest
based on its ability and interest to sell or hold these investments. Management
does not expect this statement to have a significant impact on our financial
condition or results of operation.

BUSINESS OF THE MUTUAL HOLDING COMPANY

As part of the reorganization, American Federal will organize Eagle
Financial MHC as a federally chartered mutual holding company (the "Mutual
Holding Company"). As long as they remain depositors, and, in some instances,
borrowers, of American Federal, persons who had liquidation rights with respect
to American Federal as of the date of the reorganization, will continue to have
such rights solely with respect to the Mutual Holding Company after the
reorganization. Voting rights in the Mutual Holding Company will be limited to
its members. At any point in time, members of the Mutual Holding Company consist
of persons who either have deposits in American Federal or a loan from American
Federal which was outstanding on April 18, 1991, and is still outstanding.

The Mutual Holding Company's principal assets will be its shares of
stock of Eagle received in the reorganization and up to $200,000 received as its
initial capitalization in the reorganization. Immediately after consummation of
the reorganization, it is expected that the Mutual Holding Company will not
engage in any business activity other than its investment in a majority of the
common stock of Eagle and its initial capitalization. However, the Mutual
Holding Company may, at a later date, engage in other business activities
allowed by law or regulation. The Mutual Holding Company will be a mutual
holding corporation chartered under federal law and regulated by the OTS. The
Mutual Holding Company will be subject to the limitations and restrictions on
mutual holding companies required by federal law.

BUSINESS OF EAGLE

After the reorganization Eagle will own all of the stock of American
Federal. Eagle has not yet engaged in any business and will not transact any
material business before the reorganization. We will invest our initial capital
as discussed in the "How We Intend to Use the Proceeds of the Offering" section.
In the future, we may pursue other business activities, including mergers and
acquisitions, investment alternatives and diversification of operations. There
are, however, no current plans for such activities. Initially, we will not
maintain offices separate from those of American Federal or employ any persons
other than their officers. Our officers will not be separately compensated for
their services.

BUSINESS OF AMERICAN FEDERAL

American Federal was founded in 1922 as a Montana chartered building
and loan association and has conducted operations in Helena since that time as a
mutual savings bank. In 1975, we adopted a federal thrift charter and in the
period thereafter utilized less restrictive federal branching laws to expand our
branch structure. From 1976 to the present, seven new branch facilities were
opened and a new headquarters building in Helena was constructed. We
consolidated several of these facilities and currently have four full service
branches and one drive-up facility. We also have six automated teller machines
located in our market area and we participate in the CashCard ATM network.

Since our founding in Helena in 1922, we have operated in the
southcentral portion of Montana. Since the advent of NOW accounts and low and no
cost transaction accounts, we have sought to operate in fashion similar to a
commercial bank, and to change our emphasis on home mortgage lending by
broadening and diversifying the kind of loans and deposits we offer. As a result
of these efforts, we provide full retail banking services, including one- to
four-family residential mortgage loans, home equity loans, lines of credit,
consumer loans and business loans as well as certificates of deposit, checking
accounts and savings accounts. We also originate commercial real estate loans
and offers checking accounts, NOW accounts, credit cards, debit cards and other
credit facilities to individuals and businesses within our market area. We also
engage in extensive mortgage banking. We have sought to introduce a sales
culture at all our branches by encouraging the cross selling of a wide variety
of bank products and services to our customers. As a result, at September 30,
1999, our core deposits were $85.33 million or 68.93% of total deposits. Because
of our core deposit ratio, we believe that we operate in a manner similar to
that of a commercial bank. This is also evidenced by the significant consumer
loans in our loan portfolio, the amount of our fee income, the amount of
transaction accounts and our relatively stable deposit base and in particular
our ratio of transaction accounts and passbook accounts to certificates of
deposit. Our expense ratios also more closely resemble the higher ratios of a
commercial bank as opposed to a thrift institution. At September 30, 1999, we
had total assets of $148.38 million, deposits of $123.80 million and equity of
$14.08 million.

We attract deposits from the general public and use these deposits
primarily to originate loans and to purchase investment and mortgage-backed and
other securities. The principal sources of funds for lending and investing
activities are deposits, FHLB advances, the repayment, sale and maturity of
loans and sale and maturity of securities. The principal sources of income are
interest on loans and investments. The principal expense is interest paid on
deposits and FHLB advances.

Market Area

From our headquarters in Helena, Montana, we operate four full service
offices, including our main office, and one drive-in facility. Our
headquarters/main office and our drive-in facility are located in Helena and
full service branches are located in each of Bozeman (opened 1979), Butte
(opened 1980) and Townsend (opened 1979), Montana.

Montana is one of the largest states in terms of land mass but ranks as
one of the least populated states, ranking 44th in 1997 with a population of
882,000. Helena, where we are headquartered, is the county seat of Lewis and
Clark County which has a population of approximately 54,000 and is located
within 120 miles of four of Montana's six largest cities. It is approximately
midway between Yellowstone and Glacier National Parks. Helena is also Montana's
state capital. Its economy has shown slow growth, in terms of both employment
and income, with employment in state government and the numerous offices of the
federal government comprising 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,
which have been more cyclical in nature and remain vulnerable to severe weather
conditions, increased competition, both domestic and international, as well as
commodity prices.

Bozeman, where we have a branch, is approximately 95 miles southeast of
Helena. It is located in Gallatin County, which has a population of
approximately 63,000. Bozeman is home to Montana State University and has
achieved its recent growth in part due to the growth of the University as well
as the increased tourism for resort areas in and near Bozeman. Agriculture,
however, remains an important part of Bozeman's economy. Bozeman has also become
an attractive location for retirees, primarily from the West Coast, owing to its
many winter and summer recreational opportunities and the presence of the
University. Residential construction in Bozeman has increased more rapidly than
such construction in Helena and the other cities in which we operate.

Butte, Montana is approximately 64 miles southwest of Helena. We have
one branch in Butte. Butte and the surrounding Silverbow County have a
population of approximately 35,000. Butte's population has declined as a result
of the decline in the mining industry which had afforded many higher paying jobs
to residents of Butte and Silverbow County. Since mining's decrease in the
1980's, population losses have stabilized and new manufacturing jobs related to
production of materials for computer chips have been created.

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

Competition

We face strong competition in our primary market area for the
attraction of retail deposits and the origination of loans. Until recently
Montana was a unit banking state, and, therefore, allowed depository
institutions in the state to have only one location. This resulted in Montana
having a significant number of financial institutions. While the state's
population is approximately 882,000 people, there were approximately 79 credit
unions in Montana as well as five federally chartered thrift institutions, and
89 commercial banks as of December 31, 1998. Our most direct competition for
depositors has historically come from locally owned and out-of-

state commercial banks, thrift institutions and credit unions operating in our
primary market area. The number of such competitors has increased significantly
in recent years. Our competition for loans also comes from banks, thrifts and
credit unions in addition to mortgage bankers and brokers. Our principal market
areas can be characterized as markets with moderately increasing but stable
incomes, low unemployment, increasing wealth (particularly in the growing resort
areas such as Bozeman), and moderate population growth.

Lending Activities

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

Loan Portfolio Composition. The following table analyzes the
composition of American Federal's loan portfolio by loan category at the dates
indicated.

At June 30,
------------------------------------------------
At September 30, 1999 1999 1998
----------------------- --------------------- ----------------------
Percent of Percent of Percent of
Amount Total Amount Total Amount Total
------ ----- ------ ----- ------ -----
(Dollars in thousands)
First mortgage loans:

Residential mortgage (1-4 family)(1).. $71,936 71.41% $71,120 72.64% $69,724 72.67%
Commercial real estate................ 7,529 7.47 6,811 6.96 7,555 7.87
Real estate construction............. 1,210 1.20 654 0.67 1,132 1.18
------- ------ ------- ------ ------- -----
Total first mortgage loans......... 80,675 80.08 78,585 80.27 78,411 81.73

Other loans:
Home equity........................... 11,823 11.74 11,867 12.12 10,103 10.53
Consumer.............................. 6,335 6.29 5,332 5.45 4,549 4.74
Commercial............................ 1,909 1.89 2,120 2.17 2,877 3.00
------- ------ ------- ------ ------- ------
Total other loans................... 20,067 19.92 19,319 19.73 17,529 18.27
------- ------ ------- ------- ------
Total loans............................. 100,742 100.00% 97,904 100.00% 95,940 100.00%
====== ====== ======
Less:
Deferred loan fees.................... 130 131 213
Allowance for loan losses............. 748 737 678
------- ------- -------
Total loans, net...................... $99,864 $97,036 $95,049
======= ======= =======

- ----------

(1) Excludes loans held for sale.

Fee Income. American Federal receives fee income from a variety of
sources. Its principal sources of fee income are service charges on demand
deposits, mortgage loan servicing fees, and loan related fee and service
charges. Demand deposit service charges totaled $119,000 for the three months
ended September 30, 1999, and were $463,000 and $469,000 for the years ended
June 30, 1999 and 1998, respectively. Loan-related fees generated from mortgage
loan servicing, which generally consists of collecting mortgage payments,
maintaining escrow accounts, disbursing payments to investors and foreclosure
processing for loans held by others, were $37,000 for the three months ended
September 30, 1999, and were $115,000 and $130,000 for the years ended June 30,
1999 and 1998, respectively. Fees and service charges, which are generally fees
charged in connection with the origination of loans, were $48,000 for the three
months ended September 30, 1999, and were $225,000 and $222,000 for the years
ended June 30, 1999 and 1998, respectively.

Loan Maturity Schedule. The following table sets forth the estimated
maturity of American Federal's loan portfolio at September 30, 1999. Scheduled
principal repayments of loans do not necessarily reflect the actual life of such
assets. The average life of a loan is typically substantially less than its
contractual terms because of prepayments. In addition, due on sale clauses on
loans generally give American Federal the right to declare loans immediately due
and payable in the event, among other things, that the borrower sells the real
property, subject to the mortgage, and the loan is not repaid. The average life
of a mortgage loan tends to increase, however, when the current mortgage loan
market rates are substantially higher than the rates of existing mortgage loans,
and conversely decreases when rates on existing mortgage loans are substantially
higher than current mortgage loan market rates. All mortgage loans are shown to
be maturing based on the date of the last payment required by the loan
agreement, except as noted. Loans having no stated maturity, those without a
scheduled payment, demand loans and delinquent loans, are shown as due within
six months.

More than More than 2
Within 6 6 to 12 1 year to years to Over 5 years
Months Months 2 years 5 years years Total
------ ------ ------- ------- ----- -----
(In thousands)

Residential mortgage (1-4 family). $ 435 $ 56 $ 228 $ 2,328 $69,474 $ 72,521
Commercial real estate .......... 249 308 137 409 6,426 7,529
Real estate construction.......... 1,060 150 0 0 0 1,210
Home equity....................... 93 180 309 4,398 6,843 11,823
Consumer.......................... 494 213 671 3,338 1,619 6,335
Commercial ....................... 230 320 249 458 652 1,909
------ ------ ------ ------- ------- --------
Total Loans................. $2,561 $1,227 $1,594 $10,931 $85,014 $101,327
====== ====== ====== ======= ======= ========

The following table sets forth the dollar amount of all loans, at
September 30, 1999, due after September 30, 2000, which have pre-determined
interest rates and which have floating or adjustable interest rates:

Fixed Adjustable Total
----- ---------- -----
(Dollars in thousands)
Residential mortgage (1-4 family) ....... $68,307 $ 3,723 $72,030
Commercial real estate .................. 6,393 579 6,972
Real estate construction ................ 0 0 0
Home equity ............................. 9,761 1,789 11,550
Consumer ................................ 5,381 247 5,628
Commercial .............................. 1,030 329 1,359
------- ------- -------

Total ................................... $90,872 $ 6,667 $97,539
======= ======= =======

Percent of total ........................ 93.16% 6.84% 100.0%

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

For the Three Months For the Years
Ended September 30, Ended June 30,
-------------------- --------------------
1999 1998 1999 1998
---- ---- ---- ----
(In thousands)
Net loans receivable at
beginning of period: ........ $ 98,103 $98,100 $98,100 $97,926

Loans originated:
Residential mortgage
(1-4 family) ............... 10,208 14,757 71,150 59,028
Commercial real estate ...... 863 538 1,645 2,034
Real estate construction .... 1,762 2,098 3,643 5,015
Home equity ................. 2,087 2,562 9,670 5,667
Consumer .................... 1,740 2,287 3,857 5,917
Commercial Loans ............ 379 391 1,028 2,141
-------- ------- ------- -------
Total loans originated... 17,039 22,633 90,993 79,802
-------- ------- ------- -------
Loans sold:
Whole loans ................. 5,185 12,891 48,243 37,960
Participations .............. 0 0 0 729
-------- ------- ------- -------
Total loans sold ........ 5,185 12,891 48,243 38,689
-------- ------- ------- -------
Principal repayments .......... 9,502 10,631 42,662 40,905
Allowance for losses increase.. (6) (37) (85) (34)
Net loan increase (decrease)... 2,346 (926) 3 174
-------- ------- ------- -------
Net loans receivable
at end of period ............. $100,449 $97,174 $98,103 $98,100
======== ======= ======= =======

Residential Lending. American Federal's primary lending activity
consists of the origination of one- to four-family residential mortgage loans
secured by property located in American Federal's market area. Approximately
71.41% of American Federal's loans as of September 30, 1999, were comprised of
such loans. American Federal generally originates one- to four-family
residential mortgage loans in amounts up to 80% of the lesser of the appraised
value or the selling price of the mortgaged property without requiring private
mortgage insurance. American Federal will originate a mortgage loan in an amount
up to 97% of the lesser of the appraised value or selling price of a mortgaged
property; however, private mortgage insurance for the borrower is required on
the amount financed in excess of 80%. A mortgage loan originated by American
Federal, whether fixed rate or adjustable rate, can have a term of up to 30
years. American Federal originates fixed rate loans with terms of 8, 10, 12, 15
and 30 years. All 30 year fixed rate loans are sold in the secondary market.
American Federal holds substantially all of its 8, 10 and 12 year loans in
portfolio; its fixed rate 15 year loans are held in portfolio or sold in the
secondary market depending on market conditions.

Adjustable rate loans limit the periodic interest rate adjustment and
the minimum and maximum rates that may be charged over the term of the loan. The
majority of these loans are retained in American Federal's portfolio.

The majority of American Federal's one- to four-family residential
loans (both fixed rate and adjustable rate) are underwritten in accordance with
the FHLMC guidelines, regardless of whether they will be sold in the secondary
market. However, American Federal also originates both fixed and adjustable
residential loans that do not conform to FHLMC guidelines. Such loans are
usually retained in portfolio. Substantially all of American Federal's
residential mortgages include "due on sale" clauses, which give American Federal
the right to declare a loan immediately payable if the borrower sells or
otherwise transfers an interest in the property to a third party. American
Federal also originates FHA insured, VA guaranteed and Rural Development
guaranteed loans in amounts up to 100% of the appraisal value or selling price
of the mortgaged property, whichever is less.

American Federal obtains a significant portion of its noninterest
income from servicing on loans. American Federal offers most of the fixed rate
loans it originates for sale in the secondary market on a servicing retained
basis. The retention of such servicing enables the Bank to increase fee income.
Such servicing income was $37,000 for the three months ending September 30,
1999, and was $115,000 for the year ended June 30, 1999. At September 30, 1999,
the Bank had $112.23 million in loans sold with servicing retained. American
Federal also believes that by retaining servicing, it is better able to serve
its local customers. From time to time, American Federal will sell certain loans
to investors other than FHLMC, primarily large banks or mortgage banking firms
on a servicing released basis. All loans are sold without recourse. The Bank
believes it will continue its current practice of selling conforming loans to
FHLMC for the immediate future. The Bank does not ordinarily purchase home
mortgage loans from other financial institutions.

Property appraisals on real estate securing American Federal's
single-family residential loans are made by state certified and licensed
independent appraisers approved annually by the board of directors. Appraisals
are performed in accordance with applicable regulations

and policies. American Federal generally obtains title insurance policies on all
first mortgage real estate loans originated. On occasion, certain refinancings
of mortgage loans are approved using title reports instead of title insurance.
Title reports are also allowed on, home equity loans. Borrowers generally remit
funds with each monthly payment of principal and interest, to a loan escrow
account from which American Federal makes disbursements for such items as real
estate taxes and hazard and mortgage insurance premiums as they become due.

Home Equity Loans. American Federal also originates home equity loans.
These loans are secured by the borrowers' primary real estate, but are typically
subject to a prior lien. At September 30, 1999, $11.82 million or 11.74% of our
total loans, were home equity loans. Borrowers may use the proceeds from
American Federal's home equity loans for many purposes, including home
improvement, debt consolidation, or other purchasing needs. American Federal's
home equity loans are generally fixed rate, fixed payment loans and typically
have terms of no longer than eight years.

Although home equity loans are secured by real estate, they carry a
greater risk than first lien residential mortgages because of the existence of a
prior lien on the property securing the loan, as well as the flexibility the
borrower has with respect to the loan proceeds. American Federal attempts to
minimize this risk by making home equity loans for up to only 85% of appraised
value of the underlying real estate collateral, less the amount of any existing
prior liens on the property securing the loan. Even for home equity loans
secured by real estate, the risk to American Federal is greater than that
inherent in the residential mortgage loan portfolio in that the ultimate
collection of amounts due may depend on whether any value remains after
collection by a holder with a higher priority than American Federal.

Commercial Real Estate. American Federal originates non-residential
commercial real estate mortgage loans, including both developed and undeveloped
land loans, and loans on multi-family dwellings. Commercial real estate loans
make up 7.47% of American Federal's total loan portfolio, or $7.53 million at
September 30, 1999. The majority of these loans are non-residential commercial
real estate loans. American Federal's commercial real estate mortgage loans are
primarily permanent loans secured by improved property such as office buildings,
retail stores, commercial warehouses and apartment buildings. The terms and
conditions of each loan are tailored to the needs of the borrower and based on
the financial strength of the project and any guarantors. Generally, commercial
real estate loans originated by American Federal will not exceed 70% of the
appraised value or the selling price of the property, whichever is less. The
average loan size is approximately $126,000 and is typically made with fixed
rates of interest with five to 15 year maturities, at which point the loan is
repaid or the terms and conditions are renegotiated. Generally, all originated
commercial real estate loans are within American Federal's market area and all
are within the state of Montana. American Federal's largest commercial single
real estate loan had a balance of approximately $460,000 on September 30, 1999,
and was secured by a commercial office building. See also "-- Loans to One
Borrower."

Commercial real estate, multi-family and land loans generally have
significantly greater risk than those that involve 1-4 family residential
mortgage lending. The repayment of these loans typically depends on the
successful operations and income stream of the commercial real estate and the
borrower. Such risks can be significantly affected by economic conditions. In

addition, commercial real estate lending generally requires substantially
greater oversight efforts compared to residential real estate lending.

Real Estate Construction Lending. American Federal also lends funds for
the construction of one- to four-family homes. Real estate construction loans
are made both to individual homeowners for the construction of their primary
residence and to a lesser extent, to local builders for the construction of
pre-sold houses or houses that are, being built for speculative purposes. Real
estate construction loans accounted for $1.21 million or 1.20% of American
Federal's loan portfolio at September 30, 1999.

Real estate construction lending is generally considered to involve a
higher degree of credit risk than long term financing of residential properties.
American Federal's risk of loss on a real estate construction loan depends
largely on the accuracy of the initial estimate of the property's value at
completion of construction and the estimated cost of construction. If the
estimate of construction cost and the marketability of the property after the
project is completed prove to be inaccurate, we may be compelled to advance
additional funds to complete the construction. Furthermore, if the final value
of the completed property is less than the estimated amount, the value of the
property might not be sufficient to serve as collateral for the loan.

American Federal limits its exposure for real estate construction loans
made to local builders through periodic credit analysis on the individual
builder and a series of inspections throughout the construction phase. In
addition, American Federal limits the amount and number of loans made to an
individual builder for the construction of pre-sold and speculative houses based
on the financial strength of the builder.

Consumer Loans. As part of its strategy to invest in higher yielding
shorter term loans, American Federal has made significant efforts to grow its
consumer lending portfolio which includes personal loans secured by collateral
other than real estate, personal loans and lines of credit, and loans secured by
deposits held by American Federal. As of September 30, 1999, consumer loans
totaled $6.34 million or 6.29% of American Federal's total loan portfolio. These
loans consist primarily of auto loans, boat loans, personal loans and credit
lines and deposit account loans. Consumer loans are originated in American
Federal's market area and generally have maturities of up to 10 years. For loans
secured by savings accounts, American Federal will lend up to 90% of the account
balance on single payment loans and up to 100% for monthly payment loans.

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

Consumer loans may entail greater risks than one- to four-family
residential mortgage loans, particularly consumer loans secured by rapidly
depreciable assets such as automobiles or loans that are unsecured. In such
cases, any repossessed collateral for a defaulted loan may not provide an
adequate source of repayment of the outstanding loan balance, since there is a
greater

likelihood of damage, loss or depreciation of the underlying collateral.
Further, consumer loan collections depend on the borrower's continuing financial
stability, and therefore are more likely to be adversely affected by job loss,
divorce, illness or personal bankruptcy. Finally, the application of various
federal laws, including federal and state bankruptcy and insolvency laws, may
limit the amount which can be recovered on such loans after a default. American
Federal limits its consumer loans on new vehicles to 85% of the purchase price
and to 80% of the retail value on used vehicles.

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

Commercial Loans. Commercial loans amounted to $1.91 million, or 1.89%
of American Federal's total loan portfolio at September 30, 1999. American
Federal's commercial loans are traditional business loans and are not secured by
real estate. Such loans may be structured as unsecured lines of credit or may be
secured by inventory, accounts receivable or other business assets. While the
commercial loan portfolio amounts to only 1.89% of the total portfolio at
September 30, 1999, American Federal intends to increase such lending by
focusing on market segments which it has not previously emphasized, such as
business loans to doctors, lawyers, architects and other professionals as well
as to small businesses within its market area. Our management believes that this
strategy provides opportunities for growth, without significant additional cost
outlays for staff and infrastructure.

Commercial loans of this nature usually involve greater risk than 1-4
family residential mortgage loans. The collateral we receive is typically
related directly to the performance of the borrower's business which means that
repayment of commercial loans is dependent on the successful operations and
income stream of the borrower's business. Such risks can be significantly
affected by economic conditions. In addition, commercial lending generally
requires substantially greater oversight efforts compared to residential real
estate lending.

Loans to One Borrower. Under federal law, savings institutions have,
subject to certain exemptions, lending limits to one borrower in an amount equal
to the greater of $500,000 or 15% of the institution's unimpaired capital and
surplus. As of September 30, 1999, our largest aggregation of loans to one
borrower was $788,000, consisting of two loans secured primarily by commercial
office buildings. This was well below our federal legal lending limit to one
borrower of approximately $2.11 million at such date. At September 30, 1999,
these loans were current. The increase in the capital of American Federal from
this offering will increase its legal lending limit.

Loan Solicitation and Processing. Our customary sources of mortgage
loan applications include repeat customers, walk-ins, and referrals from home
builders and real estate brokers. We also advertise in local newspapers and on
local television. Our branch managers

and loan officers located at our headquarters and in branches, have authority to
approve certain loans when presented with a completed application. Other loans
must be approved at our main offices as disclosed herein. No loan consultants or
loan brokers are currently used by us for either residential or commercial
lending activities.

After receiving a loan application from a prospective borrower, a
credit report and verifications are ordered to confirm specific information
relating to the loan applicant's employment, income and credit standing. When
required by our policies, an appraisal of the real estate intended to secure the
proposed loan is undertaken by an independent fee appraiser. In connection with
the loan approval process, our staff analyze the loan applications and the
property involved. Officers and branch managers are granted lending authority
based on the loan types that they work with and their level of experience. We
have established a series of loan committees to approve any loans which may
exceed the lending authority of particular officers or branch managers. A quorum
of the board of directors is required for approval of any loan in excess of
$500,000.

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

Loan Commitments. We generally provide commitments to fund fixed and
adjustable-rate single-family mortgage loans for periods of 60 days at a
specified term and interest rate. The total amount of our commitments to extend
credit as of September 30, 1999 was approximately $7.5 million.

Non-performing Loans and Problem Assets

Collection Procedures. Generally, our collection procedures provide
that when a loan is 15 or more days delinquent, the borrower is notified with a
past due notice. If the loan becomes 30 days delinquent, the borrower is sent a
written delinquent notice requiring payment. If the delinquency continues,
subsequent efforts are made to contact the delinquent borrower, including face
to face meetings and counseling to resolve the delinquency. All collection
actions are undertaken with the objective of compliance with the Fair Debt
Collection Act. In certain instances, we may modify the loan or grant a limited
suspension on loan payments to enable the borrower to reorganize his financial
affairs and attempt to work with the borrower to establish a repayment schedule
to cure the delinquency.

As to mortgage loans and home equity loans, if the borrower is unable
to cure the delinquency or reach a payment agreement, we will institute
foreclosure actions. If a foreclosure action is taken and the loan is not
reinstated, paid in full or refinanced, the property is sold at judicial sale at
which we may be the buyer if there are no adequate offers to satisfy the debt.
Any property acquired as the result of foreclosure or by deed in lieu of
foreclosure is classified

as real estate owned ("REO") until such time as it is sold or otherwise disposed
of. When REO is acquired, it is recorded at the lower of the unpaid principal
balance of the related loan or its fair market value less estimated selling
costs. The initial recordation of any loss is charged to the allowance for loan
losses. As of September 30, 1999, American Federal had no REO.

Loans are reviewed on a quarterly basis and are placed on non-accrual
status when they are more than 90 days delinquent. Loans may be placed on
non-accrual status at any time if, in the opinion of management, the collection
of additional interest is doubtful. Interest accrued and unpaid at the time a
loan is placed on non-accrual status is charged against interest income.
Subsequent payments are either applied to the outstanding principal balance or
recorded as interest income, depending on the assessment of the ultimate
collectibility of the loan. At September 30, 1999, we had $878,000 of loans that
were non-performing and held on a non-accrual basis.

Delinquent Loans. The following table provides information regarding
American Federal's loans delinquent 30 to 89 days at September 30, 1999:

Percentage Of Total
Number Amount Delinquent Loans
------ ------ ----------------
Loan Type:

Mortgage (1-4 family) .......... 2 $102,306 27.26%
Consumer ....................... 15 265,394 70.70
Commercial ..................... 1 7,654 2.04
-- -------- ------

Total .......................... 18 $375,354 100.00%
== ======== ======

Non-Performing Assets. The following table sets forth information
regarding American Federal's non-performing assets as of the dates indicated.
American Federal does not have any troubled debt restructurings within the
meaning of the Statement of Financial Accounting Standards No. 114.

At June 30,
At September 30, ---------------
1999 1999 1998
---- ---- ----
(Dollars in thousands)
Non-accrual loans .............................. $878 $805 $263
Accruing loans delinquent 90 days or more ...... 0 0 4
Real estate owned .............................. 0 0 143
---- ---- ----
Total .......................................... $878 $805 $410
==== ==== ====
Total non-performing loans as a
percentage of total loan portfolio ............. 0.88% 0.83% 0.43%

Percentage of total assets ..................... 0.59% 0.54% 0.28%

The increase in non-accrual loans during the year ended June 30, 1999,
was attributable primarily to $518,000 in residential loans which were placed in
non-accrual status. During the year ended June 30, 1999, American Federal did
not foreclose on any properties.

During the year ended June 30, 1999, approximately $10,538 of interest
would have been recorded on loans accounted for on a non-accrual basis was
significant if such loans had been current according to the original loan
agreements for the entire period. These amounts were not included in American
Federal's interest income for the respective periods. The amount of interest
income on loans accounted for on a non-accrual basis that was included in income
during the same periods was insignificant during the year ended June 30, 1998.

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

An asset is considered "substandard" if it is inadequately protected by
the paying capacity and net worth of the obligor or the collateral pledged, if
any. Substandard assets include those characterized by the distinct possibility
that the insured institution will sustain some loss if the deficiencies are not
corrected. Assets classified as doubtful have all of the weaknesses inherent in
those classified substandard, with the added characteristic that the weaknesses
present make collection or liquidation in full, highly questionable and
improbable, on the basis of currently existing facts, conditions, and values.
Assets classified as loss are those considered uncollectible and of such little
value that their continuance as assets without the establishment of a loss
reserve is not warranted. Assets which do not currently expose the insured
institution to a sufficient degree of risk to warrant classification in one of
the aforementioned categories but possess credit deficiencies or potential
weaknesses are required to be designated special mention by management. In
addition, each loan that exceeds $200,000 and each group of loans to one
borrower that exceeds $200,000 is monitored more closely due to the potentially
greater losses from such loans.

Management's evaluation of the classification of assets and the
adequacy of the allowance for loan losses is reviewed by the Board on a regular
basis and by the regulatory agencies as part of their examination process. The
following table reflects our classified assets.

At June 30,
At Setpember 30, -----------------
1999 1999 1998
---- ---- ----
(In thousands)
Residential mortgages (1-4 family:
Special mention ......................... $ 318 $ 319 $ 499
Substandard ............................. 869 903 862
Doubtful ................................ 0 0 0
Loss .................................... 0 0 13

Home equity:
Special mention ......................... 0 0 0
Substandard ............................. 229 201 171
Doubtful ................................ 0 0 0
Loss .................................... 2 2 3

Consumer:
Special mention ......................... 0 0 0
Substandard ............................. 48 21 18
Doubtful ................................ 0 0 0
Loss .................................... 22 24 30

Commercial:
Special mention ......................... 0 0 75
Substandard ............................. 161 168 116
Doubtful ................................ 0 0 5
Loss .................................... 55 59 64

Real estate owned:
Special mention ......................... 0 0 0
Substandard ............................. 0 0 143
Doubtful ................................ 0 0 0
Loss .................................... 0 0 30
------ ------ ------

Total classified loans and real
estate owned ............................... $1,705 $1,695 $2,103
====== ====== ======

Allowance for Loan Losses and REO. American Federal segregates the loan
portfolio for loan losses into the following broad categories: residential
mortgages (1-4 family), commercial real estate, real estate construction,
commercial loans, home equity loans and consumer loans. American Federal
provides for a general allowance for losses inherent in the portfolio by the
above categories, which consists of two components. General loss percentages are
calculated based on historical analyses and other factors. A supplemental
portion of the allowance is calculated for inherent losses which probably exist
as of the evaluation date even though they might not have been identified by the
more objective processes used. This is due to the risk of error and/or inherent
imprecision in the process. This portion of the allowance is particularly
subjective and requires judgments based on qualitative factors which do not lend
themselves to exact mathematical calculations such as:

o trends in delinquencies and non-accruals;

o trends in volume, terms and portfolio mix;

o new credit products;

o changes in lending policies and procedures;

o changes in the outlook for the local, regional and national economy;
and

o peer group comparisons.

At least quarterly, American Federal's management evaluates the need to
establish reserves against losses on loans and other assets based on estimated
losses on specific loans and on any real estate owned when a finding is made
that a loss is estimable and probable. Such evaluation includes a review of all
loans for which full collectibility may not be reasonably assured and considers,
among other matters:

o the estimated market value of the underlying collateral of problem
loans;

o prior loss experience; economic conditions; and

o overall portfolio quality.

Provisions for losses are charged against earnings in the period they
are established. We had $748,000 in allowances for loan losses at September 30,
1999.

While we believe we have established our existing allowance for loan
losses in accordance with generally accepted accounting principles, there can be
no assurance that regulators, in reviewing our loan portfolio, will not request
that we significantly increase our allowance for loan losses, or that general
economic conditions, a deteriorating real estate market, or other factors will
not cause us to significantly increase our allowance for loan losses, therefore
negatively affecting our financial condition and earnings.

In making loans, we recognize that credit losses will be experienced
and that the risk of loss will vary with, among other things, the type of loan
being made, the creditworthiness of the borrower over the term of the loan and,
in the case of a secured loan, the quality of the security for the loan.

It is our policy to review its loan portfolio, in accordance with
regulatory classification procedures, on at least a quarterly basis.
Additionally, we maintain a program of reviewing loan applications prior to
making the loan and immediately after loans are made in an effort to maintain
loan quality.

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

For Three Months Ended For Years Ended
September 30, June 30,
---------------- ------------------
1999 1998 1999 1998
---- ---- ---- ----
(Dollars in thousands)
Balance at beginning
of period ............................. $ 737 $ 678 $ 678 $ 684
Loans charged-off ...................... (4) (20) (43) (89)
Recoveries ............................. 0 31 42 23
----- ----- ----- -----
Net loans charged-off .................. (4) 11 (1) (66)
----- ----- ----- -----
Provision for possible
loan losses ........................... 15 15 60 60
----- ----- ----- -----

Balance at end of period ............... $ 748 $ 704 $ 737 $ 678
===== ===== ===== =====

Allowance for loan
losses to total loans ................. 0.75% 0.74% 0.76% 0.71%

Allowance for loan losses to
total non-performing loans ............. 85.19% 241.10% 91.55% 253.93%

Net charge-offs to average loans
outstanding during the period ........ (0.00)% 0.01% (0.00)% (0.07)%

Investment Activities

General. Federally chartered savings banks such as American Federal
have the authority to invest in various types of liquid assets, including United
States Treasury obligations, securities of various Federal agencies (including
securities collateralized by mortgages), certain certificates of deposits of
insured banks and savings institutions, municipal securities, corporate debt
securities and loans to other banking institutions.

American Federal maintains liquid assets which may be invested in
specified short-term securities and certain other investments. See "Regulation -
Regulation of American Federal - Federal Home Loan Bank System" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources." Liquidity levels may be increased
or decreased depending on the yields on investment alternatives and upon
management's judgment as to the attractiveness of the yields then available in
relation to other opportunities and its expectation of future yield levels, as
well as management's projections as to the short-term demand for funds to be
used in American Federal's loan origination and other activities. American
Federal maintains an investment securities portfolio and a mortgage-backed
securities portfolio as part of its investment portfolio.

Investment Policies. The investment policy of American Federal, which
is established by the board of directors, is designed to foster earnings and
liquidity within prudent interest rate risk guidelines, while complementing
American Federal's lending activities. The policy provides for available for
sale, held to maturity and trading classifications. However, American Federal
does not hold any securities for purposes of trading and does not anticipate
doing so in

the future. The policy permits investments in high credit quality instruments
with diversified cash flows while permitting us to maximize total return within
the guidelines set forth in our interest rate risk and liquidity management
policy. Permitted investments include but are not limited to U. S. government
obligations, government agency or government-sponsored agency obligations,
state, county and municipal obligations, mortgage-backed securities and
collateralized mortgage obligations guaranteed by government or
government-sponsored agencies, investment grade corporate debt securities, and
commercial paper. We also invest in FHLB overnight deposits and federal funds,
but these instruments are not considered part of the investment portfolio.

The policy also includes several specific guidelines and restrictions
to insure adherence with safe and sound activities. The policy prohibits
investments in high risk mortgage derivative products (as defined within its
policy) without prior approval from the board of directors. Management must
demonstrate the business advantage of such investments. In addition, the policy
limits the maximum amount of the investment in a specific investment category.
We do not participate in hedging programs, interest rate swaps, or other
activities involving the use of off-balance sheet derivative financial
instruments. Further, American Federal does not invest in securities which are
not rated investment grade.

The Board through its asset liability committee has charged the Chief
Financial Officer to implement the policy. All transactions are reported to the
board of directors monthly, as well as the current composition of the portfolio,
including market values and unrealized gains and losses.

Investment Securities. American Federal maintains a portfolio of
investment securities, classified as either available for sale or held to
maturity to enhance total return on investments. At September 30, 1999, our
investment securities were U.S. government and agency obligations, SBA pools,
municipal securities, mortgage-backed securities and corporate obligations with
varying characteristics as to rate, maturity and call provisions. Investment
securities held to maturity represented 47.18% of American Federal's total
investment portfolio.

Corporate Debt. We invest in corporate securities. Corporate bonds may
offer a higher yield than a U.S. Treasury security of comparable duration. These
debt instruments also may have a higher risk of default due to adverse change in
the creditworthiness of the issuer. Our policy limits investments in corporate
bonds to securities rated investment grade or better.

Mortgage-backed Securities and SBA Pools. We invest in mortgage-backed
securities to provide earnings, liquidity, cash flows, and diversification to
our overall balance sheet. These mortgage-backed securities are classified as
either available for sale or held to maturity. These securities are
participation certificates issued and guaranteed by the Government National
Mortgage Association ("GNMA") , the FHLMC and FNMA and secured by interests in
pools of mortgages. Mortgage-backed securities typically represent a
participation interest in a pool of single-family or multi-family mortgages,
although we focus investments on mortgage-backed securities secured by
single-family mortgages. Expected maturities will differ from contractual
maturities due to scheduled repayments and because borrowers may have the right
to call or prepay obligations with or without prepayment penalties.

Mortgage-backed securities typically are issued with stated principal
amounts. The securities are backed by pools of mortgages that have loans with
interest rates that are within a set range and have varying maturities. The
underlying pool of mortgages can be composed of either fixed-rate or adjustable
rate mortgage loans. Mortgage-backed securities are generally referred to as
mortgage participation certificates or pass-through certificates. The interest
rate risk characteristics of the underlying pool of mortgages (i.e., fixed-rate
or adjustable-rate) and the prepayment risk, are passed on to the certificate
holder. The life of a mortgage-backed pass-through security is equal to the life
of the underlying mortgages.

The Bank also invests in securities guaranteed by the Small Business
Administration ("SBA") secured by pools of SBA loans. The securities are created
and serviced by various issuers and consist of pools of the guaranteed portions
of SBA business loans which are consolidated by the issuers and which are
guaranteed by the SBA as to payment of principal and interest. There is an
active secondary market for such securities and the Bank believes that its
investments in such pools are liquid investments.

Collateralized Mortgage Obligations ("CMOs"). We also invest in CMOs,
issued or sponsored by FNMA and FHLMC. CMOs are a type of debt security that
aggregates pools of mortgages and mortgage-backed securities and creates
different classes of CMO securities with varying maturities and amortization
schedules as well as a residual interest with each class having different risk
characteristics. The cash flows from the underlying collateral are usually
divided into "tranches" or classes whereby tranches have descending priorities
with respect to the distribution of principal and interest repayment of the
underlying mortgages and mortgage-backed securities as opposed to pass through
mortgage-backed securities where cash flows are distributed pro rata to all
security holders. Unlike mortgage-backed securities from which cash flow is
received and prepayment risk is shared pro rata by all securities holders, cash
flows from the mortgages and mortgage-backed securities underlying CMOs are paid
in accordance with a predetermined priority to investors holding various
tranches of such securities or obligations. A particular tranche or class may
carry prepayment risk which may be different from that of the underlying
collateral and other tranches. Investing in CMOs allows us to moderate
reinvestment risk resulting from unexpected prepayment activity associated with
conventional mortgage-backed securities. Management believes these securities
represent attractive alternatives relative to other investments due to the wide
variety of maturity, repayment and interest rate options available. At September
30, 1999, 1.38% of our investment portfolio consisted of CMO's.

Other Securities. Equity securities owned consist of a $1.32 million
investment in FHLB of Seattle common stock as of September 30, 9199. As a member
of the FHLB of Seattle, ownership of FHLB of Seattle common shares is required.
The remaining securities and interest-bearing deposits provide diversification
and complement our overall investment strategy.

The following table sets forth the carrying value of American Federal's
investment and mortgage-backed securities portfolio at the dates indicated.

At June 30,
---------------------------------------------------
At September 30, 1999 1999 1998
--------------------- ---------------------- -----------------------
Book Percentage Book Percentage Book Percentage
Value of Total Value of Total Value of Total
----- -------- ----- -------- ----- --------
(Dollars in thousands)

Securities available for sale,
at fair value:
U.S. Government and agency obligations ... 4,385 13.36 3,536 9.67 6,365 19.37
Corporate obligations ................... 4,505 13.72 5,543 15.16 3,595 10.95
Municipal obligations .................... 3,026 9.22 3,118 8.53 0 0
Collateralized mortgage obligations ...... 453 1.38 570 1.56 1,656 5.04
Mortgage-backed securities ............... 3,980 12.12 3,823 10.45 2,246 6.84
MBS-mutual fund .......................... 0 0 0 0 2,018 6.14
------- ------ ------ ------ ------ ------
Total securities available-for-sale ...... 6,349 49.80 16,590 45.37 15,880 48.34
------- ------ ------- ------ ------- ------
Securities held to maturity, at book value:
U.S. Government and Agency obligations.... 6,700 20.41 6,700 18.32 6,417 19.53
Mortgage-backed securities ............... 6,838 20.83 6,843 18.72 4,163 12.67
Municipal obligations .................... 1,063 3.24 955 2.61 786 2.39
------- ------ ------ ------ ------ ------
Total securities held-to-maturity...... 14,601 44.48 14,498 39.65 11,366 34.59
------- ------ ------ ------ ------ ------
Total securities ......................... 30,950 94.28 31,088 85.02 27,246 82.93
Interest-bearing deposits ................ 550 1.68 4,175 11.42 4,400 13.40
Federal Home Loan Bank
capital stock, at cost ................. 1,325 4.04 1,301 3.56 1,207 3.67
------- ------ ------ ------ ------ ------
Total .................................... $32,825 100.00% $36,564 100.00% $32,853 100.00%
======= ====== ====== ====== ====== ======

The following table sets forth certain information regarding the
carrying values, weighted average yields and maturities of American Federal's
investment and mortgage-backed securities portfolio at September 30, 1999.

At September 30, 1999
---------------------------------------------------------------------------------------------
One Year or Less One to Five Years More than Five Years Total Investment Securities
-------------------- ------------------- -------------------- ------------------------------
Annualized Annualized Annualized Annualized
Weighted Weighted Weighted Approximate Weighted
Carrying Average Carrying Average Carrying Average Carrying Market Average
Value Yield Value Yield Value Yield Value Value Yield
----- ----- ----- ----- ----- ----- ----- ----- -----
(Dollars in thousands)

Securities available for sale:
U.S. Government and Agency
obligations...................... $0 0% $1,487 6.32% $2,898 5.99% $4,385 $ 4,385 6.10%
Corporate obligations.............. 428 5.85 4,077 6.22 0 0 4,505 4,505 6.18
Municipal obligations.............. 0 0 0 0 3,026 4.74 3,026 3,026 4.74
Collateralized mortgage obligations 0 0 0 0 453 6.20 453 453 6.20
Mortgage-backed securities......... 0 0 0 0 3,980 6.33 3,980 3,980 6.33
Total securities available for sale 428 5.85 5,564 6.24 10,357 5.76 16,349 16,349 5.93
Securities held to maturity:
U.S. Government and agency
obligations....................... 4,302 5.49 2,398 6.12 0 0 6,700 6,696 5.72
Mortgage-backed securities......... 0 0 1,854 6.43 4,984 6.09 6,838 6,774 6.18
Municipal obligations.............. 227 4.28 726 4.11 110 4.75 1,063 1,044 4.21
------ ---- ------ ---- ------ ---- ----- ------- ----
Total securities held to maturity.. 4,529 5.43 4,978 5.94 5,094 6.06 14,601 14,514 5.82
Total securities................... 4,957 5.47 10,542 6.10 15,451 5.86 30,950 30,863 5.88
----- ------- ------ ------ -------
Interest-bearing deposits.......... 550 5.53 0 0 0 0 550 550 5.53
Federal Home Loan Bank
capital stock.................... 0 0 0 0 1,325 7.25 1,325 1,325 7.25
Total.............................. $5,507 5.48% $10,542 6.10% $16,776 5.97% $32,825 $32,738 5.93%
====== ======= ======= ======= =======

Sources of Funds

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

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

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

Deposits are obtained primarily from residents of Helena, Bozeman,
Butte and Townsend. We believe we are able to attract deposit accounts by
offering outstanding service, competitive interest rates, and convenient
locations and service hours. We use traditional methods of advertising to
attract new customers and deposits, including radio, television, print media
advertising and sales training and incentive programs for employees. We do not
utilize the services of deposit brokers and management believes that an
insignificant number of deposit accounts are held by non-residents of Montana.

We pay interest on deposits which are competitive in our market.
Interest rates on deposits are set weekly by senior management, based on a
number of factors, including:

o projected cash flow;

o a current survey of a selected group of competitors' rates for similar
products;

o external data which may influence interest rates; investment
opportunities and loan demand; and

o scheduled certificate maturities and loan and investment repayments.

Core deposits are deposits which are more stable and somewhat less
sensitive to rate changes and represent a lower cost source of funds than rate
sensitive, more volatile accounts such as certificates of deposit. We believe
that our core deposits are our checking, as well as NOW accounts, passbook and
statement savings accounts, money market accounts and IRA accounts. Based on our
historical experience, we include IRA accounts funded by certificates of deposit
as core deposits. Core deposits amounted to $85.33 million or 68.93% of American
Federal's deposits at September 30, 1999 ($64.89 million or 52.40% if IRA
certificates of deposit are excluded). The presence of a high percentage of core
deposits and, in particular, transaction accounts, is part of our strategy to
restructure our liabilities to more closely resemble

the lower cost liabilities of a commercial bank. However, a significant portion
of our deposits remain in certificate of deposit form. These certificates of
deposit, should they mature and be renewed at higher rates, will result in an
increase in our cost of funds.

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

At June 30,
-----------------------------------------------------------
At September 30, 1999 1999 1998
----------------------------- -------------------------- ------------------------------
Weighted Weighted Weighted
Percent Average Percent Average Percent Average
Amount of Total Rate Amount of Total Rate Amount of Total Rate
------ -------- ---- ------ -------- ---- ------ -------- ----
(Dollars in thousands)

Noninterest checking....... $ 5,961 4.82% 0.00% $ 5,223 4.32% 0.00% $ 4,376 3.80% 0.00%
Passbook savings........... 21,030 16.99 3.00 21,430 17.74 3.00 20,174 17.59 3.00
Interest-bearing checking.. 21,990 17.74 1.50 21,467 17.75 1.50 21,287 18.54 2.00
Money market accounts...... 15,906 12.85 3.71 14,446 11.96 3.61 11,659 10.16 3.43
-------- ------ -------- ------ -------- ------
Total...................... 64,887 52.40 2.39 62,566 51.77 2.38 57,496 50.11 2.49
Certificates of deposit
accounts:
IRA certificates........ 20,450 16.52 5.03 20,204 16.73 5.03 20,510 17.87 5.35
Step-rate certificates . 5,157 4.17 5.12 5,358 4.43 5.04 7,606 6.63 5.68
Other certificates...... 33,310 26.90 4.99 32,694 27.06 5.03 29,117 25.38 5.51
-------- ------ ------ -------- ------
Total certificates of
deposit accounts.......... 58,917 47.60 5.01 58,256 48.23 5.04 57,233 49.89 5.47
-------- ------ -------- ------ -------- ------
Total................. $123,804 100.00% 3.64% $120,822 100.00% 3.66% $114,729 100.00% 3.98%
======== ====== ======== ====== ======== ======

The following table sets forth the amounts and maturities of our
certificates of deposit as of September 30, 1999, for the maturity dates
indicated:

Certificate Of Deposit Maturity
---------------------------------------------------------------------
(In thousands)
After
September 30, September 30, September 30, September 30,
2000 2001 2002 2002 Total
------ ------ ------ ------ ------
4.01-6%..... $40,345 $10,563 $4,660 $868 $56,436
6.01-8%..... 1,663 459 359 0 2,481
------- -------- ------ ----- -------
Total....... $42,008 $11,022 $5,019 $868 $58,917
======= ======= ====== ==== =======

The following table shows the amount of certificates of deposit of
$100,000 or more by time remaining until maturity as of September 30, 1999:

Maturity Period Amount
--------------- ------
(In thousands)
3 months or less.......................... $1,660
Over 3 to 6 months........................ 1,713
Over 6 to 12 months....................... 1,432
Over 12 months............................ 2,045
-----
Total........................... $6,850
======

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

Year Ended June 30,
------------------------
Three Months Ended
September 30, 1999 1999 1998
------------------ ---- ----
(Dollars in thousands)
Opening balance ................ $120,822 $114,729 $110,288
Deposits/Withdrawals, Net ......... 1,907 1,914 117
Interest credited ................. 1,075 4,179 4,324
-------- -------- --------
Ending balance .................... $123,804 $120,822 $114,729
======== ======== ========

Net increase ...................... $ 2,982 $ 6,093 $ 4,441

Percent increase .................. 2.47% 5.31% 4.03%

Weighted average cost of
deposits during the period ...... 3.61% 3.76% 3.99%

Weighted average cost
of deposits at end of period ... 3.64% 3.66% 3.98%

Our depositors are primarily residents of the state of Montana and only
3% of its deposits ($3.7 million) as of September 30, 1999, were from
out-of-state residents. We believe that many of these deposits are owned by
retirees who reside elsewhere but spend portions of the year in Montana. As a
result, these deposits, although owned by persons whose principal residence is
elsewhere, are less likely to be withdrawn. We have no brokered deposits.

Borrowings. Deposits are the primary source of funds for our lending
and investment activities and for general business purposes. However, as the
need arises or in order to take advantage of funding opportunities, we also
borrow funds in the form of advances from the FHLB to supplement our supply of
lendable funds and to meet deposit withdrawal requirements. Advances from the
FHLB are typically secured by our stock in the FHLB and a portion of our
residential mortgage loans. They may be secured by other assets (principally
securities which are obligations of or guaranteed by the U.S. Government). We
typically have funded loan demand and investment opportunities out of current
loan and mortgage-backed securities repayments, investment maturities and new
deposits. However, we recently utilized FHLB advances to supplement these
sources and as a match against certain assets in order to better manage interest
rate risk.

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

At or For
the Three Months At or For the
Ended September 30, Year Ended June 30,
------------------ -------------------
1999 1998 1999 1998
---- ---- ---- ----
(Dollars in thousands)
Advances from FHLB:
Average balance .................. $10,389 $13,572 $12,891 $14,463
Maximum balance at any
month-end ....................... 12,552 14,819 14,819 15,019
Balance at period end ............ 8,508 12,774 12,574 14,841
Weighted average interest rate
during the period ............... 6.45% 6.49% 6.50% 6.46%
Weighted average interest rate
at period end ................... 6.32 6.48 6.48 6.43

Subsidiary Activity

We are permitted to invest its assets in the capital stock of, or
originate secured or unsecured loans to, subsidiary corporations. We do not have
any subsidiaries.

Personnel

As of September 30, 1999, we had 69 full-time employees and 4 part-time
employees. The employees are not represented by a collective bargaining unit. We
believe our relationship with our employees to be good.

Competition

We face strong competition in attraction of deposits, which are our
primary source of funds for lending, and in the origination of real estate,
commercial and consumer loans. Our competition for deposits and loans
historically has come from local and regional commercial banks and credit unions
located in our market area. We also compete with mortgage banking companies for
real estate loans, and commercial banks and savings institutions for consumer
loans; we face competition for investor funds from mutual fund accounts,
short-term money funds and corporate and government securities. Our primary
market area is Lewis and Clark, Gallatin, Silverbow, Broadwater and Jefferson
counties in Montana.

We compete for loans by charging competitive interest rates and loan
fees, and emphasizing outstanding service for its customers. We offer consumer
banking services such as checking, passbook and statement savings accounts,
money market accounts and certificates of deposit, including IRA accounts,
overdraft protection, and consumer, commercial and mortgage loans. American
Federal also provides drive-up facilities and offers a debit card program and
ATMs. The emphasis on outstanding services differentiates American Federal in
its competition for deposits, although American Federal also offers competitive
market rates. American Federal is the second largest locally based financial
institution in terms of deposit share in its primary

market area of Helena and offers an array of retail products and considers
itself a full service community bank.

Properties and Equipment

American Federal's executive office is located at 1400 Prospect Avenue
in Helena, Montana. American Federal conducts its business through five offices,
which are located in Helena, Bozeman, Butte, and Townsend, Montana. All of its
offices are owned. Its principal banking office in Helena also serves as its
executive headquarters and operations center. It houses over 50% of the Bank's
full-time employees. The following table sets forth the location of each of
American Federal's offices, the year the office was opened, and the net book
value of each office and its related equipment, and the square footage at each
location.

Net Book Value
At September 30, Square
Location Address Opened 1999 Footage
- -------- ------- ------ ---- -------

Helena Main 1400 Prospect Ave. 1997 $4,817,912 32,304
Office Helena, MT 59601

Helena Downtown 28 Neill Ave. 1987 $373,070 1,391
Drive-up Helena, MT 59601

Butte Office 3401 Harrison 1979 $615,173 3,890
Butte, MT 59701

Bozeman Office 606 North Seventh 1980 $564,116 5,886
Bozeman, MT 59715

Townsend Office 416 Broadway 1979 $19,198 1,973
Townsend, MT 59644

As of September 30, 1999, the net book value of land, buildings,
furniture, and equipment owned by American Federal, less accumulated
depreciation, totaled $6.3 million.

Legal Proceedings

American Federal, from time to time, is a party to routine litigation,
which arises in the normal course of business, such as claims to enforce liens,
condemnation proceedings on properties in which American Federal holds security
interests, claims involving the making and servicing of real property loans, and
other issues incident to the business of American Federal. There were no
lawsuits pending or known to be contemplated against American Federal at
September 30, 1999.

REGULATION

Set forth below is a brief description of certain laws which relate to
the regulation of American Federal, Eagle and the Mutual Holding Company. The
description does not purport to be complete and is qualified in its entirety by
reference to applicable laws and regulations.

Regulation of Eagle Financial MHC

Upon completion of the reorganization and stock issuance, Eagle
Financial MHC, or the Mutual Holding Company, will become a federal mutual
holding company within the meaning of Section 10(o) of the Home Owners Loan Act.
As such, Eagle Financial MHC will be required to register with and be subject to
Office of Thrift Supervision examination and supervision as well as certain
reporting requirements. In addition, the Office of Thrift Supervision has
enforcement authority over Eagle Financial MHC and its non-savings institution
subsidiaries, if any. Among other things, this authority permits the Office of
Thrift Supervision to restrict or prohibit activities that are determined to be
a serious risk to the financial safety, soundness or stability of a subsidiary
savings bank.

A mutual holding company is permitted to, among other things:

o invest in the stock of a savings institution;

o acquire a mutual institution through the merger of such o institution
into a savings institution subsidiary of such mutual holding company
or an interim savings institution of such mutual holding company;

o merge with or acquire another mutual holding company, one of whose
subsidiaries is a savings institution;

o acquire non-controlling amounts of the stock of savings institutions
and savings institution holding companies, subject to certain
restrictions;

o invest in a corporation the capital stock of which is available for
purchase by a savings institution under Federal law or under the law
of any state where the subsidiary savings institution or institutions
have their home offices;

o furnish or perform management services for a savings institution
subsidiary of such company;

o hold, manage or liquidate assets owned or acquired from a savings
institution subsidiary of such company;

o hold or manage properties used or occupied by a savings institution
subsidiary of such company; and

o act as a trustee under deed or trust.

As a result of the Gramm-Leach-Bliley Financial Modernization Act of
1999, the activities of a newly formed mutual holding company and a unitary
savings and loan holding company is restricted to those of a financial nature
permitting certain securities and insurance activities as well as affiliations
with financial companies such as insurance and securities firms.

Regulation of American Federal

General. As a federally chartered, SAIF-insured savings bank, American
Federal is subject to extensive regulation by the OTS and the FDIC. Lending
activities and other investments must comply with federal statutory and
regulatory requirements. American Federal is also subject to reserve
requirements of the Federal Reserve System. Federal regulation and supervision
establishes a comprehensive framework of activities in which an institution can
engage and is intended primarily for the protection of the SAIF and depositors.
This regulatory structure gives the regulatory authorities extensive discretion
in connection with their supervisory and enforcement activities and examination
policies, including policies regarding to the classification of assets and the
establishment of adequate loan loss reserves.

The OTS regularly examines American Federal and prepares a report on
its examination findings to American Federal's board of directors. American
Federal's relationship with its depositors and borrowers is also regulated by
federal law, especially in such matters as the ownership of savings accounts and
the form and content of American Federal's mortgage documents.

American Federal must file reports with the OTS and the FDIC concerning
its activities and financial condition, and must obtain regulatory approvals
prior to entering into certain transactions such as mergers with or acquisitions
of other financial institutions. Any change in such regulations, whether by the
OTS, the FDIC or the United States Congress, could have a material adverse
impact on Eagle and American Federal, and their operations.

Insurance of Deposit Accounts. The deposit accounts held by American
Federal are insured by the SAIF to a maximum of $100,000 as permitted by law.
Insurance on deposits may be terminated by the FDIC if it finds an institution
has engaged in unsafe or unsound practices, is in an unsafe or unsound condition
to continue operations or has violated any applicable law, regulation, rule,
order or condition imposed by the FDIC or the institution's primary regulator.

As a member of the SAIF, American Federal paid an insurance premium to
the FDIC equal to a minimum of 0.23% of its total deposits during 1996 and prior
years. The FDIC also maintains another insurance fund, the Bank Insurance Fund
("BIF"), which primarily insures commercial bank deposits. In 1999, the annual
insurance premium for institutions in the lowest risk category, which included
most BIF members, was $2,000, regardless of size. The nominal deposit insurance
premium for BIF members placed SAIF members at a competitive disadvantage to BIF
members.

Effective September 30, 1996, a federal law was enacted which mandated
a one-time special assessment on SAIF members such as American Federal of
approximately 0.657% of deposits held on March 31, 1995. The law had the effect
of eliminating the deposit insurance premium differential. Specifically,
beginning January 1, 1997, the deposit insurance assessment for most SAIF
members was reduced to 0.064% of deposits on an annual basis through the end of
1999. During this same period, BIF members will be assessed approximately 0.013%
of deposits. It is expected that these continuing assessments for both SAIF and
BIF members will be used to repay outstanding Financing Corporation bond
obligations. As a result of these changes, beginning January 1, 1997, the rate
of deposit insurance paid by American Federal declined from 0.23% of total
deposits to .064% of the total deposits, a reduction of approximately 70%.

Regulatory Capital Requirements. OTS capital regulations require
savings institutions to meet three capital standards: (1) tangible capital equal
to 1.5% of adjusted total assets, (2) core capital equal to at least 3% of total
adjusted assets, and (3) risk-based capital equal to 8% of total risk- weighted
assets. American Federal's capital ratios are set forth under "Historical And
Pro Forma Capital Compliance."

Tangible capital is defined as core capital less all intangible assets,
less certain mortgage servicing rights and less certain investments. Core
capital is defined as common stockholders' equity, noncumulative perpetual
preferred stock and minority interests in the equity accounts of consolidated
subsidiaries, certain nonwithdrawable accounts and pledged deposits of mutual
savings associations and qualifying supervisory goodwill, less nonqualifying
intangible assets, certain mortgage servicing rights and certain investments.

The risk-based capital standard for savings institutions requires the
maintenance of total risk- based capital of 8% of risk-weighted assets.
Risk-based capital is comprised of core and supplementary capital. The
components of supplementary capital include, among other items, cumulative
perpetual preferred stock, perpetual subordinated debt, mandatory convertible
subordinated debt, intermediate-term preferred stock, and the portion of the
allowance for loan losses not designated for specific loan losses. The portion
of the allowance for loan and lease losses includable in supplementary capital
is limited to a maximum of 1.25% of risk-weighted assets. Overall, supplementary
capital is limited to 100% of core capital. A savings association must calculate
its risk-weighted assets by multiplying each asset and off-balance sheet item by
various risk factors as determined by the OTS, which range from 0% for cash to
100% for delinquent loans, property acquired through foreclosure, commercial
loans, and other assets.

OTS rules require a deduction from capital for institutions with
certain levels of interest rate risk. The OTS calculates the sensitivity of an
institution's net portfolio value based on data submitted by the institution in
a schedule to its quarterly Thrift Financial Report and using the interest rate
risk measurement model adopted by the OTS. The amount of the interest rate risk
component, if any, is deducted from an institution's total capital in order to
determine if it meets its risk-based capital requirement. Federal savings
institutions with less than $300 million in assets and a risk- based capital
ratio above 12% are exempt from filing the interest rate risk schedule. However,
the OTS may require any exempt institution to file such schedule on

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a quarterly basis and may be subject to an additional capital requirement based
on its level of interest rate risk as compared to its peers.

Dividend and Other Capital Distribution Limitations. The OTS imposes
various restrictions or requirements on the ability of savings institutions to
make capital distributions, including dividend payments.

OTS regulations impose limitations on all capital distributions by
savings institutions, such as cash dividends, payments to repurchase or
otherwise acquire its shares, payments to stockholders of another institution in
a cash-out merger, and other distributions charged against capital. The rule
establishes three tiers of institutions based primarily on an institution's
capital level. An institution that exceeds all capital requirements before and
after a proposed capital distribution ("Tier 1 institution") and has not been
advised by the OTS that it is in need of more than the normal supervision can,
after prior notice but without the approval of the OTS, make capital
distributions during a calendar year equal to the greater of (1) 100% of its net
income to date during the calendar year plus the amount that would reduce by
one-half its excess capital divided by its fully phased-in capital requirements
at the beginning of the calendar year, or (2) 75% of its net income over the
most recent four-quarter period. Any additional capital distributions require
prior regulatory notice. As of September 30, 1999, American Federal was a Tier 1
institution.

If American Federal's capital falls below its fully phased-in
requirement or the OTS notified it that it was in need of more than normal
supervision, American Federal would become a Tier 2 or Tier 3 institution and
its ability to make capital distributions could be restricted. Tier 2
institutions, that before and after the proposed distribution meet their current
minimum capital requirements, may only make capital distributions of up to 75%
of net income over the most recent four-quarter period. Tier 3 institutions are
institutions that do not meet current minimum capital requirements and propose
to make any capital distribution, and Tier 2 institutions that propose to make a
capital distribution in excess of the noted safe harbor level, must obtain OTS
approval prior to making such distribution. In addition, the OTS could prohibit
a proposed capital distribution by any institution, which would otherwise be
permitted by the regulation, if the OTS determines that such distribution would
constitute an unsafe or unsound practice.

A federal savings institution is prohibited from making a capital
distribution if, after making the distribution, the savings institution would
not meet any one of its minimum regulatory capital requirements. Further, a
federal savings institution cannot distribute regulatory capital that is needed
for its liquidation account.

Qualified Thrift Lender Test. Federal savings institutions must meet a
qualified thrift lender ("QTL") test or they become subject to certain operating
restrictions. Until recently, the chief restriction is the elimination of
borrowing rights from the FHLB. However, with passage of the Gramm-Leach-Bliley
Financial Modernization Act of 1999 by Congress, the failure to maintain QTL
will not affect borrowing rights with the FHLB. Notwithstanding these changes,
American Federal anticipates that it will maintain an appropriate level of
investments consisting primarily of residential mortgages, mortgage-backed
securities and other mortgage-related investment, and otherwise qualify as a
QTL. The required percentage of these mortgage-related

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investments is 65% of portfolio assets. Portfolio assets are all assets minus
intangible assets, property used by the institution in conducting its business
and liquid assets equal to 10% of total assets. Certain assets are subject to a
percentage limitation of 20% of portfolio assets. Compliance with the QTL test
is determined on a monthly basis in nine out of every twelve months.

Transactions With Affiliates. Generally, federal banking law requires
that transactions between a savings institution or its subsidiaries and its
affiliates must be on terms as favorable to the savings institution as
comparable transactions with non-affiliates. In addition, certain types of these
transactions are restricted to an aggregate percentage of the savings
institution's capital. Collateral in specified amounts must usually be provided
by affiliates in order to receive loans from the savings institution. In
addition, a savings institution may not extend credit to any affiliate engaged
in activities not permissible for a bank holding company or acquire the
securities of any affiliate that is not a subsidiary. The OTS has the discretion
to treat subsidiaries of savings institution as affiliates on a case-by-case
basis.

Liquidity Requirements. All federal savings institutions are required
to maintain an average daily balance of liquid assets equal to a certain
percentage of the sum of its average daily balance of net withdrawable deposit
accounts and borrowings payable in one year or less. Depending on economic
conditions and savings flows of all savings institutions, the OTS can vary the
liquidity requirement from time to time between 4% and 10%. Monetary penalties
may be imposed on institutions for liquidity requirement violations.

Federal Home Loan Bank System. We are a member of the FHLB of Seattle,
which is one of 12 regional FHLBs. Each FHLB serves as a reserve or central bank
for its members within its assigned region. It is funded primarily from funds
deposited by financial institutions and proceeds derived from the sale of
consolidated obligations of the FHLB System. It makes loans to members pursuant
to policies and procedures established by the board of directors of the FHLB.

As a member, we are required to purchase and maintain stock in the FHLB
of Seattle in an amount equal to at least 1% of our aggregate unpaid residential
mortgage loans, home purchase contracts or similar obligations at the beginning
of each year, or 20% of our outstanding advances, whichever is larger. We are in
compliance with this requirement. The FHLB imposes various limitations on
advances such as limiting the amount of certain types of real estate related
collateral to 30% of a member's capital and limiting total advances to a member.

In the past, the FHLBs provided funds for programs to resolve the
problems created by troubled savings institutions and also contribute to
affordable housing programs through direct loans or interest subsidies on
advances targeted for community investment and low- and moderate-income housing
projects. These contributions have adversely affected the level of FHLB
dividends paid and could continue to do so in the future.

Federal Reserve System. The Federal Reserve System requires all
depository institutions to maintain noninterest bearing reserves at specified
levels against their checking,

102

NOW, and Super NOW checking accounts and non-personal time deposits. The
balances maintained to meet the reserve requirements imposed by the Federal
Reserve System may be used to satisfy the OTS liquidity requirements.

Savings institutions have authority to borrow from the Federal Reserve
System "discount window," but Federal Reserve System policy generally requires
savings institutions to exhaust all other sources before borrowing from the
Federal Reserve System.

Regulation of Eagle

General. After the reorganization, Eagle, as a federal stock
corporation in a mutual holding company structure, will be deemed a federal
mutual holding company within the meaning of Section 10(o)of the Home Owners
Loan act ("HOLA"). Eagle will be required to register and file reports with the
OTS and will be subject to regulation and examination by the OTS. In addition,
the OTS will have enforcement authority over Eagle and any nonsavings
institution subsidiary. The OTS can restrict or prohibit activities that it
determines to be a serious risk to us. This regulation is intended primarily for
the protection of our depositors and not for the benefit of you, as stockholders
of Eagle.

TAXATION
Federal Taxation

Savings institutions are subject to the Internal Revenue Code of 1986,
as amended (the "Code"), in the same general manner as other corporations. Prior
to certain changes to the Code in 1996, thrift institutions enjoyed a tax
advantage over banks with respect to determining additions to its bad debt
reserves. All thrift institutions, prior to 1996, were generally allowed a
deduction for additions to a reserve for bad debts. In contrast, only "small
banks" (the average adjusted bases of all assets of such institution equals $500
million or less) were allowed a similar deduction for additions to their bad
debt reserves. In addition, while small banks were only allowed to use the
experience method in determining their annual addition to a bad debt reserve,
all thrift institutions generally enjoyed a choice between (1) the percentage of
taxable income method and, (2) the experience method, for determining the annual
addition to their bad debt reserve. This choice of methods provided a distinct
advantage to thrift institutions that continually experienced little or no
losses from bad debts, over small banks in a similar situation, because thrift
institutions in comparison to small banks were generally allowed a greater tax
deduction by using the percentage of taxable income method (rather than the
experience method) to determine their deductible addition to their bad debt
reserves.

The Code was revised in August 1996 to equalize the taxation of thrift
institutions and banks, effective for taxable years beginning after 1995. All
thrift institutions are now subject to the same provisions as banks with respect
to deductions for bad debt. Now only thrift institutions that are treated as
small banks under the Code may continue to account for bad debts under the
reserve method; however such institutions may only use the experience method for

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determining additions to their bad debt reserve. Thrift institutions that are
not treated as small banks may no longer use the reserve method to account for
their bad debts but must now use the specific charge-off method.

The revisions to the Code in 1996 also provided that all thrift
institutions must generally recapture any "applicable excess reserves" into
their taxable income, over a six year period beginning in 1996; however, such
recapture may be delayed up to two years if a thrift institution meets a
residential-lending test. Generally, a thrift institution's applicable excess
reserves equals the excess of (1) the balance of its bad debt reserves as of the
close of its taxable year beginning before January 1, 1996, over (2) the balance
of such reserves as of the close of its last taxable year beginning before
January 1, 1988 ("pre-1988 reserves"). American Federal will be required to
recapture $350,000 of applicable excess reserve as of September 30, 1999.

In addition, all thrift institutions must continue to keep track of
their pre-1988 reserves because this amount remains subject to recapture in the
future under the Code. A thrift institution such as American Federal, would
generally be required to recapture into its taxable income its pre-1988 reserves
in the case of certain excess distributions to, and redemptions of American
Federal's stock and in the case of a reduction in American Federal's outstanding
loans when comparing loans currently outstanding to loans outstanding at the end
of the base year. For taxable years after 1995, American Federal will continue
to account for its bad debts under the reserve method. The balance of American
Federal's pre-1988 reserves equaled $915,000.

Eagle may exclude from its income 100% of dividends received from
American Federal as a member of the same affiliated group of corporations. A 70%
dividends received deduction generally applies with respect to dividends
received from corporations that are not members of such affiliated group.

American Federal's federal income tax returns for the last five tax
years have not been audited by the IRS.

State Taxation

American Federal files Montana tax returns. For Montana tax purposes,
savings institutions are presently taxed at a rate equal to 6.75% of taxable
income which is calculated based on federal taxable income, subject to certain
adjustments (including the addition of interest income on state and municipal
obligations).

American Federal's state tax returns have not been audited for the past
five years by the state of Montana.

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MANAGEMENT

Directors and Executive Officers

The board of directors of American Federal currently consists of seven
individuals. After the reorganization, the Boards of Directors of American
Federal, Eagle and the Mutual Holding Company will initially be identical. The
board of directors will appoint executive officers to manage the day to day
affairs of the respective corporations. We currently expect the individuals who
currently serve as executive officers of American Federal to continue to serve
in such positions, and as executive officers of Eagle and the Mutual Holding
Company, after the reorganization. Each member of our board of directors serves
for a term of three years, with approximately one-third of the directors elected
each year. Our proposed charter and bylaws also require that directors be
divided into three classes, as nearly equal in number as possible.

Our officers are elected annually by our board and serve at the board's
discretion. These provisions also apply to American Federal and the Mutual
Holding Company, which will have the same directors and executive officers that
we have.

The following table sets forth information with respect to the
directors and executive officers, all of whom will continue to serve in the same
capacities after the reorganization.

Age At Director Term
Name September 30, 1999 Since Position Expires(1)
---- ------------------ ----- -------- ----------

Robert L. Pennington 67 1973 Chairman of the Board 2001

Larry A. Dreyer 54 1990 President, Director 2002

Don O. Campbell 65 1994 Director 2001

Teresa Hartzog 69 1993 Director 2002

Charles G. Jacoby 67 1979 Vice Chairman 2001

James A. Maierle 52 1997 Director 2000

Thomas J. McCarvel 50 1998 Director 2000

- -------------

(1) The terms for directors of Eagle Bancorp and the Mutual Holding Company
will be the same as those of American Federal.

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Other Executive Officers

Age at
Name September 30, 1999 Position
---- ------------------ --------
Peter J. Johnson 42 Senior Vice President, Treasurer
Michael C. Mundt 45 Senior Vice President, Lending
Joanne Y. Sanderson 56 Senior Vice President, Operations

There are no arrangements or understandings between the Bank and any
other person pursuant to which any director was elected or any officer
appointed.

The principal business experience for the past five years of each of
the directors and executive officers is as follows:

Robert L. Pennington is the Chairman of American Federal. He was
previously the President and Chief Executive Officer of American Federal from
1974 through 1995, when he retired. He has served as Chairman since 1993.

Teresa Hartzog is retired. She was formerly employed by the Leaphart
law firm where she served as office manager and a legal secretary.

Don O. Campbell was a certified public accountant and previously served
as Vice President and Controller of Capri, Inc., an investment management
company located in Helena.

Charles G. Jacoby is retired. He formerly owned a retail clothing
establishment in Helena. He serves as Vice Chairman of the Board.

James A. Maierle currently serves as President of Morrison-Maierle,
Inc., a civil engineering corporation, headquartered in Helena.

Thomas J. McCarvel currently serves as a Vice President of Carroll
College in Helena. He was previously the Chief Operating Officer of Anderson
ZurMuehlen & Co., P.C., a public accounting firm in Helena, and one of the
Bank's auditors.

Larry A. Dreyer is currently President (since 1993) and Chief Executive
Officer (since 1995) of American Federal. He joined the Bank in 1973, serving as
its Controller. He is a board member of the Lewis and Clark County United Way, a
member and past president of the Downtown Helena Kiwanis Club and past chairman
of both the St. Peter's Hospital Foundation and Diocese of Helena Finance
Council. He is also a member of the Independent Community Bankers of America
National Policy Development Committee.

106

Executive Officers Who Are Not Directors

Peter J. Johnson is the Bank's Senior Vice President and Treasurer, a
position he has held since 1993. He joined the Bank in 1981 and became its
Treasurer in 1983. He serves on various committees of the Helena area Chamber of
Commerce. He is a member of the Diocese of Helena Finance Council and the City
of Helena Open Space Bond Advisory Committee.

Michael C. Mundt is the Bank's Senior Vice President for Lending. He
joined the Bank in 1988 as a Vice President for Commercial and Consumer Loans.
He is a member of the Carroll College Financial Affairs Committee and the Helena
Housing Task Force.

Joanne Y. Sanderson is the Bank's Senior Vice President of Operations.
She joined the Bank in 1972 as a teller. She is a member and past president of
the Zonta Club of Helena.

Meetings and Committees of the Board of Directors

The board of directors conducts its business through meetings of the
board and through activities of its committees. During the year ended June 30,
1999, the board of directors held 12 regular meetings and one special meeting.
No director attended fewer than 75% of the total meetings of the board of
directors and committees on which such director served during the year ended
June 30, 1999. American Federal has a standing Audit Committee, as well as other
standing committees such as Investment, Compensation, and Asset Liability
Management. The entire board of directors serves as a Nominating Committee.

The Compensation Committee consists of Directors Pennington, Hartzog
and Campbell. The Compensation Committee meets at least annually to review
performance and renumeration of the officers of the Bank. It met once during the
year ended June 30, 1999.

The Audit Committee consists of Directors Jacoby and Campbell. The
Audit Committee meets at least quarterly and meets with American Federal's
independent certified public accountants to review the results of the annual
audit and other related matters. The Audit Committee met five times during the
year ended June 30, 1999.

The Investment Committee consists of Directors Dreyer, Jacoby and
Maierle, as well as executive officers Johnson and Mundt. The Investment
Committee meets at least quarterly in order to review investment performance and
strategy. The Investment Committee met four times during the year ended June 30,
1999.

The Asset Liability Management Committee consists of Directors
Pennington and Dreyer as well as executive officers Johnson and Mundt. The Asset
Liability Management Committee meets at least quarterly to review the Bank's
policies concerning interest rate risk and loan and deposit rates. It met four
times during the year ended June 30, 1999.

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Director Compensation

During 1999, each director, except for the Chairman of the Board, was
paid an annual fee of $12,000. The Chairman of the Board receives an annual fee
of $19,800. Also, each non-employee director, other than the Chairman of the
Board, was paid $130 for each committee meeting attended. The total fees paid to
the directors of the Bank for the year ended June 30, 1999, were approximately
$94,000. American Federal has no other director compensation plans or director
deferred compensation plans.

Executive Compensation

Summary Compensation Table. The following table sets forth the cash and
non-cash compensation awarded to or earned by American Federal's officers for
the year ended June 30, 1999, who earned in excess of $100,000.

Annual Compensation
----------------------------------------------------------
As of Other Annual All Other
Name and Position June 30,(1) Compensation Bonus Compensation(2) Compensation(3)
----------------- ----------- ------------ ----- --------------- ---------------

Larry A. Dreyer 1999 $96,000 $9,025 $12,000 $29,070
President and Chief
Executive Officer

- ---------------
(1) Compensation information for the fiscal years ended June 30, 1998 and 1997
has been omitted as American Federal was not a public company nor a
subsidiary thereof at such times.

(2) Represents compensation for serving on the board of directors of American
Federal.

(3) Includes $10,556 paid pursuant to American Federal's profit sharing plan as
well as employer paid medical and group term life premiums and employer
401(k) and deferred compensation payments.

Employment Agreement. American Federal has entered into an Employment
Agreement (the "Agreement") with its President, Larry A. Dreyer. The Agreement
has an initial term of three years and may be extended at the end of the third
year by the board of directors for an additional year provided the Board takes
specific action authorizing such extension. The Agreement is effective on
January 1, 2000. The Agreement is terminable by us for "cause" as defined in the
Agreement. If we terminate Mr. Dreyer without cause, he will be entitled to a
continuation of his salary plus bonuses and deferred compensation from the date
of termination through the remaining term of the Agreement. The aggregate
payment made to Mr. Dreyer would be an expense to us and would result in
reductions to our net income and capital. After the first three years, the
Agreement may be renewed annually by our board of directors after a
determination of the satisfactory performance of Mr. Dreyer in the Board's sole
discretion. If Mr. Dreyer becomes disabled during the term of the Agreement, he
would continue to receive payment of 75% of the base salary until he returns to
full-time employment at the Bank, reaches age 65, accepts another full-time
position with another employer, or upon his death. Such payments shall be
reduced by any other benefit payments made under a disability plan in effect for
Mr. Dreyer and the Bank's other employees.

Non-Contributory Profit Sharing Plan. The Bank has no pension plan for
its employees, but has established a non-contributory profit sharing plan for
eligible employees who

108

have completed one year of service with the Bank. The non-contributory plan
enables the Bank to contribute up to 15% of qualified salaries each year.
Typically 10% is contributed. The percentage amount of the contribution is
determined by the board of directors each year and is based primarily on
profitability for the past year. For the year ended June 30, 1999, the Board
authorized profit sharing contributions to Mr. Dreyer of $10,556 and total
contributions of $169,000.

The Non-Contributory Profit Sharing Plan also allows employees to make
contributions to a tax-qualified defined contribution savings plan or an
employee owned 401(k) plan. Employees can contribute a certain portion of their
salaries, (up to a maximum of $10,000 for 1999), to a 401(k) plan. The Bank's
board of directors has the authority to match up to a maximum of 50% of an
employee's contribution provided that the matching amount does not exceed 1.5%
of such employee compensation. For the year ended June 30, 1999, the Bank
contributed $1,440 to Mr. Dreyer's 401(k) program and $18,000 in total to the
401(k) program.

Salary Continuation Agreement. Another benefit offered by the Bank is a
program to increase overall retirement benefits for certain employees to levels
which more closely approximate those in comparable businesses. The Bank
consulted with independent compensation consultants and developed a plan to
supplement retirement benefits. The plan the Bank adopted covers eight of its
senior officers, including Mr. Dreyer and all senior vice presidents and vice
presidents. It is a non-qualified retirement plan which is designated the
American Federal Salary Continuation Agreement (the "Salary Continuation
Agreement" or the "Plan."). Under the Salary Continuation Agreement, each
officer receives a fixed retirement benefit based on his or her years of service
with the Bank. This plan is funded by insurance policies owned by the Bank. The
Plan also provides for partial payments in the event of early retirement, death
or disability. In Mr. Dreyer's case, if he retires at age 65, the Salary
Continuation Agreement provides for a lump sum payment of $414,000, or an annual
payment for life of $45,000. The Bank has purchased life insurance contracts for
each covered executive to fund the payments. The Bank recognizes certain
expenses to maintain the Plan. For the year ended June 30, 1999, the total
expenses were $84,000.

The Plan also contains a provision which reduces the annual or lump sum
benefit to Mr. Dreyer by 10% and to other executives by 5% in the event any of
the executives or Mr. Dreyer is the recipient of stock options from the Company
or the Bank.

Bonus Plan. The Bank also provides a discretionary bonus program
("Bonus Program") for all eligible employees. The Bonus Program is based on the
after-tax net profitability of the Bank and is linked specifically to the Bank's
return on assets. In the case of non-officer employees, bonus amounts are based
on salary levels. Under the Bonus Program, the Bank's return on assets for the
period from January through October is used to determine the bonus levels of
Bank officers. Officers' bonuses are directly linked to the return on assets.
For example, if the Bank produces a return on assets of .90%, then each officer
would receive a bonus of 9% of annual base salary. For the year ended June 30,
1999, the Bank paid total bonuses of $117,000. Mr. Dreyer's bonus during this
period was $9,025.

109

Employee Stock Ownership Plan. We have established an employee stock
ownership plan, or ESOP, for the exclusive benefit of participating employees of
ours, to be effective January 1, 2000. Participating employees are all employees
who have completed one year of service with us or our subsidiary and have
attained the age of 21 and who have been credited with 1,000 or more hours of
service in any one year. An application for a letter of determination as to the
tax-qualified status of the employee stock ownership plan will be submitted to
the IRS. Although no assurances can be given, we expect that the employee stock
ownership plan will receive a favorable letter of determination from the IRS.

The employee stock ownership plan is to be funded by contributions made
by us in cash or common stock. Benefits will be paid in shares of the common
stock. The ESOP is expected to borrow funds from Eagle with which to acquire up
to 8% of the common stock to be sold in the offering. The loan is expected to be
for a term of ten years at an annual interest rate equal to the prime rate as
published in The Wall Street Journal. Shares purchased with such loan proceeds
will be held in a suspense account and allocated among participants as principal
on the loan is repaid. The loan will be secured by the unallocated shares held
in the suspense account. It is anticipated that all contributions to the plan
will be fully tax-deductible by American Federal.

Shares sold above the maximum of the offering range (i.e., more than
878,313 shares) may be sold to the employee stock ownership plan before
satisfying remaining unfilled orders of Eligible Account Holders to fill the
plan's subscription, or the plan may purchase some or all of the shares covered
by its subscription after the offering in the open market.

Contributions to the employee stock ownership plan and shares released
from the suspense account will be allocated among participants on the basis of
their annual compensation. Generally, annual compensation is defined as W-2 pay
increased by salary reduction contributions to a 401(k) plan and by pre-tax
contributions to a cafeteria plan, up to a maximum of $80,000 for each
participant. All participants must be employed on the last day of the plan
calendar year and have worked at least 1,000 hours in the plan year, or have
terminated employment following death, disability or retirement, in order to
receive an allocation for the year. Participants become fully vested in their
plan allocations based on a seven year graded vesting schedule which provides 0%
vesting for the first two years of service; 20% vesting for three years; 40%
vesting for four years; 60% vesting for five years; 80% vesting for six years
and 100% vesting after seven years. Vesting years of service are plan years in
which an employee is credited with 1,000 or more hours of service and include
periods of employment before the adoption of the employee stock ownership plan.
Our contributions to the employee stock ownership plan to the extent necessary
to repay the acquisition loan are mandatory and may cause a reduction in
discretionary contributions to other qualified plans.

The board of directors will appoint Larry A. Dreyer, Peter J. Johnson
and Don O. Campbell to serve as the plan's trustees and Larry A. Dreyer, Peter
J. Johnson and Teresa Artz make up the committee which administers the plan. The
trustees must vote all allocated shares held in the plan as directed by plan
participants. Allocated shares for which no instructions are received will not
be voted. Unallocated shares will be voted as directed by the trustees in the
exercise of their fiduciary responsibilities.

110

Potential Stock Benefit Plans

Stock Option Plans. Following the offering, we intend to adopt a stock
option plan for directors and key employees within one year after the
reorganization. Any plan adopted will be subject to stockholder approval and
applicable laws. Any plan adopted within one year of the reorganization will
require the approval of a majority of the shares of stock held by our
stockholders, other than the Mutual Holding Company, and will also be subject to
various other regulatory limitations. However, if a stock option plan is
implemented upon stockholder approval, options to purchase our common stock in
an amount up to 10% of the amount sold in our offering will be awarded to our
key employees and directors. Shares awarded upon the exercise of option plans
pursuant to the stock option plan will be acquired through open market purchases
or from authorized but unissued shares.

The purpose of the stock option plan is to attract and retain qualified
personnel in key positions, provide officers, key employees and directors with a
proprietary interest in Eagle Bancorp as an incentive to contribute to our
success and reward officers and key employees for outstanding performance.
Although the terms of the stock option plan have not yet been determined, it is
expected that the stock option plan will provide for the grant of: (1) options
to purchase the common stock intended to qualify as incentive stock options
under the Code (incentive stock options); and (2) options that do not so qualify
(non-statutory stock options). Any stock option plans would be in effect for up
to ten years from the earlier of adoption by the board of directors or approval
by the stockholders.

Under the OTS regulations, a stock option plan adopted within a year of
the reorganization would provide for a term of 10 years, after which no awards
could be made, unless earlier terminated by the board of directors. The options
awarded would vest equally over not less than a five year period, beginning one
year after the date of grant of the option. Options would expire no later than
10 years from the date granted and would expire earlier if the option committee
so determines or in the event of termination of employment. Options would be
granted based on several factors, including seniority, job duties and
responsibilities, job performance, our financial performance and a comparison of
awards given by other savings institutions converting from mutual to stock form.

Restricted Stock Program. Following the offering, we also intend to
establish a management recognition plan, or MRP, to provide our officers and
outside directors with a proprietary interest in Eagle Bancorp. The MRP is
expected to provide for the award of common stock, subject to vesting
restrictions, at no cost to eligible officers, employees and directors. Any MRP
adopted within one year of the reorganization would require the approval of a
majority of the shares of stock held by our stockholders, other than the Mutual
Holding Company, and will also be subject to various other regulatory
limitations.

We expect to contribute funds to the MRP to acquire, in the aggregate,
up to 4% of the shares of common stock sold in the offering. Shares used to fund
the MRP may be acquired through open market purchases or from authorized but
unissued shares. No determinations have

111

been made as to the specific terms of stock programs. If we sell 878,313 shares
of stock in the offering, and the shares of stock issued pursuant to the MRP are
authorized but unissued stock, existing stockholders would be diluted by up to
approximately 2.7%

Restrictions on Stock Benefit Plans. If we adopt a stock option plan or
MRP within one year from the date of our reorganization, these plans must comply
with the following OTS restrictions:

o the plans must be fully disclosed in this prospectus;

o for stock option plans, the total number of shares for which options
may be granted may not exceed 10% of the shares sold in the
reorganization;

o for the MRP, the shares may not exceed 4% of the shares sold in the
reorganization;

o the aggregate amount of stock purchased by the employee stock
ownership plan in the reorganization may not exceed 8%;

o no individual employee may receive more than 25% of the available
awards under the stock option plan or MRP;

o directors who are not employees may not receive more than 5%
individually or 30% in the aggregate of the awards under any plan;

o all plans must be approved by a majority of the total votes eligible
to be cast (excluding the shares held by the Mutual Holding Company)
at any duly called meeting of Eagle Bancorp stockholders held no
earlier than six months following the reorganization;

o for stock option plans, the exercise price must be at least equal to
the market price of the stock at the time of grant;

o neither stock option awards nor restricted stock awards may vest
earlier than 20% as of one year after the date of stockholder approval
and 20% per year thereafter, and vesting may be accelerated only in
the case of disability or death, or if consistent with applicable OTS
regulations in effect at such time, after a change in control;

o the proxy material must clearly state that the OTS in no way endorses
or approves of the plans; and

o prior to implementing the plans, all plans must be submitted to the
Regional Director of the OTS within five days after stockholder
approval with a certification that the plans approved by the
stockholders are the same plans that were filed with and disclosed in
the proxy materials relating to the meeting at which stockholder
approval was received.

112

Transactions with Management and Others

No directors, executive officers or immediate family members of such
individuals were engaged in transactions with American Federal or any subsidiary
involving more than $60,000 (other than through a loan) during the fiscal year
ended June 30, 1999. Furthermore, American Federal had no "interlocking"
relationships in which (1) any executive officer is a member of the board of
directors of another entity, one of whose executive officers are a member of
American Federal's board of directors, or where (2) any executive officer is a
member of the compensation committee of another entity, one of whose executive
officers is a member of American Federal's board of directors.

American Federal has followed the policy of offering residential
mortgage loans for the financing of personal residences, and consumer loans to
its officers, directors and employees. Loans are made in the ordinary course of
business and also made on substantially the same terms and conditions, including
interest rate and collateral, as those of comparable transactions prevailing at
the time with other persons, and do not include more than the normal risk of
collectibility or present other unfavorable features. As of June 30, 1999, the
aggregate principal balance of loans outstanding to all directors, executive
officers and immediate family members of such individuals was approximately
$442,000.

PROPOSED MANAGEMENT PURCHASES

The following table sets forth information regarding the approximate
number of shares of our common stock, each director, executive officer and their
associates intends to purchase in the reorganization. All shares will be
purchased for investment purposes and not for purposes of resale. For purposes
of the following table, it has been estimated that 763,750 shares (the mid-point
of the estimated valuation range (the "EVR"), of common stock will be sold at
$8.00 per share and that sufficient shares will be available to satisfy
subscriptions in all categories.

113

Aggregate Price Percentage of
Total Shares of Shares Total Shares
Name Position Purchased (1) Purchased Offered
---- -------- ------------- --------- -------

Robert L. Pennington Chairman of the Board 17,500 $140,000 2.29%
Charles G. Jacoby Vice-Chairman 13,750 110,000 1.80
Larry A. Dreyer President, CEO and Director 17,500 140,000 2.29
Don O. Campbell Director 6,250 50,000 *
Teresa Hartzog Director 11,250 90,000 1.47
James A. Maierle Director 12,500 100,000 1.64
Thomas J. McCarvel Director 8,250 66,000 1.08
Michael C. Mundt Senior Vice President/Lending 5,000 40,000 *
Peter J. Johnson Senior Vice President/Treasurer 12,500 100,000 1.64
Joanne Y. Sanderson Senior Vice President/Operations 17,500 140,000 2.29
------- -------- -----
Total 122,000 $976,000 15.97%
======= ======== =====

- -------------

(1) Does not include shares expected to be purchased by the ESOP or shares
awarded to participants in the MRP, if implemented, or under the stock
option plan, if implemented.

* Represents less than 1% of outstanding shares.

RESTRICTIONS ON ACQUISITION OF EAGLE

The following discussion is a summary of statutory and regulatory
restrictions on the acquisition of our common stock. In addition, the following
discussion summarizes the mutual holding company structure, provisions of
certificates of incorporation and bylaws and regulatory provisions that have an
anti-takeover effect.

Mutual Holding Company Structure

The mutual holding company structure will restrict the ability of our
stockholders to effect a change of control of management because the Mutual
Holding Company, as long as it remains in existence as a mutual entity, will
control a majority of our voting stock. In addition, voting rights in the Mutual
Holding Company are vested with the depositors of American Federal. As such,
management of American Federal will be able to exert voting control over the
Mutual Holding Company.

Change in Bank Control Act

Federal law provides that no person, acting directly or indirectly or
through or in concert with one or more other persons, may acquire control of a
savings association unless the OTS has been given 60 days prior written notice.
Federal law provides that no company may acquire control of a savings and loan
holding company without the prior approval of the OTS. Any company that acquires
control becomes a "savings and loan holding company" subject to

114

registration, examination and regulation by the OTS. Pursuant to federal
regulations, control is conclusively deemed to have occurred when an entity,
among other things, has acquired more than 25 percent of any class of voting
stock of the institution or the ability to control the election of a majority of
the directors of an institution. Moreover, control is presumed to have occurred,
subject to rebuttal, after the acquisition of more than 10 percent of any class
of voting stock, or of more than 25 percent of any class of stock, of a savings
institution, where certain enumerated control factors are also present in the
acquisition. The OTS may prohibit an acquisition of control if:

o it would result in a monopoly or substantially lessen competition;

o the financial condition of the acquiring person might jeopardize the
financial stability of the institution; or

o the competence, experience or integrity of the acquiring person
indicates that it would not be in the interest of the depositors or of
the public to permit the acquisition of control by such person.

The foregoing restrictions do not apply to the acquisition of stock by
one or more tax-qualified employee stock benefit plans, provided that the plan
or plans do not have beneficial ownership in the aggregate of more than 25
percent of any class of our equity security.

EAGLE BANCORP'S CHARTER AND BYLAWS

General

Our charter and bylaws are available at our administrative office or by
writing or calling us, at 1400 Prospect Avenue, P.O. Box 4999, Helena, MT
59604-4999. Our telephone number is (406) 442-3080.

Classified Board of Directors and Related Provisions. Our board of
directors is divided into three classes which are as nearly equal in number as
possible. Directors serve for terms of three years. As a result, each year, only
one-third of the directors are to be elected and it would take at least two
years to elect a majority of our directors. A director may be removed only by
the affirmative vote of the holders of a majority of the shares then entitled to
vote.

Restrictions on Voting of Securities. The charter provides that for
five years no person shall directly or indirectly acquire the beneficial
ownership of 10% or more of our securities other than the Mutual Holding
Company. Any shares so acquired will not be counted as shares entitled to vote,
shall not be voted by any person or counted as voting shares in connection with
any matter submitted to stockholders for a vote, and shall not be counted as
outstanding for purposes of determining a quorum or the affirmative vote
necessary to approve any matter submitted to the stockholders for a vote. It is
possible for such a person to have voting authority for less than 10% of our
shares, depending on how the shares are registered.

115

The purpose of this provision is to reduce the chance that minority stockholders
could challenge our management.

Prohibition Against Cumulative Voting. Our charter also prohibits
cumulative voting by stockholders in the election of directors. The absence of
cumulative voting rights effectively means that the holders of a majority of the
shares voted at a meeting of stockholders may, if they so choose, elect all
directors elected at the meeting, thus precluding a minority stockholder from
obtaining representation on the board of directors unless the minority
stockholder is able to obtain the support of a majority. In accordance with the
law that relates to mutual holding companies, the Mutual Holding Company must
remain the majority holder of our voting stock for as long as it exists.

Additional Anti-Takeover Provisions. The provisions described above are
not the only provisions of our charter and bylaws having an anti-takeover
effect. For example, the charter authorizes the issuance of up to 1,000,000
shares of preferred stock, which conceivably would represent an additional class
of stock required to approve any proposed acquisition. This preferred stock,
none of which has been issued, together with authorized but unissued shares of
the common stock (the charter authorizes the issuance of up to eight million
shares of the common stock), also could represent additional capital required to
be purchased by the acquiror.

In addition to discouraging a takeover attempt which a majority of our
stockholders might determine to be in their best interest or in which our
stockholders might receive a premium over the current market prices for their
shares, the effect of these provisions may render the removal of our management
more difficult. It is possible that incumbent officers and directors might be
able to retain their positions even though a majority of our stockholders, other
than the Mutual Holding Company, desire a change.

DESCRIPTION OF CAPITAL STOCK

We are authorized to issue 10,000,000 shares of common stock, par value
$0.01 per share and 1,000,000 shares of preferred stock, no par value. We
currently expect to issue between 1,381,251 and 1,868,751 shares of common stock
in the reorganization, including between 649,188 and 878,313 shares to persons
other than the Mutual Holding Company. After payment of the purchase price
shares of common stock issued in the offering will be fully paid and
non-assessable. The common stock will represent nonwithdrawable capital, will
not be an account of insurable type and will not be insured by the FDIC or any
other governmental agency.

Voting Rights

The holders of common stock will possess exclusive voting rights in
Eagle Bancorp. The holders of shares of common stock will be entitled to one
vote for each share held on all matters subject to stockholder vote.

116

Liquidation Rights

After any liquidation, dissolution, or winding-up of Eagle Bancorp, the
holders of the common stock generally would be entitled to receive, after
payment of all debts and liabilities of Eagle Bancorp and American Federal, all
assets of Eagle Bancorp available for distribution. See also "The Reorganization
Effects of the Reorganization -- Liquidation Rights."

Preemptive Rights; Redemption

The holders of the common stock do not have any preemptive rights with
respect to any shares we may issue. Any subsequent stock issuance, however, may
only be effected through a Stock Issuance Plan approved by the OTS which would
grant subscription priorities to the Mutual Holding Company's members unless
Eagle Bancorp demonstrates that a non-conforming stock issuance would be more
beneficial to Eagle Bancorp. The common stock will not be subject to any
redemption provisions.

Preferred Stock

We are authorized to issue up to 1,000,000 shares of preferred stock
and to fix and state voting powers, designations, preferences, or other special
rights of such shares and the qualifications, limitations and restrictions of
those shares as the board of directors may determine in its discretion.
Preferred stock may be issued in distinctly designated series, may be
convertible into common stock and may rank prior to the common stock as to
dividends rights, liquidation preferences, or both, and may have full or limited
voting rights. Accordingly, the issuance of preferred stock could adversely
affect the voting and other rights of holders of common stock.

The authorized but unissued shares of preferred stock and the
authorized but unissued and unreserved shares of common stock will be available
for issuance in future mergers or acquisitions, in future public offerings or
private placements. Except as otherwise required to approve the transaction in
which the additional authorized shares of preferred stock would be issued, no
stockholder approval generally would be required for the issuance of these
shares. Depending on the circumstances, however, stockholder approval may be
required pursuant to requirements for eligibility for quotation of the common
stock on the NASDAQ Stock Market or by any exchange on which the common stock
may then be listed.

CHANGE IN AUDITORS

On August 19, 1999, the board of directors of American Federal
determined to change auditors. Specifically, the Board determined to replace
Anderson ZurMuehlen & Co., P.C. ("Anderson ZurMuehlen") with Moss Adams LLP
("Moss Adams"). Moss Adams was engaged to audit the financial statements of
American Federal for the year ended June 30, 1999. The board of directors
determined to engage Moss Adams because the Board determined that it was

117

in our best interests to engage an auditor with broad experience in the auditing
of public companies in anticipation of the reorganization.

Anderson ZurMuehlen's report on the financial statements for the fiscal
year ended June 30, 1998, did not contain an adverse opinion or disclaimer of
opinion and was not qualified as to uncertainty, audit scope or accounting
principles. During the fiscal year ended June 30, 1998, and through the date
hereof, there were no disagreements between us and Anderson ZurMuehlen on any
matter of accounting principles or practices, financial statement disclosure or
auditing scope or procedure.

During the fiscal year ended June 30, 1999, and through the date
hereof, Anderson ZurMuehlen did not advise, and has not indicated to us that it
had any reason to advise us of the following:

o That the internal controls necessary for us to develop reliable
financial statements did not exist;

o That information had come to Anderson ZurMuehlen's attention that had
led it to no longer be able to rely on management's representations,
or that made it unwilling to be associated with the financial
statements prepared by management;

o (1) the need to expand significantly the scope of our audit, or that
information had come to Anderson ZurMuehlen's attention during such
time period that if further investigated might (i) materially impact
the fairness or reliability of either: a previously issued audit
report or the underlying financial statements, or the financial
statements issued or to be issued covering the fiscal periods
subsequent to the date of the most recent financial statements covered
by an audit report (including information that may prevent it from
rendering an unqualified audit report on those financial statements),
or (ii) cause it to be unwilling to rely on management's
representation or to be associated with our financial statements, and
(2) that due to Anderson ZurMuehlen's replacement or for another
reason, the issue has not been resolved to Anderson ZurMuehlen's
satisfaction prior to its replacement.

o (1) that information had come to Anderson ZurMuehlen's attention that
it had concluded materially impacted the fairness or reliability of
either (i) a previously issued audit report or the underlying
financial statements, or (ii) the financial statements issued or to be
issued covering the fiscal periods subsequent to the date of the most
recent financial statements covered by an audit report (including
information that, unless resolved to Anderson ZurMuehlen's
satisfaction, would prevent it from rendering an unqualified audit
report on those financial statements, and (2) due to Anderson
ZurMuehlen's replacement, or for any other reason, the issue was not
resolved to Anderson ZurMuehlen's satisfaction prior to its
replacement.

118

During the two most recent fiscal years and the subsequent interim
periods preceding the selection of Moss Adams, we had not consulted Moss Adams
regarding the application of accounting principles, either contemplated or
proposed, the type of audit opinion that might be rendered on our financial
statements or any other matters that would be required to be reported therein.

LEGAL AND TAX OPINIONS

The legality of the issuance of the common stock being offered and
certain matters relating to the reorganization and federal taxation will be
passed upon for us by Nixon Peabody LLP , Washington, D.C. Certain matters
relating to state taxation will be passed upon for us by Anderson ZurMuehlen &
Co., P.C., Helena, Montana. Certain legal matters will be passed upon for Ryan,
Beck & Co. by Luse, Lehman, Gorman, Pomerenk & Schick, Washington, D.C.

EXPERTS

Our financial statements as of June 30, 1999 and 1998, and for each of
the years in the two year period ended June 30, 1999, have been included in this
prospectus in reliance upon the reports of Moss Adams LLP and Anderson
ZurMuehlen & Co., P.C. independent certified public accountants, appearing
elsewhere in this prospectus, and upon the authority of said firms as experts in
accounting and auditing.

Feldman Financial has consented to the publication in this document of
a summary of its letter to American Federal setting forth its opinion as to the
estimated pro forma market value of the common stock upon the reorganization and
stock offering and its opinion setting forth the value of subscription rights
and to the use of its name and statements with respect to it appearing in this
document.

REGISTRATION REQUIREMENTS

Our common stock will be registered pursuant to Section 12(g) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). We will be
subject to the information, proxy solicitation, insider trading restrictions,
tender offer rules, periodic reporting and other requirements of the SEC under
the Exchange Act. We may not deregister the common stock under the Exchange Act
for a period of at least three years following the reorganization.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

We are subject to the informational requirements of the Exchange Act
and must file reports and other information with the SEC.

We have filed with the SEC a registration statement on Form SB-2 under
the Securities Act of 1933, as amended, with respect to the common stock offered
in this document. As

119

permitted by the rules and regulations of the SEC, this document does not
contain all the information set forth in the registration statement. Such
information, including the appraisal report which is an exhibit to the
registration statement, can be examined without charge at the public reference
facilities of the SEC located at 450 Fifth Street, N.W., Washington, D.C. 20549,
and copies of such material can be obtained from the SEC at prescribed rates.
You may obtain information on the operation of the Public Reference Room by
calling 1-800-SEC-0330. The SEC also maintains an internet address ("Web site")
that contains reports, proxy and information statements and other information
regarding registrants, including Eagle Bancorp, that file electronically with
the SEC. The address for this Web site is "http:www.sec.gov." The statements
contained in this document as to the contents of any contract or other document
filed as an exhibit to the Form SB-2 are, of necessity, brief descriptions and
are not necessarily complete; each such statement is qualified by reference to
such contract or document.

A copy of the Amended and Restated Plan Of Mutual Holding Company
Reorganization And Stock Issuance, our charter and bylaws, as well as those of
American Federal and the Mutual Holding Company, are available for review
without charge from American Federal. They are available at all of our branches.

We filed a notice of mutual holding company reorganization with the OTS
on Form MHC-1 and Form MHC-2 and an application H-(e)1 with the Office of Thrift
Supervision. This prospectus omits certain information contained in that
application. The Application may be examined at the principal office of the
Office of Thrift Supervision, 1700 G Street, N.W., Washington, D.C. 20552, and
at the West Regional Office of the Office of Thrift Supervision, 1 Montgomery
Street, San Francisco, CA 94104.

120

AMERICAN FEDERAL SAVINGS BANK

INDEPENDENT AUDITOR'S REPORT
AND
FINANCIAL STATEMENTS

JUNE 30, 1999 AND 1998

CONTENTS
- --------------------------------------------------------------------------------

PAGE
----
INDEPENDENT AUDITOR'S REPORT .............................................. 1

FINANCIAL STATEMENTS
Statements of financial condition ..................................... 2-3
Statements of income .................................................. 4-5
Statements of retained earnings and accumulated other
comprehensive income .............................................. 6
Statements of cash flows .............................................. 7-8
Notes to financial statements ......................................... 9-35

INDEPENDENT AUDITOR'S REPORT

To the Board of Directors
American Federal Savings Bank

We have audited the accompanying statement of financial condition of American
Federal Savings Bank (the "Bank") as of June 30, 1999, and the related
statements of income, retained earnings and accumulated other comprehensive
income, and cash flows for the year ended June 30, 1999. These financial
statements are the responsibility of the Bank's management. Our responsibility
is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of American Federal Savings Bank
as of June 30, 1999, and the results of its operations and its cash flows for
the year ended June 30, 1999, in conformity with generally accepted accounting
principles.

Portland, Oregon
October 26, 1999

INDEPENDENT AUDITOR'S REPORT

To the Board of Directors
American Federal Savings Bank

We have audited the accompanying statements of financial condition of American
Federal Savings Bank (the Bank) as of June 30, 1998, and the related statements
of income, equity, and cash flows for the year then ended. These financial
statements are the responsibility of the Bank's management. Our responsibility
is to express an opinion on these financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of American Federal Savings Bank
as of June 30, 1998, and the results of its operations and its cash flows for
the year then ended in conformity with generally accepted accounting principles.

Helena, Montana
August 13, 1998

AMERICAN FEDERAL SAVINGS BANK
STATEMENTS OF FINANCIAL CONDITION
- --------------------------------------------------------------------------------

ASSETS

JUNE 30,
SEPTEMBER 30, ---------------------------
1999 1999 1998
---- ---- ----
(Unaudited)
ASSETS

Cash and due from banks ................. $ 3,381,616 $ 2,566,171 $ 2,387,538
Interest-bearing deposits with banks .... 550,000 4,175,000 4,400,000
------------ ------------ ------------
Total cash and cash equivalents .. 3,931,616 6,741,171 6,787,538

Investment securities available-for-sale,
at market value ......................... 16,349,061 16,590,332 15,880,243
Investment securities held-to-maturity,
market value of $14,513,681, in September
1999, $14,409,769 and $11,458,818 in
June 1999 and 1998, respectively ........ 14,601,372 14,497,696 11,365,879
Federal Home Loan Bank stock, at cost ........ 1,324,900 1,301,200 1,207,400
Mortgage loans held-for-sale ................. 585,449 1,066,384 3,050,827
Loans receivable, net of deferred loan fees
and allowance for loan losses ........... 99,863,665 97,036,135 95,048,906
Accrued interest and dividends receivable .... 886,903 739,071 769,016
Mortgage servicing rights .................... 1,322,960 1,279,041 751,573
Property and equipment, net .................. 7,242,207 7,361,072 7,167,527
Cash surrender value of life insurance ....... 1,971,445 1,948,570 1,857,652
Other assets ................................. 299,160 330,700 538,829
------------ ------------ ------------

Total assets ..................... $148,378,738 $148,891,372 $144,425,390
============ ============ ============

AMERICAN FEDERAL SAVINGS BANK
STATEMENTS OF FINANCIAL CONDITION
- --------------------------------------------------------------------------------

LIABILITIES AND EQUITY

JUNE 30,
SEPTEMBER 30, -------------------------
1999 1999 1998
---- ---- ----
(Unaudited)
LIABILITIES
Deposit accounts:

Noninterest-bearing ............... $ 5,960,717 $ 5,222,747 $ 4,376,198
Interest-bearing .................. 117,843,579 115,598,941 110,352,392
Advances from Federal Home Loan Bank . 8,507,778 12,574,445 14,841,111
Accrued expenses and other liabilities 1,991,408 1,601,720 2,000,611
------------ ------------ ------------
Total liabilities ......... 134,303,482 134,997,853 131,570,312
------------ ------------ ------------

COMMITMENTS AND CONTINGENCIES
(Note 12)

EQUITY
Retained earnings (substantially
restricted) .................... 14,308,482 14,099,920 12,847,668
Accumulated other comprehensive
(loss) income .................. (233,226) (206,401) 7,410
------------ ------------- ----------
Total equity ............... 14,075,256 13,893,519 12,855,078
------------ ------------- ----------

Total liabilities and equity $ 148,378,738 $ 148,891,372 $144,425,390
============= ============= ============

See accompanying notes. 3

AMERICAN FEDERAL SAVINGS BANK
STATEMENTS OF FINANCIAL CONDITION
- --------------------------------------------------------------------------------

THREE-MONTH
PERIOD ENDED YEARS ENDED
SEPTEMBER 30, JUNE 30,
------------------------------ -------------------------------
1999 1998 1999 1998
---- ---- ---- ----
(Unaudited) (Unaudited)
INTEREST AND DIVIDEND INCOME

Interest and fees on loans ......................... $ 1,982,300 $ 2,074,220 $ 8,048,779 $ 8,494,705
Interest on deposits with banks .................... 41,466 90,086 381,255 225,143
Federal Home Loan Bank stock
dividends ....................................... 23,778 22,825 93,925 90,603
Interest and dividends on investment
securities available-for-sale ................... 245,610 210,408 728,099 687,596
Interest and dividends on investment
securities held-to-maturity ..................... 214,820 184,838 769,918 769,027
------------ ------------ ------------ ------------
Total interest and dividend income .......... 2,507,974 2,582,377 10,021,976 10,267,074
------------ ------------ ------------ ------------

INTEREST EXPENSE
Deposits ........................................... 1,119,214 1,122,197 4,355,392 4,504,605
Federal Home Loan Bank advances .................... 168,790 222,591 837,692 934,863
------------ ------------ ------------
Total interest expense ...................... 1,288,004 1,344,788 5,193,084 5,439,468
------------ ------------ ------------

NET INTEREST INCOME ..................................... 1,219,970 1,237,589 4,828,892 4,827,606
LOAN LOSS PROVISION ..................................... 15,000 15,000 60,000 60,000
------------ ------------ ------------ ------------
Net interest income after loan
loss provision .......................... 1,204,970 1,222,589 4,768,892 4,767,606
------------ ------------ ------------ ------------

NONINTEREST INCOME
Demand deposit service charges ..................... 118,605 119,388 463,320 469,377
Net gain on sale of loans .......................... 88,337 187,901 714,369 629,244
Mortgage loan servicing fees ....................... 37,347 31,832 115,113 129,535
Net (loss) gain on sale of available-for-
sale securities ................................. (30,355) (6,039) (6,039) 4,903
Other .............................................. 81,678 95,272 365,808 354,232
------------ ------------ ------------ ------------
Total noninterest income .................... 295,612 428,354 1,652,571 1,587,291
------------ ------------ ------------ ------------

AMERICAN FEDERAL SAVINGS BANK
STATEMENTS OF FINANCIAL CONDITION
- --------------------------------------------------------------------------------

Salaries and employee benefits ..................... $ 642,073 $ 603,604 $ 2,421,586 $ 2,370,471
Occupancy .......................................... 106,670 107,302 430,805 425,858
Furniture and equipment depreciation ............... 79,466 61,838 289,246 245,282
Data processing .................................... 38,843 42,065 164,454 132,973
Advertising ........................................ 40,521 34,265 160,297 145,068
Federal insurance premiums ......................... 16,866 17,360 68,384 69,450
Consulting ......................................... 16,620 -- 40,168 2,100
Postage ............................................ 23,636 25,920 98,709 87,952
ATM processing ..................................... 19,674 15,050 69,407 60,743
Legal, accounting, and examination fees ............ 17,909 19,931 78,861 84,672
Other .............................................. 169,625 181,834 639,723 573,590
------------ ------------ ------------ ------------
Total noninterest expense ................... 1,171,903 1,109,169 4,461,640 4,198,159
------------ ------------ ------------ ------------

INCOME BEFORE PROVISION FOR
INCOME TAXES ....................................... 328,679 541,774 1,959,823 2,156,738

PROVISION FOR INCOME TAXES .............................. 120,117 201,800 707,571 914,474
------------ ------------ ------------ ------------

NET INCOME .............................................. $ 208,562 $ 339,974 $ 1,252,252 $ 1,242,264
============ ============ ============ ============

See accompanying notes. 5

AMERICAN FEDERAL SAVINGS BANK
STATEMENTS OF FINANCIAL CONDITION
OTHER COMPREHENSIVE INCOME
- --------------------------------------------------------------------------------

ACCUMULATED
OTHER
RETAINED COMPREHENSIVE
EARNINGS INCOME TOTAL
-------- ------ -----

BALANCE, July 1, 1997 ....................... $ 11,605,404 $ 15,108 $ 11,620,512

Comprehensive income:
Net income ............................. 1,242,264 -- 1,242,264
Change in net unrealized gain on
securities available-for-sale, net of
tax effects of $(4,810) ............. -- (7,698) (7,698)
------------ ------------ ------------
Total comprehensive income ...... 1,234,566
------------

BALANCE, June 30, 1998 ...................... 12,847,668 7,410 12,855,078
------------ ------------ ------------

Comprehensive income:
Net income ............................. 1,252,252 -- 1,252,252
Change in net unrealized gain on
securities available-for-sale, net of
tax effects of $133,595 ............. -- (213,811) (213,811)
------------ ------------ ------------
Total comprehensive income ...... 1,038,441
------------

BALANCE, June 30, 1999 ...................... 14,099,920 (206,401) 13,893,519
------------ ------------ ------------

Comprehensive income:
Net income ............................. 208,562 -- 208,562
Change in net unrealized loss on
securities available-for-sale, net of
tax effects of $(16,760) ............ -- (26,825) (26,825)
------------ ------------ ------------
Total comprehensive income ...... 181,737
------------

BALANCE, September 30, 1999
(Unaudited) ............................ $ 14,308,482 $ (233,226) $ 14,075,256
============ ============ ============

See accompanying notes. 6

AMERICAN FEDERAL SAVINGS BANK
STATEMENTS OF FINANCIAL CONDITION
- --------------------------------------------------------------------------------

THREE-MONTH
PERIOD ENDED YEARS ENDED
SEPTEMBER 30, JUNE 30,
--------------------------- -----------------------------
1999 1998 1999 1998
---- ---- ---- ----
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES

Net income .................................................... $ 208,562 $ 339,974 $ 1,252,252 $ 1,242,264
Adjustments to reconcile net income to net cash
from operating activities:
Provision for loan losses .................................. 15,000 15,000 60,000 60,000
Depreciation, accretion, and amortization expense .......... 212,660 182,170 729,821 558,356
Deferred loan fees ......................................... (16,180) (33,746) (82,211) (14,532)
Gain on sale of loans ...................................... (88,337) (187,901) (714,369) (629,244)
Net realized (gain) loss on sale of available-for-sale
securities ............................................. 30,355 6,039 6,039 (4,903)
Federal Home Loan Bank stock dividends ..................... (23,700) (22,800) (103,460) (114,902)
Increase in cash surrender value of life insurance ......... (22,875) (22,861) (90,918) (90,936)
Changes in assets and liabilities:
(Increase) decrease in assets:
Accrued interest and dividends receivable .............. (147,832) (89,897) 29,945 (35,096)
Proceeds from sale of loans held-for-sale .............. 5,348,248 13,078,851 48,243,228 37,203,421
Origination of loans held-for-sale ..................... (4,674,616) (10,717,612) (46,258,785) (37,452,873)
Other assets ........................................... 31,540 (672) 64,656 9,915
Increase (decrease) in liabilities:
Accrued expenses and other liabilities ................. 389,688 532,873 (234,558) 326,911
------------ ------------ ------------ ------------
Net cash from operating activities .............. 1,262,513 3,079,418 2,901,640 1,058,381
------------ ------------ ------------ ------------

CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales, maturities, and redemptions of
securities held-to-maturity ................................ 330,706 367,761 5,613,994 6,704,805
Purchase of securities held-to-maturity ....................... (449,936) (2,620,400) (8,762,848) (3,170,909)
Proceeds from sales of securities available-for-sale .......... 1,715,580 5,531,870 9,446,590 6,385,814
Purchase of securities available-for-sale ..................... (1,576,303) (1,586,752) (10,457,313) (11,993,725)
Net (increase) decrease in loans receivable ................... (2,982,031) (1,408,168) (1,930,354) 128,404
Proceeds from the sale of real estate ......................... -- 159,000 159,000 --
Purchase of property and equipment ............................ (247,297) (235,646) (673,133) (161,857)
Proceeds from sale of equipment ............................... 221,274 --
Principal payments received on contract receivable ............ -- -- -- 43,742
------------ ------------ ------------ ------------
Net cash from investing activities .............. (2,988,007) 207,665 (6,604,064) (2,063,726)
------------ ------------ ------------ ------------

AMERICAN FEDERAL SAVINGS BANK
STATEMENTS OF FINANCIAL CONDITION
- --------------------------------------------------------------------------------

Payments on mortgages ......................................... $ -- $ (138,029) $ (138,029) $ (22,551)
Net increase (decrease) in checking and savings accounts ...... 2,322,616 (642,528) 5,063,235 3,172,147
Net increase in certificates of deposit ....................... 659,990 674,443 1,023,831 1,242,116
Net increase (decrease) in short-term borrowings .............. -- -- (26,314) 5,538
Net increase (decrease) in FHLB advances ...................... (4,066,667) (2,066,666) (2,266,666) 1,058,333
------------ ------------ ------------ ------------
Net cash from financing activities .............. (1,084,061) (2,172,780) 3,656,057 5,455,583
------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH .................................... (2,809,555) 1,114,303 (46,367) 4,450,238
------------ ------------ ------------ ------------

CASH AND CASH EQUIVALENTS, beginning of period ..................... 6,741,171 6,787,538 6,787,538 2,337,300
------------ ------------ ------------ ------------

CASH AND CASH EQUIVALENTS, end of period ........................... $ 3,931,616 $ 7,901,841 $ 6,741,171 $ 6,787,538
============ ============ ============ ============

SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest ................................................... $ 103,890 $ 111,256 $ 5,199,828 $ 5,432,053
============ ============ ============ ============
Income taxes ............................................... $ 73,000 $ 109,500 $ 905,900 $ 565,000
============ ============ ============ ============

NONCASH INVESTING ACTIVITIES:
Real estate acquired through the settlement of loans .......... $ -- $ -- $ -- $ 161,180
============ ============ ============ ============

See accompanying notes. 8

AMERICAN FEDERAL SAVINGS BANK
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

NOTE 1 - NATURE OF OPERATIONS

American Federal Savings Bank (the "Bank") is a federally chartered savings
bank subject to the regulations of the Office of Thrift Supervision. The
Bank is a member of the Federal Home Loan Bank System and its deposit
accounts are insured to the applicable limits by the Federal Deposit
Insurance Corporation ("FDIC").

The Bank is headquartered in Helena, Montana, and operates additional
branches in Butte, Bozeman, and Townsend, Montana. The Bank's market area
is concentrated in south central Montana, to which it primarily offers
commercial, residential, and consumer loans.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Financial statement presentation and use of estimates - The financial
statements have been prepared in accordance with generally accepted
accounting principles and reporting practices applicable to the banking
industry. The preparation of financial statements requires management to
make estimates and assumptions that affect the reported amounts of assets
and liabilities and the reported amounts of income and expenses during the
reporting period. Actual results could differ from those estimates.

Significant estimates are necessary in determining the recorded value of
the allowance for loan losses and available-for-sale securities. Management
believes the assumptions used in arriving at these estimates are
appropriate.

Interim unaudited financial statements - The financial statements as of
September 30, 1999, and for the three-month periods ended September 30,
1999 and 1998, have been prepared in accordance with generally accepted
accounting principles for interim financial information. This interim
information is unaudited, but in management's opinion, reflects all normal
and recurring adjustments necessary for a fair presentation. The results of
operations for the three months ended September 30, 1999, are not
necessarily indicative of results to be anticipated for the year ending
June 30, 2000.

Cash and cash equivalents - For purposes of reporting cash flows, cash and
cash equivalents include cash, interest-bearing deposits with correspondent
banks, and federal funds sold.

The Bank maintains cash balances at several banks. Accounts at each
institution are insured by the FDIC up to $100,000.

AMERICAN FEDERAL SAVINGS BANK
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (continued)

Investment securities - The Bank designates debt and equity securities as
either held-to-maturity, available-for-sale, or trading.

Held-to-maturity - Investment securities that management has the positive
intent and ability to hold until maturity are classified as
held-to-maturity and are carried at their remaining unpaid principal
balance, net of unamortized premiums or unaccreted discounts. Premiums are
amortized and discounts are accreted using the interest method over the
period remaining until maturity.

Available-for-sale - Investment securities that will be held for indefinite
periods of time, including securities that may be sold in response to
changes in market interest or prepayment rates, needs for liquidity, and
changes in the availability of and the yield of alternative investments,
are classified as available-for-sale. These assets are carried at fair
value. Unrealized gains and losses, net of tax, are reported as other
comprehensive income. Gains and losses on the sale of available- for-sale
securities are determined using the specific identification method.

Declines in the fair value of individual held-to-maturity and
available-for-sale securities below their cost that are other than
temporary are recognized by write-downs of the individual securities to
their fair value. Such write-downs would be included in earnings as
realized losses.

Trading - No investment securities were designated as trading at September
30, 1999, or at June 30, 1999 and 1998, respectively.

Federal Home Loan Bank stock - The Bank's investment in Federal Home Loan
Bank (FHLB) stock is a restricted investment carried at par value ($100 per
share), which approximates its fair value. As a member of the FHLB system,
the Bank is required to maintain a minimum level of investment in FHLB
stock based on specific percentages of its outstanding FHLB advances. The
Bank may request redemption at par value of any stock in excess of the
amount the Bank is required to hold. Stock redemptions are made at the
discretion of the FHLB.

Mortgage loans held-for-sale - Mortgage loans originated and intended for
sale in the secondary market are carried at the lower of cost or estimated
market value, determined in aggregate. Net unrealized losses are recognized
through a valuation allowance by charges to income.

AMERICAN FEDERAL SAVINGS BANK
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (continued)

Loans receivable - Loans receivable that management has the intent and
ability to hold for the foreseeable future or until maturity are reported
at the outstanding principal balance adjusted for any charge-offs, the
allowance for loan losses, and any deferred fees or costs on originated
loans and unamortized premiums or unaccreted discounts on purchased loans.
Loan origination fees, net of certain direct origination costs are deferred
and amortized as an adjustment of the yield on the related loan using the
interest method.

Impaired loans and related income - A loan is considered impaired when
management determines that it is probable that all contractual amounts of
principal and interest will not be paid as scheduled in the loan agreement.
These loans include nonaccrual loans past due 90 days or more, loans
restructured in the current year, and other loans that management considers
to be impaired.

When a loan is placed on nonaccrual status, all interest previously
accrued, but not collected, is reversed and charged against interest
income. Income on nonaccrual loans is then recognized only when the loan is
brought current, or when, in the opinion of management, the borrower has
demonstrated the ability to resume payments of principal and interest.
Interest income on restructured loans is recognized pursuant to the terms
of new loan agreements. Interest income on other impaired loans is
monitored and based upon the terms of the underlying loan agreement.
However, the recorded net investment in impaired loans, including accrued
interest, is limited to the present value of the expected cash flows of the
impaired loan, the observable fair market value of the loan, or the fair
value of the loan's collateral.

Provision for loan losses - The allowance for loan losses is increased by
the provision for loan losses charged to operations and is decreased by
loan charge-offs, net of recoveries. Management estimates the provision for
loan losses by evaluating known and inherent risks in the loan portfolio.
These factors include changes in the size and composition of the loan
portfolio, actual loan loss experience, current and anticipated economic
conditions, detailed analysis of individual loans for which full
collectibility may not be assured, determination of the existence and
realizable value of the collateral, and guarantees securing the loans. The
allowance is based upon market factors and trends which extend beyond the
Bank's control, and which may result in losses or recoveries differing
significantly from those provided for in the financial statements.

AMERICAN FEDERAL SAVINGS BANK
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (continued)

A material estimate that is particularly susceptible to significant change
relates to the determination of the allowance for losses on loans and the
valuation of real estate acquired in connection with the foreclosures or in
satisfaction of loans. In connection with the determination of the
estimated losses on loans and foreclosed assets held-for-sale, management
obtains independent appraisals for significant properties.

The majority of the Bank's loan portfolio consists of commercial loans and
single-family residential loans secured by real estate in south central
Montana. Real estate prices in this market have been stable. However, the
ultimate collectibility of a substantial portion of the Bank's loan
portfolio may be susceptible to changes in local market conditions in the
future.

While management used available information to recognize losses on loans,
further reductions in the carrying amounts of loans may be necessary based
on changes in local economic conditions. In addition, regulatory agencies,
as an integral part of their examination process periodically review the
estimated losses on loans. Such agencies may require the Bank to recognize
additional losses based on their judgment about information available to
them at the time of their examination.

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 through
quoted market prices. 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. The Bank accounts for its recorded value, and
possible impairment of mortgage servicing rights, on a loan-by-loan basis.

The cost allocated to mortgage servicing rights is amortized in proportion
to, and over the period of, estimated net servicing income.

Real estate owned - Real estate properties acquired through, or in lieu of,
loan foreclosure are initially recorded at the lower of the unpaid
principal balance of the related loan or its fair market value less
estimated selling costs. After foreclosure, valuations are periodically
performed by management and the real estate is carried at the lower of
carrying amount or fair value less cost to sell. Revenue and expenses from
operations of foreclosed real estate and changes in the valuation allowance
are included in gain on sale of real estate owned when the property is
disposed of.

AMERICAN FEDERAL SAVINGS BANK
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (continued)

Property and equipment - Property and equipment is recorded at cost less
accumulated depreciation. Depreciation is computed using the straight-line
method over the expected useful lives of the assets, ranging from 3 to 35
years. The costs of maintenance and repairs are expensed as they are
incurred, while major expenditures for renewals and betterments are
capitalized.

Income taxes - Deferred tax assets and liabilities are reflected at
currently enacted income tax rates applicable to the period in which the
deferred tax assets or liabilities are expected to be realized or settled.
As changes in tax laws or rates are enacted, deferred tax assets and
liabilities are adjusted through the provision for income taxes. Deferred
taxes result from temporary differences in the recognition of certain
income and expense amounts between the Bank's financial statements and its
tax returns.

Advertising costs - The Bank expenses advertising costs as they are
incurred. Advertising costs were $40,521 and $34,265 for the three-month
periods ended September 30, 1999 and 1998, respectively, and were $160,297
and $145,068 for the years ended June 30, 1999 and 1998, respectively.

Impact of new accounting standards - In June 1998, the Financial Accounting
Standards Board (FASB) issued Statement of Financial Accounting Standard
(SFAS) No. 133, "Accounting for Derivative Instruments and Hedging
Activities" which was to be adopted by the Bank as of July 1, 1999.
However, in June 1999, FASB issued SFAS No. 137 which defers the effective
date of this statement by one year. SFAS No. 133 establishes accounting and
reporting standards for derivative financial instruments and for hedging
activities. Upon adoption of the Statement, all derivatives must be
recognized at fair value as either assets or liabilities in the statement
of financial condition. Changes in the fair value of derivatives not
designed as hedging instruments are to be recognized currently in earnings
or are to be recognized as a component of other comprehensive income,
depending on the intended use of the derivatives and the resulting
designations. Upon adoption, retroactive application of this Statement to
financial statements of prior periods is not permitted. Management has
determined that the impact of adopting SFAS No. 133 will not be significant
to its financial condition and results of operations.

In October 1998, the FASB issued SFAS No. 134 "Accounting for
Mortgage-Backed Securities Retained After the Securitization of Mortgage
Loans Held-for-Sale by a Mortgage Banking Enterprise, an amendment of FASB
No. 65." This statement amends SFAS No. 65 to require that after the
securitization of mortgage loans held-for-sale, an entity engaged in
mortgage banking activities classify the resulting mortgage-backed
securities or other retained interest based on its ability and interest to
sell or hold these investments. Management does not expect this Statement
to have a significant impact on the Bank's financial condition or results
of operations.

AMERICAN FEDERAL SAVINGS BANK
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (continued)

Reclassifications - Certain items in the 1998 financial statements have
been reclassified to conform with the presentation in the 1999 financial
statements. These reclassifications have no effect on the Bank's previously
reported financial position or results of operation.

NOTE 3 - REORGANIZATION TO CAPITAL STOCK FORM OF OWNERSHIP
(UNAUDITED)

On September 16, 1999, the Board of Directors of the Bank adopted a Mutual
Holding Company Plan of Reorganization and Stock Issuance ("the Plan") to
convert from a federally chartered mutual savings bank to a federally
chartered capital stock savings bank with the concurrent formation of a
mutual holding company which will own the majority of the voting stock of
the newly formed capital stock holding company. The Bank will become a
wholly owned subsidiary of the capital stock holding company. This
reorganization is subject to approval by regulatory authorities and members
of the Bank. The reorganization is expected to be accomplished through
amendment of the Bank's federal charter and the sale of less than a
majority of the capital stock holding company's common stock. A
subscription offering of such shares of common stock will be offered
initially to eligible account holders, employee benefit plans of the Bank,
and other eligible customers of the Bank. Any shares of common stock not
sold in the subscription offering are expected to be sold to the general
public.

At the time of the reorganization, the Bank will establish a liquidation
account in an amount equal to its retained earnings as of the date of the
latest statement of financial condition appearing in the prospectus for the
offering. The liquidation account will be maintained for the benefit of
eligible account holders who continue to maintain their accounts at the
Bank after the reorganization. The liquidation account will be reduced
annually to the extent that eligible account holders have reduced their
qualifying deposits as of each anniversary date. Subsequent increases will
not restore an eligible account holder's interest in the liquidation
account. In the event of a complete liquidation of the Bank, each eligible
account holder will be entitled to receive a distribution from the
liquidation account in an amount proportionate to the current adjusted
qualifying balances for accounts then held.

Subsequent to the reorganization, the capital stock holding company may not
declare or pay cash dividends on, or repurchase, any of its shares of
common stock if the effect thereof would cause equity to be reduced below
applicable regulatory capital maintenance requirements or if such
declaration and payment would otherwise violate regulatory requirements.

AMERICAN FEDERAL SAVINGS BANK
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

NOTE 3 - REORGANIZATION TO CAPITAL STOCK FORM OF OWNERSHIP
(UNAUDITED) - (continued)

Reorganization costs will be deferred and reduce the proceeds of the shares
sold in the offering. If the reorganization is not completed, all costs
will be charged as an expense. As of September 30, 1999, reorganization
costs of approximately $33,000 had been incurred and are included in
prepaid expenses in the statement of financial condition.

In connection with the reorganization, the Bank is forming an employee
stock ownership plan (ESOP), and also intends to adopt additional stock
benefit plans as allowed by regulation.

The ESOP will become effective January 1, 2000. Employees who will become
eligible to participate include all employees who have completed one year
of service, have attained the age of 21, and who have been credited with
1,000 or more hours of service in any one year. An application for a letter
of determination as to the tax-qualified status of the ESOP will be
submitted to the IRS. Although no assurances can be given, management
expects that the ESOP will receive a favorable letter of determination from
the IRS.

Participants will become fully vested in their ESOP allocations based on a
seven-year vesting schedule as follows:

First two years of service........................ 0%
Three years....................................... 20%
Four years........................................ 40%
Five years........................................ 60%
Six years......................................... 80%
After seven years................................. 100%

AMERICAN FEDERAL SAVINGS BANK
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

NOTE 3 - REORGANIZATION TO CAPITAL STOCK FORM OF OWNERSHIP
(UNAUDITED) - (continued)

Following the offering, the Bank intends to adopt a stock option plan for
directors and key employees within one year after the reorganization. Up to
10% of the shares of common stock sold in the offering will be reserved for
issuance under the stock option plan. No determinations have been made as
to the specific terms of, or awards under, the proposed stock option plan.

The Bank also intends to establish stock programs for officers and outside
directors. The stock programs are expected to provide for the award of
common stock, subject to vesting restrictions, to eligible officers,
employees, and directors.

Finally, the Bank has entered into an Employment Agreement (the
"Agreement") with its President. Under this Agreement, the President is
entitled to a continuation of his salary plus bonuses and deferred
compensation from the date of termination through the remaining term of the
Agreement for a minimum of one year, if terminated without cause. The
Agreement becomes effective January 1, 2000, and extends to December 31,
2002.

NOTE 4 - RESTRICTIONS ON CASH AND DUE FROM BANKS

The Bank is required to maintain cash reserves on deposit with the Federal
Reserve Bank based on deposits.

As of September 30, 1999, and June 30, 1999 and 1998, the Bank was required
to have aggregate cash deposits with the Federal Reserve Bank of
approximately $351,000, $290,000, and $404,000, respectively.

AMERICAN FEDERAL SAVINGS BANK
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

NOTE 5 - INVESTMENT SECURITIES

The Bank's investment policy requires that the Bank purchase only
high-grade investment securities. Purchases of debt instruments are
generally restricted to "A" or better by a nationally recognized
statistical rating organization. The amortized cost and estimated fair
values of securities, together with unrealized gains and losses, are as
follows:

SEPTEMBER 30, 1999
-----------------------------------------------------
(Unaudited)
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS (LOSSES) VALUE
---- ----- -------- -----
Available-for-sale:

U.S. government and agency
obligations ........... $ 4,430,688 $ 15,144 $ (60,822) $ 4,385,010
Muncipal obligations ..... 3,309,058 -- (282,684) 3,026,374
Corporate obligations .... 4,536,631 -- (31,784) 4,504,847
Mortgage-backed securities 3,993,183 -- (12,789) 3,980,394
Collateralized mortgage
obligations ........... 458,453 -- (6,017) 452,436
----------- ----------- ----------- -----------

Total ............. $16,728,013 $ 15,144 $ (394,096) $16,349,061
=========== =========== =========== ===========

Held-to-maturity:
U.S. government and agency
obligations ........... $ 6,699,894 $ -- $ (4,322) $ 6,695,572
Muncipal obligations ..... 1,063,132 -- (19,206) 1,043,926
Mortgage-backed securities 6,838,346 -- (64,163) 6,774,183
----------- ----------- ----------- -----------

Total ............. $14,601,372 $ -- $ (87,691) $14,513,681
=========== =========== =========== ===========

AMERICAN FEDERAL SAVINGS BANK
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

NOTE 5 - INVESTMENT SECURITIES - (Continued)

JUNE 30, 1999
------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS (LOSSES) VALUE
---- ----- -------- -----

Available-for-sale:
U.S. government and agency
obligations ........... $ 3,609,163 $ 20,760 $ (93,811) $ 3,536,112
Municipal obligations .... 3,309,422 -- (191,723) 3,117,699
Corporate obligations .... 5,620,621 -- (77,047) 5,543,574
Mortgage-backed securities 3,809,157 14,167 -- 3,823,324
Collateralized mortgage
obligations ........... 577,337 -- (7,714) 569,623
----------- ----------- ----------- -----------

Total ............. $16,925,700 $ 34,927 $ (370,295) $16,590,332
=========== =========== =========== ===========

Held-to-maturity:
U.S. government and agency
obligations ........... $ 6,699,734 $ 4,323 $ -- $ 6,704,057
Municipal obligations .... 954,704 -- (10,110) 944,594
Mortgage-backed securities 6,843,258 -- (82,140) 6,761,118
----------- ----------- ----------- -----------

Total ............. $14,497,696 $ 4,323 $ (92,250) $14,409,769
=========== =========== =========== ===========

AMERICAN FEDERAL SAVINGS BANK
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

NOTE 5 - INVESTMENT SECURITIES - (Continued)

JUNE 30, 1998
------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS (LOSSES) VALUE
---- ----- ------ -----

Available-for-sale:
U.S. government and agency
obligations ........... $ 6,368,197 $ 3,467 $ (6,394) $ 6,365,270
Corporate obligations .... 3,596,052 -- (623) 3,595,429
Mortgage-backed securities 2,212,608 32,967 -- 2,245,575
Collateralized mortgage
obligations ........... 1,666,845 -- (11,339) 1,655,506
Mutual Funds ............. 2,024,502 -- (6,039) 2,018,463
----------- ----------- ----------- -----------

Total ............. $15,868,204 $ 36,434 $ (24,395) $15,880,243
=========== =========== =========== ===========

Held-to-maturity:
U.S. government and agency
obligations ........... $ 6,416,868 $ 32,280 $ -- $ 6,449,148
Municipal obligations .... 786,183 350 -- 786,533
Mortgage-backed securities 4,162,828 60,309 -- 4,223,137
----------- ----------- ----------- -----------

Total ............. $11,365,879 $ 92,939 $ -- $11,458,818
=========== =========== =========== ===========

Gross realized (losses) gains on securities available-for-sale, were
$(30,355) and $(6,039) for the three-month periods ended September 30, 1999
and 1998, respectively, and were $(6,039) and $4,903 for the years ended
June 30, 1999 and 1998, respectively.

AMERICAN FEDERAL SAVINGS BANK
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

NOTE 5 - INVESTMENT SECURITIES - (continued)

The amortized cost and estimated fair value of securities at September 30,
1999, and June 30, 1999, by contractual maturity are shown below. Expected
maturities will differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or without call or
prepayment penalties.

SEPTEMBER 30, 1999
-----------------------------------------------------
(Unaudited)
HELD-TO-MATURITY AVAILABLE-FOR-SALE
SECURITIES SECURITIES
------------------------- -------------------------
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
---- ----- ---- -----

Due within one year ........ $ 4,529,036 $ 4,530,181 $ 427,959 $ 428,124
Due after one year through
five years ............ 3,123,990 3,105,892 5,598,210 5,563,993
Due after five years through
ten years ............. 110,000 103,425 1,501,570 1,453,520
Due after ten years ........ -- -- 4,748,638 4,470,594
----------- ----------- ----------- -----------
7,763,026 7,739,498 12,276,377 11,916,231
Mortgage-backed securities . 6,838,346 6,774,183 3,993,183 3,980,394
Collateralized mortgage
obligations ........... -- -- 458,453 452,436
----------- ----------- ----------- -----------

Total .......... $14,601,372 $14,513,681 $16,728,013 $16,349,061
=========== =========== =========== ===========

Due within one year ........ $ 4,417,332 $ 4,422,172 $ 429,215 $ 429,114
Due after one year through
five years ............ 3,137,106 3,131,320 5,691,406 5,603,525
Due after five years through
ten years ............. 100,000 95,159 1,503,861 1,452,260
Due after ten years ........ -- -- 4,914,724 4,712,486
----------- ----------- ----------- -----------
7,654,438 7,648,651 12,539,206 12,197,385
Mortgage-backed securities . 6,843,258 6,761,118 3,809,157 3,823,324
Collateralized mortgage
obligations ........... -- -- 577,337 569,623
----------- ----------- ----------- -----------

Total .......... $14,497,696 $14,409,769 $16,925,700 $16,590,332
=========== =========== =========== ===========

AMERICAN FEDERAL SAVINGS BANK
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

NOTE 5 - INVESTMENT SECURITIES - (continued)

A federal agency obligation bond valued at approximately $501,000 amortized
cost has been pledged to the Federal Reserve Bank to serve as collateral
for the Bank's treasury, tax, and loan account at September 30, 1999, and
June 30, 1999 and 1998.

NOTE 6 - LOANS RECEIVABLE

Loans receivable consist of the following:

JUNE 30,
SEPTEMBER 30, ------------------------------
1999 1999 1998
---- ---- ----
(Unaudited)
First mortgage loans

Residential mortage (1-4 family) $ 71,936,291 $ 71,119,512 $ 69,723,904
Commercial real estate ......... 7,528,695 6,811,426 7,555,342
Real estate construction ....... 1,210,301 654,046 1,131,871
Other loans
Home equity .................... 11,823,181 11,867,266 10,103,271
Consumer ....................... 6,334,743 5,331,388 4,549,260
Commercial ..................... 1,908,412 2,119,684 2,876,442
------------- ------------- -------------
Total ................... 100,741,623 97,903,322 95,940,090

Less: Allowance for loan losses ..... (747,758) (736,624) (678,410)
Deferred loan fees, net ....... (130,200) (130,563) (212,774)
------------- ------------- -------------

Total ................... $ 99,863,665 $ 97,036,135 $ 95,048,906
============= ============= =============

Loans, net of related allowance for loan losses, on which the accrual of
interest has been discontinued was $875,046 at September 30, 1999, and
$804,828 and $262,466 at June 30, 1999 and 1998, respectively. Interest
income not accrued on these loans and cash received on interest income was
immaterial for the three-month periods ended September 30, 1999 and 1998,
and for the years ended June 30, 1999 and 1998. The allowance for loan
losses on nonaccrual loans as of September 30, 1999 and June 30, 1999 and
1998, was $33,030, $28,898, and $48,381, respectively.

AMERICAN FEDERAL SAVINGS BANK
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

NOTE 6 - LOANS RECEIVABLE - (continued)

The following is a summary of changes in the allowance for loan losses:

THREE-MONTH
PERIODS ENDED YEARS ENDED
SEPTEMBER 30, JUNE 30,
------------------------ -----------------------
1999 1998 1999 1998
---- ---- ---- ----
(Unaudited) (Unaudited)
BALANCE,
beginning of period .... $ 736,624 $ 678,410 $ 678,410 $ 683,951
Provision charged to
operations ............. 15,000 15,000 60,000 60,000
Losses, net of recoveries ... (3,866) 10,342 (1,786) (65,541)
--------- --------- --------- ---------

BALANCE,
end of period .......... $ 747,758 $ 703,752 $ 736,624 $ 678,410
========= ========= ========= =========

Loans are granted to directors and officers of the Bank in the ordinary
course of business. Such loans are made in accordance with policies
established for all loans of the Bank, except that directors, officers, and
employees may be eligible to receive discounts on loan origination costs.

Loans receivable from directors and senior officers of the Bank at
September 30, 1999, and June 30, 1999 and 1998, were $89,364, $88,538, and
$105,561, respectively. Interest income from these loans was $6,947 and
$8,357 for the years ended June 30, 1999 and 1998, respectively. Interest
income on these loans for the three-month periods ended September 30, 1999
and 1998, was immaterial to the financial statements.

AMERICAN FEDERAL SAVINGS BANK
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

NOTE 7 - MORTGAGE SERVICING RIGHTS

The Bank is servicing loans for the benefit of others totaling
approximately $112,229,000, $108,931,000, and $81,739,000 at September 30,
1999, and June 30, 1999 and 1998, respectively. Servicing loans for others
generally consists of collecting mortgage payments, maintaining escrow
accounts, disbursing payments to investors, and foreclosure processing.

Custodial escrow balances maintained in connection with the foregoing loan
servicing, and included in demand deposits, were approximately $829,000,
$524,000, and $403,000 at September 30, 1999, and June 30, 1999 and 1998,
respectively.

The following is a summary of mortgage servicing rights:

THREE-MONTH
PERIODS ENDED YEARS ENDED
SEPTEMBER 30, JUNE 30,
------------------------- --------------------------
1999 1998 1999 1998
---- ---- ---- ----
(Unaudited) (Unaudited)

BALANCE,
beginning of period $ 1,279,041 $ 751,573 $ 751,573 $ 263,434
Mortgage servicing rights
capitalized ........ 80,681 179,282 670,265 549,000
Amortization of mortgage
servicing rights ... (36,762) (26,779) (142,797) (60,861)
----------- ----------- ----------- -----------

BALANCE,
end of period ...... $ 1,322,960 $ 904,076 $ 1,279,041 $ 751,573
=========== =========== =========== ===========

No write-offs of mortgage servicing rights have occurred during the
three-month periods ended September 30, 1999 and 1998, and the years ended
June 30, 1999 and 1998. Accordingly, the Bank believes that no valuation
allowance is required.

AMERICAN FEDERAL SAVINGS BANK
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

NOTE 8 - PROPERTY AND EQUIPMENT

Property and equipment is summarized by major classification as follows:

JUNE 30,
SEPTEMBER 30, -----------------------------
1999 1999 1998
---- ---- ----
(Unaudited)
Land, buildings, and
improvements ................ $ 7,730,642 $ 7,723,090 $ 7,389,215
Furniture and equipment ........ 2,720,596 2,719,272 2,528,934
------------ ------------ ------------
Total .................. 10,451,238 10,442,362 9,918,149
Accumulated depreciation ....... (3,209,031) (3,081,290) (2,750,622)
------------ ------------ ------------

Total .................. $ 7,242,207 $ 7,361,072 $ 7,167,527
============ ============ ============

Depreciation expense totaled $144,890 and $133,350 for the three-month
periods ended September 30, 1999 and 1998, respectively, and $479,053 and
$435,151 for the years ended June 30, 1999 and 1998, respectively.

NOTE 9 - DEPOSITS

Deposits are summarized as follows:

JUNE 30,
SEPTEMBER 30, --------------------------
1999 1999 1998
---- ---- ----
(Unaudited)
Noninterest checking .............. $ 5,960,717 $ 5,222,747 $ 4,376,198
Interest-bearing checking
(1.50%, 1.50%, 2.00%) ........ 21,990,296 21,466,834 21,286,969
Passbook (3.00%, 3.00%, 3.00%) .... 21,030,302 21,429,656 20,174,375
Money market (3.71%, 3.61%, 3.43%) 15,906,353 14,445,816 11,658,457
Time certificates of deposit
(4.07% - 7.70%) .............. 58,916,628 58,256,635 57,232,591
------------ ------------ ------------

$123,804,296 $120,821,688 $114,728,590
============ ============ ============

AMERICAN FEDERAL SAVINGS BANK
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

NOTE 9 - DEPOSITS - (continued)

The weighted average cost of funds was 3.64%, 3.66%, and 3.98% at September
30, 1999, and June 30, 1999 and 1998, respectively.

Time certificates of deposit maturities are as follows:

SEPTEMBER 30, JUNE 30,
1999 1999
---- ----
(Unaudited)
Within one year ...................... $42,008,413 $40,480,805
One to two years ..................... 11,021,919 11,001,483
Two to three years ................... 5,018,741 5,905,332
Three to four years .................. 273,444 395,943
Four to five years ................... 152,243 453,032
Thereafter ........................... 441,868 20,040
----------- -----------

Total ........................ $58,916,628 $58,256,635
=========== ===========

Interest expense on deposits is summarized as follows:

THREE-MONTH
PERIODS ENDED YEARS ENDED
SEPTEMBER 30, JUNE 30,
----------------------- ------------------------
1999 1998 1999 1998
---- ---- ---- ----
(Unaudited) (Unaudited)
Checking ................... $ 74,709 $ 81,483 $ 298,129 $ 362,978
Passbook ................... 161,432 152,974 614,071 602,660
Money market ............... 141,662 97,641 434,360 385,871
Time certificates
of deposit ................ 741,411 790,099 3,008,832 3,153,096
---------- ---------- ---------- ----------

Total ...... $1,119,214 $1,122,197 $4,355,392 $4,504,605
========== ========== ========== ==========

At September 30, 1999, and June 30, 1999 and 1998, the Bank held
$6,850,000, $8,659,000, and $8,600,000, respectively, in deposit accounts
of $100,000 or more.

Directors' and senior officers' deposit accounts at September 30, 1999 and
June 30, 1999 and 1998, were $639,061, $485,045, and $530,798,
respectively.

AMERICAN FEDERAL SAVINGS BANK
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

NOTE 10 - ADVANCES FROM THE FEDERAL HOME LOAN BANK

Advances from the Federal Home Loan Bank mature as follows:

JUNE 30,
SEPTEMBER 30, ----------------------------
Maturing period 1999 1999 1998
--------------- ---- ---- ----
(Unaudited)
Within one year ............. $ 2,266,667 $ 2,266,667 $ 2,266,667
One to two years ............ 266,667 266,667 2,266,667
Two to three years .......... 2,266,667 2,266,667 266,667
Three to four years ......... 266,667 2,266,667 2,266,667
Four to five years .......... 266,667 266,667 2,266,667
Thereafter .................. 3,174,443 5,241,110 5,507,776
----------- ----------- -----------
$ 8,507,778 $12,574,445 $14,841,111
=========== =========== ===========

Two advances require combined annual principal payments of $266,667. The
remaining advances are due at maturity. One advance is subject to a
quarterly put option by the FHLB which would allow the FHLB to require the
Bank to repay the advance ahead of its scheduled maturity. The next put
date is December 3, 1999. The advances are subject to prepayment penalties
and subsequent to year-end, two advances totaling $4,000,000 were paid
prior to their scheduled maturity. The weighted average interest rate for
these advances at September 30, 1999, and June 30, 1999 and 1998, was
6.32%, 6.48%, and 6.43%, respectively. The weighted average amount
outstanding was $10,389,000 for the period ended September 30, 1999, and
$12,892,000 and $14,463,000 for the years ended June 30, 1999 and 1998,
respectively.

The maximum amount outstanding at any month-end during the months ended
September 30, 1999, was $12,552,222, and $14,818,889 and $15,018,889 during
the years ended June 30, 1999 and 1998, respectively.

The advances are collateralized by U.S. Federal agency securities subject
to various pledge requirements. At September 30, 1999, and June 30, 1999
and 1998, the Bank exceeded the collateral requirements of the FHLB. The
Bank's investment in FHLB stock is pledged as collateral on these advances.

The total FHLB credit line available to the Bank at September 30, 1999, and
June 30, 1999, was 25% of total assets, or approximately $37,000,000. No
balance was

AMERICAN FEDERAL SAVINGS BANK
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

NOTE 10 - ADVANCES FROM FEDERAL HOME LOAN BANK - (continued)

outstanding on the line of credit as of September 30, 1999, and June 30,
1999 and 1998. In addition, the Bank has a cash management agreement with
the FHLB allowing cash advances up to $7,265,850, subject to the credit
limitation above.

NOTE 11 - INCOME TAXES

The components of the Bank's income tax provision (benefit) are as follows:

THREE-MONTH
PERIODS ENDED YEARS ENDED
SEPTEMBER 30, JUNE 30,
------------------------ ------------------------
1999 1998 1999 1998
---- ---- ---- ----
(Unaudited) (Unaudited)
Current:
U.S. federal ....... $ 74,166 $ 176,957 $ 522,695 $ 701,853
Montana ............ 18,951 38,443 112,876 139,788
--------- --------- --------- ---------
93,117 215,400 635,571 841,641
--------- --------- --------- ---------

Deferred:
U.S. federal ....... 27,750 (13,000) 65,000 74,484
Montana ............ (750) (600) 7,000 (1,651)
--------- --------- --------- ---------
27,000 (13,600) 72,000 72,833
--------- --------- --------- ---------

Total ........... $ 120,117 $ 201,800 $ 707,571 $ 914,474
========= ========= ========= =========

The nature and components of deferred tax assets and liabilities are as
follows:

JUNE 30,
SEPTEMBER 30, ---------------------
1999 1999 1998
---- ---- ----
(Unaudited)
Deferred tax assets:
Deferred compensation .............. $217,000 $215,000 $207,000
Allowance for loan losses
(state only) ...................... 50,000 50,000 48,000
Deferred loan fees ................. 44,000 53,000 85,000
Securities available-for-sale ...... 154,000 129,000 --
Other .............................. 30,000 37,000 29,000
-------- -------- --------
Total deferred tax assets ....... 495,000 484,000 369,000
-------- -------- --------

AMERICAN FEDERAL SAVINGS BANK
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

NOTE 11 - INCOME TAXES - (continued)

JUNE 30,
SEPTEMBER 30, --------------------
1999 1999 1998
---- ---- ----
(Unaudited)
Deferred tax liabilities:
Accumulated depreciation ................. 222,000 218,000 169,000
Federal Home Loan Bank stock ............. 396,000 387,000 348,000
Interest receivable ...................... 4,000 4,000 4,000
Allowance for loan losses (federal
only) ................................. 138,000 138,000 170,000
Other .................................... 5,000 5,000 3,000
-------- -------- --------
Total deferred tax liabilities ........ 765,000 752,000 694,000
-------- -------- --------

Net deferred tax liabilities ............... $270,000 $268,000 $325,000
======== ======== ========

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

A reconciliation of the Bank's effective income tax provision to the
statutory federal income tax rate is as follows:

THREE-MONTH
PERIODS ENDED YEARS ENDED
SEPTEMBER 30, JUNE 30,
------------------------ -----------------------
1999 1998 1999 1998
---- ---- ---- ----
(Unaudited) (Unaudited)
Federal income taxes at the
statutory rate of 34% .... $ 111,751 $ 184,203 $ 666,340 $ 733,291
State income taxes, net of
federal income tax benefit 12,508 27,008 77,700 92,260
Nontaxable interest income . (15,696) (2,658) (25,264) (8,500)
Other, net ................. 11,554 (7,253) (11,205) 97,423
--------- --------- --------- ---------

Income tax expense ......... $ 120,117 $ 201,300 $ 707,571 $ 914,474
========= ========= ========= =========

AMERICAN FEDERAL SAVINGS BANK
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

NOTE 11 - INCOME TAXES - (continued)

Prior to January 1, 1987, the Bank was allowed a special bad debt deduction
limited generally in the current year to 32% (net of preference tax) of
otherwise taxable income and subject to certain limitations based on
aggregate loans and savings account balances at the end of the year. If the
amounts that qualified as deductions for federal income tax purposes are
later used for purposes other than for bad debt losses, they will be
subject to federal income tax at the then current corporate rate. Retained
earnings include approximately $915,000 at September 30, 1999, and June 30,
1999 and 1998, for which federal income tax has not been provided.

NOTE 12 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK

All financial instruments held or issued by the Bank are held or issued for
purposes other than trading. In the ordinary course of business, the Bank
enters into off-balance-sheet financial instruments consisting of
commitments to extend credit and forward delivery commitments for the sale
of whole loans to the secondary market.

Commitments to extend credit - In response to marketplace demands, the Bank
routinely makes commitments to extend credit for fixed rate and variable
rate loans with or without rate lock guarantees. When rate lock guarantees
are made to customers, the Bank becomes subject to market risk for changes
in interest rates that occur between the rate lock date and the date that a
firm commitment to purchase the loan is made by a secondary market
investor. Generally, as interest rates increase, the market value of the
loan commitment goes down. The opposite effect takes place when interest
rates decline.

Commitments to extend credit are agreements to lend to a customer as long
as the borrower satisfies the Bank's underwriting standards and related
provisions of the borrowing agreements. Commitments generally have fixed
expiration dates or other termination clauses and may require payment of a
fee. The Bank's exposure to credit loss in the event of nonperformance by
the other party to the financial instrument for commitments to extend
credit is represented by the contractual notional amount of those
commitments. The Bank uses the same credit policies in making commitments
to extend credit as it does for on-balance-sheet instruments. Collateral is
required for substantially all loans, and normally consists of real
property. The Bank's experience has been that substantially all loan
commitments are completed or terminated by the borrower within 3 to 12
months.

AMERICAN FEDERAL SAVINGS BANK
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

NOTE 12 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK - (continued)

Forward delivery commitments - The Bank uses mandatory sell forward
delivery commitments to sell whole loans. These commitments are also used
as a hedge against exposure to interest-rate risks resulting from rate
locked loan origination commitments and certain mortgage loans
held-for-sale. Gains or losses incurred in completing these commitments
offset corresponding gains and losses in the items hedged, and are deferred
and recognized in the statement of income when the contract is closed and
the related assets are sold. Credit risks on these instruments arise when
the Bank's position in these securities becomes positive (i.e.
"in-the-money") and the Bank is a net creditor to the counterparty to the
agreement. To manage this risk, the Bank only enters into these agreements
with major, well-known financial institutions. Gains and losses resulting
from such financial instruments are recorded when they are funded or
settled.

The notional amount of the Bank's commitments to extend credit at fixed and
variable interest rates were approximately $7,500,000, $6,700,000, and
$5,600,000 at September 30, 1999, and June 30, 1999 and 1998, respectively.

The Bank also made commitments as of September 30, 1999 and June 30, 1999,
to deliver approximately $2,800,000 and $3,800,000, respectively, in loans
to various investors, all at fixed interest rates.

NOTE 13 - FAIR VALUE OF FINANCIAL INSTRUMENTS

The estimated fair value of financial instrument amounts have been
determined by the Bank using available market information and appropriate
valuation methodologies. However, considerable judgment is necessarily
required to interpret market data to

AMERICAN FEDERAL SAVINGS BANK
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

NOTE 13 - FAIR VALUE OF FINANCIAL INSTRUMENTS - (continued)

develop the estimates of fair value. Accordingly, the estimates presented
herein are not necessarily indicative of the amounts the Bank could realize
in a current market exchange. The use of different market assumptions
and/or estimation methodologies may have a material effect on the estimated
fair value amounts.

JUNE 30,
SEPTEMBER 30, ---------------------------------------------------------
1999 1999 1998
------------------------- --------------------------- --------------------------
ESTIMATED ESTIMATED ESTIMATED
CARRYING FAIR CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE AMOUNT VALUE
------ ----- ------ ----- ------ -----
(Unaudited) (Unaudited)
FINANCIAL ASSETS:

Cash and cash equivalents ........... $ 3,931,616 $ 3,931,616 $ 6,741,171 $ 6,741,171 $ 6,787,538 $ 6,787,538
Investment securities available-
for-sale ......................... $ 16,349,061 $ 16,349,061 $ 16,590,332 $ 16,590,332 $ 15,880,243 $ 15,880,243
Investment securities held-to-
maturity ......................... $ 14,601,372 $ 14,513,681 $ 14,497,696 $ 14,409,769 $ 11,365,879 $ 11,458,818
Federal Home Loan Bank stock ........ $ 1,324,900 $ 1,324,900 $ 1,301,200 $ 1,301,200 $ 1,207,400 $ 1,207,400
Mortgage loans held-for-sale ........ $ 585,449 $ 587,000 $ 1,066,384 $ 1,086,000 $ 3,050,827 $ 3,170,000
Loans receivable, net ............... $ 99,863,665 $100,094,000 $ 97,036,135 $ 97,990,000 $ 95,048,906 $ 98,764,000
Mortgage servicing rights ........... $ 1,322,960 $ 1,453,000 $ 1,279,041 $ 1,394,000 $ 751,573 $ 825,000
Cash surrender value of life
insurance ........................ $ 1,971,445 $ 1,971,445 $ 1,948,570 $ 1,948,570 $ 1,857,652 $ 1,857,652

FINANCIAL LIABILITIES:
Deposits ............................ $ 64,887,668 $ 64,887,668 $ 62,565,053 $ 62,565,053 $ 57,495,999 $ 57,495,999
Time certificates of deposit ........ $ 58,916,628 $ 59,100,000 $ 58,256,635 $ 58,475,000 $ 57,232,591 $ 57,516,000
Advances from Federal Home
Loan Bank ........................ $ 8,507,778 $ 8,526,000 $ 12,574,445 $ 12,755,000 $ 14,841,111 $ 15,056,000

The following methods and assumptions were used by the Bank in estimating
the fair value of the following classes of financial instruments.

Cash and cash equivalents - The carrying amounts for approximate fair value
due to the relatively short period of time between the origination of these
instruments and their expected realization.

Investment securities and stock in the FHLB - The fair value of investment
securities is estimated based on bid prices published in financial
newspapers or bid quotations received from securities dealers. The fair
value of stock in the FHLB approximates redemption value.

AMERICAN FEDERAL SAVINGS BANK
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

NOTE 13 - FAIR VALUE OF FINANCIAL INSTRUMENTS - (continued)

Loans receivable and mortgage loans held-for-sale - Fair values are
estimated by stratifying the loan portfolio into groups of loans with
similar financial characteristics. Loans are segregated by type such as
real estate, commercial, and consumer, with each category further segmented
into fixed and adjustable rate interest terms.

The fair value of fixed rate loans is calculated by discounting scheduled
cash flows through the anticipated maturities adjusted for prepayment
estimates. For mortgage loans, the Bank uses the secondary market rates in
effect for loans of similar size to discount cash flows. For other fixed
rate loans, cash flows are discounted at rates currently offered for
similar maturities. Adjustable interest rate loans are assumed to
approximate fair value because they generally reprice within the short
term.

Fair values are adjusted for credit risk based on assessment of risk
identified with specific loans, and risk adjustments on the remaining
portfolio based on credit loss experience.

Assumptions regarding credit risk are judgmentally determined using
specific borrower information, internal credit quality analysis, and
historical information on segmented loan categories for nonspecific
borrowers.

Mortgage servicing rights - Fair values are estimated by stratifying the
mortgage servicing portfolio into groups of loans with similar financial
characteristics, such as loan type, interest rate, and expected maturity.
When applicable, the Bank obtains bid quotations from secondary market
investors who regularly purchase mortgage servicing rights. If quoted
market price estimates are unavailable, the Bank compares the discounted
expected future cash flows to be received from servicing loans to the
future cash flows required to service the loans. Assumptions regarding loan
payoffs are determined using historical information on segmented loan
categories for nonspecific borrowers.

Cash surrender value of life insurance - They carrying amount for cash
surrender value of life insurance approximates fair value as policies are
recorded at redemption value.

Deposits and time certificates of deposit - The fair value of deposits with
no stated maturity, such as checking, passbook, and money market, is equal
to the amount payable on demand. The fair value of certificates of deposit
is based on the discounted value of contractual cash flows. The discount
rate is estimated using the rates currently offered for deposits of similar
maturities.

Advances from the FHLB - The fair value of the Bank's short-term advances
are estimated using discounted cash flow analysis based on the interest
rate that would be effective June 30, 1999, if the advances repriced
according to their stated terms.

AMERICAN FEDERAL SAVINGS BANK
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

NOTE 13 - FAIR VALUE OF FINANCIAL INSTRUMENTS - (continued)

Off-balance-sheet instruments - The Bank's off-balance-sheet instruments
include unfunded commitments to extend credit, forward delivery
commitments, and borrowing facilities available to the Bank. The fair value
of these instruments is not considered practicable to estimate because of
the lack of quoted market prices and the inability to estimate fair value
without incurring excessive costs.

Limitations - Fair value estimates are made at a specific point in time,
based on relevant market information and information about the financial
instrument. These estimates do not reflect any premium or discount that
could result from offering for sale at one time the Bank's entire holdings
of a particular financial instrument.

NOTE 14 - CONCENTRATIONS OF CREDIT RISK

Most of the Bank's business activity is with customers located within south
central Montana. The majority of such customers are also depositors of the
Bank. Investments in state and municipal securities are not significantly
concentrated within any one region of the United States. The Bank
originates first mortgage, home equity, consumer, and commercial loans. The
distribution of commitments to extend credit approximates the distribution
of loans outstanding. Generally, loans are secured by real estate, personal
property, and deposit accounts. Rights to collateral vary and are legally
documented and enforceable to the extent practicable. Although the Bank has
a diversified loan portfolio, local economic conditions may affect
borrowers' ability to meet the stated repayment terms.

NOTE 15 - EMPLOYEE BENEFITS

The Bank provides a noncontributory profit sharing plan for eligible
employees. The amount of the Bank's annual contribution, limited to a
maximum of 15% of qualified employees' salaries is determined by the Board
of Directors. Profit sharing expense was $169,185 and $166,559 for the
years ended June 30, 1999 and 1998, respectively.

The Bank's profit sharing plan includes a 401(k) feature. At the discretion
of the Board of Directors, the Bank may match annually up to 50% of
participants' contributions up to a maximum of 3% of participants'
salaries. For the years ended June 30, 1999 and 1998, the Bank's match was
$17,937 and $17,371, respectively.

AMERICAN FEDERAL SAVINGS BANK
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

NOTE 15 - EMPLOYEE BENEFITS - (continued)

The Bank has entered into a deferred compensation agreement for the benefit
of a previous director/employee. The agreement provides for payment of
$2,000 per month for the employee's and spouse's lifetime. The liability
was $55,845, $60,644, and $79,006 at September 30, 1999, and June 30, 1999
and 1998, respectively, based upon the present value of the payments over
the expected lifetime of the beneficiaries, discounted at 8%.

The Bank has also entered into deferred compensation contracts with current
key employees. The contracts provide fixed benefits payable in equal annual
installments upon retirement. The Bank has purchased life insurance
contracts which may be used to fund the payments. The charge to expense is
based on the present value computations of anticipated liabilities. For the
three-month periods ended September 30, 1999 and 1998, the total expense
was $17,304 and $32,327, respectively. For the years ended June 30, 1999
and 1998, the total expense was $83,513 and $84,230, respectively.

NOTE 16 - REGULATORY CAPITAL REQUIREMENTS

The Bank is subject to various regulatory capital requirements administered
by federal banking agencies. Failure to meet minimum capital requirements
can initiate certain mandatory - and possibly additional discretionary -
actions by regulators that, if undertaken, could have a direct material
effect on the Bank's financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, the
Bank must meet specific capital guidelines that involve quantitative
measures of the Bank's assets, liabilities, and certain off-balance-sheet
items as calculated under regulatory accounting practices. The Bank's
capital amounts and classifications are also subject to qualitative
judgments by the regulators about components, risk weightings, and other
factors.

Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the
table on the following page) of tangible and core capital (as defined in
the regulations) to total adjusted assets (as defined), and of risk-based
capital (as defined) to risk-weighted assets (as defined). Management
believes, as of September 30, 1999, and June 30, 1999 and 1998, that the
Bank meets all capital adequacy requirements to which it is subject.

AMERICAN FEDERAL SAVINGS BANK
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

NOTE 16 - REGULATORY CAPITAL REQUIREMENTS - (continued)

The most recent notification from the Office of Thrift Supervision (OTS)
(as of April 13, 1998) categorized the Bank as well-capitalized under the
regulatory framework for prompt corrective action. To be categorized as
well-capitalized, the Bank must maintain minimum tangible, core, and
risk-based ratios as set forth in the table below. Since the most recent
notification from the OTS, the Bank's ratios have improved. As a result,
management believes that the Bank would be considered well-capitalized by
the OTS at September 30, 1999, and June 30, 1999 and 1998, respectively.

The Bank's actual capital amounts (in thousands) and ratios are presented
in the table below.

TO BE CONSIDERED
WELL CAPITALIZED
UNDER PROMPT
FOR CAPITAL CORRECTIVE
ACTUAL ADEQUACY PURPOSES ACTION PROVISIONS
-------------- ----------------- -----------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------ ----- ------ ----- ------ -----
As of September 30, 1999
(Unaudited)

Leverage $14,308 9.63% $5,944 4.0% $7,431 5.0%
Tier 1 risk-based $14,308 16.75% $3,416 4.0% $5,124 6.0%
Total risk-based $15,056 17.63% $6,833 8.0% $8,541 10.0%

As of June 30, 1999
Leverage $14,100 9.46% $5,964 4.0% $7,455 5.0%
Tier 1 risk-based $14,100 16.49% $3,420 4.0% $5,130 6.0%
Total risk-based $14,837 17.35% $6,840 8.0% $8,550 10.0%

As of June 30, 1998
Leverage $12,848 8.90% $5,777 4.0% $7,221 5.0%
Tier 1 risk-based $12,848 15.80% $3,253 4.0% $4,879 6.0%
Total risk-based $13,526 16.63% $6,505 8.0% $8,132 10.0%

================================================================================

You should rely only on the information contained in this document or that to
which we have referred you. We have not authorized anyone to provide you with
information that is different. This document does not constitute an offer to
sell, or the solicitation of an offer to buy, any of the securities offered
hereby to any person in any jurisdiction in which such offer or solicitation
would be unlawful. The affairs of American Federal Savings Bank or Eagle Bancorp
may change after the date of this prospectus. Delivery of this document and the
sales of shares made hereunder does not mean or imply that the information
herein is correct as of any time subsequent to the date hereof.

Table of Contents
Summary................................................1
Risk Factors...........................................8
Selected Financial Data...............................11
Recent Developments...................................14
How We Intend To Use The Proceeds Of
The Offering........................................14
Our Policy Regarding Dividends........................14
Waiver Of Dividends By The Mutual
Holding Company.....................................15
Mutual Holding Company Conversion To
Stock Form..........................................17
Market For The Common Stock...........................17
Capitalization........................................18
Historical And Pro Forma Capital Compliance...........20
Pro Forma Data........................................22
The Reorganization....................................28
The Offering..........................................38
American Federal Savings Bank.........................52
Statements Of Income..................................52
Management's Discussion And Analysis..................54
Business Of The Mutual Holding Company................69
Business Of Eagle.....................................69
Business Of American Federal..........................70
Regulation............................................98
Taxation.............................................103
Management...........................................105
Proposed Management Purchases........................113
Restrictions On Acquisition Of Eagle.................114
Eagle Bancorp's Charter And Bylaws...................115
Description Of Capital Stock.........................116
Change In Auditors...................................117
Legal And Tax Opinions...............................119
Experts..............................................119
Registration Requirements............................119
Where You Can Find Additional Information............119

Until the later of _____, 2000, or 25 days after commencement of the offering,
all dealers effecting transactions in these securities, whether or not
participating in this offering, may be required to deliver a prospectus. This is
in addition to the dealers' obligation to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or subscriptions.

================================================================================

Up to 1,010,059 Shares
of Common Stock

EAGLE BANCORP

Proposed Holding Company
for American Federal Savings Bank

----------------
PROSPECTUS
----------------

Ryan, Beck & Co.

February ____, 2000

================================================================================

PART II: INFORMATION NOT REQUIRED IN PROSPECTUS

Item 24. Indemnification of Directors and Officers

Federal regulations define areas for indemnity coverage, as follows:

(a) Any person against whom any action is brought by reason of the
fact that such person is or was a director or officer of American
Federal Savings Bank ("American Federal") shall be indemnified by
American Federal for:

(i) Reasonable costs and expenses, including reasonable
attorney's fees, actually paid or incurred by such
person in connection with proceedings related to the
defense or settlement of such action.

(ii) Any amount for which such person becomes liable by
reason of any judgment in such action;

(iii)Reasonable costs and expenses, including reasonable
attorney's fees, actually paid or incurred in any
action to enforce his rights under this section if the
person attains a final judgment in favor of such person
in such enforcement action.

(b) Indemnification provided for in subparagraph (a) shall be made to
such officer or director only if the requirements of this
subparagraph are met:

(i) American Federal shall make the indemnification
provided by subparagraph (a) in connection with any
such action which results in a final judgment on the
merits in favor of such officer or director.

(ii) American Federal shall make the indemnification
provided by subparagraph (a) in case of settlement of
such action, final judgment against such director or
officer or final judgment in favor of such director or
officer other than on the merits except in relation to
matters as to which he shall be adjudged to be liable
for negligence or misconduct in the performance of his
duty, only if a majority of the directors of American
Federal determines that such a director or officer was
acting in good faith within what he was reasonably
entitled to believe under the circumstances was in the
best interest of American Federal or its stockholders.

(i) "Action" means any action, suit or other judicial or
administrative proceeding, or otherwise, including any
appeal or other proceeding for review;

(ii) "Court" includes, without limitation, any court to
which or in which any appeal or any proceeding for
review is brought;

(iii)"Final Judgment" means a judgment, decree, or order
which is appealable and as to which the period for
appeal has expired and no appeal has been taken;

(iv) "Settlement" includes the entry of a judgment by
consent or by confession or upon a plea of guilty or of
nolo contendere.

American Federal currently maintains a director and officer liability
insurance policy providing for the insurance of directors and officers against
liability incurred in connection with performance of their duties as directors
and officers. It is expected that a similar policy will be provided for
directors and officers of American Federal upon completion of the
reorganization.

Item 25. OtherExpenses of Issuance and Distribution

* Underwriting Fees and Expenses............................$215,000
Legal Fees and Expenses................................... 135,000
Printing, Postage and Mailing............................. 80,000
Accounting Fees and Expenses.............................. 50,000
Appraisal and Business Plan Fees and Expenses............. 17,000
Blue Sky Filing Fees and Expenses
(including legal counsel)................................ 20,000
Federal Filing Fees (OTS and SEC)......................... 17,000
Conversion Agent Fees..................................... 10,000
Stock Certificates........................................ 3,000
Transfer Agent............................................ 3,000
--------
Total.....................................................$550,000

- -----------

* Assuming all of the shares are purchased in the Subscription and Community
Offerings.

Item 26. Recent Sales of Unregistered Securities.

Not applicable.

Item 27. Exhibits:

The exhibits schedules filed as a part of this registration statement
are as follows:

1.1 Engagement Letter with Ryan, Beck & Co., Inc.

*1.2 Form of Agency Agreement with Ryan, Beck & Co., Inc.

2 Amended and Restated Plan of Mutual Holding Company Reorganization and
Stock Issuance

3.1 Charter of Eagle Bancorp

3.2 Bylaws of Eagle Bancorp

4 Form of Stock Certificate of Eagle Bancorp

5.1 Opinion of Nixon Peabody LLP regarding legality of securities being
registered

*8.1 Federal Tax Opinion of Nixon Peabody LLP

*8.2 Montana Tax Opinion of Anderson ZurMuehlen, P.C.

*8.3 Letter of Feldman Financial Advisors as to the value of subscription rights
for tax purposes

10.1 Employee Stock Ownership Plan and Trust

10.2 Employment Contract of Larry A. Dreyer

*16 Letter of Anderson ZurMuehlen, P.C.

23.1 Consents of Nixon Peabody LLP

23.2 Consent of Moss Adams LLP

23.3 Consent of Anderson ZurMuehlen, P.C.

23.4 Consent of Feldman Financial Advisors

24 Power of Attorney (reference is made to the signature page)

*99.1 Proposed Stock Order Form and Form of Certification

*99.2 Miscellaneous Solicitation and Marketing Materials

*99.3 Appraisal Report

- -------------

* To be filed by amendment.

Item 28. Undertakings

The undersigned registrant hereby undertakes:

(1) To file, during any period in which it offers or sells securities,
a post-effective amendment to this registration statement to:

(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933 ("Securities Act").

(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in
the information in the registration statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was
registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the
form of prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20 percent change in the
maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement.

(iii)Include any additional or changed material information on
the plan of distribution.

(2) For determining liability under the Securities Act, treat each
such post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that time to be
the initial bona fide offering.

(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.

(4) The undersigned registrant hereby undertakes to provide to the
underwriter at the closing specified in the underwriting agreement,
certificates in such denominations and registered in such names as required
by the underwriter to permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the small
business issuer pursuant to the foregoing provisions, or otherwise, the small
business issuer has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act, and is therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the small business issuer of expenses incurred or paid by a director, officer or
controlling person of the small business issuer in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the small business
issuer

will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.

SIGNATURES

In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of Helena,
State of Montana, on December 7, 1999.

AMERICAN FEDERAL SAVINGS BANK

By: /s/ Larry A. Dreyer
-------------------------------------------
Larry A. Dreyer
Director, President and Chief
Executive Officer
(Duly Authorized Representative)

POWER OF ATTORNEY

We, the undersigned Directors of Eagle Bancorp, hereby severally
constitute and appoint Larry A. Dreyer, with full power of substitution, our
true and lawful attorney and agent, to do any and all things in our names in the
capacities indicated below which said Larry A. Dreyer, may deem necessary or
advisable to enable Eagle Bancorp to comply with the Securities Act of 1933, as
amended, and any rules, regulations and requirements of the Securities and
Exchange Commission, in connection with the registration of Eagle Bancorp common
stock, including specifically, but not limited to, power and authority to sign
for us in our names in the capacities indicated below, the registration
statement and any and all amendments (including post-effective amendments)
thereto; and we hereby ratify and confirm all that said Larry A. Dreyer shall do
or cause to be done by virtue thereof.

In accordance with the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates stated.

Signatures Title Date
---------- ----- ----

/s/ Larry A. Dreyer President, Chief Executive 2/7/99
- ------------------------- Officer and Director
Larry A. Dreyer

/s/ Peter J. Johnson Senior Vice President 12/7/99
- ------------------------- and Treasurer
Peter J. Johnson

/s/ Robert L. Pennington Chairman 12/7/99
- -------------------------
Robert L. Pennington

/s/ Charles G. Jacoby Vice Chairman ________
- -------------------------
Charles G. Jacoby

/s/ Don O. Campbell Director 12/7/99
- -------------------------
Don O. Campbell

/s/ Teresa Hartzog Director 12/7/99
- -------------------------
Teresa Hartzog

/s/ James Maierle Director 12/7/99
- -------------------------
James Maierle

/s/ Thomas P. McCarvel Director 12/8/99
- -------------------------
Thomas P. McCarvel

As filed with the Securities and Exchange Commission on December 20, 1999.
Registration No. 333-_______

================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

----------

EXHIBITS
TO
FORM SB-2

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

VOLUME 2 OF 2

----------

Eagle Bancorp.
(Exact name of registrant as specified in its charter)

================================================================================