UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION




Washington,
D.C.  20549




FORM
10-Q




(Mark
One)





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




For
      the quarterly period ended
                    December
      31, 2008




OR





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




For the
transition period from ___________________ to
______________________





0-24571


Commission
File Number





Pulaski Financial Corp.


(Exact
name of registrant as specified in its charter)




Missouri
                      
                      43-1816913(State
      or other jurisdiction of
                      
                      (I.R.S.
      Employerincorporation
      or organization)
                      
                      Identification
      Number)12300
      Olive BoulevardSt. Louis, Missouri
                      
                      63141-6434(Address
      of principal executive offices)
                      
                      (Zip
      Code)





Registrant’s
telephone number, including area code:  (314) 878-2210





Not
Applicable


(Former
name, address and former fiscal year, if changed since last report)





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


Yes
                x
                No
                 ̈





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




Large
      accelerated filer
                         ̈
                        
                        Accelerated
      filer
                        xNon-accelerated
      filer
                         ̈
                        
                        Smaller
      reporting company
                         ̈(Do
      not check if a smaller reporting company.)





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





Indicate
the number of shares outstanding of the registrant’s classes of common stock, as
of the latest practicable date.





Class
                  
                  Outstanding at February 3,
    2009Common
      Stock, par value $.01 per share
                  
                  10,241,645
      shares








PULASKI
FINANCIAL CORP. AND SUBSIDIARIES




FORM
10-Q




DECEMBER
31, 2008




TABLE
OF CONTENTS




PagePART
      I
                  FINANCIAL
      INFORMATIONItem
      1.
                  Financial
      StatementsConsolidated
      Balance Sheets at December 31, 2008 and September 30, 2008
      (Unaudited)
                  1Consolidated
      Statements of Income and Comprehensive Income for the Three Months Ended
      December 31, 2008 and 2007 (Unaudited)
                  2Consolidated
      Statement of Stockholders’ Equity for the Three Months Ended December 31,
      2008 (Unaudited)
                  3Consolidated
      Statements of Cash Flows for the Three Months Ended December 31, 2008 and
      2007 (Unaudited)
                  4Notes
      to Unaudited Consolidated Financial Statements
                  6Item
      2.
                  Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                  16Item
      3.
                  Quantitative
      and Qualitative Disclosures About Market Risk
                  31Item
      4.
                  Controls
      and Procedures
                  31PART
      II
                  OTHER
      INFORMATIONItem
      1.
                  Legal
      Proceedings
                  33Item
      1A.
                  Risk
      Factors
                  33Item
      2.
                  Unregistered
      Sales of Equity Securities and Use of Proceeds
                  34Item
      3.
                  Defaults
      Upon Senior Securities
                  34Item
      4.
                  Submission
      of Matters to a Vote of Security Holders
                  34Item
      5.
                  Other
      Information
                  34Item 6.
                  Exhibits
                  34Signatures







PART I - FINANCIAL INFORMATION


PULASKI
      FINANCIAL CORP. AND SUBSIDIARIESCONSOLIDATED
      BALANCE SHEETSDECEMBER
      31, 2008 AND SEPTEMBER 30, 2008 (UNAUDITED)December
      31,
                                                
                                                
                                                September
      30,2008
                                                
                                                
                                                2008ASSETSCash
      and amounts due from depository institutions
                                                
                                                $
                                                22,789,675
                                                
                                                
                                                $
                                                28,430,409Federal
      funds sold and overnight deposits
                                                
                                                
                                                1,128,185
                                                
                                                
                                                
                                                647,453Total
      cash and cash equivalents
                                                
                                                
                                                23,917,860
                                                
                                                
                                                
                                                29,077,862Equity
      securities available for sale, at fair value
                                                
                                                
                                                589,000
                                                
                                                
                                                
                                                733,000Debt
      securities available for sale, at fair value
                                                
                                                
                                                4,016,819
                                                
                                                
                                                
                                                -Mortgage-backed
      and related securities held to maturity, at amortized cost (fair value,
      $15,158,931 and $15,607,652 at December 31, 2008 and September 30, 2008,
      respectively)
                                                
                                                
                                                15,130,639
                                                
                                                
                                                
                                                15,744,497Mortgage-backed
      securities available for sale, at fair value
                                                
                                                
                                                11,936,775
                                                
                                                
                                                
                                                10,180,666Capital
      stock of Federal Home Loan Bank, at cost
                                                
                                                
                                                9,860,900
                                                
                                                
                                                
                                                10,896,100Loans
      held for sale, at lower of cost or market
                                                
                                                
                                                79,301,875
                                                
                                                
                                                
                                                71,966,443Loans
      receivable, net of allowance for loan losses of $15,663,958 and
      $12,761,532 at December 31, 2008 and September 30, 2008,
      respectively
                                                
                                                
                                                1,141,328,720
                                                
                                                
                                                
                                                1,088,736,516Real
      estate acquired in settlement of loans, net of allowance for losses of
      $141,800 and $417,773 at December 31, 2008 and September 30, 2008,
      respectively
                                                
                                                
                                                2,609,331
                                                
                                                
                                                
                                                3,518,806Premises
      and equipment, net
                                                
                                                
                                                19,716,832
                                                
                                                
                                                
                                                19,853,426Bank-owned
      life insurance
                                                
                                                
                                                27,885,195
                                                
                                                
                                                
                                                27,591,986Accrued
      interest receivable
                                                
                                                
                                                5,295,601
                                                
                                                
                                                
                                                5,614,887Goodwill
                                                
                                                
                                                3,938,524
                                                
                                                
                                                
                                                3,938,524Core
      deposit intangible
                                                
                                                
                                                329,932
                                                
                                                
                                                
                                                361,591Deferred
      tax asset
                                                
                                                
                                                8,031,681
                                                
                                                
                                                
                                                8,062,641Prepaid
      expenses, accounts receivable and other assets
                                                
                                                
                                                9,268,512
                                                
                                                
                                                
                                                7,873,515Total
      assets
                                                
                                                $
                                                1,363,158,196
                                                
                                                
                                                $
                                                1,304,150,460LIABILITIES
      AND STOCKHOLDERS’ EQUITYLiabilities:Deposits
                                                
                                                $
                                                1,001,934,509
                                                
                                                
                                                $
                                                915,311,365Advances
      from Federal Home Loan Bank of Des Moines
                                                
                                                
                                                96,400,000
                                                
                                                
                                                
                                                210,600,000Borrowings
      from the Federal Reserve Bank of St. Louis
                                                
                                                
                                                143,000,000
                                                
                                                
                                                
                                                40,000,000Note
      payable
                                                
                                                
                                                7,640,000
                                                
                                                
                                                
                                                7,640,000Subordinated
      debentures
                                                
                                                
                                                19,589,000
                                                
                                                
                                                
                                                19,589,000Advance
      payments by borrowers for taxes and insurance
                                                
                                                
                                                1,791,972
                                                
                                                
                                                
                                                3,667,014Accrued
      interest payable
                                                
                                                
                                                673,604
                                                
                                                
                                                
                                                1,505,949Due
      to other banks
                                                
                                                
                                                -
                                                
                                                
                                                
                                                14,377,831Other
      liabilities
                                                
                                                
                                                9,676,204
                                                
                                                
                                                
                                                9,098,795Total
      liabilities
                                                
                                                
                                                1,280,705,289
                                                
                                                
                                                
                                                1,221,789,954Stockholders'
      Equity:Preferred
      stock - $.01 par value per share, authorized 1,000,000 shares; none issued
      or outstanding
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -Common
      stock - $.01 par value per share, authorized 18,000,000 shares;
      13,068,618 shares issued at December 31, 2008 and September 30,
      2008
                                                
                                                
                                                130,687
                                                
                                                
                                                
                                                130,687Treasury
      stock - at cost; 2,830,873 and 2,853,078 shares at December 31, 2008 and
       September 30, 2008, respectively
                                                
                                                
                                                (16,202,110
                                                )
                                                
                                                
                                                (16,278,615
                                                )Treasury
      stock - equity trust - at cost; 231,068 and 226,992 shares at December 31,
      2008 and September 30, 2008, respectively
                                                
                                                
                                                (2,681,791
                                                )
                                                
                                                
                                                (2,771,883
                                                )Additional
      paid-in capital
                                                
                                                
                                                52,207,535
                                                
                                                
                                                
                                                51,987,198Accumulated
      other comprehensive income (loss)
                                                
                                                
                                                14,802
                                                
                                                
                                                
                                                (97,394
                                                )Retained
      earnings
                                                
                                                
                                                48,983,784
                                                
                                                
                                                
                                                49,390,513Total
      stockholders’ equity
                                                
                                                
                                                82,452,907
                                                
                                                
                                                
                                                82,360,506Total
      liabilities and stockholders’ equity
                                                
                                                $
                                                1,363,158,196
                                                
                                                
                                                $
                                                1,304,150,460See
      accompanying notes to the unaudited consolidated financial
      statements.




- 1
-





PULASKI
      FINANCIAL CORP. AND SUBSIDIARIESCONSOLIDATED
      STATEMENTS OF INCOME AND COMPREHENSIVE INCOMETHREE
      MONTHS ENDED DECEMBER 31, 2008 AND 2007 (UNAUDITED)Three
      Months EndedDecember
      31,2008
                                        
                                        
                                        2007Interest
      and Dividend Income:Loans
      receivable
                                        
                                        $
                                        16,350,922
                                        
                                        
                                        $
                                        18,941,655Debt
      and equity securities
                                        
                                        
                                        106,856
                                        
                                        
                                        
                                        218,553Mortgage-backed
      securities
                                        
                                        
                                        313,123
                                        
                                        
                                        
                                        35,417Capital
      stock of the Federal Home Loan Bank of Des Moines
                                        
                                        
                                        59,867
                                        
                                        
                                        
                                        130,701Other
                                        
                                        
                                        3,944
                                        
                                        
                                        
                                        43,821Total
      interest and dividend income
                                        
                                        
                                        16,834,712
                                        
                                        
                                        
                                        19,370,147Interest
      Expense:Deposits
                                        
                                        
                                        6,123,294
                                        
                                        
                                        
                                        8,201,737Advances
      from Federal Home Loan Bank of Des Moines
                                        
                                        
                                        1,170,653
                                        
                                        
                                        
                                        2,525,367Borrowings
      from the Federal Reserve Bank of St. Louis
                                        
                                        
                                        79,767
                                        
                                        
                                        
                                        137Subordinated
      debentures
                                        
                                        
                                        246,423
                                        
                                        
                                        
                                        393,560Notes
      payable
                                        
                                        
                                        101,120
                                        
                                        
                                        
                                        47,853Total
      interest expense
                                        
                                        
                                        7,721,257
                                        
                                        
                                        
                                        11,168,654Net
      interest income
                                        
                                        
                                        9,113,455
                                        
                                        
                                        
                                        8,201,493Provision
      for loan losses
                                        
                                        
                                        4,691,578
                                        
                                        
                                        
                                        1,032,551Net
      interest income after provision for loan losses
                                        
                                        
                                        4,421,877
                                        
                                        
                                        
                                        7,168,942Non-Interest
      Income:Mortgage
      revenues
                                        
                                        
                                        1,549,630
                                        
                                        
                                        
                                        1,107,536Retail
      banking fees
                                        
                                        
                                        967,034
                                        
                                        
                                        
                                        1,028,498Investment
      brokerage revenues
                                        
                                        
                                        261,464
                                        
                                        
                                        
                                        215,011Gain
      on the sales of securities
                                        
                                        
                                        243,386
                                        
                                        
                                        
                                        53,924Other
                                        
                                        
                                        292,022
                                        
                                        
                                        
                                        573,556Total
      non-interest income
                                        
                                        
                                        3,313,536
                                        
                                        
                                        
                                        2,978,525Non-Interest
      Expense:Salaries
      and employee benefits
                                        
                                        
                                        3,342,002
                                        
                                        
                                        
                                        3,020,556Occupancy,
      equipment and data processing expense
                                        
                                        
                                        1,781,391
                                        
                                        
                                        
                                        1,596,924Advertising
                                        
                                        
                                        285,999
                                        
                                        
                                        
                                        340,167Professional
      services
                                        
                                        
                                        261,470
                                        
                                        
                                        
                                        283,217FDIC
      deposit insurance premuim expense
                                        
                                        
                                        199,219
                                        
                                        
                                        
                                        232,751Gain
      on derivative instruments
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (122,247
                                        )Real
      estate foreclosure losses and expense, net
                                        
                                        
                                        341,564
                                        
                                        
                                        
                                        228,560Other
                                        
                                        
                                        661,055
                                        
                                        
                                        
                                        700,087Total
      non-interest expense
                                        
                                        
                                        6,872,700
                                        
                                        
                                        
                                        6,280,015Income
      before income taxes
                                        
                                        
                                        862,713
                                        
                                        
                                        
                                        3,867,452Income
      tax expense
                                        
                                        
                                        296,856
                                        
                                        
                                        
                                        1,135,300Net
      income
                                        
                                        $
                                        565,857
                                        
                                        
                                        $
                                        2,732,152Other
      comprehensive income
                                        
                                        
                                        112,196
                                        
                                        
                                        
                                        104,767Comprehensive
      income
                                        
                                        $
                                        678,053
                                        
                                        
                                        $
                                        2,836,919Per
      Share Amounts:Basic
      earnings per share
                                        
                                        $
                                        0.06
                                        
                                        
                                        $
                                        0.28Weighted
      average common shares outstanding - basic
                                        
                                        
                                        10,114,506
                                        
                                        
                                        
                                        9,780,132Diluted
      earnings per share
                                        
                                        $
                                        0.06
                                        
                                        
                                        $
                                        0.27Weighted
      average common shares outstanding - diluted
                                        
                                        
                                        10,274,626
                                        
                                        
                                        
                                        10,186,789





See
accompanying notes to the unaudited consolidated financial
statements.


- 2
-





PULASKI
      FINANCIAL CORP. AND SUBSIDIARIESCONSOLIDATED
      STATEMENT OF STOCKHOLDERS’ EQUITYTHREE
      MONTHS ENDED DECEMBER 31, 2008 (UNAUDITED)AccumulatedAdditional
                                                                                  
                                                                                  
                                                                                  OtherCommon
                                                                                  
                                                                                  
                                                                                  Treasury
                                                                                  
                                                                                  
                                                                                  Paid-In
                                                                                  
                                                                                  
                                                                                  Comprehensive
                                                                                  
                                                                                  
                                                                                  RetainedStock
                                                                                  
                                                                                  
                                                                                  Stock
                                                                                  
                                                                                  
                                                                                  Capital
                                                                                  
                                                                                  
                                                                                  Income (Loss)
                                                                                  
                                                                                  
                                                                                  Earnings
                                                                                  
                                                                                  
                                                                                  TotalBalance,
      September 30, 2008
                                                                                  
                                                                                  $
                                                                                  130,687
                                                                                  
                                                                                  
                                                                                  $
                                                                                  (19,050,498
                                                                                  )
                                                                                  
                                                                                  $
                                                                                  51,987,198
                                                                                  
                                                                                  
                                                                                  $
                                                                                  (97,394
                                                                                  )
                                                                                  
                                                                                  $
                                                                                  49,390,513
                                                                                  
                                                                                  
                                                                                  $
                                                                                  82,360,506Comprehensive
      income:Net
      income
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  565,857
                                                                                  
                                                                                  
                                                                                  
                                                                                  565,857Change
      in unrealized gain (loss) on investment securities, net of
    tax
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  263,096
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  263,096Realized
      gain on sales of investment securities included in net income, net of
      tax
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  (150,900
                                                                                  )
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  (150,900
                                                                                  )Comprehensive
      income
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  112,196
                                                                                  
                                                                                  
                                                                                  
                                                                                  565,857
                                                                                  
                                                                                  
                                                                                  
                                                                                  678,053Dividends  ($0.095
      per share)
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  (972,586
                                                                                  )
                                                                                  
                                                                                  
                                                                                  (972,586
                                                                                  )Stock
      option and award expense
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  132,505
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  132,505Stock
      issued under dividend reinvestment plan (25,652 shares)
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  104,686
                                                                                  
                                                                                  
                                                                                  
                                                                                  58,430
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  163,116Shares
      surrendered to satisfy tax withholding obligations of stock-based
      compensation
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  (28,181
                                                                                  )
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  (28,181
                                                                                  )Purchase
      of equity trust shares (6,950 shares)
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  (44,200
                                                                                  )
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  (44,200
                                                                                  )Distribution
      of equity trust shares (9,504 shares)
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  134,292
                                                                                  
                                                                                  
                                                                                  
                                                                                  (134,292
                                                                                  )
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -Amortization
      of equity trust expense
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  163,694
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  163,694Balance,
      December 31, 2008
                                                                                  
                                                                                  $
                                                                                  130,687
                                                                                  
                                                                                  
                                                                                  $
                                                                                  (18,883,901
                                                                                  )
                                                                                  
                                                                                  $
                                                                                  52,207,535
                                                                                  
                                                                                  
                                                                                  $
                                                                                  14,802
                                                                                  
                                                                                  
                                                                                  $
                                                                                  48,983,784
                                                                                  
                                                                                  
                                                                                  $
                                                                                  82,452,907





See
accompanying  notes to the unaudited consolidated financial
statements.


- 3
-





PULASKI
      FINANCIAL CORP. AND SUBSIDIARIESCONSOLIDATED
      STATEMENTS OF CASH FLOWS FOR THREE MONTHSENDED
      DECEMBER 31, 2008 AND DECEMBER 31, 2007 (UNAUDITED)Three
      Months EndedDecember
      31,2008
                                      
                                      
                                      2007Cash
      Flows From Operating Activities:Net
      income
                                      
                                      $
                                      565,857
                                      
                                      
                                      $
                                      2,732,152Adjustments
      to reconcile net income to net cash from operating
    activities:Depreciation,
      amortization and accretion:Premises
      and equipment
                                      
                                      
                                      451,830
                                      
                                      
                                      
                                      425,219Net
      deferred loan costs
                                      
                                      
                                      596,425
                                      
                                      
                                      
                                      681,891Net
      amortization of debt and equity securities premiums and
      discounts
                                      
                                      
                                      54,603
                                      
                                      
                                      
                                      (125,316
                                      )Broker
      fees financed under interest-rate swap agreements
                                      
                                      
                                      -
                                      
                                      
                                      
                                      143,916Equity
      trust expense, net
                                      
                                      
                                      163,694
                                      
                                      
                                      
                                      287,186Stock
      option and award expense
                                      
                                      
                                      132,505
                                      
                                      
                                      
                                      129,389Provision
      for loan losses
                                      
                                      
                                      4,691,578
                                      
                                      
                                      
                                      1,032,551Provision
      for losses on real estate acquired in settlement of loans
                                      
                                      
                                      56,500
                                      
                                      
                                      
                                      34,000Losses
      on sales of real estate acquired in settlement of loans
                                      
                                      
                                      129,270
                                      
                                      
                                      
                                      63,104Originations
      of loans held for sale
                                      
                                      
                                      (262,834,432
                                      )
                                      
                                      
                                      (313,036,235
                                      )Proceeds
      from sales of loans held for sale
                                      
                                      
                                      256,800,138
                                      
                                      
                                      
                                      284,988,902Gain
      on sales of loans held for sale
                                      
                                      
                                      (1,301,138
                                      )
                                      
                                      
                                      (997,902
                                      )Loss
      on equity securities available for sale
                                      
                                      
                                      155,500
                                      
                                      
                                      
                                      -Gain
      on sales of debt securities available for sale
                                      
                                      
                                      (398,886
                                      )
                                      
                                      
                                      (53,924
                                      )Gain
      on sale of investment in joint venture
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (30,755
                                      )Gain
      on derivative instruments
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (122,247
                                      )Increase
      in cash value of  bank-owned life insurance
                                      
                                      
                                      (293,209
                                      )
                                      
                                      
                                      (265,390
                                      )Decrease
      in accrued expenses
                                      
                                      
                                      (721,987
                                      )
                                      
                                      
                                      (254,535
                                      )Excess
      tax benefit from stock-based compensation
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (50,099
                                      )Increase
      in current income taxes payable
                                      
                                      
                                      133,662
                                      
                                      
                                      
                                      267,610Changes
      in other assets and liabilities
                                      
                                      
                                      (748,469
                                      )
                                      
                                      
                                      (2,232,745
                                      )Net
      adjustments
                                      
                                      
                                      (2,932,416
                                      )
                                      
                                      
                                      (29,115,380
                                      )Net
      cash used in operating activities
                                      
                                      
                                      (2,366,559
                                      )
                                      
                                      
                                      (26,383,228
                                      )Cash
      Flows From Investing Activities:Proceeds
      from sales of debt securities available for sale
                                      
                                      
                                      51,050,500
                                      
                                      
                                      
                                      5,199,840Proceeds
      from maturities of debt securities available for sale
                                      
                                      
                                      -
                                      
                                      
                                      
                                      5,000,000Proceeds
      from maturities of debt securities held to maturity
                                      
                                      
                                      -
                                      
                                      
                                      
                                      10,000,000Proceeds
      from redemption of FHLB stock
                                      
                                      
                                      4,571,500
                                      
                                      
                                      
                                      1,921,000Purchases
      of debt securities available for sale
                                      
                                      
                                      (54,714,020
                                      )
                                      
                                      
                                      (10,169,930
                                      )Purchases
      of equity securities available for sale
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (6,528,544
                                      )Purchases
      of debt securities held to maturity
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (13,876,653
                                      )Purchases
      of mortgage-backed securities available for sale
                                      
                                      
                                      (1,831,568
                                      )
                                      
                                      
                                      -Purchases
      of FHLB stock
                                      
                                      
                                      (3,536,300
                                      )
                                      
                                      
                                      (6,104,400
                                      )Principal
      payments received on mortgage-backed securities
                                      
                                      
                                      849,764
                                      
                                      
                                      
                                      114,547Net
      increase in loans receivable
                                      
                                      
                                      (59,107,153
                                      )
                                      
                                      
                                      (78,937,005
                                      )Proceeds
      from sales of real estate acquired in settlement of loans
      receivable
                                      
                                      
                                      1,950,650
                                      
                                      
                                      
                                      773,000Proceeds
      from sale of investment in joint venture
                                      
                                      
                                      -
                                      
                                      
                                      
                                      49,375Cash
      paid for equity in joint venture
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (233,691
                                      )Purchases
      of premises and equipment
                                      
                                      
                                      (315,236
                                      )
                                      
                                      
                                      (186,555
                                      )Net
      cash used in investing activities
                                      
                                      $
                                      (61,081,863
                                      )
                                      
                                      $
                                      (92,979,016
                                      )





See
accompanying notes to the unaudited consolidated financial
statements.


- 4
-





PULASKI
      FINANCIAL CORP. AND SUBSIDIARIESCONSOLIDATED
      STATEMENTS OF CASH FLOWS FOR THREE MONTHSENDED
      DECEMBER 31, 2008 AND DECEMBER 31, 2007 (UNAUDITED)Three
      Months EndedDecember
      31,2008
                              
                              
                              2007Cash
      Flows From Financing Activities:Net
      increase in deposits
                              
                              $
                              86,623,144
                              
                              
                              $
                              33,533,511Proceeds
      from (repayment of) Federal Home Loan Bank advances, net
                              
                              
                              (114,200,000
                              )
                              
                              
                              93,900,000Proceeds
      from Federal Reserve Bank borrowings, net
                              
                              
                              103,000,000
                              
                              
                              
                              -Payment
      on notes payable
                              
                              
                              -
                              
                              
                              
                              (85,000
                              )Net
      decrease in due to other banks
                              
                              
                              (14,377,831
                              )
                              
                              
                              (5,874,373
                              )Net
      decrease in advance payments by borrowers for taxes and
      insurance
                              
                              
                              (1,875,042
                              )
                              
                              
                              (1,966,023
                              )Treasury
      stock issued for purchase of equity in joint venture
                              
                              
                              -
                              
                              
                              
                              191,835Proceeds
      from cash received in dividend reinvestment plan
                              
                              
                              163,116
                              
                              
                              
                              219,305Purchase
      of equity trust shares
                              
                              
                              (44,200
                              )
                              
                              
                              -Excess
      tax benefit for stock based compensation
                              
                              
                              -
                              
                              
                              
                              50,099Treasury
      stock issued for stock options exercised
                              
                              
                              -
                              
                              
                              
                              348,216Dividends
      paid on common stock
                              
                              
                              (972,586
                              )
                              
                              
                              (901,570
                              )Stock
      repurchases
                              
                              
                              (28,181
                              )
                              
                              
                              (394,064
                              )Net
      cash provided by financing activities
                              
                              
                              58,288,420
                              
                              
                              
                              119,021,936Net
      decrease in cash and cash equivalents
                              
                              
                              (5,160,002
                              )
                              
                              
                              (340,308
                              )Cash
      and cash equivalents at beginning of period
                              
                              
                              29,077,862
                              
                              
                              
                              23,674,743Cash
      and cash equivalents at end of period
                              
                              $
                              23,917,860
                              
                              
                              $
                              23,334,435Supplemental
      Disclosures of Cash Flow Information:Cash
      paid during the period for:Interest on
      deposits
                              
                              $
                              6,912,177
                              
                              
                              $
                              9,396,102Interest
      on advances from FHLB and other borrowings
                              
                              
                              1,194,530
                              
                              
                              
                              2,463,920Interest
      on other borrowings
                              
                              
                              94,521
                              
                              
                              
                              -Interest
      on subordinated debentures
                              
                              
                              251,319
                              
                              
                              
                              393,770Interest
      on notes payable
                              
                              
                              101,254
                              
                              
                              
                              47,510Cash
      paid during the period for interest
                              
                              
                              8,553,801
                              
                              
                              
                              12,301,302Income
      taxes, net
                              
                              
                              201,000
                              
                              
                              
                              839,640Noncash
      Investing Activities:Real
      estate acquired in settlement of loans receivable
                              
                              $
                              1,226,945
                              
                              
                              $
                              1,425,710





See
accompanying notes to the unaudited consolidated financial
statements.


- 5
-


PULASKI
FINANCIAL CORP. AND SUBSIDIARIES




NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


1.
            BASIS
      OF PRESENTATION




The
unaudited consolidated financial statements include the accounts of Pulaski
Financial Corp. (the “Company”) and its wholly owned subsidiary, Pulaski Bank
(the “Bank”), and the Bank’s wholly owned subsidiary, Pulaski Service
Corporation.  All significant intercompany accounts and transactions
have been eliminated.  The assets of the Company consist primarily of
the investment in the outstanding shares of the Bank and its liabilities consist
principally of subordinated debentures and notes
payable.  Accordingly, the information set forth in this report,
including the consolidated financial statements and related financial data,
relates primarily to the Bank.  The Company, through the Bank,
operates as a single business segment, providing traditional community banking
services through its full service branch network.




In the
opinion of management, the unaudited consolidated financial statements contain
all adjustments (consisting only of normal recurring accruals) necessary for a
fair presentation of the financial condition of the Company as of December 31,
2008 and September 30, 2008 and its results of operations for the three-month
periods ended December 31, 2008 and 2007.  The results of operations
for the three-month period ended December 31, 2008 are not necessarily
indicative of the operating results that may be expected for the entire fiscal
year.  These unaudited consolidated financial statements should be
read in conjunction with the Company’s audited consolidated financial statements
for the year ended September 30, 2008 contained in the Company’s 2008 Annual
Report to Stockholders, which was filed as an exhibit to the Company’s Annual
Report on Form 10-K for the year ended September 30, 2008.




The
preparation of these consolidated financial statements requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements that affect the reported amounts of revenues and
expenses during the reported periods.  Actual results could differ
from those estimates.  The allowance for loan losses and fair values
of financial instruments are significant estimates reported within the
consolidated financial statements.




Certain
reclassifications have been made to fiscal 2008 amounts to conform to the fiscal
2009 presentation.





2.
            EARNINGS PER
      SHARE




Basic
earnings per share is computed using the weighted average number of common
shares outstanding.  The dilutive effect of potential common shares
outstanding is included in diluted earnings per share.  The
computations of basic and diluted earnings per share are presented in the
following table.


- 6
-




Three
      Months EndedDecember
      31,2008
                      
                      
                      2007Net
      income
                      
                      $
                      565,857
                      
                      
                      $
                      2,732,152Weighted
      average shares outstanding - basic
                      
                      
                      10,114,506
                      
                      
                      
                      9,780,132Treasury
      stock - equity trust
                      
                      
                      101,863
                      
                      
                      
                      177,563Equivalent
      shares - employee stock options and awards
                      
                      
                      58,257
                      
                      
                      
                      229,094Weighted
      average shares outstanding - diluted
                      
                      
                      10,274,626
                      
                      
                      
                      10,186,789Net
      income per share - basic
                      
                      $
                      0.06
                      
                      
                      $
                      0.28Net
      income per share - diluted
                      
                      $
                      0.06
                      
                      
                      $
                      0.27




Under the
treasury stock method, outstanding stock options are dilutive when the average
market price of the Company’s common stock, combined with the effect of any
unamortized compensation expense, exceeds the option price during a
period.  In addition, proceeds from the assumed exercise of dilutive
options along with the related tax benefit are assumed to be used to repurchase
common shares at the average market price of such stock during the
period.




The
following options to purchase shares during the three-month periods ended
December 31, 2008 and 2007 were not included in the respective computations of
diluted earnings per share because the exercise price of the options, when
combined with the effect of the unamortized compensation expense, was greater
than the average market price of the common shares and were considered
anti-dilutive.  These options expire in various periods from 2013
through 2018, respectively.





Three
      Months EndedDecember
      31,2008
                    
                    
                    2007Number
      of option shares
                    
                    
                    654,771
                    
                    
                    
                    339,691Equivalent
      anti-dilutive shares
                    
                    
                    1,260,975
                    
                    
                    
                    132,119




3.
            STOCK-BASED
      COMPENSATION




The
Company’s shareholder-approved, stock-based incentive plans permit the grant of
awards in the form of options intended to qualify as incentive stock options
under Section 422 of the Internal Revenue Code, options that do not so qualify
(non-statutory stock options,) and grants of restricted shares of common
stock.  All employees, non-employee directors and consultants of the
Company and its affiliates are eligible to receive awards under the
plans.  Except as described below, all stock option awards issued
during the three months ended December 31, 2008 were granted with an exercise
price equal to the market value of the Company’s shares at the date of grant and
vest over a period of two to five years.  In November 2008, options
for 32,000 shares of the Company’s common stock were awarded to directors with
terms providing for immediate vesting and exercise prices equal to the market
value of the Company’s shares at the date of grant. The exercise period for
stock options generally may not exceed 10 years from the date of
grant.  Option and share awards provide for accelerated vesting if
there is a change in control (as defined in the plans).


- 7
-




A summary
of the Company’s stock option program as of December 31, 2008 and changes during
the three-month period then ended, is presented below:




Weighted-Weighted
                                      
                                      
                                      Aggregate
                                      
                                      
                                      AverageAverage
                                      
                                      
                                      Intrinsic
                                      
                                      
                                      RemainingNumber
                                      
                                      
                                      Exercise
                                      
                                      
                                      Value
                                      
                                      
                                      ContractualOf Shares
                                      
                                      
                                      Price
                                      
                                      
                                      (in millions)
                                      
                                      
                                      Life (years)Outstanding
      at October 1, 2008
                                      
                                      
                                      788,233
                                      
                                      
                                      $
                                      10.38Granted
                                      
                                      
                                      130,350
                                      
                                      
                                      
                                      7.58Exercised
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —Expired
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —Forfeited
                                      
                                      
                                      —
                                      
                                      
                                      
                                      —Outstanding
      at December 31, 2008
                                      
                                      
                                      918,583
                                      
                                      
                                      $
                                      9.99
                                      
                                      
                                      $
                                      464,527
                                      
                                      
                                      
                                      6.7Exercisable
      at December  31, 2008
                                      
                                      
                                      451,791
                                      
                                      
                                      $
                                      8.51
                                      
                                      
                                      $
                                      457,733
                                      
                                      
                                      
                                      4.5





The
weighted average grant-date fair value of options granted during the three
months ended December 31, 2008 was $1.90 per share.  As of December
31, 2008, the total unrecognized compensation expense related to non-vested
stock options and awards was $1.2 million and the related weighted average
period over which it is expected to be recognized is 3.2 years.





The fair
value of stock options granted during the three-month periods ended December 31,
2008 and 2007 is estimated on the date of grant using the Black-Scholes option
pricing model with the following average assumptions:





Three Months EndedDecember 31,2008
                        
                        
                        2007Risk
      free interest rate
                        
                        
                        4.30
                        %
                        
                        
                        4.22
                        %Expected
      volatility
                        
                        
                        35.53
                        %
                        
                        
                        27.83
                        %Expected
      life in years
                        
                        
                        5.4
                        
                        
                        
                        5.5Dividend
      yield
                        
                        
                        4.27
                        %
                        
                        
                        2.62
                        %Expected
      forfeiture rate
                        
                        
                        3.37
                        %
                        
                        
                        1.28
                        %





The
Company maintains an Equity Trust Plan for the benefit of key loan officers and
sales staff.  The plan is designed to recruit, retain and motivate
top-performing loan officers and other key revenue-producing employees who are
instrumental to the Company’s success.  The plan allows the recipients
to defer a percentage of commissions earned, which might be partially matched by
the Company and paid into a rabbi trust for the benefit of the
participants.  The assets of the trust are limited to the purchase of
Company shares in the open market and cash.  Should the participants
voluntarily leave the Company, they forego any unvested accrued
benefits.  At December 31, 2008, there were 231,068 shares in the plan
totaling $2.7 million, which were classified as treasury stock – equity trust in
the Company’s consolidated financial statements, of which 92,860 were not yet
vested.  Vested shares in the plan are treated as issued and
outstanding when computing basic and diluted earnings per share, whereas
unvested shares are treated as issued and outstanding only when computing
diluted earnings per share.  There were no excess tax benefits
associated with share based payments during the three months ended December 31,
2008.




- 8
-




4.
            INCOME
      TAXES




The
Company has adopted the provisions of Financial Accounting Standards Board
(“FASB”) Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an
Interpretation of FASB Statement No. 109” (“Interpretation No.
48”).  At December 31, 2008, the Company had $180,000 of unrecognized
tax benefits, $139,000 of which would affect the effective tax rate if
recognized.  The Company recognizes interest related to uncertain tax
positions in income tax expense and classifies such interest and penalties in
the liability for unrecognized tax benefits.  As of December 31, 2008,
the Company had approximately $41,000 accrued for the payment of interest and
penalties.  The tax years ended September 30, 2005 through 2008 remain
open to examination by the taxing jurisdictions to which the Company is
subject.




5.
              DEBT
      SECURITIES




Debt
securities available for sale at December 31, 2008 consisted of two Federal Home
Loan Bank bonds totaling $4.0 million with a weighted average interest rate
of 2.49% and a weighted average maturity of 5 months.  Gross
unrealized gains and gross unrealized losses at December 31, 2008 totaled $8,000
and $12,000, respectively.




6.
              MORTGAGE-BACKED
      SECURITIES





Mortgage-backed
securities held to maturity and available for sale at December 31, 2008 and
September 30, 2008 are summarized as follows:




December
      31, 2008Gross
                      
                      
                      Gross
                      
                      
                      EstimatedAmortized
                      
                      
                      Unrealized
                      
                      
                      Unrealized
                      
                      
                      FairCost
                      
                      
                      Gains
                      
                      
                      Losses
                      
                      
                      ValueHeld
      to Maturity:Mortgage-backed
      securities:Freddie
      Mac
                      
                      $
                      2,802
                      
                      
                      $
                      307
                      
                      
                      $
                      -
                      
                      
                      $
                      3,109Ginnie
      Mae
                      
                      
                      241,345
                      
                      
                      
                      20,282
                      
                      
                      
                      (89
                      )
                      
                      
                      261,538Fannie
      Mae
                      
                      
                      14,863,511
                      
                      
                      
                      96,778
                      
                      
                      
                      (88,634
                      )
                      
                      
                      14,871,655Total
                      
                      
                      15,107,658
                      
                      
                      
                      117,367
                      
                      
                      
                      (88,723
                      )
                      
                      
                      15,136,302Collateralized
      mortgage obligations - Freddie Mac
                      
                      
                      22,981
                      
                      
                      
                      -
                      
                      
                      
                      (352
                      )
                      
                      
                      22,629Total
                      
                      $
                      15,130,639
                      
                      
                      $
                      117,367
                      
                      
                      $
                      (89,075
                      )
                      
                      $
                      15,158,931Weighted
      average rate at end of period
                      
                      
                      4.80
                      %Available
      for Sale:Mortgage-backed
      securities:Ginnie
      Mae
                      
                      $
                      572,450
                      
                      
                      $
                      15,859
                      
                      
                      $
                      (1,992
                      )
                      
                      $
                      586,317Fannie
      Mae
                      
                      
                      1,872,309
                      
                      
                      
                      -
                      
                      
                      
                      (11,136
                      )
                      
                      
                      1,861,173Total
                      
                      
                      2,444,759
                      
                      
                      
                      15,859
                      
                      
                      
                      (13,128
                      )
                      
                      
                      2,447,490Collateralized
      mortgage obligations:Ginnie
      Mae
                      
                      
                      7,950,129
                      
                      
                      
                      21,980
                      
                      
                      
                      -
                      
                      
                      
                      7,972,109Freddie
      Mac
                      
                      
                      1,514,063
                      
                      
                      
                      3,113
                      
                      
                      
                      -
                      
                      
                      
                      1,517,176Total
                      
                      
                      9,464,192
                      
                      
                      
                      25,093
                      
                      
                      
                      -
                      
                      
                      
                      9,489,285Total
                      
                      $
                      11,908,951
                      
                      
                      $
                      40,952
                      
                      
                      $
                      (13,128
                      )
                      
                      $
                      11,936,775Weighted
      average rate at end of period
                      
                      
                      4.17
                      %




- 9
-




September
      30, 2008Gross
                                
                                
                                Gross
                                
                                
                                EstimatedAmortized
                                
                                
                                Unrealized
                                
                                
                                Unrealized
                                
                                
                                FairCost
                                
                                
                                Gains
                                
                                
                                Losses
                                
                                
                                ValueHeld
      to Maturity:Mortgage-backed
      securities:Freddie
      Mac
                                
                                $
                                3,556
                                
                                
                                $
                                376
                                
                                
                                $
                                (3
                                )
                                
                                $
                                3,929Ginnie
      Mae
                                
                                
                                282,820
                                
                                
                                
                                29,312
                                
                                
                                
                                (308
                                )
                                
                                
                                311,824Fannie
      Mae
                                
                                
                                15,434,529
                                
                                
                                
                                48,119
                                
                                
                                
                                (214,043
                                )
                                
                                
                                15,268,605Total
                                
                                
                                15,720,905
                                
                                
                                
                                77,807
                                
                                
                                
                                (214,354
                                )
                                
                                
                                15,584,358Collateralized
      mortgage obligations - Freddie Mac
                                
                                
                                23,592
                                
                                
                                
                                -
                                
                                
                                
                                (298
                                )
                                
                                
                                23,294Total
                                
                                $
                                15,744,497
                                
                                
                                $
                                77,807
                                
                                
                                $
                                (214,652
                                )
                                
                                $
                                15,607,652Weighted
      average rate at end of period
                                
                                
                                4.91
                                %Available
      for Sale:Mortgage-backed
      securities:Ginnie
      Mae
                                
                                $
                                263,833
                                
                                
                                $
                                15,657
                                
                                
                                $
                                -
                                
                                
                                $
                                279,490Fannie
      Mae
                                
                                
                                1,957,014
                                
                                
                                
                                -
                                
                                
                                
                                (14,006
                                )
                                
                                
                                1,943,008Total
                                
                                
                                2,220,847
                                
                                
                                
                                15,657
                                
                                
                                
                                (14,006
                                )
                                
                                
                                2,222,498Collateralized
      mortgage obligations - Ginnie Mae
                                
                                
                                8,105,406
                                
                                
                                
                                -
                                
                                
                                
                                (147,238
                                )
                                
                                
                                7,958,168Total
                                
                                $
                                10,326,253
                                
                                
                                $
                                15,657
                                
                                
                                $
                                (161,244
                                )
                                
                                $
                                10,180,666Weighted
      average rate at end of period
                                
                                
                                4.16
                                %




- 10
-




The
summary below displays the length of time mortgage-backed securities held to
maturity and available for sale were in a continuous unrealized loss position as
of December 31, 2008 and September 30, 2008.  The Company has the
ability and intent to hold these securities until such time as the values
recover or the securities repay or mature.  Further, the Company
believes the deterioration in value is attributable to changes in market
interest rates and not the credit quality of the issuers.




Length of Time in Continuous Unrealized Loss Position at December 31, 2008Less than 12 months
                
                
                12 months or more
                
                
                TotalAmortized
                
                
                Unrealized
                
                
                Amortized
                
                
                Unrealized
                
                
                Amortized
                
                
                UnrealizedCost
                
                
                Losses
                
                
                Cost
                
                
                Losses
                
                
                Cost
                
                
                LossesHeld
      to Maturity:Mortgage-backed
      securities
                
                
                5,460,161
                
                
                
                88,723
                
                
                
                -
                
                
                
                -
                
                
                
                5,460,161
                
                
                
                88,723Collateralized
      mortgage obligations
                
                
                22,629
                
                
                
                352
                
                
                
                -
                
                
                
                -
                
                
                
                22,629
                
                
                
                3525,482,790
                
                
                
                89,075
                
                
                
                -
                
                
                
                -
                
                
                
                5,482,790
                
                
                
                89,075





Estimated
                  
                  
                  Unrealized
                  
                  
                  Estimated
                  
                  
                  Unrealized
                  
                  
                  Estimated
                  
                  
                  UnrealizedFair Value
                  
                  
                  Losses
                  
                  
                  Fair Value
                  
                  
                  Losses
                  
                  
                  Fair Value
                  
                  
                  LossesAvailable
      for Sale:Mortgage-backed
      securities
                  
                  $
                  2,176,333
                  
                  
                  $
                  13,128
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  2,176,333
                  
                  
                  $
                  13,128Collateralized
      mortgage obligations
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -2,176,333
                  
                  
                  
                  13,128
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  2,176,333
                  
                  
                  
                  13,128Total
                  
                  $
                  7,659,123
                  
                  
                  $
                  102,203
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  7,659,123
                  
                  
                  $
                  102,203Percent
      of total
                  
                  
                  100.0
                  %
                  
                  
                  100.0
                  %
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  100.0
                  %
                  
                  
                  100.0
                  %




- 11
-




Length
      of Time in Continuous Unrealized Loss Position at September 30,
      2008Less
      than 12 months
                
                
                12
      months or more
                
                
                TotalAmortized
                
                
                Unrealized
                
                
                Amortized
                
                
                Unrealized
                
                
                Amortized
                
                
                UnrealizedCost
                
                
                Losses
                
                
                Cost
                
                
                Losses
                
                
                Cost
                
                
                LossesHeld
      to Maturity:Mortgage-backed securities
                
                
                10,201,656
                
                
                
                214,354
                
                
                
                -
                
                
                
                -
                
                
                
                10,201,656
                
                
                
                214,354Collateralized
      mortgage obligations
                
                
                23,592
                
                
                
                298
                
                
                
                -
                
                
                
                -
                
                
                
                23,592
                
                
                
                29810,225,248
                
                
                
                214,652
                
                
                
                -
                
                
                
                -
                
                
                
                10,225,248
                
                
                
                214,652





Estimated
                
                
                Unrealized
                
                
                Estimated
                
                
                Unrealized
                
                
                Estimated
                
                
                UnrealizedFair Value
                
                
                Losses
                
                
                Fair Value
                
                
                Losses
                
                
                Fair Value
                
                
                LossesAvailable
      for Sale:Mortgage-backed
      securities
                
                $
                1,943,008
                
                
                $
                14,006
                
                
                $
                -
                
                
                $
                -
                
                
                $
                1,943,008
                
                
                $
                14,006Collateralized  mortgage
      obligations
                
                
                7,958,168
                
                
                
                147,238
                
                
                
                -
                
                
                
                -
                
                
                
                7,958,168
                
                
                
                147,2389,901,176
                
                
                
                161,244
                
                
                
                -
                
                
                
                -
                
                
                
                9,901,176
                
                
                
                161,244Total
                
                $
                20,126,424
                
                
                $
                375,896
                
                
                $
                -
                
                
                $
                -
                
                
                $
                20,126,424
                
                
                $
                375,896Percent
      of total
                
                
                100.0
                %
                
                
                100.0
                %
                
                
                -
                
                
                
                -
                
                
                
                100.0
                %
                
                
                100.0
                %




- 12
-




7.
              LOANS
      RECEIVABLE




Loans
receivable at December 31, 2008 and September 30, 2008 are summarized as
follows:




December
      31,
                  
                  
                  September
      30,2008
                  
                  
                  2008Real
      estate mortgage:Residential
      first mortgage
                  
                  $
                  265,875,451
                  
                  
                  $
                  253,132,315Residential
      second mortgage
                  
                  
                  82,439,264
                  
                  
                  
                  86,348,973Home
      equity lines of credit
                  
                  
                  229,461,356
                  
                  
                  
                  225,357,406Multi-family
      residential
                  
                  
                  31,631,164
                  
                  
                  
                  32,546,370Commercial
      real estate
                  
                  
                  281,216,604
                  
                  
                  
                  261,166,327Real
      estate construction and development:Residential
                  
                  
                  32,081,925
                  
                  
                  
                  34,511,026Multi-family
                  
                  
                  9,788,821
                  
                  
                  
                  9,607,101Commercial
                  
                  
                  62,308,801
                  
                  
                  
                  55,263,607Commercial
      and industrial
                  
                  
                  154,581,490
                  
                  
                  
                  137,688,076Consumer
      and installment
                  
                  
                  6,711,794
                  
                  
                  
                  6,895,4791,156,096,670
                  
                  
                  
                  1,102,516,680Add
      (less):Deferred
      loan costs
                  
                  
                  5,241,679
                  
                  
                  
                  5,204,730Loans
      in process
                  
                  
                  (4,345,671
                  )
                  
                  
                  (6,223,362
                  )Allowance
      for loan losses
                  
                  
                  (15,663,958
                  )
                  
                  
                  (12,761,532
                  )Total
                  
                  $
                  1,141,328,720
                  
                  
                  $
                  1,088,736,516Weighted
      average interest rate at end of period
                  
                  
                  5.34
                  %
                  
                  
                  6.02
                  %




8.
            DEPOSITS




Deposits
at December 31, 2008 and September 30, 2008 are summarized as
follows:




December
      31, 2008
                    
                    
                    September
      30, 2008Weighted
                    
                    
                    
                    
                    
                    WeightedAverage
                    
                    
                    
                    
                    
                    AverageInterest
                    
                    
                    
                    
                    
                    InterestAmount
                    
                    
                    Rate
                    
                    
                    Amount
                    
                    
                    RateTransaction
      accounts:Non-interest-bearing
      checking
                    
                    $
                    106,928,752
                    
                    
                    
                    -
                    
                    
                    $
                    76,404,474
                    
                    
                    
                    -Interest-bearing
      checking
                    
                    
                    206,143,419
                    
                    
                    
                    1.71
                    %
                    
                    
                    178,697,883
                    
                    
                    
                    2.51
                    %Passbook
      savings accounts
                    
                    
                    24,962,999
                    
                    
                    
                    0.19
                    %
                    
                    
                    25,828,504
                    
                    
                    
                    0.32
                    %Money
      market
                    
                    
                    127,855,680
                    
                    
                    
                    0.92
                    %
                    
                    
                    149,141,121
                    
                    
                    
                    2.12
                    %Total
      transaction accounts
                    
                    
                    465,890,850
                    
                    
                    
                    1.02
                    %
                    
                    
                    430,071,982
                    
                    
                    
                    1.80
                    %Certificates
      of deposit:Retail
                    
                    
                    236,536,506
                    
                    
                    
                    3.33
                    %
                    
                    
                    232,369,917
                    
                    
                    
                    3.50
                    %CDARS
                    
                    
                    146,877,537
                    
                    
                    
                    2.41
                    %
                    
                    
                    123,932,466
                    
                    
                    
                    2.79
                    %Brokered
                    
                    
                    152,629,616
                    
                    
                    
                    3.53
                    %
                    
                    
                    128,937,000
                    
                    
                    
                    3.85
                    %Total
      certificates of deposit
                    
                    
                    536,043,659
                    
                    
                    
                    3.13
                    %
                    
                    
                    485,239,383
                    
                    
                    
                    3.41
                    %Total
      deposits
                    
                    $
                    1,001,934,509
                    
                    
                    
                    2.15
                    %
                    
                    $
                    915,311,365
                    
                    
                    
                    2.65
                    %





- 13
-




9.
            FAIR
      VALUES OF ASSETS AND LIABILITIES




Effective
October 1, 2008, the Company adopted the provisions of Statement of Financial
Accounting Standards No. 157, “Fair Value Measurements” (“SFAS No. 157”), which
defines fair value, establishes a framework for measuring fair value in
generally accepted accounting standards, and expands disclosures about fair
value measurements.  Fair value is defined under SFAS 157 as the
exchange price that would be received for an asset or paid to transfer a
liability (an exit price) in the principal or most advantageous market for the
asset or liability in an orderly transaction between market participants on the
measurement date.  Under SFAS 157, a fair value measurement should
reflect all of the assumptions that market participants would use in pricing the
asset or liability, including assumptions about the risk inherent in a
particular valuation technique, the effect of a restriction on the sale or use
of an asset, and the risk of nonperformance.




SFAS 157
specifies a three-level hierarchy for valuation techniques used to measure
financial assets and financial liabilities at fair value.  This
hierarchy is based on whether the valuation inputs are observable or
unobservable. Financial instrument valuations are considered Level 1 when they
are based on quoted prices in active markets for identical assets or
liabilities.  Level 2 financial instrument valuations use quoted
prices for similar assets or liabilities; quoted prices in markets that are not
active; or other inputs that are observable or can be corroborated by observable
market data of substantially the full term of the assets or
liabilities.  Financial instrument valuations are considered Level 3
when they are determined using pricing models, discounted cash flow
methodologies or similar techniques and at least one significant model
assumption or input is unobservable and when determination of the fair value
requires significant management judgment or estimation.




The
following disclosures exclude certain non-financial assets and liabilities,
which are deferred under the provisions of Financial Accounting Standards Board
(“FASB”) Staff Position No. FAS 157-2, “Effective Date of FASB Staff Position
No. 157” (“FSP No. 157-2”).  Such non-financial assets include
foreclosed real estate, long-lived assets, goodwill, and core deposit intangible
assets, which are written down to fair value if considered
impaired.  The deferral of these disclosures is intended to allow
additional time to consider the effect of various implementation issues relating
to these non-financial assets and liabilities, and defers disclosures required
by SFAS No. 157 until the Company’s fiscal year beginning October 1,
2009.  The Company does not expect the adoption of the remaining
provisions of this statement to have a material effect on its financial
statements.  In October 2008, the FASB issued FASB Staff Position No.
FAS 157-3, “Determining the Fair Value of a Financial Asset When the Market for
That Asset Is Not Active” (“FSP No. 157-3”). This position clarifies the
application of SFAS No. 157 in a market that is not active and provides an
example to illustrate key considerations in determining the fair value of a
financial asset when the market for that financial asset is not
active.  This position was effective when issued.  The
adoption of this position did not have an effect on our financial
statements.




The
Company records securities available for sale and derivative financial
instruments at their fair values on a recurring basis.  Additionally,
the Company records other assets at their fair values on a nonrecurring basis,
such as loans held for sale, loans held for investment and certain other
assets.  These nonrecurring fair value adjustments typically involve
application of lower-of-cost-or-market accounting or impairment write-downs of
individual assets.  The following is a general description of the
methods used to value such assets.




Equity Securities Available for
Sale.  The fair values of equity securities available for sale
are generally based on quoted market prices or market prices for similar
assets.  However, nonpublic investments are initially valued at
transaction price and subsequently adjusted when evidence is available to
support such adjustments.




Debt and Mortgage-Backed Securities
Available for Sale.  The fair values of debt and
mortgage-backed securities available for sale are generally based on quoted
market prices or market prices for similar assets.




Interest Rate Swap Assets and
Liabilities.  The fair values of interest rate swap assets and
liabilities are generally based on the income approach to value using observable
Level II market expectations at measurement date and standard quantitative
valuation techniques to convert future amounts to a single present amount
(discounted) assuming that participants are motivated, but not compelled to
transact.  Level II inputs for the swap valuations are limited to
quoted prices for similar assets or liabilities in active markets (specifically
futures contracts on LIBOR for the first two years) and inputs other than quoted
prices that are observable for the asset or liability (specifically LIBOR cash
and swap rates, LIBOR basis spreads, volatilities, and credit risk at commonly
quoted intervals). Mid-market pricing is used as a practical expedient for fair
value measurements.




- 14
-




Loans Held for
Sale.  The fair values of loans held for sale are generally
based on quoted market prices or market prices for similar assets.




Impaired
Loans.  The fair values of impaired loans are generally based
on market prices for similar assets.




Assets
and liabilities that were recorded at fair value on a recurring basis at
December 31, 2008 and the level of inputs used to determine their fair values
are summarized below:




Carrying Value at December 31, 2008Fair Value Measurements UsingTotal
                  
                  
                  Level 1
                  
                  
                  Level 2
                  
                  
                  Level 3(In thousands)Assets:Equity
      securities available for sale
                  
                  $
                  589
                  
                  
                  $
                  -
                  
                  
                  $
                  589
                  
                  
                  $
                  -Debt
      securities available for sale
                  
                  
                  4,017
                  
                  
                  
                  -
                  
                  
                  
                  4,017
                  
                  
                  
                  -Mortage-backed
      securities available for sale
                  
                  
                  11,937
                  
                  
                  
                  -
                  
                  
                  
                  11,937
                  
                  
                  
                  -Interest-rate
      swap
                  
                  
                  1,536
                  
                  
                  
                  -
                  
                  
                  
                  1,536
                  
                  
                  
                  -Total
      assets
                  
                  $
                  18,079
                  
                  
                  $
                  -
                  
                  
                  $
                  18,079
                  
                  
                  $
                  -Liabilities:Interest-rate
      swap
                  
                  
                  1,536
                  
                  
                  
                  -
                  
                  
                  
                  1,536
                  
                  
                  
                  -Total
      liabilities
                  
                  $
                  1,536
                  
                  
                  $
                  -
                  
                  
                  $
                  1,536
                  
                  
                  $
                  -




Assets
that were recorded at fair value on a non-recurring basis at December 31, 2008
and the level of inputs used to determine their fair values are summarized
below:




Total LossesRecognized inCarrying Value at December 31, 2008
                  
                  Quarter EndedFair Value Measurements Using
                  
                  
                  December 31,Total
                  
                  
                  Level 1
                  
                  
                  Level 2
                  
                  
                  Level 3
                  
                  
                  2008(In
      thousands)Assets:Loans
      held for sale, at lower of cost or market
                  
                  $
                  79,302
                  
                  
                  $
                  -
                  
                  
                  $
                  79,302
                  
                  
                  $
                  -
                  
                  
                  $
                  -Impaired
      loans
                  
                  
                  36,467
                  
                  
                  
                  -
                  
                  
                  
                  36,467
                  
                  
                  
                  -
                  
                  
                  
                  2,015Total
      assets
                  
                  $
                  115,769
                  
                  
                  $
                  -
                  
                  
                  $
                  115,769
                  
                  
                  $
                  -
                  
                  
                  $
                  2,015




10.
              GOODWILL




Goodwill
totaled $3.9 million at December 31, 2008 and September 30, 2008,
respectively.  Goodwill represents the amount of acquisition cost over
the fair value of net assets acquired in the purchase of another financial
institution.  The Company reviews goodwill for impairment at least
annually or more frequently if events or changes in circumstances indicate the
carrying value of the asset might be impaired.  Impairment is
determined by comparing the implied fair value of the reporting unit goodwill
with the carrying amount of that goodwill.  If the carrying amount of
the reporting unit goodwill exceeds the implied fair value of that goodwill, an
impairment loss is recognized in an amount equal to that excess.  Any
such adjustments are reflected in the results of operations in the periods in
which they become known.  After a goodwill impairment loss is
recognized, the adjusted carrying amount of goodwill becomes its new accounting
basis.  Because of the decline in the market value of the Company’s
common stock during the three months ended December 31, 2008, the Company
reviewed goodwill for impairment as of December 31, 2008 in addition to its
annual review at September 30, 2008.  No impairment losses were
recognized during fiscal year 2008 or the three months ended December 31,
2008.




- 15
-




Management’s
Discussion and Analysis of


Financial
Condition and Results of Operations




FORWARD-LOOKING
STATEMENTS




This
report contains certain “forward-looking statements” within the meaning of the
federal securities laws, which are made in good faith pursuant to the “safe
harbor” provisions of the Private Securities Litigation Reform Act of
1995.  These statements are not historical facts; rather they are
statements based on Pulaski Financial Corp.’s (the “Company”) current
expectations regarding its business strategies, intended results and future
performance.  Forward-looking statements are generally preceded by
terms such as “expects,” “believes,” “anticipates,” “intends” and similar
expressions.




Management’s
ability to predict results or the effect of future plans or strategies is
inherently uncertain.  Factors which could affect actual results
include interest rate trends, the general economic climate in the market area in
which Pulaski Financial Corp. operates, as well as nationwide, Pulaski Financial
Corp.’s ability to control costs and expenses, competitive products and pricing,
loan demand, loan delinquency rates and changes in federal and state legislation
and regulation.  The Company provides greater detail regarding some of
these factors in its Form 10-K for the year ended September 30, 2008, including
the Risk Factors section of that report.  The Company’s
forward-looking statements may also be subject to other risks and uncertainties,
including those that it may discuss elsewhere in this report or in its other
filings with the SEC.  These factors should be considered in
evaluating the forward-looking statements and undue reliance should not be
placed on such statements.  Pulaski Financial Corp. assumes no
obligation to update any forward-looking statements to reflect events or
circumstances after the date of the statements or to reflect the occurrence of
anticipated or unanticipated events.




GENERAL




Pulaski
Financial Corp. is a community-based, financial institution holding company
headquartered in St. Louis, Missouri.  It conducts operations
primarily through Pulaski Bank (the “Bank”), a federally chartered savings bank
with $1.36 billion in assets at December 31, 2008.  Pulaski Bank
provides an array of financial products and services for businesses and
consumers primarily through its twelve full-service offices in the St. Louis
metropolitan area and three loan production offices in the St. Louis and Kansas
City metropolitan areas.




The
Company has primarily grown its assets and deposits internally by building its
residential and commercial lending operations, by opening de novo branches, and
by hiring experienced bankers with existing customer relationships in its
market.  The Company’s goal is to continue to deliver value to its
shareholders and enhance its franchise value and earnings through controlled
growth in its banking operations, while maintaining the personal,
community-oriented customer service that has characterized its success to
date.




COMMUNITY
BANKING STRATEGY PRODUCES MEANINGFUL GROWTH IN KEY BUSINESS LINES




The
Company experienced a 79.3% decrease in net income for the three months ended
December 31, 2008 compared with the same quarter last year largely as the result
of an increased provision for loan losses.  However, execution of its
community banking strategy produced strong performance in each of its three
primary business lines, commercial banking services, retail mortgage lending and
retail banking services, resulting in meaningful growth in loans receivable,
core deposits, total assets, net interest income and mortgage
revenues.  The Company’s community banking strategy emphasizes
high-quality, responsive, and personalized customer service.  The
Company has been successful in distinguishing itself from the larger regional
banks operating in its market areas by offering quicker decision making in the
delivery of banking products and services, offering customized products where
needed, and providing customers access to senior decision makers.




- 16
-




Commercial Banking
Services




The
Company’s commercial banking services are centered on serving small- to
medium-sized businesses and its growth in the St. Louis market continues to be
fueled by these commercial banking relationships.  Total assets grew
$59.0 million, or 4.5%, from $1.30 billion at September 30, 2008 to $1.36
billion at December 31, 2008, primarily as the result of a $52.6 million
increase in loans receivable to $1.41 billion at December 31,
2008.  The growth in loans receivable was largely due to growth in
commercial loans, as mortgage loans secured by commercial real estate increased
$20.1 million to $281.2 million, commercial and industrial loans increased $16.9
million to $154.6 million and commercial real estate construction and
development loans increased $7.0 million to $62.3 million at December 31, 2008,
respectively.  Commercial loan originations totaled $143.4 million
during the three months ended December 31, 2008 compared with $162.4 million
during the same period last year.  Because commercial loans generally
carry the highest yields in the Company’s loan portfolio, growth in these loans
enhanced the Company’s net interest margin during the current-year
quarter.




The
Company’s commercial loan customers are also among the best sources of core
deposit accounts.  Commercial checking account balances increased
$18.0 million to $286.8 million at December 31, 2008 compared with $168.8
million at September 30, 2008.




Retail Mortgage
Lending




The
Company is a conforming, residential mortgage lender that originates loans
directly through commission-based sales staff in the St. Louis and Kansas City
metropolitan areas.  It does not engage in sub-prime
lending.  The majority of loans originated in the retail mortgage
division are one- to four-family residential loans, which are sold to investors
on a servicing-released basis, generating mortgage revenue, which is the
Company’s largest source of non-interest income.




The
Company is a leading mortgage originator in its two markets, originating $307.7
million and $343.4 million in residential loans during the three months ended
December 31, 2008 and 2007, respectively.  Residential loans sold to
investors for the three months ended December 31, 2008 totaled $255.5 million,
which generated mortgage revenues totaling $1.5 million, compared with $284.0
million of loans sold and $1.1 million in revenues for the three months ended
December 31, 2007, respectively.  The lower loan origination and sales
activity in the 2008 period was the result of weakened loan demand during the
first half of the quarter caused by an overall shrinkage in the number of
qualified, credit-worthy borrowers in the market as many potential borrowers
were impacted by the national credit crisis.  While the volume of
loans sold was lower in the December 2008 quarter compared with the same period
last year, the Company realized higher gross revenue margins during the
current-year quarter due to a shift in the mix of the types of loans originated
to products with higher sales margins, such as loans guaranteed by the FHA, and
also due to reduced market competition and lower direct origination costs,
primarily personnel costs.




As the
result of the Federal Reserve’s actions taken in November 2008, which resulted
in lower market interest rates, the Company experienced a sharp increase in
mortgage loan refinance activity in late November 2008.  Mortgage loan
originations totaled $157 million in December 2008, representing a 146% increase
in the origination volume experienced in November 2008.  However,
because it can take up to approximately 30 days from the date of origination for
the investors to fund their purchases of these loans, the Company did not fully
realize the mortgage revenues associated with this increased activity in the
December 2008 quarter.  At December 31, 2008, mortgage loan
applications in process totaled $304.7 million compared with $152.4 million
at September 30, 2008 and $131.7 million at December 31, 2007.




Retail Banking
Services




Core
deposits, which consist of checking, money market and passbook savings accounts,
have been critical to support profitable asset growth and their growth is a
primary focus of the Company’s strategic plan.  Primarily as the
result of increased commercial relationships, successful marketing efforts and
branch locations opened in 2007, core deposits increased 8.33%, or $35.8
million, to $465.9 million at December 31, 2008 from $430.1 million at September
30, 2008.  Checking accounts represent the cornerstone product in a
customer relationship and generate valuable fee income through service
charges.  The balance of checking accounts increased $58.0 million
during the quarter to $313.1 million at December 31, 2008 from $255.1 million at
September 30, 2008.  Contributing to the increase was a
$27.4 million increase in interest-bearing checking accounts resulting from
a marketing campaign focused on attracting this type of deposit.  In
addition, during the quarter ended December 31, 2008, the Bank began clearing
its own official checks that are drawn on itself, which contributed to a $30.5
million increase in noninterest-bearing checking accounts.  At
December 31, 2008, the weighted-average cost of interest-bearing checking
accounts was 1.71% compared with 2.51% at September 30, 2008.




- 17
-




Management
also considers money market deposits to be a core deposit
product.  However, during the quarter ended December 31, 2008,
marketing focus was shifted away from these products to concentrate on
interest-bearing checking accounts.  The balance of money market
accounts decreased $21.3 million to $127.9 million at December 31, 2008 from
$149.1 million at September 30, 2008.  At December 31, 2008, the
weighted-average cost of money market deposits decreased to 0.92% from 2.12% at
September 30, 2008 as the result of declining market interest
rates.  Money market and interest-bearing checking accounts carry
adjustable interest rates that make them an ideal funding source for the
Company’s prime-adjusting commercial and home equity loans.




Certificates
of deposit increased $50.8 million during the quarter to $536.0 million at
December 31, 2008, primarily as the result of a $23.7 million increase in
brokered certificates of deposit to $152.6 million, which management
actively manages as a wholesale funding source, and a $22.9 million increase in
CDARS time deposits to $146.9 million.  CDARS deposits, which are
generally offered to in-market retail and commercial customers, offer the bank’s
customers the ability to receive FDIC insurance on deposits up to $50
million.  Total deposits increased $86.6 million, or 9.5%, to $1.00
billion at December 31, 2008 from $915.3 million at September 30,
2008.




Retail
banking fees, which include fees charged to customers who have overdrawn their
checking accounts, decreased 6.0% to $967,000 for the three months ended
December 31, 2008 compared with $1.0 million for the same 2007
period.  Primarily as the result of tightened consumer spending in the
current difficult economic environment, the Bank experienced a reduction in the
volume of overdrawn checking accounts during the three months ended December 31,
2008 compared with the same period last year.




- 18
-




AVERAGE
BALANCE SHEETS




The
following table sets forth information regarding average daily balances of
assets and liabilities as well as the total dollar amounts of interest income
from average interest-earning assets and interest expense on average
interest-bearing liabilities, resultant yields, interest rate spread, net
interest margin, and ratio of average interest-earning assets to average
interest-bearing liabilities for the periods indicated.







Three
      Months EndedDecember 31, 2008
                        
                        
                        December 31, 2007Interest
                        
                        
                        
                        
                        
                        
                        
                        
                        InterestAverage
                        
                        
                        and
                        
                        
                        Yield/
                        
                        
                        Average
                        
                        
                        and
                        
                        
                        Yield/Balance
                        
                        
                        Dividends
                        
                        
                        Cost
                        
                        
                        Balance
                        
                        
                        Dividends
                        
                        
                        Cost(Dollars
      in thousands)Interest-earning
      assets:Loans
      receivable:  (1)Real
      estate and commercial
                        
                        $
                        891,328
                        
                        
                        $
                        12,931
                        
                        
                        
                        5.80
                        %
                        
                        $
                        769,685
                        
                        
                        $
                        13,967
                        
                        
                        
                        7.29
                        %Home
      equity lines of credit
                        
                        
                        226,781
                        
                        
                        
                        2,701
                        
                        
                        
                        4.76
                        %
                        
                        
                        220,379
                        
                        
                        
                        4,192
                        
                        
                        
                        7.61
                        %Consumer
                        
                        
                        3,729
                        
                        
                        
                        53
                        
                        
                        
                        5.71
                        %
                        
                        
                        4,359
                        
                        
                        
                        56
                        
                        
                        
                        5.09
                        %Total
      loans receivable
                        
                        
                        1,121,838
                        
                        
                        
                        15,685
                        
                        
                        
                        5.59
                        %
                        
                        
                        994,423
                        
                        
                        
                        18,215
                        
                        
                        
                        7.33
                        %Loans
      held for sale
                        
                        
                        50,739
                        
                        
                        
                        666
                        
                        
                        
                        5.25
                        %
                        
                        
                        51,511
                        
                        
                        
                        727
                        
                        
                        
                        5.64
                        %Debt
      securities, net
                        
                        
                        16,484
                        
                        
                        
                        99
                        
                        
                        
                        2.41
                        %
                        
                        
                        15,868
                        
                        
                        
                        180
                        
                        
                        
                        4.54
                        %Equity
      securities, net
                        
                        
                        1,224
                        
                        
                        
                        7
                        
                        
                        
                        2.42
                        %
                        
                        
                        5,485
                        
                        
                        
                        39
                        
                        
                        
                        2.81
                        %Mortgage-backed
      securities
                        
                        
                        26,084
                        
                        
                        
                        313
                        
                        
                        
                        4.80
                        %
                        
                        
                        2,980
                        
                        
                        
                        35
                        
                        
                        
                        4.75
                        %FHLB
      stock
                        
                        
                        11,601
                        
                        
                        
                        60
                        
                        
                        
                        2.06
                        %
                        
                        
                        10,992
                        
                        
                        
                        131
                        
                        
                        
                        4.76
                        %Other
                        
                        
                        1,830
                        
                        
                        
                        4
                        
                        
                        
                        0.86
                        %
                        
                        
                        3,988
                        
                        
                        
                        43
                        
                        
                        
                        4.40
                        %Total
      interest-earning assets
                        
                        
                        1,229,800
                        
                        
                        
                        16,834
                        
                        
                        
                        5.48
                        %
                        
                        
                        1,085,247
                        
                        
                        
                        19,370
                        
                        
                        
                        7.14
                        %Non-interest-earning
      assets
                        
                        
                        83,458
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        76,327Total
      assets
                        
                        $
                        1,313,258
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        $
                        1,161,574Interest-bearing
      liabilities:Interest-bearing
      checking
                        
                        $
                        188,156
                        
                        
                        $
                        1,058
                        
                        
                        
                        2.25
                        %
                        
                        $
                        62,130
                        
                        
                        $
                        251
                        
                        
                        
                        1.62
                        %Passbook
      savings
                        
                        
                        25,810
                        
                        
                        
                        13
                        
                        
                        
                        0.20
                        %
                        
                        
                        28,783
                        
                        
                        
                        26
                        
                        
                        
                        0.37
                        %Money
      market
                        
                        
                        140,106
                        
                        
                        
                        567
                        
                        
                        
                        1.62
                        %
                        
                        
                        182,037
                        
                        
                        
                        1,804
                        
                        
                        
                        3.96
                        %Certificate
      of deposit
                        
                        
                        518,897
                        
                        
                        
                        4,485
                        
                        
                        
                        3.46
                        %
                        
                        
                        489,498
                        
                        
                        
                        6,121
                        
                        
                        
                        5.00
                        %Total
      interest-bearing deposits
                        
                        
                        872,969
                        
                        
                        
                        6,123
                        
                        
                        
                        2.81
                        %
                        
                        
                        762,448
                        
                        
                        
                        8,202
                        
                        
                        
                        4.30
                        %FHLB
      advances
                        
                        
                        200,156
                        
                        
                        
                        1,171
                        
                        
                        
                        2.34
                        %
                        
                        
                        210,992
                        
                        
                        
                        2,525
                        
                        
                        
                        4.79
                        %Federal
      Reserve borrowings
                        
                        
                        27,207
                        
                        
                        
                        80
                        
                        
                        
                        1.17
                        %
                        
                        
                        11
                        
                        
                        
                        -
                        
                        
                        
                        5.04
                        %Note
      payable
                        
                        
                        7,640
                        
                        
                        
                        101
                        
                        
                        
                        5.29
                        %
                        
                        
                        2,980
                        
                        
                        
                        48
                        
                        
                        
                        6.43
                        %Subordinated
      debentures
                        
                        
                        19,589
                        
                        
                        
                        246
                        
                        
                        
                        5.03
                        %
                        
                        
                        19,589
                        
                        
                        
                        394
                        
                        
                        
                        8.05
                        %Total
      interest-bearing liabilities
                        
                        
                        1,127,561
                        
                        
                        
                        7,721
                        
                        
                        
                        2.74
                        %
                        
                        
                        996,020
                        
                        
                        
                        11,169
                        
                        
                        
                        4.49
                        %Non-interest
      bearing liabilities:Non-interest
      bearing deposits
                        
                        
                        87,028
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        59,688Other
      non-interest bearing liabilities
                        
                        
                        13,520
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        21,018Total
      non-interest-bearing liabilities
                        
                        
                        100,548
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        80,706Stockholders'
      equity
                        
                        
                        85,149
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        84,848Total
      liabilities and stockholders' equity
                        
                        $
                        1,313,258
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        $
                        1,161,574Net
      interest income
                        
                        
                        
                        
                        
                        $
                        9,113
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        $
                        8,201Interest
      rate spread(2)
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        2.74
                        %
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        2.65
                        %Net interest
      margin(3)
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        2.96
                        %
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        3.02
                        %Ratio
      of average interest-earning assets toaverage interest-bearing
      liabilities
                        
                        
                        109.07
                        %
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        108.96
                        %




(1)
                Includes
      non-accrual loans with an average balance of $11.1 million and $6.6
      million for the three months ended December 31, 2008 and 2007,
      respectively.(2)
                Yield
      on interest-earning assets less cost of
      interest-bearing  liabilities.(3)
                Net
      interest income divided by average interest-earning
  assets.


- 19
-


RATE
VOLUME ANALYSIS




The
following table sets forth the effects of changing rates and volumes on net
interest income for the periods indicated. The total change for each category of
interest-earning asset and interest-bearing liability is segmented into the
change attributable to variations in volume (change in volume multiplied by
prior period rate) and the change attributable to variations in interest rates
(changes in rates multiplied by prior period volume).  Changes in
interest income and expense attributed to both changes in volume and changes in
rate are allocated proportionately to rate and volume.





Three
      Months EndedDecember 31, 2008 vs 2007Volume
                            
                            
                            Rate
                            
                            
                            Net(In
      thousands)Interest-earning
      assets:Loans
      receivable:Real
      estate and commercial
                            
                            $
                            8,512
                            
                            
                            $
                            (9,548
                            )
                            
                            $
                            (1,036
                            )Home
      equity lines of credit
                            
                            
                            797
                            
                            
                            
                            (2,288
                            )
                            
                            
                            (1,491
                            )Consumer
                            
                            
                            (31
                            )
                            
                            
                            28
                            
                            
                            
                            (3
                            )Total
      loans receivable
                            
                            
                            9,278
                            
                            
                            
                            (11,808
                            )
                            
                            
                            (2,530
                            )Loans
      held for sale
                            
                            
                            (11
                            )
                            
                            
                            (50
                            )
                            
                            
                            (61
                            )Debt
      securities, net
                            
                            
                            46
                            
                            
                            
                            (127
                            )
                            
                            
                            (81
                            )Equity
      securities, net
                            
                            
                            (27
                            )
                            
                            
                            (5
                            )
                            
                            
                            (32
                            )Mortgage-backed
      securities
                            
                            
                            278
                            
                            
                            
                            -
                            
                            
                            
                            278FHLB
      stock
                            
                            
                            47
                            
                            
                            
                            (118
                            )
                            
                            
                            (71
                            )Other
                            
                            
                            (16
                            )
                            
                            
                            (23
                            )
                            
                            
                            (39
                            )Net
      change in income oninterest
      earning assets
                            
                            
                            9,595
                            
                            
                            
                            (12,131
                            )
                            
                            
                            (2,536
                            )Interest-bearing
      liabilities:Interest-bearing
      checking
                            
                            
                            677
                            
                            
                            
                            130
                            
                            
                            
                            807Passbook
      savings
                            
                            
                            (2
                            )
                            
                            
                            (11
                            )
                            
                            
                            (13
                            )Money
      market
                            
                            
                            (347
                            )
                            
                            
                            (890
                            )
                            
                            
                            (1,237
                            )Certificate
      of deposit
                            
                            
                            2,193
                            
                            
                            
                            (3,829
                            )
                            
                            
                            (1,636
                            )Total
      interest-bearing deposits
                            
                            
                            2,521
                            
                            
                            
                            (4,600
                            )
                            
                            
                            (2,079
                            )FHLB
      advances
                            
                            
                            (124
                            )
                            
                            
                            (1,230
                            )
                            
                            
                            (1,354
                            )Federal
      Reserve borrowings
                            
                            
                            80
                            
                            
                            
                            -
                            
                            
                            
                            80Note
      payable
                            
                            
                            109
                            
                            
                            
                            (56
                            )
                            
                            
                            53Subordinated
      debentures
                            
                            
                            -
                            
                            
                            
                            (148
                            )
                            
                            
                            (148
                            )Net
      change in expense oninterest
      bearing liabilities
                            
                            
                            2,586
                            
                            
                            
                            (6,034
                            )
                            
                            
                            (3,448
                            )Change
      in net interest income
                            
                            $
                            7,009
                            
                            
                            $
                            (6,097
                            )
                            
                            $
                            912




- 20
-




RESULTS OF
OPERATIONS





Net income
for the three months ended December 31, 2008 was $566,000, or $0.06 per diluted
share on 10.3 million average diluted shares outstanding, compared with net
income of $2.7 million, or $0.27 per diluted share on 10.2 million average
diluted shares outstanding, during the same period last year.  Results
for the current-year period were negatively impacted by a $4.7 million provision
for loan losses, which included $1.4 million in specific reserves related to two
commercial real estate loans.




Net
Interest Income




Net interest
income rose 11.1%, or $912,000, to $9.1 million for the quarter ended
December 31, 2008 compared with $8.2 million for the same period last
quarter. The increase was fueled by strong growth in the average balances of
loans receivable, which increased to $1.12 billion during the quarter ended
December 31, 2008 compared with $994.4 million during the quarter ended December
31, 2007, partially offset by a decline in the net interest
margin.  The net interest margin declined to 2.96% during the quarter
ended December 31, 2008 from 3.02% for the quarter ended December 31,
2007.  The Company’s net interest margin was negatively impacted
during the quarter by the rapid decline in market interest
rates.  While the Company saw a decline in interest rates on its prime
adjusting commercial and home equity loans and on its short-term wholesale
borrowings, interest rates paid on its retail deposits did not fall as quickly
due to strong competition for deposits.




Total interest
and dividend income decreased $2.5 million, or 13.1%, to $16.8 million
for the quarter ended December 31, 2008 compared with $19.4 million for the
comparable 2007 quarter.  The decrease was primarily due to a decrease
in the average yield on loans receivable from 7.33% during the quarter ended
December 31, 2007 to 5.59% during the quarter ended December 31, 2008, partially
offset by an increase in the average balance of loans receivable from $994.4
million during the quarter ended December 31, 2007 to $1.12 billion during the
quarter ended December 31, 2008.  The decrease in the average loan
yield was due to lower market interest rates during the 2008 period, while the
increase in the average balance was primarily due to growth in commercial
loans.




Total interest
expense decreased $3.4 million, or 30.9%, to $7.7 million for the quarter
ended December 31, 2008 compared with $11.2 million for the quarter ended
December 31, 2007.  The lower expense was the result of a decrease in
the average cost of funds partially offset by an increase in the average balance
of interest-bearing liabilities.  The average cost of funds decreased
from 4.49% for the quarter ended December 31, 2007 to 2.74% for the quarter
ended December 31, 2008 while the average balance of interest-bearing
liabilities increased from $996.0 million to $1.13 billion during the same
periods, respectively.  The increased average balance in
interest-bearing liabilities, which was used to fund asset growth during the
period, resulted primarily from increases in the average balances of deposits
(mainly checking accounts and certificates of deposit) and, to a lesser extent,
an increase in borrowings from the Federal Reserve Bank of St. Louis (“Federal
Reserve Bank”), partially offset by a decrease in the average balance of
advances from the Federal Home Loan Bank of Des Moines (“FHLB”).  The
decreased average costs were the result of lower market interest rates during
the period, growth in core deposits and a shift in the mix of wholesale funding
sources.  The Company primarily funds its assets with savings deposits
from its retail and commercial customers, which are typically its lowest-cost
funding source.  This funding source is supplemented with wholesale
funds consisting primarily of borrowings from the FHLB, short-term borrowings
from the Federal Reserve Bank and time deposits from national
brokers.  Management actively chooses among these wholesale funding
sources depending on their relative costs and the Company’s overall borrowing
capacity at the FHLB and the Federal Reserve Bank.




Interest expense
on depositsdecreased $2.1 million, or 25.3%, to $6.1 million during the
quarter ended December 31, 2008 compared with $8.2 million for the quarter ended
December 31, 2007 as the result of a decrease in the average cost partially
offset by an increase in the average balance.  The average balance of
interest-bearing deposits increased to $873.0 million for the quarter ended
December 31, 2008 from $762.4 million for the quarter ended December 31, 2007
while the average cost of deposits decreased from 4.30% to 2.81% during the same
periods, respectively.  Growth in average total deposits during the
2008 period was the result of growth in core deposits, CDARS time deposits and
brokered time deposits.  The growth of core deposits combined with
lower market interest rates resulted in lower average costs during the 2008
period.




- 21
-




Interest expense
on advances from the Federal Home Loan Bank decreased $1.4 million, or
53.6%, to $1.2 million during the quarter ended December 31, 2008 compared with
$2.5 million for the quarter ended December 31, 2007 as the result of
decreases in the average cost and the average balance.  The average
balance decreased to $200.2 million for the quarter ended December 31, 2008
from $211.0 million for the quarter ended December 31, 2007 and the average cost
decreased from 4.79% to 2.34% during the same periods,
respectively.  The decreased average balances resulted from
management’s decision to shift a portion of these short-term borrowings to less
costly short-term borrowings at the Federal Reserve Bank.  The
decreased average cost was the result of lower market interest rates during the
2008 period.




Interest expense
on borrowings from the Federal Reserve Bank increased to $80,000 during
the quarter ended December 31, 2008 compared with $137 for the quarter ended
December 31, 2007 as the result of an increase in the average balance to
$27.2 million for the quarter ended December 31, 2008 from $11,000 for the
quarter ended December 31, 2007.  The average cost of these borrowings
during the three months ended December 31, 2008 and 2007 was 1.17% and 5.04%,
respectively.  During the 2008 period, the Company shifted borrowings
from the FHLB into less-costly, short-term borrowings from the Discount Window
of the Federal Reserve Bank.




Provision
for Loan Losses




The provision for
loan losses for the three months ended December 31, 2008 was $4.7 million
compared with $1.0 million for the same period a year ago.  See Non-Performing AssetsandAllowance for Loan
Losses.




Non-Interest
Income




Total
non-interest income increased 11.2% to $3.3 million for the quarter ended
December 31, 2008 compared with $3.0 million for the same period last year
primarily due to the strong growth in mortgage revenues, gain on the sales of
securities and higher investment brokerage revenues, partially offset by a
decrease in retail banking fees.





Investment
brokerage revenuestotaled $261,000 for the
three months ended December 31, 2008 compared with $215,000 for the same period
a year ago.  The Company operates an investment brokerage division
whose operations consist principally of brokering bonds from wholesale brokerage
houses to bank, municipal and individual investors.  Revenues are
generated on trading spreads and fluctuate with changes in trading volumes and
market interest rates.  The increased revenues in the 2008 period were
the result of successful sales efforts to new customers combined with an
improved bond sales environment caused by the steepened interest-rate yield
curve.




Gain on sales of
securities totaled $243,000 for the three months ended December 31, 2008
on sales of $51.1 million of debt securities classified as available for
sale compared with $54,000 for the three months ended December 31, 2007 on sales
of $5.2 million of available-for-sale debt securities.   Such
securities are primarily held as collateral to secure large commercial and
municipal deposits.  The total balance held in these securities is
adjusted to reflect fluctuations in the balances of the deposits they are
securing.




Non-Interest
Expense




Total
non-interest expense increased $593,000 to $6.9 million for the quarter
ended December 31, 2008 compared with $6.3 million for the same period a
year ago.  The increase was primarily due to increases in salaries and
employee benefits expense, occupancy, equipment and data processing expense and
real estate foreclosure expense and losses, and a decrease in gain on derivative
financial instruments, partially offset by a decrease in advertising
expense.




Salaries and
employee benefits expenseincreased $321,000 to
$3.3 million for the quarter ended December 31, 2008 compared with $3.0 million
for the quarter ended December 31, 2007.  The increase was mainly the
result of a decrease in the volume of loans originated for sale during the
current-year quarter resulting in a lower level of direct compensation expense
that was capitalized as loan origination costs.




Occupancy,
equipment and data processing expense increased $184,000 to $1.8 million
for the three-month period ended December 31, 2008 compared with $1.6 million
for the three-month period ended December 31, 2007.  The increase was
largely related to an increase in outside contract services expense related to
the hiring of an independent security company to provide security guards at
certain of the Bank’s branch offices, increased expenses related to the
temporary relocation of one of the Bank’s branch offices due to water damage,
and increased expenses related to the increased level of loan and deposit
activity.




- 22
-




Advertising
expense decreased $54,000 to $286,000 for the three-month period ended
December 31, 2008 compared with $340,000 for the three-month period ended
December 31, 2007.  The decrease was generally due to a reduction in
the overall level of advertising during the 2008 period and a more focused
effort to control such expenses.




Gain on
derivative instrumentswas $0 for the quarter
ended December 31, 2008 compared with a gain of $122,000 for the quarter ended
December 31, 2007.  During November 2004, the Company entered into
interest rate swap agreements with notional values totaling $80 million,
which were designed to convert the fixed rates paid on certain brokered
certificates of deposits into variable, LIBOR-based rates.  The
Company used long-haul, fair-value, hedge accounting.  Under this
method, any hedge ineffectiveness was deemed not material and the impact was
recognized as a charge or credit to earnings during the period in which the
ineffectiveness occurred.  All of these interest-rate swap agreements
were called by the counterparties during the year ended September 30, 2008 due
to the declining interest-rate environment.





Real estate
foreclosure losses and expense, netinclude realized losses
on the final disposition of foreclosed properties, additional write-downs for
declines in the fair market values of properties which occur subsequent to
foreclosure and expenses incurred in connection with maintaining the properties
until they are sold.  Real estate foreclosure losses and expense, net
increased $113,000 to $342,000 for the quarter ended December 31, 2008 compared
with $229,000 for the same quarter last year. The increases were generally due
to the overall increased foreclosure activity and the related realized losses on
sales.  See Non-Performing Assets and Allowance
for Loan Losses.




Income
Taxes




The provision for
income taxes was $297,000 for the three months ended December 31, 2008
compared with $1.1 million for the three months ended December 31,
2007.  The effective tax rate for the three months ended December 31,
2008 was 34.4% compared with 29.4% for the same 2007 period.  The
lower effective tax rate in the 2007 period was primarily the result of a higher
percentage of non-taxable income to total pre-tax income related to bank-owned
life insurance and non-taxable interest income.




- 23
-






NON-PERFORMING
ASSETS AND ALLOWANCE FOR LOAN LOSSES




Non-performing
assets at December 31, 2008 and September 30, 2008 are summarized as
follows:




December 31,
                  
                  
                  September 30,2008
                  
                  
                  2008Non-accrual
      loans:Residential
      real estate:First
      mortgage
                  
                  $
                  4,330,175
                  
                  
                  $
                  5,903,709Second
      mortgage
                  
                  
                  628,127
                  
                  
                  
                  752,245Home
      equity
                  
                  
                  3,027,561
                  
                  
                  
                  1,695,073Commercial
      and multi-family real estate
                  
                  
                  1,513,516
                  
                  
                  
                  1,125,117Real
      estate construction and development
                  
                  
                  1,089,027
                  
                  
                  
                  133,108Commercial
      and industrial
                  
                  
                  3,119,410
                  
                  
                  
                  341,250Consumer
      and other
                  
                  
                  223,022
                  
                  
                  
                  159,727Total
      non-accrual loans
                  
                  
                  13,930,838
                  
                  
                  
                  10,110,229Accruing
      loans past due 90 days or more:Residential
      real estate:First
      mortgage
                  
                  
                  4,909,005
                  
                  
                  
                  2,542,770Home
      equity
                  
                  
                  435,579
                  
                  
                  
                  1,467,606Commercial
      and multi-family real estate
                  
                  
                  -
                  
                  
                  
                  230,845Real
      estate construction and development
                  
                  
                  557,435
                  
                  
                  
                  -Consumer
      and other
                  
                  
                  -
                  
                  
                  
                  7,349Total
      accruing loans past due 90 days or more
                  
                  
                  5,902,019
                  
                  
                  
                  4,248,570Troubled-debt
      restructured:Current
      under restructured terms:Residential
      real estate:First
      mortgage
                  
                  
                  9,480,307
                  
                  
                  
                  3,800,747Second
      mortgage
                  
                  
                  1,156,601
                  
                  
                  
                  659,033Home
      equity
                  
                  
                  902,739
                  
                  
                  
                  -Commercial
      and multi-family real estate
                  
                  
                  7,896,715
                  
                  
                  
                  -Commercial
      and industrial
                  
                  
                  1,361,080
                  
                  
                  
                  537,422Total
      current troubled debt restructured
                  
                  
                  20,797,442
                  
                  
                  
                  4,997,202Past
      due under restructured terms:Residential
      real estate:First
      mortgage
                  
                  
                  652,114
                  
                  
                  
                  1,183,967Second
      mortgage
                  
                  
                  11,591
                  
                  
                  
                  11,371Home
      equity
                  
                  
                  55,122
                  
                  
                  
                  112,081Commercial
      and industrial
                  
                  
                  1,020,252
                  
                  
                  
                  -Total
      past due troubled debt restructured
                  
                  
                  1,739,079
                  
                  
                  
                  1,307,419Total
      troubled debt restructured
                  
                  
                  22,536,521
                  
                  
                  
                  6,304,621Total
      non-performing loans
                  
                  
                  42,369,378
                  
                  
                  
                  20,663,420Real
      estate acquired in settlement of loans:Residential
      real estate
                  
                  
                  2,505,831
                  
                  
                  
                  3,518,806Commercial
      real estate
                  
                  
                  103,500
                  
                  
                  
                  -Total
      real estate acquired in settlement of loans
                  
                  
                  2,609,331
                  
                  
                  
                  3,518,806Other
      nonperforming assets
                  
                  
                  91,792
                  
                  
                  
                  236,690Total
      non-performing assets
                  
                  $
                  45,070,501
                  
                  
                  $
                  24,418,916Ratio
      of non-performing loans to total loans receivable
                  
                  
                  3.66
                  %
                  
                  
                  1.88
                  %Ratio
      of non-performing assets to totals assets
                  
                  
                  3.31
                  %
                  
                  
                  1.87
                  %Ratio
      of allowance for loan losses to non-performing loans
                  
                  
                  36.97
                  %
                  
                  
                  61.76
                  %




- 24
-




Non-performing
loans increased $21.7 million during the quarter to $42.4 million at December
31, 2008, primarily as the result of a $16.2 million increase in troubled debt
restructurings.  The increase in troubled debt restructurings was due
to management’s decision to proactively modify loan repayment terms with
borrowers who were experiencing financial difficulties in the current economic
climate with the belief that these actions would maximize the Bank’s recoveries
on these loans.  The restructured terms of the loans generally
included a reduction of the interest rates and, if the underlying collateral
values supported the resulting carrying values of the loans, the addition of
past due interest to the principal balance of the loans.  Many of
these borrowers were current at the time of the modification and showed strong
intent and ability to repay their obligations under the modified
terms.  At December 31, 2008, $20.8 million, or 92%, of the total
restructured loans were performing as agreed under the modified terms of the
loans.




While
these modifications were generally targeted at residential mortgage loan
customers, the Company also restructured a $7.8 million commercial real estate
loan made to a St. Louis-based customer, which was collateralized by a strip
shopping center in Naples, Florida.  The Company’s lending practices
generally limit lending outside of its two primary market areas, St. Louis and
Kansas City.  However, management has had a long, successful
relationship with this borrower.  While the loan had been current
under the previous loan terms and remains current under the restructured terms,
management determined it was necessary to temporarily reduce the interest rate
and defer principal payments while the borrower attempts to secure additional
tenants in the property.  However, after considering the values of the
borrower’s personal guarantees and the underlying collateral, the Company
recorded a $1.2 million provision for loan loss related to this loan during the
December 2008 quarter.




A loan is
classified as a troubled debt restructuring if the Company, for economic or
legal reasons related to the borrower’s financial difficulties, grants a
concession to the borrower that it would not otherwise consider.  A
loan classified as a troubled debt restructuring will retain such classification
until the borrower demonstrates the ability to pay under the terms of the
restructured note through a sustained period of repayment performance, which is
generally one year.  Interest income on restructured loans is accrued
at the reduced rate once the borrower demonstrates the ability to pay under the
terms of the restructured note through a sustained period of repayment
performance, which is generally three months for loans that were less than 30
days past due at the time of restructuring and six months for loans that were 30
days or more past due at the time of restructuring.




Also
contributing to the rise in non-performing assets was a $5.5 million increase in
loans past due 90 days or more.  The balance of such loans at December
31, 2008 included $9.2 million in first mortgage loans past due, $4.1 million in
second mortgage and home equity loans past due and $6.3 million in commercial
loans past due.  Loans are placed on non-accrual status when, in the
opinion of management, there is reasonable doubt as to the collectability of
interest or principal.  Management considers many factors before
placing a loan on non-accrual, including the overall financial condition of the
borrower, the progress of management’s collection efforts and the value of the
underlying collateral.




The ratio
of the allowance for loan losses to loans receivable increased to 1.35% at
December 31, 2008 compared with 1.16% at September 30, 2008 as the result of the
significant increase in the allowance during the quarter.  However,
the ratio of the allowance for loan losses to non-performing loans declined to
36.97% at December 31, 2008 compared with 61.76% at September 30, 2008 as the
result of the significant increase in non-performing
loans.  Management believes the decline in this coverage ratio is
reasonable due to a change in the mix of non-performing loans during the
quarter, specifically increased troubled debt restructurings that were
performing under their restructured terms and residential first mortgage
loans.  At December 31, 2008, 46% of total non-performing loans were
residential first mortgage loans, which carry a lower level of inherent risk
than other types of loans in the Company’s portfolio, especially compared to
second mortgage loans and home equity lines of credit where the Company often
does not own or service the first mortgage loan.




Real
estate acquired in settlement of loans declined to $2.6 million at December 31,
2008 compared with $3.5 million at September 30, 2008.  The balance at
December 31, 2008 consisted of 43 residential real estate properties and one
commercial real estate property in the Company’s two primary market areas of St.
Louis and Kansas City.




- 25
-




The
following table is a summary of the activity in the allowance for loan losses
for the periods indicated:




Three Months EndedDecember31,2008
                        
                        
                        2007Balance,
      beginning of year
                        
                        $
                        12,761,532
                        
                        
                        $
                        10,421,304Provision
      charged to expense
                        
                        
                        4,691,578
                        
                        
                        
                        1,032,551Charge-offs:Residential
      real estate first mortgage
                        
                        
                        667,104
                        
                        
                        
                        101,450Residential
      real estate second mortgage
                        
                        
                        470,859
                        
                        
                        
                        133,782Home
      equity lines of credit
                        
                        
                        610,327
                        
                        
                        
                        127,589Real
      estate construction & development
                        
                        
                        8,303
                        
                        
                        
                        -Commercial
      & industrial
                        
                        
                        23,577
                        
                        
                        
                        -Consumer
      and other
                        
                        
                        43,483
                        
                        
                        
                        47,771Total
      charge-offs
                        
                        
                        1,823,653
                        
                        
                        
                        410,592Recoveries:Residential
      real estate first mortgage
                        
                        
                        1,281
                        
                        
                        
                        -Residential
      real estate second mortgage
                        
                        
                        323
                        
                        
                        
                        -Home
      equity lines of credit
                        
                        
                        12,662
                        
                        
                        
                        106,218Commercial
      and multi-family real estate
                        
                        
                        14,283
                        
                        
                        
                        -Consumer
      and other
                        
                        
                        5,952
                        
                        
                        
                        2,002Total
      recoveries
                        
                        
                        34,501
                        
                        
                        
                        108,220Balance,
      end of year
                        
                        $
                        15,663,958
                        
                        
                        $
                        11,151,483





December 31,
                  
                  
                  September 30,2008
                  
                  
                  2008Specific
      loan loss allowance related to non-performing loans
                  
                  $
                  2,652,713
                  
                  
                  $
                  807,629Balance
      of non-performing loans with no specific loan loss
    allowance
                  
                  
                  27,805,731
                  
                  
                  
                  17,704,652Ratio
      of allowance to total loans outstanding
                  
                  
                  1.35
                  %
                  
                  
                  1.16
                  %




The
provision for loan losses for the three months ended December 31, 2008 was $4.7
million compared with $2.8 million for the quarter ended September 30, 2008 and
$1.0 million for the same quarter a year ago. The provision in the December 2008
quarter included the addition of $1.4 million in specific allowance related to
two loans collateralized by commercial real estate.  The increased
provision was due to the increase in the level of non-performing loans, net
charge-offs and growth in performing commercial loans, which have historically
carried a higher level of inherent risk than residential loans.




Net
charge-offs for the quarter ended December 31, 2008 totaled $1.8 million, or
0.64% of average loans on an annualized basis, compared with $2.0 million, or
0.73% of average loans on an annualized basis, for the quarter ended September
30, 2008 and $302,000, or 0.12% of average loans on an annualized basis, for the
December 2007 quarter.  Management adheres to specific loan
underwriting guidelines focusing primarily on residential and commercial real
estate and home equity loans secured by one- to four-family and commercial
properties within its primary market areas.  Because the Company’s
loan portfolio is typically collateralized by real estate, losses occur more
frequently when property values are declining and borrowers are losing equity in
the underlying collateral.  Recent declines in residential real estate
values in the Company’s market areas, as well as nationally, contributed to the
increased charge-offs in the three months ended December 31,
2008.  The Company has not engaged in sub-prime lending
activities.




The
Company maintains the allowance for loan losses to absorb probable losses in the
Company’s loan portfolio.   Loan losses are charged against and
recoveries are credited to the allowance.  Provisions for loan losses
are charged to income and credited to the allowance in an amount necessary to
maintain an appropriate allowance given risks identified in the
portfolio.  The allowance is based upon management’s quarterly
estimates of probable losses inherent in the loan
portfolio.  Management’s estimates are determined through a method of
quantifying certain risks in the portfolio that are affected primarily by
changes in the nature and volume of the portfolio combined with an analysis of
past-due and classified loans, and can also be affected by the following
factors:  changes in lending policies and procedures, including
underwriting standards and collections, charge-off and recovery practices,
changes in national and local economic conditions and developments, assessment
of collateral values based on independent appraisals, and changes in the
experience, ability, and depth of lending management staff.




- 26
-




The
following assessments are performed quarterly in accordance with the Company’s
allowance for loan losses methodology:




Homogeneous
residential mortgage loans are given one of five standard risk ratings at the
time of origination.  The risk ratings are assigned through the use of
a credit scoring model, which assesses credit risk determinants from the
borrower’s credit history, the loan-to-value, debt-to-income ratios or other
personal history.  The Company’s historical loss rates and industry
data for each credit rating, adjusted as described below, are used to determine
the appropriate allocation percentage for each loan grade.  Commercial
real estate, consumer and home equity loans are assigned standard risk
weightings that determine the allocation percentage.




When
commercial real estate loans are over 30 days delinquent or residential,
consumer and home equity loans are over 90 days past due, they are evaluated
individually for impairment.  Additionally, loans that demonstrate
credit weaknesses that may impact the borrower’s ability to repay or the value
of the collateral are also reviewed individually for impairment.  The
Company considers a loan to be impaired when management believes it will be
unable to collect all principal and interest due according to the contractual
terms of the loan.  If a loan is determined to be impaired, the
Company establishes an allowance for loan losses equal to the excess of the
loan’s carrying value over the present value of estimated future cash flows or
the fair value of collateral if the loan is collateral dependent.




The
Company’s methodology includes factors that allow the Company to adjust its
estimates of losses based on the most recent information
available.  Historical loss rates used to determine allowance
provisions are adjusted to reflect the impact of current conditions, including
actual collection and charge-off experience. In addition, various regulatory
agencies, as an integral part of their examination process, periodically review
the allowance for loan losses.  Such agencies may require the Company
to modify its allowance for loan losses based on their judgment about
information available to them at the time of their examination.




Management
believes that the amount maintained in the allowance will be adequate to absorb
probable losses inherent in the portfolio.  Although management
believes that it uses the best information available to make such
determinations, future adjustments to the allowance for loan losses may be
necessary and results of operations could be significantly and adversely
affected if circumstances differ substantially from the assumptions used in
making the determinations.  While management believes it has
established the allowance for loan losses in accordance with U.S. generally
accepted accounting principles, there can be no assurance that the Bank’s
regulators, in reviewing the Bank’s loan portfolio, will not request the Bank to
significantly increase its allowance for loan losses.  In addition,
because future events affecting borrowers and collateral cannot be predicted
with certainty, there can be no assurance that the existing allowance for loan
losses is adequate or that a substantial increase will not be necessary should
the quality of any loans deteriorate as a result of the factors discussed
above.  Any material increase in the allowance for loan losses could
adversely affect the Company’s financial condition and results of
operations.




FINANCIAL
CONDITION




Cash and cash
equivalentsdecreased $5.2 million to $23.9 million at December 31, 2008
from $29.1 million at September 30, 2008.  Cash balances included
overnight investments in federal funds of $1.1 million at December 31, 2008
compared with $647,000 at September 30, 2008.




Debt securities
available for sale increased to $4.0 million at December 31, 2008
compared with $0 at September 30, 2008.  Mortgage-backed
securities available for sale increased to $11.9 million at December 31,
2008 from $10.2 million at September 30, 2008, while mortgage-backed
securities held to maturity decreased to $15.1 million at December 31,
2008 from $15.7 million at September 30, 2008.  Such securities are
primarily held as collateral to secure large commercial and municipal
deposits.  The total balance held in these securities is adjusted as
individual securities mature to reflect fluctuations in the balances of the
deposits they are securing.




- 27
-




Stock in the
Federal Home Loan Bank of Des Moinesdecreased $1.0 million to $9.9
million at December 31, 2008 from $10.9 million at September 30,
2008.  The decrease was the result of the decrease in the amount of
FHLB borrowings during the quarter as the Bank is generally required to hold
stock equal to 5% of its total FHLB borrowings.




Prepaid expenses,
accounts receivable and other assetsincreased $1.4 million to $9.2
million at December 31, 2008 from $7.9 million at September 30,
2008.  The increase was primarily the result of an increase in the
fair value of an interest-rate swap agreement with a notional value of $14
million.  SeeQuantitative and Qualitative Disclosures about Market Risk.




Advance payments
by borrowers for taxes and insurance decreased $1.9 million to $1.8
million at December 31, 2008 from $3.7 million at September 30,
2008.  The decrease was due to the payment by the Bank of borrowers’
real estate taxes prior to their due date on December 31, 2008.




Due to otherbanks
decreased from $14.4 million at September 30, 2008 to $0 million at December 31,
2008.  Due to other banks represents checks drawn on a correspondent
bank’s checking account.  On a daily basis, the Company settles with
the correspondent bank.  The balance at September 30, 2008 primarily
represented the checks issued to fund loans on the final business day of the
month.  Subsequent to September 30, 2008, the Company began to perform
this clearing process internally, resulting in the decrease in the
liability.




Total
stockholders’ equity at December 31, 2008 was $82.5 million, an increase
of $92,000 from $82.4 million at September 30, 2008.  The
increase was primarily attributable to net income totaling $566,000, common
stock issued under the Company’s dividend reinvestment plan totaling $163,000,
the amortization of equity trust expense of $164,000 and an increase in
accumulated other comprehensive income of $112,000, partially offset by dividend
payments of $973,000.




RECENT
DEVELOPMENTS




On
January 16, 2009, as part of the U.S. Department of Treasury’s Capital Purchase
Program, the Company issued 32,538 shares of Fixed Rate Cumulative Perpetual
Preferred Stock, Series A, $1,000 per share liquidation preference, and a
warrant to purchase up to 778,421 shares of the Company’s common stock at an
exercise price of $6.27 per share in exchange for $32.5 million in cash from the
U.S. Department of Treasury.  The preferred stock pays cumulative
dividends of 5% per year for the first five years and 9% per year
thereafter.  After three years, the Company may, at its option, redeem
the preferred stock at its liquidation preference plus accrued and unpaid
dividends.  Proceeds from the sale of the preferred stock that are
injected into the Bank will qualify as Tier 1 capital.  The securities
purchase agreement between the Company and the U.S. Treasury limits the rate of
dividend payments on the Company’s common stock to the amount of its last
quarterly cash dividend of $0.095 per share for three years unless an increase
is approved by the Treasury, limits the Company’s ability to repurchase its
common stock for three years, and subjects the Company to certain executive
compensation limitations included in the Emergency Economic Stabilization Act of
2008.




In
addition, the Bank elected to participate in the FDIC’s Transaction Account
Guarantee Program.  This program provides full FDIC insurance coverage
for non interest-bearing transaction accounts and qualifying NOW accounts,
regardless of the dollar amount, and is in addition to the standard FDIC
insurance that was temporarily increased to $250,000 per
depositor.  Both FDIC limits will be in effect through December 31,
2009.




LIQUIDITY
AND CAPITAL RESOURCES




At
December 31, 2008, the Bank had outstanding commitments to originate loans
totaling $149.1 million and commitments to sell loans totaling $181.7
million.  Certificates of deposit totaling $446.1 million at December
31, 2008 were scheduled to mature in one year or less.  Based on past
experience, management believes the majority of certificates of deposit maturing
in one year or less will remain with the Bank.




If the
Bank or the Company require funds beyond their ability to generate them
internally, the Bank has the ability to borrow funds from the FHLB and the
Federal Reserve Bank and to raise certificates of deposit on a national level
through broker relationships.  The borrowings from the FHLB are
obtained under a blanket agreement, which assigns all investments in FHLB stock,
qualifying first residential mortgage loans, residential loans held for sale and
home equity loans with a 90% or less loan-to-value ratio as collateral to secure
the amounts borrowed.  Total borrowings from the FHLB are subject to
limitations based upon a risk assessment of the Bank.  At December 31,
2008, the Bank had approximately $201.6 million in additional borrowing
authority under the arrangement with the FHLB in addition to the $96.4 million
in advances outstanding at that date.




- 28
-




The
borrowings from the Federal Reserve Bank consist of short-term borrowings
(generally maturing overnight or within 28 days) borrowed under the Bank’s
primary credit line at the Federal Reserve’s Discount Window.  The
Bank had approximately $13.8 million in additional borrowing authority at
December 31, 2008 under this arrangement in addition to the $143.0 million in
borrowings outstanding at that date and had approximately $209.0 million of
commercial loans pledged as collateral under this agreement.




SOURCES
AND USES OF CASH




The
Company is a large originator of residential mortgage loans with substantially
all of such loans sold in the secondary residential mortgage
market.  Consequently, the primary source
and use of cash in operations is the origination and subsequent sale of
loans held for sale.  During the three months ended December 31, 2008,
the origination of loans held for sale used $262.8 million of cash and the sales
of such loans provided cash totaling $256.8 million compared with originations
and sales totaling $313.0 million and $285.0 million, respectively, during the
three months ended December 31, 2007.




The
primary use of cash frominvesting
activities is the origination of loans receivable which are held in
portfolio.  During the three months ended December 31, 2008, the
Company had a net increase in loans receivable of $59.1 million compared with an
increase of $78.9 million for the three months ended December 31,
2007.  In addition, the Company purchased $54.7 million in debt
securities during the three months ended December 31, 2008 compared with
purchases of $24.0 million in debt securities and $6.5 million in equity
securities during the three months ended December 31, 2007.  Sources
of cash from investing activities also included sales of debt securities
totaling $51.1 million, during the three months ended December 31, 2008
compared with sales and maturities of debt securities totaling $5.2 million and
$15.0 million, respectively, during the three months ended December 31,
2007.




The
Company’s primary sources and uses of funds from financing
activities during the three months ended December 31, 2008 included a
$86.6 million increase in deposits compared with a $33.5 million increase
for the three months ended December 31, 2007, a $103.0 million increase in
borrowings from the Federal Reserve Bank for the three months ended December 31,
2008 compared with no increase during the same period last year, and a $114.2
million decrease in advances from the Federal Home Loan Bank compared with a
$93.9 million increase during the same period last year.




The
following table presents the maturity structure of time deposits and other
maturing liabilities at December 31, 2008:




December 31, 2008Certificates
                                          
                                          
                                          FHLB
                                          
                                          
                                          Federal Reserve
                                          
                                          
                                          Note
                                          
                                          
                                          Subordinatedof Deposit
                                          
                                          
                                          Borrowings
                                          
                                          
                                          Borrowings
                                          
                                          
                                          Payable
                                          
                                          
                                          Debentures(In thousands)Maturing
      in:Three
      months or less
                                          
                                          $
                                          179,475
                                          
                                          
                                          $
                                          10,300
                                          
                                          
                                          $
                                          143,000
                                          
                                          
                                          $
                                          7,640
                                          
                                          
                                          $
                                          -Over
      three months through six months
                                          
                                          
                                          146,425
                                          
                                          
                                          
                                          20,000
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -Over
      six months through twelve months
                                          
                                          
                                          120,154
                                          
                                          
                                          
                                          5,100
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -Over
      twelve months
                                          
                                          
                                          89,990
                                          
                                          
                                          
                                          61,000
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          19,589Total
                                          
                                          $
                                          536,044
                                          
                                          
                                          $
                                          96,400
                                          
                                          
                                          $
                                          143,000
                                          
                                          
                                          $
                                          7,640
                                          
                                          
                                          $
                                          19,589




CONTRACTUAL
OBLIGATIONS




In
addition to its owned banking facilities, the Company has entered into long-term
operating leases to support ongoing activities.  The required payments
under such commitments at December 31, 2008 are as follows:


- 29
-




Less
      than one year
                      
                      $
                      595,356Over
      1 year through 3 years
                      
                      
                      1,042,320Over
      3 years through 5 years
                      
                      
                      946,219Over
      5 years
                      
                      
                      1,384,537Total
                      
                      $
                      3,968,432




REGULATORY
CAPITAL




The Bank
is required to maintain specific amounts of capital pursuant to Office of Thrift
Supervision (“OTS”) regulations on minimum capital standards.  The
OTS’ minimum capital standards generally require the maintenance of regulatory
capital sufficient to meet each of three tests, hereinafter described as the
tangible capital requirement, the Tier I (core) capital requirement and the
risk-based capital requirement.  The tangible capital requirement
provides for minimum tangible capital (defined as stockholders’ equity less all
intangible assets) equal to 1.5% of adjusted total assets.  The Tier I
capital requirement provides for minimum core capital (tangible capital plus
certain forms of supervisory goodwill and other qualifying intangible assets)
equal to 4.0% of adjusted total assets.  The risk-based capital
requirement provides for the maintenance of core capital plus a portion of
unallocated loss allowances equal to 8.0% of risk-weighted assets.  In
computing risk-weighted assets, the Bank multiplies the value of each asset on
its balance sheet by a defined risk-weighting factor (e.g., one-to four-family
conventional residential loans carry a risk-weighting factor of
50%).




The
following table illustrates the Bank’s actual regulatory capital levels compared
with its regulatory capital requirements at December 31, 2008 and September 30,
2008.




Regulatory Capital RequirementsTo be Categorized as"Well Capitalized"Under PromptFor Capital
                                                
                                                
                                                Corrective ActionActual
                                                
                                                
                                                Adequacy Purposes
                                                
                                                
                                                ProvisionsAmount
                                                
                                                
                                                Ratio
                                                
                                                
                                                Amount
                                                
                                                
                                                Ratio
                                                
                                                
                                                Amount
                                                
                                                
                                                Ratio(Dollars in thousands)As
      of December 31, 2008:Tangible
      capital (to total assets)
                                                
                                                $
                                                103,854
                                                
                                                
                                                
                                                7.65
                                                %
                                                
                                                $
                                                20,357
                                                
                                                
                                                
                                                1.50
                                                %
                                                
                                                
                                                N/A
                                                
                                                
                                                
                                                N/ATotal
      risk-based capital (to risk- weighted assets)
                                                
                                                
                                                116,865
                                                
                                                
                                                
                                                10.26
                                                
                                                
                                                
                                                91,092
                                                
                                                
                                                
                                                8.00
                                                
                                                
                                                $
                                                113,865
                                                
                                                
                                                
                                                10.00
                                                %Tier
      I risk-based capital (to risk- weighted assets)
                                                
                                                
                                                103,854
                                                
                                                
                                                
                                                9.12
                                                
                                                
                                                
                                                N/A
                                                
                                                
                                                
                                                N/A
                                                
                                                
                                                
                                                68,319
                                                
                                                
                                                
                                                6.00Tier
      I leverage capital (to average assets)
                                                
                                                
                                                103,854
                                                
                                                
                                                
                                                7.65
                                                
                                                
                                                
                                                54,284
                                                
                                                
                                                
                                                4.00
                                                
                                                
                                                
                                                67,855
                                                
                                                
                                                
                                                5.00As
      of September 30, 2008:Tangible
      capital (to total assets)
                                                
                                                $
                                                102,884
                                                
                                                
                                                
                                                7.93
                                                %
                                                
                                                $
                                                19,471
                                                
                                                
                                                
                                                1.50
                                                %
                                                
                                                
                                                N/A
                                                
                                                
                                                
                                                N/ATotal
      risk-based capital (to risk- weighted assets)
                                                
                                                
                                                114,838
                                                
                                                
                                                
                                                10.59
                                                
                                                
                                                
                                                86,769
                                                
                                                
                                                
                                                8.00
                                                
                                                
                                                $
                                                108,462
                                                
                                                
                                                
                                                10.00
                                                %Tier
      I risk-based capital (to risk- weighted assets)
                                                
                                                
                                                102,884
                                                
                                                
                                                
                                                9.49
                                                
                                                
                                                
                                                N/A
                                                
                                                
                                                
                                                N/A
                                                
                                                
                                                
                                                65,077
                                                
                                                
                                                
                                                6.00Tier
      I leverage capital (to average assets)
                                                
                                                
                                                102,884
                                                
                                                
                                                
                                                7.93
                                                
                                                
                                                
                                                51,923
                                                
                                                
                                                
                                                4.00
                                                
                                                
                                                
                                                64,904
                                                
                                                
                                                
                                                5.00




EFFECTS
OF INFLATION




Changes
in interest rates may have a significant impact on a bank’s performance because
virtually all assets and liabilities of banks are monetary in
nature.  Interest rates do not necessarily move in the same direction
or in the same magnitude as the prices of goods and
services.  Inflation does have an impact on the growth of total assets
in the banking industry, often resulting in a need to increase equity capital at
higher than normal rates to maintain an appropriate equity to asset
ratio.  The Company’s operations are not currently impacted by
inflation.


- 30
-


QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


AND
OFF-BALANCE SHEET ARRANGEMENTS




There
have been no material changes in the Company's quantitative or qualitative
aspects of market risk during the quarter ended December 31, 2008 from that
disclosed in the Company's Annual Report on Form 10-K for the year ended
September 30, 2008.




In the
normal course of operations, the Company engages in a variety of financial
transactions that, in accordance with generally accepted accounting principles,
are not recorded in its financial statements. These transactions involve, to
varying degrees, elements of credit, interest rate and liquidity
risk.  Such transactions are used primarily to manage customers’
requests for funding and take the form of loan commitments and lines of
credit.  Additionally, the Company engages in certain hedging
activities, which are described in greater detail below.





For the
three months ended December 31, 2008, the Company did not engage in any
off-balance-sheet transactions reasonably likely to have a material effect on
its financial condition, results of operations or cash flows.





The
Company originates and purchases derivative financial instruments, including
interest rate lock commitments, forward contracts to sell mortgage-backed
securities and interest rate swaps.  Derivative financial instruments
originated by the Company consist of interest rate lock commitments to originate
residential loans.  Commitments to originate loans consist primarily
of residential real estate loans.  At December 31, 2008, the Company
had issued $149.1 million of unexpired interest rate lock commitments to loan
customers compared with $137.4 million of unexpired commitments at
September 30, 2008.





The Company entered into two $14
million notional value interest-rate swap contracts during
2008.  These contracts supported a $14 million, variable-rate,
commercial loan relationship and were used to allow the commercial loan customer
to pay a fixed interest rate to the Bank, while the Bank, in turn, charged the
customer a floating interest rate on the loan.  Under the terms of the
swap contract between the Bank and the loan customer, the customer pays the Bank
a fixed interest rate of 6.58%, while the Bank pays the customer a variable
interest rate of one-month LIBOR plus 2.30%.  Under the terms of a
similar but separate swap contract between the Bank and a major securities
broker, the Bank pays the broker a fixed interest rate of 6.58%, while the
broker pays the Bank a variable interest rate of one-month LIBOR plus
2.30%.  The two contracts have identical terms except for the interest
rates and interest does not begin to accrue until May 2009.  The
contracts are scheduled to mature on May 15, 2015.  While these two
swap derivatives generally work together as an interest-rate hedge, the Company
has not designated them for hedge treatment underSFAS No. 133.  Consequently, both
derivatives are marked to fair value through either a charge or credit to
current earnings, the net effect of which offset one another during the quarter
ended December 31, 2008.  The fair values of these derivative
instruments recorded in other assets and other liabilities in the Company’s
financial statements at December 31, 2008 and September 30, 2008 were $1.5
million and $70,000, respectively.




CONTROLS
AND PROCEDURES




Pulaski
Financial maintains “disclosure controls and procedures” as such term is defined
in Rule 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of
1934, as amended (the “Exchange Act”), that are designed to ensure that the
information required to be disclosed in the reports that Pulaski Financial files
or submits under the Exchange Act with the Securities and Exchange Commission
(the “SEC”) (1) is recorded, processed, summarized and reported within the time
periods specified in the SEC’s rules and forms, and (2) is accumulated and
communicated to Pulaski Financial’s management including its principal executive
and principal financial officers as appropriate to allow timely decisions
regarding required disclosure.




During
the quarter ended December 31, 2008, Pulaski Financial’s management, including
Pulaski Financial’s principal executive officer and principal financial officer,
evaluated the effectiveness of Pulaski Financial’s disclosure controls and
procedures as of December 31, 2008, and concluded that Pulaski Financial’s
disclosure controls and procedures were effective as of such date.





There
have been no changes in the Company’s internal control over financial reporting
during the quarter ended December  31, 2008 that have materially
affected, or are reasonably likely to materially affect, the Company’s internal
control over financial reporting.




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IMPACT
OF RECENTLY ISSUED ACCOUNTING STANDARDS




In
September 2006, the Financial Accounting Standards Board issued Statement No.
157, “Fair Value Measurements” (“SFAS No. 157”), which defines fair value,
establishes a framework for measuring fair value in generally accepted
accounting standards, and expands disclosures about fair value measurements.
SFAS No. 157 was effective for the Company beginning October 1,
2008.  In March 2008, the FASB issued Staff Position No. FAS 157-2
(“FSP No. 157-2”), which delays the effective date of SFAS No. 157 for
non-financial assets and liabilities, except for items that are recognized or
disclosed at fair value in the financial statements on a recurring basis (at
least annually), to the Company’s fiscal year beginning October 1,
2009.  The adoption of SFAS No. 157 did not have a material effect on
the Company’s financial condition or results of operations.





In
September 2006, the FASB issued Statement No. 158, “Employer’s Accounting for
Defined Benefit Pension and Other Postretirement Plans” (“SFAS No. 158”), which
requires balance sheet recognition of the funded status of pension and other
postretirement benefits with the offset to accumulated other comprehensive
income. Employers will recognize actuarial gains and losses, prior service cost,
and any remaining transition amounts when recognizing a plan’s funded status.
SFAS No. 158 was effective for the Company beginning October 1,
2007.  The adoption of SFAS No. 158 did not have a material effect on
the Company’s financial condition or results of operations.





In
February 2007, the FASB issued Statement No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities - Including an amendment of FASB
Statement No. 115” (“SFAS No. 159”).  SFAS No. 159 provides companies
with an option to report selected financial assets and liabilities at estimated
fair value. Most of the provisions of SFAS No. 159 are elective; however, the
amendment to SFAS No. 115, “Accounting for Certain Investments in Debt and
Equity Securities,” applies to all entities that own trading and
available-for-sale securities.  The fair value option created by SFAS
No. 159 permits an entity to measure eligible items at fair value as of
specified election dates.  The fair value option (a) may generally be
applied instrument by instrument, (b) is irrevocable unless a new election date
occurs, and (c) must be applied to the entire instrument and not to only a
portion of the instrument.  SFAS No. 159 was effective for the Company
beginning October 1, 2008.  The adoption of SFAS No. 159 did not have
a material effect on the Company’s financial condition or results of
operations.





In
December 2007, the FASB issued Statement No. 141 (revised 2007), “Business
Combinations - A Replacement of FASB Statement No. 141” (“SFAS 141(R)”) and
Statement No. 160, “Noncontrolling Interests in Consolidated Financial
Statements - An Amendment of ARB No. 51” (“SFAS 160”).  SFAS 141(R)
establishes principles and requirements for how an acquirer recognizes and
measures certain items in a business combination, as well as disclosures about
the nature and financial effects of a business combination.  SFAS 160
establishes accounting and reporting standards surrounding noncontrolling
interests, or minority interests, which are the portions of equity in a
subsidiary not attributable, directly or indirectly, to a parent.  The
pronouncements are effective for fiscal years beginning on or after December 15,
2008 and apply prospectively to business combinations.  Presentation
and disclosure requirements related to noncontrolling interests must be
retrospectively applied.  Management is currently evaluating the
impact of SFAS 141(R) on its accounting for future acquisitions and the impact
of SFAS 160 on the Company’s consolidated financial statements.





In March
2008, the FASB issued Statement No. 161, “Disclosures about Derivative
Instruments and Hedging Activities - An Amendment of FASB Statement No. 133”
(“SFAS 161”). SFAS 161 requires enhanced qualitative disclosures about
objectives and strategies for using derivatives, quantitative disclosures about
fair value amounts of and gains and losses on derivative instruments, and
disclosures about credit-risk-related contingent features in derivative
agreements.  SFAS 161 is effective for financial statements issued for
fiscal years and interim periods beginning after November 15,
2008.  Management has evaluated the requirements of SFAS 161 and
believes it will not have a material effect on the Company’s financial condition
or results of operations.





In
September 2006, the Emerging Issues Task Force Issue 06-4, “Accounting for
Deferred Compensation and Postretirement Benefit Aspects of Endorsement
Split-Dollar Life Insurance Arrangements,” was ratified.  This EITF
Issue addresses accounting for separate agreements that split life insurance
policy benefits between an employer and employee.  The Issue requires
the employer to recognize a liability for future benefits payable to the
employee under these agreements.  The effects of applying this Issue
must be recognized through either a change in accounting principle through an
adjustment to equity or through the retrospective application to all prior
periods.   The consensus in this Issue is effective for fiscal
years beginning after December 15, 2007, with earlier application
permitted.  Management has evaluated the requirements of the Issue and
believes it will not have a material effect on the Company’s financial condition
or results of operations.


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In
November 2007, the Securities and Exchange Commission staff issued Staff
Accounting Bulletin No. 109, “Written Loan Commitments Recorded at Fair Value
through Earnings” (“SAB No. 109”).  SAB No. 109 provides revised
guidance on the valuation of written loan commitments accounted for at fair
value through earnings.  Former guidance under SAB No. 105,
“Application of Accounting Principles to Loan Commitments,” indicated that the
expected net future cash flows related to the associated servicing of the loan
should not be incorporated into the measurement of the fair value of a
derivative loan commitment.  The new guidance under SAB No. 109
requires these cash flows to be included in the fair value
measurement.  The SAB requires this view to be applied on a
prospective basis to derivative loan commitments issued or modified in the first
quarter of 2008.  The Company’s application of SAB No. 109 in 2008 did
not have a material effect on its consolidated financial
statements.





PART
II - OTHER INFORMATION




Item
      1.
            Legal
      Proceedings:




Periodically,
there have been various claims and lawsuits involving the Bank, such as claims
to enforce liens, condemnation proceedings on properties in which the Bank holds
security interests, claims involving the making and servicing of real property
loans and other issues incident to the Bank’s business.  Neither the
Bank nor the Company is a party to any pending legal proceedings that it
believes would have a material adverse effect on the financial condition or
operations of the Company.




Item
      1A.
              Risk
      Factors:




In
      addition to the other information set forth in this report, you should
      carefully consider the factors discussed in Part I, “Item 1A. Risk
      Factors” in our Annual Report on Form 10-K for the year ended September
      30, 2008, which could materially affect our business, financial condition
      or future results. The risks described in our Annual Report on Form 10-K
      are not the only risks that we face. Additional risks and uncertainties
      not currently known to us or that we currently deem to be immaterial also
      may materially adversely affect our business, financial condition and/or
      operating results.




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-


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




The
following table provides information regarding the Company’s purchases of its
equity securities during the three months ended December 31, 2008.




ISSUER PURCHASES OF EQUITY SECURITIES





Period
                                    
                                    (a)
                                      Total
                                      Number
                                      of Shares
                                      (or Units)
                                      Purchased
                                    
                                    
                                    (b)
                                      Average
                                      Price
                                      Paid per
                                      Share
                                      (or Unit)
                                    
                                    
                                    (c)
                                      Total Number of
                                      Shares (or Units)
                                      Purchased as
                                      Part of Publicly
                                      Announced Plans
                                      or Programs
                                    
                                    
                                    (d)
                                      Maximum Number
                                      (or Approximate
                                      Dollar Value) of
                                      Shares (or Units)
                                      That May Yet Be
                                      Purchased Under the
                                      Plans or Programs (1)October
      1, 2008 through October 31, 2008
                                    
                                    
                                    3,447
                                    
                                    
                                    $
                                    8.18
                                    
                                    
                                    
                                    3,447
                                    
                                    
                                    
                                    380,619November
      1, 2008 through November 30, 2008
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    380,619December
      1, 2008 through December 31, 2008
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    380,619Total
                                    
                                    
                                    3,447
                                    
                                    
                                    $
                                    8.18
                                    
                                    
                                    
                                    3,447





(1)
            In
      February 2007, the Company announced a repurchase program under which it
      would repurchase up to 497,000 shares of the Company’s common stock. The
      repurchase program will continue until it is completed or terminated by
      the Board of Directors.  However, as part of the Company’s
      participation in the Capital Repurchase Program of the U.S. Department of
      Treasury’s Troubled Asset Repurchase Program, prior to the earlier of
      January 16, 2012 or the date on which the preferred stock issued in that
      transaction has been redeemed in full or the Treasury has transferred its
      shares to non-affiliates, the Company cannot increase its quarterly cash
      dividend above $0.095 per share or repurchase any shares of its common
      stock, without the prior approval of the
  Treasury.




Item
      3.
            Defaults
      Upon Senior Securities: Not
applicable




Item
      4.
            Submission
      of Matters to a Vote of Security Holders:
None




Item
      5.
            Other
      Information: Not applicable




Item
      6.
            Exhibits:




3.1
              Articles
      of Incorporation of Pulaski Financial Corp. (1)




3.2
                Certificate
      of Amendment to Articles of Incorporation of Pulaski Financial Corp. (2)




3.3
                      Certificate
      of Designations establishing Fixed Rate Cumulative Perpetual Preferred
      Stock, Series A, of Pulaski Financial Corp. (3)




3.4
                Bylaws
      of Pulaski Financial Corp.(4)




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-


4.1
              Form
      of Certificate for Common Stock(5)




4.2
              Form
      of stock certificate for Fixed Rate Cumulative Perpetual Preferred Stock,
      Series A(3)




4.3
              Warrant
      to Purchase 778,421 Shares of Common Stock of Pulaski Financial
      Corp.(3)




31.1
            Rule
      13a-14(a)/15d-14(a) Certification of Chief Executive
    Officer




31.2
            Rule
      13a-14(a)/15d-14(a) Certification of the Chief Financial
      Officer




32.1
            Section
      1350 Certification of Chief Executive
Officer




32.2
            Section
      1350 Certification of Chief Financial
Officer







(1)
                Incorporated
      by reference into this document from the Exhibits to the 2003 proxy
      statement as filed with the Securities and Exchange Commission on December
      27, 2002.
  (2)
                Incorporated
      by reference into this document from the Form 10-Q, as filed with the
      Securities and Exchange Commission on February 17,
  2004.
  (3)
                Incorporated
      herein by reference into this document from the Form 8-K, as filed with
      the Securities and Exchange Commission on January 16,
  2009.
  (4)
                Incorporated
      herein by reference from the Form 8-K, as filed with the Securities and
      Exchange Commission on December 21,
2007.


(5)
              Incorporated
      by reference from the Form S-1 (Registration No. 333-56465), as amended,
      as filed with the Securities and Exchange Commission on June 9,
      1998.


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SIGNATURES




Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.




PULASKI
      FINANCIAL CORP.Date: February 6,
      2009
                  /s/Gary W. DouglassGary
      W. DouglassPresident
      and Chief Executive OfficerDate:
      February 6,
      2009
                  /s/Ramsey K. HamadiRamsey
      K. HamadiChief
      Financial
Officer


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