**United
      States**


**Securities
      and Exchange Commission**


**Washington,
      D.C. 20549**





**FORM**  **10-KSB**





**x**
            **ANNUAL
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934**





For
      the
      fiscal year ended June 30, 2007





**o**
            **TRANSITION
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934**





For
      the
      transition period from _________ to __________





Commission
      File Number: 0-51514





**EQUITABLE
      FINANCIAL CORP.**


(Name
      of
      small business issuer in its charter)


**United
                  States**
              
              **14-1941649**(State
                  or other jurisdiction of incorporation or organization)
              
              (I.R.S.
                  Employer Identification No.)**113-115
                  North Locust Street, Grand Island,
                  Nebraska**
              
              **68801**(Address
                  of principal executive offices)
              
              (Zip
                  Code)





Issuer’s
      telephone number: (308) 382-3136


Securities
      registered under Section 12(b) of the Exchange Act: None


Securities
      registered under Section 12(g) of the Exchange Act:





**Common
      Stock, par value $0.01 per share**


(Title
      of
      class)





Check
      whether the issuer is not required to file reports pursuant to Section 13 or
      15(d) of the Exchange Act. o





Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past 12 months (or for such shorter period
      that the registrant was required to file such reports), and (2) has been subject
      to such filing requirements for the past 90 days. Yes x No
o





Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B contained in this form, and no disclosure will be contained,
      to
      the best of the registrant’s knowledge, in definitive proxy or information
      statements incorporated by reference in Part III of the Form 10-KSB or any
      amendment to this Form 10-KSB. ****x





Indicate
      by check mark if the registrant is a shell company (as defined in Rule 12b-2
      of
      the Exchange Act).


Yes
o No
      x





The
      issuer’s revenues for its most recent fiscal year were $11,844,036.





The
      aggregate market value of the voting and non-voting common equity held by
      non-affiliates at September 17, 2007 was $12.5 million, based upon the closing
      price of $9.59 as quoted on the OTC Electronic Bulletin Board for September
      17,
      2007. Solely for purposes of this calculation, the shares held by Equitable
      Financial MHC and the directors and executive officers of the issuer are deemed
      to be held by affiliates.





As
      of
      September 17, 2007, the issuer had 3,297,509 shares of common stock
      outstanding.





DOCUMENTS
      INCORPORATED BY REFERENCE:





Portions
      of the Proxy Statement for the 2007 Annual Meeting of Stockholders are
      incorporated by reference in Part III of this Form 10-KSB.





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





**INDEX**


**Page****PART
                  I**Item
                  1.
              
              Description
                  of Business
              
              1Item
                  2.
              
              Description
                  of Property
              
              23Item
                  3.
              
              Legal
                  Proceedings
              
              24Item
                  4.
              
              Submission
                  of Matters to a Vote of Security Holders
              
              24**PART
                  II**Item
                  5.
              
              Market
                  for Common Equity, Related Stockholder Matters and Small Business
                  Issuer
                  Purchases of Equity Securities
              
              25Item
                  6.
              
              Management’s
                  Discussion and Analysis or Plan of Operation
              
              25Item
                  7.
              
              Financial
                  Statements
              
              47Item
                  8.
              
              Changes
                  In and Disagreements With Accountants on Accounting and Financial
                  Disclosure
              
              48Item
                  8A.
              
              Controls
                  and Procedures
              
              48Item
                  8B.
              
              Other
                  Information
              
              49**PART
                  III**Item
                  9.
              
              Directors,
                    Executive Officers, Promoters, Control Persons and Corporate
                    Governance;Compliance
                    with Section 16(a) of the Exchange Act
              
              49Item
                  10.
              
              Executive
                  Compensation
              
              50Item
                  11.
              
              Security
                  Ownership of Certain Beneficial Owners and Management and Related
                  Stockholder Matters
              
              50Item
                  12.
              
              Certain
                  Relationships and Related Transactions, and Director
                  Independence
              
              51Item
                  13.
              
              Exhibits
              
              51Item
                  14.
              
              Principal
                  Accountant Fees and Services
              
              52**SIGNATURES**




i


*This
      report contains certain “forward-looking statements” within the meaning of the
      federal securities laws that are based on assumptions and may describe future
      plans, strategies and expectations of Equitable Financial Corp., Equitable
      Financial MHC and Equitable Bank. These forward-looking statements are generally
      identified by terms such as “expects,” “believes,” “anticipates,” “intends,”
“estimates,” “projects” and similar expressions.*





*Management’s
      ability to predict results or the actual effect of future plans or strategies
      is
      inherently uncertain. Factors which could have a material adverse effect on
      the
      operations of Equitable Financial and its subsidiaries include, but are not
      limited to, the following: interest rate trends; the general economic climate
      in
      the market area in which we operate, as well as nationwide; our ability to
      control costs and expenses; competitive products and pricing; loan delinquency
      rates and changes in federal and state legislation and regulation. These risks
      and uncertainties should be considered in evaluating the forward-looking
      statements and undue reliance should not be placed on such statements. We assume
      no obligation to update any forward-looking statements.*





**PART
      I**




**ITEM
      1.**  **DESCRIPTION
      OF BUSINESS**





**General**




Equitable
      Financial Corp. (the “Company” or “Equitable Financial”) was organized as a
      federal corporation at the direction of Equitable Bank (the “Bank” or “Equitable
      Bank”) in connection with its mutual holding company reorganization. The
      reorganization was completed on November 8, 2005. In the reorganization,
      Equitable Financial sold 1,421,226 shares of its common stock to the public,
      contributed 62,653 shares of its common stock plus $100,000 in cash to the
      Equitable Bank Charitable Foundation and issued 1,813,630 shares of its common
      stock to Equitable Financial MHC, the mutual holding company of the Bank. In
      addition, a contribution of $100,000 was made to capitalize Equitable Financial
      MHC. In connection with the reorganization, the Bank changed its name to
      Equitable Bank from Equitable Savings Bank of Grand Island. Costs incurred
      in
      connection with the common stock offering (approximately $1.2 million) were
      recorded as a reduction of the proceeds from the offering. Net proceeds from
      the
      common stock offering amounted to approximately $13.0 million.





The
      Company is headquartered in Grand Island, Nebraska and is a community-oriented
      financial institution dedicated to serving the financial services needs of
      consumers and businesses within our market areas, including North Platte and
      Omaha. The Bank is engaged primarily in the business of attracting deposits
      from
      the general public and using such funds to originate commercial (including
      agriculture), consumer, one-to four family residential, multi-family and
      non-residential real estate and construction loans.





The
      Federal Deposit Insurance Corporation (the “FDIC”), through the Deposit
      Insurance Fund, insures the Bank’s savings accounts up to the applicable legal
      limits. The Bank is a member of the Federal Home Loan Bank System.





**Market
      Area**




We
      are
      headquartered in Grand Island, Nebraska in Hall County. In addition to our
      main
      office, we operate two additional full service facilities and a drive-through
      facility in Grand Island, Nebraska. The Company operates two retail brokerage
      facilities under the company names of Equitable Retirement Planning and
      Equitable Wealth Management which are also located in Grand Island,
      Nebraska. **** In
      the
      beginning of 2005, our board of directors made the strategic decision to expand
      into other select markets in Nebraska, as a result the Company operates one
      full
      service location which includes Equitable Wealth Management in North Platte
      and
      one full service location in Omaha. All of these cities are connected by
      Interstate 80, which runs across central Nebraska. The region in which our
      current offices are located was once dominated by agriculture, but now consists
      of a diverse blend of industries, urban centers and significant corporate
      investment .




1




Historically,
      we have considered Grand Island and the surrounding communities in Hall County
      as our primary market area. With the fourth largest population in Nebraska,
      Grand Island is a regional population and employment center for central
      Nebraska. Grand Island has a diverse employment base and serves as a center
      for
      agriculture, manufacturing, healthcare, tourism, retail and other related
      industries. The surrounding communities in Hall County are primarily rural
      and
      have an agriculture based economy.






Omaha
      is
      the leading urban market in Nebraska, located in eastern Nebraska. Omaha, which
      is Nebraska’s largest city, is a leader in the central United States in the
      insurance, telecommunications and transportation industries. North Platte,
      located in central-western Nebraska, has an economy primarily based on
      agriculture and the transportation industry.




**Competition**




We
      face
      significant competition for the attraction of deposits and origination of loans.
      Our most direct competition for deposits has historically come from the several
      financial institutions operating in our market areas and, to a lesser extent,
      from other financial service companies such as brokerage firms, credit unions
      and insurance companies. We also face competition for investors’ funds from
      money market funds, mutual funds and other corporate and government securities.
      At June 30, 2006, which is the most recent date for which data is available
      from
      the Federal Deposit Insurance Corporation, we held approximately 10.42% of
      the
      deposits in Hall County, which was the 4 th largest
      market share out of the 14 financial institutions with offices in Hall County.
      In addition, banks owned by large bank holding companies also operate in our
      market areas. These institutions are significantly larger than us and,
      therefore, have significantly greater resources.




Our
      competition for loans comes primarily from financial institutions in our market
      areas, and, to a lesser extent, from other financial service providers such
      as
      mortgage companies and mortgage brokers. Competition for loans also comes from
      the increasing number of non-depository financial service companies entering
      the
      mortgage market such as insurance companies, securities companies and specialty
      finance companies.




We
      expect
      competition to increase in the future as a result of legislative, regulatory
      and
      technological changes and the continuing trend of consolidation in the financial
      services industry. Technological advances, for example, have lowered the
      barriers to market entry, allowed banks and other lenders to expand their
      geographic reach by providing services over the Internet and made it possible
      for non-depository institutions to offer products and services that
      traditionally have been provided by banks. Changes in federal law permit
      affiliation among banks, securities firms and insurance companies, which
      promotes a competitive environment in the financial services industry.
      Competition for deposits and the origination of loans could limit our future
      growth.




2


**Lending
      Activities**




***General.*** Our loan
      portfolio consists of primarily one- to four-family residential real estate
      loans and commercial loans. To a much lesser extent, our loan portfolio includes
      multi-family and nonresidential real estate loans, construction loans, and
      consumer loans. We originate loans primarily for investment purposes. However,
      during the past year we have sold almost all of the fixed one-to four-family
      residential real estate loans that have been originated.






***One-
      to Four-Family Residential Real Estate Loans.***  We offer
      fixed-rate, adjustable-rate and balloon mortgage loans with terms up to 30
      years. Borrower demand for adjustable-rate loans versus fixed-rate loans is
      a
      function of the level of interest rates, the expectations of changes in the
      level of interest rates, and the difference between the interest rates and
      loan
      fees offered for fixed-rate mortgage loans and the initial period interest
      rates
      and loan fees for adjustable-rate loans. The relative amount of fixed-rate
      mortgage loans and adjustable-rate mortgage loans that can be originated at
      any
      time is largely determined by the demand for each in a competitive environment.
      The loan fees, interest rates and other provisions of mortgage loans are
      determined by us on the basis of our own pricing criteria and competitive market
      conditions.




We
      offer
      fixed-rate loans with terms between five and 30 years. In addition, we offer
      one- to four-family loans structured as balloon loans. We sell substantially
      all
      newly originated fixed-rate, one-to-four-family residential loans into the
      secondary market on a servicing retained basis which produces noninterest income
      in the form of net gains and losses on sales and loan servicing fees. Our
      balloon loans have terms ranging from five to 20 years and payments based on
      an
      amortization schedule of up to 30 years. The interest rate on balloon loans
      is
      fixed for the term of the loan at which time the entire balance of the loan
      becomes due. We typically notify the borrower before the end of the loan term
      of
      the maturity of the loan and that the loan must be repaid or the term extended.
      In most instances, a new rate is negotiated to meet market conditions and an
      extension of the loan is executed for a new term with a new amortization
      schedule.




Interest
      rates and payments on our adjustable-rate mortgage loans generally adjust
      annually after an initial fixed period that ranges from one to 10 years.
      Interest rates and payments on our adjustable-rate loans generally are adjusted
      to a rate typically equal to two percentage points above the one-year constant
      maturity Treasury index. The maximum amount by which the interest rate may
      be
      increased or decreased is generally two percentage points per adjustment period
      and the lifetime interest rate cap is generally five percentage points over
      the
      initial interest rate of the loan.




While
      one- to four-family residential real estate loans are normally originated with
      up to 30-year terms, such loans typically remain outstanding for substantially
      shorter periods because borrowers often prepay their loans in full upon sale
      of
      the property pledged as security or upon refinancing the original loan.
      Therefore, average loan maturity is a function of, among other factors, the
      level of purchase and sale activity in the real estate market, prevailing
      interest rates and the interest rates payable on outstanding loans.




We
      generally do not make conventional loans with loan-to-value ratios exceeding
      95%
      at the time the loan is originated, although we occasionally make loans with
      loan-to-value ratios of up to 103% with Private Mortgage Insurance or under
      Federal Housing Administration programs. We do not make sub-prime loans.
      Conventional loans with loan-to-value ratios in excess of 80% generally require
      private mortgage insurance or additional collateral. We require all properties
      securing mortgage loans to be appraised by a board-approved independent
      appraiser. We generally require title insurance on all first mortgage loans.
      Borrowers must obtain hazard insurance, and flood insurance for loans on
      properties located in a flood zone, before closing the loan.




3




In
      an
      effort to provide financing for low- and moderate-income and first-time buyers,
      we offer a special home buyers program. We offer residential mortgage loans
      through this program to qualified individuals and originate the loans using
      modified underwriting guidelines, including reduced fees and loan conditions.




***Multi-Family
      and Nonresidential Real Estate Loans.*** We offer
      fixed- and adjustable-rate mortgage loans secured by multi-family and
      nonresidential real estate. Our multi-family and nonresidential real estate
      loans are generally secured by retail buildings, small office buildings,
      owner-occupied properties and land used for agricultural purposes. In addition
      to originating these loans, we also participate in loans with other financial
      institutions located primarily in the State of Nebraska.




We
      originate a variety of fixed- and adjustable-rate and balloon multi-family
      and
      nonresidential real estate loans for terms up to 20 years. Interest rates on
      our
      adjustable-rate loans adjust based on the prime rate as published in *The
      Wall Street Journal* .
      Loans
      are secured by first mortgages, and amounts generally do not exceed 80% of
      the
      property’s appraised value at the time the loan is originated.




At
      June
      30, 2007, loan participations backed by multi-family and nonresidential real
      estate totaled $5.8 million. The properties securing these loans are located
      primarily in the State of Nebraska.




***Construction
      Loans*** ***.*** We
      originate loans to individuals and, to a lesser extent, builders to finance
      the
      construction of residential dwellings. We also make construction loans for
      commercial development projects, including apartment buildings, restaurants,
      motels, shopping centers and owner-occupied properties used for businesses.
      Our
      construction loans generally provide for the payment of interest only during
      the
      construction phase, which is usually six months for residential properties
      and
      12 months for commercial properties. At the end of the construction phase,
      the
      loan generally converts to a permanent mortgage loan. Loans generally can be
      made with a maximum loan to value ratio of 80% on residential construction
      and
      75% on commercial construction at the time the loan is originated. Before making
      a commitment to fund a construction loan, we require an appraisal of the
      property by an independent licensed appraiser. We also will require an
      inspection of the property before disbursement of funds during the term of
      the
      construction loan.




***Commercial
      Loans.***  We
      extend commercial business loans on a secured basis that generally are
      collateralized by industrial/commercial machinery and equipment, livestock,
      farm
      machinery, agriculture, accounts receivable and inventory. We originate both
      fixed- and adjustable-rate commercial loans with terms up to seven years.
      Fixed-rate loans are primarily originated with terms of up to one year. Interest
      rates on adjustable-rate commercial loans are typically based on the prime
      rate
      as published in *The
      Wall Street Journal* and
      adjust as the prime rate changes. We also originate lines of credit to finance
      the working capital needs of businesses to be repaid by seasonal cash flows
      or
      to provide a period of time during which the business can borrow funds for
      planned equipment purchases.




When
      making commercial business loans, we consider the financial statements of the
      borrower, the borrower’s payment history of both corporate and personal debt,
      the debt service capabilities of the borrower, the projected cash flows of
      the
      business, the viability of the industry in which the customer operates and
      the
      value of the collateral.




4




***Consumer
      Loans.***  We offer
      a variety of consumer loans, primarily home equity loans and lines of credit,
      and, to a much lesser extent, loans secured by savings accounts or certificates
      of deposit, automobile and recreational vehicle loans and secured and unsecured
      personal loans.




The
      procedures for underwriting consumer loans include an assessment of the
      applicant’s payment history on other debts and ability to meet existing
      obligations and payments on the proposed loan. Although the applicant’s
      creditworthiness is a primary consideration, the underwriting process also
      includes a comparison of the value of the collateral, if any, to the proposed
      loan amount.




We
      generally offer home equity loans with a maximum combined loan to value ratio
      of
      100% and home equity lines of credit with a maximum combined loan to value
      ratio
      of 100%. Home equity lines of credit have adjustable rates of interest that
      are
      indexed to the prime rate as reported in *The
      Wall Street Journal.* Home
      equity loans have fixed interest rates and terms that range from one to 15
      years.




We
      offer
      automobile and recreational vehicle loans secured by new and used vehicles.
      These loans have fixed interest rates and generally have terms up to six years
      for new vehicles and five years for used vehicles.




We
      offer
      secured consumer loans with fixed interest rates and terms up to fifteen years.
      We also offer unsecured consumer loans in amounts generally not to exceed
      $5,000. These loans have fixed interest rates and terms up to two years.




**Loan
      Underwriting Risks.**




*Adjustable-Rate
      Loans* .
      While
      we anticipate that adjustable-rate loans will better offset the adverse effects
      of an increase in interest rates as compared to fixed-rate mortgages, the
      increased mortgage payments required of adjustable-rate loan borrowers in a
      rising interest rate environment could cause an increase in delinquencies and
      defaults. The marketability of the underlying property also may be adversely
      affected in a high interest rate environment. In addition, although
      adjustable-rate mortgage loans help make our loan portfolio more responsive
      to
      changes in interest rates, the extent of this interest sensitivity is limited
      by
      the annual and lifetime interest rate adjustment limits.




*Multi-Family
      and Nonresidential Real Estate Loans* . Loans
      secured by multi-family and nonresidential real estate generally have larger
      balances and involve a greater degree of risk than one- to four-family
      residential mortgage loans. Of primary concern in multi-family and
      nonresidential real estate lending is the borrower’s creditworthiness and the
      feasibility and cash flow potential of the project. Payments on loans secured
      by
      income properties often depend on successful operation and management of the
      properties. As a result, repayment of such loans may be subject to a greater
      extent than residential real estate loans to adverse conditions in the real
      estate market or the economy. To monitor cash flows on income properties, we
      generally require borrowers and loan guarantors, if any, to provide annual
      financial statements on multi-family and nonresidential real estate loans.
      In
      reaching a decision on whether to make a multi-family and nonresidential real
      estate loan, we consider the net operating income of the property, the
      borrower’s expertise, credit history and profitability and the value of the
      underlying property. We have generally required that the properties securing
      these real estate loans have adequate debt service coverage to repay the loan
      along with any applicable taxes and insurance. Environmental surveys are
      obtained when circumstances suggest the possibility of the presence of hazardous
      materials.




5




We
      underwrite all loan participations to our own underwriting standards. In
      addition, we also consider the financial strength and reputation of the lead
      lender. To monitor cash flows on loan participations, we require the lead lender
      to provide annual financial statements for the borrower. We also conduct an
      annual internal loan review for all loan participations.




*Construction
      Loans* . Construction
      financing is generally considered to involve a higher degree of risk of loss
      than long-term financing on improved, occupied real estate. Risk of loss on
      a
      construction loan depends largely upon the accuracy of the initial estimate
      of
      the property’s value at completion of construction and the estimated cost
      (including interest) of construction. During the construction phase, a number
      of
      factors could result in delays and cost overruns. If the estimate of
      construction costs proves to be inaccurate, we may be required to advance funds
      beyond the amount originally committed to permit completion of the building.
      If
      the estimate of value proves to be inaccurate, we may be confronted, at or
      before the maturity of the loan, with a building having a value which is
      insufficient to assure full repayment. If we are forced to foreclose on a
      building before or at completion due to a default, there can be no assurance
      that we will be able to recover all of the unpaid balance of, and accrued
      interest on, the loan as well as related foreclosure and holding costs.




*Commercial
      Loans* . Unlike
      residential mortgage loans, which generally are made on the basis of the
      borrower’s ability to make repayment from his or her employment or other income,
      and which are secured by real property the value of which tends to be more
      easily ascertainable, commercial loans are of higher risk and typically are
      made
      on the basis of the borrower’s ability to make repayment from the cash flow of
      the borrower’s business. As a result, the availability of funds for the
      repayment of commercial loans may depend substantially on the success of the
      business itself. Further, any collateral securing such loans may depreciate
      over
      time, may be difficult to appraise and may fluctuate in value.




*Consumer
      Loans* . Consumer
      loans may entail greater risk than do residential mortgage loans, particularly
      in the case of consumer loans that are unsecured or secured by assets that
      depreciate rapidly. In such cases, repossessed collateral for a defaulted
      consumer loan may not provide an adequate source of repayment for the
      outstanding loan and the remaining deficiency often does not warrant further
      substantial collection efforts against the borrower. In addition, consumer
      loan
      collections depend on the borrower’s continuing financial stability, and
      therefore are more likely to be adversely affected by job loss, divorce, illness
      or personal bankruptcy. Furthermore, the application of various federal and
      state laws, including bankruptcy and insolvency laws, may limit the amount
      that
      can be recovered on such loans.




***Loan
      Originations, Purchases and Sales*** ***.*** Loan
      originations come from a number of sources. The primary source of loan
      originations are existing customers, walk-in traffic, advertising and referrals
      from customers. We advertise in newspapers that are widely circulated in our
      market areas of Grand Island, North Platte and Omaha. Accordingly, when our
      rates are competitive, we attract loans from throughout the state of Nebraska.
      We occasionally purchase loans and participation interests in loans, although
      we
      have not purchased any whole loans since 1995.




We
      generally originate loans for our portfolio, except that in recent periods
      we
      have sold almost all fixed-rate one- to four-family residential mortgage loans
      in the secondary market. We also sell all of our Department of Housing and
      Urban
      Development loans insured by the Federal Housing Administration and all of
      our
      Veterans Administration insured loans. Our decision to sell loans is based
      on
      prevailing market interest rate conditions and interest rate risk management.
      Loans are sold with servicing retained or servicing released. Loans are
      typically sold without recourse. Our loan sales have primarily been on a
      loan-by-loan basis to other financial institutions.




6




***Loan
      Approval Procedures and Authority*** ***.*** Our
      lending activities follow written, non-discriminatory, underwriting standards
      and loan origination procedures established by our board of directors and
      management. A loan committee consisting of officers of Equitable Bank approves
      all loans, subject to the ratification by the Executive Committee of the board
      of directors or the entire board of directors. The Executive Committee or the
      entire board of directors must approve all loans over 15% of Equitable Bank’s
      regulatory capital.




***Loans
      to One Borrower.*** The
      maximum amount that we may lend to one borrower and the borrower’s related
      entities generally is limited, by regulation, to 15% of our stated capital
      and
      reserves. At June 30, 2007, our general regulatory limit on loans to one
      borrower was $2.6 million. The Office of Thrift Supervision (the “OTS”) has
      approved an increase in our lending limit to one borrower to 25% of our stated
      capital and surplus for one- to four-family residential real estate loans,
      small
      business loans and small farm loans until September 2007. We anticipate that
      the
      OTS will extend the pilot program for future years. At June 30, 2007, our legal
      lending limit under this pilot program was $4.4 million. On June 30, 2007,
      our
      largest lending relationship was a $3.50 million commercial loan. This loan
      was
      performing in accordance with its original terms at June 30, 2007.




***Loan
      Commitments*** ***.*** We issue
      commitments for fixed- and adjustable-rate mortgage loans conditioned upon
      the
      occurrence of certain events. Commitments to originate mortgage loans are
      legally binding agreements to lend to our customers. Generally, our mortgage
      loan commitments expire after 60 days.




**Investment
      Activities**




We
      have
      legal authority to invest in various types of liquid assets, including U.S.
      Treasury obligations, securities of various federal agencies and municipal
      governments, deposits at the Federal Home Loan Bank of Topeka and certificates
      of deposit of federally insured institutions. Within certain regulatory limits,
      we also may invest a portion of our assets in mutual funds. We also are required
      to maintain an investment in Federal Home Loan Bank of Topeka stock. While
      we
      have the authority under applicable law to invest in derivative securities,
      our
      investment policy does not permit this investment. We had no investments in
      derivative securities at June 30, 2007.




At
      June
      30, 2007, our investment portfolio totaled $7.3 million and consisted primarily
      of U.S. Government sponsored entity securities and mortgage-backed securities
      issued primarily by Fannie Mae and Freddie Mac.




Our
      investment objectives are to provide and maintain liquidity, to establish an
      acceptable level of interest rate and credit risk, to provide an alternate
      source of low-risk investments when demand for loans is weak and to generate
      a
      favorable return. Our board of directors has the overall responsibility for
      the
      investment portfolio, including approval of our investment policy. The board
      of
      directors is also responsible for the implementation of the investment policy
      and monitoring our investment performance. Individual investment transactions,
      portfolio composition and performance are reviewed and ratified by our board
      of
      directors monthly.




**Deposit
      Activities and Other Sources of Funds**




***General*** ***.*** Deposits, borrowings and loan repayments are the major sources of our funds
      for
      lending and other investment purposes. Loan repayments are a relatively stable
      source of funds, while deposit inflows and outflows and loan prepayments are
      significantly influenced by general interest rates and money market conditions.




7




***Deposit
      Accounts.***  Substantially
      all of our depositors are residents of the State of Nebraska. Deposits are
      attracted, by advertising and through our website, from within our market areas
      through the offering of a broad selection of deposit instruments, including
      non-interest-bearing demand accounts (such as checking accounts),
      interest-bearing accounts (such as NOW and money market accounts), regular
      savings accounts and certificates of deposit. Since June 30, 2005, we have
      utilized brokered deposits as a source of funding. **** Deposit
      account terms vary according to the minimum balance required, the time periods
      the funds must remain on deposit and the interest rate, among other factors.
      In
      determining the terms of our deposit accounts, we consider the rates offered
      by
      our competition, our liquidity needs, profitability to us, matching deposit
      and
      loan products and customer preferences and concerns. We generally review our
      deposit mix and pricing weekly. Our current strategy is to offer competitive
      rates and to be in the middle of the market for rates on all types of deposit
      products.




***Borrowings*** ***.*** We
      utilize advances from the Federal Home Loan Bank of Topeka to supplement our
      supply of investable funds. The Federal Home Loan Bank functions as a central
      reserve bank providing credit for its member financial institutions. As a
      member, we are required to own capital stock in the Federal Home Loan Bank
      and
      are authorized to apply for advances on the security of such stock and certain
      of our whole first mortgage loans and other assets (principally securities
      which
      are obligations of, or guaranteed by, the United States), provided certain
      standards related to creditworthiness have been met. Advances are made under
      several different programs, each having its own interest rate and range of
      maturities. Depending on the program, limitations on the amount of advances
      are
      based either on a fixed percentage of an institution’s net worth or on the
      Federal Home Loan Bank’s assessment of the institution’s creditworthiness.




**Personnel**





As
      of
      June 30, 2007, we had 67 full-time employees and 11 part-time employees, none
      of
      whom is represented by a collective bargaining unit. We believe our relationship
      with our employees is good.





**Subsidiaries**





Equitable
      Financial’s only direct subsidiary is Equitable Bank. Equitable Bank has no
      subsidiaries.




**Risk
      Factors**




**We
      had operating losses during our last two full fiscal years. Continued losses
      will have an adverse impact on our stock price.**




We
      had
      net operating losses of $1.4 million and $969,000 for the years ended June
      30,
      2007 and 2006, respectively. Contributing to the operating loss was our branch
      expansion strategy, which has negatively impacted our salaries and employees
      benefits and occupancy and equipment expenses, and recent interest margin
      compression due to the current interest rate environment. In addition, we
      incurred a $726,000 contribution expense in 2006 relating to our contribution
      to
      the Equitable Bank Charitable Foundation in our public offering. For the years
      ended June 30, 2007 and 2006, our return on average assets was negative 0.77%
      and negative 0.56%, respectively. Continued losses will adversely impact our
      stock price.




**We
      may not be able to successfully implement our plans for growth.**




We
      have
      operated out of two full-service offices in Grand Island, Nebraska since 1974.
      Beginning two years ago, our management began to implement a growth strategy
      that expands our presence in other select markets in Nebraska. Since March
      31,
      2005, we have opened the following new offices: a full service branch in Grand
      Island; a full-service branch in North Platte; and a full service branch in
      Omaha.




8


Our
      branch expansion strategy and our branch upgrading may not be accretive to
      our
      earnings, or may not be accretive to earnings within a reasonable period of
      time. Numerous factors will affect our branch expansion strategy, such as our
      ability to select suitable branch locations, real estate acquisition costs,
      competition, interest rates, managerial resources, our ability to hire and
      retain qualified personnel, the effectiveness of our marketing strategy and
      our
      ability to attract deposits. We may not be successful in increasing the volume
      of our loans and deposits by expanding our branch network. Building and staffing
      new branch offices will increase our operating expenses. We may not be able
      to
      manage the costs and implementation risks associated with this strategy so
      that
      expansion of our branch network will be profitable.




**We
      expanded our branch network into geographic markets in which we have no previous
      experience.**




Since
      our
      formation in 1882, we have operated solely out of our offices located in Grand
      Island, Nebraska and have focused our lending in Grand Island and the
      surrounding area. A key component of our strategy to grow and improve
      profitability is to expand into additional markets in Nebraska that are also
      experiencing economic expansion. As a result, in May 2005, we opened a loan
      production office in North Platte, the largest city in western Nebraska, located
      approximately 150 miles west of Grand Island (this office was converted to
      a
      full-service branch at a new North Platte location in August 2005). In June
      2005, we opened a loan production office in Omaha (this office was converted
      to
      a full-service branch at a new Omaha location in June 2006). Omaha is the
      leading urban market in Nebraska, located approximately 150 miles east of Grand
      Island. We may pursue further expansion in these and other markets in future
      years. North Platte and Omaha are geographic markets in which we have no
      previous operating experience. In each of these markets, we have hired or
      identified potential employees with significant banking experience in the local
      market. Our ability to operate successfully in those markets will be dependent,
      in part, on our ability to identify and retain personnel familiar with the
      new
      markets. We may not be successful in attracting deposits or originating loans
      in
      these new geographic markets.




**Our
      increased emphasis on commercial and construction lending may expose us to
      increased lending risks.**




At
      June
      30, 2007, $72.9 million, or 47.3%, of our loan portfolio consisted of
      multi-family and nonresidential real estate loans, construction loans and
      commercial business loans. Although the size of this segment of our loan
      portfolio has been stable in recent years, we intend to increase our emphasis
      on
      these types of lending. These types of loans generally expose a lender to
      greater risk of non-payment and loss than one- to four-family residential
      mortgage loans because repayment of the loans often depends on the successful
      operation of the property, the income stream of the borrowers and, for
      construction loans, the accuracy of the estimate of the property’s value at
      completion of construction and the estimated cost of construction. Such loans
      typically involve larger loan balances to single borrowers or groups of related
      borrowers compared to one- to four-family residential mortgage loans. Commercial
      business loans expose us to additional risks since they typically are made
      on
      the basis of the borrower’s ability to make repayments from the cash flow of the
      borrower’s business and are secured by collateral that may depreciate over time.
      In addition, since such loans generally entail greater risk than one- to
      four-family residential mortgage loans, we may need to increase our allowance
      for loan losses in the future to account for the likely increase in probable
      incurred credit losses associated with the growth of such loans. Also, many
      of
      our commercial and construction borrowers have more than one loan outstanding
      with us. Consequently, an adverse development with respect to one loan or one
      credit relationship can expose us to a significantly greater risk of loss
      compared to an adverse development with respect to a one- to four-family
      residential mortgage loan.




9


**A
      downturn in the local economy or a decline in real estate values could hurt
      our
      earnings.**




Although
      we are currently expanding our branch network into new geographic markets within
      Nebraska, nearly all of our current loans are secured by real estate or made
      to
      businesses in Hall, Lincoln, and Douglas County, Nebraska. The Hall and Lincoln
      County economy is significantly affected by agriculture and agriculture-related
      industries and offers limited opportunity for significant growth in loan
      originations or deposits. In addition, based on 2000 United States Census data,
      the median per capita income in Hall County is less than the median per capita
      income in the United States as a whole. As a result, a downturn in the local
      economy, particularly local agriculture, could cause significant increases
      in
      nonperforming loans, which would hurt our earnings. Decreases in real estate
      values could adversely affect the value of property used as collateral for
      our
      loans which would expose us to a greater risk of loss. In addition, adverse
      employment conditions may have a negative effect on the ability of our borrowers
      to make timely repayments of their loans and on our ability to make new loans,
      which would have an adverse impact on our earnings.




**The
      loss of our President and Chief Executive Officer could hurt our operations.**




We
      rely
      heavily on our President and Chief Executive Officer, Richard L. Harbaugh.
      The
      loss of Mr. Harbaugh could have an adverse effect on us because, as a small
      community bank, Mr. Harbaugh has more responsibility than would be typical
      at a
      larger financial institution with more employees. Due to this risk we have
      appointed an individual to assume more responsibilities so that we are prepared
      in the event of the loss of our President. We have a three-year employment
      contract with Mr. Harbaugh. We have key man life insurance on Mr. Harbaugh
      in
      the amount of $200,000.




**Rising
      interest rates may hurt our earnings and asset value.**




While
      short-term market interest rates (which we use as a guide to price our deposits)
      have increased, longer-term market interest rates (which we use as a guide
      to
      price our longer-term loans) have not. This “flattening” of the market yield
      curve has had a negative impact on our interest rate spread and net interest
      margin, and if short-term interest rates continue to rise, and if rates on
      our
      deposits and borrowings continue to reprice upwards faster than the rates on
      our
      long-term loans and investments, we would continue to experience compression
      of
      our interest rate spread and net interest margin, which would have a negative
      effect on our profitability.




Changes
      in interest rates also affect the value of our interest-earning assets, and
      in
      particular our securities portfolio. Generally, the value of fixed-rate
      securities fluctuates inversely with changes in interest rates. Unrealized
      gains
      and losses on securities available for sale are reported as a separate component
      of equity, net of tax. Decreases in the fair value of securities available
      for
      sale resulting from increases in interest rates could have an adverse effect
      on
      stockholders’ equity.




**Strong
      competition within our market areas could hurt our profits and slow growth.**




We
      face
      intense competition both in making loans and attracting deposits. In particular,
      recently several financial institutions have opened new offices or branches
      in
      Hall County. This competition has made it more difficult for us to make new
      loans and at times has forced us to offer higher deposit rates. Price
      competition for loans and deposits might result in us earning less on our loans
      and paying more on our deposits, which would reduce net interest income.
      Competition also makes it more difficult to grow loans and deposits. As of
      June
      30, 2006, the most recent date for which information is available, we held
      10.42% of the deposits in Hall County, Nebraska. Competition also makes it
      more
      difficult to hire and retain experienced employees. Some of the institutions
      with which we compete have substantially greater resources and lending limits
      than we have and may offer services that we do not provide. We expect
      competition to increase in the future as a result of legislative, regulatory
      and
      technological changes and the continuing trend of consolidation in the financial
      services industry. Our profitability depends upon our continued ability to
      compete successfully in our market areas.




10


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




We
      are
      subject to extensive regulation, supervision and examination by the OTS, our
      primary federal regulator, and by the FDIC, as insurer of our deposits.
      Equitable Financial MHC, Equitable Financial and Equitable Bank are all subject
      to regulation and supervision by the OTS. Such regulation and supervision
      governs the activities in which an institution and its holding company may
      engage, and are intended primarily for the protection of the insurance fund
      and
      the depositors and borrowers of Equitable Bank rather than for holders of
      Equitable Financial common stock. Regulatory authorities have extensive
      discretion in their supervisory and enforcement activities, including the
      imposition of restrictions on our operations, the classification of our assets
      and determination of the level of our allowance for loan losses. Any change
      in
      such regulation and oversight, whether in the form of regulatory policy,
      regulations, legislation or supervisory action, may have a material impact
      on
      our operations.




**Expenses
      from our Equity Incentive Plan will adversely affect our profitability.**




Our
      stockholders approved the Equitable Financial Corp. 2006 Equity Incentive Plan
      in November 2006.  Under
      this plan, we may award up to 161,577 stock options and 64,631 shares of
      restricted stock to employees and directors. To date, we have not made any
      awards of stock options or restricted stock under the plan. Our non-interest
      expenses will increase as a result of recognizing additional annual employee
      compensation and benefit expenses stemming from shares granted under the Equity
      Incentive Plan. These additional expenses will adversely affect our
      profitability. We cannot determine the actual amount of these compensation
      and
      benefit expenses because applicable accounting practices require that they
      be
      based on the fair market value of the shares of common stock at specific points
      in the future; however, we expect them to be material. We will recognize
      expenses from restricted stock awards and stock options over the vesting period
      of awards made to recipients.




**We
      will need to implement additional finance and accounting systems, procedures
      and
      controls in order to satisfy our new public company reporting requirements.**




As
      a
      public reporting company, the federal securities laws and the regulations of
      the
      Securities and Exchange Commission require that we file annual, quarterly and
      current reports and that we maintain effective disclosure controls and
      procedures and internal controls over financial reporting. We expect that the
      obligations of being a public company, including substantial public reporting
      obligations, will require significant expenditures and place additional demands
      on our management team. These obligations will increase our operating expenses
      and could divert our management’s attention from our operations. Compliance with
      the Sarbanes-Oxley Act of 2002 and the related rules and regulations of the
      Securities and Exchange Commission will require us to improve our internal
      controls and procedures and upgrade our accounting systems.




**Equitable
      Financial MHC’s majority control of our common stock will enable it to exercise
      voting control over most matters put to a vote of shareholders, and will prevent
      shareholders from forcing a sale or a second-step conversion transaction you
      may
      find advantageous.**




Equitable
      Financial MHC owns a majority of Equitable Financial’s common stock and, through
      its board of directors, will be able to exercise voting control over most
      matters put to a vote of shareholders. The same directors and officers who
      manage Equitable Financial and Equitable Bank also manage Equitable Financial
      MHC. As a federally chartered mutual holding company, the board of directors
      of
      Equitable Financial MHC must ensure that the interests of depositors of
      Equitable Bank are represented and considered in matters put to a vote of
      shareholders of Equitable Financial. Therefore, the votes cast by Equitable
      Financial MHC may not be in your personal best interests as a shareholder.
      For
      example, Equitable Financial MHC may exercise its voting control to defeat
      a
      shareholder nominee for election to the board of directors of Equitable
      Financial. In addition, shareholders will not be able to force a merger or
      second-step conversion transaction without the consent of Equitable Financial
      MHC. Some shareholders may desire a sale or merger transaction, because
      shareholders typically receive a premium for their shares, or a second-step
      conversion transaction, because fully converted institutions tend to trade
      at
      higher multiples than mutual holding companies.




11


**The
      OTS policy on remutualization transactions could prohibit the acquisition of
      Equitable Financial, which may adversely affect our stock price.**




Current
      OTS regulations permit a mutual holding company to be acquired by a mutual
      institution in a remutualization transaction. However, the OTS has issued a
      policy statement indicating that it views remutualization transactions as
      raising significant issues concerning disparate treatment of minority
      shareholders and mutual members of the target entity and raising issues
      concerning the effect on the mutual members of the acquiring entity. Under
      certain circumstances, the OTS intends to give these issues special scrutiny
      and
      reject applications providing for the remutualization of a mutual holding
      company unless the applicant can clearly demonstrate that the OTS’ concerns are
      not warranted in the particular case. Should the OTS prohibit or otherwise
      restrict these transactions in the future, our per share stock price may be
      adversely affected. In addition, OTS regulations prohibit, for three years
      following completion of the offering, the acquisition of more than 10% of any
      class of equity security issued by us without the prior approval of the OTS.




**OTS
      regulations and anti-takeover provisions in our charter restrict the
      accumulation of our common stock, which may adversely affect our stock price.**




OTS
      regulations provide that for a period of three years following the date of
      the
      completion of the reorganization, no person, acting alone, together with
      associates or in a group of persons acting in concert, will directly or
      indirectly offer to acquire or acquire the beneficial ownership of more than
      10%
      of our common stock without the prior written approval of the OTS. In addition,
      Equitable Financial’s charter provides that, for a period of five years from the
      date of the reorganization, no person, other than Equitable Financial MHC,
      may
      acquire directly or indirectly the beneficial ownership of more than 10% of
      any
      class of any equity security of Equitable Financial. In the event a person
      acquires shares in violation of this charter provision, all shares beneficially
      owned by such person in excess of 10% will be considered “excess shares” and
      will not be counted as shares entitled to vote or counted as voting shares
      in
      connection with any matters submitted to the stockholders for a vote. These
      factors make it more difficult and less attractive for stockholders to acquire
      a
      significant amount of our common stock, which may adversely affect our stock
      price.




**Our
      contribution to Equitable Bank Charitable Foundation will not be fully tax
      deductible, which will hurt our profits.**




We
      believe that our contribution to Equitable Bank Charitable Foundation, valued
      at
      $726,000 pre-tax, will more likely than not, not be fully deductible for federal
      income tax purposes. We have established a deferred tax valuation allowance
      that, at June 30, 2007, totaled $343,000 to reduce our deferred tax asset to
      an
      amount that we estimate can be fully utilized.





12





**Regulation
      and Supervision**





**General**





**** Equitable
      Bank is subject to extensive regulation, examination and supervision by the
      Office of Thrift Supervision, as its primary federal regulator, and the Federal
      Deposit Insurance Corporation, as its deposits insurer. Equitable Bank is a
      member of the Federal Home Loan Bank System and its deposit accounts are insured
      up to applicable limits by the Deposit Insurance Fund managed by the Federal
      Deposit Insurance Corporation. Equitable Bank must file reports with the Office
      of Thrift Supervision and the Federal Deposit Insurance Corporation concerning
      its activities and financial condition in addition to obtaining regulatory
      approvals prior to entering into certain transactions such as mergers with,
      or
      acquisitions of, other financial institutions. There are periodic examinations
      by the Office of Thrift Supervision and, under certain circumstances, the
      Federal Deposit Insurance Corporation to evaluate Equitable Bank’s safety and
      soundness and compliance with various regulatory requirements. This regulatory
      structure is intended primarily for the protection of the insurance fund and
      depositors. The regulatory structure also gives the regulatory authorities
      extensive discretion in connection with their supervisory and enforcement
      activities and examination policies, including policies with respect to the
      classification of assets and the establishment of adequate loan loss reserves
      for regulatory purposes. Any change in such policies, whether by the Office
      of
      Thrift Supervision, the Federal Deposit Insurance Corporation or Congress,
      could
      have a material adverse impact on Equitable Financial, Equitable Financial
      MHC
      and Equitable Bank and their operations. Equitable Financial and Equitable
      Financial MHC, as savings and loan holding companies, will be required to file
      certain reports with, will be subject to examination by, and otherwise must
      comply with the rules and regulations of the Office of Thrift Supervision.
      Equitable Financial will also be subject to the rules and regulations of the
      Securities and Exchange Commission under the federal securities laws.




Certain
      of the regulatory requirements that are or will be applicable to Equitable
      Bank,
      Equitable Financial and Equitable Financial MHC are described below. This
      description of statutes and regulations is not intended to be a complete
      explanation of such statutes and regulations and their effects on Equitable
      Bank, Equitable Financial and Equitable Financial MHC and is qualified in its
      entirety by reference to the actual statutes and regulations .




**Regulation
      of Federal Savings Associations**





***Business
      Activities.*** ****** Federal
      law and regulations, primarily the Home Owners’ Loan Act and the regulations of
      the Office of Thrift Supervision, govern the activities of federal savings
      banks, such as Equitable Bank. These laws and regulations delineate the nature
      and extent of the activities in which federal savings banks may engage. In
      particular, certain lending authority for federal savings banks, *e.g.* ,
      commercial, non-residential real property loans and consumer loans, is limited
      to a specified percentage of the institution’s capital or assets.





***Branching.*** ****** Federal
      savings banks are authorized to establish branch offices in any state or states
      of the United States and its territories, subject to applicable notice or
      application requirements of the Office of Thrift Supervision.





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





13


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





The
      Office of Thrift Supervision also has authority to establish individual minimum
      capital requirements in appropriate cases upon a determination that an
      institution’s capital level is or may become inadequate in light of the
      particular circumstances. At June 30, 2007, Equitable Bank met each of these
      capital requirements. **** See
      note
      9 of the notes to consolidated financial statements included in this annual
      report on Form 10-KSB.





***Prompt
      Corrective Regulatory Action.*** ****** The
      Office of Thrift Supervision is required to take certain supervisory actions
      against undercapitalized institutions, the severity of which depends upon the
      institution’s degree of undercapitalization. Generally, a savings institution
      that has a ratio of total capital to risk weighted assets of less than 8%,
      a
      ratio of Tier 1 (core) capital to risk-weighted assets of less than 4% or a
      ratio of core capital to total assets of less than 4% (3% or less for
      institutions with the highest examination rating) is considered to be
“undercapitalized.” A savings institution that has a total risk-based capital
      ratio less than 6%, a Tier 1 capital ratio of less than 3% or a leverage ratio
      that is less than 3% is considered to be “significantly undercapitalized” and a
      savings institution that has a tangible capital to assets ratio equal to or
      less
      than 2% is deemed to be “critically undercapitalized.” Subject to a narrow
      exception, the Office of Thrift Supervision is required to appoint a receiver
      or
      conservator within specified time frames for an institution that is “critically
      undercapitalized.” An institution must file a capital restoration plan with the
      Office of Thrift Supervision within 45 days of the date it receives notice
      that
      it is “undercapitalized,” “significantly undercapitalized” or “critically
      undercapitalized.” Compliance with the plan must be guaranteed by any parent
      holding company. In addition, numerous mandatory supervisory actions become
      immediately applicable to an undercapitalized institution, including, but not
      limited to, increased monitoring by regulators and restrictions on growth,
      capital distributions and expansion. “Significantly undercapitalized” and
“critically undercapitalized” institutions are subject to more extensive
      mandatory regulatory actions. The Office of Thrift Supervision could also take
      any one of a number of discretionary supervisory actions, including the issuance
      of a capital directive and the replacement of senior executive officers and
      directors.





14


***Loans
      to One Borrower.*** ****** Federal
      law provides that savings institutions are generally subject to the limits
      on
      loans to one borrower applicable to national banks. A savings institution may
      not make a loan or extend credit to a single or related group of borrowers
      in
      excess of 15% of its unimpaired capital and surplus. An additional amount may
      be
      lent, equal to 10% of unimpaired capital and surplus, if secured by specified
      readily-marketable collateral.





***Standards
      for Safety and Soundness.*** ****** As
      required by statute, the federal banking agencies have adopted Interagency
      Guidelines prescribing Standards for Safety and Soundness. The guidelines set
      forth the safety and soundness standards that the federal banking agencies
      use
      to identify and address problems at insured depository institutions before
      capital becomes impaired. If the Office of Thrift Supervision determines that
      a
      savings institution fails to meet any standard prescribed by the guidelines,
      the
      Office of Thrift Supervision may require the institution to submit an acceptable
      plan to achieve compliance with the standard.





***Limitations
      on Capital Distributions.*** ****** Office
      of
      Thrift Supervision regulations impose limitations upon all capital distributions
      by a savings institution, including cash dividends, payments to repurchase
      its
      shares and payments to stockholders of another institution in a cash-out merger.
      Under the regulations, an application to and the prior approval of the Office
      of
      Thrift Supervision is required before any capital distribution if the
      institution does not meet the criteria for “expedited treatment” of applications
      under Office of Thrift Supervision regulations ( *i.e.* ,
      generally, examination and Community Reinvestment Act ratings in the two top
      categories), the total capital distributions for the calendar year exceed net
      income for that year plus the amount of retained net income for the preceding
      two years, the institution would be undercapitalized following the distribution
      or the distribution would otherwise be contrary to a statute, regulation or
      agreement with the Office of Thrift Supervision. If an application is not
      required, the institution must still provide prior notice to the Office of
      Thrift Supervision of the capital distribution if, like Equitable Bank, it
      is a
      subsidiary of a holding company. If Equitable Bank’s capital were ever to fall
      below its regulatory requirements or the Office of Thrift Supervision notified
      it that it was in need of increased supervision, its ability to make capital
      distributions could be restricted. In addition, the Office of Thrift Supervision
      could prohibit a proposed capital distribution that would otherwise be permitted
      by the regulation, if the agency determines that such distribution would
      constitute an unsafe or unsound practice.





***Qualified
      Thrift Lender Test.*** ****** Federal
      law requires savings institutions to meet a qualified thrift lender test. Under
      the test, a savings association is required to either qualify as a “domestic
      building and loan association” under the Internal Revenue Code or maintain at
      least 65% of its “portfolio assets” (total assets less: (i) specified liquid
      assets up to 20% of total assets; (ii) intangibles, including goodwill; and
      (iii) the value of property used to conduct business) in certain “qualified
      thrift investments” (primarily residential mortgages and related investments,
      including certain mortgage-backed securities) in at least nine months out of
      each 12-month period.





A
      savings
      institution that fails the qualified thrift lender test is subject to certain
      operating restrictions and may be required to convert to a bank charter. Recent
      legislation has expanded the extent to which education loans, credit card loans
      and small business loans may be considered “qualified thrift investments.” As of
      June 30, 2007, Equitable Bank met the qualified thrift lender test.




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




15




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




***Enforcement.*** ****** The
      Office of Thrift Supervision has primary enforcement responsibility over federal
      savings institutions and has authority to bring actions against the institution
      and all institution-affiliated parties, including stockholders, and any
      attorneys, appraisers and accountants who knowingly or recklessly participate
      in
      wrongful action likely to have an adverse effect on an insured institution.
      Formal enforcement action may range from the issuance of a capital directive
      or
      cease and desist order to removal of officers and/or directors to institution
      of
      receivership, conservatorship or termination of deposit insurance. Civil
      penalties cover a wide range of violations and can amount to $25,000 per day,
      or
      even $1 million per day in especially egregious cases. The Federal Deposit
      Insurance Corporation has authority to recommend to the Director of the Office
      of Thrift Supervision that enforcement action be taken with respect to a
      particular savings institution. If action is not taken by the Director, the
      Federal Deposit Insurance Corporation has authority to take such action under
      certain circumstances. Federal law also establishes criminal penalties for
      certain violations.





***Assessments.*** ****** Federal
      savings banks are required to pay assessments to the Office of Thrift
      Supervision to fund its operations. The general assessments, paid on a
      semi-annual basis, are based upon the savings institution’s total assets,
      including consolidated subsidiaries, as reported in the institution’s latest
      quarterly thrift financial report.





***Insurance
      of Deposit Accounts.***  Deposits
      of Equitable Bank are insured by the Deposit Insurance Fund of the Federal
      Deposit Insurance Corporation. Insurance premiums are based on a number of
      factors, primarily the risk of loss that insured institutions pose to the
      Deposit Insurance Fund. The Federal Deposit Insurance Corporation has the
      ability to adjust the insurance fund’s reserve ratio between 1.15% and 1.5%,
      depending on projected losses, economic changes and assessment rates at the
      end
      of a calendar year. The FDIC has adopted regulations that set assessment rates
      that took effect at the beginning of 2007. The new assessment rates for most
      banks vary between five cents and seven cents for every $100 of deposits. A
      change in insurance premiums could have an adverse effect on the operating
      expenses and results of operations of Equitable Bank. We cannot predict what
      insurance assessment rates will be in the future. Assessment credits have been
      provided to institutions that paid high premiums in the past. As a result,
      Equitable Bank will receive credits to offset a portion of its premiums in
      2007.





16





Insurance
      of deposits may be terminated by the Federal Deposit Insurance Corporation
      upon
      a finding that the institution has engaged in unsafe or unsound practices,
      is in
      an unsafe or unsound condition to continue operations or has violated any
      applicable law, regulation, rule, order or condition imposed by the Federal
      Deposit Insurance Corporation. We do not know of any practice, condition or
      violation that might lead to termination of deposit insurance.





In
      addition to the assessment for deposit insurance, institutions are required
      to
      make payments on bonds issued in the late 1980s by the Financing Corporation
      (“FICO”), and agency of the federal government established to finance takeovers
      of insolvent thrifts, to recapitalize a predecessor deposit insurance fund.





***Federal
      Home Loan Bank System.*** ****** Equitable Bank is a member of the Federal Home Loan Bank System, which consists
      of (12) regional Federal Home Loan Banks. The Federal Home Loan Bank provides
      a
      central credit facility primarily for member institutions. Equitable Bank,
      as a
      member of the Federal Home Loan Bank of Topeka, is required to acquire and
      hold
      shares of capital stock in that Federal Home Loan Bank. Equitable Bank was
      in
      compliance with this requirement with an investment in Federal Home Loan Bank
      stock at June 30, 2007 of $2.4 million.





The
      Federal Home Loan Banks are required to provide funds for the resolution of
      insolvent thrifts in the late 1980s and to contribute funds for affordable
      housing programs. These requirements could reduce the amount of dividends that
      the Federal Home Loan Banks pay to their members and could also result in the
      Federal Home Loan Banks imposing a higher rate of interest on advances to their
      members. If dividends were reduced, or interest on future Federal Home Loan
      Bank
      advances increased, our net income would likely also be reduced.





***Community
      Reinvestment Act.*** ****** Under
      the
      Community Reinvestment Act, as implemented by Office of Thrift Supervision
      regulations, a savings association has a continuing and affirmative obligation
      consistent with its safe and sound operation to help meet the credit needs
      of
      its entire community, including low and moderate income neighborhoods. The
      Community Reinvestment Act does not establish specific lending requirements
      or
      programs for financial institutions nor does it limit an institution’s
      discretion to develop the types of products and services that it believes are
      best suited to its particular community, consistent with the Community
      Reinvestment Act. The Community Reinvestment Act requires the Office of Thrift
      Supervision, in connection with its examination of a savings association, to
      assess the institution’s record of meeting the credit needs of its community and
      to take such record into account in its evaluation of certain applications
      by
      such institution.





The
      Community Reinvestment Act requires public disclosure of an institution’s rating
      and requires the Office of Thrift Supervision to provide a written evaluation
      of
      an association’s Community Reinvestment Act performance utilizing a four-tiered
      descriptive rating system.





Equitable
      Bank received a “satisfactory” rating as a result of its most recent Community
      Reinvestment Act assessment. ****





**Privacy
      Requirements of the GLBA**





The
      Gramm-Leach-Bliley Act of 1999 provided for sweeping financial modernization
      for
      commercial banks, savings banks, securities firms, insurance companies and
      other
      financial institutions operating in the United States. Among other provisions,
      the Gramm-Leach-Bliley Act places limitations on the sharing of consumer
      financial information with unaffiliated third parties. Specifically, the
      Gramm-Leach-Bliley Act requires all financial institutions offering financial
      products or services to retail customers to provide such customers with the
      financial institution’s privacy policy and provide such customers the
      opportunity to “opt out” of the sharing of personal financial information with
      unaffiliated third parties.





17


**Anti-Money
      Laundering**





The
      Uniting and Strengthening America by Providing Appropriate Tools Required to
      Intercept and Obstruct Terrorism Act of 2001 (referred to as the “USA PATRIOT
      Act”) significantly expanded the responsibilities of  financial
      institutions, including savings and loan associations, in preventing the use
      of
      the U.S. financial system to fund terrorist activities. Title III of the USA
      PATRIOT Act provides for a significant overhaul of the U.S. anti-money
      laundering regime. Among other provisions, Title III of the USA PATRIOT Act
      and
      the related regulations of the Office of Thrift Supervision require financial
      institutions operating in the United States to develop new anti-money laundering
      compliance programs, due diligence policies and controls to ensure the detection
      and reporting of money laundering. Such required compliance programs are
      intended to supplement existing compliance requirements, also applicable to
      financial institutions, under the Bank Secrecy Act and the Office of Foreign
      Assets Control Regulations.





**Other
      Regulations**





Interest
      and other charges collected or contracted for by Equitable Bank are subject
      to
      state usury laws and federal laws concerning interest rates. Equitable Bank’s
      loan operations are also subject to federal laws applicable to credit
      transactions, such as the:





·
            Truth-In-Lending
                Act, governing disclosures of credit terms to consumer
                borrowers;





·
            Home
                Mortgage Disclosure Act of 1975, requiring financial institutions
                to
                provide information to enable the public and public officials to
                determine
                whether a financial institution is fulfilling its obligation to help
                meet
                the housing needs of the community it
                serves;




·
            Equal
                Credit Opportunity Act, prohibiting discrimination on the basis of
                race,
                creed or other prohibited factors in extending
                credit;




·
            Fair
                Credit Reporting Act of 1978, governing the use and provision of
                information to credit reporting
                agencies;




·
            Fair
                Debt Collection Act, governing the manner in which consumer debts
                may be
                collected by collection agencies;
                and





·
            rules
                and regulations of the various federal agencies charged with the
                responsibility of implementing such federal
                laws.





The
      deposit operations of Equitable Bank also are subject to the:





·
            Right
                to Financial Privacy Act, which imposes a duty to maintain confidentiality
                of consumer financial records and prescribes procedures for complying
                with
                administrative subpoenas of financial
                records;




18




·
            Electronic
                Funds Transfer Act and Regulation E promulgated thereunder, which
                govern
                automatic deposits to and withdrawals from deposit accounts and customers’
                rights and liabilities arising from the use of automated teller machines
                and other electronic banking services; and




·
            Check
                Clearing for the 21stCentury Act (also known as “Check 21”), which, effective October 28, 2004,
                gives “substitute checks,” such as digital check images and copies made
                from that image, the same legal standing as the original paper
                check.





**Holding
      Company Regulation**





***General.*** ****** Equitable Financial and Equitable Financial MHC are savings and loan holding
      companies within the meaning of federal law. As such, they are registered with
      the Office of Thrift Supervision and are subject to Office of Thrift Supervision
      regulations, examinations, supervision, reporting requirements and regulations
      concerning corporate governance and activities. In addition, the Office of
      Thrift Supervision has enforcement authority over Equitable Financial and
      Equitable Financial MHC and their non-savings institution subsidiaries. Among
      other things, this authority permits the Office of Thrift Supervision to
      restrict or prohibit activities that are determined to be a serious risk to
      Equitable Bank.





***Restrictions
      Applicable to Mutual Holding Companies.*** ****** According
      to federal law and Office of Thrift Supervision regulations, a mutual holding
      company, such as Equitable Financial MHC, may generally engage in the following
      activities: (1) investing in the stock of a savings association; (2) acquiring
      a
      mutual association through the merger of such association into a savings
      association subsidiary of such holding company or an interim savings association
      subsidiary of such holding company; (3) merging with or acquiring another
      holding company, one of whose subsidiaries is a savings association; and (4)
      any
      activity approved by the Federal Reserve Board for a bank holding company or
      financial holding company or previously approved by the Office of Thrift
      Supervision for multiple savings and loan holding companies. Recent legislation,
      which authorized mutual holding companies to engage in activities permitted
      for
      financial holding companies, expanded the authorized activities. Financial
      holding companies engage in a broad array of financial service activities
      including insurance and securities.





Federal
      law prohibits a savings and loan holding company, including a federal mutual
      holding company, from directly or indirectly, or through one or more
      subsidiaries, acquiring more than 5% of the voting stock of another savings
      association, or its holding company, without prior written approval of the
      Office of Thrift Supervision. In evaluating applications by holding companies
      to
      acquire savings associations, the Office of Thrift Supervision must consider
      the
      financial and managerial resources and future prospects of the company and
      institution involved, the effect of the acquisition on the risk to the insurance
      funds, the convenience and needs of the community and competitive factors.
      Federal law also prohibits a savings and loan holding company from acquiring
      more than 5% of a company engaged in activities other than those authorized
      for
      savings and loan holding companies by federal law, or acquiring or retaining
      control of a depository institution that is not insured by the Federal Deposit
      Insurance Corporation.





The
      Office of Thrift Supervision is prohibited from approving any acquisition that
      would result in a multiple savings and loan holding company controlling savings
      associations in more than one state, except: (1) the approval of interstate
      supervisory acquisitions by savings and loan holding companies, and (2) the
      acquisition of a savings association in another state if the laws of the state
      of the target savings institution specifically permit such acquisitions. The
      states vary in the extent to which they permit interstate savings and loan
      holding company acquisitions. This limitation would not prohibit an interstate
      merger of the subsidiary savings association.





19





If
      the
      savings association subsidiary of a savings and loan holding company fails
      to
      meet the qualified thrift lender test, the holding company must register with
      the Federal Reserve Board as a bank holding company within one year of the
      savings association’s failure to so qualify.





***Stock
      Holding Company Subsidiary Regulation.*** ****** The
      Office of Thrift Supervision has adopted regulations governing the two-tier
      mutual holding company form of organization and subsidiary stock holding
      companies that are controlled by mutual holding companies. Equitable Financial
      is the stock holding company subsidiary of Equitable Financial MHC. Equitable
      Financial is permitted to engage in activities that are permitted for Equitable
      Financial MHC, subject to the same restrictions and conditions.




***Waivers
      of Dividends by Equitable Financial MHC.*** Office
      of
      Thrift Supervision regulations require Equitable Financial MHC to notify the
      Office of Thrift Supervision if it proposes to waive receipt of dividends from
      Equitable Financial. The Office of Thrift Supervision reviews dividend waiver
      notices on a case-by-case basis, and, in general, does not object to any such
      waiver if: (i) the waiver would not be detrimental to the safe and sound
      operation of the savings association; and (ii) the mutual holding company’s
      board of directors determines that such waiver is consistent with such
      directors’ fiduciary duties to the mutual holding company’s members. We
      anticipate that Equitable Financial MHC will waive dividends that Equitable
      Financial may pay, if any.




******  ***Conversion
      of Equitable Financial MHC to Stock Form.*** ****** Office
      of
      Thrift Supervision regulations permit Equitable Financial MHC to convert from
      the mutual form of organization to the capital stock form of organization.
      There
      can be no assurance when, if ever, a conversion transaction will occur, and
      the
      board of directors has no current intention or plan to undertake a conversion
      transaction. In a conversion transaction, a new holding company would be formed
      as the successor to Equitable Financial, Equitable Financial MHC’s corporate
      existence would end, and certain depositors of Equitable Federal Savings Bank
      would receive the right to subscribe for additional shares of the new holding
      company. In a conversion transaction, each share of common stock held by
      stockholders other than Equitable Financial MHC would be automatically converted
      into a number of shares of common stock of the new holding company based on
      an
      exchange ratio determined at the time of conversion that ensures that
      stockholders other than Equitable Financial MHC own the same percentage of
      common stock in the new holding company as they owned in Equitable Financial
      immediately before conversion. The total number of shares held by stockholders
      other than Equitable Financial MHC after a conversion transaction would be
      increased by any purchases by such stockholders in the stock offering conducted
      as part of the conversion transaction.




***Acquisition
      of Control.*** ****** Under
      the
      Federal Change in Bank Control Act, a notice must be submitted to the Office
      of
      Thrift Supervision if any person (including a company), or group acting in
      concert, seeks to acquire “control” of a savings and loan holding company or
      savings association. An acquisition of “control” can occur upon the acquisition
      of 10% or more of the voting stock of a savings and loan holding company or
      savings institution or as otherwise defined by the Office of Thrift Supervision.
      Under the Change in Bank Control Act, the Office of Thrift Supervision has
      60
      days from the filing of a complete notice to act, taking into consideration
      certain factors, including the financial and managerial resources of the
      acquirer and the anti-trust effects of the acquisition. Any company that so
      acquires control would then be subject to regulation as a savings and loan
      holding company.




**Sarbanes-Oxley
      Act**  **of
      2002**




The
      Sarbanes-Oxley Act of 2002 is a law that addresses, among other issues,
      corporate governance, auditing and accounting, executive compensation, and
      enhanced and timely disclosure of corporate information. As directed by Section
      302(a) of Sarbanes-Oxley Act of 2002, Equitable Financial’s Chief Executive
      Officer and Chief Financial Officer each are required to certify that its
      quarterly and annual reports do not contain any untrue statement of a material
      fact. The rules have several requirements, including having these officers
      certify that: they are responsible for establishing, maintaining and regularly
      evaluating the effectiveness of our internal controls; they have made certain
      disclosures to our auditors and the audit committee of the board of directors
      about our internal controls; and they have included information in our quarterly
      and annual reports about their evaluation and whether there have been
      significant changes in our internal controls or in other factors that could
      significantly affect internal controls. Equitable Financial will be subject
      to
      further reporting and audit requirements beginning with the year ending June
      30,
      2008 under the requirements of the Sarbanes-Oxley Act. Equitable Financial
      will
      prepare policies, procedures and systems designed to comply with these
      regulations to ensure compliance with these regulations.




20





**Federal
      and State Taxation**





**Federal
      Income Taxation**





***General.*** ****** We
      report
      our income on a fiscal year basis using the accrual method of accounting. The
      federal income tax laws apply to us in the same manner as to other corporations
      with some exceptions, including our reserve for bad debts discussed below.
      The
      following discussion of tax matters is intended only as a summary and does
      not
      purport to be a comprehensive description of the tax rules applicable to us.
      Our
      federal income tax returns have been either audited or closed under the statute
      of limitations through June 30, 2002. **** For its
      2007 year, Equitable Financial’s maximum federal income tax rate was 34%.





Equitable
      Financial and Equitable Bank have entered into a tax allocation agreement.
      Because Equitable Financial owns 100% of the issued and outstanding capital
      stock of Equitable Bank, Equitable Financial and Equitable Bank are members
      of
      an affiliated group within the meaning of Section 1504(a) of the Internal
      Revenue Code, of which group Equitable Financial is the common parent
      corporation. As a result of this affiliation, Equitable Bank will be included
      in
      the filing of a consolidated federal income tax return with Equitable Financial
      and the parties have agreed to compensate each other for their individual share
      of the consolidated tax liability and/or any tax benefits provided by them
      in
      the filing of the consolidated federal income tax return.





***Bad
      Debt Reserves.*** ****** For
      fiscal years beginning before June 30, 1996, thrift institutions that qualified
      under certain definitional tests and other conditions of the Internal Revenue
      Code were permitted to use certain favorable provisions to calculate their
      deductions from taxable income for annual additions to their bad debt reserve.
      A
      reserve could be established for bad debts on qualifying real property loans,
      generally secured by interests in real property improved or to be improved,
      under the percentage of taxable income method or the experience method. The
      reserve for nonqualifying loans was computed using the experience method.
      Federal legislation enacted in 1996 repealed the reserve method of accounting
      for bad debts and the percentage of taxable income method for tax years
      beginning after 1995 and requires savings institutions to recapture or take
      into
      income certain portions of their accumulated bad debt reserves. Approximately
      $2.1 million of our accumulated bad debt reserves would not be recaptured into
      taxable income unless Equitable Bank makes a “non-dividend distribution” to
      Equitable Financial as described below.




21




***Distributions*** ***.*** If
      Equitable Bank makes “non-dividend distributions” to Equitable Financial, the
      distributions will be considered to have been made from Equitable Bank’s
      unrecaptured tax bad debt reserves, including the balance of its reserves as
      of
      December 31, 1987, to the extent of the “non-dividend distributions,” and then
      from Equitable Bank’s supplemental reserve for losses on loans, to the extent of
      those reserves, and an amount based on the amount distributed, but not more
      than
      the amount of those reserves, will be included in Equitable Bank’s taxable
      income. Non-dividend distributions include distributions in excess of Equitable
      Bank’s current and accumulated earnings and profits, as calculated for federal
      income tax purposes, distributions in redemption of stock and distributions
      in
      partial or complete liquidation. Dividends paid out of Equitable Bank’s current
      or accumulated earnings and profits will not be so included in Equitable Bank’s
      taxable income.




The
      amount of additional taxable income triggered by a non-dividend is an amount
      that, when reduced by the tax attributable to the income, is equal to the amount
      of the distribution. Therefore, if Equitable Bank makes a non-dividend
      distribution to Equitable Financial, approximately one and one-half times the
      amount of the distribution not in excess of the amount of the reserves would
      be
      includable in income for federal income tax purposes, assuming a 34% federal
      corporate income tax rate. Equitable Bank does not intend to pay dividends
      that
      would result in a recapture of any portion of its bad debt reserves.




**State
      Taxation**





***Nebraska
      Taxation.***  Under
      Nebraska law, Equitable Bank pays a franchise tax in lieu of a corporate income
      tax. The franchise tax is the lesser of two amounts computed based on our
      average deposits and net financial income, respectively. Presently, the tax
      is
      $0.47 per $1,000 of average deposits but not to exceed an amount determined
      by
      applying 3.81% to our net financial income. **** Net
      financial income is our income as reported to the Office of Thrift Supervision
      after ordinary and necessary expenses but before income taxes. For Nebraska
      tax
      purposes, corporations are presently taxed at a rate equal to 5.58% of the
      first
      $50,000 of taxable income and 7.81% of taxable income in excess of $50,000.
      For
      this purpose, “taxable income” generally means federal taxable income, subject
      to certain adjustments (including addition of interest income on non-Nebraska
      municipal obligations and excluding interest income from qualified U.S.
      governmental obligations).


22





**ITEM
      2.**   **DESCRIPTION
      OF PROPERTY**





We
      conduct our business through our main office and branch offices. The following
      table sets forth certain information relating to these facilities as of June
      30,
      2007.





**Location**
            
            **Year
                Opened**
            
            **Owned/Leased**
            
            **Date
                of Lease Expiration****Main
                Office:**113-115
                North Locust Street (1)
              Grand
                Island, Nebraska 68801
            
            
            1959
            
            
            Owned
            
            
            N/A**Full
                Service Branch:**619
                Diers Avenue, North
              Grand
                Island, Nebraska 68803
            
            
            2000
            
            
            Owned
            
            
            N/A3012
                South Locust Street
              Grand
                Island, Nebraska 68801
            
            
            2005
            
            
            Owned
            
            
            N/A920
                South Jeffers Street
              North
                Platte, Nebraska 69101
            
            
            2005
            
            
            Owned
            
            
            N/A10855
                West Dodge Road, Suite 110
              Omaha,
                Nebraska 68154
            
            
            2006
            
            
            Leased
            
            
            06/30/2012**Other
                Properties:**Second
                & Pine Street (Drive-up)
              Grand
                Island, Nebraska 68801
            
            
            1965
            
            
            Owned
            
            
            N/AEquitable
                Retirement Planning
              119
                West 2ndStreet
              Grand
                Island, Nebraska 68801
            
            
            2001
            
            
            Owned
            
            
            N/AEquitable
                Wealth Management
              3012
                South Locust Street
              Grand
                Island, Nebraska 68801
            
            
            2005
            
            
            Owned
            
            
            N/AEquitable
                Wealth Management
              920
                South Jeffers Street
              North
                Platte, Nebraska 69101
            
            
            2005
            
            
            Owned
            
            
            N/A





(1)
            This
                property consists of the original main office acquired in 1959 and
                adjacent condominium units acquired in 1984. Equitable Bank occupies
                the
                first floor and leases out the second floor of the condominium units.




23


**ITEM
      3.**  **LEGAL
      PROCEEDINGS**





Periodically,
      there have been various claims and lawsuits against us, such as claims to
      enforce liens, condemnation proceedings on properties in which we hold security
      interests, claims involving the making and servicing of real property loans
      and
      other issues incident to our business. We are not a party to any pending legal
      proceedings that we believe would have a material adverse effect on our
      financial condition, results of operations or cash flows.





**ITEM
      4.**  **SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS**





None.


24





**PART
      II**





**ITEM
              5.**
            **MARKET
                FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS
                ISSUER
                PURCHASES OF EQUITY
                SECURITIES**





The
      common stock of Equitable Financial is traded on the OTC Bulletin Board under
      the symbol “EQFC.” As of September 20, 2007, the Company had approximately 173
      holders of record. The following table sets forth, for the quarters indicated,
      the daily high and low sales price for the common stock since the Company’s
      formation in November 2005. The prices do not necessarily reflect inter-dealer
      prices without retail markup, markdown or commission and may not reflect actual
      transactions.




**For
                the Year Ended June 30, 2007****4****th****Quarter**
            
            **3****rd****Quarter**
            
            **2****nd****Quarter**
            
            **1st
                Quarter**High
            
            $
            10.80
            
            $
            11.75
            
            $
            11.95
            
            $
            10.00Low
            
            
            9.00
            
            
            10.30
            
            
            9.95
            
            
            9.20




**For
                the Year Ended June 30, 2006****4****th****Quarter**
            
            **3****rd****Quarter**
            
            **2****nd****Quarter**
            
            **1st
                Quarter**High
            
            $
            9.40
            
            $
            9.50
            
            $
            10.25
            
            
            N/ALow
            
            
            9.00
            
            
            8.50
            
            
            9.00
            
            
            N/A





Equitable
      Financial is not subject to Office of Thrift Supervision regulatory restrictions
      on the payment of dividends. However, Equitable Financial’s ability to pay
      dividends may depend, in part, upon its receipt of dividends from Equitable
      Bank
      because Equitable Financial has no source of income other than earnings from
      the
      investment of the net proceeds from the offering that it retained. Payment
      of
      cash dividends on capital stock by a savings institution is limited by OTS
      regulations. Equitable Bank may not make a distribution that would constitute
      a
      return of capital during the three-year term of the business plan submitted
      in
      connection with its reorganization. No insured depository institution may make
      a
      capital distribution if, after making the distribution, the institution would
      be
      undercapitalized. See *“Regulation
      and Supervision—Regulation of Federal Savings Associations—Limitations on
      Capital Distribution.”*





As
      of
      June 30, 2007, Equitable Financial satisfied all prescribed capital
      requirements. Future dividend payments will depend on the Company’s
      profitability, approval by its Board of Directors and prevailing OTS
      regulations. To date, we have not declared any cash dividends.





On
      April
      19, 2007, the Company announced that it had authorized the funding of a trust
      to
      repurchase up to 64,631 of the Company’s outstanding shares. The shares acquired
      by the trust will be used to fund restricted stock awards under the Company’s
      2006 Equity Incentive Plan. On May 1, 2007 the trust purchased all 64,631
      shares. The cost per share was $10.75 for a total cost of $695,000. As of June
      30, 2007 the Company had not made any restricted stock grants and had not
      publicly announced any additional repurchase plans or programs.





**ITEM
      6.**  **MANAGEMENT’S
      DISCUSSION AND ANALYSIS OR PLAN OF OPERATION**





This
      discussion and analysis reflects the financial statements of the Company and
      other relevant statistical data, and is, intended to enhance your understanding
      of the financial condition and results of operations of the Company. The
      information in this section has been derived from the Company’s audited
      financial statements, which appear beginning on page F-1.





25




**Overview**





***Income*** **.** Our
      primary source of pre-tax income is net interest income. Net interest income
      is
      the difference between interest income, which is the income that we earn on
      our
      loans and securities, and interest expense, which is the interest that we pay
      on
      our deposits and Federal Home Loan Bank borrowings. Other significant sources
      of
      pre-tax income are service charges on deposit accounts, brokerage fee income
      and
      other loan fees (including loan brokerage fees and late charges). In addition,
      we recognize income or losses from the sale of investments in years that we
      have
      such sales.




***Allowance
      for Loan Losses*** **.** The
      allowance for loan losses is the amount estimated by management as necessary
      to
      cover probable incurred credit losses in the loan portfolio at the balance
      sheet
      date. The allowance is established through the provision for loan losses, which
      is charged to income. Determining the amount of the allowance for loan losses
      necessarily involves a high degree of judgment. Among the material estimates
      required to establish the allowance are: loss exposure at default; the amount
      and timing of future cash flows on impacted loans; value of collateral; and
      determination of loss factors to be applied to the various elements of the
      portfolio. All of these estimates are susceptible to significant change.
      Management reviews the level of the allowance on a quarterly basis and
      establishes the provision for loan losses based upon an evaluation of the
      portfolio, past loss experience, current economic conditions and other factors
      related to the collectibility of the loan portfolio. Although we believe that
      we
      use the best information available to establish the allowance for loan losses,
      future adjustments to the allowance may be necessary if economic conditions
      differ substantially from the assumptions used in making the evaluation. In
      addition, the Office of Thrift Supervision, as an integral part of its
      examination process, periodically reviews our allowance for loan losses. Such
      agency may require us to recognize adjustments to the allowance based on its
      judgments about information available to it at the time of its examination.
      A
      large loss could deplete the allowance and require increased provisions to
      replenish the allowance, which would negatively affect earnings. For additional
      discussion, see note 3 of the notes to financial statements included in this
      annual report on Form 10-KSB.




***Expenses.*** The
      non-interest expenses we incur in operating our business consist of salaries
      and
      employee benefits expenses, occupancy and equipment expenses, advertising and
      public relations expenses and various other miscellaneous expenses.




Salaries
      and employee benefits consist primarily of the following: salaries and wages
      paid to our employees; payroll taxes; and expenses for health insurance, and
      other employee benefits. We also anticipate additional annual employee
      compensation expenses stemming from the adoption of new stock-based benefit
      plans. We cannot determine the actual amount of these new stock-related
      compensation and benefit expenses at this time because applicable accounting
      practices require that they be based on the fair value of the awards when they
      are granted.




Occupancy
      and equipment expenses, which are the fixed and variable costs of buildings
      and
      equipment, consist primarily of depreciation charges, furniture and equipment
      expenses, maintenance, real estate taxes and costs of utilities. Depreciation
      of
      premises and equipment is computed using the straight-line method based on
      the
      useful lives of the related assets, which range from two to 40 years.





Advertising
      and public relations expenses include expenses for print, radio and television
      advertisements, promotions, third-party marketing services and premium items.





26


Regulatory
      fees and deposit insurance premiums are primarily payments we make to the
      Federal Deposit Insurance Corporation for insurance of our deposit accounts.




Other
      expenses include expenses for supplies, telephone and postage, data processing,
      contributions and donations, director and committee fees, insurance and surety
      bond premiums and other fees and expenses.




Our
      non-interest expenses are likely to increase as a result of operating as a
      public company. These additional expenses will be primarily legal and accounting
      fees, expenses necessary to comply with the internal control over financial
      reporting provisions of the Sarbanes-Oxley Act and expenses related to
      stockholder communications and meetings.




Our
      advertising and public relations expense may also increase as a result of our
      expanding branch network.




**Critical
      Accounting Policies**





We
      consider accounting policies involving significant judgments and assumptions
      by
      management that have, or could have, a material impact on the carrying value
      of
      certain assets or on income to be critical accounting policies. We consider
      the
      allowance for loan losses and deferred income taxes to be critical accounting
      policies.




***Allowance
      for Loan Losses*** **.** The
      allowance for loan losses is the amount estimated by management as necessary
      to
      cover probable incurred credit losses in the loan portfolio at the balance
      sheet
      date. The allowance is established through the provision for loan losses, which
      is charged to income. Determining the amount of the allowance for loan losses
      necessarily involves a high degree of judgment. Among the material estimates
      required to establish the allowance are: loss exposure at default; the amount
      and timing of future cash flows on impacted loans; value of collateral; and
      determination of loss factors to be applied to the various elements of the
      portfolio. All of these estimates are susceptible to significant change.
      Management reviews the level of the allowance on a quarterly basis and
      establishes the provision for loan losses based upon an evaluation of the
      portfolio, past loss experience, current economic conditions and other factors
      related to the collectibility of the loan portfolio. Although we believe that
      we
      use the best information available to establish the allowance for loan losses,
      future adjustments to the allowance may be necessary if economic conditions
      differ substantially from the assumptions used in making the evaluation. In
      addition, the Office of Thrift Supervision, as an integral part of its
      examination process, periodically reviews our allowance for loan losses. Such
      agency may require us to recognize adjustments to the allowance based on its
      judgments about information available to it at the time of its examination.
      A
      large loss could deplete the allowance and require increased provisions to
      replenish the allowance, which would negatively affect earnings. For additional
      discussion, see note 3 of the notes to financial statements included in this
      annual report on Form 10-KSB.




27


***Deferred
      Income Taxes.***  We
      use
      the asset and liability method of accounting for income taxes as prescribed
      in
      Statement of Financial Accounting Standards No. 109, “Accounting for Income
      Taxes.” Under this method, deferred tax assets and liabilities are recognized
      for the future tax consequences attributable to differences between the
      financial statement carrying amounts of existing assets and liabilities and
      their respective tax bases. If current available information raises doubt as
      to
      the realization of the deferred tax assets, a valuation allowance is
      established. Deferred tax assets and liabilities are measured using enacted
      tax
      rates expected to apply to taxable income in the years in which those temporary
      differences are expected to be recovered or settled. We exercise significant
      judgment in evaluating the amount and timing of recognition of the resulting
      tax
      liabilities and assets. These judgments require us to make projections of future
      taxable income. The judgments and estimates we make in determining our deferred
      tax assets, which are inherently subjective, are reviewed on a continual basis
      as regulatory and business factors change. Any reduction in estimated future
      taxable income may require us to record a valuation allowance against our
      deferred tax assets. Any additional valuation allowance would result in
      additional income tax expense in the period, which would negatively affect
      earnings.


28




Selected
      Financial Data




The
      following tables set forth selected historical financial and other data of
      the
      Company for the periods and at the dates indicated. The information should
      be
      read in conjunction with the Consolidated Financial Statements and Notes thereto
      of the Company contained elsewhere herein.


**At
                  or For the Year Ended June 30,****2007**
              
              **2006**
              
              **2005**(In
                  thousands, except per share data)**Selected
                  Financial Condition Data:**Total
                  assets
              
              $
              182,834
              
              $
              178,761
              
              $
              145,372Loans,
                  net(1)
              
              
              153,330
              
              
              153,408
              
              
              121,656Securities
                  held to maturity
              
              
              702
              
              
              915
              
              
              1,238Securities
                  available for sale
              
              
              6,584
              
              
              9,430
              
              
              12,785Deposits
              
              
              127,745
              
              
              121,922
              
              
              96,788Federal
                  Home Loan Bank borrowings
              
              
              30,600
              
              
              30,604
              
              
              32,952Equity
              
              
              23,014
              
              
              25,034
              
              
              14,363Book
                  value per common share
              
              
              6.98
              
              
              7.59
              
              
              N/A**Selected
                  Operating Data:**Total
                  interest income
              
              $
              10,428
              
              $
              8,957
              
              $
              7,697Total
                  interest expense
              
              
              6,570
              
              
              5,073
              
              
              3,805Net
                  interest income
              
              
              3,858
              
              
              3,884
              
              
              3,892Provision
                  for loan losses
              
              
              233
              
              
              120
              
              
              118Other
                  noninterest income
              
              
              1,416
              
              
              1,954
              
              
              972Other
                  noninterest expense
              
              
              7,077
              
              
              7,025
              
              
              4,394Income
                  tax (benefit) expense
              
              
              (637
              )
              
              (338
              )
              
              68Net
                  income (loss)
              
              
              (1,399
              )
              
              (969
              )
              
              283Basic
                  and diluted (loss) per share(2)
              
              
              (0.44
              )
              
              (0.27
              )
              
              N/A**Performance**********Ratios:**Return
                  on average assets
              
              
              (0.77
              )%
              
              (0.56
              )%
              
              0.20
              %Return
                  on average equity
              
              
              (5.72
              )%
              
              (4.62
              )%
              
              1.98
              %Average
                  equity to average assets
              
              
              13.49
              %
              
              12.21
              %
              
              9.86
              %Equity
                  to total assets at end of period
              
              
              12.59
              %
              
              14.00
              %
              
              9.88
              %Interest
                  rate spread(3)
              
              
              1.78
              %
              
              2.13
              %
              
              2.44
              %Net
                  interest margin(4)
              
              
              2.28
              %
              
              2.46
              %
              
              2.76
              %Average
                  interest-earning assets to average interest-bearing
                  liabilities
              
              
              112.94
              %
              
              110.00
              %
              
              111.81
              %Other
                  noninterest expenses to average total assets
              
              
              3.90
              %
              
              4.10
              %
              
              3.03
              %Efficiency
                  ratio(5)
              
              
              134.19
              %
              
              121.06
              %
              
              96.90
              %**Capital
                  Ratios:****(6)**Tangible
                  capital
              
              
              9.67
              %
              
              10.41
              %
              
              9.61
              %Tier
                  1 core capital
              
              
              12.79
              %
              
              14.25
              %
              
              14.96
              %Total
                  risk based capital
              
              
              13.56
              %
              
              14.98
              %
              
              16.04
              %**Asset
                  Quality Ratios:**Net
                  chargeoffs (recoveries) to average gross loansoutstanding
              
              
              0.07
              %
              
              (0.01
              )%
              
              0.06
              %Allowance
                  for loan losses to gross loans outstanding
              
              
              0.69
              %
              
              0.60
              %
              
              0.64
              %Non-performing
                  loans to gross loans
              
              
              0.30
              %
              
              0.36
              %
              
              0.16
              %Non-performing
                  assets to total assets(7)
              
              
              0.30
              %
              
              0.31
              %
              
              0.13
              %







(1)
            Net
                of loans in process, deferred loan cost, and allowance for loan
                losses.




29





(2)
            Earnings
                per share for the year ended June 30, 2005 is not applicable since
                the
                initial public offering was completed on November 8, 2005. Net income
                for
                the period July 1, 2005 through November 7, 2005 is not included
                in the
                calculation of basic and diluted earnings per share for the year
                ended
                June 30, 2006.




(3)
            The
                net interest rate spread represents the difference between the weighted
                average yield on interest-earning assets and the weighted average
                cost of
                interest-bearing liabilities.




(4)
            The
                net interest margin represents net interest income as a percent of
                average
                interest-earning assets.




(5)
            The
                efficiency ratio represents other expense as a percent of the sum
                of net
                interest income before the provision for loan losses and other
                non-interest income, excluding gains or losses on the sale of an
                equity
                interest in our data processor.




(6)
            Ratios
                are for Equitable Bank.




(7)
            Nonperforming
                assets consist of nonperforming loans and foreclosed real estate.
                Nonperforming loans consist of all loans over 90 days past due and
                all
                loans no longer accruing interest.




N/A
            Not
                applicable.




**Balance
      Sheet Analysis**





**** Our
      total
      assets increased $4.0 million, or 2.2%, to $182.8 million at June 30, 2007
      from
      $178.8 million at June 30, 2006. The increase in total assets was primarily
      the
      result of increases in cash and cash equivalents of $5.4 million, premises
      and
      equipment, net of $784,000 and other assets of $737,000. These increases were
      offset by a decrease in securities available for sale of $2.8 million. Deposits
      increased $5.8 million to $127.7 million at June 30, 2007 from $121.9 million
      at
      June 30, 2006. The increase in cash, the liquidity generated from the decrease
      in securities available for sale and the increase in deposits will be used
      to
      fund loan originations. The
      increase in premises and equipment and other assets was due to our branch
      expansion in Omaha and North Platte.




***Loans*** **.** **** We
      originate commercial (including agriculture), consumer, one-to four family
      residential, multi-family and nonresidential real estate and construction loans.
      Recently we have increased our emphasis on originating non-residential real
      estate, construction and commercial loans.




The
      following table sets forth the composition of our loan portfolio at the dates
      indicated. Throughout the year we sold $17.5 million of our one-to four family
      fixed rate loans of which $9.2 million was sold from loans originated in the
      current year. The remaining $8.3 million was sold from our existing portfolio.
      Proceeds from the sale of loans from our existing portfolio were used to fund
      commercial and nonresidential real estate loans. This contributed to the
      increase of $6.7 million, or 38.2%, in our commercial loan portfolio and the
      increase of $6.8 million, or 22.7% in our nonresidential real estate
      portfolio.




30





**At
                June 30,****2007**
            
            **2006**
            
            **2005****Amount**
            
            **Percent**
            
            **Amount**
            
            **Percent**
            
            **Amount**
            
            **Percent****(Dollars
                in thousands)**Real
                estate—mortgage:One-
                to four-family
            
            $
            65,266
            
            
            42.4
            %
            $
            80,031
            
            
            52.1
            %
            $
            78,341
            
            
            64.1
            %Multi-family
            
            
            6,874
            
            
            4.4
            
            
            7,480
            
            
            4.9
            
            
            8,391
            
            
            6.9Nonresidential
            
            
            37,019
            
            
            24.1
            
            
            30,169
            
            
            19.6
            
            
            16,753
            
            
            13.6Total
                real estate mortgage loans
            
            
            109,159
            
            
            70.9
            
            
            117,680
            
            
            76.6
            
            
            103,485
            
            
            84.6Construction
            
            
            4,810
            
            
            3.1
            
            
            3,790
            
            
            2.5
            
            
            1,855
            
            
            1.5Commercial
            
            
            24,154
            
            
            15.7
            
            
            17,480
            
            
            11.2
            
            
            3,970
            
            
            3.3Consumer:Home
                equity
            
            
            12,323
            
            
            8.0
            
            
            12,287
            
            
            8.0
            
            
            11,045
            
            
            9.0Other
                consumer
            
            
            3,513
            
            
            2.3
            
            
            2,726
            
            
            1.7
            
            
            1,903
            
            
            1.6Total
                consumer loans
            
            
            15,836
            
            
            10.3
            
            
            15,013
            
            
            9.7
            
            
            12,948
            
            
            10.6Total
                loans
            
            
            153,959
            
            
            100.0
            %
            
            153,963
            
            
            100.0
            %
            
            122,258
            
            
            100.0
            %Deferred
                loan origination costs, net
            
            
            428
            
            
            
            
            
            371
            
            
            
            
            
            184Allowance
                for loan losses
            
            
            (1,057
            )
            
            
            
            
            (926
            )
            
            
            
            
            (786
            )Loans,
                net
            
            $
            153,330
            
            
            
            
            $
            153,408
            
            
            
            
            $
            121,656





The
      following table sets forth certain information at June 30, 2007 regarding the
      dollar amount of loans maturing during the periods indicated. The table does
      not
      include any estimate of prepayments, which significantly shorten the average
      life of all loans and may cause our actual repayment experience to differ from
      that shown below. Demand loans having no stated schedule of repayments and
      no
      stated maturity are reported as due in one year or less.





**Real
                Estate-**
              **Mortgage**
            
            **Construction**
            
            **Commercial**
            
            **Consumer**
            
            **Total**
              **Loans****(In
                thousands)**Amounts
                due in:One
                year or less
            
            $
            7,070
            
            $
            3,997
            
            $
            14,434
            
            $
            3,371
            
            $
            28,872More
                than one to five years
            
            
            15,176
            
            
            116
            
            
            4,434
            
            
            9,441
            
            
            29,167More
                than five years
            
            
            86,913
            
            
            697
            
            
            5,286
            
            
            3,024
            
            
            95,920Total
            
            $
            109,159
            
            $
            4,810
            
            $
            24,154
            
            $
            15,836
            
            $
            153,959





31


The
      following table sets forth the dollar amount of all loans at June 30, 2007
      that
      are due after June 30, 2008 and have either fixed interest rates or floating
      or
      adjustable interest rates. The amounts shown below exclude unearned interest
      on
      consumer loans and deferred loan fees.





**Due
                After June 30, 2008****Fixed-Rates**
            
            **Floating
                or Adjustable-Rates**
            
            **Total****(In
                thousands)**Real
                estate-mortgage
            
            $
            72,581
            
            $
            29,508
            
            $
            102,089Construction
            
            
            593
            
            
            220
            
            
            813Commercial
            
            
            4,509
            
            
            5,211
            
            
            9,720Consumer
                loans
            
            
            10,297
            
            
            2,168
            
            
            12,465Total
            
            $
            87,980
            
            $
            37,107
            
            $
            125,087




The
      following table shows loan origination, participation and purchase activity
      during the periods indicated.




**Year
                Ended June 30,****2007**
            
            **2006**
            
            **2005****(In
                thousands)**Total
                loans at beginning of period
            
            $
            153,963
            
            $
            122,258
            
            $
            119,139Loans
                originated:Real
                estate—mortgage
            
            
            34,162
            
            
            44,448
            
            
            25,523Construction
            
            
            6,568
            
            
            6,142
            
            
            1,941Commercial
            
            
            42,108
            
            
            33,470
            
            
            15,886Consumer
            
            
            10,709
            
            
            14,287
            
            
            10,806Total
                loans originated
            
            
            93,547
            
            
            98,347
            
            
            54,156Deduct:Real
                estate loan principal repayments
            
            
            24,925
            
            
            20,886
            
            
            26,627Loans
                sold
            
            
            17,465
            
            
            9,367
            
            
            -Transfer
                to foreclosed assets
            
            
            328
            
            
            -
            
            
            20Other
                loan principal repayments
            
            
            50,833
            
            
            36,389
            
            
            24,390Net
                loan activity
            
            
            (4
            )
            
            31,705
            
            
            3,119Total
                loans at end of period
            
            $
            153,959
            
            $
            153,963
            
            $
            122,258




***Securities.*** **** Our
      securities portfolio consists primarily of U.S. Government-sponsored entity
      securities and mortgage-backed securities. All of our mortgage-backed securities
      and collateralized mortgage obligations were issued by Fannie Mae, Freddie
      Mac
      or Ginnie Mae. During the year ended June 30, 2007, our securities portfolio
      declined $3.1 million, or 29.6% to $7.3 million as we used the funds from
      maturing securities to fund new loans.




32





The
      following table sets forth the amortized cost and fair values of our securities
      portfolio at the dates indicated.




**At
                June 30,****2007**
            
            **2006**
            
            **2005****Amortized**
              **Cost**
            
            **Fair**
              **Value**
            
            **Amortized**
              **Cost**
            
            **Fair**
              **Value**
            
            **Amortized**
              **Cost**
            
            **Fair**
              **Value****(In
                thousands)**Securities
                available-for-sale:State
                and political subdivisions
            
            $
            993
            
            $
            973
            
            $
            993
            
            $
            966
            
            $
            992
            
            $
            999U.S.
                Government-sponsored entity securities
            
            
            3,985
            
            
            3,941
            
            
            6,596
            
            
            6,462
            
            
            8,213
            
            
            8,185Mortgage-backed
                securities
            
            
            1,464
            
            
            1,422
            
            
            1,762
            
            
            1,706
            
            
            2,282
            
            
            2,298Collateralized
                mortgage obligations
            
            
            260
            
            
            248
            
            
            306
            
            
            296
            
            
            566
            
            
            562Equity
                securities
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            15
            
            
            741Total
                securities available-for-sale
            
            
            6,702
            
            
            6,584
            
            
            9,657
            
            
            9,430
            
            
            12,068
            
            
            12,785Securities
                held-to-maturity:Mortgage-backed
                securities
            
            
            702
            
            
            684
            
            
            915
            
            
            888
            
            
            1,238
            
            
            1,248Total
                securities held-to-maturity
            
            
            702
            
            
            684
            
            
            915
            
            
            888
            
            
            1,238
            
            
            1,248Total
            
            $
            7,404
            
            $
            7,268
            
            $
            10,572
            
            $
            10,318
            
            $
            13,306
            
            $
            14,033





At
      June
      30, 2007, we had no investments in a single company or entity (other than U.S.
      Government-sponsored entity securities) that had an aggregate book value in
      excess of 10% of our equity at June 30, 2007.


33


The
      following table sets forth the maturities and weighted average yields of
      securities at June 30, 2007. The carrying value represents market value for
      the
      securities available-for-sale and historical cost for securtities
      held-to-maturity.




**One
                Year or Less**
            
            **More
                than One Year to Five Years**
            
            **More
                than Five Years to Ten Years**
            
            **More
                than Ten Years**
            
            **Total****Carrying
                Value**
            
            **Weighted
                Average Yield**
            
            **Carrying
                Value**
            
            **Weighted
                Average Yield**
            
            **Carrying
                Value**
            
            **Weighted
                Average Yield**
            
            **Carrying
                Value**
            
            **Weighted
                Average Yield**
            
            **Carrying
                Value**
            
            **Weighted
                Average Yield****(In
                thousands)**Securities
                available-for-sale:State
                and political subdivisions
            
            $
            -
            
            
            -
            %
            $
            303
            
            
            4.2
            %
            $
            670
            
            
            5.3
            %
            $
            -
            
            
            -
            %
            $
            973
            
            
            4.9
            %U.S.
                government sponsored entity securities
            
            
            2,466
            
            
            3.4
            
            
            1,475
            
            
            4.1
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            3,941
            
            
            3.6Mortgage-backed
                securities
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            99
            
            
            9.2
            
            
            1,323
            
            
            5.2
            
            
            1,422
            
            
            6.1Collateralized
                mortgage obligations
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            248
            
            
            5.0
            
            
            248
            
            
            5.0Total
                securities available-for-sale
            
            
            2,466
            
            
            3.4
            
            
            1,778
            
            
            4.1
            
            
            769
            
            
            5.8
            
            
            1,571
            
            
            5.2
            
            
            6,584
            
            
            4.3Securities
                held-to-maturityMortgage-backed
                securities
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            172
            
            
            6.0
            
            
            530
            
            
            5.3
            
            
            702
            
            
            5.5Total
                securities held-to-maturity
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            172
            
            
            6.0
            
            
            530
            
            
            5.5
            
            
            702
            
            
            5.5Total
                Securities
            
            $
            2,466
            
            
            3.4
            %
            $
            1,778
            
            
            4.1
            %
            $
            941
            
            
            5.8
            %
            $
            2,101
            
            
            5.2
            %
            $
            7,286
            
            
            4.4
            %




***Deposits*** **.** Our
      primary source of funds is our deposit accounts, which are comprised of
      non-interest-bearing accounts, interest-bearing NOW accounts, money market
      accounts, savings accounts and certificates of deposit. These deposits are
      provided primarily by individuals within our market areas.




Total
      deposits increased $5.8 million, or 4.8%, to $127.7 million at June 30, 2007
      from $121.9 million at June 30, 2006. Interest-bearing NOW and money market
      accounts increased $882,000 and $8.4 million, respectively from the year ended
      June 30, 2006. These increases are consistent with our strategy to grow our
      core
      funding sources. Certificates of deposit decreased $4.2 million to $90.1 million
      from $94.3 million at June 30, 2006 as a result of our pricing strategy and
      our
      efforts to reduce our cost of funds. It is the Company’s goal to lower the
      overall cost-of-funds. To meet that goal, the Company will continue to use
      brokered CD’s, FHLB advances and retail deposits as funding sources to increase
      the spread/margin and overall profitability.




The
        following table sets forth the balances of our deposit products at the dates
        indicated.


**At
                June 30,****2007**
            
            **2006**
            
            **2005****Amount**
            
            **Percent**
            
            **Amount**
            
            **Percent**
            
            **Amount**
            
            **Percent****(Dollars
                in thousands)**Non-interest-bearing
                accounts
            
            $
            6,466
            
            
            5.1
            %
            $
            5,748
            
            
            4.7
            %
            $
            3,685
            
            
            3.8
            %Interest-bearing
                NOW
            
            
            12,424
            
            
            9.7
            
            
            11,542
            
            
            9.5
            
            
            8,902
            
            
            9.2Money
                market
            
            
            14,317
            
            
            11.2
            
            
            5,878
            
            
            4.8
            
            
            4,531
            
            
            4.7Savings
                accounts
            
            
            4,398
            
            
            3.4
            
            
            4,445
            
            
            3.7
            
            
            4,445
            
            
            4.6Certificates
                of deposit
            
            
            90,140
            
            
            70.6
            
            
            94,309
            
            
            77.3
            
            
            75,225
            
            
            77.7Total
            
            $
            127,745
            
            
            100.0
            %
            $
            121,922
            
            
            100.0
            %
            $
            96,788
            
            
            100.0
            %




34




The
      following table indicates the amount of certificates of deposit in excess of
      $100,000 by time remaining until maturity as of June 30, 2007.




**Maturity
                Period**
            
            **Amount****(In
                thousands)**3
                Months or less
            
            $
            8,187Over
                3 through 6 months
            
            
            1,869Over
                6 through 12 months
            
            
            10,510Over
                12 months
            
            
            8,352Total
            
            $
            28,918




The
      following table sets forth the amount and maturities of certificates of deposit
      classified by rates at June 30, 2007.




**1
                Year or less**
            
            **1-2
                Years**
            
            **2-3
                Years**
            
            **3-4
                Years**
            
            **4-5
                Years**
            
            **Total****(In
                thousands)**2.00%
                to 2.99%
            
            $
            3,970
            
            $
            125
            
            $
            1
            
            $
            -
            
            $
            -
            
            $
            4,0963.00%
                to 3.99%
            
            
            6,982
            
            
            4,401
            
            
            344
            
            
            61
            
            
            -
            
            
            11,7884.00%
                to 4.99%
            
            
            3,810
            
            
            2,345
            
            
            2,968
            
            
            624
            
            
            129
            
            
            9,8765.00%
                to 5.99%
            
            
            50,908
            
            
            9,800
            
            
            2,766
            
            
            855
            
            
            51
            
            
            64,380Total
            
            $
            65,670
            
            $
            16,671
            
            $
            6,079
            
            $
            1,540
            
            $
            180
            
            $
            90,140




***Borrowings.*** ****  We
      utilize borrowings from the Federal Home Loan Bank of Topeka to supplement
      our
      supply of funds for loans and investments.




**Year
                Ended June 30,****2007**
            
            **2006**
            
            **2005****(Dollars
                in thousands)**Maximum
                amount outstanding at any month end during the period:FHLB
                Advances
            
            $
            35,132
            
            $
            38,804
            
            $
            31,726FHLB
                Line of Credit
            
            
            9,500
            
            
            8,900
            
            
            6,100Average
                amounts outstanding during the period:FHLB
                Advances
            
            $
            31,354
            
            $
            30,459
            
            $
            29,305FHLB
                Line of Credit
            
            
            3,631
            
            
            3,217
            
            
            2,123Weighted
                average interest rate during the period:FHLB
                Advances
            
            
            5.3
            %
            
            5.1
            %
            
            5.0
            %FHLB
                Line of Credit
            
            
            5.5
            
            
            3.9
            
            
            1.6Balance
                outstanding at end of period:FHLB
                Advances
            
            $
            30,600
            
            $
            30,604
            
            $
            26,852FHLB
                Line of Credit
            
            
            -
            
            
            -
            
            
            6,100Weighted
                average interest rate at end of period:FHLB
                Advances
            
            
            5.3
            %
            
            5.3
            %
            
            5.4
            %FHLB
                Line of Credit
            
            
            -
            
            
            -
            
            
            3.6




Federal
      Home Loan Bank borrowings decreased $4,000, or 0.01%, in the year ended June
      30,
      2007. The
      advances outstanding as of June 30, 2007 mature in 2008 through 2014.
      Federal Home
      Loan Bank advances decreased $2.3 million, or 7.1%, in 2007.





35




***Stockholders’*** **** ***Equity*** .
      Stockholders’ equity
      decreased $2.0 million to $23.0 million for the year ended June 30, 2007, from
      $25.0 million for the year ended June 30, 2006. This decrease was primarily
      the
      result of a net loss for the year of $1.4 million. Additionally, the decrease
      is
      a result of the Company purchasing treasury stock for $695,000 for the Equity
      Incentive Plan.




**Comparison
      of Results of Operations for the Years Ended June 30, 2007 and June 30,
      2006**




*General* .
      Net
      loss for the year ended June 30, 2007 increased $431,000 to $1.4 million,
      compared to a net loss of $969,000 for the year ended June 30, 2006. The
      increase in net loss was principally the result of a decrease in net interest
      income of $26,000, an increase in the provision for loan losses of $113,000,
      a
      decrease in non-interest income of $538,000, an increase in non-interest
      expenses of $52,000 and an increase in income tax benefits of
      $299,000.




*Interest
      Income* .
      Interest income increased $1.5 million to $10.4 million for the year ended
      June
      30, 2007, from $9.0 million for the year ended June 30, 2006. The yield on
      interest-earning assets increased 50 basis points and average interest-earning
      assets increased $11.1 million, or 7.0%, to $169.2 million for the year ended
      June 30, 2007 from $158.1 million for the year ended June 30, 2006.




Interest
      income from loans increased $1.5 million, or 18.3%, to $9.8 million for the
      year
      ended June 30, 2007, from $8.3 million for the year ended June 30, 2006. The
      increase was due to an increase in the average balance of loans during 2007
      to
      $156.2 million from $143.2 million in 2006 with an increase of 50 basis points
      in the average yield over the same period. The increase in average balance
      and
      yield is due to the Bank’s continued commitment to originate commercial loans
      that tend to have a higher balance and yield. Interest income from securities
      and other decreased $42,000 to $636,000 for the year ended June 30, 2007, from
      $678,000 for the year ended June 30, 2006. The decrease was the result of a
      decline in the average balance of securities at June 30, 2007 to $13.0 million
      from $15.0 million at June 30, 2006.




*Interest
      Expense* .
      Total
      interest expense increased $1.5 million, or 29.5%, to $6.6 million for 2007
      from
      $5.1 million for 2006. The increase in interest expense resulted from an
      increase in the average cost of interest bearing liabilities to 4.4% from 3.5%
      in 2006, reflecting higher market interest rates during 2007, and by a $6.1
      million increase in the average balance of interest bearing liabilities. The
      average balance of interest-bearing demand deposits increased $1.8 million,
      or
      18.2% to $11.9 million in 2007, with the average cost increasing to 1.9% from
      1.1% in 2006. The average balance of money market and savings accounts decreased
      $1.9 million, or 13.3%, and the average cost increased to 2.3% for the year
      ended June 30, 2007 compared to 0.7% for the year ended June 30, 2006. The
      decrease in average balances and the increase in cost was due to the Bank’s
      customers moving funds to take advantage of the increased rate environment.
      The
      average balance of certificates of deposit increased $4.8 million, or 5.6%,
      to
      $90.5 million for the year ended June 30, 2007 from $85.7 million for the year
      ended June 30, 2006. Interest expense related to borrowings increased $177,000
      due to an increase in the average balance of borrowings during 2007 of $1.3
      million or 3.9% with the average cost of borrowings increasing 30 basis points
      during 2007.




*Net
      Interest Income* .
      Net
      interest income decreased $26,000, or 0.7%, to $3.9 million for 2007. Our ratio
      of average interest earning assets to average interest-bearing liabilities
      increased to 112.9% for the year ended June 30, 2007, from 110.0% for the year
      ended June 30, 2006. Our net interest margin decreased to 2.3% for 2007 from
      2.5% for 2006.




*Provision
      for Loan Losses* .
      We
      establish provisions for loan losses, which are charged to operations, at a
      level necessary to absorb known and inherent losses that are both probable
      and
      reasonably estimable at the date of the financial statements. In evaluating
      the
      level of the allowance for loan losses, management considers historical loss
      experience, the types of loans and the amount of loans in the loan portfolio,
      adverse situations that may affect the borrower’s ability to repay, the
      estimated value of any underlying collateral, peer group information, and
      prevailing economic conditions. This evaluation is inherently subjective, as
      it
      requires estimates that are susceptible to significant revision as more
      information becomes available or as future events change. Based on our
      evaluation of these factors, management recorded a provision of $233,000 for
      the
      year ended June 30, 2007, as compared to a provision of $120,000 for the year
      ended June 30, 2006. We used the same methodology and generally similar
      assumptions in assessing the allowance for both years. The allowance for loan
      losses was $1.1 million, or 0.7% of gross loans outstanding at June 30, 2007,
      as
      compared to $926,000, or 0.6%, of gross loans outstanding at June 30, 2006.
      The
      level of the allowance is based on estimates, and the ultimate losses may vary
      from the estimates.




36




Nonperforming
      loans were $468,000 and $555,000 at June 30, 2007 and 2006, respectively. We
      have allocated the allowance among categories of loan types as well as
      classification status at each period-end date. Assumptions and allocation
      percentages based on loan types and classification status have been consistently
      applied. Classified loans are assigned a higher percentage of allowance
      allocation.




Although
      we believe that we used the best information available to establish the
      allowance for loan losses, future additions to the allowance may be necessary
      based on estimates that are susceptible to change as a result of changes in
      economic conditions and other factors. In addition, the OTS, as an integral
      part
      of its examination process, periodically reviews our allowance for loan losses.
      The OTS may require us to recognize adjustments to the allowance based on its
      judgments about information available to it at the time of its examination.




*Non-interest
      Income* .
      Non-interest income decreased $538,000, or 27.5%, to $1.4 million for the year
      ended June 30, 2007, as compared to $2.0 million for the year ended June 30,
      2006. The primary reasons for the decrease in non-interest income was a $695,000
      gain on the sale of Freddie Mac common stock realized in 2006 with no comparable
      transaction in 2007. The change in loan fees was due to loan
      activity.




*Non-interest
      Expense* .
      Non-interest expense for the year ended June 30, 2007 increased $52,000 to
      $7.1
      million from $7.0 million for the year ended June 30, 2006. Salaries and
      employee benefits for the year ended June 30, 2007 increased $655,000, or 18.6%,
      to $4.2 million from $3.5 million for the year ended June 30, 2006 primarily
      due
      to the expansion of the banking operations and increased salaries and the cost
      of employee benefits. Occupancy expense for the year ended June 30, 2007
      increased $201,000, or 25.3%, to $997,000 from $796,000 for the year ended
      June
      30, 2006 as a result of the increased costs associated with the banking
      operations such as real estate taxes and depreciation. Advertising and public
      relations expense decreased $179,000 to $240,000 for the year ended June 30,
      2007 from $419,000 for the year ended June 30, 2006. The higher expense in
      2006
      was the result of expenses incurred related to a concerted public relations
      campaign after our stock offering in November, 2005. The higher expense in
      2006
      was the result of expenses incurred related to the stock offering. Contributions
      and donations decreased $738,000 from 2006 as the Company funded Equitable
      Bank
      Charitable Foundation in 2006 with no similar transaction in 2007.




*Income
      Tax Expense* .
      We
      realized an income tax benefit of $637,000 in 2007 as compared to a income
      tax
      benefit of $338,000 in 2006. These results were based on the results from
      operations from the applicable tax year.


37




***Average
      Balances and Yields.*** ** The
      following table presents information regarding average balances of assets and
      liabilities, the total dollar amounts of interest income and dividends from
      average interest-earning assets, the total dollar amounts of interest expense
      on
      average interest-bearing liabilities, and the resulting average yields and
      costs. The yields and costs for the periods indicated are derived by dividing
      income or expense by the average balances of assets or liabilities,
      respectively, for the periods presented. For purposes of this table, nonaccrual
      loans are included in average balances only. Yields are not presented on a
      tax-equivalent basis. Any adjustments necessary to present yields on a
      tax-equivalent basis are insignificant.




**Year
                ended June 30,****2007**
            
            **2006****Average**
              **Balance**
            
            **Interest
                Income**
            
            **Yield/
                Cost**
            
            **Average**
              **Balance**
            
            **Interest
                Income**
            
            **Yield/
                Cost****(Dollars
                in thousands)****Assets:**Interest-earning
                assets:Loans,
                net
            
            $
            156,199
            
            $
            9,792
            
            
            6.3
            %
            $
            143,150
            
            $
            8,279
            
            
            5.8
            %Securities
                and other
            
            
            13,043
            
            
            636
            
            
            4.9
            
            
            14,973
            
            
            678
            
            
            4.5Total
                interest-bearing assets
            
            
            169,242
            
            
            10,428
            
            
            6.2
            
            
            158,123
            
            
            8,957
            
            
            5.7Non-interest-earning
                assets
            
            
            12,136
            
            
            
            
            
            
            
            
            13,422Total
                assets
            
            $
            181,378
            
            
            
            
            
            
            
            $
            171,545**Liabilities
                and equity:**Interest-bearing
                liabilities:Interest-bearing
                demand deposits
            
            $
            11,885
            
            $
            231
            
            
            1.9
            
            $
            10,055
            
            $
            113
            
            
            1.1Money
                market and savings accounts
            
            
            12,458
            
            
            291
            
            
            2.3
            
            
            14,364
            
            
            105
            
            
            0.7Certificates
                of deposit
            
            
            90,523
            
            
            4,189
            
            
            4.6
            
            
            85,684
            
            
            3,173
            
            
            3.7Total
                interest-bearing deposits
            
            
            114,866
            
            
            4,711
            
            
            4.1
            
            
            110,103
            
            
            3,391
            
            
            3.1FHLB
                borrowings
            
            
            34,985
            
            
            1,859
            
            
            5.3
            
            
            33,676
            
            
            1,682
            
            
            5.0Total
                interest-bearing liabilities
            
            
            149,851
            
            
            6,570
            
            
            4.4
            
            
            143,779
            
            
            5,073
            
            
            3.5Non-interest
                bearing deposits
            
            
            5,802
            
            
            
            
            
            
            
            
            4,723Other
                non-interest bearing liabilities
            
            
            1,255
            
            
            
            
            
            
            
            
            2,089Total
                liabilities
            
            
            156,908
            
            
            
            
            
            
            
            
            150,591Equity
            
            
            24,470
            
            
            
            
            
            
            
            
            20,954Total
                liabilities and equity
            
            $
            181,378
            
            
            
            
            
            
            
            $
            171,545Net
                interest income
            
            
            
            
            $
            3,858
            
            
            
            
            
            
            
            $
            3,884Interest
                rate spread
            
            
            
            
            
            
            
            
            1.8
            %
            
            
            
            
            
            
            
            2.1
            %Net
                interest margin
            
            
            
            
            
            
            
            
            2.3
            %
            
            
            
            
            
            
            
            2.5
            %Average
                interest-earning assets to average interest-bearing
                liabilities
            
            
            
            
            
            
            
            
            112.9
            %
            
            
            
            
            
            
            
            110.0
            %




38





***Rate/Volume
      Analysis*** **.** The
      following table sets forth the effects of changing rates and volumes on our
      net
      interest income. The rate column shows the effects attributable to changes
      in
      rate (changes in rate multiplied by prior volume). The volume column shows
      the
      effects attributable to changes in volume (changes in volume multiplied by
      prior
      rate). The net column represents the sum of the prior columns. For purposes
      of
      this table, changes attributable to changes in both rate and volume that cannot
      be segregated have been allocated proportionately based on the changes due
      to
      rate and the changes due to volume.





**2007
                Compared to 2006****Increase
                (Decrease) Due to****Volume**
            
            **Rate**
            
            **Net****(In
                thousands)**Interest
                and dividend income:Loans
            
            $
            802
            
            $
            711
            
            $
            1,513Securities
                and other
            
            
            (119
            )
            
            77
            
            
            (42
            )Total
                interest-earning assets
            
            
            683
            
            
            788
            
            
            1,471Interest
                expense:Deposits
            
            
            156
            
            
            1,164
            
            
            1,320FHLB
                borrowings
            
            
            68
            
            
            109
            
            
            177Total
                interest-bearing liabilities
            
            
            224
            
            
            1,273
            
            
            1,497Net
                change in interest income
            
            $
            459
            
            $
            (485
            )
            $
            (26
            )





**Risk
      Management**





***Overview*** **.** Managing
      risk is an essential part of successfully managing a financial institution.
      Our
      most prominent risk exposures are credit risk, interest rate risk and market
      risk. Credit risk is the risk of not collecting the interest and/or the
      principal balance of a loan or investment when it is due. Interest rate risk
      is
      the potential reduction of interest income as a result of changes in interest
      rates. Market risk arises from fluctuations in interest rates that may result
      in
      changes in the values of financial instruments, such as available-for-sale
      securities that are accounted for on a mark-to-market basis. Other risks that
      we
      encounter are operational risks, liquidity risks and reputation risk.
      Operational risks include risks related to fraud, regulatory compliance,
      processing errors, technology and disaster recovery. Liquidity risk is the
      possible inability to fund obligations to depositors, lenders or borrowers.
      Reputation risk is the risk that negative publicity or press, whether true
      or
      not, could cause a decline in our customer base or revenue.





***Credit
      Risk Management*** **.** Our
      strategy for credit risk management focuses on having well-defined credit
      policies and uniform underwriting criteria and providing prompt attention to
      potential problem loans. Our strategy also emphasizes the origination of one-
      to
      four-family residential real estate loans, which typically have lower default
      rates than other types of loans and are secured by collateral that generally
      tends to appreciate in value.




When
      a
      borrower fails to make a required loan payment, we take a number of steps to
      attempt to have the borrower cure the delinquency and restore the loan to
      current status. When the loan becomes 15 days past due, a past due notice is
      generated and sent to the borrower and phone calls are made. If payment is
      not
      then received by the 30 th day of
      delinquency, a further notification is sent to the borrower. If no successful
      workout can be achieved, we will commence foreclosure proceedings. If a
      foreclosure action is instituted and the loan is not brought current, paid
      in
      full, or refinanced before the foreclosure sale, the real property securing
      the
      loan generally is sold at foreclosure. Generally, when a consumer loan becomes
      60 days past due, we institute collection proceedings and attempt to repossess
      any personal property that secures the loan. We may consider loan workout
      arrangements with certain borrowers under certain circumstances.




39




Management
      reports to the board of directors monthly regarding the amount of loans
      delinquent more than 30 days, all loans in foreclosure and all foreclosed and
      repossessed property that we own.




***Analysis
      of Non-Performing and Classified Assets.*** We
      consider repossessed assets and loans that are over 90 days past due to be
      nonperforming assets. Loans are generally placed on nonaccrual status when
      they
      become over 90 days delinquent at which time the accrual of interest ceases
      and
      the allowance for any uncollectible accrued interest is established and charged
      against operations. Typically, payments received on a nonaccrual loan are
      applied to the outstanding principal and interest as determined at the time
      of
      collection of the loan.




Real
      estate that we acquire as a result of foreclosure or by deed-in-lieu of
      foreclosure is classified as foreclosed assets until it is sold. When property
      is acquired, it is initially recorded at the lower of its cost, or market,
      less
      estimate selling expenses. Holding costs and declines in fair value after
      acquisition of the property result in charges against income.




The
      following table provides information with respect to our nonperforming assets
      at
      the dates indicated. We did not have any troubled debt restructurings.




**At
                June 30,****2007**
            
            **2006**
            
            **2005****(Dollars
                in thousands)**Nonaccrual
                loans:Real
                estate—mortgage
            
            $
            205
            
            $
            452
            
            $
            169Construction
            
            
            -
            
            
            -
            
            
            -Commercial
            
            
            261
            
            
            -
            
            
            -Consumer
            
            
            3
            
            
            38
            
            
            21Total
                nonaccrual loans
            
            
            469
            
            
            490
            
            
            190Loans
                over 90 days, still on accrual
            
            
            -
            
            
            65
            
            
            -Foreclosed
                assets, net
            
            
            83
            
            
            -
            
            
            4Total
                nonperforming assets
            
            $
            552
            
            $
            555
            
            $
            194Total
                nonperforming loans to total loans
            
            
            0.3
            %
            
            0.4
            %
            
            0.2
            %Total
                nonperforming loans to total assets
            
            
            0.3
            
            
            0.3
            
            
            0.1Total
                nonperforming assets to total assets
            
            
            0.3
            
            
            0.3
            
            
            0.1




Interest
      income that would have been recorded for the year ended June 30, 2007 had
      nonaccruing loans been current according to their original terms was not
      material. No interest related to nonaccrual loans was included in interest
      income for the year ended June 30, 2007.




At
      June
      30, 2007, our ratio of allowance for loan losses to nonperforming loans
      increased to 225.4% from 189.0% at June 30, 2006. Our allowance for loan losses
      increased $130,000 during 2007.




Federal
      regulations require us to review and classify our assets on a regular basis.
      In
      addition, the Office of Thrift Supervision has the authority to identify problem
      assets and, if appropriate, require them to be classified. There are three
      classifications for problem assets: substandard, doubtful and loss. “Substandard
      assets” must have one or more defined weaknesses and are characterized by the
      distinct possibility that we will sustain some loss if the deficiencies are
      not
      corrected. “Doubtful assets” have the weaknesses of substandard assets with the
      additional characteristic that the weaknesses make collection or liquidation
      in
      full on the basis of currently existing facts, conditions and values
      questionable, and there is a high possibility of loss. An asset classified
      “loss” is considered uncollectible and of such little value that continuance as
      an asset of the institution is not warranted. The regulations also provide
      for a
“special mention” category, described as assets which do not currently expose us
      to a sufficient degree of risk to warrant classification but do possess credit
      deficiencies or potential weaknesses deserving our close attention. When we
      classify an asset as special mention, substandard or doubtful we establish
      a
      specific allowance for loan losses. If we classify an asset as loss, we allocate
      an amount equal to 100% of the portion of the asset classified loss.




40





The
      following table shows the aggregate amounts of our classified assets at the
      dates indicated.




**At
                June 30,****2007**
            
            **2006**
            
            **2005****(In
                thousands)**Special
                mention assets
            
            $
            1,939
            
            $
            116
            
            $
            588Substandard
                assets
            
            
            2,566
            
            
            2,713
            
            
            1,701Doubtful
                assets
            
            
            -
            
            
            -
            
            
            -Loss
                assets
            
            
            -
            
            
            -
            
            
            4Total
                classified assets
            
            $
            4,505
            
            $
            2,829
            
            $
            2,293




Other
      than disclosed in the above tables, there are no other loans at June 30, 2007
      that management has serious doubts about the ability of the borrowers to comply
      with the present loan repayment terms. The increase in special mention assets
      is
      primarily due to an additional $1.5 million in loans that are currently
      performing, but possess some credit deficiencies.




***Delinquencies*** ***.*** The
      following table provides information about delinquencies in our loan portfolio
      at the dates indicated.




**At
                June 30,****2007**
            
            **2006**
            
            **2005****30-59
                Days****Past
                Due**
            
            **60-89
                Days Past Due**
            
            **30-59
                Days Past Due**
            
            **60-89
                Days Past Due**
            
            **30-59
                Days Past Due**
            
            **60-89
                Days Past Due****(In
                thousands)**Real
                estate—mortgage loans
            
            $
            698
            
            $
            458
            
            $
            141
            
            $
            449
            
            $
            86
            
            $
            1,008Construction
                loans
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Commercial
                loans
            
            
            54
            
            
            2
            
            
            2
            
            
            -
            
            
            -
            
            
            -Consumer
                loans
            
            
            54
            
            
            -
            
            
            44
            
            
            14
            
            
            43
            
            
            2Total
            
            $
            806
            
            $
            460
            
            $
            187
            
            $
            463
            
            $
            129
            
            $
            1,010




***Analysis
      and Determination of the Allowance for Loan Losses*** ***.*** The
      allowance for loan losses is a valuation allowance for probable incurred credit
      losses in the loan portfolio. We evaluate the need to establish allowances
      against losses on loans on a quarterly basis. When additional allowances are
      necessary, a provision for loan losses is charged to earnings.




41




Our
      methodology for assessing the appropriateness of the allowance for loan losses
      consists of: (1) a specific allowance on identified problem loans; and (2)
      a
      general valuation allowance on the remainder of the loan portfolio. Although
      we
      determine the amount of each element of the allowance separately, the entire
      allowance for loan losses is available for the entire portfolio.




*Specific
      Allowance Required for Identified Problem Loans.* We
      establish an allowance on certain identified problem loans based on such factors
      as: (1) the strength of the customer’s personal or business cash flows; (2) the
      availability of other sources of repayment; (3) the amount due or past due;
      (4)
      the type and value of collateral; (5) the strength of our collateral position;
      (6) the estimated cost to sell the collateral; and (7) the borrower’s effort to
      cure the delinquency.




*General
      Valuation Allowance on the Remainder of the Loan Portfolio.* We
      establish a general allowance for loans that are not delinquent to recognize
      the
      incurred losses associated with lending activities. This general valuation
      allowance is determined by segregating the loans by loan category and assigning
      percentages to each category. The percentages are adjusted for significant
      factors that, in management’s judgment, affect the collectibility of the
      portfolio as of the evaluation date. These significant factors may include
      changes in existing general economic and business conditions affecting our
      primary lending areas and the national economy, staff lending experience, recent
      loss experience in particular segments of the portfolio, specific reserve and
      classified asset trends, delinquency trends and risk rating trends. The applied
      loss factors are reevaluated quarterly to ensure their relevance in the current
      economic environment.




We
      identify loans that may need to be charged off as a loss by reviewing all
      delinquent loans, classified loans and other loans that management may have
      concerns about collectibility. For individually reviewed loans, the borrower’s
      inability to make payments under the terms of the loan or a shortfall in
      collateral value would result in our allocating a portion of the allowance
      to
      the loan that was impaired.




The
      Office of Thrift Supervision, as an integral part of its examination process,
      periodically reviews our allowance for loan losses. The Office of Thrift
      Supervision may require us to make additional provisions for loan losses based
      on judgments different from ours.




At
      June
      30, 2007, our allowance for loan losses represented 0.7% of total gross loans
      and 225.4% of nonperforming loans. The allowance for loan losses increased
      $130,000 to $1.1 million at June 30, 2007 from $926,000 at June 30, 2006 as
      the
      provision for loan losses of $233,000 was partially offset by net chargeoffs
      of
      $103,000. The provision for loan losses in 2007 reflected management’s estimate
      of the potential risk in the loan portfolio at June 30, 2007 **.** At June
      30, 2007, the specific allowance identified for impaired loans was $60,000.
      The
      general valuation allowance on the remainder of the loan portfolio was $997,000.
      The increase in the specific allowance for identified problem loans from June
      30, 2006 reflected an increase in the size of the loan portfolio, particularly
      commercial and construction loans. At June 30, 2006, the specific allowance
      identified for impaired loans was $113,000. The general valuation allowance
      on
      the remainder of the loan portfolio was $813,000.


42




The
      following table sets forth the breakdown of the allowance for loan losses by
      loan category at the dates indicated.





**At
                June 30,****2007**
            
            **2006**
            
            **2005****Amount**
            
            **%
                of Allowance to Total Allowance**
            
            **%
                of Loans**
              **in
                Category**
              **to
                Total Loans**
            
            **Amount**
            
            **%
                of Allowance to Total Allowance**
            
            **%
                of Loans**
              **in
                Category**
              **to
                Total Loans**
            
            **Amount**
            
            **%
                of Allowance to Total Allowance**
            
            **%
                of Loans in Category to Total Loans****(Dollars
                in thousands)**Real
                estate-mortgage
            
            $
            703
            
            
            66.5
            %
            
            70.9
            %
            $
            575
            
            
            62.1
            %
            
            76.6
            %
            $
            553
            
            
            70.4
            %
            
            84.6
            %Construction
            
            
            34
            
            
            3.2
            
            
            3.1
            
            
            18
            
            
            1.9
            
            
            2.5
            
            
            7
            
            
            0.9
            
            
            1.5Commercial
            
            
            163
            
            
            15.4
            
            
            15.7
            
            
            188
            
            
            20.3
            
            
            11.2
            
            
            131
            
            
            16.6
            
            
            3.3Consumer
            
            
            157
            
            
            14.9
            
            
            10.3
            
            
            145
            
            
            15.7
            
            
            9.7
            
            
            95
            
            
            12.1
            
            
            10.6Total
                allowance for   loan losses
            
            $
            1,057
            
            
            100.0
            %
            
            100.0
            %
            
            926
            
            
            100.0
            %
            
            100.0
            %
            $
            786
            
            
            100.0
            %
            
            100.0
            %




Although
      we believe that we use the best information available to establish the allowance
      for loan losses, future adjustments to the allowance for loan losses may be
      necessary and our results of operations could be adversely affected if
      circumstances differ substantially from the assumptions used in making the
      determinations. Furthermore, while we believe we have established our allowance
      for loan losses in conformity with generally accepted accounting principles,
      there can be no assurance that regulators, in reviewing our loan portfolio,
      will
      not request us to increase our 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 increases 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 may adversely affect our financial
      condition and results of operations.


43


***Analysis
      of Loan Loss Experience.*** The
      following table sets forth an analysis of the allowance for loan losses for
      the
      periods indicated.




**Year
                Ended June 30,****2007**
            
            **2006**
            
            **2005****(In
                thousands)**Allowance
                at beginning of period
            
            $
            926
            
            $
            786
            
            $
            746Provision
                for loan losses
            
            
            233
            
            
            120
            
            
            118Charge
                offs:Real
                estate—mortgage
            
            
            (52
            )
            
            (5
            )
            
            -Construction
            
            
            -
            
            
            -
            
            
            -Commercial
            
            
            (39
            )
            
            (34
            )
            
            (28
            )Consumer
            
            
            (35
            )
            
            (22
            )
            
            (53
            )Total
                charge-offs
            
            
            (126
            )
            
            (61
            )
            
            (81
            )Recoveries:Real
                estate—mortgage
            
            
            -
            
            
            -
            
            
            -Construction
            
            
            -
            
            
            -
            
            
            -Commercial
            
            
            23
            
            
            80
            
            
            -Consumer
            
            
            1
            
            
            1
            
            
            3Total
                recoveries
            
            
            24
            
            
            81
            
            
            3Net
                recoveries (charge-offs)
            
            
            (102
            )
            
            20
            
            
            (78
            )Allowance
                at end of period
            
            $
            1,057
            
            $
            926
            
            $
            786Allowance
                to nonperforming loans
            
            
            225.4
            %
            
            189.0
            %
            
            412.9
            %Allowance
                to total loans outstanding at the end of the period
            
            
            0.7
            %
            
            0.6
            %
            
            0.6
            %Net
                charge-offs (recoveries) to average loans outstanding during the
                period
            
            
            0.1
            %
            
            0.0
            %
            
            0.1
            %




***Interest
      Rate Risk Management.***  We
      manage
      the interest rate sensitivity of our interest-bearing liabilities and
      interest-earning assets in an effort to minimize the adverse effects of changes
      in the interest rate environment. Deposit accounts typically react more quickly
      to changes in market interest rates than mortgage loans because of the shorter
      maturities of deposits. As a result, sharp increases in interest rates may
      adversely affect our earnings while decreases in interest rates may beneficially
      affect our earnings. To reduce the potential volatility of our earnings, we
      have
      sought to improve the match between asset and liability maturities and rates,
      while maintaining an acceptable interest rate spread. Our strategy for managing
      interest rate risk emphasizes: adjusting the maturities of borrowings; adjusting
      the investment portfolio mix and duration; and periodically selling fixed-rate
      mortgage loans and available-for-sale securities. We currently do not
      participate in hedging programs, interest rate swaps or other activities
      involving the use of derivative financial instruments.




44




We
      have
      an ALCO/Operations Committee, which includes members of management, to
      communicate, coordinate and control all aspects involving asset/liability
      management. The committee establishes and monitors the volume, maturities,
      pricing and mix of assets and funding sources with the objective of managing
      assets and funding sources to provide results that are consistent with
      liquidity, growth, risk limits and profitability goals.




***Net
      Portfolio Value Analysis*** *.* In
      addition to a net interest income simulation analysis, we use two net portfolio
      value analyses, one prepared by the Office of Thrift Supervision and the other
      prepared by us, to review our level of interest rate risk. These analyses
      measure interest rate risk by computing changes in net portfolio value of our
      cash flows from assets, liabilities and off-balance sheet items in the event
      of
      a range of assumed changes in market interest rates. Net portfolio value
      represents the market value of portfolio equity and is equal to the market
      value
      of assets minus the market value of liabilities, with adjustments made for
      off-balance sheet items. These analyses assess the risk of loss in market risk
      sensitive instruments in the event of a sudden and sustained 100 to 300 basis
      point increase or 100 and 200 basis point decrease in market interest rates
      with
      no effect given to any steps that we might take to counter the effect of that
      interest rate movement. Because of the low level of market interest rates,
      these
      analyses are not performed for decreases of more than 200 basis points. We
      measure interest rate risk by modeling the changes in net portfolio value over
      a
      variety of interest rate scenarios.




The
      following table, which is based on information that we provide to the Office
      of
      Thrift Supervision, presents the change in our net portfolio value at June
      30,
      2007, that would occur in the event of an immediate change in interest rates
      based on Office of Thrift Supervision assumptions, with no effect given to
      any
      steps that we might take to counteract that change.




**Net
                Portfolio Value**
            
            **Net
                Portfolio Value as % of**
              **Portfolio
                Value of Assets****Basis
                Point (“bp”)**
              **Change
                in Rates**
            
            **$Amount**
            
            **$Change**
            
            **%Change**
            
            **NPV
                Ratio**
            
            **Change
                (bp)****(Dollars
                in thousands)**300
            
            $
            13,823
            
            $
            (6,876
            )
            
            (33.0
            )%
            
            7.9
            %
            
            (329)bp200
            
            
            16,324
            
            
            (4,375
            )
            
            (21.0
            )
            
            9.1
            
            
            (204
            )100
            
            
            18,635
            
            
            (2,064
            )
            
            (10.0
            )
            
            10.2
            
            
            (94
            )0
            
            
            20,699
            
            
            -
            
            
            -
            
            
            11.1
            
            
            -(100)
            
            
            22,374
            
            
            1,675
            
            
            8.0
            
            
            11.9
            
            
            71(200)
            
            
            23,399
            
            
            2,700
            
            
            13.0
            
            
            12.2
            
            
            110




45




The
      Office of Thrift Supervision uses various assumptions in assessing interest
      rate
      risk. These assumptions relate to interest rates, loan prepayment rates, deposit
      decay rates, and the market values of certain assets under differing interest
      rate scenarios, among others. As with any method of measuring interest rate
      risk, certain shortcomings are inherent in the methods of analyses presented
      in
      the foregoing tables. For example, although certain assets and liabilities
      may
      have similar maturities or periods to repricing, they may react in different
      degrees to changes in market interest rates. Also, the interest rates on certain
      types of assets and liabilities may fluctuate in advance of changes in market
      interest rates, while interest rates on other types may lag behind changes
      in
      market rates. Additionally, certain assets, such as adjustable-rate mortgage
      loans, have features that restrict changes in interest rates on a short-term
      basis and over the life of the asset. Further, in the event of a change in
      interest rates, expected rates of prepayments on loans and early withdrawals
      from certificates could deviate significantly from those assumed in calculating
      the table.




***Liquidity
      and Capital Management*** ***.*** Liquidity is the ability to meet current and future financial obligations of
      a
      short-term nature. Our primary sources of funds consist of deposit inflows,
      loan
      repayments, maturities and sales of securities and borrowings from the Federal
      Home Loan Bank of Topeka. While maturities and scheduled amortization of loans
      and securities are predictable sources of funds, deposit flows and loan
      prepayments are greatly influenced by general interest rates, economic
      conditions and competition.




We
      regularly adjust our investments in liquid assets based upon our assessment
      of
      (1) expected loan demand, (2) expected deposit flows, (3) yields available
      on
      interest-earning deposits and securities and (4) the objectives of our
      asset/liability management policy.




Our
      most
      liquid assets are cash and cash equivalents. The levels of these assets depend
      on our operating, financing, lending and investing activities during any given
      period. At June 30, 2007, cash and cash equivalents totaled $9.5 million.
      Securities classified as available-for-sale, which provide additional sources
      of
      liquidity, totaled $6.6 million at June 30, 2007. Of this amount, $4.7 million
      were pledged to secure certain depository relationships, such as certificates
      of
      deposit and checking accounts held by various municipal entities and a
      charitable organization, as well as a line of credit with the Federal Home
      Loan
      Bank of Topeka. In addition, at June 30, 2007, we had the ability to borrow
      a
      total of approximately $53.9 million from the Federal Home Loan Bank of Topeka.
      On June 30, 2007, we had
      $30.6 million of borrowings outstanding. Future growth of our loan portfolio
      resulting from our expansion efforts may require us to borrow additional
      funds.




At
      June
      30, 2007, we had $18.6 million in loan commitments outstanding, which consisted
      of $2.6 million of mortgage loan commitments, $3.3 million in unused home equity
      lines of credit, $224,000 of personal lines of credit, and $12.5 million in
      home
      equity lines of credit. Certificates of deposit due within one year of June
      30,
      2007 totaled $65.7 million, or 72.9% of
      certificates of deposit. We believe the large percentage of certificates of
      deposit that mature within one year reflects the flat yield curve. If these
      maturing deposits do not remain with us, we will be required to seek other
      sources of funds, including other certificates of deposit and borrowings.
      Depending on market conditions, we may be required to pay higher rates on such
      deposits or other borrowings than we currently pay on the certificates of
      deposit due on or before June 30, 2007. Based on prior experience, management
      believes that a significant portion of such deposits will remain with us.
      Alternatively, we could reduce our level of liquid assets, such as our cash
      and
      cash equivalents. In addition, the cost of such deposits may be significantly
      higher if market interest rates are higher at the time of renewal.




46




**Recent
      Accounting Pronouncements**




For
      a
      discussion of the impact of recent accounting pronouncements, see Note 1 to
      the
      consolidated financial statements of Equitable Financial included in this
      report.




***Off-Balance
      Sheet Arrangements*** **.**  In
      the
      normal course of operations, we engage in a variety of financial transactions
      that, in accordance with generally accepted accounting principles, are not
      recorded in our 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. A presentation of our outstanding
      loan
      commitments and unused lines of credit at June 30, 2007 and their effect on
      our
      liquidity is presented at note 12 of the notes to the consolidated financial
      statements and under “—Risk Management—Liquidity Management.”




For
      the
      years ended June 30, 2007 and June 30, 2006, we did not engage in any
      off-balance-sheet transactions reasonably likely to have a material effect
      on
      our financial condition, results of operations or cash flows.





**Effect
      of Inflation and Changing Prices**





The
      financial statements and related financial data presented in this annual report
      on Form 10-KSB have been prepared in accordance with generally accepted
      accounting principles, which require the measurement of financial position
      and
      operating results in terms of historical dollars without considering the change
      in the relative purchasing power of money over time due to inflation. The
      primary impact of inflation on our operations is reflected in increased
      operating costs. Unlike most industrial companies, virtually all the assets
      and
      liabilities of a financial institution are monetary in nature. As a result,
      interest rates generally have a more significant impact on a financial
      institution’s performance than do general levels of inflation. Interest rates do
      not necessarily move in the same direction or to the same extent as the prices
      of goods and services.


47


**ITEM
      7.**  **FINANCIAL
      STATEMENTS**





Information
      required by this item is included herein beginning on page F-1.







**ITEM
              8.**
            **CHANGES
                IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
                DISCLOSURE**





None





**ITEM
      8A.**  **CONTROLS
      AND PROCEDURES**





The
      Company’s management, including the Company’s principal executive officer and
      principal financial officer, have evaluated the effectiveness of the Company’s
“disclosure controls and procedures,” as such term is defined in Rule 13a-15(e)
      promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange
      Act”). Based upon their evaluation, the principal executive officer and
      principal financial officer concluded that, as of the end of the period covered
      by this report, the Company’s disclosure controls and procedures were effective
      for the purpose of ensuring that the information required to be disclosed in
      the
      reports that the Company 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 the Company’s management,
      including its principal executive and principal financial officers, as
      appropriate to allow timely decisions regarding required
      disclosure.





48




**ITEM
      8B.**  **OTHER
      INFORMATION**





None.




**PART
      III**





**ITEM
              9.**
            **DIRECTORS,
                EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE GOVERNANCE;
                COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
                ACT**





**Directors**





For
      information concerning the directors of the Company, the information contained
      under the section captioned *“Proposal
      1 - Election of Directors”* in
      Equitable Financial’s Proxy Statement for the 2007 Annual Meeting of
      Stockholders the (“Proxy Statement”) is incorporated by reference.





**Executive
      Officers**





The
      Board
      of Directors annually elects the executive officers of Equitable Financial,
      Equitable Financial MHC and Equitable Bank, who serve at the Board’s discretion.
      Our executive officers are:





**Name**
            
            **Position**Richard
                L. Harbaugh
            
            Chief
                Executive Officer of Equitable Bank and Acting Chairman of the Board,
                Chief Executive Officer and President of Equitable Financial and
                Equitable
                Financial MHCKim
                E. Marco
            
            Executive
                Vice President and Chief Financial Officer of Equitable Bank, Equitable
                Financial and Equitable Financial MHCThomas
                E. Gdowski
            
            Executive
                Vice President and Chief Operating Officer of Equitable Bank and
                Equitable
                FinancialDavid
                F. Dohmen
            
            President
                of Equitable BankTerry
                M. Pfeifer
            
            Senior
                Vice President and Chief Investment Officer of Equitable Bank and
                Equitable Financial




Below
      is
      information regarding our executive officers who are not also directors. Unless
      otherwise stated, each executive officer has held his or her current position
      for at least the last five years. Ages presented are as of June 30, 2007.




*Kim
      E. Marco* has
      served as Chief Financial Officer of the Bank since 1995 and as Executive Vice
      President of the Bank since 2004. Mr. Marco has served as the Executive Vice
      President and Chief Financial Officer of the Company and Equitable Financial
      MHC
      since their formation in November 2005. Mr. Marco served as the Bank’s Senior
      Vice President from 1995 to 2004 and previously served as Treasurer and
      Controller. Age 55.




*David
      F. Dohmen* has
      served as Senior Vice President and Chief Lending Officer of the Bank since
      2001. Mr. Dohmen has served as the Bank’s President since the Bank’s
      reorganization in November 2005. Mr. Dohmen previously served as the Bank’s
      Assistant Vice President and Lending Officer since 1988. Age 44.




49




*Terry
      M. Pfeifer* has
      served as the Bank’s Senior Vice President and Chief Investment Officer since
      March 2001. Mr. Pfeifer has also served as the Senior Vice President and Chief
      Investment Officer of the Company since its formation in November 2005.
      Previously, Mr. Pfeifer served as an investment officer at Wells Fargo Bank
      from
      August 2000 to March 2001 and as an investment officer at Overland National
      Bank
      from August 1997 to August 2000. Age 44.




**Compliance
      with Section 16(a) of the Exchange Act**





Reference
      is made to the cover page of this report and to the section captioned *“Section
      16(a) Beneficial Ownership Reporting Compliance”* in the
      Proxy Statement for information regarding compliance with Section 16(a) of
      the
      Exchange Act.





**Disclosure
      of Audit Committee Financial Expert**





For
      information concerning the audit committee financial expert, reference is made
      to the section captioned *“Corporate
      Governance-Meetings and Committees of the Board of Directors-Audit
      Committee”* in the
      Proxy Statement.





**Disclosure
      of Code of Ethics and Business Conduct**





The
      Company has adopted a Code of Ethics and Business Conduct. A copy of the Code
      of
      Ethics and Business Conduct is available, without charge, upon written request
      to Cindy Pope, Corporate Secretary, Equitable Financial Corp., 113-115 North
      Locus Street, Grand Island, Nebraska 68801.





**ITEM
      10.**  **EXECUTIVE
      COMPENSATION**





The
      information contained under the sections captioned *“Executive
      Compensation”* and *“Corporate
      Governance—Directors’ Compensation”* in the
      Proxy Statement is incorporated herein by reference.





**ITEM
              11.**
            **SECURITY
                OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
                STOCKHOLDER MATTERS**





(a)
            Security
                Ownership of Certain Beneficial
                Owners





Information
      required by this item is incorporated herein by reference to the section
      captioned *“Stock
      Ownership”* in the
      Proxy Statement.




(b)
            Security
                Ownership of Management





Information
      required by this item is incorporated herein by reference to the section
      captioned *“Stock
      Ownership”* in the
      Proxy Statement.





(c)
            Changes
                in Control





Management
      of Equitable Financial knows of no arrangements, including any pledge by any
      person of securities of Equitable Financial, the operation of which may at
      a
      subsequent date result in a change in control of the
      registrant.


50





(d)
            Equity
                Compensation Plan Information





The
      Company has adopted the Equitable Financial Corp. 2006 Equity Incentive Plan,
      which was approved by stockholders in November 2006.




The
      following table sets forth certain information with respect to the Company’s
      equity compensation plan as of June 30, 2007.




**Plan
                Category**
            
            **(a)**
              **Number
                of securities to be issued**
              **upon
                exercise of outstanding**
              **options,
                warrants and rights**
            
            **(b)**
              **Weighted-average
                exercise**
              **price
                of outstanding**
              **options,
                warrants and rights**
            
            **(c)**
              **Number
                of securities remaining**
              **available
                for future issuance**
              **under
                equity compensation**
              **plan
                (excluding securities**
              **reflected
                in column (a))**Equity
                compensation plansapproved
                by security holders
            
            
            226,208
            
            
            —
            
            
            226,208Equity
                compensation plans notapproved
                by security holders
            
            
            —
            
            
            —
            
            
            —Total
            
            
            226,208
            
            
            —
            
            
            226,208





**ITEM
      12.**  **CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
      INDEPENDENCE**




(a)
            Certain
                relationships and related
                transactions




(b)
            Director
                Independence





The
      information required by this item is incorporated herein by reference to the
      section captioned “Proposal 1 - Election of Directors” in the Proxy
      Statement.




**ITEM
      13.**  **EXHIBITS**


3.1
              
              Charter
                  of Equitable Financial Corp.(1)3.2
              
              Bylaws
                  of Equitable Financial Corp.(1)4.0
              
              Stock
                  Certificate of Equitable Financial Corp.(2)10.1
              
              *Form
                  of Equitable Bank Employee Stock Ownership Plan and Trust(2)10.2
              
              *Form
                  of ESOP Loan Commitment Letter and ESOP Loan Documents(2)10.3
              
              *Form
                  of Equitable Bank Employee Severance Compensation Plan(2)10.4
              
              *Equitable
                  Federal Savings Bank of Grand Island 401(k) Savings Plan(2)10.5
              
              *Form
                  of Equitable Bank Supplemental Executive Retirement Plan(2)10.6
              
              *Employment
                  Agreement among Equitable Bank, Equitable Financial Corp. and Richard
                  L.
                  Harbaugh(3)10.7
              
              *Employment
                  Agreement among Equitable Bank, Equitable Financial Corp. and Kim
                  E.
                  Marco(3)10.8
              
              *Employment
                  Agreement among Equitable Bank, Equitable Financial Corp. and Terry
                  M.
                  Pfeifer(3)10.9
              
              *Employment
                  Agreement among Equitable Bank, Equitable Financial Corp. and Thomas
                  E.
                  Gdowski(4)10.10
              
              *Equitable
                  Finanical Corp. 2006 Equity Incentive Plan(5)10.11
              
              *Form
                  of Award Agreements under 2006 Equity Incentive Plan(6)21.0
              
              Subsidiaries
                  of the Small Business Issuer23.1
              
              Consent
                  of McGladery & Pullen, LLP23.2
              
              Consent
                  of Crowe Chizek and Company LLC31.1
              
              Rule
                  13a-14(a)/15d-14(a) Certification of Chief Executive
                  Officer31.2
              
              Rule
                  13a-14(a)/15d-14(a) Certification of Chief Financial
                  Officer32.0
              
              Section
                  1350 Certification







*
            Management
                contract or compensatory plan, contract or
                arrangement.




51




(1)
            Incorporated
                by reference into this document from the Exhibits filed with the
                Securities and Exchange Commission on the Quarterly Report on Form
                10-QSB
                on February 14, 2006.




(2)
            Incorporated
                by reference into this document from the Exhibits filed with the
                Securities and Exchange Commission on the Registration Statement
                on Form
                SB-2, and any amendments thereto. Registration No.
                333-126617.




(3)
            Incorporated
                by reference into this document from the Exhibits filed with the
                Securities and Exchange Commission on the Quarterly Report on Form
                10-QSB
                on May 15, 2006.




(4)
            Incorporated
                by reference into this document from Exhibit 10.9 to the Annual Report
                on
                Form 10-KSB filed with the Securities and Exchange Commission on
                September
                27, 2007.




(5)
            Incorporated
                by reference into this document from Appendix C to the definitive
                proxy
                statement filed with the Securities and Exchange Commission on October
                2,
                2006.




(6)
            Incorporated
                by reference into this document from Exhibit 10.1 to the Registration
                Statement on Form S-8 (File No.
                333-139040).





**ITEM
      14.**  **PRINCIPAL
      ACCOUNTANT FEES AND SERVICES**





The
      information required by this item is incorporated herein by reference to the
      section captioned *“Proposal
      3-Ratification of Independent Auditors”* in the
      Proxy Statement.


52


**SIGNATURES**





In
      accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
      this report to be signed on its behalf by the undersigned, thereunto duly
      authorized.


EQUITABLE
                FINANCIAL CORP.Date:
                September 26, 2007
            By:
            /s/
              Richard L. HarbaughRichard
                L. HarbaughPresident
                and Chief Executive Officer




In
      accordance with the Exchange Act, this report has been signed below by the
      following persons on behalf of the registrant in the capacities and on the
      dates
      indicated.





Name
            
            Title
            
            Date/s/ Richard
              L.
              HarbaughRichard
                L. Harbaugh
            
            President,
                Chief Executive Officer and Director (principal executive
                officer)
            
            September
                26, 2007/s/ Kim
              E. MarcoKim
                E. Marco
            
            Executive
                Vice President and Chief Financial Officer (principal accounting
                and
                financial officer)
            
            September
                26, 2007Vincent
                J. Dugan
            
            Director/s/ Thomas
              E. GdowskiThomas
                E. Gdowski
            
            Director
            
            September
                26, 2007/s/
              Gary L. HedmanGary
                L. Hedman
            
            Director
            
            September
                26, 2007/s/
              Pamela L. PricePamela
                L. Price
            
            Director
            
            September
                26, 2007Jonas
                A. Proffitt, M.D.
            
            Director




53





Name
            
            Title
            
            Date/s/ Jack
              E. RasmussenJack
                E. Rasmussen
            
            Director
            
            September
                26, 2007/s/ Douglas
              J. RedmanDouglas
                J. Redman
            
            Director
            
            September
                26, 2007/s/ Benedict
              P. Wassinger, Jr.Benedict
                P. Wassinger, Jr.
            
            Director
            
            September
                26, 2007




54


**Report
          of Independent Registered Public Accounting Firm**
 
 Board
          of
          Directors
 Equitable
          Financial Corp.
 Grand
          Island, Nebraska
 
 We
          have
          audited the accompanying consolidated balance sheet of Equitable Financial
          Corp.
          and subsidiaries as of June 30, 2007 and the related consolidated statements
          of
          operations, stockholders’ equity and cash flows for the year ended June 30,
          2007. These financial statements are the responsibility of the Company's
          management. Our responsibility is to express an opinion on these financial
          statements based on our audit.
 
 We
          conducted our audit in accordance with the standards of the Public Company
          Accounting Oversight Board (United States). Those standards require that
          we plan
          and perform the audit to obtain reasonable assurance about whether the
          financial
          statements are free of material misstatement. An audit includes examining,
          on a
          test basis, evidence supporting the amounts and disclosures in the financial
          statements. An audit also includes assessing the accounting principles
          used and
          significant estimates made by management, as well as evaluating the overall
          financial statement presentation. We believe that our audit provide a reasonable
          basis for our opinion.
 
 In
          our
          opinion, the consolidated financial statements referred to above present
          fairly,
          in all material respects, the financial position of Equitable Financial
          Corp.
          and subsidiaries as of June 30, 2007 and the results of their operations
          and
          their cash flows for the year ended June 30, 2007 in conformity with U.S.
          generally accepted accounting principles.
 
 Omaha,
          Nebraska
 September
          25, 2007
  McGladrey
          & Pullen, LLP is a member firm of RSM International -
 an
            affiliation of separate and independent legal entities.
  F-1
 
   REPORT
            OF
            INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 Board
            of
            Directors
 Equitable
            Financial Corp.
 Grand
            Island, Nebraska
 
 We
            have
            audited the accompanying consolidated balance sheet of Equitable Financial
            Corp.
            as of June 30, 2006 and the related consolidated statements of operations,
            stockholders' equity, and cash flows for the year then ended. These financial
            statements are the responsibility of the Company's management. Our
            responsibility is to express an opinion on these financial statements
            based on
            our audit.
 
 We
            conducted our audit in accordance with the standards of the Public Company
            Accounting Oversight Board (United States). Those standards require that
            we plan
            and perform the audit to obtain reasonable assurance about whether the
            financial
            statements are free of material misstatement. An audit includes examining,
            on a
            test basis, evidence supporting the amounts and disclosures in the financial
            statements. An audit also includes assessing the accounting principles
            used and
            significant estimates made by management, as well as evaluating the overall
            financial statement presentation. We believe that our audit provides
            a
            reasonable basis for our opinion.
 
 In
            our
            opinion, the consolidated financial statements referred to above present
            fairly,
            in all material respects, the financial position of Equitable Financial
            Corp. as
            of June 30, 2006, and the results of its operations and its cash flows
            for the
            year then ended in conformity with U.S. generally accepted accounting
            principles.
  Oak Brook, IllinoisSeptember
                    15,
                    2006
 F-2
  **Equitable
            Financial Corp.**
 
 **Consolidated
            Balance Sheet**
 **June
            30, 2007 and 2006**
 2007
                  
                  2006**Assets**Cash
                      and due from financial institutions
                  
                  $
                  2,382,234
                  
                  $
                  2,392,931Federal
                      funds sold
                  
                  
                  7,100,000
                  
                  
                  1,700,000Cash
                      and cash equivalents
                  
                  
                  9,482,234
                  
                  
                  4,092,931Securities
                      available-for-sale, at fair value
                  
                  
                  6,584,274
                  
                  
                  9,429,663Securities
                      held-to-maturity, fair value June 30, 2007 $684,464;June
                      30, 2006 $888,342
                  
                  
                  702,030
                  
                  
                  915,184Federal
                      Home Loan Bank stock, at cost
                  
                  
                  2,447,500
                  
                  
                  2,311,800Loans,
                      net of allowance for loan losses June 30, 2007 $1,056,873;June
                      30, 2006 $926,312
                  
                  
                  153,329,552
                  
                  
                  153,408,146Premises
                      and equipment, net
                  
                  
                  6,850,891
                  
                  
                  6,067,331Foreclosed
                      assets, net
                  
                  
                  82,900
                  
                  
                  -Accrued
                      interest receivable
                  
                  
                  1,235,278
                  
                  
                  1,153,751Other
                      assets
                  
                  
                  2,119,652
                  
                  
                  1,382,255**Total
                      assets**
                  
                  $
                  182,834,311
                  
                  $
                  178,761,061**Liabilities
                      and Stockholders' Equity**LiabilitiesDepositsNon-interest
                      bearing deposits
                  
                  $
                  6,465,861
                  
                  $
                  5,748,057Interest-bearing
                      deposits
                  
                  
                  121,279,000
                  
                  
                  116,173,516**Total
                      deposits**
                  
                  
                  127,744,861
                  
                  
                  121,921,573Federal
                      Home Loan Bank borrowings
                  
                  
                  30,599,626
                  
                  
                  30,604,426Advance
                      payments from borrowers for taxes and insurance
                  
                  
                  794,930
                  
                  
                  893,846Accrued
                      interest payable and other liabilities
                  
                  
                  528,952
                  
                  
                  246,540**Total
                      liabilities**
                  
                  
                  159,668,369
                  
                  
                  153,666,385Common
                      stock in ESOP subject to contingent repurchase obligation
                  
                  
                  151,679
                  
                  
                  61,033Commitments
                      and contingencies (See Note 12)Stockholders'
                      equityPreferred
                      stock, $0.01 par value per share; authorized 1,000,000
                      shares,no
                      shares outstanding
                  
                  
                  -
                  
                  
                  -Common
                      stock, $0.01 par value, 14,000,000 shares authorized;3,297,509
                      shares issued at June 30, 2007 and 2006
                  
                  
                  32,975
                  
                  
                  32,975Additional
                      paid-in capital
                  
                  
                  13,619,515
                  
                  
                  13,617,427Retained
                      earnings
                  
                  
                  11,421,576
                  
                  
                  12,820,516Unearned
                      ESOP shares
                  
                  
                  (1,135,440
                  )
                  
                  (1,226,280
                  )Treasury
                      stock, 64,631 shares at cost
                  
                  
                  (694,783
                  )
                  
                  -Accumulated
                      other comprehensive (loss), net of tax
                  
                  
                  (77,901
                  )
                  
                  (149,962
                  )Reclassification
                      of ESOP shares
                  
                  
                  (151,679
                  )
                  
                  (61,033
                  )**Total
                      stockholders' equity**
                  
                  
                  23,014,263
                  
                  
                  25,033,643**Total
                      liabilities and stockholders' equity**
                  
                  $
                  182,834,311
                  
                  $
                  178,761,061
 
 See
          Notes
          to Consolidated Financial Statements.
  F-3
  **Equitable
            Financial Corp.**
 
 **Consolidated
            Statements of Operations**
 **Years
            Ended June 30, 2007 and 2006**
 
 2007
                  
                  2006Interest
                      incomeLoans
                  
                  $
                  9,791,954
                  
                  $
                  8,279,023Securities
                  
                  
                  488,967
                  
                  
                  598,072Other
                  
                  
                  146,968
                  
                  
                  79,539**Total
                      interest income**
                  
                  
                  10,427,889
                  
                  
                  8,956,634Interest
                      expenseDeposits
                  
                  
                  4,710,452
                  
                  
                  3,391,211Federal
                      Home Loan Bank borrowings
                  
                  
                  1,859,397
                  
                  
                  1,681,406**Total
                      interest expense**
                  
                  
                  6,569,849
                  
                  
                  5,072,617Net
                      interest income
                  
                  
                  3,858,040
                  
                  
                  3,884,017Provision
                      for loan losses
                  
                  
                  233,231
                  
                  
                  120,000Net
                      interest income after provision for loan losses
                  
                  
                  3,624,809
                  
                  
                  3,764,017Noninterest
                      incomeService
                      charges on deposit accounts
                  
                  
                  387,480
                  
                  
                  233,823Gain
                      on sale of securities
                  
                  
                  -
                  
                  
                  694,583Brokerage
                      fee income
                  
                  
                  910,419
                  
                  
                  842,220Gain
                      on sale of data processor stock
                  
                  
                  -
                  
                  
                  34,778Loss
                      on sale of loans
                  
                  
                  (17,822
                  )
                  
                  (142,972
                  )Other
                      loan fees
                  
                  
                  58,488
                  
                  
                  211,385Other
                      income
                  
                  
                  77,582
                  
                  
                  79,904**Total
                      noninterest income**
                  
                  
                  1,416,147
                  
                  
                  1,953,721
  (continued)
 
 F-4
 
 **Equitable
          Financial Corp.**
  **Consolidated
          Statements of Operations**
 **Years
          Ended June 30, 2007 and 2006 (continued)**
  2007
                
                2006Noninterest
                    expensesSalaries
                    and employee benefits
                
                
                4,165,216
                
                
                3,510,683Director
                    and committee fees
                
                
                101,550
                
                
                97,800Data
                    processing fees
                
                
                380,906
                
                
                389,008Occupancy
                    and equipment
                
                
                997,423
                
                
                796,368Regulatory
                    fees and deposit insurance premium
                
                
                69,163
                
                
                61,033Loss
                    on sale of foreclosed assets
                
                
                3,847
                
                
                501Loss
                    on investment in low income housing partnerships
                
                
                30,866
                
                
                39,309Advertising
                    and public relations
                
                
                239,979
                
                
                419,456Contributions
                    and donations
                
                
                71,114
                
                
                809,369Insurance
                    and surety bond premiums
                
                
                90,291
                
                
                88,636Professional
                    fees
                
                
                379,204
                
                
                327,537Supplies,
                    telephone, postage
                
                
                255,554
                
                
                231,968ATM
                    expenses
                
                
                33,158
                
                
                30,955Dues
                    and subscriptions
                
                
                40,361
                
                
                45,307Other
                    expenses
                
                
                218,221
                
                
                176,836**Total
                    noninterest expense**
                
                
                7,076,853
                
                
                7,024,766(Loss)
                    before income taxes
                
                
                (2,035,897
                )
                
                (1,307,028
                )Income
                    tax (benefit)
                
                
                (636,957
                )
                
                (338,227
                )Net
                    (loss)
                
                $
                (1,398,940
                )
                $
                (968,801
                )Basic
                    and diluted (loss) per share
                
                $
                (0.44
                )
                $
                (0.27)*
 
 *
                (Loss)
                    per share is calculated based on the period of time from the
                    completion
                    date of the initial public offering, November 8, 2005, through
                    the period
                    ended June 30, 2006. See Note 11.
  See
          Notes
          to Consolidated Financial Statements.
  F-5
  **Equitable
            Financial Corp.**
 **Consolidated
            Statement of Stockholders' Equity**
 **Years
              Ended June 30, 2007 and 2006**
 Common
                    Stock
                
                
                Additional
                    Paid-In
                      Capital
                
                
                Retained
                    Earnings
                
                
                Unearned
                    ESOP
                      Shares
                
                
                Treasury
                    Stock
                
                
                Accumulated
                  Other
                  Comprehensive
                  Income
                    (Loss)
                
                
                Amount
                  Reclassified
                  on
                    ESOP
                  Shares
                
                
                TotalBalance,
                    June 30, 2005
                
                $
                -
                
                $
                -
                
                $
                13,889,317
                
                $
                -
                
                $
                -
                
                $
                473,301
                
                $
                -
                
                $
                14,362,618Comprehensive
                    lossNet
                    (loss)
                
                
                -
                
                
                -
                
                
                (968,801
                )
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                (968,801
                )Change
                    in net unrealized gain (loss) on securitiesavailable-for-sale,
                    net of income taxes andreclassification
                    adjustments
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                (623,263
                )
                
                -
                
                
                (623,263
                )**Total
                    comprehensive loss**
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (1,592,064
                )Distribution
                    to capitalize Equitable Financial MHC
                
                
                -
                
                
                -
                
                
                (100,000
                )
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                (100,000
                )Issuance
                    of common stock, net of offering costs
                
                
                32,348
                
                
                12,994,635
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                13,026,983Purchase
                    of 129,262 shares for ESOP
                
                
                -
                
                
                -
                
                
                -
                
                
                (1,292,620
                )
                
                -
                
                
                -
                
                
                -
                
                
                (1,292,620
                )Donation
                      of 62,653 shares to Equitable BankCharitable
                      Foundation
                
                
                627
                
                
                625,903
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                626,530Release
                    of 6,634 unearned ESOP shares
                
                
                -
                
                
                (3,111
                )
                
                -
                
                
                66,340
                
                
                -
                
                
                -
                
                
                -
                
                
                63,229Reclassification
                    due to release and changes in fair value ofcommon
                    stock in ESOP subject to contingentrepurchase
                    obligation of ESOP shares
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                (61,033
                )
                
                (61,033
                )Balance,
                    June 30, 2006
                
                $
                32,975
                
                $
                13,617,427
                
                $
                12,820,516
                
                $
                (1,226,280
                )
                $
                -
                
                $
                (149,962
                )
                $
                (61,033
                )
                $
                25,033,643Comprehensive
                    lossNet
                    (loss)
                
                
                **-**
                
                
                **-**
                
                
                (1,398,940
                )
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                (1,398,940
                )Change
                    in unrealized gain (loss) on securitiesavailable-for-sale,
                    net of income taxes
                
                
                **-**
                
                
                **-**
                
                
                -
                
                
                -
                
                
                -
                
                
                72,061
                
                
                -
                
                
                72,061**Total
                    comprehensive loss**
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (1,326,879
                )Release
                    of 9,084 unearned ESOP shares
                
                
                -
                
                
                2,088
                
                
                -
                
                
                90,840
                
                
                -
                
                
                -
                
                
                -
                
                
                92,928Purchase
                    of 64,631shares of treasury stock
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                (694,783
                )
                
                -
                
                
                -
                
                
                (694,783
                )Reclassification
                    due to release and changes in fair value ofcommon
                    stock in ESOP subject to contingentrepurchase
                    obligation of ESOP shares
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                (90,646
                )
                
                (90,646
                )Balance,
                    June 30, 2007
                
                $
                32,975
                
                $
                13,619,515
                
                $
                11,421,576
                
                $
                (1,135,440
                )
                $
                (694,783
                )
                $
                (77,901
                )
                $
                (151,679
                )
                $
                23,014,263
  See
            Notes
            to Consolidated Financial Statements.
  F-6
  **Equitable
            Financial Corp.**
 
 **Consolidated
            Statements of Cash Flows**
 **Years
            Ended June 30, 2007 and 2006**
 
 2007
                  
                  2006Cash
                      Flows From Operating Activities:Net
                      (loss)
                  
                  $
                  (1,398,940
                  )
                  $
                  (968,801
                  )Adjustments
                      to reconcile net (loss) to net cash (used in)operating
                      activities:Depreciation
                  
                  
                  412,948
                  
                  
                  238,917Federal
                      Home Loan Bank stock dividends
                  
                  
                  (135,700
                  )
                  
                  (108,340
                  )Charitable
                      foundation donation
                  
                  
                  -
                  
                  
                  626,530Donation
                      of premises and equipment
                  
                  
                  -
                  
                  
                  68,304ESOP
                      expense
                  
                  
                  92,928
                  
                  
                  63,229Deferred
                      loan origination costs, net
                  
                  
                  (55,994
                  )
                  
                  (187,960
                  )Amortization
                      of premiums and discounts
                  
                  
                  12,690
                  
                  
                  43,226Loss
                      on sale of loans
                  
                  
                  17,822
                  
                  
                  142,972Loss
                      on sale of foreclosed assets
                  
                  
                  3,847
                  
                  
                  501Provision
                      for loan losses
                  
                  
                  233,231
                  
                  
                  120,000Deferred
                      taxes
                  
                  
                  (635,531
                  )
                  
                  (338,226
                  )Gain
                      on sale of investments
                  
                  
                  -
                  
                  
                  (694,583
                  )Gain
                      on sale of data processor stock
                  
                  
                  -
                  
                  
                  (34,778
                  )Loss
                      on disposal of premises and equipment
                  
                  
                  21,009
                  
                  
                  -Loans
                      originated for sale
                  
                  
                  (9,945,949
                  )
                  
                  -Proceeds
                      from sale of loans
                  
                  
                  9,270,110
                  
                  
                  -Changes
                      in:Accrued
                      interest receivable
                  
                  
                  (81,527
                  )
                  
                  (467,553
                  )Other
                      assets
                  
                  
                  (42,000
                  )
                  
                  (93,536
                  )Accrued
                      interest payable and other liabilities
                  
                  
                  282,412
                  
                  
                  140,044**Net
                      cash (used in) operating activities**
                  
                  
                  (1,948,644
                  )
                  
                  (1,450,054
                  )Cash
                      Flows From Investing Activities:Net
                      change in loans
                  
                  
                  (7,944,802
                  )
                  
                  (38,156,129
                  )Proceeds
                      from sale of loans held for investment
                  
                  
                  8,079,625
                  
                  
                  6,328,580Proceeds
                      from sale of foreclosed assets, net
                  
                  
                  240,817
                  
                  
                  3,831Securities
                      available-for-saleProceeds
                      from sales
                  
                  
                  -
                  
                  
                  705,650Proceeds
                      from calls and principal repayments
                  
                  
                  2,945,397
                  
                  
                  2,367,997Securities
                      held-to-maturityProceeds
                      from principal repayments
                  
                  
                  209,638
                  
                  
                  312,009Proceeds
                      from sale of data processor stock
                  
                  
                  -
                  
                  
                  34,778Purchase
                      of Federal Home Loan Bank stock
                  
                  
                  -
                  
                  
                  (213,860
                  )Purchase
                      of premises and equipment
                  
                  
                  (1,217,517
                  )
                  
                  (2,472,458
                  )**Net
                      cash provided by (used in) investing activities**
                  
                  
                  2,313,158
                  
                  
                  (31,089,602
                  )
  (continued)
  F-7
 **Equitable
              Financial Corp.**
 
 **Consolidated
              Statements of Cash Flows (continued)**
 **Years
              Ended June 30, 2007 and 2006**
 
 2007
                    
                    2006Cash
                        Flows From Financing Activities:Net
                        change in deposits
                    
                    $
                    5,823,288
                    
                    $
                    25,133,454Proceeds
                        from Federal Home Loan Bank borrowings
                    
                    
                    58,100,000
                    
                    
                    63,100,001Repayments
                        of Federal Home Loan Bank borrowings
                    
                    
                    (58,104,800
                    )
                    
                    (65,447,825
                    )Net
                        change in advance payments from borrowers for taxes and
                        insurance
                    
                    
                    (98,916
                    )
                    
                    52,895Net
                        proceeds from initial stock offering
                    
                    
                    -
                    
                    
                    13,026,983Purchase
                        of treasury stock
                    
                    
                    (694,783
                    )Purchase
                        of ESOP shares
                    
                    
                    -
                    
                    
                    (1,292,620
                    )Distribution
                        to capitalize Equitable Financial MHC
                    
                    
                    -
                    
                    
                    (100,000
                    )**Net
                        cash provided by financing activities**
                    
                    
                    5,024,789
                    
                    
                    34,472,888Increase
                        in cash and cash equivalents
                    
                    
                    5,389,303
                    
                    
                    1,933,232Cash
                        and cash equivalents:Beginning
                    
                    
                    4,092,931
                    
                    
                    2,159,699Ending
                    
                    $
                    9,482,234
                    
                    $
                    4,092,931Supplemental
                        Cash Flow Information:Interest
                        paid on deposits and borrowings
                    
                    $
                    6,344,915
                    
                    $
                    5,036,246Income
                        taxes (refunded) paid
                    
                    $
                    (34,497
                    )
                    $
                    64,479Transfer
                        of loans to foreclosed assets
                    
                    $
                    327,564
                    
                    $
                    -Supplemental
                        Non-Cash Disclosure:Common
                        stock in ESOP subject to contingent repurchase obligation
                    
                    $
                    151,679
                    
                    $
                    61,033
 
 See
              Notes
              to Consolidated Financial Statements.
 
 F-8
 **Equitable
              Financial Corp.**
  **Notes
              to Consolidated Financial Statements**
  **Note
                    1.**
                **Nature
                    of Business and Significant Accounting
                    Policies**
  Principles
          of consolidation :
          The
          accompanying consolidated financial statements include the accounts of
          Equitable
          Financial Corp. (the “Company”) and its wholly owned subsidiary, Equitable Bank
          (the “Bank”). All significant intercompany transactions and balances are
          eliminated in consolidation.
 
 The
          Company was organized on November 8, 2005 and is a majority-owned subsidiary
          of
          Equitable Financial MHC. The financial statements do not include the
          transactions and balances of the MHC. The information as of and for the
          year
          ended June 30, 2006 includes the Company’s information beginning November 8,
          2005. The information in this report for the period prior to November 8,
          2005,
          including the financial statements and related financial data, relates
          to the
          Bank only.
 
 Mutual
          Holding Company reorganization and stock issuance :
          The
          Company was organized as a federal corporation at the direction of the
          Bank in
          connection with the mutual holding company reorganization of the Bank.
          The
          reorganization was completed on November 8, 2005. The transaction was accounted
          for at historical cost. In the reorganization, the Company sold 43.1% of
          its
          outstanding shares of common stock (1,421,226 shares) to the public, contributed
          1.9% of its outstanding shares of common stock (62,653 shares) plus $100,000
          in
          cash to the Equitable Bank Charitable Foundation and issued 55% of its
          outstanding shares of common stock (1,813,630 shares) to Equitable Financial
          MHC, the mutual holding company of the Bank. In addition, a contribution
          of
          $100,000 was made to capitalize Equitable Financial MHC. In connection
          with the
          reorganization, the Bank changed its name to Equitable Bank from Equitable
          Federal Savings Bank of Grand Island. Costs incurred in connection with
          the
          common stock offering (approximately $1.2 million) were recorded as a reduction
          of the proceeds from the offering. Net proceeds from the common stock offering
          amounted to approximately $13.0 million.
 
 Nature
          of business :
          The
          primary business of the Company is the ownership of the Bank. Through the
          Bank,
          the Company is engaged in the business of retail banking, with operations
          conducted through its main office and branches, which are located in Grand
          Island, North Platte and Omaha, Nebraska. The Bank’s primary services include
          accepting deposits, making loans, and investing in securities.
 
 Use
          of
          estimates :
          To
          prepare financial statements in conformity with U.S. generally accepted
          accounting principles, management makes estimates and assumptions based
          on
          available information. These estimates and assumptions affect the amounts
          reported in the financial statements and the disclosures provided, and
          future
          results could differ. The allowance for loan losses, deferred tax valuation
          allowance, and fair values of financial instruments are particularly subject
          to
          change.
 
 Cash
          flows :
          Cash
          and cash equivalents include cash, deposits with other financial institutions
          with maturities under 90 days, and federal funds sold. Net cash flows are
          reported for customer loan and deposit transactions, and advance payments
          from
          borrowers for taxes and insurance.
 
 Securities :
          Securities are classified as held-to-maturity and carried at amortized
          cost when
          management has the positive intent and ability to hold them to maturity.
          Securities are classified as available-for-sale when they might be sold
          before
          maturity. Securities available-for-sale are carried at fair value with
          unrealized holding gains and losses reported in other comprehensive income
          or
          loss, net of tax.
  F-9
 **Equitable
            Financial Corp.**
  **Notes
            to Consolidated Financial Statements**
 **Note
                    1.**
                **Nature
                    of Business and Significant Accounting Policies
                    (Continued)**
  Interest
          income is recognized under the interest method and includes amortization
          of
          purchase premium and discount. Gains and losses on sales are recorded on
          the
          trade date based on the amortized cost of the security sold and determined
          using
          the specific identification method.
 
 Declines
          in the fair value of securities below their cost that are other than temporary
          are reflected as realized losses. In determining if losses are
          other-than-temporary, management considers (1) the length of time and extent
          that fair value has been less than cost or adjusted cost, as applicable;
          (2) the
          financial condition and near-term prospects of the issuer; and (3) the
          Company’s
          ability and intent to hold the security for a period sufficient to allow
          for any
          anticipated recovery in fair value.
 
 Federal
          Home Loan Bank Stock :
          The
          Bank is a member of the Federal Home Loan Bank (“FHLB”) system. Members are
          required to own a certain amount of stock based on the level of borrowings
          and
          other factors and may invest in additional amounts. FHLB stock is carried
          at
          cost and classified as a restricted security. Because this stock is viewed
          as a
          long-term investment, impairment is based on ultimate recovery of par value.
          Both cash and stock dividends are reported as income.
 
 Loans
          and loan income :
          Loans
          that management has the intent and ability to hold until maturity or payoff
          are
          reported at the principal balance outstanding, net of the allowance for
          loan
          losses, premiums, and discounts on loans purchased, and net deferred loan
          costs.
          Interest income on loans is recognized in income over the term of the loan
          based
          on the amount of principal outstanding. Loan origination fees, net of certain
          direct origination costs, are deferred and recognized in interest income
          using
          the level-yield method without anticipating prepayments.
 
 Mortgage
          loans originated and intended for sale in the secondary market are carried
          at
          the lower of aggregate cost or market, as determined by outstanding commitments
          from investors. As of June 30, 2007 and 2006, loans held for sale were
          $742,925
          and $135,000, respectively.
 
 Interest
          income is reported on the interest method and includes amortization of
          net
          deferred loan fees and costs over the contractual loan term, adjusted for
          prepayments. Interest income is discontinued at the time the loan is over
          90-days delinquent unless the loan is well secured and in process of collection.
          In all cases, loans are placed on non-accrual or charged off at an earlier
          date
          if collection of principal or interest is considered doubtful.
 
 All
          interest accrued but not received for loans placed on nonaccrual is reversed
          against interest income. Interest received on such loans is accounted for
          on the
          cash-basis or cost-recovery method, until qualifying for return to accrual.
          Loans are returned to accrual status when all the principal and interest
          amounts
          contractually due are brought current and future payments are reasonably
          assured.
 
 Allowance
          for loans losses :
          The
          allowance for loan losses is a valuation allowance for probable incurred
          credit
          losses. Loan losses are charged against the allowance when management believes
          that the uncollectibility of a loan balance is confirmed. Subsequent recoveries,
          if any, are credited to the allowance. Management estimates the allowance
          balances required using past loan loss experience; the nature of the portfolio;
          information about specific borrower situations; and estimated collateral
          values,
          economic conditions, and other factors. Allocation of the allowance may
          be made
          of specific loans, but the entire allowance is available for any loan that,
          in
          management’s judgment, should be charged off.
  F-10
  **Equitable
          Financial Corp.**
  **Notes
          to Consolidated Financial Statements**
  **Note
                    1.**
                **Nature
                    of Business and Significant Accounting Policies
                    (Continued)**
  The
          allowance consists of specific and general components. The specific component
          relates to loans that are individually classified as impaired or loans
          otherwise
          classified as substandard or doubtful. The general component covers
          non-classified loans and is based on historical loss experience adjusted
          for
          current factors.
 
 A
          loan is
          impaired when full payment under the loan terms is not expected. Commercial
          loans and loans secured by nonresidential real estate are individually
          evaluated
          for impairment. If a loan is impaired, an allowance is established when
          the
          present value of estimated future cash flows using the loan’s existing rate (or
          the fair value of collateral if repayment is expected solely from the
          collateral) is lower than the carrying value of the loan. Large groups
          of
          smaller balance homogenous loans, such as consumer and loans secured by
          one-to-four family residential real estate loans, are collectively evaluated
          for
          impairment, and accordingly, they are not separately identified for impairment
          disclosures.
 
 Mortgage
          origination fees :
          Periodically, the Bank originates first mortgage loans for other investors.
          Generally, the Bank receives fees equivalent to a stated percentage of
          the loan
          amount. This fee is recognized as income at the time of closing. From time
          to
          time, the Bank also originates loans for sale in the secondary market.
          Gain on
          sale of loans in the secondary market is included in noninterest
          income.
 
 Transfers
          of financial assets :
          Transfers of financial assets are accounted for as sales when control over
          the
          assets has been surrendered. Control over transferred assets is deemed
          to be
          surrendered when: (1) the assets have been isolated from the Bank; (2)
          the
          transferee has the right to pledge or exchange the assets it received,
          and no
          condition both constrains the transferee from taking advantage of its right
          to
          pledge or exchange and provides more than a trivial benefit to the transferor;
          and (3) the Bank does not maintain effective control over the transferred
          assets
          through an agreement to repurchase them before their maturity or the ability
          to
          unilaterally cause the holder to return specific assets.
 
 Premises
          and equipment :
          Land is
          carried at cost. Premises and equipment are stated at cost less accumulated
          depreciation. Depreciation is included in non-interest expense and is computed
          on 25 to 40 years for buildings and improvements that extend the life of
          the
          original building, 10 to 20 years for routine building improvements, 5
          to 15
          years for furniture and equipment, and 2 to 5 years for computer equipment.
          The
          cost of maintenance and repairs is charged to expense as incurred.
 
 Foreclosed
          assets :
          Assets
          acquired through or instead of loan foreclosure are initially recorded
          at the
          lower of cost or market, less selling expenses when acquired. Any writedowns
          at
          the time of acquisition are charged against the allowance for loan losses.
          If
          the value declines subsequent to foreclosure, a valuation allowance is
          recorded
          through expense. Costs incurred after acquisition are expensed.
 
 Brokerage
          fee income :
          Acting
          as an agent, the Bank earns brokerage income by buying and selling securities
          on
          behalf of its customers through independent third parties and earning fees
          on
          the transactions. These fees are recorded on the settlement date, which
          is not
          materially different than the trade date.
 
 Long-term
          assets :
          Premises and equipment and other long-term assets are reviewed for impairment
          when events indicate that their carrying amount may not be recoverable
          from
          future undiscounted cash flows. If impaired, the assets are recorded at
          fair
          value.
  F-11
  **Equitable
          Financial Corp.**
  **Notes
          to Consolidated Financial Statements**
  **Note
                    1.**
                **Nature
                    of Business and Significant Accounting Policies
                    (Continued)**
  Income
          taxes :
          Income
          tax expense is the sum of the current year income tax due or refundable
          and the
          change in the deferred tax assets and liabilities. Deferred tax assets
          and
          liabilities are the expected future tax consequence of temporary differences
          between the carrying amounts and tax basis of assets and liabilities, computed
          using enacted tax rates. A valuation allowance reduces deferred tax assets
          to
          the amount expected to be realized.
 
 Employee
          Stock Ownership Plan :
          The
          cost of shares issued to the Employee Stock Ownership Plan (“ESOP”) but not yet
          allocated to participants is presented in the consolidated statement of
          financial condition as a reduction of stockholders’ equity. Compensation expense
          is recorded based on the market price of the shares as they are committed
          to be
          released for allocation to participant accounts. Because participants may
          require the Company to purchase their ESOP shares upon termination of their
          employment, the appraised fair value of all earned and allocated ESOP shares
          is
          reclassified from stockholders’ equity
 
 Loan
          commitments and related financial instruments :
          Financial instruments include off-balance-sheet credit instruments, such
          as
          commitments to make loans and standby letters of credit, issued to meet
          customer-financing needs. The face amount for these items represent the
          exposure
          to loss, before considering customer collateral or ability to repay. Such
          financial instruments are recorded when they are funded.
 
 Fair
          value of financial instruments :
          Fair
          values of financial instruments are estimated using relevant market value
          information and other assumptions, as more fully disclosed in a separate
          note.
          Fair value estimates involve uncertainties and matters of significant judgment
          regarding interest rates, credit risk, prepayments, and other factors,
          especially in the absence of broad markets for particular items. Changes
          in
          assumptions or in market conditions could significantly affect the
          estimates.
 
 Earnings
          (loss) per share :
          Basic
          earnings (loss) per share is based on net income (loss) divided by the
          weighted
          average number of shares outstanding during the period, including allocated
          and
          committed-to-be-released ESOP shares. Diluted earnings (loss) per share
          shows
          the dilutive effect, if any, of additional common shares issuable under
          stock
          options. The Company has no common stock equivalents; consequently, basic
          and
          diluted earnings (loss) per share are the same. There were no common shares
          outstanding prior to November 8, 2005.
 
 Loss
          contingencies :
          Loss
          contingencies, including claims and legal actions arising in the ordinary
          course
          of business, are recorded as liabilities when the likelihood of loss is
          probable
          and an amount or range of loss can be reasonably estimated. Management
          does not
          believe that there are such matters that will have a material effect on
          the
          financial statements.
 
 Comprehensive
          income or loss :
          Comprehensive income or loss consists of net income and other comprehensive
          income or loss. Other comprehensive income or loss includes unrealized
          gains and
          losses on securities available-for-sale, net of tax, which are also recognized
          as a separate component of stockholders’ equity.
 
 Segment
          reporting :
          An
          operating segment is defined as a component of a business for which separate
          financial information is available that is evaluated regularly by the chief
          operating decision maker in deciding how to allocate resources and evaluate
          performance. The Company has one operating segment, community
          banking.
 
 Reclassifications :
          Some
          items in the prior year financial statements were reclassified to conform
          to the
          current presentation.
  F-12
 **Equitable
            Financial Corp.**
  **Notes
            to Consolidated Financial Statements**
  **Note
                    1.**
                **Nature
                    of Business and Significant Accounting Policies
                    (Continued)**
  Pending
          accounting pronouncements :
          In June
          2006, the FASB issued Interpretation No. 48 (“FIN 48”), “ *Accounting
          for Uncertainty in Income Taxes.”* This
          interpretation applies to all tax positions accounted for in accordance
          with
          SFAS No. 109, *“Accounting
          for Income Taxes.”* FIN
          48
          clarifies the application of SFAS No. 109 by defining the criteria that
          an
          individual tax position must meet in order for the position to be recognized
          within the financial statements and provides guidance on measurement,
          derecognition, classification, interest and penalties, accounting in interim
          periods, disclosure and transition for tax positions. This interpretation
          is
          effective for fiscal years beginning after December 15, 2006, with earlier
          adoption permitted. Based upon our evaluation to date the Company does not
          expect the adoption of FIN 48 to have a material effect on our financial
          statements.
 
 In
          September 2006, the FASB issued SFAS No. 157, *“Fair
          Value Measurements”.* This
          Statement defines fair value, establishes a framework for measuring fair
          value,
          and expands disclosures about fair value measurements. It clarifies that
          fair
          value is the price that would be received to sell an asset or paid to transfer
          a
          liability in an orderly transaction between market participants in the
          market in
          which the reporting entity transacts. This Statement does not require any
          new
          fair value measurements, but rather, it provides enhanced guidance to other
          pronouncements that require or permit assets and liabilities to be measured
          at
          fair value. This Statement is effective for fiscal years beginning after
          November 15, 2007, with earlier adoption permitted. The Company does not
          expect
          that the adoption of this Statement will have a material impact on it financial
          position, results of operation and cash flows.
 
 In
          September 2006, the Emerging Issues Task Force (“EITF”) reached a final
          consensus 06-04 *“Accounting
          for Deferred Compensation and Postretirement Benefit Aspects of Endorsement
          Split-Dollar Life Insurance Arrangements.”* The
          consensus stipulates that an agreement by an employer to share a portion
          of the
          proceeds of a life insurance policy with an employee during the postretirement
          period is a postretirement benefit arrangement required to be accounted
          for
          under SFAS No. 106 or Accounting Principles Board Opinion (“APB”) No. 12,
“ *Omnibus
          Opinion - 1967.”* The
          consensus concludes that the purchase of a split-dollar life insurance
          policy
          does not constitute a settlement under SFAS No. 106 and, therefore, a liability
          for the postretirement obligation must be recognized under SFAS No. 106
          if the
          benefit is offered under an arrangement that constitutes a plan or under
          APB No.
          12 if it is not part of a plan. Issue 06-04 is effective for annual or
          interim
          reporting periods beginning after December 15, 2007. The Company has endorsement
          split-dollar life insurance policies and is currently assessing the financial
          statement impact of implementing EITF 06-04.
 
 In
          February 2007, the FASB issued SFAS 159 *“The
          Fair Value Option for Financial Assets and Financial Liabilities - Including
          an
          amendment of SFAS No. 115* ,”
which
          provides all entities, including not-for-profit organizations, with an
          option to
          report selected financial assets and liabilities at fair value. The objective
          of
          the Statement is to improve financial reporting by providing entities with
          the
          opportunity to mitigate volatility in earnings caused by measuring related
          assets and liabilities differently without having to apply complex provisions
          of
          hedge accounting. Certain specified items are eligible for the irrevocable
          fair
          value measurement option as established by Statement No. 159. Statement
          No. 159
          is effective as of the beginning of an entity’s first fiscal year beginning
          after November 15, 2007. Early adoption is permitted as of the beginning
          of a
          fiscal year that begins on or before November 15, 2007 provided the entity
          also
          elects to apply the provisions of Statement No. 157. The Company is currently
          evaluating the impact that the adoption of this Statement will have on
          its
          financial position, results of operation and cash flows.
  F-13
 **Equitable
            Financial Corp.**
  **Notes
            to Consolidated Financial Statements**
  **Note
                    1.**
                **Nature
                    of Business and Significant Accounting Policies
                    (Continued)**
 
 In
          March
          2007, the Emerging Issues Task Force (“EITF”) reached a final conclusion on
          Issue 06-10, *“Accounting
          for Collateral Assignment Split-Dollar Life Insurance
          Arrangement.”* The
          consensus concludes that a liability must be recognized for the postretirement
          obligation related to a collateral assignment split-dollar life insurance
          arrangement in accordance with SFAS No. 106 or APB No. 12. Any assets should
          be
          recognized and measure based on the nature and substance of the collateral
          assignment split-dollar life insurance arrangement. The effective date
          of EITF
          06-10 is for fiscal years beginning after December 15, 2007. The Company
          is
          currently assessing the financial statement impact of implementing EITF
          06-10.
  **Note
                    2.**
                **Securities**
  The
          fair
          value of securities available-for-sale and the related gross unrealized
          gains
          and losses recognized in accumulated other comprehensive income (loss)
          are as
          follows:
 Gross
                  
                  GrossCarrying
                  
                  Unrealized
                  
                  UnrealizedAmount
                  
                  Gains
                  
                  Losses
                  
                  Fair
                      ValueAt
                      June 30, 2007U.S.
                      government-sponsored entity securities
                  
                  $
                  3,985,000
                  
                  $
                  -
                  
                  $
                  (43,736
                  )
                  $
                  3,941,264Mortgage-backed
                      securities
                  
                  
                  1,464,099
                  
                  
                  10,494
                  
                  
                  (52,307
                  )
                  
                  1,422,286Collateralized
                      mortgage obligations
                  
                  
                  260,194
                  
                  
                  -
                  
                  
                  (12,190
                  )
                  
                  248,004State
                      and political subdivisions
                  
                  
                  993,012
                  
                  
                  -
                  
                  
                  (20,292
                  )
                  
                  972,720$
                  6,702,305
                  
                  $
                  10,494
                  
                  $
                  (128,525
                  )
                  $
                  6,584,274At
                      June 30, 2006U.S.
                      government-sponsored entity securities
                  
                  $
                  6,595,796
                  
                  $
                  -
                  
                  $
                  (133,576
                  )
                  $
                  6,462,220Mortgage-backed
                      securities
                  
                  
                  1,761,913
                  
                  
                  12,486
                  
                  
                  (68,196
                  )
                  
                  1,706,203Collateralized
                      mortgage obligations
                  
                  
                  306,419
                  
                  
                  -
                  
                  
                  (10,501
                  )
                  
                  295,918State
                      and political subdivisions
                  
                  
                  992,747
                  
                  
                  -
                  
                  
                  (27,425
                  )
                  
                  965,322$
                  9,656,875
                  
                  $
                  12,486
                  
                  $
                  (239,698
                  )
                  $
                  9,429,663
 
 The
          carrying amount, unrecognized gains and losses, and fair value of securities
          held-to-maturity were as follows:
 
 Gross
                
                GrossCarrying
                
                Unrealized
                
                Unrealized
                
                FairAmount
                
                Gains
                
                Losses
                
                ValueAt
                    June 30, 2007Mortgage-backed
                    securities
                
                $
                702,030
                
                $
                2,761
                
                $
                (20,327
                )
                $
                684,464At
                    June 30, 2006Mortgage-backed
                    securities
                
                $
                915,184
                
                $
                1,906
                
                $
                (28,747
                )
                $
                888,342
  F-14
  **Equitable
            Financial Corp.**
  **Notes
            to Consolidated Financial Statements**
 **Note
                    2.**
                **Securities
                    (Continued)**
  Mortgage-backed
          securities and collateralized mortgage obligations consist of Federal Home
          Loan
          Mortgage Corporation (“Freddie Mac”), Federal National Mortgage Association
          (“Fannie Mae”) issues and Government National Mortgage Association (“Ginnie
          Mae”).
 
 The
          carrying amount and fair values of securities available-for-sale at June
          30,
          2007 by contractual maturity are shown below. Securities not due at a single
          maturity date are shown separately. Expected maturities may differ from
          contractual maturities because borrowers may have the right to call or
          prepay
          obligations with or without call or prepayment penalties.
 Carrying
                      Amount
                  
                  Fair
                      ValueDue
                      in one year or less
                  
                  $
                  2,485,000
                  
                  $
                  2,466,574Due
                      after one year through five years
                  
                  
                  1,810,000
                  
                  
                  1,777,906Due
                      after five years through ten years
                  
                  
                  683,012
                  
                  
                  669,5044,978,012
                  
                  
                  4,913,984Mortgage-backed
                      securities
                  
                  
                  1,464,099
                  
                  
                  1,422,286Collateralized
                      mortgage obligations
                  
                  
                  260,194
                  
                  
                  248,004**Total**
                  
                  $
                  6,702,305
                  
                  $
                  6,584,274
 Securities
          pledged at June 30, 2007 and 2006 had an approximate carrying amount of
          $4,672,000 and $7,080,000, respectively and were pledged to secure certain
          customer depository relationships, advances, and a line of credit with
          the FHLB
          of Topeka.
 
 Sales
          of
          securities available-for-sale for the years ended June 30 were as
          follows:
 2007
                    
                    2006Proceeds
                    
                    $
                    -
                    
                    $
                    705,650Gross
                        gains
                    
                    
                    -
                    
                    
                    694,583Gross
                        losses
                    
                    
                    -
                    
                    
                    -
 F-15
  **Equitable
                              Financial Corp.**
  **Notes
                              to Consolidated Financial Statements**
 **Note
                                      2.**
                                  **Securities
                                      (Continued)**
  Information
                          pertaining to securities with gross unrealized losses at
                          June 30, 2007 and 2006,
                          aggregated by investment category and length of time that
                          individual securities
                          have been in a continuous loss position, follows:
 Less
                                      than 12 Months
                                  
                                  12
                                      Months or More
                                  
                                  TotalFair
                                  
                                  Unrealized
                                  
                                  Fair
                                  
                                  Unrealized
                                  
                                  Fair
                                  
                                  UnrealizedValue
                                  
                                  Losses
                                  
                                  Value
                                  
                                  Losses
                                  
                                  Value
                                  
                                  LossesJune
                                      20, 2007U.S.
                                      government-sponsored
                                      equitysecurities
                                  
                                  $
                                  -
                                  
                                  $
                                  -
                                  
                                  $
                                  3,941,264
                                  
                                  $
                                  (43,736
                                  )
                                  $
                                  3,941,264
                                  
                                  $
                                  (43,736
                                  )Mortgage-backedsecurities
                                  
                                  
                                  29,779
                                  
                                  
                                  (63
                                  )
                                  
                                  1,497,264
                                  
                                  
                                  (72,571
                                  )
                                  
                                  1,527,043
                                  
                                  
                                  (72,634
                                  )Collateralized
                                      mortgageobligations
                                  
                                  
                                  -
                                  
                                  
                                  -
                                  
                                  
                                  248,004
                                  
                                  
                                  (12,190
                                  )
                                  
                                  248,004
                                  
                                  
                                  (12,190
                                  )State
                                      and politicalsubdivisions
                                  
                                  
                                  357,300
                                  
                                  
                                  (6,510
                                  )
                                  
                                  615,420
                                  
                                  
                                  (13,782
                                  )
                                  
                                  972,720
                                  
                                  
                                  (20,292
                                  )$
                                  387,079
                                  
                                  $
                                  (6,573
                                  )
                                  $
                                  6,301,952
                                  
                                  $
                                  (142,279
                                  )
                                  $
                                  6,689,031
                                  
                                  $
                                  (148,852
                                  )June
                                      20, 2006U.S.
                                      government-sponsored
                                      equitysecurities
                                  
                                  $
                                  1,107,746
                                  
                                  $
                                  (3,050
                                  )
                                  $
                                  5,354,474
                                  
                                  $
                                  (130,526
                                  )
                                  $
                                  6,462,220
                                  
                                  $
                                  (133,576
                                  )Mortgage-backedsecurities
                                  
                                  
                                  648,632
                                  
                                  
                                  (29,043
                                  )
                                  
                                  1,205,765
                                  
                                  
                                  (67,900
                                  )
                                  
                                  1,854,397
                                  
                                  
                                  (96,943
                                  )Collateralized
                                      mortgageobligations
                                  
                                  
                                  -
                                  
                                  
                                  -
                                  
                                  
                                  295,918
                                  
                                  
                                  (10,501
                                  )
                                  
                                  295,918
                                  
                                  
                                  (10,501
                                  )State
                                      and politicalsubdivisions
                                  
                                  
                                  664,484
                                  
                                  
                                  (18,264
                                  )
                                  
                                  300,838
                                  
                                  
                                  (9,161
                                  )
                                  
                                  965,322
                                  
                                  
                                  (27,425
                                  )$
                                  2,420,862
                                  
                                  $
                                  (50,357
                                  )
                                  $
                                  7,156,995
                                  
                                  $
                                  (218,088
                                  )
                                  $
                                  9,577,857
                                  
                                  $
                                  (268,445
                                  )
 
 The
                          Company evaluates securities for other-than-temporary impairment
                          at least on a
                          quarterly basis and more frequently when economic or market
                          concerns warrant
                          such evaluation. Consideration is given to the length of
                          time and the extent to
                          which the fair value has been less than cost, the financial
                          condition and
                          near-term prospects of the issuer, and the intent and ability
                          of the Company to
                          retain its investment in the issuer for a period of time
                          sufficient to allow for
                          any anticipated recovery in fair value. In analyzing an
                          issuer’s financial
                          condition, the Company may consider whether the securities
                          are issued by the
                          federal government or one of its sponsored entities, whether
                          downgrades by bond
                          rating agencies have occurred, and the results of reviews
                          of the issuer’s
                          financial condition.
 
 Unrealized
                          losses on securities have not been recognized into income
                          because the securities
                          are of high credit quality, management has the intent and
                          ability to hold the
                          securities for the foreseeable future, and the decline
                          in fair value is largely
                          due to changes in interest rates.
  F-16
 **Equitable
                            Financial Corp.**
  **Notes
                            to Consolidated Financial Statements**
 **Note
                                    3.**
                                **Loans**
  Loans
                          at
                          June 30 are as follows:
 2007
                                  
                                  2006Secured
                                      by one-to-four family residential real estate
                                  
                                  $
                                  65,266,358
                                  
                                  $
                                  80,031,460Secured
                                      by multi-family real estate
                                  
                                  
                                  6,874,291
                                  
                                  
                                  7,480,198Secured
                                      by nonresidential real estate
                                  
                                  
                                  37,018,765
                                  
                                  
                                  30,168,888Construction
                                  
                                  
                                  4,809,760
                                  
                                  
                                  3,789,598Commercial
                                      loans
                                  
                                  
                                  24,154,252
                                  
                                  
                                  17,479,513Consumer
                                      loans
                                  
                                  
                                  15,835,720
                                  
                                  
                                  15,013,341Total
                                      loans
                                  
                                  
                                  153,959,146
                                  
                                  
                                  153,962,998Deferred
                                      loan origination costs, net
                                  
                                  
                                  427,279
                                  
                                  
                                  371,460Allowance
                                      for loan losses
                                  
                                  
                                  (1,056,873
                                  )
                                  
                                  (926,312
                                  )(629,594
                                  )
                                  
                                  (554,852
                                  )Loans,
                                      net
                                  
                                  $
                                  153,329,552
                                  
                                  $
                                  153,408,146
 Changes
                          in the allowance for loan losses for the years ended June
                          30, 2007 and 2006 were
                          as follows:
 2007
                                  
                                  2006Beginning
                                      balance
                                  
                                  $
                                  926,312
                                  
                                  $
                                  785,973Provision
                                      for loan losses
                                  
                                  
                                  233,231
                                  
                                  
                                  120,000Loans
                                      charged off
                                  
                                  
                                  (126,232
                                  )
                                  
                                  (60,727
                                  )Recoveries
                                  
                                  
                                  23,562
                                  
                                  
                                  81,066Ending
                                      balance
                                  
                                  $
                                  1,056,873
                                  
                                  $
                                  926,312
 During
                          the years ended June 30, 2007 and 2006, the Company sold
                          approximately
                          $17,465,000 and $6,472,000, respectively, of fixed-rate
                          loans secured by
                          one-to-four family residential real estate, which resulted
                          in pre-tax losses on
                          sale of $17,822 and $142,972, respectively.
 
 F-17
  **Equitable
                          Financial Corp.**
 
 **Notes
                          to Consolidated Financial Statements**
  **Note
                          3.**  **Loans
                          (Continued)**
 
 Impaired
                          loans at June 30 were as follows:
  2007
                                  
                                  2006Impaired
                                      loans with allocated allowance for loan losses
                                  
                                  $
                                  304,875
                                  
                                  $
                                  574,826Impaired
                                      loans with no allocated allowance for loan
                                      losses
                                  
                                  
                                  372,775
                                  
                                  
                                  10,750Total
                                      impaired loans
                                  
                                  $
                                  677,650
                                  
                                  $
                                  585,576Amount
                                      of the allowance for loan losses allocated
                                  
                                  $
                                  60,000
                                  
                                  $
                                  112,651Average
                                      balance of impaired loans during the year
                                  
                                  
                                  490,600
                                  
                                  
                                  688,594
 Interest
                          income recognized on impaired loans was not material.
  2007
                                  
                                  2006Nonperforming
                                      loans at June 30 were as follows:Loans
                                      past due over 90 days still on accrual
                                  
                                  $
                                  -
                                  
                                  $
                                  65,000Nonaccrual
                                      loans
                                  
                                  
                                  469,000
                                  
                                  
                                  490,000Total
                                  
                                  $
                                  469,000
                                  
                                  $
                                  555,000
 The
                          Company entered into an agreement with the FHLB to originate
                          mortgage loans on
                          behalf of the FHLB and to sell closed loans to the FHLB
                          under the FHLB Mortgage
                          Partnership Finance (“MPF”) program. Under the terms of the agreement, the Bank
                          retains a portion of the credit risk associated with each
                          conventional loan pool
                          under a risk-sharing agreement. The Bank’s credit losses are capped by the
                          credit enhancement amount established for each pool of
                          loans. Losses beyond that
                          cap are absorbed by the FHLB. At June 30, 2007 and 2006,
                          the amount of
                          conventional loans outstanding that were originated and
                          sold to the FHLB in the
                          MPF were $4,072,000 and $1,126,000, with possible credit
                          enhancement losses
                          capped at approximately $139,000 and $47,000 at June 30,
                          2007 and 2006. No
                          provision has been established for this credit risk.
  **Note
                                    4.**
                                **Accrued
                                    Interest Receivable**
  Accrued
                          interest receivable at June 30 is summarized as follows:
  2007
                                  
                                  2006Securities
                                  
                                  $
                                  39,842
                                  
                                  $
                                  65,524Loans
                                  
                                  
                                  1,195,436
                                  
                                  
                                  1,088,227$
                                  1,235,278
                                  
                                  $
                                  1,153,751
  F-18
 **Equitable
                            Financial Corp.**
 
 **Notes
                            to Consolidated Financial Statements**
 **Note
                                    5.**
                                **Premises
                                    and Equipment, Net**
  Premises
                          and equipment, net at June 30, are as follows:
  2007
                                  
                                  2006Land
                                      and land improvements
                                  
                                  $
                                  1,345,583
                                  
                                  $
                                  945,854Land
                                      held for future development
                                  
                                  
                                  -
                                  
                                  
                                  399,728Buildings
                                      and improvements
                                  
                                  
                                  6,480,879
                                  
                                  
                                  3,938,197Construction
                                      in progress
                                  
                                  
                                  -
                                  
                                  
                                  1,768,658Furniture
                                      and equipment
                                  
                                  
                                  1,236,942
                                  
                                  
                                  1,325,444Computer
                                      equipment
                                  
                                  
                                  428,430
                                  
                                  
                                  780,646**Total
                                      cost**
                                  
                                  
                                  9,491,834
                                  
                                  
                                  9,158,527Accumulated
                                      depreciation
                                  
                                  
                                  (2,640,943
                                  )
                                  
                                  (3,091,196
                                  )$
                                  6,850,891
                                  
                                  $
                                  6,067,331
 Depreciation
                          expense was $412,948 and $238,917 for the years ended June
                          30, 2007 and 2006,
                          respectively.
 
 During
                          the year ended June 30, 2005, the Bank began the process
                          of building two future
                          branch facilities. At June 30 2006 $1,769,000 of total
                          costs had been incurred.
                          During the year ended June 30, 2006, the Company capitalized
                          interest during the
                          construction period totaling $11,960. The facilities were
                          placed in operation
                          during the year ended June 30, 2007.
  **Note
                                    6.**
                                **Deposits**
  Deposits
                          as of June 30 are as follows:
  2007
                                  
                                  2006Non-interest-bearing
                                      demand
                                  
                                  $
                                  6,465,861
                                  
                                  $
                                  5,748,057Interest-bearing
                                      NOW
                                  
                                  
                                  12,424,334
                                  
                                  
                                  11,541,413Money
                                      market
                                  
                                  
                                  14,317,009
                                  
                                  
                                  5,878,262Savings
                                  
                                  
                                  4,398,332
                                  
                                  
                                  4,444,722Certificates
                                      of deposit
                                  
                                  
                                  90,139,325
                                  
                                  
                                  94,309,119$
                                  127,744,861
                                  
                                  $
                                  121,921,573
 Certificates
                          of deposit of $100,000 or more were approximately $28,918,000
                          and $36,472,000 at
                          June 30, 2007 and 2006, respectively. Included in certificates
                          of deposits of
                          $100,000 or more are $9,057,000 and $17,397,000 of brokered
                          deposits at June 30,
                          2007 and 2006, respectively.
 
 F-19
 **Equitable
                              Financial Corp.**
 
 **Notes
                              to Consolidated Financial Statements**
 **Note
                                    6.**
                                **Deposits
                                    (Continued)**
  At
                          June
                          30, 2007, the schedule maturities of certificates of deposit
                          are as
                          follows:
  2008
                                  
                                  $
                                  65,669,8832009
                                  
                                  
                                  16,671,1902010
                                  
                                  
                                  6,079,2442011
                                  
                                  
                                  1,539,7342012
                                  
                                  
                                  179,274$
                                  90,139,325
 Interest
                          expense on deposit accounts is summarized as follows for
                          the years ended June
                          30:
  2007
                                  
                                  2006Interest-bearing
                                      NOW
                                  
                                  $
                                  231,124
                                  
                                  $
                                  112,708Money
                                      market
                                  
                                  
                                  276,132
                                  
                                  
                                  82,936Savings
                                  
                                  
                                  14,426
                                  
                                  
                                  21,839Certificates
                                      of deposit
                                  
                                  
                                  4,188,770
                                  
                                  
                                  3,173,728$
                                  4,710,452
                                  
                                  $
                                  3,391,211
 F-20
 **Equitable
                            Financial Corp.**
 
 **Notes
                            to Consolidated Financial Statements**
 **Note
                                    7.**
                                **Federal
                                    Home Loan Bank Borrowings**
  FHLB
                          borrowings are summarized as follows:
  WeightedContractual
                                
                                AverageInterest
                                    Rate
                                
                                ContractualRange
                                
                                Rate
                                
                                AmountAt
                                    June 30, 2007Fixed-rate
                                    FHLB advances due:Within
                                    1 year
                                
                                
                                5.682
                                %
                                
                                5.682
                                %
                                
                                5.682
                                %
                                $
                                2,000,0001
                                    to 2 years
                                
                                
                                2.883
                                
                                
                                5.245
                                
                                
                                4.465
                                
                                
                                1,592,8602
                                    to 3 years
                                
                                
                                5.010
                                
                                
                                5.010
                                
                                
                                5.010
                                
                                
                                3,000,0003
                                    to 4 years
                                
                                
                                3.432
                                
                                
                                3.660
                                
                                
                                3.508
                                
                                
                                749,999Greater
                                    than 6 years
                                
                                
                                3.988
                                
                                
                                6.897
                                
                                
                                5.892
                                
                                
                                2,256,767Total
                                    fixed-rate FHLB advances
                                
                                
                                2.883
                                
                                
                                6.897
                                
                                
                                5.150
                                
                                
                                9,599,626Variable-rate
                                    FHLB advances due:Within
                                    1 year
                                
                                
                                5.400
                                
                                
                                5.400
                                
                                
                                5.400
                                
                                
                                1,000,0002
                                    to 3 years
                                
                                
                                5.390
                                
                                
                                5.390
                                
                                
                                5.390
                                
                                
                                4,000,0003
                                    to 4 years
                                
                                
                                5.870
                                
                                
                                5.870
                                
                                
                                5.870
                                
                                
                                10,000,0004
                                    to 5 years
                                
                                
                                4.400
                                
                                
                                5.370
                                
                                
                                4.662
                                
                                
                                6,000,000Total
                                    variable-rate FHLB advances
                                
                                
                                4.400
                                
                                
                                5.870
                                
                                
                                5.411
                                
                                
                                21,000,000Open
                                    line advances up to $10 million,due
                                    on demand
                                
                                
                                5.530
                                
                                
                                5.530
                                
                                
                                -
                                
                                
                                -Total
                                    FHLB borrowings
                                
                                
                                2.883
                                %
                                
                                6.897
                                %
                                
                                5.329
                                %
                                $
                                30,599,626At
                                    June 30, 2006Fixed-rate
                                    FHLB advances due:Within
                                    1 year
                                
                                
                                2.176
                                %
                                
                                7.086
                                %
                                
                                4.334
                                %
                                $
                                3,057,6021
                                    to 2 years
                                
                                
                                5.230
                                
                                
                                5.682
                                
                                
                                5.531
                                
                                
                                3,000,0002
                                    to 3 years
                                
                                
                                2.883
                                
                                
                                5.245
                                
                                
                                4.420
                                
                                
                                2,464,2884
                                    to 5 years
                                
                                
                                3.432
                                
                                
                                5.870
                                
                                
                                5.662
                                
                                
                                10,964,2855
                                    to 6 years
                                
                                
                                4.400
                                
                                
                                4.940
                                
                                
                                4.670
                                
                                
                                2,000,000Greater
                                    than 6 years
                                
                                
                                3.988
                                
                                
                                6.897
                                
                                
                                5.814
                                
                                
                                2,418,251Total
                                    fixed-rate FHLB advances
                                
                                
                                2.176
                                %
                                
                                7.086
                                
                                
                                5.280
                                
                                
                                23,904,426Variable-rate
                                    FHLB advances due:Within
                                    1 year
                                
                                
                                5.340
                                
                                
                                5.340
                                
                                
                                5.340
                                
                                
                                6,700,000Open
                                    line advances up to $10 million,due
                                    on demand
                                
                                
                                5.470
                                
                                
                                5.470
                                
                                
                                -
                                
                                
                                -Total
                                    FHLB borrowings
                                
                                
                                2.176
                                %
                                
                                7.086
                                %
                                
                                5.293
                                %
                                $
                                30,604,426
  F-21
 **Equitable
                            Financial Corp.**
 
 **Notes
                            to Consolidated Financial Statements**
 **Note
                                    7.**
                                **Federal
                                    Home Loan Bank Borrowings
                                    (Continued)**
  The
                          Bank
                          maintains a collateral pledge agreement covering secured
                          advances whereby the
                          Bank has agreed to at all times keep on hand, free of all
                          other pledges, liens,
                          and encumbrances, specifically identified whole first mortgage
                          on improved
                          residential property not more than 90-days delinquent to
                          secure advances from
                          the FHLB of Topeka. All stock in the FHLB of Topeka, in
                          addition to other
                          securities (see Note 2), is pledged as additional collateral
                          for these advances.
                          At June 30, 2007 and 2006, $54.7 million and $70.5 million
                          of first mortgage and
                          multi-family mortgage loans, respectively, collateralized
                          the advances. At June
                          30, 2007, the Bank had the ability to borrow an additional
                          $23.2 million in FHLB
                          advances.
  **Note
                                    8.**
                                **Regulatory
                                    Matters**
  The
                          Bank
                          is subject to regulatory capital requirements administered
                          by the federal
                          banking agencies. Failure to meet minimum capital requirements
                          can initiate
                          certain mandatory - and possibly additional discretionary
                          - actions by
                          regulators that, if undertaken, could have a direct material
                          effect on the
                          Bank’s financial statements. Under capital adequacy guidelines
                          and the
                          regulatory framework for prompt corrective action, the
                          Bank must meet specific
                          capital guidelines that involve quantitative measures of
                          the Bank’s assets,
                          liabilities, and certain off-balance-sheet items as calculated
                          under regulatory
                          accounting practices. The Bank’s capital amounts and classification are also
                          subject to qualitative judgments by regulators about components,
                          risk
                          weightings, and other factors.
 
 The
                          prompt corrective action regulations provide five classifications,
                          including
                          well capitalized, adequately capitalized, undercapitalized,
                          significantly
                          undercapitalized, and critically undercapitalized, although
                          these terms are not
                          used to represent overall financial condition. If only
                          adequately capitalized,
                          regulatory approval is required to accept brokered deposits.
                          If
                          undercapitalized, capital distributions are limited, as
                          is asset growth and
                          expansion, and plans for capital restoration are required.
                          Management believes,
                          as of June 30, 2007 and 2006, that the Bank meets all capital
                          adequacy
                          requirements to which it is subject.
 
 F-22
 **Equitable
                            Financial Corp.**
 
 **Notes
                            to Consolidated Financial Statements**
 **Note
                                    8.**
                                **Regulatory
                                    Matters (Continued)**
  At
                          year
                          end, actual capital levels and minimum required levels
                          for the Bank
                          were:
 Required
                                      to BeWell
                                      CapitalizedMinimum
                                      Required for
                                  
                                  Under
                                      PromptCapital
                                      Adequacy
                                  
                                  Corrective
                                      ActionPurposes
                                  
                                  Provisions
                                      Amount(Dollars
                                      in thousands)
                                  
                                  Amount
                                  
                                  Ratio
                                  
                                  Amount
                                      Ratio
                                  
                                  Amount
                                  
                                  RatioJune
                                      30, 2007Total
                                      capital (torisk-weighted
                                      assets)
                                  
                                  $
                                  18,737
                                  
                                  
                                  13.56
                                  %
                                  $
                                  11,057
                                  
                                  
                                  8.0
                                  %
                                  $
                                  13,822
                                  
                                  
                                  10.0
                                  %Tier
                                      1 (core) capital (torisk-weighted
                                      assets)
                                  
                                  
                                  17,680
                                  
                                  
                                  12.79
                                  %
                                  
                                  5,529
                                  
                                  
                                  4.0
                                  %
                                  
                                  8,293
                                  
                                  
                                  6.0
                                  %Tier
                                      1 (core) capital (toadjusted
                                      total assets)
                                  
                                  
                                  17,680
                                  
                                  
                                  9.67
                                  %
                                  
                                  7,315
                                  
                                  
                                  4.0
                                  %
                                  
                                  9,143
                                  
                                  
                                  5.0
                                  %Tangible
                                      capital (toadjusted
                                      total assets)
                                  
                                  
                                  17,680
                                  
                                  
                                  9.67
                                  %
                                  
                                  2,743
                                  
                                  
                                  1.5
                                  %
                                  
                                  -
                                  
                                  
                                  0.0
                                  %June
                                      30, 2006Total
                                      capital (torisk-weighted
                                      assets)
                                  
                                  $
                                  19,406
                                  
                                  
                                  14.98
                                  %
                                  $
                                  10,365
                                  
                                  
                                  8.0
                                  %
                                  $
                                  12,956
                                  
                                  
                                  10.0
                                  %Tier
                                      1 (core) capital (torisk-weighted
                                      assets)
                                  
                                  
                                  18,592
                                  
                                  
                                  14.25
                                  %
                                  
                                  5,182
                                  
                                  
                                  4.0
                                  %
                                  
                                  7,773
                                  
                                  
                                  6.0
                                  %Tier
                                      1 (core) capital (toadjusted
                                      total assets)
                                  
                                  
                                  18,592
                                  
                                  
                                  10.41
                                  %
                                  
                                  7,151
                                  
                                  
                                  4.0
                                  %
                                  
                                  8,938
                                  
                                  
                                  5.0
                                  %Tangible
                                      capital (toadjusted
                                      total assets)
                                  
                                  
                                  18,592
                                  
                                  
                                  10.41
                                  %
                                  
                                  2,679
                                  
                                  
                                  1.5
                                  %
                                  
                                  -
                                  
                                  
                                  0.0
                                  %
 
 The
                          most
                          recent notification from the Office of Thrift Supervision
                          (“OTS”) categorized
                          the Bank as well capitalized under the regulatory framework
                          for prompt
                          corrective action. There are no conditions or events since
                          that notification
                          that management believes have changed the institution’s category.
 
 Federal
                          regulations require the Bank to comply with a Qualified
                          Thrift Lender (“QTL”)
                          test, which requires that 65% of assets be maintained in
                          housing-related finance
                          and other specified assets. If the QTL test is not met,
                          limits are placed on
                          growth, branching, new investment, FHLB advances, and dividends
                          or the
                          institution must convert to a commercial bank charter.
                          Management believes the
                          QTL test has been met.
 
 F-23
  **Equitable
                          Financial Corp.**
 
 **Notes
                          to Consolidated Financial Statements**
  **Note
                                    9.**
                                **Income
                                    Taxes**
  The
                          income tax expense is as follows:
  2007
                                  
                                  2006CurrentFederal
                                  
                                  $
                                  -
                                  
                                  $
                                  (40,030
                                  )State
                                  
                                  
                                  (2,031
                                  )
                                  
                                  -(2,031
                                  )
                                  
                                  (40,030
                                  )DeferredFederal
                                  
                                  
                                  (752,926
                                  )
                                  
                                  (477,197
                                  )State
                                  
                                  
                                  -
                                  
                                  
                                  -(752,926
                                  )
                                  
                                  (477,197
                                  )Change
                                      in valuation allowance
                                  
                                  
                                  118,000
                                  
                                  
                                  179,000Total
                                      income tax expense (benefit)
                                  
                                  $
                                  (636,957
                                  )
                                  $
                                  (338,227
                                  )
 A
                          reconciliation of the provision for income taxes computed
                          at the statutory
                          federal corporate tax rate of 34% to the income tax expense
                          in the statements of
                          operations follows:
  Years
                                      Ended June 30,2007
                                  
                                  2006Provision
                                      computed at the statutory federal tax rate
                                  
                                  $
                                  (692,580
                                  )
                                  $
                                  (444,390
                                  )State
                                      taxes and other, net
                                  
                                  
                                  (2,031
                                  )
                                  
                                  (1,002
                                  )Valuation
                                      allowance for charitable contribution carryforward
                                  
                                  
                                  118,000
                                  
                                  
                                  179,000Non-taxable
                                      income and credits
                                  
                                  
                                  (60,346
                                  )
                                  
                                  (71,835
                                  )Total
                                      income tax expense
                                  
                                  $
                                  (636,957
                                  )
                                  $
                                  (338,227
                                  )Effective
                                      income tax rate
                                  
                                  
                                  (39.24
                                  )%
                                  
                                  (25.88
                                  )%
 Retained
                          earnings at June 30, 2007 and 2006 includes certain historical
                          additions to bad
                          debt reserves of approximately $2,132,000 for which no
                          deferred federal income
                          tax liability has been recorded. This amount represents
                          an allocation of income
                          to bad debt deductions for tax purposes alone. If, in the
                          future, this portion
                          of retained earnings is used for any purpose other than
                          to absorb bad debt
                          losses, federal taxes would be imposed at the then applicable
                          rates. The related
                          amount of unrecognized deferred tax liability was approximately
                          $725,000.
 
 F-24
  **Equitable
                          Financial Corp.**
 
 **Notes
                          to Consolidated Financial Statements**
  **Note
                                    9.**
                                **Income
                                    Taxes (Continued)**
  At
                          June
                          30, 2007 and 2006, the Company had charitable contribution
                          carryforwards. These
                          contributions have a five-year life and are used on a first-in,
                          first-out basis
                          after current year contributions are used. In addition,
                          these contributions are
                          subjected to a tax return deduction limitation of 10% of
                          taxable income on an
                          annual basis. The Company has continually evaluated this
                          carryforward and based
                          on an estimate of future taxable income, during the period
                          when these
                          contributions can be used, the Company has determined that
                          an additional
                          valuation allowance of $118,000 is warranted as of June
                          30, 2007. These
                          contributions will expire in the fiscal years ending June
                          30, 2007 through
                          2011.
 
 In
                          addition, at June 30, 2007 the Company had federal net
                          operating loss
                          carryforwards of $2,515,000, which will expire in the fiscal
                          years ending June
                          30, 2026 and 2027. A valuation allowance has not been established
                          for the
                          deferred tax asset related to the net operating losses,
                          as the Company believes
                          that they will be realized.
 
 The
                          net
                          deferred tax asset is as follows:
 
 Years
                                      Ended June 30,2007
                                  
                                  2006Gross
                                      deferred tax assetsAllowance
                                      for loan losses
                                  
                                  $
                                  359,337
                                  
                                  $
                                  308,031Net
                                      operating loss carryover
                                  
                                  
                                  855,248
                                  
                                  
                                  164,242Unrealized
                                      loss on securities
                                  
                                  
                                  40,131
                                  
                                  
                                  77,252Charitable
                                      contributions carryover
                                  
                                  
                                  358,365
                                  
                                  
                                  358,335Other
                                  
                                  
                                  14,771
                                  
                                  
                                  3,937General
                                      business credits
                                  
                                  
                                  197,811
                                  
                                  
                                  137,4651,825,663
                                  
                                  
                                  1,049,262Gross
                                      deferred tax liabilitiesDepreciation
                                  
                                  
                                  (60,959
                                  )
                                  
                                  (47,050
                                  )FHLB
                                      stock dividends
                                  
                                  
                                  (368,869
                                  )
                                  
                                  (322,537
                                  )Other
                                  
                                  
                                  (5,327
                                  )
                                  
                                  (5,577
                                  )(435,155
                                  )
                                  
                                  (375,164
                                  )Valuation
                                      allowance for deferred tax assets
                                  
                                  
                                  (343,000
                                  )
                                  
                                  (225,000
                                  )Net
                                      deferred tax asset (liability)
                                  
                                  $
                                  1,047,508
                                  
                                  $
                                  449,098
 F-25
  **Equitable
                          Financial Corp.**
 
 **Notes
                          to Consolidated Financial Statements**
  **Note
                                    10.**
                                **Employee
                                    Benefit Plans**
 
 The
                          Company has a 401(k) and profit sharing plan (“the Plans”) covering
                          substantially all employees. Annual contributions to the
                          Plans are made at the
                          discretion of and determined by the Board of Directors.
                          Participant interests
                          are vested over a period from one to five years of service.
                          Contributions to the
                          Plans for the years ended June 30, 2007 and 2006 were $196,712
                          and $174,325,
                          respectively.
 
 On
                          November 8, 2005, the Company adopted an employee stock
                          ownership plan (“the
                          ESOP”) for the benefit of substantially all employees. The ESOP
                          borrowed
                          $1,292,620 from the Company and used those funds to acquire
                          129,262 shares of
                          the Company’s stock in connection with the reorganization at a price
                          of $10.00
                          per share.
 
 Shares
                          purchased by the ESOP with the loan proceeds are held in
                          a suspense account and
                          are allocated to ESOP participants on a pro rata basis
                          as principal and interest
                          payments are made by the ESOP to the Company. The loan
                          is secured by shares
                          purchased with the loan proceeds and will be repaid by
                          the ESOP with funds from
                          the Company’s discretionary contributions to the ESOP and earnings
                          on ESOP
                          assets. Annual principal and interest payments of approximately
                          $145,477 are to
                          be made by the ESOP.
 
 As
                          shares
                          are released from collateral, the Company will report compensation
                          expense equal
                          to the current market price of the shares and the shares
                          will become outstanding
                          for earnings-per-share computations. Dividends on allocated
                          ESOP shares reduce
                          retained earnings; dividends on unearned ESOP shares reduce
                          accrued interest.
                          Because participants may require the Company to purchase
                          their ESOP shares upon
                          termination of their employment, the fair value of all
                          earned and allocated ESOP
                          shares may become a liability.
 
 The
                          ESOP
                          has a plan year end of December 31. At December 31, 2006
                          and 2005, 9,084 and
                          2,092 shares, respectively, were allocated to the ESOP.
                          The fair value of the
                          shares allocated approximated $11.75 per share at December
                          31, 2006. The Company
                          has recorded a compensation expense of $92,928 for shares
                          that were released and
                          committed to be released for the year ended June 30, 2007.
                          For presentation
                          purposes, 11,176 released shares and 4,542 shares that
                          have been committed to be
                          released are disclosed as allocated shares as of June 30,
                          2007.
 
 Shares
                          held by the ESOP at June 30, 2007 and 2006 were as follows:
 
 2007
                                  
                                  2006Allocated
                                      shares
                                  
                                  
                                  15,718
                                  
                                  
                                  6,634Unearned
                                      ESOP shares
                                  
                                  
                                  113,544
                                  
                                  
                                  122,628Total
                                      ESOP shares
                                  
                                  
                                  129,262
                                  
                                  
                                  129,262Fair
                                      value of unearned ESOP shares
                                  
                                  $
                                  1,095,702
                                  
                                  $
                                  1,128,178Fair
                                      value of allocated shares subject to repurchase
                                      obligation
                                  
                                  $
                                  151,679
                                  
                                  $
                                  61,033
 
 F-26
  **Equitable
                              Financial Corp.**
 
 **Notes
                              to Consolidated Financial Statements**
  **Note
                                    10.**
                                **Employee
                                    Benefit Plans (Continued)**
  The
                          Bank
                          has entered into an employment contract with the President
                          and Chief Executive
                          Officer, which provides for a base salary, bonus eligibility
                          determined by the
                          Board of Directors, eligibility to participate in bank-sponsored
                          benefit plans,
                          and other fringe benefits. Additionally, the Bank agreed
                          to purchase and pay for
                          all premiums on a $600,000 life insurance policy for the
                          President. The
                          President is the beneficiary of $400,000 of this life insurance
                          policy, while
                          the Bank is the beneficiary of the remaining $200,000.
                          If the President
                          terminated his employment with the Bank prior to November
                          22, 2010, the Bank is
                          entitled to receive the entire cash value of the life insurance
                          policy. If the
                          President terminates his employment with the Bank after
                          November 22, 2010, the
                          Bank is entitled to receive one-third or the cash value
                          of the life insurance
                          policy. At June 30, 2007, the Bank has recorded an asset
                          of $24,150 and a
                          corresponding liability of $16,110, the net of which represents
                          one-third of the
                          cash surrender value.
 
 The
                          Company approved the Equitable Financial Corp. 2006 Equity
                          Incentive Plan in
                          November 2006. Under this plan, the Company may award up
                          to 161,577 stock
                          options and 64,631 shares of restricted stock to employees
                          and directors. To
                          date, the Company has not made any awards of stock options
                          or restricted stock
                          under the plan. At June 30, 2007 the Company had purchased
                          64,631 shares of
                          Treasury stock for the restricted stock awards program
                          for approximately
                          $695,000.
  **Note
                                    11.**
                                **Earnings
                                    (Loss) Per Share**
  Amounts
                          reported in earnings (loss) per share reflect earnings
                          (loss) available to
                          common stockholders for the period divided by the weighted
                          average number of
                          shares of common stock outstanding during the year. The
                          Company did not issue
                          shares of common stock until November 8, 2005. Therefore,
                          earnings (loss) per
                          share reported for the year ended June 30, 2006 reflects
                          income (loss) only for
                          the period during which shares were outstanding. There
                          were no potentially
                          dilutive shares for the years ended June 30, 2007 and 2006.
 
 The
                          following table presents a reconciliation of the components
                          used to compute
                          basic and diluted earnings (loss) per share for the years
                          ended June 30, 2007
                          and 2006:
  2007
                                  
                                  2006Net
                                      loss available to common stockholders
                                  
                                  $
                                  (1,398,940
                                  )
                                  $
                                  (862,927
                                  )Weighted
                                      average common shares outstanding
                                  
                                  
                                  3,166,762
                                  
                                  
                                  3,169,865Basic
                                      and diluted earnings (loss) per share
                                  
                                  
                                  (0.44
                                  )
                                  
                                  (0.27
                                  )
 
 F-27
  **Equitable
                          Financial Corp.**
 
 **Notes
                          to Consolidated Financial Statements**
  **Note
                                    12.**
                                **Loan
                                    Commitments and Other Related
                                    Activities**
  The
                          Company is party to various financial instruments with
                          off-balance-sheet risk.
                          The Company uses these financial instruments in the normal
                          course of business to
                          meet the financing needs of customers and to effectively
                          manage exposure to
                          interest rate risk. These financial instruments include
                          commitments to extend
                          credit, standby letters of credit, and unused lines of
                          credit. When viewed in
                          terms of the maximum exposure, these instruments may involve,
                          to varying
                          degrees, elements of credit and interest rate risk in excess
                          of the amount
                          recognized in the statements of financial condition. Credit
                          risk is the
                          possibility that a counterparty to a financial instrument
                          will be unable to
                          perform its contractual obligations. Interest rate risk
                          is the possibility that,
                          due to changes in economic conditions, the Company’s net interest income will be
                          adversely affected.
 
 The
                          following is a summary of the contractual or notional amount
                          of each significant
                          class of off-balance-sheet financial instruments outstanding.
                          The Company’s
                          exposure to credit loss in the event of nonperformance
                          by the counterparty for
                          commitments to extend credit, standby letters of credit,
                          and unused lines of
                          credit is represented by the contractual or notional amount
                          of these
                          instruments.
 
 The
                          contractual or notional amounts as of June 30 are as follows:
 2007
                                    
                                    2006Financial
                                        instruments wherein contractual amountsrepresent
                                        credit riskCommitments
                                        to extend credit
                                    
                                    $
                                    8,319,000
                                    
                                    $
                                    5,554,000Standby
                                        letters of credit
                                    
                                    
                                    20,000
                                    
                                    
                                    20,000Unused
                                        lines of credit
                                    
                                    
                                    10,228,000
                                    
                                    
                                    9,262,000
 At
                          June
                          30, 2007, fixed-rate commitments were $746,000, with rates
                          ranging from 5.25% to
                          6.25%. These commitments are due to expire within four
                          months of
                          issuance.
 
 In
                          addition to these financial instruments, the Bank also
                          has additional funding
                          commitments for various low income housing partnerships
                          that the Bank has
                          invested in. The liability for the funding of these low
                          income housing
                          partnerships approximated $61,900  and
                          $112,500 at June 30, 2007 and 2006 and has been recorded
                          in accrued interest
                          payable and other liabilities in the statement of financial
                          condition.
 
 Since
                          many of the commitments are expected to expire without
                          being drawn upon, the
                          total commitment amounts do not necessarily represent future
                          cash requirements.
                          The Bank evaluates each customer’s creditworthiness on a case-by-case basis. The
                          amount of collateral obtained, if it is deemed necessary,
                          by the Bank upon
                          extension of credit, is based on management’s credit evaluation of the
                          counterparty. The collateral held varies but primarily
                          consists of single-family
                          residential real estate.
 
 F-28
  **Equitable
                          Financial Corp.**
 
 **Notes
                          to Consolidated Financial Statements**
  **Note
                                    12.**
                                **Loan
                                    Commitments and Other Related Activities
                                    (Continued)**
  In
                          April 2006, the Company entered into an operating
                          lease for a new branch facility, with expiration in June
                          2012. The lease has a
                          renewal option to extend the lease for five years. The
                          Company has a one time
                          option to terminate the lease on June 30, 2009, provided
                          certain conditions are
                          met. Future commitments under the operating lease approximate
                          the
                          following:
 2008
                                  
                                  $
                                  112,9562009
                                  
                                  
                                  112,9562010
                                  
                                  
                                  119,0642011
                                  
                                  
                                  119,0642012
                                  
                                  
                                  119,064$
                                  583,104
  Rental
                          expense, included in occupancy and equipment expense on
                          the consolidate
                          statement on operations, totaled approximately $150,000
                          and $90,000 for the
                          years ended June 30, 2007 and 2006, respectively.
 
 F-29
  **Equitable
                            Financial Corp.**
 
 **Notes
                            to Consolidated Financial Statements**
  **Note
                                    13.**
                                **Fair
                                    Values of Financial
                                    Instruments**
  The
                          carrying amount and estimated fair values of financial
                          instruments is as
                          follows:
 Carrying
                                  
                                  EstimatedAmount
                                  
                                  Fair
                                      ValueJune
                                      30, 2007Financial
                                      assetsCash
                                      and cash equivalents
                                  
                                  $
                                  9,482,234
                                  
                                  $
                                  9,482,234Securities
                                      available-for-sale
                                  
                                  
                                  6,584,274
                                  
                                  
                                  6,584,274Securities
                                      held-to-maturity
                                  
                                  
                                  702,030
                                  
                                  
                                  684,464Federal
                                      Home Loan Bank stock
                                  
                                  
                                  2,447,500
                                  
                                  
                                  2,447,500Loans,
                                      net
                                  
                                  
                                  153,329,552
                                  
                                  
                                  151,459,000Accrued
                                      interest receivable
                                  
                                  
                                  1,235,278
                                  
                                  
                                  1,235,278Financial
                                      liabilitiesNon-interest-bearing
                                      deposits
                                  
                                  
                                  (6,465,861
                                  )
                                  
                                  (6,465,861
                                  )Interest-bearing
                                      deposits
                                  
                                  
                                  (121,279,000
                                  )
                                  
                                  (117,908,000
                                  )Federal
                                      Home Loan Bank borrowings
                                  
                                  
                                  (30,599,626
                                  )
                                  
                                  (30,489,000
                                  )Accrued
                                      interest payable
                                  
                                  
                                  (299,356
                                  )
                                  
                                  (299,356
                                  )June
                                      30, 2006Financial
                                      assetsCash
                                      and cash equivalents
                                  
                                  $
                                  4,092,931
                                  
                                  $
                                  4,092,931Securities
                                      available-for-sale
                                  
                                  
                                  9,429,663
                                  
                                  
                                  9,429,663Securities
                                      held-to-maturity
                                  
                                  
                                  915,814
                                  
                                  
                                  888,342Federal
                                      Home Loan Bank stock
                                  
                                  
                                  2,311,800
                                  
                                  
                                  2,311,800Loans,
                                      net
                                  
                                  
                                  153,408,146
                                  
                                  
                                  149,421,000Accrued
                                      interest receivable
                                  
                                  
                                  1,153,751
                                  
                                  
                                  1,153,751Financial
                                      liabilitiesNon-interest-bearing
                                      deposits
                                  
                                  
                                  (5,748,057
                                  )
                                  
                                  (5,748,057
                                  )Interest-bearing
                                      deposits
                                  
                                  
                                  (116,173,516
                                  )
                                  
                                  (114,566,000
                                  )Federal
                                      Home Loan Bank borrowings
                                  
                                  
                                  (30,604,426
                                  )
                                  
                                  (30,459,000
                                  )Accrued
                                      interest payable
                                  
                                  
                                  (74,422
                                  )
                                  
                                  (74,422
                                  )
 The
                          methods and assumptions used to estimate fair values are
                          described as
                          follows.
 
 Carrying
                          amount is the estimated fair value for cash and cash equivalents,
                          Federal Home
                          Loan Bank stock, accrued interest receivable and payable,
                          non-interest-bearing
                          deposits, short-term debt, and variable-rate loans or deposits
                          that reprice
                          frequently and fully. Security fair values are based on
                          market prices or dealer
                          quotes and, if no such information is available, on the
                          rate and term of the
                          security and information about the issuer. For fixed-rate
                          loans or deposits and
                          for variable-rate loans or deposits with infrequent repricing
                          or repricing
                          limits, fair value is based on discounted cash flows using
                          current market rates
                          applied to the estimated life and credit risk. Fair values
                          for
  F-30
  **Equitable
                          Financial Corp.**
 
 **Notes
                          to Consolidated Financial Statements**
  **Note
                                    13.**
                                **Fair
                                    Values of Financial Instruments
                                    (Continued)**
  impaired
                          loans are estimated using discounted cash flow analysis
                          or underlying collateral
                          values. Fair value of long term debt is based on discounted
                          cash flows using
                          current rates for similar financing. The fair value of
                          off-balance-sheet items
                          if based on the current fees or cost that would be charged
                          to enter into or
                          terminate such arrangements. These were not considered
                          material and are not
                          presented in the above tables.
  **Note
                                    14.**
                                **Other
                                    Comprehensive Income**
  Other
                          comprehensive income components and related taxes for the
                          years ended June 30,
                          2007 and 2006 were as follows:
  2007
                                  
                                  2006Unrealized
                                      holding gains (losses) on securities available-for-sale
                                  
                                  $
                                  109,182
                                  
                                  $
                                  (249,752
                                  )Reclassification
                                      adjustments for gain recognized in income
                                  
                                  
                                  -
                                  
                                  
                                  (694,583
                                  )Net
                                      unrealized gains (losses)
                                  
                                  
                                  109,182
                                  
                                  
                                  (944,335
                                  )Tax
                                      (expense) benefit
                                  
                                  
                                  (37,121
                                  )
                                  
                                  321,072Other
                                      comprehensive income (loss)
                                  
                                  $
                                  72,061
                                  
                                  $
                                  (623,263
                                  )
 **Note
                                    15.**
                                **Transactions
                                    with Related Parties**
  In
                          the
                          ordinary course of business, the Bank granted loans to
                          principal officers,
                          directors, and their affiliates. Annual activity consisted
                          of the
                          following:
  2007Beginning
                                      balance
                                  
                                  $
                                  2,836,239New
                                      loans
                                  
                                  
                                  700,704Repayments
                                  
                                  
                                  (920,604
                                  )Ending
                                      balance
                                  
                                  $
                                  2,616,339
 Deposits
                          from principal officers, directors, and their affiliates
                          at June 30, 2007 and
                          2006 were $1,965,901 and $432,000.
  F-31
  **Equitable
                          Financial Corp.**
 
 **Notes
                          to Consolidated Financial Statements**
  **Note
                                    16.**
                                **Parent
                                    Company Only Condensed Financial
                                    Information**
  **Equitable
                                      Financial Corp.****Condensed
                                      Balance Sheets **June
                                      30, 2007 and
                                      2006****
  2007
                                  
                                  2006AssetsCash
                                      and cash equivalents
                                  
                                  $
                                  4,103,608
                                  
                                  $
                                  4,921,976Investment
                                      in bank subsidiary
                                  
                                  
                                  17,753,530
                                  
                                  
                                  18,723,047ESOP
                                      loan
                                  
                                  
                                  1,215,843
                                  
                                  
                                  1,272,262Other
                                      assets
                                  
                                  
                                  112,961
                                  
                                  
                                  177,391**Total
                                      assets**
                                  
                                  $
                                  23,185,942
                                  
                                  $
                                  25,094,676Liabilities
                                      and Stockholders' EquityAccrued
                                      interest payable on other liabilities
                                  
                                  $
                                  20,000
                                  
                                  $
                                  -Common
                                      stock in ESOP subject to contingent repurchase
                                      obligation
                                  
                                  
                                  151,679
                                  
                                  
                                  61,033Stockholders'
                                      equity
                                  
                                  
                                  23,014,263
                                  
                                  
                                  25,033,643**Total
                                      liabilities and stockholders' equity**
                                  
                                  $
                                  23,185,942
                                  
                                  $
                                  25,094,676
  F-32
  Equitable
                                Financial Corp.
 
 Notes
                                to Consolidated Financial Statements
 **Note
                                    16.**
                                **Parent
                                    Company Only Condensed Financial Information
                                    (Continued)**
 **Equitable
                                      Financial Corp.****Condensed
                                      Statements of Operations****Year
                                      Ended June 30, 2007 and Period from November
                                      8, 2005 through June 30,
                                      2006**
  2007
                                  
                                  2006IncomeInterest
                                      on ESOP loan
                                  
                                  $
                                  91,132
                                  
                                  $
                                  53,619Other
                                      income
                                  
                                  
                                  14,843
                                  
                                  
                                  7,696**Total
                                      income**
                                  
                                  
                                  105,975
                                  
                                  
                                  61,315ExpenseCharitable
                                      foundation donation
                                  
                                  
                                  -
                                  
                                  
                                  725,903Professional
                                      fees
                                  
                                  
                                  272,201
                                  
                                  
                                  65,373Other
                                      expense
                                  
                                  
                                  31,703
                                  
                                  
                                  5,066303,904
                                  
                                  
                                  796,342(Loss)
                                      before income tax benefit and undistributed
                                      subsidiary
                                      (loss)
                                  
                                  
                                  (197,929
                                  )
                                  
                                  (735,027
                                  )Income
                                      tax expense (benefit)
                                  
                                  
                                  66,504
                                  
                                  
                                  (136,910
                                  )(Loss)
                                      before equity in undistributed subsidiary (loss)
                                  
                                  
                                  (264,433
                                  )
                                  
                                  (598,117
                                  )Equity
                                      in undistributed subsidiary (loss)
                                  
                                  
                                  (1,134,507
                                  )
                                  
                                  (264,810
                                  )**Net
                                      (loss)**
                                  
                                  $
                                  (1,398,940
                                  )
                                  $
                                  (862,927
                                  )
  F-33
  **Equitable
                            Financial Corp.**
 
 **Notes
                            to Consolidated Financial Statements**
  **Note
                                    16.**
                                **Parent
                                    Company Only Condensed Financial Information
                                    (Continued)**
  **Equitable
                                      Financial Corp.****Condensed
                                      Statement of Cash Flows****Year
                                      Ended June 30, 2007 and Period from November
                                      8, 2005 through June 30,
                                      2006**2007
                                  
                                  2006Cash
                                      Flows From Operating ActivitiesNet
                                      (loss)
                                  
                                  $
                                  (1,398,940
                                  )
                                  $
                                  (862,927
                                  )Adjustments
                                      to reconcile net (loss) to net cash (used in)
                                      operating
                                      activities:Equity
                                      in undistributed subsidiary income
                                  
                                  
                                  1,134,507
                                  
                                  
                                  264,810Charitable
                                      foundation donation
                                  
                                  
                                  -
                                  
                                  
                                  626,530Change
                                      in other assets
                                  
                                  
                                  64,429
                                  
                                  
                                  (177,391
                                  )Change
                                      in accrued interest payable and other liabilities
                                  
                                  
                                  20,000
                                  
                                  
                                  -**Net
                                      cash (used in) operating activities**
                                  
                                  
                                  (180,004
                                  )
                                  
                                  (148,978
                                  )Cash
                                      Flows From Investing ActivitiesInitial
                                      investment in bank subsidiary
                                  
                                  
                                  -
                                  
                                  
                                  (6,583,947
                                  )ESOP
                                      loan origination
                                  
                                  
                                  -
                                  
                                  
                                  (1,292,620
                                  )Distribution
                                      to capitalize Equitable Financial MHC
                                  
                                  
                                  -
                                  
                                  
                                  (100,000
                                  )Repayment
                                      of ESOP loan
                                  
                                  
                                  56,419
                                  
                                  
                                  20,358**Net
                                      cash provided by (used in) investing activities**
                                  
                                  
                                  56,419
                                  
                                  
                                  (7,956,209
                                  )Cash
                                      Flows From Financing ActivitiesIssuance
                                      of common stock, net of offering costs
                                  
                                  
                                  -
                                  
                                  
                                  13,026,983Purchase
                                      of treasury stock
                                  
                                  
                                  (694,783
                                  )
                                  
                                  -**Net
                                      cash (used in) provided by financing activities**
                                  
                                  
                                  (694,783
                                  )
                                  
                                  13,026,983Net
                                      change in cash and cash equivalents
                                  
                                  
                                  (818,368
                                  )
                                  
                                  4,921,796Beginning
                                      cash and cash equivalents
                                  
                                  
                                  4,921,976
                                  
                                  
                                  -Ending
                                      cash and cash equivalents
                                  
                                  $
                                  4,103,608
                                  
                                  $
                                  4,921,796
 F-34