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

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

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| Virginia                                                                       |     | 27-4132729                                          |
|--------------------------------------------------------------------------------|---------------|-----------------------------------------------------|
| (State or other jurisdiction of incorporation or |          | (I.R.S. Employer Identification No.) |
| organization)                                                                  |          |                                                |

| 4501 Cox Road, Glen Allen, Virginia      |     | 23060      |
|------------------------------------------|---------------|------------|
| (Address of principal executive offices) |          | (Zip Code) |

----

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|         | Large accelerated filer  ̈                                    | Accelerated filer   ̈    |
|--------------|----------------------------------------------------------------------------------|-------------------------------------------------------|
|         | Non-accelerated filer  x                                          | Smaller Reporting Company   ̈ |
|    | (Do not check if a smaller reporting company) |                                                  |

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|                                                                                                                                  | Page No. |
|---------------------------------------------------------------------------------------------------------------------------------------|---------------|
| Part I.  Financial Information                                                                                              |          |
|                                                                                                                                  |          |
| Item 1.  Financial Statements                                                                                               |          |
|                                                                                                                                  |          |
| Consolidated Statements of Financial Condition at March 31, 2011 and September 30, 2010 (unaudited)                                   | 3             |
|                                                                                                                                  |          |
| Consolidated Statements of Earnings for the Three and Six Months Ended March 31, 2011 and 2010 (unaudited)                            | 4             |
|                                                                                                                                  |          |
| Consolidated Statements of Comprehensive Income and Changes in Net Worth for the Six Months Ended March 31, 2011 and 2010 (unaudited) | 5             |
|                                                                                                                                  |          |
| Consolidated Statements of Cash Flows for the Six Months Ended March 31, 2011 and 2010 (unaudited)                                    | 6             |
|                                                                                                                                  |          |
| Notes to the Unaudited Consolidated Financial Statements                                                                              | 7             |
|                                                                                                                                  |          |
| Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations                       | 26            |
|                                                                                                                                  |          |
| Item 3.   Quantitative and Qualitative Disclosures About Market Risk                                                   | 39            |
|                                                                                                                                  |          |
| Item 4.   Controls and Procedures                                                                                      | 40            |
|                                                                                                                                  |          |
| Part II.  Other Information                                                                                                 |          |
|                                                                                                                                  |          |
| Item 1.    Legal Proceedings                                                                                           | 41            |
|                                                                                                                                  |          |
| Item 1A. Risk Factors                                                                                                            | 41            |
|                                                                                                                                  |          |
| Item 2     Unregistered Sales of Equity Securities and Use of Proceeds                                       | 41            |
|                                                                                                                                  |          |
| Item 3.    Defaults Upon Senior Securities                                                                        | 41            |
|                                                                                                                                  |          |
| Item 4.    [Removed and Reserved]                                                                                 | 41            |
|                                                                                                                                  |          |
| Item 5.    Other Information                                                                                      | 41            |
|                                                                                                                                  |          |
| Item 6.    Exhibits                                                                                               | 41            |
|                                                                                                                                  |          |
| Signatures                                                                                                                            | 43            |

----

| (Dollars in thousands)                                   |   | March 31,2011 |      |   | September 30,2010 |   |
|--------------------------------------------------------------------|--------|--------------------|-----------|--------|------------------------|--------|
|                                                               |   | (unaudited)        |      |   |                   |   |
| Assets                                                             |   |               |      |   |                   |   |
| Cash and cash equivalents:                                         |   |               |      |   |                   |   |
| Cash and due from banks                                            |   | $                  | 121,052   |   |                   | $      | 7,401 |   |
| Interest-bearing deposits in other banks                           |   |               | 190,527   |   |                   |   | 90,028 |   |
| Money market investments                                           |   |               | 859       |   |                   |   | 480 |   |
| Total cash and cash equivalents                                    |   |               | 312,438   |   |                   |   | 97,909 |   |
|                                                               |   |               |      |   |                   |   |   |   |
| Securities available for sale                                      |   |               | 342,400   |   |                   |   | 276,643 |   |
| Securities held to maturity                                        |   |               | 31,128    |   |                   |   | 35,518 |   |
|                                                               |   |               |      |   |                   |   |   |   |
| Loans, net of deferred loan fees                                   |   |               | 490,715   |   |                   |   | 490,454 |   |
| Less allowance for loan losses                                     |   |               | 11,922    |   |                   |   | 13,419 |   |
| Net loans                                                          |   |               | 478,793   |   |                   |   | 477,035 |   |
|                                                               |   |               |      |   |                   |   |   |   |
| Loans held for sale                                                |   |               | 249       |   |                   |   | 2,781 |   |
| Federal Home Loan Bank stock                                       |   |               | 12,071    |   |                   |   | 12,542 |   |
| Office properties and equipment, net                               |   |               | 6,021     |   |                   |   | 6,099 |   |
| Real estate owned                                                  |   |               | 11,636    |   |                   |   | 11,581 |   |
| Accrued interest receivable:                                       |   |               |      |   |                   |   |   |   |
| Loans                                                              |   |               | 2,480     |   |                   |   | 2,442 |   |
| Mortgage-backed securities and collateralized mortgage obligations |   |               | 747       |   |                   |   | 667 |   |
| Other investment securities                                        |   |               | 1,786     |   |                   |   | 1,613 |   |
| Total accrued interest receivable                                  |   |               | 5,013     |   |                   |   | 4,722 |   |
|                                                               |   |               |      |   |                   |   |   |   |
| Cash surrender value of bank-owned life insurance                  |   |               | 31,066    |   |                   |   | 30,430 |   |
| Prepaid expenses and other assets                                  |   |               | 19,137    |   |                   |   | 15,795 |   |
| Total assets                                                       |   | $                  | 1,249,952 |   |                   | $      | 971,055 |   |
|                                                               |   |               |      |   |                   |   |   |   |
| Liabilities                                                        |   |               |      |   |                   |   |   |   |
| Deposits:                                                          |   |               |      |   |                   |   |   |   |
| Savings deposits                                                   |   | $                  | 277,507   |   |                   | $      | 266,694 |   |
| Time deposits                                                      |   |               | 401,603   |   |                   |   | 380,433 |   |
| Total deposits                                                     |   |               | 679,110   |   |                   |   | 647,127 |   |
|                                                               |   |               |      |   |                   |   |   |   |
| Stock order funds                                                  |   |               | 242,377   |   |                   |   | - |   |
| Federal Home Loan Bank borrowings                                  |   |               | 190,000   |   |                   |   | 190,000 |   |
| Advance payments by borrowers for property taxes and insurance     |   |               | 2,448     |   |                   |   | 2,340 |   |
| Accrued expenses and other liabilities                             |   |               | 5,675     |   |                   |   | 4,819 |   |
| Total liabilities                                                  |   |               | 1,119,610 |   |                   |   | 844,286 |   |
|                                                               |   |               |      |   |                   |   |   |   |
| Commitments and contingencies (see note 8)                         |   |               |      |   |                   |   |   |   |
|                                                               |   |               |      |   |                   |   |   |   |
| Net worth:                                                         |   |               |      |   |                   |   |   |   |
| Retained earnings                                                  |   |               | 128,109   |   |                   |   | 124,339 |   |
| Accumulated other comprehensive income                             |   |               | 2,233     |   |                   |   | 2,430 |   |
| Total net worth                                                    |   |               | 130,342   |   |                   |   | 126,769 |   |
| Total liabilities and net worth                                    |   | $                  | 1,249,952 |   |                   | $      | 971,055 |   |

----

|                                                                  |   | Three months endedMarch 31, |   |   | Six months endedMarch 31, |   |
|-----------------------------------------------------------------------|--------|--------------------------------------------|--------|--------|------------------------------------------|--------|
| (Dollars in thousands)                                      |   | 2011                                       |   |   | 2010                                     |   |   | 2011 |   |   | 2010 |   |
| Interest and dividend income:                                         |   |                                       |   |   |                                     |   |   |   |   |   |   |   |
| Interest and fees on loans                                            |   | $                                          | 7,800  |   |                                     | $      | 8,382 |   |   | $ | 15,983 |   |   | $ | 16,426 |   |
| Interest on deposits in other banks                                   |   |                                       | 33     |   |                                     |   | 44 |   |   |   | 77 |   |   |   | 75 |   |
| Interest and dividends on securities:                                 |   |                                       |   |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Taxable                                                               |   |                                       | 3,250  |   |                                     |   | 4,071 |   |   |   | 6,472 |   |   |   | 8,025 |   |
| Nontaxable                                                            |   |                                       | 79     |   |                                     |   | 79 |   |   |   | 159 |   |   |   | 167 |   |
| Total interest and dividend income                                    |   |                                       | 11,162 |   |                                     |   | 12,576 |   |   |   | 22,691 |   |   |   | 24,693 |   |
| Interest expense:                                                     |   |                                       |   |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Interest on deposits                                                  |   |                                       | 2,672  |   |                                     |   | 3,590 |   |   |   | 5,437 |   |   |   | 7,504 |   |
| Interest on borrowings                                                |   |                                       | 2,266  |   |                                     |   | 2,721 |   |   |   | 4,582 |   |   |   | 5,509 |   |
| Total interest expense                                                |   |                                       | 4,938  |   |                                     |   | 6,311 |   |   |   | 10,019 |   |   |   | 13,013 |   |
| Net interest income                                                   |   |                                       | 6,224  |   |                                     |   | 6,265 |   |   |   | 12,672 |   |   |   | 11,680 |   |
| Provision for loan losses                                             |   |                                       | 290    |   |                                     |   | 156 |   |   |   | 712 |   |   |   | 2,101 |   |
| Net interest income after provision for loan losses                   |   |                                       | 5,934  |   |                                     |   | 6,109 |   |   |   | 11,960 |   |   |   | 9,579 |   |
| Noninterest income (expense) :                                        |   |                                       |   |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Service charges on deposit accounts                                   |   |                                       | 12     |   |                                     |   | 13 |   |   |   | 20 |   |   |   | 29 |   |
| Other service charges and fees                                        |   |                                       | 91     |   |                                     |   | 332 |   |   |   | 153 |   |   |   | 437 |   |
| Gains on sales of loans                                               |   |                                       | 65     |   |                                     |   | 59 |   |   |   | 216 |   |   |   | 142 |   |
| Gains (losses) on sales of securities, net                            |   |                                       | 364    |   |                                     |   | (2 | ) |   |   | 264 |   |   |   | 1,975 |   |
| Impairment of securities, net:                                        |   |                                       |   |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Impairment of securities                                              |   |                                       | (490   | )      |                                     |   | (1,440 | ) |   |   | (786 | ) |   |   | (2,960 | ) |
| Less: Impairment recognized in other comprehensive income             |   |                                       | (108   | )      |                                     |   | (127 | ) |   |   | (105 | ) |   |   | (456 | ) |
| Net impairment reflected in earnings                                  |   |                                       | (382   | )      |                                     |   | (1,313 | ) |   |   | (681 | ) |   |   | (2,504 | ) |
| Net increase (decrease) in value of call options on equity securities |   |                                       | 26     |   |                                     |   | (6 | ) |   |   | 26 |   |   |   | (9 | ) |
| Increase in cash surrender value of bank-owned life insurance         |   |                                       | 316    |   |                                     |   | 304 |   |   |   | 636 |   |   |   | 638 |   |
| Other operating income                                                |   |                                       | 81     |   |                                     |   | 135 |   |   |   | 306 |   |   |   | 267 |   |
| Total noninterest income (expense)                                    |   |                                       | 573    |   |                                     |   | (478 | ) |   |   | 940 |   |   |   | 975 |   |
| Other noninterest expenses:                                           |   |                                       |   |   |                                     |   |   |   |   |   |   |   |   |   |   |   |
| Personnel expense                                                     |   |                                       | 2,045  |   |                                     |   | 1,903 |   |   |   | 3,999 |   |   |   | 3,857 |   |
| Occupancy expense                                                     |   |                                       | 207    |   |                                     |   | 231 |   |   |   | 408 |   |   |   | 456 |   |
| Equipment expense                                                     |   |                                       | 221    |   |                                     |   | 219 |   |   |   | 446 |   |   |   | 437 |   |
| Advertising expense                                                   |   |                                       | 32     |   |                                     |   | 79 |   |   |   | 72 |   |   |   | 120 |   |
| Federal deposit insurance premiums                                    |   |                                       | 272    |   |                                     |   | 285 |   |   |   | 518 |   |   |   | 551 |   |
| Fee on early retirement of FHLB borrowings                            |   |                                       | -      |   |                                     |   | - |   |   |   | - |   |   |   | 318 |   |
| Other operating expenses                                              |   |                                       | 1,398  |   |                                     |   | 757 |   |   |   | 2,183 |   |   |   | 1,388 |   |
| Total other noninterest expenses                                      |   |                                       | 4,175  |   |                                     |   | 3,474 |   |   |   | 7,626 |   |   |   | 7,127 |   |
| Income before provision for income taxes                              |   |                                       | 2,332  |   |                                     |   | 2,157 |   |   |   | 5,274 |   |   |   | 3,427 |   |
| Federal and state income tax expense                                  |   |                                       | 597    |   |                                     |   | 599 |   |   |   | 1,504 |   |   |   | 840 |   |
| Net income                                                            |   | $                                          | 1,735  |   |                                     | $      | 1,558 |   |   | $ | 3,770 |   |   | $ | 2,587 |   |

----

| (Dollars in thousands)                                                                                                                                               |   | Retainedearnings |    |   | Accumulated othercomprehensiveincome (loss) |   |   | Net worth |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------|---------|--------|-------------------------------------------------------|--------|--------|----------------|--------|
| Balance at September 30, 2009                                                                                                                                                  |   | $                | 125,420 |   |                                                  | $      | (1,782 | )              |   | $ | 123,638 |   |
| Net income                                                                                                                                                                     |   |             | 2,587   |   |                                                  |   | -      |           |   |   | 2,587 |   |
| Other comprehensive income (loss):                                                                                                                                             |   |             |    |   |                                                  |   |   |           |   |   |   |   |
| Net unrealized holding gains on available-for-sale securities arising during the period, net of income tax expense of $1,684                                                   |   |             |    |   |                                                  |   | 2,915  |           |   |   | 2,915 |   |
|                                                                                                                                                                           |   |             |    |   |                                                  |   |   |           |   |   |   |   |
| Reclassification adjustment for gains on available-for-sale securities included in net earnings, net of income tax expense of $743                                             |   |             |    |   |                                                  |   | (1,213 | )              |   |   | (1,213 | ) |
|                                                                                                                                                                           |   |             |    |   |                                                  |   |   |           |   |   |   |   |
| Other-than-temporary impairment of held-to-maturity securities related to factors other than credit, net of amortization, net of income tax benefit of $126                    |   |             |    |   |                                                  |   | (205   | )              |   |   | (205 | ) |
|                                                                                                                                                                           |   |             |    |   |                                                  |   |   |           |   |   |   |   |
| Amortization of previously recognized other-than-temporary impairment of available-for-sale securities related to factors other than credit, net of income tax expense of $261 |   |             |    |   |                                                  |   | 426    |           |   |   | 426 |   |
|                                                                                                                                                                           |   |             |    |   |                                                  |   |   |           |   |   |   |   |
| Comprehensive income                                                                                                                                                           |   |             |    |   |                                                  |   |   |           |   |   | 4,510 |   |
| Balance at March 31, 2010                                                                                                                                                      |   | $                | 128,007 |   |                                                  | $      | 141    |           |   | $ | 128,148 |   |
|                                                                                                                                                                           |   |             |    |   |                                                  |   |   |           |   |   |   |   |
| Balance at September 30, 2010                                                                                                                              |   | $                | 124,339 |   |                                                  | $      | 2,430  |           |   | $ | 126,769 |   |
| Net income                                                                                                                                                                     |   |             | 3,770   |   |                                                  |   | -      |           |   |   | 3,770 |   |
| Other comprehensive income (loss):                                                                                                                                             |   |             |    |   |                                                  |   |   |           |   |   |   |   |
| Net unrealized holding losses on available-for-sale securities arising during the period, net of income tax benefit of $1,199                                                  |   |             |    |   |                                                  |   | (516   | )              |   |   | (516 | ) |
|                                                                                                                                                                           |   |             |    |   |                                                  |   |   |           |   |   |   |   |
| Reclassification adjustment for gains on available-for-sale securities included in net earnings, net of income tax expense of $81                                              |   |             |    |   |                                                  |   | (132   | )              |   |   | (132 | ) |
|                                                                                                                                                                           |   |             |    |   |                                                  |   |   |           |   |   |   |   |
| Other-than-temporary impairment of held-to-maturity securities related to factors other than credit, net of amortization, net of income tax expense of $15                     |   |             |    |   |                                                  |   | 25     |           |   |   | 25 |   |
|                                                                                                                                                                           |   |             |    |   |                                                  |   |   |           |   |   |   |   |
| Amortization of previously recognized other-than-temporary impairment of available-for-sale securities related to factors other than credit, net of income tax expense of $261 |   |             |    |   |                                                  |   | 426    |           |   |   | 426 |   |
|                                                                                                                                                                           |   |             |    |   |                                                  |   |   |           |   |   |   |   |
| Comprehensive income                                                                                                                                                           |   |             |    |   |                                                  |   |   |           |   |   | 3,573 |   |
| Balance at March 31, 2011                                                                                                                                                      |   | $                | 128,109 |   |                                                  | $      | 2,233  |           |   | $ | 130,342 |   |

----

|                                                                          |   | 2011   |     |   | 2010   |   |
|-------------------------------------------------------------------------------|--------|--------|----------|--------|--------|--------|
|  (Dollars in thousands)                                                  |   |   |     |   |   |   |
| Cash Flows From Operating Activities                                          |   |   |     |   |   |   |
| Net income                                                                    |   | $      | 3,770    |   |   | $      | 2,587 |   |
| Adjustments to reconcile net income to net cash and cash                      |   |   |     |   |   |   |   |   |
| equivalents provided by operating activities:                                 |   |   |     |   |   |   |   |   |
| Depreciation and amortization                                                 |   |   | 350      |   |   |   | 334 |   |
| Provision for loan losses                                                     |   |   | 712      |   |   |   | 2,101 |   |
| Impairment charge on other real estate owned                                  |   |   | 781      |   |   |   | - |   |
| Gain on sales of securities available for sale, net                           |   |   | (264     | )      |   |   | (1,975 | ) |
| Net (increase) decrease in the value of call options on equity securities     |   |   | (26      | )      |   |   | 9 |   |
| Impairment charge on securities                                               |   |   | 681      |   |   |   | 2,504 |   |
| Loss (gain) on sales or disposal of office properties and equipment, net      |   |   | 1        |   |   |   | (10 | ) |
| Gain on sale of other real estate owned                                       |   |   | (54      | )      |   |   | - |   |
| Net amortization (accretion) on securities                                    |   |   | 767      |   |   |   | (415 | ) |
| Originations of loans held for sale                                           |   |   | (8,559   | )      |   |   | (8,131 | ) |
| Sales and principal payments on loans held for sale                           |   |   | 11,091   |   |   |   | 7,998 |   |
| Changes in assets and liabilities:                                            |   |   |     |   |   |   |   |   |
| Accrued interest receivable                                                   |   |   | (291     | )      |   |   | (35 | ) |
| Cash surrender value of bank-owned life insurance                             |   |   | (636     | )      |   |   | (638 | ) |
| Prepaid expenses and other assets                                             |   |   | (2,339   | )      |   |   | (4,060 | ) |
| Advance payments by borrowers for property taxes and insurance                |   |   | 108      |   |   |   | 561 |   |
| Accrued expenses and other liabilities                                        |   |   | 856      |   |   |   | (739 | ) |
| Net cash and cash equivalents provided by operating activities                |   |   | 6,948    |   |   |   | 91 |   |
| Cash Flows From Investing Activities                                          |   |   |     |   |   |   |   |   |
| Net redemptions of Federal Home Loan Bank stock                               |   |   | 471      |   |   |   | - |   |
| Net deposits of term interest bearing deposits in other banks                 |   |   | -        |   |   |   | (56 | ) |
| Proceeds from maturities, calls and paydowns of securities available for sale |   |   | 54,269   |   |   |   | 29,871 |   |
| Proceeds from sales and redemptions of securities available for sale          |   |   | 12,173   |   |   |   | 26,486 |   |
| Purchases of securities available for sale                                    |   |   | (134,455 | )      |   |   | (52,404 | ) |
| Proceeds from maturities and paydowns of securities held to maturity          |   |   | 4,260    |   |   |   | 4,782 |   |
| Proceeds from sales of call options on equity securities                      |   |   | 26       |   |   |   | - |   |
| Net (increase) decrease in loans                                              |   |   | (4,235   | )      |   |   | 4,676 |   |
| Purchases of office properties and equipment                                  |   |   | (277     | )      |   |   | (284 | ) |
| Proceeds from sales of office properties and equipment                        |   |   | 5        |   |   |   | 12 |   |
| Capitalized improvements of real estate owned                                 |   |   | (46      | )      |   |   | - |   |
| Proceeds from sales of real estate owned                                      |   |   | 1,030    |   |   |   | 244 |   |
| Net cash and cash equivalents provided (used) by investing activities         |   |   | (66,779  | )      |   |   | 13,327 |   |
| Cash Flows From Financing Activities                                          |   |   |     |   |   |   |   |   |
| Net increase in savings deposits                                              |   |   | 10,813   |   |   |   | 35,249 |   |
| Net increase(decrease) in time deposits                                       |   |   | 21,170   |   |   |   | (21,177 | ) |
| Net increase in stock order funds                                             |   |   | 242,377  |   |   |   | - |   |
| Net repayments of long-term Federal Home Loan Bank borrowings                 |   |   | -        |   |   |   | (10,000 | ) |
| Net cash and cash equivalents provided by financing activities                |   |   | 274,360  |   |   |   | 4,072 |   |
| Net increase in cash and cash equivalents                                     |   |   | 214,529  |   |   |   | 17,490 |   |
| Cash and cash equivalents at beginning of period                              |   |   | 97,909   |   |   |   | 62,783 |   |
| Cash and cash equivalents at end of period                                    |   | $      | 312,438  |   |   | $      | 80,273 |   |
|                                                                          |   |   |     |   |   |   |   |   |
| Supplemental disclosures of cash flow information                             |   |   |     |   |   |   |   |   |
| Cash payments for:                                                            |   |   |     |   |   |   |   |   |
| Interest                                                                      |   | $      | 9,981    |   |   | $      | 13,080 |   |
| Income taxes                                                                  |   | $      | 1,400    |   |   | $      | 700 |   |
| Supplemental schedule of noncash investing and financing activities           |   |   |     |   |   |   |   |   |
| Unrealized (losses) gains on securities available for sale                    |   | $      | (1,241   | )      |   | $      | 2,643 |   |
| Transfer of loans to other real estate owned, net                             |   | $      | 2,439    |   |   | $      | 3,885 |   |

----

| Note 1. | Nature of Business and Summary of Significant Accounting Policies |
|---------|-------------------------------------------------------------------|

----

----

| Note 2. | Stock Conversion |
|---------|------------------|

----

| Note 3. | Securities |
|---------|------------|

|                                   |   | March 31, 2011 |    |
|----------------------------------------|--------|--------------------------|---------|
|  (Dollars in thousands) |   | Adjustedamortizedcost    |    |   | OTTIrecognizedin AOCI |   |   | Amortizedcost |   |   | Grossunrealizedgains |   |   | Grossunrealizedlosses |   |   | Estimatedfair value |   |
| Available for sale:                    |   |                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S. government and federal agencies   |   | $                        | 12,500  |   |   | $ | - |   |   | $ | 12,500 |   |   | $ | - |   |   | $ | 158 |   |   | $ | 12,342 |   |
| States and political subdivisions      |   |                     | 18,904  |   |   |   | - |   |   |   | 18,904 |   |   |   | 88 |   |   |   | 862 |   |   |   | 18,130 |   |
| Agency mortgage-backed securities      |   |                     | 22,756  |   |   |   | - |   |   |   | 22,756 |   |   |   | 1,343 |   |   |   | - |   |   |   | 24,099 |   |
| Agency collateralized mortgage         |   |                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| obligations                            |   |                     | 144,759 |   |   |   | - |   |   |   | 144,759 |   |   |   | 1,837 |   |   |   | 571 |   |   |   | 146,025 |   |
| Corporate equity securities            |   |                     | 23,251  |   |   |   | - |   |   |   | 23,251 |   |   |   | 1,626 |   |   |   | 1,220 |   |   |   | 23,657 |   |
| Corporate debt securities              |   |                     | 112,041 |   |   |   | 1,821 |   |   |   | 113,862 |   |   |   | 4,990 |   |   |   | 705 |   |   |   | 118,147 |   |
| Total                                  |   | $                        | 334,211 |   |   | $ | 1,821 |   |   | $ | 336,032 |   |   | $ | 9,884 |   |   | $ | 3,516 |   |   | $ | 342,400 |   |

|                                       |   |                         |    |
|--------------------------------------------|--------|------------------------------|---------|
|                                       |   | September 30, 2010 |    |
| (Dollars in thousands)           |   | Adjustedamortizedcost        |    |   | OTTIrecognizedin AOCI |   |   | Amortizedcost |   |   | Grossunrealizedgains |   |   | Grossunrealizedlosses |   |   | Estimatedfair value |   |
| Available for sale:                        |   |                         |    |
| States and political subdivisions          |   | $                            | 20,066  |   |   | $ | - |   |   | $ | 20,066 |   |   | $ | 774 |   |   | $ | - |   |   | $ | 20,840 |   |
| Agency mortgage-backed securities          |   |                         | 27,017  |   |   |   | - |   |   |   | 27,017 |   |   |   | 1,655 |   |   |   | - |   |   |   | 28,672 |   |
| Agency collateralized mortgage obligations |   |                         | 83,520  |   |   |   | - |   |   |   | 83,520 |   |   |   | 2,120 |   |   |   | 573 |   |   |   | 85,067 |   |
| Corporate equity securities                |   |                         | 23,846  |   |   |   | - |   |   |   | 23,846 |   |   |   | 603 |   |   |   | 1,636 |   |   |   | 22,813 |   |
| Corporate debt securities                  |   |                         | 112,077 |   |   |   | 2,508 |   |   |   | 114,585 |   |   |   | 5,846 |   |   |   | 1,180 |   |   |   | 119,251 |   |
| Total                                      |   | $                            | 266,526 |   |   | $ | 2,508 |   |   | $ | 269,034 |   |   | $ | 10,998 |   |   | $ | 3,389 |   |   | $ | 276,643 |   |

----

|                                           |   | March 31, 2011 |         |
|------------------------------------------------|--------|--------------------------|--------------|
|  (Dollars in thousands)         |   | Adjustedamortizedcost    |         |   | OTTIrecognizedin AOCI |   |   | Amortizedcost |   |   | Grossunrealizedgains |   |   | Grossunrealizedlosses |   |   | Estimatedfair value |   |
| Held to maturity:                              |   |                     |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Agency mortgage-backed securities              |   | $                        | 5,919        |   |   | $ | - |   |   | $ | 5,919 |   |   | $ | 174 |   |   | $ | - |   |   | $ | 6,093 |   |
| Agency collateralized mortgage obligations     |   |                     | 7,214        |   |   |   | - |   |   |   | 7,214 |   |   |   | 549 |   |   |   | 1 |   |   |   | 7,762 |   |
| Non-agency collateralized mortgage obligations |   |                     |  17,995 |   |   |   |  948 |   |   |   |  18,943 |   |   |   |  1,064 |   |   |   |  4,621 |   |   |   |  15,386 |   |
| Total                                          |   | $                        | 31,128       |   |   | $ | 948 |   |   | $ | 32,076 |   |   | $ | 1,787 |   |   | $ | 4,622 |   |   | $ | 29,241 |   |

|                                           |   | September 30, 2010 |         |
|------------------------------------------------|--------|------------------------------|--------------|
| (Dollars in thousands)               |   | Adjustedamortizedcost        |         |   | OTTIrecognizedin AOCI |   |   | Amortizedcost |   |   | Grossunrealizedgains |   |   | Grossunrealizedlosses |   |   | Estimatedfair value |   |
| Held to maturity:                              |   |                         |         |
| Agency mortgage-backed securities              |   | $                            | 6,343        |   |   | $ | - |   |   | $ | 6,343 |   |   | $ | 154 |   |   | $ | 4 |   |   | $ | 6,493 |   |
| Agency collateralized mortgage obligations     |   |                         | 8,271        |   |   |   | - |   |   |   | 8,271 |   |   |   | 883 |   |   |   | 1 |   |   |   | 9,153 |   |
| Non-agency collateralized mortgage obligations |   |                         |  20,904 |   |   |   |  988 |   |   |   |  21,892 |   |   |   |  1,450 |   |   |   |  5,491 |   |   |   |  17,851 |   |
| Total                                          |   | $                            | 35,518       |   |   | $ | 988 |   |   | $ | 36,506 |   |   | $ | 2,487 |   |   | $ | 5,496 |   |   | $ | 33,497 |   |

|                                   |   | Available for sale |    |   | Held to maturity |   |
|----------------------------------------|--------|------------------------------|---------|--------|----------------------------|--------|
|                                   |   | Amortized                    |    |   | Estimated fair        |   |   | Amortized |   |   | Estimated fair |   |
| (Dollars in thousands)       |   | cost                         |    |   | value                      |   |   | cost |   |   | value |   |
| Non-mortgage debt securities:          |   |                         |    |   |                       |   |   |   |   |   |   |   |
| Due in one year or less                |   | $                            | 5,000   |   |                       | $      | 5,000 |   |   | $ | - |   |   | $ | - |   |
| Due after one year through five years  |   |                         | 57,644  |   |                       |   | 60,004 |   |   |   | - |   |   |   | - |   |
| Due after five years through ten years |   |                         | 34,204  |   |                       |   | 35,887 |   |   |   | - |   |   |   | - |   |
| Due after ten years                    |   |                         | 48,418  |   |                       |   | 47,728 |   |   |   | - |   |   |   | - |   |
|                                   |   |                         |    |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| Total non-mortgage debt securities     |   |                         | 145,266 |   |                       |   | 148,619 |   |   |   | - |   |   |   | - |   |
|                                   |   |                         |    |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| Mortgage-backed securities             |   |                         | 22,756  |   |                       |   | 24,099 |   |   |   | 5,919 |   |   |   | 6,093 |   |
| Collateralized mortgage obligations    |   |                         | 144,759 |   |                       |   | 146,025 |   |   |   | 26,157 |   |   |   | 23,148 |   |
| Corporate equity securities            |   |                         | 23,251  |   |                       |   | 23,657 |   |   |   | - |   |   |   | - |   |
|                                   |   |                         |    |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| Total securities                       |   | $                            | 336,032 |   |                       | $      | 342,400 |   |   | $ | 32,076 |   |   | $ | 29,241 |   |

----

|                                           |   | March 31, 2011           |   |
|------------------------------------------------|--------|------------------------------------|--------|
|                                           |   | Less Than 12 Months |   |   | 12 Months or Longer |   |   | Total |   |
|                                           |   | Estimated                          |   |   | Gross |   |   | Estimated |   |   | Gross |   |   | Estimated |   |   | Gross |   |
|                                           |   | fair                               |   |   | unrealized |   |   | fair |   |   | unrealized |   |   | fair |   |   | unrealized |   |
|  (Dollars in thousands)                   |   | value                              |   |   | losses |   |   | value |   |   | losses |   |   | value |   |   | losses |   |
| Available for sale:                            |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S. government and federal agencies           |   | $                                  | 12,342 |   |   | $ | 158 |   |   | $ | - |   |   | $ | - |   |   | $ | 12,342 |   |   | $ | 158 |   |
| States and political subdivisions              |   |                               | 5,578  |   |   |   | 862 |   |   |   | - |   |   |   | - |   |   |   | 5,578 |   |   |   | 862 |   |
| Agency collateralized mortgage obligations     |   |                               | 43,217 |   |   |   | 570 |   |   |   | 417 |   |   |   | 1 |   |   |   | 43,634 |   |   |   | 571 |   |
| Corporate equity securities                    |   |                               | 12,682 |   |   |   | 1,220 |   |   |   | - |   |   |   | - |   |   |   | 12,682 |   |   |   | 1,220 |   |
| Corporate debt securities                      |   |                               | 14,771 |   |   |   | 359 |   |   |   | 11,654 |   |   |   | 346 |   |   |   | 26,425 |   |   |   | 705 |   |
| Total available for sale                       |   |                               | 88,590 |   |   |   | 3,169 |   |   |   | 12,071 |   |   |   | 347 |   |   |   | 100,661 |   |   |   | 3,516 |   |
|                                           |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Held to maturity:                              |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Agency collateralized mortgage obligations     |   |                               | -      |   |   |   | - |   |   |   | 126 |   |   |   | 1 |   |   |   | 126 |   |   |   | 1 |   |
| Non-agency collateralized mortgage obligations |   |                               | 1,149  |   |   |   | 348 |   |   |   | 10,807 |   |   |   | 4,273 |   |   |   | 11,956 |   |   |   | 4,621 |   |
| Total held to maturity                         |   |                               | 1,149  |   |   |   | 348 |   |   |   | 10,933 |   |   |   | 4,274 |   |   |   | 12,082 |   |   |   | 4,622 |   |
|                                           |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total temporarily impaired securities          |   | $                                  | 89,739 |   |   | $ | 3,517 |   |   | $ | 23,004 |   |   | $ | 4,621 |   |   | $ | 112,743 |   |   | $ | 8,138 |   |

|                                           |   | September 30, 2010       |   |
|------------------------------------------------|--------|------------------------------------|--------|
|                                           |   | Less Than 12 Months |   |   | 12 Months or Longer |   |   | Total |   |
|                                           |   | Estimated                          |   |   | Gross |   |   | Estimated |   |   | Gross |   |   | Estimated |   |   | Gross |   |
|                                           |   | fair                               |   |   | unrealized |   |   | fair |   |   | unrealized |   |   | fair |   |   | unrealized |   |
| (Dollars in thousands)                         |   | value                              |   |   | losses |   |   | value |   |   | losses |   |   | value |   |   | losses |   |
| Available for sale:                            |   |                               |   |
| Agency collateralized mortgage obligations     |   | $                                  | 26,492 |   |   | $ | 573 |   |   | $ | - |   |   | $ | - |   |   | $ | 26,492 |   |   | $ | 573 |   |
| Corporate equity securities                    |   |                               | 15,366 |   |   |   | 1,617 |   |   |   | 3,512 |   |   |   | 19 |   |   |   | 18,878 |   |   |   | 1,636 |   |
| Corporate debt securities                      |   |                               | -      |   |   |   | - |   |   |   | 27,820 |   |   |   | 1,180 |   |   |   | 27,820 |   |   |   | 1,180 |   |
| Total available for sale                       |   |                               | 41,858 |   |   |   | 2,190 |   |   |   | 31,332 |   |   |   | 1,199 |   |   |   | 73,190 |   |   |   | 3,389 |   |
|                                           |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Held to maturity:                              |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Agency mortgage-backed securities              |   |                               | 592    |   |   |   | 4 |   |   |   | - |   |   |   | - |   |   |   | 592 |   |   |   | 4 |   |
| Agency collateralized mortgage obligations     |   |                               | -      |   |   |   | - |   |   |   | 138 |   |   |   | 1 |   |   |   | 138 |   |   |   | 1 |   |
| Non-agency collateralized mortgage obligations |   |                               | 5,448  |   |   |   | 2,607 |   |   |   | 8,686 |   |   |   | 2,884 |   |   |   | 14,134 |   |   |   | 5,491 |   |
| Total held to maturity                         |   |                               | 6,040  |   |   |   | 2,611 |   |   |   | 8,824 |   |   |   | 2,885 |   |   |   | 14,864 |   |   |   | 5,496 |   |
|                                           |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total temporarily impaired securities          |   | $                                  | 47,898 |   |   | $ | 4,801 |   |   | $ | 40,156 |   |   | $ | 4,084 |   |   | $ | 88,054 |   |   | $ | 8,885 |   |

----

| (Dollars in thousands)                                              |   |   |   |
|---------------------------------------------------------------------|--------|--------|--------|
| Balance of credit losses at September 30, 2010                      |   | $      | 526    |   |
| Additions for credit losses on securities not previously recognized |   |   | 84     |   |
| Reductions for increases in expected cash flows                     |   |   | (181   | ) |
| Balance of credit losses at March 31, 2011                          |   | $      | 429    |   |

----

| Note 4. | Loans |
|---------|-------|

|                             |   | March 31, |    |   | September 30, |   |
|----------------------------------|--------|----------------|---------|--------|--------------------|--------|
| (Dollars in thousands) |   | 2011           |    |   | 2010               |   |
| Loans                            |   |           |    |   |               |   |
| One-to four-family               |   | $              | 120,819 |   |               | $      | 128,696 |   |
| Multi-family                     |   |           | 79,729  |   |               |   | 78,183 |   |
| Nonresidential                   |   |           | 183,460 |   |               |   | 173,403 |   |
| Construction                     |   |           | 40,889  |   |               |   | 40,294 |   |
| Land and land development        |   |           | 68,631  |   |               |   | 70,482 |   |
| Other                            |   |           | 684     |   |               |   | 2,997 |   |
| Total loans                      |   |           | 494,212 |   |               |   | 494,055 |   |
|                             |   |           |    |   |               |   |   |   |
| Deferred loan fees               |   |           | 3,497   |   |               |   | 3,601 |   |
| Loans, net of deferred loan fees |   |           | 490,715 |   |               |   | 490,454 |   |
|                             |   |           |    |   |               |   |   |   |
| Allowance for loan losses        |   |           | 11,922  |   |               |   | 13,419 |   |
| Net loans                        |   | $              | 478,793 |   |               | $      | 477,035 |   |

| Note 5. | Allowance for Loan Losses |
|---------|---------------------------|

----

| (Dollars in thousands) |   | One-tofour-family |   |   | Multi-family |   |   | Non-residential |   |   | Construction |   |   | Land and landdevelopment |   |   | Other  |   |   | Total  |   |
|----------------------------------|--------|-------------------|--------|--------|--------------|--------|--------|-----------------|--------|--------|--------------|--------|--------|------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                             |   |              |   |   |         |   |   |            |   |   |         |   |   |                               |   |   |   |   |   |   |   |
| Balance, September 30, 2010      |   | $                 | 1,260  |   |         | $      | 1,177  |            |   | $      | 2,888        |   |   | $                                  | 2,700  |   |   | $      | 5,372  |   |   | $ | 22 |   |   | $ | 13,419 |   |
|                             |   |              |   |   |         |   |   |            |   |   |         |   |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Provision                        |   |              | 454    |   |         |   | 977    |            |   |   | 583          |   |   |                               | 236    |   |   |   | (1,526 | )      |   |   | (12 | ) |   |   | 712 |   |
| Recoveries                       |   |              | 1      |   |         |   | -      |            |   |   | -            |   |   |                               | 23     |   |   |   | -      |   |   |   | - |   |   |   | 24 |   |
| Charge-offs                      |   |              | (464   | )      |         |   | -      |            |   |   | -            |   |   |                               | (933   | )      |   |   | (836   | )      |   |   | - |   |   |   | (2,233 | ) |
|                             |   |              |   |   |         |   |   |            |   |   |         |   |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, March 31, 2011          |   | $                 | 1,251  |   |         | $      | 2,154  |            |   | $      | 3,471        |   |   | $                                  | 2,026  |   |   | $      | 3,010  |   |   | $ | 10 |   |   | $ | 11,922 |   |

----

| (Dollars in thousands) |   | One-tofour-family |   |   | Multi-family |   |   | Non-residential |   |   | Construction |   |   | Land and landdevelopment |   |   | Other  |   |   | Total  |   |
|----------------------------------|--------|-------------------|--------|--------|--------------|--------|--------|-----------------|--------|--------|--------------|--------|--------|------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                             |   |              |   |   |         |   |   |            |   |   |         |   |   |                               |   |   |   |   |   |   |   |
| Balance, September 30, 2009      |   | $                 | 1,046  |   |         | $      | 620    |            |   | $      | 1,306        |   |   | $                                  | 2,729  |   |   | $      | 2,781  |   |   | $ | 42 |   |   | $ | 8,524 |   |
|                             |   |              |   |   |         |   |   |            |   |   |         |   |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Provision                        |   |              | (85    | )      |         |   | 126    |            |   |   | 748          |   |   |                               | 532    |   |   |   | 795    |   |   |   | (15 | ) |   |   | 2,101 |   |
| Recoveries                       |   |              | 3      |   |         |   | -      |            |   |   | -            |   |   |                               | 127    |   |   |   | -      |   |   |   | 76 |   |   |   | 206 |   |
| Charge-offs                      |   |              | (151   | )      |         |   | -      |            |   |   | -            |   |   |                               | (294   | )      |   |   | (812   | )      |   |   | - |   |   |   | (1,257 | ) |
|                             |   |              |   |   |         |   |   |            |   |   |         |   |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, March 31, 2010          |   | $                 | 813    |   |         | $      | 746    |            |   | $      | 2,054        |   |   | $                                  | 3,094  |   |   | $      | 2,764  |   |   | $ | 103 |   |   | $ | 9,574 |   |

|                             |   | March 31, 2011 |    |
|----------------------------------|--------|--------------------------|---------|
|                             |   | General Allowance   |    |   | Specific Allowance |   |   |   |   |   |   |   |   |   |   |   | Allowance as |   |
| (Dollars in thousands) |   | Balance                  |    |   | Allowance |   |   | Balance |   |   | Allowance |   |   | TotalBalance |   |   | TotalAllowance |   |   | Coverage |   |   | % of totalallowance |   |
| One-to four-family               |   | $                        | 115,447 |   |   | $ | 1,227 |   |   | $ | 5,372 |   |   | $ | 24 |   |   | $ | 120,819 |   |   | $ | 1,251 |   |   |   | 1.04 | % |   |   | 10.5 | % |
| Multi-family                     |   |                     | 79,729  |   |   |   | 2,154 |   |   |   | - |   |   |   | - |   |   |   | 79,729 |   |   |   | 2,154 |   |   |   | 2.70 | % |   |   | 18.1 |   |
| Nonresidential                   |   |                     | 172,385 |   |   |   | 3,053 |   |   |   | 11,075 |   |   |   | 418 |   |   |   | 183,460 |   |   |   | 3,471 |   |   |   | 1.89 | % |   |   | 29.1 |   |
| Construction                     |   |                     | 40,799  |   |   |   | 1,999 |   |   |   | 90 |   |   |   | 27 |   |   |   | 40,889 |   |   |   | 2,026 |   |   |   | 4.96 | % |   |   | 17.0 |   |
| Land and land development        |   |                     | 44,135  |   |   |   | 2,840 |   |   |   | 24,496 |   |   |   | 170 |   |   |   | 68,631 |   |   |   | 3,010 |   |   |   | 4.39 | % |   |   | 25.2 |   |
| Other                            |   |                     | 684     |   |   |   | 10 |   |   |   | - |   |   |   | - |   |   |   | 684 |   |   |   | 10 |   |   |   | 1.40 | % |   |   | 0.1 |   |
| Total allowance                  |   | $                        | 453,179 |   |   | $ | 11,283 |   |   | $ | 41,033 |   |   | $ | 639 |   |   | $ | 494,212 |   |   | $ | 11,922 |   |   |   | 2.41 | % |   |   | 100.0 | % |

|                             |   | September 30, 2010 |    |
|----------------------------------|--------|------------------------------|---------|
|                             |   | General Allowance       |    |   | Specific Allowance |   |   |   |   |   |   |   |   |   |   |   | Allowance as |   |
| (Dollars in thousands) |   | Balance                      |    |   | Allowance |   |   | Balance |   |   | Allowance |   |   | TotalBalance |   |   | TotalAllowance |   |   | Coverage |   |   | % of totalallowance |   |
| One-to four-family               |   | $                            | 127,378 |   |   | $ | 799 |   |   | $ | 1,318 |   |   | $ | 461 |   |   | $ | 128,696 |   |   | $ | 1,260 |   |   |   | 0.98 | % |   |   | 9.4 | % |
| Multi-family                     |   |                         | 78,183  |   |   |   | 1,177 |   |   |   | - |   |   |   | - |   |   |   | 78,183 |   |   |   | 1,177 |   |   |   | 1.51 | % |   |   | 8.8 |   |
| Nonresidential                   |   |                         | 171,143 |   |   |   | 2,673 |   |   |   | 2,260 |   |   |   | 215 |   |   |   | 173,403 |   |   |   | 2,888 |   |   |   | 1.67 | % |   |   | 21.5 |   |
| Construction                     |   |                         | 37,770  |   |   |   | 1,818 |   |   |   | 2,524 |   |   |   | 882 |   |   |   | 40,294 |   |   |   | 2,700 |   |   |   | 6.70 | % |   |   | 20.1 |   |
| Land and land development        |   |                         | 53,921  |   |   |   | 4,458 |   |   |   | 16,561 |   |   |   | 914 |   |   |   | 70,482 |   |   |   | 5,372 |   |   |   | 7.62 | % |   |   | 40.0 |   |
| Other                            |   |                         | 2,997   |   |   |   | 22 |   |   |   | - |   |   |   | - |   |   |   | 2,997 |   |   |   | 22 |   |   |   | 0.72 | % |   |   | 0.2 |   |
| Total allowance                  |   | $                            | 471,392 |   |   | $ | 10,947 |   |   | $ | 22,663 |   |   | $ | 2,472 |   |   | $ | 494,055 |   |   | $ | 13,419 |   |   |   | 2.72 | % |   |   | 100.0 | % |

|                             |   | March 31, |   |   | September 30, |   |
|----------------------------------|--------|----------------|--------|--------|--------------------|--------|
| (Dollars in thousands) |   | 2011           |   |   | 2010               |   |
| Special mention                  |   |           |   |   |               |   |
| One-to four-family               |   | $              | 4,293  |   |               | $      | 7,189 |   |
| Nonresidential                   |   |           | 5,362  |   |               |   | 6,579 |   |
| Construction                     |   |           | 1,675  |   |               |   | 422 |   |
| Land and land development        |   |           | 7,950  |   |               |   | 7,875 |   |
| Total special mention loans      |   |           | 19,280 |   |               |   | 22,065 |   |
|                             |   |           |   |   |               |   |   |   |
| Substandard                      |   |           |   |   |               |   |   |   |
| One-to four-family               |   |           | 5,914  |   |               |   | 3,823 |   |
| Multi-family                     |   |           | 12,807 |   |               |   | 13,539 |   |
| Nonresidential                   |   |           | 442    |   |               |   | 6,018 |   |
| Construction                     |   |           | 166    |   |               |   | 166 |   |
| Land and land development        |   |           | 627    |   |               |   | 10,270 |   |
| Total substandard loans          |   |           | 19,956 |   |               |   | 33,816 |   |
|                             |   |           |   |   |               |   |   |   |
| Impaired                         |   |           |   |   |               |   |   |   |
| One-to four-family               |   |           | 5,372  |   |               |   | 1,318 |   |
| Nonresidential                   |   |           | 11,075 |   |               |   | 2,260 |   |
| Construction                     |   |           | 90     |   |               |   | 2,524 |   |
| Land and land development        |   |           | 24,496 |   |               |   | 16,561 |   |
| Total impaired loans             |   |           | 41,033 |   |               |   | 22,663 |   |
|                             |   |           |   |   |               |   |   |   |
| Total rated loans                |   | $              | 80,269 |   |               | $      | 78,544 |   |

----

|  (Dollars in thousands) |   | Total  |    |   | Good   |   |   | Satisfactory |   |   | WatchList |   |   | SpecialMention |   |   | Substandard |   |   | Impaired |   |   | Not Rated |   |
|----------------------------------------|--------|--------|---------|--------|--------|--------|--------|--------------|--------|--------|-----------|--------|--------|----------------|--------|--------|-------------|--------|--------|----------|--------|--------|----------------|--------|
| Loans                                  |   |   |    |   |   |   |   |         |   |   |      |   |   |           |   |   |        |   |   |     |   |   |           |   |
| One-to four-family                     |   | $      | 120,819 |   |   | $      | -      |         |   | $      | 23,750    |   |   | $              | 3,112  |   |        | $      | 3,756  |     |   | $      | 648            |   |   | $ | 5,372 |   |   | $ | 84,181 |   |
| Multi-family                           |   |   | 79,729  |   |   |   | 10,721 |         |   |   | 47,223    |   |   |           | -      |   |        |   | -      |     |   |   | 12,807         |   |   |   | - |   |   |   | 8,978 |   |
| Nonresidential                         |   |   | 183,460 |   |   |   | 63,276 |         |   |   | 82,655    |   |   |           | 2,720  |   |        |   | 5,362  |     |   |   | 442            |   |   |   | 11,075 |   |   |   | 17,930 |   |
| Construction                           |   |   | 40,889  |   |   |   | 8,560  |         |   |   | 16,067    |   |   |           | -      |   |        |   | 684    |     |   |   | 166            |   |   |   | 90 |   |   |   | 15,322 |   |
| Land and land development              |   |   | 68,631  |   |   |   | -      |         |   |   | 34,351    |   |   |           | -      |   |        |   | 7,950  |     |   |   | 359            |   |   |   | 24,496 |   |   |   | 1,475 |   |
| Other                                  |   |   | 684     |   |   |   | -      |         |   |   | -         |   |   |           | -      |   |        |   | -      |     |   |   | -              |   |   |   | - |   |   |   | 684 |   |
| Total loans                            |   | $      | 494,212 |   |   | $      | 82,557 |         |   | $      | 204,046   |   |   | $              | 5,832  |   |        | $      | 17,752 |     |   | $      | 14,422         |   |   | $ | 41,033 |   |   | $ | 128,570 |   |

----

| (Dollars in thousands) |   | Total  |   |   | Good   |   |   | Satisfactory |   |   | WatchList |   |   | SpecialMention |   |   | Substandard |   |   | Impaired |   |   | Not Rated |   |
|----------------------------------|--------|--------|--------|--------|--------|--------|--------|--------------|--------|--------|-----------|--------|--------|----------------|--------|--------|-------------|--------|--------|----------|--------|--------|----------------|--------|
| Allowance for loan losses        |   |   |   |   |   |   |   |         |   |   |      |   |   |           |   |   |        |   |   |     |   |   |           |   |
| One-to four-family               |   | $      | 1,251  |   |   | $      | -      |         |   | $      | 351       |   |   | $              | 69     |   |        | $      | 111    |     |   | $      | 29             |   |   | $ | 24 |   |   | $ | 667 |   |
| Multi-family                     |   |   | 2,154  |   |   |   | 25     |         |   |   | 1,063     |   |   |           | -      |   |        |   | -      |     |   |   | 864            |   |   |   | - |   |   |   | 202 |   |
| Nonresidential                   |   |   | 3,471  |   |   |   | 158    |         |   |   | 2,050     |   |   |           | 101    |   |        |   | 266    |     |   |   | 33             |   |   |   | 418 |   |   |   | 445 |   |
| Construction                     |   |   | 2,026  |   |   |   | 50     |         |   |   | 942       |   |   |           | -      |   |        |   | 80     |     |   |   | 29             |   |   |   | 27 |   |   |   | 898 |   |
| Land and land development        |   |   | 3,010  |   |   |   | -      |         |   |   | 1,848     |   |   |           | -      |   |        |   | 855    |     |   |   | 58             |   |   |   | 170 |   |   |   | 79 |   |
| Other                            |   |   | 10     |   |   |   | -      |         |   |   | -         |   |   |           | -      |   |        |   | -      |     |   |   | -              |   |   |   | - |   |   |   | 10 |   |
| Total allowance forloans losses  |   | $      | 11,922 |   |   | $      | 233    |         |   | $      | 6,254     |   |   | $              | 170    |   |        | $      | 1,312  |     |   | $      | 1,013          |   |   | $ | 639 |   |   | $ | 2,301 |   |

|  (Dollars in thousands) |   | Total  |    |   | Current |   |    | 31-60Days |   |   | 61-90Days |   |   | 91-120Days |   |   | 121-150Days |   |   | 151-180Days |   |   | 180+Days |   |
|----------------------------------------|--------|--------|---------|--------|---------|--------|---------|-----------|--------|--------|-----------|--------|--------|------------|--------|--------|-------------|--------|--------|-------------|--------|--------|----------|--------|
| One-to four-family                     |   | $      | 120,819 |   |    | $      | 113,730 |      |   | $      | 5,627     |   |   | $          | -      |   |        | $      | 129    |        |   | $      | 697      |   |   | $ | 286 |   |   | $ | 350 |   |
| Multi-family                           |   |   | 79,729  |   |    |   | 77,229  |      |   |   | -         |   |   |       | 2,500  |   |        |   | -      |        |   |   | -        |   |   |   | - |   |   |   | - |   |
| Nonresidential                         |   |   | 183,460 |   |    |   | 171,725 |      |   |   | 5,535     |   |   |       | 3,940  |   |        |   | -      |        |   |   | -        |   |   |   | - |   |   |   | 2,260 |   |
| Construction                           |   |   | 40,889  |   |    |   | 40,633  |      |   |   | -         |   |   |       | 90     |   |        |   | -      |        |   |   | -        |   |   |   | - |   |   |   | 166 |   |
| Land and land development              |   |   | 68,631  |   |    |   | 57,497  |      |   |   | 18        |   |   |       | -      |   |        |   | 31     |        |   |   | 9,925    |   |   |   | 20 |   |   |   | 1,140 |   |
| Other                                  |   |   | 684     |   |    |   | 684     |      |   |   | -         |   |   |       | -      |   |        |   | -      |        |   |   | -        |   |   |   | - |   |   |   | - |   |
| Total                                  |   | $      | 494,212 |   |    | $      | 461,498 |      |   | $      | 11,180    |   |   | $          | 6,530  |   |        | $      | 160    |        |   | $      | 10,622   |   |   | $ | 306 |   |   | $ | 3,916 |   |

|                                           |   | March 31, 2011 |   |   | September 30, 2010 |   |
|------------------------------------------------|--------|--------------------------|--------|--------|------------------------------|--------|
| (Dollars in thousands)               |   | Amount                   |   |   | Allowance                    |   |   | Amount |   |   | Allowance |   |
| Impaired loans with a specific allowance       |   |                     |   |   |                         |   |   |   |   |   |   |   |
| One-to four-family                             |   | $                        | 410    |   |                         | $      | 24 |   |   | $ | 907 |   |   | $ | 461 |   |
| Nonresidential                                 |   |                     | 1,221  |   |                         |   | 418 |   |   |   | 2,260 |   |   |   | 215 |   |
| Construction                                   |   |                     | 90     |   |                         |   | 27 |   |   |   | 2,324 |   |   |   | 882 |   |
| Land and land development                      |   |                     | 2,319  |   |                         |   | 170 |   |   |   | 4,259 |   |   |   | 914 |   |
| Total impaired loans with a specific allowance |   | $                        | 4,040  |   |                         | $      | 639 |   |   | $ | 9,750 |   |   | $ | 2,472 |   |
|                                           |   |                     |   |   |                         |   |   |   |   |   |   |   |   |   |   |   |
| Impaired loans for which no specific allowance |   |                     |   |   |                         |   |   |   |   |   |   |   |   |   |   |   |
| is necessary                                   |   |                     |   |   |                         |   |   |   |   |   |   |   |   |   |   |   |
| One-to four-family                             |   | $                        | 4,962  |   |                         | $      | - |   |   | $ | 410 |   |   | $ | - |   |
| Nonresidential                                 |   |                     | 9,854  |   |                         |   | - |   |   |   | - |   |   |   | - |   |
| Construction                                   |   |                     | -      |   |                         |   | - |   |   |   | 201 |   |   |   | - |   |
| Land and land development                      |   |                     | 22,177 |   |                         |   | - |   |   |   | 12,302 |   |   |   | - |   |
| Total impaired loans for which no specific     |   |                     |   |   |                         |   |   |   |   |   |   |   |   |   |   |   |
| allowance is necessary                         |   | $                        | 36,993 |   |                         | $      | - |   |   | $ | 12,913 |   |   | $ | - |   |

| (Dollars in thousands)                            |   | March 31,2011 |   |   | September 30,2010 |   |
|-------------------------------------------------------------|--------|--------------------|--------|--------|------------------------|--------|
| Nonaccrual loans                                            |   |               |   |   |                   |   |
| One-to four-family                                          |   | $                  | 11,421 |   |                   | $      | 4,576 |   |
| Nonresidential                                              |   |               | 11,075 |   |                   |   | 7,830 |   |
| Construction                                                |   |               | 255    |   |                   |   | 1,470 |   |
| Land and land development                                   |   |               | 12,693 |   |                   |   | 14,667 |   |
| Total non-accrual loans                                     |   | $                  | 35,444 |   |                   | $      | 28,543 |   |
|                                                        |   |               |   |   |                   |   |   |   |
| Loans past due ninety days or more and still accruing       |   |               |   |   |                   |   |   |   |
| Construction                                                |   | $                  | -      |   |                   | $      | 90 |   |
| Land and land development                                   |   |               | -      |   |                   |   | 1,140 |   |
| Total loans past due ninety days or more and still accruing |   | $                  | -      |   |                   | $      | 1,230 |   |

----

| Note 6. | Real Estate Owned |
|---------|-------------------|

|                                      |   | March 31, |   |   | September 30, |   |
|-------------------------------------------|--------|----------------|--------|--------|--------------------|--------|
| (Dollars in thousands)          |   | 2011           |   |   | 2010               |   |
| Real estate owned                         |   |           |   |   |               |   |
| Real estate held for sale                 |   | $              | 3,717  |   |               | $      | 3,240 |   |
| Real estate held for development and sale |   |           | 7,919  |   |               |   | 8,341 |   |
| Total real estate owned                   |   | $              | 11,636 |   |               | $      | 11,581 |   |

| Note 7. | Employee Benefit Plans |
|---------|------------------------|

----

|                             |   | Three months ended March 31, |   |   | Six months ended March 31, |   |
|----------------------------------|--------|--------------------------------------------------|--------|--------|------------------------------------------------|--------|
| (Dollars in thousands) |   | 2011                                             |   |   | 2010                                           |   |   | 2011 |   |   | 2010 |   |
| Service cost                     |   | $                                                | 143    |   |                                           | $      | 224 |   |   | $ | 286 |   |   | $ | 351 |   |
| Interest cost                    |   |                                             | 162    |   |                                           |   | 279 |   |   |   | 324 |   |   |   | 437 |   |
| Expected return on plan assets   |   |                                             | (218   | )      |                                           |   | (365 | ) |   |   | (435 | ) |   |   | (572 | ) |
| Recognized net actuarial loss    |   |                                             | 16     |   |                                           |   | 35 |   |   |   | 32 |   |   |   | 54 |   |
| Net periodic benefit cost        |   | $                                                | 103    |   |                                           | $      | 173 |   |   | $ | 207 |   |   | $ | 270 |   |

| Note 8. | Financial Instruments with Off-Balance-Sheet Risk |
|---------|---------------------------------------------------|

----

| Note 9. | Fair Value Measurements |
|---------|-------------------------|

|   | • | Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date. |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

|   | • | Level 2: Significant other observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, and other inputs that are observable or can be corroborated by observable market data. |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | Level 3: Valuations for assets and liabilities that are derived from other valuation methodologies, including option pricing models, discounted cash flow models and similar techniques, and not based on market exchange, dealer, or broker traded transactions. Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities. |
|--------|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

----

----

|                                       |   | Total  |    |   | Level 1 |   |   | Level 2 |   |   | Level 3 |   |
|--------------------------------------------|--------|--------|---------|--------|--------------|--------|--------|--------------|--------|--------|--------------|--------|
| Securities available for sale              |   |   |    |   |         |   |   |         |   |   |         |   |
| U.S. government and federal agencies       |   | $      | 12,342  |   |         | $      | -      |         |   | $      | 12,342       |   |   | $ | - |   |
| States and political subdivisions          |   |   | 18,130  |   |         |   | -      |         |   |   | 16,162       |   |   |   | 1,968 |   |
| Agency mortgage-backed securities          |   |   | 24,099  |   |         |   | -      |         |   |   | 24,099       |   |   |   | - |   |
| Agency collateralized mortgage obligations |   |   | 146,025 |   |         |   | -      |         |   |   | 146,025      |   |   |   | - |   |
| Corporate equity securities                |   |   | 23,657  |   |         |   | 23,657 |         |   |   | -            |   |   |   | - |   |
| Corporate debt securities                  |   |   | 118,147 |   |         |   | -      |         |   |   | 113,123      |   |   |   | 5,024 |   |
| Total assets at fair value                 |   | $      | 342,400 |   |         | $      | 23,657 |         |   | $      | 311,751      |   |   | $ | 6,992 |   |

| Balance of Level 3 assets measured on a recurring basis at December 31, 2010                         |   | $      | 6,989 |   |
|------------------------------------------------------------------------------------------------------|--------|--------|-------|--------|
| Principal payments in period                                                                         |   |   | (50   | )      |
| Accretion (amortization) of premiums or discounts                                                    |   |   | (7    | )      |
| Increase (decrease) in unrealized gains or losses included in accumulated other comprehensive income |   |   | 60    |   |
| Balance of Level 3 assets measured on a recurring basis at March 31, 2011                       |   | $      | 6,992 |   |

|                                           |   | Total  |   |   | Level 1 |   |   | Level 2 |   |   | Level 3 |   |
|------------------------------------------------|--------|--------|--------|--------|--------------|--------|--------|--------------|--------|--------|--------------|--------|
| Non-agency collateralized mortgage obligations |   | $      | 1,846  |   |         |   | -      |         |   |   | -            |   |   |   | 1,846 |   |
| Impaired loans                                 |   |   |   |   |         |   |   |         |   |   |         |   |   |   |   |   |
| One-to-four-family                             |   |   | 387    |   |         |   | -      |         |   |   | -            |   |   |   | 387 |   |
| Nonresidential                                 |   |   | 3,062  |   |         |   | -      |         |   |   | -            |   |   |   | 3,062 |   |
| Construction                                   |   |   | 63     |   |         |   | -      |         |   |   | -            |   |   |   | 63 |   |
| Land and land development                      |   |   | 2,150  |   |         |   | -      |         |   |   | -            |   |   |   | 2,150 |   |
| Real estate owned                              |   |   | 3,344  |   |         |   | -      |         |   |   | -            |   |   |   | 3,344 |   |
| Total assets at fair value                     |   | $      | 10,852 |   |         |   | -      |         |   |   | -            |   |   |   | 10,852 |   |

----

|                                                  |   | March 31, 2011 |    |   | September 30, 2010 |   |
|-------------------------------------------------------|--------|--------------------------|---------|--------|------------------------------|--------|
|                                                  |   |                     |    |   | Estimated                    |   |   |   |   |   | Estimated |   |
|                                                  |   | Carrying                 |    |   | Fair                         |   |   | Carrying |   |   | Fair |   |
| (Dollars in thousands)                                |   | Value                    |    |   | Value                        |   |   | Value |   |   | Value |   |
| Financial assets:                                     |   |                     |    |   |                         |   |   |   |   |   |   |   |
| Cash and cash equivalents                             |   | $                        | 312,438 |   |                         | $      | 312,438 |   |   | $ | 97,909 |   |   | $ | 97,909 |   |
| Securities available for sale                         |   |                     | 342,400 |   |                         |   | 342,400 |   |   |   | 276,643 |   |   |   | 276,643 |   |
| Securities held to maturity                           |   |                     | 31,128  |   |                         |   | 29,241 |   |   |   | 35,518 |   |   |   | 33,497 |   |
| Net loans                                             |   |                     | 478,793 |   |                         |   | 484,820 |   |   |   | 477,035 |   |   |   | 478,892 |   |
| Loans held for sale                                   |   |                     | 249     |   |                         |   | 249 |   |   |   | 2,781 |   |   |   | 2,781 |   |
| FHLB stock                                            |   |                     | 12,071  |   |                         |   | 12,071 |   |   |   | 12,542 |   |   |   | 12,542 |   |
| Accrued interest receivable                           |   |                     | 5,013   |   |                         |   | 5,013 |   |   |   | 4,722 |   |   |   | 4,722 |   |
|                                                  |   |                     |    |   |                         |   |   |   |   |   |   |   |   |   |   |   |
| Financial liabilities:                                |   |                     |    |   |                         |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                              |   |                     | 679,110 |   |                         |   | 657,579 |   |   |   | 647,127 |   |   |   | 636,612 |   |
| Stock order funds                                     |   |                     | 242,377 |   |                         |   | 242,377 |   |   |   | - |   |   |   | - |   |
| FHLB borrowings                                       |   |                     | 190,000 |   |                         |   | 210,836 |   |   |   | 190,000 |   |   |   | 221,776 |   |
| Accrued interest payable                              |   |                     | 926     |   |                         |   | 926 |   |   |   | 926 |   |   |   | 926 |   |
| Advance payments by borrowers for taxes and insurance |   |                     | 2,448   |   |                         |   | 2,448 |   |   |   | 2,340 |   |   |   | 2,340 |   |
|                                                  |   |                     |    |   |                         |   |   |   |   |   |   |   |   |   |   |   |
| Off-balance-sheet financial instruments:              |   |                     |    |   |                         |   |   |   |   |   |   |   |   |   |   |   |
| Commitments to extend credit                          |   |                     | 94,380  |   |                         |   | - |   |   |   | 130,815 |   |   |   | - |   |
| Standby letters of credit                             |   |                     | 1,063   |   |                         |   | 6 |   |   |   | 1,063 |   |   |   | 9 |   |

----

----

|   | • | general economic conditions, either internationally, nationally, or in our primary market area, that are worse than expected; |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------------|

|   | • | a continued decline in real estate values; |
|--------|---------|--------------------------------------------|

|   | • | changes in the interest rate environment that reduce our interest margins or reduce the fair value of financial instruments; |
|--------|---------|------------------------------------------------------------------------------------------------------------------------------|

|   | • | increased competitive pressures among financial services companies; |
|--------|---------|---------------------------------------------------------------------|

|   | • | changes in consumer spending, borrowing and savings habits; |
|--------|---------|-------------------------------------------------------------|

|   | • | legislative, regulatory or supervisory changes that adversely affect our business; |
|--------|---------|------------------------------------------------------------------------------------|

|   | • | adverse changes in the securities markets; and |
|--------|---------|------------------------------------------------|

|   | • | changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the  Financial Accounting Standards Board or the Public Company Accounting Oversight Board. |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

----

----

----

----

|                                                                    |   | For the Three Months Ended March 31, |      |
|-------------------------------------------------------------------------|--------|--------------------------------------------------------------------|-----------|
|                                                                    |   | 2011                                                               |      |   | 2010 |   |
| (Dollars in thousands)                                        |   | AverageBalance                                                     |      |   | InterestandDividends |   |   | Yield/Cost |   |   | AverageBalance |   |   | InterestandDividends |   |   | Yield/Cost |   |
| Assets:                                                                 |   |                                                               |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-earning assets:                                                |   |                                                               |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans:                                                                  |   |                                                               |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| One- to four-family                                                     |   | $                                                                  | 121,089   |   |   | $ | 2,072 |   |   |   | 6.94 | % |   | $ | 135,976 |   |   | $ | 2,365 |   |   |   | 7.05 | % |
| Multi-family                                                            |   |                                                               | 77,756    |   |   |   | 1,337 |   |   |   | 6.97 | % |   |   | 79,114 |   |   |   | 1,304 |   |   |   | 6.68 | % |
| Nonresidential                                                          |   |                                                               | 183,264   |   |   |   | 3,080 |   |   |   | 6.82 | % |   |   | 143,713 |   |   |   | 2,420 |   |   |   | 6.83 | % |
| Construction                                                            |   |                                                               | 41,572    |   |   |   | 523 |   |   |   | 5.10 | % |   |   | 68,132 |   |   |   | 735 |   |   |   | 4.38 | % |
| Land and land development                                               |   |                                                               | 68,624    |   |   |   | 773 |   |   |   | 4.57 | % |   |   | 74,420 |   |   |   | 1,529 |   |   |   | 8.33 | % |
| Other                                                                   |   |                                                               | 809       |   |   |   | 15 |   |   |   | 7.52 | % |   |   | 3,017 |   |   |   | 29 |   |   |   | 3.90 | % |
| Total loans                                                             |   |                                                               | 493,114   |   |   |   | 7,800 |   |   |   | 6.42 | % |   |   | 504,372 |   |   |   | 8,382 |   |   |   | 6.74 | % |
| Securities:                                                             |   |                                                               |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Collateralized mortgage obligations                                     |   |                                                               | 153,237   |   |   |   | 1,165 |   |   |   | 3.08 | % |   |   | 128,089 |   |   |   | 1,648 |   |   |   | 5.22 | % |
| Mortgage-backed securities                                              |   |                                                               | 31,651    |   |   |   | 295 |   |   |   | 3.78 | % |   |   | 42,692 |   |   |   | 446 |   |   |   | 4.24 | % |
| States and political subdivisions                                       |   |                                                               | 18,738    |   |   |   | 210 |   |   |   | 4.55 | % |   |   | 21,228 |   |   |   | 232 |   |   |   | 4.43 | % |
| U. S. government agencies                                               |   |                                                               | 10,303    |   |   |   | 25 |   |   |   | 0.98 | % |   |   | - |   |   |   | - |   |   |   | - |   |
| Corporate equity securities                                             |   |                                                               | 24,829    |   |   |   | 72 |   |   |   | 1.18 | % |   |   | 22,610 |   |   |   | 81 |   |   |   | 1.45 | % |
| Corporate debt securities                                               |   |                                                               | 122,884   |   |   |   | 1,538 |   |   |   | 5.07 | % |   |   | 136,588 |   |   |   | 1,734 |   |   |   | 5.15 | % |
| Total securities                                                        |   |                                                               | 361,642   |   |   |   | 3,305 |   |   |   | 3.71 | % |   |   | 351,207 |   |   |   | 4,141 |   |   |   | 4.78 | % |
| Investment in FHLB stock                                                |   |                                                               | 12,071    |   |   |   | 24 |   |   |   | 0.81 | % |   |   | 13,510 |   |   |   | 9 |   |   |   | 0.27 | % |
| Other interest-earning assets                                           |   |                                                               | 66,642    |   |   |   | 33 |   |   |   | 0.21 | % |   |   | 79,739 |   |   |   | 44 |   |   |   | 0.22 | % |
| Total interest-earning assets                                           |   |                                                               | 933,469   |   |   |   | 11,162 |   |   |   | 4.85 | % |   |   | 948,828 |   |   |   | 12,576 |   |   |   | 5.38 | % |
| Allowance for loan losses                                               |   |                                                               | (12,098   | ) |   |   |   |   |   |   |   |   |   |   | (10,083 | ) |   |   |   |   |   |   |   |   |
| Noninterest-earning assets                                              |   |                                                               | 91,999    |   |   |   |   |   |   |   |   |   |   |   | 69,947 |   |   |   |   |   |   |   |   |   |
| Total assets                                                            |   | $                                                                  | 1,013,370 |   |   |   |   |   |   |   |   |   |   | $ | 1,008,692 |   |   |   |   |   |   |   |   |   |
| Liabilities and equity:                                                 |   |                                                               |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing liabilities:                                           |   |                                                               |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits:                                                               |   |                                                               |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Passbook savings                                                        |   | $                                                                  | -         |   |   |   | - |   |   |   |   |   |   | $ | 2,732 |   |   |   | 7 |   |   |   | 1.04 | % |
| Money market savings                                                    |   |                                                               | 227,218   |   |   |   | 515 |   |   |   | 0.92 | % |   |   | 209,552 |   |   |   | 740 |   |   |   | 1.43 | % |
| Money market checking                                                   |   |                                                               | 46,586    |   |   |   | 108 |   |   |   | 0.94 | % |   |   | 31,509 |   |   |   | 114 |   |   |   | 1.47 | % |
| Certificates of deposit                                                 |   |                                                               | 390,036   |   |   |   | 2,049 |   |   |   | 2.13 | % |   |   | 410,295 |   |   |   | 2,729 |   |   |   | 2.70 | % |
| Total interest-bearing deposits                                         |   |                                                               | 663,840   |   |   |   | 2,672 |   |   |   | 1.63 | % |   |   | 654,088 |   |   |   | 3,590 |   |   |   | 2.23 | % |
| FHLB borrowings                                                         |   |                                                               | 190,000   |   |   |   | 2,266 |   |   |   | 4.84 | % |   |   | 220,000 |   |   |   | 2,721 |   |   |   | 5.02 | % |
| Total interest-bearing liabilities                                      |   |                                                               | 853,840   |   |   |   | 4,938 |   |   |   | 2.35 | % |   |   | 874,088 |   |   |   | 6,311 |   |   |   | 2.93 | % |
| Noninterest bearing liabilities                                         |   |                                                               | 28,178    |   |   |   |   |   |   |   |   |   |   |   | 10,296 |   |   |   |   |   |   |   |   |   |
| Total liabilities                                                       |   |                                                               | 882,018   |   |   |   |   |   |   |   |   |   |   |   | 884,384 |   |   |   |   |   |   |   |   |   |
| Retained earnings                                                       |   |                                                               | 127,967   |   |   |   |   |   |   |   |   |   |   |   | 127,354 |   |   |   |   |   |   |   |   |   |
| Accumulated other comprehensive income  (loss)                |   |                                                               | 3,385     |   |   |   |   |   |   |   |   |   |   |   | (3,046 | ) |   |   |   |   |   |   |   |   |
| Total net worth                                                         |   |                                                               | 131,352   |   |   |   |   |   |   |   |   |   |   |   | 124,308 |   |   |   |   |   |   |   |   |   |
| Total liabilities and net worth                                         |   | $                                                                  | 1,013,370 |   |   |   |   |   |   |   |   |   |   | $ | 1,008,692 |   |   |   |   |   |   |   |   |   |
| Net interest income                                                     |   |                                                               |      |   |   | $ | 6,224 |   |   |   |   |   |   |   |   |   |   | $ | 6,265 |   |   |   |   |   |
| Interest rate spread (1)                                                |   |                                                               |      |   |   |   |   |   |   |   | 2.50 | % |   |   |   |   |   |   |   |   |   |   | 2.45 | % |
| Net interest margin (2)                                                 |   |                                                               |      |   |   |   |   |   |   |   | 2.70 | % |   |   |   |   |   |   |   |   |   |   | 2.68 | % |
| Average interest-earning assets to average interest-bearing liabilities |   |                                                               |      |   |   |   |   |   |   |   | 109.33 | % |   |   |   |   |   |   |   |   |   |   | 108.55 | % |

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

| (2) | Net interest margin represents net interest income as a percentage of average interest-earning assets. |
|-----|--------------------------------------------------------------------------------------------------------|

----

|                                                                    |   | For the Six Months Ended March 31, |    |
|-------------------------------------------------------------------------|--------|------------------------------------------------------------------|---------|
|                                                                    |   | 2011                                                             |    |   | 2010 |   |
| (Dollars in thousands)                                        |   | AverageBalance                                                   |    |   | InterestandDividends |   |   | Yield/ Cost |   |   | AverageBalance |   |   | InterestandDividends |   |   | Yield/Cost |   |
| Assets:                                                                 |   |                                                             |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-earning assets:                                                |   |                                                             |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans:                                                                  |   |                                                             |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| One- to four-family                                                     |   | $                                                                | 123,798 |   |   | $ | 4,384 |   |   |   | 7.10 | % |   | $ | 122,254 |   |   | $ | 4,340 |   |   |   | 7.12 | % |
| Multi-family                                                            |   |                                                             | 77,179  |   |   |   | 2,624 |   |   |   | 6.82 | % |   |   | 95,139 |   |   |   | 3,156 |   |   |   | 6.65 | % |
| Nonresidential                                                          |   |                                                             | 178,427 |   |   |   | 6,082 |   |   |   | 6.84 | % |   |   | 139,164 |   |   |   | 4,645 |   |   |   | 6.69 | % |
| Construction                                                            |   |                                                             | 41,815  |   |   |   | 1,100 |   |   |   | 5.28 | % |   |   | 70,212 |   |   |   | 1,536 |   |   |   | 4.39 | % |
| Land and land development                                               |   |                                                             | 69,323  |   |   |   | 1,736 |   |   |   | 5.02 | % |   |   | 76,440 |   |   |   | 2,667 |   |   |   | 7.00 | % |
| Other                                                                   |   |                                                             | 1,925   |   |   |   | 57 |   |   |   | 5.94 | % |   |   | 4,068 |   |   |   | 82 |   |   |   | 4.04 | % |
| Total loans                                                             |   |                                                             | 492,467 |   |   |   | 15,983 |   |   |   | 6.51 | % |   |   | 507,277 |   |   |   | 16,426 |   |   |   | 6.49 | % |
| Securities:                                                             |   |                                                             |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Collateralized mortgage obligations                                     |   |                                                             | 140,972 |   |   |   | 2,293 |   |   |   | 3.26 | % |   |   | 126,583 |   |   |   | 3,307 |   |   |   | 5.24 | % |
| Mortgage-backed securities                                              |   |                                                             | 33,059  |   |   |   | 641 |   |   |   | 3.89 | % |   |   | 44,148 |   |   |   | 947 |   |   |   | 4.30 | % |
| States and political subdivisions                                       |   |                                                             | 19,598  |   |   |   | 429 |   |   |   | 4.39 | % |   |   | 22,180 |   |   |   | 479 |   |   |   | 4.33 | % |
| U. S. government agencies                                               |   |                                                             | 8,630   |   |   |   | 38 |   |   |   | 0.88 | % |   |   | - |   |   |   | - |   |   |   | - |   |
| Corporate equity securities                                             |   |                                                             | 23,382  |   |   |   | 155 |   |   |   | 1.33 | % |   |   | 23,939 |   |   |   | 177 |   |   |   | 1.48 | % |
| Corporate debt securities                                               |   |                                                             | 123,192 |   |   |   | 3,038 |   |   |   | 4.94 | % |   |   | 135,963 |   |   |   | 3,259 |   |   |   | 4.81 | % |
| Total securities                                                        |   |                                                             | 348,833 |   |   |   | 6,594 |   |   |   | 3.79 | % |   |   | 352,813 |   |   |   | 8,169 |   |   |   | 4.64 | % |
| Investment in FHLB stock                                                |   |                                                             | 12,197  |   |   |   | 37 |   |   |   | 0.61 | % |   |   | 13,510 |   |   |   | 23 |   |   |   | 0.34 | % |
| Other interest-earning assets                                           |   |                                                             | 68,250  |   |   |   | 77 |   |   |   | 0.23 | % |   |   | 71,811 |   |   |   | 75 |   |   |   | 0.21 | % |
| Total interest-earning assets                                           |   |                                                             | 921,747 |   |   |   | 22,691 |   |   |   | 4.94 | % |   |   | 945,411 |   |   |   | 24,693 |   |   |   | 5.24 | % |
| Allowance for loan losses                                               |   |                                                             | (12,457 | ) |   |   |   |   |   |   |   |   |   |   | (9,528 | ) |   |   |   |   |   |   |   |   |
| Noninterest-earning assets                                              |   |                                                             | 83,122  |   |   |   |   |   |   |   |   |   |   |   | 68,561 |   |   |   |   |   |   |   |   |   |
| Total assets                                                            |   | $                                                                | 992,412 |   |   |   |   |   |   |   |   |   |   | $ | 1,004,444 |   |   |   |   |   |   |   |   |   |
| Liabilities and equity:                                                 |   |                                                             |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing liabilities:                                           |   |                                                             |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits:                                                               |   |                                                             |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Passbook savings                                                        |   | $                                                                | 22      |   |   |   | - |   |   |   |   |   |   | $ | 3,349 |   |   |   | 17 |   |   |   | 1.02 | % |
| Money market savings                                                    |   |                                                             | 226,055 |   |   |   | 1,026 |   |   |   | 0.91 | % |   |   | 203,392 |   |   |   | 1,474 |   |   |   | 1.45 | % |
| Money market checking                                                   |   |                                                             | 45,066  |   |   |   | 212 |   |   |   | 0.94 | % |   |   | 27,928 |   |   |   | 208 |   |   |   | 1.49 | % |
| Certificates of deposit                                                 |   |                                                             | 381,872 |   |   |   | 4,199 |   |   |   | 2.21 | % |   |   | 414,931 |   |   |   | 5,805 |   |   |   | 2.81 | % |
| Total interest-bearing deposits                                         |   |                                                             | 653,015 |   |   |   | 5,437 |   |   |   | 1.67 | % |   |   | 649,600 |   |   |   | 7,504 |   |   |   | 2.32 | % |
| FHLB borrowings                                                         |   |                                                             | 190,000 |   |   |   | 4,582 |   |   |   | 4.84 | % |   |   | 220,714 |   |   |   | 5,509 |   |   |   | 5.01 | % |
| Total interest-bearing liabilities                                      |   |                                                             | 843,015 |   |   |   | 10,019 |   |   |   | 2.38 | % |   |   | 870,314 |   |   |   | 13,013 |   |   |   | 3.00 | % |
| Noninterest bearing liabilities                                         |   |                                                             | 19,803  |   |   |   |   |   |   |   |   |   |   |   | 9,707 |   |   |   |   |   |   |   |   |   |
| Total liabilities                                                       |   |                                                             | 862,818 |   |   |   |   |   |   |   |   |   |   |   | 880,021 |   |   |   |   |   |   |   |   |   |
| Retained earnings                                                       |   |                                                             | 126,767 |   |   |   |   |   |   |   |   |   |   |   | 127,571 |   |   |   |   |   |   |   |   |   |
| Accumulated other comprehensive income  (loss)                |   |                                                             | 2,827   |   |   |   |   |   |   |   |   |   |   |   | (3,148 | ) |   |   |   |   |   |   |   |   |
| Total net worth                                                         |   |                                                             | 129,594 |   |   |   |   |   |   |   |   |   |   |   | 124,423 |   |   |   |   |   |   |   |   |   |
| Total liabilities and net worth                                         |   | $                                                                | 992,412 |   |   |   |   |   |   |   |   |   |   | $ | 1,004,444 |   |   |   |   |   |   |   |   |   |
| Net interest income                                                     |   |                                                             |    |   |   | $ | 12,672 |   |   |   |   |   |   |   |   |   |   | $ | 11,680 |   |   |   |   |   |
| Interest rate spread (1)                                                |   |                                                             |    |   |   |   |   |   |   |   | 2.56 | % |   |   |   |   |   |   |   |   |   |   | 2.24 | % |
| Net interest margin (2)                                                 |   |                                                             |    |   |   |   |   |   |   |   | 2.76 | % |   |   |   |   |   |   |   |   |   |   | 2.48 | % |
| Average interest-earning assets to average interest-bearing liabilities |   |                                                             |    |   |   |   |   |   |   |   | 109.34 | % |   |   |   |   |   |   |   |   |   |   | 108.63 | % |

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

| (2) | Net interest margin represents net interest income as a percentage of average interest-earning assets. |
|-----|--------------------------------------------------------------------------------------------------------|

----

|                                       |   | Three Months Ended March 31, 2011Compared to Three Months EndedMarch 31, 2010 |   |   | Six Months Ended March 31, 2011Compared to Six Months EndedMarch 31, 2010 |   |
|--------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------|--------|--------|----------------------------------------------------------------------------------------------------------------------------------|--------|
|                                       |   | Increase (Decrease)Due to:                                                                                                 |   |   |                                                                                                                             |   |   | Increase (Decrease)Due to: |   |   |   |   |
| (Dollars in thousands)           |   | Volume                                                                                                                               |   |   | Rate                                                                                                                             |   |   | Net |   |   | Volume |   |   | Rate |   |   | Net |   |
| Interest income:                           |   |                                                                                                                                 |   |   |                                                                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans                                      |   | $                                                                                                                                    | (185   | )      |                                                                                                                             | $      | (397 | ) |   | $ | (582 | ) |   | $ | (584 | ) |   | $ | 141 |   |   | $ | (443 | ) |
| Securities                                 |   |                                                                                                                                 | 337    |   |                                                                                                                             |   | (1,173 | ) |   |   | (836 | ) |   |   | (92 | ) |   |   | (1,483 | ) |   |   | (1,575 | ) |
| Investment in FHLB stock                   |   |                                                                                                                                 | (3     | )      |                                                                                                                             |   | 18 |   |   |   | 15 |   |   |   | (6 | ) |   |   | 20 |   |   |   | 14 |   |
| Other interest earning assets              |   |                                                                                                                                 | (6     | )      |                                                                                                                             |   | (5 | ) |   |   | (11 | ) |   |   | (9 | ) |   |   | 11 |   |   |   | 2 |   |
| Total                                      |   |                                                                                                                                 | 143    |   |                                                                                                                             |   | (1,557 | ) |   |   | (1,414 | ) |   |   | (691 | ) |   |   | (1,311 | ) |   |   | (2,002 | ) |
| Interest expense:                          |   |                                                                                                                                 |   |   |                                                                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits:                                  |   |                                                                                                                                 |   |   |                                                                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Passbook savings                           |   |                                                                                                                                 | (4     | )      |                                                                                                                             |   | (3 | ) |   |   | (7 | ) |   |   | (9 | ) |   |   | (8 | ) |   |   | (17 | ) |
| Money market savings                       |   |                                                                                                                                 | 161    |   |                                                                                                                             |   | (386 | ) |   |   | (225 | ) |   |   | 403 |   |   |   | (851 | ) |   |   | (448 | ) |
| Money market checking                      |   |                                                                                                                                 | 93     |   |                                                                                                                             |   | (99 | ) |   |   | (6 | ) |   |   | 195 |   |   |   | (191 | ) |   |   | 4 |   |
| Certificates of deposit                    |   |                                                                                                                                 | (129   | )      |                                                                                                                             |   | (551 | ) |   |   | (680 | ) |   |   | (436 | ) |   |   | (1,170 | ) |   |   | (1,606 | ) |
| FHLB borrowings                            |   |                                                                                                                                 | (359   | )      |                                                                                                                             |   | (96 | ) |   |   | (455 | ) |   |   | (745 | ) |   |   | (182 | ) |   |   | (927 | ) |
| Total                                      |   |                                                                                                                                 | (238   | )      |                                                                                                                             |   | (1,135 | ) |   |   | (1,373 | ) |   |   | (592 | ) |   |   | (2,402 | ) |   |   | (2,994 | ) |
| Increase (decrease) in net interest income |   | $                                                                                                                                    | 381    |   |                                                                                                                             | $      | (422 | ) |   | $ | (41 | ) |   | $ | (99 | ) |   | $ | 1,091 |   |   | $ | 992 |   |

| (Dollars in thousands)         |   | March 31,2011 |   |   | December 31,2010 |   |   | Change |   |
|------------------------------------------|--------|--------------------|--------|--------|-----------------------|--------|--------|--------|--------|
| Nonaccrual loans:                        |   |               |   |   |                  |   |   |   |   |
| One-to four-family                       |   | $                  | 11,421 |   |                  | $      | 4,444  |   |   | $ | 6,977 |   |
| Nonresidential                           |   |               | 11,075 |   |                  |   | 7,807  |   |   |   | 3,268 |   |
| Construction                             |   |               | 255    |   |                  |   | 166    |   |   |   | 89 |   |
| Land and land development                |   |               | 12,693 |   |                  |   | 12,938 |   |   |   | (245 | ) |
| Total                                    |   |               | 35,444 |   |                  |   | 25,355 |   |   |   | 10,089 |   |
|                                     |   |               |   |   |                  |   |   |   |   |   |   |   |
| Accruing loans past due 90 days or more: |   |               |   |   |                  |   |   |   |   |   |   |   |
| Construction                             |   |               | -      |   |                  |   | 290    |   |   |   | (290 | ) |
| Land and land development                |   |               | -      |   |                  |   | 1,140  |   |   |   | (1,140 | ) |
| Total                                    |   |               | -      |   |                  |   | 1,430  |   |   |   | (1,430 | ) |
| Total non-performing loans               |   | $                  | 35,444 |   |                  | $      | 26,785 |   |   | $ | 8,659 |   |

----

| (Dollars in thousands)                                         |   | March 31,2011 |    |   | September 30,2010 |   |
|--------------------------------------------------------------------------|--------|--------------------|---------|--------|------------------------|--------|
| Nonperforming loans                                                      |   | $                  | 35,444  |   |                   | $      | 29,773 |   |
| Real estate owned                                                        |   |               | 11,636  |   |                   |   | 11,581 |   |
| Total non-performing assets                                              |   | $                  | 47,080  |   |                   | $      | 41,354 |   |
|                                                                     |   |               |    |   |                   |   |   |   |
| Allowance for loan losses                                                |   | $                  | 11,922  |   |                   | $      | 13,419 |   |
| Total loans                                                              |   | $                  | 494,212 |   |                   | $      | 494,055 |   |
|                                                                     |   |               |    |   |                   |   |   |   |
| Ratios                                                                   |   |               |    |   |                   |   |   |   |
| Allowance as a percentage of total loans                                 |   |               | 2.41    | %      |                   |   | 2.72 | % |
| Allowance as a percentage of nonperforming loans                         |   |               | 33.64   | %      |                   |   | 45.07 | % |
| Total non-performing loans to total loans                                |   |               | 7.17    | %      |                   |   | 6.03 | % |
| Total non-performing loans to total assets, excluding stock order funds  |   |               | 3.52    | %      |                   |   | 3.07 | % |
| Total non-performing assets to total assets, excluding stock order funds |   |               | 4.67    | %      |                   |   | 4.26 | % |

| • | Land and land development loans: |
|---------|----------------------------------|

|   | - | One loan on 305 acres of undeveloped land in central Virginia proposed for a multi-use development within a planned unit development. This loan had a balance of $4.9 million and was rated substandard at March 31, 2011. The collateral was valued at $12.2 million based upon a December 2010 appraisal, and a specific allowance calculation on this loan resulted in no allowance at March 31, 2011 due to sufficient collateral. |
|--------|---|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | - | One loan on 314 acres of undeveloped land in central Virginia proposed for multi-use development within a planned unit development. This loan is a participation loan with two other banks, each having a one-third interest. The balance of the Bank’s portion of this loan was $4.9 million and was rated substandard at March 31, 2011. The collateral was valued at $37.1 million (of which $12.4 million is attributable to the Bank) based upon a November 2010 appraisal, and a specific allowance calculation on this loan resulted in no allowance at March 31, 2011 due to sufficient collateral. |
|--------|---|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | - | One loan on 71 single-family lots and 58 acres of developed land in central Virginia. As of March 31, 2011, nine single-family lots had been sold. The loan is a participation with another bank and was current at March 31, 2011. Our participation interest is 62%, and our balance on this loan was $1.6 million at March 31, 2011. This loan was modified in a troubled debt restructuring during the year ended September 30, 2010 and had a related specific allowance of $133,000 at March 31, 2011. |
|--------|---|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |  - | One loan on 18 developed residential lots plus approximately 16 acres of land zoned for residential development in central Virginia.  This loan had a balance of $943,000 and was rated substandard at March 31, 2011.  The collateral was valued at $1.1 million based upon a September 2010 appraisal, and a specific allowance calculation on this loan resulted in no allowance at March 31, 2011 due to sufficient collateral. |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| • | Nonresidential real estate loans: |
|---------|-----------------------------------|

|   | - | One loan on a 37,880 square foot strip shopping center in northern Virginia with four available out-parcel sites, two of which have contingent ground leases in negotiation that, if consummated, will improve the cash flow of the property. The shopping center, which is 29% leased, is within one mile of a major regional shopping center. The loan is a participation with two other banks, and our participation portion is approximately 32%. Our balance at March 31, 2011 was $2.3 million. This loan was modified in a troubled debt restructuring during the year ended September 30, 2010.  Based upon an April 2011 appraisal valuing the collateral at $8.3 million (of which $2.7 million is attributable to the Bank), no specific allowance was necessary at March 31, 2011 due to sufficient collateral. While the loan was over 180 days delinquent and on nonaccrual status at March 31, 2011, the lenders have not taken any action on this loan pending the results of the contingent ground lease negotiations. |
|--------|---|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | - | One loan on two shopping centers in North Carolina under one deed of trust with 84,000 total leasable square feet. The shopping centers do not generate sufficient cash flow to service the loan debt. The loan balance was $5.5 million at March 31, 2011. The loan was 31-60 days delinquent and on nonaccrual status at March 31, 2011. The two shopping centers have a combined appraised value of $7.4 million based upon a December 2010 appraisal.  A specific allowance calculation on this loan resulted in no allowance at March 31, 2011 due to sufficient collateral. |
|--------|---|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | - | One loan secured by a day care center and twenty-six developed lots in central Virginia.  This loan had a balance of $2.1 million and was fewer than 30 days delinquent at March 31, 2011.  The collateral for this loan was valued at $3.6 million based on a March 2010 appraisal of the day care center and the estimated value of the lots.  We have three other loans to entities controlled by the guarantor on this loan as described below in the section regarding nonaccrual one-to four-family loans.  A specific allowance calculation on this loan resulted in no allowance at March 31, 2011 due to sufficient collateral. |
|--------|---|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | - | One loan on a 21,600 square foot shopping center in central Virginia with two outparcels.  The shopping center was 83% leased but was not generating sufficient cash flow to service the loan debt at March 31, 2011.  This loan is a participation with three other banks, and our participation is approximately 22%.  Our balance at March 31, 2011 was $1.2 million.  Based upon a February 2011 appraisal valuing the collateral at $4.0 million (of which $890,000 was attributable to the Bank), a specific allowance calculation resulted in an allowance of $419,000 at March 31, 2011. |
|--------|---|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| • | One-to four-family |
|---------|--------------------|

|   | - | Fifty-one loans on one-to four-family residential properties in central Virginia to multiple borrowers with an aggregate balance of $6.5 million at March 31, 2011. |
|--------|---|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |  - | Three loans outstanding to separate entities controlled by the same guarantor totaling $4.9 million secured by twenty-five one-to four-family homes, twenty-three of which are currently leased. These loans were 31-60 days delinquent at March 31, 2011.  A specific allowance calculation on this loan resulted in no allowance at March 31, 2011 due to sufficient collateral. |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (Dollars in thousands)       |   | March 31,2011 |    |   | September 30,2010 |   |
|----------------------------------------|--------|--------------------|---------|--------|------------------------|--------|
| Loans:                                 |   |               |    |   |                   |   |
| Special mention loans                  |   | $                  | 19,280  |   |                   | $      | 22,065 |   |
| Substandard loans                      |   |               | 60,989  |   |                   |   | 56,479 |   |
| Total criticized and classified loans  |   |               | 80,269  |   |                   |   | 78,544 |   |
| Securities:                            |   |               |    |   |                   |   |   |   |
| Substandard                            |   |               | 21,948  |   |                   |   | 29,414 |   |
| Doubtful                               |   |               | 2,446   |   |                   |   | 3,063 |   |
| Total classified securities            |   |               | 24,394  |   |                   |   | 32,477 |   |
| Total criticized and classified assets |   | $                  | 104,663 |   |                   | $      | 111,021 |   |

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|   | - | One loan on a mixed use development on 257 acres in central Virginia that, as proposed, will contain 80,000 square feet of retail space, a 280 unit apartment complex and more than 300 attached and detached single family lots. Construction of the apartment complex is expected to begin by mid-2011. As of March 31, 2011, 64 single-family lots had been sold. Payments of principal and interest are made as lots are sold. This loan had a balance of $11.3 million at March 31, 2011 and was identified as impaired. During the three months ended March 31, 2011, this loan was returned to accrual status after it was brought current and had multiple non-contingent contracts for the sale of single-family lots scheduled to close by December 31, 2011.  At March 31, 2011, the loan was under 30 days delinquent. The development has an appraised value of $19.6 million based on a December 2010 appraisal. |
|--------|---|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | - | Three loans on an apartment complex in central Virginia totaling $11.6 million. The project has approximately 600 units, of which approximately 250 units were rented at March 31, 2011. Based upon current occupancy, the apartment complex does not generate enough cash to service the debt and requires support from the guarantor. The apartment complex is valued at $15.0 million based upon a January 2011 appraisal. |
|--------|---|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |  - | One loan on a 64-unit apartment complex in central Virginia with a balance of $1.3 million at March 31, 2011. The apartment complex was approximately 25% leased at March 31, 2011 and does not generate enough cash to service the debt and requires support from the guarantor. |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                             |   | Actual |    |   | Amount required to be"adequately capitalized" |   |   | Amount required to be"well capitalized" |   |
|----------------------------------|--------|--------|---------|--------|-------------------------------------------------------------------|--------|--------|-------------------------------------------------------------|--------|
| (Dollars in thousands) |   | Amount |    |   | Percentage                                                        |   |   | Amount                                                      |   |   | Percentage |   |   | Amount |   |   | Percentage |   |
| As of March 31, 2011             |   |   |    |   |                                                              |   |   |                                                        |   |   |   |   |   |   |   |   |   |   |
| Tier 1 capital                   |   | $      | 103,575 |   |                                                              |   | 8.49   | %                                                           |   | $ | 48,795 |   |   |   | 4.00 | % |   | $ | 61,352 |   |   |   | 5.00 | % |
| (to adjusted tangible assets)    |   |   |    |   |                                                              |   |   |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                             |   |   |    |   |                                                              |   |   |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier 1 risk-based capital        |   |   | 103,575 |   |                                                              |   | 14.27  |                                                        |   |   | 29,042 |   |   |   | 4.00 |   |   |   | 43,563 |   |   |   | 6.00 |   |
| (to risk weighted assets)        |   |   |    |   |                                                              |   |   |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                             |   |   |    |   |                                                              |   |   |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tangible capital                 |   |   | 103,575 |   |                                                              |   | 8.49   |                                                        |   |   | 18,298 |   |   |   | 1.50 |   |   |   | 18,298 |   |   |   | 1.50 |   |
| (to adjusted tangible assets)    |   |   |    |   |                                                              |   |   |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                             |   |   |    |   |                                                              |   |   |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Risk-based capital               |   |   | 112,678 |   |                                                              |   | 15.52  |                                                        |   |   | 58,084 |   |   |   | 8.00 |   |   |   | 72,605 |   |   |   | 10.00 |   |
| (to risk weighted assets)        |   |   |    |   |                                                              |   |   |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                             |   |   |    |   |                                                              |   |   |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| As of September 30, 2010         |   |   |    |   |                                                              |   |   |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier 1 capital                   |   | $      | 103,183 |   |                                                              |   | 10.90  | %                                                           |   | $ | 37,877 |   |   |   | 4.00 | % |   | $ | 47,616 |   |   |   | 5.00 | % |
| (to adjusted tangible assets)    |   |   |    |   |                                                              |   |   |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                             |   |   |    |   |                                                              |   |   |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier 1 risk-based capital        |   |   | 103,183 |   |                                                              |   | 14.12  |                                                        |   |   | 29,234 |   |   |   | 4.00 |   |   |   | 43,850 |   |   |   | 6.00 |   |
| (to risk weighted assets)        |   |   |    |   |                                                              |   |   |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                             |   |   |    |   |                                                              |   |   |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tangible capital                 |   |   | 103,183 |   |                                                              |   | 10.90  |                                                        |   |   | 14,204 |   |   |   | 1.50 |   |   |   | 14,204 |   |   |   | 1.50 |   |
| (to adjusted tangible assets)    |   |   |    |   |                                                              |   |   |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                             |   |   |    |   |                                                              |   |   |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Risk-based capital               |   |   | 112,341 |   |                                                              |   | 15.37  |                                                        |   |   | 58,467 |   |   |   | 8.00 |   |   |   | 73,084 |   |   |   | 10.00 |   |
| (to risk weighted assets)        |   |   |    |   |                                                              |   |   |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

|                                                        |   | March 31, 2011 |    |
|-------------------------------------------------------------|--------|--------------------------|---------|
| (Dollars in thousands)                            |   | Tier 1capital       |    |   | Tier 1 risk-based capital |   |   | Tangiblecapital |   |   | Risk-basedcapital |   |
| GAAP capital                                                |   | $                        | 109,453 |   |   | $ | 109,453 |   |   | $ | 109,453 |   |   | $ | 109,453 |   |
| Accumulated gains on certain available- for-sale securities |   |                     | (3,108  | ) |   |   | (3,108 | ) |   |   | (3,108 | ) |   |   | (3,108 | ) |
| Disallowed deferred tax assets                              |   |                     | (4,052  | ) |   |   | (4,052 | ) |   |   | (4,052 | ) |   |   | (4,052 | ) |
| Pension plan                                                |   |                     | 1,282   |   |   |   | 1,282 |   |   |   | 1,282 |   |   |   | 1,282 |   |
| General allowance for loan losses                           |   |                     | -       |   |   |   | - |   |   |   | - |   |   |   | 9,103 |   |
| Regulatory capital – computed                         |   | $                        | 103,575 |   |   | $ | 103,575 |   |   | $ | 103,575 |   |   | $ | 112,678 |   |

|                                                        |   | September 30, 2010 |    |
|-------------------------------------------------------------|--------|------------------------------|---------|
| (Dollars in thousands)                            |   | Tier 1capital           |    |   | Tier 1 risk-based capital |   |   | Tangiblecapital |   |   | Risk-basedcapital |   |
| GAAP capital                                                |   | $                            | 107,305 |   |   | $ | 107,305 |   |   | $ | 107,305 |   |   | $ | 107,305 |   |
| Accumulated gains on certain available- for-sale securities |   |                         | (4,745  | ) |   |   | (4,745 | ) |   |   | (4,745 | ) |   |   | (4,745 | ) |
| Disallowed deferred tax assets                              |   |                         | (659    | ) |   |   | (659 | ) |   |   | (659 | ) |   |   | (659 | ) |
| Pension plan                                                |   |                         | 1,282   |   |   |   | 1,282 |   |   |   | 1,282 |   |   |   | 1,282 |   |
| General allowance for loan losses                           |   |                         | -       |   |   |   | - |   |   |   | - |   |   |   | 9,158 |   |
| Regulatory capital – computed                         |   | $                            | 103,183 |   |   | $ | 103,183 |   |   | $ | 103,183 |   |   | $ | 112,341 |   |

----

|              |   | Present Value of Equity |    |
|-------------------|--------|----------------------------------------|---------|
| Change in    |   | Market                                 |    |   |   |   |   |   |   |
| Basis Points |   | Value                                  |    |   | $ Change |   |   | % Change |   |
|              |   | (Dollars in thousands)       |    |
| -100              |   | $                                      | 114,999 |   |   | $ | (2,978 | ) |   |   | (2.5 | )% |
| -50               |   |                                   | 116,892 |   |   |   | (1,085 | ) |   |   | (0.9 | ) |
| 0                 |   |                                   | 117,977 |   |   |   | - |   |   |   | - |   |
| 50                |   |                                   | 113,507 |   |   |   | (4,470 | ) |   |   | (3.8 | ) |
| 100               |   |                                   | 108,842 |   |   |   | (9,135 | ) |   |   | (7.7 | ) |
| 200               |   |                                   | 96,156  |   |   |   | (21,821 | ) |   |   | (18.5 | ) |
| 300               |   |                                   | 85,052  |   |   |   | (32,925 | ) |   |   | (27.9 | ) |

|              |   | Projected Net Interest Income |   |
|-------------------|--------|----------------------------------------------|--------|
| Change in    |   | Net Interest                            |   |   |   |   |   |   |   |
| Basis Points |   | Income                                       |   |   | $ Change |   |   | % Change |   |
|              |   | (Dollars in thousands)             |   |
| -100              |   | $                                            | 25,212 |   |   | $ | (2,264 | ) |   |   | (8.2 | )% |
| -50               |   |                                         | 26,683 |   |   |   | (793 | ) |   |   | (2.9 | ) |
| 0                 |   |                                         | 27,476 |   |   |   | - |   |   |   | - |   |
| 50                |   |                                         | 27,368 |   |   |   | (108 | ) |   |   | (0.4 | ) |
| 100               |   |                                         | 27,196 |   |   |   | (280 | ) |   |   | (1.0 | ) |
| 200               |   |                                         | 26,834 |   |   |   | (642 | ) |   |   | (2.3 | ) |
| 300               |   |                                         | 26,093 |   |   |   | (1,383 | ) |   |   | (5.0 | ) |

----

| 3.1  | Articles of Incorporation of Franklin Financial Corporation (1)        |
|------|------------------------------------------------------------------------|
| 3.2  | Bylaws of Franklin Financial Corporation (2)                           |
| 4.0  | Form of Common Stock Certificate of Franklin Financial Corporation (3) |
| 31.1 | Rule 13a-14(a) Certification of Chief Executive Officer                |
| 31.2 | Rule 13a-14(a) Certification of Chief Financial Officer                |
| 32   | Section 1350 Certifications                                            |

----

----

| (1) | Incorporated herein by reference to Exhibit 3.1 of pre-effective amendment No. 1 to the Company’s Registration Statement on Form S-1 (File No. 333-171108), filed with the Securities and Exchange Commission on January 28, 2011. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Incorporated herein by reference to Exhibit 3.2 of pre-effective amendment No. 1 to the Company’s Registration Statement on Form S-1 (File No. 333-171108), filed with the Securities and Exchange Commission on January 28, 2011. |
| (3) | Incorporated herein by reference to Exhibit 4.0 to the Company’s Registration Statement on Form S-1 (File No. 333-171108), as amended, initially filed with the Securities and Exchange Commission on December 10, 2010.           |

----

|         | FRANKLIN FINANCIAL CORPORATION |                                            |
|--------------|--------------------------------|-------------------------------------------------|
|         | Registrant                     |                                            |
|         |                           |                                            |   |
| May 13, 2011 | By:                            | /s/ Richard T. Wheeler, Jr.                     |   |
|         |                           | Richard T. Wheeler, Jr.                         |   |
|         |                           | Chairman, President and Chief Executive Officer |   |
|         |                           | (Principal Executive Officer)                   |   |
|         |                           |                                            |   |
| May 13, 2011 | By:                            | /s/ Donald F. Marker                            |   |
|         |                           | Donald F. Marker                                |   |
|         |                           | Treasurer and Corporate Secretary               |   |
|         |                           | (Principal Financial and Accounting Officer)    |   |

----