Exhibit 13.1

2009 Annual Report

LOGO



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CMS Bancorp, Inc.



Dear Stockholders:

While some financial institutions have continued to struggle to regain their footing during these difficult economic times, Community Mutual has continued
to focus on its core business and has made major strides in implementing our business plan in each of our branch markets. During fiscal year 2009, we continued to work towards preserving our capital position, growing our deposits, increasing our
non-interest income with the development of our residential mortgage secondary market sales and strengthening our commercial lending team. Despite a moderate increase in past due and non-performing loans, we have maintained our asset quality and we
successfully opened a new branch office in Mount Kisco, N.Y.

We believe that depositors and borrowers are looking to reestablish local
community relationships and prefer working with community banks rather than dealing with the large commercial institutions. In response to this belief, we have focused on improving our commercial lending team and the in-branch customer experience
through an enhanced technology platform and successful relocation of our branch offices to new and more convenient locations, which, we believe, has provided a much improved retail banking experience for our customers.

As reflected below, in the past four years, we have grown the bank dramatically and believe we are positioned for a strong future, with profitable
operations and growth in shareholder value.



|                     |  |                                         |         |      |   |         |      |  |   |         |   |  |   |         |  
|-------------------- |  | --------------------------------------- | ------- | ---- | - | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                     |  | At or for the Years Ended September, 30 |        
|                     |  | (in thousands)                          |        
|                     |  | 2006                                    |         | 2007 |   |         | 2008 |  |   | 2009    |  
|Securities           |  | $                                       | 15,618  |      | $ | 4,565   |      |  | $ | 10,370  |   |  | $ | 58,643  |  
|Loans, net           |  |                                         | 96,732  |      |   | 146,701 |      |  |   | 181,133 |   |  |   | 169,293 |  
|Deposits             |  |                                         | 108,784 |      |   | 117,500 |      |  |   | 128,757 |   |  |   | 184,387 |  
|FHLB advances        |  |                                         |        |      |   | 30,000  |      |  |   | 50,767  |   |  |   | 34,726  |  
|Equity               |  |                                         | 8,307   |      |   | 24,354  |      |  |   | 21,709  |   |  |   | 20,913  |  
|Total assets         |  |                                         | 122,528 |      |   | 173,506 |      |  |   | 203,930 |   |  |   | 243,164 |  
|                     |  |                                         |         |     
|Interest income      |  |                                         | 5,720   |      |   | 7,505   |      |  |   | 10,291  |   |  |   | 11,405  |  
|Net interest income  |  |                                         | 4,006   |      |   | 4,494   |      |  |   | 5,517   |   |  |   | 6,392   |  
|Non-interest income  |  |                                         | 422     |      |   | 279     |      |  |   | 322     |   |  |   | 498     |  
|Non-interest expense |  |                                         | 4,336   |      |   | 5,509   |      |  |   | 7,044   |   |  |   | 7,328   |  
|Net income (loss)    |  |                                         | 52      |      |   | (803    | )    |  |   | (857    | ) |  |   | (439    | )

As we move on to 2010, we will focus on building out our current banking franchise and look at
expansion opportunities to extend our geographic reach. We would like to thank our customers, the Board of Directors, officers and employees for their efforts and performance during the 2009 fiscal year and thank you, our stockholders, for your
continued support.



|                                         |  |  |  |                                   
|---------------------------------------- |  |  |  | ----------------------------------
|LOGO                                     |  |  |  | LOGO                              
|Thomas G. Ferrara, Chairman of the Board |  |  |  | John E. Ritacco, President and CEO



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CMS Bancorp, Inc.





Selected Consolidated Financial Information and Other Data

The following information is derived from the audited consolidated financial statements of CMS Bancorp, Inc., (the Company). For additional
information about the Company and Community Mutual Savings Bank (the Bank), please see the detailed presentation contained in Managements Discussion and Analysis of Financial Condition and Results of Operations and the
consolidated financial statements and footnotes of the Company which are included in this Annual Report.



|                                  |  |                  |         |      |   |         |  |   |        
|--------------------------------- |  | ---------------- | ------- | ---- | - | ------- |  | - | -------
|Selected Financial Condition Data |  | At September 30,
|(in thousands)                    |  | 2009             |         | 2008 |   | 2007   
|Total assets                      |  | $                | 243,164 |      | $ | 203,930 |  | $ | 173,506
|Loans receivable, net             |  |                  | 169,293 |      |   | 181,133 |  |   | 146,701
|Investment securities             |  |                  | 58,643  |      |   | 10,370  |  |   | 4,565  
|Cash and cash equivalents         |  |                  | 7,304   |      |   | 5,402   |  |   | 17,540 
|Deposits                          |  |                  | 184,387 |      |   | 128,757 |  |   | 117,500
|FHLB Advances                     |  |                  | 34,726  |      |   | 50,767  |  |   | 30,000 
|Stockholders equity              |  |                  | 20,913  |      |   | 21,709  |  |   | 24,354 



|                                      |  |                           |        |   |      |   |        |      |  |   |       |  
|------------------------------------- |  | ------------------------- | ------ | - | ---- | - | ------ | ---- |  | - | ----- | -
|Selected Operating Data               |  | Years Ended September 30, |       
|(in thousands, except per share data) |  | 2009                      |        |   | 2008 |   |        | 2007 | 
|Interest income                       |  | $                         | 11,405 |   |      | $ | 10,291 |      |  | $ | 7,505 |  
|Interest expense                      |  |                           | 5,013  |   |      |   | 4,574  |      |  |   | 3,011 |  
|                                      |  |                           |        |   |      |   |        |      |  |   |       |  
|Net interest income                   |  |                           | 6,392  |   |      |   | 5,717  |      |  |   | 4,494 |  
|Provision for loan losses             |  |                           | 230    |   |      |   | 248    |      |  |   | 60    |  
|Non-interest income                   |  |                           | 498    |   |      |   | 322    |      |  |   | 279   |  
|Non-interest expense                  |  |                           | 7,328  |   |      |   | 7,044  |      |  |   | 5,509 |  
|Income tax (benefit) expense          |  |                           | (229   | ) |      |   | (396   | )    |  |   | 7     |  
|                                      |  |                           |        |   |      |   |        |      |  |   |       |  
|Net loss                              |  | $                         | (470   | ) |      | $ | (857   | )    |  | $ | (803  | )
|                                      |  |                           |        |   |      |   |        |      |  |   |       |  
|Net loss per share                    |  | $                         | (0.25  | ) |      | $ | (0.46  | )    |  | $ | (0.38 | )
|                                      |  |                           |        |   |      |   |        |      |  |   |       |  



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CMS Bancorp, Inc.





|                                                                        |  |                                         |    |  |       |    |  |       |   
|----------------------------------------------------------------------- |  | --------------------------------------- | -- |  | ----- | -- |  | ----- | --
|Selected Financial Ratios and Other Data                                |  | At or for the Years Ended September 30, |   
|                                                                        |  | 2009                                    |    |  | 2008  |    |  | 2007  |   
|Performance Ratios:                                                     |  |                                         |    |  |       |    |  |       |   
|Return on average assets                                                |  | (0.20                                   | )% |  | (0.47 | )% |  | (0.58 | )%
|Return on average equity                                                |  | (2.06                                   | )% |  | (3.69 | )% |  | (4.93 | )%
|Yield on average interest-earning assets                                |  | 5.36                                    | %  |  | 5.83  | %  |  | 5.61  | % 
|Net interest rate spread                                                |  | 2.63                                    | %  |  | 2.68  | %  |  | 2.78  | % 
|Net interest margin                                                     |  | 3.00                                    | %  |  | 3.24  | %  |  | 3.36  | % 
|Average interest-earning assets to average interest-bearing liabilities |  | 1.16                                    |    |  | 1.21  |    |  | 1.26  |   
|                                                                        |  |                                         |   
|Capital Ratios:                                                         |  |                                         |    |  |       |    |  |       |   
|Average stockholders equity to average assets                          |  | 9.70                                    | %  |  | 12.84 | %  |  | 11.79 | % 
|Tier 1 core ratio                                                       |  | 7.10                                    | %  |  | 7.23  | %  |  | 8.99  | % 
|Total risk based capital ratio                                          |  | 16.16                                   | %  |  | 14.28 | %  |  | 17.34 | % 
|                                                                        |  |                                         |   
|Asset Quality Ratios:                                                   |  |                                         |    |  |       |    |  |       |   
|Allowance for loan losses to gross loans                                |  | 0.44                                    | %  |  | 0.28  | %  |  | 0.18  | % 
|Non-performing loans to total assets                                    |  | 0.69                                    | %  |  | 0.00  | %  |  | 0.00  | % 



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Managements Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This Annual Report contains forward-looking statements, which may be identified by the use of such words as believe, expect, anticipate, should, planned,
estimated, potential and similar expressions that are intended to identify forward-looking statements. Examples of forward-looking statements include, but are not limited to, estimates with respect to our financial condition,
results of operations and business that are subject to various factors including those set forth in Part 1, Item 1  Description of Business  Risk Factors of our Form 10-K for the year ended September 30, 2009, which could cause
actual results to differ materially from these estimates. These factors include, but are not limited to:



| |  |  | changes in interest rates;
| | - |  | --------------------------



| |  |  | our allowance for loan losses may not be sufficient to cover actual loan losses;
| | - |  | --------------------------------------------------------------------------------



| |  |  | the risk of loss associated with our loan portfolio;
| | - |  | ----------------------------------------------------



| |  |  | lower demand for loans;
| | - |  | -----------------------



| |  |  | changes in our asset quality;
| | - |  | -----------------------------



| |  |  | other-than-temporary impairment charges for investments;
| | - |  | --------------------------------------------------------



| |  |  | the soundness of other financial institutions;
| | - |  | ----------------------------------------------



| |  |  | the potential for additional regulation;
| | - |  | ----------------------------------------



| |  |  | changes in liquidity;
| | - |  | ---------------------



| |  |  | changes in the Companys reputation;
| | - |  | ------------------------------------



| |  |  | higher FDIC insurance premiums;
| | - |  | -------------------------------



| |  |  | changes in the real estate market or local economy;
| | - |  | ---------------------------------------------------



| |  |  | our ability to successfully implement our future plans for growth;
| | - |  | ------------------------------------------------------------------



| |  |  | our ability to retain our executive officers and other key personnel;
| | - |  | ---------------------------------------------------------------------



| |  |  | public health issues such as the H1N1 flu outbreak;
| | - |  | ---------------------------------------------------



| |  |  | competition in our primary market area;
| | - |  | ---------------------------------------



| |  |  | changes in laws and regulations to which we are subject;
| | - |  | --------------------------------------------------------



| |  |  | recent developments affecting the financial markets;
| | - |  | ----------------------------------------------------



| |  |  | changes in the Federal Reserves monetary or fiscal policies;
| | - |  | -------------------------------------------------------------



| |  |  | our ability to maintain effective internal controls over financial reporting;
| | - |  | -----------------------------------------------------------------------------



| |  |  | the inclusion of certain anti-takeover provisions in our organizational documents; and
| | - |  | --------------------------------------------------------------------------------------



| |  |  | the low trading volume in our stock.
| | - |  | ------------------------------------

Any or all of our forward-looking statements in this Report and in any other public statements we make may turn out to be wrong. They can be affected by inaccurate assumptions we might make or by known or
unknown risks and uncertainties. Consequently, no forward-looking statement can be guaranteed. We disclaim any obligation to subsequently revise any forward-looking statements to reflect events or circumstances after the date of such statements, or
to reflect the occurrence of anticipated or unanticipated events.

General

The Companys results of operations depend primarily on its net interest income, which is the difference between the interest income it earns on its
loans, investments and other interest-earning assets and the interest it pays on its deposits, borrowings and other interest-bearing liabilities. Net interest income is affected by the relative amounts of interest-earning assets and interest-bearing
liabilities and the interest rates earned or paid on these balances. The Companys operations are also affected by non-interest income, the provision for loan losses and non-interest expenses such as salaries and employee benefits, occupancy
costs, and other general



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CMS Bancorp, Inc.





and administrative expenses. In general, financial institutions such as the Company are significantly affected by economic conditions, competition, and the monetary and fiscal policies of the
federal government. Lending activities are influenced by the demand for and supply of housing, competition among lenders, interest rate conditions, and funds availability. The Companys operations and lending activities are principally
concentrated in Westchester County, New York, and its operations and earnings are influenced by the economics of the area in which it operates. Deposit balances and cost of funds are influenced by prevailing market rates on competing investments,
customer preferences, and levels of personal income and savings in the Companys primary market area.

The Companys net interest
income may be affected by market interest rate changes. Local market conditions and liquidity needs of other financial institutions can have a dramatic impact on the interest rates offered to attract deposits. During portions of the last two fiscal
years, changes in short-term interest rates did not result in corresponding changes in long-term interest rates, and local market conditions resulted in relatively high certificate of deposit interest rates and lower interest rates on loans. The
effect of this interest rate environment did, and could in the future, continue to decrease the Companys ability to invest deposits and reinvest proceeds from loan and investment repayments at higher interest rates. During portions of the past
two fiscal years, the Companys cost of funds did not change proportionally to its yield on loans and investments, due to the longer-term nature of its interest-earning assets, the yield curve environment and higher interest rates on deposits
resulting from liquidity needs of other financial institutions.

In order to grow and diversify, the Company seeks to continue to increase its
multi-family, non-residential, construction, home equity and commercial loans by targeting these markets in Westchester County, N.Y., and the surrounding areas as a means to increase the yield on and diversify its loan portfolio, build transactional
deposit account relationships and, depending on market conditions, sell the fixed-rate residential real estate loan originations to a third party in order to diversify its loan portfolio, increase non-interest income and reduce interest rate risk.

To the extent the Company increases its investment in construction or development, consumer and commercial loans, which are considered
greater risks than one-to-four-family residential loans, the Companys provision for loan losses may increase to reflect this increased risk, which could cause a reduction in the Companys income.

Business Strategy

The Company seeks to
differentiate itself from its competition by providing superior, highly personalized and prompt service, local decision making and competitive fees and rates to its customers. Historically, the Bank has been a community-oriented retail savings bank
offering residential mortgage loans and traditional deposit products and, to a lesser extent, commercial real estate, small business and consumer loans in Westchester County and the surrounding areas. The Company has adopted a strategic plan that
focuses on growth in the loan portfolio into higher yield multi-family, non-residential, construction and commercial loan markets. The Companys strategic plan also calls for increasing deposit relationships and broadening its product lines and
services. The Company believes that this business strategy is best for its long-term success and viability, and complements its existing commitment to high quality customer service.

Critical Accounting Policies

The consolidated financial statements included in this report
have been prepared in conformity with accounting principles generally accepted in the United States of America. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported
amounts of assets and liabilities as of the dates of the statements of financial condition and revenues and expenses for the periods then ended. Actual results could differ significantly from those estimates.



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CMS Bancorp, Inc.





It is managements opinion that accounting estimates relating to certain aspects of the
Companys business have more significance than others due to the relative importance of those areas to overall performance, or the level of subjectivity required in making these estimates. Material estimates that are particularly susceptible to
significant change relate to the determination of the allowance for loan losses, the potential impairment of Federal Home Loan Bank of New York (FHLB) stock, the determination of other-than-temporary impairment on securities, and the
assessment of whether deferred taxes are more likely than not to be realized. Management believes that the allowance for loan losses represents its best estimate of losses known and inherent in the loan portfolio that are both probable and
reasonable to estimate. While management uses available information to recognize losses on loans, future additions to the allowance for loan losses may be necessary based on changes in market and economic conditions in the Companys market
area. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Companys allowance for loan losses. Such agencies may require the Company to recognize additions to the allowance for
loan losses based on their judgments about information available to them at the time of their examination.

Managements determination of
whether investments, including FHLB stock, are impaired is based on their assessment of the ultimate recoverability of their cost rather than by recognizing temporary declines in value. Managements assessment as to the amount of deferred taxes
more likely than not to be realized is based upon future taxable income, which is subject to revision upon updated information.

These
critical policies and their application have been and will continue to be reviewed periodically by the Audit Committee and the Board of Directors. All accounting policies are important, and as such, we encourage you to review each of the policies
included in Note 2 to the Companys Consolidated Financial Statements to obtain a better understanding of how its financial performance is reported.



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Average Balances, Interest and Average Yields

The following tables set forth certain information relating to the Companys average balance sheets and reflects the average annual yield on
interest-earning assets and average annual cost of interest-bearing liabilities, interest earned and interest paid for the periods indicated. Such yields and costs are derived by dividing annualized income or expense by the average balance of
interest-earning assets or interest-bearing liabilities, respectively, for the periods presented. Average balances are derived from daily balances over the periods indicated. The average balances for loans are net of allowance for loan losses.



|                                                                 |  |                        |         |            |                                      |   |                |   |                       |  |            |        |  |      |  
|---------------------------------------------------------------- |  | ---------------------- | ------- | ---------- | ------------------------------------ | - | -------------- | - | --------------------- |  | ---------- | ------ |  | ---- | -
|                                                                 |  | At September 30,2009   |         |            | For the Year EndedSeptember 30, 2009 |  
|                                                                 |  | ActualBalance          |         | Yield/Rate |                                      |   | AverageBalance |   | InterestIncomeExpense |  | Yield/Rate |       
|                                                                 |  | (Dollars in thousands) |        
|Interest-earning assets:                                         |  |                        |         |            |                                      |   |                |   |                       |  |            |        |  |      |  
|Loans receivable (1)                                             |  | $                      | 169,293 |            | 6.01                                 | % |                | $ | 177,239               |  | $          | 10,396 |  | 5.87 | %
|Securities (2)                                                   |  |                        | 58,643  |            | 2.61                                 | % |                |   | 27,290                |  |            | 905    |  | 3.32 | %
|Federal funds sold                                               |  |                        |        |            |                                     |   |                |   |                      |  |            |       |  |     | %
|Other interest-earning assets(3)                                 |  |                        | 8,234   |            | 1.49                                 | % |                |   | 8,192                 |  |            | 104    |  | 1.27 | %
|                                                                 |  |                        |         |            |                                      |   |                |   |                       |  |            |        |  |      |  
|Total interest-earning assets                                    |  |                        | 236,170 |            | 5.01                                 | % |                |   | 212,721               |  |            | 11,405 |  | 5.36 | %
|                                                                 |  |                        |         |            |                                      |   |                |   |                       |  |            |        |  |      |  
|Non-interest earning assets                                      |  |                        | 6,994   |            |                                      |   |                |   | 6,757                 |  |            |        |  |      |  
|                                                                 |  |                        |         |            |                                      |   |                |   |                       |  |            |        |  |      |  
|Total Assets                                                     |  | $                      | 243,164 |            |                                      |   |                | $ | 219,478               |  |            |        |  |      |  
|                                                                 |  |                        |         |            |                                      |   |                |   |                       |  |            |        |  |      |  
|                                                                 |  |                        |         |            |                                     
|Interest bearing-liabilities:                                    |  |                        |         |            |                                      |   |                |   |                       |  |            |        |  |      |  
|Demand deposits                                                  |  | $                      | 24,232  |            | 1.02                                 | % |                | $ | 15,095                |  |            | 226    |  | 1.50 | %
|Savings and club accounts                                        |  |                        | 42,046  |            | 0.40                                 | % |                |   | 38,271                |  |            | 150    |  | 0.40 | %
|Certificates of deposit                                          |  |                        | 101,502 |            | 2.53                                 | % |                |   | 93,228                |  |            | 2,905  |  | 3.11 | %
|Borrowed money (4)                                               |  |                        | 35,394  |            | 4.75                                 | % |                |   | 37,333                |  |            | 1,732  |  | 4.64 | %
|                                                                 |  |                        |         |            |                                      |   |                |   |                       |  |            |        |  |      |  
|Total interest-bearing liabilities                               |  |                        | 203,174 |            | 2.30                                 | % |                |   | 183,927               |  |            | 5,013  |  | 2.73 | %
|                                                                 |  |                        |         |            |                                      |   |                |   |                       |  |            |        |  |      |  
|Non-interest bearing liabilities:                                |  |                        |         |            |                                      |   |                |   |                       |  |            |        |  |      |  
|Non-interest bearing deposits                                    |  |                        | 16,607  |            |                                      |   |                |   | 12,210                |  |            |        |  |      |  
|Other                                                            |  |                        | 2,470   |            |                                      |   |                |   | 2,062                 |  |            |        |  |      |  
|                                                                 |  |                        |         |            |                                      |   |                |   |                       |  |            |        |  |      |  
|Total non-interest bearing liabilities                           |  |                        | 19,077  |            |                                      |   |                |   | 14,272                |  |            |        |  |      |  
|                                                                 |  |                        |         |            |                                      |   |                |   |                       |  |            |        |  |      |  
|Total liabilities                                                |  |                        | 222,372 |            |                                      |   |                |   | 198,199               |  |            |        |  |      |  
|                                                                 |  |                        |         |            |                                      |   |                |   |                       |  |            |        |  |      |  
|Total equity                                                     |  |                        | 20,913  |            |                                      |   |                |   | 21,279                |  |            |        |  |      |  
|                                                                 |  |                        |         |            |                                      |   |                |   |                       |  |            |        |  |      |  
|Total liabilities and equity                                     |  | $                      | 243,164 |            |                                      |   |                | $ | 219,478               |  |            |        |  |      |  
|                                                                 |  |                        |         |            |                                      |   |                |   |                       |  |            |        |  |      |  
|Interest rate spread                                             |  |                        |         |            |                                      |   |                |   |                       |  | $          | 6,392  |  | 2.63 | %
|                                                                 |  |                        |         |            |                                      |   |                |   |                       |  |            |        |  |      |  
|Net interest-earning assets/net interest margin                  |  |                        |         |            |                                      |   |                | $ | 28,794                |  |            |        |  | 3.00 | %
|                                                                 |  |                        |         |            |                                      |   |                |   |                       |  |            |        |  |      |  
|Ratio of interest-earning assets to interest-bearing liabilities |  |                        |         |            |                                      |   |                |   |                       |  |            | 1.16x  |  |      |  



|(1) | Net of allowance for loan losses and net deferred costs and fees.
|--- | -----------------------------------------------------------------

|(2) | Held to maturity securities included at amortized cost and available for sale securities included at fair value.
|--- | ----------------------------------------------------------------------------------------------------------------

|(3) | Includes stock of Federal Home Loan Bank of New York and loans held for sale, which are held for a short period of time.
|--- | ------------------------------------------------------------------------------------------------------------------------

|(4) | Includes mortgage escrow funds and securities sold under agreements to repurchase.
|--- | ----------------------------------------------------------------------------------



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|                                                                 |  |                                      |         |                       |                                      |            |  |      |                |  |                       |         |            |   |       |  |      |  
|---------------------------------------------------------------- |  | ------------------------------------ | ------- | --------------------- | ------------------------------------ | ---------- |  | ---- | -------------- |  | --------------------- | ------- | ---------- | - | ----- |  | ---- | -
|                                                                 |  | For the Year EndedSeptember 30, 2008 |         |                       | For the Year EndedSeptember 30, 2007 |           
|                                                                 |  | AverageBalance                       |         | InterestIncomeExpense |                                      | Yield/Rate |  |      | AverageBalance |  | InterestIncomeExpense |         | Yield/Rate |  
|                                                                 |  | (Dollars in thousands)               |        
|Interest-earning assets                                          |  |                                      |         |                       |                                      |            |  |      |                |  |                       |         |            |   |       |  |      |  
|Loans receivable (1)                                             |  | $                                    | 160,965 |                       | $                                    | 9,659      |  | 6.00 | %              |  | $                     | 111,089 |            | $ | 6,521 |  | 5.87 | %
|Securities (2)                                                   |  |                                      | 5,992   |                       |                                      | 259        |  | 4.32 | %              |  |                       | 12,142  |            |   | 452   |  | 3.72 | %
|Federal funds sold                                               |  |                                      | 5,191   |                       |                                      | 179        |  | 3.45 | %              |  |                       | 7,723   |            |   | 403   |  | 5.22 | %
|Other interest-earning assets(3)                                 |  |                                      | 4,309   |                       |                                      | 194        |  | 4.50 | %              |  |                       | 2,733   |            |   | 129   |  | 4.72 | %
|                                                                 |  |                                      |         |                       |                                      |            |  |      |                |  |                       |         |            |   |       |  |      |  
|Total interest-earning assets                                    |  |                                      | 176,457 |                       |                                      | 10,291     |  | 5.83 | %              |  |                       | 133,687 |            |   | 7,505 |  | 5.61 | %
|                                                                 |  |                                      |         |                       |                                      |            |  |      |                |  |                       |         |            |   |       |  |      |  
|Non-interest earning assets                                      |  |                                      | 4,332   |                       |                                      |            |  |      |                |  |                       | 4,480   |            |   |       |  |      |  
|                                                                 |  |                                      |         |                       |                                      |            |  |      |                |  |                       |         |            |   |       |  |      |  
|Total Assets                                                     |  | $                                    | 180,789 |                       |                                      |            |  |      |                |  | $                     | 138,167 |            |   |       |  |      |  
|                                                                 |  |                                      |         |                       |                                      |            |  |      |                |  |                       |         |            |   |       |  |      |  
|                                                                 |  |                                      |         |                       |                                      |           
|Interest bearing-liabilities                                     |  |                                      |         |                       |                                      |            |  |      |                |  |                       |         |            |   |       |  |      |  
|Demand deposits                                                  |  | $                                    | 10,442  |                       |                                      | 283        |  | 2.71 | %              |  | $                     | 6,433   |            |   | 238   |  | 3.70 | %
|Savings and club accounts                                        |  |                                      | 40,161  |                       |                                      | 160        |  | 0.40 | %              |  |                       | 44,529  |            |   | 178   |  | 0.40 | %
|Certificates of deposit                                          |  |                                      | 57,710  |                       |                                      | 2,397      |  | 4.15 | %              |  |                       | 48,736  |            |   | 2,268 |  | 4.65 | %
|Borrowed money (4)                                               |  |                                      | 36,996  |                       |                                      | 1,734      |  | 4.69 | %              |  |                       | 6,577   |            |   | 327   |  | 4.97 | %
|                                                                 |  |                                      |         |                       |                                      |            |  |      |                |  |                       |         |            |   |       |  |      |  
|Total interest-bearing liabilities                               |  |                                      | 145,309 |                       |                                      | 4,574      |  | 3.15 | %              |  |                       | 106,275 |            |   | 3,011 |  | 2.83 | %
|                                                                 |  |                                      |         |                       |                                      |            |  |      |                |  |                       |         |            |   |       |  |      |  
|Non-interest bearing liabilities:                                |  |                                      |         |                       |                                      |            |  |      |                |  |                       |         |            |   |       |  |      |  
|Non-interest bearing deposits                                    |  |                                      | 11,194  |                       |                                      |            |  |      |                |  |                       | 14,963  |            |   |       |  |      |  
|Other                                                            |  |                                      | 1,073   |                       |                                      |            |  |      |                |  |                       | 638     |            |   |       |  |      |  
|                                                                 |  |                                      |         |                       |                                      |            |  |      |                |  |                       |         |            |   |       |  |      |  
|Total non-interest bearing liabilities                           |  |                                      | 12,267  |                       |                                      |            |  |      |                |  |                       | 15,601  |            |   |       |  |      |  
|                                                                 |  |                                      |         |                       |                                      |            |  |      |                |  |                       |         |            |   |       |  |      |  
|Total liabilities                                                |  |                                      | 157,576 |                       |                                      |            |  |      |                |  |                       | 121,876 |            |   |       |  |      |  
|                                                                 |  |                                      |         |                       |                                      |            |  |      |                |  |                       |         |            |   |       |  |      |  
|Total equity                                                     |  |                                      | 23,213  |                       |                                      |            |  |      |                |  |                       | 16,291  |            |   |       |  |      |  
|                                                                 |  |                                      |         |                       |                                      |            |  |      |                |  |                       |         |            |   |       |  |      |  
|Total liabilities and equity                                     |  | $                                    | 180,789 |                       |                                      |            |  |      |                |  | $                     | 138,167 |            |   |       |  |      |  
|                                                                 |  |                                      |         |                       |                                      |            |  |      |                |  |                       |         |            |   |       |  |      |  
|Interest rate spread                                             |  |                                      |         |                       | $                                    | 5,717      |  | 2.68 | %              |  |                       |         |            | $ | 4,494 |  | 2.78 | %
|                                                                 |  |                                      |         |                       |                                      |            |  |      |                |  |                       |         |            |   |       |  |      |  
|                                                                 |  |                                      |         |                       |                                      |           
|Net interest-earning assets/net interest margin                  |  | $                                    | 31,148  |                       |                                      |            |  | 3.24 | %              |  | $                     | 27,412  |            |   |       |  | 3.36 | %
|                                                                 |  |                                      |         |                       |                                      |            |  |      |                |  |                       |         |            |   |       |  |      |  
|Ratio of interest-earning assets to interest-bearing liabilities |  |                                      |         |                       |                                      | 1.21x      |  |      |                |  |                       |         |            |   | 1.26x |  |      |  



|(1) | Net of allowance for loan losses and net deferred costs and fees.
|--- | -----------------------------------------------------------------

|(2) | Held to maturity securities included at amortized cost and available for sale securities included at fair value.
|--- | ----------------------------------------------------------------------------------------------------------------

|(3) | Includes stock of Federal Home Loan Bank of New York.
|--- | -----------------------------------------------------

|(4) | Includes mortgage escrow funds and securities sold under agreements to repurchase.
|--- | ----------------------------------------------------------------------------------



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CMS Bancorp, Inc.





Rate/Volume Analysis.The following tables analyze the dollar amount of changes in interest
income and interest expense for major components of interest-earning assets and interest-bearing liabilities. It shows the amount of the change in interest income or expense caused by either changes in outstanding balances (volume) or changes in
interest rates. The effect of a change in volume is measured by applying the average rate during the first period to the volume change between the two periods. The effect of changes in rate is measured by applying the change in rate between the two
periods to the average volume during the first period. Changes attributable to both rate and volume which cannot be segregated have been allocated proportionately to the absolute value of the change due to volume and the change due to rate.



|                                   |  |                                               |       |   |      |   |      |     |  |   |       |  
|---------------------------------- |  | --------------------------------------------- | ----- | - | ---- | - | ---- | --- |  | - | ----- | -
|                                   |  | Year Ended September 30, 2009Compared to 2008 |      
|                                   |  | Volume                                        |       |   | Rate |   |      | Net | 
|                                   |  | (In thousands)                                |      
|Interest-earning assets:           |  |                                               |       |   |      |   |      |     |  |   |       |  
|Loans receivable                   |  | $                                             | 779   |   |      | $ | (42  | )   |  | $ | 737   |  
|Securities                         |  |                                               | 663   |   |      |   | (17  | )   |  |   | 646   |  
|Federal funds sold                 |  |                                               | (179  | ) |      |   |     |     |  |   | (179  | )
|Other interest-earning assets      |  |                                               | 27    |   |      |   | (117 | )   |  |   | (90   | )
|                                   |  |                                               |       |   |      |   |      |     |  |   |       |  
|Total interest-earning assets      |  |                                               | 1,290 |   |      |   | (176 | )   |  |   | 1,114 |  
|                                   |  |                                               |       |   |      |   |      |     |  |   |       |  
|                                   |  |                                               |      
|Interest-bearing liabilities:      |  |                                               |       |   |      |   |      |     |  |   |       |  
|Demand deposits                    |  |                                               | 33    |   |      |   | (90  | )   |  |   | (57   | )
|Savings and club accounts          |  |                                               | (10   | ) |      |   |     |     |  |   | (10   | )
|Certificates of deposit            |  |                                               | 789   |   |      |   | (281 | )   |  |   | 508   |  
|Borrowed money                     |  |                                               | 8     |   |      |   | (10  | )   |  |   | (2    | )
|                                   |  |                                               |       |   |      |   |      |     |  |   |       |  
|Total interest-bearing liabilities |  |                                               | 820   |   |      |   | (381 | )   |  |   | 439   |  
|                                   |  |                                               |       |   |      |   |      |     |  |   |       |  
|                                   |  |                                               |      
|Net interest income                |  | $                                             | 470   |   |      | $ | 205  |     |  | $ | 675   |  
|                                   |  |                                               |       |   |      |   |      |     |  |   |       |  



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CMS Bancorp, Inc.





|                                   |  |                                               |       |   |      |   |      |     |  |   |       |  
|---------------------------------- |  | --------------------------------------------- | ----- | - | ---- | - | ---- | --- |  | - | ----- | -
|                                   |  | Year Ended September 30, 2008Compared to 2007 |      
|                                   |  | Volume                                        |       |   | Rate |   |      | Net | 
|                                   |  | (In thousands)                                |      
|Interest-earning assets:           |  |                                               |       |   |      |   |      |     |  |   |       |  
|Loans receivable                   |  | $                                             | 2,990 |   |      | $ | 148  |     |  | $ | 3,138 |  
|Securities                         |  |                                               | (202  | ) |      |   | 9    |     |  |   | (193  | )
|Federal funds sold                 |  |                                               | (111  | ) |      |   | (113 | )   |  |   | (224  | )
|Other interest-earning assets      |  |                                               | 66    |   |      |   | (1   | )   |  |   | 65    |  
|                                   |  |                                               |       |   |      |   |      |     |  |   |       |  
|Total interest-earning assets      |  |                                               | 2,743 |   |      |   | 43   |     |  |   | 2,786 |  
|                                   |  |                                               |       |   |      |   |      |     |  |   |       |  
|                                   |  |                                               |      
|Interest bearing liabilities:      |  |                                               |       |   |      |   |      |     |  |   |       |  
|Demand deposits                    |  |                                               | 76    |   |      |   | (31  | )   |  |   | 45    |  
|Savings and club accounts          |  |                                               | (18   | ) |      |   |     |     |  |   | (18   | )
|Certificates of deposit            |  |                                               | 235   |   |      |   | (106 | )   |  |   | 129   |  
|Borrowed money                     |  |                                               | 1,408 |   |      |   | (1   | )   |  |   | 1,407 |  
|                                   |  |                                               |       |   |      |   |      |     |  |   |       |  
|Total interest-bearing liabilities |  |                                               | 1,701 |   |      |   | (138 | )   |  |   | 1,563 |  
|                                   |  |                                               |       |   |      |   |      |     |  |   |       |  
|                                   |  |                                               |      
|Net interest income                |  | $                                             | 1,042 |   |      | $ | 181  |     |  | $ | 1,223 |  
|                                   |  |                                               |       |   |      |   |      |     |  |   |       |  

Comparison of Financial Condition at September 30, 2009 to September 30, 2008

Total assets increased by $39.2 million, or 19.2%, to $243.2 million at September 30, 2009 from $203.9 million at September 30,
2008. Deposit growth and amortization and prepayments of loans were used to repay borrowing from the Federal Home Loan Bank of New York (FHLB) and to purchase available for sale securities.

At September 30, 2009, cash and cash equivalents increased by $1.9 million, or 35.2% to $7.3 million as of September 30, 2009 from $5.4 million at
September 30, 2008 as a result of deposit increases which were invested in other interest-earning assets.

At September 30, 2009,
securities available for sale increased by $48.3 million as deposit increases and loan repayments were invested in available for sale securities to improve the yield on these investments and provide for liquidity. Available for sale securities
consist principally of notes, bonds and mortgage-backed securities of the U.S. Government and U.S. Government Agencies.

Loans receivable were
$169.3 million and $181.1 million at September 30, 2009 and 2008, respectively, representing a decrease of $11.8 million, or 6.5%. The decrease in loans resulted principally from higher pre-payments of one-to-four-family mortgage loans and the
decision to sell one-to-four-family loan originations, net of increases in non-residential mortgage real estate loans. One-to-four family loan originations were sold as a result of the comparatively low interest rates in the market, to increase
non-interest income and to reduce the average life of the loan portfolio in order to reduce long term-interest rate risk.



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CMS Bancorp, Inc.





While the banking industry has seen increases in loan delinquencies and defaults over the past year,
particularly in the subprime sector, the Company has not experienced significant losses in its loan portfolio due primarily to its conservative underwriting policies. As of September 30, 2009, the Company had $1.7 million of non-performing
loans which are in process of foreclosure, and are considered impaired and have been placed on non-accrual status. The Company had no impaired loans as of September 30, 2008. The increase in impaired loans resulted from general economic
conditions, increased unemployment and the declines in the local real estate market. As of September 30, 2009 and 2008, the allowance for loan losses was 0.44% and 0.28% of loans outstanding, respectively. There were $1,000 of loans charged off
in the year ended September 30, 2008 and $3,000 of recoveries in the year ended September 30, 2009. Despite a weakening economy nationally as well as in our primary market area, there was no material shift in the loan portfolio, loss
experience, or other factors affecting the Bank. As a result of the deterioration of economic conditions in the Companys primary market area and a modest increase in delinquencies $230,000 and $248,000 was added to the allowance for loan
losses in the years ended September 30, 2009 and 2008, respectively.

Additions to premises and equipment related principally to the
leasehold and furniture and equipment costs of the new Mount Kisco branch which opened in April 2009.

Redemption of FHLB stock resulted from
the repayment of borrowings.

Deposits increased by $55.6 million, or 43.2%, from $128.8 million as of September 30, 2008 to $184.4
million as of September 30, 2009. The increase in deposits resulted from promotional short-term certificate of deposit rates offered in conjunction with the opening of the Mount Kisco branch and more competitive interest rates on money market
accounts. Deposit increases also include higher non-interest-bearing demand deposits resulting from additional focus on growth in these deposits and from the introduction of on-line banking in fiscal 2009. Deposits as of September 30, 2008
included $4.0 million of brokered deposits which were used to improve liquidity during a period of tight credit and economic uncertainty, which have since been repaid.

Advances from the FHLB decreased to $34.7 million as of September 30, 2009 from $50.8 million as of September 30, 2008 as a result of the increase in deposits which were used to repay short-term
borrowings.

Stockholders equity decreased from $21.7 million at September 30, 2008 to $20.9 million at September 30, 2009 as
a result of the net loss of $439,000 incurred during the period and the purchase of the Companys common stock pursuant to the stock repurchase program for $661,000, offset in part by additions to equity resulting from accounting for stock
based compensation and the employee stock ownership plan, or ESOP.

Comparison of Operating Results for the Year Ended
September 30, 2009 and 2008

General.The Company incurred a net loss of $439,000 for the year ended September 30, 2009,
compared to a net loss of $857,000 for the year ended September 30, 2008. The decrease in the net loss resulted primarily from an increase in total interest income and non-interest income, offset in part by increases in deposit interest expense
and non-interest expense, including the FDIC special assessment and higher premiums of $331,000 in the year ended September 30, 2009.

In
April 2009, the Company opened a new branch in Mount Kisco, New York. This new branch caused operating expenses to increase for the portion of fiscal 2009 that it was open and will cause operating expenses to increase in future periods. Until
deposits and the investment of these deposits in interest-earning assets at this new branch reach a sufficient level, this new branch is likely to have a negative impact on earnings. For the year ended September 30, 2009, direct operating
expenses of the Mount Kisco branch were $339,000.



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CMS Bancorp, Inc.





Interest Income.Total interest income increased $1.1 million, or 10.8%, to $11.4 million for the
year ended September 30, 2009 from $10.3 million for the year ended September 30, 2008. The increase in interest income was due to increases of $737,000 in interest income from loans and $646,000 in interest from securities, offset in part
by a decrease of $269,000 in interest income from Federal funds sold and other interest-earning assets. Higher interest-earning asset balances contributed $1.3 million to the increase in total interest income, offset in part by the impact of lower
yields on interest-earning assets of $176,000.

Interest income from loans increased by $737,000, or 7.6%, to $10.4 million for the year ended
September 30, 2009 from $9.7 million for the year ended September 30, 2008. The increase was due to a $16.3 million, or 10.1%, increase in the average balance of loans to $177.2 million in the year ended September 30, 2009 from $161.0
million in the year ended September 30, 2008, net of a decrease in the associated average yields to 5.87% in the 2009 fiscal year from 6.00% in the 2008 fiscal year, reflecting lower market rates, decreases in interest rates on adjustable rate
loans and the write-off of deferred loan origination costs on loans that were pre-paid, which were higher in the year ended September 30, 2009 compared to the year ended September 30, 2008. The $16.3 million increase in average loan
balances in the year ended September 30, 2009 was principally from originations of conventional one-to-four-family residential mortgages, and originations and higher usage of home equity lines as well as originations of non-residential real
estate loans, multi-family housing loans and residential construction loans. Higher balances contributed $779,000 to the $737,000 increase in interest income from loans, offset in part by the impact of lower yields of $42,000.

Interest income from securities increased by $646,000 to $905,000 for the year ended September 30, 2009 from $259,000 for the year ended
September 30, 2008. The increase in interest income from securities was due to purchases of short to intermediate-term available-for-sale securities, principally notes, bonds and mortgage-backed securities of the U.S. Government and U.S.
Government Agencies which caused the average balance of securities to increase by $21.3 million in the year ended September 30, 2009 compared to 2008. The impact of higher investment balances was partially offset by a decrease in the average
yield on securities to 3.32% for the year ended September 30, 2009 compared to 4.32% for the year ended September 30, 2008. Higher balances contributed $663,000 to the $646,000 increase in interest income from investments, offset in part
by the impact of lower yields of $17,000.

The Company had no investments in Federal funds sold during the year ended September 30, 2009
and had $179,000 of interest income from investments in Federal funds sold in the year ended September 30, 2008. Interest income from other interest-earning assets declined by $90,000 for the year ended September 30, 2009, due to lower
interest rates, which decreased interest income by $117,000, offset in part by the impact of higher average balances, which increased interest income by $27,000. Deposit inflows during the year ended September 30, 2009 were invested in
overnight investments until the Bank could invest these funds in short to intermediate-term available for sale securities.

Interest
Expense.Total interest expense increased by $439,000, or 9.6%, to $5.0 million in the year ended September 30, 2009 compared to $4.6 million in 2008. Interest on demand deposits decreased $57,000 as a result of lower interest rates, offset
in part by the impact of higher average balances in the 2009 fiscal year. Interest on savings and clubs declined by $10,000 as a result of the average balances decreasing from $40.2 million in the year ended September 30, 2008 to $38.3 in 2009.
Promotional interest rates on certificates of deposit in connection with the opening of the Mount Kisco branch and more competitive market rates offered on certificates of deposit in the 2009 period resulted in an increase in the average balance of
$35.6 million, to $93.2 million for the year ended September 30, 2009 compared to $57.7 million for the year ended September 30, 2008. Interest expense on certificates of deposit was $508,000 higher in the year ended September 30,
2009 compared to 2008, primarily as a result of higher average balances causing an increase of $789,000, partially offset by the impact of lower interest rates of $281,000.

Overall declines in market interest rates reduced the average interest rate on interest-bearing liabilities from 3.15% in the year ended September 30, 2008 to 2.73% in 2009. Of the $439,000 increase
in interest expense, growth in volume of interest-bearing liabilities caused the expense to increase by $820,000, which was partially offset by a decrease in interest expense caused by lower interest rates of $381,000 in the year ended
September 30, 2009 compared to 2008.



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CMS Bancorp, Inc.





Net Interest Income.Net interest income increased $675,000, or 11.8%, to $6.4 million for the
year ended September 30, 2009 from $5.7 million for the year ended September 30, 2008. Increases in average interest-earning assets, net of a lower yield on those assets in the year ended September 30, 2009 as compared to 2008 were
partially offset by increases in the volume of interest-bearing liabilities, net of the benefit of lower interest rates on those liabilities.

Provision for Loan Losses.The allowance for loan losses was $749,000, or 0.44%, of gross loans outstanding at September 30, 2009 compared to $516,000, or 0.28%, of gross loans outstanding at September 30, 2008. The level
of the allowance for loan losses is based on estimates and ultimate losses may vary from these estimates. Management reviews the level of the allowance for loan losses on a quarterly basis, at a minimum, and establishes the provision for loan losses
based on the composition of the loan portfolio, delinquency levels, loss experience, economic conditions, and other factors related to the collectibility of the loan portfolio. Management regularly evaluates various risk factors related to the loan
portfolio, such as type of loan, underlying collateral and payment status, and the corresponding allowance allocation percentages. As of September 30, 2009 the Company had $1.7 million of non-performing loans which were in process of
foreclosure, and were considered impaired and have been placed on non-accrual status. As a result of the deterioration of economic conditions in the Companys primary market area during fiscal year 2009 and a modest increase in delinquencies,
$230,000 and $248,000 was added to the allowance for loan losses in the years ended September 30, 2009 and 2008, respectively. The Bank has allocated the allowance for loan losses among categories of loan types as well as classification status
at each period end date.

Non-interest Income.Non-interest income of $498,000 in the year ended September 30, 2009 was higher
than the non-interest income of $322,000 in the comparable 2008 fiscal year as a result of $270,000 of net gains on loans originated for sale in the 2009 fiscal year, net of a $43,000 decrease in fees and service charges in the 2009 fiscal year and
$60,000 of fees earned in the 2008 fiscal year from referring a commercial loan to another lender.

Non-interest Expenses.Non-interest
expenses were $7.3 million and $7.0 million for the years ended September 30, 2009 and 2008, respectively, representing an increase of $284,000, or 4.0%. Higher salaries and benefits of $260,000 resulted from additions to staff in branches,
including the new Mount Kisco branch and the lending department and from higher benefit costs, including medical insurance, stock based compensation costs and pension expense, net of lower executive incentive compensation.

Net occupancy costs decreased by $125,000 in the year ended September 30, 2009 as a result of writing off costs relating to two older branches in the
2008 fiscal year which were relocated and no longer used, partially offset by the lease costs of the new Mount Kisco branch in 2009. Equipment costs increased by $94,000 in the year ended September 30, 2009 principally from the new Eastchester,
Greenburgh and Mount Kisco branch locations.

Professional fees were $485,000 in the year ended September 30, 2009 and $757,000 in the
year ended September 30, 2008. The $272,000 decrease resulted from cost control programs instituted in 2009 and the reimbursement of legal fees from the insurance carrier in connection with the insurance company settlement of the suit brought
by two former employees and, the reimbursement of legal fees by the defined benefit pension plan. Professional fees in the year ended September 30, 2008 included costs associated with the proxy statement and the special shareholders meeting,
the cost of preparing and filing the first annual report and Form 10-K, the cost of the Registration Statement on Form S-8 for the stock option and management recognition programs and other costs associated with operating as a public company. In
addition, 2008 professional fees were higher due to the Compensation Committees engagement of outside compensation consultants and attorneys to review employment contracts and to a lesser degree, costs of documenting internal controls as
required by the Sarbanes-Oxley Act.



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CMS Bancorp, Inc.





Advertising costs were $47,000 higher in the 2009 fiscal year as a result of increased retail
advertising and promotion of the new Mount Kisco Branch. FDIC insurance premiums in the year ended September 30, 2009 include the special FDIC assessment of $110,000, higher regular assessment rates and the impact of higher deposit balances.
The decrease in directors fees of $19,000 in the year ended September 30, 2009 reflects fewer committee meetings, net of the impact of having a full year of stock based compensation costs in 2009. Other non-interest expense was $50,000 lower in
the year ended September 30, 2009 as a result of lower Delaware franchise taxes caused by the reduction in authorized shares.

Income
Tax Benefit. The income tax benefit was $229,000 in the year ended September 30, 2009 compared to a benefit of $396,000 in 2008. The tax benefit is recorded based on pretax loss, at the statutory rate for federal tax purposes and the higher
of the statutory rate or minimum tax rate for state purposes. The effective tax rate in the year ended September 30, 2009 and 2008 was different than the statutory rate as a result of providing for New York State minimum taxes and certain
non-deductible expenses.

Management of Market Risk

As a financial institution, the Companys primary component of market risk is interest rate volatility. Fluctuations in interest rates will ultimately impact both the level of income and expense
recorded on a significant portion of its assets and liabilities. Fluctuations in interest rates will also affect the market value of interest-earning assets and liabilities, other than those which possess a short-term maturity. Interest rates are
highly sensitive to factors that are beyond the Companys control, including general economic conditions, inflation, changes in the slope of the interest rate yield curve, monetary and fiscal policies of the federal government and the
regulatory policies of government authorities. Due to the nature of the Companys operations, it is not subject to foreign currency exchange or commodity price risk. Instead, the Companys loan portfolio, concentrated in Westchester
County, N. Y., is subject to the risks associated with the economic conditions prevailing in its market area.

The primary goals of the
Companys interest rate management strategy are to determine the appropriate level of risk given the business strategy and then manage that risk so as to reduce the exposure of the Companys net interest income to fluctuations in interest
rates. Historically, the Companys lending activities have been dominated by one-to-four-family real estate mortgage loans. The primary source of funds has been deposits and FHLB borrowings which have substantially shorter terms to maturity
than the loan portfolio. As a result, the Company has employed certain strategies to manage the interest rate risk inherent in the asset/liability mix, including but not limited to limiting terms of fixed rate one-to-four-family mortgage loan
originations which are retained in the Companys portfolio, emphasizing investments with short- and intermediate-term maturities of less than five years and borrowing term funds from FHLB.

In addition, the actual amount of time before mortgage loans are repaid can be significantly impacted by changes in mortgage prepayment rates and market
interest rates. Mortgage prepayment rates will vary due to a number of factors, including the regional economy in the area where the underlying mortgages were originated, seasonal factors, demographic variables and the assumability of the underlying
mortgages. However, the major factors affecting prepayment rates are prevailing interest rates, related mortgage refinancing opportunities and competition. The Company monitors interest rate sensitivity so that it can make adjustments to its asset
and liability mix on a timely basis.



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CMS Bancorp, Inc.





Interest Rate Risk

The Company uses a simulation model to monitor interest rate risk. This model reports the net interest income and net economic value at risk under different interest rate environments. Specifically, an
analysis is performed of changes in net interest income assuming changes in interest rates, both up and down, from current rates over the three year period following the current financial statements. The changes in interest income and interest
expense due to changes in interest rates reflect the interest sensitivity of the Companys interest-earning assets and interest-bearing liabilities.

The table below sets forth the latest available estimated changes in net interest income, as of June 30, 2009, that would result from various basis point changes in interest rates over a twelve month
period.



|                                                      |        |                        |              |  |   |               |   |  |      |  
|----------------------------------------------------- | ------ | ---------------------- | ------------ |  | - | ------------- | - |  | ---- | -
|Change in Interest Rates In Basis Points (Rate Shock) |        | Net Interest Income    |             
|                                                      | Amount |                        | DollarChange |  |   | PercentChange |  
|                                                      |        | (Dollars in thousands) |             
|                                                      |        |                        |             
|300                                                   |        | $                      | 6,917        |  | $ | (422          | ) |  | -5.8 | %
|200                                                   |        |                        | 7,133        |  |   | (206          | ) |  | -2.8 | %
|100                                                   |        |                        | 7,240        |  |   | (99           | ) |  | -1.3 | %
|0                                                     |        |                        | 7,339        |  |   |              |   |  | 0.0  | %
|-100                                                  |        |                        | 7,422        |  |   | 83            |   |  | 1.1  | %

Liquidity and Capital Resources

The Company is required to maintain levels of liquid assets sufficient to ensure the Companys safe and sound operation. Liquidity is the ability to meet current and future financial obligations of a
short-term nature. The Company adjusts its liquidity levels in order to meet funding needs for deposit outflows, payment of real estate taxes from escrow accounts on mortgage loans, repayment of borrowings and loan funding commitments. The Company
also adjusts its liquidity level as appropriate to meet its asset/liability objectives.

The Companys primary sources of funds are
deposits, the Certificate of Deposit Account Registry Service, or CDARS network, brokered certificates of deposit, amortization and prepayments of loans, FHLB advances, repayments and maturities of investment securities and funds
provided from operations. While scheduled loan and mortgage-backed securities amortization and maturing investment securities are a relatively predictable source of funds, deposit flow and loan and mortgage-backed securities repayments are greatly
influenced by market interest rates, economic conditions and competition. The Companys liquidity, represented by cash and cash equivalents and investment securities, is a product of its operating, investing and financing activities. Liquidity
management is both a daily and long-term function of business management. Excess liquidity is generally invested in short-term investments, such as federal funds and other interest-earning assets. If the Company requires funds beyond its ability to
generate them internally, the Company can acquire brokered certificates of deposit, CDARS deposits and borrowing agreements which exist with the FHLB and the Federal Reserve which provide an additional source of funds. At September 30, 2009 and
2008, the Company had $34.7 million and $50.8 million of advances from the FHLB, respectively, and no CDARS deposits. As of September 30, 2008, the Company had $4.0 million in brokered deposits which had been repaid as of September 30,
2009.



15



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CMS Bancorp, Inc.





In the year ended September 30, 2009, net cash used by operating activities was $28,000, compared
to net cash provided by operating activities of $55,000 in 2008. In the year ended September 30, 2009, the net loss of $439,000 included non-cash expenses of $1.3 million. Loans originated for resale in the 2009 fiscal year used $635,000 of
cash and other operating activity items used $309,000 of cash.

In the year ended September 30, 2009, investing activities used $36.7
million of cash, compared to $43.0 million in 2008. In the year ended September 30, 2009, investments in securities, net of maturities and repayments used $47.8 million of cash, net loan decreases provided $11.4 million of cash, additions to
premises and equipment used $957,000 of cash and the redemption of FHLB stock provided $649,000 of cash. In the year ended September 30, 2008, investments in securities, net of maturities and repayments used cash of $5.8 million of cash, loan
growth used $34.7 million and additions to premises and equipment and the purchase of FHLB stock used $2.4 million of cash.

Net cash provided
by financing activities was $38.6 million and $30.8 million in the years ended September 30, 2009 and 2008, respectively. In the 2009 fiscal year, increases in retail deposits provided $59.6 million of cash while the repayment of brokered
certificates of deposit used $4.0 million of cash. Repayment of borrowings from FHLB used $16.0 million of cash and purchases of stock under the buyback program used $661,000 of cash. In the 2008 fiscal year, increases in retail deposits provided
$7.3 million of cash, brokered certificates of deposit provided $4.0 million and net borrowings from FHLB provided $20.8 million of cash, and purchases of stock under the buyback program and to fund the management recognition plan used $1.9 million
of cash.

The $110,000 FDIC special assessment in June 2009 increased the Companys non-interest expenses for the year ended
September 30, 2009. Additional FDIC special assessments, the FDICs new rule requiring the prepayment of three years of assessments in advance (as described below) and other regulatory changes impacting the financial services industry
could negatively affect the Companys liquidity and financial results in future periods.

On November 12, 2009, the FDIC adopted a
final rule that requires insured depository institutions to prepay their quarterly risk-based assessments for the fourth quarter of 2009, and for all of 2010, 2011, and 2012, on December 30, 2009, along with each institutions risk-based
deposit insurance assessment for the third quarter of 2009. For purposes of calculating the prepaid amount, the base assessment rate in effect at September 30, 2009 will be used for 2010. That rate will be increased by an annualized 3 basis
points for 2011 and 2012 assessments. The prepayment calculation also assumes a 5 percent annual growth rate, increased quarterly, through the end of 2012. Under the final rule, an institution will account for the prepayment by recording the entire
amount of its prepaid assessment as a prepaid expense (an asset) as of December 30, 2009. Subsequently, each institution will record an expense (charge to earnings) for its regular quarterly assessment and an offsetting credit to the prepaid
assessment until the asset is exhausted. Once the asset is exhausted, the institution will resume paying and accounting for quarterly deposit insurance assessments as they do currently. The FDIC will notify any institution that the FDIC exempts, on
its own initiative, from the prepaid assessment no later than November 23, 2009. In addition, an insured institution may apply before December 1, 2009, to the FDIC for an exemption from the prepayment requirement if the prepayment would
significantly impair the institutions liquidity, or otherwise create extraordinary hardship. The Bank does not plan to apply for an exemption nor does it anticipate that the FDIC will provide an exemption on its own initiative. Under the final
rule, the FDIC stated that its requirement for prepaid assessments does not preclude the FDIC from changing assessment rates or from further revising the risk-based assessment system during 2009, 2010, 2011, 2012, or thereafter, pursuant to
notice-and-comment rulemaking procedures provided by statute, and therefore, continued actions by the FDIC could significantly increase the Banks noninterest expense in fiscal 2010 and for the foreseeable future.

The Company anticipates that it will have sufficient funds available to meet its current loan and other commitments. As of September 30, 2009, the
Company had cash and cash equivalents of $7.3 million and securities of $58.6 million. At September 30, 2009, the Company has outstanding commitments to originate



16



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CMS Bancorp, Inc.





loans of $10.0 million and $10.0 million of undisbursed funds from approved lines of credit, principally under a homeowners equity line of credit lending program. Certificates of deposit
scheduled to mature in one year or less at September 30, 2009, totaled $88.3 million. Historically, the Companys deposit flow history has been that a significant portion of such deposits remain with the Company. A portion of the retail
deposit increase of $59.6 million in the year ended September 30, 2009 occurred from promotional certificate of deposit rates offered in connection with the Mount Kisco branch opening, and the retention rate for these certificates of deposit
has been lower than the Companys historical retention rates. Through December 15, 2009, approximately $22.2 million of the promotional rate certificates had been withdrawn from the Bank and such withdrawals were funded from loan
amortization and prepayments, available cash balances, from securities and overnight borrowings from the FHLB.

During the year ended
September 30, 2008, an independent trustee purchased 82,206 shares of the Companys common stock to fund the MRP, for $856,000. These shares are recorded as a reduction of additional paid in capital at September 30, 2009.

On April 17, 2008 and September 25, 2008, the Companys Board of Directors approved stock buy back plans that authorized the Company to
buy back up to 98,647 and 93,715 shares of the outstanding stock of the Company, respectively. The buy backs were administered as 10(b)5-1 plans by Stifel Nicolaus, the Companys investment banker. Through September 30, 2009, 98,647 shares
of the Companys common stock had been purchased for $999,000 under the first plan and 93,715 shares of common stock had been repurchased for $661,000 under the second plan.

The Company has an overnight line of credit and a one month overnight repricing line of credit commitment with the FHLB totaling $28.5 million, which expire on August 10, 2010, of which none was in
use at September 30, 2009. The Companys overall credit exposure at the FHLB cannot exceed 50% of its total assets, subject to certain limitations based on the underlying loan and securities pledged as collateral.

The following table sets forth the Banks capital position at September 30, 2009, compared to the minimum regulatory capital requirements:



|                                                |  |                        |        |       |                              |   |        |                                                               |        |  |       |        |  |       |         |  |        |  
|----------------------------------------------- |  | ---------------------- | ------ | ----- | ---------------------------- | - | ------ | ------------------------------------------------------------- | ------ |  | ----- | ------ |  | ----- | ------- |  | ------ | -
|                                                |  | Actual                 |        |       | For CapitalAdequacy Purposes |   |        | To be WellCapitalized underPrompt CorrectiveAction Provisions |       
|                                                |  | Amount                 |        | Ratio |                              |   | Amount |                                                               | Ratio  |  |       | Amount |  | Ratio |        
|                                                |  | (Dollars in thousands) |       
|Total capital (to risk-weighted assets)         |  | $                      | 17,890 |       | 16.16                        | % |        | $                                                             | 38,857 |  | 38.00 | %      |  | $     | 311,071 |  | 310.00 | %
|Core (Tier 1) capital (to risk-weighted assets) |  |                        | 17,141 |       | 15.48                        |   |        |                                                               |       |  |      |        |  |       | 36,643  |  | 36.00  |  
|Core (Tier 1) capital (to total assets)         |  |                        | 17,141 |       | 7.10                         |   |        |                                                               | 39,660 |  | 34.00 |        |  |       | 312,075 |  | 35.00  |  
|Tangible capital (to total assets)              |  |                        | 17,141 |       | 7.10                         |   |        |                                                               | 33,622 |  | 31.50 |        |  |       |        |  |       |  



17



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CMS Bancorp, Inc.





Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Companys financial condition, revenues or expenses, results
of operations, liquidity, capital expenditures or capital resources that are material to investors.

Recent Accounting Pronouncements

In February 2008, the FASB issued guidance concerning accounting for transfers of financial assets and repurchase financing transactions. This
guidance addresses the issue of whether or not these transactions should be viewed as two separate transactions or as one linked transaction. The guidance includes a rebuttable presumption that presumes linkage of the two
transactions unless the presumption can be overcome by meeting certain criteria. The guidance is effective for fiscal years beginning after November 15, 2008 and applies only to original transfers made after that date; early adoption will not
be allowed. The implementation of this standard did not have a material impact on the Companys consolidated financial position or results of operations.

In March 2008, the FASB issued guidance concerning disclosures about derivative instruments and hedging activities, an amendment to previous guidance on the topic. This guidance requires entities
that utilize derivative instruments to provide qualitative disclosures about their objectives and strategies for using such instruments, as well as any details of credit-risk-related contingent features contained within derivatives. This
guidance also requires entities to disclose additional information about the amounts and location of derivatives located within the financial statements, how the provisions of the previous guidance has been applied, and the impact that hedges have
on an entitys financial position, financial performance, and cash flows. The guidance is effective for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The implementation of this
standard did not have a material impact on the Companys consolidated financial position or results of operations.

In April 2008, the
FASB issued guidance concerning determination of the useful life of intangible assets. This guidance amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized
intangible asset under guidance concerning goodwill and other intangible assets. The intent of this guidance is to improve the consistency between the useful life of a recognized intangible asset under guidance concerning goodwill and other
intangible assets and the period of expected cash flows used to measure the fair value of the asset under guidance concerning business combinations, and other generally accepted accounting principles (GAAP). This guidance is effective
for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. Early adoption is prohibited. The implementation of this standard did not have a material impact on the
Companys consolidated financial position or results of operations.

In June 2009, the FASB issued guidance concerning accounting for
transfers of financial assets, an amendment to previous guidance on the topic. This statement prescribes the information that a reporting entity must provide in its financial reports about a transfer of financial assets; the effects of a transfer on
its financial position, financial performance and cash flows; and a transferors continuing involvement in transferred financial assets. Specifically, among other aspects, this guidance amends previous guidance concerning accounting for
transfers and servicing of financial assets and extinguishments of liabilities by removing the concept of a qualifying special-purpose entity from previous guidance on transfers and servicing and removes the exception from applying previous guidance
on transfers and servicing to variable interest entities that are qualifying special-purpose entities. It also modifies the financial-components approach used in previous guidance. This guidance is effective for fiscal years beginning after
November 15, 2009. The Company is currently evaluating the potential impact the new pronouncement will have on its consolidated financial statements.



18



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CMS Bancorp, Inc.





In June 2009, the FASB issued guidance requiring an enterprise to determine whether its variable
interest or interests give it a controlling financial interest in a variable interest entity. The primary beneficiary of a variable interest entity is the enterprise that has both (1) the power to direct the activities of a variable interest
entity that most significantly impact the entitys economic performance and (2) the obligation to absorb losses of the entity that could potentially be significant to the variable interest entity or the right to receive benefits from the
entity that could potentially be significant to the variable interest entity. This guidance also amends previous guidance to require ongoing reassessments of whether an enterprise is the primary beneficiary of a variable interest entity. This
guidance is effective for fiscal years beginning after November 15, 2009. The Company is currently evaluating the potential impact the new pronouncement will have on its consolidated financial statements.

In June 2009, the FASB issued guidance concerning the FASB accounting standards codification and the hierarchy of GAAP. This guidance is a replacement of
previous guidance concerning the hierarchy of GAAP and is designed to establish the FASB accounting standards codification as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in
preparation of financial statements in conformity with GAAP in the United States. This guidance is effective for interim and annual periods ending after September 15, 2009. The implementation of this standard did not have a material impact on
the Companys consolidated financial position or results of operations.

In November 2008, the SEC released a proposed roadmap regarding
the potential use by U.S. issuers of financial statements prepared in accordance with International Financial Reporting Standards (IFRS). IFRS is a comprehensive series of accounting standards published by the International Accounting Standards
Board (IASB). Under the proposed roadmap, the Company may be required to prepare financial statements in accordance with IFRS as early as 2014. The SEC will make a determination in 2011 regarding the mandatory adoption of IFRS. The Company is
currently assessing the impact that this potential change would have on its consolidated financial statements, and it will continue to monitor the development of the potential implementation of IFRS.

Impact of Inflation and Changing Prices

The consolidated financial statements and related notes of the Company have been prepared in accordance with GAAP which generally requires the measurement of financial position and operating results in terms of historical dollars without
consideration for changes in the relative purchasing power of money over time due to inflation. The impact of inflation is reflected in the increased cost of the Companys operations. Unlike industrial companies, the Companys assets and
liabilities are primarily monetary in nature. As a result, the effect of changes in interest rates will have a more significant impact on the Companys performance than will the effect of changing prices and inflation in general.



19



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Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

CMS Bancorp, Inc.

White Plains, New York

We have audited the accompanying consolidated statements of financial condition of CMS Bancorp, Inc. and subsidiary (the
Company) as of September 30, 2009 and 2008, and the related statements of operations, changes in stockholders equity and cash flows for the years then ended. CMS Bancorp, Inc.s management is responsible for the consolidated
financial statements. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control
over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and the significant
estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of CMS Bancorp, Inc. and subsidiary as of September
30, 2009 and 2008, and the consolidated results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

/s/  ParenteBeard LLC

Clark, New Jersey

December 15, 2009



20



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CMS Bancorp, Inc.



CONSOLIDATED STATEMENTS OF
FINANCIAL CONDITION



|                                                                                                                                                                                                                                         |  |                                              |         |   |      |   |         |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------- | ------- | - | ---- | - | ------- | -
|                                                                                                                                                                                                                                         |  | September 30,                                |        
|                                                                                                                                                                                                                                         |  | 2009                                         |         |   | 2008 |  
|                                                                                                                                                                                                                                         |  | (Dollars in thousands,except per share data) |        
|ASSETS                                                                                                                                                                                                                                   |  |                                              |         |  
|                                                                                                                                                                                                                                         |  |                                             
|Cash and amounts due from depository institutions                                                                                                                                                                                        |  | $                                            | 1,008   |   |      | $ | 1,270   |  
|Interest-bearing deposits                                                                                                                                                                                                                |  |                                              | 6,296   |   |      |   | 4,132   |  
|                                                                                                                                                                                                                                         |  |                                              |         |   |      |   |         |  
|Total cash and cash equivalents                                                                                                                                                                                                          |  |                                              | 7,304   |   |      |   | 5,402   |  
|Securities available for sale                                                                                                                                                                                                            |  |                                              | 58,487  |   |      |   | 10,179  |  
|Securities held to maturity, estimated fair value of $172 and $209, respectively                                                                                                                                                         |  |                                              | 156     |   |      |   | 191     |  
|Loans held for sale                                                                                                                                                                                                                      |  |                                              | 635     |   |      |   |        |  
|Loans receivable, net of allowance for loan losses of $749 and $516, respectively                                                                                                                                                        |  |                                              | 169,293 |   |      |   | 181,133 |  
|Premises and equipment                                                                                                                                                                                                                   |  |                                              | 3,119   |   |      |   | 2,494   |  
|Federal Home Loan Bank of New York stock                                                                                                                                                                                                 |  |                                              | 1,938   |   |      |   | 2,587   |  
|Interest receivable                                                                                                                                                                                                                      |  |                                              | 976     |   |      |   | 781     |  
|Other assets                                                                                                                                                                                                                             |  |                                              | 1,256   |   |      |   | 1,163   |  
|                                                                                                                                                                                                                                         |  |                                              |         |   |      |   |         |  
|Total assets                                                                                                                                                                                                                             |  | $                                            | 243,164 |   |      | $ | 203,930 |  
|                                                                                                                                                                                                                                         |  |                                              |         |   |      |   |         |  
|                                                                                                                                                                                                                                         |  |                                             
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                                                                     |  |                                              |         |   |      |   |         |  
|                                                                                                                                                                                                                                         |  |                                             
|Liabilities:                                                                                                                                                                                                                             |  |                                              |         |   |      |   |         |  
|Deposits                                                                                                                                                                                                                                 |  | $                                            | 184,387 |   |      | $ | 128,757 |  
|Securities sold under repurchase agreements                                                                                                                                                                                              |  |                                              |        |   |      |   | 614     |  
|Advances from Federal Home Loan Bank of New York                                                                                                                                                                                         |  |                                              | 34,726  |   |      |   | 50,767  |  
|Advance payments by borrowers for taxes and insurance                                                                                                                                                                                    |  |                                              | 668     |   |      |   | 387     |  
|Other liabilities                                                                                                                                                                                                                        |  |                                              | 2,470   |   |      |   | 1,696   |  
|                                                                                                                                                                                                                                         |  |                                              |         |   |      |   |         |  
|Total liabilities                                                                                                                                                                                                                        |  |                                              | 222,251 |   |      |   | 182,221 |  
|                                                                                                                                                                                                                                         |  |                                              |         |   |      |   |         |  
|Stockholders equity:                                                                                                                                                                                                                    |  |                                              |         |   |      |   |         |  
|Preferred stock, $.01 par value, 1,000,000 shares authorized, none outstanding                                                                                                                                                           |  |                                              |        |   |      |   |        |  
|Common stock, $.01 par value, authorized shares: 7,000,000 at September 30, 2009 and 14,000,000 at September 30, 2008;
shares issued: 2,055,165; shares outstanding: 1,862,803 at September 30, 2009 and 1,956,518 at September 30, 2008 |  |                                              | 21      |   |      |   | 21      |  
|Additional paid in capital                                                                                                                                                                                                               |  |                                              | 18,045  |   |      |   | 17,852  |  
|Retained earnings                                                                                                                                                                                                                        |  |                                              | 6,345   |   |      |   | 6,784   |  
|Treasury stock, 192,362 shares at September 30, 2009 and 98,647 shares at September 30, 2008                                                                                                                                             |  |                                              | (1,660  | ) |      |   | (999    | )
|Unearned Employee Stock Ownership Plan (ESOP) shares                                                                                                                                                                                   |  |                                              | (1,507  | ) |      |   | (1,562  | )
|Accumulated other comprehensive loss                                                                                                                                                                                                     |  |                                              | (331    | ) |      |   | (387    | )
|                                                                                                                                                                                                                                         |  |                                              |         |   |      |   |         |  
|Total stockholders equity                                                                                                                                                                                                               |  |                                              | 20,913  |   |      |   | 21,709  |  
|                                                                                                                                                                                                                                         |  |                                              |         |   |      |   |         |  
|                                                                                                                                                                                                                                         |  |                                             
|Total liabilities and stockholders equity                                                                                                                                                                                               |  | $                                            | 243,164 |   |      | $ | 203,930 |  
|                                                                                                                                                                                                                                         |  |                                              |         |   |      |   |         |  

See notes to consolidated financial statements.



21



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CMS Bancorp, Inc.



CONSOLIDATED STATEMENTS OF
OPERATIONS



|                                                     |  |                                               |           |   |      |   |           |  
|---------------------------------------------------- |  | --------------------------------------------- | --------- | - | ---- | - | --------- | -
|                                                     |  | Years EndedSeptember 30,                      |          
|                                                     |  | 2009                                          |           |   | 2008 |  
|                                                     |  | (Dollars in thousands, except per share data) |          
|Interest income:                                     |  |                                               |           |  
|Loans, including fees                                |  | $                                             | 10,396    |   |      | $ | 9,659     |  
|Securities, taxable                                  |  |                                               | 905       |   |      |   | 259       |  
|Federal funds sold                                   |  |                                               |          |   |      |   | 179       |  
|Other interest-earning assets                        |  |                                               | 104       |   |      |   | 194       |  
|                                                     |  |                                               |           |   |      |   |           |  
|Total interest income                                |  |                                               | 11,405    |   |      |   | 10,291    |  
|                                                     |  |                                               |           |   |      |   |           |  
|Interest expense:                                    |  |                                               |           |   |      |   |           |  
|Deposits                                             |  |                                               | 3,281     |   |      |   | 2,840     |  
|Mortgage escrow funds                                |  |                                               | 21        |   |      |   | 16        |  
|Borrowings, short-term                               |  |                                               | 13        |   |      |   | 53        |  
|Borrowings, long-term                                |  |                                               | 1,698     |   |      |   | 1,665     |  
|                                                     |  |                                               |           |   |      |   |           |  
|Total interest expense                               |  |                                               | 5,013     |   |      |   | 4,574     |  
|                                                     |  |                                               |           |   |      |   |           |  
|                                                     |  |                                              
|Net interest income                                  |  |                                               | 6,392     |   |      |   | 5,717     |  
|Provision for loan losses                            |  |                                               | 230       |   |      |   | 248       |  
|                                                     |  |                                               |           |   |      |   |           |  
|Net interest income after provision for loan losses  |  |                                               | 6,162     |   |      |   | 5,469     |  
|                                                     |  |                                               |           |   |      |   |           |  
|Non-interest income:                                 |  |                                               |           |   |      |   |           |  
|Fees and service charges                             |  |                                               | 214       |   |      |   | 243       |  
|Net gain on sale of loans                            |  |                                               | 270       |   |      |   | 14        |  
|Other                                                |  |                                               | 14        |   |      |   | 65        |  
|                                                     |  |                                               |           |   |      |   |           |  
|Total non-interest income                            |  |                                               | 498       |   |      |   | 322       |  
|                                                     |  |                                               |           |   |      |   |           |  
|Non-interest expenses:                               |  |                                               |           |   |      |   |           |  
|Salaries and employee benefits                       |  |                                               | 3,878     |   |      |   | 3,618     |  
|Net occupancy                                        |  |                                               | 942       |   |      |   | 1,067     |  
|Equipment                                            |  |                                               | 633       |   |      |   | 539       |  
|Professional fees                                    |  |                                               | 485       |   |      |   | 757       |  
|Advertising                                          |  |                                               | 186       |   |      |   | 139       |  
|Federal insurance premium                            |  |                                               | 346       |   |      |   | 15        |  
|Directors fees                                      |  |                                               | 161       |   |      |   | 180       |  
|Other insurance                                      |  |                                               | 68        |   |      |   | 63        |  
|Bank charges                                         |  |                                               | 87        |   |      |   | 74        |  
|Other                                                |  |                                               | 542       |   |      |   | 592       |  
|                                                     |  |                                               |           |   |      |   |           |  
|Total non-interest expenses                          |  |                                               | 7,328     |   |      |   | 7,044     |  
|                                                     |  |                                               |           |   |      |   |           |  
|Loss before income tax benefit                       |  |                                               | (668      | ) |      |   | (1,253    | )
|Income tax benefit                                   |  |                                               | (229      | ) |      |   | (396      | )
|                                                     |  |                                               |           |   |      |   |           |  
|Net loss                                             |  | $                                             | (439      | ) |      | $ | (857      | )
|                                                     |  |                                               |           |   |      |   |           |  
|                                                     |  |                                              
|Net (loss) per common share                          |  |                                               |           |   |      |   |           |  
|Basic and diluted                                    |  | $                                             | (0.25     | ) |      | $ | (0.46     | )
|                                                     |  |                                               |           |   |      |   |           |  
|Weighted average number of common shares outstanding |  |                                               |           |   |      |   |           |  
|Basic and diluted                                    |  |                                               | 1,732,422 |   |      |   | 1,855,846 |  
|                                                     |  |                                               |           |   |      |   |           |  

See notes to consolidated financial statements.



22



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CMS Bancorp, Inc.



CONSOLIDATED STATEMENTS OF
CHANGES IN STOCKHOLDERS EQUITY

Years Ended September 30, 2009 and 2008

(Dollars in thousands)



|                                                    |  |             |    |                          |   |        |                  |  |   |               |   |  |                    |        |   |                                   |   |        |       |  |   |      |   |  |   |        |  
|--------------------------------------------------- |  | ----------- | -- | ------------------------ | - | ------ | ---------------- |  | - | ------------- | - |  | ------------------ | ------ | - | --------------------------------- | - | ------ | ----- |  | - | ---- | - |  | - | ------ | -
|                                                    |  | CommonStock |    | AdditionalPaid-inCapital |   |        | RetainedEarnings |  |   | TreasuryStock |   |  | UnearnedESOPShares |        |   | AccumulatedOtherComprehensiveLoss |   |        | Total | 
|                                                    |  |             |    |                          |   |        |                 
|Balance October 1, 2007                             |  | $           | 21 |                          | $ | 18,535 |                  |  | $ | 7,641         |   |  | $                  |       |   |                                   | $ | (1,617 | )     |  | $ | (226 | ) |  | $ | 24,354 |  
|                                                    |  |             |    |                          |   |        |                  |  |   |               |   |  |                    |        |   |                                   |   |        |       |  |   |      |   |  |   |        |  
|                                                    |  |             |    |                          |   |        |                 
|Net loss                                            |  |             |    |                          |   |        |                  |  |   | (857          | ) |  |                    |        |   |                                   |   |        |       |  |   |      |   |  |   | (857   | )
|                                                    |  |             |    |                          |   |        |                 
|Other comprehensive loss                            |  |             |    |                          |   |        |                  |  |   |               |   |  |                    |        |   |                                   |   |        |       |  |   | (161 | ) |  |   | (161   | )
|                                                    |  |             |    |                          |   |        |                  |  |   |               |   |  |                    |        |   |                                   |   |        |       |  |   |      |   |  |   |        |  
|Total comprehensive loss                            |  |             |    |                          |   |        |                  |  |   |               |   |  |                    |        |   |                                   |   |        |       |  |   |      |   |  |   | (1,018 | )
|ESOP shares committed for release                   |  |             |    |                          |   | (1     | )                |  |   |               |   |  |                    |        |   |                                   |   | 55     |       |  |   |      |   |  |   | 54     |  
|Stock option expense                                |  |             |    |                          |   | 70     |                  |  |   |               |   |  |                    |        |   |                                   |   |        |       |  |   |      |   |  |   | 70     |  
|Restricted stock award expense                      |  |             |    |                          |   | 104    |                  |  |   |               |   |  |                    |        |   |                                   |   |        |       |  |   |      |   |  |   | 104    |  
|Stock purchased to fund management recognition plan |  |             |    |                          |   | (856   | )                |  |   |               |   |  |                    |        |   |                                   |   |        |       |  |   |      |   |  |   | (856   | )
|Treasury stock purchased - (98,647 shares)          |  |             |    |                          |   |        |                  |  |   |               |   |  |                    | (999   | ) |                                   |   |        |       |  |   |      |   |  |   | (999   | )
|                                                    |  |             |    |                          |   |        |                  |  |   |               |   |  |                    |        |   |                                   |   |        |       |  |   |      |   |  |   |        |  
|Balance September 30, 2008                          |  |             | 21 |                          |   | 17,852 |                  |  |   | 6,784         |   |  |                    | (999   | ) |                                   |   | (1,562 | )     |  |   | (387 | ) |  |   | 21,709 |  
|                                                    |  |             |    |                          |   |        |                  |  |   |               |   |  |                    |        |   |                                   |   |        |       |  |   |      |   |  |   |        |  
|Net loss                                            |  |             |    |                          |   |        |                  |  |   | (439          | ) |  |                    |        |   |                                   |   |        |       |  |   |      |   |  |   | (439   | )
|Other comprehensive income                          |  |             |    |                          |   |        |                  |  |   |               |   |  |                    |        |   |                                   |   |        |       |  |   | 56   |   |  |   | 56     |  
|                                                    |  |             |    |                          |   |        |                  |  |   |               |   |  |                    |        |   |                                   |   |        |       |  |   |      |   |  |   |        |  
|Total comprehensive loss                            |  |             |    |                          |   |        |                  |  |   |               |   |  |                    |        |   |                                   |   |        |       |  |   |      |   |  |   | (314   | )
|                                                    |  |             |    |                          |   |        |                  |  |   |               |   |  |                    |        |   |                                   |   |        |       |  |   |      |   |  |   |        |  
|ESOP shares committed for release                   |  |             |    |                          |   | (15    | )                |  |   |               |   |  |                    |        |   |                                   |   | 55     |       |  |   |      |   |  |   | 40     |  
|Stock option expense                                |  |             |    |                          |   | 83     |                  |  |   |               |   |  |                    |        |   |                                   |   |        |       |  |   |      |   |  |   | 83     |  
|Restricted stock award expense                      |  |             |    |                          |   | 125    |                  |  |   |               |   |  |                    |        |   |                                   |   |        |       |  |   |      |   |  |   | 125    |  
|Treasury stock purchased  (93,715 shares)          |  |             |    |                          |   |        |                  |  |   |               |   |  |                    | (661   | ) |                                   |   |        |       |  |   |      |   |  |   | (661   | )
|                                                    |  |             |    |                          |   |        |                  |  |   |               |   |  |                    |        |   |                                   |   |        |       |  |   |      |   |  |   |        |  
|                                                    |  |             |    |                          |   |        |                 
|Balance September 30, 2009                          |  | $           | 21 |                          | $ | 18,045 |                  |  | $ | 6,345         |   |  | $                  | (1,660 | ) |                                   | $ | (1,507 | )     |  | $ | (331 | ) |  | $ | 20,913 |  
|                                                    |  |             |    |                          |   |        |                  |  |   |               |   |  |                    |        |   |                                   |   |        |       |  |   |      |   |  |   |        |  

See notes to consolidated financial statements.



23



---

CMS Bancorp, Inc.



CONSOLIDATED STATEMENTS OF CASH
FLOWS



|                                                                                          |  |                          |         |   |      |   |         |  
|----------------------------------------------------------------------------------------- |  | ------------------------ | ------- | - | ---- | - | ------- | -
|                                                                                          |  | Years EndedSeptember 30, |        
|                                                                                          |  | 2009                     |         |   | 2008 |  
|                                                                                          |  | (In thousands)           |        
|Cash flows from operating activities:                                                     |  |                          |         |  
|Net loss                                                                                  |  | $                        | (439    | ) |      | $ | (857    | )
|Adjustments to reconcile net loss to net cash (used by) provided by operating activities: |  |                          |         |   |      |   |         |  
|Depreciation of premises and equipment                                                    |  |                          | 332     |   |      |   | 224     |  
|Amortization and accretion, net                                                           |  |                          | 313     |   |      |   | 45      |  
|Provision for loan losses                                                                 |  |                          | 230     |   |      |   | 248     |  
|Deferred income taxes                                                                     |  |                          | (165    | ) |      |   | (349    | )
|ESOP expense                                                                              |  |                          | 40      |   |      |   | 54      |  
|Stock option expense                                                                      |  |                          | 83      |   |      |   | 70      |  
|Restricted stock award expense                                                            |  |                          | 125     |   |      |   | 104     |  
|Net gain on sale of loans                                                                 |  |                          | (270    | ) |      |   | (14     | )
|Loans originated for resale                                                               |  |                          | (12,527 | ) |      |   | (1,386  | )
|Proceeds from loans sold                                                                  |  |                          | 12,162  |   |      |   | 1,400   |  
|(Increase) decrease in interest receivable                                                |  |                          | (195    | ) |      |   | 14      |  
|(Increase) decrease in other assets                                                       |  |                          | 34      |   |      |   | 321     |  
|Increase (decrease) in accrued interest payable                                           |  |                          | 286     |   |      |   | (49     | )
|(Decrease) increase in other liabilities                                                  |  |                          | (37     | ) |      |   | 230     |  
|                                                                                          |  |                          |         |   |      |   |         |  
|Net cash (used by) provided by operating activities                                       |  |                          | (28     | ) |      |   | 55      |  
|                                                                                          |  |                          |         |   |      |   |         |  
|Cash flows from investing activities:                                                     |  |                          |         |   |      |   |         |  
|Proceeds from maturities and calls of securities available for sale                       |  |                          | 2,500   |   |      |   | 2,046   |  
|Proceeds from maturities of securities held to maturity                                   |  |                          |        |   |      |   | 2,200   |  
|Purchases of securities available for sale                                                |  |                          | (54,723 | ) |      |   | (10,792 | )
|Principal repayments on securities available for sale                                     |  |                          | 4,439   |   |      |   | 645     |  
|Principal repayments on securities held to maturity                                       |  |                          | 35      |   |      |   | 58      |  
|Net decrease (increase) in loans receivable                                               |  |                          | 11,392  |   |      |   | (34,725 | )
|Additions to premises and equipment                                                       |  |                          | (957    | ) |      |   | (1,392  | )
|Redemption (purchase) of FHLB stock                                                       |  |                          | 649     |   |      |   | (1,037  | )
|                                                                                          |  |                          |         |   |      |   |         |  
|Net cash (used by) investing activities                                                   |  |                          | (36,665 | ) |      |   | (42,997 | )
|                                                                                          |  |                          |         |   |      |   |         |  
|Cash flows from financing activities:                                                     |  |                          |         |   |      |   |         |  
|Net increase in deposits                                                                  |  |                          | 55,630  |   |      |   | 11,257  |  
|Net (decrease) increase in securities sold under repurchase agreements                    |  |                          | (614    | ) |      |   | 614     |  
|Advances from Federal Home Loan Bank of N.Y.                                              |  |                          |        |   |      |   | 20,900  |  
|Repayment of advances from Federal Home Loan Bank of N.Y.                                 |  |                          | (16,041 | ) |      |   | (133    | )
|Net increase in payments by borrowers for taxes and insurance                             |  |                          | 281     |   |      |   | 21      |  
|Funding of restricted stock awards                                                        |  |                          |        |   |      |   | (856    | )
|Purchase of treasury stock                                                                |  |                          | (661    | ) |      |   | (999    | )
|                                                                                          |  |                          |         |   |      |   |         |  
|Net cash provided by financing activities                                                 |  |                          | 38,595  |   |      |   | 30,804  |  
|                                                                                          |  |                          |         |   |      |   |         |  
|Net increase (decrease) in cash and cash equivalents                                      |  |                          | 1,902   |   |      |   | (12,138 | )
|Cash and cash equivalents-beginning                                                       |  |                          | 5,402   |   |      |   | 17,540  |  
|                                                                                          |  |                          |         |   |      |   |         |  
|Cash and cash equivalents-ending                                                          |  | $                        | 7,304   |   |      | $ | 5,402   |  
|                                                                                          |  |                          |         |   |      |   |         |  
|Supplemental information                                                                  |  |                          |         |   |      |   |         |  
|Cash paid during the period for                                                           |  |                          |         |   |      |   |         |  
|Interest                                                                                  |  | $                        | 4,727   |   |      | $ | 4,623   |  
|                                                                                          |  |                          |         |   |      |   |         |  
|Income taxes                                                                              |  | $                        | 3       |   |      | $ |        |  
|                                                                                          |  |                          |         |   |      |   |         |  

See notes to consolidated financial statements.



24



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CMS Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 1 - Principles of Consolidation

The consolidated financial statements include the accounts of CMS Bancorp, Inc. (the
Company) and its wholly owned subsidiary, Community Mutual Savings Bank (the Bank). The Companys business is conducted principally through the Bank. All significant intercompany accounts and transactions have been
eliminated in consolidation. Certain prior period amounts have been reclassified in the consolidated financial statements to conform to the current presentation.

Note 2 - Summary of Significant Accounting Policies

Basis of Financial Statement
Presentation

The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the
United States of America (GAAP). In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the dates of the statements of
financial condition and revenues and expenses for the periods then ended. Actual results could differ significantly from those estimates.

It
is managements opinion that accounting estimates covering certain aspects of the business have more significance than others due to the relative importance of those areas to overall performance, or the level of subjectivity required in making
these estimates. Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan losses, the potential impairment of Federal Home Loan Bank of New York (FHLB) stock, the
determination of other-than-temporary impairment on securities, and the assessment of whether deferred taxes are more likely than not to be realized. Management believes that the allowance for loan losses represents its best estimate of losses known
and inherent in the loan portfolio that are both probable and reasonable to estimate. While management uses available information to recognize losses on loans, future additions to the allowance for loan losses may be necessary based on changes in
market and economic conditions in the Companys market area. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Companys allowance for loan losses. Such agencies may require
the Company to recognize additions to the allowance for loan losses based on their judgments about information available to them at the time of their examination.

Managements determination of whether investments, including FHLB stock, are impaired is based on their assessment of the ultimate recoverability of their cost rather than by recognizing temporary
declines in value. Managements assessment as to the amount of deferred taxes more likely than not to be realized is based upon future taxable income, which is subject to revision upon updated information.

Effective April 1, 2009, the Company adopted the Financial Accounting Standards Board (FASB) guidance on subsequent events, which
establishes general standards for accounting for and disclosure of events that occur after the balance sheet date but before the financial statements are issued. The guidance sets forth the period after the balance sheet date during which management
of the reporting entity, should evaluate events or transactions that may occur for potential recognition in the financial statements, identifies the circumstances under which an entity should recognize events or transactions occurring after the
balance sheet date in its financial statements, and the disclosure that should be made about events or transactions that occur after the balance sheet date. In preparing these consolidated financial statements, the Company evaluated the events that
occurred between October 1, 2009 and December 15, 2009, the date these consolidated financial statements were issued.

Cash and
Cash Equivalents

Cash and cash equivalents include cash and amounts due from depository institutions, interest-earning deposits and
federal funds sold, all with original maturities of three months or less.



25



---

CMS Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 2 - Summary of Significant Accounting
Policies (Continued)



Securities

Investments in debt securities that the Company has the positive intent and ability to hold to maturity are classified as held to maturity securities and reported at amortized cost. Debt securities that
are bought and held principally for the purpose of selling them in the near term are classified as trading securities and reported at fair value, with unrealized holding gains and losses included in earnings. Debt securities not classified as
trading securities or as held to maturity securities, are classified as available for sale securities and reported at fair value, with unrealized holding gains and losses, net of applicable income taxes, reported in accumulated other comprehensive
income (loss), as a separate component of stockholders equity. The Company has no securities classified as trading securities.

Premiums
and discounts on all debt securities are amortized or accreted to income by use of the interest method over the estimated remaining period to contractual maturity, or the security call date.

Gains or losses on sales of securities are recognized on the specific identification method.

Individual securities are considered impaired when the fair value of such security is less than its amortized cost. The Company evaluates all securities with unrealized losses quarterly to determine if
such impairments are temporary or other-than-temporary in accordance with applicable accounting guidance. The Company accounts for temporary impairments based upon security classification as either available for sale or held to maturity.
Temporary impairments on available for sale securities are recognized on a tax-effected basis, through other comprehensive income (loss) with offsetting entries adjusting the carrying value of the securities and the balance of deferred income taxes.
Temporary impairments of held to maturity securities are not recognized in the consolidated financial statements; however information concerning the amount and duration of impairments on held to maturity securities is disclosed in the notes to the
consolidated financial statements.

Other-than-temporary impairments on securities that the Company has decided to sell or will more likely
than not be required to sell prior to the full recovery of their fair value to a level to, or exceeding amortized cost are recognized in earnings. Otherwise, the other-than-temporary impairment is bifurcated into credit related and noncredit-related
components. The credit related impairment generally represents the amount by which the present value of the cash flows expected to be collected on a debt security falls below its amortized cost. The noncredit-related component represents the
remaining portion of the impairment not otherwise designated as credit-related. Credit related other-than-temporary impairments are recognized in earnings while noncredit-related other-than-temporary impairments are recognized, net of deferred
income taxes, in other comprehensive income (loss).

The Company reviews its investment portfolio on a quarterly basis for indications of
impairment. This review includes analyzing the length of time and the extent to which the fair value has been lower than the cost, and the financial condition and near-term prospects of the issuer, including any specific events which may influence
the operations of the issuer. The Company also assesses its intent with regard to selling or holding each security as well as any conditions which may require it to sell the security prior to the recovery of fair value to a level which equals or
exceeds amortized cost.

Loans Receivable

Loans receivable are carried at unpaid principal balances and net deferred loan origination costs less the allowance for loan losses.

The Company defers loan origination fees and certain direct loan origination costs and accretes net amounts as an adjustment of yield over the contractual lives of the related loans. Unamortized net fees
and costs are written off if the loan is repaid before its stated maturity.



26



---

CMS Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 2 - Summary of Significant Accounting
Policies (Continued)



Recognition of interest income is discontinued and existing accrued interest receivable is reversed on
loans that are more than ninety days delinquent and where management, through its loan review process, feels such loan should be classified as non-accrual. Income is subsequently recognized only to the extent that cash payments are received until,
in managements judgment, the borrowers ability to make periodic interest and principal payments is probable, in which case the loan is returned to an accrual status.

Allowance for Loan Losses

An allowance for loan losses is maintained at a level that
represents managements best estimate of losses known and inherent in the loan portfolio that are both probable and estimable. The allowance is decreased by loan charge-offs, increased by subsequent recoveries of loans previously charged off,
and then adjusted, via either a charge or credit to operations, to an amount determined by management to be necessary. Loans or portions thereof, are charged off when, after collection efforts are exhausted, they are determined to be uncollectible.
Management of the Company, in determining the allowance for loan losses, considers the losses inherent in its loan portfolio and changes in the nature and volume inherent in its loan activities, along with the general economic and real estate market
conditions. The Company utilizes a two tier approach: (1) identification of impaired loans and establishment of specific loss allowances on such loans; and (2) establishment of general valuation allowances on the remainder of its loan
portfolio. The Company maintains a loan review system which allows for a periodic review of its loan portfolio and the early identification of potential impaired loans.

Such system takes into consideration, among other things, delinquency status, size of loans, type of collateral and financial condition of the borrowers. Specific loan loss allowances are established for
identified loans based on a review of such information and/or appraisals of the underlying collateral. General loan losses are determined based upon a combination of factors including, but not limited to, actual loan loss experience, composition of
the loan portfolio, current economic conditions and managements judgment. Although management believes that specific and general loan losses are established in accordance with managements best estimate, actual losses are dependent upon
future events and, as such, further additions to the level of loan loss allowances may be necessary.

A loan evaluated for impairment is
deemed to be impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. The amount of loan impairment is measured based
on the present value of expected future cash flows discounted at the loans effective interest rate or, as a practical expedient, at the loans observable market price or the fair value of the collateral if the loan is collateral
dependent. All loans identified as impaired are evaluated independently. The Company does not aggregate such loans for evaluation purposes.

Federal Home Loan Bank of New York Stock

The Companys required investment in the common stock of the FHLB is carried at
cost as of September 30, 2009 and 2008.

Management evaluates this common stock for impairment in accordance with the FASB guidance on
Accounting by Certain Entities That Lend to or Finance the Activities of Others. Managements determination of whether this investment is impaired is based on their assessment of the ultimate recoverability of their cost rather than by
recognizing temporary declines in value. The determination of whether a decline affects the ultimate recoverability of their cost is influenced by criteria such as (1) the significance of the decline in net assets of the FHLB as compared to the
capital stock amount for the FHLB and the length of time this situation has persisted, (2) commitments by the FHLB to make payments required by law or regulation and the level of such payments in relation to the operating performance of the
FHLB, and (3) the impact of legislative and regulatory changes on institutions and, accordingly, on the customer base of the FHLB. Management believes no impairment charge was necessary related to the FHLB stock as of September 30, 2009.



27



---

CMS Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 2 - Summary of Significant Accounting
Policies (Continued)



Transfer of Financial Assets

Transfers of financial assets are accounted for as sales when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been
isolated from the Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of the right) to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control
over the transferred assets through an agreement to repurchase them before their maturity.

Concentration of Risk

The Companys lending activities are concentrated in loans secured by real estate located in Westchester County, N. Y. and surrounding areas.

Premises and Equipment

Premises and equipment are comprised of land, at cost, and buildings, building improvements, furnishings and equipment and leasehold improvements, at cost less accumulated depreciation and amortization. Depreciation and amortization charges
are computed using the straight-line method over the following estimated useful lives:



|                           |  |                                           
|-------------------------- |  | ------------------------------------------
|                           |  | Years                                     
|                           | 
|Buildings and improvements |  | 10 - 50                                   
|Furnishings and equipment  |  | 3 - 10                                    
|Leasehold improvements     |  | The lesser of useful life or term of lease

Significant renewals and betterments are charged to the property and equipment account. Maintenance
and repairs are charged to expense in the year incurred. Rental income is netted against occupancy expenses in the consolidated statements of operations.

Advertising

Advertising expense is recognized as incurred.

Income Taxes

The Company and the Bank file
a consolidated federal income tax return. Federal income taxes are allocated to the Company and the Bank based upon the contribution of their respective income or loss to the consolidated return. The Company and the Bank file a combined state income
tax return.

Federal and state income taxes have been provided on the basis of reported income (loss). The amounts reflected on the income tax
returns differ from these provisions due principally to temporary differences in the treatment of certain items for financial statement and income tax reporting purposes. Deferred income taxes have been recorded to recognize such temporary
differences. The realization of deferred tax assets is assessed and a valuation allowance is provided, when necessary, for that portion of the asset which more likely than not will not be realized.

Effective July 1, 2007, the Company adopted the FASBs guidance regarding accounting for uncertainty in income taxes. This guidance provides
clarification on accounting for uncertainty in income taxes recognized in an enterprises financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax
position taken or expected to be taken in a tax return, and also provides guidance on derecognizing, classification, interest and penalties, accounting in interim periods, disclosure and transition. As a result of the Companys evaluation of
the implementation of this guidance, no significant income tax uncertainties were identified. Therefore, the Company recognized no adjustment for



28



---

CMS Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 2 - Summary of Significant Accounting
Policies (Continued)



unrecognized income tax benefits for the years ended September 30, 2009 and 2008. The Companys policy is to recognize interest and penalties on unrecognized tax benefits in income
taxes expense in the consolidated statement of income. The Company did not recognize any interest and penalties for the years ended September 30, 2009 and 2008. The tax years subject to examination by the taxing authorities are the years ended
December 31, 2008, 2007 and 2006.

Benefit Plans

The Company has a non-contributory defined benefit pension plan covering all eligible employees. The Company also has a 401(k) retirement plan and an ESOP, both of which are defined contribution plans.

The benefits for the pension plan are based on years of service and employees compensation. Prior service costs for the pension plan
generally are amortized over the estimated remaining service periods of employees. The Company uses the corridor approach in the valuation of the pension plan which defers all actuarial gains and losses resulting from differences between actual
results and economic estimates or actuarial assumptions. For the pension plan, these unrecognized gains and losses are amortized to income when net gains and losses exceed 10% of the greater of the market-value of plan assets or the projected
benefit obligation at the beginning of the plan year.

In accordance with FASBs guidance regarding accounting for defined benefit and
other postretirement plans, which the Company adopted as of September 30, 2007, the Company recognizes the over-funded or under-funded status of the benefit plans as an asset or liability in the consolidated statement of financial condition,
with the changes in the funded status recorded through other comprehensive income (loss) in the year in which the change occurs.

Net Loss
Per Share

Basic net loss per share is calculated by dividing the net loss by the weighted average number of shares of common stock
outstanding. Outstanding stock options were antidilutive and were therefore excluded from common stock equivalents. Unallocated common shares held by the ESOP are not included in the weighted average number of common shares outstanding for purposes
of calculating both basic and diluted net loss per share until they are committed to be released.

Off-Balance Sheet Credit-Related
Financial Instruments

In the ordinary course of business, the Company enters into commitments to extend credit, including commitments
under lines of credit. Such financial instruments are recorded when they are funded.



29



---

CMS Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 3 - Securities Available for Sale



Securities available for sale as of September 30, 2009 and 2008 were as follows:



|                                    |  |                |        |                      |   |                       |  |           |    |  |   |       
|----------------------------------- |  | -------------- | ------ | -------------------- | - | --------------------- |  | --------- | -- |  | - | ------
|                                    |  | AmortizedCost  |        | GrossUnrealizedGains |   | GrossUnrealizedLosses |  | FairValue
|                                    |  | (In thousands)
|September 30, 2009                  |  |                |        |                      |   |                       |  |           |    |  |   |       
|U.S. Government Agencies:           |  |                |        |                      |   |                       |  |           |    |  |   |       
|Due after one but within five years |  | $              | 18,415 |                      | $ | 174                   |  | $         |   |  | $ | 18,589
|Due after five years                |  |                | 5,861  |                      |   |                      |  |           | 22 |  |   | 5,839 
|Mortgage-backed securities          |  |                | 33,628 |                      |   | 464                   |  |           | 33 |  |   | 34,059
|                                    |  |                |        |                      |   |                       |  |           |    |  |   |       
|                                    |  | $              | 57,904 |                      | $ | 638                   |  | $         | 55 |  | $ | 58,487
|                                    |  |                |        |                      |   |                       |  |           |    |  |   |       
|                                    |  |                |        |                     
|September 30, 2008                  |  |                |        |                      |   |                       |  |           |    |  |   |       
|U.S. Government Agencies:           |  |                |        |                      |   |                       |  |           |    |  |   |       
|Due within one year                 |  | $              | 2,000  |                      | $ |                      |  | $         | 1  |  | $ | 1,999 
|Mortgage-backed securities          |  |                | 8,213  |                      |   | 20                    |  |           | 53 |  |   | 8,180 
|                                    |  |                |        |                      |   |                       |  |           |    |  |   |       
|                                    |  | $              | 10,213 |                      | $ | 20                    |  | $         | 54 |  | $ | 10,179
|                                    |  |                |        |                      |   |                       |  |           |    |  |   |       

The age of unrealized losses and fair value of related securities available for sale at
September 30, 2009 and 2008 were as follows:



|                           |  |                     |        |                   |   |           |  |                  |   |           |   |                  |  |   |        |  |   |   
|-------------------------- |  | ------------------- | ------ | ----------------- | - | --------- |  | ---------------- | - | --------- | - | ---------------- |  | - | ------ |  | - | --
|                           |  | Less than 12 Months |        | 12 Months or More |   | Total    
|                           |  | FairValue           |        | UnrealizedLosses  |   | FairValue |  | UnrealizedLosses |   | FairValue |   | UnrealizedLosses
|                           |  | (In thousands)     
|September 30, 2009         |  |                     |        |                   |   |           |  |                  |   |           |   |                  |  |   |        |  |   |   
|U.S. Government Agencies   |  | $                   | 5,839  |                   | $ | 22        |  | $                |  |           | $ |                 |  | $ | 5,839  |  | $ | 22
|Mortgage-backed securities |  |                     | 12,212 |                   |   | 33        |  |                  |  |           |   |                 |  |   | 12,212 |  |   | 33
|                           |  |                     |        |                   |   |           |  |                  |   |           |   |                  |  |   |        |  |   |   
|                           |  | $                   | 18,051 |                   | $ | 55        |  | $                |  |           | $ |                 |  | $ | 18,051 |  | $ | 55
|                           |  |                     |        |                   |   |           |  |                  |   |           |   |                  |  |   |        |  |   |   
|                           |  |                     |        |                   |   |          
|September 30, 2008         |  |                     |        |                   |   |           |  |                  |   |           |   |                  |  |   |        |  |   |   
|U.S. Government Agencies   |  | $                   | 1,999  |                   | $ | 1         |  | $                |  |           | $ |                 |  | $ | 1,999  |  | $ | 1 
|Mortgage-backed securities |  |                     | 6,090  |                   |   | 53        |  |                  |  |           |   |                 |  |   | 6,090  |  |   | 53
|                           |  |                     |        |                   |   |           |  |                  |   |           |   |                  |  |   |        |  |   |   
|                           |  | $                   | 8,089  |                   | $ | 54        |  | $                |  |           | $ |                 |  | $ | 8,089  |  | $ | 54
|                           |  |                     |        |                   |   |           |  |                  |   |           |   |                  |  |   |        |  |   |   

When the fair value of security is below its amortized cost, and depending on the length of time the
condition exists, additional analysis is performed to determine whether an other-than-temporary impairment condition exists. Securities are analyzed quarterly for possible other-than-temporary impairment. The analysis considers (i) whether the
Company has the intent to sell the securities prior to recovery and/or maturity and (ii) whether it is more likely than not that the Company will have to sell the securities prior to recovery and/or maturity. Often, the information available to
conduct these assessments is limited and rapidly changing, making estimates of fair value subject to judgment. If actual information or conditions are different than estimated, the extent of the impairment of the security may be different than
previously estimated, which could have a material effect on the Companys consolidated financial statements.



30



---

CMS Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 3 - Securities Available for Sale
(Continued)



Management does not believe that any of the individual unrealized losses at September 30, 2009 and
2008, represent other-than-temporary impairment. The unrealized losses reported on securities at September 30, 2009 relate to two securities issued by U.S. Government Agencies and seven mortgage-backed securities. These unrealized losses are
due to changes in interest rates. The Company does not intend to sell these securities and it is not more-likely-than-not that the Company would be required to sell these securities prior to full recovery of fair value to a level which equals or
exceeds amortized cost.

All mortgage-backed securities are U.S. Government Agencies backed and collateralized by residential mortgages.

There were no sales of securities available for sale during the years ended September 30, 2009 or 2008.

Note 4 - Securities Held to Maturity



|                                                |  |                |     |                      |   |                       |  |           |   |  |   |    
|----------------------------------------------- |  | -------------- | --- | -------------------- | - | --------------------- |  | --------- | - |  | - | ---
|                                                |  | AmortizedCost  |     | GrossUnrealizedGains |   | GrossUnrealizedLosses |  | FairValue
|                                                |  | (In thousands)
|                                                |  |                |     |                     
|September 30, 2009                              |  |                |     |                      |   |                       |  |           |   |  |   |    
|Mortgage-backed securities, due after ten years |  | $              | 156 |                      | $ | 16                    |  | $         |  |  | $ | 172
|                                                |  |                |     |                      |   |                       |  |           |   |  |   |    
|                                                |  | $              | 156 |                      | $ | 16                    |  | $         |  |  | $ | 172
|                                                |  |                |     |                      |   |                       |  |           |   |  |   |    
|                                                |  |                |     |                     
|September 30, 2008                              |  |                |     |                      |   |                       |  |           |   |  |   |    
|Mortgage-backed securities, due after ten years |  | $              | 191 |                      | $ | 18                    |  | $         |  |  | $ | 209
|                                                |  |                |     |                      |   |                       |  |           |   |  |   |    
|                                                |  | $              | 191 |                      | $ | 18                    |  | $         |  |  | $ | 209
|                                                |  |                |     |                      |   |                       |  |           |   |  |   |    

There were no sales of securities held to maturity during the years ended September 30, 2009 and
2008.



31



---

CMS Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 5 - Loans Receivable



|                                    |  |                |         |   |      |   |         |  
|----------------------------------- |  | -------------- | ------- | - | ---- | - | ------- | -
|                                    |  | September 30,  |        
|                                    |  | 2009           |         |   | 2008 |  
|                                    |  | (In thousands) |        
|                                    |  |               
|Real estate:                        |  |                |         |   |      |   |         |  
|One-to-four-family                  |  | $              | 135,580 |   |      | $ | 156,519 |  
|Multi-family                        |  |                | 2,401   |   |      |   | 2,435   |  
|Non-residential                     |  |                | 19,831  |   |      |   | 9,819   |  
|Construction                        |  |                | 667     |   |      |   | 2,409   |  
|Equity and second mortgages         |  |                | 9,245   |   |      |   | 8,147   |  
|                                    |  |                |         |   |      |   |         |  
|                                    |  |               
|                                    |  |                | 167,724 |   |      |   | 179,329 |  
|                                    |  |                |         |   |      |   |         |  
|                                    |  |               
|Commercial                          |  |                | 944     |   |      |   | 600     |  
|                                    |  |                |         |   |      |   |         |  
|                                    |  |               
|Consumer:                           |  |                |         |   |      |   |         |  
|Passbook and other                  |  |                | 301     |   |      |   | 371     |  
|Student                             |  |                | 15      |   |      |   | 17      |  
|Checking overdraft                  |  |                | 17      |   |      |   | 18      |  
|                                    |  |                |         |   |      |   |         |  
|                                    |  |               
|                                    |  |                | 333     |   |      |   | 406     |  
|                                    |  |                |         |   |      |   |         |  
|                                    |  |               
|Total Loans                         |  |                | 169,001 |   |      |   | 180,335 |  
|                                    |  |               
|Allowance for loan losses           |  |                | (749    | ) |      |   | (516    | )
|Net deferred loan origination costs |  |                | 1,041   |   |      |   | 1,314   |  
|                                    |  |                |         |   |      |   |         |  
|                                    |  |               
|                                    |  | $              | 169,293 |   |      | $ | 181,133 |  
|                                    |  |                |         |   |      |   |         |  

The following is an analysis of the allowance for loan losses:



|                                |  |                          |     |      |   |     |  
|------------------------------- |  | ------------------------ | --- | ---- | - | --- | -
|                                |  | Years EndedSeptember 30, |    
|                                |  | 2009                     |     | 2008 |  
|                                |  | (In thousands)           |    
|                                |  |                         
|Balance  beginning of year     |  | $                        | 516 |      | $ | 269 |  
|Provision charged to operations |  |                          | 230 |      |   | 248 |  
|Loans recovered                 |  |                          | 3   |      |   |    |  
|Loans charged off               |  |                          |    |      |   | (1  | )
|                                |  |                          |     |      |   |     |  
|                                |  |                         
|Balance  end of year           |  | $                        | 749 |      | $ | 516 |  
|                                |  |                          |     |      |   |     |  



32



---

CMS Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 5 - Loans Receivable (Continued)



At September 30, 2009, the Company had loans in the amount of $1.7 million that were considered to
be impaired. At September 30, 2008, the Company had no loans that were considered to be impaired. At September 30, 2009, none of the loans deemed impaired were subject to specific loss reserves. The average balances of impaired loans
outstanding during the year ended September 30, 2009 was $139,000. Interest income recorded on impaired loans during the year ended September 30, 2009 was $44,000. Loans on which the accrual of interest has been discontinued amounted to
$1.7 million at September 30, 2009. During the year ended September 30, 2009, $44,000 of interest was collected and recognized on these loans and had all such loans been performing in accordance with their original terms, additional
interest income of $49,000 would have been recognized. The Company is not committed to lend additional funds on these non-accrual loans. At September 30, 2009, the Company had student loans which were ninety days or more delinquent and still
accruing interest of $4,000 and such loans were guaranteed by New York State.

Note 6 - Premises and Equipment



|                           |  |                |        |   |      |   |        |  
|-------------------------- |  | -------------- | ------ | - | ---- | - | ------ | -
|                           |  | September 30,  |       
|                           |  | 2009           |        |   | 2008 |  
|                           |  | (In thousands) |       
|                           |  |               
|Land                       |  | $              | 179    |   |      | $ | 179    |  
|                           |  |                |        |   |      |   |        |  
|                           |  |               
|Buildings and improvements |  |                | 1,190  |   |      |   | 1,156  |  
|Accumulated depreciation   |  |                | (490   | ) |      |   | (461   | )
|                           |  |                |        |   |      |   |        |  
|                           |  |                | 700    |   |      |   | 695    |  
|                           |  |                |        |   |      |   |        |  
|                           |  |               
|Leasehold improvements     |  |                | 1,889  |   |      |   | 1,167  |  
|Accumulated amortization   |  |                | (384   | ) |      |   | (267   | )
|                           |  |                |        |   |      |   |        |  
|                           |  |                | 1,505  |   |      |   | 900    |  
|                           |  |                |        |   |      |   |        |  
|                           |  |               
|Furnishings and equipment  |  |                | 2,097  |   |      |   | 1,886  |  
|Accumulated depreciation   |  |                | (1,362 | ) |      |   | (1,166 | )
|                           |  |                |        |   |      |   |        |  
|                           |  |                | 735    |   |      |   | 720    |  
|                           |  |                |        |   |      |   |        |  
|                           |  | $              | 3,119  |   |      | $ | 2,494  |  
|                           |  |                |        |   |      |   |        |  

Note 7 - Accrued Interest Receivable



|           |  |                |     |      |   |    
|---------- |  | -------------- | --- | ---- | - | ---
|           |  | September 30, 
|           |  | 2009           |     | 2008
|           |  | (In thousands)
|           |  |               
|Loans      |  | $              | 706 |      | $ | 731
|Securities |  |                | 270 |      |   | 50 
|           |  |                |     |      |   |    
|           |  | $              | 976 |      | $ | 781
|           |  |                |     |      |   |    



33



---

CMS Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 8 - Deposits



|                              |  |                        |         |                     |      |   |        |   |                     |  |      |  
|----------------------------- |  | ---------------------- | ------- | ------------------- | ---- | - | ------ | - | ------------------- |  | ---- | -
|                              |  | September 30,          |        
|                              |  | 2009                   |         |                     | 2008 |  
|                              |  | Amount                 |         | WeightedAverageRate |      |   | Amount |   | WeightedAverageRate | 
|                              |  | (Dollars in thousands) |        
|                              |  |                        |         |                    
|Demand deposits:              |  |                        |         |                     |      |   |        |   |                     |  |      |  
|Non-interest bearing deposits |  | $                      | 16,607  |                     |     |   |        | $ | 10,361              |  |     |  
|Interest bearing deposits     |  |                        | 24,232  |                     | 1.02 | % |        |   | 10,092              |  | 1.86 | %
|                              |  |                        |         |                     |      |   |        |   |                     |  |      |  
|                              |  |                        | 40,839  |                     | 0.61 | % |        |   | 20,453              |  | 0.92 | %
|Savings and club deposits     |  |                        | 42,046  |                     | 0.40 | % |        |   | 37,933              |  | 0.40 | %
|Certificates of deposit       |  |                        | 101,502 |                     | 2.53 | % |        |   | 70,371              |  | 3.50 | %
|                              |  |                        |         |                     |      |   |        |   |                     |  |      |  
|                              |  | $                      | 184,387 |                     | 1.61 | % |        | $ | 128,757             |  | 2.17 | %
|                              |  |                        |         |                     |      |   |        |   |                     |  |      |  

The scheduled maturities of certificates of deposit are as follows:



|                                          |  |   |        
|----------------------------------------- |  | - | -------
|Years Ending September 30, (In thousands) |  |   |        
|2010                                      |  | $ | 88,323 
|2011                                      |  |   | 6,715  
|2012                                      |  |   | 4,841  
|2013                                      |  |   | 768    
|2014                                      |  |   | 855    
|                                          |  |   |        
|                                          |  | $ | 101,502
|                                          |  |   |        

The aggregate amount of certificates of deposit with balances of $100,000 or more totaled
approximately $45,950,000 and $26,530,000 at September 30, 2009 and 2008, respectively. Deposits in excess of $250,000 are generally not insured by FDIC.

Interest expense on deposits consists of the following:



|                          |  |                           |       |      |   |      
|------------------------- |  | ------------------------- | ----- | ---- | - | -----
|                          |  | Years Ended September 30,
|                          |  | 2009                      |       | 2008
|                          |  | (In thousands)           
|Demand deposits           |  | $                         | 226   |      | $ | 283  
|Savings and club deposits |  |                           | 150   |      |   | 160  
|Certificates of deposit   |  |                           | 2,905 |      |   | 2,397
|                          |  |                           |       |      |   |      
|                          |  | $                         | 3,281 |      | $ | 2,840
|                          |  |                           |       |      |   |      

Note 9 - Securities Sold Under Agreements to Repurchase

At September 30, 2008, the Company had securities sold under agreements to repurchase totaling $614,000 which bore interest at the federal funds rate,
less 125 basis points (0.75% at September 30, 2008). The accounts were secured by the pledge of a Federal Home Loan Mortgage Corp. bond with a fair value of $1,999,000 as of September 30, 2008.



34



---

CMS Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 10 - Advances from FHLB



|                                                                                                                                                                                  |  |                |        |      |   |       
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | ------ | ---- | - | ------
|                                                                                                                                                                                  |  | September 30, 
|                                                                                                                                                                                  |  | 2009           |        | 2008
|                                                                                                                                                                                  |  | (In thousands)
|                                                                                                                                                                                  |  |               
|Overnight borrowings with interest at 1.63%                                                                                                                                       |  | $              |       |      | $ | 15,900
|Five year advance, maturing August 15, 2012, convertible on August 15, 2010, with interest payable quarterly at 4.78%                                                             |  |                | 10,000 |      |   | 10,000
|Five year advance, maturing August 8, 2012, with interest payable quarterly at 4.81%                                                                                              |  |                | 10,000 |      |   | 10,000
|Seven year advance, maturing December 29, 2014, convertible on December 29, 2009, with interest payable quarterly at
3.56%                                                        |  |                | 5,000  |      |   | 5,000 
|Seven year fixed rate advance with interest at 5.57%, payable in monthly installments of principal and interest of $57,000 with a
balloon payment of $8,925,000 on August 8, 2014 |  |                | 9,726  |      |   | 9,867 
|                                                                                                                                                                                  |  |                |        |      |   |       
|Total                                                                                                                                                                             |  | $              | 34,726 |      | $ | 50,767
|                                                                                                                                                                                  |  |                |        |      |   |       

A schedule of the Companys annual principal obligations to the FHLB is as follows:



|                                         |  |   |       
|---------------------------------------- |  | - | ------
|Year Ending September 30, (In thousands) |  |   |       
|2010                                     |  | $ | 149   
|2011                                     |  |   | 157   
|2012                                     |  |   | 20,166
|2013                                     |  |   | 176   
|2014                                     |  |   | 14,078
|                                         |  |   |       
|                                         |  | $ | 34,726
|                                         |  |   |       

These FHLB advances are secured by stock of the FHLB in the amount of $1,938,000 and $2,587,000 at
September 30, 2009 and 2008, respectively, and a blanket assignment of qualifying loans and securities.

The Company has an overnight
line of credit and a one month overnight repricing line of credit commitment with the FHLB totaling $28.6 million, which expire on August 10, 2010, of which none was in use at September 30, 2009. The Companys overall credit exposure
at the FHLB cannot exceed 50% of its total assets, subject to certain limitations based on the underlying loan and securities pledged as collateral.

Note 11 - Lease Commitments and Total Rental Expense

The Company leases six locations under long-term operating leases. Future
minimum lease payments by year and in the aggregate, under non-cancellable operating leases with initial or remaining terms of one year or more, consisted of the following at September 30, 2009 (in thousands):



|                           |  |   |      
|-------------------------- |  | - | -----
|Years ending September 30, |  |   |      
|2010                       |  | $ | 592  
|2011                       |  |   | 514  
|2012                       |  |   | 521  
|2013                       |  |   | 555  
|2014                       |  |   | 570  
|Thereafter                 |  |   | 2,756
|                           |  |   |      
|                           |  | $ | 5,508
|                           |  |   |      



35



---

CMS Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 11 - Lease Commitments and Total Rental
Expense (Continued)



The total rental expense and related charges for all leases for the years ended September 30, 2009
and 2008 was $581,000 and $821,000, respectively. Rental expense in 2008 includes $210,000 relating to two older branches which have been relocated and are no longer used.

Note 12 - Income Taxes

The Company qualifies as a thrift under the provisions of the
Internal Revenue Code and, therefore, was permitted, prior to January 1, 1996, to deduct from federal taxable income an allowance for bad debts based on 8% of taxable income before such deduction, less certain adjustments, subject to certain
limitations. Beginning January 1, 1996, the Company, for federal income tax purposes, must calculate its tax bad debt deduction using either the experience or specific charge off method. The New York State tax law permits the Company to deduct
32% of its taxable income before bad debt deduction, subject to certain limitations.

Retained earnings at September 30, 2009 include
approximately $1,981,000 of such bad debt deduction for which federal income taxes of approximately $612,000 have not been provided. In addition, deferred New York State taxes of approximately $369,000 have not been provided on bad debt deductions
in the amount of $4,100,000. If such amount is used for purposes other than for bad debt losses, including distributions in liquidation, it will be subject to income tax at the then current rate.

The components of income taxes (benefit) are as follows:



|                                       |  |                           |      |   |      |   |      |  
|-------------------------------------- |  | ------------------------- | ---- | - | ---- | - | ---- | -
|                                       |  | Years Ended September 30, |     
|                                       |  | 2009                      |      |   | 2008 |  
|                                       |  | (In thousands)            |     
|Current income tax expense (benefit):  |  |                           |      |   |      |   |      |  
|Federal                                |  | $                         | (12  | ) |      | $ | (67  | )
|State                                  |  |                           | (52  | ) |      |   | 20   |  
|                                       |  |                           |      |   |      |   |      |  
|                                       |  |                           | (64  | ) |      |   | (47  | )
|                                       |  |                           |      |   |      |   |      |  
|                                       |  |                          
|Deferred income tax expense (benefit): |  |                           |      |   |      |   |      |  
|Federal                                |  |                           | (182 | ) |      |   | (270 | )
|State                                  |  |                           | 17   |   |      |   | (79  | )
|                                       |  |                           |      |   |      |   |      |  
|                                       |  |                           | (165 | ) |      |   | (349 | )
|                                       |  |                           |      |   |      |   |      |  
|                                       |  |                          
|                                       |  | $                         | (229 | ) |      | $ | (396 | )
|                                       |  |                           |      |   |      |   |      |  



36



---

CMS Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 12 - Income Taxes (Continued)



The following table reconciles the reported income taxes and the federal income taxes which would be
computed by applying the normal federal income tax rate of 34% to income (loss) before income taxes:



|                                                     |  |                           |      |   |                      |       |    |      |   |      |                      |  |       |   
|---------------------------------------------------- |  | ------------------------- | ---- | - | -------------------- | ----- | -- | ---- | - | ---- | -------------------- |  | ----- | --
|                                                     |  | Years Ended September 30, |     
|                                                     |  | 2009                      |      |   | Percentof PretaxLoss |       |    | 2008 |   |      | Percentof PretaxLoss | 
|                                                     |  | (Dollars in thousands)    |     
|                                                     |  |                           |      |  
|Federal income taxes (benefit)                       |  | $                         | (227 | ) |                      | (34.0 | )% |      | $ | (426 | )                    |  | (34.0 | )%
|State income taxes, net of federal income tax effect |  |                           | (23  | ) |                      | (3.5  | )% |      |   | (39  | )                    |  | (3.1  | )%
|Non-deductible benefit plan                          |  |                           | 40   |   |                      | 6.0   | %  |      |   | 30   |                      |  | 2.4   | % 
|Other items, net                                     |  |                           | (19  | ) |                      | (2.8  | )% |      |   | 39   |                      |  | 3.1   | % 
|                                                     |  |                           |      |   |                      |       |    |      |   |      |                      |  |       |   
|                                                     |  |                           |      |  
|Effective Income Taxes                               |  | $                         | (229 | ) |                      | (34.3 | )% |      | $ | (396 | )                    |  | (31.6 | )%
|                                                     |  |                           |      |   |                      |       |    |      |   |      |                      |  |       |   

The tax effects of existing temporary differences that give rise to significant portions of net
deferred tax assets and liabilities are as follows:



|                                                 |  |                |       |   |      |   |      |  
|------------------------------------------------ |  | -------------- | ----- | - | ---- | - | ---- | -
|                                                 |  | September 30,  |      
|                                                 |  | 2009           |       |   | 2008 |  
|                                                 |  | (In thousands) |      
|                                                 |  |               
|Deferred tax assets:                             |  |                |       |   |      |   |      |  
|Allowance for loan losses                        |  | $              | 299   |   |      | $ | 206  |  
|Deferred rent                                    |  |                | 41    |   |      |   | 115  |  
|Net operating loss carryforward                  |  |                | 242   |   |      |   |     |  
|Contribution carryover                           |  |                | 270   |   |      |   | 270  |  
|Benefit plan adjustment                          |  |                | 453   |   |      |   | 244  |  
|Accrued pension                                  |  |                | 68    |   |      |   | 39   |  
|Unrealized loss on securities available for sale |  |                |      |   |      |   | 14   |  
|Stock based compensation                         |  |                | 108   |   |      |   | 49   |  
|Other                                            |  |                | 40    |   |      |   | 7    |  
|                                                 |  |                |       |   |      |   |      |  
|                                                 |  |               
|Total Deferred Tax Assets                        |  |                | 1,521 |   |      |   | 944  |  
|                                                 |  |                |       |   |      |   |      |  
|                                                 |  |               
|Deferred tax liabilities:                        |  |                |       |   |      |   |      |  
|Depreciation                                     |  |                | 219   |   |      |   | 2    |  
|Unrealized gain on securities available for sale |  |                | 233   |   |      |   |     |  
|                                                 |  |                |       |   |      |   |      |  
|                                                 |  |               
|Total Deferred Tax Liabilities                   |  |                | 452   |   |      |   | 2    |  
|                                                 |  |                |       |   |      |   |      |  
|Valuation allowance                              |  |                | (270  | ) |      |   | (270 | )
|                                                 |  |                |       |   |      |   |      |  
|                                                 |  |               
|Net Deferred Tax Assets Included in Other Assets |  | $              | 799   |   |      | $ | 672  |  
|                                                 |  |                |       |   |      |   |      |  



37



---

CMS Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 13 - Comprehensive Income (Loss)



Total comprehensive income represents the sum of net income and items of other comprehensive
income or loss that are reported directly in equity on an after tax basis, such as the net unrealized holding gain or loss on securities available for sale and minimum pension liability adjustments. The Company has reported its total
comprehensive income in the statements of changes in stockholders equity.

Other comprehensive income (loss) is summarized as follows:



|                                                                                                                          |  |                          |      |   |      |   |      |  
|------------------------------------------------------------------------------------------------------------------------- |  | ------------------------ | ---- | - | ---- | - | ---- | -
|                                                                                                                          |  | Years EndedSeptember 30, |     
|                                                                                                                          |  | 2009                     |      |   | 2008 |  
|                                                                                                                          |  | (In thousands)           |     
|                                                                                                                          |  |                         
|Securities available for sale                                                                                             |  |                          |      |   |      |   |      |  
|Net unrealized holding gains (losses) arising during the year, net of income taxes of $(247,000) and $15,000
respectively |  | $                        | 371  |   |      | $ | (24  | )
|                                                                                                                          |  |                         
|Defined benefit plan adjustment, net of income taxes of $209,000 and $92,000 respectively                                 |  |                          | (315 | ) |      |   | (137 | )
|                                                                                                                          |  |                          |      |   |      |   |      |  
|                                                                                                                          |  |                         
|                                                                                                                          |  | $                        | 56   |   |      | $ | (161 | )
|                                                                                                                          |  |                          |      |   |      |   |      |  

Accumulated other comprehensive (loss), which is included in stockholders equity, consisted of
the following:



|                                                                                                                                           |  |                |      |   |      |   |      |  
|------------------------------------------------------------------------------------------------------------------------------------------ |  | -------------- | ---- | - | ---- | - | ---- | -
|                                                                                                                                           |  | September 30,  |     
|                                                                                                                                           |  | 2009           |      |   | 2008 |  
|                                                                                                                                           |  | (In thousands) |     
|                                                                                                                                           |  |               
|Net unrealized holding gains (losses) on securities available for sale, net of deferred income tax of $(233,000) and $14,000,
respectively |  | $              | 350  |   |      | $ | (21  | )
|Benefit plan adjustment, net of related deferred taxes of $453,000 and $244,000, respectively                                              |  |                | (681 | ) |      |   | (366 | )
|                                                                                                                                           |  |                |      |   |      |   |      |  
|                                                                                                                                           |  |               
|                                                                                                                                           |  | $              | (331 | ) |      | $ | (387 | )
|                                                                                                                                           |  |                |      |   |      |   |      |  

Note 14 - Regulatory Matters

For the purpose of granting eligible account holders a priority in the event of future liquidation, the Bank, at the time of conversion, established a liquidation account in an amount equal to its
retained earnings of $8.3 million at September 30, 2006. In the event of a future liquidation of the Bank (and only in such event), an eligible account holder who continues to maintain his or her deposit account shall be entitled to receive a
distribution from the special account. The total amount of the special account is decreased (but never increased) in an amount proportionally corresponding to decreases in the deposit account balances of eligible account holders as of each
subsequent year end. After conversion, no dividends may be paid to stockholders if such dividends would reduce retained earnings of the converted Bank below the amount required by the special account.



38



---

CMS Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 14 - Regulatory Matters (Continued)



The Bank is subject to various regulatory capital requirements administered by the federal banking
agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary, actions by regulators that, if undertaken, could have a direct material effect on the Company. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Banks assets, liabilities, and certain off balance sheet items as calculated under
regulatory accounting practices. The Banks capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios of Total and Tier 1
capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital to total assets (as defined).

The
following table presents a reconciliation of the Banks capital based on GAAP and regulatory capital at the dates presented:



|                                                                               |  |                |        |   |      |   |        |  
|------------------------------------------------------------------------------ |  | -------------- | ------ | - | ---- | - | ------ | -
|                                                                               |  | September 30,  |       
|                                                                               |  | 2009           |        |   | 2008 |  
|                                                                               |  | (In thousands) |       
|                                                                               |  |               
|GAAP capital:                                                                  |  | $              | 16,819 |   |      | $ | 14,940 |  
|Disallowed deferred tax asset                                                  |  |                | (9     | ) |      |   | (672   | )
|Pension liability, net of deferred taxes                                       |  |                | 681    |   |      |   | 366    |  
|Unrealized (gain) loss on securities available for sale, net of deferred taxes |  |                | (350   | ) |      |   | 21     |  
|Intangible asset                                                               |  |                |       |   |      |   | (44    | )
|                                                                               |  |                |        |   |      |   |        |  
|                                                                               |  |               
|Tier I and tangible capital                                                    |  |                | 17,141 |   |      |   | 14,611 |  
|General valuation allowance                                                    |  |                | 749    |   |      |   | 516    |  
|                                                                               |  |                |        |   |      |   |        |  
|                                                                               |  |               
|Total Regulatory Capital                                                       |  | $              | 17,890 |   |      | $ | 15,127 |  
|                                                                               |  |                |        |   |      |   |        |  



39



---

CMS Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 14 - Regulatory Matters (Continued)



The following table sets forth the Banks capital position, compared to the minimum regulatory
capital requirements:



|                                                 |  |                        |        |       |                              |   |        |                                                               |        |  |       |        |  |       |         |  |        |  
|------------------------------------------------ |  | ---------------------- | ------ | ----- | ---------------------------- | - | ------ | ------------------------------------------------------------- | ------ |  | ----- | ------ |  | ----- | ------- |  | ------ | -
|                                                 |  | Actual                 |        |       | For CapitalAdequacy Purposes |   |        | To be WellCapitalized underPrompt CorrectiveAction Provisions |       
|                                                 |  | Amount                 |        | Ratio |                              |   | Amount |                                                               | Ratio  |  |       | Amount |  | Ratio |        
|                                                 |  | (Dollars in thousands) |       
|                                                 |  |                        |        |       |                              |  
|September 30, 2009:                              |  |                        |        |       |                              |   |        |                                                               |        |  |       |        |  |       |         |  |        |  
|Total capital (to risk-weighted assets)          |  | $                      | 17,890 |       | 16.16                        | % |        | $                                                             | 38,857 |  | 38.00 | %      |  | $     | 311,071 |  | 310.00 | %
|Core (Tier 1) capital (to risk-weighted assets)  |  |                        | 17,141 |       | 15.48                        |   |        |                                                               |       |  |      |        |  |       | 36,643  |  | 36.00  |  
|Core (Tier 1) capital (to total adjusted assets) |  |                        | 17,141 |       | 7.10                         |   |        |                                                               | 39,660 |  | 34.00 |        |  |       | 312,075 |  | 35.00  |  
|Tangible capital (to total adjusted assets)      |  |                        | 17,141 |       | 7.10                         |   |        |                                                               | 33,622 |  | 31.50 |        |  |       |        |  |       |  
|                                                 |  |                        |        |       |                              |  
|September 30, 2008:                              |  |                        |        |       |                              |   |        |                                                               |        |  |       |        |  |       |         |  |        |  
|Total capital (to risk-weighted assets)          |  | $                      | 15,127 |       | 14.28                        | % |        | $                                                             | 38,471 |  | 38.00 | %      |  | $     | 310,589 |  | 310.00 | %
|Core (Tier 1) capital (to risk-weighted assets)  |  |                        | 14,611 |       | 13.80                        |   |        |                                                               |       |  |      |        |  |       | 36,354  |  | 36.00  |  
|Core (Tier 1) capital (to total adjusted assets) |  |                        | 14,611 |       | 7.23                         |   |        |                                                               | 38,079 |  | 34.00 |        |  |       | 310,099 |  | 35.00  |  
|Tangible capital (to total adjusted assets)      |  |                        | 14,611 |       | 7.23                         |   |        |                                                               | 33,030 |  | 31.50 |        |  |       |        |  |       |  

As of the most recent notification from the regulatory authorities, the Bank was categorized as
well-capitalized under the regulatory framework for prompt corrective action. There are no conditions existing or events which have occurred since notification that management believes have changed the Banks regulatory capital
categorization.



40



---

CMS Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 15 - Benefit Plans



Pension Plan

The Bank maintains a non-contributory defined benefit pension plan (the Plan) covering all eligible employees hired before July 1, 2008. The benefits are based on employees years of
service and compensation. The Banks policy is to fund the Plan annually with at least the minimum contribution deductible and/or allowable for federal income tax purposes.

The following table sets forth the Plans funded status and components of net periodic pension cost:



|                                                   |  |                |        |   |      |   |        |  
|-------------------------------------------------- |  | -------------- | ------ | - | ---- | - | ------ | -
|                                                   |  | September 30,  |       
|                                                   |  | 2009           |        |   | 2008 |  
|                                                   |  | (In thousands) |       
|                                                   |  |               
|Change in benefit obligation:                      |  |                |        |   |      |   |        |  
|Benefit obligation  beginning of year             |  | $              | 3,427  |   |      | $ | 3,487  |  
|Service cost                                       |  |                | 211    |   |      |   | 228    |  
|Interest cost                                      |  |                | 234    |   |      |   | 216    |  
|Actuarial (gain) loss                              |  |                | 204    |   |      |   | (342   | )
|Benefits paid                                      |  |                | (158   | ) |      |   | (158   | )
|                                                   |  |                |        |   |      |   |        |  
|                                                   |  |               
|Benefit obligation  end of year                   |  | $              | 3,918  |   |      | $ | 3,427  |  
|                                                   |  |                |        |   |      |   |        |  
|                                                   |  |               
|Change in plan assets:                             |  |                |        |   |      |   |        |  
|Fair value of assets  beginning of year           |  | $              | 2,722  |   |      | $ | 3,186  |  
|Actual return on plan assets                       |  |                | (157   | ) |      |   | (372   | )
|Benefits paid                                      |  |                | (158   | ) |      |   | (158   | )
|Contributions                                      |  |                | 207    |   |      |   | 66     |  
|                                                   |  |                |        |   |      |   |        |  
|                                                   |  |               
|Fair value of assets  end of year                 |  | $              | 2,614  |   |      | $ | 2,722  |  
|                                                   |  |                |        |   |      |   |        |  
|                                                   |  |               
|Reconciliation of funded status:                   |  |                |        |   |      |   |        |  
|Accumulated benefit obligation                     |  | $              | 3,452  |   |      | $ | 3,044  |  
|                                                   |  |                |        |   |      |   |        |  
|                                                   |  |               
|Projected benefit obligation                       |  | $              | (3,918 | ) |      | $ | (3,427 | )
|Fair value of assets                               |  |                | 2,614  |   |      |   | 2,722  |  
|                                                   |  |                |        |   |      |   |        |  
|Funded status                                      |  | $              | (1,304 | ) |      | $ | (705   | )
|                                                   |  |                |        |   |      |   |        |  
|                                                   |  |               
|Accrued pension cost included in other liabilities |  | $              | (1,304 | ) |      | $ | (705   | )
|                                                   |  |                |        |   |      |   |        |  
|                                                   | 
|                                                   |  | September 30,  |       
|                                                   |  | 2009           |        |   | 2008 |  
|Valuation assumptions                              |  |                |        |   |      |   |        |  
|Discount rate                                      |  |                | 7.00   | % |      |   | 7.00   | %
|Rate of compensation increase                      |  |                | 4.00   | % |      |   | 4.00   | %



41



---

CMS Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 15 - Benefit Plans (Continued)



|                                                                                 |  |                |        |   |      |   |      |  
|-------------------------------------------------------------------------------- |  | -------------- | ------ | - | ---- | - | ---- | -
|                                                                                 |  | September 30,  |       
|                                                                                 |  | 2009           |        |   | 2008 |  
|                                                                                 |  | (In thousands) |       
|                                                                                 |  |               
|Amounts recognized in accumulated other comprehensive loss, pre-tax, consist of: |  |                |        |   |      |   |      |  
|Net actuarial loss                                                               |  | $              | (1,114 | ) |      | $ | (585 | )
|Prior service cost                                                               |  |                | (20    | ) |      |   | (24  | )
|                                                                                 |  |                |        |   |      |   |      |  
|                                                                                 |  | $              | (1,134 | ) |      | $ | (609 | )
|                                                                                 |  |                |        |   |      |   |      |  

As required for the fiscal year ended September 30, 2010, $64,000 in unrecognized net loss and
$4,000 in unrecognized net prior service cost will be recognized as a component of net periodic pension.



|                                      |  |                          |      |   |      |   |      |  
|------------------------------------- |  | ------------------------ | ---- | - | ---- | - | ---- | -
|                                      |  | Years EndedSeptember 30, |     
|                                      |  | 2009                     |      |   | 2008 |  
|                                      |  | (Dollars in thousands)   |     
|                                      |  |                         
|Net periodic pension expense          |  |                          |      |   |      |   |      |  
|Service cost                          |  | $                        | 211  |   |      | $ | 228  |  
|Interest cost                         |  |                          | 234  |   |      |   | 216  |  
|Expected return on assets             |  |                          | (192 | ) |      |   | (220 | )
|Amortization of prior service cost    |  |                          | 4    |   |      |   | 4    |  
|Amortization of unrecognized net loss |  |                          | 21   |   |      |   | 13   |  
|                                      |  |                          |      |   |      |   |      |  
|                                      |  |                         
|Total net periodic pension expense    |  | $                        | 278  |   |      | $ | 241  |  
|                                      |  |                          |      |   |      |   |      |  
|                                      |  |                         
|Valuation assumptions:                |  |                          |      |   |      |   |      |  
|Discount rate                         |  |                          | 6.00 | % |      |   | 6.00 | %
|Rate of return on long-term assets    |  |                          | 7.00 | % |      |   | 7.00 | %
|Salary increase rate                  |  |                          | 4.00 | % |      |   | 4.00 | %



42



---

CMS Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 15 - Benefit Plans (Continued)



The Plan assets are invested as follows:



|                           |  |               |   |  |      |  
|-------------------------- |  | ------------- | - |  | ---- | -
|                           |  | September 30, |  
|                           |  | 2009          |   |  | 2008 |  
|                           |  |              
|Equity securities          |  | 53            | % |  | 54   | %
|Guaranteed insurance funds |  | 47            | % |  | 46   | %
|                           |  |               |   |  |      |  
|                           |  |              
|                           |  | 100           | % |  | 100  | %
|                           |  |               |   |  |      |  

The long-term rate of return on assets assumption is set based on historical returns earned by
equities and fixed income securities, adjusted to reflect expectations of future returns as applied to the Plans actual target allocation of asset classes. Equities and fixed income securities are assumed to earn real rates of return in the
ranges of 5.0% to 9.0% and 2.0% to 6.0%, respectively. Additionally, the long-term inflation rate is projected to be 2.5%. When these overall return expectations are applied to the Plans target allocation, the result is an expected return of
8.0% to 10.0%.

The Bank intends to maintain the current asset mix and seek to achieve an optimal risk/reward profile by limiting market
exposure to present levels. It is expected to have a 4.0% to 5.0% return from fixed income and a 5.0% to 9.0% rate of return from equities. The overall expected long-term rate of return on Plan assets used was 7.0% for both 2009 and 2008.

At September 30, 2009, expected benefit payments were as follows (in thousands):



|                           |  |   |      
|-------------------------- |  | - | -----
|Years ending September 30, |  |   |      
|2010                       |  | $ | 158  
|2011                       |  |   | 158  
|2012                       |  |   | 198  
|2013                       |  |   | 218  
|2014                       |  |   | 254  
|2015 to 2019               |  |   | 1,552
|                           |  |   |      
|                           | 
|                           |  | $ | 2,538
|                           |  |   |      

The Bank expects to contribute $425,000 to the Plan during the year ended September 30, 2010.

Savings and Investment Plan

The Company has implemented a Savings and Investment Plan (the Savings Plan) pursuant to Section 401(k) of the Internal Revenue Code for all eligible employees. Under the Savings Plan, employees may elect to contribute a
percentage of their compensation, subject to limits. The Company makes a matching contribution equal to 25% in 2009 and 50% in 2008 of an employees contribution, up to 8.0% of compensation, subject to certain limitations. The Savings Plan
expenses for the years ended September 30, 2009 and 2008, amounted to $26,000 and $52,000, respectively.



43



---

CMS Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 15 - Benefit Plans (Continued)



Employees Stock Ownership Plan (ESOP)

The Company established an ESOP for all eligible employees in connection with the public offering of common stock in April 2007. The ESOP used the proceeds
of a $1.6 million, 8.0% term loan from the Company to purchase 164,413 shares of Company common stock. The term loan from the Company to the ESOP is payable in annual installments of principal and interest over 30 years commencing on
December 31, 2007. The Company intends to make discretionary contributions to the ESOP which will be equal to principal and interest payments on the term loan to the ESOP from the Company. Shares purchased with the loan proceeds are initially
pledged as collateral for the term loan and are held in a suspense account for future allocation among participants. Contributions to the ESOP and shares released from the suspense account will be allocated among the participants on the basis of
compensation, as defined by the ESOP, in the year of allocation. As of September 30, 2009 and 2008, the loan had a balance of $1,584,000 and $1,599,000, respectively.

The ESOP is accounted for in accordance with the guidance issued by FASB. Accordingly, the ESOP shares pledged as collateral are reported as unearned ESOP shares in the consolidated statements of
financial condition. As shares are committed to be released from collateral, the Company reports compensation expense equal to the current market price of the shares, and the shares become outstanding for earnings per share computations. Dividends
on unallocated ESOP shares are recorded as a reduction of debt. ESOP compensation expense was $40,000 and $54,000 for the years ended September 30, 2009 and 2008, respectively.

The ESOP shares are summarized as follows:



|                                |  |               |           |      |   |          
|------------------------------- |  | ------------- | --------- | ---- | - | ---------
|                                |  | September 30,
|                                |  | 2009          |           | 2008
|                                |  |              
|Unearned shares                 |  |               | 149,343   |      |   | 154,823  
|Shares committed to be released |  |               | 4,110     |      |   | 4,110    
|Shares released                 |  |               | 10,960    |      |   | 5,480    
|                                |  |               |           |      |   |          
|Total shares                    |  |               | 164,413   |      |   | 164,413  
|                                |  |               |           |      |   |          
|                                |  |              
|Fair value of unearned shares   |  | $             | 1,060,000 |      | $ | 1,195,000
|                                |  |               |           |      |   |          

Note 16 - Stock-Based Compensation

At a special meeting of the stockholders of the Company held on November 9, 2007, the stockholders approved the CMS Bancorp, Inc. 2007 Stock Option Plan
and the CMS Bancorp, Inc. 2007 Recognition and Retention Plan (collectively the Plans). The Plans authorize the award of up to 205,516 stock options and 82,206 shares of restricted stock. On November 28, 2007, non-employee directors
received an aggregate of 40,275 stock options with an exercise price of $10.12 per share and 14,110 shares of restricted stock with a grant date fair value of $10.12 per share. On November 28, 2007, certain officers and employees of the Company
and the Bank received an aggregate of 111,879 stock options with an exercise price of $10.12 per share and 47,591 shares of restricted stock with a grant date fair value of $10.12 per share. The Company expenses, in accordance with FASB guidance,
the fair value of all options at $2.73 per option, over their five year vesting periods and expenses the fair value of all share-based compensation granted over the requisite five year vesting periods. In the years ended September 30, 2009 and
2008 the Company recorded an expense of $83,000 and $70,000 respectively relating to stock options and $125,000 and $104,000 respectively relating to the restricted stock. The Company recognized approximately $59,000 and $49,000 of income tax
benefits resulting from this expense in the years ended September 30, 2009 and 2008, respectively.



44



---

CMS Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 16 - Stock-Based Compensation
(Continued)



In November 2009, certain officers of the Company and the Bank received an aggregate of 8,300 stock
options with an exercise price of $7.25 per share and 4,150 shares of restricted stock with a grant date fair value of $7.25 per share. The Company will expense, in accordance with FASB guidance, the fair value of these options at $2.49 per option,
over their five year vesting periods and expenses the fair value of all share-based compensation granted over the requisite five year vesting periods.

As of September 30, 2009 and 2008 there were 53,362 stock options and 20,505 shares of restricted stock remaining available for future awards under the Plans. Stock options and restricted stock awarded under the Plans vest over five
years, at the rate of 20% per year.

The following is a summary of the status of the Companys restricted shares:



|                                 |  |                  |   |  |                                      |      
|-------------------------------- |  | ---------------- | - |  | ------------------------------------ | -----
|                                 |  | RestrictedShares |   |  | Weighted AverageGrant Date FairValue
|Non-vested at October 1, 2007    |  |                 |   |  |                                      |     
|Granted                          |  | 61,701           |   |  | $                                    | 10.12
|                                 |  |                  |   |  |                                      |      
|Non-vested at September 30, 2008 |  | 61,701           |   |  | $                                    | 10.12
|Vested                           |  | (12,340          | ) |  | $                                    | 10.12
|                                 |  |                  |   |  |                                      |      
|Non-vested at September 30, 2009 |  | 49,361           |   |  | $                                    | 10.12
|                                 |  |                  |   |  |                                      |      

Expected future compensation expense relating to the 49,361 non-vested restricted shares outstanding
at September 30, 2009 is $395,000 over a weighted average period of 3.2 years. During the year ended September 30, 2008, an independent trustee purchased 82,206 shares of the Companys common stock for $856,000 to fund the Recognition
and Retention Plan.

The following is a summary of stock option activity:



|                                  |  |                       |  |                               |       |                                           |           
|--------------------------------- |  | --------------------- |  | ----------------------------- | ----- | ----------------------------------------- | ----------
|                                  |  | Numberof StockOptions |  | WeightedAverageExercise Price |       | Weighted AverageRemaining ContractualTerm
|Balance at October 1, 2007,       |  |                      |  |                               |      |                                           |           
|Granted                           |  | 152,154               |  | $                             | 10.12 |                                           | 10.0 years
|                                  |  |                       |  |                               |       |                                           |           
|Balance at September 30, 2008     |  | 152,154               |  | $                             | 10.12 |                                           | 9.2 years 
|                                  |  |                       |  |                               |       |                                           |           
|Balance at September 30, 2009     |  | 152,154               |  | $                             | 10.12 |                                           | 8.2 years 
|                                  |  |                       |  |                               |       |                                           |           
|                                  |  |                       | 
|Exercisable at September 30, 2009 |  | 30,431                |  | $                             | 10.12 |                                           |          

Shares issued upon exercise of stock options will be issued from treasury stock or from previously
unissued shares. As of September 30, 2009 the Company had 192,362 shares of treasury stock. Expected future compensation expense relating to the 152,154 vested and non-vested options outstanding at September 30, 2009 is $263,000 over a
weighted average period of 3.2 years.

The fair value of the options granted on November 28, 2007, as computed using the Black-Scholes
option-pricing model, was determined to be $2.73 per option based on the following underlying assumptions: a risk-free interest rate of 4.03%, expected option life of 7 years, expected stock price volatility of 11.3% and no expected dividend.

At September 30, 2009 and 2008, the stock options outstanding and stock options exercisable had no intrinsic value.



45



---

CMS Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 17 - Stock Repurchase Programs



On April 17, 2008, the Companys Board of Directors approved a stock buy back plan that
authorized the Company to buy back up to 98,647 shares of the outstanding stock of the Company. The buy back was administered as a 10(b)5-1 plan by Stifel Nicolaus, the Companys investment banker. Through September 30, 2008, 98,647 shares
of the Companys common stock had been repurchased for $999,000.

On September 25, 2008, the Companys Board of Directors
approved an additional stock buy back plan that authorized the Company to buy back up to 93,715 shares of the outstanding stock of the Company. The buy back plan was administered as a 10(b)5-1 plan by Stifel Nicolaus, the Companys investment
banker. Through September 30, 2009, 93,715 shares of common stock had been repurchased for $661,000.

Note 18 - Commitments and
Contingencies

The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the
financing needs of its customers. These financial instruments primarily include commitments to extend credit. These financial instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized in
the statements of financial condition. The contract amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments.

The Companys exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit is represented by the contractual amount of those
instruments. The Company uses the same credit policies in making commitments as it does for on-balance-sheet instruments.

The Company has the
following outstanding commitments:



|                                                                      |  |                |        |      |   |       
|--------------------------------------------------------------------- |  | -------------- | ------ | ---- | - | ------
|                                                                      |  | September 30  
|                                                                      |  | 2009           |        | 2008
|                                                                      |  | (In thousands)
|Commitments to originate loans, expiring in three months or less      |  | $              | 9,967  |      | $ | 3,645 
|Commitments under homeowners equity lending program                  |  |                | 8,835  |      |   | 7,761 
|Commitments under overdraft protection and commercial lines of credit |  |                | 1,180  |      |   | 140   
|                                                                      |  |                |        |      |   |       
|                                                                      |  |               
|Total                                                                 |  | $              | 19,982 |      | $ | 11,547
|                                                                      |  |                |        |      |   |       

At September 30, 2009, of the $9,967,000 in outstanding commitments to originate loans,
$4,646,000 were at fixed rates ranging from 4.625% to 7.840% and $5,321,000 were adjustable rates with initial rates ranging from 4.00% to 6.27%.

At September 30, 2008, of the $3,645,000 in outstanding commitments to originate loans, $2,425,000 were at fixed rates ranging from 6.625% to 7.625% and $1,220,000 were adjustable rates with initial rates ranging from 5.0% to 7.0%.

At September 30, 2009 and 2008, undisbursed funds from approved lines of credit under a homeowners equity lending program totaled
$8,835,000 and $7,761,000, respectively. Interest rates are either fixed (ranging from 6.75% to 7.625% at September 30, 2009) or variable, based on the prime rate or prime minus 25 basis points adjusted on a monthly basis (ranging from 3.0% to
6.0% at September 30, 2009). At September 30, 2009 and 2008, unused overdraft protection and commercial lines of credits were $1.2 million and $140,000, respectively. Unless specifically cancelled by notice from the Company, these funds
represent firm commitments available to the respective borrowers on demand.



46



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CMS Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 18 - Commitments and Contingencies
(Continued)



Commitments to extend credit are agreements to lend to a customer as long as there is no violation of
any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since some of the commitments are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customers creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of
credit, is based on managements credit evaluation of the counterparty. Collateral held consists primarily of residential real estate, but may include income-producing commercial properties.

The Company also has, in the normal course of business, commitments for services and supplies. Management does not anticipate losses on any of these
transactions.

The Company is not currently a party to litigation, but may in the future become a party to litigation which arises primarily
in the ordinary course of business. In the opinion of management, the ultimate disposition of such litigation should not have a material adverse effect on the financial position or results of operations of the Company.

Note 19 - Fair Value Measurements and Fair Value of Financial Instruments

Effective July 1, 2008, the Company adopted FASBs guidance on fair value measurement. The guidance defines fair value, establishes a framework for measuring fair value, and expands disclosures
about fair value measurements. This guidance does not require any new fair value measurements. The definition of fair value retains the exchange price notion in earlier definitions of fair value. The guidance clarifies that the exchange price is the
price in an orderly transaction between market participants to sell the asset or transfer the liability in the market in which the reporting entity would transact for the asset or liability. The definition focuses on the price that would be received
to sell the asset or paid to transfer the liability (an exit price), not the price that would be paid to acquire the asset or received to assume the liability (an entry price). The guidance emphasizes that fair value is a market-based measurement,
not an entity-specific measurement.

Additional guidance concerning the effective date of FASBs statement on fair value measurement
issued in February 2008, delayed the effective date of the guidance for nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed at fair value in an entitys statements on a recurring basis (at least
annually), to fiscal years beginning after November 15, 2008 and interim periods within those fiscal years. The implementation of this guidance did not have a material impact on the Companys consolidated financial position or results of
operations.



47



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CMS Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 19 - Fair Value Measurements and Fair
Value of Financial Instruments (Continued)



The guidance on fair value measurement describes three levels of inputs that may be used to measure fair
value:



|         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|-------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Level 1: |  | Quoted prices in active markets for identical assets or liabilities.                                                                                                                                                                                                                                                                                                                                                                            
|         | 
|Level 2: |  | Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or inputs that are observable
or can be corroborated by observable market data for substantially the full term of the assets or liabilities.                                                                                                                                                
|         | 
|Level 3: |  | Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities
include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or
estimation.

In addition, the guidance requires the Company to disclose the fair value for financial assets on
both a recurring and non-recurring basis.

For financial assets measured at fair value on a recurring and non-recurring basis, the fair value
measurements by level within the fair value hierarchy at September 30, 2009 are summarized below:



|                              |  |         |        |                                                            |   |                                           |  |                                        |        |  |   |    
|----------------------------- |  | ------- | ------ | ---------------------------------------------------------- | - | ----------------------------------------- |  | -------------------------------------- | ------ |  | - | ---
|Description                   |  | Balance |        | (Level 1)Quoted Prices inActive Marketsfor IdenticalAssets |   | (Level 2)SignificantOtherObservableInputs |  | (Level 3)SignificantUnobservableInputs
|(In thousands)               
|                              |  |         |        |                                                           
|Recurring basis:              |  |         |        |                                                            |   |                                           |  |                                        |        |  |   |    
|Securities available for sale |  | $       | 58,487 |                                                            | $ |                                          |  | $                                      | 58,487 |  | $ |   
|Non-recurring basis:          |  |         |        |                                                            |   |                                           |  |                                        |        |  |   |    
|Loans held for sale           |  | $       | 635    |                                                            | $ |                                          |  | $                                      |       |  | $ | 635

The fair values of securities available for sale (carried at fair value) or held to maturity (carried
at amortized cost) are primarily determined by obtaining matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by
relying on the securities relationship to other benchmark quoted securities (Level 2 inputs).

Loans held for sale are carried at the
lower of cost or estimated fair value in the aggregate.

The following methods and assumptions were used to estimate the fair value of each
class of financial instruments at September 30, 2009 and 2008:

Cash and Cash Equivalents, Interest Receivable and Interest
Payable. The carrying amounts for cash and cash equivalents, interest receivable and interest payable approximate fair value because they mature in three months or less.



48



---

CMS Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 19 - Fair Value Measurements and Fair
Value of Financial Instruments (Continued)



Securities. The fair value for debt securities, both available for sale and held to maturity are
based on quoted market prices or dealer prices (Level 1), if available. If quoted market prices are not available, fair values are based on matrix pricing (Level 2), a mathematical technique used to value debt securities relying upon the benchmark
quoted prices.

Loans Receivable. The fair value of loans receivable is estimated by discounting the future cash flows,
using the current market rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities, of such loans.

Loans held for sale. Loans held for sale are carried at the lower of cost or estimated fair value in the aggregate.

Deposits. The fair value of demand, savings and club accounts is equal to the amount payable on demand at the reporting date. The fair value of certificates of deposit is estimated
using market rates currently offered for deposits of similar remaining maturities. The fair value estimates do not include the benefit that results from the low-cost funding provided by deposit liabilities compared to the cost of borrowing funds in
the market.

Securities sold under agreement to repurchase.The fair value of securities sold under agreements to repurchase is equal
to their carrying amount because they mature in three months or less.

Advances from FHLB. Fair value is estimated using
rates currently offered for advances of similar remaining maturities.

Commitments to extend credits. The fair value of commitments to
fund credit lines and originate or participate in loans is estimated using fees currently charged to enter into similar agreements taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For
fixed rate loan commitments, fair value also considers the difference between current levels of interest and the committed rates. The carrying value, represented by the net deferred fee arising from the unrecognized commitment, and the fair value,
determined by discounting the remaining contractual fee over the term of the commitment using fees currently charged to enter into similar agreements with similar credit risk, was not considered material at September 30, 2009 or 2008.



49



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CMS Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 19 - Fair Value Measurements and Fair
Value of Financial Instruments (Continued)



The carrying amounts and estimated fair values of financial instruments are as follows:



|                                               |  |                |         |                    |   |                |  |                    |         |  |   |        
|---------------------------------------------- |  | -------------- | ------- | ------------------ | - | -------------- |  | ------------------ | ------- |  | - | -------
|                                               |  | September 30, 
|                                               |  | 2009           |         | 2008              
|                                               |  | CarryingAmount |         | EstimatedFairValue |   | CarryingAmount |  | EstimatedFairValue
|                                               |  | (In thousands)
|Financial assets                               |  |                |         |                    |   |                |  |                    |         |  |   |        
|Cash and cash equivalents                      |  | $              | 7,304   |                    | $ | 7,304          |  | $                  | 5,402   |  | $ | 5,402  
|Securities available for sale                  |  |                | 58,487  |                    |   | 58,487         |  |                    | 10,179  |  |   | 10,179 
|Securities held to maturity                    |  |                | 156     |                    |   | 172            |  |                    | 191     |  |   | 209    
|Loans held for sale                            |  |                | 635     |                    |   | 635            |  |                    |        |  |   |       
|Loans receivable                               |  |                | 169,293 |                    |   | 181,596        |  |                    | 181,133 |  |   | 176,292
|Accrued interest receivable                    |  |                | 976     |                    |   | 976            |  |                    | 781     |  |   | 781    
|                                               |  |                |         |                   
|Financial liabilities                          |  |                |         |                    |   |                |  |                    |         |  |   |        
|Deposits                                       |  |                | 184,387 |                    |   | 184,951        |  |                    | 128,757 |  |   | 129,160
|Securities sold under agreements to repurchase |  |                |        |                    |   |               |  |                    | 614     |  |   | 614    
|FHLB Advances                                  |  |                | 34,726  |                    |   | 37,533         |  |                    | 50,767  |  |   | 51,077 
|Accrued interest payable                       |  |                | 649     |                    |   | 649            |  |                    | 363     |  |   | 363    
|Off-balance sheet financial instruments        |  |                |        |                    |   |               |  |                    |        |  |   |       

Limitations

The fair value estimates are made at a discrete point in time based on relevant market information about the financial instruments. Fair value estimates are based on judgments regarding future expected
loss experience, current economic conditions, risk characteristics of various financial instruments and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be
determined with precision. Changes in assumptions could significantly affect the estimates. Further, the foregoing estimates may not reflect the actual amount that could be realized if all of the financial instruments were offered for sale.

In addition, the fair value estimates are based on existing on-and-off balance sheet financial instruments without attempting to value the
anticipated future business and the value of assets and liabilities that are not considered financial instruments. Other significant assets and liabilities that are not considered financial assets and liabilities include premises and equipment and
advances from borrowers for taxes and insurance. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in any of the
estimates.

Finally, reasonable comparability between financial institutions may not be likely due to the wide range of permitted valuation
techniques and numerous estimates which must be made given the absence of active secondary markets for many of the financial instruments. This lack of uniform valuation methodologies introduces a greater degree of subjectivity to these estimated
fair values.



50



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CMS Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 20 - Recent Accounting Pronouncements



In February 2008, the FASB issued guidance concerning accounting for transfers of financial assets and
repurchase financing transactions. This guidance addresses the issue of whether or not these transactions should be viewed as two separate transactions or as one linked transaction. The guidance includes a rebuttable
presumption that presumes linkage of the two transactions unless the presumption can be overcome by meeting certain criteria. The guidance is effective for fiscal years beginning after November 15, 2008 and applies only to original
transfers made after that date; early adoption will not be allowed. The implementation of this standard did not have a material impact on the Companys consolidated financial position or results of operations.

In March 2008, the FASB issued guidance concerning disclosures about derivative instruments and hedging activities, an amendment to previous guidance on the
topic. This guidance requires entities that utilize derivative instruments to provide qualitative disclosures about their objectives and strategies for using such instruments, as well as any details of credit-risk-related contingent features
contained within derivatives. This guidance also requires entities to disclose additional information about the amounts and location of derivatives located within the financial statements, how the provisions of the previous guidance has been
applied, and the impact that hedges have on an entitys financial position, financial performance, and cash flows. The guidance is effective for fiscal years and interim periods beginning after November 15, 2008, with early
application encouraged. The implementation of this standard did not have a material impact on the Companys consolidated financial position or results of operations.

In April 2008, the FASB issued guidance concerning determination of the useful life of intangible assets. This guidance amends the factors that should be considered in developing renewal or extension
assumptions used to determine the useful life of a recognized intangible asset under guidance concerning goodwill and other intangible assets. The intent of this guidance is to improve the consistency between the useful life of a recognized
intangible asset under guidance concerning goodwill and other intangible assets and the period of expected cash flows used to measure the fair value of the asset under guidance concerning business combinations, and other GAAP. This guidance is
effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. Early adoption is prohibited. The implementation of this standard did not have a material impact on the
Companys consolidated financial position or results of operations.

In June 2009, the FASB issued guidance concerning accounting for
transfers of financial assets, an amendment to previous guidance on the topic. This statement prescribes the information that a reporting entity must provide in its financial reports about a transfer of financial assets; the effects of a transfer on
its financial position, financial performance and cash flows; and a transferors continuing involvement in transferred financial assets. Specifically, among other aspects, this guidance amends previous guidance concerning accounting for
transfers and servicing of financial assets and extinguishments of liabilities by removing the concept of a qualifying special-purpose entity from previous guidance on transfers and servicing and removes the exception from applying previous guidance
on transfers and servicing to variable interest entities that are qualifying special-purpose entities. It also modifies the financial-components approach used in previous guidance. This guidance is effective for fiscal years beginning after
November 15, 2009. The Company is currently evaluating the potential impact the new pronouncement will have on its consolidated financial statements.

In June 2009, the FASB issued guidance requiring an enterprise to determine whether its variable interest or interests give it a controlling financial interest in a variable interest entity. The primary
beneficiary of a variable interest entity is the enterprise that has both (1) the power to direct the activities of a variable interest entity that most significantly impact the entitys economic performance and (2) the obligation to
absorb losses of the entity that could potentially be significant to the variable interest entity or the right to receive benefits from the entity that could potentially be significant to the variable interest entity. This guidance also amends
previous guidance to require ongoing reassessments of whether an enterprise is the primary beneficiary of a variable interest entity. This guidance is effective for fiscal years beginning after November 15, 2009. The Company is currently
evaluating the potential impact the new pronouncement will have on its consolidated financial statements.



51



---

CMS Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 20 - Recent Accounting Pronouncements
(Continued)



In June 2009, the FASB issued guidance concerning the FASB accounting standards codification and the
hierarchy of GAAP. This guidance is a replacement of previous guidance concerning the hierarchy of GAAP and is designed to establish the FASB accounting standards codification as the source of authoritative accounting principles recognized by the
FASB to be applied by nongovernmental entities in preparation of financial statements in conformity with GAAP in the United States. This guidance is effective for interim and annual periods ending after September 15, 2009. The implementation of
this standard did not have a material impact on the Companys consolidated financial position or results of operations.

In November
2008, the SEC released a proposed roadmap regarding the potential use by U.S. issuers of financial statements prepared in accordance with International Financial Reporting Standards (IFRS). IFRS is a comprehensive series of accounting standards
published by the International Accounting Standards Board (IASB). Under the proposed roadmap, the Company may be required to prepare financial statements in accordance with IFRS as early as 2014. The SEC will make a determination in 2011 regarding
the mandatory adoption of IFRS. The Company is currently assessing the impact that this potential change would have on its consolidated financial statements, and it will continue to monitor the development of the potential implementation of IFRS.



52



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CMS Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 21 - Parent Only Financial Information



The following are the financial statements of the Company (Parent only) as of and for the years ended
September 30, 2009 and 2008.

CONDENSED STATEMENTS OF FINANCIAL CONDITION

(In thousands)



|                                           |  |               |        |      |   |       
|------------------------------------------ |  | ------------- | ------ | ---- | - | ------
|                                           |  | September 30,
|                                           |  | 2009          |        | 2008
|Assets                                     |  |               |        |      |   |       
|Cash and cash equivalents                  |  | $             | 863    |      | $ | 3,511 
|Investment in Bank                         |  |               | 16,819 |      |   | 14,940
|Loan receivable                            |  |               | 1,474  |      |   | 1,489 
|ESOP loan receivable                       |  |               | 1,584  |      |   | 1,599 
|Other assets                               |  |               | 194    |      |   | 180   
|                                           |  |               |        |      |   |       
|Total assets                               |  | $             | 20,934 |      | $ | 21,719
|                                           |  |               |        |      |   |       
|                                           |  |              
|Liabilities and stockholders equity       |  |               |        |      |   |       
|Other liabilities                          |  | $             | 21     |      | $ | 10    
|Stockholders equity                       |  |               | 20,913 |      |   | 21,709
|                                           |  |               |        |      |   |       
|Total liabilities and stockholders equity |  | $             | 20,934 |      | $ | 21,719
|                                           |  |               |        |      |   |       

CONDENSED STATEMENTS OF OPERATIONS

(In thousands)



|                               |  |                           |      |   |      |   |      |  
|------------------------------ |  | ------------------------- | ---- | - | ---- | - | ---- | -
|                               |  | Years Ended September 30, |     
|                               |  | 2009                      |      |   | 2008 |  
|Interest income                |  | $                         | 237  |   |      | $ | 240  |  
|Equity in (loss) of Bank       |  |                           | (425 | ) |      |   | (736 | )
|                               |  |                           |      |   |      |   |      |  
|Total loss                     |  |                           | (188 | ) |      |   | (496 | )
|                               |  |                           |      |   |      |   |      |  
|                               |  |                          
|Other non-interest expenses    |  |                           | 252  |   |      |   | 417  |  
|                               |  |                           |      |   |      |   |      |  
|                               |  |                          
|Loss before income tax benefit |  |                           | (440 | ) |      |   | (913 | )
|Income tax benefit             |  |                           | (1   | ) |      |   | (56  | )
|                               |  |                           |      |   |      |   |      |  
|Net loss                       |  | $                         | (439 | ) |      | $ | (857 | )
|                               |  |                           |      |   |      |   |      |  



53



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CMS Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 21 - Parent Only Financial Information
(Continued)



CONDENSED STATEMENTS OF CASH FLOWS

(In thousands)



|                                                |  |                           |        |   |      |   |        |  
|----------------------------------------------- |  | ------------------------- | ------ | - | ---- | - | ------ | -
|                                                |  | Years Ended September 30, |       
|                                                |  | 2009                      |        |   | 2008 |  
|Cash flows from operating activities:           |  |                           |        |   |      |   |        |  
|Net (loss)                                      |  | $                         | (439   | ) |      | $ | (857   | )
|Equity in loss of Bank                          |  |                           | 425    |   |      |   | 736    |  
|Increase in other assets                        |  |                           | (14    | ) |      |   | (100   | )
|Increase (decrease) in other liabilities        |  |                           | 11     |   |      |   | (20    | )
|                                                |  |                           |        |   |      |   |        |  
|Net cash used in operating activities           |  |                           | (17    | ) |      |   | (240   | )
|                                                |  |                           |        |   |      |   |        |  
|                                                |  |                          
|Cash flows from investing activities:           |  |                           |        |   |      |   |        |  
|Net decrease (increase) in loans receivable     |  |                           | 15     |   |      |   | (1,489 | )
|Decrease in ESOP loan receivable                |  |                           | 15     |   |      |   | 45     |  
|Capital contributed to Bank                     |  |                           | (2,000 | ) |      |   |       |  
|                                                |  |                           |        |   |      |   |        |  
|Net cash used in investing activities           |  |                           | (1,970 | ) |      |   | (1,444 | )
|                                                |  |                           |        |   |      |   |        |  
|                                                |  |                          
|Cash flows from financing activities:           |  |                           |        |   |      |   |        |  
|Purchase of treasury stock                      |  |                           | (661   | ) |      |   | (999   | )
|Funding of restricted stock awards              |  |                           |       |   |      |   | (856   | )
|                                                |  |                           |        |   |      |   |        |  
|Net cash used in financing activities           |  |                           | (661   | ) |      |   | (1,855 | )
|                                                |  |                           |        |   |      |   |        |  
|                                                |  |                          
|Net decrease in cash and cash equivalents       |  |                           | (2,648 | ) |      |   | (3,540 | )
|                                                |  |                          
|Cash and cash equivalents  beginning of period |  |                           | 3,511  |   |      |   | 7,051  |  
|                                                |  |                           |        |   |      |   |        |  
|                                                |  |                          
|Cash and cash equivalents  end of period       |  | $                         | 863    |   |      | $ | 3,511  |  
|                                                |  |                           |        |   |      |   |        |  



54



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CMS Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 22 - Quarterly Financial Data
(Unaudited)



|                                                      |  |                                            |       |   |               |   |              |  |   |               |   |  |   |       |  
|----------------------------------------------------- |  | ------------------------------------------ | ----- | - | ------------- | - | ------------ |  | - | ------------- | - |  | - | ----- | -
|                                                      |  | Year Ended September 30, 2009              |      
|                                                      |  | Dollars in thousands,except per share
data |      
|                                                      |  | FirstQuarter                               |       |   | SecondQuarter |   | ThirdQuarter |  |   | FourthQuarter |  
|Interest income                                       |  | $                                          | 2,863 |   |               | $ | 2,826        |  | $ | 2,858         |   |  | $ | 2,858 |  
|Interest expense                                      |  |                                            | 1,277 |   |               |   | 1,201        |  |   | 1,289         |   |  |   | 1,246 |  
|                                                      |  |                                            |       |   |               |   |              |  |   |               |   |  |   |       |  
|Net interest income                                   |  |                                            | 1,586 |   |               |   | 1,625        |  |   | 1,569         |   |  |   | 1,612 |  
|Provision for loan losses                             |  |                                            |      |   |               |   | 30           |  |   |              |   |  |   | 200   |  
|                                                      |  |                                            |       |   |               |   |              |  |   |               |   |  |   |       |  
|Net interest income after provision for loan losses   |  |                                            | 1,586 |   |               |   | 1,595        |  |   | 1,569         |   |  |   | 1,412 |  
|Non-interest income                                   |  |                                            | 78    |   |               |   | 94           |  |   | 184           |   |  |   | 142   |  
|Non-interest expense                                  |  |                                            | 1,652 |   |               |   | 1,655        |  |   | 1,918         |   |  |   | 2,103 |  
|                                                      |  |                                            |       |   |               |   |              |  |   |               |   |  |   |       |  
|Income (loss) before income taxes                     |  |                                            | 12    |   |               |   | 34           |  |   | (165          | ) |  |   | (549  | )
|Income taxes (benefit)                                |  |                                            | 13    |   |               |   | 19           |  |   | (46           | ) |  |   | (215  | )
|                                                      |  |                                            |       |   |               |   |              |  |   |               |   |  |   |       |  
|Net income (loss)                                     |  | $                                          | (1    | ) |               | $ | 15           |  | $ | (119          | ) |  | $ | (334  | )
|                                                      |  |                                            |       |   |               |   |              |  |   |               |   |  |   |       |  
|Net income (loss) per common share, basic and diluted |  | $                                          | 0.00  |   |               | $ | 0.01         |  | $ | (0.07         | ) |  | $ | (0.19 | )
|                                                      |  |                                            |       |   |               |   |              |  |   |               |   |  |   |       |  



|                                                    |  |                                            |       |   |               |   |       |              |  |   |               |   |  |   |       |  
|--------------------------------------------------- |  | ------------------------------------------ | ----- | - | ------------- | - | ----- | ------------ |  | - | ------------- | - |  | - | ----- | -
|                                                    |  | Year Ended September 30, 2008              |      
|                                                    |  | Dollars in thousands,except per share
data |      
|                                                    |  | FirstQuarter                               |       |   | SecondQuarter |   |       | ThirdQuarter |  |   | FourthQuarter |  
|Interest income                                     |  | $                                          | 2,457 |   |               | $ | 2,507 |              |  | $ | 2,567         |   |  | $ | 2,760 |  
|Interest expense                                    |  |                                            | 1,155 |   |               |   | 1,158 |              |  |   | 1,143         |   |  |   | 1,118 |  
|                                                    |  |                                            |       |   |               |   |       |              |  |   |               |   |  |   |       |  
|Net interest income                                 |  |                                            | 1,302 |   |               |   | 1,349 |              |  |   | 1,424         |   |  |   | 1,642 |  
|Provision for loan losses                           |  |                                            | 15    |   |               |   | 35    |              |  |   | 65            |   |  |   | 133   |  
|                                                    |  |                                            |       |   |               |   |       |              |  |   |               |   |  |   |       |  
|Net interest income after provision for loan losses |  |                                            | 1,287 |   |               |   | 1,314 |              |  |   | 1,359         |   |  |   | 1,509 |  
|Non-interest income                                 |  |                                            | 129   |   |               |   | 66    |              |  |   | 74            |   |  |   | 53    |  
|Non-interest expense                                |  |                                            | 1,565 |   |               |   | 1,594 |              |  |   | 1,692         |   |  |   | 2,193 |  
|                                                    |  |                                            |       |   |               |   |       |              |  |   |               |   |  |   |       |  
|Loss before income tax benefit                      |  |                                            | (149  | ) |               |   | (214  | )            |  |   | (259          | ) |  |   | (631  | )
|Income tax benefit                                  |  |                                            | (19   | ) |               |   | (65   | )            |  |   | (81           | ) |  |   | (231  | )
|                                                    |  |                                            |       |   |               |   |       |              |  |   |               |   |  |   |       |  
|Net (loss)                                          |  | $                                          | (130  | ) |               | $ | (149  | )            |  | $ | (178          | ) |  | $ | (400  | )
|                                                    |  |                                            |       |   |               |   |       |              |  |   |               |   |  |   |       |  
|Net (loss) per common share, basic and diluted      |  | $                                          | (0.07 | ) |               | $ | (0.08 | )            |  | $ | (0.10         | ) |  | $ | (0.21 | )
|                                                    |  |                                            |       |   |               |   |       |              |  |   |               |   |  |   |       |  



55



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CMS Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 23 - Transactions with Officers and
Directors



The Bank has had, and may be expected to have in the future, banking transactions in the ordinary course
of business with its officers, directors, and their immediate families (commonly referred to as related parties), on the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with others.
These persons were indebted to the Bank for loans totaling $902,000 and $1,203,000 at September 30, 2009 and 2008, respectively. During the year ended September 30, 2009, no new loans and $301,000 of repayments were made.



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