**United
      States**


**Securities
      and Exchange Commission**


**Washington,
      D.C. 20549**





**FORM**  **10-K**





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





For
      the
      fiscal year ended March 31, 2008





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





For
      the
      transition period from _________ to __________





Commission
      File Number: 0-52532





**SUGAR
      CREEK FINANCIAL CORP.**


(Exact
      name of registrant as specified in its charter)





**United
                States**
            
            **74-3210459**(State
                or other jurisdiction of
            
            (I.R.S.
                Employer Identification No.)incorporation
                or organization)**28
                West Broadway, Trenton, Illinois**
            
            **62293**(Address
                of principal executive offices)
            
            (Zip
                Code)




Registrant’s
      telephone number, including area code: (618) 224-9228


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


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




**Common Stock, par value
                  $0.01 per share**(Title of class)





Indicate by check mark
      if the registrant is a well-known seasoned issuer, as defined in Rule 405 of
      the
      Securities Act. Yes o No  x




Indicate
      by check mark if the registrant is not required to file reports pursuant to
      Section 13 or 15(d) of the Act. Yes o No x




Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      past 12 months (or for such shorter period that the registrant was required
      to
      file such reports), and (2) has been subject to such filing requirements for
      the
      past 90 days. Yes x   No
o




Indicate
      by check mark if disclosure of delinquent filers pursuant to Item 405 of
      Regulation S-K is not contained herein, and will not be contained, to the best
      of the registrant’s knowledge, in definitive proxy or information statements
      incorporated by reference in Part III of the Form 10-K or any amendment to
      this
      Form 10-K. x




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




Large
                Accelerated Filer o
            Accelerated
                Filer oNon-Accelerated
                Filer o
            Smaller
                Reporting Company x(Do
                not check if a smaller reporting company)





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




The
      issuer’s revenues for its most recent fiscal year were $5.2
      million.




The
      aggregate market value of the voting and non-voting common equity held by
      non-affiliates at September 30, 2007 was $3.67 million. **** Solely
      for purposes of this calculation, the shares held by Sugar Creek MHC and the
      directors and executive officers of the issuer are deemed to be held by
      affiliates.




As
      of
      June 10, 2008, the issuer had 906,879 shares of common stock
      outstanding.




DOCUMENTS
      INCORPORATED BY REFERENCE




Portions
      of the Proxy Statement for the 2008 Annual Meeting of Stockholders are
      incorporated by reference in Part III of this Form 10-K.









**INDEX**





**Page****PART
                I**Item
                1.
            
            Business
            
            1Item
                1A.
            
            Risk
                Factors
            
            13Item
                1B.
            
            Unresolved
                Staff Comments
            
            16Item
                2.
            
            Properties
            
            16Item
                3.
            
            Legal
                Proceedings
            
            16Item
                4.
            
            Submission
                of Matters to a Vote of Security Holders
            
            16**PART
                II**Item
                5.
            
            Market
                for Registrant’s Common Equity, Related Stockholder Matters and Issuer
                Purchases of Equity Securities
            
            16Item
                6.
            
            Selected
                Financial Data
            
            17Item
                7.
            
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operation
            
            17Item
                7A.
            
            Quantitative
                and Qualitative Disclosures about Market Risk
            
            31Item
                8.
            
            Financial
                Statements and Supplementary Data
            
            31Item
                9.
            
            Changes
                In and Disagreements With Accountants on Accounting and Financial
                Disclosure
            
            31Item
                9A(T).
            
            Controls
                and Procedures
            
            31Item
                9B.
            
            Other
                Information
            
            32**PART
                III**Item
                10.
            
            Directors,
                Executive Officers and Corporate Governance
            
            32Item
                11.
            
            Executive
                Compensation
            
            32Item
                12.
            
            Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters
            
            33Item
                13.
            
            Certain
                Relationships and Related Transactions, and Director
                Independence
            
            33Item
                14.
            
            Principal
                Accountant Fees and Services
            
            34Item
                15.
            
            Exhibits,
                Financial Statement Schedules
            
            34**SIGNATURES**




i




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





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





**PART
      I**





**ITEM
      1.**   **BUSINESS**





**General**




Sugar
      Creek Financial was organized as a federal corporation at the direction of
      Tempo
      Bank in connection with the reorganization of the Bank from the mutual form
      of
      organization to the mutual holding company form of organization. The
      reorganization was completed on April 3, 2007. In the reorganization, Sugar
      Creek Financial issued a total of 906,879 shares of common stock, selling
      408,095 shares of its common stock to the public and issuing 498,784 shares
      of
      its common stock to Sugar Creek MHC, the mutual holding company of the Bank.
      In
      addition, a contribution of $50,000 was made to capitalize Sugar Creek MHC.
      Costs incurred in connection with the common stock offering (approximately
      $679,000) were recorded as a reduction of the proceeds from the offering. Net
      proceeds from the common stock offering amounted to approximately $3.0 million,
      after deduction of conversion costs and unearned compensation of $355,000
      related to shares issued to the ESOP.





As
      a
      result of the reorganization, Tempo Bank is a wholly owned subsidiary of Sugar
      Creek Financial, which is a majority-owned subsidiary of Sugar Creek MHC. Sugar
      Creek Financial’s business activities primarily consist of the ownership of the
      outstanding capital stock of Tempo Bank. Sugar Creek Financial neither owns
      nor
      leases any property but instead uses the premises, equipment and other property
      of Tempo Bank with the payment of appropriate rental fees, under the terms
      of an
      expense allocation agreement. In the future, Sugar Creek Financial may acquire
      or organize other operating subsidiaries; however, there are no current plans,
      arrangements, agreements or understandings, written or oral, to do so. Sugar
      Creek Financial has no significant assets, other than all of the outstanding
      shares of Tempo Bank and no significant liabilities. Accordingly, the
      information set forth in this report, including the consolidated financial
      statements and related financial data, relates primarily to Tempo
      Bank.




Tempo
      Bank was originally chartered in 1889 as an Illinois state-chartered mutual
      building and loan association named “Trenton Building and Loan Association.”
Tempo Bank converted to a federally chartered savings bank in 1989 and changed
      its name to “Tempo Bank, A Federal Savings Bank.” Tempo Bank adopted its present
      name in October 2006.




Sugar
      Creek MHC is our federally chartered mutual holding company parent. As a mutual
      holding company, Sugar Creek MHC is a non-stock company that has as its members
      the depositor and certain borrowers of Tempo Bank. Sugar Creek MHC does not
      engage in any business activity other than owning a majority of the common
      stock
      of Sugar Creek Financial.





Our
      website address is www.tempobank.com. Information on our website should not
      be
      considered a part of this Form 10-K.




1




**Market
      Areas**





We
      are
      headquartered in Trenton, Illinois. In addition to our main office, we operate
      a
      full-service branch office in Breese, Illinois. Trenton and Breese are in
      Clinton County, Illinois, approximately 35 miles east of St. Louis, Missouri.
      Historically, substantially all of our loans were made to borrowers who resided
      within approximately 18 miles of our main office, which includes the communities
      in Clinton County, eastern St. Clair County and southeastern Madison
      County.




The
      communities served by Tempo Bank are economically diverse. The communities
      in
      Clinton County and southeastern Madison County are generally rural and have an agriculturally-based economy. St. Clair County,
      Illinois is immediately due east of St. Louis, Missouri and is home to Scott
      Air
      Force Base. The communities that we serve in eastern St. Clair County were
      once
      dominated by agriculture. In the past several years, however, as the St. Louis
      metropolitan area has expanded in Illinois, the communities in eastern St.
      Clair
      County have experienced economic expansion and now consist of a diverse blend
      of
      industries, urban centers and significant corporate investment.





**Competition**





We
      face
      significant competition for the attraction of deposits and origination of loans.
      Our most direct competition for deposits has historically come from the many
      financial institutions operating in our market area and, to a lesser extent,
      from other financial service companies such as brokerage firms, credit unions
      and insurance companies. Several large holding companies operate banks in our
      market area, including Bank of America, U.S. Bancorp and Regions Financial
      Corporation. These institutions are significantly larger than us and, therefore,
      have significantly greater resources. We also face competition for investors’
funds from money market funds, mutual funds and other corporate and government
      securities. At June 30, 2007, which is the most recent date for which data
      is
      available from the Federal Deposit Insurance Corporation, we held 7.01% of
      the
      deposits in Clinton County, Illinois, which was the sixth largest market share
      out of 12 institutions with offices in Clinton County.





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





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





**Lending
      Activities**




***One-
      to Four-Family Residential Loans*** **.** We offer
      three types of residential mortgage loans: fixed-rate loans, balloon loans
      and
      adjustable-rate loans. We offer fixed-rate mortgage loans with terms of 10,
      15
      or 30 years and balloon mortgage loans with terms of three, five, 10 or 15
      years. We offer adjustable-rate mortgage loans with interest rates and payments
      that adjust annually or every three years. Interest rates and payments on our
      adjustable-rate loans generally are adjusted to a rate equal to a percentage
      above the one year U.S. Treasury index. The maximum amount by which the interest
      rate may be increased or decreased is generally 2.0% per adjustment period
      and
      the lifetime interest rate cap is generally 6.0% over the initial interest
      rate
      of the loan. Our current practice is to retain all mortgage loans that we
      originate in our loan portfolio.




Borrower
      demand for adjustable-rate or balloon loans compared to fixed-rate loans is
      a
      function of the level of interest rates, the expectations of changes in the
      level of interest rates, and the difference between the interest rates and
      loan
      fees offered for fixed-rate mortgage loans as compared to the interest rates
      and
      loan fees for adjustable-rate or balloon loans. The relative amount of
      fixed-rate, balloon and adjustable-rate mortgage loans that can be originated
      at
      any time is largely determined by the demand for each in a competitive
      environment. The loan fees, interest rates and other provisions of mortgage
      loans are determined by us on the basis of our own pricing criteria and
      competitive market conditions.




2




While
      one- to four-family residential real estate loans are normally originated with
      up to 30-year terms, such loans typically remain outstanding for substantially
      shorter periods because borrowers often prepay their loans in full either upon
      sale of the property pledged as security or upon refinancing the original loan.
      Therefore, average loan maturity is a function of, among other factors, the
      level of purchase and sale activity in the real estate market, prevailing
      interest rates and the interest rates payable on outstanding loans. We do not
      offer loans with negative amortization and generally do not offer interest
      only
      loans.





We
      generally do not make high loan-to-value loans (defined as loans with a
      loan-to-value ratio of 90% or more) without private mortgage insurance. We
      require all properties securing mortgage loans to be appraised by a
      board-approved independent appraiser. We generally require title insurance
      on
      all first mortgage loans. Borrowers must obtain hazard insurance, and flood
      insurance is required for loans on properties located in a flood
      zone.





***Commercial
      and Multi-Family Real Estate Loans*** **.** We
      occasionally offer fixed-rate, balloon and adjustable-rate mortgage loans
      secured by commercial and multi-family real estate. Our commercial and
      multi-family real estate loans are generally secured by apartment, retail,
      restaurant and office/warehouse buildings.





While
      the
      terms of our commercial and multi-family real estate loans are set on a case
      by
      case basis, generally these loans are balloon loans with terms of three, five,
      10 or 15 years. Loans are secured by first mortgages, and amounts generally
      do
      not exceed 85% of the property’s appraised value.





As
      of
      March 31, 2008, our largest commercial or multi-family real estate loan
      was **** $774,000
      and was secured by a commercial building. This loan was performing in accordance
      with its original terms at March 31, 2008.





***Land
      Loans*** ***.***  We
      also
      originate fixed-rate loans secured by unimproved land. Our land loans generally
      have terms of 15 years or less and loan amounts generally do not exceed 85%
      of
      the lesser of the appraised value or the purchase price. As of March 31, 2008,
      our largest land loan was $226,000 and was secured by undeveloped land. This
      loan was performing in accordance with its original terms at March 31,
      2008.





***Consumer
      Loans*** **.** Our
      consumer loans consist primarily of new and used automobile loans and home
      equity loans. We occasionally make loans secured by deposit accounts.





Our
      automobile loans have fixed interest rates and generally have terms up to five
      years for new automobiles and four years for used automobiles. We will generally
      offer automobile loans with a maximum loan-to-value ratio of 90% of the purchase
      price of the vehicle.





We
      generally offer home equity loans with a maximum combined loan to value ratio
      of
      89% or less. Home equity loans have fixed interest rates and terms that
      typically range from one to 15 years.





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





**Loan
      Underwriting Risks**




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




3




*Commercial
      and Multi-Family Real Estate Loans and Land Loans* . Loans
      secured by multi-family and commercial real estate generally have larger
      balances and involve a greater degree of risk than one- to four-family
      residential mortgage loans. Of primary concern in commercial and multi-family
      real estate lending is the borrower’s creditworthiness and the feasibility and
      cash flow potential of the project. Payments on loans secured by income
      properties often depend on successful operation and management of the
      properties. Loans
      secured by undeveloped land generally involve greater risks than residential
      mortgage lending because land loans are more difficult to evaluate. If the
      estimate of value proves to be inaccurate, in the event of default and
      foreclosure, we may be confronted with a property the value of which is
      insufficient to assure full repayment. As a result, repayment of commercial
      and
      multi-family real estate and land loans may be subject to a greater extent
      than
      residential real estate loans, to adverse conditions in the real estate market
      or the economy. In reaching a decision on whether to make a commercial or
      multi-family real estate loan or a land loan, we consider and review a global
      cash flow analysis of the borrower and consider the net operating income of
      the
      property, the borrower’s expertise, credit history and profitability and the
      value of the underlying property. We have generally required that the properties
      securing these real estate loans have debt service coverage ratios (the ratio
      of
      earnings before debt service to debt service) of at least 1.25. An environmental
      survey or environmental risk insurance is obtained when the possibility exists
      that hazardous materials may have existed on the site, or the site may have
      been
      impacted by adjoining properties that handled hazardous materials.





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




*Loan
      Originations, Purchases and Sales* . Loan
      originations come from a number of sources. The primary source of loan
      originations are real estate agents and home builders, existing customers,
      walk-in traffic, advertising and referrals from customers. We generally
      originate loans for our portfolio and generally do not purchase or sell loans
      or
      participation interests in loans.





*Loan
      Approval Procedures and Authority* . Our
      lending activities follow written, non-discriminatory, underwriting standards
      and loan origination procedures established by our board of directors and
      management. The board of directors has granted loan approval authority to
      certain officers or groups of officers up to prescribed limits, based on the
      officer’s experience and tenure. All loans over $50,000 must be approved by the
      loan committee of the board of directors.





*Loans
      to One Borrower* . The
      maximum amount that we may lend to one borrower and the borrower’s related
      entities is limited, by regulation, to generally 15% of our stated capital
      and
      reserves. At March 31, 2008, our regulatory limit on loans to one borrower
      was
      $1.3 million. At that date, our largest lending relationship under the
      regulatory limit was $891,000, secured by several single-family rental
      properties. ****





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




**Investment
      Activities**




We
      have
      legal authority to invest in various types of liquid assets, including U.S.
      Treasury obligations, securities of various federal agencies and of state and
      municipal governments, mortgage-backed securities and certificates of deposit
      of
      federally insured institutions. Within certain regulatory limits, we also may
      invest a portion of our assets in corporate securities and mutual funds. We
      also
      are required to maintain an investment in Federal Home Loan Bank of Chicago
      stock.




4




At
      March
      31, 2008, our investment portfolio totaled $1.7 million, or 1.92% of total
      assets, and consisted solely of our investment in Federal Home Loan Bank of
      Chicago stock.





Our
      investment objectives are to provide and maintain liquidity, to establish an
      acceptable level of interest rate and credit risk, to provide an alternate
      source of low-risk investments when demand for loans is weak and to generate
      a
      favorable return. Our board of directors has the overall responsibility for
      the
      investment portfolio, including approval of our investment policy. The board
      of
      directors is also responsible for implementation of the investment policy and
      monitoring our investment performance. **** Our **** board
      of
      directors reviews the status of our investment portfolio on a monthly basis,
      or
      more frequently if warranted.





**Deposit
      Activities and Other Sources of Funds**




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





***Deposit
      Accounts*** **.** Substantially all of our depositors are residents of Illinois. Deposits are
      attracted from within our market area through the offering of a broad selection
      of deposit instruments, including non-interest-bearing NOW accounts,
      interest-bearing demand accounts (such as NOW and money market accounts),
      savings accounts and certificates of deposit. In addition to accounts for
      individuals, we also offer commercial checking accounts designed for the
      businesses operating in our market area. We do not have any brokered deposits.





Deposit
      account terms vary according to the minimum balance required, the time periods
      the funds must remain on deposit and the interest rate, among other factors.
      In
      determining the terms of our deposit accounts, we consider the rates offered
      by
      our competition, our liquidity needs, profitability to us, and customer
      preferences and concerns. We generally review our deposit mix and pricing
      weekly. Our deposit pricing strategy has generally been to offer competitive
      rates and to be in the middle of the market for rates on all types of deposit
      products.




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





**Personnel**





As
      of
      March 31, 2008, we had 17 full-time employees and four part-time employees,
      none
      of whom is represented by a collective bargaining unit. We believe our
      relationship with our employees is good.





**Subsidiaries**





Sugar
      Creek Financial’s only direct subsidiary is Tempo Bank. Tempo Bank does not have
      any subsidiaries.




5




**Regulation
      and Supervision**


**General**





As
      a
      federal mutual holding company, Sugar Creek MHC is required by federal law
      to
      report to, and otherwise comply with the rules and regulations of, the OTS.
      Sugar Creek Financial, as a federally chartered corporation, is also subject
      to
      reporting to and regulation by the OTS. Tempo Bank is subject to extensive
      regulation, examination and supervision by the OTS, as its primary federal
      regulator, and the FDIC, as the deposit insurer. Tempo Bank is a member of
      the
      FHLB System and, with respect to deposit insurance, of the Deposit Insurance
      Fund managed by the FDIC. Tempo Bank must file reports with the OTS and the
      FDIC
      concerning its activities and financial condition in addition to obtaining
      regulatory approvals prior to entering into certain transactions such as mergers
      with, or acquisitions of, other savings institutions. The OTS and/or the FDIC
      conduct periodic examinations to test the Bank’s safety and soundness and
      compliance with various regulatory requirements. This regulation and supervision
      establishes a comprehensive framework of activities in which an institution
      can
      engage and is intended primarily for the protection of the insurance fund and
      depositors. The regulatory structure also gives the regulatory authorities
      extensive discretion in connection with their supervisory and enforcement
      activities and examination policies, including policies with respect to the
      classification of assets and the establishment of adequate loan loss reserves
      for regulatory purposes. Any change in such regulatory requirements and
      policies, whether by the OTS, the FDIC or Congress, could have a material
      adverse impact on Sugar Creek MHC, Sugar Creek Financial, **** Tempo
      Bank and their operations. Certain regulatory requirements applicable to Sugar
      Creek MHC, Sugar Creek Financial and Tempo Bank are referred to below or
      elsewhere herein. The description of statutory provisions and regulations
      applicable to savings institutions and their holding companies set forth below
      and elsewhere in this document does not purport to be a complete description
      of
      such statutes and regulations and their effects on Sugar Creek MHC, Sugar Creek
      Financial and Tempo Bank and is qualified in its entirety by reference to the
      actual statutes and regulations.





**Holding
      Company Regulation**





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





***Activities
      Restrictions Applicable to Mutual Holding Companies.*** Pursuant
      to federal law and OTS regulations, a mutual holding company, such as Sugar
      Creek MHC, may engage in the following activities: (i) investing in the stock
      of
      a savings association; (ii) acquiring a mutual association through the merger
      of
      such association into a savings association subsidiary of such holding company
      or an interim savings association subsidiary of such holding company; (iii)
      merging with or acquiring another holding company, one of whose subsidiaries
      is
      a savings association; (iv) investing in a corporation, the capital stock of
      which is available for purchase by a savings association under federal law
      or
      under the law of any state where the subsidiary savings association or
      associations share their home offices; (v) furnishing or performing management
      services for a savings association subsidiary of such company; (vi) holding,
      managing or liquidating assets owned or acquired from a savings subsidiary
      of
      such company; (vii) holding or managing properties used or occupied by a savings
      association subsidiary of such company properties used or occupied by a savings
      association subsidiary of such company; (viii) acting as trustee under deeds
      of
      trust; (ix) any other activity (A) that the Federal Reserve Board, by
      regulation, has determined to be permissible for bank holding companies under
      Section 4(c) of the Bank Holding Company Act, unless the OTS, by regulation,
      prohibits or limits any such activity for savings and loan holding companies;
      or
      (B) in which multiple savings and loan holding companies were authorized (by
      regulation) to directly engage on March 5, 1987; and (x) purchasing, holding,
      or
      disposing of stock acquired in connection with a qualified stock issuance if
      the
      purchase of such stock by such savings and loan holding company is approved
      by
      the OTS.





The
      Gramm-Leach Bliley Act of 1999 was designed to modernize the regulation of
      the
      financial services industry by expanding the ability of bank holding companies
      to affiliate with other types of financial services companies such as insurance
      companies and investment banking companies. The legislation also expanded the
      activities permitted for mutual savings and loan holding companies to also
      include any activity permitted a “financial holding company” under the
      legislation, including a broad array of insurance and securities
      activities.




6




Federal
      law prohibits a savings and loan holding company, including a federal mutual
      holding company, from, directly or indirectly or through one or more
      subsidiaries, acquiring more than 5% of the voting stock of another savings
      institution, or holding company thereof, without prior written approval of
      the
      OTS from acquiring or retaining, with certain exceptions, more than 5% of a
      non-subsidiary holding company or savings association. A savings and loan
      holding company is also prohibited from acquiring more than 5% of a company
      engaged in activities other than those authorized by federal law; or acquiring
      or retaining control of a depository institution that is not insured by the
      FDIC. In evaluating applications by holding companies to acquire savings
      institutions, the OTS must consider the financial and managerial resources
      and
      future prospects of the company and institution involved, the effect of the
      acquisition on the risk to the insurance funds, the convenience and needs of
      the
      community and competitive factors.





The
      OTS
      is prohibited from approving any acquisition that would result in a multiple
      savings and loan holding company controlling savings institutions in more than
      one state, except: (i) the approval of interstate supervisory acquisitions
      by savings and loan holding companies; and (ii) the acquisition of a
      savings institution in another state if the laws of the state of the target
      savings institution specifically permit such acquisitions. The states vary
      in
      the extent to which they permit interstate savings and loan holding company
      acquisitions.





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





Although
      savings and loan holding companies are not currently subject to regulatory
      capital requirements or specific restrictions on the payment of dividends or
      other capital distributions, federal regulations do prescribe such restrictions
      on subsidiary savings institutions as described below. Tempo Bank must notify
      the OTS 30 days before declaring any dividend. In addition, the financial impact
      of a holding company on its subsidiary institution is a matter that is evaluated
      by the OTS and the agency has authority to order cessation of activities or
      divestiture of subsidiaries deemed to pose a threat to the safety and soundness
      of the institution.





***Stock
      Holding Company Subsidiary Regulation.*** The OTS
      has adopted regulations governing the two-tier mutual holding company form
      of
      organization and mid-tier stock holding companies that are controlled by mutual
      holding companies. We have adopted this form of organization, where Sugar Creek
      Financial is the stock holding company subsidiary of Sugar Creek MHC. Under
      these rules, Sugar Creek Financial holds all the shares of Tempo Bank and issued
      the majority of its own shares to Sugar Creek MHC. In addition, Sugar Creek
      Financial is permitted to engage in activities that are permitted for Sugar
      Creek MHC subject to the same terms and conditions. Finally, OTS regulations
      maintain that Sugar Creek Financial must be federally chartered for supervisory
      reasons.





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





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




7




***Acquisition
      of the Company.*** **** Under
      the
      Federal Change in Control Act , a notice must be submitted to the OTS if any
      person (including a company), or group acting in concert, seeks to acquire
      “control” of a savings and loan holding company or savings institution. Under
      certain circumstances, a change of control may occur, and prior notice is
      required, upon the acquisition of 10% or more of the outstanding voting stock
      of
      the company or institution, unless the OTS has found that the acquisition will
      not result in a change of control of the Company. Under the Change in Control
      Act, the OTS generally has 60 days from the filing of a complete notice to
      act,
      taking into consideration certain factors, including the financial and
      managerial resources of the acquirer and the anti-trust effects of the
      acquisition. Any company that acquires control would then be subject to
      regulation as a savings and loan holding company.





**Federal
      Savings Institution Regulation**





***Business
      Activities.*** The
      activities of federal savings banks are governed by federal law and regulations.
      These laws and regulations delineate the nature and extent of the activities
      in
      which federal savings banks may engage. In particular, certain lending authority
      for federal savings institutions, *e.g.* ,
      commercial, non-residential real property loans and consumer loans, is limited
      to a specified percentage of the institution’s capital or assets.





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





The
      risk-based capital standard for savings institutions requires the maintenance
      of
      Tier 1 (core) and total capital (which is defined as core capital and
      supplementary capital) to risk-weighted assets of at least 4% and 8%,
      respectively. In determining the amount of risk-weighted assets, all assets,
      including certain off-balance sheet assets, recourse obligations, residual
      interests and direct credit substitutes, are multiplied by a risk-weight factor
      of 0% to 100%, assigned by the OTS capital regulation based on the risks
      believed inherent in the type of asset. Core (Tier 1) capital is generally
      defined as common stockholders’ equity (including retained earnings), certain
      non-cumulative perpetual preferred stock and related surplus, and minority
      interests in equity accounts of consolidated subsidiaries less intangibles
      other
      than certain mortgage servicing rights and credit card relationships. The
      components of supplementary capital (Tier 2 capital) currently include
      cumulative preferred stock, long-term perpetual preferred stock, mandatory
      convertible securities, subordinated debt and intermediate preferred stock,
      the
      allowance for loan and lease losses, limited to a maximum of 1.25% of
      risk-weighted assets, and up to 45% of unrealized gains on available-for-sale
      equity securities with readily determinable fair market values. Overall, the
      amount of supplementary capital included as part of total capital cannot exceed
      100% of core capital.





The
      OTS
      also has authority to establish individual minimum capital requirements in
      appropriate cases upon a determination that an institution’s capital level is or
      may become inadequate in light of the particular circumstances. At March 31,
      2008, Tempo Bank met each of its capital requirements.





***Prompt
      Corrective Regulatory Action.*** ** The OTS
      is required to take certain supervisory actions against undercapitalized
      institutions, the severity of which depends upon the institution’s degree of
      undercapitalization. Generally, a savings institution that has a ratio of total
      capital to risk weighted assets of less than 8%, a ratio of Tier 1 (core)
      capital to risk-weighted assets of less than 4% or a ratio of core capital
      to
      total assets of less than 4% (3% or less for institutions with the highest
      examination rating) is considered to be “undercapitalized.” A savings
      institution that has a total risk-based capital ratio less than 6%, a Tier
      1
      capital ratio of less than 3% or a leverage ratio that is less than 3% is
      considered to be “significantly undercapitalized” and a savings institution that
      has a tangible capital to assets ratio equal to or less than 2% is deemed to
      be
“critically undercapitalized.” Subject to a narrow exception, the OTS is
      required to appoint a receiver or conservator within specified time frames
      for
      an institution that is “critically undercapitalized.” The regulation also
      provides that a capital restoration plan must be filed with the OTS within
      45
      days of the date a savings institution is deemed to have received notice that
      it
      is “undercapitalized,” “significantly undercapitalized” or “critically
      undercapitalized.” Compliance with the plan must be guaranteed by any parent
      holding company in an amount of up to the lesser of 5% of the savings
      association’s total assets when it was deemed to be undercapitalized or the
      amount necessary to achieve compliance with applicable capital regulations.
      In
      addition, numerous mandatory supervisory actions become immediately applicable
      to an undercapitalized institution, including, but not limited to, increased
      monitoring by regulators and restrictions on growth, capital distributions
      and
      expansion. The OTS could also take any one of a number of discretionary
      supervisory actions, including the issuance of a capital directive and the
      replacement of senior executive officers and directors. Significantly and
      undercapitalized institutions are subject to additional mandatory and
      discretionary restrictions.




8




***Insurance
      of Deposit Accounts.*** Tempo
      Bank’s deposits are insured up to applicable limits by the Deposit Insurance
      Fund of the FDIC. The Deposit Insurance Fund is the successor to the Bank
      Insurance Fund and the Savings Association Insurance Fund, which were merged
      in
      2006. The FDIC amended its risk-based assessment system in 2007 to implement
      authority granted by the Federal Deposit Insurance Reform Act of 2005 (“Reform
      Act”). Under the revised system, insured institutions are assigned to one of
      four risk categories based on supervisory evaluations, regulatory capital levels
      and certain other factors. An institution’s assessment rate depends upon the
      category to which it is assigned. Risk category I, which contains the least
      risky depository institutions, includes more than 90% of all institutions.
      Unlike the other categories, Risk Category I contains further risk
      differentiation based on the FDIC’s analysis of financial ratios, examination
      component ratings and other information. Assessment rates are determined by
      the
      FDIC and currently range from five to seven basis points for the healthiest
      institutions (Risk Category I) to 43 basis points of assessable deposits for
      the
      riskiest (Risk Category IV). The FDIC may adjust rates uniformly from one
      quarter to the next, except that no single adjustment can exceed three basis
      points. No institution may pay a dividend if in default of the FDIC
      assessment.





The
      Reform Act also provided for a one-time credit for eligible institutions based
      on their assessment base as of December 31, 1996. Subject to certain limitations
      with respect to institutions that are exhibiting weaknesses, credits could
      be
      used to offset assessments until exhausted. Tempo Bank’s one-time credit
      approximated $46,000, of which $37,000 was used to offset assessments during
      the
      2008 fiscal year, and $9,000 is still available for future use. The Reform
      Act
      also provided for the possibility that the FDIC may pay dividends to insured
      institutions once the Deposit Insurance fund reserve ratio equals or exceeds
      1.35% of estimated insured deposits.





In
      addition to the assessment for deposit insurance, institutions are required
      to
      make payments on bonds issued in the late 1980s by the Financing Corporation
      to
      recapitalize a predecessor deposit insurance fund.





The
      Reform Act provided the FDIC with authority to adjust the Deposit Insurance
      Fund
      ratio to insured deposits within a range of 1.15% and 1.50%, in contrast to
      the
      prior statutorily fixed ratio of 1.25%. The ratio, which is viewed by the FDIC
      as the level that the fund should achieve, was established by the agency at
      1.25%, subject to future adjustments.





For
      the
      year ended March 31, 2008, Tempo Bank paid an annual deposit insurance
      assessment to the FDIC of $7,000. Based on the present level of deposits and
      assessment rate, management expects its annual deposit insurance assessment
      for
      the year ended March 31, 2009 will be approximately $40,000.





The
      FDIC
      has authority to increase insurance assessments. A significant increase in
      insurance premiums would likely have an adverse effect on the operating expenses
      and results of operations of Tempo Bank. Management cannot predict what
      insurance assessment rates will be in the future.





Insurance
      of deposits may be terminated by the FDIC upon a finding that the institution
      has engaged in unsafe or unsound practices, is in an unsafe or unsound condition
      to continue operations or has violated any applicable law, regulation, rule,
      order or condition imposed by the FDIC or the OTS. The management of Tempo
      Bank
      does not know of any practice, condition or violation that might lead to
      termination of deposit insurance.




9




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





***QTL
      Test.*** Federal
      law requires savings institutions to meet a qualified thrift lender test. Under
      the test, a savings association is required to either qualify as a “domestic
      building and loan association” under the Internal Revenue Code or maintain at
      least 65% of its “portfolio assets” (total assets less: (i) specified liquid
      assets up to 20% of total assets; (ii) intangibles, including goodwill; and
      (iii) the value of property used to conduct business) in certain “qualified
      thrift investments” (primarily residential mortgages and related investments,
      including certain mortgage-backed securities) in at least 9 months out of each
      12 month period. Legislation has expanded the extent to which education loans,
      credit card loans and small business loans may be considered “qualified thrift
      investments.”





A
      savings
      institution that fails the qualified thrift lender test is subject to certain
      operating restrictions and may be required to convert to a bank charter. As
      of
      March 31, 2008, Tempo Bank met the qualified thrift lender test.





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





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





***Transactions
      with Related Persons.*** Tempo
      Bank’s authority to engage in transactions with “affiliates” ( *e.g* .,
      any
      entity that controls or is under common control with an institution, including
      Sugar Creek MHC, Sugar Creek Financial and their non-savings institution
      subsidiaries) is limited by federal law. The aggregate amount of covered
      transactions with any individual affiliate is limited to 10% of the capital
      and
      surplus of the savings institution. The aggregate amount of covered transactions
      with all affiliates is limited to 20% of the savings institution’s capital and
      surplus. Certain transactions with affiliates are required to be secured by
      collateral in an amount and of a type specified by federal law. The purchase
      of
      low quality assets from affiliates is generally prohibited. The transactions
      with affiliates must be on terms and under circumstances that are at least
      as
      favorable to the institution as those prevailing at the time for comparable
      transactions with non-affiliated companies. In addition, savings institutions
      are prohibited from lending to any affiliate that is engaged in activities
      that
      are not permissible for bank holding companies and no savings institution may
      purchase the securities of any affiliate other than a subsidiary.





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




10




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





***Assessments.*** **** Savings
      institutions are required to pay assessments to the OTS to fund the agency’s
      operations. The general assessments, paid on a semi-annual basis, are computed
      based upon the savings institution’s (including consolidated subsidiaries) total
      assets, condition and complexity of portfolio.





**Federal
      Home Loan Bank System**





Tempo
      Bank is a member of the FHLB System, which consists of 12 regional FHLBs. The
      FHLB provides a central credit facility primarily for member institutions.
      Tempo
      Bank, as a member of the FHLB, is required to acquire and hold shares of capital
      stock in that FHLB. Tempo Bank was in compliance with this requirement at March
      31, 2008.





The
      FHLBs
      are required to provide funds for the resolution of insolvent thrifts in the
      late 1980s and to contribute funds for affordable housing programs. These
      requirements could result in the FHLBs imposing a higher rate of interest on
      advances to their members and reduce Tempo Bank’s net interest income. See
“Management’s Discussion and Analysis of Financial Condition and Results of
      Operation-Balance Sheet Analysis-Investments” for discussion of suspension of
      dividends on FHLB of Chicago stock.





**Federal
      Reserve System**





The
      Federal Reserve Board regulations require savings institutions to maintain
      non-interest earning reserves against their transaction accounts (primarily
      Negotiable Order of Withdrawal (NOW) and regular checking accounts). The
      regulations generally provide that reserves be maintained against aggregate
      transaction accounts as follows: a 3% reserve ratio is assessed on net
      transaction accounts up to and including $43.9 million; a 10% reserve ratio
      is
      applied above $43.9 million. The first $9.3 million of otherwise reservable
      balances (subject to adjustments by the Federal Reserve Board) are exempted
      from
      the reserve requirements. The amounts are adjusted annually. Tempo Bank complies
      with the foregoing requirements.





**Federal
      Income Taxation**





***General.*** ****** We
      report
      our income on a fiscal year basis using the accrual method of accounting. The
      federal income tax laws apply to us in the same manner as to other corporations
      with some exceptions, including particularly our reserve for bad debts discussed
      below. The following discussion of tax matters is intended only as a summary
      and
      does not purport to be a comprehensive description of the tax rules applicable
      to us. Our federal income tax returns have been either audited or closed under
      the statute of limitations through tax year 2003. For its 2008 fiscal year,
      Tempo Bank’s maximum federal income tax rate was 34%.





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




11




***Bad
      Debt Reserves.*** ****** Prior
      to
      1996, thrift institutions that qualified under certain definitional tests and
      other conditions of the Internal Revenue Code were permitted to use certain
      favorable provisions to calculate their deductions from taxable income for
      annual additions to their bad debt reserve. A reserve could be established
      for
      bad debts on qualifying real property loans, generally secured by interests
      in
      real property improved or to be improved, under the percentage of taxable income
      method or the experience method. The reserve for nonqualifying loans was
      computed using the experience method. Federal legislation enacted in 1996
      repealed the reserve method of accounting for bad debts and the percentage
      of
      taxable income method for tax years beginning after 1995 and require savings
      institutions to recapture or take into income certain portions of their
      accumulated bad debt reserves. Tempo Bank uses the experience method bad debt
      deduction. Approximately $888,000 **** of
      our
      accumulated bad debt reserves would not be recaptured into taxable income unless
      Tempo Bank makes a “non-dividend distribution” to Sugar Creek Financial as
      described below.





***Distributions.*** If
      Tempo
      Bank makes “non-dividend distributions” to Sugar Creek Financial, the
      distributions will be considered to have been made from Tempo Bank’s
      unrecaptured tax bad debt reserves, including the balance of its reserves as
      of
      March 31, 1988, to the extent of the “non-dividend distributions,” and then from
      Tempo Bank’s supplemental reserve for losses on loans, to the extent of those
      reserves, and an amount based on the amount distributed, but not more than
      the
      amount of those reserves, will be included in Tempo Bank’s taxable income.
      Non-dividend distributions include distributions in excess of Tempo Bank’s
      current and accumulated earnings and profits, as calculated for federal income
      tax purposes, distributions in redemption of stock, and distributions in partial
      or complete liquidation. Dividends paid out of Tempo Bank’s current or
      accumulated earnings and profits will not be so included in Tempo Bank’s taxable
      income.





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





**State
      Taxation**





***Illinois
      Taxation.*** ****** Sugar
      Creek MHC, Sugar Creek Financial and Tempo Bank are subject to Illinois income
      tax at the rate of 7.2% **** on
      its
      taxable income, before net operating loss deductions and special deductions
      for
      federal income tax purposes. For this purpose, “taxable income” generally means
      federal taxable income subject to certain adjustments (including addition of
      interest income on state and municipal obligations).




12




**Executive
      Officers of the Registrant**





The
      executive officers of Sugar Creek MHC, Sugar Creek Financial and Tempo Bank
      are
      elected annually by the board of directors and serve at the board’s discretion.
      The executive officers of Sugar Creek MHC, Sugar Creek Financial and Tempo
      Bank
      are:





**Name**
            
            **Position**Robert J. Stroh, Jr.
            
            Chairman of the Board, Chief Executive Officer and Chief Financial OfficerFrancis J. Eversman
            
            President and Chief Operating OfficerPhyllis J. Brown
            
            Vice President
              and Corporate Secretary





Below
      is
      information regarding our executive officer who is not also a director. Ms.
      Brown’s age set forth below is as of March 31, 2008.





*Phyllis
      J. Brown* has
      served as Vice President and Corporate Secretary of Tempo Bank since 1993 and
      of
      Sugar Creek MHC and Sugar Creek Financial since their formation in April 2007.
      Age 64.





**ITEM
      1A.**   **RISK
      FACTORS**





**Changes
      in interest rates may hurt our earnings.**





Short-term
      market interest rates (which we use as a guide to price our deposits) have
      until
      recently risen from historically low levels, while longer-term market interest
      rates (which we use as a guide to price our longer-term loans) have
      not.  This “flattening” of the market yield curve has had a negative
      impact on our net interest margin, which has reduced our
      profitability.  For the years ended March 31, 2008 and 2007,
      respectively, our net interest margin was 2.35% compared to
      2.38%.  Recently, however, the U.S. Federal Reserve decreased its
      target for the federal funds rate from 5.25% to 2.00%. If short-term interest
      rates rise, and if rates on our deposits reprice upwards faster than the rates
      on our long-term loans and investments, we would experience compression of
      our
      interest rate spread and net interest margin, which would have a negative effect
      on our profitability. Decreases in interest rates can result in increased
      prepayments of loans, as borrowers refinance to reduce their borrowing
      costs.  Under these circumstances, we are subject to reinvestment risk
      as we may have to redeploy such loan proceeds into lower-yielding assets, which
      might also negatively impact our income.





**A
      downturn in the local economy could hurt our profits.**





Nearly
      all of our loans are secured by real estate or made to businesses in Clinton
      County, southwestern Madison County and eastern St. Clair County, Illinois.
      The
      Clinton and Madison County economies are significantly affected by agriculture
      and agriculture-related industries and offer limited opportunity for significant
      growth in loan originations or deposits. The economy of eastern St. Clair County
      and the surrounding communities is heavily dependent on Scott Air Force Base.
      In
      addition, several defense contractors are currently located in communities
      near
      Scott Air Force Base. As a result, a downturn in the local economy, particularly
      local agriculture or the downsizing or closing of Scott Air Force Base, could
      cause significant increases in nonperforming loans, which would hurt our
      earnings. We have no reason to believe that Scott Air Force Base might be
      downsized or closed. In addition, adverse employment conditions may have a
      negative effect on the ability of our borrowers to make timely repayments of
      their loans and on our ability to make new loans, which would have an adverse
      impact on our earnings.





**As
      a result of our concentration on one- to four-family residential real estate
      lending, a downturn in real estate values could hurt our
      profits.**





At
      March
      31, 2008, $69.9 million, or 87.3%, of our loan portfolio consisted of one-
      to
      four-family residential real estate loans. Although these types of loans
      generally expose a lender to less risk of non-payment and loss than commercial
      and construction loans, the market for loans on one- to four-family homes is
      significantly dependent on real estate values. A decline in real estate values
      could cause some of our one- to four-family residential real estate loans to
      become inadequately collateralized, which would expose us to a greater risk
      of
      loss. Additionally, a decline in real estate values could result in a decline
      in
      the origination of such loans.




13





**If
      our allowance for loan losses is not sufficient to cover actual loan losses,
      our
      earnings will decrease.**





We
      make
      various assumptions and judgments about the collectibility of our loan
      portfolio, including the creditworthiness of our borrowers and the value of
      the
      real estate and other assets serving as collateral for the repayment of many
      of
      our loans. In determining the amount of the allowance for loan losses, we review
      our loans and our loss and delinquency experience, and we evaluate economic
      conditions. If our assumptions are incorrect, our allowance for loan losses
      may
      not be sufficient to cover losses inherent in our loan portfolio, resulting
      in
      additions to our allowance. Our allowance for loan losses was 0.16% of total
      gross loans at March 31, 2008, and material additions to our allowance could
      materially decrease our net income. In addition, bank regulators periodically
      review our allowance for loan losses and may require us to increase our
      provision for loan losses or recognize further loan charge-offs. Any increase
      in
      our allowance for loan losses or loan charge-offs as required by these
      regulatory authorities might have a material adverse effect on our financial
      condition and results of operations.





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





We
      face
      intense competition in making loans, attracting deposits and hiring and
      retaining experienced employees. This competition has made it more difficult
      for
      us to make new loans and attract deposits. Price competition for loans and
      deposits sometimes results in us charging lower interest rates on our loans
      and
      paying higher interest rates on our deposits, which reduces our net interest
      income. Competition also makes it more difficult and costly to attract and
      retain qualified employees. Some of the institutions with which we compete
      have
      substantially greater resources and lending limits than we have and may offer
      services that we do not provide. We expect competition to increase in the future
      as a result of legislative, regulatory and technological changes and the
      continuing trend of consolidation in the financial services industry. Our
      profitability depends upon our continued ability to compete successfully in
      our
      market area.





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





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





**Issuance
      of shares for benefit programs may dilute your ownership
      interest.**





At
      the
      2007 Annual Meeting of Stockholders, stockholders approved the Sugar Creek
      Financial Corp. 2007 Equity Incentive Plan. We intend to issue shares to our
      officers, employees and directors through the equity incentive plan. We may
      fund
      the equity incentive plan through the purchase of common stock in the open
      market, subject to regulatory restrictions, by a trust established in connection
      with the equity incentive plan, or from authorized but unissued shares of Sugar
      Creek Financial common stock. If the restricted stock awards under the equity
      incentive plan are funded from authorized but unissued stock, your ownership
      interest in the shares could be diluted by up to approximately 1.9%, assuming
      awards of common stock equal to 1.96% of the shares issued in the offering,
      including shares issued to Sugar Creek MHC, are awarded under the equity
      incentive plan. If the shares issued upon the exercise of stock options under
      the equity incentive plan are issued from authorized but unissued stock, your
      ownership interest in the shares could be diluted by up to approximately 4.7%,
      assuming stock option grants equal to 4.9% of the shares issued in the offering,
      including shares issued to Sugar Creek MHC, are granted under the equity
      incentive plan.


14





**Additional
      expenses from our 2007 Equity Incentive Plan will adversely affect our
      profitability.**





Our
      non-interest expenses are likely to increase as a result of additional annual
      employee compensation expenses stemming from options and shares granted to
      employees, directors and executives under our 2007 Equity Incentive Plan. These
      additional expenses will adversely affect our profitability. We cannot determine
      the actual amount of these new stock-related compensation expenses at this
      time
      because applicable accounting practices generally require that they be based
      on
      the fair market value of the options or shares of common stock at the date
      of
      the grant; however, we expect them to be material. We recognize expenses for
      restricted stock awards and stock options over the vesting period of awards
      made
      to recipients.





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




Sugar
      Creek MHC owns a majority of Sugar Creek Financial’s common stock and, through
      its board of directors, is able to exercise voting control over most matters
      put
      to a vote of stockholders. The same directors and officers who manage Sugar
      Creek Financial and Tempo Bank also manage Sugar Creek MHC. As a federally
      chartered mutual holding company, the board of directors of Sugar Creek MHC
      must
      ensure that the interests of depositors of Tempo Bank are represented and
      considered in matters put to a vote of stockholders of Sugar Creek Financial.
      Therefore, the votes cast by Sugar Creek MHC may not be in your personal best
      interests as a stockholder. For example, Sugar Creek MHC may exercise its voting
      control to defeat a stockholder nominee for election to the board of directors
      of Sugar Creek Financial. Sugar Creek MHC’s ability to control the outcome of
      the election of the board of directors of Sugar Creek Financial restricts the
      ability of minority stockholders to effect a change of management. In addition,
      stockholders will not be able to force a merger or second-step conversion
      transaction without the consent of Sugar Creek MHC, as such transactions require
      the approval of at least two-thirds of all outstanding voting stock, which
      can
      only be achieved if Sugar Creek MHC voted to approve such transactions. Some
      stockholders may desire a sale or merger transaction, since stockholders
      typically receive a premium for their shares, or a second-step conversion
      transaction, since fully converted institutions tend to trade at higher
      multiples than mutual holding companies. Sugar Creek MHC is not able to control,
      however, the vote for second-step transactions and implementation of equity
      incentive plans, each of which require, under current Office of Thrift
      Supervision regulations and policies, approval by the stockholders other than
      Sugar Creek MHC.





**Office
      of Thrift Supervision policy on remutualization transactions could prevent
      acquisition of Sugar Creek Financial, which may adversely affect our stock
      price.**




Current
      Office of Thrift Supervision regulations permit a mutual holding company to
      be
      acquired by a mutual institution in what is commonly called a “remutualization”
transaction. In the past, remutualization transactions resulted in minority
      stockholders receiving a significant premium for their shares. However, in
      2003
      the Office of Thrift Supervision issued a policy statement indicating that
      it
      views remutualization transactions as raising significant issues concerning
      disparate treatment of minority stockholders and mutual members of the target
      entity and raising issues concerning the effect on the mutual members of the
      acquiring entity. Under certain circumstances, the Office of Thrift Supervision
      intends to give these issues special scrutiny and reject applications providing
      for the remutualization of a mutual holding company unless the applicant can
      clearly demonstrate that the Office of Thrift Supervision’s concerns are not
      warranted in the particular case. Should the Office of Thrift Supervision
      prohibit or further restrict these transactions in the future, our per share
      stock price may be adversely affected.




15


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




Office
      of
      Thrift Supervision regulations provide that for a period of three years
      following the date of the completion of the stock offering, no person, acting
      alone, together with associates or in a group of persons acting in concert,
      will
      directly or indirectly offer to acquire or acquire the beneficial ownership
      of
      more than 10% of our common stock without the prior written approval of the
      Office of Thrift Supervision. In addition, Sugar Creek Financial’s charter
      provides that, until April 4, 2012, no person, other than Sugar Creek MHC may
      acquire directly or indirectly the beneficial ownership of more than 10% of
      any
      class of any equity security of Sugar Creek Financial. In the event a person
      acquires shares in violation of this charter provision, all shares beneficially
      owned by such person in excess of 10% will be considered “excess shares” and
      will not be counted as shares entitled to vote or counted as voting shares
      in
      connection with any matters submitted to the stockholders for a vote. These
      restrictions make it more difficult and less attractive for stockholders to
      acquire a significant amount of our common stock, which may adversely affect
      our
      stock price.





**ITEM
      1B.**   **UNRESOLVED
      STAFF COMMENTS**





Not
      Applicable.





**ITEM
      2.**   **PROPERTIES**





We
      conduct our business through our main office in Trenton, Illinois and our branch
      office in Breese, Illinois, both of which we own. The net book value of our
      land, buildings, furniture, fixtures and equipment was $1.0 million as of March
      31, 2008.





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





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





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





Not
      Applicable.





**PART
      II**





**ITEM 5.**
            **MARKET
                FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
                PURCHASES OF EQUITY
                SECURITIES**





The
      common stock of Sugar Creek Financial is quoted on the OTC Bulletin Board under
      the symbol “SUGR.” As of May 1, 2008, there were approximately 169 holders of
      record of the Company’s common stock.




16


The
      following table sets forth the high and low sales prices for the common stock
      as
      reported on the OTC Bulletin Board for each full quarterly period during which
      the Company’s stock was traded during the past fiscal year. Because the
      Company’s stock did not begin trading until April 4, 2007, information is
      provided beginning with the quarter ended June 30, 2007. Sugar Creek Financial
      has not paid dividends during this period.





**Quarter
                Ended:**
            
            **High**
            
            **Low**June
                30, 2007
            
            $
            10.80
            
            $
            10.40September
                30, 2007
            
            
            10.60
            
            
            9.10December
                31, 2007
            
            
            10.25
            
            
            8.50March
                31, 2008
            
            
            9.10
            
            
            8.50





Sugar
      Creek Financial is not subject to OTS regulatory restrictions on the payment
      of
      dividends. However, Sugar Creek Financial’s ability to pay dividends may depend,
      in part, upon its receipt of dividends from Tempo Bank because Sugar Creek
      Financial has no source of income other than earnings from the investment of
      the
      net proceeds from the offering that it retained. Payment of cash dividends
      on
      capital stock by a savings institution is limited by OTS regulations. For a
      discussion of restrictions on the payment of cash dividends by Tempo Bank,
      see *“Item
      1−Business−Regulation and Supervision−Federal Savings Institution−Limitation on
      Capital Distributions.”*





We
      have
      not repurchased any of our common stock and have no publicly announced
      repurchase plans or programs as of March 31, 2008.





**ITEM
      6.**  **SELECTED
      FINANCIAL DATA**





Not
      Applicable.





**ITEM 7.**
            **MANAGEMENT’S
                DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
                OPERATION**





**Overview-General**





Our
      principal business is to acquire deposits from individuals and businesses in
      the
      communities surrounding our offices and to use these deposits to fund loans.
      We
      focus on providing our products and services to two segments of customers:
      individuals and small businesses.





***Income*** **.** Our
      primary source of income is net interest income. Net interest income is the
      difference between interest income, which is the income that we earn on our
      loans and investments, and interest expense, which is the interest that we
      pay
      on our deposits and borrowings. Changes in levels of interest rates affect
      our
      net interest income. In recent periods, short-term interest rates (which
      influence the rates we pay on deposits) have increased, while longer-term
      interest rates (which influence the rates we earn on loans) have not. The
      narrowing of the spread between the interest we earn on loans and investments
      and the interest we pay on deposits has negatively affected our net interest
      income.





A
      secondary source of income is non-interest income, which is revenue that we
      receive from providing products and services. The majority of our non-interest
      income generally comes from loan service charges and service charges on deposit
      accounts.





***Allowance
      for Loan Losses*** **.** The
      allowance for loan losses is a valuation allowance for probable losses inherent
      in the loan portfolio. We evaluate the need to establish allowances against
      losses on loans on a monthly basis. When additional allowances are necessary,
      a
      provision for loan losses is charged to earnings.





***Expenses.*** The
      noninterest expenses we incur in operating our business consist of compensation
      and benefits expenses, occupancy expenses, equipment and data processing
      expenses and other miscellaneous expenses, such as advertising, supplies,
      telephone, postage and professional services.


17





Our
      largest noninterest expense is compensation and benefits, which consist
      primarily of salaries and wages paid to our employees, payroll taxes, expenses
      for health insurance, retirement plans and other employee benefits, including
      employee stock ownership plan allocations. In the future, we may also recognize
      additional annual employee compensation expenses stemming from the adoption
      of
      the 2007 Equity Incentive Plan. We cannot determine the actual amount of these
      new stock-related compensation and benefit expenses at this time because
      applicable accounting practices require that they be based on the fair market
      value of the shares of common stock at specific points in the future.





Our
      noninterest expenses also include expenses resulting from operating as a public
      company, consisting primarily of legal and accounting fees and expenses of
      shareholder communications and meetings.





**Overview-Financial
      Highlights**





**** ***Operating
      Results*** **.** Net
      earnings decreased by $48,000 to $71,000 for the year ended March 31, 2008
      primarily due to increases in noninterest expense and the provision for loan
      losses, partially offset by an increase in net interest income and noninterest
      income and a decrease in income tax expense. Noninterest expenses increased
      primarily as a result of higher compensation expense and costs associated with
      being a public company.





***Financial
      Condition*** **.** Total
      assets decreased by $3.7 million to $86.6 million at March 31, 2008. The decline
      was attributable in part to the repayment of $2.0 million of advances from
      the
      FHLB of Chicago. In addition, deposits declined $5.0 million to $59.2 million
      at
      March 31, 2008 as a result of the use of customer deposits held on behalf of
      subscribers for purchase of common stock of Sugar Creek Financial and strong
      rate competition for certificates. The decrease in deposits and advances from
      the FHLB of Chicago was offset by net proceeds from the stock offering, which
      amounted to $3.0 million.


****


**Critical
      Accounting Policies**





In
      the
      preparation of our financial statements, we have adopted various accounting
      policies that govern the application of U.S. generally accepted accounting
      principles. Our significant accounting policies are described in note 1 of
      the
      notes to the consolidated financial statements included in this Form
      10-K. ****





Certain
      accounting policies involve significant judgments and assumptions by us that
      have a material impact on the carrying value of certain assets and liabilities.
      We consider these accounting policies to be critical accounting policies. The
      judgments and assumptions we use are based on historical experience and other
      factors, which we believe to be reasonable under the circumstances. Actual
      results could differ from these judgments and estimates under different
      conditions, resulting in a change that could have a material impact on the
      carrying values of our assets and liabilities and our results of operations.





***Allowance
      for Loan Losses*** **.** We
      consider the allowance for loan losses to be a critical accounting policy.
      The
      allowance for loan losses is the amount estimated by management as necessary
      to
      cover probable losses inherent in the loan portfolio at the balance sheet date.
      The allowance is established through the provision for loan losses, which is
      charged to income. Determining the amount of the allowance for loan losses
      necessarily involves a high degree of judgment. Among the material estimates
      required to establish the allowance are: loss exposure at default; the amount
      and timing of future cash flows on impacted loans; value of collateral; and
      determination of loss factors to be applied to the various elements of the
      portfolio. All of these estimates are susceptible to significant change.
      Management reviews the level of the allowance at least monthly and establishes
      the provision for loan losses based upon an evaluation of the portfolio, past
      loss experience, current economic conditions and other factors related to the
      collectibility of the loan portfolio. Although we believe that we use the best
      information available to establish the allowance for loan losses, future
      adjustments to the allowance may be necessary if economic conditions differ
      substantially from the assumptions used in making the evaluation. In addition,
      the Office of Thrift Supervision, as an integral part of its examination
      process, periodically reviews our allowance for loan losses. Such agency may
      require us to recognize adjustments to the allowance based on its judgments
      about information available to it at the time of its examination. A large loss
      could deplete the allowance and require increased provisions to replenish the
      allowance, which would adversely affect earnings. See notes 1 and 3 of the
      notes to the consolidated financial statements included in this Form
      10-K.


18





**Balance
      Sheet Analysis**





***Loans.*** Our
      primary lending activity is the origination of loans secured by real estate.
      We
      originate real estate loans secured by one- to four-family residential real
      estate, commercial and multi-family real estate and undeveloped land. To a
      much
      lesser extent, we originate consumer loans.





The
      largest segment of our real estate loans is one- to four-family residential
      real
      estate loans. At March 31, 2008, one- to four-family residential real
      estate loans totaled $69.9 million, or 87.3% of total loans, compared to $70.5
      million, or 88.0% of total loans, at March 31, 2007. One- to four-family
      residential real estate loans decreased over this period as a result of a
      decline in the real estate market and a general slowing in real estate sales.
      In
      addition, commercial real estate loans increased over this period as a result
      of
      steady commercial real estate development. Consumer loans decreased in 2008
      as a
      result of decreasing car sales and consumer debt contraction.





The
      following table sets forth the composition of our loan portfolio at the dates
      indicated.





**Table
      1: Loan Portfolio Analysis**





**March
                31,****2008**
            
            **2007****(Dollars
                in thousands)**
            
            **Amount**
            
            **Percent**
            
            **Amount**
            
            **Percent**Real
                estate loans:One-to
                four-family
            
            $
            69,904
            
            
            87.33
            %
            $
            70,528
            
            
            87.97
            %Multi-family
            
            
            966
            
            
            1.21
            
            
            1,099
            
            
            1.37Commercial
            
            
            2,886
            
            
            3.60
            
            
            1,638
            
            
            2.04Land
                loans
            
            
            1,723
            
            
            2.15
            
            
            1,723
            
            
            2.15Total
                real estate loans
            
            
            75,479
            
            
            94.29
            
            
            74,988
            
            
            93.53Consumer
                loans:Automobile
            
            
            2,522
            
            
            3.15
            
            
            2,825
            
            
            3.52Home
                equity
            
            
            1,526
            
            
            1.91
            
            
            1,534
            
            
            1.92Loans
                secured by depositaccounts
            
            
            521
            
            
            0.65
            
            
            828
            
            
            1.03Total
                consumer loans
            
            
            4,569
            
            
            5.71
            
            
            5,187
            
            
            6.47Total
                loans
            
            
            80,048
            
            
            100.00
            %
            
            80,175
            
            
            100.00
            %Loans
                in process
            
            
            –
            
            
            
            
            
            –Allowance
                for losses
            
            
            (124
            )
            
            
            
            
            (130
            )Net
                deferred loan fees
            
            
            (120
            )
            
            
            
            
            (124
            )Loans,
                net
            
            $
            79,804
            
            
            
            
            $
            79,921





At
      March
      31, 2008, fixed-rate loans, balloon loans and adjustable-rate loans totaled
      $44.5 million, $34.9 million and $563,000, respectively.





The
      following table sets forth certain information at March 31, 2008 regarding
      the
      dollar amount of loan principal repayments becoming due during the years
      indicated. The table does not include any estimate of prepayments which
      significantly shorten the average life of all loans and may cause our actual
      repayment experience to differ from that shown below. Demand loans having no
      stated schedule of repayments and no stated maturity are reported as due in
      one
      year or less. The amounts shown below exclude net deferred loan
      fees. **** Our
      adjustable-rate mortgage loans generally do not provide for downward adjustments
      below the initial discounted contract rate. When market interest rates rise,
      as
      has occurred in recent periods, the interest rates on these loans may increase
      based on the contract rate (the index plus the margin) exceeding the initial
      interest rate floor.


19


**Table
      2: Contractual Maturities and Interest Rate Sensitivity**





**March
                31, 2008 (Dollars in thousands)**
            
            **Real
                Estate**
              **Loans**
            
            **Consumer**
              **Loans**
            
            **Total**
              **Loans**Amounts
                due in:One
                year or less
            
            $
            1,409
            
            $
            602
            
            $
            2,011More
                than one to five years
            
            
            10,009
            
            
            2,442
            
            
            12,451More
                than five years
            
            
            64,061
            
            
            1,525
            
            
            65,586Total
            
            $
            75,479
            
            $
            4,569
            
            $
            80,048Interest
                rate terms on amounts due after one year:Fixed-rate
                loans (including balloon loans)
            
            $
            73,621
            
            $
            3,967
            
            $
            77,588Adjustable-rate
                loans
            
            
            449
            
            
            –
            
            
            449Total
            
            $
            74,070
            
            $
            3,967
            
            $
            78,037





***Investments*** .
      At
      March 31, 2008, our investment portfolio totaled $1.7 million and consisted
      solely of our investment in Federal Home Loan Bank of Chicago stock. Our
      investment in Federal Home Loan Bank of Chicago stock remained unchanged during
      the year ended March 31, 2008 due to a prohibition on excess stock redemptions
      imposed by the Federal Housing Finance Board. On October 10, 2007, the Federal
      Home Loan Bank of Chicago entered into a consensual cease and desist order
      with
      the Federal Housing Finance Board Office of Supervision, which limits the
      ability of the Federal Home Loan Bank of Chicago to redeem excess or voluntary
      stock or to pay dividends. The Federal Home Loan Bank of Chicago did not declare
      or pay a dividend for the third and fourth quarters of 2007 and first quarter
      of
      2008 citing continuing pressure on net interest income, projected earnings
      levels, market conditions and regulatory requirements. At March 31, 2008,
      $810,000 of our investment in Federal Home Loan Bank stock consisted of excess
      or voluntary stock. Based on the liquidity needs of Tempo Bank and subject
      to
      the stock redemption guidelines of the Federal Home Loan Bank of Chicago, Tempo
      Bank expects to redeem the majority of its excess or voluntary stock as soon
      as
      an official redemption policy has been announced by the Federal Home Loan Bank
      of Chicago.





We
      had no
      investments that had an aggregate book value in excess of 10% of our equity
      at
      March 31, 2008, except for our investment in Federal Home Loan Bank of
      Chicago.





***Other
      Assets.*** Other
      assets decreased due primarily to $399,000 of deferred stock conversion costs
      at
      March 31, 2007. These costs reduced the proceeds from the sale of common stock
      in April, 2007.





***Deposits*** **.** Our
      deposit base is comprised of noninterest-bearing NOW accounts, NOW accounts,
      savings accounts, money market accounts and certificates of deposit. We consider
      our deposit accounts other than certificates of deposit to be core deposits.
      Deposits decreased $5.0 million, or 7.8%, for the year ended March 31, 2008,
      as
      certificates of deposit decreased $1.9 million, or 4.4% and core deposits
      decreased **** $3.1
      million, or 14.8%. Overall, deposits decreased during the year ended March
      31,
      2008 primarily as a result of strong rate competition for certificates and
      the
      completion of the stock offering and transfer of proceeds held as core deposits
      to stockholder’s equity effective April 3, 2007.


20


**Table
      3: Deposits**





**March
                31,****2008**
            
            **2007****(Dollars
                in thousands)**
            
            **Amount**
            
            **Percent**
            
            **Amount**
            
            **Percent**Noninterest-bearing
              NOW
                accounts
            
            $
            2,620
            
            
            4.43
            %
            $
            2,404
            
            
            3.75
            %NOW
                accounts
            
            
            4,420
            
            
            7.47
            
            
            4,782
            
            
            7.45Savings
                accounts
            
            
            7,277
            
            
            12.29
            
            
            11,286
            
            
            17.59Money
                market accounts
            
            
            3,324
            
            
            5.62
            
            
            2,242
            
            
            3.49Certificates
                of deposit
            
            
            41,540
            
            
            70.19
            
            
            43,456
            
            
            67.72Total
            
            $
            59,181
            
            
            100.00
            %
            $
            64,170
            
            
            100.00
            %





**Table
      4: Time Deposit Maturities of $100,000 or more**





**March
                31, 2008 (Dollars in thousands)**
            
            **Amount****Maturity
                Period**Three
                months or less
            
            $
            2,288Over
                three through six months
            
            
            2,607Over
                six through twelve months
            
            
            2,584Over
                twelve months
            
            
            2,380Total
            
            $
            9,859





***Borrowings*** **.** We
      utilize FHLB advances to supplement our supply of funds for loans. In the table
      below, the weighted average interest rate during the year is based on the
      weighted average balances determined on a monthly basis.





**Table
      5: Borrowings**





**Year
                Ended**
              **March
                31,****(Dollars
                in thousands)**
            
            **2008**
            
            **2007**Maximum
                amount outstanding at any monthend
                during the year:FHLB
                advances
            
            $
            23,000
            
            $
            19,000Average
                amount outstanding during the year:FHLB
                advances
            
            
            20,083
            
            
            14,308Weighted
                average interest rate during the year:FHLB
                advances
            
            
            4.77
            %
            
            4.80
            %Balance
                outstanding at end of year:FHLB
                advances
            
            
            17,000
            
            
            19,000Weighted
                average interest rate at end of year:FHLB
                advances
            
            
            4.82
            %
            
            4.84
            %




Borrowings
      decreased **** during
      2008 as a result of a slow down in the residential and consumer loan
      markets.





***Stockholders’
      Equity.*** Stockholders’
      equity increased due primarily to $3.0 million raised from the sale of common
      stock in April 2007. ****


21


**Comparison
      of Results of Operations for the Years Ended March 31, 2008 and March 31,
      2007**





**Table
      6: Summary Income Statements**





**Year
                Ended March 31, (Dollars in thousands)**
            
            **2008**
            
            **2007**
            
            **2008
                v. 2007**
            
            **%
                Change**Net
                interest income
            
            $
            2,006
            
            $
            1,897
            
            $
            109
            
            
            5.75
            %Provision
                for loan losses
            
            
            (80
            )
            
            4
            
            
            (84
            )
            
            (2100.00
            )Noninterest
                income
            
            
            175
            
            
            132
            
            
            43
            
            
            32.58Noninterest
                expense
            
            
            (2,002
            )
            
            (1,835
            )
            
            (167
            )
            
            9.10Income
                taxes
            
            
            (28
            )
            
            (79
            )
            
            51
            
            
            (64.56
            )Net
                earnings
            
            $
            71
            
            $
            119
            
            $
            (48
            )
            
            (40.34
            )%Return
                on average equity
            
            
            0.93
            %
            
            1.99
            %Return
                on average assets
            
            
            0.08
            
            
            0.15





***Net
      Interest Income.*** Net
      interest income increased as a result of the growth in the Bank’s loan
      portfolio. During the prior year, loans increased by $12.8 million primarily
      through the use of advances from the FHLB of Chicago. As a result, the ratio
      of
      average interest-earning assets to average interest-bearing liabilities
      increased to 114.03% for 2008 from 109.98% for 2007. The positive effect of
      asset growth on net interest income was partially offset by a decrease in the
      interest rate spread to 1.86% for 2008 from 2.04% for 2007. The Bank’s cost of
      funds rose due to higher market interest rates paid on money market accounts
      and
      certificates of deposit.





**Table
      7: Analysis of Net Interest Income**





**Year
                Ended March 31, (Dollars in thousands)**
            
            **2008**
            
            **2007**
            
            **2008
                v. 2007**
            
            **%
                Change****Components
                of net interest income**Loans
            
            $
            4,880
            
            $
            4,380
            
            $
            500
            
            
            11.42
            %Stock
                in FHLB of Chicago
            
            
            13
            
            
            70
            
            
            (57
            )
            
            (81.43
            )Other
                interest-earning assets
            
            
            115
            
            
            153
            
            
            (38
            )
            
            (24.84
            )Total
                interest income
            
            
            5,008
            
            
            4,603
            
            
            405
            
            
            8.80Deposits
            
            
            (2,044
            )
            
            (2,019
            )
            
            (25
            )
            
            1.24Borrowings
            
            
            (958
            )
            
            (687
            )
            
            (271
            )
            
            39.45Total
                interest expense
            
            
            (3,002
            )
            
            (2,706
            )
            
            (296
            )
            
            10.94Net
                interest income
            
            
            2,006
            
            $
            1,897
            
            $
            109
            
            
            5.75
            %**Average
                yields and rates paid**Interest-earning
                assets
            
            
            5.86
            %
            
            5.77
            %
            
            0.09
            %
            
            1.56
            %Interest-bearing
                liabilities
            
            
            4.00
            
            
            3.73
            
            
            0.27
            
            
            7.24Interest
                rate spread
            
            
            1.86
            
            
            2.04
            
            
            (0.18
            )
            
            (8.82
            )Net
                interest margin
            
            
            2.35
            
            
            2.38
            
            
            (0.03
            )
            
            (1.26
            )**Average
                balances**Loans
            
            $
            81,084
            
            $
            74,510
            
            $
            6,574
            
            
            8.82
            %Stock
                in FHLB of Chicago
            
            
            1,660
            
            
            2,260
            
            
            (600
            )
            
            (6.61
            )Other
                interest-earning assets
            
            
            2,756
            
            
            2,951
            
            
            (195
            )
            
            (15.86
            )Deposits
            
            
            54,898
            
            
            58,178
            
            
            (3,280
            )
            
            (5.64
            )Borrowings
            
            
            20,083
            
            
            14,308
            
            
            5,775
            
            
            40.36





***Provision
      for Loan Losses.*** The
      provision for loan losses was $80,000 for the year ended March 31, 2008,
      compared to a recovery of loan losses of $4,000 for the year ended March 31,
      2007. The Bank recorded charge-offs of $92,000 and recoveries of $6,000 for
      the
      year ended March 31, 2008 compared to charge-offs of $11,000 and recoveries
      of
      $15,000 for the year ended March 31, 2007. Charge-offs and the provision for
      loan losses were higher due primarily to the write-down of one loan secured
      by a
      single-family residence located in O’Fallon, Illinois.





The
      allowance for loan losses was $124,000, or 0.16% of total loans outstanding
      as
      of March 31, 2008, as compared with $130,000, or 0.16% as of March 31, 2007.
      An
      analysis of the changes in the allowance for loan losses is presented under
      “ *Risk
      Management - Analysis and Determination of the Allowance for Loan
      Losses* .”


22


***Noninterest
      Income.*** ****** Noninterest
      income increased due primarily to higher deposit account service charges.
      Deposit account service charges increased as a result of the implementation
      of a
      more aggressive program of assessing non-sufficient fund fees to our customers.





**Table
      8: Noninterest Income Summary**





**Year
                Ended March 31, (Dollars in thousands)**
            
            **2008**
            
            **2007**
            
            **$
                Change**
            
            **%
                Change**Loan
                service charges
            
            $
            24
            
            $
            20
            
            $
            4
            
            
            20.00
            %Service
                charges on deposit accounts
            
            
            133
            
            
            82
            
            
            51
            
            
            62.20Gain
                on sale of investment in service bureau
            
            
            –
            
            
            18
            
            
            (18
            )
            
            (100.00
            )Other
            
            
            18
            
            
            12
            
            
            6
            
            
            50.00Total
            
            $
            175
            
            $
            132
            
            $
            43
            
            
            32.58
            %





***Noninterest
      Expense.*** **** Noninterest
      expense increased as a result of higher expenses for compensation and costs
      associated with being a public company, including consulting costs for program
      development and implementation of Sarbanes-Oxley Section 404. Compensation
      and
      benefits expenses increased due to higher salary levels primarily as a result
      of
      cost of living increases. Equipment and data processing expenses increased
      due
      primarily to the elimination of incentive credits from the Bank’s data processor
      during 2008. Advertising expenses decreased as a result of management’s efforts
      to decrease noninterest expenses.





**Table
      9: Noninterest Expense Summary**





**Year
                Ended March 31, (Dollars in thousands)**
            
            **2008**
            
            **2007**
            
            **$
                Change**
            
            **%
                Change**Compensation
                and benefits
            
            $
            1,179
            
            $
            1,095
            
            $
            84
            
            
            7.67
            %Occupancy
            
            
            100
            
            
            90
            
            
            10
            
            
            11.11Equipment
                and data processing
            
            
            328
            
            
            299
            
            
            29
            
            
            9.70Federal
                deposit insurance premiums
            
            
            7
            
            
            7
            
            
            –
            
            
            –Advertising
            
            
            39
            
            
            58
            
            
            (19
            )
            
            (32.76
            )Supplies
            
            
            37
            
            
            35
            
            
            2
            
            
            5.71Professional
                and regulatory fees
            
            
            138
            
            
            69
            
            
            69
            
            
            100.00Other
            
            
            174
            
            
            182
            
            
            (8
            )
            
            (4.40
            )Total
            
            $
            2,002
            
            $
            1,835
            
            $
            167
            
            
            9.10
            %





***Income
      Taxes.*** **** Income
      taxes were $28,000 for 2008, reflecting an effective tax rate of 28.3%, compared
      to $79,000 for 2007, reflecting an effective tax rate of 39.9%. Income taxes
      decreased due to lower pre-tax earnings.





***Average
      Balances and Yields.*** The
      following table presents information regarding average balances of assets and
      liabilities, the total dollar amounts of interest income and dividends from
      average interest-earning assets, the total dollar amounts of interest expense
      on
      average interest-bearing liabilities, and the resulting annualized average
      yields and costs. The yields and costs for the years indicated are derived
      by
      dividing income or expense by the average balances of assets or liabilities,
      respectively, for the years presented. For purposes of this table, average
      balances have been calculated using month-end balances, and nonaccrual loans
      are
      included in average balances only. Management does not believe that use of
      month-end balances instead of daily average balances has caused any material
      differences in the information presented. Loan fees are included in interest
      income on loans and are insignificant. None of the income reflected in the
      following table is tax-exempt income.


23





**Table
      10: Average Balance Table**





**Years
                Ended March 31,****2008**
            
            **2007****(Dollars
                in thousands)**
            
            
            **Average**
              **Balance**
            
            
            **Interest**
              **and**
              **Dividends**
            
            
            **Yield/**
              **Cost**
            
            
            **Average**
              **Balance**
            
            
            **Interest**
              **and**
              **Dividends**
            
            
            **Yield/**
              **Cost****Assets:**Interest-earning
                assets:Loans
            
            $
            81,084
            
            $
            4,880
            
            
            6.02
            %
            $
            74,510
            
            $
            4,380
            
            
            5.88
            %Stock
                in FHLB of Chicago
            
            
            1,660
            
            
            13
            
            
            0.79
            
            
            2,260
            
            
            70
            
            
            3.10Other
                interest-earning assets
            
            
            2,756
            
            
            115
            
            
            4.17
            
            
            2,951
            
            
            153
            
            
            5.18Total
                interest-earning assets
            
            
            85,500
            
            
            5,008
            
            
            5.86
            
            
            79,721
            
            
            4,603
            
            
            5.77Noninterest-earning
                assets
            
            
            2,164
            
            
            
            
            
            
            
            
            2,555Total
                assets
            
            
            87,664
            
            
            
            
            
            
            
            $
            82,276**Liabilities
                and Stockholders’ Equity:**Interest-bearing
                liabilities:NOW
                accounts
            
            $
            4,413
            
            
            23
            
            
            0.52
            %
            $
            4,629
            
            
            27
            
            
            0.59
            %Savings
                accounts
            
            
            7,243
            
            
            49
            
            
            0.65
            
            
            8,026
            
            
            76
            
            
            0.95Money
                market accounts
            
            
            2,683
            
            
            82
            
            
            3.12
            
            
            1,702
            
            
            34
            
            
            1.98Certificates
                of deposit
            
            
            40,559
            
            
            1,890
            
            
            4.66
            
            
            43,821
            
            
            1,882
            
            
            4.29Total
                interest-bearing deposits
            
            
            54,898
            
            
            2,044
            
            
            3.73
            
            
            58,178
            
            
            2,019
            
            
            3.47FHLB
                advances
            
            
            20,083
            
            
            958
            
            
            4.77
            
            
            14,308
            
            
            687
            
            
            4.80Other
                borrowings
            
            
            –
            
            
            –
            
            
            –
            
            
            –
            
            
            –
            
            
            –Total
                interest-bearing liabilities
            
            $
            74,981
            
            
            3,002
            
            
            4.00
            
            $
            72,486
            
            
            2,706
            
            
            3.73Noninterest-bearing
                NOW accounts
            
            
            2,456
            
            
            
            
            
            
            
            
            2,151Other
                noninterest-bearing liabilities
            
            
            1,130
            
            
            
            
            
            
            
            
            1,630Total
                liabilities
            
            
            78,567
            
            
            
            
            
            
            
            
            76,267Stockholders’
                Equity
            
            
            9,097
            
            
            
            
            
            
            
            
            6,009Total
                liabilities and stockholders’ equity
            
            $
            87,664
            
            
            
            
            
            
            
            $
            82,276Net
                interest income
            
            
            
            
            $
            2,006
            
            
            
            
            
            
            
            $
            1,897Interest
                rate spread
            
            
            
            
            
            
            
            
            1.86
            %
            
            
            
            
            
            
            
            2.04
            %Net
                interest margin
            
            
            
            
            
            2.35
            %
            
            
            
            
            
            
            
            2.38
            %Average
                interest-earning assets toaverage
                interest-bearing liabilities
            
            
            114.03
            %
            
            
            
            
            
            
            
            109.98
            %




24


***Rate/Volume
      Analysis*** **.** The
      following tables set forth the effects of changing rates and volumes on our
      net
      interest income. The rate column shows the effects attributable to changes
      in
      rate (changes in rate multiplied by prior volume). The volume column shows
      the
      effects attributable to changes in volume (changes in volume multiplied by
      prior
      rate). Changes due to both volume and rate have been allocated proportionally
      to
      the volume and rate changes. The net column represents the sum of the prior
      columns.





**Table
      11: Net Interest Income - Changes Due to Rate and Volume**





**Year
      Ended March 31, 2008 Compared to Year Ended March 31, 2007**





**(Dollars
                in thousands)**
            
            **Volume**
            
            **Rate**
            
            **Net**Interest
                income:Loans
                receivable
            
            $
            394
            
            $
            106
            
            $
            500Stock
                in FHLB of Chicago
            
            
            (15
            )
            
            (42
            )
            
            (57
            )Other
                interest-earning assets
            
            
            (10
            )
            
            (28
            )
            
            (38
            )Total
            
            
            369
            
            
            36
            
            
            405Interest
                expense:Passbook
                accounts
            
            
            (7
            )
            
            (20
            )
            
            (27
            )NOW
                accounts
            
            
            (1
            )
            
            (4
            )
            
            (5
            )MMDA
                accounts
            
            
            24
            
            
            24
            
            
            48Certificates
            
            
            (57
            )
            
            66
            
            
            9Total
                deposits
            
            
            (41
            )
            
            66
            
            
            25Advances
                from FHLB
            
            
            272
            
            
            (1
            )
            
            271Total
            
            
            231
            
            
            65
            
            
            296Increase
                (decrease) in net interest income
            
            $
            138
            
            $
            (29
            )
            $
            109





**Risk
      Management**





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





***Credit
      Risk Management*** **.** Our
      strategy for credit risk management focuses on having well-defined credit
      policies and uniform underwriting criteria and providing prompt attention to
      potential problem loans.





When
      a
      borrower fails to make a required loan payment, we take a number of steps to
      have the borrower cure the delinquency and restore the loan to current status,
      including contacting the borrower by letter and phone at regular intervals.
      When
      the borrower is in default, we may commence collection proceedings. If a
      foreclosure action is instituted and the loan is not brought current, paid
      in
      full, or refinanced before the foreclosure sale, the real property securing
      the
      loan generally is sold at foreclosure. Generally, when a consumer loan becomes
      90 days past due, we institute collection proceedings and attempt to repossess
      any personal property that secures the loan. Management informs the board of
      directors monthly of the amount of loans delinquent more than 90 days, all
      loans
      in foreclosure and repossessed property that we own.





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


25





Real
      estate that we acquire as a result of foreclosure or by deed-in-lieu of
      foreclosure is classified as real estate owned until it is sold. When property
      is acquired it is recorded at the lower of its cost, which is the unpaid balance
      of the loan plus foreclosure costs, or fair market value at the date of
      foreclosure. Holding costs and declines in fair value after acquisition of
      the
      property result in charges against income.





**Table
      12: Nonperforming Assets**





**March
                31,****(Dollars
                in thousands)**
            
            **2008**
            
            **2007**Nonaccrual
                loans:Residential
                real estate
            
            $
            –
            
            $
            698Consumer
            
            
            64
            
            
            30Total
            
            
            64
            
            
            728Foreclosed
                real estate - residential
            
            
            386
            
            
            –Total
                nonperforming assets
            
            $
            450
            
            $
            728Total
                nonperforming loans to total loans
            
            
            0.08
            %
            
            0.91
            %Total
                nonperforming loans to total assets
            
            
            0.07
            
            
            0.81Total
                nonperforming assets to total assets
            
            
            0.52
            %
            
            0.81
            %





Foreclosed
      real estate consists of one single-family residence located in O’Fallon,
      Illinois.





We
      did
      not have any troubled debt restructurings or any accruing loans past due 90
      days
      or more at the dates presented above. Interest income that would have been
      recorded for the year ended March 31, 2008 and year ended March 31, 2007, had
      nonaccruing loans been current according to their original terms amounted to
      $6,000 and $49,000, respectively. Income related to nonaccrual loans included
      in
      interest income for the year ended March 31, 2008 and the year ended March
      31,
      2007 was $5,000 and $45,000, respectively.





At
      March
      31, 2008, we had no loans which were not currently classified as nonaccrual,
      90
      days past due or impaired but where known information about possible credit
      problems of borrowers caused management to have serious concerns as to the
      ability of the borrowers to comply with present loan repayment terms and which
      may result in disclosure as nonaccrual, 90 days past due or
      impaired.





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





**Table
      13: Classified Assets**





**At
                March 31,****(Dollars
                in thousands)**
            
            **2008**
            
            **2007**Substandard
                assets
            
            $
            64
            
            $
            728Total
                classified assets
            
            $
            64
            
            $
            728





We
      did
      not have any assets classified as “special mention,” “doubtful” or “loss” at the
      dates presented above.


26





**Table
      14: Selected Loan Delinquencies**





**March
                31,****2008**
            
            **2007****(Dollars
                in thousands)**
            
            **30-59**
              **Days**
              **Past
                Due**
            
            **60-89**
              **Days**
              **Past
                Due**
            
            **30-59**
              **Days**
              **Past
                Due**
            
            **60-89**
              **Days**
              **Past
                Due**One-
                to four- family
            
            $
            1,383
            
            $
            288
            
            $
            423
            
            
            –Consumer
            
            
            103
            
            
            121
            
            
            19
            
            
            47Total
            
            $
            1,486
            
            $
            409
            
            $
            442
            
            $
            47





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





Our
      methodology for assessing the appropriateness of the allowance for loan losses
      consists of: (1) a general valuation allowance on identified problem loans;
      (2)
      a general valuation allowance on the remainder of the loan portfolio and (3)
      a
      specific valuation allowance on loans classified as “loss.” Although we
      determine the amount of each element of the allowance separately, the entire
      allowance for loan losses is available to absorb losses in the loan
      portfolio.





We
      establish a general allowance on identified problem loans, including all
      classified loans, based on such factors as: (1) the strength of the customer’s
      personal or business cash flows and personal guarantees; (2) the availability
      of
      other sources of repayment; (3) the amount due or past due; (4) the type and
      value of collateral; (5) the strength of our collateral position; (6) the
      estimated cost to sell the collateral; and (7) the borrower’s effort to cure the
      delinquency.





We
      establish another general allowance for loans that are not classified to
      recognize the inherent probable losses associated with lending activities.
      This
      general valuation allowance is determined by segregating the loans by loan
      category and assigning allowance percentages to each category. The allowance
      percentages have been derived using percentages commonly applied under the
      regulatory framework for Tempo Bank and other similarly-sized institutions.
      The
      percentages may be adjusted for significant factors that, in management’s
      judgment, affect the collectibility of the portfolio as of the evaluation date.
      These significant factors may include changes in lending policies and
      procedures, changes in existing general economic and business conditions
      affecting our primary lending areas, credit quality trends, collateral value,
      loan volumes and concentrations, seasoning of the loan portfolio, recent loss
      experience in particular segments of the portfolio, duration of the current
      business cycle and bank regulatory examination results. The applied loss factors
      are reevaluated periodically to ensure their relevance in the current economic
      environment.




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





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





At
      March
      31, 2008, our allowance for loan losses represented 0.16% of total gross loans.
      The allowance for loan losses decreased slightly from $130,000 at March 31,
      2007
      to $124,000 at March 31, 2008. The Bank’s percentage of allowance for loan
      losses to total loans remained constant at March 31, 2008 and 2007 at
      0.16%.


27





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





**Table
      15: Allocation of Allowance of Loan Losses**





**March
                31,****2008**
            
            **2007****(Dollars
                in thousands)**
            
            **Amount**
            
            **%
                of**
              **Loans
                in**
              **Category**
              **to
                Total**
              **Loans**
            
            **Amount**
            
            **%
                of**
              **Loans
                in**
              **Category**
              **to
                Total**
              **Loans**One-
                to four- family
            
            $
            75
            
            
            87.33
            %
            $
            103
            
            
            87.97
            %Multi-family
            
            
            –
            
            
            1.21
            
            
            –
            
            
            1.37Commercial
                real estate
            
            
            8
            
            
            3.60
            
            
            10
            
            
            2.04Land
            
            
            –
            
            
            2.15
            
            
            –
            
            
            2.15Consumer
            
            
            18
            
            
            5.71
            
            
            8
            
            
            6.47Unallocated
            
            
            23
            
            
            –
            
            
            9
            
            
            –Total
                allowance for loan losses
            
            $
            124
            
            
            100.00
            %
            $
            130
            
            
            100.00
            %





Although
      we believe that we use the best information available to establish the allowance
      for loan losses, future adjustments to the allowance for loan losses may be
      necessary and our results of operations could be adversely affected if
      circumstances differ substantially from the assumptions used in making the
      determinations. Furthermore, while we believe we have established our allowance
      for loan losses in conformity with U.S. generally accepted accounting
      principles, there can be no assurance that regulators, in reviewing our loan
      portfolio, will not require us to increase our allowance for loan losses. In
      addition, because future events affecting borrowers and collateral cannot be
      predicted with certainty, there can be no assurance that the existing allowance
      for loan losses is adequate or that increases will not be necessary should
      the
      quality of any loans deteriorate as a result of the factors discussed above.
      Any
      material increase in the allowance for loan losses may adversely affect our
      financial condition and results of operations.





**Table
      16: Analysis of Loan Loss Experience**





**Years
                Ended**
              **March
                31,****(Dollars
                in thousands)**
            
            **2008**
            
            **2007**Allowance
                at beginning of year
            
            $
            130
            
            $
            130Provision
                for (recovery of) loan losses
            
            
            80
            
            
            (4
            )Charge-offs:One-
                to four- family
            
            
            (86
            )
            
            –Consumer
                loans
            
            
            (6
            )
            
            (11
            )Total
                charge-offs
            
            
            (92
            )
            
            (11
            )Recoveries:One-
                to four- family
            
            
            6
            
            
            –Consumer
                loans
            
            
            –
            
            
            15Total
                recoveries
            
            
            6
            
            
            15Net
                recoveries (charge-offs)
            
            
            (86
            )
            
            4Allowance
                at end of year
            
            $
            124
            
            $
            130Allowance
                to nonperforming loans
            
            
            193.75
            %
            
            17.86
            %Allowance
                to total loans outstandingat
                the end of the year
            
            
            0.16
            
            
            0.16Net
                charge-offs (recoveries) to averageloans
                outstanding during the year
            
            
            0.11
            %
            
            (0.01
            )%




28




***Interest
      Rate Risk Management.***  Our
      earnings and the market value of our assets and liabilities are subject to
      fluctuations caused by changes in the level of interest rates. We manage the
      interest rate sensitivity of our interest-bearing liabilities and
      interest-earning assets in an effort to minimize the adverse effects of changes
      in the interest rate environment. Deposit accounts typically react more quickly
      to changes in market interest rates than mortgage loans because of the shorter
      maturities of deposits. As a result, sharp increases in interest rates may
      adversely affect our earnings while decreases in interest rates may beneficially
      affect our earnings. To reduce the potential volatility of our earnings, we
      have
      sought to improve the match between asset and liability maturities and rates,
      while maintaining an acceptable interest rate spread. Our strategy for managing
      interest rate risk emphasizes: originating balloon loans or loans with
      adjustable interest rates; and promoting core deposit products.





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





We
      use an
      interest rate sensitivity analysis that we prepare to review our level of
      interest rate risk. This analysis measures interest rate risk by computing
      changes in net portfolio value of our cash flows from assets, liabilities and
      off-balance sheet items in the event of a range of assumed changes in market
      interest rates. Net portfolio value represents the market value of portfolio
      equity and is equal to the market value of assets minus the market value of
      liabilities, with adjustments made for off-balance sheet items. This analysis
      assesses the risk of loss in market risk sensitive instruments in the event
      of a
      sudden and sustained 100, 200 and 300 basis point increase or 100 and 200 basis
      point decrease in market interest rates with no effect given to any steps that
      we might take to counter the effect of that interest rate movement. We measure
      interest rate risk by modeling the changes in net portfolio value over a variety
      of interest rate scenarios. The following table presents the change in the
      net
      portfolio value of the Bank at March 31, 2008 that would occur in the event
      of
      an immediate change in interest rates based on our assumptions, with no effect
      given to any steps that we might take to counteract that change.





**Table
      17: NPV Analysis**





**Net Portfolio Value**
              **(Dollars in thousands)**
            
            **Net Portfolio Value as % of**
              **Portfolio Value of Assets****Basis Point (“bp”)**
              **Change in Rates**
            
            **Estimated**
              **$ Amount**
            
            **$ Change**
            
            **% Change**
            
            **NPV Ratio**
            
            **Change**300bp
            
            $
            7,039
            
            $
            (3,777
            )
            
            (34.92
            )%
            
            8.68
            %
            $
            (349
            )200
            
            
            8,559
            
            
            (2,257
            )
            
            (20.87
            )
            
            10.20
            
            
            (197
            )100
            
            
            9,857
            
            
            (959
            )
            
            (8.87
            )
            
            11.39
            
            
            (78
            )0
            
            
            10,816
            
            
            –
            
            
            –
            
            
            12.17
            
            
            –(100)
            
            
            11,003
            
            
            187
            
            
            1.73
            
            
            12.15
            
            
            (2
            )(200)
            
            
            10,250
            
            
            (566
            )
            
            (5.23
            )
            
            11.23
            
            
            (94
            )





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




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




29




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





Our
      most
      liquid assets are cash and cash equivalents. The levels of these assets depend
      on our operating, financing, lending and investing activities during any given
      period. At March 31, 2008, cash and cash equivalents totaled $3.2 million.
      In
      addition, at March 31, 2008, we had the ability to borrow up to a total of
      $16.2
      million from the Federal Home Loan Bank of Chicago. On March 31, 2008, we had
      $17.0 million of advances outstanding.





A
      significant use of our liquidity is the funding of loan originations. At March
      31, 2008, we had fixed-rate mortgage loan commitments of $616,000 outstanding.
      Historically, many of the commitments expire without being fully drawn;
      therefore, the total commitment amounts do not necessarily represent future
      cash
      requirements. Another significant use of our liquidity is the funding of deposit
      withdrawals. Certificates of deposit due within one year of March 31, 2008
      totaled $32.3 million, or 77.8% of certificates of deposit. The large percentage
      of certificates of deposit that mature within one year reflects customers’
hesitancy to invest their funds for long periods in the recent low interest
      rate
      environment. If these maturing deposits do not remain with us, we will be
      required to seek other sources of funds, including other certificates of deposit
      and borrowings. Depending on market conditions, we may be required to pay higher
      rates on such deposits or other borrowings than we currently pay on the
      certificates of deposit due on or before March 31, 2009. We believe, however,
      based on past experience, that a significant portion of our certificates of
      deposit will remain with us. We have the ability to attract and retain deposits
      by adjusting the interest rates offered.





Our
      primary investing activity is the origination of loans. Our primary financing
      activities consist of activity in deposit accounts and Federal Home Loan Bank
      advances. Deposit flows are affected by the overall level of interest rates,
      the
      interest rates and products offered by us and our local competitors and other
      factors. We generally manage the pricing of our deposits to be competitive.
      Occasionally, we offer promotional rates on certain deposit products to attract
      deposits.




***Capital
      Management.*** We are
      subject to various regulatory capital requirements administered by the Office
      of
      Thrift Supervision, including a risk-based capital measure. The risk-based
      capital guidelines include both a definition of capital and a framework for
      calculating risk-weighted assets by assigning balance sheet assets and
      off-balance sheet items to broad risk categories. At March 31, 2008, we exceeded
      all of our regulatory capital requirements. We are considered “well capitalized”
under regulatory guidelines. **** See
      “ *Regulation
      and Supervision—Federal Savings Institution Regulation—Capital
      Requirements,* ”
and
      note 9 of notes to the consolidated financial statements.





The
      offering increased our equity by $3.0 million. We manage our capital for maximum
      stockholder benefit. The capital from the offering has significantly increased
      our liquidity and capital resources. Over time, the initial level of liquidity
      will be reduced as net proceeds from the stock offering are used for general
      corporate purposes, including the funding of lending activities. Our financial
      condition and results of operations will be enhanced by the capital from the
      offering, resulting in increased net interest-earning assets and net earnings.
      However, the large increase in equity resulting from the capital raised in
      the
      offering will, initially, have an adverse impact on our return on equity. We
      may
      use capital management tools such as cash dividends and common share
      repurchases. However, under Office of Thrift Supervision regulations, we will
      not be allowed to repurchase any shares during the first year following the
      offering, except: (1) in extraordinary circumstances, we may make open market
      repurchases of up to 5% of our outstanding stock if we receive the prior
      non-objection of the OTS of such repurchases; (2) repurchases of qualifying
      shares of a director or if we conduct an OTS-approved offer to repurchase made
      to all shareholders; (3) if we repurchase to fund a restricted stock award
      plan
      that has been approved by shareholders; or (4) if we repurchase stock to fund
      a
      tax-qualified employee stock benefit plan. All repurchases are prohibited,
      however, if the repurchase would reduce Tempo Bank’s regulatory capital below
      regulatory required levels.





***Off-Balance
      Sheet Arrangements*** **.** In the
      normal course of operations, we engage in a variety of financial transactions
      that, in accordance with generally accepted accounting principles, are not
      recorded in our financial statements. These transactions involve, to varying
      degrees, elements of credit, interest rate and liquidity risk. Such transactions
      are used primarily to manage customers’ requests for funding and take the form
      of loan commitments and lines of credit. For information about our loan
      commitments and unused lines of credit, see note 10 of notes to the
      consolidated financial statements.




30




For
      the
      year ended March 31, 2008 and March 31, 2007, we did not engage in any
      off-balance sheet transactions reasonably likely to have a material effect
      on
      our financial condition, results of operations or cash flows.





**Impact
      of Recent Accounting Pronouncements**





For
      a
      discussion of the impact of recent accounting pronouncements, see note 1 of
      the
      notes to consolidated financial statements included in this Form
      10-K.





**Effect
      of Inflation and Changing Prices**





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





**ITEM
              7A.**
            **QUANTITATIVE
                AND QUALITATIVE DISCLOSURES ABOUT MARKET
                RISK**





Information
      required by this item is incorporated by reference to Part II, Item 7, *“Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operation.”*





**ITEM
              8.**
            **FINANCIAL
                STATEMENTS AND SUPPLEMENTARY
                DATA**





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





**ITEM
              9.**
            **CHANGES
                IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
                DISCLOSURE**





None.




**ITEM
              9(T).**
            **CONTROLS
                AND PROCEDURES**





***(a)***  ***Disclosure
      Controls and Procedures***





The
      Company’s management, including the Company’s principal executive officer and
      principal financial officer, have evaluated the effectiveness of the Company’s
“disclosure controls and procedures,” as such term is defined in Rule 13a-15(e)
      promulgated under the Securities Exchange Act of 1934, as amended, (the
“Exchange Act”). Based upon their evaluation, the principal executive officer
      and principal financial officer concluded that, as of the end of the period
      covered by this report, the Company’s disclosure controls and procedures were
      effective for the purpose of ensuring that the information required to be
      disclosed in the reports that the Company files or submits under the Exchange
      Act with the Securities and Exchange Commission (the “SEC”) (1) is recorded,
      processed, summarized and reported within the time periods specified in the
      SEC’s rules and forms, and (2) is accumulated and communicated to the Company’s
      management, including its principal executive and principal financial officers,
      as appropriate to allow timely decisions regarding required disclosure.





31




***(b)***  ***Internal
      Controls Over Financial Reporting***





Management’s
      annual report on internal control over financial reporting is incorporated
      herein by reference to the section *“Management’s
      Report on Internal Control over Financial Reporting”* in this
      Annual Report on Form 10-K.





***(c)***  ***Changes
      to Internal Control Over Financial Reporting***





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





**ITEM
              9B.**
            **OTHER
                INFORMATION**





None.





**PART
      III**





**ITEM
              10.**
            **DIRECTORS,
                EXECUTIVE OFFICERS AND CORPORATE
                GOVERNANCE**





**Directors**





For
      information concerning the directors and executive officers of the Company,
      the
      information contained under the sections captioned *“Items
      to be Voted on by Stockholders – Item 1 – Election of
      Directors”* in Sugar
      Creek Financial Corp.’s Proxy Statement for the 2008 Annual Meeting of
      Stockholders (“Proxy Statement”) is incorporated by reference.





**Executive
      Officers**





For
      information relating to officers of the Company, the section captioned *“Items
      to be Voted on by Stockholders – Item 1 – Election of
      Directors”* **** in
      the
      Proxy Statement, and Part I, Item 1, *“Description
      of Business—Executive Officers of the Registrant”* in this
      Annual Report on Form 10-K are incorporated by reference.





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





For
      information regarding compliance with Section 16(a) of the Exchange Act, the
      section captioned *“Other
      Information Relating to Directors and Executive Officers – Section 16(a)
      Beneficial Ownership Reporting Compliance”* in the
      Proxy Statement are incorporated by reference.





**Corporate
      Governance**





For
      information concerning the audit committee and the audit committee financial
      expert, the section captioned *“Corporate
      Governance and Board Matters – Committees of the Board of Directors –
Audit Committee”* in the
      Proxy Statement is incorporated by reference.




**Disclosure
      of Code of Ethics**





The
      Company has adopted a Code of Ethics and Business Conduct, which is available
      to
      stockholders, without charge, upon written request to Phyllis J. Brown,
      Corporate Secretary, Sugar Creek Financial Corp., 28 West Broadway, Trenton,
      Illinois 62293.





**ITEM
              11.**
            **EXECUTIVE
                COMPENSATION**





For
      information regarding executive compensation, the sections captioned *“Executive
      Compensation”* and *“Directors’
      Compensation”* in the
      Proxy Statement are incorporated by reference.




32




**ITEM
              12.**
            **SECURITY
                OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
                STOCKHOLDER MATTERS**





***(a)***  ***Securities
      Authorized for Issuance under Equity Compensation Plans***





The
      following table sets forth information, as of March 31, 2008, about Company
      common stock that may be issued under the Sugar Creek Financial Corp. 2007
      Equity Incentive Plan, which was approved by the Company’s stockholders at the
      2007 Annual Meeting of Stockholders.





**Plan category**
            
            **Number of securities to**
              **be issued upon exercise**
              **of outstanding options,**
              **warrants and rights**
            
            **Weighted-average**
              **exercise price of**
              **outstanding options,**
              **warrants and rights**
            
            **Number of securities**
              **remaining available for**
              **future issuance under equity**
              **compensation plans**
              **(excluding securities**
              **reflected in the first column)**Equity
                compensation plans approved by security holders
            
            
            –
            
            
            –
            
            
            62,211Equity
                compensation plans not approved by security holders
            
            
            –
            
            
            –
            
            
            –Total
            
            
            –
            
            
            –
            
            
            62,211





***(b)***  ***Security
      Ownership of Certain Beneficial Owners***





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




***(c)***  ***Security
      Ownership of Management***





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





***(d)***  ***Changes
      in Control***





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





**ITEM
              13.**
            **CERTAIN
                RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
                INDEPENDENCE**





The
      information required by this item is incorporated herein by reference to the
      sections captioned *“Transactions
      with Related Persons* ”
in
      the
      Proxy Statement.




Information
      regarding director independence is incorporated herein by reference to the
      section captioned *“Corporate
      Governance and Board Matters – Director Independence.”*




33


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





The
      information required by this item is incorporated herein by reference to the
      sections captioned “ *Item
      2 – Ratification of Independent Registered Public Accounting Firm − Audit
      and Non-Audit Fees”* and *“Item
      2 – Ratification of Independent Registered Public Accounting Firm −
Pre-Approval of Services by the Independent Registered Public Accounting
      Firm.”*





**ITEM
              15.**
            **EXHIBITS,
                FINANCIAL STATEMENT SCHEDULES**





3.1
            Charter
                of Sugar Creek Financial(1)


3.2
            Bylaws
                of Sugar Creek Financial(1)


4.0
            Stock
                Certificate of Sugar Creek Financial(2)


10.1
            *Tempo
                Bank Employment Agreement with Robert J. Stroh, Jr.(1)


10.2
            *Sugar
                Creek Financial Employment Agreement with Robert J. Stroh, Jr.(1)


10.3
            *Tempo
                Bank Employment Agreement with Francis J. Eversman(1)


10.4
            *Sugar
                Creek Financial Employment Agreement with Francis J. Eversman****(1)


10.5
            *Tempo
                Bank Employee Severance Compensation Plan(1)


10.6
            *Sugar
                Creek Financial Corp. 2007 Equity Incentive Plan(3)


21.0
            Subsidiaries
                of the Registrant


23.0
            Consent
                of Michael Trokey & Company, P.C. 31.0
            Rule
              13a-14(a)/15d-14(a) Certification of Chief Executive Officer and Chief
              Financial Officer 32.0
            Section
              1350 Certification







*
      Management contract or compensatory plan, contract or arrangement.


(1)
            Incorporated
                by reference into this document from the Exhibits filed with the
                Securities and Exchange Commission on the Annual Report on Form 10-KSB
                (File No. 000-52532), filed on June 27,
                2007.


(2)
            Incorporated
                by reference into this document from the Exhibits filed with the
                Securities and Exchange Commission on the Registration Statement
                on Form
                SB-2, (File No. 333-139332) and any amendments
                thereto.


(3)
            Incorporated
                by reference into this document from Appendix A to the Proxy Statement
                for
                the 2007 Annual Meeting of Stockholders (File No. 000-52532), filed
                with
                the Securities and Exchange Commission on October 15, 2007.




34




**SIGNATURES**





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


SUGAR
                  CREEK FINANCIAL CORP.Date:
                  June 26, 2008
              By:
              /s/
                  Robert J. Stroh, Jr.Robert
                  J. Stroh, Jr.Chairman,
                  Chief Executive Officer and Chief Financial
                Officer




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


Name
                    
                    Title
                    
                    Date/s/
                        Robert J. Stroh, Jr.
                    
                    Chairman,
                        Chief Executive Officer and
                    
                    June
                        26, 2008Robert
                        J. Stroh, Jr.
                    
                    Chief
                        Financial Officer (principalexecutive
                        officer and principal financialofficer)/s/
                        Francis J. Eversman
                    
                    President,
                        Chief Operating Officer and
                    
                    June
                          26, 2008Francis
                        J. Eversman
                    
                    Director/s/
                        Timothy W. Deien
                    
                    Director
                    
                    June
                          26, 2008Timothy
                        W. Deien/s/
                        Timothy P. Fleming
                    
                    Director
                    
                    June
                          26, 2008Timothy
                        P. Fleming/s/
                        Daniel S. Reilly
                    
                    Director
                    
                    June
                          26, 2008Daniel
                        S. Reilly/s/
                        Gary R. Schwend
                    
                    Director
                    
                    June
                          26, 2008Gary
                        R. Schwend




35




**Management’s
      Report on Internal Control Over Financial Reporting**





The
      management of the Company is responsible for establishing and maintaining
      adequate internal control over financial reporting. The internal control process
      has been designed under our supervision to provide reasonable assurance
      regarding the reliability of financial reporting and the preparation of the
      Company’s financial statements for external reporting purposes in accordance
      with accounting principles generally accepted in the United States of
      America.





Management
      conducted an assessment of the effectiveness of the Company’s internal control
      over financial reporting as of March 31, 2008, utilizing the framework
      established in Internal Control – Integrated Framework issued by the
      Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based
      on this assessment, management has determined that the Company’s internal
      control over financial reporting as of March 31, 2008 is effective.





Our
      internal control over financial reporting includes policies and procedures
      that
      pertain to the maintenance of records that accurately and fairly reflect, in
      reasonable detail, transactions and dispositions of assets; and provide
      reasonable assurances that: (1) transactions are recorded as necessary to permit
      preparation of financial statements in accordance with accounting principles
      generally accepted in the United States; (2) receipts and expenditures are
      being
      made only in accordance with authorizations of management and the directors
      of
      the Company; and (3) unauthorized acquisition, use, or disposition of the
      Company’s assets that could have a material effect on the Company’s financial
      statements are prevented or timely detected.





All
      internal control systems, no matter how well designed, have inherent
      limitations. Therefore, even those systems determined to be effective can
      provide only reasonable assurance with respect to financial statement
      preparation and presentation. Also, projections of any evaluation of
      effectiveness to future periods are subject to the risk that controls may become
      inadequate because of changes in conditions, or that the degree of compliance
      with the policies or procedures may deteriorate.





This
      annual report does not include an attestation report of the Company’s
      independent registered public accounting firm regarding internal control over
      financial reporting. Management’s report was not subject to attestation by the
      Company’s independent registered public accounting firm pursuant to temporary
      rules of the Securities and Exchange Commission that permit the Company to
      provide only management’s report in this annual report.





36




**MICHAEL
      TROKEY & COMPANY, P.C.**


CERTIFIED
      PUBLIC ACCOUNTANTS


10411
      CLAYTON ROAD


ST.
      LOUIS, MISSOURI 63131





**Report
      of Independent Registered Public Accounting Firm**





Audit
      Committee, Board of Directors and Stockholders


Sugar
      Creek Financial Corp.


Trenton,
      Illinois





We
      have
      audited the accompanying consolidated balance sheets of Sugar Creek Financial
      Corp. and subsidiary as of March 31, 2008 and 2007 and the related consolidated
      statements of earnings, stockholders’ equity and cash flows for the years then
      ended. These financial statements are the responsibility of the Company’s
      management. Our responsibility is to express an opinion on these financial
      statements based on our audits.





We
      conducted our audits in accordance with standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether the financial
      statements are free of material misstatement. An audit includes examining,
      on a
      test basis, evidence supporting the amounts and disclosures in the financial
      statements. An audit also includes assessing the accounting principles used
      and
      significant estimates made by management, as well as evaluating the overall
      financial statement presentation. We believe that our 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 financial position of Sugar Creek Financial Corp.
      as of March 31, 2008 and 2007, and the results of their operations and their
      cash flows for the years then ended in conformity with U.S. generally accepted
      accounting principles.





We
      were
      not engaged to examine management’s assertion about the effectiveness of Sugar
      Creek Financial Corp.’s internal control over financial reporting as of March
      31, 2008 included in the accompanying Management’s report on internal control
      over financial reporting and, accordingly, we do not express an opinion thereon.




/s/
      Michael Trokey & Company, P.C.


Certified
      Public Accountants


St.
      Louis, Missouri


June
      20,
      2008




F-1




**SUGAR
      CREEK FINANCIAL CORP. AND SUBSIDIARY**





**Consolidated
      Balance Sheets**





**March 31,****2008**
            
            **2007****Assets**Cash
                and due from banks
            
            $
            607,687
            
            
            469,454Federal
                funds sold
            
            
            929,733
            
            
            1,680,880FHLB
                daily investment
            
            
            1,629,805
            
            
            4,808,373Cash
                and cash equivalents
            
            
            3,167,225
            
            
            6,958,707Stock
                in Federal Home Loan Bank of Chicago
            
            
            1,660,145
            
            
            1,660,145Loans
                receivable, net of allowance for loan losses of $124,287 at March
                31, 2008
                and $130,000 at March 31, 2007
            
            
            79,803,742
            
            
            79,920,973Premises
                and equipment, net
            
            
            1,036,555
            
            
            866,898Foreclosed
                real estate
            
            
            385,847
            
            
            -Accrued
                interest receivable:Securities
            
            
            -
            
            
            10,000Loans
                receivable
            
            
            329,079
            
            
            307,241Other
                assets including prepaid income taxes of $20,646 at at March 31,
                2008 and
                $60,626 at March 31, 2007
            
            
            223,594
            
            
            617,405Total
                assets
            
            $
            86,606,187
            
            
            90,341,369**Liabilities
                and Stockholders' Equity**Deposits
            
            $
            59,181,449
            
            
            64,170,227Accrued
                interest on deposits
            
            
            233,399
            
            
            244,647Advances
                from FHLB of Chicago
            
            
            17,000,000
            
            
            19,000,000Advances
                from borrowers for taxes and insurance
            
            
            342,017
            
            
            275,521Other
                liabilities
            
            
            247,438
            
            
            161,303Deferred
                tax liability
            
            
            436,865
            
            
            420,865Total
                liabilities
            
            
            77,441,168
            
            
            84,272,563Commitments
                and contingenciesStockholders'
                equity:Preferred
                stock, $.01 par value, 1,000,000 shares authorized; none issued or
                outstanding
            
            
            -
            
            
            -Common
                stock, $.01 par value, 14,000,000 shares authorized; 906,879 shares
                issued
                and outstanding
            
            
            9,069
            
            
            -Additional
                paid-in capital
            
            
            3,341,901
            
            
            -Common
                stock acquired by ESOP
            
            
            (325,866
            )
            
            -Retained
                earnings - substantially restricted
            
            
            6,139,915
            
            
            6,068,806Total
                stockholders' equity
            
            
            9,165,019
            
            
            6,068,806Total
                liabilities and stockholders' equity
            
            $
            86,606,187
            
            
            90,341,369





See
      accompanying notes to consolidated financial statements.


F-2


**SUGAR
      CREEK FINANCIAL CORP. AND SUBSIDIARY**





**Consolidated
      Statements of Earnings**





**Years Ended March 31,****2008**
            
            **2007**Interest
                income:Loans
                receivable
            
            $
            4,880,189
            
            
            4,379,734Securities
            
            
            13,051
            
            
            70,061Other
                interest-earning assets
            
            
            114,894
            
            
            152,997Total
                interest income
            
            
            5,008,134
            
            
            4,602,792Interest
                expense:Deposits
            
            
            2,044,657
            
            
            2,018,825Advances
                from FHLB
            
            
            957,685
            
            
            686,716Total
                interest expense
            
            
            3,002,342
            
            
            2,705,541Net
                interest income
            
            
            2,005,792
            
            
            1,897,251Provision
                (credit) for loan losses
            
            
            80,436
            
            
            (4,452
            )Net
                interest income after provision (credit) for loan losses
            
            
            1,925,356
            
            
            1,901,703Noninterest
                income:Loan
                service charges
            
            
            24,183
            
            
            19,796Service
                charges on deposit accounts
            
            
            133,050
            
            
            82,295Gain
                on sale of investment in service bureau
            
            
            -
            
            
            18,491Other
            
            
            18,242
            
            
            11,709Total
                noninterest income
            
            
            175,475
            
            
            132,291Noninterest
                expense:Compensation
                and benefits
            
            
            1,178,909
            
            
            1,094,993Occupancy
                expense
            
            
            99,682
            
            
            89,656Equipment
                and data processing
            
            
            328,372
            
            
            298,528Federal
                deposit insurance premiums
            
            
            6,969
            
            
            7,323Advertising
            
            
            38,514
            
            
            58,445Supplies
                expense
            
            
            36,962
            
            
            34,973Professional
                and regulatory fees
            
            
            137,859
            
            
            68,869Other
            
            
            174,455
            
            
            182,564Total
                noninterest expense
            
            
            2,001,722
            
            
            1,835,351Earnings
                before income taxes
            
            
            99,109
            
            
            198,643Income
                tax expense
            
            
            28,000
            
            
            79,307Net
                earnings
            
            $
            71,109
            
            
            119,336Earnings
                per share
            
            $
            0.08
            
            
            N/ADividends
                per share
            
            $
            0.00
            
            
            N/A





N/A
      - Not
      applicable.


See
      accompanying notes to consolidated financial statements.


F-3


**SUGAR
      CREEK FINANCIAL CORP. AND SUBSIDIARY**





**Consolidated
      Statements of Stockholders’ Equity**





**Years
      Ended March 31, 2008 and 2007**





**Common****Additional**
            
            **Stock**
            
            
            
            **Total****Common**
            
            **Paid-in**
            
            **Acquired**
            
            **Retained**
            
            **Stockholders'****Stock**
            
            **Capital**
            
            **by ESOP**
            
            **Earnings**
            
            **Equity**Balance
                at March 31, 2006
            
            $
            -
            
            
            -
            
            
            -
            
            
            5,949,470
            
            
            5,949,470Net
                earnings
            
            
            -
            
            
            -
            
            
            -
            
            
            119,336
            
            
            119,336Balance
                at March 31, 2007
            
            
            -
            
            
            -
            
            
            -
            
            
            6,068,806
            
            
            6,068,806Net
                earnings
            
            
            -
            
            
            -
            
            
            -
            
            
            71,109
            
            
            71,109Proceeds
                from sale of common stock after distribution of $50,000 to
                MHC
            
            
            9,069
            
            
            3,342,509
            
            
            (355,490
            )
            
            -
            
            
            2,996,088Amortization
                of ESOP award
            
            
            -
            
            
            (608
            )
            
            29,624
            
            
            -
            
            
            29,016Balance
                at March 31, 2008
            
            $
            9,069
            
            
            3,341,901
            
            
            (325,866
            )
            
            6,139,915
            
            
            9,165,019





See
      accompanying notes to consolidated financial statements.


F-4


**SUGAR
      CREEK FINANCIAL CORP. AND SUBSIDIARY**





**Consolidated
      Statements of Cash Flows**





**Years Ended March 31,****2008**
            
            **2007**Cash
                flows from operating activities:Net
                earnings
            
            $
            71,109
            
            
            119,336Adjustments
                to reconcile net earnings to net cash provided by (used for) operating
                activities:Depreciation
            
            
            90,303
            
            
            89,674ESOP
                expense
            
            
            29,016
            
            
            -Amortization
                of deferred loan fees, net
            
            
            (24,211
            )
            
            (16,720
            )Provision
                (credit) for loan losses
            
            
            80,436
            
            
            (4,452
            )Decrease
                (increase) in accrued interest receivable
            
            
            (11,838
            )
            
            (45,575
            )Decrease
                (increase) in other assets
            
            
            393,811
            
            
            (419,991
            )Increase
                (decrease) in:Accrued
                interest on deposits
            
            
            (11,248
            )
            
            55,307Other
                liabilities
            
            
            86,135
            
            
            12,369Deferred
                income tax liability
            
            
            16,000
            
            
            (2,000
            )Net
                cash provided by (used for) operating activities
            
            
            719,513
            
            
            (212,052
            )Cash
                flows from investing activities:Net
                change in loans receivable
            
            
            (306,501
            )
            
            (12,807,618
            )Redemption
                of FHLB stock
            
            
            -
            
            
            1,171,310Purchase
                of premises and equipment
            
            
            (259,960
            )
            
            (23,781
            )Additions
                to foreclosed real estate
            
            
            (18,340
            )
            
            -Net
                cash provided by (used for) investing activities
            
            
            (584,801
            )
            
            (11,660,089
            )Cash
                flows from financing activities:Net
                increase (decrease) in deposits
            
            
            (4,988,778
            )
            
            4,714,206Increase
                (decrease) in advances from borrowers for taxes and
                insurance
            
            
            66,496
            
            
            5,959Proceeds
                from advances from FHLB
            
            
            22,000,000
            
            
            16,000,000Repayment
                of advances from FHLB
            
            
            (24,000,000
            )
            
            (7,000,000
            )Proceeds
                from sale of common stock, net
            
            
            2,996,088
            
            
            -Net
                cash provided by (used for) financing activities
            
            
            (3,926,194
            )
            
            13,720,165Net
                increase (decrease) in cash and cash equivalents
            
            
            (3,791,482
            )
            
            1,848,024Cash
                and cash equivalents at beginning of year
            
            
            6,958,707
            
            
            5,110,683Cash
                and cash equivalents at end of year
            
            $
            3,167,225
            
            
            6,958,707Supplemental
                disclosures - cash paid during the year for:Interest
                on deposits and advances from FHLB
            
            $
            3,016,701
            
            
            2,614,786Federal
                and state income taxes
            
            $
            36,158
            
            
            105,000Real
                estate and repossessions acquired in settlement of loans
            
            $
            540,507
            
            
            -





See
      accompanying notes to consolidated financial statements.


F-5


**SUGAR
      CREEK FINANCIAL CORP. AND SUBSIDIARY**





**Notes
      to Consolidated Financial Statements**


**Years
      Ended March 31, 2008 and 2007**





**(1)** **Summary
      of Significant Accounting Policies**




On
      April
      3, 2007, Tempo Bank (“Bank”) completed its reorganization into a two-tier
      holding company structure and Sugar Creek Financial Corp. (“Company”) completed
      its initial public offering. As part of the reorganization, the Bank became
      a
      capital stock savings bank and a wholly-owned subsidiary of the Company, which
      became the majority-owned subsidiary of Sugar Creek MHC (“MHC”). In connection
      with the offering, the Company sold 408,095 shares, or 45% of its common stock,
      to eligible depositors of the Bank, an employee stock ownership plan and members
      of the general public at a price of $10 per share. In addition, the Company
      issued 498,784 shares, or 55% of its common stock, to the MHC. The significant
      accounting policies which the Company and Bank follow in preparing and
      presenting their consolidated financial statements were:




a.
            The
                consolidated financial statements include the accounts of the Company
                and
                its wholly-owned subsidiary, Tempo Bank. The Company’s principal business
                is the business of the Bank. All significant intercompany accounts
                and
                transactions have been eliminated.




b.
            For
                purposes of reporting cash flows, cash and cash equivalents include
                cash
                and due from banks, federal funds sold and the FHLB daily investment
                account, all with original maturities of three months or less.
                Interest-bearing funds in cash and cash equivalents were $2,108,632
                and
                $6,038,546 at March 31, 2008 and 2007, respectively.




c.
            Stock
                in Federal Home Loan Bank of Chicago ("FHLBC") is recorded at cost,
                which
                represents historical redemption value, and is periodically evaluated
                for
                impairment based on ultimate recovery of par value. On
                October 10, 2007, the FHLBC entered into a consensual cease and desist
                order with the Federal Housing Finance Board Office of Supervision
                which
                limits the ability of the FHLBC to redeem stock or pay dividends.
                The
                FHLBC did not declare a dividend for the third and fourth calendar
                quarters of 2007 and first quarter of 2008. At March 31, 2008, $810,000
                of
                the Bank’s FHLBC stock consisted of excess stock. Excess stock is stock
                held by members over the amount required as a condition of membership
                or
                for borrowings from the FHLBC. The required investment in the common
                stock
                is based upon a percentage of the Bank’s assets and FHLB advances. For the
                years ended March 31, 2008 and 2007, the Bank recognized dividend
                income
                from the FHLBC of $13,051 and $70,061, respectively.




d.
            Loans
                receivable, net are carried at unpaid principal balances, less allowance
                for losses, net deferred loan fees and loans in process. Loan origination
                and commitment fees and certain direct loan origination costs are
                deferred
                and amortized to interest income over the contractual life of the
                loan
                using the interest method.




e.
            Specific
                valuation allowances are established for impaired loans for the difference
                between the loan amount and the fair value of collateral less estimated
                selling costs. The Bank considers a loan to be impaired when, based
                on
                current information and events, it is probable that the Bank will
                be
                unable to collect all amounts due according to the contractual terms
                of
                the loan agreement on a timely basis. Such loans are placed on nonaccrual
                status at the point deemed uncollectible. Impairment losses are recognized
                through an increase in the allowance for loan losses. A loan is considered
                delinquent when a payment has not been made by the contractual due
                date.


F-6


SUGAR
      CREEK FINANCIAL CORP. AND SUBSIDIARY





**Notes
      to Consolidated Financial Statements**




f.
            Allowance
                for losses is available to absorb losses incurred on loans receivable
                and
                represents additions charged to expense, less net charge-offs. Loans
                are
                charged-off in the period deemed uncollectible. Recoveries of loans
                previously charged-off are recorded when received. In determining
                the
                allowance for losses to be maintained, management evaluates current
                economic conditions, past loss and collection experience, fair value
                of
                the underlying collateral and risk characteristics of the loan portfolio.
                Management believes that all known and inherent losses in the loan
                portfolio that are probable and reasonable to estimate have been
                recorded
                as of each balance sheet date.




g.
            Premises
                and equipment, net are carried at cost, less accumulated depreciation.
                Depreciation of premises and equipment is computed using the straight-line
                method based on the estimated useful lives of the related assets.
                Estimated lives are fifteen to forty years for the office buildings
                and
                improvements and three to ten years for furniture and equipment.




h.
            Foreclosed
                real estate held for sale is carried at the lower of cost or fair
                value
                less estimated selling costs. Costs relating to improvement of foreclosed
                real estate are capitalized. Allowance for losses is available when
                necessary to absorb losses incurred on foreclosed real estate and
                represents additions charged to expense, less net gains or losses.
                In
                determining the allowance for losses to be maintained, management
                evaluates current economic conditions, fair value of the underlying
                collateral and risk characteristics of foreclosed real estate held
                for
                sale. Foreclosed assets also include properties for which the Bank
                has
                taken physical possession, even though formal foreclosure proceedings
                have
                not taken place.




i.
            Interest
                on securities and loans receivable is accrued as earned. Interest
                on loans
                receivable deemed uncollectible is excluded from income until collected.
                When a loan is classified as nonaccrual, accrued interest is reversed
                against current income. Subsequent collection of interest on nonaccrual
                loans is recorded as income when received or applied to reduce the
                loan
                balance. Accrual of interest is resumed on previously classified
                nonaccrual loans, when there is no longer any reasonable doubt as
                to the
                timely collection of interest.




j.
            Deferred
                income tax assets and liabilities are computed for differences between
                the
                financial statement and tax bases of assets and liabilities that
                will
                result in taxable or deductible amounts in the future based on enacted
                tax
                laws and rates applicable to the periods in which the differences
                are
                expected to affect taxable income. Valuation allowances are established
                when necessary to reduce deferred tax assets to the amount that will
                more
                likely than not be realized. Income tax expense is the tax payable
                or
                refundable for the period plus or minus the net change in the deferred
                tax
                assets and liabilities.





k.
            The
                cost of shares issued to the ESOP, but not yet committed to be released,
                is shown as a reduction of stockholders’ equity.For
                ESOP shares committed to be released, the Bank recognizes compensation
                expense equal to the average fair value of the shares committed to
                be
                released during the period in accordance with the provisions of Statement
                of Position 93-6. To the extent that the fair value of the ESOP shares
                differs from the cost of such shares, the difference is charged or
                credited to stockholders’ equity as additional paid-in
                capital.





l.
            Earnings
                per share are based upon the weighted-average shares outstanding,
                including ESOP shares, which have been allocated or committed to
                be
                released since the last plan year end. Earnings per share for the
                period
                from the conversion date of April 3, 2007 to March 31, 2008 were
                based
                upon net earnings for the year ended March 31, 2008 of $71,109 and
                weighted-average shares outstanding of 906,879 less ESOP shares not
                yet
                committed to be released of 33,969, or 872,910. Net earnings for
                the
                period of April 1, 2007 to April 2, 2007 were not considered significant.
                Earnings per share are not applicable for periods prior to the conversion
                date of April 3, 2007.


F-7




**SUGAR
      CREEK FINANCIAL CORP. AND SUBSIDIARY**





**Notes
      to Consolidated Financial Statements**




m.
            The
                following paragraphs summarize recent accounting pronouncements:




In
      December 2004, the Financial Accounting Standards Board ("FASB") issued
      Statement of Financial Accounting Standards ("SFAS") No. 123 (revised 2004)
      (SFAS No. 123(R) "Share-Based Payment". SFAS No. 123(R) requires all entities
      to
      recognize compensation expense equal to the fair value of share-based payments
      such as stock options granted to employees. SFAS No. 123(R) is effective for
      the
      first interim period after the effective date of the Conversion and
      Reorganization (see Note 9). The effect on future operations will depend on
      the
      level of future option grants, vesting period of such options and fair value
      of
      options granted at such future dates.





In
      March
      2005, the Securities and Exchange Commission (“SEC”) issued SEC Staff Accounting
      Bulletin No. 107 (“SAB 107”), which expresses views of the staff regarding the
      interaction between SFAS No. 123(R) and certain SEC rules and regulations and
      provides the staff’s views regarding the valuation of share-based payment
      arrangements for public entities. The Company will consider the guidance
      provided by SAB 107 as part of its adoption of SFAS No. 123(R).





In
      June
      2006, the FASB issued FASB Interpretation No. 48 “Accounting for Uncertainty in
      Income Taxes - an Interpretation of FASB No. 109.” This Interpretation
      prescribes a recognition threshold and measurement attribute for financial
      statement recognition and measurement of a tax position taken in a tax return,
      and provides guidance on derecognition, classification, interest and penalties,
      accounting for interim periods and transition. This interpretation is effective
      for fiscal years beginning after December 15, 2006. T he
      Company adopted the provisions of FIN 48, effective April 1, 2007. No
      adjustments were recognized for uncertain tax positions. The Company is subject
      to U.S. Federal income taxes, as well as State of Illinois income taxes. Tax
      years ending March 31, 2006 through March 31, 2008 remain open to examination
      by
      these jurisdictions. The Company recognizes interest and penalties related
      to
      tax positions in income tax expense. At March 31, 2008, there was no accrual
      for
      uncertain tax positions or related interest.





In
      September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,” to
      define fair value, establish a framework for measuring fair value and expand
      disclosures about fair values. The Statement is effective for financial
      statements issued for fiscal years beginning after November 15, 2007, and
      interim periods within those fiscal years. SFAS No. 157 was adopted April 1,
      2008 and did not have a material impact on the Company’s financial position or
      results of operation.





In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities.” SFAS No. 159 permits entities to
      choose to measure many financial instruments and certain other items at fair
      value. Entities shall report unrealized gains and losses on those items which
      the fair value option has been elected in earnings. SFAS No. 159 is effective
      as
      of the beginning of an entity’s first fiscal year that begins after November 15,
      2007. SFAS
      No.
      159 was adopted April 1, 2008 and did not have a material impact on the
      Company’s financial position or results of operation.




In
      November 2007, the SEC issued Staff Accounting Bulletin No. 109 (”SAB 109”),
“Written Loan Commitments Recorded at Fair Value Through Earnings.” SAB 109
      supercedes SAB 105, “Application of Accounting Principles to Loan Commitments,”
and indicates that the expected net future cash flows related to the associated
      servicing of the loan should be included in the measurement of all written
      loan
      commitments that are accounted for at fair value through earnings. The guidance
      in SAB 109 is applied on a prospective basis to derivative loan commitments
      issued or modified in fiscal quarters beginning after December 15, 2007. SAB
      109
      was adopted January 1, 2008 and did not have a material impact on the Company’s
      financial position or results of operation.


F-8


**SUGAR
      CREEK FINANCIAL CORP. AND SUBSIDIARY**





**Notes
      to Consolidated Financial Statements**





In
      December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
      Consolidated Financial Statements - an amendment of ARB No. 51.” SFAS No. 160
      improves the relevance, comparability, and transparency of the financial
      information that an entity provides in its consolidated financial statements
      by
      establishing accounting and reporting standards for a noncontrolling interest
      or
      minority interest, the portion of equity in a subsidiary not attributable,
      directly or indirectly, to a parent.





In
      December 2007, the FASB issued SFAS No. 141 (revised 2007) (R), “Business
      Combinations.” SFAS No. 141 (R) improves the relevance, representational
      faithfulness, and comparability of the financial information that an entity
      provides in its financial reports regarding business combinations and its
      effects.





SFAS
      No.
      160 and SFAS No. 141 (R) are effective for fiscal years, and interim periods
      within those fiscal years, beginning after December 15, 2008. The Company is
      currently reviewing the applications of SFAS No. 160 and SFAS No. 141 (R).
      At
      March 31, 2008, t he
      Company did not have a noncontrolling interest.





In
      March
      2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments
      and Hedging Activities - an amendment of FASB Statement No. 133.” SFAS No. 161
      requires enhanced disclosures about an entity’s derivative and hedging
      activities and improves the transparency of financial reporting. SFAS No. 161
      is
      effective for financial statements issued for fiscal years and interim periods
      beginning after November 15, 2008, with earlier application encouraged. The
      Company is currently reviewing the applications of SFAS No. 161. At March 31,
      2008, the Company did not have any derivative instruments nor hedging
      activities.





In
      May
      2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
      Accounting Principles.” SFAS No. 162 identifies the sources of accounting
      principles and the framework for selecting the principles to be used in
      preparation of financial statements that are presented in conformity with U.S.
      generally accepted accounting principles. SFAS No. 162 is effective 60 days
      following the SEC’s approval of the PCAOB amendments to AU Section 411, “The
      Meaning of Present Fairly in Conformity With Generally Accepted Accounting
      Principles.”


F-9


**SUGAR
      CREEK FINANCIAL CORP. AND SUBSIDIARY**





**Notes
      to Consolidated Financial Statements**





**(2)** **Risks
      and Uncertainties**





The
      Bank
      is a community oriented financial institution that provides traditional
      financial services within the areas it serves. The Bank is engaged primarily
      in
      the business of attracting deposits from the general public and using these
      funds to originate one- to four-family residential mortgage loans located in
      the
      Clinton, St. Clair, Madison and Bond County, Illinois area. Further, operations
      of the Bank are managed and financial performance is evaluated on an
      institution-wide basis. As a result, all of the Bank’s operations are considered
      by management to be aggregated in one reportable operating segment.





The
      financial statements have been prepared in conformity with U.S. generally
      accepted accounting principles. In preparing the financial statements,
      management is required to make estimates and assumptions which affect the
      reported amounts of assets and liabilities as of the balance sheet dates and
      income and expenses for the periods covered. Actual results could differ
      significantly from these estimates and assumptions.





The
      Bank's operations are affected by interest rate risk, credit risk, market risk
      and regulations by the Office of Thrift Supervision (“OTS”). The Bank is subject
      to interest rate risk to the degree that its interest-bearing liabilities mature
      or reprice more rapidly, or on a different basis, than its interest-earning
      assets. The Bank uses a net market value methodology provided by an outside
      consulting firm to measure its interest rate risk exposure. This exposure is
      a
      measure of the potential decline in the net portfolio value of the Bank based
      upon the effect of a rate shock of plus or minus 50 and 100 basis points. Net
      portfolio value is the expected net cash flows from the institution's assets,
      liabilities and off-balance sheet contracts. Credit risk is the risk of default
      on the Bank's loan portfolio that results from inability or unwillingness of
      borrowers to make contractually required payments. Market risk reflects changes
      in the value of collateral underlying loans receivable and the valuation of
      real
      estate held by the Bank.





The
      Bank
      is subject to periodic examination by regulatory agencies that may require
      the
      Bank to record increases in the allowances based on their evaluation of
      available information. There can be no assurance that the Bank's regulators
      will
      not require further increases to the allowances.


F-10


**SUGAR
      CREEK FINANCIAL CORP. AND SUBSIDIARY**





**Notes
      to Consolidated Financial Statements**





**(3)**  **Loans
      Receivable, Net**


Loans
      receivable, net are summarized as follows:





**March
                31,****2008**
            
            **2007**Real
                estate loans:Single-family
                loans, 1- 4 units
            
            $
            69,903,270
            
            
            70,527,114Multi-family
            
            
            966,253
            
            
            1,099,137Commercial
                real estate
            
            
            2,885,924
            
            
            1,638,301Land
            
            
            1,723,060
            
            
            1,722,794Automobile
                loans
            
            
            2,521,802
            
            
            2,824,639Home
                equity loans
            
            
            1,526,650
            
            
            1,534,302Loans
                secured by deposit accounts
            
            
            520,904
            
            
            828,271Fresh
                Start loans
            
            
            280
            
            
            -80,048,143
            
            
            80,174,558Allowance
                for losses
            
            
            (124,287
            )
            
            (130,000
            )Deferred
                loan fees, net
            
            
            (120,114
            )
            
            (123,585
            )$
            79,803,742
            
            
            79,920,973Weighted-average
                rate
            
            
            6.07
            %
            
            5.95
            %





Balloon
      and adjustable-rate loans in the loan portfolio amounted to $35,510,283 and
      $37,005,723 at March 31, 2008 and 2007, respectively.





The
      Bank
      originates single-family loans and home equity loans with high loan to value
      ratios exceeding 90 percent which amounted to $1.2 million at March 31,
      2008.





Following
      is a summary of activity in allowance for losses:


**Years Ended****March 31,****2008**
              
              **2007**Balance,
                  beginning of year
              
              $
              130,000
              
              
              130,000Loan
                  charge-offs
              
              
              (92,073
              )
              
              (10,553
              )Recoveries
              
              
              5,924
              
              
              15,005Provision
                  (credit) for loan losses
              
              
              80,436
              
              
              (4,452
              )Balance,
                  end of year
              
              $
              124,287
              
              
              130,000




F-11


**SUGAR
      CREEK FINANCIAL CORP. AND SUBSIDIARY**





**Notes
      to Consolidated Financial Statements**





Following
      is a summary of loans to directors, executive officers and associates of such
      persons at year ended March 31, 2008:





Balance,
                beginning of year
            
            $
            3,559,107Additions
            
            
            960,649Repayments
            
            
            (1,081,694
            )Balance,
                end of year
            
            $
            3,438,062





These
      loans were made on substantially the same terms as those prevailing at the
      time
      for comparable transactions with unaffiliated persons.





There
      were no impaired loans under SFAS No. 114 at March 31, 2008 or
      2007.





Following
      is a summary of nonperforming loans:





**March 31,****2008**
            
            **2007**Nonaccrual
                loans
            
            $
            64,009
            
            
            727,771Accruing
                loans past due 90 days or more
            
            
            -
            
            
            -Total
                nonperforming loans
            
            $
            64,009
            
            
            727,771Allowance
                for losses on nonperforming loans
            
            $
            6,401
            
            
            72,777Nonperforming
                loans with no allowance
            
            $
            -
            
            
            -Average
                balance of nonperforming loans
            
            $
            574,500
            
            
            874,862





During
      the year ended March 31, 2008, the amount of interest income recognized on
      nonperforming loans and the amount if such loans had been current during the
      period of impairment was $4,900 and $5,582, respectively.


F-12


**SUGAR
      CREEK FINANCIAL CORP. AND SUBSIDIARY**





**Notes
      to Consolidated Financial Statements**





**(4)** **Premises and Equipment, Net**


Premises
      and equipment, net are summarized as follows:




**March 31,****2008**
            
            **2007**Land
            
            $
            243,041
            
            
            243,041Office
                buildings and improvements
            
            
            1,334,924
            
            
            1,192,000Furniture
                and equipment
            
            
            679,511
            
            
            648,3952,257,476
            
            
            2,083,436Less
                accumulated depreciation
            
            
            1,220,921
            
            
            1,216,538$
            1,036,555
            
            
            866,898





Depreciation
      expense for 2008 and 2007 was $90,303 and $89,674, respectively.





**(5)** **Deposits**


Deposits
      are summarized as follows:




**March 31,****Description
                and Interest Rate**
            
            **2008**
            
            **2007**Non-interest
                bearing NOW accounts
            
            $
            2,620,292
            
            
            2,403,498NOW
                accounts, .50% and .50%
            
            
            4,420,144
            
            
            4,782,179Savings
                accounts, .67% and .77%
            
            
            7,277,525
            
            
            11,286,497Money
                market accounts, 2.65% and 2.33%
            
            
            3,323,884
            
            
            2,242,233Total
                transaction accounts
            
            
            17,641,845
            
            
            20,714,407Certificates:1.01
                - 2.00%
            
            
            709,466
            
            
            2,413,9272.01
                - 3.00%
            
            
            3,099,180
            
            
            990,8433.01
                - 4.00%
            
            
            5,832,531
            
            
            5,899,5154.01
                - 5.00%
            
            
            17,976,853
            
            
            17,321,7145.01
                - 6.00%
            
            
            13,921,574
            
            
            16,829,821Total
                certificates, 4.55% and 4.63%
            
            
            41,539,604
            
            
            43,455,820Total
                deposits
            
            $
            59,181,449
            
            
            64,170,227Weighted-average
                rate - total deposits
            
            
            3.46
            %
            
            3.39
            %





Certificate
      maturities are summarized as follows:





**March 31,****2008**
            
            **2007**First
                year
            
            $
            32,297,607
            
            
            38,031,711Second
                year
            
            
            6,835,117
            
            
            4,492,851Third
                year
            
            
            2,193,007
            
            
            824,584Fourth
                year
            
            
            12,832
            
            
            94,107Fifth
                year
            
            
            201,041
            
            
            12,567$
            41,539,604
            
            
            43,455,820


F-13


**SUGAR
      CREEK FINANCIAL CORP. AND SUBSIDIARY**





**Notes
      to Consolidated Financial Statements**





The
      aggregate amount of transaction accounts and certificates in denominations
      of
      $100,000 or more at March 31, 2008 were $3,697,238 and $9,859,191, respectively.
      The aggregate amount of transaction accounts and certificates in denominations
      of $100,000 or more at March 31, 2007 were $6,559,000 and $8,724,000,
      respectively.





Interest
      expense on deposits is summarized as follows:





**Years Ended March 31,****2008**
            
            **2007**NOW
                accounts
            
            $
            22,975
            
            
            27,452Savings
                accounts
            
            
            49,466
            
            
            76,232Money
                market accounts
            
            
            81,860
            
            
            33,633Certificates
            
            
            1,890,356
            
            
            1,881,508$
            2,044,657
            
            
            2,018,825





**(6)** **Advances
      from FHLB of Chicago**


Advances
      from FHLB of Chicago are
      summarized as follows:****





**March 31,****Final Maturity Date**
            
            **Interest Rate**
            
            **2008**
            
            **2007**Daily
            
            
            2.92
            %
            $
            1,000,000
            
            
            3,000,000October
                12, 2007
            
            
            3.44
            %
            
            -
            
            
            3,000,000October
                10, 2008
            
            
            5.16
            %
            
            2,000,000
            
            
            2,000,000February
                13, 2017
            
            
            4.71
            %
            
            5,000,000
            
            
            5,000,000October
                13, 2009
            
            
            4.78
            %
            
            3,000,000
            
            
            -November
                28, 2011
            
            
            4.96
            %
            
            2,000,000
            
            
            2,000,000December
                22, 2011
            
            
            4.95
            %
            
            4,000,000
            
            
            4,000,000$
            17,000,000
            
            
            19,000,000Weighted-average
                rate
            
            
            
            
            
            4.82
            %
            
            4.84
            %


At
      March
      31, 2008 advances from FHLB were secured by FHLB stock and mortgage loans of
      $52.0 million. At March 31, 2007 advances from FHLB were secured by FHLB stock
      and mortgage loans of $51.9 million.





**(7)** **Income Taxes**


The
      Bank
      used the experience method bad debt deduction for all periods covered by the
      financial statements. The Bank’s tax bad debt reserves at March 31, 2008 and
      2007 were approximately $888,000. The estimated deferred tax liability on such
      amount is approximately $302,000, which has not been recorded in the
      accompanying consolidated financial statements. If these tax bad debt reserves
      are used for other than loan losses, the amount used will be subject to Federal
      income taxes at the then prevailing corporate rate.


F-14


**SUGAR
      CREEK FINANCIAL CORP. AND SUBSIDIARY**





**Notes
      to Consolidated Financial Statements**





The
      provision for income taxes differs from the Federal statutory corporate tax
      rate
      of 34% as follows:





**Percentage of earnings before income taxes****Years Ended March 31,****2008**
            
            **2007**Federal
                statutory income tax rate
            
            
            34.0
            %
            
            34.0
            %Increases
                in tax rate:State
                taxes, net of Federal tax benefit
            
            
            4.8
            
            
            4.2Surtax
                exemption
            
            
            (11.9
            )
            
            (3.6
            )Other,
                net
            
            
            1.4
            
            
            5.3Tax
                rate
            
            
            28.3
            %
            
            39.9
            %





The
      components of the net deferred tax liability are summarized as
      follows:




**March 31,****2008**
              
              **2007**Deferred
                  tax liabilities:FHLB
                  stock dividends
              
              $
              129,548
              
              
              129,548Deferred
                  loan costs
              
              
              4,998
              
              
              6,190Tax
                  over book depreciation
              
              
              229,585
              
              
              214,631Accrued
                  income and expense
              
              
              123,708
              
              
              121,196Other
              
              
              1,443
              
              
              -Total
                  deferred tax liabilities
              
              
              489,282
              
              
              471,565Deferred
                  tax assets:Allowance
                  for losses on loans
              
              
              (48,472
              )
              
              (50,700
              )Book
                  over tax ESOP expense
              
              
              (3,945
              )
              
              -Total
                  deferred tax assets
              
              
              (52,417
              )
              
              (50,700
              )Net
                  deferred tax liability
              
              $
              436,865
              
              
              420,865




F-15


**SUGAR
      CREEK FINANCIAL CORP. AND SUBSIDIARY**





**Notes
      to Consolidated Financial Statements**





Income
      taxes are summarized as follows:





**Years Ended March 31,****2008**
            
            **2007**Current:Federal
            
            $
            8,000
            
            
            67,681State
            
            
            4,000
            
            
            13,62612,000
            
            
            81,307Deferred:Federal
            
            
            13,000
            
            
            (1,000
            )State
            
            
            3,000
            
            
            (1,000
            )16,000
            
            
            (2,000
            )Total
                income taxes
            
            $
            28,000
            
            
            79,307





**(8)** **Employee Benefits**


The
      Bank
      participates in an industry-wide retirement plan, which covers substantially
      all
      employees. Since this is a multiemployer plan, the plan’s administrators are
      unable to determine the actuarial present value of benefits attributable to
      the
      Bank’s participants. The unfunded pension liability of the Bank was
      approximately $227,000 and $479,000 at June 30, 2007 (the most recent report
      available), and June 30, 2006, respectively. Pension expense was $205,251 and
      $260,559 for the years ended March 31, 2008 and 2007, respectively.





The
      Bank
      has a defined contribution plan which covers substantially all employees.
      Participants may contribute up to 20% of salary, subject to Internal Revenue
      Code limitations. The Bank matches the employee contribution, up to 4% of
      salary. Participants are fully vested after four years of service. Plan expense
      was $26,005 and $24,589 for the years ended March 31, 2008 and 2007,
      respectively.





In
      conjunction with the stock offering, $355,490 was loaned by the Company to
      a
      trust for the ESOP, enabling it to acquire 35,549 shares of common stock. Eligible
      employees in the ESOP are those who also participated in the Bank’s defined
      contribution plan as of April 3, 2007 and employees hired thereafter which
      complete at least 1000 hours of service during the plan year, which begins
      January 1. Participant benefits become fully vested upon completion of 3 years
      of service; participants will be 0% vested prior to that time. The Bank makes
      annual contributions equal to the ESOP's debt service, less dividends on
      unallocated shares used to repay the loan. Dividends on allocated ESOP shares
      are paid to participants and charged to retained earnings. The ESOP shares
      are
      pledged as collateral on the loan. As the loan is repaid, shares are released
      from collateral and allocated to participating employees, based on the
      proportion of loan principal and interest repaid and compensation of the
      participants. ESOP expense for the year ended March 31, 2008 was $29,016. There
      was no ESOP expense for the year ended March 31, 2007.





The
      number of ESOP shares allocated, shares released for allocation and unreleased
      shares at March 31, 2008 were 2,370, 593 and 32,586, respectively. There were
      no
      ESOP shares at March 31, 2007. The
      fair
      value of unreleased ESOP shares at March 31, 2008 was $296,533.


F-16


**SUGAR
      CREEK FINANCIAL CORP. AND SUBSIDIARY**





**Notes
      to Consolidated Financial Statements**





**(9)** **Stockholders’ Equity and Regulatory
      Capital**


On
      April
      3, 2007, the Bank completed its reorganization into a two-tier holding company
      structure and Sugar Creek Financial Corp. (“Company”) completed its initial
      public offering. As part of the reorganization, the Bank became a capital stock
      savings bank and a wholly-owned subsidiary of the Company, which became a
      majority-owned subsidiary of Sugar Creek MHC (“MHC”). In connection with the
      offering, the Company sold 408,095 shares, or 45% of its common stock, to
      eligible depositors of the Bank, an employee stock ownership plan and members
      of
      the general public at a price of $10 per share. In addition, the Company issued
      498,784 shares, or 55% of its common stock, to the MHC. Total shares issued
      and
      outstanding on April 3, 2007 were 906,879. Net proceeds from the sale of common
      stock were $3,046,088 after deduction of conversion costs of $679,372, and
      unearned compensation of $355,490 related to shares issued to the ESOP. Net
      proceeds contributed to the MHC, Company and Bank were $50,000, $76,285 and
      $2,919,803, respectively.





In
      the
      event of a liquidation of the Bank, the Company would be entitled to the assets
      of the Bank available for distribution after payment of all liabilities of
      the
      Bank, including all accounts of depositors and accrued interest. Upon the
      liquidation of the Company, the holders of its common stock would be entitled
      to
      the assets of the Company available for distribution after payment of its
      liabilities. The Bank may not declare or pay a cash dividend, if the effect
      of
      such dividends would be to cause the capital of the Bank to be reduced below
      the
      aggregate amount required by federal or state law. The Company may pay a
      dividend, if and when declared by its Board of Directors. Any dividends waived
      by the MHC, are subject to approval by the OTS. Any
      repurchases of the Company’s common stock will be conducted in accordance with
      applicable laws and regulations.




The
      Bank
      is subject to various regulatory capital requirements administered by the
      federal banking agencies. Failure to meet minimum capital requirements can
      result in certain mandatory and possibly additional discretionary actions by
      regulators that, if undertaken, could have a direct material effect on the
      Bank’s financial statements. Under capital adequacy guidelines, the Bank must
      meet specific capital guidelines that involve quantitative measures of assets,
      liabilities, and certain off-balance sheet items as calculated under regulatory
      accounting practices. The Bank’s capital amounts and classifications are also
      subject to quantitative judgments by the regulators about components,
      risk-weightings and other factors. At March 31, 2008, the Bank met all capital
      adequacy requirements. The Bank is also subject to the regulatory framework
      for
      prompt corrective action. At March 31, 2008 and 2007, the most recent
      notification from the regulatory agencies categorized the Bank as well
      capitalized. To be categorized as well capitalized, the Bank must maintain
      minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set
      forth in the following table. There are no conditions or events since the
      aforementioned notifications that management believes have changed the Bank’s
      category.


F-17


**SUGAR
      CREEK FINANCIAL CORP. AND SUBSIDIARY**





**Notes
      to Consolidated Financial Statements**





The
      Bank’s actual and required capital amounts and ratios at March 31, 2008 are as
      follows:





Minimum
            
            Requiredfor Capital
            
            to be "WellActual
            
            Adequacy
            
            Capitalized"Amount
            
            Ratio
            
            Amount
            
            Ratio
            
            Amount
            
            Ratio(Dollars
                in Thousands)Stockholders'
                equity of the Bank
            
            $
            8,782
            
            
            10.1
            %
            $
            1,298
            
            
            1.5
            %General
                valuation allowance
            
            
            124Total
                capital to risk-weighted assets
            
            $
            8,906
            
            
            19.0
            %
            $
            3,744
            
            
            8.0
            %
            $
            4,681
            
            
            10.0
            %Tier
                1 capital to risk-weighted assets
            
            $
            8,782
            
            
            18.8
            %
            $
            1,872
            
            
            4.0
            %
            $
            2,808
            
            
            6.0
            %Tier
                1 capital to total assets
            
            $
            8,782
            
            
            10.1
            %
            $
            3,462
            
            
            4.0
            %
            $
            4,328
            
            
            5.0
            %





The
      Bank’s actual and required capital amounts and ratios at March 31, 2007 are as
      follows:





Minimum
            
            Requiredfor Capital
            
            to be "WellActual
            
            Adequacy
            
            Capitalized"Amount
            
            Ratio
            
            Amount
            
            Ratio
            
            Amount
            
            Ratio(Dollars in Thousands)Stockholders'
                equity of the Bank
            
            $
            6,069
            
            
            6.7
            %
            $
            1,354
            
            
            1.5
            %General
                valuation allowance
            
            
            130Total
                capital to risk-weighted assets
            
            $
            6,199
            
            
            13.2
            %
            $
            3,772
            
            
            8.0
            %
            $
            4,715
            
            
            10.0
            %Tier
                1 capital to risk-weighted assets
            
            $
            6,069
            
            
            12.9
            %
            $
            1,886
            
            
            4.0
            %
            $
            2,829
            
            
            6.0
            %Tier
                1 capital to total assets
            
            $
            6,069
            
            
            6.7
            %
            $
            3,611
            
            
            4.0
            %
            $
            4,514
            
            
            5.0
            %





**(10)** **Financial
      Instruments with Off-Balance Sheet Risk**


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 generally include commitments to originate mortgage loans.
      Those instruments involve, to varying degrees, elements of credit and interest
      rate risk in excess of the amount recognized in the balance sheet. The Company’s
      maximum exposure to credit loss in the event of nonperformance by the borrower
      is represented by the contractual amount and related accrued interest receivable
      of those instruments. The Company minimizes this risk by evaluating each
      borrower’s creditworthiness on a case-by-case basis. Generally, collateral held
      by the Company consists of a first or second mortgage on the borrower’s
      property. Loan commitments to originate fixed-rate mortgage loans were $616,000
      at March 31, 2008. There were no loan commitments outstanding at March 31,
      2007.


F-18


**SUGAR
      CREEK FINANCIAL CORP. AND SUBSIDIARY**





**Notes
      to Consolidated Financial Statements**





**(11)
      Contingencies**


At
      March
      31, 2008 and 2007, there were no known pending litigation or other claims that
      management believes will be material to the Company’s financial position.





**(12)
      Fair Value of Financial Instruments**


The
      following methods and assumptions
      were used in estimating the fair values shown below:




.
            Cash
                and cash equivalents are valued at their carrying amounts due to
                the
                relatively short period to maturity of the instruments.


.
            Stock
                in FHLB of Chicago is valued at cost, which represents historical
                redemption value and approximates fair
                value.


.
            Fair
                values are computed for each loan category using market spreads to
                treasury securities for similar existing loans in the portfolio and
                management's estimates of
                prepayments.


.
            The
                carrying amounts of accrued interest receivable and payable approximate
                fair value.


.
            Deposits
                with no defined maturities, such as NOW accounts, savings accounts
                and
                money market deposit accounts, are valued at the amount payable on
                demand
                at the reporting date.


.
            The
                fair values of certificates of deposit and advances from FHLB are
                computed
                at fixed spreads to treasury securities with similar
                maturities.





**March
                31,**
            
            **March
                31,****2008**
            
            **2007****Carrying**
            
            **Fair**
            
            **Carrying**
            
            **Fair****Amount**
            
            **Value**
            
            **Amount**
            
            **Value**Non-trading
                instruments and nonderivatives:Cash
                and cash equivalents
            
            $
            3,167,225
            
            
            3,167,225
            
            
            6,958,707
            
            
            6,958,707Stock
                in FHLB of Chicago
            
            
            1,660,145
            
            
            1,660,145
            
            
            1,660,145
            
            
            1,660,145Loans
                receivable, net
            
            
            79,803,742
            
            
            82,101,558
            
            
            79,920,973
            
            
            80,846,000Accrued
                interest receivable
            
            
            329,079
            
            
            329,079
            
            
            317,241
            
            
            317,241Deposits
            
            
            59,181,449
            
            
            58,760,147
            
            
            64,170,227
            
            
            61,911,000Accrued
                interest on deposits
            
            
            233,399
            
            
            233,399
            
            
            244,647
            
            
            244,647Advances
                from FHLB
            
            $
            17,000,000
            
            
            17,598,880
            
            
            19,000,000
            
            
            18,712,000




Off-balance
      sheet assets include the commitments to extend credit for which fair values
      were
      estimated based on interest rates and fees currently charged to enter into
      similar transactions. As a result of the short-term nature of the outstanding
      commitments, the fair values of fees on those commitments approximate the amount
      collected and the Company has not assigned a value to such instruments for
      purpose of this disclosure.


F-19


**SUGAR
      CREEK FINANCIAL CORP. AND SUBSIDIARY**





**Notes
      to Consolidated Financial Statements**





**(13)****Parent Company Only Financial
          Statements**





The
      following balance sheet, statement of earnings and statement of cash flows
      for
      Sugar Creek Financial Corp. should be read in conjunction with the consolidated
      financial statements and the notes thereto.





**Balance
      Sheet**


**March
      31, 2008**





**Assets**Cash
                and cash equivalents
            
            $
            21,394Investment
                in Bank
            
            
            8,782,432ESOP
                note receivable
            
            
            335,981Accrued
                interest receivable
            
            
            6,911Other
                assets
            
            
            55,563Total
                assets
            
            $
            9,202,281**Liabilities
                and Stockholders' Equity**Other
                liabilities
            
            $
            37,262Common
                stock
            
            
            9,069Additional
                paid-in capital
            
            
            3,341,901Retained
                earnings-substantially restricted
            
            
            6,139,915Common
                stock acquired by ESOP
            
            
            (325,866
            )Total
                stockholders' equity
            
            
            9,165,019Total
                liabilities and stockholders' equity
            
            $
            9,202,281


F-20


**SUGAR
      CREEK FINANCIAL CORP. AND SUBSIDIARY**




**Notes
      to Consolidated Financial Statements**




**Statement
      of Earnings**




**Period
      from April 3, 2007 to March 31, 2008**





Interest
                income:Interest
                income on ESOP note receivable
            
            $
            28,766Interest
                income - Tempo Bank
            
            
            1,838Total
                interest income
            
            
            30,604Noninterest
                expense
            
            
            98,792Loss
                before income taxes and equity in undistributed earnings of
                Bank
            
            
            (68,188
            )Income
                tax benefit
            
            
            (19,000
            )Net
                loss before equity in undistributed earnings of Bank
            
            
            (49,188
            )Equity
                in undistributed earnings of Bank
            
            
            120,297Net
                earnings
            
            $
            71,109


F-21


**SUGAR
      CREEK FINANCIAL CORP. AND SUBSIDIARY**




**Notes
      to Consolidated Financial Statements**




**Statement
      of Cash Flows**




**Period
      from April 3, 2007 to March 31, 2008**




Cash
                flows from operating activities:Net
                earnings
            
            $
            71,109Adjustments
                to reconcile net earnings to net cash provided by (used for) operating
                activities:Equity
                in undistributed net earnings of Bank
            
            
            (120,297
            )ESOP
                expense
            
            
            29,016Increase
                in accrued interest receivable
            
            
            (6,911
            )Increase
                in other assets
            
            
            (55,563
            )Increase
                in other liabilities
            
            
            37,262Net
                cash provided by (used for) operating activities
            
            
            (45,384
            )Cash
                flows from investing activities:Capital
                contribution to Bank
            
            
            (2,593,329
            )Loan
                to ESOP to finance shares
            
            
            (355,490
            )Repayment
                of ESOP loan
            
            
            19,509Net
                cash provided by (used for) investing activities
            
            
            (2,929,310
            )Cash
                flows from financing activities- proceeds from sale of common stock,
                net
            
            
            2,996,088Net
                increase in cash and cash equivalents
            
            
            21,394Cash
                and cash equivalents at beginning of period
            
            
            -Cash
                and cash equivalents at end of period
            
            $
            21,394


F-22