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,
2009


OR


 ̈
              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 pursuant to Section 12(b) of the Act:  None


Securities
registered pursuant to 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   ̈   No  x




Indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or Section
15(d) of the Act.  Yes   ̈   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 preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90
days.  Yes    x  No
 ̈




Indicate by check mark whether the
registrant has submitted electronically and posted on its corporate Web site, if
any, every Interactive Data File required to be submitted and posted pursuant to
Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such
files).  Yes   ̈  No  ̈




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 this 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 the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.  (Check one)




Large
      Accelerated Filer  ̈
                Accelerated
      Filer  ̈Non-Accelerated
      Filer   ̈
                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   ̈   No  x




The aggregate market value of the
voting and non-voting common equity held by non-affiliates at September 30, 2008
was $3.61 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 19, 2009, the issuer
had 900,107 shares of common stock outstanding.




DOCUMENTS
INCORPORATED BY REFERENCE




Portions of the Proxy Statement for the
2009 Annual Meeting of Stockholders are incorporated by reference in Part III of
this Form 10-K.





INDEX





PagePART
      IItem
      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
                        
                        17PART
      IIItem
      5.
                        Market
      for Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities
                        
                        17Item
      6.
                        Selected
      Financial Data
                        
                        17Item
      7.
                        Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                        
                        17Item
      7A.
                        Quantitative
      and Qualitative Disclosures about Market Risk
                        
                        32Item
      8.
                        Financial
      Statements and Supplementary Data
                        
                        32Item
      9.
                        Changes
      In and Disagreements with Accountants on Accounting and Financial
      Disclosure
                        
                        32Item
      9A(T).
                        Controls
      and Procedures
                        
                        32Item
      9B.
                        Other
      Information
                        
                        33PART
      IIIItem
      10.
                        Directors,
      Executive Officers and Corporate Governance
                        
                        33Item
      11.
                        Executive
      Compensation
                        
                        33Item
      12.
                        Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
                        
                        33Item
      13.
                        Certain
      Relationships and Related Transactions, and Director
      Independence
                        
                        34Item
      14.
                        Principal
      Accounting Fees and Services
                        
                        34PART
      IVItem
      15.
                        Exhibits
      and Financial Statement Schedules
                        
                        35SIGNATURES





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. (“Sugar Creek Financial” or
the  “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.  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.  Sugar Creek Financial has no significant assets, other
than all of the outstanding shares of Tempo Bank, and has 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 depositors 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.





Market
Area





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 located 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.


1


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, 2008, which is the most recent date for which
data is available from the Federal Deposit Insurance Corporation, we held 7.27%
of the deposits in Clinton County, Illinois, which was the seventh largest
market share out of 11 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.





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.


2


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, 2009, our largest
commercial real estate loan was$755,000 and was
secured by an office building. Our largest multi-family real estate loan was
$401,000 and was secured by a 16 unit apartment building.  Both of
these loans were performing in accordance with their original terms at March 31,
2009.





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, 2009, our largest land loan was $213,000 and was secured by
undeveloped land.  This loan was performing in accordance with its
original terms at March 31, 2009.





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.





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.


3


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, 2009, our regulatory limit on loans to one
borrower was $1.3 million.  At that date, our largest lending
relationship under the regulatory limit was $877,000, 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.





At March 31, 2009, our investment
portfolio totaled $1.6 million, or 1.81 % 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.Ourboard of directors
reviews the status of our investment portfolio on a monthly basis, or more
frequently if warranted.


4





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, 2009, we had 15 full-time employees and five 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; (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, 2009, Tempo Bank
met each of its capital requirements.


8


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.





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.





Under the Federal Deposit Insurance
Corporation’s risk-based assessment system, insured institutions are assigned to
one of four risk categories based on supervisory evaluations, regulatory capital
levels and certain other factors, with less risky institutions paying lower
assessments.  An institution’s assessment rate depends upon the
category to which it is assigned.  For 2008, assessments ranged from
five to forty-three basis points of assessable deposits.  Due to
losses incurred by the Deposit Insurance Fund in 2008 from failed institutions,
and anticipated future losses, the Federal Deposit Insurance Corporation,
pursuant to a Restoration Plan to replenish the fund, has adopted an across the
board seven basis point increase in the assessment  range for the
first quarter of 2009.  The Federal Deposit Insurance Corporation has
adopted further refinements to its risk-based assessment that are effective
April 1, 2009 and effectively make the range seven to 771⁄2 basis
points.  On May 22, 2009, the Federal Deposit Insurance Corporation
issued a final rule that will impose a special five basis points assessment on
each institution’s assets minus Tier 1 capital as of June 30, 2009, which would
be payable to the Federal Deposit Insurance Corporation on September 30,
2009.  If after June 30, 2009, the reserve ratio of the Deposit
Insurance Fund falls to a level that the Board of the Federal Deposit Insurance
Corporation (“the Board”) believes would adversely affect public confidence or
to a level close to or below zero, the Board may impose an additional special
assessment of up to five basis points on each institution’s assets minus Tier 1
capital for the third and fourth quarters of 2009 if deemed
necessary.  The cost of this special five basis points assessment to
Tempo Bank based on assets minus Tier 1 capital as of March 31, 2009, would be
$41,000. No institution may pay a dividend if in default of the federal deposit
insurance assessment.




Due
to the recent difficult economic conditions, deposit insurance per account owner
has been raised to $250,000 for all types of accounts until December 31,
2009.  On May 20, 2009, the Federal Deposit Insurance Corporation
extended the insurance coverage of $250,000 on all deposit accounts until
December 31, 2013.  Thereafter, regular deposit accounts will be
insured up to a maximum of $100,000 and self-directed retirement accounts up to
a maximum of $250,000.





In
addition, the Federal Deposit Insurance Corporation adopted an optional
Temporary Liquidity Guarantee Program by which, for a fee, noninterest bearing
transaction accounts would receive unlimited insurance coverage until December
31, 2009 and certain senior unsecured debt issued by institutions and their
holding companies would be guaranteed by the Federal Deposit Insurance
Corporation through June 30, 2012 and in certain conditions through December 31,
2012. Tempo Bank made the business decision not to participatein the unlimited
noninterest bearing transaction account coverage and Tempo Bank, Sugar Creek
Financial and Sugar Creek MHC opted not to participate in the unsecured debt
guarantee program.





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.  That payment is established quarterly and
during the calendar year ending December 31, 2008 averaged 1.12 basis points of
assessable deposits.





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.


9


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.





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, 2009,
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.


10


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 person’s 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.





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, 2009.





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 $44.4 million; a 10% reserve ratio is applied above $44.4
million.  The first $10.3 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.


11


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
2004.  For its 2009 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.





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
              
              PositionRobert
      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, 2009.





Phyllis J. Brownhas 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 65.





ITEM
      1A.
            RISK
      FACTORS





Changes
in interest rates could reduce our net interest income and
earnings.





Our net interest income is the interest
we earn on loans and investment less the interest we pay on our deposits and
borrowings.  Our net interest yield is the difference between the
yield we earn on our assets and the interest rate we pay for deposits and our
other sources of funding.  Changes in interest rates—up or down—could
adversely affect our net interest yield and, as a result, our net interest
income.  Although the yield we earn on our assets and our funding
costs tend to move in the same direction in response to changes in interest
rates, one can rise or fall faster than the other, causing our net interest
margin to expand or contract.  Our liabilities tend to be shorter in
duration than our assets, so they may adjust faster in response to changes in
interest rates.  As a result, when interest rates rise, our funding
costs may rise faster than the yield we earn on our assets, causing our net
interest margin to contract until the yield catches up.  Changes in
the slope of the “yield curve”—or the spread between short-term and long-term
interest rates—could also reduce our net interest margin.  Normally,
the yield curve is upward sloping, meaning short-term rates are lower than
long-term rates.  Because our liabilities tend to be shorter in
duration than our assets, when the yield curve flattens or even inverts, we
could experience pressure on our net interest margin as our cost of funds
increases relative to the yield we can earn on our assets.





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.





Future
FDIC Assessments Will Hurt Our Earnings





In
May 2009, the FDIC adopted a final rule imposing a special assessment on all
insured institutions due to recent bank and savings association
failures.  The emergency assessment amounts to 5 basis points of total
assets minus Tier 1 Capital as of June 30, 2009.  The assessment will
be collected on September 30, 2009 and recorded against earnings for the quarter
ended June 30, 2009.  The special assessment will negatively impact
the Company's earnings and the Company expects that non-interest expenses will
increase approximately $41,000 for the year ended March 31, 2010 as compared to
the year ended March 31, 2009 as a result of this special
assessment.  In addition, the final rule allows the FDIC to impose
additional emergency special assessments of up to 5 basis points per quarter for
the third and fourth quarters of 2009 if necessary to maintain public confidence
in federal deposit insurance or as a result of deterioration in the deposit
insurance fund reserve ratio due to institution failures.  Any
additional emergency special assessment imposed by the FDIC will further hurt
the Company's earnings.


13





A
continuation of recent turmoil in the financial markets could have an adverse
effect on our financial position or results of operations.





Beginning in 2008, United States and
global markets have experienced severe disruption and volatility, and general
economic conditions have declined significantly.  Adverse developments
in credit quality, asset values and revenue opportunities throughout the
financial services industry, as well as general uncertainty regarding the
economic, industry and regulatory environment, have had a marked negative impact
on the industry.  The United States and the governments of other
countries have taken steps to try to stabilize the financial system, including
investing in financial institutions, and have also been working to design and
implement programs to improve general economic
conditions.  Notwithstanding the actions of the United States and
other governments, there can be no assurances that these efforts will be
successful in restoring industry, economic or market conditions and that they
will not result in adverse unintended consequences.  Factors that
could continue to pressure financial services companies, including Sugar Creek
Financial, are numerous and include (1) worsening credit quality, leading among
other things to increases in loan losses and reserves, (2) continued or
worsening disruption and volatility in financial markets, leading among other
things to continuing reductions in assets values, (3)  capital and
liquidity concerns regarding financial institutions generally, (4) limitations
resulting from or imposed in connection with governmental actions intended to
stabilize or provide additional regulation of the financial system, or (5)
recessionary conditions that are deeper or last longer than currently
anticipated.





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, 2009, $69.5 million, or
87.49%, 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.





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 0.21% of total
gross loans at March 31, 2009, 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.


14


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.





Granting
of stock options under 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 may grant stock options 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 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 will be diluted.





Granting
of stock options under our 2007 Equity Incentive Plan will adversely affect our
profitability.





If we grant stock options under our
2007 Equity Incentive Plan, our non-interest expenses will likely increase as a
result of the additional annual employee compensation expenses stemming from the
option grants.  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 at
the date of the grant; however, we expect them to be material.  We
recognize expenses for 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.  In addition, stockholders will not be able
to force a merger or second-step conversion transaction without the consent of
Sugar Creek MHC.  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.


15


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.  However, the Office of Thrift Supervision has 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.




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





None.





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 $1.1 million as of
March 31, 2009.





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.


16


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





None.





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 June 1, 2009, there were approximately 165 holders of
record of the Company’s common stock.





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 two fiscal
years.  Sugar Creek Financial has not paid dividends during this
period.




Quarter
      Ended:
                  
                  High
                  
                  
                  LowJune
      30,
      2007
                  
                  $
                  10.80
                  
                  
                  $
                  10.40September
      30,
      2007
                  
                  
                  10.60
                  
                  
                  
                  9.10December
      31,
      2007
                  
                  
                  10.25
                  
                  
                  
                  8.50March
      31,
      2008
                  
                  
                  9.10
                  
                  
                  
                  8.50June
      30,
      2008
                  
                  $
                  9.15
                  
                  
                  $
                  7.99September
      30,
      2008
                  
                  
                  10.10
                  
                  
                  
                  7.90December
      31,
      2008
                  
                  
                  10.10
                  
                  
                  
                  6.00March
      31,
      2009
                  
                  
                  8.50
                  
                  
                  
                  7.30




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 Regulation−Limitation on Capital
Distributions.”





We did not repurchase any of our
common stock during the quarter ended March 31, 2009 and had no publicly
announced repurchase plans or programs as of March 31, 2009.





ITEM
      6.
            SELECTED
      FINANCIAL DATA





Not applicable.





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





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.


17


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.





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
and restricted stock awards made under the 2007 Equity Incentive
Plan.  In the future, we may also recognize additional annual employee
compensation expenses stemming from any stock option grants made under the 2007
Equity Incentive Plan.  We cannot determine the actual amount of these
new stock-related compensation and benefit expenses, if any, 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 increased by $199,000 to $270,000 for the year ended March 31, 2009
primarily due to lower rates paid for deposits and FHLB borrowings.





Financial
Condition.Total
assets increased by $5.1 million to $91.7 million at March 31,
2009.  The increase was attributable in part to larger balances in
cash and cash equivalent accounts.  In addition, deposits increased
$7.9 million to $67.1 million at March 31, 2009 as a result of stock market
volatility and a move by customers toward the safety of FDIC insured
deposits.




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.


18


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.





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, 2009, one- to four-family residential real estate loans totaled
$69.5 million, or 87.49% of total loans, compared to $69.9 million, or 87.33% of
total loans, at March 31, 2008.  One- to four-family residential real
estate loans decreasedmodestlyover this period as a
result of a continuing decline in real estate sales and very competitive
refinance rates in the local market.  Multi-family and commercial real
estate loans increased over this period as a result of a steady market for these
properties in our market area. Consumer loans decreased in 2009 as a result of
the contraction in auto sales and the increase in consumer debt.





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





Table
1:  Loan Portfolio Analysis





March 31,2009
                                
                                
                                2008(Dollars in thousands)
                                
                                Amount
                                
                                
                                Percent
                                
                                
                                Amount
                                
                                
                                PercentReal
      estate loans:One-to
      four-family
                                
                                $
                                69,479
                                
                                
                                
                                87.49
                                %
                                
                                $
                                69,904
                                
                                
                                
                                87.33
                                %Multi-family
                                
                                
                                1,124
                                
                                
                                
                                1.42
                                
                                
                                
                                966
                                
                                
                                
                                1.21Commercial
                                
                                
                                3,375
                                
                                
                                
                                4.25
                                
                                
                                
                                2,886
                                
                                
                                
                                3.60Land
      loans
                                
                                
                                1,584
                                
                                
                                
                                1.99
                                
                                
                                
                                1,723
                                
                                
                                
                                2.15Total
      real estate loans
                                
                                
                                75,562
                                
                                
                                
                                95.15
                                
                                
                                
                                75,479
                                
                                
                                
                                94.29Consumer
      loans:Automobile
                                
                                
                                2,314
                                
                                
                                
                                2.91
                                
                                
                                
                                2,522
                                
                                
                                
                                3.15Home
      equity
                                
                                
                                1,158
                                
                                
                                
                                1.46
                                
                                
                                
                                1,526
                                
                                
                                
                                1.91Loans
      secured by depositaccounts
                                
                                
                                383
                                
                                
                                
                                0.48
                                
                                
                                
                                521
                                
                                
                                
                                0.65Total
      consumer loans
                                
                                
                                3,855
                                
                                
                                
                                4.85
                                
                                
                                
                                4,569
                                
                                
                                
                                5.71Total
      loans
                                
                                
                                79,417
                                
                                
                                
                                100.00
                                %
                                
                                
                                80,048
                                
                                
                                
                                100.00
                                %Loans
      in process
                                
                                
                                –
                                
                                
                                
                                
                                
                                
                                
                                –Allowance
      for losses
                                
                                
                                (165
                                )
                                
                                
                                
                                
                                
                                
                                (124
                                )Net
      deferred loan fees
                                
                                
                                (123
                                )
                                
                                
                                
                                
                                
                                
                                (120
                                )Loans,
      net
                                
                                $
                                79,129
                                
                                
                                
                                
                                
                                
                                $
                                79,804





At March
31, 2009, fixed-rate loans, balloon loans and adjustable-rate loans totaled
$42.8 million, $36.2 million and $372,000, respectively.





The following table sets forth certain
information at March 31, 2009 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, 2009 (Dollars in thousands)
                          
                          Real Estate
                            Loans
                          
                          
                          Consumer
                            Loans
                          
                          
                          Total
                            LoansAmounts
      due in:One
      year or less
                          
                          $
                          1,323
                          
                          
                          $
                          447
                          
                          
                          $
                          1,770More
      than one to five years
                          
                          
                          9,901
                          
                          
                          
                          1,935
                          
                          
                          
                          11,836More
      than five years
                          
                          
                          65,496
                          
                          
                          
                          315
                          
                          
                          
                          65,811Total
                          
                          $
                          76,720
                          
                          
                          $
                          2,697
                          
                          
                          $
                          79,417Interest
      rate terms on amounts due after one year:Fixed-rate
      loans (including balloon loans)
                          
                          $
                          75,219
                          
                          
                          $
                          2,250
                          
                          
                          $
                          77,469Adjustable-rate
      loans
                          
                          
                          178
                          
                          
                          
                          -
                          
                          
                          
                          178Total
                          
                          $
                          75,397
                          
                          
                          $
                          2,250
                          
                          
                          $
                          77,647





Investments.
At March 31, 2009, our investment portfolio totaled $1.7million 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, 2009 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 has not declared or
paid a dividend since the second quarter of 2007 citing regulatory requirements,
continuing pressure on net interest income, projected earnings levels, and
market conditions.  At March 31, 2009, $921,000 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, 2009,
except for our investment in Federal Home Loan Bank of Chicago.





Premises
and Equipment, Net.Premises and equipment,
net, increased $94,000 to $1.1 million at March 31, 2009 primarily as a result
of the purchase of a tract of land for a possible future branch
location.





Other
Assets.Other
assets, including prepaid income taxes, decreased due primarily to the timing of
income tax payments.





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 increased$7.9 million for the
year ended March 31, 2009, as certificates of deposit increased $5.1 million,
and core deposits increased$2.8
million.  Overall, deposits increased during the year ended March 31,
2009 primarily as a result of stock market volatility and a move by customers
toward the safety of FDIC insured deposits.




20





Table
3:  Deposits





March 31,2009
                          
                          
                          2008(Dollars in thousands)
                          
                          Amount
                          
                          
                          Percent
                          
                          
                          Amount
                          
                          
                          PercentNoninterest-bearing
                            NOW
      accounts
                          
                          $
                          3,148
                          
                          
                          
                          4.69
                          %
                          
                          $
                          2,620
                          
                          
                          
                          4.43
                          %NOW
      accounts
                          
                          
                          4,211
                          
                          
                          
                          6.28
                          
                          
                          
                          4,420
                          
                          
                          
                          7.47Savings
      accounts
                          
                          
                          7,721
                          
                          
                          
                          11.51
                          
                          
                          
                          7,277
                          
                          
                          
                          12.29Money
      market accounts
                          
                          
                          5,355
                          
                          
                          
                          7.99
                          
                          
                          
                          3,324
                          
                          
                          
                          5.62Certificates
      of deposit
                          
                          
                          46,641
                          
                          
                          
                          69.53
                          
                          
                          
                          41,540
                          
                          
                          
                          70.19Total
                          
                          $
                          67,076
                          
                          
                          
                          100.00
                          %
                          
                          $
                          59,181
                          
                          
                          
                          100.00
                          %





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





March 31, 2009 (Dollars in thousands)
                          
                          AmountMaturity
      PeriodThree
      months or less
                          
                          $
                          2,317Over
      three through six months
                          
                          
                          3,095Over
      six through twelve months
                          
                          
                          3,025Over
      twelve months
                          
                          
                          3,738Total
                          
                          $
                          12,175





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)
                          
                          2009
                          
                          
                          2008Maximum
      amount outstanding at any monthend
      during the year:FHLB
      advances
                          
                          $
                          23,000
                          
                          
                          $
                          23,000Average
      amount outstanding during the year:FHLB
      advances
                          
                          
                          19,125
                          
                          
                          
                          20,083Weighted
      average interest rate during the year:FHLB
      advances
                          
                          
                          4.18
                          %
                          
                          
                          4.77
                          %Balance
      outstanding at end of year:FHLB
      advances
                          
                          
                          14,000
                          
                          
                          
                          17,000Weighted
      average interest rate at end of year:FHLB
      advances
                          
                          
                          4.83
                          %
                          
                          
                          4.82
                          %





Borrowings
decreasedduring
2009 due to the repayment of overnight FHLB advances and maturity of other FHLB
advances.





Other
Liabilities.Other liabilities
increased due primarily to increased accrued income taxes which increased due to
the timing of payment of income taxes.





Stockholders’
Equity.Stockholders’ equity increased due primarily to net
earnings of $270,000 for the year ended March 31, 2009, partially offset by the
repurchase of common stock of $200,000.




21


Comparison of Results of Operations for
the Years Ended March 31, 2009 and March 31,
2008


Table
6:  Summary Income Statements





Year Ended March 31, (Dollars in thousands)
                      
                      2009
                      
                      
                      2008
                      
                      
                      2009 v. 2008
                      
                      
                      % ChangeNet
      interest income
                      
                      $
                      2,339
                      
                      
                      $
                      2,006
                      
                      
                      $
                      333
                      
                      
                      
                      16.63
                      %Provision
      for loan losses
                      
                      
                      (59
                      )
                      
                      
                      (80
                      )
                      
                      
                      21
                      
                      
                      
                      (26.64
                      )Noninterest
      income
                      
                      
                      197
                      
                      
                      
                      175
                      
                      
                      
                      22
                      
                      
                      
                      12.20Noninterest
      expense
                      
                      
                      (2,036
                      )
                      
                      
                      (2,002
                      )
                      
                      
                      (34
                      )
                      
                      
                      1.73Income
      taxes
                      
                      
                      (171
                      )
                      
                      
                      (28
                      )
                      
                      
                      (143
                      )
                      
                      
                      511.09Net
      earnings
                      
                      $
                      270
                      
                      
                      $
                      71
                      
                      
                      $
                      199
                      
                      
                      
                      279.25
                      %Return
      on average equity
                      
                      
                      2.91
                      %
                      
                      
                      0.78
                      %Return
      on average assets
                      
                      
                      0.30
                      
                      
                      
                      0.08





Net
Interest Income.    Net interest income increased as
a result of lower costs for deposits and borrowings.  As a result, the
interest rate spread increased to 2.26% for 2009 from 1.86% for
2008.  The Bank’s cost of funds declined due to much lower market
interest rates paid on money market accounts and certificates of deposit,
partially offset by an increase in the average balance of
deposits.  Borrowing costs decreased due to lower market rates paid on
short-term advances from FHLB which were utilized during the year ended March
31, 2009.





Table
7:  Analysis of Net Interest Income





Year Ended March 31, (Dollars in thousands)
                      
                      2009
                      
                      
                      2008
                      
                      
                      2009 v. 2008
                      
                      
                      % ChangeComponents
      of net interest incomeLoans
                      
                      $
                      4,969
                      
                      
                      $
                      4,880
                      
                      
                      $
                      89
                      
                      
                      
                      1.82
                      %Stock
      in FHLB of Chicago
                      
                      
                      -
                      
                      
                      
                      13
                      
                      
                      
                      (13
                      )
                      
                      
                      (100.00
                      )Other
      interest-earning assets
                      
                      
                      28
                      
                      
                      
                      115
                      
                      
                      
                      (87
                      )
                      
                      
                      (75.64
                      )Total
      interest income
                      
                      
                      4,997
                      
                      
                      
                      5,008
                      
                      
                      
                      (11
                      )
                      
                      
                      (0.23
                      )Deposits
                      
                      
                      (1,858
                      )
                      
                      
                      (2,044
                      )
                      
                      
                      186
                      
                      
                      
                      (9.13
                      )Borrowings
                      
                      
                      (800
                      )
                      
                      
                      (958
                      )
                      
                      
                      158
                      
                      
                      
                      (16.51
                      )Total
      interest expense
                      
                      
                      (2,658
                      )
                      
                      
                      (3,002
                      )
                      
                      
                      344
                      
                      
                      
                      (11.48
                      )Net
      interest income
                      
                      
                      2,339
                      
                      
                      
                      2,006
                      
                      
                      
                      333
                      
                      
                      
                      16.63
                      %Average
      yields and rates paidInterest-earning
      assets
                      
                      
                      5.67
                      %
                      
                      
                      5.86
                      %
                      
                      
                      (0.19
                      )%
                      
                      
                      (3.24
                      )%Interest-bearing
      liabilities
                      
                      
                      3.41
                      
                      
                      
                      4.00
                      
                      
                      
                      (0.59
                      )
                      
                      
                      (14.75
                      )Interest
      rate spread
                      
                      
                      2.26
                      
                      
                      
                      1.86
                      
                      
                      
                      0.40
                      
                      
                      
                      21.51Net
      interest margin
                      
                      
                      2.65
                      
                      
                      
                      2.35
                      
                      
                      
                      0.30
                      
                      
                      
                      12.77Average
      balancesLoans
                      
                      $
                      82,454
                      
                      
                      $
                      81,084
                      
                      
                      $
                      1,370
                      
                      
                      
                      1.69
                      %Stock
      in FHLB of Chicago
                      
                      
                      1,660
                      
                      
                      
                      1,660
                      
                      
                      
                      -
                      
                      
                      
                      -Other
      interest-earning assets
                      
                      
                      4,082
                      
                      
                      
                      2,756
                      
                      
                      
                      1,326
                      
                      
                      
                      48.11Deposits
                      
                      
                      58,859
                      
                      
                      
                      54,898
                      
                      
                      
                      3,961
                      
                      
                      
                      7.22Borrowings
                      
                      
                      19,125
                      
                      
                      
                      20,083
                      
                      
                      
                      (958
                      )
                      
                      
                      (4.77
                      )





Provision
for Loan Losses.  The provision for loan losses was $59,000 for
the year ended March 31, 2009, compared to $80,000 for the year ended March 31,
2008.  The Bank recorded charge-offs of $18,000 and no recoveries for
the year ended March 31, 2009 compared to charge-offs of $92,000 and recoveries
of $6,000 for the year ended March 31, 2008.





The allowance for loan losses was
$165,000, or 0.21% of total loans outstanding as of March 31, 2009, as compared
with $124,000, or 0.16% of total loans outstanding as of March 31,
2008.  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 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)
                  
                  2009
                  
                  
                  2008
                  
                  
                  $ Change
                  
                  
                  % ChangeLoan
      service charges
                  
                  $
                  20
                  
                  
                  $
                  24
                  
                  
                  $
                  (4
                  )
                  
                  
                  (16.87
                  )%Service
      charges on deposit accounts
                  
                  
                  157
                  
                  
                  
                  133
                  
                  
                  
                  24
                  
                  
                  
                  17.85Other
                  
                  
                  20
                  
                  
                  
                  18
                  
                  
                  
                  2
                  
                  
                  
                  9.53Total
                  
                  $
                  197
                  
                  
                  $
                  175
                  
                  
                  $
                  22
                  
                  
                  
                  12.20
                  %





Noninterest
Expense.All
categories of noninterest expense were higher, except compensation and benefits
and supplies expense. Compensation and benefits decreased primarily as a result
of lower costs related to the Bank’s multi-employer retirement plan, lower
health insurance expenses and a lower ESOP expense.  Retirement plan
expenses decreased due to lower plan contributions required as a result of
higher investment returns in the defined benefit plan. Health care costs
declined as a result of our decision to change providers which has resulted in a
cost savings. Equipment and data processing increased as a result of higher
depreciation expense on computer equipment and higher data processing costs as a
result of a new internet banking system, implementation of the Check 21 program
and upgrades to data lines.




FDIC
premium expense increased due to the growth of the Bank and a higher risk-based
assessment which considers the supervisory rating and certain financial ratios
of each financial institution.  See also, “Item 1A-Risk Factors-Future FDIC
Assessments Will Hurt Our Earnings.”




Other
noninterest expense increased due primarily to higher real estate taxes,
maintenance expenses and utility costs on foreclosed real estate, a provision
for loss on foreclosed real estate of $28,000 and modest increases in various
other expenses.





Table
9:  Noninterest Expense Summary





Year Ended March 31, (Dollars in thousands)
                      
                      2009
                      
                      
                      2008
                      
                      
                      $ Change
                      
                      
                      % ChangeCompensation
      and benefits
                      
                      $
                      1,033
                      
                      
                      $
                      1,179
                      
                      
                      $
                      (146
                      )
                      
                      
                      (12.40
                      )%Occupancy
      expense
                      
                      
                      114
                      
                      
                      
                      100
                      
                      
                      
                      14
                      
                      
                      
                      14.33Equipment
      and data processing
                      
                      
                      363
                      
                      
                      
                      328
                      
                      
                      
                      35
                      
                      
                      
                      10.52FDIC
      premium expense
                      
                      
                      50
                      
                      
                      
                      7
                      
                      
                      
                      43
                      
                      
                      
                      626.75Advertising
                      
                      
                      44
                      
                      
                      
                      39
                      
                      
                      
                      5
                      
                      
                      
                      13.79Supplies
      expense
                      
                      
                      32
                      
                      
                      
                      37
                      
                      
                      
                      (5
                      )
                      
                      
                      (12.19
                      )Professional
      and regulatory fees
                      
                      
                      152
                      
                      
                      
                      138
                      
                      
                      
                      14
                      
                      
                      
                      10.21Other
                      
                      
                      248
                      
                      
                      
                      174
                      
                      
                      
                      74
                      
                      
                      
                      42.08Total
                      
                      $
                      2,036
                      
                      
                      $
                      2,002
                      
                      
                      $
                      34
                      
                      
                      
                      1.73
                      %





Income
Taxes.Income
taxes were $171,000 for 2009, reflecting an effective tax rate of 38.8%,
compared to $28,000 for 2008, reflecting an effective tax rate of
28.3%.  Income taxes increased due to higher 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 31,2009
                            
                            
                            2008(Dollars in thousands)
                            
                            Average
                              Balance
                            
                            
                            Interest
                              and
                              Dividends
                            
                            
                            Yield/
                              Cost
                            
                            
                            Average
                              Balance
                            
                            
                            Interest
                              and
                              Dividends
                            
                            
                            Yield/
                              CostAssets:Interest-earning
      assets:Loans
                            
                            $
                            82,454
                            
                            
                            $
                            4,969
                            
                            
                            
                            6.03
                            %
                            
                            $
                            81,084
                            
                            
                            $
                            4,880
                            
                            
                            
                            6.02
                            %Stock
      in FHLB of Chicago
                            
                            
                            1,660
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            1,660
                            
                            
                            
                            13
                            
                            
                            
                            0.79Other
      interest-earning assets
                            
                            
                            4,082
                            
                            
                            
                            28
                            
                            
                            
                            0.69
                            
                            
                            
                            2,756
                            
                            
                            
                            115
                            
                            
                            
                            4.17Total
      interest-earning assets
                            
                            
                            88,196
                            
                            
                            
                            4,997
                            
                            
                            
                            5.67
                            
                            
                            
                            85,500
                            
                            
                            
                            5,008
                            
                            
                            
                            5.86Noninterest-earning
      assets
                            
                            
                            2,852
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            2,164Total
      assets
                            
                            
                            91,048
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            87,664Liabilities
      and Stockholders’ Equity:Interest-bearing
      liabilities:NOW
      accounts
                            
                            $
                            4,353
                            
                            
                            $
                            22
                            
                            
                            
                            0.51
                            %
                            
                            $
                            4,413
                            
                            
                            $
                            23
                            
                            
                            
                            0.52
                            %Savings
      accounts
                            
                            
                            7,482
                            
                            
                            
                            50
                            
                            
                            
                            0.67
                            
                            
                            
                            7,243
                            
                            
                            
                            49
                            
                            
                            
                            0.65Money
      market accounts
                            
                            
                            4,628
                            
                            
                            
                            118
                            
                            
                            
                            2.55
                            
                            
                            
                            2,683
                            
                            
                            
                            82
                            
                            
                            
                            3.12Certificates
      of deposit
                            
                            
                            42,396
                            
                            
                            
                            1,668
                            
                            
                            
                            3.93
                            
                            
                            
                            40,559
                            
                            
                            
                            1,890
                            
                            
                            
                            4.66Total
      interest-bearing deposits
                            
                            
                            58,859
                            
                            
                            
                            1,858
                            
                            
                            
                            3.16
                            
                            
                            
                            54,898
                            
                            
                            
                            2,044
                            
                            
                            
                            3.73FHLB
      advances
                            
                            
                            19,125
                            
                            
                            
                            799
                            
                            
                            
                            4.18
                            
                            
                            
                            20,083
                            
                            
                            
                            958
                            
                            
                            
                            4.77Other
      borrowings
                            
                            
                            –
                            
                            
                            
                            –
                            
                            
                            
                            –
                            
                            
                            
                            –
                            
                            
                            
                            –
                            
                            
                            
                            –Total
      interest-bearing liabilities
                            
                            $
                            77,984
                            
                            
                            
                            2,657
                            
                            
                            
                            3.41
                            
                            
                            $
                            74,981
                            
                            
                            
                            3,002
                            
                            
                            
                            4.00Noninterest-bearing
      NOW accounts
                            
                            
                            2,538
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            2,456Other
      noninterest-bearing liabilities
                            
                            
                            1,261
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            1,130Total
      liabilities
                            
                            
                            81,783
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            78,567Stockholders’
      equity
                            
                            
                            9,265
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            9,097Total
      liabilities and stockholders’ equity
                            
                            $
                            91,048
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            $
                            87,664Net
      interest income
                            
                            
                            
                            
                            
                            $
                            2,340
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            $
                            2,006Interest
      rate spread
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            2.26
                            %
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            1.86
                            %Net
      interest margin
                            
                            
                            
                            
                            
                            
                            2.65
                            %
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            2.35
                            %Average
      interest-earning assets to average interest-bearing
      liabilities
                            
                            
                            113.09
                            %
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            114.03
                            %





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.




24





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




Year
Ended March 31, 2009 Compared to Year Ended March 31, 2008





(Dollars in thousands)
                      
                      Volume
                      
                      
                      Rate
                      
                      
                      NetInterest
      income:Loans
      receivable
                      
                      $
                      81
                      
                      
                      $
                      8
                      
                      
                      $
                      89Stock
      in FHLB of Chicago
                      
                      
                      -
                      
                      
                      
                      (13
                      )
                      
                      
                      (13
                      )Other
      interest-earning assets
                      
                      
                      118
                      
                      
                      
                      (205
                      )
                      
                      
                      (87
                      )Total
                      
                      
                      199
                      
                      
                      
                      (210
                      )
                      
                      
                      (11
                      )Interest
      expense:Passbook
      accounts
                      
                      
                      1
                      
                      
                      
                      -
                      
                      
                      
                      1NOW
      accounts
                      
                      
                      -
                      
                      
                      
                      (1
                      )
                      
                      
                      (1
                      )MMDA
      accounts
                      
                      
                      48
                      
                      
                      
                      (12
                      )
                      
                      
                      36Certificates
                      
                      
                      90
                      
                      
                      
                      (312
                      )
                      
                      
                      (222
                      )Total
      deposits
                      
                      
                      139
                      
                      
                      
                      (325
                      )
                      
                      
                      (186
                      )Advances
      from FHLB
                      
                      
                      (44
                      )
                      
                      
                      (114
                      )
                      
                      
                      (158
                      )Total
                      
                      
                      95
                      
                      
                      
                      (439
                      )
                      
                      
                      (344
                      )Increase
      in net interest income
                      
                      $
                      104
                      
                      
                      $
                      229
                      
                      
                      $
                      333





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.





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.




25





Table
12:  Nonperforming Assets


March 31,(Dollars in thousands)
                              
                              2009
                              
                              
                              2008Nonaccrual
      loans:Residential
      real estate
                              
                              $
                              1,515
                              
                              
                              $
                              -Commercial
      real estate
                              
                              
                              158
                              
                              
                              
                              -Land
                              
                              
                              18
                              
                              
                              
                              -Consumer
                              
                              
                              93
                              
                              
                              
                              64Total
                              
                              $
                              1,784
                              
                              
                              
                              64Foreclosed
      real estate – residential
                              
                              
                              358
                              
                              
                              
                              386Other
      repossessed assets – automobile
                              
                              
                              6
                              
                              
                              
                              -364
                              
                              
                              
                              386Total
      nonperforming assets
                              
                              $
                              2,148
                              
                              
                              $
                              450Total
      nonperforming loans to total loans
                              
                              
                              2.25
                              %
                              
                              
                              0.08
                              %Total
      nonperforming loans to total assets
                              
                              
                              1.94
                              
                              
                              
                              0.07Total
      nonperforming assets to total assets
                              
                              
                              2.34
                              %
                              
                              
                              0.52
                              %





Nonaccrual
loans at March 31, 2009 consisted of eight loans secured by single-family
properties; two loans secured by commercial real estate; one loan secured by
land and nine loans secured by automobiles. The largest lending relationship in
the nonaccrual loan category amounted to $437,000, which was secured by one
single-family dwelling and commercial real estate. Nonaccrual loans increased as
a result of a slowing local and regional economy, job layoffs, divorce and
health issues afflicting our borrowers. Foreclosed real estate consists of one
single-family residential property. Other repossessed assets consist of one
automobile.





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, 2009 and 2008 had nonaccruing loans been
current according to their original terms amounted to $48,000 and $6,000,
respectively.  Income related to nonaccrual loans included in interest
income for the year ended March 31, 2009 and 2008 was $21,000 and $5,000,
respectively.





At March 31, 2009, 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.




26





Table
13:  Classified Assets





At March 31,(Dollars
      in thousands)
                                        
                                        2009
                                        
                                        
                                        2008Special
      mention assets
                                        
                                        $
                                        -
                                        
                                        
                                        $
                                        -Substandard
      assets
                                        
                                        
                                        2,148
                                        
                                        
                                        
                                        450Doubtful
      assets
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -Loss
      assets
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -Total
      classified assets
                                        
                                        $
                                        2,148
                                        
                                        
                                        $
                                        450





Substandard
assets, which include all nonperforming assets, were higher due to an increase
in nonaccrual loans.





Table
14:  Selected Loan Delinquencies





March 31,2009
                          
                          
                          2008(Dollars in thousands)
                          
                          30-59
                            Days
                            Past Due
                          
                          
                          60-89
                            Days
                            Past Due
                          
                          
                          30-59
                            Days
                            Past Due
                          
                          
                          60-89
                            Days
                            Past DueOne-
      to four- family
                          
                          $
                          822
                          
                          
                          $
                          818
                          
                          
                          $
                          1,383
                          
                          
                          $
                          288Consumer
                          
                          
                          51
                          
                          
                          
                          3
                          
                          
                          
                          103
                          
                          
                          
                          121Total
                          
                          $
                          873
                          
                          
                          $
                          821
                          
                          
                          $
                          1,486
                          
                          
                          $
                          409





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.




27





The allowance for loan losses increased
from $124,000 at March 31, 2008 to $165,000 at March 31, 2009.  The
Bank’s percentage of allowance for loan losses to total loans increased to 0.21%
at March 31, 2009 as compared to 0.16% at March 31, 2008.





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 31,2009
                          
                          
                          2008(Dollars in thousands)
                          
                          Amount
                          
                          
                          % of
                            Loans in
                            Category
                            to Total
                            Loans
                          
                          
                          Amount
                          
                          
                          % of
                            Loans in
                            Category
                            to Total
                            LoansOne-
      to four- family
                          
                          $
                          133
                          
                          
                          
                          87.49
                          %
                          
                          $
                          75
                          
                          
                          
                          87.33
                          %Multi-family
                          
                          
                          –
                          
                          
                          
                          1.42
                          
                          
                          
                          –
                          
                          
                          
                          1.21Commercial
      real estate
                          
                          
                          2
                          
                          
                          
                          4.25
                          
                          
                          
                          8
                          
                          
                          
                          3.60Land
                          
                          
                          –
                          
                          
                          
                          1.99
                          
                          
                          
                          –
                          
                          
                          
                          2.15Consumer
                          
                          
                          30
                          
                          
                          
                          4.85
                          
                          
                          
                          18
                          
                          
                          
                          5.71Unallocated
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          23
                          
                          
                          
                          –Total
      allowance for loan losses
                          
                          $
                          165
                          
                          
                          
                          100.00
                          %
                          
                          $
                          124
                          
                          
                          
                          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.




28





Table
16:  Analysis of Loan Loss Experience




Years Ended
                            March 31,(Dollars
      in thousands)
                          
                          2009
                          
                          
                          2008Allowance
      at beginning of year
                          
                          $
                          124
                          
                          
                          $
                          130Provision
      for loan losses
                          
                          
                          59
                          
                          
                          
                          80Charge-offs:One-
      to four- family
                          
                          
                          –
                          
                          
                          
                          (86
                          )Consumer
      loans
                          
                          
                          (18
                          )
                          
                          
                          (6
                          )Total
      charge-offs
                          
                          
                          (18
                          )
                          
                          
                          (92
                          )Recoveries:One-
      to four- family
                          
                          
                          –
                          
                          
                          
                          6Consumer
      loans
                          
                          
                          –
                          
                          
                          
                          –Total
      recoveries
                          
                          
                          –
                          
                          
                          
                          6Net
      charge-offs
                          
                          
                          (18
                          )
                          
                          
                          (86
                          )Allowance
      at end of year
                          
                          $
                          165
                          
                          
                          $
                          124Allowance
      to nonperforming loans
                          
                          
                          9.26
                          %
                          
                          
                          193.75
                          %Allowance
      to total loans outstandingat
      the end of the year
                          
                          
                          0.21
                          
                          
                          
                          0.16Net
      charge-offs (recoveries) to averageloans
      outstanding during the year
                          
                          
                          0.02
                          %
                          
                          
                          0.11
                          %





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 50 to 300 basis
point increase or 50 to 100 basis point decreases 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, 2009 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.


29


Table
17:  NPV Analysis





Net Portfolio Value
                    (Dollars in thousands)
                  
                  
                  Net Portfolio Value as % of
                    Portfolio Value of AssetsBasis Point (“bp”)
                    Change in Rates
                  
                  Estimated
                    $ Amount
                  
                  
                  $ Change
                  
                  
                  % Change
                  
                  
                  NPV Ratio
                  
                  
                  Change in bp300bp
                  
                  $
                  12,550
                  
                  
                  $
                  423
                  
                  
                  
                  3.49
                  %
                  
                  
                  13.85
                  %
                  
                  
                  114
                  bp200
                  
                  
                  13,221
                  
                  
                  
                  1,094
                  
                  
                  
                  9.02
                  
                  
                  
                  14.22
                  
                  
                  
                  151100
                  
                  
                  13,085
                  
                  
                  
                  958
                  
                  
                  
                  7.90
                  
                  
                  
                  13.82
                  
                  
                  
                  11150
                  
                  
                  13,513
                  
                  
                  
                  1,386
                  
                  
                  
                  11.43
                  
                  
                  
                  13.97
                  
                  
                  
                  1260
                  
                  
                  12,127
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  12.71
                  
                  
                  
                  -(50)
                  
                  
                  12,126
                  
                  
                  
                  (1
                  )
                  
                  
                  (0.01
                  )
                  
                  
                  12.71
                  
                  
                  
                  -(100)
                  
                  
                  10,542
                  
                  
                  
                  (1,585
                  )
                  
                  
                  (13.07
                  )
                  
                  
                  11.04
                  
                  
                  
                  (167
                  )





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.





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, 2009, cash and cash equivalents totaled $8.9
million.  In addition, at March 31, 2009, we had the ability to borrow
up to a total of $33.2 million from the Federal Home Loan Bank of
Chicago.  On March 31, 2009, we had $14.0 million of advances
outstanding.





A significant use of our liquidity is
the funding of loan originations.  At March 31, 2009, we had
fixed-rate mortgage loan commitments of $95,000 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, 2009 totaled $34.0 million, or 72.90% 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, 2010.  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.




30





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, 2009, 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 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.





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.





For the years ended March 31, 2009 and
2008, 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.


31


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 Operations.”





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
      9A(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.





(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, 2009 that have materially affected, or are reasonably likely to materially
affect, the Company’s internal control over financial reporting.




32





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 2009 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, “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 is
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
“Director Compensation”
in the Proxy Statement is incorporated by reference.





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, 2009, 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.




33





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
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          44,437Equity
      compensation plans not approved by security holders
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          –Total
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          44,437





(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





Information
regarding transactions with related persons 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.”





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 the
Independent Registered Public Accounting Firm − Audit and Other Fees” and
“Item 2 – Ratification of the
Independent Registered Public Accounting Firm − Pre-Approval of Services by the
Independent Registered Public Accounting Firm.”




34





ITEM
      15.
            EXHIBITS,
      FINANCIAL STATEMENT SCHEDULES





(1)           The
financial statements required in response to this item are incorporated by
reference from Item 8 of this report.





(2)           All
financial statement schedules are omitted because they are not required or
applicable, or the required information is shown in the consolidated financial
statements or the notes thereto.





(3)           Exhibits





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., as amended
      (3)10.2
                *Sugar
      Creek Financial Employment Agreement with Robert J. Stroh, Jr., as amended
      (3)10.3
                *Tempo
      Bank Employment Agreement with Francis J. Eversman, as amended
      (3)10.4
                *Sugar
      Creek Financial Employment Agreement with Francis J. Eversman, as amended
      (3)10.5
                *Tempo
      Bank Employee Severance Compensation Plan, as amended
  (3)10.6
                *Sugar
      Creek Financial Corp. 2007 Equity Incentive Plan (4)21.0
                Subsidiaries
      of the Registrant23.0
                Consent
      of Michael Trokey & Company, P.C.31.0
                Rule
      13a-14(a)/15d-14(a) Certification of Chief Executive Officer and Chief
      Financial Officer32.0
                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 the Exhibits filed with the
      Securities and Exchange Commission on the Quarterly Report on Form 10-Q
      (File No. 000-52532), filed on February 10,
  2009.


(4)
            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.


35


SIGNATURES





Pursuant to the requirements of Section
13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.





SUGAR
      CREEK FINANCIAL CORP.Date:
      June 26, 2009
              By:
              /s/ Robert J. Stroh, Jr.Robert
      J. Stroh, Jr.Chairman,
      Chief Executive Officer and Chief Financial
  Officer





Pursuant to the requirements of the
Securities Exchange Act of 1934, 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 Chief Financial
                      
                      June
      26, 2009Robert
      J. Stroh, Jr.
                      
                      Officer
      (principal executive officer and principal financial officer)/s/ Francis J. Eversman
                      
                      President,
      Chief Operating Officer and Director
                      
                      June
      26, 2009Francis
      J. Eversman/s/ Timothy W. Deien
                      
                      Director
                      
                      June
      26, 2009Timothy
      W. Deien/s/ Timothy P. Fleming
                      
                      Director
                      
                      June
      26, 2009Timothy
      P. Fleming/s/ Daniel S. Reilly
                      
                      Director
                      
                      June
      26, 2009Daniel
      S. Reilly/s/ Gary R. Schwend
                      
                      Director
                      
                      June
      26, 2009Gary
      R. Schwend


36




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, 2009, 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, 2009 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.
  37




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. as of March 31, 2009 and 2008 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, 2009 and 2008, 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, 2009 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.


St.
Louis, Missouri


June 26,
2009


F-1


SUGAR
CREEK FINANCIAL CORP. AND SUBSIDIARY





Consolidated
Balance Sheets





March 31,2009
                          
                          
                          2008AssetsCash
      and due from banks
                          
                          $
                          775,208
                          
                          
                          
                          607,687Federal
      funds sold
                          
                          
                          5,611,104
                          
                          
                          
                          929,733FHLB
      daily investment account
                          
                          
                          2,543,514
                          
                          
                          
                          1,629,805Cash
      and cash equivalents
                          
                          
                          8,929,826
                          
                          
                          
                          3,167,225Stock
      in Federal Home Loan Bank of Chicago
                          
                          
                          1,660,145
                          
                          
                          
                          1,660,145Loans
      receivable, net of allowance for loan lossesof $165,323 at March
      31, 2009 and $124,287 at March 31, 2008
                          
                          
                          79,129,004
                          
                          
                          
                          79,803,742Premises
      and equipment, net
                          
                          
                          1,130,874
                          
                          
                          
                          1,036,555Foreclosed
      real estate, net of allowance for loss of $28,000 at March 31,
      2009
                          
                          
                          357,847
                          
                          
                          
                          385,847Accrued
      interest receivable on loans
                          
                          
                          315,727
                          
                          
                          
                          329,079Other
      assets, including prepaid income taxes of $20,646 at March 31,
      2008
                          
                          
                          204,640
                          
                          
                          
                          223,594Total
      assets
                          
                          $
                          91,728,063
                          
                          
                          
                          86,606,187Liabilities
      and Stockholders' EquityDeposits
                          
                          $
                          67,076,374
                          
                          
                          
                          59,181,449Accrued
      interest payable on deposits
                          
                          
                          193,674
                          
                          
                          
                          233,399Advances
      from FHLB of Chicago
                          
                          
                          14,000,000
                          
                          
                          
                          17,000,000Advances
      from borrowers for taxes and insurance
                          
                          
                          310,026
                          
                          
                          
                          342,017Other
      liabilities
                          
                          
                          254,856
                          
                          
                          
                          247,438Accrued
      income taxes
                          
                          
                          257,564
                          
                          
                          
                          -Deferred
      tax liability
                          
                          
                          361,865
                          
                          
                          
                          436,865Total
      liabilities
                          
                          
                          82,454,359
                          
                          
                          
                          77,441,168Commitments
      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
                          
                          
                          9,069
                          
                          
                          
                          9,069Additional
      paid-in capital
                          
                          
                          3,213,361
                          
                          
                          
                          3,341,901Treasury
      stock, at cost, 6,772 shares
                          
                          
                          (56,157
                          )
                          
                          
                          -Common
      stock acquired by employee stock ownership plan
                          
                          
                          (302,167
                          )
                          
                          
                          (325,866
                          )Retained
      earnings - substantially restricted
                          
                          
                          6,409,598
                          
                          
                          
                          6,139,915Total
      stockholders' equity
                          
                          
                          9,273,704
                          
                          
                          
                          9,165,019Total
      liabilities and stockholders' equity
                          
                          $
                          91,728,063
                          
                          
                          
                          86,606,187





See
accompanying notes to consolidated financial statements.





F-2





SUGAR
CREEK FINANCIAL CORP. AND SUBSIDIARY





Consolidated
Statements of Earnings





Years Ended March 31,2009
                  
                  
                  2008Interest
      income:Loans
      receivable
                  
                  $
                  4,968,873
                  
                  
                  
                  4,880,189Securities
                  
                  
                  -
                  
                  
                  
                  13,051Other
      interest-earning assets
                  
                  
                  27,992
                  
                  
                  
                  114,894Total
      interest income
                  
                  
                  4,996,865
                  
                  
                  
                  5,008,134Interest
      expense:Deposits
                  
                  
                  1,858,051
                  
                  
                  
                  2,044,657Advances
      from FHLB of Chicago
                  
                  
                  799,542
                  
                  
                  
                  957,685Total
      interest expense
                  
                  
                  2,657,593
                  
                  
                  
                  3,002,342Net
      interest income
                  
                  
                  2,339,272
                  
                  
                  
                  2,005,792Provision
      for loan losses
                  
                  
                  59,007
                  
                  
                  
                  80,436Net
      interest income after provision for loan losses
                  
                  
                  2,280,265
                  
                  
                  
                  1,925,356Noninterest
      income:Loan
      service charges
                  
                  
                  20,103
                  
                  
                  
                  24,183Service
      charges on deposit accounts
                  
                  
                  156,795
                  
                  
                  
                  133,050Other
                  
                  
                  19,980
                  
                  
                  
                  18,242Total
      noninterest income
                  
                  
                  196,878
                  
                  
                  
                  175,475Noninterest
      expense:Compensation
      and benefits
                  
                  
                  1,032,751
                  
                  
                  
                  1,178,909Occupancy
      expense
                  
                  
                  113,965
                  
                  
                  
                  99,682Equipment
      and data processing
                  
                  
                  362,908
                  
                  
                  
                  328,372FDIC
      premium expense
                  
                  
                  50,647
                  
                  
                  
                  6,969Advertising
                  
                  
                  43,826
                  
                  
                  
                  38,514Supplies
      expense
                  
                  
                  32,456
                  
                  
                  
                  36,962Professional
      and regulatory fees
                  
                  
                  151,936
                  
                  
                  
                  137,859Other
                  
                  
                  247,867
                  
                  
                  
                  174,455Total
      noninterest expense
                  
                  
                  2,036,356
                  
                  
                  
                  2,001,722Earnings
      before income taxes
                  
                  
                  440,787
                  
                  
                  
                  99,109Income
      tax expense
                  
                  
                  171,104
                  
                  
                  
                  28,000Net
      earnings
                  
                  $
                  269,683
                  
                  
                  
                  71,109Basic
      and diluted earnings per share
                  
                  $
                  0.31
                  
                  
                  
                  0.08Dividends
      per share
                  
                  $
                  0.00
                  
                  
                  
                  0.00





See
accompanying notes to consolidated financial statements.





F-3





SUGAR
CREEK FINANCIAL CORP. AND SUBSIDIARY





Consolidated
Statements of Stockholders’ Equity





Years
Ended March 31, 2009 and 2008





CommonAdditional
                    
                    
                    
                    
                    
                    Stock
                    
                    
                    
                    
                    
                    TotalCommon
                    
                    
                    Paid-in
                    
                    
                    Treasury
                    
                    
                    Acquired
                    
                    
                    Retained
                    
                    
                    Stockholders'Stock
                    
                    
                    Capital
                    
                    
                    Stock
                    
                    
                    by ESOP
                    
                    
                    Earnings
                    
                    
                    EquityBalance
      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
                    
                    
                    
                    9,165,019Net
      earnings
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    269,683
                    
                    
                    
                    269,683Repurchase
      of common stock
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (200,066
                    )
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (200,066
                    )Amortization
      of ESOP award
                    
                    
                    -
                    
                    
                    
                    (3,257
                    )
                    
                    
                    -
                    
                    
                    
                    23,699
                    
                    
                    
                    -
                    
                    
                    
                    20,442Equity
      incentive plan expense
                    
                    
                    -
                    
                    
                    
                    18,626
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    18,626Treasury
      shares used to fund equity incentive plan
                    
                    
                    -
                    
                    
                    
                    (143,909
                    )
                    
                    
                    143,909
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Balance
      at March 31, 2009
                    
                    $
                    9,069
                    
                    
                    
                    3,213,361
                    
                    
                    
                    (56,157
                    )
                    
                    
                    (302,167
                    )
                    
                    
                    6,409,598
                    
                    
                    
                    9,273,704





See
accompanying notes to consolidated financial statements.





F-4





SUGAR
CREEK FINANCIAL CORP. AND SUBSIDIARY





Consolidated
Statements of Cash Flows





Years Ended March 31,2009
                  
                  
                  2008Cash
      flows from operating activities:Net
      earnings
                  
                  $
                  269,683
                  
                  
                  
                  71,109Adjustments
      to reconcile net earnings to net cash provided by (used for) operating
      activities:Depreciation
                  
                  
                  106,018
                  
                  
                  
                  90,303ESOP
      expense
                  
                  
                  20,442
                  
                  
                  
                  29,016Equity
      incentive plan expense
                  
                  
                  18,626
                  
                  
                  
                  -Amortization
      of deferred loan fees, net
                  
                  
                  (34,173
                  )
                  
                  
                  (24,211
                  )Provision
      for loan losses
                  
                  
                  59,007
                  
                  
                  
                  80,436Provision
      for losses on foreclosed real estate
                  
                  
                  28,000
                  
                  
                  
                  -Decrease
      (increase) in accrued interest receivable
                  
                  
                  13,352
                  
                  
                  
                  (11,838
                  )Decrease
      (increase) in other assets
                  
                  
                  18,954
                  
                  
                  
                  393,811Increase
      (decrease) in:Accrued
      interest on deposits
                  
                  
                  (39,725
                  )
                  
                  
                  (11,248
                  )Other
      liabilities
                  
                  
                  7,418
                  
                  
                  
                  86,135Accrued
      income taxes
                  
                  
                  257,564
                  
                  
                  
                  -Deferred
      income tax liability
                  
                  
                  (75,000
                  )
                  
                  
                  16,000Net
      cash provided by (used for) operating activities
                  
                  
                  650,166
                  
                  
                  
                  719,513Cash
      flows from investing activities:Net
      change in loans receivable
                  
                  
                  649,904
                  
                  
                  
                  (306,501
                  )Purchase
      of premises and equipment
                  
                  
                  (200,337
                  )
                  
                  
                  (259,960
                  )Additions
      to foreclosed real estate
                  
                  
                  -
                  
                  
                  
                  (18,340
                  )Net
      cash provided by (used for) investing activities
                  
                  
                  449,567
                  
                  
                  
                  (584,801
                  )Cash
      flows from financing activities:Net
      increase (decrease) in deposits
                  
                  
                  7,894,925
                  
                  
                  
                  (4,988,778
                  )Increase
      (decrease) in advances from borrowers for taxes and
    insurance
                  
                  
                  (31,991
                  )
                  
                  
                  66,496Proceeds
      from advances from FHLB
                  
                  
                  19,500,000
                  
                  
                  
                  22,000,000Repayment
      of advances from FHLB
                  
                  
                  (22,500,000
                  )
                  
                  
                  (24,000,000
                  )Proceeds
      from sale of common stock, net
                  
                  
                  -
                  
                  
                  
                  2,996,088Repurchase
      of common stock
                  
                  
                  (200,066
                  )
                  
                  
                  -Net
      cash provided by (used for) financing activities
                  
                  
                  4,662,868
                  
                  
                  
                  (3,926,194
                  )Net
      increase (decrease) in cash and cash equivalents
                  
                  
                  5,762,601
                  
                  
                  
                  (3,791,482
                  )Cash
      and cash equivalents at beginning of year
                  
                  
                  3,167,225
                  
                  
                  
                  6,958,707Cash
      and cash equivalents at end of year
                  
                  $
                  8,929,826
                  
                  
                  
                  3,167,225Supplemental
      disclosures - cash paid (received):Interest
      on deposits and advances from FHLB
                  
                  $
                  2,710,167
                  
                  
                  
                  3,016,701Federal
      and state income taxes
                  
                  $
                  (31,755
                  )
                  
                  
                  36,158Real
      estate and repossessions acquired in settlement of loans
                  
                  $
                  47,299
                  
                  
                  
                  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, 2009 and 2008





(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 $7,704,618 and
      $2,108,632 at March 31, 2009 and 2008,
  respectively.




c.
      Stock in Federal Home Loan Bank of Chicago ("FHLBC") is recorded at cost,
      which represents historical redemption 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 has not declared a dividend since the second calendar quarter of
      2007.  As a result, no dividends on FHLBC stock were accrued at
      March 31, 2009 or 2008.  At March 31, 2009, $921,000 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.





FHLBC
      stock is evaluated for impairment in accordance with Statement of Position
      01-06, “Accounting by Certain Entities (Including Entities with Trade
      Receivables) That Lend to or Finance the Activities of
      Others.”  Determination of whether the FHLBC stock is impaired
      is based on the assessment of the ultimate recoverability of cost rather
      than by recognizing declines in value.  The determination of
      whether a decline affects the ultimate recoverability of costs is
      influenced by the significance of the decline in net assets compared to
      the capital of the FHLBC and the length of time this situation has
      persisted; the ability of the FHLBC to make payments required by law or
      regulation and operating performance; the impact of legislative and
      regulatory changes on member institutions and customer base and the
      liquidity position of the FHLBC.




Management
      believes that no impairment charge on FHLBC stock is necessary at March
      31, 2009.




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.





F-6





SUGAR
CREEK FINANCIAL CORP. AND SUBSIDIARY





Notes
to Consolidated Financial Statements




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.
      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.




The
      Company adopted the provisions of FASB Interpretation (“FIN”) No. 48,
      “Accounting for Uncertainty in Income Taxes - an interpretation of FASB
      No. 109,” effective April 1, 2007.  There was no cumulative
      effect on adoption of FIN 48.  A tax position is recognized as a
      benefit only if it is “more likely than not” that the tax position would
      be sustained in a tax examination, with a tax examination being presumed
      to occur.  The amount recognized is the largest amount of tax
      benefit that is greaterthan 50% likely of being realized on
      examination.  For tax positions not meeting the “more likely
      than not” test, no tax benefit is recorded.  The Company
      recognizes interest and penalties related to tax positions in income tax
      expense.




F-7





SUGAR
CREEK FINANCIAL CORP. AND SUBSIDIARY





Notes
to Consolidated Financial Statements





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.





On
      April 3, 2007, the date of the conversion to a public company, the Company
      adopted SFAS No. 123 (R), “Share-Based Payment,” using the modified
      prospective method.  Under this method compensation expense is
      recognized based on the fair value of awards granted, which includes
      restricted stock and stock options, at the grant date and is recognized on
      a straight-line basis over the requisite service period, generally defined
      as the vesting period.





l.
      Earnings per share are based upon the weighted-average shares
      outstanding.  ESOP shares, which have been committed to be
      released, are considered outstanding and stock options and restricted
      stock to the extent dilutive.  Under the treasury stock method,
      stock options and restricted stock are dilutive when the average market
      price of the Company’s common stock and effect of any unamortized
      compensation expense exceeds the exercise price during the
      period.  In addition, proceeds from the assumed exercise of
      dilutive stock options and restricted stock and related tax benefit are
      assumed to be used to repurchase common stock at the average market price
      during the period.





Years Ended March 31,2009
                        
                        
                        2008Net
      earnings
                        
                        $
                        269,683
                        
                        
                        
                        71,109Weighted-average
      shares - Basic EPS
                        
                        
                        865,926
                        
                        
                        
                        872,515Effect
      of dilutive stock awards
                        
                        
                        1,019
                        
                        
                        
                        -Weighted-average
      shares - Diluted EPS
                        
                        
                        866,945
                        
                        
                        
                        872,515Basic
      earnings per common share
                        
                        $
                        0.31
                        
                        
                        
                        0.08Diluted
      earnings per common share
                        
                        $
                        0.31
                        
                        
                        
                        0.08Anti-dilutive
      shares
                        
                        $
                        -
                        
                        
                        
                        -




m. The
following paragraphs summarize recent accounting
pronouncements:





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.





F-8





SUGAR
CREEK FINANCIAL CORP. AND SUBSIDIARY




Notes
to Consolidated Financial Statements





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
      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.  SFAS No. 160 and SFAS No. 141 (R) were adopted April 1,
      2009 and did not have a material impact on the Company’s financial
      position or results of operation.





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.  SFAS
      No. 161 was adopted April 1, 2009 and did not have a material impact on
      the Company’s financial position or results of operation.  At
      March 31, 2009, 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.”





In
      February 2008, the FASB issued FASB Staff Position (“FSP”) SFAS No. 157-2,
      “Effective Date of FASB Statement No. 157.”  The Bank adopted
      this FSP for non-financial assets and liabilities that are not recognized
      or disclosed at fair value in the financial statements, effective April 1,
      2009.  The FSP did not have a material impact on the Company’s
      financial condition or results of
operation.




F-9





SUGAR
CREEK FINANCIAL CORP. AND SUBSIDIARY


Notes
to Consolidated Financial Statements


In
      April 2009, the FASB issued FSP SFAS No. 157-4, “Determining Fair Value
      When the Volume and Level of Activity for the Asset or Liability Have
      Significantly Decreased and Identifying Transactions That Are Not
      Orderly.”  FSP SFAS No. 157-4 provides factors to determine
      whether there has been a significant decrease in the volume and level of
      activity for the asset or liability and circumstances that
      may indicate that a transaction is not orderly.  In those
      instances, adjustments to the transactions or quoted prices may be
      necessary to estimate fair value with SFAS No. 157.  This FSP
      does not apply to Level 1 inputs.  FSP SFAS No. 157 also
      requires additional disclosures, including inputs and valuation techniques
      used, and changes thereof, to measure the fair value.  FSP SFAS
      No. 157-4 is effective for interim and annual reporting periods ending
      after June 15,   2009.  This FSP amends SFAS No.
      157 and supersedes FSP SFAS No. 157-3.  FSP SFAS No. 157-4 will
      be adopted, effective June 30, 2009, and is not expected to have a
      material impact on the Company’s financial position or results of
      operation.




In
      April 2009, the FASB issued FSP SFAS No. 115-2 and SFAS No. 124-2,
      “Recognition and Presentation of Other-Than-Temporary
      Impairments.”  FSP SFAS No. 115-2 and SFAS No. 124-2 applies to
      debt securities classified as available-for-sale and held-to-maturity and
      makes other-than-temporary impairment guidance more operational and
      improves related presentation and disclosure requirements.  This
      FSP requires that impairment losses related to credit losses will be
      included in earnings. Impairments related to other factors will be
      included in other comprehensive income, when management asserts it does
      not have the intent to sell the security and it is not more likely than
      not that it will have to sell the security before its
      recovery.





For
      debt securities held at the beginning of the interim period of adoption
      for which an other-than-temporary impairment was previously recognized, if
      the entity does not intend to sell and it is not more likely than not that
      it will be required to sell the security before recovery of its amortized
      cost basis, the entity will recognize the cumulative-effect adjustment,
      including related tax effects, to the beginning balance of retained
      earnings and corresponding adjustment to accumulated other comprehensive
      income.  FSP SFAS No. 115-2 and SFAS No. 124-2 is effective for
      interim and annual periods ending after June 15, 2009.  This FSP
      amends SFAS No. 115 and other
      related   guidance.  FSP SFAS No. 115-2 and SFAS
      No. 124-2 will be adopted, effective June 30, 2009, and is not expected to
      have a material impact on the Company’s financial position or results of
      operations.





In
      April 2009, the FASB issued FSP SFAS No. 107-1 and APB No. 28-1, “Interim
      Disclosures about Fair Value of Financial Instruments.”  This
      FSP requires public entities to disclose the fair values of financial
      instruments for interim reporting periods.  FSP SFAS No. 107-1
      and APB No. 28-1 is effective for interim reporting periods after June 15,
      2009.  The Company will adopt this FSP as of June 30,
      2009.





In
      April 2009, the FASB issued FSP SFAS No. 141 (R)-1, “Accounting for Assets
      Acquired and Liabilities Assumed in a Business Combination That Arise from
      Contingencies.”  This FSP amends and clarifies application
      issues regarding the initial recognition, measurement, accounting and
      disclosure of assets and liabilities arising from contingencies in a
      business combination.  FSP SFAS No. 141 (R)-1 is effective for
      business combinations that occur during the first annual reporting period
      beginning after December 15, 2008.  FSP SFAS No. 141 (R)-1 was
      adopted April 1, 2009 and did not have a material impact on the Company’s
      financial position or results of
operation.





In
      May 2009, the FASB issued SFAS No. 165, “Subsequent
      Events.”  SFAS No. 165 establishes principles for accounting for
      and disclosures for events that occur after the balance sheet date but
      before financial statements are issued or are available to be
      issued.  SFAS No. 165 is effective for interim and annual
      periods ending after June 15, 2009.





F-10





SUGAR
CREEK FINANCIAL CORP. AND SUBSIDIARY


Notes
to Consolidated Financial Statements





In
      June 2009, the FASB issued SFAS No. 166, “Accounting for Transfers of
      Financial Assets- an amendment of SFAS No. 140” and SFAS No. 167,
      “Amendments to FASB Interpretation No. 46 (R).”  SFAS No. 166
      improves the relevance, representational faithfulness, and comparability
      of the financial information that an entity provides in its financial
      reports regarding a transfer of financial assets and its
      effects.  SFAS No. 167 improves financial reporting for
      companies involved with variable interest entities.  The Company
      is currently reviewing the applications of SFAS No. 166 and SFAS No.
      167.  SFAS No. 166 and SFAS No. 167 are effective as of the
      beginning of an entity’s first fiscal year that begins after November 15,
      2009.





(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-11





SUGAR
CREEK FINANCIAL CORP. AND SUBSIDIARY


Notes
to Consolidated Financial Statements





(3)
            Loans
      Receivable, Net


Loans
receivable, net are summarized as follows:





March31,2009
                              
                              
                              2008Real
      estate loans:Single-family
      loans, 1- 4 units
                              
                              $
                              69,479,059
                              
                              
                              
                              69,903,270Multi-family
                              
                              
                              1,123,570
                              
                              
                              
                              966,253Commercial
      real estate
                              
                              
                              3,374,589
                              
                              
                              
                              2,885,924Land
                              
                              
                              1,584,414
                              
                              
                              
                              1,723,060Automobile
      loans
                              
                              
                              2,313,744
                              
                              
                              
                              2,521,802Home
      equity loans
                              
                              
                              1,158,382
                              
                              
                              
                              1,526,650Loans
      secured by deposit accounts
                              
                              
                              382,815
                              
                              
                              
                              520,904Fresh
      Start Loans
                              
                              
                              -
                              
                              
                              
                              28079,416,573
                              
                              
                              
                              80,048,143Allowance
      for losses
                              
                              
                              (165,323
                              )
                              
                              
                              (124,287
                              )Deferred
      loan fees, net
                              
                              
                              (122,246
                              )
                              
                              
                              (120,114
                              )$
                              79,129,004
                              
                              
                              
                              79,803,742Weighted-average
      rate
                              
                              
                              6.06
                              %
                              
                              
                              6.07
                              %





Balloon
      and adjustable-rate loans in the loan portfolio amounted to $36,642,921
      and $35,510,283 at March 31, 2009 and 2008,
  respectively.





The
      Bank originates single-family loans and home equity loans with high loan
      to value ratios exceeding 90 percent which amounted to $796,773 at March
      31, 2009.





Following
is a summary of activity in allowance for losses:





YearsEndedMarch31,2009
                            
                            
                            2008Balance,
      beginning of year
                            
                            $
                            124,287
                            
                            
                            
                            130,000Loan
      charge-offs
                            
                            
                            (17,971
                            )
                            
                            
                            (92,073
                            )Recoveries
                            
                            
                            -
                            
                            
                            
                            5,924Provision
      for loan losses
                            
                            
                            59,007
                            
                            
                            
                            80,436Balance,
      end of year
                            
                            $
                            165,323
                            
                            
                            
                            124,287





F-12





SUGAR
CREEK FINANCIAL CORP. AND SUBSIDIARY




Notes
to Consolidated Financial Statements





Following
      is a summary of activity for loans to directors, executive officers and
      associates of such persons for the year ended March 31,
    2009:




Balance,
      beginning of year
                  
                  $
                  3,438,062Additions
                  
                  
                  984,500Repayments
                  
                  
                  (666,493
                  )Balance,
      end of year
                  
                  $
                  3,756,069




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, 2009 or
2008.





Following
is a summary of nonperforming loans:





March31,2009
                            
                            
                            2008Nonaccrual
      loans
                            
                            $
                            1,784,513
                            
                            
                            
                            64,009Accruing
      loans past due 90 days or more
                            
                            
                            -
                            
                            
                            
                            -Total
      nonperforming loans
                            
                            $
                            1,784,513
                            
                            
                            
                            64,009Allowance
      for losses on nonperforming loans
                            
                            $
                            20,116
                            
                            
                            
                            6,401Nonperforming
      loans with no allowance
                            
                            $
                            1,723,678
                            
                            
                            
                            -Average
      balance of nonperforming loans
                            
                            $
                            1,043,128
                            
                            
                            
                            574,500





During
      the year ended March 31, 2009, the amount of interest income recognized on
      nonperforming loans and the amount if such loans had been current during
      the period of impairment was $21,174 and $48,033,
      respectively.





(4)
            Premises
      and Equipment, Net


Premises
and equipment, net are summarized as follows:


March 31,2009
                    
                    
                    2008Land
                    
                    $
                    243,041
                    
                    
                    
                    243,041Land
      for possible future branch location
                    
                    
                    152,263
                    
                    
                    
                    -Office
      buildings and improvements
                    
                    
                    1,381,004
                    
                    
                    
                    1,334,924Furniture
      and equipment
                    
                    
                    610,852
                    
                    
                    
                    679,5112,387,160
                    
                    
                    
                    2,257,476Less
      accumulated depreciation
                    
                    
                    1,256,286
                    
                    
                    
                    1,220,921$
                    1,130,874
                    
                    
                    
                    1,036,555


Depreciation
expense for 2009 and 2008 was $106,018 and $90,303, respectively.





F-13




SUGAR
CREEK FINANCIAL CORP. AND SUBSIDIARY





Notes
to Consolidated Financial Statements





(5)
            Deposits


Deposits
are summarized as follows:





March 31,Description
      and Interest Rate
                  
                  2009
                  
                  
                  2008Non-interest
      bearing NOW accounts
                  
                  $
                  3,148,703
                  
                  
                  
                  2,620,292NOW
      accounts, .50% and .50%
                  
                  
                  4,211,007
                  
                  
                  
                  4,420,144Savings
      accounts, .69% and .67%
                  
                  
                  7,720,796
                  
                  
                  
                  7,277,525Money
      market accounts, 2.26% and 2.65%
                  
                  
                  5,354,694
                  
                  
                  
                  3,323,884Total
      transaction accounts
                  
                  
                  20,435,200
                  
                  
                  
                  17,641,845Certificates:1.01
      - 2.00%
                  
                  
                  706,918
                  
                  
                  
                  709,4662.01
      - 3.00%
                  
                  
                  10,351,759
                  
                  
                  
                  3,099,1803.01
      - 4.00%
                  
                  
                  24,232,763
                  
                  
                  
                  5,832,5314.01
      - 5.00%
                  
                  
                  9,899,140
                  
                  
                  
                  17,976,8535.01
      - 6.00%
                  
                  
                  1,450,594
                  
                  
                  
                  13,921,574Total
      certificates, 3.58% and 4.55%
                  
                  
                  46,641,174
                  
                  
                  
                  41,539,604Total
      deposits
                  
                  $
                  67,076,374
                  
                  
                  
                  59,181,449Weighted-average
      rate - total deposits
                  
                  
                  2.78
                  %
                  
                  
                  3.46
                  %





The
aggregate amount of transaction accounts and certificates in denominations of
$100,000 or more at March 31, 2009 were $5,784,630 and $12,175,320,
respectively.  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.





Certificate
maturities are summarized as follows:


March 31,2009
                  
                  
                  2008First
      year
                  
                  $
                  34,000,065
                  
                  
                  
                  32,297,607Second
      year
                  
                  
                  9,278,507
                  
                  
                  
                  6,835,117Third
      year
                  
                  
                  2,935,569
                  
                  
                  
                  2,193,007Fourth
      year
                  
                  
                  205,348
                  
                  
                  
                  12,832Fifth
      year
                  
                  
                  221,685
                  
                  
                  
                  201,041$
                  46,641,174
                  
                  
                  
                  41,539,604




F-14


SUGAR
CREEK FINANCIAL CORP. AND SUBSIDIARY





Notes
to Consolidated Financial Statements





Interest
expense on deposits is summarized as follows:


Years Ended March 31,2009
                  
                  
                  2008NOW
      accounts
                  
                  $
                  21,607
                  
                  
                  
                  22,975Savings
      accounts
                  
                  
                  50,593
                  
                  
                  
                  49,466Money
      market deposit accounts
                  
                  
                  117,720
                  
                  
                  
                  81,860Certificates
                  
                  
                  1,668,131
                  
                  
                  
                  1,890,356$
                  1,858,051
                  
                  
                  
                  2,044,657





(6)
            Advances
      from FHLB of Chicago


Advances
from FHLB of Chicago are summarized as follows:


March 31,Final Maturity Date
                  
                  Interest Rate
                  
                  
                  2009
                  
                  
                  2008Daily
                  
                  
                  2.92%
                  
                  
                  $
                  -
                  
                  
                  
                  1,000,000October
      10, 2008
                  
                  
                  5.16%
                  
                  
                  
                  -
                  
                  
                  
                  2,000,000October
      13, 2009
                  
                  
                  4.78%
                  
                  
                  
                  3,000,000
                  
                  
                  
                  3,000,000November
      28, 2011
                  
                  
                  4.96%
                  
                  
                  
                  2,000,000
                  
                  
                  
                  2,000,000December
      22, 2011
                  
                  
                  4.95%
                  
                  
                  
                  4,000,000
                  
                  
                  
                  4,000,000February
      13, 2017
                  
                  
                  4.71%
                  
                  
                  
                  5,000,000
                  
                  
                  
                  5,000,000$
                  14,000,000
                  
                  
                  
                  17,000,000Weighted-average
      rate
                  
                  
                  
                  
                  
                  
                  4.83
                  %
                  
                  
                  4.82
                  %





All
advances from FHLB are fixed rate at March 31, 2009.  At March 31,
2009 advances from FHLB were secured by FHLB stock and mortgage loans of $50.9
million.  At March 31, 2008 advances from FHLB were secured by FHLB
stock and mortgage loans of $52.0 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,
2009 and 2008 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-15


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 earningsbefore income taxesYears Ended March 31,2009
                  
                  
                  2008Federal
      statutory income tax rate
                  
                  
                  34.0
                  %
                  
                  
                  34.0
                  %Increases
      in tax rate:State
      taxes, net of Federal tax benefit
                  
                  
                  4.6
                  
                  
                  
                  4.8Surtax
      exemption
                  
                  
                  -
                  
                  
                  
                  (11.9
                  )Other,
      net
                  
                  
                  0.2
                  
                  
                  
                  1.4Tax
      rate
                  
                  
                  38.8
                  %
                  
                  
                  28.3
                  %





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





March 31,2009
                    
                    
                    2008Deferred
      tax liabilities:FHLB
      stock dividends
                    
                    $
                    129,548
                    
                    
                    
                    129,548Deferred
      loan costs
                    
                    
                    3,807
                    
                    
                    
                    4,998Tax
      over book depreciation
                    
                    
                    193,523
                    
                    
                    
                    229,585Accrued
      income and expense
                    
                    
                    113,960
                    
                    
                    
                    123,708Other
                    
                    
                    4,318
                    
                    
                    
                    1,443Total
      deferred tax liabilities
                    
                    
                    445,156
                    
                    
                    
                    489,282Deferred
      tax assets:Allowance
      for loss- loans and foreclosed real estate
                    
                    
                    (75,396
                    )
                    
                    
                    (48,472
                    )Book
      over tax ESOP expense
                    
                    
                    (7,895
                    )
                    
                    
                    (3,945
                    )Total
      deferred tax assets
                    
                    
                    (83,291
                    )
                    
                    
                    (52,417
                    )Net
      deferred tax liability
                    
                    $
                    361,865
                    
                    
                    
                    436,865





Income
taxes are summarized as follows:


Years Ended March 31,2009
                  
                  
                  2008Current:Federal
                  
                  $
                  202,104
                  
                  
                  
                  8,000State
                  
                  
                  44,000
                  
                  
                  
                  4,000246,104
                  
                  
                  
                  12,000Deferred:Federal
                  
                  
                  (62,000
                  )
                  
                  
                  13,000State
                  
                  
                  (13,000
                  )
                  
                  
                  3,000(75,000
                  )
                  
                  
                  16,000Total
      income taxes
                  
                  $
                  171,104
                  
                  
                  
                  28,000




F-16





SUGAR
CREEK FINANCIAL CORP. AND SUBSIDIARY





Notes
to Consolidated Financial Statements





The
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, 2007 through March 31, 2009 remain
open to examination by these jurisdictions.  At March 31, 2009, there
was no accrual for uncertain tax positions or related
interest.





(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 $140,000 and $227,000 at June 30, 2008
(the most recent report available), and June 30, 2007,
respectively.  Pension expense was $122,108 and $205,251 for the years
ended March 31, 2009 and 2008, 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 $25,542 and $26,005 for the
years ended March 31, 2009 and 2008, 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, 2009 and
March 31, 2008 was $20,442 and $29,016, respectively.





The
number of ESOP shares allocated, shares released for allocation and unreleased
shares at March 31, 2009 were 4,740, 593 and 30,216,
respectively.  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. The fair value of unreleased ESOP shares at March 31, 2009
and March 31, 2008 was $220,577 and $296,533, respectively.





On
November 19, 2007 stockholders approved the Sugar Creek Financial Corp. 2007
Equity Incentive Plan (the “Plan”).  Under the Plan, the Company may
grant to employees, officers and directors up to 62,211 shares of common stock,
including 44,437 shares for stock options and 17,774 shares of restricted
stock.





On July
21, 2008, the Board of Directors granted 17,774 shares of restricted stock to
officers and directors of the Company.  Shares of common stock to fund
these awards were repurchased in the open market at an average price of
$8.10.


F-17


SUGAR
CREEK FINANCIAL CORP. AND SUBSIDIARY





Notes
to Consolidated Financial Statements




A summary
of the Company’s restricted stock award expense under the Plan is as
follows:





Years Ended March 31,2009
                  
                  
                  2008Pre-tax
                  
                  $
                  18,626
                  
                  
                  
                  -After-tax
                  
                  
                  11,362
                  
                  
                  
                  -Basic
      and diluted earnings per share
                  
                  $
                  0.01
                  
                  
                  
                  -





At March
31, 2009, the total unrecognized expense related to restricted stock awards
was   approximately $122,000 and is expected to be recognized
over the weighted-average period of 4.25 years.




A summary
of the Company’s non-vested stock award activity for the period ended March 31,
2009 is as follows:




Weighted-Number of
                  
                  
                  AverageNon-vested
                  
                  
                  Grant DateShares
                  
                  
                  Fair ValueNonvested
      at March 31, 2008
                  
                  
                  -
                  
                  
                  $
                  -Granted
                  
                  
                  17,774
                  
                  
                  
                  7.90Vested
                  
                  
                  -
                  
                  
                  
                  -Forfeited
                  
                  
                  -
                  
                  
                  
                  -Nonvested
      at March 31, 2009
                  
                  
                  17,774
                  
                  
                  $
                  7.90





(9)
            Stockholders’
      Equity and Regulatory Capital


On April
3, 2007, the Bank completed its reorganization into a two-tier holding company
structure and the 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 the 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.


F-18


SUGAR
CREEK FINANCIAL CORP. AND SUBSIDIARY





Notes
to Consolidated Financial Statements





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, 2009, the Bank met all capital adequacy requirements.  The Bank is
also subject to the regulatory framework for prompt corrective
action.  At March 31, 2009 and 2008, 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 tables.  There are no conditions or events since the
aforementioned notifications that management believes have changed the Bank’s
category.





The
Bank’s actual and required capital amounts and ratios at March 31, 2009 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
                              
                              $
                              8,910
                              
                              
                              
                              9.7
                              %
                              
                              $
                              1,376
                              
                              
                              
                              1.5
                              %General
      valuation allowance
                              
                              
                              165Total
      capital to risk-weighted assets
                              
                              $
                              9,075
                              
                              
                              
                              18.7
                              %
                              
                              $
                              3,883
                              
                              
                              
                              8.0
                              %
                              
                              $
                              4,854
                              
                              
                              
                              10.0
                              %Tier
      1 capital to risk-weighted assets
                              
                              $
                              8,910
                              
                              
                              
                              18.4
                              %
                              
                              $
                              1,941
                              
                              
                              
                              4.0
                              %
                              
                              $
                              2,912
                              
                              
                              
                              6.0
                              %Tier
      1 capital to total assets
                              
                              $
                              8,910
                              
                              
                              
                              9.7
                              %
                              
                              $
                              3,669
                              
                              
                              
                              4.0
                              %
                              
                              $
                              4,586
                              
                              
                              
                              5.0
                              %




F-19





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
                        %





(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 $95,000 and $616,000 at March 31,
2009 and 2008, respectively.





(11)
            Contingencies


At March
31, 2009 and 2008, there were no known pending litigation or other claims that
management believes will be material to the Company’s financial
position.





(12)
            Fair
      Value Measurements and Fair Value of Financial
  Instruments





Fair
Value Measurements





Effective
April 1, 2008, the Company adopted the provisions of SFAS No. 157, “Fair Value
Measurements,” for financial assets and liabilities.  In accordance
with Financial Accounting Standards Board Staff Position No. 157-2, “Effective
Date of FASB Statement No. 157,” the Company will delay application of SFAS No.
157 for non-financial assets and liabilities that are not recognized or
disclosed at fair value in the financial statements, until April 1,
2009.





SFAS No.
157 defines fair value as the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between market
participants at the measurement date.  The fair value hierarchy
prioritizes the assumptions that market participants would use in pricing the
assets or liabilities (the “inputs”) into three broad
levels.


F-20





SUGAR
CREEK FINANCIAL CORP. AND SUBSIDIARY





Notes
to Consolidated Financial Statements





The fair
value hierarchy gives the highest priority (Level 1) to quoted prices in active
markets for identical assets and liabilities and the lowest priority (Level 3)
to unobservable inputs in which little, if any, market activity exists,
requiring entities to develop their own assumptions and data.





Level 2
inputs are inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly or
indirectly.  These inputs include quoted prices for similar assets or
liabilities in active markets, quoted prices for identical or similar assets or
liabilities in market areas that are not active, inputs other than quoted prices
that are observable for the asset or liability (such as interest rates,
volatilities, prepayment speeds, credit risks and default rates) or inputs that
are derived principally from or corroborated by observable market data by
correlation or other means.





Valuation
Techniques





Available
for sale securities are carried at fair value utilizing Level 1 and Level 2
inputs.  For debt securities, the Bank obtains fair value measurements
from an independent pricing service.  The fair value measurements
consider observable data that may include dealer quotes, live trading levels,
trade execution data, cash flows, market consensus prepayment speeds, market
spreads, credit information and the U.S. Treasury yield
curve.





Impaired
loans are carried at fair value utilizing Level 3 inputs, consisting of
appraisals of underlying collateral and discounted cash flow
analysis.  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.  The types of loans for which impairment is
measured include nonaccrual income property loans, large nonaccrual single-
family loans and troubled debt restructurings.  Valuation allowances
are established for impaired loans for the difference between the loan amount
and the fair value of collateral and estimated selling costs.





At March
31, 2009, the Company did not have any available for sale securities or impaired
loans.





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.


F-21





SUGAR
CREEK FINANCIAL CORP. AND SUBSIDIARY





Notes
to Consolidated Financial Statements





March 31,
                  
                  
                  March 31,2009
                  
                  
                  2008Carrying
                  
                  
                  Fair
                  
                  
                  Carrying
                  
                  
                  FairAmount
                  
                  
                  Value
                  
                  
                  Amount
                  
                  
                  ValueNon-trading
      instruments and nonderivatives:Cash
      and cash equivalents
                  
                  $
                  8,929,826
                  
                  
                  
                  8,929,826
                  
                  
                  
                  3,167,225
                  
                  
                  
                  3,167,225Stock
      in FHLB of Chicago
                  
                  
                  1,660,145
                  
                  
                  
                  1,660,145
                  
                  
                  
                  1,660,145
                  
                  
                  
                  1,660,145Loans
      receivable, net
                  
                  
                  79,129,004
                  
                  
                  
                  82,770,610
                  
                  
                  
                  79,803,742
                  
                  
                  
                  82,101,558Accrued
      interest receivable
                  
                  
                  315,727
                  
                  
                  
                  315,727
                  
                  
                  
                  329,079
                  
                  
                  
                  329,079Deposits
                  
                  
                  67,076,374
                  
                  
                  
                  66,748,824
                  
                  
                  
                  59,181,449
                  
                  
                  
                  58,760,147Accrued
      interest on deposits
                  
                  
                  193,674
                  
                  
                  
                  193,674
                  
                  
                  
                  233,399
                  
                  
                  
                  233,399Advances
      from FHLB of Chicago
                  
                  $
                  14,000,000
                  
                  
                  
                  14,825,091
                  
                  
                  
                  17,000,000
                  
                  
                  
                  17,598,880




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-22





SUGAR
CREEK FINANCIAL CORP. AND SUBSIDIARY





Notes
to Consolidated Financial Statements





(13)
            Parent
      Company Only Financial Statements





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





Balance
Sheets





March 31,2009
                  
                  
                  2008AssetsCash
      and cash equivalents
                  
                  $
                  30,809
                  
                  
                  
                  21,394Investment
      in Bank
                  
                  
                  8,909,784
                  
                  
                  
                  8,782,432ESOP
      note receivable
                  
                  
                  322,411
                  
                  
                  
                  335,981Accrued
      interest receivable
                  
                  
                  6,559
                  
                  
                  
                  6,911Other
      assets
                  
                  
                  5,786
                  
                  
                  
                  55,563Total
      assets
                  
                  $
                  9,275,349
                  
                  
                  
                  9,202,281Liabilities
      and Stockholder's EquityOther
      liabilities
                  
                  $
                  1,645
                  
                  
                  
                  37,262Common
      stock
                  
                  
                  9,069
                  
                  
                  
                  9,069Additional
      paid-in capital
                  
                  
                  3,213,361
                  
                  
                  
                  3,341,901Treasury
      stock
                  
                  
                  (56,157
                  )
                  
                  
                  -Retained
      earnings - substantially restricted
                  
                  
                  6,409,598
                  
                  
                  
                  6,139,915Common
      stock acquired by ESOP
                  
                  
                  (302,167
                  )
                  
                  
                  (325,866
                  )Total
      stockholder's equity
                  
                  
                  9,273,704
                  
                  
                  
                  9,165,019Total
      liabilities and stockholder's equity
                  
                  $
                  9,275,349
                  
                  
                  
                  9,202,281




F-23




SUGAR
CREEK FINANCIAL CORP. AND SUBSIDIARY




Notes
to Consolidated Financial Statements




Statements
of Earnings





April 3, 2007Year Ended
                  
                  
                  toMarch 31, 2009
                  
                  
                  March 31, 2008Interest
      income:Interest
      income on ESOP note receivable
                  
                  $
                  27,442
                  
                  
                  
                  28,766Interest
      income - Tempo Bank
                  
                  
                  2,796
                  
                  
                  
                  1,838Total
      interest income
                  
                  
                  30,238
                  
                  
                  
                  30,604Dividend
      from Bank
                  
                  
                  200,000
                  
                  
                  
                  -Noninterest
      expense
                  
                  
                  59,884
                  
                  
                  
                  98,792Earnings
      (loss) before income taxes and equity in undistributed earnings of
      Bank
                  
                  
                  170,354
                  
                  
                  
                  (68,188
                  )Income
      tax benefit
                  
                  
                  (11,045
                  )
                  
                  
                  (19,000
                  )Net
      earnings (loss) before equity in undistributed earnings of
      Bank
                  
                  
                  181,399
                  
                  
                  
                  (49,188
                  )Equity
      in undistributed earnings of Bank
                  
                  
                  88,284
                  
                  
                  
                  120,297Net
      earnings
                  
                  $
                  269,683
                  
                  
                  
                  71,109




F-24




SUGAR
CREEK FINANCIAL CORP. AND SUBSIDIARY




Notes
to Consolidated Financial Statements




Statements
of Cash Flows





April 3, 2007Year Ended
                  
                  
                  toMarch 31,
                  
                  
                  March 31,2009
                  
                  
                  2008Cash
      flows from operating activities:Net
      earnings
                  
                  $
                  269,683
                  
                  
                  
                  71,109Adjustments
      to reconcile net earnings to net cash provided by (used for) operating
      activities:Equity
      in undistributed net earnings of Bank
                  
                  
                  (88,284
                  )
                  
                  
                  (120,297
                  )Decrease
      (increase) in accrued interest receivable
                  
                  
                  352
                  
                  
                  
                  (6,911
                  )Decrease
      (increase) in other assets
                  
                  
                  49,777
                  
                  
                  
                  (55,563
                  )Increase
      (decrease) in other liabilities
                  
                  
                  (35,617
                  )
                  
                  
                  37,262Net
      cash provided by (used for) operating activities
                  
                  
                  195,911
                  
                  
                  
                  (74,400
                  )Cash
      flow from investing activities:Investment
      in Bank
                  
                  
                  -
                  
                  
                  
                  (2,564,313
                  )Loan
      to ESOP to finance shares
                  
                  
                  -
                  
                  
                  
                  (355,490
                  )Repayment
      of ESOP loan
                  
                  
                  13,570
                  
                  
                  
                  19,509Net
      cash provided by (used for) investing activities
                  
                  
                  13,570
                  
                  
                  
                  (2,900,294
                  )Cash
      flow from financing activities:Proceeds
      from sale of common stock, net
                  
                  
                  -
                  
                  
                  
                  2,996,088Repurchase
      of common stock
                  
                  
                  (200,066
                  )
                  
                  
                  -Net
      cash provided by (used for) financing activities
                  
                  
                  (200,066
                  )
                  
                  
                  2,996,088Net
      increase in cash and cash equivalents
                  
                  
                  9,415
                  
                  
                  
                  21,394Cash
      and cash equivalents at beginning of period
                  
                  
                  21,394
                  
                  
                  
                  -Cash
      and cash equivalents at end of period
                  
                  $
                  30,809
                  
                  
                  
                  21,394




F-25