UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549


____________





FORM
10-Q


(Mark
One)





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





For the
quarterly period ended September 30, 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 incorporation or organization)
              
              (I.R.S. Employer Identification No.)





28 West Broadway, Trenton,
Illinois 62293-1304


(Address
of principal executive offices)





(618)
224-9228


(Registrant’s
telephone number, including area code)





Not
Applicable


(Former
name, former address and former fiscal year, if changed since last
report)





Indicate
by checkmark 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 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





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





As of
November 11, 2009 there were 899,009 shares of the registrant’s common stock
outstanding, $.01 par value per share.





SUGAR
CREEK FINANCIAL CORP.





FORM
10-Q





Index





Page
      No.PART
      I.  FINANCIAL INFORMATIONItem
      1.
                      Financial
      Statements
                      1Consolidated
      Balance Sheets at September 30, 2009 andMarch
      31, 2009 (Unaudited)
                      1Consolidated
      Statements of Operations for the three and six monthsended
      September 30, 2009 and 2008 (Unaudited)
                      2Consolidated
      Statements of Cash Flows for the six months endedSeptember
      30, 2009 and 2008 (Unaudited)
                      3Notes
      to Unaudited Consolidated Financial Statements
                      4Item
      2.
                      Management’s
      Discussion and Analysis of Financial Condition andResults
      of Operations
                      7Item
      3.
                      Quantitative
      and Qualitative Disclosure About Market Risk
                      15Item
      4.
                      Controls
      and Procedures
                      15PART
      II.  OTHER INFORMATIONItem
      1.
                      Legal
      Proceedings
                      17Item
      1A.
                      Risk
      Factors
                      17Item
      2.
                      Unregistered
      Sales of Equity Securities and Use of Proceeds
                      17Item
      3.
                      Defaults
      upon Senior Securities
                      17Item
      4.
                      Submission
      of Matters to a Vote of Security Holders
                      17Item
      5.
                      Other
      Information
                      17Item
      6.
                      Exhibits
                      17Signatures


i


Part
I.  Financial Information





Item
1. Financial Statements.





SUGAR
CREEK FINANCIAL CORP. AND SUBSIDIARY





Consolidated
Balance Sheets (Unaudited)





September 30,
                        
                        
                        March 31,2009
                        
                        
                        2009AssetsCash
      and due from banks
                        
                        $
                        634,259
                        
                        
                        
                        775,208Federal
      funds sold
                        
                        
                        4,918,730
                        
                        
                        
                        5,611,104FHLB
      daily investment account
                        
                        
                        3,195,108
                        
                        
                        
                        2,543,514Cash
      and cash equivalents
                        
                        
                        8,748,097
                        
                        
                        
                        8,929,826Stock
      in Federal Home Loan Bank of Chicago
                        
                        
                        1,660,145
                        
                        
                        
                        1,660,145Loans
      receivable, net of allowance for loan lossesof
      $205,323 at September 30, 2009 and $165,323 at March 31,
    2009
                        
                        
                        76,232,952
                        
                        
                        
                        79,129,004Premises
      and equipment, net
                        
                        
                        1,114,736
                        
                        
                        
                        1,130,874Foreclosed
      real estate
                        
                        
                        928,640
                        
                        
                        
                        357,847Accrued
      interest receivable on loans
                        
                        
                        310,274
                        
                        
                        
                        315,727Other
      assets
                        
                        
                        147,716
                        
                        
                        
                        204,640Total
      assets
                        
                        $
                        89,142,560
                        
                        
                        
                        91,728,063Liabilities
      and Stockholders' EquityDeposits
                        
                        $
                        64,826,342
                        
                        
                        
                        67,076,374Accrued
      interest payable on deposits
                        
                        
                        149,068
                        
                        
                        
                        193,674Advances
      from FHLB of Chicago
                        
                        
                        14,000,000
                        
                        
                        
                        14,000,000Advances
      from borrowers for taxes and insurance
                        
                        
                        350,380
                        
                        
                        
                        310,026Other
      liabilities
                        
                        
                        247,475
                        
                        
                        
                        254,856Income
      taxes payable
                        
                        
                        330,192
                        
                        
                        
                        619,429Total
      liabilities
                        
                        
                        79,903,457
                        
                        
                        
                        82,454,359Commitments
      and contingenciesStockholders'
      equity:Preferred
      stock, $.01 par value, 1,000,000 sharesauthorized;  none
      issued or outstanding
                        
                        
                        -
                        
                        
                        
                        -Common
      stock, $.01 par value, 14,000,000 sharesauthorized;  906,879
      shares issued
                        
                        
                        9,069
                        
                        
                        
                        9,069Additional
      paid-in capital
                        
                        
                        3,224,225
                        
                        
                        
                        3,213,361Treasury
      stock, at cost, 7,870 shares
                        
                        
                        (64,118
                        )
                        
                        
                        (56,157
                        )Common
      stock acquired by employee stock ownership plan
                        
                        
                        (290,317
                        )
                        
                        
                        (302,167
                        )Retained
      earnings - substantially restricted
                        
                        
                        6,360,244
                        
                        
                        
                        6,409,598Total
      stockholders' equity
                        
                        
                        9,239,103
                        
                        
                        
                        9,273,704Total
      liabilities and stockholders' equity
                        
                        $
                        89,142,560
                        
                        
                        
                        91,728,063





See
accompanying notes to consolidated financial statements.


1


SUGAR
CREEK FINANCIAL CORP. AND SUBSIDIARY





Consolidated
Statements of Operations (Unaudited)





Three
      Months Ended
                  
                  
                  Six
      Months EndedSeptember 30,
                  
                  
                  September 30,2009
                  
                  
                  2008
                  
                  
                  2009
                  
                  
                  2008Interest
      income:Loans
      receivable
                  
                  $
                  1,146,436
                  
                  
                  
                  1,268,723
                  
                  
                  $
                  2,319,132
                  
                  
                  
                  2,486,600Securities
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Other
      interest-earning assets
                  
                  
                  2,181
                  
                  
                  
                  12,266
                  
                  
                  
                  4,514
                  
                  
                  
                  21,457Total
      interest income
                  
                  
                  1,148,617
                  
                  
                  
                  1,280,989
                  
                  
                  
                  2,323,646
                  
                  
                  
                  2,508,057Interest
      expense:Deposits
                  
                  
                  406,520
                  
                  
                  
                  444,056
                  
                  
                  
                  858,279
                  
                  
                  
                  934,758Advances
      from FHLB
                  
                  
                  172,781
                  
                  
                  
                  231,118
                  
                  
                  
                  343,684
                  
                  
                  
                  437,611Total
      interest expense
                  
                  
                  579,301
                  
                  
                  
                  675,174
                  
                  
                  
                  1,201,963
                  
                  
                  
                  1,372,369Net
      interest income
                  
                  
                  569,316
                  
                  
                  
                  605,815
                  
                  
                  
                  1,121,683
                  
                  
                  
                  1,135,688Provision
      for loan losses
                  
                  
                  92,846
                  
                  
                  
                  11,830
                  
                  
                  
                  137,348
                  
                  
                  
                  11,830Net
      interest income after provisionfor
      loan losses
                  
                  
                  476,470
                  
                  
                  
                  593,985
                  
                  
                  
                  984,335
                  
                  
                  
                  1,123,858Noninterest
      income:Loan
      service charges
                  
                  
                  5,294
                  
                  
                  
                  5,386
                  
                  
                  
                  11,637
                  
                  
                  
                  9,942Service
      charges on deposit accounts
                  
                  
                  36,874
                  
                  
                  
                  44,488
                  
                  
                  
                  73,813
                  
                  
                  
                  79,604Other
                  
                  
                  4,983
                  
                  
                  
                  5,224
                  
                  
                  
                  10,530
                  
                  
                  
                  10,122Total
      noninterest income
                  
                  
                  47,151
                  
                  
                  
                  55,098
                  
                  
                  
                  95,980
                  
                  
                  
                  99,668Noninterest
      expense:Compensation
      and benefits
                  
                  
                  262,366
                  
                  
                  
                  236,038
                  
                  
                  
                  535,262
                  
                  
                  
                  499,605Occupancy
      expense
                  
                  
                  34,834
                  
                  
                  
                  28,290
                  
                  
                  
                  62,204
                  
                  
                  
                  50,493Equipment
      and data processing
                  
                  
                  82,471
                  
                  
                  
                  90,190
                  
                  
                  
                  148,948
                  
                  
                  
                  185,241FDIC
      premium expense
                  
                  
                  26,517
                  
                  
                  
                  2,621
                  
                  
                  
                  81,789
                  
                  
                  
                  4,249Advertising
                  
                  
                  7,537
                  
                  
                  
                  7,407
                  
                  
                  
                  12,565
                  
                  
                  
                  16,404Supplies
      expense
                  
                  
                  5,109
                  
                  
                  
                  3,773
                  
                  
                  
                  14,659
                  
                  
                  
                  17,212Other
                  
                  
                  160,362
                  
                  
                  
                  90,763
                  
                  
                  
                  242,538
                  
                  
                  
                  167,704Total
      noninterest expense
                  
                  
                  579,196
                  
                  
                  
                  459,082
                  
                  
                  
                  1,097,965
                  
                  
                  
                  940,908Earnings
      (loss) before income taxes
                  
                  
                  (55,575
                  )
                  
                  
                  190,001
                  
                  
                  
                  (17,650
                  )
                  
                  
                  282,618Income
      taxes (benefit)
                  
                  
                  (11,892
                  )
                  
                  
                  75,005
                  
                  
                  
                  (5,237
                  )
                  
                  
                  107,841Net
      earnings (loss)
                  
                  $
                  (43,683
                  )
                  
                  
                  114,996
                  
                  
                  $
                  (12,413
                  )
                  
                  
                  174,777Basic
      and diluted earnings (loss) per share
                  
                  $
                  (0.05
                  )
                  
                  
                  0.13
                  
                  
                  $
                  (0.01
                  )
                  
                  
                  0.20Dividends
      per share
                  
                  $
                  0.10
                  
                  
                  
                  0.00
                  
                  
                  $
                  0.10
                  
                  
                  
                  0.00





See
accompanying notes to consolidated financial statements.


2


SUGAR
CREEK FINANCIAL CORP. AND SUBSIDIARY





Consolidated
Statements of Cash Flows


(Unaudited)


Six
      Months EndedSeptember 30,2009
                    
                    
                    2008Cash
      flows from operating activities:Net
      earnings (loss)
                    
                    $
                    (12,413
                    )
                    
                    
                    174,777Adjustments
      to reconcile net earnings (loss) to netcash
      provided by (used for) operating activities:Depreciation
                    
                    
                    51,544
                    
                    
                    
                    26,498ESOP
      expense
                    
                    
                    8,769
                    
                    
                    
                    10,051Equity
      incentive plan expense
                    
                    
                    13,945
                    
                    
                    
                    4,680Amortization
      of deferred loan fees, net
                    
                    
                    (17,194
                    )
                    
                    
                    (9,146
                    )Provision
      for loan losses
                    
                    
                    137,348
                    
                    
                    
                    11,830Provision
      for losses on foreclosed real estate
                    
                    
                    12,847
                    
                    
                    
                    -Decrease
      (increase) in accrued interest receivable
                    
                    
                    5,453
                    
                    
                    
                    (27,239
                    )Decrease
      (increase) in other assets
                    
                    
                    56,924
                    
                    
                    
                    69,941Increase
      (decrease) in:Accrued
      interest on deposits
                    
                    
                    (44,606
                    )
                    
                    
                    (45,383
                    )Other
      liabilities
                    
                    
                    (7,381
                    )
                    
                    
                    (11,961
                    )Accrued
      income taxes
                    
                    
                    (289,237
                    )
                    
                    
                    115,910Net
      cash provided by (used for) operating activities
                    
                    
                    (84,001
                    )
                    
                    
                    319,958Cash
      flows from investing activities:Net
      change in loans receivable
                    
                    
                    2,192,258
                    
                    
                    
                    (4,718,384
                    )Purchase
      of premises and equipment
                    
                    
                    (35,406
                    )
                    
                    
                    (172,135
                    )Net
      cash provided by (used for) investing activities
                    
                    
                    2,156,852
                    
                    
                    
                    (4,890,519
                    )Cash
      flows from financing activities:Net
      increase (decrease) in deposits
                    
                    
                    (2,250,032
                    )
                    
                    
                    18,323Increase
      (decrease) in advances fromborrowers
      for taxes and insurance
                    
                    
                    40,354
                    
                    
                    
                    (108,017
                    )Proceeds
      from advances from FHLB
                    
                    
                    -
                    
                    
                    
                    13,500,000Repayment
      of advances from FHLB
                    
                    
                    -
                    
                    
                    
                    (7,500,000
                    )Dividends
      paid
                    
                    
                    (36,941
                    )
                    
                    
                    -Repurchase
      of common stock
                    
                    
                    (7,961
                    )
                    
                    
                    (69,855
                    )Net
      cash provided by (used for) financing activities
                    
                    
                    (2,254,580
                    )
                    
                    
                    5,840,451Net
      increase (decrease) in cash and cash equivalents
                    
                    
                    (181,729
                    )
                    
                    
                    1,269,890Cash
      and cash equivalents at beginning of period
                    
                    
                    8,929,826
                    
                    
                    
                    3,167,225Cash
      and cash equivalents at end of period
                    
                    $
                    8,748,097
                    
                    
                    
                    4,437,115Supplemental
      disclosures - cash paid (received):Interest
      on deposits and advances from FHLB
                    
                    $
                    1,248,482
                    
                    
                    
                    1,410,688Federal
      and state income taxes
                    
                    
                    (5,137
                    )
                    
                    
                    107,841Real
      estate and repossessions acquired in settlement of loans
                    
                    $
                    583,639
                    
                    
                    
                    -





See
accompanying notes to consolidated financial statements.





3




SUGAR
CREEK FINANCIAL CORP. AND SUBSIDIARY


Notes
to the Unaudited Consolidated Financial Statements





(1)
            Basis
      of Presentation





The accompanying unaudited consolidated
financial statements have been prepared in accordance with instructions for Form
10-Q and, therefore, do not include all disclosures necessary for a complete
presentation of the financial statements in conformity with U.S. generally
accepted accounting principles. However, all adjustments that are, in the
opinion of management, necessary for the fair presentation of the interim
financial statements have been included. Such adjustments were of a normal
recurring nature. The results of operations for the three and six month periods
ended September 30, 2009 are not necessarily indicative of the results that may
be expected for the entire year or any other interim period. Subsequent events
have been evaluated through November 12, 2009, which is the date the financial
statements were issued.




In preparing financial statements in
conformity with U.S. generally accepted accounting principles, management is
required to make estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosure of contingent assets and liabilities
at the date of the financial statements and income and expenses during the
reporting period. Actual results could differ significantly from those
estimates. Material estimates that are particularly susceptible to significant
change in the near term relate to determination of the allowance for losses on
loans.




Effective
for all interim and annual periods ending after September 15, 2009, the
Financial Accounting Standards Board (“FASB”) Accounting Standards Codification
(“ASC”) became the source of authoritative U.S. generally accepted accounting
principles (“GAAP”) recognized by FASB to be applied to nongovernmental
entities. Rules and interpretive releases of the Securities and Exchange
Commission (“SEC”) under authority of federal securities laws are also sources
of authoritative GAAP for SEC registrants.





(2)
            Mutual Holding Company
      Reorganization and Minority Stock
  Issuance




Sugar
Creek Financial Corp. (the “Company”) was organized as a federal corporation at
the direction of Tempo Bank (the “Bank”) in connection with the mutual holding
company reorganization of the Bank. The reorganization was completed on April 3,
2007. In the reorganization, the Company sold 45% of its outstanding shares of
common stock (408,095 shares) to the public, and issued 55% of its outstanding
shares of common stock (498,784 shares) to Sugar Creek MHC, the mutual holding
company of the Bank. The Company loaned $355,490 to a trust for the Employee
Stock Ownership Plan (“the ESOP”) enabling the ESOP to purchase 35,549 shares of
common stock in the offering for the benefit of the Bank’s employees. In
addition, a contribution of $50,000 was made to capitalize Sugar Creek MHC.
Costs incurred in connection with the common stock offering were recorded as a
reduction of the proceeds from the offering and totaled $679,000. The Company
owns all of the Bank’s capital stock.




(3)
            Earnings
      (Loss) Per Share





Earnings
(loss) per share are based upon the weighted-average shares outstanding. ESOP
shares, which have been committed to be released within the next twelve months,
are considered outstanding. Stock options, if any, and restricted stock are
considered outstanding 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.


4





Three
      Months Ended
                
                
                Six
      Months EndedSeptember 30,
                
                
                September 30,2009
                
                
                2008
                
                
                2009
                
                
                2008Net
      earnings (loss)
                
                $
                (43,683
                )
                
                
                114,996
                
                
                $
                (12,413
                )
                
                
                174,777Weighted-average
      shares - Basic EPS
                
                
                869,933
                
                
                
                873,546
                
                
                
                870,118
                
                
                
                874,064Effect
      of dilutive stock awards
                
                
                1,347
                
                
                
                -
                
                
                
                1,045
                
                
                
                -Weighted-average
      shares - Diluted EPS
                
                
                871,280
                
                
                
                873,546
                
                
                
                871,163
                
                
                
                874,064Basic
      earnings (loss) per common share
                
                $
                (0.05
                )
                
                
                0.13
                
                
                $
                (0.01
                )
                
                
                0.20Diluted
      earnings (loss) per common share
                
                $
                (0.05
                )
                
                
                0.13
                
                
                $
                (0.01
                )
                
                
                0.20Anti-dilutive
      shares
                
                
                -
                
                
                
                6,093
                
                
                
                -
                
                
                
                2,518





(4)
            Equity
      Incentive Plan





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.





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





Three
      Months Ended
                
                
                Six
      Months EndedSeptember
      30,
                
                
                September
      30,2009
                
                
                2008
                
                
                2009
                
                
                2008Pre-tax
                
                $
                6,973
                
                
                
                4,680
                
                
                
                13,945
                
                
                
                4,680After-tax
                
                
                4,253
                
                
                
                2,855
                
                
                
                8,506
                
                
                
                2,855Diluted
      earnings (loss) per common share
                
                $
                0.00
                
                
                
                0.00
                
                
                
                (0.01
                )
                
                
                0.00





At
September 30, 2009, the total unrecognized expense related to restricted stock
awards was approximately $109,000 and is expected to be recognized over the
weighted-average period of 3.75 years.




Non-vested
stock awards activity for the six months ended September 30, 2009 is summarized
as follows:


5





Weighted-Number
      of
                    
                    
                    AverageNon-vested
                    
                    
                    Grant
      DateShares
                    
                    
                    Fair
      ValueNonvested
      at March 31, 2009
                    
                    
                    17,774
                    
                    
                    $
                    7.90Granted
                    
                    
                    -Vested
                    
                    
                    -Forfeited
                    
                    
                    -Nonvested
      at September 30, 2009
                    
                    
                    17,774
                    
                    
                    $
                    7.90





5)
            Fair
      Value Measurements and Fair Value of Financial
  Instruments





Fair
Value Measurements




The
Company follows the provisions of FASB ASC 820-10, “Fair Value Measurements,”
for financial assets and liabilities. FASB ASC 820-10 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.




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. The Company had no debt
securities at June 30, 2009.





Impaired
loans, as defined under FASB ASC 310-10-35,
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
September 30, 2009, the Company did not have any available for sale securities
or impaired loans under FASB ASC
310-10-35.


6




Non-financial
assets measured on a non-recurring basis include foreclosed real estate of
$929,000 at September 30, 2009.




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 (“FHLBC”) is valued at cost, which represents
      historical redemption value and approximates fair value.  The
      FHLBC has suspended redemption of FHLBC stock.  See “Balance
      Sheet Analysis – Investments”.
 .
              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.





September
      30,
                      
                      
                      March
      31,2009
                      
                      
                      2009
                      
                      
                      2009
                      
                      
                      2009Carrying
                      
                      
                      Fair
                      
                      
                      Carrying
                      
                      
                      FairAmount
                      
                      
                      Value
                      
                      
                      Amount
                      
                      
                      ValueNon-trading
      instrumentsand
      nonderivatives:Cash
      and cash equivalents
                      
                      $
                      8,748,097
                      
                      
                      
                      8,748,097
                      
                      
                      
                      8,929,826
                      
                      
                      
                      8,929,826Stock
      in FHLB of Chicago
                      
                      
                      1,660,145
                      
                      
                      
                      1,660,145
                      
                      
                      
                      1,660,145
                      
                      
                      
                      1,660,145Loans
      receivable, net
                      
                      
                      76,232,952
                      
                      
                      
                      79,665,995
                      
                      
                      
                      79,129,004
                      
                      
                      
                      82,770,610Accrued
      interest receivable
                      
                      
                      310,274
                      
                      
                      
                      310,274
                      
                      
                      
                      315,727
                      
                      
                      
                      315,727Deposits
                      
                      
                      64,826,342
                      
                      
                      
                      64,878,249
                      
                      
                      
                      67,076,374
                      
                      
                      
                      66,748,824Accrued
      interest on deposits
                      
                      
                      149,068
                      
                      
                      
                      149,068
                      
                      
                      
                      193,674
                      
                      
                      
                      193,674Advances
      from FHLB of Chicago
                      
                      $
                      14,000,000
                      
                      
                      
                      14,659,287
                      
                      
                      
                      14,000,000
                      
                      
                      
                      14,825,091





Item
2. Management’s Discussion and Analysis of Financial Condition and Results of
Operation





Management’s
discussion and analysis of the financial condition and results of operations at
and for the three and six months ended September 30, 2009 and 2008 is intended
to assist in understanding our financial condition and results of operations.
The information contained in this section should be read in conjunction with the
Unaudited Consolidated Financial Statements and the notes thereto, appearing in
Part I, Item 1 of this report.





Forward-Looking
Statements





This
quarterly report contains forward-looking statements that are based on
assumptions and may describe our future plans, strategies and expectations.
These forward-looking statements are generally identified by use of the words
“believe,” “expect,” “intend,” “anticipate,” “estimate,” “project” or similar
expressions.




7




Our
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 our
operations include, but are not limited to, changes in interest rates, national
and regional economic conditions, legislative and regulatory changes, monetary
and fiscal policies of the U.S. government, including policies of the U.S.
Treasury and the Federal Reserve Board, the quality and composition of our loan
or investment portfolios, demand for loan products, deposit flows, competition,
demand for financial services in our market area, changes in real estate market
values in our area, and changes in relevant accounting principles and
guidelines.




These
risks and uncertainties should be considered in evaluating forward-looking
statements and undue reliance should not be placed on such statements. Except as
required by applicable law or regulation, we do not undertake, and specifically
disclaim any obligation, to release publicly the result of any revisions that
may be made to any forward-looking statements to reflect events or circumstances
after the date of the statements or to reflect the occurrence of anticipated or
unanticipated events.




General
 
 Sugar
Creek Financial Corp. is the holding company for Tempo Bank. Tempo Bank operates
from two offices in Trenton and Breese, Illinois. Tempo Bank is engaged
primarily in the business of attracting deposits from the general public and
using such funds to originate a variety of single-family residential mortgages,
consumer and business loans.
 
 Overview
– Financial Highlights
 
 Financial Condition.Total
assets at September 30, 2009 were $89.1 million compared to $91.7 million at
March 31, 2009. Asset shrinkage was lead by a $2.9 million decrease in loans
receivable caused by prepayments, offset by an increase of $600,000 in real
estate owned as two residential properties were acquired by deed-in-lieu of
foreclosure. Liability shrinkage was lead by a decrease in deposits of $2.3
million as rate sensitive deposits were withdrawn by customers.  Cash
and cash equivalents decreased slightly to $8.7 million during the six month
period ended September 30, 2009.
 
 Operating Results.During the six month
period ended September 30, 2009 a loss of $12,400 was recorded compared to net
earnings of $175,000 for the comparable 2008 period.  The decrease in
net earnings for the period was primarily due to an increased loan loss
provision of $137,000, increases in FDIC deposit insurance and operations of
real estate owned, which are included in other expense.
 
 Critical
Accounting Policy
 
 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.





8




Balance
Sheet Analysis





Loans Receivable, Net. Loans
receivable, net of allowance for loan losses, decreased to $76.2 million at
September 30, 2009 from $79.1 million at March 31, 2009. The decrease consisted
primarily of one-to four-family residential real estate loans.




Nonaccrual
loans at September 30, 2009 decreased to $307,000 compared to $1.8 million at
March 31, 2009. Nonaccrual loans at September 30, 2009 consisted of three
single-family loans aggregating $246,000 and eight consumer loans totaling
$61,000. At March 31, 2009, there were eight single-family loans aggregating
$1.5 million; two loans secured by commercial real estate aggregating $158,000;
one loan secured by land for $18,000; and nine consumer loans of $93,000
classified as nonaccrual. Nonaccrual loans continue to be impacted by a slowing
local and regional economy, job layoffs, divorce and health issues afflicting
our borrowers. There were two single-family troubled debt restructurings
totaling $505,000 at September 30, 2009. There were no loans 90 days or more
past due and still accruing at either date. Foreclosed real estate consisted of
three single-family residential properties. Other repossessed assets consisted
of two automobile loans.





September
      30,
                  
                  
                  March
      31,(Dollars in thousands)
                  
                  2009
                  
                  
                  2009Nonaccrual
      loans:Residential
      real estate
                  
                  $
                  246
                  
                  
                  $
                  1,515Multi-family
                  
                  
                  -
                  
                  
                  
                  158Commercial
                  
                  
                  -
                  
                  
                  
                  18Consumer
                  
                  
                  61
                  
                  
                  
                  93Troubled
      debt restructurings
                  
                  
                  505
                  
                  
                  
                  -Total
      nonperforming loans
                  
                  
                  812
                  
                  
                  
                  1,784Foreclosed
      real estate - residential
                  
                  
                  941
                  
                  
                  
                  358Other
      repossessed assets - autos
                  
                  
                  21
                  
                  
                  
                  6Total
                  
                  
                  962
                  
                  
                  
                  364Total
      nonperforming assets
                  
                  $
                  1,774
                  
                  
                  $
                  2,148Total
      nonperforming loans to total loans
                  
                  
                  1.05
                  %
                  
                  
                  2.25
                  %Total
      nonperforming loans to total assets
                  
                  
                  0.91
                  
                  
                  
                  1.94Total
      nonperforming assets to total assets
                  
                  
                  1.99
                  %
                  
                  
                  2.34
                  %





At September 30, 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 in
nonaccrual, 90 days past due or impaired.





For the six-months ended September 30,
2009, the amount of interest income collected (and recognized) on nonperforming
loans and the contractual amount due during the period was $8,756 and $5,806,
respectively.




Investments. The Bank is a
member of the Federal Home Loan Bank of Chicago (“FHLBC”), from which we borrow
to fund our operations. As a member, we are required to own stock in the FHLBC.
In addition, we maintain excess or voluntary stock, which is stock held in
excess of the amount required as a condition of membership or for borrowings. 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 excess or voluntary stock or to pay dividends.
The FHLBC 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.


9





At
September 30, 2009, we owned $1.7 million of FHLBC stock, of which $914,000 was
considered excess or voluntary stock. Based on the liquidity needs of Tempo Bank
and subject to the stock redemption guidelines of the FHLBC, 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 FHLBC.




Premises and Equipment, Net.Premises and equipment, net decreased $16,000 to $1.1 million at
September 30, 2009 as a result of depreciation.





Other Assets.At September 30,
2009,other assets
decreased to $148,000 from $205,000 at September 30, 2008 due primarily to the
timing and recognition of certain prepaid items.




Deposits. Deposit balances
decreased to $64.8 million at September 30, 2009 from $67.1 million at March 31,
2009. Deposits decreased, in part, due to rate sensitive deposits being
withdrawn during the period.




Borrowings. We use short-term,
cash equivalent FHLB advances as an additional source of liquidity. FHLB
advances remained steady at $14.0 million at September 30, 2009 as compared with
March 31, 2009.




Other Liabilities.Advances
from borrowers for taxes and insurance increased $40,000 to $350,000 at
September 30, 2009 due to deposits made by borrowers for real estate taxes and
insurance. Other liabilities decreased $7,000 to $247,000 at September 30, 2009
as a result of timing and payment of certain accrual items.





Results
of Operations for the Three Months Ended September 30, 2009 and
2008.





Total Interest Income.Total interest income
decreased $132,000 to $1.1 million for the three months ended September 30,
2009. The decrease was largely due to a reduction in loans receivable and the
significantly lower rates received on other interest-earning assets for the
quarter ended September 30, 2009.




Total Interest Expense.Total
interest expense decreased by $96,000 to $579,000 for the three months ended
September 30, 2009 from $675,000 for the three months ended September 30, 2008.
The decrease resulted primarily from lower deposits and advance balances and
from lower average rates paid for deposits and borrowings.




Net Interest Income. Net
interest income decreased $37,000 to $569,000 for the three months ended
September 30, 2009 from $606,000 for the three months ended September 30, 2008.
The decrease is due primarily to the lower balances of loans receivable of $76.2
million at September 30, 2009 versus $84.6 million at September 30,
2008.





Provision for Loan Losses. We
establish provisions for loan losses which are charged to operations at a level
we believe to be appropriate to our risk profile. These provisions represent
management’s best estimate of probable loan losses in the portfolio. In
evaluating the allowance for loan losses, management considers historical loss
experience, the composition of the loan portfolio, adverse situations that might
impact a borrower’s ability to repay the loan, the value of the underlying
collateral, and other information, including level of nonaccrual loans. During
the quarter ended September 30, 2009, the Bank recorded a provision for loan
losses of $93,000. In the comparable period for 2008, the Bank recorded a
provision for loan losses of $12,000. The effects of the economic downturn and
unemployment are negatively impacting our market area causing an increase in
delinquencies and a decrease in collateral values.




10




Noninterest Income.
Noninterest income includes service charges on deposit accounts, loan service
charges, and other income. Total noninterest income decreased for the three
month period ended September 30, 2009 to $47,000 from $55,000 for the three
months ended September 30, 2008 due primarily to lower overdraft privilege fees
and loan service charges.




Noninterest Expense.
Noninterest expense includes salaries and employee benefits, equipment and data
processing, occupancy and other expenses. Total noninterest expense increased by
$120,000 to $579,000 for the three months ended September 30, 2009 from $459,000
for the three months ended September 30, 2008. Increases in compensation and
benefits and occupancy expense contributed $33,000 to the increase. FDIC
premiums and other noninterest expenses, primarily real estate owned expenses,
increased by $93,000. Real estate owned expenses have increased as a result of
real estates tax expense subsequent to foreclosure or acceptance of
deeds-in-lieu of foreclosure and real estate owned property repair and
maintenance expenses. Other noninterest expenses were minor in comparison and
primarily included higher professional fees and costs associated with the
Company’s status as a public entity.




Income
Taxes.An income tax benefit of $12,000 for the three
months ended September 30, 2009 compared to an expense of $75,000 for the three
months ended September 30, 2008. The decrease in tax expense is primarily
attributable to the lower pre-tax income.Results of Operations for the Six
Months Ended September 30, 2009 and 2008.




Results
of Operations for the Six Months Ended September 30, 2009 and
2008.





General.The Company recorded
a net loss of $12,000 for the six months ended September 30, 2009 compared with
net earnings $175,000 at September 30, 2008. The decrease in net earnings for
the period was primarily due to an increased loan loss provision of $137,000,
increases in FDIC deposit insurance and real estate owned expenses.




The
following table summarizes average balances and annualized average yields and
costs for the six months ended September 30, 2009 and 2008.


11





Six
      Months Ended September 30,2009
                          
                          
                          2008(Dollars
      in thousands)
                          
                          
                          
                          
                          Interest
                          
                          
                          
                          
                          
                          
                          
                          
                          InterestAverage
                          
                          
                          and
                          
                          
                          Yield/
                          
                          
                          Average
                          
                          
                          and
                          
                          
                          Yield/Balance
                          
                          
                          Dividends
                          
                          
                          Cost
                          
                          
                          Balance
                          
                          
                          Dividends
                          
                          
                          CostAssets:Interest-earning
      assets:Loans
                          
                          $
                          77,053
                          
                          
                          $
                          2,319
                          
                          
                          
                          6.02
                          %
                          
                          $
                          82,310
                          
                          
                          $
                          2,487
                          
                          
                          
                          6.04
                          %Stock
      in FHLB of Chicago
                          
                          
                          1,660
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          1,660
                          
                          
                          
                          -
                          
                          
                          
                          -Other
      interest-earning assets
                          
                          
                          9,297
                          
                          
                          
                          5
                          
                          
                          
                          0.11
                          %
                          
                          
                          3,110
                          
                          
                          
                          21
                          
                          
                          
                          1.35
                          %Total
      interest-earning assets
                          
                          
                          88,010
                          
                          
                          
                          2,324
                          
                          
                          
                          5.28
                          %
                          
                          
                          87,080
                          
                          
                          
                          2,508
                          
                          
                          
                          5.76
                          %Noninterest-earning
      assets
                          
                          
                          3,396
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          2,525Total
      assets
                          
                          
                          91,406
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          89,605Liabilities
      and Stockholders’ Equity:Interest-bearing
      liabilities:NOW
      accounts
                          
                          $
                          4,232
                          
                          
                          $
                          10
                          
                          
                          
                          0.47
                          %
                          
                          $
                          4,247
                          
                          
                          $
                          11
                          
                          
                          
                          0.52
                          %Savings
      accounts
                          
                          
                          8,167
                          
                          
                          
                          29
                          
                          
                          
                          0.71
                          %
                          
                          
                          7,323
                          
                          
                          
                          25
                          
                          
                          
                          0.68
                          %Money
      market accounts
                          
                          
                          7,440
                          
                          
                          
                          71
                          
                          
                          
                          1.91
                          %
                          
                          
                          4,353
                          
                          
                          
                          57
                          
                          
                          
                          2.62
                          %Certificates
      of deposit
                          
                          
                          44,624
                          
                          
                          
                          748
                          
                          
                          
                          3.35
                          %
                          
                          
                          40,544
                          
                          
                          
                          842
                          
                          
                          
                          4.15
                          %Total
      interest-bearing deposits
                          
                          
                          64,463
                          
                          
                          
                          858
                          
                          
                          
                          2.66
                          %
                          
                          
                          56,467
                          
                          
                          
                          935
                          
                          
                          
                          3.31
                          %FHLB
      advances
                          
                          
                          14,000
                          
                          
                          
                          344
                          
                          
                          
                          4.91
                          %
                          
                          
                          20,250
                          
                          
                          
                          438
                          
                          
                          
                          4.33
                          %Other
      borrowings
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          –Total
      interest-bearing liabilities
                          
                          $
                          78,463
                          
                          
                          $
                          1,202
                          
                          
                          
                          3.06
                          %
                          
                          $
                          76,717
                          
                          
                          $
                          1,373
                          
                          
                          
                          3.58
                          %Noninterest-bearing
      NOW accounts
                          
                          
                          2,314
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          2,405Other
      noninterest-bearing liabilities
                          
                          
                          1,340
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          1,241Total
      liabilities
                          
                          
                          82,117
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          80,363Stockholders’
      equity
                          
                          
                          9,289
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          9,242Total
      liabilities and stockholders’ equity
                          
                          $
                          91,406
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          $
                          89,605Net
      interest income
                          
                          
                          
                          
                          
                          $
                          1,122
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          $
                          1,135Interest
      rate spread
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          2.22
                          %
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          2.18
                          %Net
      interest margin
                          
                          
                          
                          
                          
                          
                          2.55
                          %
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          2.61
                          %Average
      interest-earning assets to average interest-bearing
      liabilities
                          
                          
                          112.17
                          %
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          113.51
                          %




Total Interest Income. Total
interest income decreased $184,000 to $2.3 million for the six months ended
September 30, 2009 from $2.5 million for the same period ended September 30,
2008. The decrease was largely due to a reduction in loan receivable balances
and the interest rates received on overnight funds.




Total Interest Expense.Total
interest expense decreased by $170,000 to $1.2 million for the six months ended
September 30, 2009 from $1.4 million for the comparable prior year period. The
decline was due to reductions in deposit interest expense and FHLB advance
expense.





Net Interest Income. Net
interest income decreased by $14,000 to $1.1 million for the six months ended
September 30, 2009 from $1.1 million for the six months ended September 30, 2008
as a result of lower average rates on deposits and FHLB advances.




12





Provision for Loan Losses. We
establish provisions for loan losses which are charged to operations at a level
we believe to be appropriate to our risk profile. These provisions represent
management’s best estimate of probable loan losses in the portfolio. In
evaluating the allowance for loan losses, management considers historical loss
experience, the composition of the loan portfolio, adverse situations that might
impact a borrower’s ability to repay the loan, the value of the underlying
collateral, and other information, including level of nonaccrual loans. During
the six month period ended September 30, 2009, we recorded a provision for loan
losses of $137,000.





Analysis
of Loan Loss Experience.





Six Months Ended
                    September 30,(Dollars
      in thousands)
                  
                  2009
                  
                  
                  2008Allowance
      at beginning of period
                  
                  $
                  165
                  
                  
                  $
                  124Provision
      for (recovery of) loan losses
                  
                  
                  137
                  
                  
                  
                  12Charge-offs:One-
      to four- family
                  
                  
                  (98
                  )
                  
                  
                  -Consumer
      loans
                  
                  
                  -
                  
                  
                  
                  (6
                  )Total
      charge-offs
                  
                  
                  (98
                  )
                  
                  
                  (6
                  )Recoveries:One-
      to four- family
                  
                  
                  -
                  
                  
                  
                  -Consumer
      loans
                  
                  
                  1
                  
                  
                  
                  -Total
      recoveries
                  
                  
                  -
                  
                  
                  
                  -Net
      recoveries (charge-offs)
                  
                  
                  (97
                  )
                  
                  
                  (6
                  )Allowance
      at end of period
                  
                  $
                  205
                  
                  
                  $
                  130Allowance
      to nonperforming loans
                  
                  
                  25.25
                  %
                  
                  
                  33.00
                  %Allowance
      to total loans outstanding at end of six month period
                  
                  
                  0.27
                  %
                  
                  
                  0.15
                  %Annualized
      net charge-offs (recoveries) to average loans outstanding
                  
                  
                  0.25
                  %
                  
                  
                  0.01
                  %





Noninterest Income.Noninterest income includes service charges on deposit accounts, loan
service charges, and other income. Total noninterest income decreased for the
six months ended September 30, 2009 to $96,000 from $100,000 for the same period
ended September 30, 2008. The decrease was a result of lower overdraft privilege
fees offset by an increase in loan service charges.




Noninterest Expense.Noninterest expense includes salaries and employee benefits, equipment
and data processing, occupancy and other expenses. Total noninterest expense
increased to $1.1 million for the six months ended September 30, 2009 from
$941,000 for the same period ended September 30, 2008. Increases in compensation
and benefits and occupancy expenses contributed $47,000 to the increase.
However, FDIC premiums and other noninterest expenses, primarily real estate
owned expenses, increased by $157,000, contributing most significantly to the
increase. Real estate owned expenses have increased as a result of real estates
tax expense subsequent to foreclosure or acceptance of deeds-in-lieu of
foreclosure and real estate owned property repair and maintenance
expenses.




Income Taxes.Income tax
expense decreased to a benefit of $5,000 for the six months ended September 30,
2009 from a $108,000 expense for the same period ended September 30, 2008. The
decrease in tax expense is primarily attributable to the lower pre-tax
income.


13







Liquidity
and Capital Management





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 FHLBC. 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 September 30, 2009,
cash and cash equivalents totaled $8.7 million. At September 30, 2009, the Bank
had $14.0 million in FHLBC advances outstanding.




A significant use of our liquidity is
the funding of loan originations. At September 30, 2009, we had $657,000 in four
outstanding single-family loan commitments. 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 September 30, 2009 totaled $30.8
million, or 73.5% of certificates of deposit. Although the percentage of
certificates of deposit that mature within one year is slightly larger than last
quarter, it continues to reflect consumers’ hesitancy to invest their funds for
longer periods given uncertainties about the economic and 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. With the recent action taken by the Federal Reserve’s Federal
Open Market Committee to leave the Fed funds and Discount Window rates and their
current benchmarks, we have been able to attract new money deposits with
targeted pricing. The local deposit market remains extremely competitive with
both regional and national banking institutions “buying the market” for
liquidity, several of which are TARP recipients. This has resulted in a very
rate sensitive time deposit base. We have the ability to attract and retain
these deposits by adjusting the interest rates offered, if deemed
appropriate.





The
Company is a separate legal entity from the Bank and must provide for its own
liquidity. In addition to its operating expenses, the Company is responsible for
paying any dividends declared to its shareholders, and interest and principal on
outstanding debt. The Company also has repurchased shares of its common stock.
The Company’s primary source of income is dividends received from the Bank. The
amount of dividends that the Bank may declare and pay to the Company in any
calendar year, without the receipt of prior approval from the Office of Thrift
Supervision but with prior notice to Office of Thrift Supervision, cannot exceed
net income for that year to date plus retained net income (as defined) for the
preceding two calendar years. At September 30, 2009, the Company had liquid
assets of $36,000.





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





Capital Management.We are
subject to various regulatory capital requirements administered by the Office of
Thrift Supervision, including a risk-based capital measure. The risk-based
capital guidelines include both a definition of capital and a framework for
calculating risk-weighted assets by assigning balance sheet assets and
off-balance sheet items to broad risk categories. At September 30, 2009, we
exceeded all of our regulatory capital requirements. We are considered “well
capitalized” under regulatory guidelines.


14





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.


On August
3, 2009, the Board of Directors of the Company declared a one-time cash dividend
of $.10 per share. The dividend was paid to stockholders of record as of August
18, 2009, excluding the MHC, on September 1, 2009.


The
Bank’s actual and required capital amounts and ratios at September 30, 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
                  
                  $
                  8,851
                  
                  
                  
                  9.9
                  %
                  
                  $
                  1,337
                  
                  
                  
                  1.5
                  %General
      valuation allowance
                  
                  
                  205Total
      capital to risk-weighted assets
                  
                  $
                  9,056
                  
                  
                  
                  19.4
                  %
                  
                  $
                  3,741
                  
                  
                  
                  8.0
                  %
                  
                  $
                  4,676
                  
                  
                  
                  10.0
                  %Tier
      1 capital to risk-weighted assets
                  
                  $
                  8,851
                  
                  
                  
                  18.9
                  %
                  
                  $
                  1,870
                  
                  
                  
                  4.0
                  %
                  
                  $
                  2,805
                  
                  
                  
                  6.0
                  %Tier
      1 capital to total assets
                  
                  $
                  8,851
                  
                  
                  
                  9.9
                  %
                  
                  $
                  3,566
                  
                  
                  
                  4.0
                  %
                  
                  $
                  4,458
                  
                  
                  
                  5.0
                  %





Off-Balance
Sheet Arrangements





In the
normal course of operations, we engage in a variety of financial transactions
that, in accordance with U.S. 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 the
six months ended September 30, 2009, 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.





Item
3. Quantitative and Qualitative Disclosure About Market Risk





Not
applicable.





Item
4.     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.





15




During
the quarterly period ended September 30, 2009, there were no changes in the
Company’s internal control over financial reporting which materially affected,
or are reasonably likely to materially affect, the Company’s internal controls
over financial reporting.


16


PART
II. OTHER INFORMATION





Item
1.   Legal Proceedings





Sugar
Creek Financial Corp. is not involved in any pending legal proceedings. Tempo
Bank is not involved in any pending legal proceedings other than routine legal
proceedings occurring in the ordinary course of business. Such routine legal
proceedings, in the aggregate, are believed by management to be immaterial to
its financial condition and results of operations.





Item
1A.   Risk Factors





Not
applicable.





Item
2.   Unregistered Sales of Equity Securities and Use of
Proceeds





None.





Item
3.   Defaults upon Senior Securities





Not Applicable.





Item
4.   Submission of Matters to a Vote of Security
Holders





(a)
            On
      August 17, 2009, the Company held its Annual Meeting of
      Shareholders.


(b)
            At
      the meeting, Gary R. Schwend and Timothy W. Deien were elected, each to
      serve a three-year term.


(c)
            Stockholders
      voted on the following matters:





(i)
            The
      election of directors of the
Company:





DIRECTOR
                  
                  FOR
                  
                  
                  ABSTAINGary
      R. Schwend
                  
                  
                  800,440
                  
                  
                  
                  3,900Timothy
      W. Deien
                  
                  
                  799,890
                  
                  
                  
                  4,450





(ii)
            The
      ratification of the appointment of Michael Trokey & Company, P.C. as
      independent registered public accounting firm for the Company for the
      fiscal year ended March 31, 2010:





FOR
                  
                  
                  AGAINST
                  
                  
                  ABSTAIN798,067
                  
                  
                  
                  1,600
                  
                  
                  
                  4,673





There were no broker non-votes on
either matter up for a vote.





Item
5.   Other Information





None.





Item
6.   Exhibits




3.1
            Charter
      of Sugar Creek Financial (1)


17




3.2
            Bylaws
      of Sugar Creek Financial (1)




4.0           Stock
certificate of Sugar Creek Financial (2)




31.0
            Rule
      13a-14(a)/15d-14(a) Certification of Chief Executive Officer and Chief
      Financial Officer




32.0
            Section
      1350 Certification





(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.


18


SIGNATURES





Pursuant
to the requirements 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.Dated:  November
      12, 2009
                    By:
                    /s/ Robert J. Stroh, Jr.Robert
      J. Stroh, Jr.Chairman,
      Chief Executive Officer andChief
      Financial
Officer





19