GENERAL

The principal business of the Company is to provide banking services through the Bank. Specifically, the Bank obtains savings and checking deposits from the public, then uses those funds to originate and purchase real estate loans and other loans. The Bank also purchases mortgage-backed securities ("MBS") and other investment securities from time to time as conditions warrant. In addition to customer deposits, the Bank obtains funds from the sale of loans held-for-sale, the sale of securities available-for-sale, repayments of existing mortgage assets, advances from the Federal Home Loan Bank ("FHLB"), and the purchase of brokered deposit accounts. The Bank's primary sources of income are interest on loans, MBS, and investment securities plus customer service fees and income from mortgage banking activities. Expenses consist primarily of interest payments on customer deposits and other borrowings and general and administrative costs.

The Bank is regulated by the Office of Thrift Supervision ("OTS") and the Federal Deposit Insurance Corporation ("FDIC"), and is subject to periodic examination by both entities. The Bank is also subject to the regulations of the Board of Governors of the Federal Reserve System ("FRB"), which establishes rules regarding reserves that must be maintained against customer deposits.

FINANCIAL CONDITION

ASSETS
The Company's total assets as of June 30, 2009, were $1,615.1 million, an increase of $98.4 million from September 30, 2008, the prior fiscal year end.

As the Bank originates mortgage loans each month, management evaluates the existing market conditions to determine which loans will be held in the Bank's portfolio and which loans will be sold in the secondary market. Loans sold in the secondary market can be sold with servicing released or converted into MBS and sold with the loan servicing retained by the Bank. At the time of each loan commitment, a decision is made to either hold the loan for investment, hold it for sale with servicing retained, or hold it for sale with servicing released. Management monitors market conditions to decide whether loans should be held in portfolio or sold and if sold, which method of sale is appropriate. During the nine months ended June 30, 2009, the Bank originated and purchased $1,189.5 million in mortgage loans held for sale, $200.3 million in mortgage loans held for investment, and $3.4 million in other loans. This total of $1,393.2 million in loans compares to $987.2 million in loans originated and purchased during the nine months ended June 30, 2008.

Loans held for sale as of June 30, 2009, were $119.9 million, and consisted entirely of mortgage loans held for sale with servicing released. As of October 1, 2008, the Company elected to carry loans held for sale at fair value, as permitted under GAAP.

The Bank classifies problem assets as "substandard," "doubtful" or "loss." Substandard assets have one or more defined weaknesses, and it is possible that the Bank will sustain some loss unless the deficiencies are corrected. Doubtful assets have the same defects as substandard assets plus other weaknesses that make collection or full liquidation improbable. Assets classified as loss are considered uncollectible and of such little value that a specific loss allowance is warranted.

The following table summarizes the Bank's classified assets as reported to the OTS, plus any classified assets of the holding company. Dollar amounts are expressed in thousands.

                              6/30/09      9/30/08      6/30/08
                            -------------------------------------
Asset Classification:
   Substandard               $ 48,906       34,320       30,273
   Doubtful                        --           --           --
   Loss                         2,900        1,442          215
                            -------------------------------------
                               51,806       35,762       30,488
Allowance for losses on
  loans and real estate
  owned                       (16,376)     (14,476)     (10,973)
                            -------------------------------------
                             $ 35,430       21,286       19,515
                            =====================================

The following table summarizes non-performing assets, troubled debt restructurings, and real estate acquired through foreclosure or in- substance foreclosure. Dollar amounts are expressed in thousands.

                             6/30/09       9/30/08      6/30/08
                           ----------------------------------------
Total Assets              $ 1,615,130    1,516,761      1,571,172
                           ========================================

Non-accrual loans         $    30,377       35,075         10,936
Troubled debt
  restructurings                4,004           --             --
Net real estate and
  other assets acquired
  through foreclosure          12,037        6,038          6,230
                           ----------------------------------------
     Total                $    46,418       41,113         17,166
                           ========================================
Percent of total assets         2.87%        2.71%          1.09%
                           ========================================

Management records a provision for loan losses in amounts sufficient to cover current net charge-offs and an estimate of probable losses based on an analysis of risks that management believes to be inherent in the loan portfolio. The Allowance for Loan and Lease Losses ("ALLL") recognizes the inherent risks associated with lending activities, but, unlike specific allowances, have not been allocated to particular problem assets but to a homogenous pool of loans. Management believes that the specific loss allowances and ALLL are adequate. While management uses available information to determine these allowances, future allowances may be necessary because of changes in economic conditions. Also, regulatory agencies (OTS and FDIC) review the Bank's allowance for losses as part of their examinations, and they may require the Bank to recognize additional loss provisions based on the information available at the time of their examinations.

LIABILITIES AND EQUITY
Customer and brokered deposit accounts increased $170.8 million during the nine months ended June 30, 2009. The weighted average rate on customer and brokered deposits as of June 30, 2009, was 2.53%, a decrease from 3.51% as of June 30, 2008.

Advances from the FHLB were $467.0 million as of June 30, 2009, a decrease of $83.0 million from September 30, 2008. During the nine- month period, the Bank borrowed $319.0 million of new advances and repaid $402.0 million. Management regularly uses FHLB advances as an alternate funding source to provide operating liquidity and to fund the origination and purchase of mortgage loans.

Subordinated debentures were $25.8 million as of June 30, 2009. Such debentures resulted from the issuance of pooled Trust Preferred Securities through the Company's wholly owned statutory trust, NASB Preferred Trust I. The Trust used the proceeds from the offering to purchase a like amount of the Company's subordinated debentures. The debentures, which have a variable rate of 1.65% over the 3-month LIBOR and a 30-year term, are the sole assets of the Trust.

Escrows were $8.1 million as of June 30, 2009, a decrease of $1.7 million from September 30, 2008. This decrease is due to amounts paid for borrowers' taxes during the fourth calendar quarter of 2008.

Total stockholders' equity as of June 30, 2009, was $161.9 million (10.0% of total assets). This compares to $152.4 million (10.0% of total assets) at September 30, 2008. On a per share basis, stockholders' equity was $20.58 on June 30, 2009, compared to $19.37 on September 30, 2008.

The Company paid cash dividends on its common stock of $0.225 per share on November 28, 2008, February 27, 2009, and May 29, 2009. Subsequent to the quarter ended June 30, 2009, the Company announced a cash dividend of $0.225 per share to be paid on August 28, 2009, to stockholders of record as of August 7, 2009.

Total stockholders' equity as of June 30, 2009, includes an unrealized gain of $1.7 million net of deferred income taxes, on available for sale securities. This amount is reflected in the line item "Accumulated other comprehensive income."

RATIOS
     The following table illustrates the Company's return on assets
(annualized net income divided by average total assets); return on
equity (annualized net income divided by average total equity); equity-
to-assets ratio (ending total equity divided by ending total assets);
and dividend payout ratio (dividends paid divided by net income).


                              Nine months ended
                           ------------------------
                            6/30/09       6/30/08
                           ------------------------
Return on assets              1.07%         0.72%
Return on equity             10.71%         7.31%
Equity-to-assets ratio       10.03%         9.72%
Dividend payout ratio        42.07%        64.10%

RESULTS OF OPERATIONS - Comparison of three and nine months ended June 30, 2009 and 2008.

For the three months ended June 30, 2009, the Company had net income of $4,242,000 or $0.54 per share. This compares to net income of $3,610,000 or $0.46 per share for the quarter ended June 30, 2008.

For the nine months ended June 30 2009, the Company had net income of $12,621,000 or $1.60 per share. This compares to net income of $8,285,000 or $1.05 per share for the nine months ended June 30, 2008.

NET INTEREST MARGIN
The Company's net interest margin is comprised of the difference ("spread") between interest income on loans, MBS and investments and the interest cost of customer and brokered deposits and other borrowings. Management monitors net interest spreads and, although constrained by certain market, economic, and competition factors, it establishes loan rates and customer deposit rates that maximize net interest margin.

The following table presents the total dollar amounts of interest income and expense on the indicated amounts of average interest-earning assets or interest-costing liabilities for the nine months ended June 30, 2009 and 2008. Average yields reflect reductions due to non-accrual loans. Once a loan becomes 90 days delinquent, any interest that has accrued up to that time is reserved and no further interest income is recognized unless the loan is paid current. Average balances and weighted average yields for the periods include all accrual and non- accrual loans. The table also presents the interest-earning assets and yields for each respective period. Dollar amounts are expressed in thousands.

                                   Nine months ended 6/30/09    As of
                                  --------------------------- 6/30/09
                                   Average            Yield/   Yield/
                                   Balance  Interest   Rate     Rate
                                  -------------------------------------
Interest-earning assets
  Loans                         $1,360,780    64,110   6.28%    6.19%
  Mortgage-backed securities        53,183     1,494   3.75%    4.25%
  Securities                        53,231     1,542   3.86%    4.97%
  Bank deposits                     23,450        94   0.53%    0.01%
                                 --------------------------------------
    Total earning assets         1,490,644    67,240   6.01%    6.02%
                                            ---------------------------
Non-earning assets                  64,720
                                 ----------
      Total                     $1,555,364
                                 ==========
Interest-costing liabilities
  Customer checking and savings
    deposit accounts             $ 166,856     1,114   0.89%    0.80%
  Customer and brokered
    certificates of deposit        685,973    18,429   3.58%    2.92%
  FHLB Advances                    508,432    13,212   3.46%    3.01%
  Subordinated debentures           25,000       709   3.78%    2.69%
                                 --------------------------------------
    Total costing liabilities    1,386,261    33,464   3.22%    2.69%
                                            ---------------------------
Non-costing liabilities             12,817
Stockholders' equity               156,286
                                 ----------
      Total                     $1,555,364
                                 ==========
Net earning balance             $  104,383
                                 ==========
Earning yield less costing rate                        2.79%    3.33%
                                                      ================
Average interest-earning assets,
  net interest, and net yield
  spread on average interest-
  earning assets                $1,490,644    33,776   3.02%
                                 ============================

                                   Nine months ended 6/30/08   As of
                                  --------------------------- 6/30/08
                                   Average            Yield/   Yield/
                                   Balance  Interest   Rate     Rate
                                  -------------------------------------
Interest-earning assets
  Loans                         $1,367,604    69,818   6.81%    6.39%
  Mortgage-backed securities        74,217     1,962   3.52%    4.14%
  Securities                        25,923       824   4.23%    4.00%
  Bank deposits                      8,656       143   2.20%    1.63%
                                 --------------------------------------
    Total earning assets         1,476,400    72,747   6.57%    6.22%
                                            ---------------------------
Non-earning assets                  60,775
                                 ----------
      Total                     $1,537,175
                                 ==========
Interest-costing liabilities
  Customer checking and savings
    deposit accounts             $ 166,160     1,478   1.19%    1.00%
  Customer and brokered
    certificates of deposit        643,638    22,502   4.66%    4.15%
  FHLB Advances                    535,499    18,697   4.66%    4.28%
  Subordinated debentures           25,000     1,071   5.71%    4.55%
                                 --------------------------------------
    Total costing liabilities    1,370,297    43,748   4.26%    3.83%
                                            ---------------------------
Non-costing liabilities             16,060
Stockholders' equity               150,818
                                 ----------
      Total                     $1,537,175
                                 ==========
Net earning balance             $  106,103
                                 ==========
Earning yield less costing rate                        2.31%    2.39%
                                                      ================
Average interest-earning assets,
  net interest, and net yield
  spread on average interest-
  earning assets                $1,476,400    28,999   2.62%
                                 ============================

The following table provides information regarding changes in interest income and interest expense. For each category of interest- earning asset and interest-costing liability, information is provided on changes attributable to (1) changes in rates (change in rate multiplied by the old volume), and (2) changes in volume (change in volume multiplied by the old rate), and (3) changes in rate and volume (change in rate multiplied by the change in volume). Average balances, yields and rates used in the preparation of this analysis come from the preceding table. Dollar amounts are expressed in thousands.

                                         Nine months ended June 30, 2009, compared to
                                              nine months ended June 30, 2008
                                        -----------------------------------------------
                                                                     Yield/
                                           Yield         Volume      Volume      Total
                                        -----------------------------------------------
Components of interest income:
  Loans                                $  (5,436)        (349)         77      (5,708)
  Mortgage-backed securities                 128         (555)        (41)       (468)
  Securities                                 (72)         866         (76)        718
  Bank deposits                             (108)         244        (185)        (49)
                                        -----------------------------------------------
Net change in interest income             (5,488)         206        (225)     (5,507)
                                        -----------------------------------------------

Components of interest expense:
  Customer and brokered
    deposit accounts                      (5,405)       1,275        (307)     (4,437)
  FHLB Advances                           (4,819)        (946)        280      (5,485)
  Subordinated debentures                   (362)          --          --        (362)
                                        -----------------------------------------------
Net change in interest expense           (10,586)         329         (27)    (10,284)
                                        -----------------------------------------------
  Increase in net interest
    margin                             $   5,098         (123)       (198)      4,777
                                        ===============================================

Net interest margin before loan loss provision for the three months ended June 30, 2009, increased $2.3 million from the same period in the prior year. Specifically, interest income decreased $661,000 due primarily to a decrease in the average rate earned on interest-earning assets. The decrease in interest income was offset by a $3.0 million decrease in interest expense, which resulted primarily from a decrease in the average rate paid on interest-costing liabilities.

Net interest margin before loan loss provision for the nine months ended June 30, 2009, increased $4.8 million from the same period in the prior year. Specifically, interest income decreased $5.5 million, which was offset by a $10.3 million decrease in interest expense for the period. Interest on loans decreased $5.7 million as the result of a 53 basis point decrease in the average yield and a $6.8 million decrease in the average balance of loans receivable outstanding during the period. Interest on mortgage-backed securities decreased $468,000 due primarily to a $21.0 million decrease in the average balance of such securities. These decreases in interest income were partially offset by a $718,000 increase in interest on investment securities, due primarily to a $27.3 million increase in the average balance of such securities. Interest expense on customer and brokered deposit accounts decreased $4.4 million due primarily to an 89 basis point decrease in the average rate paid on such interest-costing liabilities. Interest expense on FHLB advances decreased $5.5 million as the result of a 120 basis point decrease in the average rate paid on such liabilities and a $27.1 million decrease in the average balance of FHLB advances outstanding during the period. Interest expense on subordinated debentures decreased $362,000 due to a 193 basis point decrease in the average rate paid on such liabilities.

PROVISION FOR LOAN LOSSES
The Company recorded a provision for loan losses of $4.0 million during the quarter ended June 30, 2009, in response to an increase in loans classified as substandard or loss and an increase in loan charge offs related to the residential construction and development and commercial real estate loan portfolios. Management determined that the increased provision was appropriate due to the continued deterioration in the real estate market. The Company recorded a provision for loan losses of $1.0 million during the quarter ended March 31, 2009, due primarily to increases in loan charge offs related to the residential construction and development and commercial real estate loan portfolios. The Company recorded a provision for loan losses of $250,000 during the quarter ended December 31, 2008, due primarily to increases in commercial real estate and residential construction and development loans classified as special mention. Management performs an ongoing analysis of individual loans and of homogenous pools of loans to assess for any impairment. On a consolidated basis, the allowance for losses on loans and real estate owned was 31.6% of total classified assets at June 30, 2009, 40.5% at September 30, 2008, and 36.0% at June 30, 2008.

Management believes that the allowance for losses on loans and real estate owned is adequate. The provision can fluctuate based on changes in economic conditions, changes in the level of classified assets, changes in the amount of loan charge-offs and recoveries, or changes in other information available to management. Also, regulatory agencies review the Company's allowances for losses as a part of their examination process and they may require changes in loss provision amounts based on information available at the time of their examination.

OTHER INCOME
Other income for the three months ended June 30, 2009, increased $6.0 million from the same period in the prior year. Specifically, gain on sale of loans held for sale increased $4.9 million due to increased mortgage banking volume during the period. Provision for loss on real estate owned decreased $400,000 due to a decrease in charge-offs of foreclosed assets held for sale during the period. Customer service fees and charges increased $679,000 due to an increase in miscellaneous loan origination fees resulting from the increase in mortgage banking volume. Gain on sale of securities available for sale increased $548,000 due to the sale of corporate debt securities during the quarter. These increases were partially offset by a $541,000 decrease in other income due to a decrease in loan prepayment penalties and to the effect of recording the net fair value of certain loan-related commitments in accordance with FASB Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities."

Other income for the nine months ended June 30, 2009, increased $12.7 million from the same period in the prior year. Specifically, gain on sale of loans held for sale increased $9.5 million due to increased mortgage banking volume during the period. Provision for loss on real estate owned decreased $1.0 million due to a decrease in charge- offs of foreclosed assets held for sale during the period. Customer service fees and charges increased $1.1 million due primarily to an increase in miscellaneous loan origination fees resulting from the increase in mortgage banking volume. Gain on sale of securities available for sale increased $426,000 due to the sale of corporate debt securities during the quarter. In addition, other income increased $902,000 due to a $1.4 million increase related to recording the net fair value of certain loan-related commitments in accordance with FASB Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities," which was partially offset by decreases in loan prepayment penalties and income from foreclosed assets held for sale. These increases in other income were offset by a $171,000 decrease in loan servicing fees decreased due primarily to an increase in capitalized servicing amortization, which resulted from an increase in actual prepayments and estimated future repayments of the underlying mortgage loans during the period.

GENERAL AND ADMINISTRATIVE EXPENSES
Total general and administrative expenses for the three months ended June 30, 2009, increased $4.1 million from the same period in the prior year. Specifically, compensation and fringe benefits increased $958,000 due primarily to the addition of personnel in the Company's information technology, mortgage banking, training, and loan servicing departments. Commission-based mortgage banking compensation increased $2.5 million due primarily to an increase in mortgage banking volume for the period. Federal deposit insurance premium expense increased $820,000 related primarily to the FDIC special assessment, which was imposed on all insured institutions' assets minus Tier I capital as of June 30, 2009. The special assessment will paid on September 30, 2009.

Total general and administrative expenses for the nine months ended June 30, 2009, increased $7.5 million from the same period in the prior year. Specifically, compensation and fringe benefits increased $1.5 million due primarily to the addition of personnel in the Company's information technology, mortgage banking, training, and loan servicing departments. Commission-based mortgage banking compensation increased $4.6 million due primarily to an increase in mortgage banking volume for the period. Advertising and business promotion expense increased $367,000 resulting from an increase in mortgage banking volume for the period. Federal deposit insurance premium expense increased $844,000 related primarily to the FDIC special assessment. Additionally, other expense increased $345,000 due primarily to increases in legal fees related to the Company's lending operations.

REGULATION

The Bank is a member of the FHLB System and its customers' deposits are insured by the Deposit Insurance Fund ("DIF") of the FDIC. The Bank is subject to regulation by the OTS as its chartering authority. Since passage of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA" or the "Act"), the FDIC also has regulatory control over the Bank. The transactions of DIF-insured institutions are limited by statute and regulations that may require prior supervisory approval in certain instances. Institutions also must file reports with regulatory agencies regarding their activities and their financial condition. The OTS and FDIC make periodic examinations of the Bank to test compliance with the various regulatory requirements. The OTS can require an institution to re-value its assets based on appraisals and to establish specific valuation allowances. This supervision and regulation is intended primarily for the protection of depositors. Also, savings institutions are subject to certain reserve requirements under Federal Reserve Board regulations.

INSURANCE OF ACCOUNTS
The DIF insures the Bank's customer deposit accounts to a maximum of $100,000 for each insured owner, with the exception of self-directed retirement accounts, which are insured to a maximum of $250,000. On October 3, 2008, the Emergency Economic Stabilization Act of 2008 temporarily raised the basic limit of federal deposit insurance coverage from $100,000 to $250,000 per depositor. This legislation provides that the basic deposit insurance limit will return to $100,000 after December 31, 2013. Deposit insurance premiums are determined using a Risk- Related Premium Schedule ("RRPS"), a matrix which places each insured institution into one of three capital groups and one of three supervisory groups. Currently, deposit insurance premiums range from 5 to 43 basis points of the institution's total deposit accounts, depending on the institution's risk classification. The Bank is currently considered "well capitalized," which is the most favorable capital group and supervisory subgroup. DIF-insured institutions are also assessed a premium to service the interest on Financing Corporation ("FICO") debt.

On May 22, 2009, the Federal Deposit Insurance Corporation (FDIC) adopted a final rule imposing a five basis point special assessment on . . .