FORWARD-LOOKING STATEMENTS

We may from time to time make written or oral "forward-looking statements," including statements contained in our filings with the Securities and Exchange Commission ("SEC"). These forward-looking statements may be included in this quarterly report to shareholders and in other communications by the Company, which are made in good faith by us pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements include statements about our beliefs, plans, objectives, goals, expectations, anticipations, estimates and intentions, that are subject to significant risks and uncertainties, and are subject to change based on various factors, some of which are beyond our control. The words "may," "could," "should," "would," "believe," "anticipate," "estimate," "expect," "intend," "plan," and similar expressions are intended to identify forward-looking statements. The following factors, among others, could cause our financial performance to differ materially from the plans, objectives, goals, expectations, anticipations, estimates and intentions expressed in the forward-looking statements:

• the strength of the U.S. economy in general and the strength of the local economies in which we conduct operations;

• the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Federal Reserve Board;

• the effects of, and changes in, foreign and military policy of the United States Government; inflation, interest rate, market and monetary fluctuations;

• the timely development and acceptance of our new products and services and the perceived overall value of these products and services by users, including the features, pricing and quality compared to competitors' products and services;

• the willingness of users to substitute competitors' products and services for our products and services;

• our success in gaining regulatory approval of our products, services and branching locations, when required;

• the impact of changes in financial services' laws and regulations, including laws concerning taxes, banking, securities and insurance;

• technological changes;

• acquisitions and dispositions;

• changes in consumer spending and saving habits;

• our success at managing the risks involved in our business; and

• changes in the fair value or economic value of, impairments of, and risks associated with the Bank's investments in real estate owned, mortgage backed securities and other assets.

This list of important factors is not all-inclusive. We do not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of the Company or the Bank. For further discussion of these factors, see "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended September 30, 2011, filed with the Securities and Exchange Commission, and in our Quarterly Reports, if applicable.

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.

Assets

The Company's total assets as of June 30, 2012 were $1,220.6 million, a decrease of $33.0 million from September 30, 2011, the prior fiscal year end.

Loans receivable held for investment were $807.1 million as of June 30, 2012, a decrease of $180.3 million during the nine month period. The weighted average rate on such loans as of June 30, 2012, was 5.86%, a decrease from 6.18% as of June 30, 2011.

Loans receivable held for sale as of June 30, 2012, were $123.9 million, an increase of $8.4 million from September 30, 2011. This portfolio consists of residential mortgage loans originated by the Bank's mortgage banking division that will be sold with servicing released. The Company has elected to carry loans held for sale at fair value, as permitted under GAAP.

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, 2012, the Bank originated and purchased $1,294.3 million in mortgage loans held for sale, $62.8 million in mortgage loans held for investment, and $2.5 million in other loans. This total of $1,359.6 million in loans compares to $1,337.5 million in loans originated and purchased during the nine months ended June 30, 2011.

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 little value.

The following table summarizes the Bank's classified assets, including foreclosed assets held for sale, as reported to their primary regulator, plus any classified assets of the holding company. Dollar amounts are expressed in thousands.

                                                         6/30/12          9/30/11          6/30/11
Asset Classification:
Substandard                                             $ 153,463          149,336          142,615
Doubtful                                                      948               -                -
Loss*                                                          -            49,384           52,876

                                                          154,411          198,720          195,491
Allowance for losses on loans and real estate owned       (34,816 )        (80,561 )        (83,652 )

                                                        $ 119,595          118,159          111,839

* Assets classified as loss represent the amount of measured impairment related to loans and foreclosed assets held for sale that have been deemed impaired. Prior to quarter ended March, 31 2012, the Bank established a specific valuation allowance for such assets. In conjunction with the adoption of the Call Report during the quarter ended March 31, 2012, such assets are charged-off against the ALLL at the time they are deemed to be a "confirmed loss."

                                                 6/30/12            9/30/11           6/30/11
Total Assets                                   $  1,220,569         1,253,584         1,256,998

Non-accrual loans                                    63,360            24,018            24,093
Performing troubled debt restructurings              18,501            72,603            72,501
Net real estate and other assets acquired
through foreclosure                                  17,488            16,937            19,834

Total                                                99,349           113,558           116,428

Percent of total assets                        $       8.14 %            9.06 %            9.26 %

The significant decline in TDRs from September 30, 2011, noted in the table above, is primarily the result of management's decision to move certain impaired collateral dependent loans secured by land development properties to nonaccrual during the nine month period ended June 30, 2012, even though the majority of such loans are current and paying in accordance with their contractual terms. Due to the continued deterioration in the real estate markets, further declines in the value of collateral securing these loans are possible.

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 recognizes the inherent risks associated with lending activities for individually identified problem assets as well as the entire homogenous and non-homogenous loan portfolios. Management believes that the specific loss allowances and ALLL are adequate. While management uses available information to determine these allowances, future provisions may be necessary because of changes in economic conditions or changes in the information available to management. Also, regulatory agencies 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.

Investment securities were $190.5 million as of June 30, 2012, an increase of $118.4 million from September 30, 2011. During the nine month period, the Bank purchased securities of $163.1 million and sold $19.7 million of securities available for sale. The Company realized gross gains of $227,000 and gross losses of $570,000 on the sale of securities available for sale during the period.

Mortgage-backed securities were $29.1 million as of June 30, 2012, a decrease of $10.7 million from the prior year end. During the nine month period, the Bank sold $859,000 of mortgage backed securities held to maturity. The decision was made to sell the security after it was determined that there was significant deterioration in the issuer's creditworthiness. The Company realized gross losses of $32,000 on the sale of such securities during the period. The average yield on the mortgage-backed securities portfolio was 4.85% at June 30, 2012, an increase from 4.70% at June 30, 2011.

The Company's investment in LLCs, which is accounted for using the equity method, was $17.4 million at June 30, 2012, a decrease of $311,000 from September 30, 2011. During the quarter ended March 31, 2012, the Company recorded a $200,000 impairment charge related to its investment in LLCs. There have been no events subsequent to March 31, 2012, that would indicate an additional impairment in value of the Company's investment in LLCs at June 30, 2012.

Liabilities and Equity

Customer and brokered deposit accounts increased $55.7 million during the nine months ended June 30, 2012, due primarily to an increase in retail certificates of deposits resulting from promotions during the period. The weighted average rate on customer and brokered deposits as of June 30, 2012, was 0.98%, a decrease from 1.70% as of June 30, 2011.

Advances from the FHLB were $150.0 million as of June 30, 2012, a decrease of $97.0 million from September 30, 2011. During the nine month period, the Bank borrowed $25 million of new advances and repaid $122.0 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.

Escrows were $6.9 million as of June 30, 2012, a decrease of $3.2 million from September 30, 2011. This decrease is due to amounts paid for borrowers' taxes during the fourth calendar quarter of 2011.

Total stockholders' equity as of June 30, 2012, was $161.2 million (13.2% of total assets). This compares to $150.4 million (12.0% of total assets) at September 30, 2011. On a per share basis, stockholders' equity was $20.49 on June 30, 2012, compared to $19.11 on September 30, 2011.

The Company did not pay any cash dividends to its stockholders during the nine month period ended June 30, 2012. In accordance with the April 2010 agreement which is described more fully in Footnote 15, the Company is restricted from the payment of dividends or other capital distributions during the period of the agreement without prior written consent from its primary regulator.

Total stockholders' equity as of June 30, 2012, includes an unrealized loss, net of deferred income taxes, on available for sale securities of $283,000. 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
                                           6/30/12       6/30/11
                  Return on assets             1.12 %       (2.29 )%
                  Return on equity             8.87 %      (19.77 )%
                  Equity-to-assets ratio      13.21 %       11.50 %
                  Dividend payout ratio          -  %          -  %

RESULTS OF OPERATIONS - Comparison of three and nine months ended June 30, 2012 and 2011.

For the three months ended June 30, 2012, the Company had net income of $5.1 million or $0.64 per share. This compares to a net income of $4.4 million or $0.56 per share for the three month period ended June 30, 2011.

For the nine months ended June 30, 2012, the Company had net income of $10.4 million or $1.32 per share. This compares to a net loss of $23.2 million or $(2.94) per share for the nine month period ended June 30, 2011.

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, 2012 and 2011. Average yields reflect reductions due to non-accrual loans. Once a loan becomes 90 days delinquent, or when full payment of interest and principal is not expected, any interest that has accrued up to that time is reversed 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 6/30/12              As of              Nine months ended 6/30/11              As of
                                                                                   6/30/12                                                   6/30/11
                                         Average                     Yield/        Yield/          Average                     Yield/        Yield/
                                         Balance       Interest       Rate          Rate           Balance       Interest       Rate          Rate
Interest-earning assets
Loans                                  $   971,111        43,817        6.02 %         5.57 %    $ 1,087,355        50,605        6.21 %         6.05 %
Mortgage-backed securities                  34,616         1,377        5.30 %         4.85 %         45,111         1,730        5.11 %         4.70 %
Securities                                  93,102         2,142        3.07 %         1.72 %         64,211         2,954        6.13 %         5.13 %
Bank deposits                               20,796            11        0.07 %         0.01 %         13,868             7        0.07 %         0.01 %

Total earning assets                     1,119,625        47,347        5.64 %         4.87 %      1,210,545        55,296        6.09 %         5.93 %

Non-earning assets                          95,361                                                   110,978

Total                                  $ 1,214,986                                               $ 1,321,523

Interest-costing liabilities
Customer checking and savings
deposit accounts                       $   263,667           950        0.48 %         0.46 %    $   200,213           826        0.55 %         0.53 %
Customer and brokered certificates
of deposit                                 589,367         6,205        1.40 %         1.24 %        699,944        11,077        2.11 %         2.06 %
FHLB Advances                              166,007         1,859        1.49 %         1.75 %        223,913         4,111        2.45 %         1.73 %
Subordinated debentures                     25,000           401        2.14 %         2.12 %         25,000           371        1.98 %         1.92 %

Total costing liabilities                1,044,041         9,415        1.20 %         1.12 %      1,149,070        16,385        1.90 %         1.71 %

Non-costing liabilities                     14,016                                                    14,447
Stockholders' equity                       156,929                                                   158,006

Total                                  $ 1,214,986                                               $ 1,321,523

Net earning balance                         75,584                                                    61,475

Earning yield less costing rate                                         4.44 %         3.75 %                                     4.19 %         4.22 %

Average interest-earning assets, net
interest, and net yield spread on
average interest -earning assets       $ 1,119,625        37,932        4.52 %                   $ 1,210,545        38,911        4.29 %

                                                         Nine months ended June 30, 2012, compared to
                                                               nine months ended June 30, 2011
                                                                                       Yield/
                                                     Yield             Volume          Volume        Total
Components of interest income:
Loans                                             $    (1,549 )           (5,414 )         175        (6,788 )
Mortgage-backed securities                                 64               (402 )         (15 )        (353 )
Securities                                             (1,474 )            1,328          (666 )        (812 )
Bank deposits                                              -                   4            -              4

Net change in interest income                          (2,959 )           (4,484 )        (506 )      (7,949 )

Components of interest expense:
Customer and brokered deposit accounts                 (4,321 )             (622 )         195        (4,748 )
FHLB Advances                                          (1,612 )           (1,064 )         424        (2,252 )
Subordinated debentures                                    30                 -             -             30

Net change in interest expense                         (5,903 )           (1,686 )         619        (6,970 )

Increase in net interest margin                   $     2,944             (2,798 )      (1,125 )        (979 )

Net interest margin before loan loss provision for the nine months ended June 30, 2012, decreased $979,000 from the same period in the prior year. Specifically, interest income decreased $7.9 million, which was offset by a $7.0 million decrease in interest expense for the period. Interest on loans decreased $6.8 million as the result of a $116.2 million decrease in the average balance of loans receivable outstanding during the period and a 19 basis point decrease in the average rate earned on such loans during the period. Interest on mortgage-backed securities decreased $353,000 due primarily to a $10.5 million decrease in the average balance of such securities during the period. Interest on investment securities decreased $812,000 resulting from a 306 basis point decrease in the average rate earned on such securities, the effect of which was partially offset by a $28.9 million increase in the average balance of such securities during the period. Interest expense on customer and brokered deposit accounts decreased $4.7 million due to a 64 basis point decrease in the average rate and a $47.1 million decrease in the average balance of such interest-costing liabilities during the period. Interest expense on FHLB advances decreased $2.3 million as the result of a 96 basis point decrease in the average rate and a $57.9 million decrease in the average balance of such liabilities during the period.

Provision for Loan Losses

The Company recorded a provision for loan losses of $3.0 million during the quarter ended June 30, 2012, due primarily to declines in the value of collateral securing impaired land development loans that are collateral dependent. The Company recorded a provision for loan losses of $5.0 million during the quarter ended March 31, 2012, due primarily to declines in the value of collateral securing impaired loans that are collateral dependent. This increase in the ALLL, resulting from the provision for loan loss, was offset by net charge offs of $26.2 million during the three month period, as the Bank's elimination of the use of specific valuation allowances. Prior to the quarter ended March 31, 2012, measured impairments were recorded as specific valuation allowances and carried as contra-assets to reduce a loan's carrying value to fair value. When the Bank adopted the Call Report, during the quarter ended March 31, 2012, the cumulative specific valuation allowance that were considered "confirmed losses" were charged-off and netted against their respective loans balances. For collateral dependent loans that are deemed impaired, a "confirmed loss" is defined as the amount by which the loan's recorded investment exceeds the fair value of its collateral. If a loan is considered uncollectible, the entire balance is deemed a "confirmed loss" and is fully charged-off. The Company recorded a provision for loan losses of $2.5 million during the three month period ended December 31, 2011, due primarily to increases in specific reserves related to impaired commercial real estate loans. This increase in the ALLL, resulting from the provision for loan loss, was offset by net charge offs of $14.8 million during the period, which primarily resulted from the foreclosure or sale of certain impaired collateral dependent commercial and land development loans which were being carried at the fair value of the collateral.

The Company recorded a provision for loan losses of $38.8 million during the three month period ended March 31, 2011. This provision resulted primarily from: . . .