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 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, as well as those discussed under Item 1A. "Risk Factors" in our Annual Report on Form 10-K for the year ended September 30, 2012, filed with the Securities and Exchange Commission, 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, 2012, filed with the Securities and Exchange Commission, and in our Quarterly Reports, if applicable.

GENERAL

NASB Financial, Inc. was formed in 1998 as a unitary thrift holding company of North American Savings Bank, F.S.B. The Bank is a federally chartered stock savings bank, with its headquarters in the Kansas City area. The Bank began operating in 1927, and became a member of the Federal Home Loan Bank of Des Moines ("FHLB") in 1940. Its customer deposit accounts are insured by the Deposit Insurance Fund ("DIF"), a division of the Federal Deposit Insurance Corporation ("FDIC"). The Bank converted to a stock form of ownership in September 1985.

The Bank's primary market area includes the counties of Jackson, Cass, Clay, Buchanan, Andrew, Platte, and Ray in Missouri, and Johnson and Wyandotte counties in Kansas. The Bank currently has nine retail deposit offices in Missouri including one each in Grandview, Lee's Summit, Independence, Harrisonville, Excelsior Springs, Platte City, and St. Joseph, and two in Kansas City. North American also operates loan production offices in Kansas City, Lee's Summit and Springfield in Missouri. The economy of the Kansas City area is diversified with major employers in agribusiness, greeting cards, automobile production, transportation, telecommunications, and government.

FINANCIAL CONDITION

Assets

The Company's total assets as of December 31, 2012 were $1,252.5 million, an increase of $11.7 million from September 30, 2012, the prior fiscal year end.

Loans receivable held for investment were $722.7 million as of December 31, 2012, a decrease of $43.9 million during the three month period. The weighted average rate on such loans as of December 31, 2012, was 5.73%, a decrease from 5.97% as of December 31, 2011.

Loans receivable held for sale as of December 31, 2012, were $164.6 million, an increase of $801,000 from September 30, 2012. 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 three months ended December 31, 2012, the Bank originated and purchased $542.8 million in mortgage loans held for sale, $25.6 million in mortgage loans held for investment, and $588,000 in other loans. This total of $569.0 million in loans compares to $433.8 million in loans originated and purchased during the three months ended December 31, 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.

                                                        12/31/12          9/30/12         12/31/11
Asset Classification:
Substandard                                             $ 132,431          156,117          166,783
Doubtful                                                      575              777               -
Loss*                                                          -                -            36,139

                                                          133,006          156,894          202,922
Allowance for losses on loans and real estate owned       (27,853 )        (31,829 )        (67,392 )

                                                        $ 105,153          125,065          135,530

* 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."

                                                12/31/12           9/30/12          12/31/11
Total Assets                                   $ 1,252,524         1,240,826         1,205,525

Non-accrual loans                                   61,076            74,767            18,247
Performing troubled debt restructurings             34,469            15,926            72,331
Net real estate and other assets acquired
through foreclosure                                 15,314            17,040            19,553

Total                                              110,859           107,733           110,131

Percent of total assets                        $      8.85 %            8.68 %            9.14 %

The significant decline in performing TDRs from December 31, 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 $266.3 million as of December 31, 2012, an increase of $52.1 million from September 30, 2012. During the three month period, the Bank purchased $52.5 million of securities available for sale. There were no sales of investment securities during the three month period ended December 31, 2012.

Mortgage-backed securities were $24.2 million as of December 31, 2012, a decrease of $2.3 million from the prior year end. There were no sales of mortgage-backed securities during the three month period ended December 31, 2012. The average yield on the mortgage-backed securities portfolio was 4.51% at December 31, 2012, a decrease from 4.72% at December 31, 2011.

The Company's investment in LLCs, which is accounted for using the equity method, was $17.1 million at December 31, 2012, a decrease of $85,000 from September 30, 2012. During the year ended September 30, 2012, the Company recorded a $200,000 impairment charge related to its investment in LLCs. There have been no events subsequent to September 30, 2012, that would indicate an additional impairment in value of the Company's investment in LLCs at December 31, 2012.

Liabilities and Equity

Customer and brokered deposit accounts decreased $17.5 million during the three months ended December 31, 2012, due primarily to a decrease in brokered certificates of deposits during the period. The weighted average rate on customer and brokered deposits as of December 31, 2012, was 0.76%, a decrease from 1.13% as of December 31, 2011.

Subordinated debentures were $25.8 million as of December 31, 2012. Such debentures resulted from the issuance of 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 $4.3 million as of December 31, 2012, a decrease of $4.4 million from September 30, 2012. This decrease is due to amounts paid for borrowers' taxes during the fourth calendar quarter of 2012.

Total stockholders' equity as of December 31, 2012, was $179.9 million (14.4% of total assets). This compares to $171.5 million (13.8% of total assets) at September 30, 2012. On a per share basis, stockholders' equity was $22.86 on December 31, 2012, compared to $21.80 on September 30, 2012.

The Company did not pay any cash dividends to its stockholders during the three month period ended December 31, 2012. In accordance with the agreement, which is described more fully in Footnote 14, Regulatory Agreements, 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 December 31, 2012, includes an unrealized gain, net of deferred income taxes, on available for sale securities of $2.3 million. 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).



                                              Three months ended
                                          12/31/12         12/31/11
                 Return on assets              2.67 %           1.61 %
                 Return on equity             18.94 %          12.92 %
                 Equity-to-assets ratio       14.36 %          12.89 %
                 Dividend payout ratio            - %              - %

RESULTS OF OPERATIONS-Comparison of three months ended December 31, 2012 and 2011.

For the three months ended December 31, 2012, the Company had net income of $8.3 million or $1.06 per share. This compares to a net income of $4.9 million or $0.63 per share for the three month period ended December 31, 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 three months ended December 31, 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.

                                                                                       As of                                                        As of
                                              Three months ended 12/31/12             12/31/12            Three months ended 12/31/11              12/31/11
                                           Average                      Yield/         Yield/          Average                      Yield/          Yield/
                                           Balance        Interest       Rate           Rate           Balance        Interest       Rate            Rate
Interest-earning assets
Loans                                    $    862,292        12,334        5.72 %          5.28 %    $  1,025,876        15,893        6.20 %           5.74 %
Mortgage-backed securities                     28,649           294        4.10 %          4.51 %          37,079           499        5.38 %           4.72 %
Securities                                    244,369           963        1.58 %          1.56 %          66,876           968        5.79 %           4.44 %
Bank deposits                                  19,766             2        0.04 %          0.01 %          12,765             2        0.06 %           0.01 %

Total earning assets                        1,155,076        13,593        4.71 %          4.37 %       1,142,596        17,362        6.08 %           5.46 %

Non-earning assets                             74,662                                                     100,541

Total                                    $  1,229,738                                                $  1,243,137

Interest-costing liabilities
Customer checking and savings deposit
accounts                                 $    297,848           344        0.46 %          0.41 %    $    259,470           311        0.48 %           0.44 %
Customer and brokered certificates of
deposit                                       583,967         1,405        0.96 %          0.94 %         580,463         2,168        1.49 %           1.40 %
FHLB Advances                                 131,755           531        1.61 %          1.42 %         208,758           635        1.22 %           1.79 %
Subordinated debentures                        25,000           129        2.06 %          1.96 %          25,000           129        2.06 %           2.08 %
Other borrowings                                  210             3        5.71 %          5.00 %              -             -            - %              - %

Total costing liabilities                   1,038,780         2,412        0.93 %          0.88 %       1,073,691         3,243        1.21 %           1.23 %

Non-costing liabilities                        15,966                                                      15,723
Stockholders' equity                          174,992                                                     153,723

Total                                    $  1,229,738                                                $  1,243,137

Net earning balance                           116,296                                                      68,905

Earning yield less costing rate                                            3.78 %          3.49 %                                      4.87 %           4.23 %

Average interest-earning assets, net
interest, and net yield spread on
average interest -earning assets         $  1,155,076        11,181        3.87 %                    $  1,142,596        14,119        4.94 %

                                                  Three months ended December 31, 2012, compared to
                                                        three months ended December 31, 2011
                                                                                   Yield/
                                              Yield             Volume             Volume          Total
Components of interest income:
Loans                                      $    (1,231 )           (2,536 )              208        (3,559 )
Mortgage-backed securities                        (119 )             (113 )               27          (205 )
Securities                                        (704 )            2,569             (1,870 )          (5 )
Bank deposits                                       (1 )                1                 -             -

Net change in interest income                   (2,055 )              (79 )           (1,635 )      (3,769 )

Components of interest expense:
Customer and brokered deposit accounts            (819 )              124                (35 )        (730 )
FHLB Advances                                      204               (235 )              (73 )        (104 )
Subordinated debentures                             -                  -                  -             -
Other borrowings                                    -                  -                   3             3

Net change in interest expense                    (615 )             (111 )             (105 )        (831 )

Increase in net interest margin            $    (1,440 )               32             (1,530 )      (2,938 )

Net interest margin before loan loss provision for the three months ended December 31, 2012, decreased $2.9 million from the same period in the prior year. Specifically, interest income decreased $3.8 million, which was offset by an $831,000 decrease in interest expense for the period. Interest on loans decreased $3.6 million as the result of a $163.5 million decrease in the average balance of loans receivable outstanding during the period and a 48 basis point decrease in the average rate earned on such loans during the period. Interest on mortgage-backed securities decreased $205,000 due to an $8.4 million decrease in the average balance of mortgage-backed securities during the period and a 128 basis point decrease in the average rate earned on such securities during the period. Interest on investment securities decreased $5,000 resulting from a 421 basis point decrease in the average rate earned on such securities, the effect of which was offset by a $177.5 million increase in the average balance of such securities during the period. Interest expense on customer and brokered deposit accounts decreased $730,000 due to a 39 basis point decrease in the average rate paid on such liabilities, the effect of which was partially offset by a $41.9 million increase in the average balance of such interest-costing liabilities during the period. Interest expense on FHLB advances decreased $104,000 as the result a $77.0 million decrease in the average balance of advances outstanding during the period, the effect of which was partially offset by a 39 basis point decrease in the average rate paid of such liabilities.

Provision for Loan Losses

The Company recorded a negative provision for loan losses of $4.0 million during the current quarter. Based upon management's analysis, the resulting allowance for loan losses of $27.9 million is adequate at December 31, 2012.

The negative provision for loan loss for the current quarter was based upon the Bank's ALLL methodology, which contains both qualitative and quantitative factors. Specifically, activity during the quarter reflected in quantitative factors included the following:

• The Bank's portfolio of loans held to maturity decreased $43.9 million during the quarter ended December 31, 2012, to $722.7 million. This decrease consisted almost entirely of declines within the Bank's commercial real estate and construction and land development portfolios, which historically have experienced higher credit losses than the Bank's other portfolios.

• The Bank's loss experience during the current quarter was much better than the previous 36 months. During the three month period ended December 31, 2012, the Bank recorded net recoveries of $24,000.

• The level of nonperforming loans decreased $13.7 million during the three month period. Similar to the decrease in gross loan balances, this decline consisted almost entirely of loans within the Bank's commercial real estate and construction and land development portfolios.

In addition to the quantitative factors noted above, management observed the following qualitative factors when determining the appropriate level of the Bank's ALLL at December 31, 2012:

• The housing market in the Kansas City metropolitan area, where all of the Bank's construction and land development lending is concentrated, has shown renewed strength during the current period. In terms of new building permits, the market experienced its best fourth calendar quarter since 2008, and the supply of new housing inventory has dropped below the equilibrium level, resulting in an increase in new housing starts.

• During the current period, an independent third party review was completed, which included approximately 80% of the loans within the Bank's commercial real estate and construction and land development portfolios. This review resulted in no loan classification discrepancies, validating the effectiveness of the Bank's internal asset review process.

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 . . .