Osage Bancshares 10-Q 2009 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 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 December 31, 2008

or

o 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 1-33224

OSAGE BANCSHARES, INC.

(Exact name of Registrant as specified in its Charter)

Maryland	32-0181888
(State or other jurisdiction of	(IRS Employer
incorporation or organization)	Identification No.)

239 East Main Street, Pawhuska, Oklahoma 74056

(Address of principal executive offices) (Zip Code)

(918) 287-2919

(Registrant’s telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year,

if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

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.

Large accelerated filer o	Accelerated filer o
Non-accelerated filer o (Do not check if a smaller reporting company)	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 o No x

As of January 31, 2009 there were 2,829,777 shares of the Registrant’s common stock, par value $.01 per share, outstanding.

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OSAGE BANCSHARES, INC.

PAWHUSKA, OKLAHOMA

INDEX

			Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements
Consolidated Balance Sheets as of December 31, 2008 (Unaudited) and June 30, 2008			3
Consolidated Statements of Income - (Unaudited) for the three and six months ended December 31, 2008 and 2007			4
Consolidated Statements of Cash Flows - (Unaudited) for the six months ended December 31, 2008 and 2007			5
Notes to Consolidated Financial Statements (Unaudited)			7
Item 2		Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
Item 3.		Quantitative and Qualitative Disclosures about Market Risk	20
Item 4T.		Controls and Procedures	20
PART II.		OTHER INFORMATION
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds	21
Item 4.		Submission Matters to a Vote of Security Holders	21
Item 6.		Exhibits	22
Signatures			23

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ITEM 1.FINANCIAL STATEMENTS

OSAGE BANCSHARES, INC.

Consolidated Balance Sheets

ASSETS
	December 31, 2008			June 30, 2008
	(unaudited)
Cash and due from banks	$	1,985,308		$	2,027,328
Interest bearing deposits with banks		1,534,446			466,055
Federal funds sold		4,677,000			5,297,000
Cash and cash equivalents		8,196,754			7,790,383
Available-for-sale securities		17,052,747			19,439,486
Held-to-maturity securities (fair value $12,906,389 at December 31, 2008 and $14,089,294 at June 30, 2008)		13,188,127			14,642,340
Loans, net of allowance for loan losses of $450,210 and $430,356 at December 31, 2008 and June 30, 2008, respectively		108,983,400			105,977,860
Loans held for sale		—			455,400
Premises and equipment		1,943,446			1,957,457
Foreclosed assets held for sale, net		76,947			63,444
Interest receivable		693,129			691,128
Federal Home Loan Bank stock, at cost		1,904,900			1,883,100
Deferred income taxes		213,492			262,351
Bank owned life insurance		2,288,634			2,243,926
Goodwill		913,704			913,704
Core deposit intangibles		259,172			283,017
Other		376,244			169,064
Total assets	$	156,090,696		$	156,772,660
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits	$	105,883,094		$	102,355,155
Federal Home Loan Bank advances		22,878,000			21,300,000
Advances from borrowers held in escrow		461,545			817,327
Accrued interest and other liabilities		760,779			1,132,501
Total liabilities		129,983,418			125,604,983
Commitments and Contingencies		—			—
Equity Received from Contributions to the ESOP (90,055 and 65,497 shares at December 31, 2008 and June 30, 2008, respectively)		784,002			554,634
Stockholders’ Equity
Preferred stock, $.01 par value (5,000,000 shares authorized; none outstanding)		—			—
Common stock, $.01 par value (20,000,000 shares authorized; 2,839,077 and 3,236,145 shares issued and outstanding at December 31, 2008 and June 30, 2008, respectively, net of 288,000 allocated and unallocated ESOP shares)		25,511			29,481
Additional paid-in capital		27,001,113			26,850,729
Retained earnings (deficit)		(1,713,897	)		3,795,873
Accumulated other comprehensive gain (loss)		10,549			(63,040	)
Total stockholders’ equity		25,323,276			30,613,043
Total liabilities and stockholders’ equity	$	156,090,696		$	156,772,660

See Notes to Consolidated Financial Statements

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OSAGE BANCSHARES, INC.

Consolidated Statements of Operations

	Three Months Ended					Six Months Ended
	December 31,					December 31,
	2008			2007		2008			2007
	(unaudited)					(unaudited)
Interest Income
Loans	$	1,785,418		$	1,580,942	$	3,584,837		$	3,106,344
Available-for-sale securities		213,968			200,604		428,041			409,000
Held-to-maturity securities		152,246			72,061		312,439			147,113
Deposits with other financial institutions		9,111			134,536		27,958			194,462
Other		7,362			21,447		21,933			44,776
Total interest income		2,168,105			2,009,590		4,375,208			3,901,695
Interest Expense
Deposits		718,914			739,954		1,443,371			1,357,596
Advances from Federal Home Loan Bank		226,400			164,583		444,696			322,933
Total interest expense		945,314			904,537		1,888,067			1,680,529
Net Interest Income		1,222,791			1,105,053		2,487,141			2,221,166
Provision for loan losses		25,000			—		25,000			—
Net interest income after provision for loan losses		1,197,791			1,105,053		2,462,141			2,221,166
Noninterest Income
Service charges on deposit accounts		100,873			97,163		206,604			186,116
Other service charges and fees		18,825			16,742		38,841			35,063
Gain on sale of mortgage loans		25,665			18,326		43,727			30,900
Net loan servicing fees		21,645			16,951		41,392			32,368
Other income		44,642			43,127		89,546			84,070
Total noninterest income		211,650			192,309		420,110			368,517
Noninterest Expense
Salaries and employee benefits		612,403			476,149		1,217,413			940,040
Net occupancy expense		106,065			73,357		228,216			151,703
Deposit insurance premium		13,500			2,451		26,858			5,013
Other operating expenses		314,895			286,460		638,278			548,630
Impairment charge on investment securities		1,165,481			——		2,247,102			——
Total noninterest expense		2,212,344			838,417		4,357,867			1,645,386
Income (Loss) Before Income Taxes		(802,903	)		458,945		(1,475,616	)		944,297
Provision for Income Taxes		112,167			165,064		257,317			342,652
Net Income (Loss)	$	(915,070	)	$	293,881	$	(1,732,933	)	$	601,645
Basic Earnings (Loss) Per Share	$	(0.35	)	$	0.09	$	(0.64	)	$	0.18
Diluted Earnings (Loss) Per Share	$	(0.35	)	$	0.09	$	(0.64	)	$	0.18
Cash Dividends Paid Per Share	$	0.085		$	0.085	$	0.17		$	0.17

See Notes to Consolidated Financial Statements

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OSAGE BANCSHARES, INC.

Consolidated Statements of Cash Flows

	Six Months Ended
	December 31,
	2008			2007
	(unaudited)
Operating Activities
Net income (loss)	$	(1,732,933	)	$	601,645
Items not requiring (providing) cash
Depreciation		99,664			65,398
Provision (credit) for loan losses and foreclosed asset losses		25,000			(10,000	)
Amortization of securities, market value adjustment, and originated mortgage servicing rights		62,836			20,663
Restricted stock plan and option expense		154,762			83,024
Deferred income taxes		3,758			27,920
Other than temporary impairment on available-for-sale securities		2,247,102			—
Gain on sale of mortgage loans		(43,727	)		(30,900	)
Gain (loss) on sale of foreclosed assets held for sale		(1,679	)		740
Dividends on available-for-sale mutual funds		(260,869	)		(335,354	)
Stock dividends on Federal Home Loan Bank stock		(21,800	)		(44,500	)
Increase in cash surrender value of bank owned life insurance		(44,708	)		(39,042	)
Originations of loans held for delivery against commitments		(3,098,730	)		(3,536,445	)
Proceeds from nonrecourse sale of loans held for delivery against commitments		3,576,353			3,548,796
Amortization of employee stock ownership plan shares		229,368			213,405
Changes in:
Interest receivable		(2,001	)		(44,337	)
Other assets		(42,509	)		18,189
Income taxes refundable		(133,458	)		(112,071	)
Accrued interest and other liabilities		(439,939	)		2,014
Net cash provided by operating activities		576,490			429,145
Investing Activities
Net change in loans		(3,117,014	)		(6,779,070	)
Purchases of premises and equipment		(89,502	)		(179,042	)
Proceeds from sale of foreclosed assets		31,686			27,701
Proceeds from maturities and paydowns of held-to-maturity securities		1,444,015			519,318
Proceeds from maturities and paydowns of available-for-sale securities		513,746			818,768
Net cash used in investing activities		(1,217,069	)		(5,592,325	)

See Notes to Consolidated Financial Statements

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OSAGE BANCSHARES, INC.

Consolidated Statements of Cash Flows

(Continued)

	Six Months Ended
	December 31,
	2008			2007
	(unaudited)
Financing Activities
Net increase/(decrease) in demand, money market, NOW and savings deposits	$	(1,808,052	)	$	398,989
Net increase in certificates of deposit		5,349,752			12,690,160
Net decrease in Federal Home Loan Bank short-term borrowings		(422,000	)		—
Proceeds from Federal Home Loan Bank advances		4,000,000			1,000,000
Repayments of Federal Home Loan Bank advances		(2,000,000	)		—
Shares repurchased under stock buyback plans		(3,220,234	)		—
Net decrease in advances from borrowers held in escrow		(355,782	)		(306,069	)
Payment of dividends (net of restricted stock dividends)		(492,355	)		(586,824	)
Tax benefits of employee benefit plans		10,615			20,125
Shares purchased and withheld for restricted stock plans		(14,994	)		(46,605	)
Net cash provided by financing activities		1,046,950			13,169,776
Increase in Cash and Cash Equivalents		406,371			8,006,596
Cash and Cash Equivalents, Beginning of Period		7,790,383			4,969,820
Cash and Cash Equivalents, End of Period	$	8,196,754		$	12,976,416
Supplemental Cash Flows Information
Real estate and other assets acquired in settlement of loans	$	69,046		$	25,884
Interest paid	$	1,880,721		$	1,659,710
Income taxes paid	$	375,000		$	491,500
Mutual fund dividends reinvested	$	260,869		$	335,354

See Notes to Consolidated Financial Statements

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OSAGE BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements were prepared in accordance with instructions for Form 10-Q and therefore, do not include all disclosures necessary for a complete presentation of the balance sheet, statements of operations and statements of cash flows in conformity with accounting principles generally accepted in the United States of America. However, all adjustments which are, in the opinion of management, necessary for the fair presentation of the interim financial statements have been included. These adjustments are all of a normal recurring nature except for the other-than-temporary impairment on securities discussed in Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations. The consolidated balance sheet of the Company as of June 30, 2008 has been derived from the audited consolidated balance sheet of the Company as of that date. The consolidated statements of operations for periods presented are not necessarily indicative of the results which may be expected for the entire year.

Certain information and note disclosures normally included in the Company’s annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These condensed financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2008 filed with the Securities and Exchange Commission.

2. RECENT ACCOUNTING PRONOUNCEMENTS

In February 2007, the FASB issued Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. This Statement permits entities to choose to measure eligible items at fair value at specified election dates. For items for which the fair value option has been elected, unrealized gains and losses are to be reported in earnings at each subsequent reporting date. The fair value option is irrevocable unless a new election date occurs, may be applied instrument by instrument, with a few exceptions, and applies only to entire instruments and not to portions of instruments. This Statement provides an opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting. Statement No. 159 is effective for the Company beginning July 1, 2008. The adoption of the Statement has not had a material impact to the Company’s results of operations or financial condition.

In March 2008, the FASB issued Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities. This Statement amends and expands the disclosure requirements in SFAS No. 133, Accounting for Derivatives Instruments and Hedging Activities. The FASB issued this Statement to address concerns that the existing disclosure requirements for derivative instruments and related hedged items do not provide adequate information on the effect that derivative activities have on an entity’s overall consolidated financial condition or results of operations. Specific disclosure requirements are outlined in the Statement. Statement No. 161 is effective for the Company beginning November 15, 2008. The adoption of this Statement has not had a material impact to the Company’s results of operations or financial condition.

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In December 2007, the FASB issued SFAS No. 141 (revised), Business Combinations. SFAS No. 141(revised) retains the fundamental requirements in Statement 141 that the acquisition method of accounting be used for business combinations, but broadens the scope of Statement 141 and contains improvements to the application of this method. The Statement requires an acquirer to recognize the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date, measured at their fair values as of that date. Costs incurred to effect the acquisition are to be recognized separately from the acquisition. Assets and liabilities arising from contractual contingencies must be measured at fair value as of the acquisition date. Contingent consideration must also be measured at fair value as of the acquisition date. SFAS No. 141 (revised) applies to business combinations occurring in fiscal years beginning after December 15, 2008. 

3. EARNINGS PER SHARE

Earnings per share (EPS) are presented based upon the outstanding shares of Osage Bancshares, Inc.

The Company continued to buy shares under its third announced buyback plan during the quarter ended December 31, 2008 totaling 275,500 shares. The effect of these buybacks is reflected both in the common and common diluted shares outstanding for the three and six months ended December 31, 2008 below.

EPS were computed as follows for the three and six months ended December 31:

	Three months ended					Six months ended
	December 31,					December 31,
	2008			2007		2008			2007
Net Income (Loss)	$	(915,070	)	$	293,881	$	(1,732,933	)	$	601,645
Average common shares outstanding		2,606,784			3,327,755		2,719,737			3,324,497
Average common diluted shares outstanding		2,606,784			3,336,678		2,719,737			3,331,718
Basic earnings (loss) per share	$	(0.35	)	$	0.09	$	(0.64	)	$	0.18
Fully diluted earnings (loss) per share	$	(0.35	)	$	0.09	$	(0.64	)	$	0.18

For the three months and six months ended December 31, 2008, the effects of 329,004 and 325,936 stock options, respectively, and 69,749 restricted stock shares have been excluded from the calculation of diluted earnings per share, because their effects would be antidilutive. For the three and six months ended December 31, 2007, the effects of 177,000 stock options and 96,622 restricted stock shares, respectively, have been excluded from the calculation of diluted earnings per share, because their effects would be antidilutive.

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4.OTHER COMPREHENSIVE INCOME (LOSS)

Other comprehensive income (loss) is comprised of the following:

	Three Months Ended					Six Months Ended
	December 31,					December 31,
	2008			2007		2008			2007
	(Unaudited)
Net Income (Loss)	$	(915,070	)	$	293,881	$	(1,732,933	)	$	601,645
Other Comprehensive Income (Loss)
Unrealized gain (loss) on available-for-sale securities, net of income taxes		(1,102,551	)		10,279		(2,173,513	)		8,489
Less reclasification adjustment for losses included in net income		1,165,481			——		2,247,102			——
		62,390			10,279		73,589			8,489
Comprehensive Income (Loss)	$	(852,680	)	$	304,160	$	(1,659,344	)	$	610,134

5. CASH DIVIDENDS PAID PER SHARE

For the three months ended December 31, 2008 and September 30, 2008, cash dividends paid per share represent the cash dividends paid on 2,839,577 and 3,159,105 shares, respectively, of Osage Bancshares, Inc. stock. The Company acquired 77,040 shares purchased in the open market early in the first quarter on which dividends were not paid. The Company acquired an additional 319,528 shares purchased in the open market in the first quarter and early in the second quarter on which dividends were not paid. For the three months and six months ended December 31, 2007,cash dividends paid per share represent the cash dividends paid on 3,603,590 shares of Osage Bancshares, Inc. stock. Dividends that will be paid in the third quarter of fiscal 2009 will be further reduced to reflect the repurchase of 9,100 shares under the partially completed 10% buyback plan.

6. FAIR VALUE MEASUREMENT

Effective July 1, 2008, the Company adopted SFAS No. 157, Fair Value Measurements, which defines fair value and establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS No. 157 has been applied prospectively as of the beginning of this fiscal year. The adoption of SFAS 157 did not have an impact on our financial statements except for the expanded disclosures noted below.

The following definitions describe the fair value hierarchy of levels of inputs used in the Fair Value Measurements.

• Quoted prices in active markets for identical assets or liabilities (Level 1): Inputs that are quoted unadjusted prices in active markets for identical assets that the Company has the ability to access at the measurement date. An active market for the asset is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

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• Other observable inputs (Level 2): Inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity including quoted prices for similar assets, quoted prices for securities in inactive markets and inputs derived principally from or corroborated by observable market data by correlation or other means.

• Significant unobservable inputs (Level 3): Inputs that reflect assumptions of a source independent of the reporting entity or the reporting entity’s own assumptions that are supported by little or no market activity or observable inputs.

Financial instruments are broken down as follows by recurring or nonrecurring measurement status. Recurring assets are initially measured at fair value and are required to be remeasured at fair value in the financial statements at each reporting date. Assets measured on a nonrecurring basis are assets that, due to an event or circumstance, were required to be remeasured at fair value after initial recognition in the financial statements at some time during the reporting period.

The following is a description of valuation methodologies used for assets recorded at fair value on a recurring or nonrecurring basis at December 31, 2008:

Securities Available for Sale. Investment securities available for sale are recorded at fair value utilizing Level 1 and Level 2 inputs. For these securities, the Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, benchmark yields, market spreads, live trading levels, and market consensus prepayment speeds, among other things.

	Fair value measurement at December 31, 2008 using
	Fair value		Level 1	Level 2		Level 3
	December 31, 2008		Inputs	Inputs		Inputs
Available for sale securities
Collateralized mortgage obligations	$	597,720	—	$	597,720	—
Mortgage-backed securities		6,115,627	—		6,115,627	—
Equity securities		10,339,400	—		10,339,400
Total available for sale securities	$	17,052,747	—	$	17,052,747	—

Loans. The Company does not record loans at fair value on a recurring basis. However, nonrecurring fair value adjustments to collateral dependent loans are recorded to reflect partial write-downs based on the observable market price or current appraised value of the underlying collateral.

Loans Held for Sale. Mortgage loans held for sale are recorded at the lower of carrying value or fair value. The fair value of mortgage loans held for sale is based on what secondary markets are currently offering for portfolios with similar characteristics. As such, the Company classifies mortgage loans held for sale as Nonrecurring Level 2. Write-downs to fair value typically do not occur as the company generally enters into commitments to sell individual mortgage loans at the time the loan is originated to reduce market risk. The Company typically does not have commercial loans held for sale. There were no mortgage loans held for sale at December 31, 2008.

Impaired Loans. Impaired loans are reported at the fair value of the underlying collateral if repayment is expected solely from the collateral. Collateral values are estimated using third

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party appraisals or internally developed appraisals or discounted cash flow analysis. The Company records impaired loans as Nonrecurring Level 3. If a loan’s fair value as estimated by the Company is less than its carrying value, the Company either records a charge-off of the portion of the loan that exceeds the fair value or establishes a specific reserve as part of the allowance for loan losses. In accordance with the provisions of SFAS No. 114, impaired loans with a carrying value and fair value of $308,000 are included in the financial statements at December 31, 2008.

7. CHANGE IN ACCOUNTING PRINCIPLE

In September 2006, the FASB ratified the consensus reached by the EITF on Issue No. 06-4, Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements. EITF 06-4 requires the recognition of a liability and related compensation costs for endorsement split-dollar life insurance policies that provide a benefit to an employee that extends to postretirement periods as defined in SFAS No. 106, Employers’ Accounting for Postretirement Benefits Other Than Pensions. The EITF reached a consensus that bank owned life insurance policies purchased for this purpose do not effectively settle the entity’s obligation to the employee in this regard and thus the entity must record compensation cost and the related liability. Entities should recognize the effects of applying this Issue through either (a) a change in accounting principle through a cumulative effect adjustment to retained earnings or to other components of equity or net assets in the balance sheet as of the beginning of the year of adoption, or (b) a change in accounting principle through retrospective application to all prior periods. This issue is effective for fiscal years beginning after December 15, 2007. The effects of this guidance have been applied as a change in accounting principle through a cumulative effect adjustment to retained earnings of $68,217 as of July 1, 2008.

8. SUBSEQUENT EVENTS

On January 28, 2009, the Company’s Board of Directors declared a cash dividend of $0.085 per share payable February 24, 2009 to stockholders of record as of the close of business on February 9, 2009.

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ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

GENERAL

The following discussion and analysis is intended to assist in understanding the financial condition and results of operations of the Company.

FORWARD-LOOKING STATEMENTS

When used in this discussion and elsewhere in this Quarterly Report on Form 10-Q, the words or phrases “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” or similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. The Company cautions readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made, and advises readers that various factors, including regional and national economic conditions, substantial changes in level of market interest rates, credit and other risks of lending and investment activities and competitive and regulatory factors could affect the Company’s financial performance and could cause the Company’s actual results for future periods to differ materially from those anticipated or projected. The Company does not undertake and specifically disclaims any obligation to update any forward-looking statements to reflect occurrence of anticipated or unanticipated events or circumstances after the date of such statements.

CRITICAL ACCOUNTING POLICIES, JUDGMENTS AND ESTIMATES

The accounting and reporting policies of the Company conform with accounting principles generally accepted in the United States and general practices within the financial services industry. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. Actual results could differ from those estimates. The Company believes that the determination of the allowance for loan losses involves a higher degree of judgment and complexity than its other significant accounting policies. The allowance for loan losses is calculated with the objective of maintaining an allowance level believed by management to be sufficient to absorb estimated loan losses. Management’s determination of the adequacy of the allowance is based on periodic evaluations of the loan portfolio and other relevant factors. However, this evaluation is inherently subjective as it requires material estimates, including, among others, expected default probabilities, loss given default, expected commitment usage, the amounts and timing of expected future cash flows on impaired loans, value of collateral, estimated losses, and general amounts for historical loss experience. The process also considers economic conditions, uncertainties in estimating losses and inherent risks in the loan portfolio. All of these factors may be susceptible to significant change. To the extent actual outcomes differ from management estimates, additional provisions for loan losses may be required that would adversely impact earnings in future periods.

Declines in the fair value of held-to-maturity and available-for-sale securities below their cost that are deemed to be other-than-temporary are reflected in earnings as realized losses. In estimating other-than-temporary impairment losses, management considers, among other things, (i) the length of time and the extent to which the fair value has been less than cost, (ii) the financial condition and near-term prospects of the issuer, and (iii) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. Management has the ability and intent to hold the securities classified as held to maturity until they mature, at which time

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the Company anticipates fair value will have fully recovered.. Furthermore, as of December 31, 2008, management also had the ability and intent to hold the debt securities classified as available-for-sale for a period of time sufficient for a recovery of cost. The unrealized losses and other-than-temporary impairments are largely due to general market concerns, and significant uncertainty and illiquidity in the markets for these types of securities. The Company believes it is possible that substantially all of the principal and interest payments will be received. However, in light of the decline in the fair value of the AMF Ultra-Short Mortgage Fund, which represents a significant portion of the Company’s available-for-sale securities, the Company recognized an other-than temporary impairment, totaling $1.2 million and $2.2 million (pre-tax and after-tax), respectively, for the three months and six months ended December 31, 2008 through a charge to the income statement.

With the acquisition of Barnsdall State Bank on April 1, 2008, the Company recognized goodwill in the amount of $914,000. Goodwill is the excess of cost over the fair value of the net assets of the business acquired. Goodwill is to be tested for impairment annually, or whenever events or changes in business circumstances indicate that an asset might be impaired. The Company is in the process of establishing an annual testing date. However, if market conditions continue to worsen or there is significant regulatory action that negatively affects our business, there can be no assurance that future goodwill impairment tests will not result in a charge to earnings. The Company will perform its impairment tests utilizing the two steps as outlined in SFAS 142. If the carrying amount of a reporting unit (the Company, in our case) exceeds its implied fair value, an impairment loss would be recognized in an amount equal to the excess of the implied fair value of the reporting unit’s goodwill over its carrying value, not to exceed the carrying amount of the goodwill. The Company’s market value, based on a share price of $7.26 at December 31, 2008 on 2,839,077 outstanding shares, was $20.6 million. This was below our December 31, 2008 book value of $25.3 million. We did an interim evaluation of goodwill impairment using comparable sales data for third and fourth quarter calendar 2008 transactions of banks, bank holding companies and thrifts across the United States. We adjusted our market price upward to reflect the average sales price of these financial institutions. Based on this interim evaluation, the Company passed Phase 1 testing of goodwill impairment, and as of December 31, 2008, there was no impairment of goodwill.

The Bank does not participate in subprime lending activities in the normal course of business. Periodically, the Bank may grant a credit extension to a borrower whose credit scores are marginal, but who has sufficient collateral or who has a positive payment history with the Bank. These balances at December 31, 2008 are considered to be immaterial.

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Comparison of Financial Condition at December 31, 2008 and June 30, 2008

Our total assets decreased by $682,000 to $156.1 million at December 31, 2008 from $156.8 million at June 30, 2008, reflecting paydowns in both available-for-sale and held-to-maturity securities and a reduction in federal funds sold, partially offset by growth in loans. Loans receivable, net grew $3.0 million or 2.8% in the same time period. Loans receivable, net increased to $109.0 million at December 31, 2008 from $106.0 million at June 30, 2008. This increase in loans receivable, net primarily resulted from a $2.5 million, or 3.7%, increase in one-to-four family loans, while nonresidential loans decreased $541,000. There were no loans held for sale at December 31, 2008, compared to $455,000 at June 30, 2008. Cash and cash equivalents increased $406,000, from $7.8 million at June 30, 2008 to $8.2 million at December 31, 2008. This increase was a result of a $1.1 million increase in interest-bearing deposits with banks, partially offset by a decrease in federal funds sold of $620,000. The federal funds sold position was impacted by an increase in lending, mentioned above, and the settlement of $3.4 million for stock buybacks, more than offset by a $3.5 million in increase in deposits and a $1.6 million increase in advances. Total securities decreased to $30.2 million at December 31, 2008 from $34.1 million at June 30, 2008, as a result of $2.0 million of normal paydowns, and a $2.2 million other-than-temporary impairment charge.

Our total liabilities increased $4.4 million, or 3.5% mainly due to an increase in deposits and FHLB advances. Total deposits were $105.9 million at December 31, 2008, a $3.5 million, or 3.4% increase from $102.4 million at June 30, 2008. Transaction accounts decreased $2.1 million, from $20.9 million at June 30, 2008 to $18.8 million at December 31, 2008. $762,000 of this decrease was related to the Bank’s internal accounts through which various disbursements are made. Advances were $22.9 million at December 31, 2008, and increased $1.6 million, or 7.4%, from $21.3 million at June 30, 2008. The increase is due to new term advances, partially offset by a $422,000 decrease in our short-term line of credit.

Stockholders’ equity decreased $5.3 million to $25.3 million at December 31, 2008 from $30.6 million at June 30, 2008. This decrease in stockholders’ equity was primarily due to the buyback of 397,068 shares of common stock as announced in the two latest stock repurchase programs. In accordance with the Maryland General Corporation Law, the repurchased shares are treated as authorized but unissued. The total effect of these buybacks was a reduction in stockholders’ equity of $3.2 million. The net loss for the period ended December 31, 2008 decreased equity by $1.7 million, and amortization of awards under the stock option plan and restricted stock plan increased stockholders’ equity by $43,000 and $112,000, respectively. The Company paid regular cash dividends of $492,000 (net of restricted stock dividends of $18,000), in the period ending December 31, 2008. In September 2006, the Financial Accounting Standards Board (FASB) ratified the consensuses reached by the FASB’s Emerging Issue Task Force (“EITF”) relating to EITF 06-4, “Accounting for the Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements” (“EITF 06-4”). EITF 06-4 requires recognition of a liability related to the postretirement benefits covered by an endorsement split-dollar life insurance arrangement. The Company adopted EITF 06-4 on July 1, 2008, which resulted in a $68,000 decrease to retained earnings. Accumulated other comprehensive gain (loss) increased by $74,000 from a loss of $63,000 at June 30, 2008 to a gain of $11,000 at December 31, 2008, due to a slight improvement in market values of some of our available-for-sale mortgage-backed securities.

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Comparison of Operating Results for the Three Months Ended December 31, 2008 and 2007

General. Net loss for the three months ended December 31, 2008 was $(915,000) ($(0.35) per diluted share), a $1.2 million decrease compared to net income of $294,000 ($0.09 per diluted share) for the three months ended December 31, 2007. Excluding the $1.2 million pre-tax and after-tax other-than-temporary impairment charge on the AMF Ultra-Short Mortgage Fund, net income would have been $250,000 ($0.10 per diluted share). The decrease in net income, excluding the impairment charge, resulted mainly from an increase in noninterest expense and provision for loan losses, partially offset by increases in net interest income and noninterest income, and a decrease in the provision for income taxes.

Interest Income. Total interest income increased by $159,000, or 7.9%, to $2.2 million for the three months ended December 31, 2008 from $2.0 million for the same period in 2007 primarily due to an increase in the average balance of earning assets. The average balance of total interest-earning assets for the three months ended December 31, 2008 was $148.9 million, an increase of $17.5 million from the average balance of $131.3 million for the three months ended December 31, 2007 due to increased loan balances and the acquisition of Barnsdall State Bank (Barnsdall). The yield on earning assets for the period decreased, and was 5.78% compared to a yield of 6.07% in the same period in 2007.

The primary factor for the increase in interest income was a $204,000, or 12.9% increase in interest from loans. Average loans increased $14.9 million, or 15.8%, from $94.2 million in 2007 to $109.1 million in 2008. There was a 17 basis point decrease in the average yield on loans to 6.49% for the 2008 period from 6.66% in the 2007 period, reflecting general rate declines. The prime lending rate dropped by 400 basis points from December 31, 2007 to December 31, 2008. However, most of our variable-rate loans are tied to the one-year Treasury rate, and reprice annually or less frequently. This rate dropped by 303 basis points in the same time period.

Our average investment portfolio and cash investments totaled $37.9 million for the three months ended December 31, 2008, a $2.6 million increase from the same period in 2007. This increase reflects the Barnsdall acquisition and purchases of available-for-sale securities in the fourth quarter of fiscal 2008, which were funded by Federal Home Loan Bank advances. These increases were partially offset by a reduction in short-term investments to fund loan growth. The yield on these investments decreased to 3.93% compared to 4.57% in 2007. This yield decrease is primarily due to the 400 basis point drop in the rates on federal funds sold, which is the instrument in which we invest excess funds.

Interest Expense. Total interest expense was $945,000 for the three months ended December 31, 2008, an increase of $41,000 over the three months ended December 31, 2007. Average interest-bearing liabilities were $119.3 million for the period, an increase of $25.8 million, or 27.5% from the same period last year. This increase was due to the Barnsdall acquisition and higher certificates of deposit balances. During the same periods, the average cost of interest-bearing liabilities decreased 70 basis points to 3.14%, compared to 3.84% in the same period last year.

Interest on deposits increased $21,000 over the same period last year. Average interest-bearing deposits were up $18.0 million between the two quarters, with certificates of deposit accounting for an $11.1 million increase. For the same time periods, passbook savings balances, money market savings, and interest-bearing transaction accounts increased $2.5 million, $104,000, and $4.3 million, respectively. Much of this growth is attributable to the Barnsdall acquisition. Barnsdall had $10.5 million in total deposits at March 31, 2008, immediately prior to the acquisition date. Average rates on certificates decreased 91 basis points, to 3.54%, during the current period, compared to 4.45% for the same period last year.

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Interest expense on advances from the Federal Home Loan Bank of Topeka increased $62,000 from the prior year, reflecting an $8.1 million increase in average balances, partially offset by a 56 basis point decrease in average rates.

Net Interest Income. Net interest income increased by $118,000 or 10.7%, to $1.2 million for the three months ended December 31, 2008 from $1.1 million for the three months ended December 31, 2007. The net interest rate spread was 2.64% for the current period, compared to 2.24% in the same period last year. The net interest margin decreased to 3.26% from 3.34% for the same periods.

Provision for Loan Losses. The provision for loan losses was $25,000 for the quarter ended December 31, 2008. No provision was recorded in the quarter ended December 31, 2007. There were $5,000 of net charge-offs in the current quarter, compared to less than $1,000 of net recoveries in the same period last year. Based on our stratification of the loan portfolios using historical loss factors and other data, management believes that the recorded allowance would cover both known and inherent losses in the portfolio that were both probable and estimable.

The evaluation of the level of loan loss allowance is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available or as future events change. The level of the allowance is based on estimates and the ultimate losses may vary from these estimates. The allowance for loan losses was $450,000 at December 31, 2008 and $399,000 at December 31, 2007, and as a percentage of total loans outstanding was 0.41% and 0.42% at December 31, 2008 and 2007, respectively. The decrease in this ratio is mainly reflective of the increase in total loans outstanding. Our nonaccrual loans were $308,000 and $9,000 at December 31, 2008 and 2007, respectively. At December 31, 2008, nonaccrual loans included two real estate loans, each in excess of $100,000, which are in the process of foreclosure. We estimate the collateral value to be more than sufficient to satisfy the debt. The ratios of total nonaccrual loans to total loans as of those dates were .28% and .01%, respectively.

Management assesses the allowance for loan losses monthly. While management uses available information to estimate losses on loans, loan loss provisions may be necessary based on changes in economic conditions. In addition, regulatory agencies, as an integral part of their examination process, periodically review the allowance for loan losses and may require the Bank to recognize additional provisions based on their judgment of information available to them at the time of their examination. The allowance for loan losses as of December 31, 2008 was maintained at a level that represented management’s best estimate of losses in the loan portfolio to the extent they were both probable and reasonably estimable. However, there can be no assurance that the allowance of loan losses will be sufficient to offset any future loan losses.

Noninterest Income. Noninterest income increased to $212,000 for the three months ended December 31, 2008 from $192,000 for the three months ended December 31, 2007. Gains on sales of loans increased $7,000 due to better spreads on rates, and mortgage loan servicing fees increased $5,000, reflecting higher dollar amounts of loans serviced.

Noninterest Expense. Noninterest expense was $2.2 million for the three months ended December 31, 2008. Excluding the other-than-temporary impairment charge, noninterest expense was $1.10 million, increasing $208,000 from $838,000 for the three months ended December 31, 2007. Salaries and benefits increased $136,000, or 28.6%, due to the acquisition of Barnsdall, other additions to staff, and normal salary increases. Stock and stock option awards given under the recently approved Osage Bancshares, Inc. 2007 Stock Compensation and Incentive Plan increased these expenses $34,000. Other benefits increased $14,000, including educational costs and temporary agency fees, and payroll taxes increased $14,000, mainly due to higher payroll and employment taxes paid on restricted stock

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awards. Occupancy expense increased $33,000 primarily as a result of remodeling of the Bartlesville location and the acquisition of Barnsdall. Deposit insurance premiums increased $11,000, reflecting higher deposit balances and a reduced credit amount available for use against the premium assessment. The Company anticipates a significant increase in the cost of federal deposit insurance from current levels of five to seven basis points. The FDIC has recently increased the assessment rate for the most highly rated institutions to between 12 and 14 basis points for the first quarter of 2009 and proposed to set the rate between 10 and 14 basis points thereafter. Assessment rates could be further increased if an institution’s FHLB advances exceed 15% of deposits. The FDIC has also established a program under which it fully guarantees all non-interest bearing transaction accounts and senior unsecured debt of a bank or its holding company. Institutions that did not opt out of the program by December 5, 2008 will be assessed ten basis points for non-interest bearing transaction account balances in excess of $250,000 and 75 basis points of the amount of debt issued. The Company chose not to participate in this program.

Other operating expenses increased by $28,000. Data processing increased $13,000 because of technology upgrades and the addition of Barnsdall. Item processing costs and other charges from correspondent banks increased $9,000 due to higher volumes and some price increases. Directors’ fees increased $9,000 as a result of per meeting fee increases. SEC-related expenses decreased $17,000. The previous year quarter’s fees reflected the costs of establishing the Osage Bancshares, Inc. 2007 Stock Compensation and Incentive Plan and expenses for the Barnsdall acquisition, which were later capitalized.

Provision for Income Taxes. The provision for income taxes decreased $53,000, or 32.0%, reflecting a decrease in taxable income. Excluding the other-than-temporary impairment charge, the effective tax rate was 31% for the three months ended December 31, 2008, and 36% for the three months ended December 31, 2007. The decrease in the effective tax rate reflects a higher proportion of nontaxable income in the current year.

Comparison of Operating Results for the Six Months Ended December 31, 2008 and 2007

General. Net loss for the six months ended December 31, 2008 was $(1.7 million) ($(0.64) per diluted share), a $2.3 million decrease compared to net income of $602,000 ($0.18 per diluted share) for the six months ended December 31, 2007. Excluding the $2.2 million pre-tax and after-tax other-than-temporary impairment charge on the AMF Ultra-Short Mortgage Fund, net income would have been $514,000 ($0.19 per diluted share). The decrease in net income, excluding the impairment charge, resulted mainly from an increase in noninterest expense and provision for loan losses, partially offset by increases in net interest income and noninterest income, and a decrease in the provision for income taxes.

Interest Income. Total interest income increased by $474,000, or 12.1%, to $4.4 million for the six months ended December 31, 2008 from $3.9 million for the same period in 2007 primarily due to an increase in the balance of earning assets. The average balance of total interest-earning assets for the six months ended December 31, 2008 was $148.7 million, an increase of $22.5 million from the average balance of $126.2 million for the six months ended December 31, 2007. The yield on earning assets for the period decreased 29 basis points, and was 5.84% compared to a yield of 6.13% in the same period in 2007.

The primary factor for the increase in interest income was a $478,000, or 15.4% increase in interest from loans. Average loans increased $16.4 million, or 17.7%, from $92.2 million in 2007 to $108.6 million in 2008. There was a 13 basis point decrease in the average yield on loans to 6.55% for the 2008 period from 6.68% in the 2007 period, reflecting lower long-term interest rates, downward repricing of variable-rate loans, and a change in the mix of loans.

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Our average investment portfolio and cash investments totaled $38.2 million for the six months ended December 31, 2008, a $6.0 million or 18.8% increase from the same period in 2007. The yield on these investments decreased to 3.99% compared to 4.63% in 2007. This yield decrease is attributable to much lower overnight rates, and decreases in average yields on the mutual fund investing in short-duration mortgages.

Interest Expense. Total interest expense increased $208,000 or 12.3%, to $1.9 million for the six months ended December 31, 2008 from $1.7 million for the six months ended December 31, 2007. The increase in interest expense resulted from a $29.1 million, or 33.0%, increase in the average balance of interest-bearing liabilities, to $117.4 million for the 2008 period compared to $88.3 million for the 2007 period. The average cost of interest-bearing liabilities decreased 61 basis points, to 3.17% in the current period from 3.78% in the same period of 2007. We had a change in the mix of our deposits, with average interest-bearing deposits up $21.7 million between the two periods. Certificates of deposit accounted for $14.7 million of this increase. For the same time periods, passbook savings account balances increased $2.3 million, and interest-bearing transaction account balances increased $4.5 million. Much of this growth is attributable to the Barnsdall acquisition. Barnsdall had $10.5 million in total deposits at March 31, 2008, immediately prior to the acquisition date. Average rates on certificates of deposit for the current period were 3.61%, decreasing 80 basis points from 4.41% during the same period last year. These rate decreases reflect general market conditions.

Interest expense on FHLB advances increased $122,000 for the six months ended December 31, 2008, or 37.7%, compared to the six months ended December 31, 2007, reflecting an increase in the average balance of advances to $21.8 million for the 2008 period from $14.2 million for the 2007 period, combined with a 47 basis point decrease in the average cost. We have increased advances over the period to fund loan growth and to maintain liquidity.

Net Interest Income. Net interest income increased by $266,000, or 12.0%, to $2.5 million for the six months ended December 31, 2008 from $2.2 million for the six months ended December 31, 2007. The net interest rate spread increased to 2.67% for the 2008 period from 2.36% for the 2007 period, while the net interest margin decreased to 3.34% from 3.49% for the same periods. The increase in spread reflects repricing of our maturing certificates of deposit and advances. The decrease in the net interest margin reflects lower levels of equity available for investment, and a decline in short-term investment rates.

Provision for Loan Losses. The provision for loan losses was $25,000 for the period ended December 31, 2008. No provision was recorded in the period ended December 31, 2007. There were $5,000 of net charge-offs in the current period, compared to $3,000 of net charge-offs in the same period last year. We have seen an increase in loan delinquencies from the prior year, and we increased the allowance for loan losses accordingly. Based on our stratification of the loan portfolios using historical loss factors and other data, management believes that the recorded allowance would cover both known and inherent losses in the portfolio that were both probable and estimable.

Noninterest Income. Noninterest income increased to $420,000 for the six months ended December 31, 2008 from $369,000 for the six months ended December 31, 2007. Service charges on deposit accounts increased $20,000 between the periods, reflecting fee income from the Barnsdall branch. Gains on sales of mortgage loans were up $13,000 due to better spreads on rates, and mortgage loan servicing fees increased $9,000, reflecting higher dollar amounts of loans serviced.

Noninterest Expense. Noninterest expense was $4.4 million for the six months ended December 31, 2008. Excluding the other-than-temporary impairment charge, noninterest expense was $2.1 million, increasing $465,000 from $1.6 million for the six months ended December 31, 2007. Salaries and benefits

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increased $277,000, or 29.5%, due to the acquisition of Barnsdall, other additions to staff, and normal salary increases. Stock and stock option awards given under the recently approved Osage Bancshares, Inc. 2007 Stock Compensation and Incentive Plan increased these expenses $82,000. Other benefits increased $36,000, including educational costs and temporary agency fees, and payroll taxes increased $17,000, mainly due to higher payroll and employment taxes paid on restricted stock awards. Employee insurance costs increased $21,000 during the same period. Occupancy expense increased $77,000 mostly as a result of a branch renovation and the addition of the Barnsdall branch. Data processing increased $25,000 because of technology upgrades and the addition of Barnsdall. Deposit insurance premiums increased $22,000, reflecting higher deposit balances and a reduced credit amount available for use against the premium assessment. Item processing costs and other charges from correspondent banks increased $18,000 due to higher volumes and some price increases. SEC-related expenses decreased $17,000. The previous year’s fees reflected the costs of establishing the Osage Bancshares, Inc. 2007 Stock Compensation and Incentive Plan and expenses for the Barnsdall acquisition, which were later capitalized.

Provision for Income Taxes. The provision for income taxes decreased $85,000, or 24.9%, reflecting an increase in taxable income. Excluding the other-than-temporary impairment charge, the effective tax rate was 33% for the period ended December 31, 2008, and 36% for the period ended December 31, 2007. The decrease in the effective tax rate reflects a higher proportion of nontaxable income in the current year.

Liquidity and Capital Resources

We are required to have enough investments that qualify as liquid assets in order to maintain sufficient liquidity to ensure a safe and sound banking operation. Liquidity may increase or decrease depending upon the availability of funds and comparative yields on investments in relation to the return on loans. Historically, we have maintained liquid assets above levels believed to be adequate to meet the requirements of normal operations, including potential deposit outflows. Cash flow projections are regularly reviewed and updated to assure that adequate liquidity is maintained.

Our liquidity, represented by cash and cash equivalents, is a product of our operating, investing and financing activities. Our primary sources of funds are deposits, scheduled payments, prepayments and maturities of outstanding loans and mortgage-backed securities, maturities of investment securities and other short-term investments and funds provided from operations. While scheduled payments from the amortization of loans and mortgage-backed securities and maturing investment securities and short-term investments are relatively predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions and competition. In addition, we invest excess funds in short-term interest-earning assets, which provide liquidity to meet lending requirements. We also generate cash through borrowings. We utilize FHLB advances to leverage our capital base and provide a portion of the funding needed to manage the interest rate risk presented by our core business of attracting and retaining retail deposits to fund mortgage and consumer loans.

Liquidity management is both a daily and long-term function of business management. Excess liquidity is generally invested in short-term investments such as overnight deposits, and collateralized mortgage obligations. On a longer term basis, we maintain a strategy of investing in various loan products. We use our sources of funds primarily to meet our ongoing commitments, to pay maturing certificates of deposit and savings withdrawals, to fund loan commitments and to maintain our portfolio of mortgage-backed securities and investment securities. At December 31, 2008, the total approved loan origination commitments outstanding amounted to $5.2 million. At the same date, construction loans in process were $3.2 million. We also had $906,000 of unfunded commitments on lines of credit on that date, and $26,000 in standby letters of credit. We had $3.8 million of commitments to sell loans to

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Freddie Mac. Certificates of deposit scheduled to mature in one year or less at December 31, 2008, totaled $52.1 million. Management’s policy is to maintain deposit rates at levels that are competitive with other local financial institutions. Based on the competitive rates and on historical experience, management believes that a significant portion of maturing deposits will remain with Osage Federal. In addition, at December 31, 2008, our total collateralized borrowing limit was $59.9 millionof which we had $22.9 million in FHLB advances outstanding. We are also party to letters of credit with the FHLB in the amount of $17.0 million. These letters of credit are used to collateralize the deposits of certain governmental agencies to replace excess deposit insurance that is no longer available. In turn, they reduce the amount we may borrow from the FHLB by the same amount, giving us the ability at December 31, 2008 to borrow an additional $20.0 million from the FHLB of Topeka as a funding source to meet commitments and for liquidity purposes.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4T. CONTROLS AND PROCEDURES

The Company’s management evaluated, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, the effectiveness of the Company’s disclosure controls and procedures, as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

There were no changes in the Company’s internal control over financial reporting that occurred during the Company’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a) Unregistered Sales of Equity Securities. Not applicable.

(b) Use of Proceeds. Not applicable

(c) Issuer Purchases of Equity Securities.

Period	(a) Total Number Of Shares (or Units) Purchased	(b) Average Price Paid per Share (or Unit)	(c) Total Number of Shares (or Units) Purchased as Part Of Publicly Announced Plans or Programs (1)	(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
October 1 through 31, 2008	275,000	$7.46	414,068	55,932
November 1 through 30, 2008	--	--	254,068	55,932
December 1 through 31, 2008	500	7.46	254,568	55,432
Total	275,500	$7.46	254,568	55,432

__________

(1) On March 26, 2008, the Registrant announced that its Board of Directors had approved a stock repurchase program for up to 5% of outstanding shares (approximately 160,000 shares). On October 23, 2008, the Registrant announced that its Board of Directors had approved an additional stock repurchase program for up to 10% of its outstanding shares (approximately 310,000 shares). The new repurchase program commenced immediately upon completion of the 5% stock repurchase program announced on March 26, 2008, in which 20,932 shares were purchased in the October 1-31, 2008 period. 46,832 remain available to be repurchased as of January 27, 2009.

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

On November 19, 2008, the Company held its annual meeting of stockholders at which the following items were voted on.

(1) Election of Directors

Nominee	For	Withheld
Milton V. Labadie	2,168,881	55,703
Mark A. Formby	2,160,412	64,172

There were no abstentions or broker non-votes in the election of directors.

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ITEM 6. EXHIBITS

The following exhibits are either being filed with or incorporated by reference in this quarterly report on Form 10-Q:

Number	Description
3(i)	Articles of Incorporation *
3(ii)	Bylaws **
4	Form of Common Stock Certificate ***
10.1	Executive Salary Continuation Plan and Split Dollar Agreements with Mark S. White****
10.2	Executive Salary Continuation Plan and Split Dollar Agreements with Richard Trolinger****
10.3	Executive Salary Continuation Plan and Split Dollar Agreements with Martha Hayes****
10.4	Executive Salary Continuation Plan and Split Dollar Agreements with Sue Allen Smith****
10.5	Director Supplemental Income Plan and Split Dollar Agreements with Mark A. Formby****
10.6	Director Supplemental Income Plan and Split Dollar Agreements with Harvey Payne****
10.7	Director Supplemental Income Plan and Split Dollar Agreements with Gary Strahan****
10.8	Osage Bancshares, Inc. 2004 Stock Option Plan*****
10.9	Osage Federal Bank 2004 Restricted Stock Plan*****
10.10	Osage Bancshares, Inc. 2007 Stock Compensation and Incentive Plan ******
10.11	Amendment to Executive Salary Continuation Plan and Split Dollar Agreements with Mark S. White *******
10.12	Amendment to Executive Salary Continuation Plan and Split Dollar Agreements with Richard Trolinger *******
10.13	Amendment to Executive Salary Continuation Plan and Split Dollar Agreements with Martha M. Hayes *******
10.14	Amendment to Executive Salary Continuation Plan and Split Dollar Agreements with Sue Allen Smith *******
10.15	Amendment to Director Supplemental Income Plan and Split Dollar Agreements with Mark A. Formby *******
10.16	Amendment to Director Supplemental Income Plan and Split Dollar Agreements with Harvey Payne *******
10.17	Amendment to Director Supplemental Income Plan and Split Dollar Agreements with Gary Strahan *******
31.1	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
31.2	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
32	Section 1350 Certification

*	Incorporated by reference from Pre-Effective Amendment No. 1 to the Registrant’s Registration Statement on Form S-1 (File No. 333-137377).
**	Incorporated by reference from Registrant’s Annual Report on Form 10-KSB for the fiscal year ended June 30, 2007.
***	Incorporated by reference from the Registrant’s Registration Statement on Form S-1 (File No. 333-137377)
****	Incorporated by reference from the Quarterly Report on Form 10-QSB of Osage Federal Financial, Inc. for the Quarter Ended March 31, 2005.
*****	Incorporated by reference to the Registrant’s Registration Statement on Form S-8 (File No. 333-140308).
******	Incorporated by reference from Registrant’s Registration Statement on Form S-8 (File No. 333-149136).
*******	Incorporated by reference from Registrant’s Current Report on Form 8-K filed January 29, 2008.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

OSAGE BANCSHARES, INC.

Date: February 17, 2009	/s/ Mark S. White
	Mark S. White, President
	(Duly Authorized Representative)

Date: February 17, 2009		/s/ Sue Allen Smith
		Sue Allen Smith, Vice President
	:	(Principal Financial Officer)

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