**EXHIBIT
      13**







**FINANCIAL
      STATEMENTS**









AJS
      BANCORP, INC.


Midlothian,
      Illinois





CONSOLIDATED
      FINANCIAL STATEMENTS


December
      31, 2006 and 2005








CONTENTS








REPORT
                OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
            F-2CONSOLIDATED
                FINANCIAL STATEMENTSCONSOLIDATED
                STATEMENTS OF FINANCIAL CONDITION
            F-3CONSOLIDATED
                STATEMENTS OF INCOME
            F-4CONSOLIDATED
                STATEMENTS OF STOCKHOLDERS’ EQUITY
            F-5CONSOLIDATED
                STATEMENTS OF CASH FLOWS
            F-7NOTES
                TO CONSOLIDATED FINANCIAL STATEMENTS
            F-9








All
      schedules are omitted as the required information either is not applicable
      or is
      included in the consolidated financial statements or related notes.










REPORT
      OF
      INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM








Board
      of
      Directors


AJS
      Bancorp, Inc.


Midlothian,
      Illinois








We
      have
      audited the accompanying consolidated statements of financial condition of
      AJS
      Bancorp, Inc. as of December 31, 2006 and 2005, and the related consolidated
      statements of income, stockholders’ equity, and cash flows for each of the three
      years in the period ended December 31, 2006. These financial statements are
      the
      responsibility of the Company’s management. Our responsibility is to express an
      opinion on these financial statements based on our audits.





We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether the financial
      statements are free of material misstatement. An audit includes examining,
      on a
      test basis, evidence supporting the amounts and disclosures in the financial
      statements. An audit also includes assessing the accounting principles used
      and
      significant estimates made by management, as well as evaluating the overall
      financial statement presentation. We believe that our audits provide a
      reasonable basis for our opinion.





In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the financial position of AJS Bancorp, Inc. as of
      December 31, 2006 and 2005, and the results of its operations and its cash
      flows
      for each of the three years in the period ended December 31, 2006, in conformity
      with U.S. generally accepted accounting principles.





/s/
                Crowe Chizek and Company LLCCrowe
                Chizek and Company LLC


Oak
      Brook, Illinois


March
      7,
      2007




F-2


AJS
      BANCORP, INC.


CONSOLIDATED
      STATEMENTS OF FINANCIAL CONDITION


December
      31, 2006 and 2005


(Dollars
      in thousands)





2006
            
            2005**ASSETS**Cash
                and cash equivalentsCash
                and due from banks (interest-earning: 2006 - $32,571; 2005 -
                $11,477)
            
            $
            36,617
            
            $
            14,776Federal
                funds sold
            
            
            7,231
            
            
            454Total
                cash and cash equivalents
            
            
            43,848
            
            
            15,230Certificates
                of deposit
            
            
            5,490
            
            
            8,584Securities
                available for sale
            
            
            68,774
            
            
            71,239Securities
                held to maturity (fair value: 2006 - $204; 2005 - $295)
            
            
            204
            
            
            295Loans,
                net of allowance of $1,619 - 2006 and $1,701 - 2005
            
            
            138,377
            
            
            151,768Federal
                Home Loan Bank stock
            
            
            2,450
            
            
            3,416Premises
                and equipment
            
            
            4,342
            
            
            4,541Accrued
                interest receivable
            
            
            1,021
            
            
            960Other
                assets
            
            
            2,007
            
            
            1,872Total
                assets
            
            $
            266,513
            
            $
            257,905**LIABILITIES
                AND STOCKHOLDERS’ EQUITY**LiabilitiesDeposits
            
            $
            202,176
            
            $
            190,407Federal
                Home Loan Bank advances
            
            
            28,750
            
            
            32,750Advance
                payments by borrowers for taxes and insurance
            
            
            1,655
            
            
            1,746Other
                liabilities and accrued interest payable
            
            
            5,183
            
            
            4,750Total
                liabilities
            
            
            237,764
            
            
            229,653Commitments
                and contingent liabilities (note 14)Stockholders’
                equityPreferred
                stock, $.01 par value, 20,000,000 shares authorized; none
                issued
            
            
            -
            
            
            -Common
                stock, $.01 par value, 50,000,000 shares authorized; 2,444,521 shares
                issued
            
            
            24
            
            
            24Additional
                paid-in capital
            
            
            10,428
            
            
            10,839Treasury
                stock, at cost (2006 - 310,217 shares; 2005 - 296,714
                shares)
            
            
            (7,256
            )
            
            (6,931
            )Unearned
                RRP shares
            
            
            -
            
            
            (486
            )Retained
                earnings
            
            
            26,368
            
            
            25,820Accumulated
                other comprehensive loss
            
            
            (815
            )
            
            (1,014
            )Total
                stockholders’ equity
            
            
            28,749
            
            
            28,252Total
                liabilities and stockholders’ equity
            
            $
            266,513
            
            $
            257,905







See
      accompanying notes to consolidated financial statements.


F-3


AJS
      BANCORP, INC.


CONSOLIDATED
      STATEMENTS OF INCOME


Years
      ended December 31, 2006, 2005, and 2004


(Dollars
      in thousands, except per share data)


2006
            
            2005
            
            2004Interest
                and dividend incomeLoans
            
            $
            9,250
            
            $
            9,127
            
            $
            9,405Securities
            
            
            2,874
            
            
            2,682
            
            
            2,226Interest-earning
                deposits and other
            
            
            1,227
            
            
            1,075
            
            
            1,037Federal
                funds sold
            
            
            238
            
            
            64
            
            
            69Total
                interest income
            
            
            13,589
            
            
            12,948
            
            
            12,737Interest
                expenseDeposits
            
            
            5,736
            
            
            4,606
            
            
            4,046Federal
                Home Loan Bank advances and other
            
            
            1,281
            
            
            1,417
            
            
            1,132Total
                interest expense
            
            
            7,017
            
            
            6,023
            
            
            5,178Net
                interest income
            
            
            6,572
            
            
            6,925
            
            
            7,559Provision
                for loan losses
            
            
            (28
            )
            
            (130
            )
            
            (112
            )Net
                interest income after provision for loan losses
            
            
            6,600
            
            
            7,055
            
            
            7,671Noninterest
                incomeService
                fees
            
            
            509
            
            
            514
            
            
            502Gain
                on sale of other real estate
            
            
            2
            
            
            6
            
            
            2Insurance
                commissions
            
            
            188
            
            
            195
            
            
            232Gain
                on sale of loans
            
            
            54
            
            
            27
            
            
            -Rental
                income
            
            
            139
            
            
            124
            
            
            109Correspondent
                fees
            
            
            4
            
            
            15
            
            
            26Other
            
            
            43
            
            
            55
            
            
            62Total
                noninterest income
            
            
            939
            
            
            936
            
            
            933Noninterest
                expenseCompensation
                and employee benefits
            
            
            3,460
            
            
            3,481
            
            
            3,621Occupancy
                expense
            
            
            850
            
            
            897
            
            
            781Data
                processing expense
            
            
            368
            
            
            392
            
            
            378Advertising
                and promotion
            
            
            322
            
            
            404
            
            
            372Professional
            
            
            217
            
            
            224
            
            
            147Postage
                and supplies
            
            
            203
            
            
            163
            
            
            175Bank
                security
            
            
            130
            
            
            130
            
            
            124Other
            
            
            538
            
            
            509
            
            
            593Total
                noninterest expense
            
            
            6,088
            
            
            6,200
            
            
            6,191Income
                before income taxes
            
            
            1,451
            
            
            1,791
            
            
            2,413Income
                taxes
            
            
            540
            
            
            694
            
            
            833Net
                income
            
            $
            911
            
            $
            1,097
            
            $
            1,580Earnings
                per shareBasic
            
            $
            .43
            
            $
            .51
            
            $
            .70Diluted
            
            
            .43
            
            
            .50
            
            
            .69







See
      accompanying notes to consolidated financial statements.





F-4


AJS
      BANCORP, INC.


CONSOLIDATED STATEMENTS
      OF STOCKHOLDERS’ EQUITY


Years
      ended December 31, 2006, 2005, and 2004


(Dollars
      in thousands, except per share data)








AccumulatedAdditional
            
            Unearned
            
            Unearned
            
            
            
            OtherCommon
            
            Paid-In
            
            Treasury
            
            Stock
            
            ESOP
            
            Retained
            
            ComprehensiveStock
            
            Capital
            
            Stock
            
            Awards
            
            Shares
            
            Earnings
            
            Income
                (Loss)
            
            TotalBalance
                at January 1, 2004
            
            $
            24
            
            $
            10,972
            
            $
            (1,075
            )
            $
            (924
            )
            $
            (377
            )
            $
            23,257
            
            $
            228
            
            $
            32,105Purchase
                of 125,864 shares of treasury stock
            
            
            -
            
            
            -
            
            
            (3,000
            )
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (3,000
            )ESOP
                shares earned
            
            
            -
            
            
            272
            
            
            -
            
            
            -
            
            
            188
            
            
            -
            
            
            -
            
            
            460Reclassification
                due to changes in fair value of common stock in ESOP subject to contingent
                repurchase obligation
            
            
            -
            
            
            (438
            )
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (438
            )Stock
                awards earned
            
            
            -
            
            
            24
            
            
            -
            
            
            242
            
            
            -
            
            
            -
            
            
            -
            
            
            266Comprehensive
                incomeNet
                income
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            1,580
            
            
            -
            
            
            1,580Change
                in unrealized gain (loss) on securities available for sale, net of
                taxes
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (443
            )
            
            (443
            )Total
                comprehensive income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            1,137Balance
                at December 31, 2004
            
            
            24
            
            
            10,830
            
            
            (4,075
            )
            
            (682
            )
            
            (189
            )
            
            24,837
            
            
            (215
            )
            
            30,530Purchase
                of 124,950 shares of treasury stock
            
            
            -
            
            
            -
            
            
            (2,976
            )
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (2,976
            )Allocation
                of stock awards
            
            
            -
            
            
            2
            
            
            -
            
            
            (2
            )
            
            -
            
            
            -
            
            
            -
            
            
            -ESOP
                shares earned
            
            
            -
            
            
            258
            
            
            -
            
            
            -
            
            
            189
            
            
            -
            
            
            -
            
            
            447Reclassification
                due to changes in fair value of common stock in ESOP subject to contingent
                repurchase obligation
            
            
            -
            
            
            (298
            )
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (298
            )Stock
                awards earned
            
            
            -
            
            
            55
            
            
            -
            
            
            198
            
            
            -
            
            
            -
            
            
            -
            
            
            253Stock
                options exercised
            
            
            -
            
            
            (8
            )
            
            120
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            112Cash
                dividend ($0.10 per share)
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (114
            )
            
            -
            
            
            (114
            )Comprehensive
                incomeNet
                income
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            1,097
            
            
            -
            
            
            1,097Change
                in unrealized gain (loss) on securities available for sale, net of
                taxes
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (799
            )
            
            (799
            )Total
                comprehensive income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            298




(Continued)





F-5




AJS
      BANCORP, INC.


CONSOLIDATED STATEMENTS
      OF STOCKHOLDERS’ EQUITY


Years
      ended December 31, 2006, 2005, and 2004


(Dollars
      in thousands, except per share data)




AccumulatedAdditional
            
            
            
            Unearned
            
            Unearned
            
            
            
            OtherCommon
            
            Paid-In
            
            Treasury
            
            Stock
            
            ESOP
            
            Retained
            
            ComprehensiveStock
            
            Capital
            
            Stock
            
            Awards
            
            Shares
            
            Earnings
            
            Income
                (Loss)
            
            TotalBalance
                at December 31, 2005
            
            
            24
            
            
            10,839
            
            
            (6,931
            )
            
            (486
            )
            
            -
            
            
            25,820
            
            
            (1,014
            )
            
            28,252Transfer
                to additional paid-in capital
            
            
            -
            
            
            (486
            )
            
            -
            
            
            486
            
            
            -
            
            
            -
            
            
            -
            
            
            -Purchase
                of 14,503 shares treasury stock
            
            
            -
            
            
            -
            
            
            (340
            )
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (340
            )Allocation
                of stock awards
            
            
            -
            
            
            (11
            )
            
            11
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Reclassification
                due to changes in fair value of common stock in ESOP subject to contingent
                repurchase obligation
            
            
            -
            
            
            (199
            )
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (199
            )Stock
                awards earned
            
            
            -
            
            
            229
            
            
            (28
            )
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            201Stock
                options exercised
            
            
            -
            
            
            (2
            )
            
            32
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            30Stock
                option compensation expense
            
            
            -
            
            
            58
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            58Cash
                dividend ($0.41 per share)
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (363
            )
            
            -
            
            
            (363
            )Comprehensive
                incomeNet
                income
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            911
            
            
            -
            
            
            911Change
                in unrealized gain on securities available for sale, net of
                taxes
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            199
            
            
            199Total
                comprehensive income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            1,110Balance
                at December 31, 2006
            
            $
            24
            
            $
            10,428
            
            $
            (7,256
            )
            $
            -
            
            $
            -
            
            $
            26,368
            
            $
            (815
            )
            $
            28,749





See
      accompanying notes to consolidated financial statements.





F-6


AJS
      BANCORP, INC.


CONSOLIDATED
      STATEMENTS OF CASH FLOWS


Years
      ended December 31, 2006, 2005, and 2004


(Dollars
      in thousands)




2006
            
            2005
            
            2004**Cash
                flows from operating activities**Net
                income
            
            $
            911
            
            $
            1,097
            
            $
            1,580Adjustments
                to reconcile net income to net cash provided by operating
                activitiesDepreciation
            
            
            267
            
            
            298
            
            
            310Provision
                for loan losses
            
            
            (28
            )
            
            (130
            )
            
            (112
            )Deferred
                income taxes
            
            
            (62
            )
            
            (403
            )
            
            298Premium
                amortization on securities, net
            
            
            113
            
            
            83
            
            
            89Stock
                award compensation expense
            
            
            201
            
            
            253
            
            
            266ESOP
                compensation expense
            
            
            -
            
            
            447
            
            
            460Stock
                option compensation expense
            
            
            58
            
            
            -
            
            
            -Federal
                Home Loan Bank stock dividends
            
            
            -
            
            
            (457
            )
            
            (847
            )Dividend
                reinvestments on securities available for sale
            
            
            (447
            )
            
            (288
            )
            
            (124
            )Gain
                on sale of loans
            
            
            (54
            )
            
            (27
            )
            
            -Changes
                inAccrued
                interest receivable
            
            
            (61
            )
            
            9
            
            
            (2
            )Other
                assets
            
            
            114
            
            
            (609
            )
            
            394Accrued
                interest payable
            
            
            253
            
            
            5
            
            
            59Other
                liabilities
            
            
            (334
            )
            
            817
            
            
            (586
            )Net
                cash (used in) provided by   operating
                activities
            
            
            931
            
            
            1,095
            
            
            1,785**Cash
                flows from investing activities**Securities
                available for salePurchases
            
            
            (16,695
            )
            
            (23,484
            )
            
            (35,706
            )Maturities
                and principal payments
            
            
            19,821
            
            
            12,627
            
            
            16,009Securities
                held to maturityPurchases
            
            
            -
            
            
            (200
            )
            
            -Maturities
                and principal payments
            
            
            91
            
            
            37
            
            
            45Purchase
                of certificates of deposit
            
            
            -
            
            
            (1,195
            )
            
            (9,783
            )Maturities
                of certificates of deposit
            
            
            3,094
            
            
            2,394
            
            
            -Loan
                originations, net
            
            
            10,109
            
            
            9,676
            
            
            (7,549
            )Proceeds
                from loan sales
            
            
            3,364
            
            
            2,004
            
            
            -Proceeds
                from sale of other real estate
            
            
            -
            
            
            -
            
            
            21Purchase
                of equipment
            
            
            (68
            )
            
            (79
            )
            
            (195
            )Proceeds
                from the sale of Federal Home Loan Bank stock
            
            
            966
            
            
            9,500
            
            
            2,000Net
                cash provided by (used in) investing activities
            
            
            20,682
            
            
            11,280
            
            
            (35,158
            )


(Continued)


F-7


AJS
      BANCORP, INC.


CONSOLIDATED
      STATEMENTS OF CASH FLOWS


Years
      ended December 31, 2006, 2005, and 2004


(Dollars
      in thousands)




2006
            
            2005
            
            2004**Cash
                flows from financing****activities**Dividends
                paid
            
            $
            (363
            )
            $
            (114
            )
            $
            -Net
                change in deposits
            
            
            11,769
            
            
            (7,649
            )
            
            14,209Purchases
                of Federal Home Loan Bank advances
            
            
            -
            
            
            1,000
            
            
            23,450Maturities
                of Federal Home Loan Bank advances
            
            
            (4,000
            )
            
            (4,500
            )
            
            (4,200
            )Purchase
                of common stock
            
            
            (340
            )
            
            (2,976
            )
            
            (3,000
            )Proceeds
                from exercise of stock options
            
            
            30
            
            
            112
            
            
            -Net
                change in advance payments by borrowers for taxes and
                insurance
            
            
            (91
            )
            
            (49
            )
            
            144Net
                cash provided by (used in) financing activities
            
            
            7,005
            
            
            (14,176
            )
            
            30,603Net
                change in cash and cash equivalents
            
            
            28,618
            
            
            (1,801
            )
            
            (2,770
            )Cash
                and cash equivalents at beginning of year
            
            
            15,230
            
            
            17,031
            
            
            19,801**Cash
                and cash equivalents at end of year**
            
            $
            43,848
            
            $
            15,230
            
            $
            17,031Supplemental
                disclosures of cash flow informationCash
                paid during the year forInterest
            
            $
            6,764
            
            $
            6,018
            
            $
            5,119Income
                taxes
            
            
            688
            
            
            1,069
            
            
            616





See
      accompanying notes to consolidated financial statements.





F-8


AJS
      BANCORP, INC.


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


December
      31, 2006 and 2005


(Dollars
      in thousands, except per share data)




**NOTE
      1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**





Principles
      of Consolidation :
      The
      consolidated financial statements include the accounts of AJS Bancorp, Inc.
      (“the Company”) and its wholly owned subsidiary, A. J. Smith Federal Savings
      Bank (“the Bank”). All significant intercompany balances and transactions have
      been eliminated. The Company is 57.5% owned by a mutual holding company, AJS
      Bancorp, MHC. These consolidated financial statements do not include AJS
      Bancorp, MHC and its results or financial condition.





Nature
      of Operations :
      The
      only business of the Company is ownership of the Bank. The Bank is a federally
      chartered savings bank with operations located in Midlothian and Orland Park,
      Illinois. The Bank provides single-family residential and home equity loans
      and
      commercial loans to customers and accepts deposits from customers located in
      the
      southern suburbs of Chicago, Illinois. Substantially all of the loans are
      secured by specific items of collateral including business assets, consumer
      assets, and commercial and residential real estate. Commercial loans are
      expected to be repaid from cash flows from operations of businesses. There
      are
      no significant concentrations of loans to any one industry or customer. However,
      the ability of the customers to repay their loans is dependent on the real
      estate and general economic conditions in the area.





Use
      of
      Estimates :
      To
      prepare financial statements in conformity with U.S. generally accepted
      accounting principles, management makes estimates and assumptions based on
      available information. These estimates and assumptions affect the amounts
      reported in the financial statements, and the disclosures provided and future
      results could differ. The allowance for loan losses and fair values of financial
      instruments are particularly subject to change.





Cash
      Flows :
      Cash
      and cash equivalents include cash, deposits with other financial institutions
      with original maturities of less than 90 days, and federal funds sold. Net
      cash
      flows are reported for loan and deposit transactions.





Securities :
      Debt
      securities are classified as held to maturity and carried at amortized cost
      when
      management has the positive intent and ability to hold them to maturity. Debt
      securities are classified as available for sale when they might be sold before
      maturity. Equity securities with readily determinable fair values are classified
      as available for sale. Securities available for sale are carried at fair value,
      with unrealized holding gains and losses reported in other comprehensive income.
      Other securities such as Federal Home Loan Bank stock are carried at
      cost.





Interest
      income includes amortization of purchase premium or discount. Premiums and
      discounts on securities are amortized on the level-yield method without
      anticipating prepayments, except for mortgage backed securities where
      prepayments are anticipated. Gains


(Continued)


F-9


AJS
      BANCORP, INC.


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


December
      31, 2006 and 2005


(Dollars
      in thousands, except per share data)




**NOTE
      1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES** (Continued)





and
      losses on sales are based on the amortized cost of the security sold. Securities
      are written down to fair value when a decline in fair value is not temporary.





Declines
      in the fair value of securities below their cost that are other than temporary
      are reflected as realized losses. In estimating other-than-temporary losses,
      management considers: the length of time and extent that fair value has been
      less than cost, the financial condition and near term prospects of the issuer,
      and the Company’s ability and intent to hold the security for a period
      sufficient to allow for any anticipated recovery in fair value.





Loans
      Held for Sale :
      Mortgage loans originated and intended for sale in the secondary market are
      carried at the lower of aggregate cost or market, as determined by outstanding
      commitments from investors. Net unrealized losses, if any, are recorded as
      a
      valuation allowance and charged to earnings.





Mortgage
      loans held for sale are generally sold with servicing rights retained. The
      carrying value of mortgage loans sold is reduced by the cost allocated to the
      servicing right. Gains and losses on sales of mortgage loans are based on the
      difference between the selling price and the carrying value of the related
      loan
      sold. At December 31, 2006 and December 31, 2005, there were no loans held
      for
      sale.





Loans :
      Loans
      that management has the intent and ability to hold for the foreseeable future
      or
      until maturity or payoff are reported at the principal balance outstanding,
      net
      of unearned interest, deferred loan fees and costs, and an allowance for loan
      losses.





Interest
      income is reported on the interest method and includes amortization of net
      deferred loan fees and costs over the contractual loan term. Interest income
      is
      accrued on the unpaid principal balance. Loan origination fees, net of certain
      direct origination costs, are deferred and recognized in interest income using
      the level-yield method without anticipating prepayments. Interest income on
      mortgage and commercial loans is discontinued at the time the loan is 90 days
      delinquent unless the loan is well-secured and in process of collection.
      Consumer and credit card loans are typically charged off no later than 120
      days
      past due. Past due status is based on the contractual terms of the loan. In
      all
      cases, loans are placed on nonaccrual or charged-off at an earlier date if
      collection of principal or interest is considered doubtful.





Allowance
      for Loan Losses :
      The
      allowance for loan losses is a valuation allowance for probable incurred credit
      losses, increased by the provision for loan losses and decreased by charge-offs
      less recoveries. Management estimates the allowance balance required using
      past
      loan loss experience; known and inherent losses in the nature and volume of
      the
      portfolio that are both probable and estimable; information about specific
      borrower situations; and estimated


(Continued)


F-10


AJS
      BANCORP, INC.


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


December
      31, 2006 and 2005


(Dollars
      in thousands, except per share data)







**NOTE
      1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES** (Continued)




collateral
      values, economic conditions, and other factors. Allocations of the allowance
      may
      be made for specific loans, but the entire allowance is available for any loan
      that, in management’s judgment, should be charged off. Loan losses are charged
      against the allowance where management believes that the uncollectiblity of
      a
      loan balance is confirmed.




The
      allowance consists of specific and general components. The specific component
      relates to loans that are individually classified as impaired or loans otherwise
      classified as substandard or doubtful. The general component covers
      non-classified loans and is based on historical loss experience adjusted for
      current factors.





A
      loan is
      impaired when full payment under the loan terms is not expected. Impairment
      is
      evaluated in total for smaller-balance loans of similar nature such as
      residential mortgage and consumer loans and on an individual loan basis for
      other loans. If a loan is impaired, a portion of the allowance is allocated
      so
      that the loan is reported, net, at the present value of estimated future cash
      flows using the loan’s existing rate or at the fair value of collateral if
      repayment is expected solely from the collateral.





Premises
      and Equipment :
      Land is
      carried at cost. Premises and equipment are stated at cost less accumulated
      depreciation. Depreciation is calculated using primarily the straight-line
      method and is provided over the estimated useful lives of 15 to 50 years for
      premises and 1 to 10 years for equipment.





Servicing
      Rights :
      Servicing rights are recognized as assets for the allocated value of retained
      servicing rights on loans sold. Servicing rights are expensed in proportion
      to
      and over the period of estimated net servicing revenues. Impairment is evaluated
      based on the fair value of the rights, using groupings of the underlying loans
      as to interest rates and prepayment characteristics. Any impairment of a
      grouping is reported as a valuation allowance. Servicing rights are not material
      and are included with other assets on the consolidated statement of financial
      condition.





Servicing
      fee income is recorded for fees earned for servicing loans. The fees are based
      on a contractual percentage of the outstanding principal or a fixed amount
      per
      loan and are recorded as income when earned. The amortization of mortgage
      servicing rights is netted against loan servicing fee income.





Other
      Real Estate Owned :
      Real
      estate properties acquired through or in lieu of loan foreclosure are recorded
      at the lower of cost or fair value less estimated costs to sell. Costs relating
      to improvement of property are capitalized, whereas costs relating to holding
      property are expensed.


(Continued)


F-11


AJS
      BANCORP, INC.


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


December
      31, 2006 and 2005


(Dollars
      in thousands, except per share data)




**NOTE
      1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES** (Continued)





Valuations
      are periodically performed by management, and an allowance for losses is
      established by a charge to income if the carrying value of a property exceeds
      its estimated fair value less estimated costs to sell. There was no other real
      estate owned at December 31, 2006 or 2005.





Long-term
      Assets : **** Premises
      and equipment, core deposit and other intangible assets, and other long-term
      assets are reviewed for impairment when events indicate their carrying amount
      may not be recoverable from future undiscounted cash flows. If impaired, the
      assets are recorded at fair value.





Income
      Taxes :
      Income
      tax expense is the total of the current year income tax due or refundable and
      the change in deferred tax assets and liabilities. Deferred tax assets and
      liabilities are the expected future tax amounts for the temporary differences
      between carrying amounts and tax bases of assets and liabilities, computed
      using
      enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets
      to the amount expected to be realized.





Loss
      Contingencies :
      Loss
      contingencies, including claims and legal actions arising in the ordinary course
      of business, are recorded as liabilities when the likelihood of loss is probable
      and an amount or range of loss can be reasonably estimated. Management does
      not
      believe there now are such matters that will have a material effect on the
      financial statements.





Loan
      Commitments and Related Financial Statements :
      Financial instruments include off-balance-sheet credit instruments, such as
      commitments to make loans and commercial letters of credit, issued to meet
      customer financing needs. The face amount for these items represents the
      exposure to loss, before considering customer collateral or ability to repay.
      Such financial instruments are recorded when they are funded.





Fair
      Value of Financial Instruments :
      Fair
      values of financial instruments are estimated using relevant market information
      and other assumptions, as more fully disclosed in a separate note. Fair value
      estimates involve uncertainties and matters of significant judgment regarding
      interest rates, credit risk, prepayments, and other factors, especially in
      the
      absence of broad markets for particular items. Changes in assumptions or in
      market conditions could significantly affect the estimates.





Earnings
      Per Common Share :
      Basic
      earnings per common share is net income divided by the weighted average number
      of common shares outstanding during the period. Employee stock ownership plan
      shares are considered outstanding for this calculation unless unearned. Diluted
      earnings per common share includes the dilutive effect of additional potential
      common shares issuable under stock options and the vesting of stock awards.
      Earnings and dividends per share are restated for all stock splits and dividends
      through the date of issue of the financial statements.


(Continued)


F-12


AJS
      BANCORP, INC.


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


December
      31, 2006 and 2005


(Dollars
      in thousands, except per share data)




**NOTE
      1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES** (Continued)





Comprehensive
      Income :
      Comprehensive income consists of net income and other comprehensive income.
      Other comprehensive income includes unrealized gains and losses on securities
      available for sale, which are also recognized as separate components of
      stockholders’ equity.





Employee
      Stock Ownership Plan (“ESOP”) :
      The
      cost of shares issued to the ESOP but not yet allocated to participants is
      presented in the consolidated statement of financial condition as a reduction
      of
      stockholders’ equity. Compensation expense is recorded based on the market price
      of the shares as they are committed to be released for allocation to participant
      accounts. The difference between the market price and the cost of the shares
      committed to be released is recorded as an adjustment to paid-in capital.
      Dividends on ESOP shares reduce retained earnings; dividends on unearned ESOP
      shares are used to reduce debt service. Shares are considered outstanding in
      the
      earnings per share calculations as they are committed to be released;
      unallocated shares are not considered outstanding. Because participants may
      require the Company to purchase their ESOP shares upon termination of their
      employment and certain predetermined dates according to the ESOP plan document,
      the fair value of the put-able allocated ESOP shares is reclassified from
      stockholders’ equity and included in other liabilities.





Stock
      Compensation : **** Effective
      January 1, 2006, the Company adopted Statement of Financial Accounting Standards
      (“SFAS”) No. 123R, “Share Based Payment.” The Company elected to utilize
      the modified prospective transition method; therefore, prior period results
      were
      not restated. The Company has recorded stock-based employee compensation cost
      using the fair value method starting in 2006. For 2006, adopting this standard
      resulted in a reduction of income before income taxes of $58,000, a reduction
      in
      net income of $36,000, and a decrease in basic and diluted earnings per share
      of
      $0.02 and $0.01.





Prior
      to
      January 1, 2006, employee compensation expense under stock options was
      reported using
      the
      intrinsic value method; therefore, no stock-based compensation cost is reflected
      in net income
      for the years ending December 31, 2005 and 2004, as all options granted had
      an
      exercise price equal to or greater than the market price of the underlying
      common stock at date of grant.


(Continued)


F-13





AJS
      BANCORP, INC.


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


December
      31, 2006 and 2005


(Dollars
      in thousands, except per share data)





**NOTE
      1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES** (Continued)





The
      following table illustrates the effect on net income and earnings per share
      if
      expense was measured using the fair value recognition provisions of FASB
      Statement No. 123, *Accounting
      for Stock-Based Compensation,* for
      the
      years ending December 31, 2005 and 2004.





2005
            
            2004Net
                income as reported
            
            $
            1,097
            
            $
            1,580Deduct:
                Stock-based compensation expense determined under fair value based
                method
            
            
            (24
            )
            
            (24
            )Pro
                forma net income
            
            $
            1,073
            
            $
            1,556Basic
                earnings per share as reported
            
            $
            .51
            
            $
            .70Pro
                forma basic earnings per share
            
            
            .50
            
            
            .69Diluted
                earnings per share as reported
            
            
            .50
            
            
            .69Pro
                forma diluted earnings per share
            
            
            .49
            
            
            .68





Dividend
      Restriction :
      Banking
      regulations require maintaining certain capital levels and may limit the
      dividends paid by the bank to the holding company or by the holding company
      to
      the stockholders. These restrictions pose no practical limit on the ability
      of
      the bank or the holding company to pay dividends at historical
      levels.





Operating
      Segment :
      Internal financial information is primarily reported and aggregated in a single
      line of business, banking. Accordingly, all of the financial service operations
      are considered by management to be aggregated in one reportable operating
      segment.





Reclassifications :
      Certain
      items on the prior year financial statements have been reclassified with no
      effect on net income to conform to the current year presentation.





Adoption
      of New Accounting Standards :
      Effective January 1, 2006, the Company adopted Statement of Financial Accounting
      Standards (“SFAS”) No. 123(R), *Share-based
      Payment* .
      See
“Stock Compensation” above for further discussion of the effect of adopting this
      standard.





SAB
      108:
      In September 2006, the Securities and Exchange Commission (SEC) released Staff
      Accounting Bulletin No. 108, *Considering
      the Effects of Prior Year Misstatements when Quantifying Misstatements in
      Current Year Financial Statements (SAB 108),* which
      is
      effective for fiscal years ending on or after November 15, 2006. SAB 108
      provides guidance on how the effects of prior-year uncorrected financial
      statement misstatements should be considered in quantifying a (Continued)




F-14


AJS
      BANCORP, INC.


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


December
      31, 2006 and 2005


(Dollars
      in thousands, except per share data)





**NOTE
      1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES** (Continued)




current
      year misstatement. SAB 108 requires public companies to quantify misstatements
      using both an income statement (rollover) and balance sheet (iron curtain)
      approach and evaluate whether either approach results in a misstatement that,
      when all relevant quantitative and qualitative factors are considered, is
      material. If prior year errors that had been previously considered immaterial
      now are considered material based on either approach, no restatement is required
      so long as management properly applied its previous approach and all relevant
      facts and circumstances were considered. Adjustments considered immaterial
      in
      prior years under the method previously used, but now considered material under
      the dual approach required by SAB 108, are to be recorded upon initial adoption
      of SAB 108. The amount so recorded is shown as a cumulative effect adjustment
      and recorded in opening retained earnings as of January 1, 2006. The adoption
      of
      SAB 108 had no effect on the Company’s financial statements for the year ending
      December 31, 2006.




Effect
      of Newly Issued But Not Yet Effective Accounting Standards :
      In
      February 2006, the Financial Accounting Standards Board (FASB) issued Statement
      No. 155, *Accounting
      for Certain Hybrid Financial Instruments-an amendment to FASB Statements No.
      133
      and 140* .
      This
      Statement permits fair value re-measurement for any hybrid financial
      instruments, clarifies which instruments are subject to the requirements of
      Statement No. 133, and establishes a requirement to evaluate interests in
      securitized financial assets and other items. The new standard is effective
      for
      financial assets acquired or issued after the beginning of the entity’s first
      fiscal year that begins after September 15, 2006. Management has determined
      that
      the adoption of this statement on January 1, 2007 will not have a material
      impact on its consolidated financial position or results of operations.





In
      March
      2006, the FASB issued Statement No. 156, *Accounting
      for Servicing of Financial Assets-an amendment of FASB Statement No.
      140.* This
      Statement provides the following: 1) revised guidance on when a servicing asset
      and servicing liability should be recognized; 2) requires all separately
      recognized servicing assets and servicing liabilities to be initially measured
      at fair value, if practicable; 3) permits an entity to elect to measure
      servicing assets and servicing liabilities at fair value each reporting date
      and
      report changes in fair value in earnings in the period in which the changes
      occur; 4) upon initial adoption, permits a one time reclassification of
      available-for-sale securities to trading securities for securities which are
      identified as offsetting the entity’s exposure to changes in the fair value of
      servicing assets or liabilities that a servicer elects to subsequently measure
      at fair value; and 5) requires separate presentation of servicing assets and
      servicing liabilities subsequently measured at fair value in the statement
      of
      financial position and additional footnote disclosures. This standard is
      effective as of the beginning of an entity’s first fiscal year that begins after
      September 15, 2006 with the effects of initial adoption being reported as a
      cumulative-effect adjustment to retained earnings.


(Continued)




F-15


AJS
      BANCORP, INC.


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


December
      31, 2006 and 2005


(Dollars
      in thousands, except per share data)





**NOTE
      1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES** (Continued)





Management
      has determined that the adoption of this statement on January 1, 2007 will
      not
      have a material impact on its consolidated financial position or results of
      operations.





In
      July
      2006, the FASB issued FASB Interpretation No. 48, *Accounting
      for Uncertainty in Income Taxes - an interpretation of FASB Statement No.
      109* (FIN
      48), which prescribes a recognition


threshold
      and measurement attribute for a tax position taken or expected to be taken
      in a
      tax return. FIN 48 also provides guidance on derecognition, classification,
      interest and penalties, accounting in interim periods, disclosure and
      transition. FIN 48 is effective for fiscal years beginning after December 15,
      2006. The Company has determined that the adoption of FIN 48 will not have
      a
      material effect on the financial statements.





In
      September 2006, the FASB issued Statement No. 157, *Fair
      Value Measurements* .
      This
      Statement defines fair value, establishes a framework for measuring fair value
      and expands disclosures about fair value measurements. This Statement
      establishes a fair value hierarchy about the assumptions used to measure fair
      value and clarifies assumptions about risk and the effect of a restriction
      on
      the sale or use of an asset. The standard is effective for fiscal years
      beginning after November 15, 2007. The Company has not completed its evaluation
      of the impact of the adoption of this standard.





In
      September 2006, FASB issued SFAS No. 158, *Employers’
      Accounting for Defined Benefit Pension and Other Postretirement Plans - an
      amendment of FASB Statements No. 87, 88, 106 and 132(R)* .
      This
      Statement requires an employer to recognize the overfunded or underfunded status
      of a defined benefit postretirement plan (other than a multiemployer plan)
      as an
      asset or liability in its balance sheet, beginning with year end 2006, and
      to
      recognize changes in the funded status in the year in which the changes occur
      through comprehensive income beginning in 2007. Additionally, defined benefit
      plan assets and obligations are to be measured as of the date of the employer’s
      fiscal year-end, starting in 2008. The Company has determined that the adoption
      of FAS 158 will not have a material effect on the financial
      statements.


(Continued)




F-16


AJS
      BANCORP, INC.


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


December
      31, 2006 and 2005


(Dollars
      in thousands, except per share data)





**NOTE
      2 - SECURITIES**





The
      fair
      value of securities available for sale and the related gross unrealized gains
      and losses recognized in accumulated other comprehensive income (loss) were
      as
      follows:





Gross
            
            GrossFair
            
            Unrealized
            
            UnrealizedValue
            
            Gains
            
            LossesDecember
                31, 2006U.S.
                governmental agencies
            
            $
            23,749
            
            $
            15
            
            $
            (215
            )Mortgage-backed
            
            
            34,059
            
            
            31
            
            
            (1,026
            )Mutual
                fund
            
            
            10,904
            
            
            2
            
            
            (201
            )Equity
                investment
            
            
            62
            
            
            61
            
            
            -Total
            
            $
            68,774
            
            $
            109
            
            $
            (1,442
            )December
                31, 2005U.S.
                governmental agencies
            
            $
            26,580
            
            $
            1
            
            $
            (410
            )Mortgage-backed
            
            
            36,130
            
            
            36
            
            
            (1,159
            )Mutual
                fund
            
            
            8,473
            
            
            -
            
            
            (183
            )Equity
                investment
            
            
            56
            
            
            55
            
            
            -Total
            
            $
            71,239
            
            $
            92
            
            $
            (1,752
            )




The
      amortized cost, unrecognized gains and losses, and fair values of securities
      held to maturity follow:





Gross
            
            GrossAmortized
            
            Unrecognized
            
            Unrecognized
            
            FairCost
            
            Gains
            
            Losses
            
            ValueDecember
                31, 2006Mortgage-backed
            
            $
            74
            
            $
            -
            
            $
            -
            
            $
            74State
                and municipal
            
            
            130
            
            
            -
            
            
            -
            
            
            130$
            204
            
            $
            -
            
            $
            -
            
            $
            204December
                31, 2005Mortgage-backed
            
            $
            95
            
            $
            -
            
            $
            -
            
            $
            95State
                and municipal
            
            
            200
            
            
            -
            
            
            -
            
            
            200$
            295
            
            $
            -
            
            $
            -
            
            $
            295


(Continued)




F-17


AJS
      BANCORP, INC.


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


December
      31, 2006 and 2005


(Dollars
      in thousands, except per share data)





**NOTE
      2 - SECURITIES** (Continued)





Contractual
      maturities of securities at December 31, 2006 were as follows. Securities not
      due at a single maturity date, including mortgage-backed securities and mutual
      funds, are shown separately.





Available
            
            Held
                tofor
                Sale
            
            MaturityFair
            
            Amortized
            
            FairValue
            
            Cost
            
            ValueDue
                in one year or less
            
            $
            7,918
            
            $
            65
            
            $
            65Due
                after one year through five years
            
            
            15,831
            
            
            65
            
            
            65Due
                after five years
            
            
            -
            
            
            -
            
            
            -Mortgage-backed
                securities
            
            
            34,059
            
            
            74
            
            
            74Mutual
                fund
            
            
            10,904
            
            
            -
            
            
            -Equity
                investment
            
            
            62
            
            
            -
            
            
            -$
            68,774
            
            $
            204
            
            $
            204





Securities
      with a carrying value of approximately $9,903 and $9,879 at December 31,
      2006 and 2005 were pledged to secure public deposits and for other purposes
      as
      required or permitted by law. There were no security sales were recorded during
      2006, 2005, or 2004.





Securities
      with unrealized losses at year end not recognized in income are as
      follows:





Less
                Than 12 Months
            
            12
                Months or More
            
            TotalFair
            
            Unrealized
            
            Fair
            
            Unrealized
            
            Fair
            
            UnrealizedValue
            
            Loss
            
            Value
            
            Loss
            
            Value
            
            Loss2006U.S.
                government agencies
            
            $
            6,959
            
            $
            (13
            )
            $
            13,786
            
            $
            (202
            )
            $
            20,745
            
            $
            (215
            )Mortgage-backed
            
            
            1,990
            
            
            (1
            )
            
            28,749
            
            
            (1,025
            )
            
            30,739
            
            
            (1,026
            )Mutual
                fund
            
            
            292
            
            
            (1
            )
            
            8,400
            
            
            (200
            )
            
            8,692
            
            
            (201
            )Total
                temporarily impaired
            
            $
            9,241
            
            $
            (15
            )
            $
            50,935
            
            $
            (1,427
            )
            $
            60,176
            
            $
            (1,442
            )2005U.S.
                government agencies
            
            $
            12,821
            
            $
            (165
            )
            $
            12,757
            
            $
            (245
            )
            $
            25,578
            
            $
            (410
            )Mortgage-backed
            
            
            11,575
            
            
            (251
            )
            
            23,523
            
            
            (908
            )
            
            35,098
            
            
            (1,159
            )Mutual
                fund
            
            
            3,191
            
            
            (41
            )
            
            5,226
            
            
            (142
            )
            
            8,417
            
            
            (183
            )Total
                temporarily impaired
            
            $
            27,587
            
            $
            (457
            )
            $
            41,506
            
            $
            (1,295
            )
            $
            69,093
            
            $
            (1,752
            )




(Continued)


F-18


AJS
      BANCORP, INC.


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


December
      31, 2006 and 2005


(Dollars
      in thousands, except per share data)





**NOTE
      2 - SECURITIES** (Continued)





Unrealized
      losses have not been recognized into income because the issuer’s bonds are of
      high credit quality and/or they are backed by the government, such as Fannie
      Mae
      or Freddie Mac bonds and mortgage-backed securities. In addition, management
      has
      the intent and ability to hold them for the foreseeable future and the decline
      in fair value is largely due to increases in market interest rates. The fair
      value is expected to recover as the securities approach their maturity date
      and/or market rates change. The mutual fund, which holds adjustable rate
      mortgage securities, holds mortgage-backed securities and is inversely sensitive
      to short-term rates. The fund is expected to recover as short-term interest
      rates stabilize or decline.








**NOTE
      3 - LOANS**





Loans
      consist of:


2006
            
            2005Mortgage
                loans:Secured
                by one-to-four-family residences
            
            $
            86,024
            
            $
            101,325Multi-family
                and other loans secured by other properties
            
            
            41,194
            
            
            38,317Home
                equity loans
            
            
            12,198
            
            
            13,279Consumer
                and other loans
            
            
            482
            
            
            502139,898
            
            
            153,423Allowance
                for loan losses
            
            
            (1,619
            )
            
            (1,701
            )Net
                deferred costs and other
            
            
            98
            
            
            46Loans,
                net
            
            $
            138,377
            
            $
            151,768





The
      Bank’s mortgage loan portfolio includes “subprime” loans made to borrowers with
      weakened credit characteristics, such as prior payment delinquencies,
      foreclosures, bankruptcies, or diminished repayment ability. These subprime
      loans totaled $5,239 and $7,755 at December 31, 2006 and 2005.





Changes
      in the allowance for loan losses follow:





2006
            
            2005
            
            2004Beginning
                balance
            
            $
            1,701
            
            $
            1,847
            
            $
            1,962Provision
                for loan losses
            
            
            (28
            )
            
            (130
            )
            
            (112
            )Charge-offs
            
            
            (82
            )
            
            (71
            )
            
            (115
            )Recoveries
            
            
            28
            
            
            55
            
            
            112Ending
                balance
            
            $
            1,619
            
            $
            1,701
            
            $
            1,847


(Continued)


F-19


AJS
      BANCORP, INC.


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


December
      31, 2006 and 2005


(Dollars
      in thousands, except per share data)





**NOTE
      3 - LOANS** (Continued)





Impaired
      loans were as follows:




2006
            
            2005
            
            2004Impaired
                loans with no allocated allowance for loan losses
            
            $
            454
            
            $
            98
            
            $
            70Average
                of impaired loans during the year
            
            
            893
            
            
            161
            
            
            216Interest
                income recognized during impairment
            
            
            25
            
            
            7
            
            
            28Cash-basis
                interest income recognized
            
            
            17
            
            
            7
            
            
            28





Nonperforming
      loans were as follows:





2006
            
            2005
            
            2004Nonaccrual
                loans
            
            $
            540
            
            $
            394
            
            $
            983Loans
                past due over 90 days still on accrual
            
            
            -
            
            
            -
            
            
            -





Nonperforming
      loans and impaired loans are defined differently. Some loans may be included
      in
      both categories, whereas other loans may only be included in one category.
      There
      were no impaired loans with an allocated allowance for loan losses.





Certain
      directors and executive officers of the Bank and companies with which they
      are
      affiliated have obtained loans from the Bank on various occasions. A summary
      of
      such loans made by the Bank is as follows:




2006
            
            2005
            
            2004Beginning
                balance
            
            $
            1,552
            
            $
            1,563
            
            $
            1,735New
                loans
            
            
            -
            
            
            583
            
            
            410Effect
                of changes in related parties
            
            
            -
            
            
            -
            
            
            (128
            )Repayments
            
            
            (57
            )
            
            (594
            )
            
            (454
            )Ending
                balance
            
            $
            1,495
            
            $
            1,552
            
            $
            1,563




(Continued)


F-20


AJS
      BANCORP, INC.


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


December
      31, 2006 and 2005


(Dollars
      in thousands, except per share data)





**NOTE
      3 - LOANS** (Continued)





Mortgage
      loans serviced for others are not included in the consolidated statements of
      financial condition. The unpaid principal balances of these loans
      follows:





2006
            
            2005Mortgage
                loan portfolios serviced for:Fannie
                Mae
            
            $
            8,048
            
            $
            5,736Freddie
                Mac
            
            
            90
            
            
            95Balance,
                end of year
            
            $
            8,138
            
            $
            5,831





The
      carrying value of mortgage servicing rights is $57 and $20 at December 31,
      2006
      and 2005. Custodial escrow balances maintained in connection with the foregoing
      loan servicing were approximately $221 and $310 at December 31, 2006 and
      2005.








**NOTE
      4 - PREMISES AND EQUIPMENT**





Premises
      and equipment consist of:




2006
            
            2005Land
            
            $
            1,351
            
            $
            1,351Office
                buildings and improvements
            
            
            5,252
            
            
            5,233Furniture,
                fixtures, and equipment
            
            
            1,717
            
            
            1,7008,320
            
            
            8,284Less
                accumulated depreciation
            
            
            3,978
            
            
            3,743$
            4,342
            
            $
            4,541








**NOTE
      5 - DEPOSITS**





Certificates
      of deposit in denominations of $100,000 or more were $35,880, $29,699, and
      $30,389 at December 31, 2006, 2005, and 2004. Depending on how ownership of
      the
      account is listed, some deposit amounts in excess of $100,000 may not be
      federally insured.


(Continued)




F-21


AJS
      BANCORP, INC.


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


December
      31, 2006 and 2005


(Dollars
      in thousands, except per share data)





**NOTE
      5 - DEPOSITS** (Continued)





Deposit
      accounts are summarized as follows:




2006
            
            2005Passbook
                accounts
            
            $
            40,463
            
            $
            46,854NOW
                and checking accounts
            
            
            23,098
            
            
            22,220Money
                market accounts
            
            
            9,336
            
            
            8,446Certificates
                of deposit
            
            
            129,279
            
            
            112,887Total
                deposits
            
            $
            202,176
            
            $
            190,407








Scheduled
      maturities of time certificates at December 31, 2006 are as
      follows:




Year2007
            
            $
            100,7192008
            
            
            12,9952009
            
            
            6,8442010
            
            
            6,5482011
            
            
            2,173$
            129,279





Interest
      expense on deposits is summarized as follows:





2006
            
            2005
            
            2004NOW
            
            $
            69
            
            $
            77
            
            $
            58Money
                market
            
            
            246
            
            
            170
            
            
            80Passbook
            
            
            468
            
            
            621
            
            
            407Certificates
                of deposit
            
            
            4,953
            
            
            3,738
            
            
            3,501$
            5,736
            
            $
            4,606
            
            $
            4,046





Non-interest-bearing
      deposits (NOW accounts) totaled $13,361 and $11,808 at December 31, 2006
      and 2005. Deposit accounts held by directors and executive officers totaled
      $926
      and $852 at December 31, 2006 and 2005.


(Continued)


F-22


AJS
      BANCORP, INC.


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


December
      31, 2006 and 2005


(Dollars
      in thousands, except per share data)





**NOTE
      6 - FEDERAL HOME LOAN BANK ADVANCES**





Advances
      from the Federal Home Loan Bank consist of:




FixedMaturity
                  Date
              
              Rate
              
              2006
              
              2005January
                  23, 2006
              
              
              2.02
              %
              $
              -
              
              $
              500January
                  27, 2006
              
              
              2.71
              
              
              
              
              
              500March
                  23, 2006
              
              
              1.93
              
              
              
              
              
              500April
                  26, 2006
              
              
              2.61
              
              
              
              
              
              1,000May
                  8, 2006
              
              
              2.91
              
              
              
              
              
              500July
                  24, 2006
              
              
              3.69
              
              
              
              
              
              500November
                  13, 2006
              
              
              3.43
              
              
              
              
              
              500January
                  23, 2007
              
              
              2.69
              
              
              500
              
              
              500January
                  29, 2007
              
              
              3.26
              
              
              400
              
              
              400March
                  23, 2007
              
              
              2.53
              
              
              500
              
              
              500April
                  26, 2007
              
              
              3.35
              
              
              1,000
              
              
              1,000May
                  7, 2007
              
              
              3.57
              
              
              1,000
              
              
              1,000July
                  23, 2007
              
              
              4.06
              
              
              500
              
              
              500November
                  13, 2007
              
              
              3.74
              
              
              500
              
              
              500November
                  27, 2007
              
              
              5.28
              
              
              1,000
              
              
              1,000January
                  23, 2008
              
              
              3.21
              
              
              500
              
              
              500January
                  28, 2008
              
              
              3.68
              
              
              400
              
              
              400March
                  24, 2008
              
              
              2.96
              
              
              625
              
              
              625April
                  28, 2008
              
              
              3.84
              
              
              1,000
              
              
              1,000May
                  7, 2008
              
              
              4.08
              
              
              1,000
              
              
              1,000June
                  18, 2008
              
              
              4.33
              
              
              1,000
              
              
              1,000July
                  22, 2008
              
              
              4.41
              
              
              500
              
              
              500November
                  13, 2008
              
              
              4.16
              
              
              500
              
              
              500November
                  17, 2008
              
              
              3.64
              
              
              400
              
              
              400November
                  27, 2008
              
              
              5.48
              
              
              1,000
              
              
              1,000March
                  20, 2009
              
              
              5.63
              
              
              3,000
              
              
              3,000March
                  23, 2009
              
              
              3.35
              
              
              625
              
              
              625June
                  17, 2009
              
              
              4.40
              
              
              1,000
              
              
              1,000June
                  22, 2009
              
              
              4.67
              
              
              1,000
              
              
              1,000June
                  25, 2009
              
              
              4.61
              
              
              1,000
              
              
              1,000July
                  1, 2009
              
              
              4.54
              
              
              1,000
              
              
              1,000August
                  10, 2009
              
              
              3.88
              
              
              650
              
              
              650September
                  16, 2009
              
              
              3.68
              
              
              600
              
              
              600September
                  28, 2009
              
              
              3.79
              
              
              2,000
              
              
              2,000


(Continued)


F-23


AJS
      BANCORP, INC.


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


December
      31, 2006 and 2005


(Dollars
      in thousands, except per share data)





**NOTE
      6 - FEDERAL HOME LOAN BANK ADVANCES** (Continued)





FixedMaturity
                  Date
              
              Rate
              
              2006
              
              2005March
                  23, 2010
              
              
              3.71
              %
              $
              250
              
              $
              250July
                  2, 2010
              
              
              4.69
              
              
              1,000
              
              
              1,000October
                  25, 2010
              
              
              4.16
              
              
              1,000
              
              
              1,000July
                  7, 2011
              
              
              4.61
              
              
              800
              
              
              800October
                  26, 2011
              
              
              4.02
              
              
              400
              
              
              400November
                  17, 2011
              
              
              4.31
              
              
              1,100
              
              
              1,100January
                  10, 2012
              
              
              4.36
              
              
              1,000
              
              
              1,000$
              28,750
              
              $
              32,750





The
      advances are secured by a blanket lien on qualifying first mortgage loans in
      an
      amount equal to at least 170% of the amount of outstanding advances. The
      advances are also subject to a prepayment penalty equivalent to the unpaid
      interest cash flows at rates effective at the time of the
      prepayment.





Maturities
      over the next five years and thereafter are as follows:





2007
            
            $
            5,4002008
            
            
            6,9252009
            
            
            10,8752010
            
            
            2,2502011
            
            
            2,3002012
                and thereafter
            
            
            1,000$
            28,750




(Continued)


F-24


AJS
      BANCORP, INC.


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


December
      31, 2006 and 2005


(Dollars
      in thousands, except per share data)





**NOTE
      7 - INCOME TAXES**





Income
      tax expense was as follows:




2006
            
            2005
            
            2004CurrentFederal
            
            $
            607
            
            $
            971
            
            $
            483State
            
            
            55
            
            
            126
            
            
            52Deferred
            
            
            (122
            )
            
            (403
            )
            
            298Total
            
            $
            540
            
            $
            694
            
            $
            833





Effective
      tax rates differ from federal statutory rates applied to financial statement
      income due to the following.





2006
            
            2005
            
            2004Income
                tax at federal statutory rate
            
            $
            493
            
            $
            609
            
            $
            820Effect
                ofState
                taxes, net of federal benefit
            
            
            24
            
            
            50
            
            
            73Other,
                net
            
            
            23
            
            
            35
            
            
            (60
            )Total
            
            $
            540
            
            $
            694
            
            $
            833Effective
                tax rate
            
            
            37.2
            %
            
            38.7
            %
            
            34.5
            %





The
      net
      deferred tax assets included in other assets in the consolidated statements
      of
      financial condition are as follows:





2006
            
            2005Deferred
                tax assetsAllowance
                for loan losses
            
            $
            684
            
            $
            695Accrued
                expenses
            
            
            781
            
            
            729Unrealized
                loss on securities available for sale
            
            
            518
            
            
            644Other
            
            
            41
            
            
            342,024
            
            
            2,102Deferred
                tax liabilitiesPremises
                and equipment
            
            
            (312
            )
            
            (321
            )Federal
                Home Loan Bank stock dividends
            
            
            (186
            )
            
            (259
            )Deferred
                loan fees
            
            
            (129
            )
            
            (121
            )(627
            )
            
            (701
            )Net
                deferred tax asset
            
            $
            1,397
            
            $
            1,401


(Continued)


F-25




AJS
      BANCORP, INC.


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


December
      31, 2006 and 2005


(Dollars
      in thousands, except per share data)





**NOTE
      7 - INCOME TAXES** (Continued)





Federal
      income tax laws provided additional bad debt deductions through 1987 totaling
      $2,372. Accounting standards do not require a deferred tax liability to be
      recorded on this amount, which liability otherwise would total $921 at December
      31, 2006. If the Bank were liquidated or otherwise ceased to be a bank or if
      tax
      laws were to change, this amount would be expensed.





**NOTE
      8 - EMPLOYEE BENEFITS**





The
      Bank
      maintains a contributory profit sharing plan for its employees. To be eligible
      to participate, an employee must have completed one year of service, be credited
      with 1,000 hours of service during that period, and have attained the age of
      18.
      Bank contributions to the plan are discretionary and determined by the Board
      of
      Directors. Profit sharing expense was $150 for the year ended December 31,
      2006,
      and $10 for the years ended 2005 and 2004.





The
      Bank
      sponsors nonqualified unfunded retirement plans for certain directors and
      officers, which provide annual benefit payments to directors upon retirement.
      The Bank’s liability for the plans totaled $2,011 and $1,877 at December 31,
      2006 and 2005. Expense related to the plans totaled $117, $104, and $101 for
      the
      years ended December 31, 2006, 2005, and 2004.





**NOTE
      9 - EMPLOYEE STOCK OWNERSHIP PLAN**





As
      part
      of the conversion transaction, the Company established an ESOP for the benefit
      of substantially all employees. The ESOP borrowed $944 from the Company and
      used
      those funds to acquire 94,352 shares of the Company’s stock at $10 per
      share.





Shares
      issued to the ESOP are allocated to ESOP participants based on principal and
      interest repayments made by the ESOP on the loan from the Company. The loan
      was
      secured by shares purchased with the loan proceeds and was repaid by the ESOP
      with funds from the Company’s discretionary contributions to the ESOP and
      earnings on the ESOP’s assets. Principal payments were scheduled to occur over a
      ten-year period; however, the Company elected to prepay the loan and as of
      December 31, 2005, the loan is paid in full. There are no plans to adopt another
      Employee Stock Option Plan at this time.





Participants
      receive the shares at the end of employment. A participant may require stock
      received to be repurchased unless the stock is traded on an established
      market.


(Continued)


F-26




AJS
      BANCORP, INC.


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


December
      31, 2006 and 2005


(Dollars
      in thousands, except per share data)





**NOTE
      9 - EMPLOYEE STOCK OWNERSHIP PLAN** (Continued)





During
      2005 and 2004, approximately 18,870 shares per year of stock with an average
      fair value of $23.65 and $24.38 per share were committed to be released,
      resulting in ESOP compensation expense of $447 and $460. At December 31, 2006,
      all ESOP shares have been allocated. Shares held by the ESOP at December 31
      are as follows:





2006
            
            2005Allocated
                shares
            
            $
            83,427
            
            $
            86,152Shares
                distributed from plan
            
            
            10,925
            
            
            8,200Total
                ESOP shares
            
            
            94,352
            
            
            94,352Fair
                value of allocated shares subject to repurchase obligation recorded
                in
                other liabilities
            
            $
            2,182
            
            $
            1,981





**NOTE
      10 - EMPLOYEE STOCK BENEFITS**





At
      December 31, 2006 the Company had a stock option plan and a recognition and
      retention plan.





Stock
      Option Plan





Under
      the
      stock option plan, certain key employees are granted options to purchase shares
      of the Company’s Common Stock at fair value at the date of the grant. All stock
      options have an exercise price that is at least equal to the fair market value
      of the Company’s stock on the date the options were granted.  The Company
      adopted the stock plan in May 2003 under the terms of which options for 114,685
      shares of the Company’s common stock were granted to directors, officers, and
      employees. The options generally become exercisable in equal installments over
      a
      five-year period from the date of grant, and they expire ten years from the
      date
      of grant. No option may be exercised if such exercise would cause the mutual
      holding company to own fewer than a majority of the total number of shares
      outstanding. There
      are
      a total of 7,456 options available for future grant under the stock option
      plan.





The
      fair
      value of each option award is estimated on the date of grant using a closed
      form
      option valuation (Black-Scholes) model that uses the assumptions noted in the
      table below. Expected volatilities are based on historical volatilities of
      the
      Company’s common stock. The Company uses historical data to estimate option
      exercise and post-vesting termination behavior. **(** Employee
      and management options are tracked separately.) The expected term of
      options




(Continued)


F-27


AJS
      BANCORP, INC.


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


December
      31, 2006 and 2005


(Dollars
      in thousands, except per share data)





**NOTE
      10 - EMPLOYEE STOCK BENEFITS** (Continued)




granted
      is based on historical data and represents the period of time that options
      granted are expected to be outstanding, which takes into account that the
      options are not transferable. The risk-free interest rate for the expected
      term
      of the option is based on the U.S. Treasury yield curve in effect at the time
      of
      the grant.




The
      fair
      value of options granted during 2006 was determined using the following
      weighted-average assumptions as of grant date. There were no stock options
      granted during 2005 and 2004.





2006Risk-free
                interest rate
            
            
            4.71
            %Expected
                option life
            
            
            2.2
            yearsExpected
                stock price volatility
            
            
            10.11
            %Dividend
                yield
            
            
            1.68
            %





A
      summary
      of the activity in the stock option plan for 2006 follows:




Shares
              
              Weighted
                Average
                Exercise
                Price
              
              Weighted
                Average
                Remaining
                Contractual
                Term
              
              Aggregate
                Intrinsic
                ValueOutstanding
                  at beginning of year
              
              
              105,685
              
              $
              18.75Granted
              
              
              1,200
              
              
              23.75Exercised
              
              
              (1,600
              )
              
              18.75Forfeited
                  or expired
              
              
              (2,400
              )
              
              18.75Outstanding
                  at end of year
              
              
              102,885
              
              $
              18.81
              
              
              6.4
              
              $
              755Exercisable
                  at end of year
              
              
              61,411
              
              $
              18.79
              
              
              6.4
              
              $
              452





Information
      related to the stock option plan during each year follows:





2006
            
            2005
            
            2004Intrinsic
                value of options exercised
            
            $
            8
            
            $
            32
            
            $
            -Cash
                received from option exercises
            
            
            30
            
            
            112
            
            
            -Tax
                benefit realized from option exercises
            
            
            3
            
            
            12
            
            
            -Weighted
                average fair value of options granted
            
            
            2.40
            
            
            -
            
            
            -




(Continued)


F-28


AJS
      BANCORP, INC.


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


December
      31, 2006 and 2005


(Dollars
      in thousands, except per share data)





**NOTE
      10 - EMPLOYEE STOCK BENEFITS** (Continued)





As
      of
      December 31, 2006 there was $80 of total unrecognized compensation cost related
      to nonvested stock options granted under the Plan. The cost is expected to
      be
      recognized over a weighted-average period of 1.4 years.





Share
      Award Plan





Pursuant
      to its 2003 stock-based incentive plan, the Company awarded 58,971 shares of
      restricted stock in May 2003. These shares normally vest over a five-year
      period, unless certain circumstances occur that trigger earlier vesting
      according to the approved Recognition and Retention Plan (“RRP”). The
      unamortized cost of shares not yet earned (vested) is reported as a reduction
      of
      stockholders’ equity.





A
      summary
      of the activity in the RRP is as follows:


Nonvested
                  Shares
              
              Shares
              
              Weighted-Average
                Grant-Date
                Fair
                  ValueNonvested
                  at January 1, 2006
              
              
              32,002
              
              $
              18.75Granted
              
              
              600
              
              
              23.75Vested
              
              
              (10,534
              )
              
              18.85Forfeited
              
              
              (1,200
              )
              
              18.75Nonvested
                  at December 31, 2006
              
              
              20,868
              
              $
              18.85





As
      of
      December 31, 2006, there was $280 of total unrecognized compensation cost
      related to nonvested shares granted under the Plan. The cost is expected to
      be
      recognized over a weighted-average period of 1.4 years. The total fair value
      of
      shares vested during the years ended December 31, 2006, 2005 and 2004 was $201,
      $253 and $266.


(Continued)


F-29


AJS
      BANCORP, INC.


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


December
      31, 2006 and 2005


(Dollars
      in thousands, except per share data)





**NOTE
      11 - FAIR VALUES OF FINANCIAL INSTRUMENTS**





The
      carrying amount and estimated fair value of financial instruments were as
      follows.





December
                31, 2006
            
            December
                31, 2005Carrying
            
            Fair
            
            Carrying
            
            FairAmount
            
            Value
            
            Amount
            
            ValueFinancial
                assetsCash
                and cash equivalents
            
            $
            43,848
            
            $
            43,848
            
            $
            15,230
            
            $
            15,230Certificates
                of deposit
            
            
            5,490
            
            
            5,490
            
            
            8,584
            
            
            8,584Securities
                available for sale
            
            
            68,774
            
            
            68,774
            
            
            71,239
            
            
            71,239Securities
                held to maturity
            
            
            204
            
            
            204
            
            
            295
            
            
            295Loans,
                net
            
            
            138,377
            
            
            137,851
            
            
            151,768
            
            
            150,458Federal
                Home Loan Bank stock
            
            
            2,450
            
            
            2,450
            
            
            3,416
            
            
            3,416Accrued
                interest receivable
            
            
            1,021
            
            
            1,021
            
            
            960
            
            
            960Financial
                liabilitiesDeposits
            
            
            (202,176
            )
            
            (202,236
            )
            
            (190,407
            )
            
            (190,341
            )Advances
                from Federal Home Loan Bank
            
            
            (28,750
            )
            
            (28,267
            )
            
            (32,750
            )
            
            (32,258
            )Advances
                from borrowers for taxes and insurance
            
            
            (1,655
            )
            
            (1,655
            )
            
            (1,746
            )
            
            (1,746
            )Accrued
                interest payable
            
            
            (401
            )
            
            (401
            )
            
            (148
            )
            
            (148
            )





The
      methods and assumptions used to estimate fair value are described as
      follows.





Carrying
      amount is the estimated fair value for cash and cash equivalents, short-term
      borrowings, Federal Home Loan Bank stock, accrued interest receivable and
      payable, demand deposits, short-term debt, and variable rate loans or deposits
      that reprice frequently and fully. Security fair value is based on market prices
      or dealer quotes and, if no such information is available, on the rate and
      term
      of the security and information about the issuer. For fixed rate loans or
      deposits and for variable rate loans or deposits with infrequent repricing
      or
      repricing limits, fair value is based on discounted cash flows using current
      market rates applied to the estimated life and credit risk. Fair values for
      impaired loans are estimated using discounted cash flow analysis or underlying
      collateral values. Fair value of loans held for sale is based on market quotes.
      Fair value of debt is based on current rates for similar financing. Fair value
      of off-balance-sheet items is based on the current fees or cost that would
      be
      charged to enter into or terminate such arrangements.


(Continued)


F-30


AJS
      BANCORP, INC.


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


December
      31, 2006 and 2005


(Dollars
      in thousands, except per share data)





**NOTE
      12 - REGULATORY CAPITAL**





The
      Bank
      is subject to regulatory capital requirements administered by federal banking
      agencies. Capital adequacy guidelines and, additionally for banks, prompt
      corrective action regulations involve quantitative measures of assets,
      liabilities, and certain off-balance-sheet items calculated under regulatory
      accounting practices. Capital amounts and classifications are also subject
      to
      qualitative judgments by regulators. Failure to meet capital requirements can
      initiate regulatory action.





Prompt
      corrective action regulations provide five classifications: well capitalized,
      adequately capitalized, undercapitalized, significantly undercapitalized, and
      critically undercapitalized, although these terms are not used to represent
      overall financial condition. If adequately capitalized, regulatory approval
      is
      required to accept brokered deposits. If undercapitalized, capital distributions
      are limited, as is asset growth and expansion, and capital restoration plans
      are
      required.





The
      Bank’s actual and required capital amounts and ratios are presented
      below:





To
                Be WellCapitalized
                UnderFor
                Capital
            
            Prompt
                CorrectiveActual
            
            Adequacy
                Purposes
            
            Action
                ProvisionsAmount
            
            Ratio
            
            Amount
            
            Ratio
            
            Amount
            
            RatioAs
                of December 31, 2006Total
                capital to risk-weighted assets
            
            $
            29,944
            
            
            23.7
            %
            $
            10,122
            
            
            8.0
            %
            $
            12,652
            
            
            10.0
            %Tier
                I (core) capital to risk- weighted assets
            
            
            28,362
            
            
            22.4
            
            
            5,061
            
            
            4.0
            
            
            7,591
            
            
            6.0Tier
                I (core) capital to adjusted total assets
            
            
            28,362
            
            
            10.6
            
            
            10,708
            
            
            4.0
            
            
            13,385
            
            
            5.0As
                of December 31, 2005Total
                capital to risk-weighted assets
            
            $
            30,333
            
            
            23.1
            %
            $
            10,483
            
            
            8.0
            %
            $
            13,104
            
            
            10.0
            %Tier
                I (core) capital to risk- weighted assets
            
            
            28,695
            
            
            21.9
            
            
            5,241
            
            
            4.0
            
            
            7,862
            
            
            6.0Tier
                I (core) capital to adjusted total assets
            
            
            28,695
            
            
            11.1
            
            
            10,379
            
            
            4.0
            
            
            12,974
            
            
            5.0





The
      Qualified Thrift Lender test requires that at least 65% of assets be maintained
      in housing-related finance and other specified areas. If this test is not met,
      limits are placed on growth, branching, new investments, Federal Home Loan
      Bank
      advances, and dividends or the Bank must convert to a commercial bank charter.
      Management believes that this test is met.


(Continued)




F-31




AJS
      BANCORP, INC.


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


December
      31, 2006 and 2005


(Dollars
      in thousands, except per share data)








**NOTE
      12 - REGULATORY CAPITAL** (Continued)





As
      of
      December 31, 2006, the most recent notification from the Office of Thrift
      Supervision (“the OTS”) categorized the Bank as well capitalized under the
      regulatory framework for prompt corrective action. There are no conditions
      or
      events since that notification that management believes have changed the Bank’s
      category.





During
      2006, the Company paid a cash dividend of $0.10 per share during the first
      three
      quarters of the year, and $0.11 per share for the last quarter of the year.
      During 2005, the Company paid a cash dividend of $0.10 per share. The OTS
      approved a waiver of dividends on the shares held by the mutual holding company.
      The amount of dividends waived, totaling $503 for 2006, and $98 for 2005, is
      a
      restriction on retained earnings of the Company.




**NOTE
      13 - EARNINGS PER COMMON SHARE**





A
      reconciliation of the numerator and denominator of the earnings per common
      share
      computation for the year ended December 31 follows:





2006
            
            2005BasicNet
                income
            
            $
            911
            
            $
            1,097Weighted
                average common shares outstanding
            
            
            2,118,093
            
            
            2,168,196Less:
                average unallocated ESOP shares
            
            
            -
            
            
            9,435Average
                shares
            
            
            2,118,093
            
            
            2,158,761Basic
                earnings per common share
            
            $
            .43
            
            $
            .51DilutedNet
                income
            
            $
            911
            
            $
            1,097Weighted
                average common shares outstanding for basic earnings per common
                share
            
            
            2,118,093
            
            
            2,158,761Add:
                dilutive effects of assumed exercises of stock options and stock
                awards
            
            
            20,779
            
            
            24,989Average
                shares and dilutive potential common shares
            
            
            2,138,872
            
            
            2,183,750Diluted
                earnings per common share
            
            $
            .43
            
            $
            .50





At
      December 31, 2006 and 2005, there were no antidilutive shares.


(Continued)


F-32


AJS
      BANCORP, INC.


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


December
      31, 2006 and 2005


(Dollars
      in thousands, except per share data)





**NOTE
      14 - OFF-BALANCE-SHEET ACTIVITIES**





Some
      financial instruments, such as loan commitments, credit lines, letters of
      credit, and overdraft protection, are issued to meet customer financing needs.
      These are agreements to provide credit or to support the credit of others,
      as
      long as conditions established in the contract are met, and usually have
      expiration dates. Commitments may expire without being used. Off-balance-sheet
      risk to credit loss exists up to the face amount of these instruments, although
      material losses are not anticipated. The same credit policies are used to make
      such commitments as are used for loans, including obtaining collateral at
      exercise of the commitment.





The
      contractual amount of financial instruments with off-balance-sheet risk was
      as
      follows at year end:




2006
            
            2005Fixed
            
            Variable
            
            Fixed
            
            VariableRate
            
            Rate
            
            Rate
            
            RateCommitments
                to make loans
            
            $
            413
            
            $
            4,540
            
            $
            2,438
            
            $
            907Unused
                lines of credit and letters of credit
            
            
            -
            
            
            15,730
            
            
            -
            
            
            14,725





Commitments
      to make loans are generally made for periods of 120 days or less. The fixed
      rate
      loan commitments have interest rates ranging from 5.25% to 7.75% and the
      commitments are to extend credit ranging from 10 to 30 years.





The
      Bank
      has previously sold fixed rate mortgages to Fannie Mae and Freddie Mac with
      and
      without recourse. Recourse obligations on sold loans are recorded at fair
      value.





2006
            
            2005Contract
            
            Carrying
            
            Contract
            
            CarryingAmount
            
            Value
            
            Amount
            
            ValueLoans
                sold with recourse
            
            $
            123
            
            $
            123
            
            $
            191
            
            $
            191





In
      the
      normal course of business, there are various outstanding contingent liabilities,
      such as claims and legal actions that are not reflected in the financial
      statements. In the opinion of management, no material losses are anticipated
      as
      a result of these actions or claims.


(Continued)




F-33


AJS
      BANCORP, INC.


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


December
      31, 2006 and 2005


(Dollars
      in thousands, except per share data)





**NOTE
      15 - OTHER COMPREHENSIVE INCOME**





Other
      comprehensive income components and related taxes were as follows:





2006
            
            2005
            
            2004Unrealized
                holding gains and losses on securities available for sale
            
            $
            327
            
            $
            (1,306
            )
            $
            (724
            )Less
                reclassification adjustments for gains and losses later recognized
                in
                income
            
            
            -
            
            
            -
            
            
            -Net
                unrealized gains and losses
            
            
            327
            
            
            (1,306
            )
            
            (724
            )Tax
                effect
            
            
            (128
            )
            
            507
            
            
            281Other
                comprehensive income (loss)
            
            $
            199
            
            $
            (799
            )
            $
            (443
            )








**NOTE
      16 - PARENT COMPANY CONSOLIDATED FINANCIAL STATEMENTS**





The
      following are the condensed balance sheets and statements of income and cash
      flows for AJS Bancorp, Inc. without subsidiary.





CONDENSED
      BALANCE SHEETS


December
      31, 2006 and 2005





2006
            
            2005**ASSETS**Cash
                and cash equivalents
            
            $
            3,363
            
            $
            2,522Investment
                in bank subsidiary
            
            
            27,548
            
            
            27,680$
            30,911
            
            $
            30,202**LIABILITIES
                AND STOCKHOLDERS’ EQUITY**Liabilities
            
            $
            2,162
            
            $
            1,950Stockholders’
                equity
            
            
            28,749
            
            
            28,252$
            30,911
            
            $
            30,202


(Continued)


F-34


AJS
      BANCORP, INC.


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


December
      31, 2006 and 2005


(Dollars
      in thousands, except per share data)





**NOTE
      16 - PARENT COMPANY CONSOLIDATED FINANCIAL STATEMENTS**


**** (Continued)





CONDENSED
      STATEMENTS OF INCOME


For
      the
      years ended December 31, 2006, 2005, and 2004





2006
            
            2005
            
            2004**Income**ESOP
                loan
            
            $
            -
            
            $
            12
            
            $
            17Deposits
                in financial institutions
            
            
            133
            
            
            68
            
            
            31Dividends
                from subsidiary
            
            
            1,500
            
            
            1,500
            
            
            3,000Total
                income
            
            
            1,633
            
            
            1,580
            
            
            3,048**Other
                expenses**Other
                operating expenses
            
            
            132
            
            
            162
            
            
            121Income
                before income taxes and equity in undistributed earnings
            
            
            1,501
            
            
            1,418
            
            
            2,927Income
                taxes
            
            
            -
            
            
            (32
            )
            
            (27
            )Income
                before equity in undistributed earnings of bank subsidiary
            
            
            1,501
            
            
            1,450
            
            
            2,954Dividends
                in excess of earnings
            
            
            (590
            )
            
            (353
            )
            
            (1,374
            )**Net
                income**
            
            $
            911
            
            $
            1,097
            
            $
            1,580


(Continued)




F-35


AJS
      BANCORP, INC.


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


December
      31, 2006 and 2005


(Dollars
      in thousands, except per share data)





**NOTE
      16 - PARENT COMPANY CONSOLIDATED FINANCIAL STATEMENTS**


**** (Continued)





CONDENSED
      STATEMENTS OF CASH FLOWS


For
      the
      years ended December 31, 2006, 2005, and 2004





2006
            
            2005
            
            2004**Operating
                activities**Net
                income
            
            $
            911
            
            $
            1,097
            
            $
            1,580Adjustments
                to reconcile net income to net cash provided by (used in) operating
                activities:Equity
                in undistributed earnings of bank subsidiary
            
            
            590
            
            
            353
            
            
            1,374Change
                in other assets and liabilities
            
            
            13
            
            
            (33
            )
            
            (8
            )Net
                cash provided by (used in) operating activities
            
            
            1,514
            
            
            1,417
            
            
            2,946**Financing
                activities**Dividends
                paid
            
            
            (363
            )
            
            (114
            )
            
            -Payment
                received on loan to ESOP
            
            
            -
            
            
            189
            
            
            189Purchase
                of common stock
            
            
            (340
            )
            
            (2,976
            )
            
            (3,000
            )Proceeds
                for exercising stock options
            
            
            30
            
            
            112
            
            
            -Net
                cash used in financing activities
            
            
            (673
            )
            
            (2,789
            )
            
            (2,811
            )Net
                change in cash and cash equivalents
            
            
            841
            
            
            (1,372
            )
            
            135Cash
                and cash equivalents at beginning of year
            
            
            2,522
            
            
            3,894
            
            
            3,759**Cash
                and cash equivalents at end of year**
            
            $
            3,363
            
            $
            2,522
            
            $
            3,894


(Continued)




F-36


AJS
      BANCORP, INC.


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


December
      31, 2006 and 2005


(Dollars
      in thousands, except per share data)





**NOTE
      16 - QUARTERLY FINANCIAL DATA (UNAUDITED)**


Interest
                Income
              
              Net
                  Interest
                Income
              
              Net
                Income
              
              Earnings
                Per
                  Share
                Basic
                  and
                Diluted2006First
                  quarter
              
              $
              3,239
              
              $
              1,652
              
              $
              254
              
              $
              .12Second
                  quarter
              
              
              3,325
              
              
              1,639
              
              
              240
              
              
              .11Third
                  quarter
              
              
              3,460
              
              
              1,675
              
              
              248
              
              
              .12Fourth
                  quarter
              
              
              3,565
              
              
              1,606
              
              
              169
              
              
              .082005First
                  quarter
              
              $
              3,276
              
              $
              1,837
              
              $
              371
              
              $
              .17Second
                  quarter
              
              
              3,218
              
              
              1,723
              
              
              329
              
              
              .15Third
                  quarter
              
              
              3,237
              
              
              1,717
              
              
              253
              
              
              .12Fourth
                  quarter
              
              
              3,216
              
              
              1,647
              
              
              144
              
              
              .07





F-37