Exhibit
13








AJS
BANCORP, INC.


Midlothian,
Illinois





CONSOLIDATED
FINANCIAL STATEMENTS


December
31, 2009 and 2008











AJS
BANCORP, INC.


Midlothian,
Illinois





CONSOLIDATED
FINANCIAL STATEMENTS


December
31, 2009 and 2008




















CONTENTS




















REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
            
            F-2CONSOLIDATED
      FINANCIAL STATEMENTSCONSOLIDATED
      STATEMENTS OF FINANCIAL CONDITION
            
            F-3CONSOLIDATED
      STATEMENTS OF OPERATIONS
            
            F-4CONSOLIDATED
      STATEMENTS OF STOCKHOLDERS’ EQUITYAND COMPREHENSIVE INCOME
      (LOSS)
            
            F-5CONSOLIDATED
      STATEMENTS OF CASH FLOWS
            
            F-6NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS
            
            F-8











REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM











Board of
Directors and shareholders


AJS
Bancorp, Inc.


Midlothian,
Illinois








We have
audited the accompanying consolidated statements of financial condition of
AJS Bancorp, Inc. as of December 31, 2009 and 2008, and the related
consolidated statements of operations, stockholders’ equity, and cash flows for
the years then ended.  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.  The
Company is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting.  Our audit included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the Company's
internal control over financial reporting.  Accordingly, we express no
such opinion.  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, 2009 and 2008, and the results of its operations and its cash flows
for the years then ended, in conformity with U.S. generally accepted accounting
principles.














Oak
Brook, Illinois


March 22,
2010





F-2




AJS
BANCORP, INC.
 CONSOLIDATED
STATEMENTS OF FINANCIAL CONDITION


December
31, 2009 and 2008


(Dollars
in thousands, except per share data)







2009
            
            
            2008ASSETSCash
      and cash equivalentsCash
      and due from banks (interest-earning: 2009 - $1,963;2008 - $2,077)
            
            $
            6,484
            
            
            $
            7,335Federal
      funds sold
            
            
            -
            
            
            
            58Total
      cash and cash equivalents
            
            
            6,484
            
            
            
            7,393Certificates
      of deposit
            
            
            1,700
            
            
            
            6,797Trading
      securities
            
            
            25
            
            
            
            18Securities
      available for sale
            
            
            92,167
            
            
            
            89,490Securities
      held to maturity (fair value:  2009 - $365;2008 - $360)
            
            
            360
            
            
            
            367Loans,
      net of allowance of $3,035 - 2009 and $2,734 - 2008
            
            
            127,456
            
            
            
            126,395Federal
      Home Loan Bank stock
            
            
            2,450
            
            
            
            2,450Premises
      and equipment
            
            
            4,181
            
            
            
            4,262Bank
      owned life insurance
            
            
            3,351
            
            
            
            3,202Other
      real estate owned
            
            
            2,768
            
            
            
            -Due
      from broker
            
            
            4,727
            
            
            
            -Accrued
      interest receivable
            
            
            973
            
            
            
            1,027Other
      assets
            
            
            2,626
            
            
            
            2,569Total
      assets
            
            $
            249,268
            
            
            $
            243,970LIABILITIES
      AND STOCKHOLDERS’ EQUITYLiabilitiesDeposits
            
            $
            193,175
            
            
            $
            180,291Federal
      Home Loan Bank advances
            
            
            25,300
            
            
            
            30,175Advance
      payments by borrowers for taxes and insurance
            
            
            1,566
            
            
            
            1,502Other
      liabilities and accrued interest payable
            
            
            5,381
            
            
            
            4,905Total
      liabilities
            
            
            225,422
            
            
            
            216,873Commitments
      and contingent liabilities (note 14)Stockholders’
      equityPreferred
      stock, $.01 par value, 20,000,000 sharesauthorized; none issued
            
            
            -
            
            
            
            -Common
      stock, $.01 par value, 50,000,000 sharesauthorized; 2,444,521 shares issued
            
            
            24
            
            
            
            24Additional
      paid-in capital
            
            
            12,207
            
            
            
            11,728Treasury
      stock, at cost (2009 – 421,239 shares;2008 – 418,888 shares)
            
            
            (9,824
            )
            
            
            (9,795
            )Retained
      earnings
            
            
            20,979
            
            
            
            23,764Accumulated
      other comprehensive income
            
            
            460
            
            
            
            1,376Total
      stockholders’ equity
            
            
            23,846
            
            
            
            27,097Total
      liabilities and stockholders’ equity
            
            $
            249,268
            
            
            $
            243,970










F-3




AJS
BANCORP, INC.
 CONSOLIDATED
STATEMENTS OF OPERATIONS


Years
ended December 31, 2009 and 2008


(Dollars
in thousands, except per share data)





2009
            
            
            2008Interest
      and dividend incomeLoans
            
            $
            6,937
            
            
            $
            7,737Securities
            
            
            3,413
            
            
            
            3,762Interest-earning
      deposits and other
            
            
            152
            
            
            
            447Federal
      funds sold
            
            
            1
            
            
            
            53Total
      interest income
            
            
            10,503
            
            
            
            11,999Interest
      expenseDeposits
            
            
            3,235
            
            
            
            4,635Federal
      Home Loan Bank advances and other
            
            
            978
            
            
            
            1,299Total
      interest expense
            
            
            4,213
            
            
            
            5,934Net
      interest income
            
            
            6,290
            
            
            
            6,065Provision
      for loan losses
            
            
            2,917
            
            
            
            4,328Net
      interest income after provisionfor loan losses
            
            
            3,373
            
            
            
            1,737Non-interest
      incomeService
      fees
            
            
            419
            
            
            
            410Rental
      income
            
            
            96
            
            
            
            92Earnings
      on bank owned life insurance
            
            
            149
            
            
            
            148Gain
      on the sale of securities available for sale
            
            
            833
            
            
            
            17Realized
      loss on the sale of trading securities
            
            
            -
            
            
            
            (192
            )Change
      in fair value of trading securities
            
            
            7
            
            
            
            (13
            )Loss
      on correspondent bank investment
            
            
            (168
            )
            
            
            -Other
            
            
            171
            
            
            
            98Total
      non-interest income
            
            
            1,507
            
            
            
            560Non-interest
      expenseCompensation
      and employee benefits
            
            
            2,894
            
            
            
            3,110Occupancy
      expense
            
            
            884
            
            
            
            849Data
      processing expense
            
            
            353
            
            
            
            375Advertising
      and promotion
            
            
            227
            
            
            
            282Professional
            
            
            287
            
            
            
            231Postage
      and supplies
            
            
            145
            
            
            
            142Bank
      security
            
            
            147
            
            
            
            147Federal
      deposit insurance
            
            
            376
            
            
            
            42Loss
      on other real estate write-downs
            
            
            649
            
            
            
            -Other
            
            
            640
            
            
            
            597Total
      non-interest expense
            
            
            6,602
            
            
            
            5,775Loss
      before income taxes
            
            
            (1,722
            )
            
            
            (3,478
            )Income
      tax expense (benefit)
            
            
            713
            
            
            
            (1,407
            )Net
      loss
            
            $
            (2,435
            )
            
            $
            (2,071
            )Loss
      per shareBasic
            
            $
            (1.20
            )
            
            $
            (1.02
            )Diluted
            
            
            (1.20
            )
            
            
            (1.02
            )











F-4





AJS
BANCORP, INC.
 CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME (LOSS)


Years
ended December 31, 2009 and 2008


(Dollars
in thousands, except per share data)








AccumulatedAdditional
            
            
            
            
            
            
            
            
            OtherCommon
            
            
            Paid-In
            
            
            Treasury
            
            
            Retained
            
            
            ComprehensiveStock
            
            
            Capital
            
            
            Stock
            
            
            Earnings
            
            
            Income (Loss)
            
            
            TotalBalance
      at January 1, 2008
            
            $
            24
            
            
            $
            11,079
            
            
            $
            (9,598
            )
            
            $
            26,543
            
            
            $
            (120
            )
            
            $
            27,928Purchase
      of 11,239 treasury stock shares
            
            
            -
            
            
            
            -
            
            
            
            (197
            )
            
            
            -
            
            
            
            -
            
            
            
            (197
            )Reclassification
      due to changes in fair valueof common stock in ESOP subject tocontingent repurchase obligation
            
            
            -
            
            
            
            550
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            550Stock
      awards earned
            
            
            -
            
            
            
            70
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            70Stock
      option compensation expense
            
            
            -
            
            
            
            29
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            29Adjustment
      to initially apply pension guidancenet of tax
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            46
            
            
            
            (46
            )
            
            
            -Cash
      dividend (regular $0.44 per share;special dividend $0.50 per share)
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (754
            )
            
            
            -
            
            
            
            (754
            )Comprehensive
      lossNet
      loss
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (2,071
            )
            
            
            -
            
            
            
            (2,071
            )Change
      in unrealized gain (loss) on securitiesavailable for sale, net of taxes
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            1,542
            
            
            
            1,542Total
      comprehensive loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (529
            )Balance
      at December 31, 2008
            
            
            24
            
            
            
            11,728
            
            
            
            (9,795
            )
            
            
            23,764
            
            
            
            1,376
            
            
            
            27,097Purchase
      of 2,351 treasury stock shares
            
            
            -
            
            
            
            -
            
            
            
            (29
            )
            
            
            -
            
            
            
            -
            
            
            
            (29
            )Reclassification
      due to changes in fair valueof common stock in ESOP subject tocontingent repurchase obligation
            
            
            -
            
            
            
            479
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            479Cash
      dividend (regular $0.44 per share)
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (350
            )
            
            
            -
            
            
            
            (350
            )Comprehensive
      lossNet
      loss
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (2,435
            )
            
            
            -
            
            
            
            (2,435
            )Change
      in unrealized gain (loss) on securitiesavailable for sale, net of taxes
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (916
            )
            
            
            (916
            )Total
      comprehensive loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (3,351
            )Balance
      at December 31, 2009
            
            $
            24
            
            
            $
            12,207
            
            
            $
            (9,824
            )
            
            $
            20,979
            
            
            $
            460
            
            
            $
            23,846











F-5





AJS
BANCORP, INC.
 CONSOLIDATED
STATEMENTS OF CASH FLOWS


Years
ended December 31, 2009 and 2008


(Dollars
in thousands)








2009
            
            
            2008Cash
      flows from operating activitiesNet
      loss
            
            $
            (2,435
            )
            
            $
            (2,071
            )Adjustments
      to reconcile net loss to net cashprovided by operating activitiesDepreciation
            
            
            295
            
            
            
            260Provision
      for loan losses
            
            
            2,917
            
            
            
            4,328Deferred
      income taxes
            
            
            836
            
            
            
            (217
            )Premium
      amortization on securities, net
            
            
            97
            
            
            
            22Stock
      award compensation expense
            
            
            -
            
            
            
            70Stock
      option compensation expense
            
            
            -
            
            
            
            29Earnings
      on bank owned life insurance
            
            
            (149
            )
            
            
            (148
            )Dividend
      reinvestments on trading securities
            
            
            -
            
            
            
            (154
            )Gain
      on sale of securities available for sale
            
            
            (833
            )
            
            
            (17
            )Realized
      loss on the sale of trading securities
            
            
            -
            
            
            
            192Loss
      on correspondent bank investment
            
            
            168
            
            
            
            -Loss
      on other real estate owned write-downs
            
            
            649
            
            
            
            -Changes
      inFair
      value of trading securities
            
            
            (7
            )
            
            
            13Accrued
      interest receivable and other assets
            
            
            (425
            )
            
            
            (1,577
            )Accrued
      interest payable and other liabilities
            
            
            (45
            )
            
            
            469Net
      cash provided by operating activities
            
            
            1,068
            
            
            
            1,199Cash
      flows from investing activitiesTrading
      securitiesPurchases
            
            
            -
            
            
            
            (1,500
            )Redemptions
            
            
            -
            
            
            
            44Proceeds
      from the sale of mutual fund
            
            
            -
            
            
            
            11,400Maturities
      and principal payments
            
            
            -
            
            
            
            1,500Securities
      available for salePurchases
            
            
            (73,222
            )
            
            
            (46,427
            )Sales
            
            
            16,170
            
            
            
            1,020Maturities
      and principal payments
            
            
            49,886
            
            
            
            28,241Securities
      held to maturityPurchases
            
            
            -
            
            
            
            (320
            )Maturities
      and principal payments
            
            
            7
            
            
            
            78Purchases
      of certificates of deposit, net
            
            
            -
            
            
            
            (3,800
            )Maturities
      of certificates of deposit
            
            
            5,097
            
            
            
            -Loan
      origination and repayments, net
            
            
            (7,144
            )
            
            
            2,064Proceeds
      from sale of other real estate
            
            
            -
            
            
            
            179Purchase
      of equipment
            
            
            (214
            )
            
            
            (240
            )Net
      cash used in investing activities
            
            
            (9,420
            )
            
            
            (7,761
            )











F-6





AJS
BANCORP, INC.
 CONSOLIDATED
STATEMENTS OF CASH FLOWS


Years
ended December 31, 2009 and 2008


(Dollars
in thousands)








2009
            
            
            2008Cash
      flows from financing activitiesDividends
      paid
            
            $
            (350
            )
            
            $
            (754
            )Net
      change in deposits
            
            
            12,884
            
            
            
            (10,243
            )Purchases
      of FHLB advances
            
            
            6,000
            
            
            
            13,750Maturities
      of FHLB advances
            
            
            (10,875
            )
            
            
            (6,925
            )Purchase
      of treasury stock
            
            
            (29
            )
            
            
            (197
            )Net
      change in advance payments by borrowersfor
      taxes and insurance
            
            
            (187
            )
            
            
            (49
            )Net
      cash from financing activities
            
            
            7,443
            
            
            
            (4,418
            )Net
      change in cash and cash equivalents
            
            
            (909
            )
            
            
            (10,980
            )Cash
      and cash equivalents at beginning of year
            
            
            7,393
            
            
            
            18,373Cash and cash equivalents at
      end of year
            
            $
            6,484
            
            
            $
            7,393Supplemental
      disclosures of cash flow informationCash
      paid during the year forInterest
            
            $
            4,387
            
            
            $
            6,035Income
      taxes
            
            
            75
            
            
            
            505Supplemental
      noncash disclosuresTransfers
      from loans to real estate owned
            
            $
            3,417
            
            
            $
            179Due
      to broker
            
            
            1,000
            
            
            
            -Due
      from broker
            
            
            4,727
            
            
            
            -Securities
      transferred from available for sale to trading uponadoption of ASC 825-10
            
            
            -
            
            
            
            11,513Transfers
      of negative advance payment by borrowers fortaxes and insurance balances to loans
            
            
            251
            
            
            
            -


F-7
  AJS
BANCORP, INC.
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2009 and 2008
 (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 60.7% 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.  The Company’s exposure to credit risk is significantly affected
by changes in the economy of Chicago and its suburban areas.





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, valuation of other real estate owned, deferred tax asset
valuation allowance 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 loans,
certificates of deposit with other financial institutions, and deposit
transactions.  Proceeds from sales of trading securities are reported
as an investing activity.





Interest-Earning Deposits in
Other Financial Institution:  Interest-earning deposits in
other financial institutions mature within one year and are carried at
cost.





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 trading securities.  These
trading securities are carried at fair value with unrealized gains and losses
reported through earnings.  Securities available for sale are carried
at fair value, with unrealized holding gains and losses reported in other
comprehensive income (loss), net of tax.





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 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.











F-8


AJS
BANCORP, INC.
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2009 and 2008
 (Dollars
in thousands, except per share data)


NOTE 1 - SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued)





Management
evaluates securities for other-than-temporary impairment (“OTTI”) at least on a
quarterly basis, and more frequently when economic or market conditions warrant
such an evaluation.





Federal Home Loan Bank
(FHLB) Stock:  The Bank is a member of the FHLB
system.  Members are required to own a certain amount of stock based
on the level of borrowings and other factors, and may invest in additional
amounts.  FHLB stock is carried at cost, classified as a restricted
security, and periodically evaluated for impairment based on ultimate recovery
of par 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 fair value, 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
fair value 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, 2009
and December 31, 2008, 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 91 days delinquent unless the loan is well-secured and in process of
collection.  Consumer 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
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 when 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.







F-9


AJS
BANCORP, INC.
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2009 and 2008
 (Dollars
in thousands, except per share data)


NOTE 1 - SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued)





Nonperforming
loans and impaired loans are defined differently.  A loan is impaired
when, based on current information and events, it is probable that a creditor
will be unable to collect all amounts due according to the contractual terms of
the loan agreement.  Loans, for which the terms have been modified,
and for which the borrower is experiencing financial difficulties, are
considered troubled debt restructurings and classified as impaired.  A
loan is non- performing when it is greater than ninety days past
due.  Some loans may be included in both categories, whereas other
loans may only be included in one category.  Specific allocations are
made for loans that are determined to be impaired.  Company policy
requires that all non-homogeneous loans past due greater than ninety days be
classified as impaired and non-performing.  However, loans past due
less than 90 days may also be classified as impaired when management does not
expect to collect all amounts due according to the contractual terms of the loan
agreement.  Impairment is measured by determining the present value of
expected future cash flows or, for collateral-dependent loans, the fair value of
the collateral adjusted for market conditions and selling expenses as compared
to the loan carrying amount.





Multifamily
and commercial real estate loans over $500 are individually evaluated for
impairment.  Troubled debt restructurings are measured at the present
value of estimated future cash flows using the loan’s effective rate at
inception.





Other Real Estate
Owned:  Assets acquired through or instead of loan foreclosure
are initially recorded at lower of cost or fair value less costs to sell when
acquired, establishing a new cost basis.  If fair value declines
subsequent to foreclosure, a valuation allowance is recorded through
expense.  Operating costs after acquisition are expensed.





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.





Bank-Owned Life
Insurance:  The Company has purchased life insurance policies
on certain key executives.  Company owned life insurance is recorded
at the amount that can be realized under the insurance contract at the balance
sheet date, which is the cash surrender value adjusted for other charges or
other amounts due that are probable at settlement.





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.





A tax
position is recognized as a benefit only if it is “more likely than not” that
the tax position would be sustained in a tax examination, with a tax examination
being presumed to occur.  The amount recognized







F-10


AJS
BANCORP, INC.
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2009 and 2008
 (Dollars
in thousands, except per share data)


NOTE 1 - SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued)





is the
largest amount of tax benefit that is greater than 50% likely of being realized
on examination.  For tax positions not meeting the “more likely than
not” test, no tax benefit is recorded.  At December 31, 2009 and 2008,
there are no amounts accrued for uncertainty in income taxes.





The
Company recognizes interest and/or penalties related to income tax matters in
income tax expense.  No expense was accrued for these items during the
years ended 2009 and 2008.





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 Instruments:  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.





Loss Per Common
Share:  Basic loss per common share is net loss 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 show the dilutive effect, if any, of additional common shares
issuable from stock options and stock awards.  Loss and dividends per
share are restated for all stock splits and dividends through the date of issue
of the financial statements.  No stock splits or stock dividends
occurred during 2009 or 2008.





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





Retirement
Plans:  Profit sharing plan expense is the amount of
discretionary Company contributions.  Deferred compensation is funded
by employee contributions. Supplemental retirement plan expense allocates the
benefits over years of service once eligible participants meet minimum
employment requirements.





Employee Stock Ownership
Plan (“ESOP”):  The ESOP was fully allocated in
2006.  Compensation expense was recorded based on the market price of
the shares as they were 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 was recorded as an adjustment to paid-in
capital.  Dividends on ESOP shares





F-11


AJS
BANCORP, INC.
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2009 and 2008
 (Dollars
in thousands, except per share data)


NOTE 1 - SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued)





reduce
retained earnings.  Shares are considered outstanding in the earnings
per share calculations as they are committed to be released.  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 putable allocated ESOP shares is
reclassified from stockholders’ equity and included in other
liabilities.





Stock-Based
Compensation:  Compensation cost is recognized for stock
options and restricted stock awards issued to employees, based on the fair value
of these awards at the date of grant. A Black-Scholes model is utilized to
estimate the fair value of stock options, while the market price of the
Corporation’s common stock at the date of grant is used for restricted stock
awards. Compensation cost is recognized over the required service period,
generally defined as the vesting period. For awards with graded vesting,
compensation cost is recognized on a straight-line basis over the requisite
service period for the entire award.





Dividend
Restriction:  Banking regulations require the maintenance of
certain capital levels and may limit the dividends paid by the Bank to the
holding company or by the holding company to the stockholders.





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





In
May 2009, the FASB issued guidance which requires the effects of events
that occur subsequent to the balance-sheet date to be evaluated through the date
the financial statements are either issued or available to be
issued.  Companies are required to reflect in their financial
statements the effects of subsequent events that provide additional evidence
about conditions at the balance-sheet date (recognized subsequent
events).  Companies are also prohibited from reflecting in their
financial statements the effects of subsequent events that provide evidence
about conditions that arose after the balance-sheet date (non-recognized
subsequent events), but requires information about those events to be disclosed
if the financial statements would otherwise be misleading.  This
guidance was effective for interim and annual financial periods ending after
June 15, 2009 with prospective application.





In
April 2009, the FASB amended existing guidance for determining whether
impairment is other-than-temporary for debt securities.  The guidance
requires an entity to assess whether it intends to sell, or it is more likely
than not that it will be required to sell, a security in an unrealized loss
position before recovery of its amortized cost basis.  If either of
these criteria is met, the entire difference between amortized cost and fair
value is recognized as impairment through earnings.  For securities
that do not meet the aforementioned criteria, the amount of impairment is split
into two components as follows: 1) other-than-temporary impairment (OTTI)
related to other factors, which is recognized in other comprehensive income and
2) OTTI related to credit loss, which must be recognized in the
income







F-12


AJS
BANCORP, INC.
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2009 and 2008
 (Dollars
in thousands, except per share data)


NOTE 1 - SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued)





statement.  The
credit loss is defined as the difference between the present value of the cash
flows expected to be collected and the amortized cost basis. Additionally,
disclosures about other-than-temporary impairments for debt and equity
securities were expanded.  This guidance was effective for interim and
annual reporting periods ending after June 15, 2009, with early adoption
permitted for periods ending after March 15, 2009.  This guidance
had no impact on the Company for the year ending December 31, 2009.




NOTE
2 - SECURITIES





At
December 31, 2009 and 2008, the Company had trading securities, consisting of
equity securities, carried at fair value.  Trading securities had a
carrying value of $25 and $18, and unrealized gains of $24 and $17 at December
31, 2009, and 2008, respectively.





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
            
            
            GrossAmortized
            
            
            Unrealized
            
            
            Unrealized
            
            
            FairCost
            
            
            Gains
            
            
            Losses
            
            
            ValueDecember  31,
2009Securities
    available-for-saleU.S.
      Treasuries
            
            $
            1,968
            
            
            $
            -
            
            
            $
            (43
            )
            
            $
            1,925U.S.
      government-sponsored entities
            
            
            55,379
            
            
            
            50
            
            
            
            (855
            )
            
            
            54,574Residential
      agency mortgage-backed
            
            
            34,069
            
            
            
            1,599
            
            
            
            -
            
            
            
            35,668Total
            
            $
            91,416
            
            
            $
            1,649
            
            
            $
            (898
            )
            
            $
            92,167December 31, 2008Securities
    available-for-saleU.S.
      government-sponsored entities
            
            $
            20,000
            
            
            $
            198
            
            
            $
            -
            
            
            $
            20,198Residential
      agency mortgage-backed
            
            
            67,240
            
            
            
            2,077
            
            
            
            (25
            )
            
            
            69,292Total
            
            $
            87,240
            
            
            $
            2,275
            
            
            $
            (25
            )
            
            $
            89,490





F-13


AJS
BANCORP, INC.
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2009 and 2008
 (Dollars
in thousands, except per share data)


NOTE 2 - SECURITIES(Continued)





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, 2009Securities held-to-maturityResidential
      agencymortgage-backed
            
            $
            40
            
            
            $
            2
            
            
            $
            -
            
            
            $
            42State
      and municipal
            
            
            320
            
            
            
            3
            
            
            
            -
            
            
            
            323$
            360
            
            
            $
            5
            
            
            $
            -
            
            
            $
            365December 31, 2008Securities held-to-maturityResidential
      agencymortgage-backed
            
            $
            47
            
            
            $
            2
            
            
            $
            -
            
            
            $
            49State
      and municipal
            
            
            320
            
            
            
            -
            
            
            
            (9
            )
            
            
            311$
            367
            
            
            $
            2
            
            
            $
            (9
            )
            
            $
            360





Expected
maturities of securities at December 31, 2009 were as
follows.  Securities not due at a single maturity date, primarily
mortgage-backed securities, are shown separately.





Available
            
            
            Held
      tofor Sale
            
            
            MaturityFair
            
            
            Amortized
            
            
            FairValue
            
            
            Cost
            
            
            ValueDue
      in one year or less
            
            $
            -
            
            
            $
            -
            
            
            $
            -Due
      after one year through five years
            
            
            8,966
            
            
            
            -
            
            
            
            -Due
      after five years through ten years
            
            
            21,699
            
            
            
            205
            
            
            
            208Due
      after ten years
            
            
            25,834
            
            
            
            115
            
            
            
            115Residential
      agency mortgage-backed securities
            
            
            35,668
            
            
            
            40
            
            
            
            42$
            92,167
            
            
            $
            360
            
            
            $
            365





Securities
with a carrying value of approximately $15,473 and $11,258 at December 31,
2009 and 2008 were pledged to secure public deposits and for other purposes as
required or permitted by law.





F-14


AJS
BANCORP, INC.
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2009 and 2008
 (Dollars
in thousands, except per share data)


NOTE 2 - SECURITIES(Continued)





Sales of
trading and available for sale securities were as follows:





2009
            
            
            2008Available for saleProceeds
      from sale
            
            $
            16,170
            
            
            $
            1,020Gross
      realized gains
            
            
            833
            
            
            
            17TradingProceeds
      from sale
            
            
            -
            
            
            
            11,400Gross
      realized losses
            
            
            -
            
            
            
            (192
            )





Securities
with unrealized losses at year end not recognized in income, by length of time
that individual securities have been in a continuous unrealized loss position,
are as follows:





Less Than 12 Months
            
            
            12 Months or More
            
            
            TotalFair
            
            
            Unrealized
            
            
            Fair
            
            
            Unrealized
            
            
            Fair
            
            
            UnrealizedValue
            
            
            Loss
            
            
            Value
            
            
            Loss
            
            
            Value
            
            
            Loss2009U.S.
      government-sponsored entities
            
            $
            42,993
            
            
            $
            (855
            )
            
            $
            -
            
            
            $
            -
            
            
            $
            42,993
            
            
            $
            (855
            )U.S.
      treasuries
            
            
            1,925
            
            
            
            (43
            )
            
            
            -
            
            
            
            -
            
            
            
            1,925
            
            
            
            (43
            )Total
      temporarilyimpaired
            
            $
            44,918
            
            
            $
            (898
            )
            
            $
            -
            
            
            $
            -
            
            
            $
            44,918
            
            
            $
            (898
            )2008Residential
      agencymortgage-backed
            
            $
            15
            
            
            $
            (1
            )
            
            $
            2,926
            
            
            $
            (24
            )
            
            $
            2,941
            
            
            $
            (25
            )State
      and politicalsubdivisions
            
            
            311
            
            
            
            (9
            )
            
            
            -
            
            
            
            -
            
            
            
            311
            
            
            
            (9
            )$
            326
            
            
            $
            (10
            )
            
            $
            2,926
            
            
            $
            (24
            )
            
            $
            3,252
            
            
            $
            (34
            )





Unrealized
losses on securities have not been recognized into income because the issuer(s)
securities are of high credit quality (rated AA or higher), management does not
intend to sell and it is not more likely than not that management would be
required to sell the securities prior to their anticipated recovery, and the
decline in fair value is largely due to changes in interest
rates.  The fair value is expected to recover as the securities(s)
approach maturity.





F-15


AJS
BANCORP, INC.
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2009 and 2008
 (Dollars
in thousands, except per share data)


NOTE
3 - LOANS





Loans
consist of:


2009
            
            
            2008Mortgage:Secured
      by one-to-four-family residences
            
            $
            91,731
            
            
            $
            84,411Secured
      by Multi-family and commercialproperties
            
            
            25,152
            
            
            
            32,064Home
      equity
            
            
            13,154
            
            
            
            12,261Consumer
      and other
            
            
            375
            
            
            
            323130,412
            
            
            
            129,059Allowance
      for loan losses
            
            
            (3,035
            )
            
            
            (2,734
            )Net
      deferred costs and other
            
            
            79
            
            
            
            70Loans,
      net
            
            $
            127,456
            
            
            $
            126,395





Changes
in the allowance for loan losses follow:





2009
            
            
            2008Beginning
      balance
            
            $
            2,734
            
            
            $
            1,539Provision
      for loan losses
            
            
            2,917
            
            
            
            4,328Charge-offs
            
            
            (2,652
            )
            
            
            (3,200
            )Recoveries
            
            
            36
            
            
            
            67Ending
      balance
            
            $
            3,035
            
            
            $
            2,734





Impaired
loans were as follows:





2009
            
            
            2008Impaired
      loans with allocated allowance forloan
      losses
            
            $
            2,914
            
            
            $
            6,464Impaired
      loans with no allocated allowancefor
      loan losses
            
            
            3,688
            
            
            
            4,116Total
            
            $
            6,602
            
            
            $
            10,580Amount
      of the allowance for loan losses allocated
            
            $
            1,313
            
            
            $
            1,335Average
      of impaired loans during the year
            
            $
            9,218
            
            
            $
            4,053Interest
      income recognized during impairment,substantially
      all on a cash-basis
            
            
            148
            
            
            
            190








F-16


AJS
BANCORP, INC.
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2009 and 2008
 (Dollars
in thousands, except per share data)


NOTE 3 - LOANS(Continued)





Nonperforming
loans were as follows:


2009
            
            
            2008Nonaccrual
      loans
            
            $
            6,490
            
            
            $
            3,736Loans
      past due over 90 days still on accrual
            
            
            -
            
            
            
            -





During
2009 and 2008, the Company restructured loans totaling $3.1
million.  These loans are considered troubled debt restructurings and
are classified as impaired at December 31, 2009 and 2008.  Specific
reserves of $1,313 and $1,335 were allocated to these loans at December 31, 2009
and 2008, respectively. No additional loan commitments are outstanding to these
borrowers.





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:





2009
            
            
            2008Beginning
      balance
            
            $
            1,515
            
            
            $
            1,517New
      loans
            
            
            315
            
            
            
            871Effect
      of changes in related parties
            
            
            -
            
            
            
            (51
            )Repayments
            
            
            (460
            )
            
            
            (822
            )Ending
      balance
            
            $
            1,370
            
            
            $
            1,515





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





2009
            
            
            2008Mortgage
      loan portfolios serviced for:Fannie
      Mae
            
            $
            4,044
            
            
            $
            5,077Freddie
      Mac
            
            
            71
            
            
            
            78Balance,
      end of year
            
            $
            4,115
            
            
            $
            5,155





The
carrying value of mortgage servicing rights is $17 and $38 at December 31, 2009
and 2008.  Custodial escrow balances maintained in connection with the
foregoing loan servicing were approximately $73 and $164 at December 31, 2009
and 2008.





F-17


AJS
BANCORP, INC.
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2009 and 2008
 (Dollars
in thousands, except per share data)


NOTE
4 - PREMISES AND EQUIPMENT





Premises
and equipment consist of:


2009
            
            
            2008Land
            
            $
            1,351
            
            
            $
            1,351Office
      buildings and improvements
            
            
            5,388
            
            
            
            5,342Furniture,
      fixtures, and equipment
            
            
            1,535
            
            
            
            1,5308,274
            
            
            
            8,223Less
      accumulated depreciation
            
            
            4,093
            
            
            
            3,961$
            4,181
            
            
            $
            4,262




NOTE
5 - DEPOSITS





Certificates
of deposit in denominations of $100 or more were $41,762 and $32,972 at
December 31, 2009 and 2008.




Deposit
accounts are summarized as follows:


2009
            
            
            2008Passbook
      accounts
            
            $
            45,027
            
            
            $
            38,952NOW
      and checking accounts
            
            
            23,215
            
            
            
            21,022Money
      market accounts
            
            
            7,002
            
            
            
            13,006Certificates
      of deposit
            
            
            117,931
            
            
            
            107,311Total
      deposits
            
            $
            193,175
            
            
            $
            180,291





Scheduled
maturities of time certificates at December 31, 2009 are as
follows:





2010
            
            $
            79,8522011
            
            
            22,2792012
            
            
            6,2122013
            
            
            4,1122014
            
            
            5,476$
            117,931





Interest
expense on deposits is summarized as follows:





2009
            
            
            2008NOW
            
            $
            24
            
            
            $
            38Money
      market
            
            
            38
            
            
            
            159Passbook
            
            
            365
            
            
            
            352Certificates
      of deposit
            
            
            2,808
            
            
            
            4,086$
            3,235
            
            
            $
            4,635







F-18


AJS
BANCORP, INC.
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2009 and 2008
 (Dollars
in thousands, except per share data)


NOTE 5 – DEPOSITS
(Continued)





Non-interest-bearing
deposits (NOW accounts) totaled $13,441 and $12,206 at December 31, 2009 and
2008.  Deposit accounts held by directors and executive officers
totaled $1,207 and $1,140 at December 31, 2009 and 2008.




NOTE
6 - FEDERAL HOME LOAN BANK ADVANCES





At year
end, advances from the FHLB were as follows:





FixedMaturity Date
            
            Rate
            
            
            2009
            
            
            2008March
      20, 2009
            
            
            5.63
            
            
            $
            -
            
            
            $
            3,000March
      23, 2009
            
            
            3.35
            
            
            
            -
            
            
            
            625June
      17, 2009
            
            
            4.40
            
            
            
            -
            
            
            
            1,000June
      22, 2009
            
            
            4.67
            
            
            
            -
            
            
            
            1,000June
      25, 2009
            
            
            4.61
            
            
            
            -
            
            
            
            1,000July
      1, 2009
            
            
            4.54
            
            
            
            -
            
            
            
            1,000August
      10, 2009
            
            
            3.88
            
            
            
            -
            
            
            
            650September
      16, 2009
            
            
            3.68
            
            
            
            -
            
            
            
            600September
      28, 2009
            
            
            3.79
            
            
            
            -
            
            
            
            2,000January
      4, 2010
            
            
            3.51
            
            
            
            1,750
            
            
            
            1,750January
      12, 2010
            
            
            0.40
            
            
            
            3,000
            
            
            
            -February
      16, 2010
            
            
            2.89
            
            
            
            3,000
            
            
            
            3,000March
      23, 2010
            
            
            3.71
            
            
            
            250
            
            
            
            250July
      2, 2010
            
            
            4.69
            
            
            
            1,000
            
            
            
            1,000July
      29, 2010
            
            
            1.58
            
            
            
            1,000
            
            
            
            -October
      25, 2010
            
            
            4.16
            
            
            
            1,000
            
            
            
            1,000January
      31, 2011
            
            
            2.14
            
            
            
            2,000
            
            
            
            -February
      22, 2011
            
            
            3.32
            
            
            
            2,000
            
            
            
            2,000March
      21, 2011
            
            
            2.93
            
            
            
            3,000
            
            
            
            3,000July
      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
            
            
            
            1,000February
      22, 2012
            
            
            3.63
            
            
            
            2,000
            
            
            
            2,000February
      27, 2013
            
            
            3.95
            
            
            
            2,000
            
            
            
            2,000$
            25,300
            
            
            $
            30,175





F-19


AJS
BANCORP, INC.
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2009 and 2008
 (Dollars
in thousands, except per share data)


NOTE 6 - FEDERAL HOME LOAN BANK
ADVANCES (Continued)





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 fixed rate and 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 are as follows:





2010
            
            $
            11,0002011
            
            
            9,3002012
            
            
            3,0002013
            
            
            2,0002014
            
            
            -$
            25,300








NOTE
7 - INCOME TAXES





Income
tax expense (benefit) was as follows:




2009
            
            
            2008CurrentFederal
            
            $
            (113
            )
            
            $
            (816
            )State
            
            
            (8
            )
            
            
            (20
            )Deferred
            
            
            (666
            )
            
            
            (571
            )Change
      in valuation allowance
            
            
            1,500
            
            
            
            -Total
            
            $
            713
            
            
            $
            (1,407
            )





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




2009
            
            
            2008Income
      tax at federal statutory rate (34%)
            
            $
            (586
            )
            
            $
            (1,182
            )Effect
      ofState
      taxes, net of federal benefit
            
            
            (105
            )
            
            
            (208
            )Other,
      net
            
            
            (96
            )
            
            
            (17
            )Change
      in valuation allowance
            
            
            1,500
            
            
            
            -Total
            
            $
            713
            
            
            $
            (1,407
            )Effective
      tax rate
            
            
            41.4
            %
            
            
            (40.5
            )%













F-20


AJS
BANCORP, INC.
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2009 and 2008
 (Dollars
in thousands, except per share data)


NOTE 7 - INCOME TAXES
(Continued)





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





2009
            
            
            2008Deferred
      tax assetsAllowance
      for loan losses
            
            $
            1,178
            
            
            $
            1,061Accrued
      expenses
            
            
            964
            
            
            
            916Reserve
      for uncollectible interest
            
            
            220
            
            
            
            117OREO
      write-downs
            
            
            252
            
            
            
            -Other,
      net
            
            
            251
            
            
            
            1222,865
            
            
            
            2,216Deferred
      tax liabilitiesPremises
      and equipment
            
            
            (328
            )
            
            
            (334
            )Federal
      Home Loan Bank stock dividends
            
            
            (186
            )
            
            
            (186
            )Deferred
      loan fees
            
            
            (108
            )
            
            
            (117
            )Unrealized
      gain on securities available for sale
            
            
            (291
            )
            
            
            (874
            )(913
            )
            
            
            (1,511
            )Net
      deferred tax asset
            
            
            1,952
            
            
            
            705Valuation
      allowance
            
            
            (1,500
            )
            
            
            -Net
      deferred tax asset
            
            $
            452
            
            
            $
            705





A
valuation allowance should be recognized against deferred tax assets if, based
on the weight of available evidence, it is more likely than not (i.e., greater
than 50% probability) that some portion or all of the deferred tax asset will
not be realized.  Future realization of a deferred tax asset
ultimately depends on the existence of sufficient taxable income of the
appropriate character (for example, ordinary income or capital gain) within the
carry back and carry forward periods available under the tax law.  The
Company evaluates the future realization of the deferred tax asset on a
quarterly basis.  During the Company’s three most recent calendar
years, 2009, 2008, and 2007, the Company’s operating performance resulted in a
cumulative loss position.  The valuation allowance was determined
based on consideration of future performance as well as tax planning strategies
available to the Company.  Tax-planning strategies are actions that
the Company would take in order to prevent an operating loss or tax credit carry
forward from expiring unused.  In order for a tax-planning strategy to
be considered, it must be prudent and feasible and result in realization of the
deferred tax assets.  Based on the Company’s analysis of projected
operating performance and prudent and feasible tax planning strategies currently
available, the Company recorded a valuation allowance of $1,500 during the year
ended December 31, 2009.  No valuation allowance was recorded during
2008.





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, 2009.  If the Bank were liquidated or otherwise ceased to
be a bank or if tax laws were to change, this amount would be
expensed.  The Company files income tax returns in the U.S. federal
jurisdiction and in Illinois.  The Company is no longer subject to
examination by the U.S. federal tax authorities and by Illinois tax authorities
for years prior to 2006.





F-21


AJS
BANCORP, INC.
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2009 and 2008
 (Dollars
in thousands, except per share data)


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 $100
for the years ended December 31, 2009 and 2008.





The Bank
offers a deferred compensation plan to its officers and
directors.  Participants can defer (i) twenty percent (20%) of such
Participant’s Base Salary; (ii) fifty percent (50%) of such Participant’s annual
Bonus; (iii) and one hundred percent (100%) of such Participant’s Director’s
Fees.  Deferred compensation balances earn a rate equal to two
percentage points above the prime rate, as published in The Wall Street
Journal.  The Bank’s liability for the deferred compensation plan
totaled $702 and $669 at December 31, 2009 and 2008.  Expenses related
to the plan were $33 and $48 at December 31, 2009 and 2008, and are reflected as
a part of compensation expense.   The assets of the plan are
subject to claim of the general creditors of the Bank.





The Bank
sponsors nonqualified unfunded retirement plans for certain directors, which
provide annual benefit payments upon their retirement.  The Bank’s
liability for the plans totaled $1,615 and $1,555 at December 31, 2009 and
2008.  Expense related to the plans totaled $60 and $56 for the years
ended December 31, 2009 and 2008.




NOTE
9 - EMPLOYEE STOCK OWNERSHIP PLAN





The
Company maintains an ESOP for the benefit of substantially all
employees.  The ESOP originally 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 in full during 2005, with funds from the
Company’s discretionary contributions to the ESOP and earnings on the ESOP’s
assets.  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.





F-22


AJS
BANCORP, INC.
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2009 and 2008
 (Dollars
in thousands, except per share data)


NOTE 9 - EMPLOYEE STOCK OWNERSHIP
PLAN (Continued)





At
December 31, 2009 and 2008, all ESOP shares were allocated.  Shares
held by the ESOP at December 31 are as follows:





2009
            
            
            2008Allocated
      shares
            
            
            65,299
            
            
            
            71,974Shares
      distributed from plan
            
            
            29,053
            
            
            
            22,378Total
      ESOP shares
            
            
            94,352
            
            
            
            94,352Fair
      value of allocated shares subject to repurchaseobligation
      recorded in other liabilities
            
            $
            787
            
            
            $
            1,267








NOTE
10 - EMPLOYEE STOCK BENEFITS





The
Company has 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 less than a
majority of the total number of shares outstanding.  There are a total
of 17,456 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 granted is based on
historical data and represents the period of time that optionsgranted 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.













F-23


AJS
BANCORP, INC.
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2009 and 2008
 (Dollars
in thousands, except per share data)


NOTE 10 - EMPLOYEE STOCK
BENEFITS (Continued)





There
were no stock options granted during 2009 or 2008.





A summary
of the activity in the stock option plan for 2009 follows:





WeightedWeighted
            
            
            AverageAverage
            
            
            RemainingExercise
            
            
            ContractualShares
            
            
            Price
            
            
            TermOutstanding
      at beginning of year
            
            
            90,485
            
            
            $
            18.82Granted
            
            
            -
            
            
            
            -Exercised
            
            
            -
            
            
            
            -Forfeited
      or expired
            
            
            -
            
            
            
            -Outstanding
      at end of year
            
            
            90,485
            
            
            $
            18.82
            
            
            
            3.4Exercisable
      at end of year
            
            
            90,485
            
            
            $
            18.82
            
            
            
            3.4





Aggregate
intrinsic value is zero at December 31, 2009 as the weighted average exercise
price exceeds the December 31, 2009 quoted stock price.





As of
December 31, 2009 and 2008, there was no unrecognized compensation cost, as all
outstanding options granted under the plan are fully vested.





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.  As of December
31, 2008 all of the RRP shares are 100% vested.  The total fair value
of shares vested during the year ended December 31, 2008 was $70.




NOTE
11 - FAIR VALUES





Fair
value is the exchange price that would be received for an asset or paid to
transfer a liability (exit price) in the principal or most advantageous market
for the asset or liability in an orderly transaction between market participants
on the measurement date.  There are three levels of inputs that may be
used to measure fair value:





Level 1:
Quoted prices (unadjusted) for identical assets or liabilities in active markets
that the entity has the ability to access as of the measurement
date.




Level 2:
Significant other observable inputs other than Level 1 prices such as quoted
prices for similar assets or liabilities; quoted prices in markets that are not
active; or other inputs that are observable or can be corroborated by observable
market data.





Level 3:
Significant unobservable inputs that reflect a company’s own assumptions about
the assumptions that market participants would use in pricing an asset or
liability.













F-24


AJS
BANCORP, INC.
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2009 and 2008
 (Dollars
in thousands, except per share data)


NOTE 11 - FAIR VALUES OF FINANCIAL
INSTRUMENTS (Continued)




The
Company used the following methods and significant assumptions used to estimate
the fair value of items:





Securities:  The
fair values of trading securities and securities available for sale are
determined by quoted market prices, if available (Level 1).  For
securities where quoted prices are not available, fair values are calculated
based on market prices of similar securities (Level 2).





Impaired
Loans:  The fair value of impaired loans with specific
allocations of the allowance for loan losses is generally based on recent real
estate appraisals. These appraisals may utilize a single valuation approach or a
combination of approaches including comparable sales and the income approach.
Adjustments are routinely made in the appraisal process by the appraisers to
adjust for differences between the comparable sales and income data available.
Such adjustments are usually significant and typically result in a Level 3
classification of the inputs for determining fair value.





Other Real Estate
Owned:  Nonrecurring adjustments to certain commercial and
residential real estate properties classified as other real estate owned (OREO)
are measured at the lower of carrying amount or fair value, less costs to
sell.  Fair values are generally based on third party appraisals of
the property, resulting in a Level 3 classification.  In cases where
the carrying amount exceeds the fair value, less costs to sell, an impairment
loss is recognized.





At
December 31, 2009 and 2008, the Company had no liabilities measured at fair
value.  Assets measured at fair value on a recurring basis are
summarized below:








Fair
      value Measurements at
            
            
            Fair
      Value Measurements atDecember 31, 2009 Using
            
            
            December 31, 2008 UsingQuoted
            
            
            
            
            
            QuotedPrices
      in
            
            
            
            
            
            Prices
      inActive
            
            
            
            
            
            ActiveMarkets
      for
            
            
            Significant
            
            
            Markets
      for
            
            
            SignificantIdentical
            
            
            Other
            
            
            Identical
            
            
            OtherAssets
            
            
            Observable
            
            
            Assets
            
            
            Observable(Level 1)
            
            
            Inputs (Level 2)
            
            
            (Level 1)
            
            
            Inputs (Level 2)Trading
      securities
            
            $
            25
            
            
            $
            -
            
            
            $
            18
            
            
            $
            -Securities
      available-for-saleU.S.
      Treasuries
            
            
            -
            
            
            
            1,925
            
            
            
            -
            
            
            
            -U.S.
      government-sponsored entities
            
            
            -
            
            
            
            54,574
            
            
            
            -
            
            
            
            20,198Residential
      agency mortgage-backed
            
            
            -
            
            
            
            35,668
            
            
            
            -
            
            
            
            69,292













F-25


AJS
BANCORP, INC.
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2009 and 2008
 (Dollars
in thousands, except per share data)


NOTE 11 - FAIR VALUES OF FINANCIAL
INSTRUMENTS (Continued)





The
following table sets forth the Company’s assets that were measured at fair value
on a non-recurring basis:





Fair
      value Measurements at
            
            
            Fair
      Value Measurements atDecember 31, 2009 Using
            
            
            December 31, 2008 UsingSignificant
            
            
            
            
            
            SignificantCarrying
            
            
            Unobservable
            
            
            Carrying
            
            
            UnobservableAmount
            
            
            Inputs (Level 3)
            
            
            Amount
            
            
            Inputs (Level 3)Impaired
      loans
            
            $
            1,601
            
            
            $
            1,601
            
            
            $
            5,129
            
            
            $
            5,129Other
      Real Estate Owned
            
            
            2,768
            
            
            
            2,768
            
            
            
            -
            
            
            
            -





At
December 31, 2009 impaired loans, which are measured for impairment using the
fair value of the collateral for collateral dependent loans, had a carrying
amount of $2,914, with a valuation allowance of $1,313, resulting in an
additional provision for loan losses of $1,313 for 2009.  At December
31, 2008, impaired loans had a carrying amount of $6,464, with a valuation
allowance of $1,335, resulting in an additional provision for loan losses of
$1,335 for the year ending December 31, 2008.





At
December 31, 2009, other real estate owned carried at fair value approximates
$2,768.  This balance is net of a valuation allowance of $649 for the
year ending December 31, 2009.













F-26


AJS
BANCORP, INC.
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2009 and 2008
 (Dollars
in thousands, except per share data)


NOTE 11 - FAIR VALUES(Continued)





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





December 31, 2009
            
            
            December 31, 2008Carrying
            
            
            Fair
            
            
            Carrying
            
            
            FairAmount
            
            
            Value
            
            
            Amount
            
            
            ValueFinancial
      assetsCash
      and cash equivalents
            
            $
            6,484
            
            
            $
            6,484
            
            
            $
            7,393
            
            
            $
            7,393Certificates
      of deposit
            
            
            1,700
            
            
            
            1,700
            
            
            
            6,797
            
            
            
            6,797Trading
      securities
            
            
            25
            
            
            
            25
            
            
            
            18
            
            
            
            18Securities
      available for sale
            
            
            92,167
            
            
            
            92,167
            
            
            
            89,490
            
            
            
            89,490Securities
      held to maturity
            
            
            360
            
            
            
            365
            
            
            
            367
            
            
            
            360Loans,
      net
            
            
            127,456
            
            
            
            124,907
            
            
            
            126,395
            
            
            
            131,173Federal
      Home Loan Bank stock
            
            
            2,450
            
            
            
            N/A
            
            
            
            2,450
            
            
            
            N/AAccrued
      interest receivable
            
            
            973
            
            
            
            973
            
            
            
            1,027
            
            
            
            1,027Financial
      liabilitiesDeposits
            
            
            (193,175
            )
            
            
            (194,526
            )
            
            
            (180,291
            )
            
            
            (181,505
            )FHLB
      advances
            
            
            (25,300
            )
            
            
            (25,908
            )
            
            
            (30,175
            )
            
            
            (31,031
            )Advances
      from borrowers for taxesand
      insurance
            
            
            (1,566
            )
            
            
            (1,566
            )
            
            
            (1,502
            )
            
            
            (1,502
            )Accrued
      interest payable
            
            
            (156
            )
            
            
            (156
            )
            
            
            (330
            )
            
            
            (330
            )





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, accrued
interest receivable and payable, demand deposits, short-term borrowings, and
variable rate loans or deposits that reprice frequently and fully.  It
was not practicable to determine the fair value of FHLB stock due to
restrictions placed on its transferability.  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 (including
consideration of widening credit spreads).  Fair value of FHLB
advances are based on current rates for similar financing.  The fair
value of off-balance-sheet items is not considered material.






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.  As of December
31, 2009 and 2008, management believes the Company and Bank meet all capital
adequacy requirements to which it is subject.





F-27


AJS
BANCORP, INC.
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2009 and 2008
 (Dollars
in thousands, except per share data)


NOTE 12 - REGULATORY CAPITAL(Continued)





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.  At year-end 2009 and 2008, the most recent regulatory
notifications 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
institution’s category.





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, 2009Total
      risk-based capital torisk-weighted
      assets
            
            $
            23,355
            
            
            
            19.64
            %
            
            $
            9,508
            
            
            
            8.0
            %
            
            $
            11,886
            
            
            
            10.0
            %Tier
      I (core) capital to risk-weighted
      assets
            
            
            21,849
            
            
            
            18.38
            
            
            
            4,754
            
            
            
            4.0
            
            
            
            7,132
            
            
            
            6.0Tier
      I (core) capital toadjusted
      total assets
            
            
            21,849
            
            
            
            8.75
            
            
            
            9,986
            
            
            
            4.0
            
            
            
            12,482
            
            
            
            5.0As of December 31, 2008Total
      risk-based capital torisk-weighted
      assets
            
            $
            25,946
            
            
            
            22.51
            %
            
            $
            9,222
            
            
            
            8.0
            %
            
            $
            11,528
            
            
            
            10.0
            %Tier
      I (core) capital to risk-weighted
      assets
            
            
            24,658
            
            
            
            21.39
            
            
            
            4,611
            
            
            
            4.0
            
            
            
            6,917
            
            
            
            6.0Tier
      I (core) capital toadjusted
      total assets
            
            
            24,658
            
            
            
            10.20
            
            
            
            9,672
            
            
            
            4.0
            
            
            
            12,090
            
            
            
            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.





During
2009, the Company paid a regular cash dividend of $0.11 per share for each
quarter of the year.  During 2008, the Company paid a regular cash
dividend of $0.11 per share for each quarter of the year, and a one-time only
special dividend of $0.50 per share.  The OTS approved a waiver of
dividends on the shares held by the mutual holding company.  The
amount of dividends waived, totaling $540 for 2009 and $1,154 for 2008, is a
restriction on retained earnings of the Company.













F-28


AJS
BANCORP, INC.
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2009 and 2008
 (Dollars
in thousands, except per share data)


NOTE 12 - REGULATORY CAPITAL
(Continued)





The
Company’s principal source of funds for dividend payments is dividends received
from the Bank.  Banking regulations limit the amount of dividends that
may be paid without prior approval of regulatory agencies. Under these
regulations, the amount of dividends that may be paid in any calendar year is
limited to the current year’s net profits, combined with the retained net
profits of the preceding two years, subject to the capital requirements
described above.




NOTE
13 - LOSS PER COMMON SHARE





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





2009
            
            
            2008BasicNet
      loss
            
            $
            (2,435
            )
            
            $
            (2,071
            )Weighted
      average common shares outstanding
            
            
            2,023,974
            
            
            
            2,031,909Basic
      loss per common share
            
            $
            (1.20
            )
            
            $
            (1.02
            )DilutedNet
      loss
            
            $
            (2,435
            )
            
            $
            (2,071
            )Weighted
      average common sharesoutstanding
      for basic loss per common share
            
            
            2,023,974
            
            
            
            2,031,909Add:  dilutive
      effects of assumed exercises ofstock
      options and stock awards
            
            
            -
            
            
            
            1,224Average
      shares and dilutive potentialcommon
      shares
            
            
            2,023,974
            
            
            
            2,033,133Diluted
      loss per common share
            
            $
            (1.20
            )
            
            $
            (1.02
            )





At
December 31, 2009 and 2008, there were 90,485 and 0 antidilutive shares,
respectively.




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.





F-29


AJS
BANCORP, INC.
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2009 and 2008
 (Dollars
in thousands, except per share data)


NOTE 14 - OFF-BALANCE-SHEET
ACTIVITIES(Continued)





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





2009
            
            
            2008Fixed
            
            
            Variable
            
            
            Fixed
            
            
            VariableRate
            
            
            Rate
            
            
            Rate
            
            
            RateCommitments
      to make loans
            
            $
            2,872
            
            
            $
            320
            
            
            $
            3,744
            
            
            $
            855Unused
      lines of credit andletters
      of credit
            
            
            -
            
            
            
            13,328
            
            
            
            -
            
            
            
            14,453





Commitments
to make loans are generally made for periods of 120 days or less.  At
December 31, 2009, the fixed rate loan commitments have interest rates ranging
from 4.00% to 6.50% 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.





2009
            
            
            2008Contract
            
            
            Carrying
            
            
            Contract
            
            
            CarryingAmount
            
            
            Value
            
            
            Amount
            
            
            ValueLoans
      sold with recourse
            
            $
            42
            
            
            $
            42
            
            
            $
            74
            
            
            $
            74





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.




NOTE
15 - OTHER COMPREHENSIVE INCOME (LOSS)





Other
comprehensive income (loss) components and related taxes were as
follows:





2009
            
            
            2008Unrealized
      holding gains (losses)on securities available for sale
            
            $
            (2,332
            )
            
            $
            2,713Less
      reclassification adjustments forgains (losses) recognized in income
            
            
            833
            
            
            
            (192
            )Net
      unrealized gains and losses
            
            
            (1,499
            )
            
            
            2,521Tax
      effect
            
            
            583
            
            
            
            (979
            )Other
      comprehensive income (loss)
            
            $
            (916
            )
            
            $
            1,542







F-30


AJS
BANCORP, INC.
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2009 and 2008
 (Dollars
in thousands, except per share data)


NOTE
16 - PARENT COMPANY CONSOLIDATED FINANCIAL STATEMENTS





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





CONDENSED
BALANCE SHEETS


December
31, 2009 and 2008





2009
            
            
            2008ASSETSCash
      and cash equivalents
            
            $
            1,740
            
            
            $
            2,250Investment
      in bank subsidiary
            
            
            22,769
            
            
            
            26,038$
            24,509
            
            
            $
            28,288LIABILITIES
      AND STOCKHOLDERS’ EQUITYLiabilities
            
            $
            663
            
            
            $
            1,191Stockholders’
      equity
            
            
            23,846
            
            
            
            27,097$
            24,509
            
            
            $
            28,288





CONDENSED
STATEMENTS OF OPERATIONS


For the
years ended December 31, 2009 and 2008





2009
            
            
            2008IncomeDeposits
      in financial institutions
            
            $
            18
            
            
            $
            48Dividends
      from subsidiary
            
            
            -
            
            
            
            2,70018
            
            
            
            2,748Other
      expensesOther
      operating expenses
            
            
            146
            
            
            
            148Income
      (loss) before income taxes and equity inundistributed earnings
            
            
            (128
            )
            
            
            2,600Income
      tax benefit
            
            
            (50
            )
            
            
            (39
            )Income
      (loss) before equity in undistributedloss of bank subsidiary
            
            
            (78
            )
            
            
            2,639Undistributed
      losses
            
            
            (2,357
            )
            
            
            (4,710
            )Net
      loss
            
            $
            (2,435
            )
            
            $
            (2,071
            )





F-31


AJS
BANCORP, INC.
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2009 and 2008
 (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, 2009 and 2008





2009
            
            
            2008Operating
      activitiesNet
      loss
            
            $
            (2,435
            )
            
            $
            (2,071
            )Adjustments
      to reconcile net loss to netcash provided by (used in) operating activities:Equity
      in undistributed loss of bank subsidiary
            
            
            2,357
            
            
            
            4,710Change
      in other assets and liabilities
            
            
            (53
            )
            
            
            (57
            )Net
      cash provided by (used in) operating activities
            
            
            (131
            )
            
            
            2,582Financing
      activitiesDividends
      paid
            
            
            (350
            )
            
            
            (754
            )Purchase
      of treasury stock
            
            
            (29
            )
            
            
            (197
            )Net
      cash used in financing activities
            
            
            (379
            )
            
            
            (951
            )Net
      change in cash and cash equivalents
            
            
            (510
            )
            
            
            1,631Cash
      and cash equivalents at beginning of year
            
            
            2,250
            
            
            
            619Cash
      and cash equivalents at end of year
            
            $
            1,740
            
            
            $
            2,250