UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


Washington,
      D.C. 20549





**FORM
      10-QSB**





**ý     QUARTERLY
      REPORT UNDER SECTION 13 OR 15(d)**


**OF
      THE SECURITIES EXCHANGE ACT OF 1934**





For
      the
      quarterly period ended June 30, 2007


**Commission
      file number 000-33405**





**AJS
      BANCORP, INC.**


(Exact
      name of registrant specified in its charter)





**Federal**
            **36-4485429**(State
                of incorporation)
            (IRS
                Employer Identification No.)











**14757
      S. Cicero Avenue, Midlothian, Illinois 60445**


(Address
      of Principal Executive Offices)








**(708)
      687-7400**


(Issuer’s
      telephone number, including area code)





**Not
      Applicable**


(Former
      Name, Former Address and Former Fiscal year, if changed since last
      report)











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





Indicate
      by checkmark whether the registrant is a large accelerated filer,  an
      accelerated filer or a non-accelerated filer. (as defined in Rule 12b-2 of
      the
      Exchange Act)





Large
                  Accelerated Filer  o
              Accelerated
                  Filer o
              Non-Accelerated
                  Filer  ý








Indicate
      by check mark whether the Registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act.) Yes oNo ý








As
      of
      August 3, 2007, 2,117,117 shares of the issuer’s common stock were issued and
      outstanding














**AJS
      BANCORP, INC.**





Form
      10-QSB Quarterly Report








Index





PagePART
                I - Financial InformationItem
                1.
            Financial
                Statements
            1Item
                2.
            Management’s
                Discussion and Analysis of Financial Condition
                and   Results of Operations
            10Item
                3.
            Quantitative
                and Qualitative Disclosures About Market
                Risk
            15Item
                4.
            Controls
                and Procedures
            16PART
                II - Other InformationItem
                1.
            Legal
                Proceedings
            16Item
                1A.
            Risk
                Factors
            16Item
                2.
            Unregistered
                Sales of Equity Securities and Use of
                Proceeds
            17Item
                3.
            Defaults
                Upon Senior Securities
            17Item
                4.
            Submission
                of Matters to a Vote of Securities
                Holders
            17Item
                5.
            Other
                Information
            18Item
                6.
            Exhibits
            18SIGNATURES
            19








**ITEM
      1.  FINANCIAL STATEMENTS**





**AJS
      Bancorp, Inc.**


**Consolidated
      Statements of Financial Condition**


**(in
      thousands of dollars, except share data)**


**(unaudited)**





**June 30,**
            
            
            **December 31,****2007**
            
            
            **2006****ASSETS**Cash
                and cash equivalentsCash
                and due from banks (interest-earning: 2007 –$23,649;
                2006 - $32,571)
            
            $
            27,422
            
            
            $
            36,617Federal
                funds sold
            
            
            2,055
            
            
            
            7,231Total
                cash and cash equivalents
            
            
            29,477
            
            
            
            43,848Certificates
                of deposit
            
            
            3,996
            
            
            
            5,490Securities
                available-for-sale
            
            
            87,142
            
            
            
            68,774Securities
                held-to-maturity
            
            
            131
            
            
            
            204Loans,
                net
            
            
            131,809
            
            
            
            138,377Federal
                Home Loan Bank stock, at cost
            
            
            2,450
            
            
            
            2,450Premises
                and equipment
            
            
            4,283
            
            
            
            4,342Accrued
                interest receivable
            
            
            1,107
            
            
            
            1,021Other
                assets
            
            
            2,312
            
            
            
            2,007Total
                assets
            
            $
            262,707
            
            
            $
            266,513**LIABILITIES
                AND STOCKHOLDERS’ EQUITY**LiabilitiesDeposits
            
            $
            202,092
            
            
            $
            202,176Federal
                Home Loan Bank advances
            
            
            25,350
            
            
            
            28,750Advance
                payments by borrowers for taxes and insurance
            
            
            1,684
            
            
            
            1,655Accrued
                interest payable and other liabilities
            
            
            4,867
            
            
            
            5,183Total
                liabilities
            
            
            233,993
            
            
            
            237,764Stockholders’
                equityPreferred
                stock, $.01 par value, 20,000,000 shares authorized;none
                issued
            
            
            -
            
            
            
            -Common
                stock, $.01 par value, 50,000,000 shares authorized;2,444,521
                shares issued at June 30, 2007 and December 31, 2006
            
            
            24
            
            
            
            24Additional
                paid in capital
            
            
            10,914
            
            
            
            10,428Treasury
                stock (324,204 shares at June 30, 2007; 310,217shares
                at December 31, 2006)
            
            
            (7,605
            )
            
            
            (7,256
            )Retained
                earnings
            
            
            26,584
            
            
            
            26,368Accumulated
                other comprehensive loss
            
            
            (1,203
            )
            
            
            (815
            )Total
                stockholders’ equity
            
            
            28,714
            
            
            
            28,749Total
                liabilities and stockholders’ equity
            
            $
            262,707
            
            
            $
            266,513





See
            notes
            to consolidated financial
            statements.
 1


**AJS
      Bancorp, Inc.**


**Consolidated
      Statements of Income**


**(in
      thousands of dollars, except share data)**


**(unaudited)**





**For
                the Three Months**
            
            
            **For
                the Six Months Ended****Ended
                June 30,**
            
            
            **June
                30,****2007**
            
            
            **2006**
            
            
            **2007**
            
            
            **2006**Interest
                and dividend incomeLoans
            
            $
            2,069
            
            
            $
            2,309
            
            
            $
            4,216
            
            
            $
            4,588Securities
            
            
            958
            
            
            
            692
            
            
            
            1,739
            
            
            
            1,388Interest-earning
                deposits and other
            
            
            455
            
            
            
            287
            
            
            
            1,020
            
            
            
            529Federal
                funds sold
            
            
            44
            
            
            
            37
            
            
            
            129
            
            
            
            59Total
                interest income
            
            
            3,526
            
            
            
            3,325
            
            
            
            7,104
            
            
            
            6,564Interest
                expenseDeposits
            
            
            1,673
            
            
            
            1,365
            
            
            
            3,313
            
            
            
            2,624Federal
                Home Loan Bankadvances
                and other
            
            
            287
            
            
            
            321
            
            
            
            587
            
            
            
            649Total
                interest expense
            
            
            1,960
            
            
            
            1,686
            
            
            
            3,900
            
            
            
            3,273Net
                interest income
            
            
            1,566
            
            
            
            1,639
            
            
            
            3,204
            
            
            
            3,291Provision
                (reduction) for loan losses
            
            
            (1
            )
            
            
            -
            
            
            
            (71
            )
            
            
            (12
            )Net
                interest income after provision forloan
                losses
            
            
            1,567
            
            
            
            1,639
            
            
            
            3,275
            
            
            
            3,303Noninterest
                incomeService
                fees
            
            
            119
            
            
            
            135
            
            
            
            244
            
            
            
            253Insurance
                commissions
            
            
            5
            
            
            
            37
            
            
            
            26
            
            
            
            108Gain
                on sale of loans
            
            
            -
            
            
            
            15
            
            
            
            -
            
            
            
            34Other
            
            
            44
            
            
            
            52
            
            
            
            90
            
            
            
            94Total
                noninterest income
            
            
            168
            
            
            
            239
            
            
            
            360
            
            
            
            489Noninterest
                expenseCompensation
                and employee benefits
            
            
            794
            
            
            
            852
            
            
            
            1,650
            
            
            
            1,717Occupancy
                expense
            
            
            204
            
            
            
            210
            
            
            
            405
            
            
            
            420Data
                processing expense
            
            
            85
            
            
            
            86
            
            
            
            168
            
            
            
            190Advertising
                and promotion
            
            
            61
            
            
            
            75
            
            
            
            135
            
            
            
            130Other
            
            
            343
            
            
            
            266
            
            
            
            628
            
            
            
            542Total
                noninterest expense
            
            
            1,487
            
            
            
            1,489
            
            
            
            2,986
            
            
            
            2,999Income
                before income taxes
            
            
            248
            
            
            
            389
            
            
            
            649
            
            
            
            793Income
                taxes
            
            
            89
            
            
            
            149
            
            
            
            239
            
            
            
            299Net
                income
            
            $
            159
            
            
            $
            240
            
            
            $
            410
            
            
            $
            494Earnings
                per shareBasic
            
            $
            0.08
            
            
            $
            0.11
            
            
            $
            0.19
            
            
            $
            0.23Diluted
            
            
            0.07
            
            
            
            0.11
            
            
            
            0.19
            
            
            
            0.23Weighted
                average shares - Diluted
            
            
            2,140,505
            
            
            
            2,135,615
            
            
            
            2,144,008
            
            
            
            2,134,124Comprehensive
                income (loss)
            
            $
            (338
            )
            
            $
            121
            
            
            $
            22
            
            
            $
            74








See
            notes
            to consolidated financial
            statements.
 2


**AJS
      Bancorp, Inc.**


**Consolidated
      Statements of Cash Flows**


**(in
      thousands of dollars)**


**(unaudited)**


**Six
                Months Ended****June 30,****2007**
            
            
            **2006****Cash
                flows from operating activities**Net
                income
            
            $
            410
            
            
            $
            494Adjustments
                to reconcile net income to net cashprovided
                by operating activitiesDepreciation
            
            
            120
            
            
            
            135Provision
                for loan losses
            
            
            (71
            )
            
            
            (12
            )Deferred
                income taxes
            
            
            (90
            )
            
            
            (377
            )Net
                amortization of securities
            
            
            (9
            )
            
            
            35Stock
                award compensation expense
            
            
            125
            
            
            
            100Stock
                option compensation expense
            
            
            29
            
            
            
            29Dividend
                reinvestments
            
            
            (284
            )
            
            
            (186
            )Gain
                on the sale of loans
            
            
            -
            
            
            
            (34
            )Changes
                inAccrued
                interest receivable and other assets
            
            
            126
            
            
            
            20Accrued
                interest payable and other liabilities
            
            
            16
            
            
            
            34Net
                cash from operating activities
            
            
            372
            
            
            
            238**Cash
                flows from investing activities**Securities
                available-for-salePurchases
            
            
            (29,311
            )
            
            
            (2,000
            )Maturities
                and principal payments
            
            
            10,603
            
            
            
            7,539Securities
                held-to-maturityMaturities
                and principal payments
            
            
            73
            
            
            
            81Net
                change in certificates of deposit
            
            
            1,494
            
            
            
            1,798Net
                change in loans
            
            
            6,457
            
            
            
            2,438Purchase
                of equipment
            
            
            (61
            )
            
            
            (41
            )Sale
                of Federal Home Loan Bank stock
            
            
            -
            
            
            
            618Net
                cash from investing activities
            
            
            (10,745
            )
            
            
            10,433**Cash
                from financing activities**Net
                change in deposits
            
            
            (84
            )
            
            
            1,894Net
                change in advance payments by borrowers for taxes and
                insurance
            
            
            29
            
            
            
            57Net
                change in Federal Home Loan Bank advances
            
            
            (3,400
            )
            
            
            (3,000
            )Dividends
                paid
            
            
            (194
            )
            
            
            (176
            )Purchase
                of treasury stock
            
            
            (349
            )
            
            
            (309
            )Exercise
                of stock option
            
            
            -
            
            
            
            30Net
                cash from financing activities
            
            
            (3,998
            )
            
            
            (1,504
            )Net
                change in cash and cash equivalents
            
            
            (14,371
            )
            
            
            9,167Cash
                and cash equivalents at beginning of period
            
            
            43,848
            
            
            
            15,230**Cash
                and cash equivalents at end of period**
            
            $
            29,477
            
            
            $
            24,397Non-cash
                investing and financing activitiesOther
                real estate acquired in settlement of loans
            
            
            182
            
            
            
            -


See
            notes
            to consolidated financial
            statements.
 3


**AJS
      Bancorp, Inc.**


**Consolidated
      Statements of Stockholders’ Equity**


**Six
      months ended June 30, 2007**


**(in
      thousands of dollars)**


**(unaudited)**


Common
                  Stock
                
                
                Additional
                  Paid-in
                  Capital
                
                
                Treasury
                  Stock
                
                
                Unearned
                  Stock
                  Awards
                
                
                Retained
                  Earnings
                
                
                Accumulated
                  Other
                  Comprehensive
                  Loss
                
                
                Total
                  Stockholders’
                  EquityBalance
                    at December 31, 2005
                
                $
                24
                
                
                $
                10,839
                
                
                $
                (6,931
                )
                
                $
                (486
                )
                
                $
                25,820
                
                
                $
                (1,014
                )
                
                $
                28,252Transfer
                    to additional paid in capital
                
                
                -
                
                
                
                (486
                )
                
                
                
                
                
                
                486
                
                
                
                -
                
                
                
                -
                
                
                
                -Purchase
                    of 13,235 shares of treasury stock
                
                -
                
                
                
                -
                
                
                
                (309
                )
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (309
                )ESOP
                    put option
                
                
                -
                
                
                
                (172
                )
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (172
                )Stock
                    awards earned
                
                
                -
                
                
                
                100
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                100Stock
                    options compensation
                
                
                -
                
                
                
                29
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                29Forfeit
                    of stock awards (1,200 shares)
                
                
                -
                
                
                
                28
                
                
                
                (28
                )
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Stock
                    awards granted (600 shares)
                
                
                -
                
                
                
                (11
                )
                
                
                11
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Stock
                    options exercised (1,600 shares)
                
                
                -
                
                
                
                (2
                )
                
                
                32
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                30Cash
                    dividend ($0.20 per share)
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (176
                )
                
                
                -
                
                
                
                (176
                )Comprehensive
                    loss:Net
                    income
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                494
                
                
                
                -
                
                
                
                494Change
                    in unrealized loss on
                    securitiesavailable
                    for sale,
                    net of taxes
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (420
                )
                
                
                (420
                )Total
                    comprehensive
                    income
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                74Balance
                    at June 30, 2006
                
                $
                24
                
                
                $
                10,325
                
                
                $
                (7,225
                )
                
                $
                -
                
                
                $
                26,138
                
                
                $
                (1,434
                )
                
                $
                27,828


(Continued)
 4


**AJS
      Bancorp, Inc.**


**Consolidated
      Statements of Stockholders’ Equity**


**Six
      months ended June 30, 2007**


**(in
      thousands of dollars)**


**(unaudited)**





Common
                Stock
              
              
              Additional
                Paid-in
                Capital
              
              
              Treasury
                Stock
              
              
              Retained
                Earnings
              
              
              Accumulated
                Other
                Comprehensive
                Loss
              
              
              Total
                Stockholders’
                EquityBalance
                  at December 31, 2006
              
              $
              24
              
              
              $
              10,428
              
              
              $
              (7,256
              )
              
              $
              26,368
              
              
              $
              (815
              )
              
              $
              28,749Purchase
                  of 13,987 shares of treasury stock
              
              
              -
              
              
              
              -
              
              
              
              (349
              )
              
              
              -
              
              
              
              -
              
              
              
              (349
              )ESOP
                  put option
              
              
              -
              
              
              
              332
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              332Stock
                  awards earned
              
              
              -
              
              
              
              125
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              125Stock
                  options compensation
              
              
              -
              
              
              
              29
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              29Cash
                  dividend ($0.22 per share)
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (194
              )
              
              
              -
              
              
              
              (194
              )Comprehensive
                  loss:Net
                  income
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              410
              
              
              
              -
              
              
              
              410Change
                  in unrealized loss on
                  securitiesavailable
                  for sale,
                  net of taxes
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (388
              )
              
              
              (388
              )Total
                  comprehensive income
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              22Balance
                  at June 30, 2007
              
              $
              24
              
              
              $
              10,914
              
              
              $
              (7,605
              )
              
              $
              26,584
              
              
              $
              (1,203
              )
              
              $
              28,714


See
            notes
            to consolidated financial
            statements.
 5


AJS
      BANCORP, INC.


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


June 30,
      2007








Note
      1 -
      Basis of Presentation





Principles
      of Consolidation:  The accompanying consolidated interim 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
      accompanying interim consolidated financial statements have been prepared
      pursuant to the rules and regulations for reporting on Form
      10-QSB.  Accordingly, certain disclosures required by U.S. generally
      accepted accounting principles are not included herein.  These interim
      statements should be read in conjunction with the Company's Annual Report on
      Form 10-K.  The December 31, 2006 balance sheet presented herein
      has been derived from the audited consolidated financial statements included
      in
      the Company's Annual Report on Form 10-K, but does not include all of the
      disclosures required by U. S. generally accepted accounting
      principles.





Interim
      statements are subject to possible adjustment in connection with the annual
      audit of the Company for the year ending December 31, 2007.  In
      the opinion of the management of the Company, the accompanying unaudited interim
      consolidated financial statements reflect all of the adjustments (consisting
      of
      normal recurring adjustments) necessary for a fair presentation of the
      consolidated financial position and consolidated results of operations for
      the
      periods presented.  The results of operations for interim periods are
      not necessarily indicative of the results to be expected for the full
      year.








Note
      2 -
      Earnings Per Share





Basic
      earnings per share for the three months ended June 30, 2007 and 2006 were
      computed by dividing net income by the weighted average number of shares
      outstanding.  Diluted earnings per share for the three months ended
      June 30, 2007 and 2006 were computed by dividing net income by the weighted
      average number of shares outstanding, adjusted for the dilutive effect of the
      outstanding stock options and stock awards.  Computations for basic
      and diluted earnings per share are provided below.





**For
                the Three Months**
            
            
            **For
                the Six Months****Ended
                June 30,**
            
            
            **Ended
                June 30,****2007**
            
            
            **2006**
            
            
            **2007**
            
            
            **2006**(in
                thousands, except
            
            
            (in
                thousands, exceptper
                share data)
            
            
            per
                share data)**Basic**Net
                income
            
            $
            159
            
            
            $
            240
            
            
            $
            410
            
            
            $
            494Weighted
                average common sharesoutstanding
            
            
            2,117
            
            
            
            2,117
            
            
            
            2,119
            
            
            
            2,117Basic
                earnings per common share
            
            $
            0.08
            
            
            $
            0.11
            
            
            $
            0.19
            
            
            $
            0.23





**For
                the Three Months**
            
            
            **For
                the Six Months****Ended
                June 30,**
            
            
            **Ended
                June 30,****2007**
            
            
            **2006**
            
            
            **2007**
            
            
            **2006**(in
                thousands, except
            
            
            (in
                thousands, exceptper
                share data)
            
            
            per
                share data)**Diluted**Net
                income
            
            $
            159
            
            
            $
            240
            
            
            $
            410
            
            
            $
            494Weighted
                average common sharesoutstanding
            
            
            2,117
            
            
            
            2,117
            
            
            
            2,119
            
            
            
            2,117Dilutive
                effect of stock awards
            
            
            2
            
            
            
            3
            
            
            
            2
            
            
            
            3Dilutive
                effect of stock options
            
            
            22
            
            
            
            16
            
            
            
            23
            
            
            
            14Diluted
                average common shares
            
            
            2,141
            
            
            
            2,136
            
            
            
            2,144
            
            
            
            2,134Diluted
                earnings per common share
            
            $
            0.07
            
            
            $
            0.11
            
            
            $
            0.19
            
            
            $
            0.23







6




There
      were no shares that were anti-dilutive for the period ended June 30, 2007 and
      2006.





Note
      3 -
      Stock Plans and Stock Based Compensation





At
      June
      30, 2007, the Company had a stock option plan and a recognition and retention
      plan.





Under
      the
      stock option plan, certain key employees are granted options to purchase shares
      of the Company’s Common Stock at fair value at the date of the
      grant.  All stock options have an exercise price that is at least
      equal to the fair market value of the Company’s stock on the date the options
      were granted.  The Company adopted the stock plan in May 2003 under the
      terms of which options for 114,685 shares of the Company’s common stock were
      granted to directors, officers, and employees.  The options generally
      become exercisable in equal installments over a five-year period from the date
      of grant, and they expire ten years from the date of grant.  No option
      may be exercised if such exercise would cause the mutual holding company to
      own
      fewer than a majority of the total number of shares
      outstanding.  There were no options granted or exercised during the
      six months ended June 30, 2007.  There were 1,200 options granted and
      1,600 options exercised during the six months ended June 30, 2006.





The
      following assumptions were used for options granted during the period ended
      June
      30, 2006:





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








All
      share-based payments to employees, including grants of employee stock options,
      are recognized as compensation expense over the service period (generally the
      vesting period) in the consolidated financial statements based on their fair
      values.





7


A
      summary
      of the status of the Company’s stock option plan and changes during the six
      months ended June 30, 2007 and 2006 is presented below:





**For
                the Six Months****Ended
                June 30,****2007**
            
            
            **2006**Weighted-
            
            
            
            
            
            Weighted-Average
            
            
            
            
            
            AverageExercise
            
            
            
            
            
            ExerciseShares
            
            
            Price
            
            
            Shares
            
            
            PriceOutstanding
                at beginning of period
            
            
            102,885
            
            
            
            18.81
            
            
            
            105,685
            
            
            $
            18.75Granted
            
            
            -
            
            
            
            -
            
            
            
            1,200
            
            
            
            23.75Exercised
            
            
            -
            
            
            
            -
            
            
            
            (1,600
            )
            
            
            18.75Forfeited
            
            
            -
            
            
            
            -
            
            
            
            (2,400
            )
            
            
            18.75Outstanding
                at end of period
            
            
            102,885
            
            
            $
            18.81
            
            
            
            102,885
            
            
            $
            18.81





2007
            
            
            2006Options
                exercisable at end of period
            
            
            82,148
            
            
            
            61,411Intrinsic
                value of options outstanding
            
            $
            647,100
            
            
            $
            636,900Intrinsic
                value of options exercisable
            
            $
            516,700
            
            
            $
            380,100Average
                remaining option term
            
            6
                years
            
            
            7
                years





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 above.  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 options granted are
      expected to be outstanding, which takes into account that the options are not
      transferable.  Estimated forfeitures are based on historical
      forfeiture rates of approximately 4.7%.  The risk-free rate for
      periods within the contractual life of the option is based on the U.S. Treasury
      yield curve in effect at the time of grant.





The
      intrinsic value for stock options is calculated based on the exercise price
      of
      the underlying awards and the market price of our common stock as of the
      reporting date. The intrinsic value of options exercised during the six months
      ended June 30, 2006 was $8,000.  The Company recorded $29,000 in stock
      compensation expense during the each of the six months ended June 30, 2007
      and
      June 30, 2006 to salaries and employee benefits





Unrecognized
      stock option compensation expense related to unvested awards for the remainder
      of 2007 and beyond is estimated in the table below.  These figures
      represent gross expense and forfeitures are expected to reduce this
      cost.  We estimate our forfeiture rate for the stock option plan to be
      4.7%.





Period
            *(in
                thousands)*July
                2007 – December 2007
            
            $
            29,2002008
            
            
            22,800Total
            
            $
            52,000





8


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.  Compensation expense
      for restricted stock awards totaled $125,000 and $100,000 for the six months
      ended June 30, 2007 and 2006, respectively.  Compensation expense
      for restricted stock awards is reporting net of forfeitures.  We
      estimate our forfeiture rate of the restricted stock awards to be
      3.0%.





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





Weighted-AverageGrant-DateNonvested
                Shares
            
            Shares
            
            
            Fair
                ValueNonvested
                at January 1, 2007
            
            
            20,868
            
            
            $
            18.85Granted
            
            
            -
            
            
            
            -Vested
            
            
            10,434
            
            
            
            18.85Forfeited
            
            
            -
            
            
            
            -Nonvested
                at March 31, 2007
            
            
            10,434
            
            
            $
            18.85





As
      of
      June 30, 2007, there was $180,000 of total unrecognized compensation cost
      related to nonvested shares granted under the Plan.  The cost is
      expected to be recognized over a weighted-average period of 0.9
      years.





Note
      4 –
New Accounting Pronouncements





The
      Company adopted FASB Interpretation 48, Accounting for Uncertainty in Income
      Taxes (“FIN 48”), as of January 1, 2007.   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 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.  The adoption had no affect on the
      Company’s financial statements.





The
      Company and its subsidiaries are subject to U.S. federal income tax as well
      as
      income tax of the state of Illinois and various other state income
      taxes.  The Company is no longer subject to examination by taxing
      authorities for years before 2002.  The Company does not expect the
      total amount of unrecognized tax benefits to significantly increase in the
      next
      twelve months.





The
      Company recognizes interest related to income tax matters as interest expense
      and penalties related to income tax matters as other expense.  The
      Company did not have any amounts accrued for interest and penalties at March
      30,
      2007.





In
      September 2006, the FASB issued Statement No. 157, *Fair Value
      Measurements*.  This Statement defines fair value, establishes a
      framework for measuring fair value and expands disclosures about fair value
      measurements.  This Statement establishes a fair value hierarchy about
      the assumptions used to measure fair value and clarifies assumptions about
      risk
      and the effect of a restriction on the sale or use of an asset.  The
      standard is effective for fiscal years beginning after November 15,
      2007.  The Company is currently evaluating the impact of the adoption
      of this standard.





In
      February 2007, the FASB issued Statement No. 159, *The Fair Value Option for
      Financial Assets and Financial Liabilities.*This Statement
      allows companies to record certain financial assets and liabilities at full
      fair
      value if they so choose.  This Statement was issued to mitigate
      volatility in reporting earnings caused by an


9


accounting
      model using multiple measurement attributes.  The effective date is
      the beginning of the first fiscal year after November 15, 2007.  Early
      adoption must be made within 120 days of the beginning of the fiscal
      year of adoption.  Early adoption also requires the adoption of the
      requirements of Statement No. 157, *Fair Value
      Measurements.*The Company is currently evaluating the impact of
      the adoption of this standard.





**ITE****M
                2.**
            **MANAGEMENT’S
                DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
                OPERATIONS**





SAFE
      HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM
      ACT  OF 1995





This
      report contains certain forward-looking statements within the meaning of Section
      27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
      Exchange Act of 1934, as amended.  The Company intends such
      forward-looking statements to be covered by the safe harbor provisions for
      forward-looking statements contained in the Private Securities Litigation Reform
      Act of 1995 as amended and is including this statement for purposes of these
      safe harbor provisions.  Forward-looking statements, which are based
      on certain assumptions and describe future plans, strategies, and expectations
      of the Company, are generally identifiable by use of the words “believe,”
“expect,” “intend,” “anticipate,” “estimate,” “project,” or similar
      expressions.  The Company’s ability to predict results or the actual
      effect of future plans or strategies is inherently uncertain.  Factors
      that could have a material adverse affect on the operations and future prospects
      of the Company and its wholly owned subsidiaries include, but are not limited
      to, changes in:  interest rates; general economic conditions;
      legislative/regulatory provisions; monetary and fiscal policies of the U.S.
      Government, including policies of the U.S. Treasury and the Federal Reserve
      Board; the quality or composition of the loan or investment portfolios; demand
      for loan products; deposit flows; competition; demand for financial services
      in
      the Company’s market area; and accounting principles, policies, and
      guidelines.  These risks and uncertainties should be considered in
      evaluating forward-looking statements, and undue reliance should not be placed
      on such statements.  Further information concerning the Company and
      its business, including additional factors that could materially affect the
      Company’s financial results, is included in the Company’s filings with the
      Securities and Exchange Commission.





The
      following discussion compares the financial condition of the Company at
      June 30, 2007 to its financial condition at December 31, 2006 and the
      results of operations for the three- and six-month periods ended June 30,
      2007 to the same periods in 2006.  This discussion should be read in
      conjunction with the interim financial statements and footnotes included
      herein.





FINANCIAL
      CONDITION





Total
      assets at June 30, 2007 were $262.7 million compared to $266.5 million at
      December 31, 2006, a decrease of $3.8 million, or 1.4%.  The
      decrease in total assets reflects decreases in cash and cash equivalents,
      certificates of deposit, and loans receivable, partially offset by an increase
      in securities and other assets.   There was a decrease of $14.4
      million or 32.8% in cash and cash equivalents to $29.5 million at June 30,
      2007
      from $43.8 million at December 31, 2006.  Certificates of deposit
      decreased $1.5 million or 27.2% to $4.0 million at June 30, 2007 compared
      to $5.5 million at December 31, 2006.  The decrease in certificates of
      deposit was due to maturities in the portfolio.  Loans receivable
      decreased $6.6 million to $131.8 million at June 30, 2007 from $138.4 million
      at
      December 31, 2006.The
      decrease in loans primarily occurred in commercial mortgage loans due payoffs
      exceeding originations and a softening in demand for mortgage loans
      overall.  Securities increased $18.3 million or 26.5% to $87.3 million
      at June 30, 2007 from $69.0 million at December 31, 2006.  The
      increase in securities was due to purchases of fixed-rate government-backed
      notes and bonds and mortgage-backed securities.  These investments
      provided slightly higher yields than overnight federal fund
      investments.  Accrued interest receivable and other assets increased
      $391,000 to $3.4 million at June 30, 2007 from $3.0 million at December 31,
      2006.





10


The
      allowance for loan losses was $1.6 million at June 30, 2007 and at
      December 31, 2006.  This represents a ratio of allowance for loan
      losses to gross loans receivable of 1.18% at June 30, 2007 and 1.16% at
      December 31, 2006.  The Company had non-performing assets of
      $489,000 at June 30, 2007 and $540,000 at December 31,
      2006.  The decrease in non-performing assets primarily reflects an
      additional write-down in the carrying value of the Company’s real estate owned
      property to $182,000.  During the six-months ended June 30, 2007 the
      Company foreclosed on a commercial loan property and entered into a contract
      for
      the sale of the property.  Subsequent to June 30, 2007 the Company
      closed on the sale of the property and recovered $14,000 of the previously
      estimated loss.  The allowance for loan losses to non-performing loans
      was 510.75% at June 30, 2007 compared to 299.81% at December 31,
      2006.





Total
      liabilities at June 30, 2007 were $234.0 million compared to $237.8 million
      at December 31, 2006, a decrease of $3.8 million, primarily reflecting a
      decrease in FHLB advances.  FHLB advances decreased to
      $25.4 million at June 30, 2007 from $28.8 million at December 31,
      2006.





Total
      stockholders’ equity decreased $35,000 to $28.7 million at June 30, 2007
      from $28.8 million at December 31, 2006.  The decrease in
      stockholders’ equity was primarily due to the decrease in other comprehensive
      income reflecting the lower fair market value of securities held for sale and
      common stock repurchases that took place during the six months ended June 30,
      2007.   These decreases were offset by net income of $410,000 for
      the six months ended June 30, 2007.  The Company repurchased 13,987
      shares of the Company’s stock at an average price of $24.99 per share totaling
      $349,000.  There were 3,177 shares repurchased from employee
      participants in the recognition and retention plan (“RRP”) to satisfy the tax
      liability due on the vesting of the underlying RRP shares.  Shares
      repurchased in conjunction with RRP vesting are repurchased outside the publicly
      announced repurchase program.  The Board of Directors has authorized
      the repurchase of 267,000 shares of the Company’s stock, and has 47,227 shares
      remaining to be repurchased under the current repurchase
      plan.  Repurchased shares are classified as treasury shares, but are
      not considered outstanding and are not included when calculating earnings per
      share or book value information.





The
      Company paid quarterly dividends of $0.11 cents per share each on February
      23,
      2007 and May 25, 2007 to stockholders of record as of February 9, 2007 and
      May
      11, 2007, respectively.  In addition, the Company’s Board of Directors
      announced that it has declared a third quarter dividend of $0.11 cents per
      share
      payable on August 24, 2007, to stockholders of record on August 10,
      2007.  AJS Bancorp, MHC (the “MHC”) waived 100% of the May dividend
      and intends to waive 100% of the August dividend declaration.  As of
      June 30, 2007, the Company held cash totaling $29.5 million.  At June
      30, 2007 the Bank’s tier 1 capital as well as its tangible capital ratio was
      10.9%, and its risk-based capital ratio was 25.0%.





RESULTS
      OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2007 AND JUNE 30,
      2006





Net
      income decreased $81,000 to $159,000 for the quarter ended June 30, 2007
      compared to the same period in 2006.  The return on average assets
      increased to 0.24% for the quarter ended June 30, 2007 from 0.37% for the
      same period in 2006.  The decrease was due to a decrease in net
      interest income as well as a decrease in non-interest income.  Total
      interest income increased by $201,000 or 6.1% to $3.5 million for the
      quarter ended June 30, 2007 as compared to $3.3 million for the same quarter
      in
      2006.  The increase was due to increases in interest income earned on
      securities, interest earning deposits and federal funds sold, partially offset
      by a decrease in interest earned on loans.  The largest percentage
      increases occurred on securities and interest earning
      deposits.  Interest income earned on securities increased $266,000 or
      38.4% for the comparable quarter, while income earned on interest earning
      deposits increased $168,000 or 58.5% for the comparable
      period.  Interest income earned on securities and interest earning
      deposits increased due to increases in both the asset balances as well as
      increases in the average yield earned on the respective assets for the three
      months ended June 30, 2007 compared to the three months ended June 30,
      2006.  The average balances for securities and interest earning
      deposits increased to $84.5 million and $34.8 million respectively, for the
      three months ended June 30, 2007 while the average balance for securities and
      interest earning deposits was $69.6 million and $25.1 million, respectively
      for
      the same period last year.  The average yield


11


increased
      to 4.53% on securities and 5.23% on interest-earning deposits while for the
      same
      quarter last year the average yield was 3.98% on securities and 4.57% on
      interest earning deposits.  Interest income earned on federal funds
      sold increased due to higher average balances and higher interest earned for
      the
      comparable quarters ending June 30, 2007 and 2006.  The average
      balance for federal funds sold for the three months ended June 30, 2007 was
      $3.5 million with an average yield of 5.05% compared to an average balance
      of
      $3.3 million with an average yield of 4.66% for the same quarter in
      2006.   Interest income earned on loans decreased primarily due
      to lower average loan balances for the comparable quarters.  The
      average loan balance for the three months ended June 30, 2007 was $133.1 million
      with an average yield of 6.22% while for the comparable quarter in 2006, the
      average loan balances were $152.1 million with an average yield of
      6.07%





Total
      interest expense increased $274,000 to $2.0 million at June 30, 2007 from $1.7
      million at June 30, 2006.  The increase in interest expense was
      primarily due to the increased cost of deposits partially offset by a decrease
      in the cost of Federal Home Loan Bank (“FHLB”) advances.  The average
      cost of deposits at June 30, 2007 was 3.35% as compared to 2.83% at June
      30, 2006.  The increase in the cost of deposits was primarily due to
      rising short-term interest rates.  Interest expense on FHLB advances
      decreased by $34,000 or 10.6% to $287,000 for the quarter ended June 30,
      2007 from $321,000 for the same quarter in 2006.  This was due to a
      decrease in the average FHLB advance balances for the quarter ended June 30,
      2007 compared to the same quarter in 2006.  The average FHLB advance
      balance was $25.7 million and the average cost was 4.47% for the quarter ended
      June 30, 2007 compared to an average balance of $30.1 million and an average
      cost of 4.27% for the same quarter in 2006.  The average cost of
      interest-bearing liabilities increased to 3.48% for the three months ended
      June 30, 2007 from 3.02% for the same period ended 2006, reflecting the
      impact of the inverted yield curve as shorter term interest rates used to price
      deposits and borrowings was higher relative to longer term interest
      rates.





Our
      net
      interest rate spread decreased 27 basis points to 2.03% for the quarter ended
      June 30, 2007 from 2.30% for the same period in 2006, while our net
      interest margin decreased 17 basis points to 2.45% for the quarter ended
      June 30, 2007 from 2.62% for the same period in June 30,
      2006.  The ratio of average interest-earning assets to average
      interest-bearing liabilities increased to 113.66% for the three months ended
      June 30, 2007 from 112.01% for the same period in 2006.





There
      was
      a $1,000 negative provision for loan losses for the three months ended June
      30,
      2007 and no provision for loan losses for the three months ended June 30,
      2006.  There was $1,000 in loan loss recoveries during the three
      months ended June 30, 2007.  Loan provisions made are to maintain the
      allowance at a level to reflect management’s estimates of losses inherent in our
      loan portfolio.  At June 30, 2007 we had $307,000 in non-performing
      loans, compared with $540,000 at December 31, 2006.  At this time,
      management believes no additional provisions are necessary.  Should
      any unforeseen risks present themselves however, management may need to increase
      this provision in the future.  At June 30, 2007 and
      December 31, 2006 our allowance for loan losses was $1.6 million or 1.18%
      and 1.16% of total loans, respectively.  Non-performing assets as a
      percentage of total assets were 0.19% at June 30, 2007 and 0.20% at
      December 31, 2006.





Non-interest
      income decreased $71,000 or 29.7% to $168,000 for the quarter ended June 30,
      2007 compared to $239,000 for the same quarter in 2006.  Insurance
      commissions decreased $32,000 or 86.5% to $5,000 for the quarter ended June
      30,
      2007 compared to $37,000 for the quarter ended June 30,
      2006.  Insurance commissions decreased primarily due to a reduction in
      the staff of the Bank’s insurance and investment division.  Service
      charges on deposit accounts decreased $16,000 or 11.9% to $119,000 for the
      quarter ended June 30, 2007 compared to $135,000 for the comparable quarter
      in
      2006.  The decrease in service charges on accounts is primarily due to
      a decrease in demand deposit fee income resulting from a reduction in the number
      of demand deposit accounts, even while the balances in the demand accounts
      have
      increased.  Other non-interest income decreased $23,000 or 34.3% to
      $44,000 for the quarter ended June 30, 2007 compared to $67,000 for the
      comparable period in 2006.  Other non-interest income decreased
      primarily due to a decrease in the gain on loans held for sale.  The
      Company had sold new mortgage originations into the secondary market during
      the
      three months ended June 30, 2006, however, the Company retained all new mortgage
      loan


12


originations
      during the three months ended June 30, 2007.  The Company intends to
      continue to retain new mortgage loan originations for the foreseeable
      future.





Non-interest
      expense decreased by $2,000 to $1.5 million for the three months ended June
      30,
      2007 and June 30, 2006.   The decrease was primarily due to
      decreases in salaries and employee benefits and advertising and promotion,
      partially offset by an increase in other non-interest
      expense.  Salaries and employee benefits decreased $58,000 to $794,000
      for the quarter ended June 30, 2007 compared to $852,000 for the same period
      in
      2006, primarily due to a reduction in the number of full time equivalent
      employees for the comparable periods.  Advertising and promotion costs
      decreased $14,000 to $61,000 for the quarter ended June 30, 2007 compared to
      $75,000 for the same period in 2006.  Advertising and promotion costs
      decreased due to a reduction in the placement of radio and newspaper
      advertisements during the quarter.  These decreases were offset by a
      $77,000 increase in other non-interest expense for the three months ended June
      30, 2007 when compared to the same period in 2006.  The increase in
      other non-interest expense was primarily due to a $73,000 additional write
      down
      of the Company’s other real estate owned.  During the six-months ended
      June 30, 2007 the Company foreclosed on a commercial loan property and entered
      into a contract for the sale of the property.  Subsequent to June 30,
      2007 the Company closed on the sale of the property and recovered $14,000 of
      the
      previously estimated loss.





Our
      federal and state taxes decreased $60,000 to $89,000 for the quarter ended
      June
      30, 2007 from $149,000 during the same period of 2006.  This is
      primarily due to lower pre-tax income during the three months ended June 30,
      2007.





RESULTS
      OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2007 AND JUNE 30,
      2006





Net
      income decreased by $84,000 or 17% to $410,000 for the six months ended June
      30,
      2007, compared to net income of $494,000 for the same period in
      2006.  The Company’s return on average assets decreased to 0.31% for
      the six months ended June 30, 2007 from 0.38% for the comparable period in
      2006.  The decrease in net income resulted from decreases in net
      interest income and non-interest income primarily offset by a decrease in
      non-interest expense.





Net
      interest income was $3.2 million for the six months ended June 30, 2007 compared
      to $3.3 million for the same period in 2006.  The decrease in net
      interest income was primarily due to the cost of average interest-bearing
      liabilities increasing at a faster pace than the average interest-earning asset
      yield increased, and the resulting decrease in the net interest rate
      spread.  Average interest earning assets were $256.8 million and
      $249.9 million during the comparative 2007 and 2006 six-month periods while
      the
      average yield was 5.53% and 5.25%, respectively.  Our net interest
      rate spread decreased 23 basis points to 2.08% from 2.31% while our net interest
      margin decreased 13 basis points to 2.50% from 2.63%.  The ratio of
      average interest-earning assets to average interest-bearing liabilities
      increased to 113.69% for the six months ended June 30, 2007 from 112.23% for
      the
      same period in 2006.  The higher cost of interest-bearing liabilities
      is primarily due to rising market rates for deposits.





There
      was
      a negative provision for loan losses of $71,000 for the six months ended June
      30, 2007 compared to a $12,000 negative loan loss provision for the six months
      ended June 30, 2006.  There were $21,000 in loan loss recoveries and
      $50,000 in negative provisions during the six months ended June 30, 2007, and
      $12,000 in recoveries during the six months ended June 30, 2006.  Any
      loan loss provisions made are to maintain the allowance at a level to reflect
      management’s estimate of losses inherent in our loan
      portfolio.  Management concluded that no additional provisions were
      necessary during the six months ended June 30, 2007 or
      2006.  Management’s evaluation of the losses inherent in our loan
      portfolio reflected a decreased risk of loss in the loan portfolio, which
      required a reduction of the provision of loan losses for the six months ended
      June 30, 2007.  Should any unforeseen risks present themselves,
      however, management may need to make a provision for loan losses in the
      future.


13


Non-interest
      income decreased to $360,000 for the six months ended June 30, 2007 from
      $489,000 for the comparable period in 2006.  The $129,000 decrease was
      primarily the result of decreases in insurance commission income, and other
      non-interest income for the six months ended June 30, 2007 when compared to
      the
      six months ended June 30, 2006.  Insurance commission income decreased
      $82,000 or 75.9% to $26,000 for the six months ended June 30, 2007 compared
      to
      $108,000 for the six months ended June 30, 2006.  Insurance
      commissions decreased primarily due to a reduction in the staff of the Bank’s
      insurance and investment division.  Other non-interest income
      decreased $38,000 or 29.7% to $90,000 for the six months ended June 30, 2007
      compared to $128,000 for the six months ended June 30, 2006.  Other
      non-interest income decreased primarily due to a decrease in the gain on loans
      held for sale.  The Company had sold new mortgage originations into
      the secondary market during the six months ended June 30, 2006, however, the
      Company retained all new mortgage loan originations during the six months ended
      June 30, 2007.  The Company intends to continue to retain new mortgage
      loan originations for the foreseeable future.





Non-interest
      expense decreased $13,000 to $3.0 million for the six-month periods ended June
      30, 2007 and 2006.  The decrease was primarily due to lower salaries
      and employee benefit costs for the six months ended June 30, 2007 compared
      to
      the same period in 2006, offset by an increase in other non-interest
      expense.  Salaries and employee benefits decreased primarily due to a
      reduction in the number of full time equivalent employees for the comparable
      periods.  The increase in other non-interest expense was primarily due
      to a $73,000 additional write down of the Company’s other real estate
      owned.





Our
      federal and state taxes decreased $60,000 to $239,000 for the six months ended
      June 30, 2007 from $299,000 in the same period of 2006.  This is
      primarily the result of lower pre-tax income that occurred during the six months
      ended June 30, 2007.




LIQUIDITY





The
      Bank
      must maintain an adequate level of liquidity to ensure the availability of
      sufficient funds to fund loan originations and deposit withdrawals, to satisfy
      other financial commitments, and to take advantage of investment
      opportunities.  The Bank invests excess funds in overnight deposits
      and other short-term interest-earning assets to provide liquidity to meet these
      needs.  At June 30, 2007, cash and cash equivalents totaled $29.5
      million.  At June 30, 2007, the Bank had commitments to fund
      loans of $4.5 million, available lines of credit of $15.5 million, and standby
      letters of credit of $200,000.  At June 30, 2007, certificates of
      deposit represented 63.1% of total deposits.  The Bank has
      historically retained these deposit accounts.  In addition, the Bank
      has borrowing capacity for an additional $36.6 million from the FHLB without
      providing additional collateral.  The Bank considers its liquidity and
      capital resources sufficient to meet its outstanding short-term and long-term
      needs.





CAPITAL
      RESOURCES





The
      Bank
      is subject to capital-to-asset requirements in accordance with bank
      regulations.  The following table summarizes the Bank’s regulatory
      capital requirements versus actual capital as of June 30,
      2007:








Actual
            
            
            
            
            
            Required
            
            
            
            
            
            Excess(Dollars
                in thousands)
            
            Amount
            
            
            %
            
            
            Amount
            
            
            %
            
            
            Amount
            
            
            %Core
                capital(to
                adjusted total assets)
            
            $
            28,931
            
            
            
            10.9
            %
            
            $
            10,579
            
            
            
            4.0
            %
            
            $
            18,352
            
            
            
            6.9
            %Risk-based
                capitalto
                (risk-weighted assets)
            
            
            30,456
            
            
            
            25.0
            %
            
            
            9,758
            
            
            
            8.0
            %
            
            
            20,698
            
            
            
            17.0
            %








14


**ITEM
      3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
      MARKET RISK**





QUALITATIVE
      ASPECTS OF MARKET RISK





The
      majority of our assets and liabilities are monetary in
      nature.  Consequently, our most significant form of market risk is
      interest rate risk.  Our assets, consisting primarily of mortgage
      loans, have longer maturities than our liabilities, consisting primarily of
      deposits.  As a result, a principal part of our business strategy is
      to manage interest rate risk and reduce the exposure of our net interest income
      to changes in market interest rates.  Accordingly, our Board of
      Directors has established an Asset/Liability Management Committee, which is
      responsible for evaluating the interest rate risk inherent in our assets and
      liabilities, for determining the level of risk that is appropriate given our
      business strategy, operating environment, capital, liquidity and performance
      objectives; and for managing this risk consistent with the guidelines approved
      by the Board of Directors.  Senior management monitors the level of
      interest rate risk on a regular basis, and the Asset/ Liability Management
      Committee, which consists of senior management operating under a policy adopted
      by the Board of Directors, meets as needed to review our asset/liability
      policies and interest rate risk position.





We
      have
      sought to manage our interest rate risk by more closely matching the maturities
      of our interest rate sensitive assets and liabilities.  In the current
      low interest rate environment we have kept our purchases of investments in
      fixed
      rate notes and bonds to maturities within two to three years.  In
      addition, we may emphasize fixed rate mortgages that mature in fifteen years
      or
      less by offering very competitive interest rates on those products while not
      being as aggressive in pricing those mortgages that mature in greater than
      fifteen years.  We also offer one-, three-, five-, and seven-year
      adjustable rate mortgage loans, and three- and five-year balloon
      loans.  However, in a low interest rate environment, borrowers
      typically prefer fixed-rate loans rather than adjustable-rate
      mortgages.  We may sell some of our originations of longer-term
      fixed-rate loans into the secondary market.  We do not solicit
      high-rate jumbo certificates of deposit or brokered funds.  In past
      years, many savings associations have measured interest rate sensitivity by
      computing the “gap” between the assets and liabilities that are expected to
      mature or reprice within certain time periods based on assumptions regarding
      loan prepayment and deposit decay rates formerly provided by the Office of
      Thrift Supervision.  However, the Office of Thrift Supervision now
      requires the computation of amounts by which the net present value of an
      institution’s cash flow from assets, liabilities, and off-balance-sheet items
      (the institution’s net portfolio value or “NPV”) would change in the event of a
      range of assumed changes in market interest rates.  The Office of
      Thrift Supervision provides all institutions that file a Consolidated
      Maturity/Rate Schedule as a part of their quarterly Thrift Financial Report
      with
      an interest rate sensitivity report of net portfolio value.  The
      Office of Thrift Supervision simulation model uses a discounted cash flow
      analysis and an option-based pricing approach to measuring the interest rate
      sensitivity of net portfolio value.  The Office of Thrift Supervision
      model estimates the economic value of each type of asset, liability, and
      off-balance-sheet contract under the assumption that the United States Treasury
      yield curve increases or decreases instantaneously by 100 to 300 basis points
      in
      100 basis point increments.  A basis point equals one-hundredth of one
      percent, and 100 basis points equals one percent.  An increase in
      interest rates from 7% to 8% would mean, for example, a 100 basis point increase
      in the “Change in Interest Rates” column below.  The Office of Thrift
      Supervision provides us the results of the interest rate sensitivity model,
      which is based on information we provide to the Office of Thrift Supervision
      to
      estimate the sensitivity of our net portfolio value.





The
      following table sets forth as of March 31, 2007 (the latest date for which
      information is available), the estimated changes in our net portfolio value
      that
      would result from the designated instantaneous changes in the United States
      Treasury yield curve.  The Company anticipates that the June 30,
      2007 Net Portfolio Value will be similar to the March 31, 2007 table shown
      below.


15





**Change
                in**
            
            
            
            
            
            
            
            
            
            
            
            **NPV
                as % of****Interest
                Rates**
            
            
            
            
            
            
            
            
            
            
            
            **Portfolio
                Value of Assets****in
                Basis Points**
            
            
            **Net
                Portfolio Value**
            
            
            **NPV**
            
            
            **Basis
                Point****(Rate
                Shock)**
            
            
            **Amount**
            
            
            **$
                Change**
            
            
            **%
                Change**
            
            
            **Ratio**
            
            
            **Change**(Dollars
                in thousands)300
            
            
            
            10,236
            
            
            
            (10,236
            )
            
            
            (27
            )%
            
            
            10.26
            %
            
            
            (318
            )200
            
            
            
            30,607
            
            
            
            (6,657
            )
            
            
            (18
            )
            
            
            11.41
            
            
            
            (203
            )100
            
            
            
            34,086
            
            
            
            (3,179
            )
            
            
            (9
            )
            
            
            12.49
            
            
            
            (95
            )Static
            
            
            
            37,264
            
            
            
            
            
            
            
            
            
            
            
            13.44-100
            
            
            
            39,809
            
            
            
            2,545
            
            
            
            7
            
            
            
            14.16
            
            
            
            72-200
            
            
            
            41,121
            
            
            
            3,857
            
            
            
            10
            
            
            
            14.49
            
            
            
            105





The
      table
      above indicates that at March 31, 2007, in the event of a 200 basis point
      increase in interest rates, we would experience an 18% decrease in net portfolio
      value.  A 200 basis point decrease in interest rate would result in a
      10% increase in net portfolio value.  All model outputs associated
      with the -300 basis point scenarios are not applicable because of the low
      prevailing interest rate environment.





Certain
      shortcomings are inherent in the methodology used in the above interest rate
      risk measurement.  Modeling changes in net portfolio value require
      making certain assumptions that may or may not reflect the manner in which
      actual yields and costs respond to changes in market interest
      rates.  In this regard, the net portfolio value table presented
      assumes that the composition of our interest-sensitive assets and liabilities
      existing at the beginning of a period remains constant over the period being
      measured and assumes that a particular change in interest rates is reflected
      uniformly across the yield curve regardless of the duration or repricing of
      specific assets and liabilities.  Accordingly, although the net
      portfolio value table provides an indication of our interest rate risk exposure
      at a particular point in time, such measurements are not intended to and do
      not
      provide a precise forecast of the effect of changes in market interest rates
      on
      its net interest income, and will differ from actual results.





**ITEM
      4.  CONTROLS AND PROCEDURES**





Under
      the
      supervision and with the participation of the Company’s management, including
      the Chief Executive Officer, President and Chief Financial Officer, the Company
      has evaluated the effectiveness of the design and operation of it’s disclosure
      controls and procedures (as defined in Rule 13a-15(e) and 15(d)-15(e) under
      the
      Exchange Act) as of the end of the period covered by this quarterly
      report.  Based upon that evaluation, the Chief Executive Officer,
      President and Chief Financial Officer concluded that, as of the end of the
      period covered by this quarterly report, the Company’s disclosure controls and
      procedures are effective to ensure that information required to be disclosed
      in
      the reports that the Company files or submits under the Securities Exchange
      Act
      of 1934 is recorded, processed, summarized and reported, within the time periods
      specified in the Securities and Exchange commission’s rules and
      forms.  There has been no change in the Company’s internal control
      over financial reporting during the most recent fiscal quarter that has
      materially affected, or is reasonably likely to materially affect, the Company’s
      internal control over financial reporting.





**PART
      II - - OTHER INFORMATION**





**ITEM1.  LEGAL PROCEEDINGS.**





Periodically,
      there have been various claims and lawsuits involving the Company, such as
      claims to enforce liens, condemnation proceedings on properties in which the
      Company holds security interest, claims involving the making and servicing
      of
      real property loans, and other issues incident to the Company’s
      business.  In the opinion of management, after consultation with the
      Company’s legal counsel, no significant loss is expected from any such pending
      claims or lawsuits.  The Company is not a party to any material
      pending legal proceedings.





**ITEM
      1A.  RISK FACTORS.**


16





There
      are
      no changes in the risk factors previously disclosed in the registrants’ annual
      report on Form 10-K.





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





The
      Company’s second repurchase plan was announced on May 18, 2004 and allows for
      the repurchase of 117,000 shares of the Company’s stock, which represented
      approximately 5% of the Company’s outstanding shares.  Increases to
      the Company’s second repurchase plan were announced on March 22, 2005 and on
      October 18, 2005.  They allow an additional 100,000 and 50,000 shares
      respectively, to be added to the current stock repurchase program.





Issuer
      purchases of equity securities during the prior three months:








**Maximum****Total
                number**
            
            
            **number
                of****of
                shares**
            
            
            **shares
                that may****purchased**
            
            
            **be
                purchased****Total**
            
            
            **Average**
            
            
            **under
                publicly**
            
            
            **under
                the****number
                shares**
            
            
            **price
                paid**
            
            
            **announced**
            
            
            **repurchase****purchased**
            
            
            **per
                share**
            
            
            **plan**
            
            
            **plan**April
                1 – April 30
            
            
            625
            
            
            $
            24.75
            
            
            
            212,188
            
            
            
            267,000May
                1 – May 31*
            
            
            3,317
            
            
            
            24.94
            
            
            
            212,328
            
            
            
            267,000June
                1 – June 30
            
            
            7,445
            
            
            
            25.11
            
            
            
            219,773
            
            
            
            267,000





*Included
      in the 3,317 shares the Company repurchased is 3,177 shares purchased in
      connection with vesting of shares awarded under the recognition and retention
      plan.





**ITEM
      3.  DEFAULTS UPON SENIOR
      SECURITIES**.





None





**ITEM
      4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITIES
      HOLDERS.**





At
      the Company’s Annual meeting of
      Stockholders held on May 16, 2007, stockholders voted on the election of
      directors and the ratification of auditors.  The number of shares
      outstanding and entitled to vote was 2,131,704, and the number of shares present
      at the meeting in person or by proxy was 1,958,975.





1.
            The
                vote with respect to the Election of Directors was as
                follows:





For
            
            
            WithheldRichard
                J. Nogal
            
            
            1,862,295
            
            
            
            96,680Edward
                S. Milen
            
            
            1,861,445
            
            
            
            97,530





2.
            Ratification
                of appointment of Crowe Chizek and Company LLC as
                auditors





For
            Against
            Abstain1,944,156
            7,590
            7,229





17


**ITEM
      5.  OTHER INFORMATION.**





None





**ITEM
      6.  EXHIBITS.**





(a)
            Exhibits


31.1
        Certification of Chief Executive Officer Pursuant to
        Section 302 of the Sarbanes-Oxley Act of 2002.
 31.2 Certification
        of President Pursuant to Section
        302 of the Sarbanes-Oxley Act of 2002.
 31.3
        Certification of Chief Financial Officer Pursuant to
        Section 302 of the Sarbanes-Oxley Act of 2002.
 32.1
        Certification pursuant to 18 U.S.C. Section 1350, as
        adopted pursuant toSection 906 of the Sarbanes-Oxley Act of
        2002.







18





**SIGNATURES**








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








AJS
                BANCORP, INC.Date:  August
                7, 2007
            /s/
                Thomas R. ButkusThomas
                R. ButkusChief
                Executive Officer and Chairman of the BoardDate:
                August 7, 2007
            /s/
                Lyn G. RupichLyn
                G. RupichPresident
                and Chief Operating Officer






19