UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


Washington,
      D.C. 20549





**FORM
      10-Q**





**[X]**  **QUARTERLY
      REPORT UNDER SECTION 13 OR 15(d)**


**OF
      THE SECURITIES EXCHANGE ACT OF 1934**





For
      the
      quarterly period ended June 30, 2006


**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 [ X ] No [ 
]





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 (_)
            Accelerated
                Filer (_)
            Non-Accelerated
                Filer (X)





Indicate
      by check mark whether the Registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act.)   Yes    No X








As
      of
      August 3, 2006 2,135,572 shares of the issuer’s common stock were issued and
      outstanding


*Back
          to Index*







**AJS
      BANCORP, INC.**





Form
      10-Q
      Quarterly Report








Index





PagePART
                I - Financial InformationItem
                1.
            Financial
                Statements
            1Item
                2.
            Management's
                Discussion and Analysis of Financial Condition
                andResults
                of Operations
            8Item
                3.
            Quantitative
                and Qualitative Disclosures About Market
                Risk
            14Item
                4.
            Controls
                and Procedures
            15PART
                II - Other InformationItem
                1.
            Legal
                Proceedings
            15Item
                1A.
            Risk
                Factors
            15Item
                2.
            Unregistered
                Sales of Equity Securities and Use of
                Proceeds
            15Item
                3.
            Defaults
                Upon Senior Securities
            16Item
                4.
            Submission
                of Matters to a Vote of Securities
                Holders
            16Item
                5.
            Other
                Information
            16Item
                6.
            Exhibits
            16SIGNATURES
            17











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          to Index*





**ITEM
      1. FINANCIAL STATEMENTS**





**AJS
      Bancorp, Inc.**


**Consolidated
      Statements of Financial Condition**


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


**(unaudited)**


**June 30,**
            
            **December 31,****2006**
            
            **2005****ASSETS**Cash
                and cash equivalentsCash and due from banks (interest-earning:
            
            
            2006
            
            
            -$14,003; 2005 - $11,477)
            
            $
            17,186
            
            $
            14,776Federal funds sold
            
            
            7,211
            
            
            454Total cash and cash equivalents
            
            
            24,397
            
            
            15,230Certificates
                of deposit
            
            
            6,786
            
            
            8,584Securities
                available-for-sale
            
            
            65,166
            
            
            71,239Securities
                held-to-maturity
            
            
            214
            
            
            295Loans,
                net
            
            
            149,376
            
            
            151,768Federal
                Home Loan Bank stock, at cost
            
            
            2,798
            
            
            3,416Premises
                and equipment
            
            
            4,447
            
            
            4,541Accrued
                interest receivable
            
            
            1,019
            
            
            960Other
                assets
            
            
            2,435
            
            
            1,872Total assets
            
            $
            256,638
            
            $
            257,905**LIABILITIES
                AND STOCKHOLDERS' EQUITY**LiabilitiesDeposits
            
            $
            192,301
            
            $
            190,407Federal Home Loan Bank advances
            
            
            29,750
            
            
            32,750Advance payments by borrowers for taxes and insurance
            
            
            1,803
            
            
            1,746Accrued interest payable and other liabilities
            
            
            4,956
            
            
            4,750Total liabilities
            
            
            228,810
            
            
            229,653Stockholders'
                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, 2006 and December 31,
                2005
            
            
            24
            
            
            24Additional paid in capital
            
            
            10,325
            
            
            10,839Treasury stock (308,949 shares at June 30, 2006; 296,714shares at December 31, 2005)
            
            
            (7,225
            )
            
            (6,931
            )Unearned stock awards
            
            
            -
            
            
            (486
            )Retained earnings
            
            
            26,138
            
            
            25,820Accumulated other comprehensive loss
            
            
            (1,434
            )
            
            (1,014
            )Total stockholders' equity
            
            
            27,828
            
            
            28,252Total liabilities and stockholders' equity
            
            $
            256,638
            
            $
            257,905








See
            notes
            to consolidated financial statements.
 *Back
          to Index*
 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,****2006**
            
            **2005**
            
            **2006**
            
            **2005**Interest
                and dividend incomeLoans
            
            $
            2,309
            
            $
            2,283
            
            $
            4,588
            
            $
            4,624Securities
            
            
            692
            
            
            655
            
            
            1,388
            
            
            1,252Interest-earning
                deposits and other
            
            
            287
            
            
            262
            
            
            529
            
            
            585Federal
                funds sold
            
            
            37
            
            
            18
            
            
            59
            
            
            33Total
                interest income
            
            
            3,325
            
            
            3,218
            
            
            6,564
            
            
            6,494Interest
                expenseDeposits
            
            
            1,365
            
            
            1,139
            
            
            2,624
            
            
            2,205Federal
                Home Loan Bankadvances
                and other
            
            
            321
            
            
            356
            
            
            649
            
            
            729Total
                interest expense
            
            
            1,686
            
            
            1,495
            
            
            3,273
            
            
            2,934Net
                interest income
            
            
            1,639
            
            
            1,723
            
            
            3,291
            
            
            3,560Provision
                (reduction) for loan losses
            
            
            -
            
            
            (58
            )
            
            (12
            )
            
            (92
            )Net
                interest income after provision forloan
                losses
            
            
            1,639
            
            
            1,781
            
            
            3,303
            
            
            3,652Noninterest
                incomeService
                fees
            
            
            135
            
            
            121
            
            
            253
            
            
            263Insurance
                commissions
            
            
            37
            
            
            56
            
            
            108
            
            
            106Gain
                on sale of loans
            
            
            15
            
            
            9
            
            
            34
            
            
            9Other
            
            
            52
            
            
            48
            
            
            94
            
            
            100Total
                noninterest income
            
            
            239
            
            
            234
            
            
            489
            
            
            478Noninterest
                expenseCompensation
                and employee benefits
            
            
            852
            
            
            872
            
            
            1,717
            
            
            1,743Occupancy
                expense
            
            
            210
            
            
            210
            
            
            420
            
            
            416Data
                processing expense
            
            
            86
            
            
            96
            
            
            190
            
            
            199Advertising
                and promotion
            
            
            75
            
            
            122
            
            
            130
            
            
            222Other
            
            
            266
            
            
            260
            
            
            542
            
            
            517Total
                noninterest expense
            
            
            1,489
            
            
            1,560
            
            
            2,999
            
            
            3,097Income
                before income taxes
            
            
            389
            
            
            455
            
            
            793
            
            
            1,033Income
                taxes
            
            
            149
            
            
            126
            
            
            299
            
            
            333Net
                income
            
            $
            240
            
            $
            329
            
            $
            494
            
            $
            700Earnings
                per shareBasic
            
            $
            0.11
            
            $
            0.15
            
            $
            0.23
            
            $
            0.32Diluted
            
            
            0.11
            
            
            0.15
            
            
            0.23
            
            $
            0.32Weighted
                average shares - Diluted
            
            
            2,135,615
            
            
            2,195,832
            
            
            2,134,124
            
            
            2,217,096Comprehensive
                income
            
            $
            121
            
            $
            618
            
            $
            74
            
            $
            523








See
          notes
          to consolidated financial statements.
 
  *Back
          to Index*
 2


**AJS
      Bancorp, Inc.**


**Consolidated
      Statements of Cash Flows**


**(in
      thousands of dollars)**


**(unaudited)**


**Six
                Months Ended****June 30,****2006******
            
            ******2005****Cash
                flows from operating activities**Net
                income
            
            $
            494
            
            $
            700Adjustments
                to reconcile net income to net cashprovided
                by operating activitiesDepreciation
            
            
            135
            
            
            152Provision
                for loan losses
            
            
            (12
            )
            
            (92
            )Deferred
                income taxes
            
            
            (377
            )
            
            205Net
                amortization of securities
            
            
            35
            
            
            47Stock
                award compensation expense
            
            
            100
            
            
            98Stock
                option compensation expense
            
            
            29
            
            
            -ESOP
                compensation expense
            
            
            -
            
            
            274Federal
                Home Loan Bank stock dividends
            
            
            -
            
            
            (294
            )Dividend
                reinvestments
            
            
            (186
            )
            
            (288
            )Gain
                on the sale of loans
            
            
            (34
            )
            
            (9
            )Changes
                inLoans
                held for sale
            
            
            -
            
            
            (77
            )Accrued
                interest receivable and other assets
            
            
            20
            
            
            (221
            )Accrued
                interest payable and other liabilities
            
            
            34
            
            
            1,988Net
                cash from operating activities
            
            
            238
            
            
            2,483**Cash
                flows from investing activities**Securities
                available-for-salePurchases
            
            
            (2,000
            )
            
            (19,922
            )Maturities
                and principal payments
            
            
            7,539
            
            
            6,526Securities
                held-to-maturityPurchases
            
            
            -
            
            
            (200
            )Maturities
                and principal payments
            
            
            81
            
            
            16Net
                change in certificates of deposit
            
            
            1,798
            
            
            (699
            )Net
                change in loans
            
            
            2,438
            
            
            10,102Purchase
                of equipment
            
            
            (41
            )
            
            (21
            )Sale
                of Federal Home Loan Bank stock
            
            
            618
            
            
            4,500Net
                cash from investing activities
            
            
            10,433
            
            
            302**Cash
                from financing activities**Net
                change in deposits
            
            
            1,894
            
            
            (2,221
            )Net
                change in advance payments by borrowers for taxes and
                insurance
            
            
            57
            
            
            88Net
                change in Federal Home Loan Bank advances
            
            
            (3,000
            )
            
            (2,500
            )Dividends
                paid
            
            
            (176
            )
            
            -Purchase
                of treasury stock
            
            
            (309
            )
            
            (2,449
            )Exercise
                of stock option
            
            
            30
            
            
            120Net
                cash from financing activities
            
            
            (1,504
            )
            
            (6,962
            )Net
                change in cash and cash equivalents
            
            
            9,167
            
            
            (4,177
            )Cash
                and cash equivalents at beginning of period
            
            
            15,230
            
            
            17,031**Cash
                and cash equivalents at end of period**
            
            $
            24,397
            
            $
            12,854











See
            notes
            to consolidated financial statements.
 *Back
          to Index*
 3


**AJS
      Bancorp, Inc.**


**Consolidated
      Statements of Stockholders' Equity**


**Six
      months ended June 30, 2006**


**(in
      thousands of dollars)**


**(unaudited)**




Common
                Stock
              
              Additional
                Paid-in
                Capital
              
              Treasury
                Stock
              
              Unearned
                  StockAwards
              
              Unearned
                ESOP
                Shares
              
              Retained
                Earnings
              
              Accumulated
                Other
                  ComprehensiveLoss
              
              Total
                Stockholders'
                EquityBalance
                  at December 31, 2004
              
              $
              24
              
              $
              10,830
              
              $
              (4,075
              )
              $
              (682
              )
              $
              (189
              )
              $
              24,837
              
              $
              (215
              )
              $
              30,530Purchase
                  of 102,202 shares of treasury stock
              
              
              -
              
              
              -
              
              
              (2,449
              )
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (2,449
              )ESOP
                  shares earned
              
              
              -
              
              
              179
              
              
              -
              
              
              -
              
              
              95
              
              
              -
              
              
              -
              
              
              274Stock
                  awards earned
              
              
              -
              
              
              -
              
              
              -
              
              
              98
              
              
              -
              
              
              -
              
              
              -
              
              
              598ESOP
                  put option
              
              
              -
              
              
              (144
              )
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (144
              )Stock
                  options exercised (6,000 shares)
              
              
              -
              
              
              -
              
              
              120
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              120Comprehensive
                  lossNet
                  income
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              700
              
              
              -
              
              
              700Change
                  in unrealized gain on securities
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Available-for-sale,
                  net of taxes
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (177
              )
              
              (177
              )Total
                  comprehensive loss
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              523Balance
                  at June 30, 2005
              
              $
              24
              
              $
              10,865
              
              $
              (6,404
              )
              $
              (584
              )
              $
              (94
              )
              $
              25,537
              
              $
              (392
              )
              $
              28,952




Common
                  Stock
                
                Additional
                  Paid-in
                  Capital
                
                Treasury
                  Stock
                
                Unearned
                    StockAwards
                
                Retained
                  Earnings
                
                Accumulated
                  Other
                    ComprehensiveLoss
                
                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





See
            notes
            to consolidated financial statements.
 *Back
          to Index*
 4


AJS
      BANCORP, INC.


NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS


June 30,
      2006








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-Q. 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, 2005
      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, 2006. 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, 2006 and 2005 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,
      2006 and 2005 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,****2006**
            
            **2005**
            
            **2006**
            
            **2005**(in
                thousands, except
            
            (in
                thousands, exceptper
                share data)
            
            per
                share data)**Basic**Net
                income
            
            $
            240
            
            $
            329
            
            $
            494
            
            $
            700Weighted
                average common sharesoutstanding
            
            
            2,117
            
            
            2,169
            
            
            2,117
            
            
            2,190Basic
                earnings per common share
            
            $
            0.11
            
            $
            0.15
            
            $
            0.23
            
            $
            0.32







*Back
          to Index*
 5





**For
                the Three Months**
            
            **For
                the Six Months****Ended
                June 30,**
            
            **Ended
                June 30,****2006**
            
            **2005**
            
            **2006**
            
            **2005**(in
                thousands, except
            
            (in
                thousands, exceptper
                share data)
            
            per
                share data)**Diluted**Net
                income
            
            $
            240
            
            $
            329
            
            $
            494
            
            $
            700Weighted
                average common sharesoutstanding
            
            
            2,117
            
            
            2,169
            
            
            2,117
            
            
            2,190Dilutive
                effect of stock awards
            
            
            3
            
            
            4
            
            
            3
            
            
            4Dilutive
                effect of stock options
            
            
            16
            
            
            22
            
            
            14
            
            
            23Diluted
                average common shares
            
            
            2,136
            
            
            2,196
            
            
            2,134
            
            
            2,217Diluted
                earnings per common share
            
            $
            0.11
            
            $
            0.15
            
            $
            0.23
            
            $
            0.32




There
      were no shares that were anti-dilutive for the period ended June 30, 2006 and
      2005.





Note
      3 -
      Stock Plans and Stock Based Compensation





At
      June
      30, 2006 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 1,200 options granted and 1,600 options exercised during
      the six months ended June 30, 2006. There were no options granted and 6,000
      options exercised during the six months ended June 30, 2005.





Effective
      January 1, 2006, the Company adopted Statement of Financial Accounting Standards
      ("SFAS") No. 123R, "Share Based Payment." The Company elected to utilize
      the modified prospective transition method; therefore, prior period results
      were
      not restated. Prior to the adoption of SFAS 123R, stock-based compensation
      expense was not recognized in the results of operations if the exercise price
      was at least equal to the market value of the common stock on the grant
      date.





SFAS
      123R
      requires all share-based payments to employees, including grants of employee
      stock options, to be recognized as compensation expense over the service period
      (generally the vesting period) in the consolidated financial statements based
      on
      their fair values. Under the modified prospective method, unvested awards,
      awards that were granted, modified, or settled on or after January 1, 2006
      are
      measured and accounted for in accordance with SFAS 123R.


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 6


**A
      summary of the status of the Company's stock option plan and changes during
      the
      six months ended June 30, 2006 and 2005 is presented below:**





**For
                the Six Months****Ended
                June 30,****2006**
            
            **2005**Weighted-
            
            
            
            Weighted-Average
            
            
            
            AverageExercise
            
            
            
            ExerciseShares
            
            Price
            
            Shares
            
            PriceOutstanding
                at beginning of period
            
            
            105,685
            
            $
            18.75
            
            
            112,685
            
            $
            18.75Granted
            
            
            1,200
            
            
            23.75
            
            
            -
            
            
            -Exercised
            
            
            (1,600
            )
            
            18.75
            
            
            (6,000
            )
            
            18.75Forfeited
            
            
            (2,400
            )
            
            18.75
            
            
            (1,000
            )
            
            18.75Outstanding
                at end of period
            
            
            102,885
            
            $
            18.81
            
            
            105,685
            
            $
            18.752006
            
            
            2005Options
                exercisable at end of period
            
            
            
            
            
            
            
            
            61,411
            
            
            42,274Intrinsic
                value of options outstanding
            
            
            
            
            
            
            
            $
            636,900
            
            $
            517,900Intrinsic
                value of options exercisable
            
            
            
            
            
            
            
            $
            380,100
            
            $
            207,100Average
                remaining option term
            
            
            
            
            
            
            
            
            7
                years
            
            
            8
                years





The
      fair
      value of each stock option granted is estimated on the date of grant using
      the
      Black-Scholes based stock option valuation model.  This model requires the
      input of subjective assumptions that will have an impact on the fair value
      estimate. Expected volatilities are based on historical volatility of the
      Company's stock, and other factors.  Expected dividends are based on
      dividend trends and the market price of the Company's stock price at
      grant.  The Company uses historical data to estimate option exercises and
      employee terminations within the valuation model.  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
      pro
      forma effects are computed using option pricing models using the following
      weighted-average assumptions as of grant date for options granted during the
      period ended June 30, 2006.





2006Risk-free
                interest rate
            
            
            4.71
            %Expected
                option life
            
            
            2.167
            yearsExpected
                stock price volatility
            
            
            10.11
            %Dividend
                yield
            
            
            1.68
            %







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. There were no options exercised during the
      second quarter of 2006. The Company recorded $29,000 in stock compensation
      expense during the six months ended June 30, 2006 to salaries and employee
      benefits.




Prior
      to
      2006, the Company applied Accounting Principles Board ("APB") Opinion 25 and
      related Interpretations in accounting for its stock option plan. Accordingly,
      no
      compensation cost was recognized at


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 7


the
      date
      of grant. Had compensation cost been determined based on the fair value at
      the
      grant dates for awards under the plan consistent with the method of Statement
      of
      Financial Accounting Standards ("SFAS") No. 123, *Accounting
      for Stock-Based Compensation* ,
      the
      Company's net income and earnings per share for the three months and six months
      ended June 30, 2005 would have been reduced to the pro forma amounts in the
      table below. For purposes of pro forma disclosure, the estimated fair value
      of
      the options is amortized to expense over the option's vesting
      period.




**For
                the Three Months**
            
            **For
                the Six Months****Ended
                June 30,**
            
            **Ended
                June 30,****2005**
            
            **2005**(in
                thousands, except
            
            (in
                thousands, exceptper
                share data)
            
            per
                share data)Net
                income as reported
            
            $
            329
            
            
            $
            700Pro
                forma net income
            
            
            323
            
            
            
            688Earnings
                per share as reportedBasic
            
            
            0.15
            
            
            
            0.32Diluted
            
            
            0.15
            
            
            
            0.32Pro
                forma earnings per shareBasic
                and diluted
            
            
            0.15
            
            
            
            0.31





Unrecognized
      stock option compensation expense related to unvested awards for the remainder
      of 2006 and beyond is estimated in the table below. These figures represent
      gross expense forfeitures are expected to reduce this cost. We estimate our
      forfeiture rate for the stock option plan to be 4.7%.





Year
            
            *(in
                thousands**)*July
                2006 - December 2006
            
            $
            292007
            
            
            582008
            
            
            22Total
            
            $
            109




Pursuant
      to its 2003 stock-based incentive plan, the Company awarded 58,971 shares of
      restricted stock in May 2003. These shares vest over a five-year period. The
      unamortized cost of shares not yet earned (vested) is reported as a reduction
      of
      stockholders' equity. Compensation  expense
      for restricted stock awards totaled $46,000 and $50,000 for the six months
      ended
      June 30, 2006 and 2005, respectively. Compensation expenses totaled $97,000
      and $98,000 for the six months ended June 30, 2006 and 2005, 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%.





**ITEM
      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


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 8


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, 2006 to its financial condition at December 31, 2005 and the
      results of operations for the three- and six-month periods ended June 30,
      2006 to the same periods in 2005. This discussion should be read in conjunction
      with the interim financial statements and footnotes included
      herein.





FINANCIAL
      CONDITION





Total
      assets at June 30, 2006 were $256.6 million compared to $257.9 million at
      December 31, 2005, a decrease of $1.3 million, or 0.5%. The decrease in
      total assets reflects decreases in certificates of deposit, securities, loans
      receivable and Federal Home Loan Bank (“FHLB”) stock, partially offset by an
      increase in cash and cash equivalents. Certificates of deposit decreased $1.8
      million or 21.0% to $6.8 million at June 30, 2006 compared to $8.6 million
      at
      December 31, 2005. Securities decreased $6.1 million or 8.6% to $65.4 million
      at
      June 30, 2006 from $71.5 million at December 31, 2005. Loans receivable
      decreased $2.4 million to $149.4 million at June 30, 2006 from $151.8 million
      at
      December 31, 2005.  The
      decrease in certificates of deposit was due to maturities in the portfolio.
      The
      decrease in securities was due to principal repayments and maturities. The
      decrease in loans occurred in the conventional fixed-rate, adjustable-rate
      and
      home equity mortgage loan types. This is primarily due to the fact that the
      Company is currently selling the majority of the 30- and 15-year conventional
      fixed-rate mortgages it originates, as well as reductions in the Company’s
      refinancing activity.




The
      allowance for loan losses was $1.7 million at June 30, 2006 and at
      December 31, 2005. This represents a ratio of allowance for loan losses to
      gross loans receivable of 1.13% at June 30, 2006 and 1.11% at
      December 31, 2005. The Company had non-performing assets of $950,000 as of
      June 30, 2006 and $394,000 as of December 31, 2005. The increase in
      non-performing loans primarily reflects an increase in the principal balance
      of
      loans that are delinquent and a slight increase in the number of delinquent
      loans. The allowance for loan losses to non-performing loans was 179.05% at
      June 30, 2006 compared to 431.73% at December 31, 2005.





Total
      liabilities at June 30, 2006 were $228.8 million compared to $229.7 million
      at December 31, 2005, a decrease of $843,000, reflecting a decrease in FHLB
      advances, offset by an increase in deposits. Total deposits increased $1.9
      million, or 1.0%, to $192.3 million at June 30, 2006 from $190.4 million at
      December 31, 2005. This increase in deposits was primarily in certificates
      of deposits and demand deposit accounts. FHLB advances decreased to
      $29.8 million at June 30, 2006 from $32.8 million at December 31,
      2005.





Total
      stockholders' equity decreased to $27.8 million at June 30, 2006 from $28.3
      million at December 31, 2005. The decrease in stockholders' equity was
      primarily due to the repurchase of 13,235 shares of the Company's stock at
      an
      average price of $23.40 per share totaling $309,000 combined with an increase
      in
      other comprehensive loss. 3,216 shares were repurchased from employee
      participants in the recognition and


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 9


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
      59,305 shares remaining to be repurchased under the current repurchase plan.
      Other comprehensive loss increased due to a decrease in the market value of
      securities available for sale. 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 a quarterly dividend of $0.10 cents per share on May 26, 2006
      to
      stockholders of record as of May 12, 2006. In addition, the Company's Board
      of
      Directors announced that it has declared a third quarter dividend of $0.10
      cents
      per share payable on August 25, 2006, to stockholders of record on August 11,
      2006. 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, 2006, the
      Company held cash totaling $24.4 million. At June 30, 2006 the Bank's tier
      1
      capital as well as its tangible capital ratio was 11.5%, and its risk-based
      capital ratio was 23.9%.





RESULTS
      OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE  30, 2006 AND JUNE 30,
      2005





Net
      income decreased $89,000 to $240,000 for the quarter ended June 30, 2006
      compared to the same period in 2005. The return on average assets decreased
      to
      0.37% for the quarter ended June 30, 2006 from 0.50% for the same period in
      2005. The decrease was due to a decrease in net interest income partially offset
      by a decrease in non-interest expense. Total interest income increased by
      $107,000 or 3.3% to $3.3 million for the quarter ended June 30, 2006 as
      compared to $3.2 million for the same quarter in 2005. The increase was due
      to
      increases in all interest income earning categories which include interest
      income earned on loans, securities, interest earning deposits and federal funds
      sold, with the largest percentage increases occurring on interest earning
      deposits and federal funds sold. Income earned on interest earning deposits
      increased $25,000 or 9.5% for the comparable quarters, while income earned
      on
      federal funds sold increased $19,000 or 105.6% for the comparable period.
      Interest income earned on interest earning deposits increased primarily due
      to
      an increase in the interest earned on the average interest-earning deposit
      balances, even while the average interest-earning deposit balances decreased
      for
      the three months ended June 30, 2006 compared to the three months ended June
      30,
      2005. The average balance for interest-earning deposits decreased to $25.1
      million for the three months ended June 30, 2006 while the average balance
      for
      interest-earning deposits was $25.5 million for the same period last year.
      The
      average yield increased to 4.57% on interest-earning deposits while for the
      same
      quarter last year the average yield was 4.11%. Interest income earned on federal
      funds sold increased due to higher average balances and higher interest earned
      for the comparable quarters ending June 30, 2006 and 2005. The average balance
      for federal funds sold for the three months ended June 30, 2006 was $3.3
      million with an average yield of 4.66% compared to an average balance of $2.7
      million with an average yield of 2.81% for the same quarter in 2005.





Total
      interest expense increased $191,000 to $1.7 million at June 30, 2006 from $1.5
      million at June 30, 2005. The increase in interest expense was primarily
      due to the increased cost of deposits offset by a decrease in the cost of
      Federal Home Loan Bank ("FHLB") advances. The average cost of deposits at
      June 30, 2006 was 2.83% as compared to 2.33% at June 30, 2005. The increase
      in the cost of deposits was primarily due to rising short-term interest rates.
      Interest expense on FHLB advances decreased by $35,000 or 9.8% to $321,000
      for
      the quarter ended June 30, 2006 from $356,000 for the same quarter in 2005.
      This was due to a decrease in the average FHLB advance balances for the quarter
      ended June 30, 2006 compared to the same quarter in 2005. The average FHLB
      advance balance was $30.1 million and the average cost was 4.27% for the quarter
      ended June 30, 2006 compared to an average balance of $34.4 million and an
      average cost of 4.14% for the same quarter in 2005. The average cost of
      interest-bearing liabilities increased to 3.02% for the three months ended
      June 30, 2006 from 2.60% for the same period ended 2005.


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 10





Our
      net
      interest rate spread decreased 10 basis points to 2.30% for the quarter ended
      June 30, 2006 from 2.40% for the same period in 2005, while our net
      interest margin decreased 6 basis points to 2.62% for the quarter ended
      June 30, 2006 from 2.68% for the same period in June 30, 2005. The
      ratio of average interest-earning assets to average interest-bearing liabilities
      declined to 112.01% for the three months ended June 30, 2006 from 112.02%
      for the same period in 2005.





The
      Company did not record any provision for loan losses for the three months ended
      June 30, 2006, and a negative provision of $58,000 for the three months ended
      June 30, 2005. The negative provision recorded in 2005 was due to a combination
      of loan loss recoveries and our review of losses inherent in our loan portfolio.
      Loan provisions made are to maintain the allowance to reflect management's
      estimates of losses inherent in our loan portfolio. 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, 2006 and December 31, 2005 our allowance for
      loan losses was $1.7 million or 1.13% and 1.11% of total loans, respectively.
      Non-performing assets as a percentage of total assets was 0.37% at June 30,
      2006 and 0.15% at December 31, 2005.





Non-interest
      income remained fairly stable at $239,000 for the quarter ended June 30,
      2006 compared to $234,000 for the comparable quarter in 2005. Insurance
      commissions decreased $19,000 or 33.9% to $37,000 for the quarter ended June
      30,
      2006 compared to $56,000 for the quarter ended June 30, 2005. This decrease
      was
      offset by a $14,000 increase in service charges on accounts, a $6,000 increase
      in gain on loans held for sale, and a $4,000 increase in other non-interest
      income items. The decrease in insurance commissions is due to lower sales of
      variable and fixed-rate annuities. The increase in service charges on accounts
      is primarily due to an increase in prepayment penalties on commercial loans
      due
      to an early pay off of a loan and an increase in service charges on checking
      accounts. The increase in gain on loans held for sale in primarily due to an
      increase in the volume of loans sold during the quarter ended June 30, 2006
      when
      compared to the same period in 2005. There were eight loans totaling $1.0
      million sold during the quarter ended June 30, 2006 compared to two loans
      totaling $420,000 sold during the quarter ended June 30, 2005.




Non-interest
      expense decreased by $71,000 to $1.5 million for the quarter ended June 30,
      2006
      compared to $1.6 million for the same quarter in 2005. The decrease was
      primarily due to decreases in salaries and employee benefits, advertising and
      promotion, and data processing costs. Salaries and employee benefits decreased
      $20,000 to $852,000 for the quarter ended June 30, 2006 compared to $872,000
      for
      the same period in 2005. The decrease was primarily due to the reduction of
      costs associated with the Employee Stock Ownership Plan (“ESOP”). The shares in
      the ESOP fully vested at December 31, 2005. Advertising and promotion costs
      fell
      $47,000 to $75,000 for the quarter ended June 30, 2006 compared to $122,000
      for
      the same period in 2005. Advertising and promotion costs decreased primarily
      due
      to a reduction in newspaper advertising. Data processing costs decreased $10,000
      to $86,000 for the quarter ended June 30, 2006 compared to $96,000 for the
      same
      period in 2005. The decrease in data processing costs was primarily due to
      the
      company realizing a one-time savings on bundled purchases of software packages.




Our
      federal and state taxes increased $23,000 to $149,000 for the quarter ended
      June 30, 2006 from $126,000 in the same period of 2005. This is primarily
      due to the lack of federal and state taxes recorded on negative provisions
      and
      recoveries of loan losses that occurred during the quarter ended June 30, 2005.





RESULTS
      OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2006 AND JUNE 30,
      2005





Net
      income decreased by $206,000 or 29.4% to $494,000 for the six months ended
      June
      30, 2006, compared to net income of $700,000 for the same period in 2005. The
      Company’s return on average assets decreased to 0.38% for the six months ended
      June 30, 2006 from 0.52% for the comparable period in 2005. The decrease in
      net
      income resulted from a decrease in net interest income primarily offset by
      a
      decrease in non-interest expense. Non-interest income remained relatively stable
      when comparing the two periods.


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 11


Net
      interest income was $3.3 million for the six months ended June 30, 2006 compared
      to $3.6 million for the same period in 2005. 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 $249.9 million and $258.6 million during the comparative 2006 and
      2005 six-month periods while the average yield was 5.25% and 5.02%,
      respectively. Our net interest rate spread decreased 16 basis points to 2.31%
      from 2.47% while our net interest margin decreased 12 basis points to 2.63%
      from
      2.75%. The ratio of average interest-earning assets to average interest-bearing
      liabilities decreased to 112.23% for the six months ended June 30, 2006 from
      112.25% for the same period in 2005. The decrease in our net interest rate
      spread and net interest margin is primarily due to the inverted yield curve,
      which has resulted in rising short term interest rates with longer term interest
      rates remaining stable.





There
      was
      a negative provision for loan losses of $12,000 for the six months ended June
      30, 2006 compared to a $92,000 negative loan loss provision for the six months
      ended June 30, 2005. There were $12,000 in loan loss recoveries during the
      six
      months ended June 30, 2006, and $54,000 in recoveries during the six months
      ended June 30, 2005. Any loan loss provisions made are to maintain the allowance
      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, 2006 or 2005. Management's evaluation of the losses
      inherent in our loan portfolio reflected a decrease risk of loss in the loan
      portfolio, which required a reduction of the provision of loan losses for the
      six months ended June 30, 2005. Should any unforeseen risks present themselves,
      however, management may need to make a provision for loan losses in the future.





Non-interest
      income increased to $489,000 for the six months ended June 30, 2006 from
      $478,000 for the comparable period in 2005. The $11,000 increase was the result
      of increases in insurance commission income and gain on loans held for sale,
      offset by decreases in service charge income on accounts and other non-interest
      income items for the six months ended June 30, 2006 when compared to the six
      months ended June 30, 2005. The increase in insurance commissions reflects
      slightly higher sales of variable- and fixed-rate annuities. Gain on loans
      held
      for sale increased primarily due to an increase in the volume of loan sold
      for
      the comparable six-month periods.





Non-interest
      expense decreased to $3.0 million from $3.1 million for the six months ended
      June 30, 2006 and 2005, respectively. Salaries and benefits decreased $26,000
      and advertising and promotion decreased $92,000, while other non-interest
      expense items increased $25,000 for the comparable six-month period. The
      decrease in salaries and benefits was primarily due to a decrease in Employee
      Stock Ownership Plan (“ESOP”) costs. The ESOP was fully vested at December 31,
      2005. The decrease in advertising and promotion costs occurred due to a
      reduction in newspaper advertising and a decrease in promotional give away
      items
      during the six months ended June 30, 2006 as compared to the six months ended
      June 30, 2005. Other non-interest expenses increased in small, non-material
      amounts throughout several expense categories, but the largest increases were
      in
      stationary, printing, office supplies as well as cleaning supplies.




NEW
      ACCOUNTING PRONOUNCEMENTS





Effect
      of
      Newly Issued But Not Yet Effective Accounting Interpretation: In June 2006,
      the
      FASB issued Interpretation No. 48 “Accounting for Uncertainty in Income Taxes” -
      an interpretation of FASB No. 109” (FIN 48). FIN 48 prescribes a recognition
      threshold and measurement attribute for the financial statement recognition
      and
      measurement of a tax position taken or expected to be taken in a tax return.
      The
      Interpretation is effective for fiscal years beginning after December 31, 2006.
      The company is currently evaluating the impact of the adoption of FIN 48, with
      respect to its results of operations, financial position and
      liquidity.











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 12


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-bearing assets to provide liquidity to meet these needs. At
      June 30, 2006, cash and cash equivalents totaled $24.4 million. At
      June 30, 2006, the Bank had commitments to fund loans of $5.1 million,
      available lines of credit of $15.3 million, and standby letters of credit of
      $150,000. At June 30, 2006, certificates of deposit represented 61.9% of
      total deposits. The Bank expects to retain these deposit accounts. In addition,
      the Bank has borrowing capacity for an additional $42.6 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, 2006:




Actual
            
            
            
            
            Required
            
            
            
            
            Excess(Dollars
                in thousands)
            
            Amount
            
            %
            
            Amount
            
            %
            
            
            Amount
            
            %Core
                capital(to
                adjusted total assets)
            
            $
            29,331
            
            
            11.3
            %
            
            $
            10,357
            
            
            4.0
            %
            
            $
            18,974
            
            
            7.3
            %Risk-based
                capitalto
                (risk-weighted assets)
            
            
            30,954
            
            
            23.9
            %
            
            
            10,382
            
            
            8.0
            %
            
            
            20,572
            
            
            15.9




**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.


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 13


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, 2006 (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, 2006 Net
      Portfolio Value will be similar to the March 31, 2006 table shown
      below.





**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
            26,066
            (10,214)
            (28)%
            10.48%
            (322)200
            29,448
            (6,832)
            (19)
            11.60
            (210)100
            32,901
            (3,379)
            (9)
            12.69
            (101)Static
            36,280
            
            13.70-100
            39,268
            2,988
            8
            14.55
            85-200
            40,897
            4,617
            13
            14.94
            124








The
      table
      above indicates that at March 31, 2006, in the event of a 200 basis point
      increase in interest rates, we would experience a 19% decrease in net portfolio
      value. A 200 basis point decrease in interest rates would result in a 13%
      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.


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 14


**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**





**ITEM
      1. 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.**





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
            
            
            -
            
            $
            -
            
            
            206,276
            
            
            267,000May
                1 - May 31*
            
            
            3,571
            
            
            24.14
            
            
            206,631
            
            
            267,000June
                1 - June 30
            
            
            1,064
            
            
            23.15
            
            
            207,695
            
            
            267,000


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 15


*Included
      in the 3,571 shares the Company repurchased 3,216 shares 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 17, 2006, stockholders
      voted on the election of directors and the ratification of auditors. The number
      of shares outstanding and entitled to vote was 2,142,207, and the number of
      shares present at the meeting in person or by proxy was 1,875,252.





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





For
            WithheldRaymond
                J. Blake
            1,860,157
            15,095Thomas
                R. Butkus
            1,860,142
            15,110








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





For
            Against
            Abstain1,869,537
            4,350
            1,365





**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 to Section 906 of the Sarbanes-Oxley Act of
              2002.






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 16


**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 9, 2006
            /s/
                Thomas R. ButkusThomas
                R. ButkusChief
                Executive Officer and Chairman of the BoardDate:
                August 9, 2006
            /s/
                Lyn G. RupichLyn
                G. RupichPresident
                and Chief Operating Officer






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17