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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

Annual Report Persuant to Section
            13 or 15(d)of

the Securities Exchange Act of 1934

For the fiscal year ended December
            31, 2006

Commission file number 0-18121

___________________________

MAF BANCORP, INC.

(Exact name of registrant as specified
            in its charter)

|                                                                           |                                                                                           
|-------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------
|Delaware
                    
                    (State of Incorporation) | 36-3664868
                      (I.R.S. Employer
                     Identification No.)
|                                                                           |                                                                                           
|                                                                           |                                                                                           
|                                                                           |                                                                                           
|                                                                           |                                                                                           

55th Street & Holmes Avenue,
            Clarendon Hills, Illinois 60514-1500
            Telephone Number (630) 325-7300

Securities registered pursuant to
            Section 12(b) of the Act: None

Securities registered pursuant to
            Section 12(g) of the Act:

Common Stock, par value $.01
            per share
            (Title of Class)

Indicate by check mark if the registrant
            is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Indicate by check mark if the registrant
            is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange
            Act.

Indicate by check mark whether the
            registrant (1) has filed all reports required to be filed by Section 13 or 15(d)
            of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has
            been subject to such filing requirements for the past 90 days.

Indicate by check mark if disclosure
            of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein,
            and will not be contained, to the best of registrant's knowledge, in definitive
            proxy or information statements incorporated by reference in Part III of this Form
            10-K/A or any amendments to this Form 10-K/A.

Indicate by check mark whether the
            registrant is a large accelerated filer, an accelerated filer, or a non-accelerated
            filer. See definition of accelerated filer and large accelerated
            filer in Rule 12b-2 of the Exchange Act.

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

Based opon closing price of the
            registrant's common stock as of June 30, 2006, the aggregate market value of the
            voting stock held by non affiliates of the reistrant was $1.3 billion. *

The number of shares of Common Stock
            outstanding as of February 23, 2007: 32,926,938

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Document Incorporated by Reference

PART III - Portions of the Proxy
            Statement for the Annual Meeting of Shareholders to be held on May 16, 2007 are
            incorporated by reference into Part III hereof.

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*Solely for purposes of this calculation,
            all executive officers and directors of the registrant are considered to be affiliates.
            Except to the extent shares have been allocated to the plan accounts of directors
            and executive officers, the affiliate holdings do not include shares held in certain
            employee benefit plans administered by plan committees the include executive officers.

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MAF BANCORP, INC. AND SUBSIDIARIES

FORM 10-K

Page

PART I.

|           |                                                                                                                                                                               |    
|---------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---
|Item 1.    | Business                                                                                                                                                                      | 2  
|Item 1A.   | Risk Factors                                                                                                                                                                  | 28 
|Item 1B.   | Unresolved Staff Comments                                                                                                                                                     | 31 
|Item 2.    | Properties                                                                                                                                                                    | 31 
|Item 3.    | Legal Proceedings                                                                                                                                                             | 31 
|Item 4.    | Submission of Matters to a Vote
                    of Security Holders                                                                                                       | 31 
|           | PART
                    II                                                                                                                                                   |    
|           |                                                                                                                                                                               |    
|Item 5.    | Market for the Registrant's Common
                    Equity, Related Stockholder Matters
                    
                    and Issuer Purchases of Equity Securities | 31 
|Item 6.    | Selected Financial Data                                                                                                                                                       | 33 
|Item 7.    | Management's Discussion and Analysis
                    of Financial Condition
                    and Results of Operations                                                 | 37 
|Item 7A.   | Quantitative and Qualitative
                    Disclosures about Market Risk                                                                                                | 55 
|Item 8.    | Financial Statements and Supplementary
                    Data                                                                                                               | 59 
|Item 9.    | Changes in and Disagreements
                    with Accountants on Accounting
                    and Financial Disclosure                                                  | 99 
|Item 9A.   | Controls and Procedures                                                                                                                                                       | 99 
|Item 9B.   | Other Informtion                                                                                                                                                              | 99 
|           | PART
                    III                                                                                                                                                  |    
|           |                                                                                                                                                                               |    
|Item 10.   | Directors, Executive Officers
                    and Corporate Governance                                                                                                    | 99 
|Item 11.   | Executive Compensation                                                                                                                                                        | 100
|Item 12.   | Security Ownership of Certain
                    Beneficial Owners and Management
                    and Related Stockholder Matters                                        | 100
|Item 13.   | Certain Relationships and Related
                    Transactions, and Director Independence                                                                                 | 100
|Item 14.   | Principle Accountant Fees and
                    Services                                                                                                                    | 101
|           | PART
                    IV                                                                                                                                                   |    
|Item 15.   | Exhibits and Financial Statements
                    Schedules                                                                                                               | 101
|SIGNATURES |                                                                                                                                                                               | 105

i

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# PART I

# Item 1. Business

# General

MAF
            Bancorp, Inc. was incorporated under the laws of the state of Delaware in 1989,
            as the holding company for Mid America Bank, fsb (Bank), our banking
            subsidiary. The Bank, which was organized as a mutual savings and loan association
            and has been operating in the Chicago area since 1922, formed the holding company
            in connection with its conversion from a mutual to stock savings institution. Over
            the last five years, the Bank has grown from 32 branches and $5.60 billion in total
            assets at December 31, 2001 to 82 branches and $11.12 billion in assets at December
            31, 2006. Today, the Bank is one of the largest community-oriented financial institutions
            in the Chicago and Milwaukee metropolitan areas, serving both retail and business
            banking customers. We also engage in residential real estate land development through
            our subsidiary, MAF Developments, Inc., or MAFD, a business we have been active
            in for over 30 years.

The
            Companys executive offices are located at 55th Street and Holmes Avenue, Clarendon
            Hills, Illinois 60514-1500. The Companys telephone number is (630) 325-7300.

We
            have grown our franchise through de novo branching, as well as acquisitions of other
            financial institutions and branch acquisitions. We have opened 13 denovo branches
            in the past five years. The table below summarizes information regarding the acquisitions
            we have completed during the past five years.

|Acquired Company                | Number of
                    Branches | Market Area | Acquisition
                    Date | Total Assets at
                    Closing | Total Deposits at
                    Closing
|------------------------------- | -------------------------------------- | ----------- | ------------------------------------ | ------------------------------------------- | ---------------------------------------------
|
|EFC Bancorp, Inc.               |                                        |             |                                      | 7                                           |                                              
|Chesterfield Financial Corp     |                                        |             |                                      | 3                                           |                                              
|St. Francis Capital Corporation |                                        |             |                                      | 23                                          |                                              
|Fidelity Bancorp, Inc.          |                                        |             |                                      | 4                                           |                                              

We
            may continue to consider selective acquisition opportunities to strengthen our market
            share in the greater Chicago and Milwaukee metropolitan areas or to pursue strategic
            growth opportunities in other attractive markets.

As
            we have grown, we have successfully transitioned our business from a traditional
            savings and loan engaged primarily in one- to four-family residential mortgage lending
            to a more diversified community bank, servicing both consumer and business customers,
            while retaining our emphasis on relationship-driven, responsive customer service.
            We offer a wide variety of checking, savings and other deposit accounts as well
            as investment services and securities brokerage, general insurance services and
            other financial services targeted to individuals, families and small- to medium-sized
            businesses in our primary market areas. All of our locations are full-service branches,
            many of which offer customers the convenience of drive-up facilities.

We
            launched our Business Banking unit in 2001 and have steadily grown commercial deposits
            and business banking loans over the past six years. We have also emphasized home
            equity lending in recent years as part of our strategy to diversify our loan portfolio
            with higher-yielding loan categories. We continue to originate, and to a lesser
            extent purchase, residential one- to four-family mortgage loans primarily in our
            market areas through our residential loan origination platform. While we expect
            to keep more of our adjustable rate mortgage originations in our portfolio, we have
            migrated to more of an originate-and-sell model in our mortgage business. The acquisitions
            of Fidelity, St. Francis and EFC Bancorp contributed significantly to the change
            in our asset mix, increasing our multi-family mortgages, home equity loans, commercial
            real estate and business loans and reducing the concentration of one- to four-family
            mortgage loans in our total loan portfolio. At December 31, 2006, 54% of total
            loans were comprised of one- to four-family mortgages compared to 79% at December
            31, 2002.

For
            segment information regarding the Companys two lines of business (banking
            and land development), see Note 18. Segment Information to
            the audited consolidated financial statements of the Company included in Item
            8. Financial Statements and Supplementary Data.

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# Lending Activities

Loan
            Portfolio Composition. The following table sets forth the composition
            of the Banks loan portfolio by loan type at the dates indicated. The table
            reflects the change in the loan portfolio mix over the last four years resulting
            from increased emphasis on equity lines of credit, the successful growth of our
            Business Banking unit and the impact from acquisitions.

|                       | At December 31, | 
|---------------------- | --------------- | 
|
|
|
|One- to four-family    |                 | 
|Equity lines of credit |                 | 
|and home equity loans  |                 | 
|Multi-family           |                 | 
|Commercial real        |                 | 
|estate                 |                 | 
|Construction           |                 | 
|Land                   |                 | 
|Commercial             |                 | 
|business loans         |                 | 
|Consumer               |                 | 
|                       |                 | 
|                       |                 | 
|                       |                 | 

The
            following table shows the breakdown of fixed-rate and adjustable-rate loans in our
            portfolio for loan categories other than our residential lending categories as of
            the dates indicated:

|                                       | At December 31, | 
|-------------------------------------- | --------------- | 
|
|
|
|Multi-family:                          |                 | 
|Adjustable-rate                        |                 | 
|Fixed-rate                             |                 | 
|                                       |                 | 
|Total
                    multi-family |                 | 
|                                       |                 | 
|Commercial real estate:                |                 | 
|Adjustable-rate                        |                 | 
|Fixed-rate                             |                 | 
|                                       |                 | 
|Total
                    commercial   |                 | 
|real
                    estate        |                 | 
|                                       |                 | 
|Construction and Land:                 |                 | 
|Adjustable-rate                        |                 | 
|Fixed-rate                             |                 | 
|                                       |                 | 
|Total
                    construction |                 | 
|and
                    land           |                 | 
|                                       |                 | 
|Commercial business loans:             |                 | 
|Adjustable-rate                        |                 | 
|Fixed-rate                             |                 | 
|                                       |                 | 
|Total
                    commercial   |                 | 
|business                               |                 | 
|                                       |                 | 

Loan
            Maturity. The following table shows the principal amount of loans
            for loan categories other than one- to four-family mortgages, home equity lines
            of credit, home equity loans, and consumer loans by contractual final maturity at
            December 31, 2006. This table is not indicative of the timing of expected repayments
            on these loans.

|                          | At December 31, 2006 |  |   |         | 
|------------------------- | -------------------- |  | - | ------- | 
|
|
|Multi-family              |                      |  | $ | 12,720  | 
|Commercial real estate    |                      |  |   | 52,797  | 
|Construction              |                      |  |   | 101,959 | 
|Land                      |                      |  |   | 115,513 | 
|Commercial business loans |                      |  |   | 111,647 | 
|                          |                      |  |   |         | 
|Total                     |                      |  | $ | 394,636 | 
|                          |                      |  |   |         | 

Of
            the $1.73 billion of loans shown in the table above with contractual final maturities
            after one year, $1.17 billion, or 67%, are adjustable rate loans and $568.8 million
            or 33%, are fixed rate loans.

Residential
            Lending.At December 31, 2006, we had approximately $4.01 billion
            of one- to four-family mortgage loans in our loan portfolio. We sell the majority
            of our one- to four-family fixed rate

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mortgage production into the secondary
            market, as well as a significant portion of our conforming and Alt-A adjustable-rate
            loan originations. For this reason, we generally underwrite our residential loans
            to investor criteria and typically price our loans to secondary market rates. We
            have developed a broad base of investors to include not only Fannie Mae, Freddie
            Mac and the Federal Home Loan Bank Mortgage Finance Partnership program (MPF),
            but also commercial and investment banks and other private investors, to provide
            outlets for most of our products. This allows us to limit liquidity risk and interest
            rate risk.

We
            currently attract most of our residential mortgage loan customers through commissioned
            loan officers and cross-selling to banking customers. We are working to expand our
            telemarketing and web-based offerings in an effort to attract more business through
            alternative channels. We also offer subprime loans for prospective borrowers with
            substandard credit through a small group of specialized officers, and we have broker
            and correspondent lending relationships with other mortgage companies who purchase
            the subprime loans that we originate through these programs. Our policy is not to
            retain these loans in portfolio.

We
            offer ARM loans with 30- and 40-year amortization terms with initial rates that
            are fixed for a period of one to ten years, with annual adjustments (and periodic
            and lifetime caps) thereafter, to the extent they do not refinance. At December
            31, 2006, $3.13 billion, or 78% of our one- to four-family portfolio were adjustable
            rate loans, including $1.14 billion of 3/1 ARMs, $1.62 billion of 5/1 ARMs, and
            $377.0 million of 7/1 and 10/1 ARMs. At December 31, 2006 the ARM loan portfolio
            included $625.9 million of loans with 40-year amortization terms. Despite the benefits
            of ARM loans for asset/liability management purposes, particularly those with shorter
            initial fixed-rate periods, adjustable rate loans do pose potentially greater credit
            risks than fixed rate loans, since as interest rates rise, the underlying payment
            requirements of the borrower rise, increasing the potential risk of default.

For
            traditional mortgage loans with loan-to-value ratios (LTVs) in excess of 80%, to
            better manage our credit risk we generally require that a customer maintain private
            mortgage insurance (PMI), and/or we obtain lender paid private mortgage insurance.
            In situations where we believe the credit risks associated with higher LTV loans
            are mitigated by the borrowers FICO score, we may self insure. If the customer
            does not obtain PMI, we charge the customer a higher interest rate on the loan to
            compensate us for the cost of insurance we pay or the greater risk of the loan.
            For loans with PMI, the Bank has a mortgage reinsurance subsidiary that shares in
            a portion of insurance premiums earned by various private mortgage insurance companies
            on loans originated by the Bank, in return for assuming a second-tier layer of risk
            on insured portions of these loans. To date, the Bank has experienced no losses
            through our assumed risk layers. For the years ended December 31, 2006, 2005 and
            2004 this activity generated pre-tax income of $2.5 million, $2.3 million and $1.9
            million, respectively. We have also invested in various debt instruments issued
            by one of the PMI companies where the interest rate earned on the note is based
            on the performance and loss experience of the underlying pool of insured loans.
            During the years ended December 31, 2006, 2005 and 2004, we received interest income
            of $630,000, $985,000 and $1.4 million, respectively, on these instruments.

Over
            the past few years, we have expanded our offerings of non-traditional mortgage products
            to include a variety of interest-only products for primary residences, investment
            properties and vacation homes. We also offer products for up to 100% combined LTVs
            that use alternative underwriting standards without relying on standard income verifications.
            We have developed a particular niche originating no-income-verification loans for
            homeowners in ethnic communities. We have not offered payment- option-ARMs or other
            loans involving negative amortization. Interest-only loans accounted for approximately
            24% of our 2006 originations and comprised approximately 12% of our residential
            mortgage portfolio at year end. While non-traditional mortgages, particularly high
            LTV interest-only loans, may pose a higher risk of loss than conventional one- to
            four-family loans, we generally earn a higher interest rate on these loans to compensate
            us for the risk.

An
            important part of our business strategy is our commitment to community lending initiatives.
            We offer various innovative and flexible home mortgage products and participate
            in or actively support many special lending programs designed to promote affordable
            homeownership and address the needs of underserved communities in the markets we
            serve. These programs include single and multi-family home mortgage loans in low-to-moderate
            income census tracts, loans in predominantly minority communities, and loans to
            borrowers whose income is below 80% of median income. Many loans we make in our
            community lending programs tend to have higher LTVs.

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Home
            Equity Lending.Home equity lending totaled $1.30 billion, or 17.5%
            of our loan portfolio. Several years ago, we made a strategic decision to expand
            our level of equity line activity in an effort to capitalize on our penetration
            of residential lending production in our primary market areas, diversify our asset
            mix and reduce our interest rate risk exposure, as home equity lines are variable
            rate products generally tied to the Prime rate. At December 31, 2006, the average
            utilization rate on our equity line portfolio was 51.5% compared to 53.8% at December
            31, 2005 and 55.7% at December 31, 2004. The rising interest rates over the past
            year made growth in this portfolio more challenging as consumers repaid balances
            or refinanced into fixed rate mortgage products. We underwrite our home equity loans
            similarly to our one- to four-family production, by evaluating a customers
            ability to repay the loan, including FICO score, and by reviewing the combined loan-to-value
            ratio (CLTVs) of the loan taking into account any first mortgage loan. Our underwriting
            procedures limit the combined loan-to-value ratio to 100% or less. We generally
            determine the rate on an equity line of credit using a tiered pricing schedule based
            on a combination of a customers FICO score and CLTV ratios. Under applicable
            regulatory guidelines, we maintain higher capital levels to support second lien
            home equity lines of credit than are required for first lien residential mortgages,
            taking into account the entire approved amount of the equity line, not just the
            amount drawn at any given time. We do not normally obtain PMI insurance on home
            equity products. As part of our originate- and-sell strategy in residential lending,
            in 2005 and 2006 we sold some of our home equity-line production to generate gain
            on sale income. We have considered home equity line sales from time to time when
            market pricing has been attractive relative to our prepayment speed projections,
            and to reduce credit risk exposure on higher CLTV products. In these transactions,
            we have endeavored to select for sale loans we have made to single-service
            customers whose business relationships with the Bank are limited to their home equity
            lines.

Multi-family
            Lending. Our multi-family real estate loans totaled $801.9 million
            at December 31, 2006, or 10.8% of our loan portfolio. We originate multi-family
            residential mortgage loans in our market areas. These residential mortgage loans
            are generally ARM loans having interest rates with initial fixed rate terms of three
            to ten years, amortization periods of up to 25 years and balloon maturity dates
            of five to ten years. Our underwriting standards for these loans generally require
            a loan-to-value ratio not greater than 80% and net operating income to debt service
            coverage ratio that is not less than 1.0 for loans secured by less than 24 units
            and 1.15 for loans secured by more than 24 units. In cases where the debt service
            ratios are lower, we may charge a higher yield, require additional collateral, require
            a lower LTV or verify the overall cash flow of the borrower or guarantor to cover
            any debt service shortfall. The multi-family loans typically carry more risk than
            single family loans as the loan balances are larger and the repayment of loans is
            dependent in part on the cash flow of the property securing the loan.

To
            a lesser extent, we also offer equity lines secured by multi-family properties,
            which permit equity borrowing up to 80% LTV.

Commercial
            Real Estate Lending.Our commercial real estate loans totaled $629.0
            million at December 31, 2006, or 8.4% of our loan portfolio. We lend on various
            commercial properties, including small office buildings, warehouses, industrial/manufacturing
            buildings, land acquisition and development, and other improved residential and
            non-residential properties. Commercial real estate loans that are adjustable-rate
            in nature have floating interest rates that are generally tied to Prime or LIBOR.
            Payments on loans secured by commercial real estate properties are often dependent
            on the successful operation or management of the properties or their primary tenants,
            and as such, repayment of such loans may be subject to adverse conditions in the
            real estate market or the economy. We seek to minimize these risks by lending primarily
            to experienced developers, or existing income-producing properties and generally
            restrict such loans to properties in our market areas.

Commercial
            real estate loans tend to be much larger than our average residential loan, and
            involve a greater degree of risk than residential mortgage loans with respect to
            the determination of the market value of the collateral and underlying cash flow
            assumptions. This increased risk is a result of several factors, including the concentration
            of principal in a limited number of loans and borrowers, the effects of general
            economic conditions, and the increased difficulty of evaluating and monitoring these
            loans.  Furthermore, the repayment of loans secured by non-residential property
            is typically dependent upon the successful operation of the related real estate
            project.  If the cash flow from the project is reduced, the borrowers
            ability to repay the loan may be impaired. See Business  Delinquent,
            Non-performing and Classified Assets.

Our
            underwriting of commercial real estate loans is a robust process and is less homogeneous
            than generally found in our residential loan underwriting. We use a combination
            of inside and outside

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appraisers with pertinent expertise
            to appraise our commercial real estate properties. Our credit analysis includes
            a review of the propertys ability to service debt, the capacity of the borrower
            to generate income elsewhere and where applicable, the strength of any personal
            guarantor(s). We generally seek a net operating income to debt coverage ratio that
            is not less than 1.20, exclusive of other outside income. In instances where the
            coverage ratio is lower, we seek a higher rate of interest or collect additional
            fees to compensate us for the increased level of risk or require other compensating
            factors such as additional collateral, personal guarantees or strong overall cash
            flow from borrowers and guarantors.

Construction
            and Land Lending. Our commercial real estate construction, single-family
            construction and land loans totaled $498.9 million at December 31, 2006, or 6.7%
            of our loan portfolio. Our construction and land lending are both focused primarily
            on one- to four-family residences and residential land developments in our market
            areas. This lending focuses on construction of properties where qualified contractors
            are involved, and loans are structured to be repaid or converted to permanent loans
            at the end of the construction phase. Our construction loans tend to be adjustable-rate,
            with interest-only payments during the construction phase.

The
            maximum loan-to-value during construction is generally limited to 80% LTV. Loan
            proceeds are disbursed in increments as construction progresses, inspections are
            completed and lien waivers obtained. Our land lending includes loans to developers
            for the initial purchase and land development for residential subdivisions in our
            market area, as well as loans to builders and individuals. Under our policy, the
            loan-to-value ratio for development loans may not exceed 80%. The majority of these
            loans are floating rate based on the Prime rate or LIBOR. We require an appraisal
            of the property, and feasibility studies may also be required to determine the profit
            potential of the development project.

Construction
            and land development loans involve higher risks than residential mortgages because
            the uncertainties inherent in estimating construction costs, as well as variations
            in the market value of the completed project and the effects of local governmental
            regulation of real property, make it relatively difficult to precisely estimate
            the total funds required to complete a project and the related loan-to-value ratio.
            Construction and land development lending often involves the disbursement of substantial
            funds with repayment dependent, in part, on the success of the ultimate project
            rather than the ability of the borrower or guarantor to repay principal and interest.
            If we have to foreclose on a project, especially if prior to completion, we may
            have difficulty recovering all of the unpaid balance of and accrued interest on
            the loan, as well as related foreclosure and holding costs. In addition, we may
            be required to fund additional amounts to complete the project and may have to hold
            the property for an unspecified period of time. We have attempted to address these
            risks through our underwriting procedures and monitoring of construction lending
            on multi-family and commercial real estate properties.

Commercial
            Business Lending. Our commercial business loans totaled $198.9 million
            at December 31, 2006, or 2.7% of our loan portfolio. We originate a variety of commercial
            business loans, including working capital financing, equipment loans, and selected
            personal loans for executives, professionals and entrepreneurs with floating interest
            rates typically tied to Prime or LIBOR and fixed rates indexed to Treasury rates
            or LIBOR. Supporting collateral can take many forms, such as accounts receivable,
            inventory equipment and other business or personal assets, or in some cases loans
            may be unsecured. Typically, we target small-to medium-sized, privately held businesses
            in our primary market areas and seek to establish full service commercial loan and
            deposit relationships. Growing our commercial lending portfolio is key to the success
            of our asset diversification strategy, since this type of lending typically provides
            higher yield opportunities than residential loans and is an important component
            in achieving a more balanced loan portfolio.

Loans
            to commercial business entities involve risk factors unique to the business of each
            borrower. In order to mitigate these risks, we seek to gain an understanding of
            the business of each borrower; understand the cash flow generated by the business,
            place appropriate value on collateral taken and structure the loan properly to make
            sure that collateral values and financial conditions are maintained while loans
            are outstanding. Appropriate documentation of commercial business loans is also
            important to protect our interests. Our credit approval process for commercial loans
            is comprehensive and our underwriting process includes an evaluation of the borrowers
            historical and projected balance sheet, income statement, liquidity and cash flow
            as well as the strength of the collateral to determine the level of creditworthiness
            of the borrower. We typically review the current and future cash needs of the borrower,
            its business strategy, managements ability to execute the strategies, and
            the strength of any guarantors. While our loan policy has guidelines for advances
            on different types of collateral, we establish eligible asset values on a case-by-case
            basis for each borrower. Generally, the commercial business loans are

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secured by a first priority security
            interest in all the assets of the borrower and also include the personal guarantees
            of business owners. The repayment of a commercial business loan depends primarily
            on the ability of the borrower to generate cash and the creditworthiness of the
            borrower, since liquidation of collateral is often a secondary and potentially insufficient
            source of repayment due to inventory or assets being obsolete, or accounts receivable
            becoming uncollectible.

We
            may also provide letter of credit services to certain borrowers on a case-by-case
            basis. Underwriting, structuring and collateralization of letters of credit are
            similar to that used in other commercial loans.

Lending
            Concentrations. Our largest lending relationship at December 31,
            2006, involved $68.4 million of credit exposure, the majority of which is comprised
            of construction and land loans relating to residential developments. Aggregate credit
            exposure to our ten largest lending relationships at December 31, 2006, was approximately
            $373 million. The majority of our loans are made in our Chicago and Milwaukee market
            areas. Of our total loan portfolio at December 31, 2006, 76.3% are loans secured
            by property located in Illinois and 20.2% by property located in Wisconsin.

Environmental
            Issues. We encounter certain environmental risks in our lending activities.
            Under federal and state environmental laws, and in certain circumstances, lenders
            may become liable for the costs of cleaning up hazardous materials found on security
            property. To mitigate environmental related risks to us, our loan policies call
            for management to consider all relevant factors in order to determine whether an
            environmental review is needed and, if so, the scope and detail, prior to our origination
            of commercial and multi-family loans. Although environmental risks are usually associated
            with industrial and commercial loans, there are also risks for residential lenders
            like us if environmental contamination makes the collateral property unsuitable
            or has an adverse effect on nearby property values.

No
            assurance can be given that the values of properties securing loans in our portfolio
            will not be adversely affected by unforeseen environmental risks, although we are
            unaware of any such environmental issues which subject us to potential material
            liability at this time.

# Secondary Market and Loan Servicing
            Activities

Originations,
            Purchases and Sales of Mortgage Loans. Our mortgage origination volumes,
            and the mix of fixed-rate and ARM products in our originations, are significantly
            dependent on the interest rate environment, consumer preferences and the expected
            level of future interest rates. We originate the majority of our production, through
            our internal sales force of commissioned loan originators. In addition, in the past
            several years we have worked to establish relationships with a number of selected
            mortgage brokers operating in our market areas from whom we purchase loans, primarily
            home equity products, based on our published rate sheets and in conformity with
            our underwriting guidelines and usually in whole loan transactions where we assume
            the servicing.

Our
            strategy regarding loan sales is dependent on a number of factors and varies from
            time to time depending on the impact of these factors on our operations. We consider
            the profit margin on sale compared to the spread income expected to be earned on
            a loan in determining whether we sell certain production. We also sell loans as
            a means of managing our overall level of interest-rate risk as well as the credit
            risk profile of our residential loan portfolio. We may also sell loans as a means
            of providing liquidity to our operations. In managing our interest-rate and liquidity
            risks, we generally sell most of our fixed-rate residential mortgage originations,
            and tend to sell more ARM originations when the yield curve is flatter. During 2006,
            we sold a larger percentage of our ARM loan production as part of our strategy to
            limit portfolio growth in the inverted yield curve environment, intended to mitigate
            net interest margin pressure. Based on our current interest rate outlook, we may
            retain more of our ARM loan production in portfolio in 2007 as we work to grow interest
            earning assets at acceptable spreads.

We
            began selling home equity loans on a servicing-released basis two years ago, selling
            $139.3 million in 2005 and $114.5 million in 2006. We sold home equity loans to
            realize the attractive gain on sale margins available in the secondary market for
            this product. In addition, the sales were used to help manage our credit risk by
            selling more of the higher loan-to-value production, particularly in 2006 as we
            started to see negative asset quality trends and higher loss experience on these
            loans due to the weakening housing market conditions. We expect to continue this
            strategy in 2007.

7

---

The
            following table shows the Banks one- to four-family mortgage and home equity
            originations and purchases and loan sale activity for the periods indicated:

|                                                                    | At or For the Year Ended December
                    31, | 
|------------------------------------------------------------------- | --------------------------------------------------------- | 
|
|
|
|One- to Four-Family Originations
                    and Purchases: |                                                           | 
|                                                                    |                                                           | 
|Fixed-rate                                                          |                                                           | 
|Adjustable-rate                                                     |                                                           | 
|                                                                    |                                                           | 
|Total                                                               |                                                           | 
|                                                                    |                                                           | 
|Equity lines of
                    credit(1)                       |                                                           | 
|Home equity loans                                                   |                                                           | 
|Loans Sales:                                                        |                                                           | 
|One- to four-family
                    loans:                      |                                                           | 
|Fixed-rate(2)                                                       |                                                           | 
|Adjustable-rate(2)                                                  |                                                           | 
|                                                                    |                                                           | 
|Total                                                               |                                                           | 
|                                                                    |                                                           | 
|Equity loans                                                        |                                                           | 
|                                                                    |                                                           | 
|Gain (loss) on sale or writedown
                    of:            |                                                           | 
|One- to four-family loans                                           |                                                           | 
|Lower of cost or market                                             |                                                           | 
|adjustment on                                                       |                                                           | 
|loans transferred to held for                                       |                                                           | 
|sale                                                                |                                                           | 
|Home equity loans                                                   |                                                           | 
|                                                                    |                                                           | 
|Total
                    loan sale gains                           |                                                           | 
|                                                                    |                                                           | 
|Margin on loan sales:                                               |                                                           | 
|One- to four-family
                    loans                       |                                                           | 
|(exclusive
                    of lower of                          |                                                           | 
|cost or market adjustment)                                          |                                                           | 
|Equity loans                                                        |                                                           | 
|                                                                    |                                                           | 

---

|(1) | Represents total disbursements during the year on all home equity lines, including
                    amounts related to lines newly originated during the year and lines previously outstanding.
                    This does not reflect any unused amounts that remain available at year end.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Loans sold includes one- to four-family originations that are swapped into mortgage-backed
                    securities and sold simultaneously and does not include $37.2 million in 2005 of
                    Bank-originated loans swapped into mortgage-backed securities and held in portfolio.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Of
            our fixed-rate originations in 2006, $613.3 million, or 97%, conformed to the requirements
            for sale to Fannie Mae and Freddie Mac and $19.5 million, or 3%, were non-conforming.
            Our non-conforming loans are generally designated as such because the
            principal loan balance exceeds $417,000, which is the Freddie Mac, Fannie Mae, and
            MPF purchase limit, and not because the loans present increased risk of default.
            Non-conforming loans, or jumbo loans with such higher balances, generally carry
            interest rates from one-eighth to one quarter of one percent higher than similar,
            conforming fixed-rate loans. Jumbo loans are priced higher to compensate for their
            higher risks of prepayment.

We
            generally sell our conforming long-term fixed-rate production to Freddie Mac, Fannie
            Mae, or the MPF program of the Federal Home Loan Bank of Chicago, commonly referred
            to as GSEs, or government sponsored entities. Since 2002, we have been
            selling most of our non-conforming long-term fixed-rate production to private investors.
            During 2006 we sold $525.2 million of adjustable rate loans, or 56% of our ARM originations
            as spreads to funding costs narrowed as a means to hold down growth in lower-yielding
            assets and mitigate pressure on the net interest margin.

We
            often enter into forward commitments for loan sales with various investors based
            on our mortgage production pipeline as our primary hedge of price risk. The majority
            of our loans are sold without recourse, except those loans sold through the MPF
            program, where we retain a limited level of risk in exchange for better pricing
            on the loans sold and a credit enhancement fee. At December 31, 2006, we had
            approximately $16.8 million in net credit risk exposure on loans we have sold through
            the MPF program.

Loan
            servicing. We have generally retained servicing rights on single
            family mortgage loans that we sell into the secondary market, but to date, not on
            equity lines that we sell. When we retain the servicing, we generate loan servicing
            fee income from fees the investors pay us to collect and remit mortgage payments,
            insurance premiums and real estate taxes. The monthly servicing fees we receive
            are equal to at least .25% of the outstanding principal balance of the sold loans
            being serviced. Costs of servicing loans for others are charged to expense as incurred,
            while we capitalize mortgage servicing rights upon the sale of loans based on assumptions
            as to fee income earned, estimated prepayment

8

---

speeds of the underlying mortgage
            loans, and the cost of servicing. Mortgage servicing rights are intangible assets
            and are amortized based on the estimated life of the loan servicing income stream,
            which is recorded as a decrease to loan servicing fee income. Our mortgage servicing
            rights are assessed quarterly for impairment, with any impairment or recovery recognized
            through a valuation allowance and a related charge to earnings.

The
            following table shows the components of loan servicing fee income in dollars and
            as a percentage of loans serviced for others, as well as other information regarding
            loans serviced for others for the years indicated:

|                                                                    | Year Ended December 31, |  |  
|------------------------------------------------------------------- | ----------------------- |  | -
|
|
|Gross servicing revenue                                             |                         |  | $
|Amortization of mortgage servicing
                    rights       |                         |  |  
|                                                                    |                         |  |  
|Loan servicing
                    fee income                       |                         |  | $
|                                                                    |                         |  |  
|As a percentage of average loans
                    serviced for   |                         | 
|others:                                                             |                         | 
|Gross servicing
                    revenue                         |                         |  |  
|Amortization of
                    mortgage servicing rights       |                         |  |  
|                                                                    |                         |  |  
|Loan
                    servicing fee income                       |                         |  |  
|                                                                    |                         |  |  
|Average balance of loans serviced
                    for others    |                         |  | $
|Loans serviced for others at end
                    of year(1)     |                         |  |  
|Mortgage servicing rights at end
                    of year, net   |                         |  |  
|Average service fee at year end                                     |                         |  |  
|Mortgage servicing rights as a percentage
                    of    |                         | 
|mortgage loans
                    serviced for others              |                         |  |  
|Multiple of average servicing fee
                    at year end   |                         |  |  
|Weighted-average interest rate on
                    loans         |                         | 
|serviced for others                                                 |                         |  |  
|                                                                    |                         |  |  
|                                                                    |                         | 
|Loan Servicing:                                                     |                         | 
|Gain on sale of mortgage servicing
                    rights       |                         |  | $
|Valuation recovery on mortgage servicing
                    rights |                         |  |  

---

|(1) | One- to four-family loans serviced for other investors which are primarily GSE and
                    to a lesser extent private investors.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------

The loans we service for others
            are loans we have sold, typically without recourse, and are not included in our
            loan portfolio composition totals or in our consolidated statements of financial
            condition. The following table shows delinquency information about mortgage loans
            we serviced for others at the dates shown:

|                  | Loan Serviced for Others(1) | 
|----------------- | --------------------------- | 
|
|
|
|December 31, 2006 |                             | 
|December 31, 2005 |                             | 
|December 31, 2004 |                             | 

---

|(1) | Sold loans are serviced for other investors which are primarily GSEs and to
                    a lesser extent, private investors.
|--- | ------------------------------------------------------------------------------------------------------------------------------------

|(2) | Principal balance of delinquent loans serviced for others as a percentage of total
                    loans serviced for others.
|--- | ---------------------------------------------------------------------------------------------------------------------------------

From
            time to time, we may sell all or a portion of our servicing portfolio if we believe
            market valuations of servicing rights offer us a better return than our outlook
            for servicing fee income streams on the loans serviced for others. Servicing rights
            valuations are significantly dependent on loan prepayment speed assumptions. We
            completed a sale of servicing rights on $963.1 million of loans, approximately 27%
            of our one- to four-family mortgage loans serviced for others portfolio, during
            the fourth quarter of 2006 at a pre-tax gain of $3.6 million. The loan servicing
            rights were sold to take advantage of an increase in servicing valuations early
            in the fourth quarter and represented primarily single service customers we had
            determined were unlikely prospects for additional business based on the outcome
            of our cross-selling efforts. We sold servicing rights on $751 million of loans
            in 2005 at a pre-tax gain of $2.4 million for similar reasons.

9

---

# Asset Quality and Allowance for
            Loan Losses

We
            work with consumers and business clients to provide a wide range of lending products
            designed to meet their individual needs, while adhering to our internal underwriting
            standards that have allowed us to maintain strong credit quality and minimize credit
            losses historically.

Delinquent
            Loans. When a borrower fails to make a required payment by the end
            of the month in which the payment is due, we commence collection efforts through
            borrower notifications and other collection procedures. When a loan payment is delinquent
            for three or more monthly installments, we will generally initiate foreclosure proceedings
            and cease accruing interest. At the dates shown delinquencies in our portfolio were
            as follows:

|                  | 61-90 Days | > 90 Days(2) | 
|----------------- | ---------- | ------------ | 
|
|
|December 31, 2006 |            |              | 
|December 31, 2005 |            |              | 
|December 31, 2004 |            |              | 

---

|(1) | Reflects principal balance of delinquent loans as a percentage of total loans outstanding.
|--- | ------------------------------------------------------------------------------------------

|(2) | The more than 90 days category includes all loans on non-accrual regardless of days
                    past due.
|--- | -----------------------------------------------------------------------------------------------------------------

Non-Performing
            Assets. The table below sets forth information regarding non-performing
            assets in our portfolio at the dates shown:

|                                                                 | At December 31, | 
|---------------------------------------------------------------- | --------------- | 
|
|
|Non-accrual loans:(1)                                            |                 | 
|One- to four-family                                              |                 | 
|Equity lines of
                    credit and home equity loans |                 | 
|Multi-family                                                     |                 | 
|Commercial real
                    estate                       |                 | 
|Construction                                                     |                 | 
|Land                                                             |                 | 
|Commercial business
                    loans                    |                 | 
|Consumer loans                                                   |                 | 
|                                                                 |                 | 
|Total                                                            |                 | 
|                                                                 |                 | 
|Non-performing loans to total loans                              |                 | 
|                                                                 |                 | 
|Non-accrual investment securities                                |                 | 
|                                                                 |                 | 
|Foreclosed real estate:                                          |                 | 
|One- to four-family                                              |                 | 
|Commercial real
                    estate                       |                 | 
|                                                                 |                 | 
|Total
                    foreclosed real estate                 |                 | 
|                                                                 |                 | 
|Total non-performing assets                                      |                 | 
|                                                                 |                 | 
|Total non-performing assets to total
                    assets  |                 | 
|                                                                 |                 | 

---

|(1) | Consists of loans in the process of foreclosure or for which interest is otherwise
                    deemed uncollectible.
|--- | ----------------------------------------------------------------------------------------------------------------------------

Non-accrual
            loans. Generally, when a loan is more than 90 days or more past due,
            in the process of foreclosure, or in bankruptcy, or when collectibility is otherwise
            in doubt, the full amount of previously accrued but unpaid interest on such non-accrual
            loan is deducted from interest income. Income is subsequently recorded to the extent
            cash payments are received, or at the time when the loan is brought current in accordance
            with its original terms. This policy is applied consistently for all types of loans
            in the Banks loan portfolio. There were no loans over 90 days delinquent and
            still accruing at any year end shown in the table above.

For
            the year ended December 31, 2006, the amount of interest income that would
            have been recorded on non-accrual loans if these loans were performing in accordance
            with their terms amounted to $2.6 million for 2006 and $1.4 million for each of
            the years ended December 31, 2005 and 2004. For the years ended December 31,
            2006, 2005 and 2004, interest income on non-accrual loans that was actually collected
            and recorded amounted to $2.0 million, $563,000 and $630,000.

The
            majority of our non-performing loans are secured by one- to four-family residential
            real estate in our market area with current loan-to-value ratios less than 90% or
            with private mortgage insurance.

10

---

We generally regard these loans
            as presenting lower risk of credit loss due to the nature of the collateral. Approximately
            17% of our non-accrual loans at December 31, 2006, are covered by private mortgage
            insurance. Ratios for loans secured by one- to four-family residential properties
            were as follows:

|                                                                                                                                                                     | At December 31, | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------- | 
|
|One- to four-family, equity lines
                    of credit and home equity loans as a percentage of total loans                                                 |                 | 
|Non-performing one- to four-family,
                    equity lines of credit and home equity loans as percentage of total non-performing
                    loans |                 | 
|Percentage of non-performing one
                    - to four-family, equity lines of credit and home equity loans                                                  |                 | 
|with private mortgage insurance
                    or other guarantees                                                                                              |                 | 
|Percentage of one- to four-family,
                    equity lines of credit and home equity loans without                                                          |                 | 
|private mortgage insurance
                    and with combined loan- to-value greater than 90%                                                                     |                 | 

Impaired
            Loans. We consider a loan impaired when, based on current information
            and events, it is probable that we will be unable to collect all amounts due according
            to the contractual terms of the loan. Impairment for loans considered individually
            significant and that exhibit probable or observed credit weaknesses are measured
            based on the present value of expected future cash flows discounted at the loans
            effective interest rate, or the fair value of the collateral if the loan is collateral
            dependent. If the determined fair value of an impaired loan is less than the carrying
            value of the loan and a loss has deemed to have occurred, we charge off the principal
            amount of the loan in excess of fair value or net realizable value. For loans that
            are not individually significant, loans $1.0 million or less, and represent a homogeneous
            population, we evaluate impairment collectively based on management reports on the
            level and extent of delinquencies, as well as historical loss experience for these
            types of loans. These homogeneous loans are excluded from the impaired loan disclosures.
            We use these criteria on one- to four-family residential loans, consumer loans,
            smaller multi-family residential loans, and land loans. At December 31, 2006
            and 2005, the Company had $8.7 million and $2.1 million of impaired loans. Impaired
            loans at December 31, 2006 includes $5.6 million related to a loan on a commercial
            office building that resulted from the Bank advancing funds under a standby letter
            of credit in December 2006. Earlier in the year we had recorded a $1.0 million writedown
            on the letter of credit obligation and we charged off an additional $200,000 on
            the loan in the fourth quarter. This loan was paid off in January 2007. The average
            balance of impaired loans for 2006 and 2005 was $3.6 million and $2.4 million, respectively.

Classified
            Assets. The federal regulators have adopted a classification system
            for problem assets of insured institutions, which covers all problem assets and
            requires certain reserves. Under this classification system, problem assets of insured
            institutions are classified as substandard, doubtful, or
            loss. An asset is considered substandard if it is inadequately
            protected by the current net worth and paying capacity of the obligor or the value
            of the collateral pledged, if any. Substandard assets include those
            characterized by the distinct possibility that the insured institution
            will sustain some loss if the deficiencies are not corrected. Assets
            classified as doubtful have all of the weaknesses inherent in those
            classified substandard, with the added characteristic that the weaknesses
            present make collection or liquidation in full, on the basis of currently
            existing facts, conditions, and values, highly questionable and improbable.
            Assets classified as loss are those considered uncollectible
            and of such little value that their continuance as assets without the establishment
            of a specific loss reserve is not warranted. In addition, a special mention
            category consists of assets, which currently do not expose the Company to a sufficient
            degree of risk to warrant adverse classification, but do possess credit deficiencies
            deserving managements close attention.

In
            connection with our filing of periodic reports with the OTS, we regularly review
            the problem assets in our portfolio to determine whether any loans or investments
            require classification in accordance with applicable regulations. At December 31,
            2006 all our non-performing loans were classified as substandard, except $676,000
            classified as doubtful. In addition, at December 31, 2006, we had classified
            $9.8 million of multi-family loans, $3.8 million of commercial loans, $74,000 of
            land loans, $2.5 million of construction loans and $1.5 million of commercial business
            loans as that were still accruing interest as substandard for regulatory purposes.
            At December 31, 2005 all of our non-performing loans were classified as substandard
            except $12,000 classified as doubtful. At December 31, 2005, we had classified $3.5
            million of multi-family loans, $8.2 million of commercial real estate loans and
            $2.5 million of commercial business loans that were accruing interest as substandard
            for regulatory purposes. Special mention loans at December 31, 2006 and 2005
            totaled $49.6 million and $23.9 million, respectively.

Allowance
            for Loan Losses. In evaluating the adequacy of the allowance for
            loan losses and determining the related provision for loan losses, if any, management
            considers: (1) historical loss

11

---

experience and change in the size
            and mix of the overall portfolio composition, (2) specific allocations based
            upon probable losses identified during the review of the portfolio, (3) delinquency
            trends in the portfolio and the composition of non-performing loans, including the
            percent of non-performing loans with supplemental mortgage insurance, and (4) subjective
            factors, including local and general economic business factors and trends, industry
            and interest rate trends, new lending products and changes in underwriting criteria
            and portfolio concentrations. Larger loans, typically secured by commercial real
            estate, that exhibit probable or observed credit weaknesses are subject to individual
            review. In addition, various regulatory agencies, as an integral part of their examination
            process, periodically review our allowance for loan losses. Such agencies may require
            us to recognize additions to the allowance based on their judgments about information
            available to them at the time of their examination. While we use available information
            to recognize inherent losses on loans, future adjustments to the allowance for loan
            losses may be necessary based on changes in economic conditions and other factors
            and the impact of such changes on the Banks borrowers. The allowance for loan
            losses totaled $39.9 million at December 31, 2006, or .54% of total loans receivable,
            exclusive of loans held for sale, and $36.5 million, or .51% of total loans receivable
            at December 31, 2005. An analysis of the changes in the allowance for loan
            losses for the years indicated is presented in the table below.

|                                                     | Year Ended December 31, | 
|---------------------------------------------------- | ----------------------- | 
|
|
|Balance at beginning of year                         |                         | 
|Charge-offs:                                         |                         | 
|One- to four-family                                  |                         | 
|Equity lines of
                    credit and       |                         | 
|home
                    equity loans                |                         | 
|Multi-family                                         |                         | 
|Commercial real
                    estate           |                         | 
|Constuction                                          |                         | 
|Land                                                 |                         | 
|Commercial business
                    loans        |                         | 
|Consumer                                             |                         | 
|                                                     |                         | 
|                                                     |                         | 
|                                                     |                         | 
|Recoveries:                                          |                         | 
|One- to four-family                                  |                         | 
|Equity lines of
                    credit and       |                         | 
|home
                    equity loans                |                         | 
|Multi-family                                         |                         | 
|Commercial real
                    estate           |                         | 
|Construction                                         |                         | 
|Land                                                 |                         | 
|Commercial business
                    loans        |                         | 
|Consumer                                             |                         | 
|                                                     |                         | 
|                                                     |                         | 
|                                                     |                         | 
|Charge-offs, net of recoveries                       |                         | 
|Provision for loan losses                            |                         | 
|Additions related to acquisitions                    |                         | 
|                                                     |                         | 
|Balance at end of year                               |                         | 
|                                                     |                         | 
|Net charge-offs to average
                    loans |                         | 
|outstanding                                          |                         | 
|Allowance for loan losses to                         |                         | 
|total loans receivable,                              |                         | 
|exclusive of one-
                    to             |                         | 
|four-family loans
                    held for sale  |                         | 
|Allowance for loan losses to                         |                         | 
|total non-performing
                    loans       |                         | 

The
            following table sets forth our allocation of allowance for loan losses. This allocation
            is based on managements subjective estimates. The amount of reserves allocated
            to a particular category may not be indicative of actual future losses, and amounts
            allocated to particular categories may change from year to year based on changes
            in managements assessment of the risk characteristics of the loan portfolio.
            During 2006, we refined the methodology we use to evaluate the impact of the various
            factors described above in establishing allowance allocations for each loan category.
            The portion of the reserve that is unallocated reflects managements recognition
            of the imprecision in measuring and estimating loss when evaluating reserves for
            individual loans or categories of loans. The allowance allocation as a percentage
            of one- to four-family loans was relatively unchanged from December 31, 2005 and
            the decrease in the allocation amount is primarily related to portfolio shrinkage.
            At December 31, 2006, the

12

---

allowance allocation amount and
            as a percentage of equity lines of credit and home equity loans was up significantly
            compared to December 31, 2005 due to the higher level of non-performing loans and
            delinquencies and a much higher level of charge-offs in 2006, the increased risk
            characteristics in the portfolio related to new products, the increase in high LTV
            loans in the loan mix, and changes in underwriting criteria. The allowance allocations
            as a percentage of the commercial real estate, and commercial business portfolios
            were lower, reflecting a healthy corporate sector environment, very low levels of
            non-performing loans, excellent delinquency trends and extremely low levels of net
            charge-offs, particularly in the commercial real estate portfolio. The allowance
            allocations as a percentage of the multi-family, construction and land portfolios
            were also lower, reflecting very low levels of non-performing loans and delinquencies
            and another year of no charge-offs in these portfolios. We have not experienced
            any charge-offs in the construction and land portfolios in the last five years.
            The increase in the allowance allocation amounts for the land, construction and
            commercial business loans is due to portfolio growth. The decrease in the allowance
            amounts for the multi-family and commercial real estate portfolios was primarily
            due to the lower percentage allocations for the reasons described above offsetting
            the impact of growth in these portfolios.

|                       | At December 31, | 
|---------------------- | --------------- | 
|
|
|
|                       |                 | 
|One- to four-family    |                 | 
|Equity lines of credit |                 | 
|and home equity        |                 | 
|loans                  |                 | 
|Multi-family           |                 | 
|Commercial real        |                 | 
|estate                 |                 | 
|Construction           |                 | 
|Land                   |                 | 
|Commercial             |                 | 
|business               |                 | 
|Consumer               |                 | 
|Unallocated            |                 | 
|reserve                |                 | 
|                       |                 | 
|Total                  |                 | 
|                       |                 | 

At
            December 31, 2006, 17% of our non-performing residential loans carried private
            mortgage insurance or government guarantees and the average loan-to-value ratio
            on the one- to four-family, equity lines of credit and home equity non-performing
            loans without supplemental mortgage insurance was 86%. Our net income could be affected
            if our estimate of the amount of loan loss that may be incurred is materially different
            than actual results, which could require an additional provision for loan losses
            and a respective charge to earnings. We believe the allowance for loan losses is
            adequate at December 31, 2006. However, future adjustments to the allowance may
            be necessary based on changes in economic conditions and the impact of such changes
            may have on our borrowers.

# Investment Activities

Our
            strategy is to use our investment and mortgage-backed securities portfolios as stable
            sources of interest income and to provide flexibility in managing our interest rate
            risk and liquidity needs. For this reason, we keep our investment portfolios relatively
            short-term in nature and seek to limit exposure to credit risk. These portfolios
            represented a combined 17.4% of our total assets at December 31, 2006 compared to
            21.0% at December 31, 2005. We maintain a majority of our investment and mortgage-backed
            securities in an available-for-sale portfolio, and we may sell these securities
            for liquidity needs, to alter asset/liability management strategies or to manage
            risk-based capital levels. The classification of investments and mortgage-backed
            securities as held to maturity, available for sale or trading is made at the time
            of purchase based upon managements intent at that time.

At
            December 31, 2006, our investment securities classified as available for sale had
            a fair market value of $530.0 million and a cost basis of $529.3 million. Mortgage-backed
            securities available for sale had a fair value of $1.20 billion with a cost basis
            of $1.21 billion. At December 31, 2006, we had $212.3 million of mortgage-backed
            securities in a held to maturity portfolio in which the loans underlying these securities
            are loans we originated and swapped into mortgage-backed securities. See Note
            4, Mortgage-Backed Securities Available for Sale and Held to Maturity in Item
            8. Financial Statements and Supplementary Data, for further information regarding
            our balance sheet restructuring.

13

---

We
            owned $146.4 million of stock in the Federal Home Loan Bank of Chicago, or FHLBC,
            at December 31, 2006, which is carried at cost, representing 1.3% of total assets
            and 13.7% of stockholders equity. At December 31, 2006, we were required to
            hold $107.7 million of stock, based on our outstanding credit obligations to the
            FHLBC. We may, subject to the regulatory and capital constraints of the FHLBC, redeem
            at par any capital stock greater than our required investment. While our voluntary
            investment in FHLBC stock yielded us a higher than market return in past years,
            the current yield on this investment no longer represents an attractive rate compared
            to alternative investments. In mid-2004, we began reducing our voluntary FHLBC stock
            position at the recommendation of our asset liability committee (ALCO)
            in order to lower the investment concentration that resulted from our 2003 acquisitions.
            We redeemed $31.9 million of FHLBC stock in 2006, $125.6 million in 2005 and $125.7
            million in 2004. We expect to redeem any remaining excess investment if and when
            the FHLBC allows further redemptions. See Regulation and Supervision-Federal
            Home Loan Bank System.

The
            following table sets forth certain information regarding the carrying value of our
            investment and mortgage-backed securities portfolios at the dates indicated.

|                                      | At December 31, | 
|------------------------------------- | --------------- | 
|
|
|Investment securities available       |                 | 
|for sale:                             |                 | 
|U.S. Government and Agency securities |                 | 
|Municipal securities                  |                 | 
|Asset-backed securities               |                 | 
|Corporate debt securities             |                 | 
|Bank trust preferred securities       |                 | 
|GSE preferred stock and other         |                 | 
|                                      |                 | 
|Total investment securities           |                 | 
|                                      |                 | 
|Stock in FHLB of Chicago              |                 | 
|                                      |                 | 
|Mortgage-backed securities            |                 | 
|Available for sale                    |                 | 
|Held to maturity                      |                 | 
|                                      |                 | 
|Total mortgage-backed                 |                 | 
|securities                            |                 | 
|                                      |                 | 

The
            table below sets forth information regarding the carrying value and weighted average
            yields based on amortized cost and expected maturities for our investment and mortgage-backed
            securities.

|                              | At December 31, 2006 | 
|----------------------------- | -------------------- | 
|
|
|
|U.S. Government               |                      | 
|and Agency securities         |                      | 
|Municipal securities(5)       |                      | 
|Asset-backed                  |                      | 
|securities                    |                      | 
|Corporate debt                |                      | 
|securities                    |                      | 
|Bank trust preferred          |                      | 
|securities                    |                      | 
|Marketable equity securities: |                      | 
|GSE preferred                 |                      | 
|stock                         |                      | 
|Other                         |                      | 
|Stock in FHLB of              |                      | 
|Chicago(1)(2)                 |                      | 
|Mortgage-backed               |                      | 
|securities(3):                |                      | 
|Available for sale(4)         |                      | 
|Held to maturity(4)           |                      | 
|                              |                      | 
|Total                         |                      | 
|                              |                      | 

---

| | (1) | Marketable equity securities and
                    stock in the FHLBC with no stated maturity are included in the More than 10
                    Years category. These securities are excluded in the calculation of average
                    life. Actual repricings and yields of the securities may differ from that reflected
                    in the table depending upon actual interest rates and callable features of those
                    investments.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | The yield reflects the dividend
                    declared for the fourth quarter of 2006.
| | --- | --------------------------------------------------------------------------------------------

| | (3) | Mortgage-backed securities available
                    for sale and held to maturity are categorized for maturity purposes by their individual
                    weighted average lives.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (4) | The yields to maturity of mortgage-backed
                    securities are based upon estimated future cash flow and prepayments. The yields
                    on these securities may differ from that reflected in the table depending upon actual
                    interest rates and prepayment experience.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (5) | The yields exclude any tax equivalent
                    adjustments.
| | --- | ----------------------------------------------------------------------

14

---

The
            bank trust preferred securities shown in the tables above represent investments
            in several different pools of collateralized debt securities consisting of primarily
            30-year capital securities issued by various banks, thrifts and insurance companies.
            The underlying pool of issuers of the collateralized debt securities are well diversified
            as to asset size and geography. These securities are primarily LIBOR-indexed floating-rate
            securities and contain an issuer call provision at par anytime after five years
            from the issuance date. The individual issuers of trust preferred securities have
            the ability to defer interest payments for up to 20 consecutive quarters in certain
            circumstances. At December 31, 2006, the $91.7 million of bank trust preferred
            securities classified as available for sale had a cost basis of $91.2 million.

During
            2004, we recorded a $2.0 million other-than-temporary impairment on two Freddie
            Mac floating-rate preferred stock securities with an aggregate carrying value of
            $8.8 million. We recorded the write-down because the current yield on these securities
            was below market interest rates, the fair value was below cost for an extended period,
            and a recovery in fair value was not assumed within a reasonably short period of
            time. We determined that an impairment charge on these securities was not necessary
            during 2006 and 2005.

Investment
            Subsidiary.The Bank has a wholly-owned subsidiary organized as a
            Nevada corporation that was acquired in the St. Francis acquisition. This subsidiary
            holds and manages a portfolio of our investment securities that are included in
            the tables above. At December 31, 2006, the Banks total investment in the
            Nevada subsidiary was approximately $448.5 million, and the subsidiary had assets
            of $448.9 million consisting primarily of mortgage-backed securities.

Wisconsin
            does not require consolidated tax returns and because the investment subsidiary
            is out of state, its income has not been subject to state income tax in Wisconsin.
            Representatives of the Wisconsin Department of Revenue have indicated that the Department
            may revoke its previously issued favorable tax rulings relating to such Nevada subsidiaries,
            even though there has not been any intervening change in law. The Department also
            has implemented a program for the audit of financial institutions operating in Wisconsin
            that have subsidiaries incorporated and located in Nevada and is asserting a basis
            for imposition of Wisconsin income taxes on income from those operations. Although
            the Bank is not currently under audit by the Department, we are in discussions with
            the Department concerning an agreement to finalize prior years tax liabilities
            relating to the Nevada subsidiary that remain subject to audit, which, if agreement
            is reached, may among other things place certain limitations on the operations of
            the Nevada subsidiary in future periods.

Other
            Investments.In addition to our investment securities and mortgage-backed
            securities portfolios, we maintain a portion of our assets in more liquid investments
            for daily liquidity management. Our liquid investments include interest-bearing
            deposits, primarily at the Federal Home Loan Bank of Chicago, federal funds sold
            and U.S. Government and federal agency obligations. We invest overnight federal
            funds with two large commercial banks in Chicago, based upon periodic review of
            these institutions financial condition. We generally limit overnight federal
            funds sold investments to $100.0 million at any one institution.

# Deposits

We
            offer a variety of deposit accounts having a wide range of interest rates and terms.
            Our deposits consist of passbook accounts, interest-bearing and non-interest bearing
            checking accounts, money market and certificate accounts. We rely primarily on competitive
            pricing policies, advertising, and customer service to attract and retain deposits.
            The flow of deposits is influenced significantly by general economic conditions,
            changes in money market and prevailing interest rates, and competition. At December
            31, 2006, core deposits, defined as commercial and non-interest bearing checking
            accounts, interest-bearing checking accounts, money market accounts and passbooks,
            accounted for approximately 49.4% of our total deposits. While this core deposit
            ratio is lower than our core deposit ratio of 53.4% at December 31, 2005, reflecting
            our pricing strategies in the face of rising interest rates during the year, we
            continue to benefit from a favorable core deposit ratio.

15

---

The
            following table sets forth the composition of deposits by type at the dates indicated
            and the change in the dollar amount of our deposits for the periods shown:

|                              | At or For the Year Ended
                    December 31, 2006 | At or For the Year Ended
                    December 31, 2005 | At or For the
                    Year Ended
                    December 31, 2004 |          
|----------------------------- | -------------------------------------------------------------- | -------------------------------------------------------------- | ---------------------------------------------------------------------------------- | ---------
|
|
|Commercial checking           |                                                                |                                                                | $                                                                                  | 300,624  
|Non-interest bearing checking |                                                                |                                                                |                                                                                    | 303,480  
|Interest-bearing checking     |                                                                |                                                                |                                                                                    | 739,149  
|Commercial money markets      |                                                                |                                                                |                                                                                    | 105,783  
|Money markets                 |                                                                |                                                                |                                                                                    | 900,959  
|Passbooks                     |                                                                |                                                                |                                                                                    | 1,113,980
|                              |                                                                |                                                                |                                                                                    |          
|Total core deposits           |                                                                |                                                                |                                                                                    | 3,463,975
|Certificates of deposit       |                                                                |                                                                |                                                                                    | 3,554,317
|Unamortized premium           |                                                                |                                                                |                                                                                    | (282     
|                              |                                                                |                                                                |                                                                                    |          
|Total deposits                |                                                                |                                                                | $                                                                                  | 7,018,010
|                              |                                                                |                                                                |                                                                                    |          

The
            following table sets forth the distribution and the weighted-average interest rates
            of our average deposits for the years indicated:

|                                                 | Year Ended | 
|------------------------------------------------ | ---------- | 
|
|
|
|Commercial checking                              |            | 
|Non-interest bearing checking                    |            | 
|Interest-bearing checking                        |            | 
|Commercial money markets                         |            | 
|Money markets                                    |            | 
|Passbooks                                        |            | 
|                                                 |            | 
|Total
                    checking, money market |            | 
|and
                    passbook accounts        |            | 
|                                                 |            | 
|Certificates with original                       |            | 
|maturities of:                                   |            | 
|6 months or less                                 |            | 
|7 to 12 months                                   |            | 
|Greater than 1
                    to 3 years    |            | 
|Greater than 3
                    years         |            | 
|                                                 |            | 
|Total
                    certificates of        |            | 
|deposits                                         |            | 
|                                                 |            | 
|Total average
                    deposits       |            | 
|                                                 |            | 
|                                                 |            | 

The
            following table presents, by various interest rate categories, the amount of our
            certificates of deposit outstanding at December 31, 2006, 2005, and 2004, and
            the periods to maturity of the certificates of deposit outstanding at December 31,
            2006. Certificates of deposit in our portfolio represent predominately retail deposits
            attracted from households in our market areas as we have not sought to attract internet
            certificates of deposit nor have we pursued brokered certificates of deposit as
            a funding source. For this reason we believe our certificate of deposit portfolio
            reflects a stable part of our deposit base.

|                         | At December 31, | Time to Maturity at December 31,
                    2006 |  
|------------------------ | --------------- | --------------------------------------------------------- | -
|
|
|Certificates of deposit: |                 |                                                           |  
|Up to 2.99%              |                 |                                                           | $
|3.00% to 3.99%           |                 |                                                           |  
|4.00% to 4.99%           |                 |                                                           |  
|5.00% and greater        |                 |                                                           |  
|                         |                 |                                                           |  
|Total                    |                 |                                                           | $
|                         |                 |                                                           |  

At
            December 31, 2006, we had outstanding $1.04 billion in certificate of deposit
            accounts in amounts of $100,000 or more maturing as follows:

|Period to Maturity            | Amount
|----------------------------- | ------
|
|Three months or less          |       
|Over three through six months |       
|Over six through 12 months    |       
|Over 12 months                |       
|                              |       
|Total                         |       
|                              |       

16

---

Borrowed Funds and Junior Subordinated
            Debentures

The following table is a summary of the Company's borrowed funds and junior subordinated
            debentures at December 31, 2006 and 2005. The unamortized premium (discount) was
            recorded as a result of purchase accounting adjustments for the acquisitions of
            St. Francis in 2003 and EFC in 2006.

|                                                             | At December 31, 2006 | At December 31, 2005 |             
|------------------------------------------------------------ | -------------------- | -------------------- | ------------
|
|
|Fixed-rate advances from FHLBC                               |                      |                      |             
|due:                                                         |                      |                     
|Within 1 year                                                |                      |                      | 2.76 - 5.14%
|1 to 2 years                                                 |                      |                      | 2.78 - 5.24 
|2 to 3 years                                                 |                      |                      | 3.53 - 4.85 
|3 to 4 years                                                 |                      |                      | 4.28 - 4.28 
|4 to 5 years                                                 |                      |                      | 4.36 - 4.36 
|                                                             |                      |                      |             
|Total
                    fixed-rate advances                |                      |                      | 2.76 - 5.24 
|                                                             |                      |                      |             
|Adjustable-rate advances from FHLBC
                    due: |                      |                     
|Within 1 year                                                |                      |                      | 5.29 - 5.52 
|1 to 2 years                                                 |                      |                      |            
|                                                             |                      |                      |             
|Total
                    adjustable-rate                    |                      |                     
|advances                                                     |                      |                      | 5.29 - 5.52 
|                                                             |                      |                      |             
|Total
                    advances from FHLBC                |                      |                      | 2.76 - 5.52 
|                                                             |                      |                      |             
|Unsecured term bank loan                                     |                      |                      |             
|Other borrowings                                             |                      |                      |             
|Junior subordinated debentures                               |                      |                      |             
|Unamortized premium                                          |                      |                      |             
|                                                             |                      |                      |             
|Total
                    borrowed funds and                 |                      |                     
|junior
                    subordinated                      |                      |                     
|debentures                                                   |                      |                      |             
|                                                             |                      |                      |             

Federal
            Home Loan Bank of Chicago Advances. Although deposits are our primary
            source of funds, our membership in the FHLBC has provided us another attractive
            funding source. We obtain advances from the FHLBC secured by our capital stock investment
            in the FHLBC and a blanket pledge of certain of our residential mortgage loans.
            See Regulation and Supervision  Federal Home Loan Bank System.
            We borrow under several different credit programs, each of which has its own interest
            rate and range of maturities. The maximum amount that the FHLBC will advance to
            member institutions, including the Bank, for purposes other than meeting withdrawals,
            fluctuates from time to time in accordance with the policies of the FHLBC. The maximum
            amount of FHLBC advances to a member institution generally is reduced by secured
            borrowings from any other source. At December 31, 2006, the Banks FHLBC
            advances totaled $2.16 billion, or 19.4% of our total assets, compared to $2.47
            billion, or 23.6% of total assets at December 31, 2005.

Included
            in FHLBC advances at December 31, 2006 are $40.0 million of fixed-rate advances
            with original scheduled maturities of 10 years at interest rates ranging from 5.12%
            to 5.24%, which are callable quarterly at the discretion of the FHLBC until maturity
            and are currently expected to be put which may require us to refinance these borrowings.
            At inception, we receive a lower cost of borrowing on such advances than on similar-termed
            non-callable advances, in return for granting the FHLBC the option to call the advances
            prior to their final maturity. If called, the FHLBC will provide replacement funding,
            should we want or need to refinance the borrowing, at the then prevailing market
            rate of interest for the remaining term to maturity of the advances, subject to
            standard terms and conditions.

The
            interest rate on $100.0 million of adjustable-rate advances is tied to the Prime
            rate and ranges from Prime minus 280 basis points to prime minus 287 basis points.
            At December 31, 2006, we had a $50.0 million adjustable-rate advance that is
            indexed at three-month London interbank offering rate (LIBOR) minus
            6 basis points. The remaining $400.0 million of adjustable-rate advances is indexed
            at the FHLBC effective federal funds rate minus 3 basis points, which was 5.29%
            at December 31, 2006. This borrowing was funded in late December as part of the
            balance sheet restructuring transaction and was repaid in January 2007 with the
            proceeds from the sale of investments and mortgage-backed securities.

Reverse
            Repurchase Agreements. We enter into sales of securities under agreements
            to repurchase the identical securities (reverse repurchase agreements)
            with nationally recognized primary securities dealers. These reverse repurchase
            agreements are treated as financings and are reflected on our balance sheet as other
            borrowings. The securities underlying the agreements are delivered to the

17

---

dealers who arrange the transaction
            and continue to be reflected as assets on our balance sheet. The following table
            presents certain information regarding reverse repurchase agreements as of the end
            of and for the periods indicated:

|                                 | Year Ended December 31, | 
|-------------------------------- | ----------------------- | 
|
|
|Balance at end of period         |                         | 
|Maximum month-end balance        |                         | 
|Average balance                  |                         | 
|Weighted average rate at end of  |                         | 
|period                           |                         | 
|Weighted average rate on average |                         | 
|balance                          |                         | 

At
            December 31, 2006, $300 million of the reverse repurchase agreements were floating-rate
            and have maturities ranging from three months to four years. The interest rate on
            $75 million of these agreements is tied to Prime and ranges from Prime minus 280
            basis points to Prime minus 284 basis points. The remaining $225 million have interest
            rates ranging from three-month LIBOR minus 26 basis points to three-month LIBOR
            minus 58.5 basis points. The LIBOR-indexed repurchase agreements are putable at
            the discretion of the lender quarterly in 2007 and are currently expected to be
            put which may require us to refinance these borrowings. At December 31, 2006, reverse
            repurchase agreements were collateralized by investment and collateralized mortgage
            obligation (CMO) securities with a carrying value of $429.7 million
            and a market value of $425.8 million. We intend to continue to use reverse repurchase
            agreements as an additional funding source.

Retail
            Repurchase Agreements.For certain customers with significant funds
            available for deposit at the Bank, we offer retail repurchase agreements
            under which we collateralize our obligation to repay the customer funds with U.S.
            government or agency securities. The retail repurchases, which totaled $69.8 million
            at December 31, 2006, are collateralized by three U.S. government agency and
            ten CMO securities with a carrying and fair value of $74.7 million.

Unsecured
            Term Bank Loan and Line of Credit. During 2006, we twice refinanced
            the unsecured term bank loan and revolving line of credit that we maintain from
            an unaffiliated lender to increase our holding company borrowings. The first refinancing
            was to fund a portion of our acquisition of EFC Bancorp, Inc. and the second quarter
            refinancing was to fund a portion of our stock buyback program.

We
            increased our unsecured term bank loan from $63.0 million outstanding at December
            31, 2005, to $155.0 million during 2006 and increased our revolving line of credit
            from $55.0 million to $60.0 million. We made a scheduled principal payment on the
            term loan of $7.5 million on December 31, 2006 reducing the balance to $147.5 million.
            At December 31, 2006 and 2005, there were no amounts outstanding under the line.
            The loan agreement provides for an interest rate on the term loan at our option
            of one, two, three, six or twelve-month LIBOR plus 95 basis points. The term loan
            is unsecured and matures on December 31, 2015, with the next scheduled payment of
            principal due on December 31, 2007, and annually thereafter. Prepayments of principal
            are allowed without penalty at the end of any repricing period.

The
            revolving line of credit is also unsecured, bears an interest rate at our option
            at Prime minus .50% or one, two, three, six or twelve-month LIBOR plus 80 basis
            points and matures on June 30, 2007.

The
            credit agreement for both the unsecured term loan and the secured revolving line
            of credit contains covenants that, among other things, require the Company to maintain
            a minimum stockholders equity balance and to obtain certain minimum operating
            results, as well as requiring the Bank to maintain well capitalized
            regulatory capital levels and certain non-performing asset ratios. In addition,
            the Company has agreed to certain restrictions on additional indebtedness and agreed
            not to pledge any stock of the Bank or MAF Developments for any purpose.

18

---

Junior
            Subordinated Debentures.In 2005, we issued $67.0 million of junior subordinated
            debentures through two privately-offered trust preferred financings. This debt,
            which matures in 30 years and is callable at par in 2010, provides an attractive
            alternative to equity capital. Interest on the junior subordinated debentures is
            payable quarterly at a floating rate tied to three-month LIBOR and is tax deductible.
            At December 31, 2006, the interest rate for $30.9 million of the debentures was
            7.11% and for $36.1 million was 6.76%.

# Real Estate Development

We
            engage in the business of purchasing unimproved land for development into residential
            subdivisions of single-family lots through MAFD, a wholly-owned subsidiary of the
            Company. We started this business in 1974 and since that time have developed and
            sold over 6,600 lots in 24 different subdivisions primarily in the western suburbs
            of Chicago. MAFD typically acts as sole principal or as a joint venture partner
            in our development projects. Historically, we have provided essentially all of the
            capital for a joint venture and receive in exchange an ownership interest in the
            joint venture which entitles us to a market rate of return on invested capital plus
            a percentage of the profit or loss generated by the project, generally 50-60%, with
            the exact percentage based upon a number of factors, including characteristics of
            the venture, the perceived risks involved, and the time to completion. In addition,
            MAFD from time to time invests in residential real estate projects, either individually
            or structured as limited partnership investments, managed by unaffiliated parties.

Springbank
            of Plainfield. Currently, our only active development is our Springbank
            project. This joint venture project consists of 950 acres in Plainfield, Illinois,
            located in Will County, southwest of Chicago along the fast-developing I-55 corridor.
            Delayed receipt of local zoning and plan approvals in 2005 and 2006 has prolonged
            the original timeline expected for lot sale closings in the project. Based on the
            current plans for this project, future development costs are currently estimated
            to be $78.0 million. The investment balance shown in the table above includes
            land purchases, engineering, survey and other development costs incurred to date.
            With the recent weakness in new and existing home sales, development of this project
            is currently expected to continue over the next four to six years.

|                                                                       | At December 31, 2006 | 
|---------------------------------------------------------------------- | -------------------- | 
|
|
|Springbank of Plainfield                                               |                      | 
|1,599 residential
                    lots; 281 multi-family units and |                      | 
|45.8 acres
                    for commercial development              |                      | 
|Other(2)                                                               |                      | 
|                                                                       |                      | 
|                                                                       |                      | 
|                                                                       |                      | 

---

|(1) | Lots remaining for sale reflects planned single-family lots in the current project
                    that have not yet been sold and does not include commercial or multi-family units.
                    The units are being developed in phases, and lots are generally not offered for
                    sale until unit development is near completion.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Reflects investment in 160 acres of unimproved land for potential future development.
                    Development plan has not yet been established.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------

# Regulation and Supervision

General.The Company, as a savings and loan holding company, is required to file certain
            reports with, and otherwise comply with the rules and regulations of, the OTS under
            the Home Owners Loan Act, or the HOLA. In addition, the activities of savings
            institutions, like us, are governed by the HOLA and the Federal Deposit Insurance
            Act, or the FDI Act.

We
            are subject to extensive regulation, examination and supervision by the OTS, as
            our primary federal regulator, and the FDIC, as the deposit insurer. We are a member
            of the Federal Home Loan Bank System, or FHLBC System and our deposit accounts are
            insured up to applicable limits by the Deposit Insurance Fund, or SAIF, managed
            by the FDIC. We must file reports with the OTS and the FDIC concerning our activities
            and financial condition in addition to obtaining regulatory approvals prior to entering
            into certain transactions such as mergers with, or acquisitions of, other savings
            institutions. The OTS and/or the FDIC conduct periodic examinations to test our
            compliance with various regulatory requirements. This regulation and supervision
            establishes a comprehensive framework of activities in

19

---

which an institution can engage
            and is intended primarily for the protection of the insurance fund and depositors.
            The regulatory structure also gives the regulatory authorities extensive discretion
            in connection with their supervisory and enforcement activities and examination
            policies, including policies with respect to the classification of assets and the
            establishment of adequate loan loss reserves for regulatory purposes. Any change
            in such regulatory requirements and policies, whether by the OTS, the FDIC or the
            Congress, could have a material adverse impact on our operations. Certain regulatory
            requirements applicable to us are referred to below or elsewhere herein. The description
            of statutory provisions and regulations applicable to savings institutions and their
            holding companies set forth in this Form 10-K does not purport to be a complete
            description of such statutes and regulations and their effects on our business.

Holding
            Company Regulation.The Company is a non-diversified unitary savings
            and loan holding company within the meaning of the HOLA. As a unitary savings and
            loan holding company, the Company generally will not be restricted under existing
            laws as to the types of business activities in which it may engage, provided that
            we continue to be a qualified thrift lender, or QTL. See Federal Savings Institution
            Regulation  QTL Test. Upon any non-supervisory acquisition by the Company
            of another savings institution or savings bank that meets the QTL test and is deemed
            to be a savings institution by the OTS, the Company would become a multiple savings
            and loan holding company (if the acquired institution is held as a separate subsidiary)
            and would be subject to limitations on the types of business activities in which
            it could engage. The HOLA limits the activities of a multiple savings and loan holding
            company and its uninsured institution subsidiaries primarily to activities permissible
            for bank holding companies under Section 4(c)(8) of the Bank Holding Company Act
            of 1956, as amended, or the BHC Act, subject to the prior approval of the OTS, and
            activities authorized by OTS regulation. No multiple savings and loan holding company
            may acquire more than 5% of the voting stock of a company engaged in impermissible
            activities.

The
            HOLA prohibits a savings and loan holding company, directly or indirectly, or through
            one or more subsidiaries, from acquiring more than 5% of the voting stock of another
            savings institution or holding company thereof, without prior written approval of
            the OTS; or acquiring or retaining control of a depository institution that is not
            insured by the FDIC. In evaluating applications by holding companies to acquire
            savings institutions, the OTS must consider the financial and managerial resources
            and future prospects of the company and institution involved the effect of the acquisition
            on the institution, the risk to the insurance funds, the convenience and needs of
            the community and competitive factors.

Although
            savings and loan holding companies are not subject to specific capital requirements
            or specific restrictions on the payment of dividends or other capital distributions,
            HOLA does prescribe such restrictions on subsidiary savings institutions, as described
            below. We must notify the OTS 30 days before declaring any dividend to the
            Company. In addition, the financial impact of a holding company on its subsidiary
            institution is a matter that is evaluated by the OTS and the agency has authority
            to order cessation of activities or divestiture of uninsured subsidiaries deemed
            to pose a threat to the safety and soundness of the institution.

Federal Savings Institution
            Regulation

Capital
            Requirements. The OTS capital regulations require savings institutions
            to meet three minimum capital standards: a 1.5% tangible capital ratio, a 3% leverage
            (core capital) ratio for institutions receiving the highest rating on the CAMEL
            financial institution rating system, and a 4% leverage (core capital) ratio for
            all other institutions, like the Bank, and an 8% risk-based capital ratio. In addition,
            the prompt corrective action standards discussed below also establish, in effect,
            a minimum 2% tangible capital standard, a 4% leverage (core capital) ratio (3% for
            institutions receiving the highest rating on the CAMEL financial institution rating
            system), and, together with the risk-based capital standard itself, a 4% Tier I
            risk-based capital standard. The OTS regulations also require that, in meeting the
            leverage ratio, tangible and risk-based capital standards, institutions must generally
            deduct investments in and loans to subsidiaries engaged in activities as principal
            that are not permissible for a national bank. The risk-based capital standard for
            savings institutions requires the maintenance of Tier I (core) and total capital
            (which is defined as core capital and supplementary capital) to risk-weighted assets
            of at least 4% and 8%, respectively.

20

---

At
            December 31, 2006 and 2005, the Bank was in compliance with the current capital
            requirements as follows:

|                                                          | At December 31,
                    2006 | At December 31,
                    2005 |  
|--------------------------------------------------------- | ---------------------------------------- | ---------------------------------------- | -
|
|
|Stockholder's equity of the Bank                          |                                          |                                          | $
|                                                          |                                          |                                          |  
|Tangible capital of the Bank                              |                                          |                                          | $
|Tangible capital requirement                              |                                          |                                          |  
|                                                          |                                          |                                          |  
|Excess                                                    |                                          |                                          | $
|                                                          |                                          |                                          |  
|Core capital of the Bank                                  |                                          |                                          | $
|Core capital requirement                                  |                                          |                                          |  
|                                                          |                                          |                                          |  
|Excess                                                    |                                          |                                          | $
|                                                          |                                          |                                          |  
|Core and supplementary capital of
                    the |                                          |                                         
|Bank                                                      |                                          |                                          | $
|Risk based capital requirement                            |                                          |                                          |  
|                                                          |                                          |                                          |  
|Excess                                                    |                                          |                                          | $
|                                                          |                                          |                                          |  
|Total Bank assets                                         |                                          |                                          | $
|Adjusted total Bank assets                                |                                          |                                          |  
|Total risk weighted Bank assets                           |                                          |                                          |  
|Adjusted total risk weighted Bank                         |                                          |                                         
|assets                                                    |                                          |                                          |  

The
            following table reflects the adjustments required to reconcile the Banks stockholders
            equity to the Banks regulatory capital at December 31, 2006:

|                                                   | Tangible | Core | Risk-Based
|-------------------------------------------------- | -------- | ---- | ----------
|
|Stockholder's equity of the Bank                   |          |      | $         
|Goodwill and core deposit intangibles              |          |      |           
|Non-permissible subsidiary deduction               |          |      |           
|Non-includible purchased mortgage                  |          |      |           
|servicing rights                                   |          |      |           
|Adjustment for available for                       |          |      |           
|sale securities                                    |          |      |           
|Recourse on loan sales                             |          |      |           
|General allowance for loan losses                  |          |      |           
|                                                   |          |      |           
|Regulatory capital
                    of the Bank |          |      | $         
|                                                   |          |      |           

Prompt
            Corrective Regulatory Action. Under the OTS prompt corrective action
            regulations, the OTS is required to take certain supervisory actions against undercapitalized
            institutions, the severity of which depends upon the institutions degree of
            undercapitalization. For this purpose, a savings association is placed in one of
            the following five categories based on its capital:

| | o well capitalized if
                    its ratio of total capital to risk-weighted assets is at least 10%, its ratio of
                    Tier I (core) capital to risk-weighted assets is at least 6%, its ratio of core
                    capital to total assets is at least 5%, and it is not subject to any order or directive
                    by the OTS to meet a specific capital level;
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o adequately capitalized
                    if its ratio of total capital to risk-weighted assets is at least 8%, its ratio
                    of Tier I (core) capital to risk-weighted assets is at least 4%, its ratio of core
                    capital to total assets is at least 4% (3% if the institution receives highest rating
                    on the CAMELS financial institution rating system) and it does not meet the definition
                    of well capitalized;
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o undercapitalized if
                    its ratio of total capital to risk-weighted assets is less than 8%, its ratio of
                    Tier I (core) capital to risk-weighted assets is less than 4% or its ratio of core
                    capital to total assets is less than 4% (3% or less for institutions with highest
                    rating on the CAMELS financial institution rating system);
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o significantly undercapitalized
                    if its ratio of total capital to risk-weighted assets is less than 6%, its ratio
                    of Tier I (core) capital to risk-weighted assets is less than 3% or its ratio of
                    core capital to total assets is less than 3%; or
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o critically undercapitalized
                    if its tangible capital to assets ratio is equal to or less than 2%.
| | ------------------------------------------------------------------------------------------------------------------------

Subject
            to a narrow exception, the OTS is required to appoint a receiver or conservator
            within specified time frames for an institution that is critically undercapitalized.
            The regulation also provides

21

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that a capital restoration plan
            must be filed with the OTS within 45 days of the date a savings institution receives
            notice that it is undercapitalized, significantly undercapitalized
            or critically undercapitalized. Compliance with the plan must be guaranteed
            by any parent holding company. In addition, numerous mandatory supervisory actions
            become immediately applicable to an undercapitalized institution, including, but
            not limited to, increased monitoring by regulators and restrictions on growth, investment
            activities, capital distributions and expansion. The OTS could also take any one
            of a number of discretionary supervisory actions against undercapitalized institutions,
            including the issuance of a capital directive and the replacement of senior executive
            officers and directors.

At
            December 31, 2006, the Bank met the criteria for being considered well
            capitalized.

Insurance
            of Deposit Accounts. The Banks deposits are insured up to applicable
            limits by the Deposit Insurance Fund, or DIF, of the FDIC. The DIF is the successor
            to the Bank Insurance Fund and the Savings Association Insurance Fund, which were
            merged in 2006. The Banks deposits, therefore, are subject to FDIC deposit
            insurance assessment.

The
            FDIC recently amended its risk-based deposit assessment system for 2007 to implement
            authority granted by the Federal Deposit Insurance Reform Act of 2005, or the Reform
            Act. Under the revised system, insured institutions are assigned to one of four
            risk categories based on supervisory evaluations, regulatory capital levels and
            certain other factors. An institutions assessment rate depends upon the category
            to which it is assigned. Risk Category I, which contains the least risky depository
            institutions, is expected to include more than 90% of all institutions. Unlike the
            other categories, Risk Category I contains further risk differentiation based on
            the FDICs analysis of financial ratios, examination component ratings and
            other information. Assessment rates are determined by the FDIC and currently range
            from five to seven basis points for the healthiest institutions (Risk Category I)
            to 43 basis points of assessable deposits for the riskiest (Risk Category IV). The
            FDIC may adjust rates uniformly from one quarter to the next, except that no single
            adjustment can exceed three basis points.

The
            FDIC is authorized to set the reserve ratio for the DIF annually at between 1.15%
            and 1.5% of estimated insured deposits, in contrast to the statutorily fixed ratio
            of 1.25% under the old system. The ratio, which is viewed by the FDIC as the level
            that the funds should achieve, was established by the agency at 1.25% for 2007.
            The Reform Act also provided for the possibility that the FDIC may pay dividends
            to insured institutions once the DIF reserve ratio equals or exceeds 1.35% of estimated
            insured deposits. The Reform Act also provided for a one-time credit for eligible
            institutions based on their assessment base as of December 1996. Subject to certain
            limitations with respect to institutions that are exhibiting weaknesses, credits
            can be used to offset future assessments until exhausted. The Banks one-time
            credit is estimated by the FDIC to be approximately $6.5 million.

In
            addition to the assessment for deposit insurance, institutions are required to make
            payments on bonds issued in the late 1980s by the Financing Corporation, or
            FICO, to recapitalize the predecessor to the Savings Association Insurance Fund.
            The payment is established quarterly and during the calendar year ending December 31,
            2006 averaged 1.28 basis points of assessable deposits.

The
            Banks total assessment paid for this period (including the FICO payments)
            was $907,000. The FDIC has the authority and is expected to increase insurance assessments
            as described above. A significant increase in insurance premiums would likely have
            an adverse effect on the operating expenses and results of operations of the Bank.
            Management can not predict what insurance assessment rates will be in the future.

Under
            the FDI Act, insurance of deposits may be terminated by the FDIC upon a finding
            that the institution has engaged in unsafe or unsound practices, is in an unsafe
            or unsound condition to continue operations or has violated any applicable law,
            regulation, rule, order or condition imposed by the FDIC or the OTS. Our management
            does not know of any practice, condition or violation that might lead to termination
            of deposit insurance.

Community
            Reinvestment. Under the Community Reinvestment Act, or the CRA, every
            insured depository institution, including the Bank, has a continuing and affirmative
            obligation, consistent with its safe and sound operation, to help meet the credit
            needs of its entire community, including low- and moderate-income neighborhoods.
            The CRA does not establish specific lending requirements or programs for financial
            institutions, or limit an institutions discretion to develop the types of
            products and services that it believes are best suited to its particular community
            that are consistent with the CRA. Institutions are rated on their performance in
            meeting the needs of their communities. Performance is tested in three

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areas: (a) lending, which evaluates
            the institutions record of making loans in its assessment areas; (b) investment,
            which evaluates the institutions record of investing in community development
            projects, affordable housing and programs benefiting low- or moderate-income individuals
            and businesses; and (c) service, which evaluates the institutions delivery
            of services to residents of its communities through its branches, ATMs and other
            offices. The CRA requires each federal banking agency, in connection with its examination
            of a financial institution, to assess and assign one of four ratings to the institutions
            record of meeting the credit needs of its community and to take this record into
            account in evaluating certain applications by the institution, including applications
            for charters, branches and other deposit facilities, relocations, mergers, consolidations,
            acquisitions of assets or assumptions of liabilities, and savings and loan holding
            company acquisitions. The CRA also requires that all institutions publicly disclose
            their CRA ratings. The Bank received an outstanding rating on its CRA
            performance evaluation prepared by the OTS dated July 18, 2005, the most recent
            report we have received.

Gramm-Leach-Bliley
            Act. The Gramm-Leach-Bliley Act, or the GLB Act, significantly reformed
            various aspects of the financial services business, including, but not limited to:
            (i) the establishment of a new framework under which bank holding companies
            and, subject to numerous restrictions, banks can own securities firms, insurance
            companies and other financial companies; (ii) subjecting banks to the same
            securities regulation as other providers of securities products; and (iii) prohibiting
            new unitary savings and loan holding companies from engaging in nonfinancial activities
            or affiliating with non-financial entities.

The
            provisions in the GLB Act permitting full affiliations between bank holding companies
            or banks and other financial companies do not increase the Companys authority
            to affiliate with securities firms, insurance companies or other financial companies.
            As a unitary savings and loan holding company, the Company was generally permitted
            to have such affiliations prior to the enactment of the GLB Act. It is expected,
            however, that these provisions will benefit the Companys competitors.

The
            prohibition on the ability of new unitary savings and loan holding companies to
            engage in nonfinancial activities or affiliating with nonfinancial entities generally
            applies only to savings and loan holding companies that were not, or had not submitted
            an application to become, savings and loan holding companies as of May 4, 1999.
            Since the Company was treated as a unitary savings and loan holding company prior
            to that date, the GLB Act will not prohibit the Company from engaging in nonfinancial
            activities or acquiring nonfinancial subsidiaries. However, the GLB Act generally
            restricts any nonfinancial entity from acquiring the Company unless such nonfinancial
            entity was, or had submitted an application to become a savings and loan holding
            company as of May 4, 1999.

The
            GLB Act imposed new requirements on financial institutions with respect to customer
            privacy by generally prohibiting disclosure of customer information to non-affiliated
            third parties unless the customer has been given the opportunity to object and has
            not objected to such disclosure. Financial institutions are further required to
            disclose their privacy policies to customers annually. The Company has developed
            policies and procedures to comply with the implementing regulations promulgated
            by the OTS and the other federal regulators with regard to customer privacy.

To
            the extent the GLB Act permits banks, securities firms and insurance companies to
            affiliate, the financial services industry may experience further consolidation.
            This could result in a growing number of larger financial institutions that offer
            a wider variety of financial services than the Company currently offers and that
            can aggressively compete in the markets the Company currently serves.

USA
            Patriot Act of 2001/Bank Secrecy Act. The USA Patriot Act of 2001,
            or the Patriot Act, was enacted in response to the terrorist attacks that occurred
            on September 11, 2001. The Patriot Act is intended to strengthen U.S. law enforcements
            and the intelligence communities abilities to work cohesively to combat terrorism
            on a variety of fronts. The potential impact of the Patriot Act on financial institutions
            of all kinds is significant and wide ranging. By way of amendments to the Bank Secrecy
            Act, the Patriot Act contains sweeping anti-money laundering and financial transparency
            laws and requires various regulations, including standards for verifying customer
            identification at account opening, and rules to promote cooperation among financial
            institutions, regulators, and law enforcement entities in identifying parties that
            may be involved in terrorism or money laundering. Under the Bank Secrecy Act, a
            financial institution is required to have systems in place to detect certain transactions,
            based on the size and nature of the transaction. The OTS is required to consider
            a financial institutions compliance with the Bank Secrecy Act when reviewing
            applications from financial institutions.

23

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Loans
            to One Borrower. Under the HOLA, savings institutions are generally
            subject to the limits on loans to one borrower applicable to national banks. Generally,
            savings institutions may not make a loan or extend credit to a single or related
            group of borrowers in excess of 15% of its unimpaired capital and surplus. An additional
            amount may be lent, equal to 10% of unimpaired capital and surplus, if such loan
            is secured by readily marketable collateral, which is defined to include certain
            financial instruments and bullion. At December 31, 2006, our legal lending
            limit on loans to any one borrower was $122.0 million. At December 31, 2006,
            the Banks largest amount of loans to any one related borrower group was $68.4
            million.

QTL
            Test. The HOLA requires savings institutions to meet a QTL test.
            Under the QTL test, a savings and loan association is required to either qualify
            as a domestic building and loan association under the Internal Revenue
            Code or maintain at least 65% of its portfolio assets (total assets
            less (i) specified liquid assets up to 20% of total assets; (ii) intangibles,
            including goodwill; and (iii) the value of property used to conduct business)
            in certain qualified thrift investments (primarily residential mortgages
            and related investments, including certain mortgage-backed securities) in at least
            9 months out of each 12 month period. A savings institution that fails the QTL test
            is subject to certain operating restrictions and may be required to convert to a
            bank charter. As of December 31, 2006, the Bank maintained 83.3% of its portfolio
            assets in qualified thrift investments and, therefore, met the QTL test.

Limitation
            on Capital Distributions. OTS regulations impose limitations upon
            all capital distributions by a savings institution, such as cash dividends, payments
            to repurchase or otherwise acquire its shares, payments to shareholders of another
            institution in a cash out merger and other distributions charged against capital,
            if the institution would not be well-capitalized after the distribution. The regulations
            provide that an institution (i) which is not eligible for expedited treatment
            under the application processing rules of the OTS; or (ii) for which its total
            amount of capital distributions for the applicable calendar year exceeds its net
            income for that year to date plus its retained income for the preceding two years;
            or (iii) which would not be at least adequately capitalized following the distribution;
            or (iv) which would violate a prohibition contained in a statute, regulation
            or agreement between the institution and the OTS by performing the capital distribution,
            must submit an application to the OTS to receive approval of the capital distribution.
            Under any other circumstances, the Bank would be required to provide a written notice
            to the OTS 30 days prior to the capital distribution.As of December 31,
            2006, the Banks capital distributions have met the foregoing conditions and
            no prior applications to the OTS have been required.

Assessments.
            Savings institutions are required to pay assessments to the OTS to fund the agencys
            operations. The general assessments, paid on a semi-annual basis, are computed upon
            the savings institutions total assets, including consolidated subsidiaries,
            as reported in the Banks latest quarterly thrift financial report. The assessments
            paid by the Bank were $1.6 million, $1.5 million and $1.3 million in 2006, 2005
            and 2004, respectively.

Branching.
            OTS regulations permit nationwide branching by federally chartered savings institutions
            to the extent allowed by federal statute. Generally, a federal savings institution
            which meets the QTL test, may establish or acquire branches in states other than
            its home state. This permits federal savings institutions to establish interstate
            networks and to geographically diversify their loan portfolios and lines of business.
            The OTS authority preempts any state law purporting to regulate branching by federal
            savings institutions.

Transactions
            with Related Parties. The Banks authority to engage in transactions
            with related parties or affiliates (e.g., any company that controls
            or is under common control with an institution, including the Company and its non-savings
            institution subsidiaries) is limited by Sections 23A and 23B of the Federal Reserve
            Act, or FRA, and Regulation W thereunder. Section 23A limits the aggregate amount
            of covered transactions with any individual affiliate to 10% of the capital and
            surplus of the savings institution. The aggregate amount of covered transactions
            with all affiliates is limited to 20% of the savings institutions capital
            and surplus. Certain transactions with affiliates are required to be secured by
            collateral in an amount and of a type described in Section 23A, and the purchase
            of low quality assets from affiliates is generally prohibited. Section 23B generally
            provides that certain transactions with affiliates, including loans and asset purchases,
            must be on terms and under circumstances, including credit standards, that are substantially
            the same or at least as favorable to the institution as those prevailing at the
            time for comparable transactions with non-affiliated companies. In addition, savings
            institutions are prohibited from lending to any affiliate that is engaged in activities
            that are not permissible

24

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for bank holding companies and no
            savings institution may purchase the securities of any affiliate other than a subsidiary.

The
            Banks authority to extend credit to executive officers, directors and 10%
            shareholders, as well as entities such persons control, is governed by Sections
            22(g) and 22(h) of the FRA and Regulation O thereunder. Among other things,
            such loans are generally required to be made on terms substantially the same as
            those offered to unaffiliated individuals and to not involve more than the normal
            risk of repayment. Regulation O also places individual and aggregate limits
            on the amount of loans the Bank may make to such persons based, in part, on the
            Banks capital position and requires certain board approval procedures to be
            followed.

Enforcement.
            Under the FDI Act, the OTS has primary enforcement responsibility over savings institutions
            and has the authority to bring actions against the institution and all institution
            affiliated parties, including certain shareholders, and any attorneys, appraisers
            and accountants who knowingly or recklessly participate in wrongful action likely
            to have an adverse effect on an insured institution. Formal enforcement action may
            range from the issuance of a capital directive or cease and desist order for removal
            of officers and/or directors to institution of proceedings for receivership, conservatorship
            or termination of deposit insurance. Civil penalties cover a wide range of violations
            and may amount to as much as $1 million per day in certain circumstances. Under
            the FDI Act, the FDIC has the authority to recommend to the Director of the OTS
            enforcement action to be taken with respect to a particular savings institution.
            If action is not taken by the Director, the FDIC has authority to take such action
            under certain circumstances. Federal law also establishes criminal penalties for
            certain violations.

Standards
            for Safety and Soundness. The federal banking agencies have adopted
            Interagency Guidelines Prescribing Standards for Safety and Soundness, or the Guidelines,
            and a final rule to implement safety and soundness standards required under the
            FDI Act. The Guidelines set forth the safety and soundness standards that the federal
            banking agencies use to identify and address problems at insured depository institutions
            before capital becomes impaired. The standards set forth in the Guidelines address
            internal controls and information systems; internal audit system; credit underwriting;
            loan documentation; interest rate risk exposure; asset growth; asset quality; earnings
            and compensation; fees and benefits. If the appropriate federal banking agency determines
            that an institution fails to meet any standard prescribed by the Guidelines, the
            agency may require the institution to submit to the agency an acceptable plan to
            achieve compliance with the standard, as required by the FDI Act. The OTS requires
            that a savings association file a written safety and soundness compliance plan within
            30 days of receiving a request for a compliance plan from the OTS.

Consumer
            Lending Laws.We also are subject to many federal and state consumer
            protection statutes and regulations including the Equal Credit Opportunity Act,
            the Fair Housing Act, the Truth in Lending Act, the Truth in Savings Act, the Real
            Estate Settlement Procedures Act and the Home Mortgage Disclosure Act. Among other
            things, these acts:

| | o require lenders to disclose credit
                    terms in meaningful and consistent ways;
| | -------------------------------------------------------------------------------------------------

| | o prohibit discrimination against
                    an applicant in any consumer or business credit transaction;
| | ------------------------------------------------------------------------------------------------------------------

| | o prohibit discrimination in housing-related
                    lending activities;
| | ------------------------------------------------------------------------------------

| | o require certain lenders to collect
                    and report applicant and borrower data regarding loans for home purchases or improvement
                    projects;
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o require lenders to provide borrowers
                    with information regarding the nature and cost of real estate settlements;
| | -------------------------------------------------------------------------------------------------------------------------------------

| | o prohibit certain lending practices
                    and limit escrow account amounts with respect to real estate transactions; and
| | ---------------------------------------------------------------------------------------------------------------------------------------

| | o prescribe possible penalties for
                    violations of the requirements of consumer protection statutes and regulations.
| | --------------------------------------------------------------------------------------------------------------------------------------

In
            addition to private actions by aggrieved borrowers or applicants for actual and
            punitive damages, the U.S. Department of Justice and other regulatory agencies can
            take enforcement action seeking injunctive and other equitable relief for alleged
            violations. The Bank is subject to an Agreed

25

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Consent Order that it entered into
            on December 30, 2002, to resolve allegations by the Department of Justice that
            the Bank had violated the fair lending laws based on the level of the Banks
            lending in minority areas during the period 1996-2000. The Bank denied all alleged
            violations. The Agreed Consent Order requires the Bank to undertake a number of
            actions over the five year period of 2003-2008 to promote its home mortgage lending
            in communities with significant minority populations, including:

| | o Open or acquire two branch offices
                    in minority areas by June 30, 2005.
| | --------------------------------------------------------------------------------------------

| | o Implement a targeted advertising
                    campaign to increase home mortgage lending.
| | --------------------------------------------------------------------------------------------------

| | o Provide $10 million in benefits
                    to borrowers under special lending programs to help residents of minority areas
                    achieve home ownership (which may include subsidized interest rates, down payment
                    and closing cost assistance, and Prime rate loans to borrowers with below Prime
                    credit).
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o Contribute $500,000 over the five
                    year period 2003-2008 to homebuyer education and counseling programs, and conduct
                    an assessment of the home mortgage credit needs of residents in minority areas.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The
            Bank is in compliance with all terms of the Order. Since the Order was entered by
            the court, the Bank has opened two branch offices within minority areas, conducted
            an assessment of home mortgage credit needs of residents in minority areas, and
            implemented a targeted marketing campaign to increase mortgage lending. The Bank
            fully satisfied the $10 million financial benefits requirement in 2003 through special
            lending programs designed to help minority residents achieve homeownership and is
            continuing to offer special community lending programs targeted to minority and
            low-income borrowers in its market areas.

# Federal Home Loan Bank System

The
            Bank is a member of the FHLBC System, which consists of 12 regional Federal Home
            Loan Banks. The FHLBC System provides a central credit facility primarily for member
            institutions. As a member of the FHLBC, the Bank is required to acquire and hold
            shares of capital stock in the FHLBC in an amount at least equal to 1% of the aggregate
            principal amount of its unpaid residential mortgage loans and similar obligations
            at the beginning of each year, or 1/20 of its advances (borrowings) from the FHLBC,
            whichever is greater. Regulatory directives, capital requirements and net income
            of the FHLBC affect its ability to pay dividends to us. In addition, the FHLBs are
            required to provide funds to cover certain obligations on bonds issued by the Resolution
            Funding Corporation to fund the resolution of insolvent thrifts and to contribute
            funds for affordable housing programs. These requirements could reduce the amount
            of dividends that the FHLBs pay to their members and could also result in the FHLBs
            imposing a higher rate of interest on advances to their members. From an average
            of 6.125% paid in 2004, the FHLBC has reduced its dividend to 3.10% in 2006.

We
            currently have an investment in FHLBC stock in excess of our required investment
            by approximately $38.7 million at December 31, 2006. Excess investments are redeemable
            at par upon notice to the FHLBC, subject to regulatory or capital constraints of
            the FHLBC. During 2006, we redeemed $31.9 million of FHLB stock. FHLBC has indicated
            that it is not currently redeeming additional stock, but we intend to redeem our
            excess investment if and when redemption opportunities resume.

At
            December 31, 2006, the Bank had advances from the FHLBC with aggregate outstanding
            principal balances of $2.16 billion, and the Banks investment in FHLBC stock
            totaled $146.4 million. FHLBC advances must be secured by specified types of collateral
            and are available to member institutions primarily for the purpose of providing
            funds for residential housing finance. We also sell mortgages to the FHLBC through
            the FHLBCs MPF program. See the discussion under Secondary Market and
            Loan Servicing Activities for more information.

# Federal Reserve System

The
            Federal Reserve Board regulations require savings institutions to maintain non-interest
            earning reserves against their transaction accounts (primarily checking accounts).
            The Federal Reserve Board regulations generally require that reserves be maintained
            against aggregate transaction accounts as follows: for accounts aggregating $45.8
            million or less (subject to adjustment by the Federal Reserve Board) the reserve
            requirement is 3%; and for accounts greater than $45.8 million, the reserve

26

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requirement is currently $1,119,000
            plus 10% (subject to adjustment by the Federal Reserve Board) against that portion
            of total transaction accounts in excess of $45.8 million. The first $8.5 million
            of otherwise reserveable balances (subject to adjustments by the Federal Reserve
            Board) are exempted from the reserve requirements. The Bank is in compliance with
            the foregoing requirements. The balances maintained to meet the reserve requirements
            imposed by the Federal Reserve Board may be used to satisfy liquidity requirements
            imposed by the OTS.

# Executive Officers of the Registrant

Information regarding the executive
            officers of the Company and the Bank are listed below.

|Name               | Age | Year of
                    Employment | Position and Background |   
|------------------ | --- | -------------------------------------- | ----------------------- | --
|Allen H. Koranda   |     |                                        |                         | 60
|Kenneth Koranda    |     |                                        |                         | 57
|                   |     |                                       
|                   |     |                                       
|Jerry A. Weberling |     |                                        |                         | 55
|James E. Allen     |     |                                        |                         | 48
|                   |     |                                       
|                   |     |                                       
|Gerard J. Buccino  |     |                                        |                         | 45
|Jennifer R. Evans  |     |                                        |                         | 48
|                   |     |                                       
|                   |     |                                       
|                   |     |                                       
|James S. Eckel     |     |                                        |                         | 51
|William G. Haider  |     |                                        |                         | 56
|Michael J. Janssen |     |                                        |                         | 47
|Edward A. Karasek  |     |                                        |                         | 53
|                   |     |                                       
|David W. Kohlsaat  |     |                                        |                         | 52
|Thomas C. Miers    |     |                                        |                         | 55
|Sharon M. Wheeler  |     |                                        |                         | 54

# Employees

We
            employed a total of 2,152 full-time equivalent employees as of December 31,
            2006. Management considers its relationship with its employees to be excellent.

# Safe Harbor Statement under the
            Private Securities Litigation Reform Act of 1995

This
            report, including the discussion in Item 7. Managements Discussion and
            Analysis of Financial Condition and Results of Operations and elsewhere, contains,
            and other periodic reports and press releases of the Company may contain, certain
            forward-looking statements (within the meaning of Section 21E of the Securities
            Exchange Act of 1934, as amended), which involve certain risks and uncertainties.
            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

27

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1995, and is including this statement
            for purposes of invoking these safe harbor provisions. These 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, plan, or similar expressions. The Companys
            ability to predict results or the actual effect of future plans or strategies is
            inherently uncertain and actual results may differ from those predicted. The Company
            undertakes no obligation to update these forward-looking statements in the future.
            Please see Risk Factors below for a discussion of the risks and uncertainties
            that could affect managements outlook or future prospects of the Company

Item 1A.  Risk Factors

The
            Company is subject to certain risks. In addition to the factors discussed below,
            please see the discussion under Item 7A. Quantitative and Qualitative Disclosure
            about Market Risk beginning on page 55. These risks and uncertainties, along
            with the other information in our Form 10-K, should be considered in evaluating
            forward-looking statements, and undue reliance should not be placed on such statements.

Unanticipated changes in interest
            rates and/or continuation of the inverted yield curve environment could reduceour
            profitability and affect the value of our assets.

Our
            net interest income, which is our primary source of revenue, depends on the spread
            between the interest we earn on loans and investments and the interest we pay on
            deposits and borrowings. For this reason, the level of our earnings is highly susceptible
            to changes in interest rates which generally impact our interest-earning assets
            and our interest-bearing liabilities differently. While we actively manage this
            sensitivity to interest rate risk as a key part of our business strategy, unanticipated
            changes in interest rates and changes in the yield curve may have a material adverse
            effect on our results of operations. Changes in the level of interest rates also
            may negatively affect the level of our mortgage loan originations, the value of
            our assets and our ability to realize gains from the sale of loans.

In
            addition, further prolonging of the current inverted treasury yield curve environment
            may continue to pressure our net interest margin and could have a material adverse
            effect on our results of operations.

Weakening of the real estate
            markets in the Chicago and Milwaukee metropolitan areas could have a material adverse
            effect on us.

With
            most of our real estate loans concentrated in suburban Chicago and suburban Milwaukee
            areas, a decline in local economic conditions or declining demand for real estate
            in these markets could adversely affect the value of the collateral securing our
            loans and may cause us to suffer loan losses, particularly if loans we originated
            at higher loan-to value ratios default. For example, recent weakness in housing
            prices and the slowdown in home purchase activity in our markets have made it more
            difficult to fully recover on some of our defaulted residential mortgage and home
            equity loans through the sale of the residential real estate collateral and have
            increased our cost associated with the sale of foreclosed real estate. A decline
            in local economic and market conditions may have a greater effect on our earnings
            and capital than on the earnings and capital of institutions whose real estate loan
            portfolios are more geographically diverse.

In
            addition, the residential mortgage business, historically a strong part of our operations,
            is largely dependent on home sales activity. With the considerable slowdown of home
            purchases nationwide, the mortgage industry has slowed dramatically. Our mortgage
            loan origination volumes dropped 23% in 2006 to $1.6 billion, generally in line
            with the overall decline industry-wide. Until the housing market improves, we expect
            continued pressure on our one- to four-family loan origination volume and mortgage
            banking revenues.

High loan-to-value ratios on
            a portion of our residential mortgage and home equity portfolios expose us togreater
            risk of loss.

Some
            of our residential mortgage loans are secured by liens on mortgage properties in
            which the borrowers have little or no equity, which may lead to a higher incidence
            of default on these loans. Our product offerings include certain mortgage and home
            equity loans or lines of credit that allow qualifying

28

---

borrowers to obtain loans with combined
            loan-to-value ratios at origination of up to 100% of the value of the home securing
            the loan. At December 31, 2006, approximately $428.1 million, or 8%, of our $5.31
            billion single-family residential mortgage loan portfolio, including equity lines
            of credit and home equity loans, had combined loan-to-value ratios in excess of
            90% (based on total line available) and no private mortgage insurance. There was
            an additional approximately $40 million of undrawn amounts remaining available under
            high CLTV equity lines in our portfolio at December 31, 2006. During 2006, we experienced
            a higher loss rate on high CLTV loans than our residential portfolio as a whole,
            and we are likely to continue to experience a higher risk of loss on these loans
            that we elect to keep in portfolio, since our ability to recover against the collateral
            is more sensitive to declining property values than for loans with lower combined
            loan-to-value ratios.

Competition from financial institutions
            and other financial service providers may adversely affect our growth and profitability.

The
            financial services business is highly competitive and we experience competition
            in each of our markets from many other financial institutions. The Chicago metropolitan
            market, in particular, is regarded as one of the most competitive banking markets
            in the country due to fragmented market share among many competing institutions
            which also tends to attract new entrants to the market. We compete with community
            banks, savings and loan associations, credit unions, mortgage banking firms, mortgage
            brokers, consumer finance companies, securities brokerage firms, insurance companies,
            money market funds and other mutual funds, as well as other regional, super-regional,
            national and international financial institutions that operate offices in our primary
            market areas and elsewhere. While we believe we can and do successfully compete
            with these other financial institutions in our primary markets, we may face a competitive
            disadvantage as a result of lesser geographic diversification and inability to spread
            our marketing costs across a broader market.

We
            compete with these institutions both in attracting deposits and in originating loans.
            A key part of our strategy is to compete through concentrated marketing in our primary
            markets with local advertisements, broad product offerings, community support, personal
            contacts, and flexibility and responsiveness in working with local customers, but
            competition has made it more difficult for us to grow our customer base without
            adjusting our pricing. We have experienced increased competition from larger commercial
            banks which have refocused their marketing efforts on the retail banking customers.
            In addition, in recent years we have encountered many de novo banks in our market
            areas that tend to price their loans and deposits aggressively in order to attract
            customers. Price competition for loans and deposits causes us to earn less on our
            loans and pay more on our deposits, which reduces net interest income.

Income from our real estate development
            business may continue to be adversely affected by housing market conditions and other
            uncertainties.

Historically,
            a significant source of our non-interest income for us has been income from our
            real estate development projects involving the acquisition and development of raw
            land into residential lots for sale to home builders. We often develop these projects
            in multiple phases over a period of years and our initial projections regarding
            the time to completion and development costs involved may prove to be inaccurate.
            For example, in our Springbank project in Plainfield, Illinois, delays in the approval
            process, weak housing market conditions and other factors outside our control, have
            extended the project timeline, increased our development costs and reduced our expected
            returns on investment over the life of the project. The weakness in new and existing
            home sales activity that we experienced in 2006, along with softening real estate
            prices, contributed to significantly lower income from real estate operations in
            2006. Without improved housing market conditions, we are likely to continue to experience
            weaker income from real estate in 2007 and beyond.

Our allowance for loan losses
            is based on our estimates of future losses inherent in our portfolio, and actual
            losses we incur could exceed these estimates.

We
            maintain an allowance for loan losses we deem adequate to cover losses inherent
            in our portfolio from loans that may not be repaid in their entirety. In evaluating
            the adequacy of our allowance for loan losses on a quarterly basis, in addition
            to numerous quantitative factors we take into account, we also consider many qualitative
            factors, such as general business and economic conditions, general real

29

---

estate market trends and other matters
            which are by their nature more subjective and susceptible to change. In addition,
            our estimates of the risk of loss and amount of loss on some of our commercial loans
            require us to assess our borrowers abilities to successfully execute their
            business models through changing economic environments, competitive challenges and
            other factors outside our control. Because of the degree of uncertainty in the assumptions
            we make and the factors we consider, the losses we actually incur may exceed our
            estimates and our allowance for loan losses may prove insufficient to absorb these
            losses.

Breaches of our computer and
            network security may result in compromises of information which could have a material
            adverse effect on our business.

We
            depend heavily in our daily operations on our automated information systems, networks
            and telecommunications systems which support the evaluation, acquisition, monitoring,
            collection and administration of our loan and deposit servicing portfolios, general
            accounting and other management controls. We also outsource some data and payment
            processing to third parties. While we have implemented extensive policies and procedures
            designed to limit the impact of system failures or disruptions as well as information
            security measures to safeguard these systems, technological difficulties or security
            breaches involving our systems or those of any of our vendors could compromise our
            ability to protect customer personal information and could interfere with our ability
            to accurately process and account for customer transactions, and this could potentially
            expose us to significant loss. In addition, a failure or interruption of these systems
            or a failure of data integrity could subject us to customer complaints, potential
            lawsuits or increased regulatory scrutiny and could damage our reputation, making
            it more difficult for us to compete successfully.

Our ability to service our holding
            company debt and pay dividends to our shareholders is substantially dependent on
            dividends from the Bank, and these dividends are subject to regulatory limits.

Since
            January 1, 2005, we increased debt at our holding company $135 million as a result
            of acquisitions and as part of our capital management strategy designed to increase
            shareholder returns. The Company is largely dependent on the receipt of dividends
            from the Bank in order to service this debt and the availability of dividends from
            the Bank is limited by various statutes and regulations. In the event that the Bank
            is unable to pay dividends to us, we may not be able to service our debt, fund additional
            real estate development activities, complete stock buybacks, if any, or pay dividends
            on our common stock.

We operate in a highly regulated
            environment and we may be adversely affected by changes in laws and regulations.

The
            Bank is subject to extensive regulation, supervision and examination by the Office
            of Thrift Supervision, its chartering authority, and by the Federal Deposit Insurance
            Corporation, as insurer of its deposits. Such regulation and supervision govern
            the activities in which an institution and its holding company may engage, and are
            not intended to protect the interests of investors in our common stock. Regulatory
            authorities have broad discretion in their supervisory and enforcement activities,
            including the authority to impose restrictions on our operations, to classify our
            assets which may affect the level of our allowance for loan losses, to limit our
            dividends or impose higher capital requirements on us, to limit acquisition activities
            we may propose and to impose penalties for noncompliance. In addition, we are likely
            to continue to incur significant operational costs related to compliance as the
            risks and burden of regulatory compliance have increased significantly in recent
            years. Regulatory changes, whether in the form of regulatory policy, regulations,
            legislation or supervisory action, may have a material impact on our operations.

Our acquisition strategy exposes
            us to certain risks.

We
            have acquired a number of other banking companies in recent years and we may pursue
            selective acquisitions of other financial institutions in the future. Acquisitions
            can present certain managerial and operational challenges. While we evaluate acquisition
            opportunities across a variety of parameters, including our assessment of the potential
            impact on our financial condition as well as our prospective financial performance,
            our results may suffer as a result of an acquisition if we are not

30

---

effective in integrating the acquired
            operations into our business and converting data processing systems to our platform
            as planned, or if we fail to achieve anticipated cost savings or revenue enhancements.
            In addition, we anticipate that future acquisitions, if any, will likely be valued
            at a premium to book value and at a premium to current market value, which may result
            in book value per share or tangible book value per share dilution and possible short-term
            earnings per share dilution for our shareholders depending on the transaction structure
            and pricing.

# Item 1B. Unresolved Staff Comments

None.

# Available Information

Our
            internet address is www.mafbancorp.com. We make available through this address,
            free of charge, our annual report on Form 10-K, proxy statement, quarterly
            reports on Form 10-Q, current reports on Form 8-K and amendments to those
            reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act
            as soon as reasonably practicable after such material is electronically filed with,
            or furnished to, the SEC. Our Code of Ethics and other corporate governance information
            is also available on our website.

# Item 2. Properties

All
            of our facilities are located in the greater Chicago and Milwaukee metropolitan
            areas. At December 31, 2006, we own the majority of our 82 banking offices
            and lease others under individual lease arrangements. We also own our executive
            office building in Clarendon Hills, Illinois, and lease additional corporate offices
            in Downers Grove, Illinois, both located in the western suburbs of Chicago. We believe
            that all of our facilities are suitable and adequate for our operational needs.

See
            Note 8 in Item 8. Financial Statement and Supplementary Data
            for additional information about the Companys properties.

# Item 3. Legal Proceedings

There
            are various actions pending against the Company or its subsidiaries in the normal
            course of business, but in the opinion of management, none of these actions is likely
            to have a material adverse effect on our consolidated financial statements.

# Item 4. Submission of Matters to
            a Vote of Security Holders

None.

# PART II

# Item 5. Market for the Registrants
            Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our
            common stock trades on the NASDAQ Stock Market under the symbol MAFB.
            As of February 23, 2007, we had 3,800 shareholders of record. The table below
            shows the reported high and low sales prices of the common stock during the periods
            indicated as well as the period end closing sales prices.

|               | Year ended December 31, 2006 | Year ended December 31, 2005 |  
|-------------- | ---------------------------- | ---------------------------- | -
|
|First Quarter  |                              |                              | $
|Second Quarter |                              |                              |  
|Third Quarter  |                              |                              |  
|Fourth Quarter |                              |                              |  

We
            declared $1.00 per share in dividends during the year ended December 31, 2006
            and $0.92 per share in dividends for the year ended December 31, 2005. During
            the first quarter of 2007, we announced an increase in our quarterly dividend to
            $0.27 per share, or $1.08 per share on an annualized basis. Our ability to pay cash
            dividends depends largely on cash dividends received from the Bank. Dividend payments
            from the Bank are subject to various regulatory restrictions. See Item 1.
            Business -Regulation and Supervision  Federal Savings Institution Regulation
             Limitation on Capital Distributions.

31

---

# Stock Performance Graph

The
            following graph shows a comparison of cumulative total shareholder return (including
            reinvested dividends) on the Companys common stock, with the cumulative total
            returns of both a broad-market index and a peer group index for the period December
            31, 2001 through December 29, 2006. The broad-market index chosen was
            the Nasdaq Market Index, and the peer group index chosen was the Hemscott Industry
            Group, comprised of savings and loan institutions, which is the same peer group
            index used in past years. The data was provided by Hemscott, Inc. (formerly known
            as Core Data, Inc.). The shareholder returns are measured based on an assumed investment
            of $100 on December 31, 2001.

# Comparison of Cumulative Total Return
            Among MAF Bancorp,
            Peer Group Index and Nasdaq Market Index

# 

|                    | 12/31/01 | 12/31/02 | 12/31/03 | 12/31/04 | 12/30/05 | 12/29/06
|------------------- | -------- | -------- | -------- | -------- | -------- | --------
|MAF Bancorp         |          |          |          | 100      | .00      |         
|Peer Group Index    |          |          |          | 100      | .00      |         
|Nasdaq Market Index |          |          |          | 100      | .00      |         
|                    |          |          |         

| | A. | The lines represent yearly index
                    levels derived from compounded returns that include all dividends.
| | -- | -----------------------------------------------------------------------------------------------------------------------

| | B. | If the fiscal year end is not a
                    trading day, the preceding day is used.
| | -- | -------------------------------------------------------------------------------------------

| | C. | The index level for all series was
                    set to $100.00 on 12/31/01.
| | -- | ----------------------------------------------------------------------------------

The
            following table sets forth information in connection with purchases of common stock
            made by or on behalf of us during the fourth quarter of the year ended December 31,
            2006.

|Period                                                    | Total
                    Number of
                    Shares
                    Purchased(1) | Average
                    Price Paid
                    per Share | Total Number of
                    Shares
                    Purchased as
                    Part of Publicly
                    Announced Plans
                    or Programs | Maximum Number of
                    Shares that May Yet
                    be Purchased under
                    the Plans or Programs
|--------------------------------------------------------- | ----------------------------------------------------------------------------------------------- | -------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------
|October 1, 2006 through October
                    31,   |                                                                                                 |                                                                      |                                                                                                                                                                                      |                                                                                                                                           
|2006                                                      |                                                                                                 |                                                                      |                                                                                                                                                                                      |                                                                                                                                          
|November 1, 2006 through November
                    30, |                                                                                                 |                                                                     
|2006                                                      |                                                                                                 |                                                                      |                                                                                                                                                                                      | 2,747                                                                                                                                     
|December 1, 2006 through December
                    31, |                                                                                                 |                                                                     
|2006                                                      |                                                                                                 |                                                                      |                                                                                                                                                                                      | 2,705                                                                                                                                     
|                                                          |                                                                                                 |                                                                      |                                                                                                                                                                                      |                                                                                                                                           
|Total                                                     |                                                                                                 |                                                                      |                                                                                                                                                                                      | 5,452                                                                                                                                     
|                                                          |                                                                                                 |                                                                      |                                                                                                                                                                                      |                                                                                                                                           

---

| | (1) | Reflects 5,452 shares that were
                    surrendered to us in payment of option exercise prices. The table does not include
                    1,706 shares that were surrendered in payment of withholding tax in connection with
                    the exercise of related options during the quarter.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

32

---

# Item 6. Selected Financial Data

The
            following tables set forth certain summary consolidated financial data, performance
            ratios and other data at or for the periods indicated. This information should be
            read in conjunction with the Consolidated Financial Statements and notes thereto
            included herein. See Item 8. Financial Statements and Supplementary
            Data. We also have presented certain Non-GAAP financial information that management
            believes is helpful to an understanding of our financial results. See Non-GAAP Financial Information following these tables for a reconciliation of
            these items to GAAP measures.

|                                                             | At December 31, | 
|------------------------------------------------------------ | --------------- | 
|
|
|Selected Balance Sheet Data:                                 |                 | 
|                                                             |                 | 
|Total assets                                                 |                 | 
|Loans receivable,
                    net                    |                 | 
|Mortgage-backed
                    securities available     |                 | 
|for sale                                                     |                 | 
|Mortgage-backed
                    securities held to       |                 | 
|maturity                                                     |                 | 
|Interest bearing
                    deposits                |                 | 
|Federal funds
                    sold                       |                 | 
|Investment securities
                    available for sale |                 | 
|Stock in Federal
                    Home Loan Bank of       |                 | 
|Chicago                                                      |                 | 
|Real estate held
                    for development or sale |                 | 
|Goodwill and core
                    deposit intangibles    |                 | 
|Deposits                                                     |                 | 
|Borrowed funds                                               |                 | 
|Junior subordinated
                    debentures           |                 | 
|Stockholders'
                    equity                     |                 | 
|Book value per
                    share                     |                 | 
|Tangible book
                    value per share(1)         |                 | 
|Common shares
                    outstanding                |                 | 
|                                                            

|                                                                       | For the Year Ended December 31, |  |   |            | 
|---------------------------------------------------------------------- | ------------------------------- |  | - | ---------- | 
|
|
|Selected Income Statement Data:                                        |                                 |  |   |            | 
|                                                                       |                                 |  |   |            | 
|Interest income                                                        |                                 |  | $ | 595,200    | 
|Interest expense                                                       |                                 |  |   | 335,571    | 
|                                                                       |                                 |  |   |            | 
|Net interest
                    income                                |                                 |  |   | 259,629    | 
|Provision for loan losses                                              |                                 |  |   | 3,900      | 
|                                                                       |                                 |  |   |            | 
|Net interest
                    income after provision                |                                 | 
|for
                    loan losses                                    |                                 |  |   | 255,729    | 
|Total non-interest income                                              |                                 |  |   | 75,918     | 
|Total non-interest expense                                             |                                 |  |   | 198,070    | 
|                                                                       |                                 |  |   |            | 
|Income before
                    income taxes                         |                                 |  |   | 133,577    | 
|                                                                       |                                 |  |   |            | 
|Income taxes                                                           |                                 |  |   | 48,994     | 
|                                                                       |                                 |  |   |            | 
|Net income                                                             |                                 |  | $ | 84,583     | 
|                                                                       |                                 |  |   |            | 
|Net income
                    as adjusted for balance sheet           |                                 | 
|restructuring
                    and certain tax charges              |                                 |  | $ | 100,651    | 
|                                                                       |                                 |  |   |            | 
|Net income per common share:                                           |                                 | 
|Basic earnings
                    per share                           |                                 |  | $ | 2.55       | 
|Diluted
                    earnings per share                         |                                 |  |   | 2.51       | 
|Diluted
                    earnings per share as adjusted for balance |                                 | 
|sheet
                    restructuring and certain tax charges        |                                 |  |   | 2.99       | 
|Average common and common
                    equivalent               |                                 | 
|shares outstanding:                                                    |                                 | 
|Basic                                                                  |                                 |  |   | 33,177,226 | 
|Diluted                                                                |                                 |  |   | 33,765,012 | 

---

| |  | (see footnote on following page)
| |  | --------------------------------

33

---

|                                                                  | At or For the Years Ended December
                    31, | 
|----------------------------------------------------------------- | ---------------------------------------------------------- | 
|
|
|Average Balance Data:                                             |                                                            | 
|Average interest-earning assets                                   |                                                            | 
|Average interest-bearing liabilities                              |                                                            | 
|Average loans to average deposits                                 |                                                            | 
|Average stockholders' equity                                      |                                                            | 
|Average stockholders' equity to average                           |                                                            | 
|assets                                                            |                                                            | 
|Average interest-earning assets to average                        |                                                            | 
|interest-bearing liabilities                                      |                                                            | 
|Interest rate spread                                              |                                                            | 
|Net interest margin                                               |                                                            | 
|                                                                  |                                                            | 
|Performance Ratios:                                               |                                                            | 
|Return on average assets                                          |                                                            | 
|Return on average assets, exclusive of balance sheet              |                                                            | 
|restructuring and certain tax charges(1)                          |                                                            | 
|Return on average equity                                          |                                                            | 
|Return on average equity, exclusive of balance sheet              |                                                            | 
|restructuring and certain tax charges(1)                          |                                                            | 
|Return on average tangible equity(2)                              |                                                            | 
|Return on average tangible equity, exclusive of balance           |                                                            | 
|sheet restructuring and certain tax charges(1)(2)                 |                                                            | 
|Stockholders' equity to total assets                              |                                                            | 
|Tangible stockholders' equity to tangible                         |                                                            | 
|assets(3)                                                         |                                                            | 
|Tangible and core capital to total assets                         |                                                            | 
|(Bank only)                                                       |                                                            | 
|Risk based capital ratio (Bank only)                              |                                                            | 
|Non-interest expense to average assets                            |                                                            | 
|                                                                  |                                                            | 
|Non-interest expense exclusive of balance sheet                   |                                                            | 
|restructuring to average assets(1)                                |                                                            | 
|Efficiency ratio, exclusive of balance sheet restructuring (1)(4) |                                                            | 
|Ratio of earnings to fixed charges:                               |                                                            | 
|Including interest on deposits                                    |                                                            | 
|Excluding interest on deposits                                    |                                                            | 
|                                                                  |                                                            | 
|Asset Quality Data (at year-end):                                 |                                                            | 
|Non-performing loans to total loans                               |                                                            | 
|Non-performing assets to total assets                             |                                                            | 
|Allowance for loan loss to total loans                            |                                                            | 
|Allowance for loan loss to non-performing                         |                                                            | 
|loans                                                             |                                                            | 
|                                                                  |                                                            | 
|Other Data (at year-end):                                         |                                                            | 
|Number of deposit accounts                                        |                                                            | 
|Mortgage loans serviced for others                                |                                                            | 
|Number of retail banking offices                                  |                                                            | 
|Number of FTEs                                                    |                                                            | 
|Cumulative one-year gap                                           |                                                            | 
|                                                                  |                                                            | 
|Stock Price and Dividend Information:                             |                                                            | 
|High                                                              |                                                            | 
|Low                                                               |                                                            | 
|Close                                                             |                                                            | 
|Cash dividends declared per share                                 |                                                            | 
|Dividend payout ratio                                             |                                                            | 

---

|(1) | Exclusive of balance sheet restructuring and certain tax charges. See Non-GAAP
                    Financial Information below for related reconciliations.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Return on average tangible equity is calculated by dividing net income by the difference
                    of average shareholder equity less average goodwill and core deposit intangibles.
                    See Non-GAAP Financial Information below for related reconciliations.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | See Non-GAAP Financial Information.
|--- | -------------------------------------

|(4) | The efficiency ratio is calculated by dividing non-interest expense exclusive of
                    restructuring charges by the sum of net interest income and non-interest income,
                    exclusive of restructuring charges and net gain/(loss) on sale and write-down of
                    mortgage-backed and investment securities, gain on sale of mortgage servicing rights
                    and fixed assets.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

34

---

Non-GAAP
            Financial Information

This
            report contains certain financial information determined by methods other than in
            accordance with U.S. generally accepted accounting principles, or GAAP. The Companys
            management uses tangible book value per share, tangible stockholders equity
            to tangible assets ratio and return on average tangible equity in its analysis of
            the Companys performance and financial condition and believes this presentation
            provides useful supplemental information that is helpful in understanding our financial
            condition and results, as it provides a method to assess managements success
            in managing alternatives for the utilization of tangible capital.

The
            Company believes net income, non-interest income and non-interest expense adjusted
            for the 2006 balance sheet restructuring and certain 2006 tax charges recorded in
            the fourth quarter of 2006 is useful supplemental information to better understand
            the core operating performance of the Company. See Management's Discussion
            and Analysis of Financial Condition and Results of Operations for a discussion
            of the restructuring plan we announced in the fourth quarter of 2006. The excluded
            tax charges relate to adjustments to tax reserves for prior year periods that were
            recorded in the fourth quarter of 2006 because of uncertainties that recently arose
            relating to an unresolved tax authority audit and other developments. See Managements
            Discussion & Analysis of Financial Condition  Results of Operations 
            Income Taxes.

These disclosures should not be
            considered an alternative to GAAP, nor are they necessarily comparable to Non-GAAP
            performance measures that might be presented by other companies.

Tangible
            Book Value Per Share.Tangible book value per share is calculated
            by dividing (a) stockholders equity less the sum of goodwill and core deposit
            intangibles, by (b) common shares outstanding. The following table presents a reconciliation
            of stockholders equity to tangible stockholders equity (in thousands):

|                                             | 12/31/06 | 12/31/05 |  
|-------------------------------------------- | -------- | -------- | -
|
|Stockholders' equity - as reported           |          |          | $
|Goodwill                                     |          |          |  
|Core
                    deposit intangibles |          |          |  
|                                             |          |          |  
|Tangible stockholders' equity                |          |          | $
|                                             |          |          |  

Tangible
            Stockholders Equity to Tangible Assets.Tangible stockholders
            equity to tangible assets is calculated by dividing (a) stockholders equity
            less the sum of goodwill and core deposit intangibles, by (b) total assets less
            the sum of goodwill and core deposit intangibles. The following table presents a
            reconciliation of total assets to tangible assets (in thousands):

|                                             | 12/31/06 | 12/31/05 |  
|-------------------------------------------- | -------- | -------- | -
|Total assets - as reported                   |          |          | $
|Goodwill                                     |          |          |  
|Core
                    deposit intangibles |          |          |  
|                                             |          |          |  
|Tangible total assets                        |          |          | $
|                                             |          |          |  

35

---

Return
            on Average Stockholders Equity and Return on Average Tangible Stockholders
            Equity.Return on average stockholders equity is calculated
            by dividing (a) net income adjusted for balance sheet restructuring charges and
            certain tax charges (see below) by (b) average stockholders equity. Return
            on average tangible stockholders equity is calculated by dividing (a) net
            income adjusted for balance sheet restructuring charges and certain tax charges
            by (b) average stockholders equity less average goodwill and core deposit
            intangibles. The following table presents a reconciliation of average stockholders
            equity to average tangible stockholders equity (in thousands):

|                                                     |  | Year Ended
                    December 31, |  | 
|---------------------------------------------------- |  | ------------------------------------------- |  | 
|
|Average stockholders' equity                         |  |                                             |  | 
|Average
                    goodwill                 |  |                                             |  | 
|Average
                    core deposit intangibles |  |                                             |  | 
|                                                     |  |                                             |  | 
|Average tangible stockholders' equity                |  |                                             |  | 
|                                                     |  |                                             |  | 

The
            following three tables reconcile net income, non-interest income and non-interest
            expense to net income, non-interest income and non-interest expense as adjusted
            for the balance sheet restructuring and certain tax charges (in thousands):

Net income adjusted for balance
            sheet restructuring and certain tax charges. Diluted earnings per share
            as adjusted for balance sheet restructuring and certain tax charges is calculated
            by dividing net income as adjusted for balance sheet restructuring and certain tax
            charges by the weighted average number of diluted shares outstanding.

|                                                                        |  | Year Ended
                    December 31, 2006
|----------------------------------------------------------------------- |  | ------------------------------------------------
|Net income - as reported                                                |  |                                                 
|Lower of
                    cost of market adjustment on loans         |  |                                                 
|transferred
                    to held for sale                        |  |                                                 
|Loss on
                    mortgage-backed securities                  |  |                                                 
|Loss on
                    investment securities                       |  |                                                 
|Prepayment
                    charge related to repayment              |  |                                                 
|of
                    borrowings                                       |  |                                                 
|Tax benefits
                    related to balance sheet               |  |                                                 
|restructuring
                    charges                               |  |                                                 
|Certain
                    tax charges                                 |  |                                                 
|                                                                        |  |                                                 
|Net income adjusted for balance
                    sheet restructuring |  |                                                 
|and certain
                    tax charges                             |  |                                                 
|                                                                        |  |                                                 

Return
            on average assets is calculated by dividing (a) net income adjusted for balance
            sheet restructuring and certain tax charges by (b) average total assets.

Non-interest income adjusted
            for balance sheet restructuring charges

|                                                                   | Year Ended
                    December 31, 2006 | 
|------------------------------------------------------------------ | ------------------------------------------------ | 
|Non-interest income - as reported                                  |                                                  | 
|Lower of
                    cost of market adjustment on loans    |                                                  | 
|transferred
                    to held for sale                   |                                                  | 
|Loss on
                    mortgage-backed securities             |                                                  | 
|Loss on
                    investment securities                  |                                                  | 
|                                                                   |                                                  | 
|Non-interest income adjusted for
                    balance sheet |                                                  | 
|restructuring
                    charges                          |                                                  | 
|                                                                   |                                                  | 

Non-interest expense adjusted
            for balance sheet restructuring charges

|                                                                    | Year Ended
                    December 31, 2006 | 
|------------------------------------------------------------------- | ------------------------------------------------ | 
|Non-interest expense - as reported                                  |                                                  | 
|Prepayment
                    charge related to repayment          |                                                  | 
|of
                    borrowings                                   |                                                  | 
|                                                                    |                                                  | 
|Non-interest expense adjusted for
                    balance sheet |                                                  | 
|restructuring
                    charges                           |                                                  | 
|                                                                    |                                                  | 

The
            ratio of non-interest expense to average assets is calculated by dividing (a) non-interest
            expense adjusted for balance sheet restructuring charges by (b) average total assets.

36

---

Item 7. Management's Discussion
            and Analysis of Financial Condition and Results of Operations

We
            encourage you to read the following discussion in conjunction with the selected
            financial information as of and for the three years ended December 31, 2006, included
            in Item 6. Selected Financial Data and the financial information as
            of and for the three years ended December 31, 2006, included in Item 8. Financial
            Statements and Supplementary Data.

# Overview

Our net income was $84.6 million in 2006 compared to $103.4 million in 2005 and
            $101.5 million in 2004. Net income for 2006 was reduced by $12.1 million, or $.36
            per diluted share due to the balance sheet restructuring plan we implemented in
            the fourth quarter. In addition, 2006 results were reduced by certain tax charges
            of $4.0 million, or $.12 per diluted share, primarily relating to reserves established
            in connection with uncertainties arising from a recent tax authority audit. Exclusive
            of these charges, 2006 net income was $100.7 million, or $2.99 per diluted share
            compared to $3.13 per diluted share in 2005 and $3.01 in 2004. The decline in earnings
            during 2006 primarily reflects the difficult operating environment that our industry
            faces in the inverted yield curve environment in weak mortgage and housing market
            conditions.

Our
            primary source of revenue is net interest income which is driven by the volume of
            our interest-earning assets and our net interest margin. During 2006, the increasing
            and flat to inverted interest rate yield curve had a negative impact on our net
            interest income as the increase in the average cost of our interest-bearing liabilities
            out-paced increases in our average interest-earning asset yields. In light of the
            unfavorable interest rate environment, a key part of the interest rate risk management
            strategies we pursued in 2006 was to limit balance sheet growth of our one-to-four
            family mortgages, which mitigated some of the margin pressures. Gravitating to more
            of an originate-and-sell model in our residential lending business, we sold a significant
            portion of our ARM loans as well as the majority of our fixed-rate mortgage production
            which generate income from gains on sales. However, significantly lower mortgage
            origination volumes resulting from rising interest rates and slowing housing sales
            during the year limited growth in this source of income.

Due
            to the extended duration of the inverted yield curve environment, we undertook a
            balance sheet restructuring plan in the fourth quarter to reposition our balance
            sheet for improved earnings in the future. As described more fully below, we sold
            certain lower-yielding loans and investment securities, repaid certain higher-cost
            wholesale borrowings, and reinvested remaining proceeds in short-term investment
            securities to eliminate negative interest rate spread that had been reducing our
            net interest income. While this deleveraging caused us to recognize restructuring
            charges in the fourth quarter of 2006 and will shrink our balance sheet for the
            near term, management believes the restructuring will benefit the Company by allowing
            us to reinvest certain funds into higher yielding short-term securities and over
            time to redeploy capital in more favorable investment opportunities as we continue
            our strategy of increasing the concentration of business and home equity loans in
            our portfolio.

Exclusive
            of restructuring charges, we grew non-interest income approximately 14% in 2006
            largely due to stronger deposit account service fees and higher gains on sale of
            loans in our mortgage banking operation which more than offset a $2.1 million decline
            in income from real estate operations. Lot sales activity has been adversely impacted
            by the slow down in the housing market. We anticipate that 2007 will also be a difficult
            year for our land development operations.

37

---

As
            expected, non-interest expense in 2006 increased with the additional costs of operating
            two de novo branches that we opened in December 2005 and the seven branches we added
            in our acquisition of EFC Bancorp, Inc. in February 2006. However, we were able
            to limit the increase in our total non-interest expense through cost containment
            efforts that we pursued in the face of the challenging operating environment. Exclusive
            of expense related to the balance sheet restructuring, our ratio of non-interest
            expense to average assets improved in 2006 to 1.73% from 1.86% in 2005 and 2.01%
            in 2004. We are continuing to address our cost structure and are pursuing additional
            cost control initiatives in 2007.

# Recent Acquisitions

We
            have acquired a number of other financial institutions in recent years, including
            EFC Bancorp in early 2006. The following table summarizes financial information
            relating to our recent acquisitions:

|Selling Entity               | Acquisition Date | Data Processing
                    Conversion
                    Completion | Acquired
                    Deposits | Acquired
                    Loans | Goodwill and
                    Intangibles
                    Recorded
|---------------------------- | ---------------- | ----------------------------------------------------------------------------- | ------------------------------------- | ---------------------------------- | -------------------------------------------------------------------------
|
|EFC Bancorp, Inc.(1)         |                  |                                                                               | February 1, 2006                      |                                    |                                                                          
|Chesterfield Financial Corp. |                  |                                                                              
|(2)                          |                  |                                                                               | November 1, 2004                      |                                    |                                                                          
|St. Francis Capital          |                  |                                                                              
|Corporation(3)               |                  |                                                                               | December 1, 2003                      |                                    |                                                                          
|Fidelity Bancorp, Inc.(4)    |                  |                                                                               | July 21, 2003                         |                                    |                                                                          

---

|(1) | We acquired EFC Bancorp for $176.6 million. We issued 2.3 million shares of stock
                    and paid $67.3 million in cash, $52 million of which was funded with increased borrowings
                    under our unsecured term loan.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | We acquired Chesterfield Financial Corp. for $128.4 million. We issued 981,467 shares
                    of stock and paid $85.7 million in cash for the purchase, $25 million of which was
                    funded by an increase in borrowings under our unsecured term loan.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | We acquired St. Francis Capital Corporation by issuing 7.5 million shares in an
                    all-stock transaction valued at $358 million.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | We acquired Fidelity Bancorp by issuing 2.8 million shares in an all-stock transaction
                    valued at $115 million.
|--- | ----------------------------------------------------------------------------------------------------------------------------------

# Critical Accounting Policies and
            Estimates

Our
            discussion and analysis of financial condition and results of operations are based
            upon consolidated financial statements, which have been prepared in conformity with
            U.S. generally accepted accounting principles, and are more fully described in Note 1
            of the consolidated financial statements found in Item 8. Financial
            Statements and Supplementary Data. The preparation of these consolidated financial
            statements requires that management make estimates and assumptions that affect the
            reported amounts of assets, liabilities, income and expense, as well as related
            disclosures of contingencies. Managements judgment is based on historical
            experience, terms of existing contracts, market trends and other information available.
            We believe that of our significant accounting policies, the following may involve
            a higher degree of judgment and complexity:

Allowance
            for loan losses. In evaluating the adequacy of the allowance for
            loan losses and determining the related provision for loan losses on a quarterly
            basis, management considers: (1) historical loss experience and change in the
            size and mix of the overall portfolio composition, (2) specific allocations
            based upon probable losses identified during the review of the portfolio, (3) delinquency
            trends in the portfolio and the composition of non-performing loans, including the
            percent of non-performing loans with supplemental mortgage insurance, and (4) subjective
            factors, including local and general economic business factors and trends, industry
            and interest rate trends, new lending products and changes in underwriting criteria,
            and portfolio concentrations. A provision for loan losses is recorded as a charge
            to current earnings. The allowance for loan losses is managements estimate
            of probable losses inherent in the Banks loan portfolio at the assessment
            date. If actual losses ultimately exceed managements estimate, the allowance
            may not be sufficient to absorb probable losses in the loan portfolio and may result
            in an additional provision for loan losses. The allowance is also subject to examination
            and adequacy testing by regulatory agencies, which may consider such factors as
            the methodology used to determine the adequacy and size of the allowance relative
            to that of peer institutions, and other adequacy tests. Such regulatory agencies
            could require an adjustment to our allowance based on information available to them
            at the time of their examination.

Valuation
            of mortgage servicing rights. We capitalize the fair value of mortgage
            servicing rights upon the sale of loans. We determine the fair value by allocating
            the previous carrying amount of the sold loans based on the relative fair values
            of the servicing rights retained and the loans that are sold to a third party. The
            estimated value takes into consideration contractually known amounts, such as loan
            balance, term, contract rate and whether the customer escrows funds with the Bank
            for the payment of

38

---

taxes and insurance. The estimated
            value is also affected by additional assumptions relating to loan prepayment speeds,
            earnings on escrow funds, as well as the discount rate used to present value the
            estimated future cash flow stream. Subsequent to the establishment of this asset,
            management reviews the fair value of mortgage servicing rights on a quarterly basis
            using current estimates of prepayment speeds, cash flow and discount rate assumptions.
            Changes in these estimates impact fair value, and could require us to record a valuation
            allowance or recovery. There was no valuation reserve at December 31, 2006 or 2005.
            Net recoveries of $171,000 were recorded in 2005 due to lower prepayment estimates
            reflective of a rising rate environment. Should estimates assumed by management
            regarding future prepayment speeds on the underlying loans supporting the mortgage
            servicing rights prove to be incorrect, additional valuation allowances could occur,
            or conversely, valuation allowances could be recovered if changing estimates increase
            the fair value of mortgage servicing rights.

Valuation
            of goodwill and intangible assets. In accounting for acquisitions
            of other companies, we generally record as assets on our financial statements both
            goodwill and identifiable intangible assets, such as core deposit intangibles. The
            amounts we record are based on our estimates of the fair value of assets and liabilities
            acquired. The valuation techniques we use to determine the carrying value of tangible
            and intangible assets and liabilities acquired in acquisitions and the estimated
            lives of the identifiable intangible assets involve a number of subjective judgments
            such as estimates for discount rates, projected future cash flows and time period
            of useful lives, all of which are susceptible to change based on changes in economic
            conditions and other factors. Core deposit and other identifiable intangible assets
            are amortized to expense over their estimated useful lives and are reviewed for
            impairment whenever events or changes in circumstances indicate that the carrying
            amount of the asset exceeds the remaining value we are reasonably likely to realize.
            Similarly, on an annual basis we evaluate whether the carrying value of our goodwill
            has become impaired, in which case we reduce its carrying value through a charge
            to our earnings. Goodwill is evaluated for impairment at the segment reporting level,
            and all of our goodwill is recorded in our banking segment. Based on our evaluations,
            we recorded no goodwill impairment in the years ended December 31, 2006, 2005 and
            2004.

While
            we believe the valuation assumptions and estimates we used are reasonable, using
            different assumptions or estimates would have resulted in our recording different
            amounts of goodwill and core deposit intangibles and could have impacted our amortization
            expense. For example, if we had assumed faster prepayment speeds of mortgage loans
            we acquired in our acquisitions, the value of the mortgage loans we acquired would
            have been less and the goodwill we recorded would have been greater. Similarly,
            if we had assumed greater deposit run-off rates, we may have recorded lower core
            deposit intangibles, but might have shortened our estimate of the average life of
            this intangible asset, and the combination of these changes may have increased or
            decreased our amortization expense in 2006. Any changes in the assumptions and estimates
            which we use in future periods to determine the carrying value of our goodwill and
            identifiable intangible assets which adversely affect their value or shortens estimated
            lives would adversely affect our results of operations.

Real
            estate held for development. Income from real estate operations in
            the Companys real estate developments are based on cash received less the
            cost of sales per lot, including capitalized interest and an estimate of future
            costs to be incurred. This is especially true at the outset of a project, where
            few actual costs have been incurred in the project as a whole. The estimate of total
            project costs is reviewed on a quarterly basis by management. Estimates are subject
            to change for various reasons, including the duration of the project, changes in
            rules or requirements of the communities where the projects reside, soil and weather
            conditions, increased project budgets, as well as the general level of inflation.
            If these estimates are incorrect and either the expenses are greater than anticipated
            or the sales do not close as expected, we may have to expend additional funds or
            obtain borrowings to cover current improvement costs.

Any change in income from real estate
            operations from past sales that results from changes in future estimated costs are
            recognized in the period of change as either a charge or an addition to income from
            real estate operations. Additionally, we periodically evaluate the net realizable
            value from each project by considering other factors, such as pace of lot absorption,
            sources of funding and timing of disbursements. A charge to current earnings would
            occur if this evaluation indicated a projects net realizable value did not
            exceed its recorded cost. Currently, the estimated net realizable value of Springbank,
            our only project currently under development, exceeds the recorded cost of the project.

Income
            Taxes. The determination of income tax expense and the amounts of
            current and deferred income tax assets and liabilities is based on complex analyses
            of many factors, including

39

---

interpretation of Federal and state
            income tax laws, current financial accounting standards, the difference between
            tax and financial reporting bases of assets and liabilities (temporary differences),
            assessments of the likelihood that the reversals of deferred deductible temporary
            differences will yield tax benefits and estimates of reserves required for tax uncertainties.

We
            periodically undergo examination by various governmental taxing authorities. Such
            agencies may require that changes in the amount of tax expense be recognized when
            their interpretations of tax law differ from those of management, based on their
            judgments about information available to them at the time of their examinations.
            There can be no assurance that future events, such as court decisions, new interpretations
            of existing law or positions by federal or state taxing authorities, will not result
            in tax liability amounts that differ from managements current assessment of
            such amounts, the impact of which could be significant to future results.

Temporary
            differences may give rise to deffered tax assets, which are recorded on our balance
            sheet. We assess the likelihood that deferred tax assets
            will be realized in future periods and establish a valuation allowance for those
            assets for which recovery is unlikely. In making this assessment, we must make judgments
            and estimates regarding the ability to realize these assets through carryback to
            taxable income in prior years, the future reversal of existing taxable temporary
            differences, future taxable income, and the possible application of future tax planning
            strategies. Although the Company has established valuation allowances relating to
            certain deferred tax assets, there is no guarantee that the tax benefits associated
            with other deferred tax assets for which no valuation allowance has been established,
            will be fully realized.

In
            the preparation of income tax returns, tax positions are taken based on interpretation
            of federal and state income tax laws for which the outcome of such positions may
            not be certain. Management periodically reviews and evaluates the status of uncertain
            tax positions and may establish tax reserves for estimates of amounts that may ultimately
            be due or owed (including interest). These estimates may change from time to time
            based on managements evaluation of developments subsequent to the filing of
            the income tax return, such as tax authority audits, court decisions or other tax
            law interpretations. There can be no assurance that any tax reserves will be sufficient
            to cover tax liabilities that may ultimately be determined to be owed. FASB Interpretation
            No. 48 provides new accounting for uncertain income tax positions and is effective
            for 2007. See Recent Accounting Standards.

For
            additional discussion of income taxes, see Management's Discussion and Anaylsis
            of Financial Condition and Results of Operations - Results of Operations- Income
            Tax Expense and Notes 1 and 14 of Notes to Consolidated Financial Statements
            in Item 8 of this Form 10-K.

# Results of Operations

|                                                                    | Year Ended December 31, |  |  
|------------------------------------------------------------------- | ----------------------- |  | -
|
|
|Net income                                                          |                         |  | $
|Net income as adjusted for balance
                    sheet        |                         | 
|restructuring
                    and certain tax charges           |                         |  |  
|Diluted earnings per share                                          |                         |  |  
|Diluted earnings per share as adjusted
                    for      |                         | 
|balance sheet
                    restructuring and                 |                         | 
|certain tax charges                                                 |                         |  |  
|Return on average assets                                            |                         |  |  
|Return on average assets, exclusive
                    of          |                         | 
|balance sheet
                    restructuring and certain tax     |                         | 
|charges (1)                                                         |                         |  |  
|Return on average equity                                            |                         |  |  
|Return on average equity, exclusive
                    of          |                         | 
|balance sheet
                    restructuring and certain tax     |                         | 
|charges (1)                                                         |                         |  |  
|                                                                    |                         | 
|Return on average tangible equity(2)                                |                         |  |  
|Return on average tangible equity,
                    exclusive of |                         | 
|balance sheet
                    restructuring and certain tax     |                         | 
|charges(1)(2)                                                       |                         |  |  
|Average diluted shares outstanding                                  |                         |  |  

---

|(1) | These ratios are calculated exclusive of balance sheet restructuring and certain
                    tax charges. See Item 6. Non-GAAP Financial Information
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Return on average tangible equity is calculated by dividing net income by the difference
                    of average shareholder equity less average goodwill and core deposit intangibles.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

40

---

Balance Sheet Restructuring

During
            the fourth quarter of 2006, we undertook a balance sheet restructuring plan seeking
            to better position the Bank for current difficult and uncertain interest rate environment.
            The restructuring has allowed us to reduce pressure on our net interest margin as
            we reduced the size of our investment portfolio and repaid certain wholesale borrowings,
            and has enabled us to improve future operating results without increasing interest
            rate risk. The restructuring plan had a negative impact on 2006 pre-tax earnings
            of $19.9 million, or $.36 per diluted share on an after-tax basis. We estimate that
            the restructuring will benefit 2007 pre-tax earnings by approximately $9.8 million,
            or approximately $.18 per diluted share on an after-tax basis, and that we will
            have recouped the 2006 restructuring costs through increased net interest income
            in approximately 2.1 years without considering any potential redeployment of capital
            in longer-term opportunities.

The
            table below summarizes the results of the various components of the restructuring:

|                                                | Balance | Yield/
                    Cost | Pre-tax
                    
                    Impact on 2006
                    Results
|----------------------------------------------- | ------- | ------------------------------- | -------------------------------------------------------------------------------------------
|Interest-earning assets sold:                   |         |                                 |                                                                                            
|Loans receivable                                |         |                                 | $                                                                                          
|Investment Securities                           |         |                                 |                                                                                            
|Mortgage-backed securities                      |         |                                 |                                                                                            
|                                                |         |                                 |                                                                                            
|                                                |         |                                 | $                                                                                          
|                                                |         |                                 |                                                                                            
|FHLBC advances prepaid                          |         |                                 | $                                                                                          
|                                                |         |                                 |                                                                                            
|Total restructuring
                    charges |         |                                 |                                                                                            
|                                                |         |                                 |                                                                                            

We
            identified for sale $219.6 million of one- to four-family loans held in our portfolio,
            primarily seasoned 5/1 hybrid ARMs with approximately two years remaining to their
            first repricing, which carried a weighted average yield of 4.21%. A lower-of-cost-or-market
            adjustment was recorded in December 2006, when we reclassified the loans into the
            loans held for sale category. We also identified for sale investments and mortgage-backed
            securities with; a cost basis of $531.4 million, an average duration of approximately
            2.17 years, and an average yield of 3.93%. We recorded an other-than-temporary impairment
            on these securities as of December 31, 2006. Much of this write-down was previously
            recognized as a reduction to stockholders equity through other comprehensive
            income adjustments in accordance with SFAS No. 115. We repaid $501.5 million of
            FHLBC advances with a duration of approximately 2.07 years and included advances
            with unexercised put options. We repaid the borrowings in late December 2006, and
            recorded $2.8 million of expense associated with prepayment of these borrowings.
            We initially funded the repayment with cash on hand and a $400 million short-term
            borrowing until the asset sales were consummated and settled in early 2007. Consequently,
            at December 31, 2006, our balance sheet has yet to reflect the deleverage aspect
            of the transaction. The short-term borrowing was repaid on January 9, 2007. The
            approximately $230.0 million of liquidity available for immediate reinvestment has
            been used to purchase securities which meet the Banks duration target contemplated
            in the transaction, at a current yield of approximately 5.69%, well above the yields
            on assets sold.

Net interest income

Net
            interest income is our principal source of earnings, and consists primarily of interest
            income on loans receivable and mortgage-backed and investment securities, offset
            by interest expense on deposits, borrowed funds, and junior subordinated debentures.
            Net interest income fluctuates due to a variety of reasons, most notably due to
            the size of our balance sheet, changes in interest rates, the shape of the U.S.
            Treasury yield curve, competitive market pressures on the pricing of our products,
            the extent of our investment in non-interest earning assets and the level of interest-rate
            and credit risk we are willing to accept. Our net interest margin has contracted
            over the last several years largely due to the concentration of one- to four-family
            mortgages in our portfolio.

Traditionally,
            we have been able to increase net interest income at a faster pace when intermediate
            to long-term U.S. Treasury rates are greater than short-term interest rates, as
            our funding costs tend to be tied to shorter-term rates, while pricing on our fixed-rate
            and ARM loan products tend to

41

---

be tied to intermediate to longer-term
            interest rates. In periods of greater slope in the yield curve, we have leveraged
            our capital to increase loans and other earning assets and this strategy has successfully
            increased past profits. As the market differential between short- and long-term
            interest rates has shrunk since late 2004, marginal incremental business added to
            our balance sheet carries smaller net interest margin income, and ultimately decreases
            our net interest margin percentage. We have attempted to limit the adverse impact
            of the flatter and inverted yield curve environment by limiting asset growth in
            lower yielding asset categories, by selling a higher percentage of our one- to four-family
            ARM mortgage loan production.

Over
            the past five years, we have successfully transitioned a greater percentage of our
            balance sheet into higher-yielding, adjustable-rate loans related to our business
            banking and home equity line of credit loan portfolios as another way of combating
            a flatter, or inverted yield curve environment. These products tend to be tied to
            the Prime rate (or to a lesser extent three-month LIBOR) and adjust to increased
            short-term interest rates more rapidly than other assets in our portfolio. Because
            of this, we can more effectively match fund these assets with similar duration liabilities,
            exclusive of the shape of the yield curve.

Core
            deposits, which tend to provide lower-cost funding, also help us mitigate the impact
            of a flatter yield curve. Impacting our net interest income recently has been the
            shifting of our low-cost core deposits into higher-yielding certificate accounts
            and money market accounts due to rapid increases in short-term interest rates since
            2005. As rates rose in the first half of 2006, our pricing strategy was designed
            to migrate interest-sensitive depositors to more rate-sensitive certificates of
            deposit. In the fourth quarter of 2006, when rates appeared to have peaked, we changed
            our pricing strategy with a goal of moving these funds back into shorter term products
            such as money market accounts. Our mix of core deposits to total deposits has declined
            slightly from 53.4% at December 31, 2005, to 49.4% at December 31, 2006, and the
            cost of core deposits has also risen, both due to higher short-term market rates
            and competitive pricing for deposits. These factors have added pressure to our net
            interest margin.

42

---

Average
            Balance Sheets.The following table reflects the average yield on
            assets and average cost of liabilities for the periods indicated. Such yields or
            costs are derived by dividing income or expense by the average balance of assets
            or liabilities, excluding any tax equivalent adjustments for municipal security
            income, the impact of which is not significant. Average balances are derived from
            average daily balances, and include non-accrual loans and investments. The yield/cost
            at December 31, 2006 includes fees that are considered adjustments to yield.

|                                         | Year Ended December 31, | 
|---------------------------------------- | ----------------------- | 
|
|
|
|Assets:                                  |                         | 
|Loans receivable                         |                         | 
|Mortgage-backed                          |                         | 
|securities                               |                         | 
|Stock in FHLB of                         |                         | 
|Chicago                                  |                         | 
|Investment securities                    |                         | 
|Interest-bearing deposits                |                         | 
|and federal funds sold(1)                |                         | 
|                                         |                         | 
|Total interest-earning                   |                         | 
|assets                                   |                         | 
|Non-interest earning                     |                         | 
|assets                                   |                         | 
|                                         |                         | 
|Total assets                             |                         | 
|                                         |                         | 
|Liabilities and                          |                         | 
|stockholders' equity:                    |                         | 
|Deposits                                 |                         | 
|Borrowed funds                           |                         | 
|Junior subordinated                      |                         | 
|debentures                               |                         | 
|                                         |                         | 
|Total interest-bearing                  
|liabilities                              |                         | 
|Non-interest                             |                         | 
|bearing deposits                         |                         | 
|Other liabilities                        |                         | 
|                                         |                         | 
|Total liabilities                        |                         | 
|Stockholders' equity                     |                         | 
|                                         |                         | 
|Liabilities and                          |                         | 
|stockholders'
                    equity |                         | 
|                                         |                         | 
|Net interest income/                     |                         | 
|interest rate spread                     |                         | 
|                                         |                         | 
|Net earning assets/net                   |                         | 
|yield on average                         |                         | 
|interest-earning assets                  |                         | 
|                                         |                         | 
|Ratio of interest-earning                |                         | 
|assets to interest-                      |                         | 
|bearing liabilities                      |                         | 
|                                         |                         | 

|(1) | Includes pro-rata share of interest income received on outstanding drafts payable.
|--- | ----------------------------------------------------------------------------------

43

---

Rate/Volume
            Analysis. The table below shows the impact of changes in interest-earning
            assets and interest-bearing liabilities and changes in interest rates on our interest
            income and interest expense during the periods indicated. Changes attributable to
            the combined impact of volume and rate have been allocated proportionately to the
            changes due to volume and the changes due to rate.

|                                                  | Year Ended
                    December 31, 2006 vs. 2005 | Year Ended
                    December 31, 2005 vs. 2004 |  
|------------------------------------------------- | --------------------------------------------------------- | --------------------------------------------------------- | -
|
|
|Change in:                                        |                                                           |                                                           |  
|Interest-income:                                  |                                                           |                                                          
|Loans receivable                                  |                                                           |                                                           | $
|Mortagage-backed
                    securities   |                                                           |                                                           |  
|Investment
                    securities         |                                                           |                                                           |  
|Stock in
                    FHLB of Chicago      |                                                           |                                                           |  
|Interest-bearing
                    deposits and |                                                           |                                                          
|federal
                    funds sold            |                                                           |                                                           |  
|                                                  |                                                           |                                                           |  
|Total
                    interest income         |                                                           |                                                           |  
|                                                  |                                                           |                                                           |  
|Interest-expense:                                 |                                                           |                                                          
|Deposits                                          |                                                           |                                                           |  
|Borrowed
                    funds                |                                                           |                                                           |  
|Junior subordinated                               |                                                           |                                                          
|debentures                                        |                                                           |                                                           |  
|                                                  |                                                           |                                                           |  
|Total
                    interest expense        |                                                           |                                                           |  
|                                                  |                                                           |                                                           |  
|Net
                    change in interest        |                                                           |                                                          
|income                                            |                                                           |                                                           | $
|                                                  |                                                           |                                                           |  

2006
            versus 2005.Net interest income decreased to $259.6 million in 2006, compared
            to $264.8 million in 2005. While we grew average earning assets by $1.12 billion,
            primarily due to the acquisition of EFC, our net interest margin declined 36 basis
            points, to 2.52% from 2.88%. With higher funding costs, our one- to four-family
            mortgage portfolio, made up primarily of hybrid ARMs originated within the last
            one to three years, is negatively impacting our margin. More than $1.5 billion of
            these loans are scheduled to reprice over the next eight quarters, which should
            help our net interest margin beginning in late 2007.

The
            overall yield on interest-earning assets improved 56 basis points to 5.77% in 2006,
            reflecting higher market rates of interest as well as the strategic shift in our
            mix of loans. Organic growth in interest-earning assets was minimal in 2006 due
            to our strategy to limit balance sheet growth in lower-yielding asset categories.

We
            experienced 35 and 48 basis point improvements in the average yields on our mortgage-backed
            and investment securities portfolio, respectively, during 2006 due to maturities
            and amortization of lower-yielding securities redeployed at higher current yields.
            Due to our balance sheet restructuring, the yields on these portfolios should improve
            further in 2007, while average balances are expected to decrease.

We
            reduced our investment in FHLBC stock in 2006 to the extent of permitted redemptions,
            but continued to hold excess investment in what is now an underperforming investment.
            The dividend yield declined to 3.17% in 2006 from 5.91% in 2005 due to continued
            regulatory restrictions and weaker earnings at the FHLBC. We anticipate further
            reducing our excess investment in 2007, subject to FHLBC constraints.

The
            cost of our interest-bearing liabilities increased 98 basis points to 3.54% in 2006,
            as deposit costs increased by 104 basis points due to upward repricing of maturing
            certificates of deposit, slow checking account growth and a decline in the balance
            of passbook accounts. Money market deposit costs increased due to our strategy of
            offering a higher rate money market product as an alternative to higher cost CDs.
            The increase in the prime rate due to Federal Reserve Board tightened monetary policy
            (as well as 3-month LIBOR) led to an increase in the cost of variable rate borrowings
            and our junior subordinated debentures.

In addition, during 2006 we repurchased 1.9 million shares of stock using borrowed
            funds, which improved earnings per share results but had the effect of reducing
            the net interest margin. We also increased our investments in bank-owned life insurance
            (earnings from which are classified as non-

44

---

interest income) by another $35
            million during 2006 after having added $35 million in the second quarter of 2005,
            and our investment in real estate held for development. Investments in non-interest
            earning assets negatively impact the net interest margin.

2005
            versus 2004.Net interest income increased to $264.8 million in 2005, compared
            to $261.3 million in 2004, due to an increase in average interest-earning assets
            of $642.3 million, or 7.5%, to $9.19 billion. Our net interest margin contracted
            18 basis points from the previous year to 2.88% in 2005, due to the faster upward
            repricing of our deposits and borrowed funds compared to our interest->earning assets,
            in response to the rise in short-term market interest rates and our issuance during
            2005 of junior subordinated debentures, which are higher cost than the average rate
            on our other borrowings. We used the majority of this amount to fund stock repurchases
            during the year.

Our
            overall yield on interest-earning assets increased 29 basis points to 5.21% in 2005.
            We achieved a 34 basis point increase in the yield on our loan portfolio, to 5.44%,
            as our portfolios of equity lines of credit and commercial business loans adjusted
            upward in response to the rise in the Prime rate of interest. Similarly, a 38 basis
            point increase in the average yield on our mortgage-backed and investment securities
            portfolio due to new assets purchased at higher rates helped improve our asset yields.
            Due to limited growth in our loan portfolio, attributable to slower mortgage production
            and increased prepayments on mortgage loans and equity lines, we grew our average
            mortgage-backed securities portfolio by $402.8 million, while maintaining our interest
            rate risk objectives. Our overall average asset yield in 2005 was negatively impacted
            by the yield reduction on our FHLBC stock investment, as well as the $147.7 million
            reduction in the average balance of this investment. We redeemed FHLBC stock periodically
            throughout the year during 2005 to address the concentration in our investment portfolio
            resulting from prior acquisitions.

Our
            overall cost of interest-bearing liabilities increased 49 basis points to 2.56%
            in 2006, driven by a 53 basis point increase in our cost of deposits, to 1.94%.
            Deposits accounted for 66.5% of our funding in 2005. Our deposit costs were impacted
            by a variety of factors, including the sharp upward repricing of maturing certificate
            of deposit accounts and money market deposits, slower growth of checking deposits,
            and a decline in the balance of passbook accounts, which led to a reduction in the
            percentage of our core deposits to total deposits to 53.4% in 2005, compared to
            59.6% in 2004. Similarly, our costs of borrowed funds increased 31 basis points
            to 3.77% in 2005. In response to our increase in shorter-term interest-earning assets,
            we have increased our exposure to Prime and LIBOR-indexed borrowed funds, which
            have repriced upward in response to rising short-term interest rates.

Provision for Loan Losses

We
            recorded a provision for loan losses and experienced net charge-offs as follows
            for the three years ended December 31, 2006 as shown below:

|                                 | Year Ended December 31,
|-------------------------------- | -----------------------
|
|
|Provision for loan losses        |                        
|Net charge-offs                  |                        
|Net charge-offs to average loans |                        

The
            provision for loan losses increased in 2006 due to higher incurred and expected
            losses on the residential loan portfolio, particularly in the high loan-to-value
            equity lines of credit category, where we earn a higher rate of interest to compensate
            for the greater credit risk associated with these loans. Higher interest rates and
            weakness in residential real estate prices have contributed to higher levels of
            delinquencies, non-accrual loans and chargeoffs on these loans although our overall
            credit quality experience as measured by net-charge-offs to average loans has remained
            strong.

45

---

In
            evaluating the adequacy of the allowance for loan losses and determining, if any,
            the related provision for loan losses shown in the table above, management considers:
            (1) historical loss experience and change in the size and mix of the overall
            portfolio composition, (2) specific allocations based upon probable losses
            identified during the review of the portfolio, (3) delinquency trends in the
            portfolio and the composition of non-performing loans, including the percent of
            non-performing loans with supplemental mortgage insurance, and (4) subjective factors,
            including local and general economic business factors and trends, industry and interest
            rate trends, new lending products and changes in underwriting criteria and portfolio
            concentrations. The table below shows the total allowance for loan losses and selected
            percentages for the periods indicated:

|                                                                                   | Year Ended December 31, | 
|---------------------------------------------------------------------------------- | ----------------------- | 
|
|
|Allowance for loan losses                                                          |                         | 
|Allowance for loan losses as a percentage
                    of non-performing    |                         | 
|loans                                                                              |                         | 
|Allowance for loan losses as a percentage
                    of loans receivable, |                         | 
|exclusive of loans
                    held for sale                               |                         | 

Non-interest income

2006
            versus 2005. Non-interest income is another significant source of revenue for
            us. It consists primarily of fees earned on deposit and loan products and services
            and gains and losses from asset sale activity. Non-interest income decreased $5.3
            million or 6.5% for the year ended December 31, 2006 compared to the year ended
            December 31, 2005. Exclusive of balance sheet restructuring charges, however, non-interest
            income grew by $11.8 million, or 15% in 2006.

The
            table below shows the composition of non-interest income for the periods indicated.

|                                       | Year Ended December 31, | Percentage Increase
                    
                    (Decrease) |  
|-------------------------------------- | ----------------------- | ----------------------------------------------------------------------- | -
|
|
|Net gain (loss) on sale and write-down |                         |                                                                         |  
|of assets:                             |                         |                                                                        
|Loans receivable                       |                         |                                                                         | $
|Mortgage-backed securities             |                         |                                                                         |  
|Investment securities                  |                         |                                                                         |  
|Premises and equipment                 |                         |                                                                         |  
|Foreclosed real estate                 |                         |                                                                         |  
|Mortgage loan servicing rights         |                         |                                                                         |  
|Deposit account service charges        |                         |                                                                         |  
|Other loan fees                        |                         |                                                                         |  
|Bank-owned life insurance              |                         |                                                                         |  
|Brokerage and insurance commissions    |                         |                                                                         |  
|Loan servicing fee income              |                         |                                                                         |  
|Valuation recovery (allowance) on      |                         |                                                                        
|mortgage servicing rights              |                         |                                                                         |  
|Income from real estate operations     |                         |                                                                         |  
|Other income:                          |                         |                                                                        
|Safe deposit box fees                  |                         |                                                                         |  
|Title agency fees                      |                         |                                                                         |  
|Assumed premium income                 |                         |                                                                         |  
|Real estate held for investment        |                         |                                                                        
|income(1)                              |                         |                                                                         |  
|Other                                  |                         |                                                                         |  
|                                       |                         |                                                                         |  
|Total other income                     |                         |                                                                         |  
|                                       |                         |                                                                         |  
|Total non-interest income              |                         |                                                                         | $
|                                       |                         |                                                                         |  

---

|(1) | Income from investments in affordable housing properties in Wisconsin.
|--- | ----------------------------------------------------------------------

Exclusive
            of the $4.2 million lower-of-cost or market adjustment related to our balance sheet
            restructuring, our gain on sale of loans in 2006 increased to $13.0 million on $1.28
            billion of loan sales compared to $10.7 million on $825.8 million of loan sales
            in 2005. Also contributing to 2006 non-interest income was a $3.6 million gain on
            sale of $963 million of loan servicing rights compared to a $2.4 million gain on
            $751 million of loan servicing rights sold in 2005, continuing our strategy of selling
            primarily single-service loan servicing rights to take advantage of attractive market
            opportunity when we believe market pricing offers us a better return than our projected
            servicing cash flows.

Losses
            on investment and mortgage-backed securities in 2006 resulted from $12.9 million
            of other-than-temporary impairment writedowns on $531 million of securities identified
            for sale as part of the balance sheet restructuring. Subsequent to year end, these
            securities have all been sold. Investment

46

---

gains in 2005 related primarily
            to consideration received in the dissolution of a regional ATM network in which
            we held shares.

Losses
            of $322,000 in 2006 from the sale of foreclosed real estate is indicative of the
            slowdown in home sales in the U.S. and local economy.

Assumed
            premium income, which represents the portion we share of insurance premiums under
            reinsurance agreements with various private mortgage insurance (PMI) companies in
            return for our assuming part of the risk of loss on credits we originate, increased
            over 6% due to a higher volume of loans included in these programs.

Deposit
            account service charge income increased primarily due to higher fee rates for deposit
            service charges, as well as the addition of the EFC deposit base acquired in February
            2006. The growth also reflects increases in debit card activity and higher consumer
            overdraft activity.

Income
            earned from bank-owned life insurance increased $1.7 million, or 31%, in 2006, as
            the result of $15 million of new investments during the year and additional BOLI
            investments acquired in the EFC acquisition.

Other
            loan fee income, which primarily includes late charges, commercial processing fees,
            equity lines of credit fees, income from our origination and sale of subprime product
            offerings and letter of credit fees, was $6.8 million in 2006, an increase of $518,000
            over 2005. The increase is due primarily to higher fee income from subprime lending
            activities where we originate loans as a broker or correspondent for third party
            subprime lenders.

Brokerage
            and insurance commissions improved 28.4% to $6.3 million due to the improved equity
            markets, additional sales personnel, as well as the acquisition of EFC. We currently
            employ 28 licensed investment professionals throughout our network selling investment
            products to our customers.

Loan
            servicing fee income improved in 2006 as a result of slower prepayment speeds experienced
            in the current year that resulted from higher interest rates and slower home sales.
            The improvement supports the higher value of servicing rights in the market, and
            why we have sold mortgage servicing rights in the past two years.

Income
            from real estate operations for the last three years is detailed below by project:

|                                                | Year Ended December 31, | 
|----------------------------------------------- | ----------------------- | 
|
|
|
|Springbank of Plainfield                        |                         | 
|Shenandoah                                      |                         | 
|Tallgrass of Naperville:                        |                         | 
|Single-family                                   |                         | 
|Multi-family
                    and commercial |                         | 
|Other                                           |                         | 
|                                                |                         | 
|                                                |                         | 
|                                                |                         | 

During
            2006, we sold the final lots in Tallgrass of Naperville. Lot sales in the Springbank
            development in 2006 decreased due to the weaker housing market that has significantly
            reduced new and existing home sales nationwide and in our markets. Higher estimated
            costs to completion in the project, largely due to earlier project delays, have
            contributed to lower lot sale profit margins. While we now have product to sell
            to our builder group, most of the builders have been reluctant to add to their existing
            lot inventories due to the slow home sales market. The $296,000 other loss in 2006
            resulted from the Companys decision not to exercise an expiring option to
            purchase a parcel of real estate in Plainfield, IL , which resulted in a write-off
            of an earnest money deposit and other costs. The slow real estate sales market and
            the considerable investment the Company has in the Springbank development in Plainfield
            led to this decision. To accelerate revenue in the Springbank project, we are considering
            potential bulk lot sales, and the sale of unimproved land and the commercial and
            townhome sites in the subdivision.

2005
            versus 2004.Loan sale volume dropped to $825.8 million in 2005 compared to
            $914.1 million in 2004, but our gain on sale of loans increased nearly 15% due to
            higher loan sale margins, primarily on our equity line of credit sales. During the
            year we also completed a sale of mortgage servicing rights, representing 21% of
            our serviced for others portfolio, at a pre-tax gain of $2.4 million.

47

---

Gain
            on investment securities in 2005 resulted primarily from the dissolution of a regional
            ATM network and the sale of two investments in other equity securities. The gain
            in 2004 resulted from the sale of certain corporate debt securities that had incurred
            other-than-temporary impairment write-downs in previous periods at a net gain of
            $2.7 million that was offset by a $2.0 million other-than-temporary impairment write-down
            on $8.8 million of Freddie Mac floating-rate preferred stock securities.

Assumed
            premium income increased over 20% due to an increase in the volume of loans originated
            with PMI that we included in these programs.

Deposit
            account service charge income increased primarily due to higher fee rates for deposit
            service charges, as well as the addition of the EFC deposit base acquired in February
            2006.

Income
            earned from bank-owned life insurance increased $2.2 million, or 64%, in 2005, as
            the result of $35 million of new investments during the year and the receipt of
            $664,000 of death benefit proceeds.

Other
            loan fee income was $6.3 million in 2005, an increase of $528,000 over 2004. The
            increase was due primarily to a higher volume of late charges and commercial processing
            fees.

We
            closed on the first lots in the Springbank development in the fourth quarter of
            2005. The 2005 income from Shenandoah included a $428,000 gain resulting from the
            closing out of the project.

Non-interest expense

The
            table below shows the composition of non-interest expense for the periods indicated.

|                                                                                                             | Year Ended December 31, | Percentage
                    Increase (Decrease) |  
|------------------------------------------------------------------------------------------------------------ | ----------------------- | -------------------------------------------------- | -
|
|
|Compensation                                                                                                 |                         |                                                    | $
|Employee benefits                                                                                            |                         |                                                    |  
|                                                                                                             |                         |                                                    |  
|Total
                    compensation and benefits                                                          |                         |                                                    |  
|                                                                                                             |                         |                                                    |  
|Occupancy expense                                                                                            |                         |                                                    |  
|Furniture, fixture and equipment
                    expense                                                 |                         |                                                    |  
|Advertising and promotion                                                                                    |                         |                                                    |  
|Data processing                                                                                              |                         |                                                    |  
|Amortization of core deposit intangibles                                                                     |                         |                                                    |  
|Prepayment charges related to repayment
                    of borrowings                                    |                         |                                                    |  
|Other expenses:                                                                                              |                         |                                                   
|Professional fees                                                                                            |                         |                                                    |  
|Stationery, brochures
                    and supplies                                                       |                         |                                                    |  
|Postage                                                                                                      |                         |                                                    |  
|Telephone                                                                                                    |                         |                                                    |  
|Transaction fraud
                    losses, net                                                            |                         |                                                    |  
|Correspondent
                    banking services                                                           |                         |                                                    |  
|Title fees, recording
                    fees and credit                                                    |                         |                                                    |  
|report
                    expense                                                                           |                         |                                                   
|Security expense                                                                                             |                         |                                                    |  
|Insurance costs                                                                                              |                         |                                                    |  
|FDIC premiums
                    and OTS assessment                                                         |                         |                                                    |  
|Real estate held
                    for investment(1)                                                       |                         |                                                    |  
|Other                                                                                                        |                         |                                                    |  
|                                                                                                             |                         |                                                    |  
|Total other expenses                                                                                         |                         |                                                    |  
|                                                                                                             |                         |                                                    |  
|Total
                    non-interest expense                                                               |                         |                                                    | $
|                                                                                                             |                         |                                                    |  
|Non-interest expense
                    to average assets, exclusive of balance sheet restructuring charges |                         |                                                    |  
|FTEs                                                                                                         |                         |                                                    |  

---

|(1) | Expenses related to investments in affordable housing properties in Wisconsin.
|--- | ------------------------------------------------------------------------------

48

---

2006
            versus 2005.Non-interest expense increased 6.5%, or $12.0 million, in 2006
            compared to 2005, including $2.8 million of prepayment charges related to the balance
            sheet restructuring and $1.0 million loss related to a standby letter of credit
            obligation. While we added seven branches from the acquisition of EFC and operated
            two de novo branches opened in December 2005 for the full year, we partially offset
            these costs through a number of cost curtailment strategies implemented during the
            year. The ratio of non-interest expense to average assets improved to 1.73% in 2006
            from 1.86% in 2005. Efforts to carefully monitor and control non-interest expense
            levels will continue to be a focus in 2007.

Compensation
            and benefits increased by 5.8% during 2006, while occupancy and equipment costs
            increased by 8.2% over this same period. The increase in these categories is primarily
            due to the impact of the EFC transaction.

We
            experienced a 19.0% increase in data processing expense to $9.7 million in 2006
            as the expansion of our retail network in the EFC acquisition necessitated additional
            resources allocated to network hardware support. Also contributing to the increase
            was the cost of additional security safeguards.

Amortization
            of core deposit intangibles increased as a result of the EFC acquisition.

Other
            expenses of $36.0 million were 3.6% lower than 2005 despite the $1.0 million write
            down. Professional expenses were substantially lower in 2006 compared to 2005 as
            certain expenses incurred in 2005 relating to anti-money laundering and Sarbanes-Oxley
            functions were not recurring in 2006.

2005
            versus 2004.Our successful cost control efforts during the year held non-interest
            expenses flat to the prior year. The ratio of non-interest expense to average assets
            improved to 1.86% in 2005 compared to 2.01% in 2004. This was achieved while operations
            continued to expand through acquisition (Chesterfield Financial Corp. in October
            2004) and three new branch openings in 2005.

Compensation
            and benefit costs increased only 1.7% in 2005, as our average full-time equivalent
            number of employees remained flat, and we reduced annual incentive compensation
            despite adding three new branches during the year.

Our
            advertising costs were reduced by 8.4% as we changed our marketing initiatives,
            spending less on new account premiums and channeling those savings into more targeted,
            rate-driven promotions.

Professional
            fees increased during 2005 compared to the prior year, reflecting higher costs related
            to consulting fees for various process improvement initiatives, including an automated
            work flow system for the mortgage loan division, and for enhancement of our ongoing
            Bank Secrecy Act/anti-money laundering compliance activities.

Telephone
            expense decreased year over year due to renegotiation and consolidation of our contract.
            Reductions in stationery and supplies expenses for 2005 reflect various efficiency
            and cost-reduction efforts.

# Income Tax Expense

2006
            versus 2005.Income tax expense decreased to $49.0 million for 2006, compared
            to $54.5 million for 2005 due to a decrease in pre-tax income, the effect of which
            was partially offset by an increase in the effective income tax rate. Our effective
            tax rate increased to 36.7% in 2006 compared to 34.5% for 2005. The increase in
            the effective tax rate compared to the prior year period was primarily attributable
            to adjustments to tax reserves for uncertainties.

During
            2006, we recorded additional tax reserves of approximately $4.5 million relating
            to tax uncertainties (including interest) associated with income earned through
            the Banks REIT subsidiary that invests in real estate loans. Included in this
            total is $4.0 million of REIT-related reserves recorded in the fourth quarter as
            a result of state audit activity. As part of its audit of state income tax returns
            for 1999 to 2001, the Illinois Department of Revenue (IDR) issued a
            proposed adjustment in January 2007 that reflected the disallowance of the REIT
            dividends paid deduction for the years under examination, and a proposed increase in state income tax of approximately $11.4 million is claimed to be due. We disagree with the IDR
            proposed adjustment and intend to defend our tax filing positions.

49

---

Although
            we believe we have established adequate reserves for the state tax uncertainties
            associated with the REIT, if we are unsuccessful in defending our tax filing positions
            in these and subsequent years, we may incur increased tax expense in future periods.

2005
            versus 2004.Income tax expense increased to $54.5 million for 2005, compared
            to $50.8 million for 2004, due to an increase in pre-tax income and to an increase
            in our effective tax rate to 34.5% in 2005 compared to 33.3% for 2004. The increase
            in the effective tax rate in 2005 was primarily due to the reversal of tax reserves
            for uncertainties in 2004 that related to certain prior years income tax matters.

A
            reconciliation of the statutory federal income tax rate to the effective tax rate
            is included in Note 14 to the consolidated financial statements in Item 8. Financial
            Statements and Supplementary Data.

# Liquidity and Capital Resources

Our
            holding company manages liquidity and capital resources to provide funds necessary
            for holding company debt service on borrowings, cash dividends to stockholders,
            funding our real estate operations, and planned repurchases of common stock. Our
            major sources of liquidity at our holding company are dividends from the Bank, which
            are subject to regulatory limitations. Additionally, we maintain a $60.0 million
            unsecured line of credit with a Chicago-based commercial bank. See Business
            Borrowed Funds and Junior Subordinated Debentures on page 19 for more information
            relating to this bank line of credit.

At
            December 31, 2006 our capital structure at the holding company includes equity capital
            of $1.07 billion, coupled with $67.0 million of junior subordinated debentures and
            $147.5 million of unsecured term debt. The weighted-average cost of our junior subordinated
            debentures is equal to 3-month LIBOR plus 156 basis points, while our term debt
            floats at 3-month LIBOR plus 95 basis points. We have used a combination of these
            sources of funds over the past few years to fund acquisitions and to repurchase
            our common stock in the open market. In connection with our purchase of EFC, we
            issued $105.1 million worth of our common stock, and increased our unsecured term
            loan to $115 million from $63 million to help finance the cash portion of the transaction.
            We also increased our revolving line of credit during 2006 from $55.0 million to
            $60.0 million. In July, 2006, we increased the term loan by $40 million to $155
            million in part to provide funding for our stock buyback program. A scheduled principal
            payment on the term loan of $7.5 million was paid on December 31, 2006 reducing
            the balance to $147.5 million. At December 31, 2006, there were no amounts outstanding
            under the $60 million line of credit.

During
            2006, the Company received $95.0 million in dividends from the Bank. At December
            31, 2006 under current OTS regulations, the Bank has $13.3 million of retained earnings
            available for dividend declarations. On January 1, 2007 the amount available for
            dividend declarations increased to $40.5 million.

We
            manage liquidity at the Bank to ensure that adequate funds are available to meet
            normal operating requirements, as well as unexpected loan demand or deposit withdrawals
            by our customers, and other contractual obligations or commitments, on a timely
            and cost-effective manner. Our primary sources of funds are deposits, wholesale
            borrowings, principal repayments on loans and mortgage-backed securities, as well
            as proceeds from the sale of loans and investment securities. We manage our liquidity
            through regular review of loan originations and payoffs, deposit flows, and anticipated
            movements in interest rates, efforts that are aimed at forecasting when liquidity
            needs may occur and satisfying these liquidity needs while attempting to minimize
            funding risk.

While
            our scheduled loan and mortgage-backed securities amortization and maturing certificates
            of deposit are a relatively predictable source of funds, core deposit flows, loan
            and mortgage-backed securities prepayments are greatly influenced by economic conditions,
            the general level of interest rates and competition. We utilize particular sources
            of funds based on comparative costs and availability. We expect to continue diversifying
            our funding sources in 2007 through increased use of other wholesale borrowing sources,
            including reverse repurchase agreements. We may pursue wholesale borrowings with
            optionality structures to provide lower effective borrowing costs.

At
            December 31, 2006, we have approximately $1.21 billion of potential additional borrowing
            capacity from the FHLBC and approximately $1.05 billion of available collateral
            capacity under our one- to four-family blanket pledge agreement. We also have the
            ability to pledge other mortgage-backed and investment securities, as well as certain
            multi-family mortgage loans. Additional borrowings from the

50

---

FHLBC are subject to the Banks
            compliance underwriting, collateral, capital stock and other policies set forth
            in the FHLBC credit guide at the time of the borrowing request. In addition, we
            have $80 million of various short-term lines of credit with two other commercial
            banks. We also have additional capacity to obtain other borrowings through the pledge
            of investment or mortgage-backed securities.

Contractual Obligations and Commitments
            and Contingencies

Through
            the normal course of business we enter into certain contractual obligations and
            other commitments. These obligations generally relate to the funding of operations
            through deposits or borrowings. We generally renew a large percentage of our certificates
            of deposit, upon maturity, as certificates of deposit are primarily retail-oriented
            accounts rather than more rate-sensitive brokered certificates. As such, the scheduled
            $2.78 billion of maturing certificates of deposit in 2007 are not expected to put
            a burden on our cash needs. We have the ability to refinance any advance coming
            due with the FHLBC, which we will normally do in the normal course of business if
            our loan portfolio is growing and out-pacing deposit growth. If loan portfolio growth
            is slower, due to higher prepayments in the loan portfolio or increased loan sale
            activity, we may repay our maturing advances out of loan repayment proceeds.

Contractual
            Obligations. The following table shows our contractual obligations
            coming due in the periods indicated at December 31, 2006:

|                                     | Total | Less than
                    1 Year | 1 to 3
                    Years | 3 to 5
                    Years | After 5
                    Years
|------------------------------------ | ----- | ------------------------------------ | -------------------------------- | -------------------------------- | ---------------------------------
|
|Certificates of deposit              |       |                                      | $                                | 3,554,035                        |                                  
|FHLB of Chicago advances             |       |                                      |                                  | 2,155,000                        |                                  
|Other borrowings                     |       |                                      |                                  | 470,751                          |                                  
|Unsecured term bank loan             |       |                                      |                                  | 147,500                          |                                  
|Junior subordinated debentures       |       |                                      |                                  | 67,011                           |                                  
|Purchase obligations                 |       |                                      |                                  | 5,623                            |                                  
|Real estate development contracts(1) |       |                                      |                                  | 11,898                           |                                  
|Post retirement benefit plans        |       |                                      |                                  | 5,895                            |                                  
|Operating leases                     |       |                                      |                                  | 54,310                           |                                  
|                                     |       |                                      |                                  |                                  |                                  
|Total                                |       |                                      | $                                | 6,472,023                        |                                  
|                                     |       |                                      |                                  |                                  |                                  

---

|(1) | Reflects pending contractual commitments for improvements. These figures do not
                    include estimated development costs not under contract, currently estimated at $67
                    million for existing real estate development projects, all of which relates to our
                    Springbank of Plainfield development.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Purchase
            obligations reflect payment obligations under agreements to purchase goods or services
            in determinable amounts at fixed prices that are enforceable and legally binding
            on the Company.

Real
            estate development costs have been funded primarily out of proceeds from sales of
            previously developed lots, and when sales have not generated sufficient cash flow,
            funding is supported by additional capital investments from the holding company.
            It is currently anticipated that in 2007 we will be required to supplement the cash
            flow from lot sales with capital investments from the holding company.

Post
            retirement benefits include benefits for certain employees and/or directors under
            the Companys Supplemental Executive Retirement Plan and Long-Term Medical
            Plan.

51

---

Commitments
            and Contingencies. The following table shows certain off-balance
            sheet commitments and contingencies of the Company and the Bank as of December 31,
            2006:

|                                                    | Total | Less than
                    1 Year | 1 to 3
                    Years | 3 to 5
                    Years | After 5
                    Years
|--------------------------------------------------- | ----- | ------------------------------------ | -------------------------------- | -------------------------------- | ---------------------------------
|
|One- to four-family mortgage                        |       |                                      |                                  |                                  |                                  
|commitments                                         |       |                                      | $                                | 377,617                          |                                  
|Equity line and equity loan                         |       |                                     
|commitments                                         |       |                                      |                                  | 55,856                           |                                  
|Unused portion of equity lines of                   |       |                                     
|credit                                              |       |                                      |                                  | 1,166,102                        |                                  
|Commitments to sell one- to                         |       |                                     
|four-family mortgage
                    and equity |       |                                     
|loans                                               |       |                                      |                                  | 109,266                          |                                  
|SBIC commitments                                    |       |                                      |                                  | 3,625                            |                                  
|Other mortgage loan commitments                     |       |                                      |                                  | 50,404                           |                                  
|Commercial business lines                           |       |                                      |                                  | 643,059                          |                                  
|Letters of credit(1)                                |       |                                      |                                  | 111,091                          |                                  
|Commercial business loan                            |       |                                     
|commitments                                         |       |                                      |                                  | 3,985                            |                                  
|Loans in Process                                    |       |                                      |                                  | 32,258                           |                                  
|Contingent liability under                          |       |                                     
|recourse provisions(2)                              |       |                                      |                                  | 63,128                           |                                  
|                                                    |       |                                      |                                  |                                  |                                  
|Total                                               |       |                                      | $                                | 2,616,391                        |                                  
|                                                    |       |                                      |                                  |                                  |                                  

---

|(1) | Letters of credit include $14.0 million related to land development projects.
|--- | -----------------------------------------------------------------------------

|(2) | Amounts are shown based on time to maturity for amounts if used. Reflects the maximum
                    amount of potential liability for credit losses at December 31, 2006 that we have
                    retained relating to an aggregate $719.2 million of one- to four-family loans. We
                    have either sold the loans to investors with recourse or have assumed a layer of
                    credit risk through private mortgage insurance in force in the Banks captive
                    reinsurance subsidiary and have a contingent liability under these provisions of
                    $63.1 million. Our loss experience to date under such recourse provisions has been
                    immaterial.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

At
            December 31, 2006, we have $331.2 million of cash and liquidity, $109.3 million
            of commitments to sell loans and significant additional borrowing capacity from
            the FHLBC and other wholesale borrowing sources. These sources are also available
            for the funding of unused equity lines of credit. However, we do not expect all
            of these lines to be used based on historical levels of total line usage by our
            customers. Recourse provisions include credit risk related to $28.6 million of loans
            sold with recourse to investors, $16.8 million of credit risk relating to loans
            sold to the MPF program and $17.7 million of credit risk related to loans with private
            mortgage insurance in force in our captive reinsurance subsidiary.

# Impact of Inflation and Changing
            Prices

The
            consolidated financial statements and related consolidated information are prepared
            in accordance with generally accepted accounting principles, which require the measurement
            of financial position and operating results in terms of historical dollars without
            considering changes in the relative purchasing power of money over time due to inflation.
            Unlike most industrial companies, virtually all of the assets and liabilities of
            a financial institution are monetary in nature. As a result, interest rates have
            a more significant effect on a financial institutions performance than the
            effects of general levels of inflation. Interest rates do not necessarily move in
            the same direction or in the same magnitude as the price of goods and services.

# Recent Accounting Standards

Statements of Financial Accounting
            Standards

Stock
            Based Compensation.In December 2004, the FASB issued Statement No. 123 (revised
            2004), Share-Based Payment (SFAS No. 123R). SFAS No. 123R
            is a revision of SFAS No. 123, Accounting for Stock Based Compensation,
            supersedes APB 25 and amends FASB Statement No. 95, Statement of Cash Flows.
            SFAS No. 123R requires that stock option awards, as well as other equity-based compensation,
            be recognized as compensation expense in the income statement based on their fair
            values determined at the date of the grant. Under SEC guidance, the applicable effective
            date of SFAS No. 123R is the beginning of the next fiscal year after June 15, 2005.
            SFAS No. 123R permits companies to adopt the recognition requirements using either
            a modified prospective method or a modified retrospective
            method. Under the modified prospective method, compensation cost is
            recognized in the financial statements based on the time of vesting beginning with
            the effective date, under the requirements of SFAS No. 123R for all share-based
            payments granted after that date and under the requirements of SFAS No. 123 for
            all awards granted prior to the effective date of SFAS No. 123R that vest after
            the effective date.

52

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The
            Company adopted SFAS No. 123R effective January 1, 2006 using the modified
            prospective method and plans to use the Black-Scholes option valuation model.
            Adopting SFAS No. 123R will result in the Company recording compensation cost for
            employee stock options that vest on or after January 1, 2006 or are granted on or
            after January 1, 2006. Nearly all stock options outstanding on December 31, 2005
            were fully-vested and there were no new stock options granted in 2006 so SFAS No.
            123R had minimal impact in 2006. We will incur compensation expense to the extent
            that additional stock option awards are made in future periods. Had the Company
            adopted stock option expensing in prior periods, the impact would have approximated
            that as presented in the SFAS No. 123 disclosure of pro-forma net income and earnings
            per share in Note 1, Summary of Accounting Policies, of this Form 10-K.
            See Note 1 for the pro forma impact in 2005 and 2004.

For
            additional information regarding the Companys stock-based compensation plans,
            refer to Note 16, Officer, Director and Employee Benefit Plans, of this
            Form 10-K.

Accounting
            Changes and Error Corrections. In May 2005, the FASB issued Statement No. 154,
            Accounting Changes and Error Corrections, which provides guidance on
            the accounting for and reporting of accounting changes and error corrections. It
            establishes, unless impracticable, retrospective application as the required method
            for reporting a change in accounting principle in the absence of explicit transition
            requirements specific to the newly adopted accounting principle. The reporting of
            a correction of an error by restating previously issued financial statements is
            also addressed by this statement. This statement became effective, on a prospective
            basis, for fiscal years beginning after December 15, 2005. Our implementation of
            this statement has not had a material affect on our consolidated financial statements.

Accounting
            for Certain Hybrid Financial Instruments  an amendment of FASB Statements
            No. 133 and 140.In February 2006, FASB issued SFAS No. 155, Accounting
            for Certain Hybrid Financial Instruments  an amendment of FASB No. 133 and
            140, which is effective for fiscal years beginning after September 15, 2006.
            The statement was issued to clarify the application of SFAS No. 133 to beneficial
            interests in securitized financial assets and to improve the consistency of accounting
            for similar financial instruments, regardless of the form of the instruments.
            This statement is effective for the first fiscal year beginning after September
            30, 2006. We do not expect implementation of the Statement in 2007 to have a material
            effect on our consolidated financial statements.

Accounting
            for Servicing of Financial Assets.In March 2006, FASB issued SFAS No. 156,
            Accounting for Servicing of Financial Assets  an amendment to FASB Statement
            No. 140. The new standard requires recognition of servicing assets in connection
            with any obligation to service a financial asset arising from 1) a servicing contract
            entered into as part of a transfer of assets meeting the requirements for sale accounting,
            2) the transfer of assets to a special purpose entity in a guaranteed mortgage securitization
            where the transferor retains a controlling interest in the securitized asset, or
            3) an acquisition or assumption of obligations to service financial assets not related
            to the servicer or its consolidated affiliates. The servicing assets and liabilities
            must be measured at fair value initially, if practicable, and the assets or liabilities
            must either be amortized or recorded at fair value at each reporting date. The statement
            allows a one-time reclassification for entities with servicing rights and subsequently
            requires separate presentation of servicing assets and liabilities at fair value
            in the statement of financial position. This statement is effective for the first
            fiscal year beginning after September 15, 2006, with earlier adoption permitted.
            We adopted this pronouncement January 1, 2007 and will utilize the amortization
            method. We do not expect this implementation to have a material effect on our consolidated
            financial statements.

Fair
            Value Measurements.In September 2006, FASB issued SFAS No. 157,Fair
            Value Measurements,whichestablishes a framework for measuring
            fair value, and expands disclosures about fair value measurements required under
            the accounting pronouncements, but does not change existing guidance as to whether
            or not an instrument is carried at fair value. Additionally, it establishes a fair
            value hierarchy that prioritizes the information used to develop those assumptions.
            SFAS No. 157 is effective for financial statements issued for fiscal years beginning
            after November 15, 2007, and interim periods within those fiscal years. Earlier
            application is encouraged, provided that the reporting entity has not yet issued
            financial statements for fiscal year, including financial statements for an interim
            period within the fiscal year. We are currently evaluating the impact, if any, that
            SFAS No. 157 will have on our consolidated financial statements.

53

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Employers
            Accounting for Defined Benefit Pension and Other Postretirement Plans, an Amendment
            of FASB Statements No. 87, 88, 106, and 132R.In September 2006, the FASB, issued
            SFAS, No. 158, Employers Accounting for Defined Benefit Pension and
            Other Postretirement Plans, an Amendment of FASB Statements No. 87, 88, 106, and
            132R, which requires employers to recognize the underfunded or overfunded
            status of a defined benefit postretirement plan as an asset or liability in its
            statement of financial position and to recognize changes in the funded status in
            the year in which the changes occur through accumulated other comprehensive income.
            Additionally, SFAS No. 158 requires employers to measure the funded status of a
            plan as of the date of its year-end statement of financial position. The new reporting
            requirements and related new footnote disclosure rules of SFAS No. 158 are effective
            for fiscal years ending after December 15, 2006. We adopted the provisions of SFAS
            No. 158 for the year end 2006, and the effect of recognizing the funded status in
            accumulated other comprehensive income was not significant. The new measurement
            date requirement applies for fiscal years ending after December 15, 2008. See Note
            16, Officer, Director and Employee Benefit Plans, of this Form 10-K
            for additional information.

Financial Accounting Standards
            Board Staff Positions, Interpretations and Issues

Other-Than-Temporary
            Impairment. FASB Staff Position on FAS No. 115-1 and FAS No. 124-1
            (the FSP), The Meaning of Other-Than-Temporary Impairment and
            Its Application to Certain Investments, was issued in November 2005 and addresses
            the determination of when an investment is considered impaired, whether the impairment
            on an investment is other-than-temporary and how to measure an impairment loss.
            The FSP also addresses accounting considerations subsequent to the recognition of
            other-than-temporary impairments on a debt security, and requires certain disclosures
            about unrealized losses that have not been recognized as other-than-temporary impairments.
            The FSP replaces the impairment guidance on Emerging Issues Task Force (EITF) Issue
            No. 03-1 with references to existing authoritative literature concerning other-than-temporary
            determinations. Under the FSP, losses arising from impairment deemed to be other-than-temporary,
            must be recognized in earnings at an amount equal to the entire difference between
            the securities cost and its fair value at the financial statement date, without
            considering partial recoveries subsequent to that date. The FSP also required that
            an investor recognize other-than-temporary impairment losses when a decision to
            sell a security has been made and the investor does not expect the fair value of
            the security to fully recover prior to the expected time of sale. The FSP is effective
            for reporting periods beginning after December 15, 2005. Our initial adoption
            of this statement has not had a material impact on our consolidated financial statements.

FASB
            Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an
            interpretation of FASB Statement No.109. Interpretation 48 prescribes
            a recognition threshold and a measurement attribute for the financial statement
            recognition and measurement of a tax position taken or expected to be taken in a
            tax return. Benefits from tax positions should be recognized in the financial statements
            only when it is more likely than not that the tax position will be sustained upon
            examination by the appropriate taxing authority that would have full knowledge of
            all relevant information. The amount of tax benefits to be recognized for a tax
            position that meets the more-likely-than-not recognition threshold is measured as
            the largest amount of benefit that is greater than fifty percent likely of being
            realized upon ultimate settlement. Tax benefits relating to tax positions that previously
            failed to meet the more-likely-than-not recognition threshold should be recognized
            in the first subsequent financial reporting period in which that threshold is met
            or certain other events have occurred. Previously recognized tax benefits relating
            to tax positions that no longer meet the more-likely-than-not recognition threshold
            should be derecognized in the first subsequent financial reporting period in which
            that threshold is no longer met. Interpretation 48 also provides guidance on the
            accounting for and disclosure of tax reserves for unrecognized tax benefits, interest
            and penalties and accounting in interim periods. Interpretation 48 is effective
            for fiscal years beginning after December 15, 2006. The change in net assets as
            a result of applying this pronouncement will be a change in accounting principle
            with the cumulative effect of the change required to be treated as an adjustment
            to the opening balance of retained earnings on January 1, 2007, except in certain
            cases involving uncertainties relating to income taxes in purchase business combinations.
            In such instances, the impact of the adoption of Interpretation 48 will result in
            an adjustment to goodwill. While our analysis of the impact of adopting Interpretation
            48 is not yet complete, we do not currently anticipate it will have a material impact
            on the Companys consolidated financial statements.

Accounting
            for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar
            Life Insurance Arrangements. In September 2006, FASB ratified the consensus
            reached by the Emerging Issues Task Force, or EITF, in Issue No. 06-4, Accounting
            for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar
            Life Insurance Arrangements. EITF 06-4 requires companies with split-dollar
            life insurance policies that provide a benefit to an employee that extends

54

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to post-retirement periods to recognize
            a liability for future benefits based on the substantive agreement with the employee.
            Recognition should be in accordance with FASB Statement No. 106, Employers
            Accounting for Retirement Benefits Other Than Pensions or APB Opinion No.
            12, Omnibus Opinion  1967, depending on whether a substantive
            plan is deemed to exist. Companies are permitted to recognize the effects of applying
            the consensus through either (1) a change in accounting principle the cumulative-effect
            adjustment to retained earnings or to other components of equity or net assets as
            of the beginning of the year of adoption or (2) a change in accounting principle
            through retrospective application to all prior periods. EITF 06-4 will be effective
            for fiscal years beginning after December 15, 2007, with early adoption permitted.
            We anticipate adopting EITF 06-4 in 2008 and are in the process of assessing the
            impact on our consolidated financial statements.

Accounting
            for Purchases of Life Insurance-Determining the Amount That Could Be Realized in
            Accordance with FASB Technical Bulletin No. 85-4, Accounting for Purchases of Life
            Insurance. In September 2006, FASB ratified the consensus reached by the EITF,
            in Issue No. 06-5. Accounting for Purchases of Life Insurance-Determining
            the Amount That Could Be Realized in Accordance with FASB Technical Bulletin No.
            85-4, Accounting for Purchases of Life Insurance. EITF 06-5 concluded that
            companies purchasing a life insurance policy including COLI or BOLI should record
            the amount that could be realized, considering any additional amounts beyond cash
            surrender value included in the contractual terms of the policy. The amount that
            could be realized should be based on assumed surrender at the individual policy
            or certificate level, unless all policies or certificates are required to be surrendered
            as a group. When it is probable that contractual restrictions would limit the amount
            that could be realized, such contractual limitations should be considered and any
            amounts recoverable at the insurance companys discretion should be excluded
            from the amount that could be realized. Companies are permitted to recognize the
            effects of applying the consensus through either (1) a change in accounting principle
            through a cumulative-effect adjustment to retained earnings or to other components
            of equity or net assets as of the beginning of the year of adoption or (2) a change
            in accounting principle through retrospective application to all prior periods.
            EITF 06-5 will be effective for fiscal years beginning after December 15, 2006.
            We will adopt EITF 06-5 in 2007 and are in the process of assessing the impact on
            our consolidated financial statements.

SEC Staff Accounting Bulletins

Considering
            the Effects of Prior Year Misstatements in Current Year Financial Statements.
            In September 2006, the Securities and Exchange Commission issued Staff Accounting
            Bulletin No. 108, Considering the Effects of Prior Year Misstatements when
            Quantifying Misstatements in Current Year Financial Statements, (SAB
            108),which provides interpretive guidance on the consideration of the effects
            of prior year misstatements in quantifying current year misstatements for the purpose
            of a materiality assessment. We adopted SAB 108 in the fourth quarter of 2006 with
            no impact on our consolidated financial statements.

# Item 7A. Quantitative and Qualitative
            Disclosures about Market Risk

Ourprimary market risk is considered to be interest rate risk. Interest
            rate risk on our balance sheet arises from the maturity mismatch of interest-earning
            assets versus interest-bearing liabilities, as well as the potential for maturities
            to shorten or lengthen on our interest-earning assets, and to a lesser extent on
            our interest-bearing liabilities due to the exercise of options. The most common
            of these are prepayment options on mortgage loans, and mortgage-backed securities,
            and to a lesser extent put options on wholesale borrowings or jump-rate features
            in our certificates of deposits. Managements goal, through policies established
            by the Asset/Liability Management Committee of the Board of Directors (ALCO), is
            to maximize net interest income while achieving adequate returns on equity capital
            and managing our balance sheet within the established interest rate risk policy
            limits prescribed by the ALCO.

We
            use a variety of measurement and modeling techniques that estimate the impact of
            future movements in interest rates on the net interest income of our Company. Generally,
            we measure the impact via parallel movements in interest rates in 100 basis point
            increments over a one-year time horizon, although we also model other scenarios,
            such as ramps and rotations of the Treasury yield curve.

One
            of the techniques used in measuring the sensitivity of net interest income to changes
            in interest rates is interest rate sensitivity (static) gap analysis. The static
            gap is the difference between the amount of interest-earning assets maturing or
            repricing within a specific period of time and the amount of interest-bearing liabilities
            maturing or repricing within that same period of time. We utilize our static gap
            analysis as means of managing our interest rate risk at the cumulative one-year
            time horizon. In this

55

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analysis, maturities of assets and
            liabilities are adjusted for the estimated impact of embedded options that are contained
            in certain financial instruments on the Companys balance sheet. These include
            prepayment assumptions on real estate loans, and mortgage-backed securities, call
            options embedded in investment securities, and put options embedded in certain borrowings.
            Because of the level of financial instruments with embedded options on our balance
            sheet, certain shortcomings are inherent in using gap analysis to quantify exposure
            to interest rate risk. For instance, while we model expected loan prepayments in
            our static gap analysis, actual customer behavior may prove to be much different.
            Changes in interest rates may impact cash flow on a lag basis, or lead future interest
            rate movements, and our expected lives of our non-maturity core deposit accounts
            may not prove to be as long-term as we assume them to be in our gap analysis. However,
            we still believe static gap analysis remains a useful tool for us to help manage
            our interest rate risk.

Generally,
            a positive one-year gap, where more interest-earning assets are repricing or maturing
            during one-year period than interest-bearing liabilities, would tend to result in
            a reduction in net interest income in a period of falling interest rates. Conversely,
            during a period of rising interest rates, a positive one-year gap would likely result
            in an improvement in net interest income. Our goal is to maintain our cumulative
            one-year gap within the range of (15)% to 15%, although we will begin to adjust
            our ALCO strategies in our interest-sensitive portfolios, if the gap exceeds (10)%
            to 10%, recognizing that changes in ALCO strategies take some time to impact our
            overall static gap position. Our loan portfolio tends to have the most impact on
            the movement in our static gap over a range of changing interest rates, due to the
            predominance of one- to four-family mortgage loans that allow the customer to prepay
            without penalty. We have mitigated the impact one- to four-family loans can have
            on our gap by 1) reducing their concentration as a percentage of our overall loan
            portfolio, 2) limiting our exposure to long-term fixed-rate mortgage loans, and
            3) expanding our equity line of credit and business loan portfolios, that generally
            carry more frequent interest rate adjustments, adjustable rates and/or shorter maturities.

Currently
            we do not use derivative financial instruments such as interest rate swaps, caps,
            floors, options or similar financial instruments, to manage our interest rate risk,
            or periodic net interest income. We do use forward commitments with the GSEs and
            other investors when selling our loan production originated for sale.

The
            following tables set forth the scheduled repricing or maturity of the Banks
            assets and liabilities at December 31, 2006 and 2005. The table uses a series
            of assumptions to disclose the expected cash flows in our various interest sensitive
            portfolios. Loans held for sale are shown in the less than six months category due
            to managements intent, ability and often use of firm forward commitments to
            sell mortgage loans. In 2006, loans held for sale includes $215.9 million of loans
            transferred to held for sale as part of our balance sheet restructuring transactions
            which were subsequently sold in January 2007. Investments and mortgage-backed securities
            are shown at their average maturity, adjusted for estimated prepayments, and/or
            expected calls. In 2006, the less than six month category includes $226.0 million
            and $292.4 million for investments and mortgage-backed securities identified for
            sale as part of our balance sheet restructuring which were subsequently sold in
            January 2007. Decay rates for non-maturity deposits are based in internally generated
            historical information, while FHLBC advances are shown at maturity, adjusted for
            any put options deemed in the money. Prepayment assumptions on loans receivable
            are based on internal models developed from our actual prepayment experience, while
            prepayment assumptions on mortgage-backed securities and the impact of embedded
            put options on borrowings and call options on investments are based on current market
            expectations.

56

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|                                                   | At December 31, 2006 | 
|-------------------------------------------------- | -------------------- | 
|
|
|Interest-earning assets:                           |                      | 
|Loans receivable
                    held for sale |                      | 
|Loans receivable                                   |                      | 
|Mortgage-backed
                    securities     |                      | 
|Investment securities                              |                      | 
|Stock in FHLB
                    of Chicago       |                      | 
|Interest-bearing
                    deposits      |                      | 
|Federal funds
                    sold             |                      | 
|                                                   |                      | 
|Total
                    interest-earning         |                      | 
|assets                                             |                      | 
|                                                   |                      | 
|Interest-bearing liabilities:                      |                      | 
|Interest-bearing
                    checking      |                      | 
|accounts                                           |                      | 
|Money market accounts                              |                      | 
|Passbook accounts                                  |                      | 
|Certificate accounts                               |                      | 
|FHLBC advances                                     |                      | 
|Other borrowings                                   |                      | 
|Junior subordinated
                    debentures |                      | 
|                                                   |                      | 
|Total
                    interest-bearing         |                      | 
|liabilities                                        |                      | 
|                                                   |                      | 
|Interest sensitivity gap                           |                      | 
|                                                   |                      | 
|Cumulative gap                                     |                      | 
|                                                   |                      | 
|Cumulative gap as a percentage                     |                      | 
|of total assets                                    |                      | 
|Cumulative net interest-earning                    |                      | 
|assets as a percentage
                    of      |                      | 
|interest-bearing
                    liabilities   |                      | 

---

|(1) | Represents forward commitments to sell mortgage loans.
|--- | ------------------------------------------------------

|                                                   | At December 31, 2005 | 
|-------------------------------------------------- | -------------------- | 
|
|
|Interest-earning assets:                           |                      | 
|Loans receivable
                    held for      |                      | 
|sale                                               |                      | 
|Loans receivable                                   |                      | 
|Mortgage-backed
                    securities .   |                      | 
|Investment securities                              |                      | 
|Stock in FHLB
                    of Chicago       |                      | 
|Interest-bearing
                    deposits      |                      | 
|Federal funds
                    sold             |                      | 
|                                                   |                      | 
|Total
                    interest-earning         |                      | 
|assets                                             |                      | 
|                                                   |                      | 
|Interest-bearing liabilities:                      |                      | 
|Interest-bearing
                    checking      |                      | 
|accounts                                           |                      | 
|Money market accounts                              |                      | 
|Passbook accounts                                  |                      | 
|Certificate accounts                               |                      | 
|FHLBC advances                                     |                      | 
|Other borrowings                                   |                      | 
|Junior subordinated
                    debentures |                      | 
|                                                   |                      | 
|Total
                    interest-bearing         |                      | 
|liabilities                                        |                      | 
|                                                   |                      | 
|Interest sensitivity gap                           |                      | 
|                                                   |                      | 
|Cumulative gap                                     |                      | 
|                                                   |                      | 
|Cumulative gap as a percentage                     |                      | 
|of total assets                                    |                      | 
|                                                   |                      | 
|Cumulative net                                     |                      | 
|interest-earning
                    assets as     |                      | 
|a percentage of                                    |                      | 
|interest-bearing
                    liabilities   |                      | 

---

|(1) | Represents forward commitments to sell mortgage loans.
|--- | ------------------------------------------------------

Our
            cumulative one-year gap at December 31, 2006 is (7.38)%, compared to (1.31)% one-year
            gap at December 31, 2005. Our negative gap which indicates that if interest rates
            rose, without us making any additional managerial decisions regarding our ALCO strategy,
            our net interest income would decline modestly over the next 12 months. Conversely,
            if rates declined, our net interest income would increase modestly over the next
            twelve months. To maintain our gap within policy limits, we intend to continue to
            control our extension risk by limiting our investment in long-term mortgage loans
            and expanding our short-term interest sensitive equity lines of credit and business
            loan portfolios. Our negative gap is higher at December 31, 2006 due to our strategy
            of attracting additional money market accounts as opposed to short-term certificates
            of deposit, which are carrying higher rates than the money market product. Unlike
            our core money market accounts, we are showing approximately $472.4 million in high-rate
            money markets related to this new product entirely in the less than six month bucket
            as the product pays a market rate of interest that can change at any time and we
            have limited experience related to the duration of these accounts. Because of the
            short-term nature of our certificates of deposit our one-year gap is not materially
            impacted.

57

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In
            addition to static gap analysis, we model the impact of instantaneous parallel shifts
            in yield curve changes in interest rates (assuming interest rates rise and fall
            in increments of 100 basis points), on anticipated net interest income over a 12-month
            horizon. These models are more robust than our static gap analysis, in that we are
            modeling underlying cash flows in each of our interest-sensitive portfolios under
            these changing rate environments. This includes adjusting anticipated prepayments,
            analyzing put and call exercises, changing expected business volumes and mix (such
            as the mix in loan originations between ARMs and fixed-rate), as well as modeling
            anticipated changes in interest rates paid on core deposit accounts, whose rates
            do not necessarily move in any relationship to movements in Treasury rates. We compare
            these results to our results assuming flat interest rates. Our modeling as of December
            31, 2006 indicates that net interest income would decrease by approximately 3.6%
            if interest rates rose 100 basis points instantaneously, while if rates instantaneously
            fell by 100 basis points, net interest income would increase by approximately 6.1%.

A
            third measurement of our interest rate risk we use is Net Portfolio Value Analysis.
            Under OTS Thrift Bulletin 13a, we are required to measure our interest rate risk
            assuming various increases and decreases in general interest rates, and their effect
            on our market value of portfolio equity. The Board of Directors has established
            limits to changes in Net Portfolio Value (NPV), (including limits regarding
            the change in net interest income discussed above), across a range of hypothetical
            interest rate changes. If estimated changes to NPV and net interest income are not
            within these limits, the Board may direct management to adjust its asset/liability
            mix to bring its interest rate risk within Board limits. At December 31, 2006 and
            2005, the Bank was well within the Board-approved limits. NPV is computed as the
            difference between the market value of assets and the market value of liabilities,
            adjusted for the value of off-balance sheet items, including a core deposit intangible
            on the Banks core deposit balances.

Net
            Portfolio Value Analysis measures our interest rate risk by calculating the estimated
            change in the NPV of our cash flows from interest-sensitive assets and liabilities,
            as well as certain off-balance sheet items, in the event of a shock in interest
            rates ranging from 100 to 200 basis points. We use a 200 basis point movement up
            or down as our means of measuring overall NPV interest-rate risk. The table below
            shows the change in NPV applying various instantaneous rate shocks to the Banks
            interest-earning assets and interest-bearing liabilities as of December 31, 2006
            and 2005.

|Change in Interest Rate | Estimated NPV | Estimated Increase
                    (Decrease) in NPV | Percentage Increase
                    (Decrease) in NPV |          
|----------------------- | ------------- | -------------------------------------------------------- | --------------------------------------------------------- | ---------
|
|
|200 basis point rise    |               |                                                          | $                                                         | 943,641  
|100 basis point rise    |               |                                                          |                                                           | 1,044,011
|Base scenario           |               |                                                          |                                                           | 1,137,070
|100 basis point decline |               |                                                          |                                                           | 1,189,940
|200 basis point decline |               |                                                          |                                                           | 1,215,507

---

|(1) | The base scenario includes the impact of the balance sheet restructuring.
|--- | -------------------------------------------------------------------------

The 2006 decline in NPV assuming an up 200 basis point shock in interest rates is
            similar when compared to 2005 on a percentage basis. Although short-term interest
            rates rose during 2006, the remainder of the term structure of interest rates remained
            relatively steady and similarly sloped at the end of 2006 compared to 2005. As such,
            we are estimating similar mortgage loan prepayments in each analysis, which is the
            main driver of our change in NPV. The actual increase in interest rates that did
            occur, and which negatively impacted interest-earning asset values at the end of
            2006 compared to 2005 were offset by higher core deposit values due to the larger
            increase in short-term interest rates.

58

---

| |                                                                                              |     
| | -------------------------------------------------------------------------------------------- | ----
| | Item 8. Financial Statements
                    and Supplementary Data                      |     
| |                                                                                              | Page
| | Report of Management Regarding Internal
                    Control Over Financial Reporting | 60  
| | Report of Independent Registered
                    Public Accounting Firm                  | 61  
| | Report of Independent Registered
                    Public Accounting Firm                  | 62  
| | Consolidated Statements of Financial
                    Condition                           | 63  
| | Consolidated Statements of Operations                                                        | 64  
| | Consolidated Statements of Changes
                    in Stockholders' Equity               | 65  
| | Consolidated Statements of Cash
                    Flows                                    | 66  
| | Notes to Consolidated Financial
                    Statements                               | 68  

59

---

# Report of Management Regarding Internal
            Control Over Financial Reporting

The
            management of MAF Bancorp, Inc. is responsible for the preparation, integrity, and
            fair presentation of the consolidated financial statements included in this annual
            report. The consolidated financial statements and notes included in this annual
            report have been prepared in conformity with U.S. generally accepted accounting
            principles and necessarily include some amounts that are based on managements
            best estimates and judgments.

In
            order to produce reliable financial statements, management is responsible for establishing
            and maintaining effective internal control over financial reporting. Management
            evaluates the effectiveness of internal control over financial reporting and tests
            for reliability of recorded financial information through a program of ongoing internal
            audits. Any system of internal control, no matter how well designed, has inherent
            limitations, including the possibility that a control can be circumvented or overridden
            and misstatements due to error or fraud may occur and not be detected. Also, because
            of changes in conditions, internal control effectiveness may vary over time. Accordingly,
            even an effective system of internal control will provide only reasonable assurance
            with respect to financial statement preparation.

Management
            assessed the Companys internal control over financial reporting as of December
            31, 2006, as required by Section 404 of the Sarbanes-Oxley Act of 2002, based on
            the criteria for effective internal control over financial reporting described in
            the Internal Control-Integrated Framework, adopted by the Committee
            of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment,
            management concludes that, as of December 31, 2006, the Companys internal
            control over financial reporting is effective at the reasonable assurance level.

KPMG
            LLP, the independent registered public accounting firm that audited the Companys
            consolidated financial statements included in this Annual Report on Form 10-K/A, has
            issued an attestation report on managements assessment of the Companys
            internal control over financial reporting as of December 31, 2006. The report, which
            expresses unqualified opinions on managements assessment and on the effectiveness
            of the Companys internal control over financial reporting as of December 31,
            2006, is included in this Item. See Report of Independent Registered Public
            Accounting Firm on page 61.

60

---

# Report of Independent Registered
            Public Accounting Firm

The Stockholders and Board of Directors
            MAF Bancorp, Inc.

We
            have audited managements assessment, included in the accompanying Report of
                Management Regarding Internal Control Over Financial Reporting, that MAF
            Bancorp, Inc. maintained effective internal control over financial reporting as
            of December 31, 2006, based on criteria established in Internal ControlIntegrated
                Framework issued by the Committee of Sponsoring Organizations of the Treadway
            Commission (COSO). MAF Bancorp, Inc.s management is responsible for maintaining
            effective internal control over financial reporting and for its assessment of the
            effectiveness of internal control over financial reporting. Our responsibility is
            to express an opinion on managements assessment and an opinion on the effectiveness
            of MAF Bancorp, Inc.s internal control over financial reporting based on our
            audit.

We
            conducted our audit in accordance with the standards of the Public Company Accounting
            Oversight Board (United States). Those standards require that we plan and perform
            the audit to obtain reasonable assurance about whether effective internal control
            over financial reporting was maintained in all material respects. Our audit included
            obtaining an understanding of internal control over financial reporting, evaluating
            managements assessment, testing and evaluating the design and operating effectiveness
            of internal control, and performing such other procedures as we considered necessary
            in the circumstances. We believe that our audit provides a reasonable basis for
            our opinion.

A
            companys internal control over financial reporting is a process designed to
            provide reasonable assurance regarding the reliability of financial reporting and
            the preparation of financial statements for external purposes in accordance with
            generally accepted accounting    principles. A companys internal control over
            financial reporting includes those policies and procedures that (1) pertain to the
            maintenance of records that, in reasonable detail, accurately and fairly reflect
            the transactions and dispositions of the assets of the company; (2) provide reasonable
            assurance that transactions are recorded as necessary to permit preparation of financial
            statements in accordance with generally accepted accounting principles, and that
            receipts and expenditures of the company are being made only in accordance with
            authorizations of management and directors of the company; and (3) provide reasonable
            assurance regarding prevention or timely detection of unauthorized acquisition,
            use, or disposition of the companys assets that could have a material effect
            on the financial statements.

Because
            of its inherent limitations, internal control over financial reporting may not prevent
            or detect misstatements. Also, projections of any evaluation of effectiveness to
            future periods are subject to the risk that controls may become inadequate because
            of changes in conditions, or that the degree of compliance with the policies or
            procedures may deteriorate.

In
            our opinion, managements assessment that MAF Bancorp, Inc. maintained effective
            internal control over financial reporting as of December 31, 2006, is fairly stated,
            in all material respects, based on criteria established in Internal ControlIntegrated
                Framework issued by the Committee of Sponsoring Organizations of the Treadway
            Commission (COSO). Also, in our opinion, the Company maintained, in all material
            respects, effective internal control over financial reporting as of December 31,
            2006, based on criteria established in Internal ControlIntegrated Framework
            issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We
            also have audited, in accordance with the standards of the Public Company Accounting
            Oversight Board (United States), the consolidated statements of financial condition
            of MAF Bancorp, Inc. and subsidiaries as of December 31, 2006 and 2005, and the
            related consolidated statements of operations, changes in stockholders equity,
            and cash flows for each of the years in the three-year period ended December 31,
            2006, and our report dated March 1, 2007 expressed an unqualified opinion on those
            consolidated financial statements.

KPMG LLP

Chicago, Illinois
            
            March 1, 2007

61

---

# Report of Independent Registered
            Public Accounting Firm

The Stockholders and Board of Directors
            MAF Bancorp, Inc.

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

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

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

We
            also have audited, in accordance with the standards of the Public Company Accounting
            Oversight Board (United States), the effectiveness of MAF Bancorp, Inc.s internal
            control over financial reporting as of December 31, 2006, based on criteria
            established in Internal ControlIntegrated Frameworkissued by the Committee
            of Sponsoring Organizations of the Treadway Commission, and our report dated March
            1, 2007 expressed an unqualified opinion on managements assessment of, and
            the effective operation of, internal control over financial reporting.

KPMG LLP

Chicago, Illinois
            March 1, 2007

62

---

# MAF Bancorp, Inc. and Subsidiaries
            Consolidated Statements of Financial Condition

|                                                                                                   | December 31, | 
|-------------------------------------------------------------------------------------------------- | ------------ | 
|
|
|Assets                                                                                             |              | 
|Cash and due from banks                                                                            |              | 
|Interest-bearing deposits                                                                          |              | 
|Federal funds sold                                                                                 |              | 
|                                                                                                   |              | 
|Total cash and
                    cash equivalents                                                |              | 
|Investment securities available
                    for sale, at fair value                        |              | 
|Stock in Federal Home Loan Bank
                    of Chicago, at cost                            |              | 
|Mortgage-backed securities available
                    for sale, at fair value                   |              | 
|Mortgage-backed securities held
                    to maturity (fair value $205,620 and $237,489) |              | 
|Loans receivable held for sale                                                                     |              | 
|Loans receivable, net                                                                              |              | 
|Allowance for loan losses                                                                          |              | 
|                                                                                                   |              | 
|Loans receivable,
                    net of allowance for loan losses                             |              | 
|                                                                                                   |              | 
|Accrued interest receivable                                                                        |              | 
|Foreclosed real estate                                                                             |              | 
|Real estate held for development
                    or sale                                       |              | 
|Premises and equipment, net                                                                        |              | 
|Bank-owned life insurance                                                                          |              | 
|Goodwill                                                                                           |              | 
|Intangibles, net                                                                                   |              | 
|Other assets                                                                                       |              | 
|                                                                                                   |              | 
|Total assets                                                                                       |              | 
|                                                                                                   |              | 
|Liabilities and Stockholders'
                    Equity                                           |              | 
|Liabilities                                                                                        |              | 
|Deposits                                                                                           |              | 
|Borrowed funds                                                                                     |              | 
|Junior subordinated debentures                                                                     |              | 
|Advances by borrowers for taxes
                    and insurance                                  |              | 
|Accrued expenses and other liabilities                                                             |              | 
|                                                                                                   |              | 
|Total liabilities                                                                                  |              | 
|                                                                                                   |              | 
|Stockholders' equity                                                                               |              | 
|Preferred stock, $.01 par value;
                    authorized 5,000,000 shares; none issued or   |              | 
|outstanding                                                                                        |              | 
|Common stock, $.01 par value; 80,000,000
                    shares authorized; 34,499,494 and     |              | 
|33,634,642 shares
                    issued; 32,895,846 and 32,066,721 shares outstanding         |              | 
|Additional paid-in capital                                                                         |              | 
|Retained earnings, substantially
                    restricted                                    |              | 
|Accumulated other comprehensive
                    loss, net of tax                               |              | 
|Treasury stock, at cost; 1,603,648
                    and 1,567,921 shares                        |              | 
|                                                                                                   |              | 
|Total stockholders'
                    equity                                                     |              | 
|                                                                                                   |              | 
|Total liabilities
                    and stockholders' equity                                     |              | 
|                                                                                                   |              | 

See accompanying Notes to Consolidated
            Financial Statements.

63

---

# MAF Bancorp, Inc. and Subsidiaries
            Consolidated Statements of Operations

|                                                                             | Year Ended December 31, | 
|---------------------------------------------------------------------------- | ----------------------- | 
|
|
|Interest income:                                                             |                         | 
|Loans receivable                                                             |                         | 
|Mortgage-backed
                    securities held to maturity              |                         | 
|Mortgage-backed
                    securities available for sale            |                         | 
|Federal Home Loan
                    Bank of Chicago stock                  |                         | 
|Investment securities
                    available for sale                 |                         | 
|Interest-bearing
                    deposits and federal funds sold         |                         | 
|                                                                             |                         | 
|Total
                    interest income                                    |                         | 
|Interest expense:                                                            |                         | 
|Deposits                                                                     |                         | 
|Borrowed funds                                                               |                         | 
|Junior subordinated
                    debentures                           |                         | 
|                                                                             |                         | 
|Total
                    interest expense                                   |                         | 
|                                                                             |                         | 
|Net
                    interest income                                      |                         | 
|Provision for loan losses                                                    |                         | 
|                                                                             |                         | 
|Net
                    interest income after provision for loan losses      |                         | 
|Non-interest income:                                                         |                         | 
|Net gain (loss)
                    on sale and write-down of:               |                         | 
|Loans
                    receivable                                         |                         | 
|Mortgage-backed
                    securities                               |                         | 
|Investment
                    securities                                    |                         | 
|Premises
                    and equipment                                   |                         | 
|Foreclosed
                    real estate                                   |                         | 
|Mortgage
                    loan servicing rights                           |                         | 
|Deposit account
                    service charges                          |                         | 
|Other loan fees                                                              |                         | 
|Bank-owned life
                    insurance                                |                         | 
|Brokerage and
                    insurance commissions                      |                         | 
|Loan servicing
                    fee income                                |                         | 
|Valuation recovery
                    on mortgage servicing rights          |                         | 
|Income from real
                    estate operations                       |                         | 
|Other                                                                        |                         | 
|                                                                             |                         | 
|Total
                    non-interest income                                |                         | 
|Non-interest expense:                                                        |                         | 
|Compensation and
                    benefits                                |                         | 
|Office occupancy
                    and equipment                           |                         | 
|Advertising and
                    promotion                                |                         | 
|Data processing                                                              |                         | 
|Amortization of
                    core deposit intangibles                 |                         | 
|Prepayment charge
                    related to repayment of borrowings     |                         | 
|Other                                                                        |                         | 
|                                                                             |                         | 
|Total
                    non-interest expense                               |                         | 
|                                                                             |                         | 
|Income
                    before income taxes                               |                         | 
|Income taxes                                                                 |                         | 
|                                                                             |                         | 
|Net
                    income                                               |                         | 
|                                                                             |                         | 
|Basic earnings per share                                                     |                         | 
|Diluted earnings per share                                                   |                         | 
|Dividends declared per common share                                          |                         | 
|Average common and common equivalent
                    shares outstanding: |                         | 
|Basic                                                                        |                         | 
|Diluted                                                                      |                         | 

See accompanying Notes to Consolidated
            Financial Statements.

64

---

# MAF Bancorp, Inc. and Subsidiaries
            Consolidated Statements of Changes in Stockholders Equity

|                                                                | Common
                    stock | Additional
                    paid-in
                    capital | Retained
                    earnings | Gain
                    Deferral
                    Plan | Accumu-
                    lated other
                    compre-
                    hensive
                    income
                    (loss) | Treasury
                    stock | Total  
|--------------------------------------------------------------- | -------------------------------- | ------------------------------------------------------------------ | ------------------------------------- | ---------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------- | -------
|
|Balance at December 31, 2003                                    |                                  |                                                                    | $                                     | 331                                                        |                                                                                                                                                       |                                    | 495,747
|                                                                |                                  |                                                                    |                                       |                                                            |                                                                                                                                                       |                                    |        
|Comprehensive income:                                           |                                  |                                                                   
|Net income                                                      |                                  |                                                                    |                                       |                                                           |                                                                                                                                                       |                                    |       
|Other comprehensive
                    income, net of          |                                  |                                                                   
|tax:                                                            |                                  |                                                                   
|Unrealized
                    holding loss during              |                                  |                                                                   
|the
                    year                                    |                                  |                                                                    |                                       |                                                           |                                                                                                                                                       |                                    |       
|Reclassification
                    adjustment of              |                                  |                                                                   
|gains
                    included in net income                |                                  |                                                                    |                                       |                                                           |                                                                                                                                                       |                                    |       
|                                                                |                                  |                                                                    |                                       |                                                            |                                                                                                                                                       |                                    |        
|Total comprehensive
                    income                  |                                  |                                                                    |                                       |                                                           |                                                                                                                                                       |                                    |       
|                                                                |                                  |                                                                    |                                       |                                                            |                                                                                                                                                       |                                    |        
|Exercise of 425,282 stock options
                    and       |                                  |                                                                   
|reissuance of
                    treasury stock                |                                  |                                                                    |                                       |                                                           |                                                                                                                                                       |                                    | 1,162  
|Issuance of 981,467 shares for                                  |                                  |                                                                   
|acquisition of
                    Chesterfield                 |                                  |                                                                   
|Financial Corp.                                                 |                                  |                                                                    |                                       | 5                                                          |                                                                                                                                                       |                                    | 23,114 
|Purchase of 1,151,000 shares of                                 |                                  |                                                                   
|treasury stock                                                  |                                  |                                                                    |                                       |                                                           |                                                                                                                                                       |                                    |       
|Tax benefits from stock-related                                 |                                  |                                                                   
|compensation                                                    |                                  |                                                                    |                                       |                                                           |                                                                                                                                                       |                                    | 2,024  
|Cash dividends declared, $0.84 per                              |                                  |                                                                   
|share                                                           |                                  |                                                                    |                                       |                                                           |                                                                                                                                                       |                                    |       
|Dividends paid to Gain Deferral
                    Plan        |                                  |                                                                    |                                       |                                                           |                                                                                                                                                       |                                    |       
|                                                                |                                  |                                                                    |                                       |                                                            |                                                                                                                                                       |                                    |        
|Balance at December 31, 2004                                    |                                  |                                                                    |                                       | 336                                                        |                                                                                                                                                       |                                    | 522,047
|                                                                |                                  |                                                                    |                                       |                                                            |                                                                                                                                                       |                                    |        
|Comprehensive income:                                           |                                  |                                                                   
|Net income                                                      |                                  |                                                                    |                                       |                                                           |                                                                                                                                                       |                                    |       
|Other comprehensive
                    income, net of          |                                  |                                                                   
|tax:                                                            |                                  |                                                                   
|Unrealized
                    holding loss during              |                                  |                                                                   
|the
                    year                                    |                                  |                                                                    |                                       |                                                           |                                                                                                                                                       |                                    |       
|Reclassification
                    adjustment of              |                                  |                                                                   
|gains
                    included in net income                |                                  |                                                                    |                                       |                                                           |                                                                                                                                                       |                                    |       
|                                                                |                                  |                                                                    |                                       |                                                            |                                                                                                                                                       |                                    |        
|Total comprehensive
                    income                  |                                  |                                                                    |                                       |                                                           |                                                                                                                                                       |                                    |       
|                                                                |                                  |                                                                    |                                       |                                                            |                                                                                                                                                       |                                    |        
|Exercise of 267,423 stock options
                    and       |                                  |                                                                   
|reissuance of
                    treasury stock from           |                                  |                                                                   
|option exercise
                    and 4,930 shares            |                                  |                                                                   
|from restricted
                    stock unit awards           |                                  |                                                                    |                                       |                                                           |                                                                                                                                                       |                                    |       
|Purchase of 1,342,500 shares of                                 |                                  |                                                                   
|treasury stock                                                  |                                  |                                                                    |                                       |                                                           |                                                                                                                                                       |                                    |       
|Tax benefits from stock-related                                 |                                  |                                                                   
|compensation                                                    |                                  |                                                                    |                                       |                                                           |                                                                                                                                                       |                                    | 1,137  
|Cash dividends declared, $0.92 per                              |                                  |                                                                   
|share                                                           |                                  |                                                                    |                                       |                                                           |                                                                                                                                                       |                                    |       
|Distribution of Gain Deferral Plan                              |                                  |                                                                   
|shares                                                          |                                  |                                                                    |                                       |                                                           |                                                                                                                                                       |                                    | 3,947  
|Dividends paid to Gain Deferral
                    Plan        |                                  |                                                                    |                                       |                                                           |                                                                                                                                                       |                                    |       
|                                                                |                                  |                                                                    |                                       |                                                            |                                                                                                                                                       |                                    |        
|Balance at December 31, 2005                                    |                                  |                                                                    |                                       | 336                                                        |                                                                                                                                                       |                                    | 527,131
|                                                                |                                  |                                                                    |                                       |                                                            |                                                                                                                                                       |                                    |        
|Comprehensive income:                                           |                                  |                                                                   
|Net income                                                      |                                  |                                                                    |                                       |                                                           |                                                                                                                                                       |                                    |       
|Other comprehensive
                    income, net of          |                                  |                                                                   
|tax:                                                            |                                  |                                                                   
|Adjustment
                    to initially apply SFAS No. 158, |                                  |                                                                   
|net
                    of tax                                  |                                  |                                                                    |                                       |                                                           |                                                                                                                                                       |                                    |       
|Unrealized
                    holding gain during              |                                  |                                                                   
|the
                    year                                    |                                  |                                                                    |                                       |                                                           |                                                                                                                                                       |                                    |       
|Reclassification
                    adjustment of              |                                  |                                                                   
|losses
                    included in net income               |                                  |                                                                    |                                       |                                                           |                                                                                                                                                       |                                    |       
|                                                                |                                  |                                                                    |                                       |                                                            |                                                                                                                                                       |                                    |        
|Total comprehensive
                    income                  |                                  |                                                                    |                                       |                                                           |                                                                                                                                                       |                                    |       
|                                                                |                                  |                                                                    |                                       |                                                            |                                                                                                                                                       |                                    |        
|Exercise of 460,196 stock options
                    and       |                                  |                                                                   
|reissuance of
                    treasury stock from           |                                  |                                                                   
|option exercise
                    and 7,842 shares            |                                  |                                                                   
|from restricted
                    stock unit awards           |                                  |                                                                    |                                       | 1                                                          |                                                                                                                                                       |                                    | 1,386  
|Issuance of 2,343,186 shares for
                    the        |                                  |                                                                   
|acquisition of
                    EFC Bancorp and the          |                                  |                                                                   
|conversion of
                    168,690 EFC Bancorp           |                                  |                                                                   
|stock options                                                   |                                  |                                                                    |                                       | 8                                                          |                                                                                                                                                       |                                    | 38,905 
|Purchase of 1,917,379 shares of                                 |                                  |                                                                   
|treasury stock                                                  |                                  |                                                                    |                                       |                                                           |                                                                                                                                                       |                                    |       
|Tax benefits from stock-related                                 |                                  |                                                                   
|compensation                                                    |                                  |                                                                    |                                       |                                                           |                                                                                                                                                       |                                    | 1,720  
|Cash dividends declared, $1.00 per                              |                                  |                                                                   
|share                                                           |                                  |                                                                    |                                       |                                                           |                                                                                                                                                       |                                    |       
|                                                                |                                  |                                                                    |                                       |                                                            |                                                                                                                                                       |                                    |        
|Balance at December 31, 2006                                    |                                  |                                                                    | $                                     | 345                                                        |                                                                                                                                                       |                                    | 569,142
|                                                                |                                  |                                                                    |                                       |                                                            |                                                                                                                                                       |                                    |        

See accompanying Notes to Consolidated
            Financial Statements.

65

---

# MAF Bancorp, Inc. and Subsidiaries
            Consolidated Statements of Cash Flows

|                                                                                   | Year Ended December 31, | 
|---------------------------------------------------------------------------------- | ----------------------- | 
|
|
|Operating activities:                                                              |                         | 
|Net income                                                                         |                         | 
|Adjustments to reconcile net income
                    to net cash provided by    |                         | 
|operating activities:                                                              |                         | 
|Amortization (accretion)
                    of premiums, discounts and            |                         | 
|deferred
                    loan fees                                             |                         | 
|Provision for
                    loan losses                                      |                         | 
|FHLB of Chicago
                    stock dividends                                |                         | 
|Net gain on sale
                    of loans receivable                           |                         | 
|Net gain on sale
                    of mortgage servicing rights                  |                         | 
|Net gain on sale
                    of investment and mortgage-backed             |                         | 
|securities                                                                         |                         | 
|Other than temporary
                    impairment write-down on investment       |                         | 
|securities                                                                         |                         | 
|Net gain on real
                    estate held for development or sale           |                         | 
|Net gain on sale
                    of premises and equipment                     |                         | 
|Amortization of
                    mortgage servicing rights, net                 |                         | 
|Depreciation and
                    amortization                                  |                         | 
|Amortization of
                    core deposit intangibles                       |                         | 
|Deferred income
                    tax expense (benefit)                          |                         | 
|Increase (decrease)
                    in accrued interest receivable             |                         | 
|Net increase (decrease)
                    in bank-owned life insurance income    |                         | 
|Net change in
                    other assets and liabilities, net of effects     |                         | 
|from
                    acquisitions                                              |                         | 
|Tax benefit for stock options exercised                                            |                         | 
|Excess tax benefits realized on
                    exercise of stock compensation |                         | 
|Loans originated and purchased for
                    sale                        |                         | 
|Sale of loans originated and purchased
                    for sale                |                         | 
|                                                                                   |                         | 
|Net cash provided
                    by operating activities                      |                         | 
|                                                                                   |                         | 
|Investing activities:                                                              |                         | 
|Loans originated and purchased for
                    investment                  |                         | 
|Principal repayments on loans receivable                                           |                         | 
|Principal repayments on mortgage-backed
                    securities             |                         | 
|Proceeds from maturities of investment
                    securities available    |                         | 
|for sale                                                                           |                         | 
|Proceeds from sale or redemption
                    of:                           |                         | 
|Investment securities
                    available for sale                       |                         | 
|Mortgage-backed
                    securities available for sale                  |                         | 
|Real estate held
                    for development or sale                       |                         | 
|Stock in Federal
                    Home Loan Bank of Chicago                     |                         | 
|Premises and equipment                                                             |                         | 
|Purchases of:                                                                      |                         | 
|Investment securities
                    available for sale                       |                         | 
|Mortgage-backed
                    securities available for sale                  |                         | 
|Bank-owned life
                    insurance                                      |                         | 
|Real estate held
                    for development or sale                       |                         | 
|Premises and equipment                                                             |                         | 
|Net cash received (paid) in acquisition                                            |                         | 
|                                                                                   |                         | 
|Net cash provided by (used in) investing
                    activities            |                         | 
|                                                                                   |                         | 
|Financing Activities:                                                              |                         | 
|Proceeds from:                                                                     |                         | 
|FHLB of Chicago
                    advances                                       |                         | 
|Issuance of junior
                    subordinated debentures                     |                         | 
|Unsecured bank
                    term loan                                       |                         | 
|Unsecured line
                    of credit                                       |                         | 
|Reverse repurchase
                    agreements                                  |                         | 
|Repayments of:                                                                     |                         | 
|FHLB of Chicago
                    advances                                       |                         | 
|Unsecured bank
                    term loan                                       |                         | 
|Unsecured line
                    of credit                                       |                         | 
|Reverse repurchase
                    agreements                                  |                         | 
|Net increase (decrease) in:                                                        |                         | 
|Deposits                                                                           |                         | 
|Other short-term
                    borrowings                                    |                         | 
|Advances by borrowers
                    for taxes and insurance                  |                         | 

66

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# MAF Bancorp, Inc. and Subsidiaries
            Consolidated Statements of Cash Flows - (Continued)

|                                                                                   | Year Ended December 31, | 
|---------------------------------------------------------------------------------- | ----------------------- | 
|
|
|Proceeds from exercise of stock
                    options                        |                         | 
|Excess tax benefits realized on
                    exercise of stock compensation |                         | 
|Purchase of treasury stock                                                         |                         | 
|Cash dividends paid                                                                |                         | 
|                                                                                   |                         | 
|Net cash provided
                    by (used in) financing activities            |                         | 
|                                                                                   |                         | 
|Increase (decrease) in cash and
                    cash equivalents               |                         | 
|Cash and cash
                    equivalents at beginning of year                 |                         | 
|                                                                                   |                         | 
|Cash and cash
                    equivalents at end of year                       |                         | 
|                                                                                   |                         | 
|Supplemental disclosure of cash
                    flow information:              |                         | 
|Cash paid during the year for:                                                     |                         | 
|Interest on deposits
                    and borrowed funds                        |                         | 
|Income taxes                                                                       |                         | 
|Summary of non-cash transactions:                                                  |                         | 
|Transfer of loans
                    receivable to foreclosed real estate         |                         | 
|Loans receivable
                    transferred to held for sale                  |                         | 
|Loans receivable
                    swapped into mortgage-backed securities       |                         | 
|Treasury stock
                    received for withholding tax liability          |                         | 
|related
                    to stock option exercises (14,591, 10,411 and          |                         | 
|12,224
                    shares)                                                 |                         | 
|Treasury stock
                    received for stock option exercises (50,156,    |                         | 
|36,149
                    and 34,143 shares)                                      |                         | 
|                                                                                   |                         | 
|Acquisitions:                                                                      |                         | 
|Assets acquired                                                                    |                         | 
|Common stock issued                                                                |                         | 
|                                                                                   |                         | 
|Cash paid                                                                          |                         | 
|Cash acquired                                                                      |                         | 
|                                                                                   |                         | 
|Net cash (paid)
                    received from acquisitions                     |                         | 
|                                                                                   |                         | 

See accompanying Notes to Consolidated
            Financial Statements.

67

---

# MAF Bancorp, Inc. and Subsidiaries
            Notes to Consolidated Financial Statements

# 1. Summary of Significant Accounting
            Policies

Principles
            of Consolidation. The consolidated financial statements include the
            accounts of MAF Bancorp, Inc. (Company) and its wholly-owned subsidiaries.
            All significant intercompany balances and transactions have been eliminated in consolidation.
            Certain reclassifications of prior year amounts have been made to conform to the
            current year presentation.

Use
            of Estimates. The accounting and reporting policies of the Company
            conform with U.S. generally accepted accounting principles (GAAP). The preparation
            of consolidated financial statements in conformity with GAAP requires management
            to make estimates, assumptions and judgments that affect the amounts reported in
            the consolidated financial statements and accompanying notes. Actual results could
            differ materially from those estimates.

Statement
            of Cash Flows. Cash and cash equivalents include cash and due from
            banks, interest-bearing deposits and federal funds sold. Generally, federal funds
            are sold for one-day periods and interest-bearing deposits mature within one day
            to three months.

Restrictions
            on Cash. Based on the types and amounts of deposits received, the
            Bank maintains vault cash and non-interest bearing cash balances in accordance with
            Federal Reserve Bank reserve requirements. The Banks reserve requirements
            of $20.6 million at December 31, 2006 and $21.7 million at December 31, 2005
            were met with funds on deposit in a pass-through account at the Federal Home Loan
            Bank of Chicago as well as vault cash on hand and in the branches.

The
            Bank is also required to keep a compensating balance based on the average daily
            remittance of checks issued for daily operating activities with a third party. This
            balance was $7.7 million at December 31, 2006 and $10.9 million at December 31,
            2005.

Investment
            and Mortgage-Backed Securities. All investment and mortgage-backed
            securities are classified as available for sale or held to maturity. Investments
            and mortgage-backed securities that are categorized as available for sale are carried
            at fair value, with unrealized gains and losses reflected in stockholders
            equity, net of tax. Held to maturity securities include mortgage-backed securities
            which the Company has the positive intent and ability to hold to maturity. These
            investments are carried at amortized cost, with no recognition of unrealized gains
            or losses in the consolidated financial statements. Losses on securities that are
            deemed other-than-temporary are recognized in the consolidated statement of operations,
            with a new cost basis established in the consolidated statement of financial condition.

Interest
            and dividends on investments and mortgage-backed securities, including amortization
            of premiums, discounts, and purchase accounting adjustments to the earlier of call
            or maturity, or in the case of mortgage-related securities, over the estimated life
            of the security using the level-yield method are included in interest income. Gains
            and losses on sales of investment securities, mortgage-backed securities, and equity
            securities are determined using the specific identification method.

The
            Bank executes swap transactions with the Federal National Mortgage Association
            (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie
            Mac) to exchange whole mortgage loans originated by the Bank for mortgage-backed
            securities guaranteed by the agencies, for which the Bank pays a guarantee fee.

Bank-Owned
            Life Insurance (BOLI). BOLI represents life insurance policies
            on the lives of certain Company officers and employees for former officers or employees
            or which we are the beneficiary. These policies are recorded as an asset on the
            consolidated statements of financial condition at their cash surrender value, the
            amount that could be realized currently. The change in cash surrender value and
            insurance proceeds received are recorded as BOLI income in the consolidated statements
            of operations in non-interest income and is not subject to income taxes.

Loans
            receivable held for sale. The Bank sells, generally without recourse,
            whole loans and participation interests in mortgage loans and home equity lines
            of credit that it originates primarily to GSEs such as Fannie Mae and Freddie Mac
            and to a lesser extent, private investors. The Bank sells various loans, with recourse,
            to the Federal Home Loan Bank Mortgage Partnership Program (MPF) and

68

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# MAF Bancorp, Inc. and Subsidiaries
            Notes to Consolidated Financial Statements - (Continued)

to a lesser extent, other investors
            in which it retains a limited and specified level of credit risk. Loans originated
            are identified as either held for investment or sale upon origination. Loans which
            the Bank intends to sell before maturity are classified as held for sale, and are
            carried at the lower of cost, adjusted for applicable deferred loan fees or costs,
            or estimated market value, in the aggregate.

The
            Bank enters into forward commitments, primarily with Fannie Mae, to sell mortgage
            loans originated by the Bank at a specific time and specific price in the future.
            Loans subject to forward sales are classified as held for sale. Unrealized losses
            and gains, if any, on forward commitments are included in gain on sale of mortgage
            loans in the period the loans are committed.

Loans
            Receivable. Loans receivable are stated at unpaid principal balances
            less unearned discounts, deferred loan origination fees and costs, loans in process
            and the allowance for loan losses.

Interest
            is recognized on an accrual basis. Loan fees and certain direct loan origination
            costs are deferred at origination, and the net deferred fee or cost is amortized
            into interest income using the level-yield method over the contractual life of the
            loans. Discounts on loans receivable are amortized to interest income using the
            level-yield method over the remaining period to contractual maturity, adjusted for
            anticipated prepayments. Purchase accounting premiums or discounts are amortized
            into interest income over the contractual term of loans receivable acquired, adjusted
            for anticipated prepayments, using the level-yield method.

The
            accrual of interest income for all loans is discontinued when there is clear indication
            that the borrowers cash flow may not be sufficient to meet payments as they
            become due or management becomes aware of facts or circumstances that may adversely
            impact the collectibility of principal or interest on loans. A loan (whether considered
            impaired or not) is classified as non-accrual when the borrower becomes 91 days
            past due. When a loan is placed on non-accrual status, or is in the process of bankruptcy
            or foreclosure, previously accrued but unpaid interest is reversed against interest
            income. Income is subsequently recorded to the extent cash payments are received,
            if the entire principal balance is considered collectible, or at a time when the
            loan is brought current in accordance with its original terms.

The
            Bank considers a loan impaired when, based on current information and events, it
            is probable that the Bank will be unable to collect all amounts due according to
            the contractual terms of the loan. For loans which are not individually significant
            (i.e. loans under $1.0 million) and represent a homogeneous population, the Bank
            evaluates impairment collectively based on management reports on the volume and
            extent of delinquencies, as well as historical loss experience for these types of
            loans. The Bank uses this criteria on one- to four-family residential loans, consumer
            loans, smaller multi-family residential loans and land loans. Impairment for loans
            considered individually significant, as well as commercial real estate and commercial
            business loans, are measured based on the present value of expected future cash
            flows discounted at the loans effective interest rate, or the fair value of
            the collateral if the loan is collateral dependent. Charge-offs of principal occur
            when a loss has deemed to have occurred as a result of the book value exceeding
            the fair value or net realizable value.

Allowance
            for Loan Losses. We maintain an allowance for loan losses to cover
            managements estimate of probable losses inherent in the Banks loan portfolio.
            In evaluating the allowance for loan losses and determining the amount of any provision
            for loan losses, management considers: (1) historical loss experience and the
            change in size and the mix of the overall portfolio composition, (2) specific
            allocations based upon probable losses identified during the review of the portfolio,
            (3) delinquency trends in the portfolio and the composition of non-performing
            loans, including the percent of non-performing loans with supplemental mortgage
            insurance, and (4) subjective factors, including local and general economic
            business factors and trends, industry and interest rate trends, new lending products
            and changes in underwriting criteria and portfolio concentrations.

The
            allowance for loan losses is established through a provision for loan losses that
            is recorded in the consolidated statement of operations.

Foreclosed
            Real Estate. Real estate properties acquired through, or in lieu
            of, foreclosure are initially recorded at the lower of carrying value or fair value
            less the estimated cost to dispose at the date of foreclosure, establishing a new
            cost basis. Management periodically performs valuations and an allowance for loss
            is established if the carrying value of a property exceeds its estimated fair value
            less

69

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# MAF Bancorp, Inc. and Subsidiaries
            Notes to Consolidated Financial Statements - (Continued)

cost to dispose. At December 31,
            2006, foreclosed real estate included 17 one- to four-family residences and one
            commercial real estate property.

Real
            Estate Held for Development or Sale. The direct cost of material,
            labor, overhead, real estate taxes, interest, design, engineering and project management
            during construction and development are capitalized as real estate held for development
            or sale. Real estate properties held for development or sale, are carried at the
            lower of cost, including capitalized holding costs, or net realizable value. Gains
            and losses on individual lot sales in a particular development are based on cash
            received less the estimated cost of sales per lot. Cost of sales per lot is calculated
            as the current investment in the particular development unit plus anticipated costs
            to complete the development unit, which includes capitalized interest and real estate
            taxes, divided by the total number of lots to be sold in the unit. Periodic reviews
            are made as to a developments estimated costs to complete.

Premises
            and Equipment. Land is carried at cost. Buildings, leasehold improvements,
            furniture, fixtures, and equipment are carried at cost, less accumulated depreciation
            and amortization. Purchase of premises and equipment are recorded at market value
            for business acquisitions. Buildings, furniture, fixtures, and equipment are depreciated
            using the straight-line method over the estimated useful lives of the assets. The
            cost of leasehold improvements is amortized using the straight-line method over
            the lesser of the life of the leasehold improvement or the term of the related lease.
            Maintenance and repairs are charged to expense as incurred.

Affordable
            Housing Investments. Affordable housing investments included in other
            assets represent multi-family rental properties (affordable housing projects) in
            which a subsidiary of the Bank has limited partner interests, generally 98-99%.
            The financial condition, results of operations and cash flows of each LLP or LLC
            is consolidated in the Companys financial statements. The properties are recorded
            at cost less accumulated depreciation. The Company evaluates the recoverability
            of the carrying value on a regular basis. If the recoverability was determined to
            be in doubt, a valuation allowance would be established. Depreciation expense is
            provided on a straight-line basis over the estimated useful life of the assets.
            The operations of the properties tend to generate an aggregate net loss before income
            taxes, but contribute income tax credits, which lowers the Companys effective
            tax rate. Once established, the credits on each property last for ten years and
            reduce the consolidated federal income tax liability and expense of the Company.
            The Company is obligated to keep the projects low-rent structure in place
            for a period of time after the ten-year tax credit period.

Goodwill
            and Intangibles. Goodwill represents the excess of the purchase price
            over the fair value of the net identifiable assets acquired in business combinations
            or branch acquisitions. Core deposit intangibles represent the value assigned to
            the core deposit base acquired. The valuation techniques we use to determine the
            carrying value of tangible and intangible assets and liabilities acquired in acquisitions
            and the estimated lives of the identifiable intangible assets involve a number of
            subjective judgments such as estimates for discount rates, projected future cash
            flows and time period of useful lives, all of which are susceptible to change based
            on changes in economic conditions and other factors.

Both
            goodwill and core deposit intangibles are recognized as a result of the purchase
            method of accounting for business combinations. Core deposit intangibles have finite
            lives and are amortized on an accelerated basis to expense over the estimated life
            of the core deposit which approximates ten years.

The
            Company reviews long-lived assets and certain identifiable intangibles for impairment
            whenever events or changes in circumstances indicate that the carrying amount may
            not be recoverable. The impairment is measured based on the expected future cash
            flows from the use of the asset and its eventual disposition. If expected future
            cash flows are less than the carrying amount of the asset, an impairment loss is
            recognized based on current fair values.

Goodwill
            and indefinite life intangibles are no longer amortized but are subject to impairment
            tests on at least an annual basis. Any impairment of goodwill or intangibles will
            be recognized as an expense in the period of impairment. No impairment was identified
            as a result of the Companys annual analysis in May 2006 or 2005.

70

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# MAF Bancorp, Inc. and Subsidiaries
            Notes to Consolidated Financial Statements - (Continued)

Mortgage
            Servicing Rights. Mortgage servicing rights are initially capitalized
            upon acquisition, at fair value of allocated cost, and are subsequently amortized
            over the estimated life of the loan servicing income stream, using the level-yield
            method. Mortgage servicing rights that are retained when mortgage loans are sold
            are recorded by allocating the previous carrying amount of the sold loan between
            the servicing rights retained and the loans that are sold to a third party. This
            allocation is based upon the relative fair values of the mortgage servicing rights
            and the loans sold. The estimated value takes into consideration contractually known
            amounts, such as loan balance, term, contract rate, and escrow funds with the Bank
            for the payment of taxes and insurance. The balance of mortgage servicing rights
            is included in the consolidated statement of financial condition in intangible assets.
            The Bank conducts periodic impairment analyses by evaluating the present value of
            the future economic benefit to be derived from the servicing rights using current
            information regarding interest rates, prepayment assumptions, ancillary income,
            and the cost to service such loans. For purposes of measuring impairment, the mortgage
            servicing rights are stratified based on the predominant risk characteristics of
            the underlying loans. The Bank stratifies loans by interest rate, maturity, and
            whether the loans are fixed or adjustable rate. A valuation allowance is recognized
            in the amount by which the capitalized servicing rights for a specific stratum exceeds
            its estimated fair value.

Income
            Taxes. The Company and its subsidiaries file a consolidated federal
            income tax return, except for MAF Realty Co., L.L.C.  IV, a REIT, which is
            required to file a separate federal income tax return. The provision for income
            taxes is based upon net income in the consolidated financial statements, rather
            than amounts reported on the Companys tax return. Deferred income taxes are
            provided for all significant items of income and expense that are recognized in
            different periods for financial reporting purposes and income tax reporting purposes.
            The asset and liability approach is used for the financial accounting and reporting
            of income taxes. This approach requires companies to take into account changes in
            the tax rates when valuing the deferred income tax accounts recorded on the consolidated
            statement of financial condition. In addition, it provides that a deferred tax liability
            or asset shall be recognized for the estimated future tax effects attributable to
            temporary differences. Temporary differences include differences between
            financial statement income and tax return income which are expected to reverse in
            future periods as well as differences between tax bases of assets and liabilities
            and their amounts for financial reporting purposes which are also expected to be
            settled in future periods. To the extent a deferred tax asset is established which
            is not more likely than not to be realized, a valuation allowance shall be established
            against such asset.

Derivative
            Financial Instruments. The Company utilizes forward commitments to
            sell mortgage loans as part of its mortgage loan origination hedging strategy. Loan
            commitments and forward sales are accounted for as derivative instruments with adjustments
            included in earnings as a component of gain on sale of loans at each period end.
            All derivatives are recognized on the consolidated statement of financial condition
            at their fair value.

Comprehensive
            Income. Comprehensive income includes net income plus other comprehensive
            income. Other comprehensive income includes revenues, expenses, gains and losses
            that under GAAP are included in comprehensive income but excluded from net income.
            The Company reports comprehensive income in its consolidated statement of changes
            in stockholders equity.

Segments.
            The Company uses the management approach for determining segment reporting. Based
            on the management approach, the Company operates two separate lines of business,
            banking and real estate operations.

Stock
            Option and Equity-based Plans. The Company has various stock-based
            compensation plans pursuant to which stock options and other equity-based awards
            have been granted.

Prior
            to 2006, the Company applied APB Opinion 25, Accounting for Stock Issued to
            Employees, and related interpretations in accounting for its stock option
            plans. On January 1, 2006, the Company adopted Statement of Financial Accounting
            Standards, or SFAS, No. 123R, Share-Based Payments. SFAS No. 123R requires
            the recognition of compensation expense in an amount equal to the fair value of
            all share-based payments. The Company elected to apply SFAS 123R on a modified prospective
            method, which requires the Company to record compensation expense for options granted
            on or after January 1, 2006 and over the remaining vesting period for previous awards
            that were partially unvested as of the

71

---

# MAF Bancorp, Inc. and Subsidiaries
            Notes to Consolidated Financial Statements - (Continued)

date of adoption of SFAS No. 123R.
            See Note No. 16 Officer, Director and Employee Benefit Plans for additional
            information regarding the impact on prior years results.

Compensation
            expense for restricted stock unit awards is recognized ratably over the period of
            service, usually the vesting period, based on the fair value of the stock on the
            date of grant.

Earnings
            Per Share. Earnings per share is determined by dividing net income
            for the period by the weighted average number of shares outstanding. Stock options
            are considered in the earnings per share calculations only if dilutive, and are
            the only adjustments made to average shares outstanding in computing diluted earnings
            per share. Anti-dilutive stock options not included in the computation of diluted
            earnings per share were 442,250, 1,109,150, and 393,750 at December 31, 2006,
            2005 and 2004, respectively.

|                                        | Year Ended December 31, 2006 | Year Ended December 31, 2005 | Year Ended December 31, 2004 | 
|--------------------------------------- | ---------------------------- | ---------------------------- | ---------------------------- | 
|
|
|Basic earnings per share:               |                              |                              |                              | 
|Income available to                     |                              |                             
|common
                    shareholders |                              |                              | $84,583                      | 
|                                        |                              |                              |                              | 
|Effect of dilutive securities-          |                              |                             
|stock options                           |                              |                              |                              | 
|                                        |                              |                              |                              | 
|Diluted earnings per share:             |                              |                             
|Income available to                     |                              |                             
|common
                    shareholders |                              |                             
|plus
                    assumed        |                              |                             
|conversions                             |                              |                              | $ 84,583                     | 
|                                        |                              |                              |                              | 

# 2. Business Combinations

On
            February 1, 2006, the Company acquired EFC Bancorp, Inc. (EFC), in a
            cash and stock transaction valued at $176.6 million including stock options. The
            Company paid $67.3 million in cash and issued 2.34 million common shares, and remaining
            options to purchase EFC common stock were converted into options to purchase a total
            of 168,690 shares of the Companys common stock. The acquisition was accounted
            for under the purchase method as of the closing date. Goodwill and core deposit
            intangibles recorded was $97.4 million. At January 31, 2006, EFC had $1.1 billion
            in total assets, $703.4 million in deposits and $82.5 million in stockholders
            equity. The acquisition added seven offices to the Banks branch network, with
            offices in Kane and Cook Counties, Illinois. The Company funded the cash portion
            of the merger consideration primarily through an increase in its unsecured term
            bank loan in the amount of $52 million.

72

---

# MAF Bancorp, Inc. and Subsidiaries
            Notes to Consolidated Financial Statements - (Continued)

The
            following table summarizes the estimated fair value of the assets acquired and liabilities
            assumed at the date of acquisition of EFC (dollars in thousands):

|                                              | 
|--------------------------------------------- | 
|Cash                                          | 
|Investment securities                         | 
|FHLB of Chicago stock                         | 
|Mortgage-backed securities                    | 
|Loans                                         | 
|Allowance for loan losses                     | 
|Premises                                      | 
|Other assets                                  | 
|Goodwill                                      | 
|Core deposit intangibles                      | 
|                                              | 
|Total assets acquired                         | 
|                                              | 
|Deposits                                      | 
|Borrowings                                    | 
|Other liabilities                             | 
|                                              | 
|Total liabilities
                    assumed | 
|                                              | 
|Net assets acquired                           | 
|                                              | 

The
            $83.9 million of goodwill and $13.5 million of core deposit intangible recorded
            in the acquisition were assigned to the banking segment. The core deposit intangible
            has an estimated life of ten years. The Company relied on a valuation report by
            an independent third party in valuing the core deposit intangible.

On
            November 1, 2004, the Company acquired Chesterfield Financial Corp. in a transaction
            valued at $128.4 million including stock options. The Company paid $85.7 million
            in cash and issued approximately 982,000 shares of MAF Bancorp common stock. Goodwill
            and core deposit intangibles of $45.9 million were generated in the transaction.
            The merger provided three additional branch locations in the Chicago area. At acquisition
            date, Chesterfield had assets of $354.2 million, deposits of $270.7 million and
            stockholders equity of $73.3 million.

# 3. Investment Securities Available
            for Sale

Investment
            securities available for sale are summarized below:

|                                      | December 31, 2006 | December 31, 2005 |  
|------------------------------------- | ----------------- | ----------------- | -
|
|
|
|U.S. Government and Agency securities |                   |                   | $
|Municipal securities                  |                   |                   |  
|Asset-backed securities               |                   |                   |  
|Corporate debt securities             |                   |                   |  
|Bank trust preferred                  |                   |                  
|securities                            |                   |                   |  
|GSE preferred stock and               |                   |                  
|other                                 |                   |                   |  
|                                      |                   |                   |  
|                                      |                   |                   | $
|                                      |                   |                   |  

The
            Company did not have any investment securities classified as held to maturity or
            trading at December 31, 2006 or 2005.

73

---

# MAF Bancorp, Inc. and Subsidiaries
            Notes to Consolidated Financial Statements - (Continued)

The
            amortized cost and fair value of securities at December 31, 2006, by contractual
            maturity, are shown in the table below. Expected maturities may differ from contractual
            maturities because certain issuers have the right to call obligations prior to maturity
            without penalty. At December 31, 2006, the Company had $177.5 million of investment
            securities with call options, of which $132.7 million were callable within one year.

|                                          | Amortized
                    Cost | Fair
                    Value
|----------------------------------------- | ---------------------------------- | ------------------------------
|
|Debt securities:                          |                                    |                               
|Under one year                            |                                    |                               
|Over 1 to 5 years                         |                                    |                               
|Over 5 to 10 years                        |                                    |                               
|Over 10 years                             |                                    |                               
|                                          |                                    |                               
|Total
                    debt securities |                                    |                               
|Asset-backed securities                   |                                    |                               
|GSE preferred stock and                   |                                    |                               
|other                                     |                                    |                               
|                                          |                                    |                               
|Total
                    investment      |                                    |                               
|securities                                |                                    |                               
|                                          |                                    |                               

Activity
            in the sales of investment securities available for sale is as follows:

|                            | Year Ended December 31, | 
|--------------------------- | ----------------------- | 
|
|
|Total proceeds on sale      |                         | 
|                            |                         | 
|Gross realized gains        |                         | 
|Gross realized losses       |                         | 
|                            |                         | 
|Net gain on sale            |                         | 
|Impairment writedown deemed |                         | 
|other-than-temporary        |                         | 
|                            |                         | 
|Net gain (loss) on sale or  |                         | 
|writedown                   |                         | 
|                            |                         | 

During
            2006, other-than-temporary impairment writedown of $3.6 million were recorded on
            approximately $229.7 million of investments upon the decision to sell these securities
            as part of a balance sheet restructuring program in December 2006. In 2005, the
            gain represents a dissolution of stock in a regional ATM network and the sale of
            two marketable equity securities. During 2004, the Company recorded a $2.0 million
            other-than-temporary impairment write-down on two Freddie Mac floating-rate preferred
            stock securities with an aggregate carrying value of $8.8 million. The Company recorded
            the write-down because the current yields on these securities were below market
            interest rates, the fair value had been below cost for an extended period, and a
            recovery in fair value was not assumed within a reasonably short period of time.

The
            following table discloses the securities in the Companys investment portfolio
            that have unrealized losses aggregated by each category of investment as of December 31,
            2006. The $229.7 million of securities identified as being part of the balance sheet
            restructuring are not included in the table below as the unrealized losses were
            recorded in the 2006 consolidated statement of operations.

|                                      | Aggregate Unrealized Losses on Investment
                    Securities | 
|------------------------------------- | ------------------------------------------------------------------------ | 
|
|
|
|U.S. Government and Agency securities |                                                                          | 
|Municipal securities                  |                                                                          | 
|Asset-backed securities               |                                                                          | 
|GSE preferred stock                   |                                                                          | 
|                                      |                                                                          | 
|                                      |                                                                          | 
|                                      |                                                                          | 

74

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# MAF Bancorp, Inc. and Subsidiaries
            Notes to Consolidated Financial Statements - (Continued)

The
            following table discloses the securities in the Companys investment portfolio
            that have unrealized losses aggregated by each category of investment as of December
            31, 2005:

|                                      | Aggregate Unrealized Losses on Investment
                    Securities | 
|------------------------------------- | ------------------------------------------------------------------------ | 
|
|
|
|U.S. Government and Agency securities |                                                                          | 
|Municipals                            |                                                                          | 
|Asset-backed securities               |                                                                          | 
|Bank trust preferred                  |                                                                          | 
|securities                            |                                                                          | 
|GSE preferred stock                   |                                                                          | 
|                                      |                                                                          | 
|                                      |                                                                          | 
|                                      |                                                                          | 

Because
            the securities in the investment portfolio are classified as available for sale,
            and carried at fair value with unrealized losses, net of related tax effects, recorded
            in stockholders equity, any charge to earnings in the future if the securities
            were to be sold or were deemed by management to be other-than-temporarily impaired
            would not be expected to have a significant impact on stockholders equity
            at December 31, 2006. None of the unrealized losses are related to credit deterioration,
            but rather market value deterioration due to higher interest rates. See Note No.
            4 Mortgage-Backed Securities Available for Sale and Held to Maturity
            for further information regarding the sale of mortgage-backed securities as part
            or our balance sheet restructuring.

# 4. Mortgage-Backed Securities Available
            for Sale and Held to Maturity

Mortgage-backed
            securities available for sale and held to maturity are summarized below:

|                                       | December 31, 2006 | December 31, 2005 |  
|-------------------------------------- | ----------------- | ----------------- | -
|
|
|
|Available for sale:                    |                   |                   |  
|Pass-through                           |                   |                  
|certificates:                          |                   |                  
|Fannie Mae                             |                   |                   | $
|Freddie Mac                            |                   |                   |  
|Other                                  |                   |                   |  
|Collateralized mortgage                |                   |                  
|obligations:                           |                   |                  
|Agency CMOs                            |                   |                   |  
|Private issue
                    CMOs |                   |                   |  
|                                       |                   |                   |  
|                                       |                   |                   | $
|                                       |                   |                   |  
|Held to maturity -                     |                   |                  
|Fannie Mae                             |                   |                  
|pass-through                           |                   |                  
|certificates                           |                   |                   | $
|                                       |                   |                   |  

In
            2006, the Bank did not swap any originated loans into mortgage-backed securities.
            During 2005, the Bank swapped $45.4 million of primarily fixed-rate loans it originated
            into mortgage-backed securities which were sold in the same period. Additionally
            in 2005, the Bank swapped $37.2 million of 15-year fixed-rate loans into mortgage-backed
            securities that were added to the held to maturity portfolio. Included in mortgage-backed
            securities held to maturity at December 31, 2006 and 2005 are $212.3 million
            and $243.2 million, respectively, of loans originated by the Bank.

Activity
            in the sales of mortgage-backed securities available for sale is as follows:

|                            | Year Ended December 31, |  |  
|--------------------------- | ----------------------- |  | -
|
|
|                            |                         |  |  
|Total proceeds on sale      |                         |  | $
|                            |                         |  |  
|Gross realized gains        |                         |  | $
|Gross realized losses       |                         |  |  
|                            |                         |  |  
|Net gain on sale            |                         |  |  
|                            |                         |  |  
|Impairment writedown deemed |                         | 
|other-than-temporary        |                         |  |  
|                            |                         |  |  
|Net gain (loss) on sale or  |                         | 
|writedown                   |                         |  | $
|                            |                         |  |  

75

---

# MAF Bancorp, Inc. and Subsidiaries
            Notes to Consolidated Financial Statements - (Continued)

During
            2006, other-than-temporary impairment writedowns of $9.3 million were recorded on
            approximately $301.7 million of mortgage-backed securities upon the decision to
            sell these securities as part of a balance sheet restructuring program in December
            2006.

The
            following table discloses the securities in the Companys available for sale
            and held to maturity portfolios that have unrealized losses aggregated by each category
            of investment as of December 31, 2006. The $301.7 million of mortgage-backed
            securities identified for sale as part of the balance sheet restructuring are not
            included in the table below as the unrealized losses were recorded in the 2006 consolidated
            statement of operations.

|                                                    | Aggregate Unrealized Losses on Mortgage-Backed
                    Securities | 
|--------------------------------------------------- | ----------------------------------------------------------------------------- | 
|
|
|
|Available for sale:                                 |                                                                               | 
|Pass-through certificates:                          |                                                                               | 
|Fannie Mae                                          |                                                                               | 
|Freddie Mac                                         |                                                                               | 
|Other                                               |                                                                               | 
|                                                    |                                                                               | 
|Total
                    pass-through certificates |                                                                               | 
|                                                    |                                                                               | 
|Collateralized mortgage obligations:                |                                                                               | 
|Agency CMOs                                         |                                                                               | 
|Private issue
                    CMOs              |                                                                               | 
|                                                    |                                                                               | 
|Total
                    CMOs                      |                                                                               | 
|                                                    |                                                                               | 
|Total
                    available for             |                                                                               | 
|sale                                                |                                                                               | 
|                                                    |                                                                               | 
|Held to maturity -                                  |                                                                               | 
|Fannie Mae pass-through                             |                                                                               | 
|certificates                                        |                                                                               | 
|                                                    |                                                                               | 
|                                                    |                                                                               | 

The
            following table discloses the securities in the Companys available for sale
            and held to maturity portfolios that have unrealized losses aggregated by each category
            of investment as of December 31, 2005:

|                                                    | Aggregate Unrealized Losses on Mortgage-Backed
                    Securities | 
|--------------------------------------------------- | ----------------------------------------------------------------------------- | 
|
|
|
|Available for sale:                                 |                                                                               | 
|Pass-through certificates:                          |                                                                               | 
|Fannie Mae                                          |                                                                               | 
|Freddie Mac                                         |                                                                               | 
|Other                                               |                                                                               | 
|                                                    |                                                                               | 
|Total
                    pass-through certificates |                                                                               | 
|                                                    |                                                                               | 
|Collateralized mortgage obligations:                |                                                                               | 
|Agency CMOs                                         |                                                                               | 
|Private issue
                    CMOs              |                                                                               | 
|                                                    |                                                                               | 
|Total
                    CMOs                      |                                                                               | 
|                                                    |                                                                               | 
|Total available
                    for sale        |                                                                               | 
|                                                    |                                                                               | 
|Held to maturity -                                  |                                                                               | 
|Fannie Mae pass-through                             |                                                                               | 
|certificates                                        |                                                                               | 
|                                                    |                                                                               | 

Because
            the securities identified in the table above are classified as available for sale,
            and carried at fair value with unrealized losses, net of related tax effects, recorded
            in stockholders equity, any charge to earnings in the future if the securities
            were to be sold or were deemed by management to be other-than-temporarily impaired
            would not be expected to have a significant impact on stockholders equity.
            None of the unrealized losses are related to credit deterioration, but rather market
            value deterioration due to higher interest rates.

76

---

# MAF Bancorp, Inc. and Subsidiaries
            Notes to Consolidated Financial Statements - (Continued)

During
            the fourth quarter of 2006, the Bank evaluated its overall asset/liability position
            and identified $531.4 of investment and mortgage-backed securities for sale as part
            of a balance sheet restructuring plan approved by the Companys Board of Directors
            on December 19, 2006. The plan objectives were aimed at reducing the size of its
            investment portfolio, repaying wholesale borrowings, managing liquidity and better
            positioning the Bank for the current difficult and uncertain interest rate environment.
            When determining the securities to sell, the Bank considered reducing its portfolio
            with the lowest coupon rates, which have negatively impacted cash flows most dramatically
            due to rising short-term interest rates. The Bank also sought to maintain its net
            duration position after repaying borrowings. All of the securities identified for
            sale were rated AAA. To a lesser extent, the Bank considered its collateral needs
            in selecting securities for sale.

The
            Bank assessed the remainder of the investment and mortgage-backed portfolio relative
            to its asset/liability and liquidity management objectives and its ability to more
            effectively manage the current interest rate environment. Given this assessment,
            the Bank maintains its intent and ability to hold the remaining available-for-sale
            investment and mortgage-backed securities to the earlier of the recovery of the
            unrealized losses or maturity.

# 5. Loans Receivable Held For Sale

Loans
            receivable held for sale are summarized as follows:

|                                                    | At December 31, | 
|--------------------------------------------------- | --------------- | 
|
|
|
|One- to four-family                                 |                 | 
|Fixed-rate                                          |                 | 
|Adjustable-rate                                     |                 | 
|                                                    |                 | 
|Total
                    one- to four-family       |                 | 
|                                                    |                 | 
|Equity lines of credit and home                     |                 | 
|equity
                    loans:                   |                 | 
|Equity lines of credit                              |                 | 
|Home equity loans                                   |                 | 
|                                                    |                 | 
|Total equity
                    loans              |                 | 
|                                                    |                 | 
|Total
                    loans receivable held for |                 | 
|sale                                                |                 | 
|                                                    |                 | 

# 6. Loans Receivable

Loans
            receivable are summarized as follows:

|                                                                 | At December 31, | 
|---------------------------------------------------------------- | --------------- | 
|
|
|One- to four-family                                              |                 | 
|Equity lines of credit and home
                    equity loans |                 | 
|Multi-family                                                     |                 | 
|Commercial real estate                                           |                 | 
|Construction                                                     |                 | 
|Land                                                             |                 | 
|Commercial business loans                                        |                 | 
|Consumer loans                                                   |                 | 
|                                                                 |                 | 
|Loans
                    receivable, net                        |                 | 
|                                                                 |                 | 

Loans
            that have adjustable-rate features included in loans receivable totaled $5.80 billion
            at December 31, 2006 and $5.88 billion at December 31, 2005. Netted in
            loans receivable at December 31, 2006 and December 31, 2005 are net deferred loan
            origination costs of $16.0 million and $23.3 million, respectively.

77

---

# MAF Bancorp, Inc. and Subsidiaries
            Notes to Consolidated Financial Statements - (Continued)

Allowance
            for loan losses. Activity in the allowance for loan losses is summarized
            as follows for the years indicated:

|                             | Year Ended December 31, | 
|---------------------------- | ----------------------- | 
|
|
|Balance at beginning of year |                         | 
|Provision for loan losses    |                         | 
|Balance acquired in          |                         | 
|acquisitions                 |                         | 
|Charge-offs                  |                         | 
|Recoveries                   |                         | 
|                             |                         | 
|Balance at end of year       |                         | 
|                             |                         | 

At
            December 31, 2006, 2005 and 2004, the Bank had $66.5 million, $31.2 million and
            $31.5 million, respectively, in loans that were on non-accrual status. Interest
            income that would have been recorded on non-accrual loans amounted to $2.6 million
            for the year ended December 31, 2006, and $1.4 million for each years ended
            December 31, 2005 and 2004. Interest income recognized on non-accrual loans and
            included in interest income was $2.0 million, $563,000 and $630,000, for the years
            ended December 31, 2006, 2005 and 2004, respectively.

At
            December 31, 2006 there were $4.1 million of commitments to lend additional funds
            to borrowers whose loans were non-performing.

At
            December 31, 2006, 2005 and 2004, the Company had $8.7 million, $2.1 million
            and $3.4 million of impaired loans, respectively. There were no specific reserves
            established for these loans. The average balance of impaired loans for 2006, 2005
            and 2004 was $3.6 million, $2.4 million and $2.7 million, respectively.

# 7. Real Estate Held for Development
            or Sale

The
            carrying value of the Companys investment in real estate held for development
            or sale by project is as follows:

|                   | At December 31, | 
|------------------ | --------------- | 
|
|
|Springbank of      |                 | 
|Plainfield         |                 | 
|Future development |                 | 
|                   |                 | 
|                   |                 | 
|                   |                 | 

Income
            from real estate operations by project for the years indicated is as follows:

|              | Year Ended December 31, | 
|------------- | ----------------------- | 
|
|
|Springbank of |                         | 
|Plainfield    |                         | 
|Shenandoah    |                         | 
|Tallgrass of  |                         | 
|Naperville    |                         | 
|              |                         | 
|              |                         | 
|              |                         | 

Interest
            expense capitalized to real estate held for development or sale amounted to $729,000,
            $173,000 and $8,000 for the years ended December 31, 2006, 2005 and 2004, respectively.

78

---

# MAF Bancorp, Inc. and Subsidiaries
            Notes to Consolidated Financial Statements - (Continued)

# 8. Premises and Equipment

Premises
            and equipment are summarized as follows:

|                                                                    |  | At December 31,
|------------------------------------------------------------------- |  | ---------------
|
|
|Land                                                                |  |                
|Office buildings                                                    |  |                
|Furniture, fixtures and equipment                                   |  |                
|Computer equipment                                                  |  |                
|Leasehold improvements                                              |  |                
|                                                                    |  |                
|Total premises
                    and equipment, at cost           |  |                
|Less: accumulated depreciation and
                    amortization |  |                
|                                                                    |  |                
|                                                                    |  |                
|                                                                    |  |                

Depreciation
            and amortization of premises and equipment, included in data processing expense
            and office occupancy and equipment expense, totaled $17.1 million, $15.1 million
            and $13.7 million for the years ended December 31, 2006, 2005 and 2004, respectively.
            Rent expense is recorded on a straight line basis. As a result, actual rental payments
            during a period may differ from rent expense recorded, due to lease escalation clauses
            or rent abatements. Occupancy expense is reduced by rental income from leased premises
            totaling $832,000, $930,000, and $982,000 for the years ended December 31,
            2006, 2005 and 2004, respectively.

The
            Bank is obligated under non-cancelable operating leases primarily for office space.
            Rent expense under these leases for the years ended December 31, 2006, 2005
            and 2004, was $8.0 million, $8.0 million, and $8.2 million, respectively. The projected
            minimum rental expense over the remaining terms of original existing leases as of
            December 31, 2006 is as follows (in thousands):

|Year Ended December 31, |  
|----------------------- | -
|2007                    | $
|2008                    |  
|2009                    |  
|2010                    |  
|2011                    |  
|2012 and thereafter     |  

# 9. Goodwill and Intangibles

The
            changes in the carrying amount of goodwill, all recorded in the Banking segment,
            for the years ended December 31, 2006 and 2005 are shown below. The adjustments
            to goodwill relating to prior acquisitions primarily reflect tax adjustments that
            resulted from provision to tax return changes and changes in the estimated amounts
            of tax reserves relating to such acquisitions, as well as adjustments for 2005 relating
            to improved information received on contingent liability reserves from prior acquisitions.

The
            changes in the carrying amount of goodwill, all recorded in the Banking segment,
            for the years ended December 31, 2006 and 2005 are as follows (in thousands):

|                                                        | 
|------------------------------------------------------- | 
|Balance at December 31, 2004                            | 
|Adjustments related
                    to prior        | 
|acquisitions                                            | 
|                                                        | 
|Balance at December 31, 2005                            | 
|Addition related
                    to EFC acquisition | 
|Adjustments related
                    to prior        | 
|acquisitions                                            | 
|                                                        | 
|Balance at December 31, 2006                            | 
|                                                        | 

79

---

# MAF Bancorp, Inc. and Subsidiaries
            Notes to Consolidated Financial Statements - (Continued)

The
            changes in the carrying amount of intangibles for the years ended December 31,
            2006 and 2005 are as follows:

|                                                            | Core Deposit
                    Intangibles | Mortgage
                    Servicing
                    Rights | Total
|----------------------------------------------------------- | -------------------------------------------- | ----------------------------------------------------------------- | -----
|
|Balance at December 31, 2004                                |                                              |                                                                   | $    
|Additions                                                   |                                              |                                                                   |      
|Amortization expense                                        |                                              |                                                                   |      
|Carrying value of servicing rights
                    sold |                                              |                                                                   |      
|Valuation recovery                                          |                                              |                                                                   |      
|                                                            |                                              |                                                                   |      
|Balance at December 31, 2005                                |                                              |                                                                   |      
|                                                            |                                              |                                                                   |      
|Additions                                                   |                                              |                                                                   |      
|Amortization expense                                        |                                              |                                                                   |      
|Carrying value of servicing rights
                    sold |                                              |                                                                   |      
|                                                            |                                              |                                                                   |      
|Balance at December 31, 2006                                |                                              |                                                                   | $    
|                                                            |                                              |                                                                   |      

The
            following is a summary of intangible assets subject to amortization:

|                             | As of December 31, 2006 | As of December 31, 2005 |  
|---------------------------- | ----------------------- | ----------------------- | -
|
|
|                             |                         |                         |  
|Core deposit intangibles     |                         |                         | $
|Mortgage servicing rights(1) |                         |                         |  
|                             |                         |                         |  
|Total                        |                         |                         | $
|                             |                         |                         |  

---

|(1) | The estimated fair values
                    of mortgage servicing rights at December 31, 2006 and 2005 were $25.3 million and
                    $29.0 million, respectively.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Amortization
            expense for core deposit intangibles and mortgage servicing rights for the year
            ended December 31, 2006 and estimates for the five years thereafter are as
            follows. These estimates relate to the carrying value of the Banks core deposit
            intangibles and mortgage servicing rights as of December 31, 2006.

|                                                     | Core
                    Deposit
                    Intangibles | Mortgage
                    Servicing
                    Rights
|---------------------------------------------------- | ---------------------------------------------------------------- | -----------------------------------------------------------------
|
|Aggregate amortization expense for                   |                                                                  |                                                                  
|the year ended
                    December 31, 2006 |                                                                  |                                                                  
|Estimated amortization expense for                   |                                                                  |                                                                  
|the year ending
                    December 31,:    |                                                                  |                                                                  
|2007                                                 |                                                                  |                                                                  
|2008                                                 |                                                                  |                                                                  
|2009                                                 |                                                                  |                                                                  
|2010                                                 |                                                                  |                                                                  
|2011                                                 |                                                                  |                                                                  

Loan
            servicing and mortgage servicing rights. The Bank services loans
            for the benefit of others pursuant to loan servicing agreements. Under these agreements,
            the Bank typically collects from the borrower monthly payments of principal and
            interest, as well as funds for the payment of real estate taxes and insurance. The
            Bank retains its loan servicing fee from these payments and remits the balance of
            the principal and interest payments to the various investors. Mortgage loans serviced
            for others are not included in the accompanying consolidated statement of financial
            condition. The unpaid principal balances of these loans were $2.7 billion, $2.9
            billion and $3.6 billion, at December 31, 2006, 2005 and 2004, respectively.
            Loan servicing fee income was $3.4 million, $2.3 million and $1.2 million for the
            years ended December 31, 2006, 2005 and 2004, respectively. Non-interest bearing
            custodial balances maintained in connection with mortgage loans serviced for others
            (included in deposits) were $46.8 million and $41.2 million at December 31,
            2006 and 2005, respectively.

80

---

# MAF Bancorp, Inc. and Subsidiaries
            Notes to Consolidated Financial Statements - (Continued)

# 10. Deposits

The
            following table is a summary of the Companys deposits at December 31,
            2006 and 2005. The weighted average rates are contractual rates and are not adjusted
            for the effect of purchase accounting adjustments. The unamortized premium represents
            part of the purchase accounting adjustments remaining from the acquisitions of Chesterfield,
            St. Francis and Elgin to mark the deposits to fair value.

|                         | At December 31, 2006 | At December 31, 2005 |  
|------------------------ | -------------------- | -------------------- | -
|
|
|Commercial checking      |                      |                      | $
|Non-interest bearing     |                      |                     
|checking                 |                      |                      |  
|Interest bearing         |                      |                     
|checking                 |                      |                      |  
|Commercial money markets |                      |                      |  
|Money markets            |                      |                      |  
|Passbooks                |                      |                      |  
|                         |                      |                      |  
|                         |                      |                      |  
|                         |                      |                      |  
|Certificate accounts:    |                      |                     
|Up to 2.99%              |                      |                      |  
|3.00% to 3.99%           |                      |                      |  
|4.00% to 4.99%           |                      |                      |  
|5.00% and greater        |                      |                      |  
|                         |                      |                      |  
|                         |                      |                      |  
|                         |                      |                      |  
|Unamortized              |                      |                     
|premium(discount)        |                      |                      |  
|                         |                      |                      |  
|Total deposits           |                      |                      | $
|                         |                      |                      |  

The
            aggregate amount of certificates of deposit with denominations of $100,000 or greater
            was $1.04 billion and $751.1 million at December 31, 2006 and 2005, respectively.

Scheduled
            maturities of certificate accounts at December 31, 2006 are as follows (in
            thousands):

|                  | 
|----------------- | 
|                  | 
|12 months or less | 
|13 to 24 months   | 
|25 to 36 months   | 
|Over 36 months    | 
|                  | 
|                  | 
|                  | 

Interest
            expense on deposit accounts is summarized as follows for the periods indicated:

|                          | Year Ended December 31, |  |  
|------------------------- | ----------------------- |  | -
|
|
|Interest-bearing checking |                         |  | $
|Money markets             |                         |  |  
|Passbooks                 |                         |  |  
|Certificates              |                         |  |  
|                          |                         |  |  
|                          |                         |  | $
|                          |                         |  |  

At
            December 31, 2006, U.S. Treasury Notes, Freddie Mac and Fannie Mae mortgage-backed
            securities, as well as mortgage loans with an aggregate carrying value of $136.8
            million and fair value of $136.4 million, were pledged as collateral for certain
            certificate accounts.

81

---

# MAF Bancorp, Inc. and Subsidiaries
            Notes to Consolidated Financial Statements - (Continued)

# 11. Borrowed Funds

The
            following table is a summary of the Companys borrowed funds at December 31,
            2006 and 2005. The weighted average rates are contractual rates and are not adjusted
            for the effect of purchase accounting adjustments.

|                                              | At December 31, 2006 | At December 31, 2005 |             
|--------------------------------------------- | -------------------- | -------------------- | ------------
|
|
|Fixed-rate advances from FHLBC                |                      |                      |             
|due:                                          |                      |                     
|Within 1 year                                 |                      |                      | 2.76 - 5.14%
|1 to 2 years                                  |                      |                      | 2.78 - 5.24 
|2 to 3 years                                  |                      |                      | 3.53 - 4.85 
|3 to 4 years                                  |                      |                      | 4.28 - 4.28 
|4 to 5 years                                  |                      |                      | 4.36 - 4.36 
|                                              |                      |                      |             
|Total
                    fixed-rate advances |                      |                      | 2.76 - 5.24 
|                                              |                      |                      |             
|Adjustable-rate advances from                 |                      |                     
|FHLBC due:                                    |                      |                     
|Within 1 year                                 |                      |                      | 5.29 - 5.52 
|1 to 2 years                                  |                      |                      |            
|                                              |                      |                      |             
|Total
                    adjustable-rate     |                      |                     
|advances                                      |                      |                      | 5.29 - 5.52 
|                                              |                      |                      |             
|Total
                    advances from FHLBC |                      |                      | 2.76 - 5.52%
|                                              |                      |                      |             
|Unsecured term bank loan                      |                      |                      |             
|Other borrowings                              |                      |                      |             
|Unamortized premium(discount)                 |                      |                      |             
|                                              |                      |                      |             
|Total
                    borrowed funds      |                      |                      |             
|                                              |                      |                      |             

Federal
            Home Loan Bank of Chicago Advances. The Bank has adopted a collateral
            pledge agreement whereby the Bank has agreed to at all times keep on hand, free
            of all other pledges, liens, and encumbrances, first mortgages with unpaid principal
            balances aggregating no less than 150% of the outstanding secured advances from
            the Federal Home Loan Bank of Chicago (FHLBC). All stock in the FHLBC
            is pledged as additional collateral for these advances. At December 31, 2006, no
            other securities were pledged for these borrowings.

Included
            in FHLBC advances at December 31, 2006 are $40.0 million of fixed-rate advances
            with original scheduled maturities of 10 years, with interest rates ranging from
            5.12% to 5.24% which are putable at the discretion of the FHLBC within the next
            twelve months. At inception, the Bank receives a lower cost of borrowing on such
            advances than on similar termed non-putable advances, in return for granting the
            FHLBC the option to put the advances back to the Bank prior to their final maturity.
            At

December 31, 2006, the Bank had
            $100 million of adjustable rate advances indexed at the Prime rate ranging from
            Prime minus 280 basis points to 287 basis points, a $50.0 million adjustable-rate
            advance that is indexed at three-month London interbank offering rate (LIBOR)
            minus 6 basis points and $400.0 million of a short term advance at a FHLBC effective
            federal funds rate minus 3 basis points, which was 5.29% at December 31, 2006. This
            last borrowing was funded in late December as part of the balance sheet restructuring
            transaction and was repaid in January 2007 with the proceeds from the sale of investments
            and mortgage-backed securities. The table above shows all advances at their final
            contractual maturity.

Unsecured
            Term Bank Loan. At December 31, 2006, the Company has an unsecured
            term loan with a final maturity of December 31, 2015. The loan agreement provides
            for an interest rate of one, two, three, six or twelve-month LIBOR plus 95 basis
            points at the option of the Company at each reprice date. At December 31, 2006,
            the weighted average interest rate was 6.32%. The next scheduled principal payment
            of $12.5 million is due on December 31, 2007. Prepayments of principal are
            allowed without penalty at the end of any repricing period. At December 31, 2006
            and 2005, the balance of the unsecured term loan was $147.5 million and $63.0 million,
            respectively.

Unsecured
            Line of Credit. In conjunction with the term bank loan, the Company
            also maintains a $60.0 million one-year unsecured revolving line of credit, which
            was renewed until June 30, 2007. There was no balance drawn at December 31, 2006
            and December 31, 2005.

82

---

# MAF Bancorp, Inc. and Subsidiaries
            Notes to Consolidated Financial Statements - (Continued)

The
            term bank loan and line of credit agreements contain covenants that, among other
            things, require the Company to maintain a minimum stockholders equity balance
            and to obtain certain minimum operating results, as well as requiring the Bank to
            maintain well capitalized regulatory capital levels and certain non-performing
            asset ratios. In addition, the Company has agreed to certain restrictions on additional
            indebtedness and agreed not to pledge any stock of the Bank or MAF Developments
            for any purpose. At December 31, 2006, the Company was in compliance with these
            covenants after giving effect to the waiver obtained from the lenders with respect
            to the net income impact of the balance sheet restructuring.

Reverse
            Repurchase Agreements. The Bank enters into sales of securities under
            agreements to repurchase the identical securities (reverse repurchase agreements)
            with nationally recognized primary securities dealers and are treated as financings.
            The securities underlying the agreements are delivered to the dealers who arrange
            the transaction and are reflected as assets. The usual terms of agreements require
            the seller, generally after a short period of time, to repurchase the same securities
            at a predetermined price or yield. The following table presents certain information
            regarding reverse repurchase agreements as of and for the periods indicated:

|                                 | Year Ended December 31, | 
|-------------------------------- | ----------------------- | 
|
|
|Balance at end of period         |                         | 
|Maximum month-end balance        |                         | 
|Average balance                  |                         | 
|Weighted average rate at end of  |                         | 
|period                           |                         | 
|Weighted average rate on average |                         | 
|balance                          |                         | 

At
            December 31, 2006, reverse repurchase agreements totaled $400 million of which
            $300 million are adjustable-rate and $100 million are fixed-rate. The adjustable
            rate agreements have remaining terms to maturity ranging from 3 months to 4 years.
            The interest rate on $75.0 million of adjustable rate agreements is tied to the
            Prime rate and ranges from Prime minus 280 basis points to Prime minus 284 basis
            points. The remaining $225.0 million have interest rates ranging from three-month
            LIBOR minus 26 basis points to three-month LIBOR minus 58.5 basis points. The LIBOR-based
            repurchase agreements are putable at the discretion of the lender quarterly starting
            in 2007. The rates on the putable fixed rate repurchase agreements range from 4.31%
            to 4.65%, and these agreements are putable at discretion of the lender quarterly
            at various dates in 2007 and 2008. The remaining terms on the fixed-rate agreements
            range from 4 years to 8 years. At December 31, 2006, reverse repurchase agreements
            were collateralized by investment and CMO securities with a carrying value of $429.7
            million and fair value of $425.8 million. Securities sold under agreements to repurchase
            were delivered for escrow to the broker-dealer who arranged the transactions.

Scheduled
            principal repayments on our long-term debt obligations including FHLBC advances,
            reverse repurchase agreements and the unsecured term bank loan are as follows as
            of December 31, 2006 (in thousands):

|           | FHLBC
                    Advances | Reverse
                    Repurchase
                    Agreements | Unsecured
                    Term Bank
                    Loan | Total    
|---------- | ---------------------------------- | --------------------------------------------------------------------- | ---------------------------------------------------------------- | ---------
|2007       |                                    |                                                                       | $                                                                | 1,495,000
|2008       |                                    |                                                                       |                                                                  | 564,000  
|2009       |                                    |                                                                       |                                                                  | 36,000   
|2010       |                                    |                                                                       |                                                                  | 50,000   
|2011       |                                    |                                                                       |                                                                  | 10,000   
|2012 and   |                                    |                                                                      
|thereafter |                                    |                                                                       |                                                                  |         
|           |                                    |                                                                       |                                                                  |          
|           |                                    |                                                                       | $                                                                | 2,155,000
|           |                                    |                                                                       |                                                                  |          

Retail
            repurchase agreements. For certain customers with significant funds
            available for deposit at the Bank, the Bank offers retail repurchase
            agreements under which the Bank collateralizes its obligation to repay the customer
            funds with U.S. government or agency securities. The retail

83

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# MAF Bancorp, Inc. and Subsidiaries
            Notes to Consolidated Financial Statements - (Continued)

repurchases, which totaled $69.8
            million at December 31, 2006, are collateralized by U.S. government agency
            and CMO securities with a carrying value and fair value of $74.7 million.

Interest
            expense on borrowed funds is summarized as follows for the periods indicated:

|                              | Year Ended December 31, | 
|----------------------------- | ----------------------- | 
|
|
|FHLB of Chicago advances      |                         | 
|Reverse repurchase agreements |                         | 
|Unsecured term bank loan      |                         | 
|Unsecured line of credit      |                         | 
|Other borrowings              |                         | 
|                              |                         | 
|                              |                         | 
|                              |                         | 

# 12. Junior Subordinated Debentures

The
            following table summarizes the amount of junior subordinated debentures issued by
            the Company to MAF Bancorp Capital Trust I and MAF Bancorp Capital Trust II as of
            December 31, 2006:

|                             |  | At December 31, 2006 |               
|---------------------------- |  | -------------------- | --------------
|
|MAF Bancorp Capital Trust I  |  |                      | April 15, 2005
|MAF Bancorp Capital Trust II |  |                      | August 4, 2005
|                             |  |                      |               
|                             |  |                      |               
|                             |  |                      |               

During
            2005, the Company formed MAF Bancorp Capital Trust I and MAF Bancorp Capital Trust
            II (the Trusts) as special purpose finance subsidiaries. The Trusts
            have issued $65.0 million in trust preferred securities. The proceeds from the sale
            of the preferred securities, along with $2.0 million received from the Companys
            purchase of the common equity securities of the Trusts, were invested in junior
            subordinated debentures of the Company. The sole assets of the Trusts are the junior
            subordinated debentures. The Trusts are unconsolidated subsidiaries in accordance
            with the guidance from the Financial Accounting Standards Board (FASB)
            Interpretation No. 46 Revised, Consolidation of Variable Interest Entities:
            (FIN 46R). The total balance of the junior subordinated debentures issued
            to the Trusts is recorded as a liability. Interest expense on the junior subordinated
            debentures is recorded in interest expense in the consolidated statement of operations.

# 13. Derivative Financial Instruments

The
            Bank enters into forward commitments to sell mortgage loans for future delivery
            as a means of limiting exposure to changing interest rates between the date a loan
            customer commits to a given rate, or closes the loan, whichever is sooner, and the
            sale date, which is generally 10 to 60 days after the closing date. These commitments
            to sell require the Bank to deliver mortgage loans at stated coupon rates within
            the specified forward sale period, and subject the Bank to risk to the extent the
            loans do not close. The Bank attempts to mitigate this risk by collecting a non-refundable
            commitment fee, when possible, and by estimating a percentage of fallout when determining
            the amount of forward commitments to sell. The following is a summary of the Banks
            forward sales commitment activity for the periods indicated:

|                                   | Year Ended December 31, | 
|---------------------------------- | ----------------------- | 
|
|
|Balance at beginning of year       |                         | 
|New forward commitments to deliver |                         | 
|loans                              |                         | 
|Loans delivered to satisfy forward |                         | 
|commitments                        |                         | 
|                                   |                         | 
|Balance at end of year             |                         | 
|                                   |                         | 

84

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# MAF Bancorp, Inc. and Subsidiaries
            Notes to Consolidated Financial Statements - (Continued)

Loan
            commitments and forward sales are accounted for as derivative instruments with adjustments
            included in gain on sale of mortgage loans. At December 31, 2006 and 2005,
            the net fair value adjustment of locked commitments and forward sales was ($171,000)
            and ($382,000), respectively.

# 14. Income Taxes

Income
            tax expenses is summarized below:

|                                     | Year Ended December 31, | 
|------------------------------------ | ----------------------- | 
|
|
|Current:                             |                         | 
|Federal                              |                         | 
|State                                |                         | 
|                                     |                         | 
|                                     |                         | 
|                                     |                         | 
|Deferred:                            |                         | 
|Federal                              |                         | 
|State                                |                         | 
|                                     |                         | 
|                                     |                         | 
|                                     |                         | 
|Total
                    income tax |                         | 
|expense                              |                         | 
|                                     |                         | 

Retained
            earnings at December 31, 2006 include $95.0 million of tax bad debt reserves
            for which no provision for income taxes has been made. This amount represents earnings
            legally appropriated to bad debt reserves and deducted for federal income tax purposes
            and is generally not available for payment of cash dividends by the Bank or other
            distributions to shareholders of the Bank. If in the future this amount or a portion
            thereof, is used for certain purposes other than to absorb losses on bad debts,
            an income tax liability will be imposed on the amount so used at the then current
            corporate income tax rate. If deferred taxes were required to be provided on this
            item, the amount of this deferred tax liability would be approximately $37.3 million.

The
            reasons for the differences between the effective income tax rate and the corporate
            federal income tax rate are summarized in the following table:

|                                                   | Percentage of Income Before
                    Income Taxes | 
|-------------------------------------------------- | ------------------------------------------------------------ | 
|
|
|Federal income tax rate                            |                                                              | 
|Items affecting effective income                   |                                                              | 
|tax rate:                                          |                                                              | 
|State income taxes,
                    net of     |                                                              | 
|federal
                    benefit                |                                                              | 
|Bank-owned life
                    insurance      |                                                              | 
|Affordable housing
                    tax credits |                                                              | 
|Other items, net                                   |                                                              | 
|                                                   |                                                              | 
|Effective income tax rate                          |                                                              | 
|                                                   |                                                              | 

The
            higher effective income tax rate for 2006 primarily results from adjustments to
            tax reserves for uncertainties associated with the Companys real estate investment
            trust (REIT) subsidiary, which the Company has had in place since 1999. As part
            of its audit of state income tax returns for 1999 to 2001, the Illinois Department
            of Revenue (IDR) issued a proposed adjustment in January 2007 that reflected
            the disallowance of the REIT dividends paid deduction for the years under examination.The
            Company believes it has established adequate reserves to cover its tax liabilities,
            including these state income tax uncertainties. The Company disagrees with the proposed
            IDR adjustment and intends to defend its tax filing positions.

85

---

# MAF Bancorp, Inc. and Subsidiaries
            Notes to Consolidated Financial Statements - (Continued)

The
            tax effects of temporary differences that give rise to significant portions of the
            deferred tax assets and deferred tax liabilities at December 31, 2006 and 2005
            are presented below:

|                                                                | December 31, | 
|--------------------------------------------------------------- | ------------ | 
|
|
|Deferred tax assets:                                            |              | 
|Deferred compensation                                           |              | 
|Allowance for
                    loan losses                   |              | 
|Unrealized loss
                    on securities available     |              | 
|for
                    sale                                    |              | 
|Book versus tax
                    basis of securities         |              | 
|Book versus tax
                    basis of loans receivable   |              | 
|Book versus tax
                    basis of deposits           |              | 
|State net operating
                    losses                  |              | 
|Other                                                           |              | 
|                                                                |              | 
|Total deferred tax assets                                       |              | 
|Valuation allowance                                             |              | 
|                                                                |              | 
|Total
                    deferred tax assets net of            |              | 
|valuation
                    allowance                         |              | 
|Deferred tax liabilities:                                       |              | 
|REIT dividends                                                  |              | 
|Loan origination
                    fees and expenses          |              | 
|Book versus tax
                    basis of land and fixed     |              | 
|assets                                                          |              | 
|Book versus tax
                    basis of capitalized        |              | 
|servicing                                                       |              | 
|Book versus tax
                    basis of intangible assets  |              | 
|Book versus tax
                    basis of FHLBC stock        |              | 
|Book versus tax
                    basis of loans receivable . |              | 
|Book versus tax
                    basis of deposits           |              | 
|Other                                                           |              | 
|                                                                |              | 
|Total
                    deferred tax liabilities              |              | 
|                                                                |              | 
|Net
                    deferred tax liability                  |              | 
|                                                                |              | 

At
            December 31, 2006, there are deferred tax assets relating to approximately
            $60.1 million of various state net operating loss carryforwards, of which $35.6
            million relate to pre-acquisition losses of acquired companies. The net operating
            losses expire during a period that begins in 2007 and ends in 2021. The deferred
            tax assets associated with the net operating loss carryforwards and certain other
            deferred deductible items are reduced by a 100% valuation allowance because realization
            of these tax benefits is in doubt. The increase in the valuation allowance in 2006
            primarily relates to net operating losses incurred in 2006 and 2005. If the net
            operating losses with a related valuation allowance are subsequently utilized, the
            related recognized tax benefits will be allocated to reduce goodwill to the extent
            they relate to pre-acquisition net operating losses of acquired companies.

# 15. Regulatory Capital

The
            Bank is subject to regulatory capital requirements by the Office of Thrift Supervision
            (OTS). Failure to meet minimum capital requirements can initiate certain
            mandatory, and possibly additional discretionary actions by regulators, which could
            have a material impact on the Banks financial statements. Under capital adequacy
            guidelines and the regulatory framework for prompt corrective action, the Bank must
            meet specific capital guidelines that involve quantitative measures of the Banks
            assets, liabilities, and certain off-balance sheet items as calculated under regulatory
            accounting practices.

Quantitative
            measures established by the OTS to ensure capital adequacy require the Bank to maintain
            minimum amounts and ratios (as set forth in the table below) of three capital requirements:
            a tangible capital (as defined in the regulations) to adjusted total assets ratio,
            a core capital (as defined) to adjusted total assets ratio, and a risk-based capital
            (as defined) to total risk-weighted assets ratio. The Bank met all capital adequacy
            requirements to which it is subject as of December 31, 2006 and 2005.

86

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# MAF Bancorp, Inc. and Subsidiaries
            Notes to Consolidated Financial Statements - (Continued)

The
            Banks actual capital amounts and ratios, as well as minimum amounts and ratios
            required for capital adequacy and prompt corrective action provisions are presented
            below:

|                                                            | Actual | For Capital Adequacy
                    Purposes | To Be Well Capitalized
                    Under Prompt
                    Corrective Action
                    Provisions |        
|----------------------------------------------------------- | ------ | ------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------- | -------
|
|
|As of December 31, 2006:                                    |        |                                                   |                                                                                                                              |        
|Tangible capital (to total assets)                          |        |                                                   | $                                                                                                                            | 789,888
|Core capital (to total assets)                              |        |                                                   |                                                                                                                              | 789,888
|Total capital (to risk-weighted
                    assets) |        |                                                   |                                                                                                                              | 804,554
|Core capital (to risk-weighted assets)                      |        |                                                   |                                                                                                                              | 789,888
|                                                            |        |                                                  
|As of December 31, 2005:                                    |        |                                                  
|Tangible capital (to total assets)                          |        |                                                   |                                                                                                                              | 715,105
|Core capital (to total assets)                              |        |                                                   |                                                                                                                              | 715,105
|Total capital (to risk-weighted
                    assets) |        |                                                   |                                                                                                                              | 735,996
|Core capital (to risk-weighted assets)                      |        |                                                   |                                                                                                                              | 715,105

OTS
            regulations provide various standards under which the Bank may declare and pay dividends
            to the Company. During 2007, the amount of dividends the Bank can pay to the Company
            without prior approval of the OTS is limited to 2007 eligible net profits, as defined,
            and adjusted retained 2006 and 2005 net income from the Bank and its subsidiaries.
            At December 31, 2006 under current OTS regulations, the Bank has $13.3 million of
            retained earnings available for dividend declarations.

As
            of December 31, 2006 and 2005, the Bank was categorized as well capitalized
            under the regulatory framework for prompt corrective action. To be categorized as
            well capitalized, the Bank must maintain a minimum core capital to adjusted total
            assets, risk-based capital to adjusted risk-weighted assets, and core capital to
            adjusted risk-weighted assets ratios as set forth in the table above.

# 16. Officer, Director and Employee
            Benefit Plans

Employee
            Stock Ownership Plan (ESOP). The Mid America Bank, fsb ESOP covers
            substantially all employees who met minimum service requirements and who have attained
            the age of 21. Contributions to the ESOP by the Bank are currently made to purchase
            additional common shares of the Companys stock. For the years ended December 31,
            2006, 2005 and 2004, total contributions to the ESOP were $670,000, $720,000, and
            $680,000, respectively, which were expensed. The ESOP purchased 14,647, 16,650 and
            16,237 of the Companys shares for the years ended December 31, 2006,
            2005 and 2004 respectively.

Profit Sharing Plan/401(k) Plan. The Mid America Bank, fsb Profit
            Sharing/401(k) Plan allows employees to make pre-tax or after-tax contributions
            to the plan, subject to certain limitations. The Bank matches the pre-tax contributions
            of employees at a rate equal to 35%, up to a $1,200 maximum matching contribution
            per employee. The Bank, at its discretion, may make additional contributions to
            the plan. Employees contributions vest immediately while the Banks contributions
            vest gradually over a six-year period based on an employees years of service.
            The Bank made discretionary and matching contributions to the plan of $2.7 million,
            $2.9 million and $2.7 million for the years ended December 31, 2006, 2005,
            and 2004, respectively.

Qualified
            Retirement Plans of Acquired Companies. As a result of the merger
            with EFC Bancorp Inc. in 2006, the Company, through Mid America Bank, became the
            plan sponsor of the Elgin Financial Center, S.B. ESOP and the Elgin Financial Center,
            S.B. 401(k) Plan. The Elgin ESOP and 401(k) plans were merged into the Mid America
            Profit Sharing Plan, in 2006.

As
            a result of the merger with Fidelity Bancorp in 2003, the Company, through Mid America
            Bank, became the plan sponsor of the Fidelity Retirement Plan. The plan has been
            terminated and distributions totaling $976,000 were made to plan participants during
            2005. The Company did not record any contribution expense for this plan during 2005
            or 2004.

87

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# MAF Bancorp, Inc. and Subsidiaries
            Notes to Consolidated Financial Statements - (Continued)

As
            a result of the merger with Chesterfield Financial Corp. in 2004, the Company, through
            Mid America Bank, became the plan sponsor of the Chesterfield ESOP and the Chesterfield
            Profit Sharing Plan. The Chesterfield ESOP has been terminated and distributions
            totaling $5.5 million were made to plan participants during 2005. The Chesterfield
            Profit Sharing Plan has been terminated and distributions were made to plan participants
            during 2006. The Company did not record any contribution expense for these plans
            during 2006, 2005 or 2004.

As
            a result of the merger with St. Francis Capital Corporation during 2003, the Company,
            through Mid America Bank, became the plan sponsor of the St. Francis ESOP and the
            St. Francis Savings and Retirement Plan. The St. Francis ESOP and St. Francis Savings
            and Retirement Plan were merged into the Mid America ESOP and Mid America Profit
            Sharing Plan, respectively, during 2004.

Incentive
            Plan/Stock Option Plans. Prior to January 1, 2006, the Company elected
            to apply Accounting Principles Board, or APB, No. 25 and related interpretations
            under SFAS No. 123 Accounting for Stock-Based Compensation and SFAS
            No. 148 Accounting for Stock-Based Compensation  Transition and Disclosure.
            Pursuant to the guidance in these pronouncements, we did not record compensation
            expense under our plans related to stock options.

On
            January 1, 2006, the Company adopted Statement of Financial Accounting Standards,
            or SFAS, No. 123R, Share-Based Payments. SFAS No. 123R requires the
            recognition of compensation expense in an amount equal to the fair value of all
            share-based payments. The Company elected to apply SFAS 123R on a modified prospective
            method, which requires the Company to record compensation expense for options granted
            on or after January 1, 2006 and over the remaining vesting period for previous awards
            that were partially unvested as of the date of adoption of SFAS No. 123R. Also,
            under the modified prospective method, the financial statements for prior periods
            do not reflect any adjusted amounts. The Company utilized the Black-Scholes option-pricing
            model to determine the grant date value of stock options.

Had
            the Company elected to record compensation expense for stock option grants based
            on the fair value at the grant dates for stock option awards under those plans consistent
            with the method of SFAS No. 148, the Companys net income and earnings per
            share would have been reduced to the pro-forma amounts indicated in the table below:

|                                                                                              | Year Ended December 31, | 
|--------------------------------------------------------------------------------------------- | ----------------------- | 
|
|Net income                                                                                    |                         | 
|As reported                                                                                   |                         | 
|Add: Stock based
                    employee compensation expense included in reported net   |                         | 
|income,
                    net of tax effects                                                |                         | 
|Deduct: total
                    stock option employee compensation expense determined using |                         | 
|Black-Scholes
                    method for all awards, net of related tax effects           |                         | 
|                                                                                              |                         | 
|Pro-forma                                                                                     |                         | 
|                                                                                              |                         | 
|Basic earnings per share                                                                      |                         | 
|As reported                                                                                   |                         | 
|Pro-forma                                                                                     |                         | 
|Diluted earnings per share                                                                    |                         | 
|As reported                                                                                   |                         | 
|Pro-forma                                                                                     |                         | 
|                                                                                              |                         | 

The
            fair value of each option grant was estimated using the Black-Scholes option-pricing
            model with the following weighted-average assumptions used for grants during the
            years ended December 31, 2005 and 2004: dividend yield of 2.05% and 1.88%;
            expected volatility of 24.67% and 25.91%; risk-free interest rates of 4.42% and
            4.20%; expected life of 7.5 years for each period.

The
            MAF Bancorp Incentive Compensation Plan, or the Incentive Plan, was adopted in July
            2003. Under the Incentive Plan, a variety of different types of awards may be granted
            to directors and employees, including stock options, stock appreciation rights,
            restricted shares, performance shares, restricted and performance share units, cash
            awards, awards under deferred compensation or similar plans, and other incentive
            awards. Stock options have also been granted to employees and directors under prior
            stock option plans. Our shareholders have approved all stock incentive plans. We
            generally issue treasury shares to satisfy stock option exercises and upon vesting
            of RSUs, as available.

88

---

# MAF Bancorp, Inc. and Subsidiaries
            Notes to Consolidated Financial Statements  (Continued)

The
            plan provides that the total number of shares of common stock which may be issued
            pursuant to awards under the plan may not exceed 800,000 shares, plus such number
            of shares of common stock that have already been authorized and previously approved
            by the Companys shareholders and are available for issuance under the Companys
            2000 Stock Option Plan.

Of
            the shares authorized for issuance under the Incentive Plan, up to 25% may be issued
            with respect to awards of restricted stock and restricted stock units. In the case
            of stock option awards, the option exercise price must be at least 100% of the fair
            market value of the common stock on the date of grant, and the option term cannot
            exceed 10 years. Vesting periods are determined at the discretion of the Companys
            Compensation Committee. For the initial stock options awards granted under the Incentive
            Plan in 2003, the vesting period was established as two years. The stock options
            awarded during 2005 and 2004 were immediately vested on the date of grant.

All
            current outstanding stock options have been granted at an exercise price equal to
            or greater than the fair market value of the underlying common stock at the date
            of grant, and may be exercisable for up to 10 years. We recorded expense for the
            year ended December 31, 2006 of $6,312 related to 500 options that became fully
            vested in December 2006. We did not grant any stock options in 2006. In 2005 and
            2004, stock options granted were immediately vested and no associated compensation
            expense has been recorded for such options in 2006, 2005 or 2004.

In
            conjunction with the Companys acquisitions, certain outstanding stock options
            of the acquired institutions were converted into stock options of the Company based
            on the transactions exchange ratios and other terms of the merger agreements.
            The value of these stock options was included in the purchase price of the transactions,
            and therefore no compensation expense was recorded for such options in 2006, 2005
            or 2004.

|                              | Year Ended December 31, | 
|----------------------------- | ----------------------- | 
|
|
|Beginning of year             |                         | 
|Options granted               |                         | 
|Acquiree options converted    |                         | 
|Options exercised             |                         | 
|Converted options exercised   |                         | 
|Options cancelled             |                         | 
|                              |                         | 
|End of year                   |                         | 
|                              |                         | 
|Options exercisable           |                         | 
|                              |                         | 
|Fair value of options granted |                         | 
|during year                   |                         | 
|                              |                         | 

At
            December 31, 2006 the following stock options are outstanding:

|                | Options Outstanding | Options Exercisable | 
|--------------- | ------------------- | ------------------- | 
|
|$13.77 to 24.24 |                     |                     | 
|25.22 to 34.11  |                     |                     | 
|34.94 to 44.87  |                     |                     | 
|                |                     |                     | 
|                |                     |                     | 
|                |                     |                     | 

The
            Company also granted restricted stock units (RSUs) to employees pursuant
            to the Incentive Plan. An RSU award entitles a recipient to receive a like number
            of shares of MAF Bancorp stock on certain designated vesting dates, assuming the
            recipient is still employed with the Company on such dates. RSUs granted to employees
            in 2006 vest ratably over a three-year or five-year period while RSUs granted to
            directors in 2006 vest over one-year period. RSUs granted in 2005 vest ratably over
            a three-year period while RSUs granted in 2004 vest on various dates during a period
            that ends five years from the date of grant. The following is a summary of outstanding
            RSUs:

89

---

# MAF Bancorp, Inc. and Subsidiaries
            Notes to Consolidated Financial Statements - (Continued)

|                  | Year Ended December 31, | 
|----------------- | ----------------------- | 
|
|Beginning of Year |                         | 
|RSUs granted      |                         | 
|RSUs vested       |                         | 
|RSUs cancelled    |                         | 
|                  |                         | 
|End of year       |                         | 
|                  |                         | 

The
            Company incurred compensation expense totaling $671,000, $343,000, and $201,000
            in 2006, 2005 and 2004, respectively, relating to restricted stock awards. In addition
            to the outstanding stock options and RSUs shown in the tables above, there were
            75,553 shares available for grant under the Incentive Plan as of December 31,
            2006. Cancelled stock options and RSUs increase the number of shares available for
            grant under the Incentive Plan.

Stock
            Option Gain Deferral Plan. The MAF Bancorp, Inc. Stock Option Gain
            Deferral Plan (Gain Deferral Plan) was adopted during 1999 and terminated
            in 2005. The Gain Deferral Plan combined traditional deferred compensation arrangements
            with stock option exercise transactions by allowing designated executive officer
            participants to defer to a future date, the receipt of shares representing the value
            of underlying MAF Bancorp stock options. Dividends paid on MAF Bancorp shares deferred
            through the Gain Deferral Plan were recorded as compensation expense and reinvested
            in MAF Bancorp shares. The Companys obligation to issue the deferred MAF Bancorp
            shares in the future was recorded in stockholders equity as the sum of (a) the
            number of shares purchased with reinvested dividends multiplied by the purchase
            price of such shares, and (b) the number of shares deferred in option exercise
            transactions multiplied by the exercise price of the related stock options. On February 1,
            2005, the Gain Deferral Plan was terminated. The assets of the Plan, which were
            invested in shares of the Companys common stock, were distributed in kind
            to the two Plan participants upon termination.

Deferred
            Compensation Plans.The Bank maintains deferred compensation plans
            for directors, executive officers and certain other corporate officers. The deferred
            compensation plans allow directors to defer all of their director compensation and
            other participants to defer up to 25% of their salary and certain bonuses. Plan
            participants have the option to have their deferred amounts earn interest at 110%
            (130% prior to January 1, 2005) of the Moodys corporate bond rate or to earn
            a total return based on an investment in MAF Bancorp common stock. The Bank also
            offers a deferred compensation plan to other selected employees that has similar
            terms but provides for a lower interest crediting rate and no stock investment option.
            In addition, the Bank is the successor to various deferred compensation plans of
            acquired companies. The Company records compensation expense relating to the interest
            credited on deferred compensation balances. Amounts deferred remain the property
            of the Bank.

The
            Company invests in bank-owned life insurance that may be used to satisfy obligations
            of the deferred compensation plans, including certain death benefits. At December
            31, 2006, and 2005 the Company had an aggregate liability to the participants of
            the deferred compensation plans totaling $18.7 million and $17.7 million, respectively,
            including the value of common stock attributable to participants accounts
            based on the fair market value of the common stock at the time of deferral. For
            the years ended December 31, 2006, 2005 and 2004, benefit expenses related to these
            plans were $1.1 million, $1.2 million and $1.1 million, respectively.

Post
            Retirement Benefits. The Bank sponsors a supplemental executive retirement
            plan (SERP) for the purpose of providing certain retirement benefits
            to executive officers and other corporate officers approved by the board of directors.
            The annual retirement plan benefit under the SERP is calculated equal to 2% of final
            average salary times the years of service after 1994, or such later date that a
            participant enters the plan. Up to ten additional years of service are credited
            to participants in the event of a change in control transaction although in no event
            may total years of service exceed 20 years. The maximum annual retirement benefit
            payable is equal to 40% of final average salary. Benefits are payable in various
            forms in the event of retirement, death, disability and separation from service,
            subject to certain conditions defined in the plan. The SERP also provides for certain
            death benefits to the extent

90

---

# MAF Bancorp, Inc. and Subsidiaries
            Notes to Consolidated Financial Statements - (Continued)

such amounts exceed a participants
            accrued benefit at the time of death. The plan is unfunded, however, the Company
            funds life insurance policies that may be used to satisfy obligations of the SERP.

The
            Bank also provides a long-term medical plan for the purpose of providing employees
            post- retirement medical benefits. If retirement occurs prior to age 65, but at
            least age 55 with 10 years of service, the retiree pays 100% of the premium cost
            of the plan for lifetime. If retirement occurs at 65 or later, the retiree pays
            the following percentage of premium costs based on service at retirement:

|Years of service | Contribution
                    percentage
|---------------- | -------------------------------------------
|10-19            |                                            
|20-24            |                                            
|25-29            |                                            
|30+              |                                            

The
            benefits under the retiree benefit plan are not pre-funded and there are no plan
            assets. Benefits are funded on a pay-as-you-go basis. The Banks long-term
            Medical Plan was amended January 1, 2005, to eliminate the retiree subsidy for all
            non-retired participants effective January 1, 2006. Employees who retired prior
            to 2006 are grandfathered under the subsidy provisions.

The
            prescription contribution paid by Bank employees and directors is not actuarially
            equivalent to Medicare Part D, as defined by the Medicare Prescription Drug Improvement
            and Modernization Act of 2003. Therefore, the Bank does not qualify for the government
            subsidy of 28%.

Members
            of the board of directors pay a portion of the cost for both pre-65 and post-65
            coverage, which the case of pre-65 coverage is comparable to the cost paid by current
            employees.

The
            following table sets forth the change in benefit obligations and the related assumptions
            for the SERP and long-term medical plan for the periods indicated:

|                                                                     | Year Ended December 31, | 
|-------------------------------------------------------------------- | ----------------------- | 
|
|
|
|                                                                     |                         | 
|Projected benefit obligation - beginning
                    of year |                         | 
|Service cost                                                         |                         | 
|Interest cost                                                        |                         | 
|Plan amendments                                                      |                         | 
|Actuarial losses                                                     |                         | 
|Benefits paid                                                        |                         | 
|                                                                     |                         | 
|Projected benefit obligation - end                                   |                         | 
|of year                                                              |                         | 
|                                                                     |                         | 
|Funded status                                                        |                         | 
|Unrecognized transition obligation                                   |                         | 
|Unrecognized prior-service cost                                      |                         | 
|Unrecognized loss                                                    |                         | 
|                                                                     |                         | 
|Accrued benefit cost                                                 |                         | 
|                                                                     |                         | 
|Weighted average assumptions:                                        |                         | 
|Discount rate                                                        |                         | 
|Discount rate at the end of the
                    year             |                         | 
|Rate of compensation increase                                        |                         | 
|                                                                     |                         | 

91

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# MAF Bancorp, Inc. and Subsidiaries
            Notes to Consolidated Financial Statements - (Continued)

SFAS
            158, Employers Accounting for Defined Benefit Pension and other Post-retirement
            Plans, requires employers to recognize the underfunded or overfunded status
            of a defined benefit post-retirement plan as an asset or liability in its statement
            of financial position and to recognize changes in the funded status in the year
            in which the changes occur through accumulated other comprehensive loss. Additionally,
            SFAS No. 158 requires employers to measure the funded status of a plan as of the
            date of its year-end statement of financial position. The incremental effect of
            applying SFAS No. 158 on our consolidated balance sheet in relationship to the SERP
            and long-term medical plans were as follows:

|                                                                     | Adjustments |  |   |          
|-------------------------------------------------------------------- | ----------- |  | - | ---------
|
|
|Accrued expenses and other liabilities                               |             |  | $ | 145,526  
|Accumulated other comprehensive
                    loss, net of tax |             |  |   | (8,172   
|Total stockholders' equity                                           |             |  |   |          
|                                                                     |             |  |   | 1,072,449

The
            components of the net periodic benefit cost of post retirement plans are as follows:

|                                   | Year Ended December 31, | 
|---------------------------------- | ----------------------- | 
|
|
|
|Service cost                       |                         | 
|Interest cost                      |                         | 
|Amortization of prior-service cost |                         | 
|Unrecognized net loss              |                         | 
|                                   |                         | 
|Net periodic benefit cost          |                         | 
|                                   |                         | 

The
            projected future benefit payments related to the SERP and long-term medical plan
            for the next five years and the total payments thereafter are as follows (in thousands):

|For the year ended
                    December 31, | SERP | Long-Term
                    Medical
|--------------------------------------------------- | ---- | -------------------------------------
|2007                                                |      |                                      
|2008                                                |      |                                      
|2009                                                |      |                                      
|2010                                                |      |                                      
|2011                                                |      |                                      
|2012 - 2016                                         |      |                                      

# 17. Commitments and Contingencies

The
            Bank is a party to various financial instruments with off-balance sheet risk in
            the normal course of its business. These instruments include commitments to extend
            credit, standby letters of credit, and forward commitments to sell loans. These
            financial instruments carry varying degrees of credit and interest-rate risk in
            excess of amounts recorded in the financial statements. The contractual amounts
            of credit-related financial instruments, such as commitments to extend credit and
            letters of credit, represent the amounts of potential loss should the contract be
            fully drawn upon, the customer default, or the value of any existing collateral
            become worthless.

Commitments
            to originate and purchase loans of $487.9 million at December 31, 2006, represent
            amounts which the Bank plans to fund within the normal commitment period of 30 to
            90 days of which $205.1 million were fixed-rate, with rates averaging 6.78%, and
            $282.8 million were adjustable-rate loans with rates averaging 7.12%. At December
            31, 2006, prospective borrowers had locked the interest rate on $36.8 million of
            fixed-rate loans, with rates averaging 6.72%, and $53.6 million of adjustable-rate
            loans, with rates averaging 7.05%. At December 31, 2006 the bank also had outstanding
            commitments to originate $55.9 million of floating-rate equity lines of credit,
            with rates averaging 8.36%. Because the credit worthiness of each customer is reviewed
            prior to extension of the commitment, the Bank adequately controls its credit risk
            on these commitments, as it does for loans recorded on the balance sheet. As part
            of its effort to control interest-rate risk on these commitments, the Bank generally
            sells fixed-rate mortgage loan commitments, for future delivery, at a specified
            price and at a specified future date. Such commitments for future delivery present
            a risk to the Bank, in the event it cannot deliver the

92

---

# MAF Bancorp, Inc. and Subsidiaries
            Notes to Consolidated Financial Statements - (Continued)

loans during the delivery period.
            This could lead to the Bank being charged a fee for non-performance, or being forced
            to reprice the mortgage loans at a lower rate, causing a loss to the Bank. The Bank
            seeks to mitigate this potential loss by charging potential borrowers, when possible,
            a fee to fix the interest rate. The Bank also estimates a percentage of fallout
            when determining the amount of forward commitments to enter into. At December 31,
            2006, forward commitments to sell mortgage and equity loans for future delivery
            were $109.3 million, of which $69.2 million are related to loans held for sale,
            and $40.1 million are unfunded as of December 31, 2006.

The
            Bank has approved, but unused home equity lines of credit of $1.17 billion at December 31,
            2006. Approval of equity lines is based on underwriting standards that generally
            do not allow total borrowings, including the equity line of credit, to exceed 100%
            of the current appraised value of the customers home, which is similar to
            guidelines used when the Bank originates first mortgage loans, and are a means of
            controlling its credit risk on the loan. However, the Bank offers home equity lines
            of credit up to 100% of the homes current appraised value, less existing liens,
            at a commensurately higher interest rate. In addition, the Bank has $643.1 million
            in approved, but unused commercial business lines.

At
            December 31, 2006, the Bank had standby letters of credit, excluding land development,
            totaling $97.1 million, one of which totals $6.5 million to enhance an industrial
            revenue bond financing of commercial real estate in the Banks market. At December 31,
            2006, the Bank had pledged investment and mortgage-backed securities with an aggregate
            carrying value and fair value of $13.1 million and $12.8 million respectively, as
            collateral for this letter of credit. Standby letters of credit are conditional
            commitments issued by the Bank to guarantee the performance of a customer to a third
            party. The credit risk involved in these transactions is essentially the same as
            that involved in extending a loan to a customer in the normal course of business,
            as performance under the letters of credit creates a first position lien in favor
            of the Bank. Additionally, at December 31, 2006, the Company had standby letters
            of credit totaling $14.0 million, which ensure the completion of land development
            improvements on behalf of MAF Developments, Inc.

At
            December 31, 2006, the Bank had $16.8 million of credit risk related to loans sold
            to the MPF program and $28.6 million of loans sold with recourse to investors. There
            were no losses incurred in 2006, 2005 or 2004. There are no expected losses and
            no reported liability at December 31, 2006 and 2005 for such exposure. Additionally
            the Bank had $17.7 million of credit risk related to loans with private mortgage
            insurance in force in the Banks captive reinsurance subsidiary.

In
            addition to financial instruments with off-balance sheet risk, the Bank is exposed
            to varying risks with concentrations of credit. Concentrations of credit include
            significant lending activities in specific geographical areas and large extensions
            of credit to single borrowers. The Banks loan portfolio primarily consists
            of loans secured by real estate within its market area. At December 31, 2006
            and 2005, loans representing 76.3% and 76.8%, respectively, of the Banks total
            loans receivable were secured by real estate located in the State of Illinois and
            20.2% and 19.6% respectively, were secured by real estate located in the State of
            Wisconsin.

The
            Company is also subject to various contingent tax liabilities relating to tax positions
            it takes in the filing of its tax returns that may be disallowed by taxing authorities
            based on their differing interpretation of applicable tax law. The Company believes
            it has established adequate reserves for such tax uncertainties.

There
            are various matters of litigation pending against the Bank that have arisen during
            the normal course of business. Management believes that the liability, if any, resulting
            from these matters will not be material to the consolidated financial position or
            results of operation of the Bank.

# 18. Segment Information

The
            Company utilizes the management approach for segment reporting. This
            approach is based on the way that management of the Company organizes lines of business
            for making operating decisions and assessing performance.

93

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# MAF Bancorp, Inc. and Subsidiaries
            Notes to Consolidated Financial Statements - (Continued)

Currently,
            the Company has two segments. The Banking segment includes lending and deposit gathering
            operations, as well as other financial services offered to individuals and business
            customers. The Real Estate Operations segment consists primarily of acquiring, obtaining
            necessary zoning and regulatory approvals, and improving raw land into developed
            residential lots for sale to builders. All goodwill is assigned to the Banking segment.
            Selected segment information is included in the table below:

|                            | Year Ended December 31, 2006 | 
|--------------------------- | ---------------------------- | 
|
|
|Interest income             |                              | 
|Interest expense            |                              | 
|                            |                              | 
|Net interest income         |                              | 
|Provision for loan losses   |                              | 
|                            |                              | 
|Net interest income after   |                              | 
|provision                   |                              | 
|Non-interest income         |                              | 
|Non-interest expense before |                              | 
|depreciation                |                              | 
|Depreciation expense        |                              | 
|                            |                              | 
|Income before income taxes  |                              | 
|Income tax expense          |                              | 
|                            |                              | 
|Net income                  |                              | 
|                            |                              | 
|Average assets              |                              | 
|                            |                              | 
|Total revenues              |                              | 
|                            |                              | 
|                            |                              | 

|                            | Year Ended December 31, 2005 | 
|--------------------------- | ---------------------------- | 
|
|
|Interest income             |                              | 
|Interest expense            |                              | 
|                            |                              | 
|Net interest income         |                              | 
|Provision for loan losses   |                              | 
|                            |                              | 
|Net interest income         |                              | 
|after provision             |                              | 
|Non-interest income         |                              | 
|Non-interest expense before |                              | 
|depreciation                |                              | 
|Depreciation expense        |                              | 
|                            |                              | 
|Income before income taxes  |                              | 
|Income tax expense          |                              | 
|                            |                              | 
|Net income                  |                              | 
|                            |                              | 
|Average assets              |                              | 
|                            |                              | 
|Total revenues              |                              | 
|                            |                              | 
|                            |                              | 

|                            | Year Ended December 31, 2004 | 
|--------------------------- | ---------------------------- | 
|
|
|Interest income             |                              | 
|Interest expense            |                              | 
|                            |                              | 
|Net interest income         |                              | 
|Provision for loan losses   |                              | 
|                            |                              | 
|Net interest income after   |                              | 
|provision                   |                              | 
|Non-interest income         |                              | 
|Non-interest expense before |                              | 
|depreciation                |                              | 
|Depreciation expense        |                              | 
|                            |                              | 
|Income before income taxes  |                              | 
|Income tax expense          |                              | 
|                            |                              | 
|Net income                  |                              | 
|                            |                              | 
|Average assets              |                              | 
|                            |                              | 
|Total revenues              |                              | 
|                            |                              | 

# 19. Fair Values of Financial Instruments

SFAS
            No. 107, Disclosures about Fair Value of Financial Instruments requires
            the disclosure of estimated fair values of all asset, liability and off-balance
            sheet financial instruments. The estimated fair value amounts under SFAS No. 107
            have been determined as of a specific point in time utilizing available market information,
            assumptions and appropriate valuation methodologies. Accordingly, the estimated
            fair values presented herein are not necessarily representative of the underlying
            value of the Company. Rather the disclosures are limited to reasonable estimates
            of the fair value of only the Companys financial instruments. The use of assumptions
            and various valuation techniques, as well as the absence of

94

---

# MAF Bancorp, Inc. and Subsidiaries
            Notes to Consolidated Financial Statements - (Continued)

secondary markets for certain financial
            instruments, will likely reduce the comparability of fair value disclosures between
            financial institutions. The Company does not plan to sell most of its assets or
            settle most of its liabilities at these values.

The
            estimated fair values of the Companys financial instruments as of December 31,
            2006 and 2005 are set forth in the following table below.

|                                              | December 31, 2006 | December 31, 2005 |  
|--------------------------------------------- | ----------------- | ----------------- | -
|
|
|Financial assets:                             |                   |                   |  
|Cash and cash
                    equivalents |                   |                   | $
|Investment securities                         |                   |                  
|available
                    for sale        |                   |                   |  
|Stock in FHLB
                    of Chicago  |                   |                   |  
|Mortgage-backed                               |                   |                  
|securities
                    available      |                   |                  
|for
                    sale                  |                   |                   |  
|Mortgage-backed                               |                   |                  
|securities                                    |                   |                  
|held
                    to maturity          |                   |                   |  
|Loans receivable
                    held     |                   |                  
|for
                    sale                  |                   |                   |  
|Loans receivable                              |                   |                   |  
|Interest receivable                           |                   |                   |  
|Bank-owned life
                    insurance |                   |                   |  
|Mortgage loan
                    servicing   |                   |                  
|rights                                        |                   |                   |  
|                                              |                   |                   |  
|Total
                    financial assets    |                   |                   | $
|                                              |                   |                   |  
|Financial liabilities:                        |                   |                  
|Non-maturity deposits                         |                   |                   | $
|Deposits with
                    stated      |                   |                  
|maturities                                    |                   |                   |  
|Borrowed funds                                |                   |                   |  
|Junior subordinated                           |                   |                  
|debentures                                    |                   |                   |  
|Interest payable                              |                   |                   |  
|                                              |                   |                   |  
|Total
                    financial           |                   |                  
|liabilities                                   |                   |                   | $
|                                              |                   |                   |  

The
            following methods and assumptions are used by the Company in estimating the fair
            value amounts for its financial instruments.

Cash
            and cash equivalents. The carrying value of cash and cash equivalents approximates
            fair value due to the relatively short period of time between the origination of
            the instruments and their expected realization.

Investment
            securities and mortgage-backed securities. The fair values of these financial
            instruments were estimated using quoted market prices, when available. The fair
            value of FHLBC stock is based on its redemption value.

Loans
            receivable. The fair value of loans receivable held for investment is estimated
            based on contractual cash flows adjusted for prepayment assumptions, discounted
            using the current rate at which similar loans would be made to borrowers with similar
            credit ratings and remaining terms to maturity. The fair value of mortgage loans
            held for sale is based on estimated values that could be obtained in the secondary
            market.

Interest
            receivable and payable. The carrying value of interest receivable, net of the
            reserve for uncollected interest, and interest payable, approximates fair value
            due to the relatively short period of time between accrual and expected realization.

Deposits.       
            The fair value of deposits with no stated maturity, such as demand deposit, passbook
            savings, checking and money market accounts, are disclosed as the amount payable
            on demand. The fair value of fixed-maturity deposits is the present value of the
            contractual cash flows discounted using interest rates currently being offered for
            deposits with similar remaining terms to maturity.

Borrowed
            funds. The fair value of FHLBC advances and reverse repurchase agreements is
            the present value of the contractual cash flows, discounted by the current rate
            offered for similar remaining maturities. The carrying value of the unsecured term
            bank loan approximates fair value due to the short term to repricing and adjustable
            rate nature of the loan.

95

---

# MAF Bancorp, Inc. and Subsidiaries
            Notes to Consolidated Financial Statements - (Continued)

Commitments
            to extend credit and standby letters of credit. The fair value of commitments
            to extend credit is estimated based on current levels of interest rates versus the
            committed rates. As of December 31, 2006 and 2005, the fair value of the Banks
            mortgage loan commitments of $487.9 million and $756.4 million, respectively, was
            $1.1 million and ($817,000), respectively, which represents the differential between
            the committed value and value at current rates. The fair value of the standby letters
            of credit approximate the recorded amounts of related fees and are not material
            at December 31, 2006 and 2005.

# 20. Related Party Transactions

The
            Company, through its subsidiary bank, has made loans and had transactions with certain
            of its directors and officers. All such loans and transactions were made in the
            ordinary course of business on substantially the same terms, including interest
            rates and collateral, as those prevailing at the time for comparable transactions
            with other persons and did not involve more than the normal risk of collectibility
            or present other unfavorable features. We had loans and commitments to extend credit
            to directors and executive officers of $3.3 million and $3.1 million at December 31,
            2006 and 2005, respectively. During 2006, we originated new loans and commitments
            totaling $246,000 to such persons.

A
            director of the Company is a partner in a law firm that provides legal services
            to the Company and the Bank. Total fees paid to this law firm were $315,360, $316,720
            and $387,660 for the years ended December 31, 2006, 2005 and 2004, respectively.
            The same law firm leases office space from the Company and paid rents in the amount
            of $115,992 for each of the years ended December 31, 2006, 2005 and 2004.

The
            Company and the Bank also employ various relatives of certain executive officers
            and directors and pay them compensation commensurate with their positions at the
            Bank and the Company.

# 21. Parent Company Only Financial
            Information

The
            information as of December 31, 2006, and 2005, and for the years ended December 31,
            2006, 2005, and 2004, presented below should be read in conjunction with the other
            Notes to Consolidated Financial Statements.

|                                                                     | At December 31, | 
|-------------------------------------------------------------------- | --------------- | 
|
|
|Assets:                                                              |                 | 
|Cash and cash
                    equivalents                        |                 | 
|Investment securities                                                |                 | 
|Equity in net
                    assets of subsidiaries             |                 | 
|Other assets                                                         |                 | 
|                                                                     |                 | 
|Total assets                                                         |                 | 
|                                                                     |                 | 
|Liabilities and Stockholders'
                    Equity:            |                 | 
|Liabilities:                                                         |                 | 
|Borrowed funds                                                       |                 | 
|Junior subordinated
                    debentures                   |                 | 
|Accrued expenses                                                     |                 | 
|                                                                     |                 | 
|Total liabilities                                                    |                 | 
|                                                                     |                 | 
|Stockholders' equity:                                                |                 | 
|Common stock                                                         |                 | 
|Additional paid-in
                    capital                       |                 | 
|Retained earnings,
                    substantially restricted      |                 | 
|Accumulated other
                    comprehensive loss, net of tax |                 | 
|Treasury stock                                                       |                 | 
|                                                                     |                 | 
|Total stockholders'
                    equity                       |                 | 
|                                                                     |                 | 
|Total liabilities
                    and stockholders' equity       |                 | 
|                                                                     |                 | 
|                                                                     |                 | 

96

---

# MAF Bancorp, Inc. and Subsidiaries
            Notes to Consolidated Financial Statements - (Continued)

|                                                                    | Year Ended December 31, | 
|------------------------------------------------------------------- | ----------------------- | 
|
|
|Dividend income from subsidiaries                                   |                         | 
|Interest income                                                     |                         | 
|Interest expense                                                    |                         | 
|                                                                    |                         | 
|Net interest and
                    dividend income                |                         | 
|Gain on sale of investments, net                                    |                         | 
|Non-interest expense                                                |                         | 
|Net income before income tax benefit
                    and equity |                         | 
|in undistributed
                    earnings of subsidiaries       |                         | 
|Income tax benefit                                                  |                         | 
|                                                                    |                         | 
|Net income before
                    equity in undistributed       |                         | 
|earnings of subsidiaries                                            |                         | 
|Equity (deficit) in undistributed
                    earnings of   |                         | 
|subsidiaries                                                        |                         | 
|                                                                    |                         | 
|Net
                    income                                      |                         | 
|                                                                    |                         | 

|                                                                     | December 31, | 
|-------------------------------------------------------------------- | ------------ | 
|
|
|Operating activities:                                                |              | 
|Net income                                                           |              | 
|Deficit (equity)
                    in undistributed earnings of    |              | 
|subsidiaries                                                         |              | 
|Gain on sale of
                    investment securities            |              | 
|Net decrease (increase)
                    in other assets and      |              | 
|liabilities,
                    net of effects from                 |              | 
|acquisitions                                                         |              | 
|                                                                     |              | 
|Net
                    cash provided by operating activities        |              | 
|                                                                     |              | 
|Investing activities:                                                |              | 
|Proceeds from
                    sale and maturities of investment  |              | 
|securities                                                           |              | 
|Loans to subsidiaries
                    less repayments, net       |              | 
|Investments in
                    unconsolidated subsidiaries       |              | 
|Purchases of investment
                    securities               |              | 
|Payment for acquisitions,
                    net of cash acquired   |              | 
|                                                                     |              | 
|Net
                    cash used in investing activities            |              | 
|                                                                     |              | 
|Financing activities:                                                |              | 
|Proceeds from:                                                       |              | 
|Exercise
                    of stock options                        |              | 
|Borrowings                                                           |              | 
|Issuance
                    of junior subordinated debentures       |              | 
|Repayment of borrowings                                              |              | 
|Purchase of treasury
                    stock                       |              | 
|Cash dividends
                    paid                              |              | 
|                                                                     |              | 
|Net
                    cash used in financing activities            |              | 
|                                                                     |              | 
|Increase
                    (decrease) in cash and cash equivalents |              | 
|Cash and cash equivalents at beginning
                    of year   |              | 
|                                                                     |              | 
|Cash and cash equivalents at end
                    of year         |              | 
|                                                                     |              | 

97

---

# MAF Bancorp, Inc. and Subsidiaries
            Notes to Consolidated Financial Statements - (Continued)

# 22. Selected Quarterly Financial
            Data (Unaudited)

The following are the consolidated
            results of operations on a quarterly basis:

|                                         | Year Ended December 31, 2006 | Year Ended December 31, 2005 |  
|---------------------------------------- | ---------------------------- | ---------------------------- | -
|
|
|Interest income                          |                              |                              | $
|Interest expense                         |                              |                              |  
|                                         |                              |                              |  
|Net interest income                      |                              |                              |  
|Provision for loan losses                |                              |                              |  
|                                         |                              |                              |  
|Net interest income                      |                              |                             
|after
                    provision for  |                              |                             
|loan
                    losses          |                              |                              |  
|Net gain (loss) on sale or               |                              |                             
|writedown of assets                      |                              |                              |  
|Income (loss) from real                  |                              |                              |  
|estate operations                        |                              |                              |  
|Deposit account service                  |                              |                             
|charges                                  |                              |                              |  
|Other income                             |                              |                              |  
|                                         |                              |                              |  
|Total non-interest                       |                              |                             
|income                                   |                              |                              |  
|Non-interest expense                     |                              |                              |  
|                                         |                              |                              |  
|Income before
                    income |                              |                             
|taxes                                    |                              |                              |  
|Income tax expense                       |                              |                              |  
|                                         |                              |                              |  
|Net income                               |                              |                              | $
|                                         |                              |                              |  
|Basic earnings per share                 |                              |                              | $
|Diluted earnings per share               |                              |                              |  
|Dividends declared per                   |                              |                             
|common share                             |                              |                              |  

98

---

# Item 9.      
            Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

# Item 9A. Controls and Procedures

As
            of December 31, 2006, our Chief Executive Officer and Chief Financial Officer
            carried out an evaluation under their supervision, with the participation of other
            members of management as they deemed appropriate, of the effectiveness of the design
            and operation of the Companys disclosure controls and procedures as contemplated
            by Rule 13a-15(e) under the Securities Exchange Act of 1934. Based upon, and as
            of the date of that evaluation, the Chief Executive Officer and Chief Financial
            Officer concluded that the Companys disclosure controls and procedures are
            effective, in all material respects, in timely alerting them to material information
            relating to the Company (and its consolidated subsidiaries) and in ensuring that
            information required to be included in the periodic reports the Company files or
            submits to the SEC under the Securities Exchange Act is recorded, processed, summarized
            and reported as required.

As
            of December 31, 2006, we also evaluated the effectiveness of our internal controls
            over financial reporting as required by Section 404 of the Sarbanes-Oxley Act
            and Rule 13a-15(f) under the Securities Exchange Act of 1934. The report of
            our Chief Executive Officer and Chief Financial Officer regarding managements
            internal control assessment is included in Item 8 and incorporated herein by
            reference.

In
            order to produce reliable financial statements, management is responsible for establishing
            and maintaining effective internal controls over financial reporting. Management
            evaluates the effectiveness of its system of internal control over financial reporting
            and tests for reliability of recorded financial information through a program of
            ongoing internal audits. Actions are taken to address potential control deficiencies
            that are identified. Any system of internal control, no matter how well designed,
            has inherent limitations, including the possibility that a control can be circumvented
            or overridden and misstatements due to error or fraud may occur and not be detected.
            Also, because of changes in conditions, internal control effectiveness may vary
            over time. Accordingly, even an effective system of internal control will provide
            only reasonable assurance with respect to financial statement preparation. Our Chief
            Executive Officer and Chief Financial Officer concluded that our system of internal
            control over financial reporting at December 31, 2006 is designed and operating
            effectively at this reasonable assurance level.

The
            audit committee, consisting entirely of independent directors, meets regularly with
            management, internal auditors and the independent registered public accounting firm,
            and reviews audit plans and results, as well as managements actions taken
            in discharging responsibilities for accounting, financial reporting, and internal
            control. KPMG LLP, independent registered public accounting firm, and the Companys
            internal auditors have direct and confidential access to the audit committee.

# Item 9B.      
            Other Information

None.

# PART III

# Item 10. Directors, Executive Officers
            and Corporate Governance

Information
            regarding our directors is included in our proxy statement under the headings Information
            About Directors and Others, Transactions with Certain Related Persons
            and Other Information, Corporate Governance Matters  Audit Committee
            and the information included therein is incorporated herein by reference. Information
            regarding the executive officers of the Company included in this Form 10-K is included
            in Item 1. Business. Information regarding beneficial ownership reporting
            compliance is included in the Companys proxy statement under the heading Section
            16(a) Beneficial Ownership Reporting Compliance and the information included
            therein is incorporated by reference.

There
            have been no material changes to the procedures by which security holders may recommend
            nominees to our board of directors.

99

---

The
            Company has adopted a code of ethics as required by the listing standards of the
            NASDAQ National Market and the SEC. This code applies to all of its directors, officers
            and employees. The Company has also adopted a charter for each of its audit committee,
            administrative/compensation committee and nominating and corporate governance committee
            and has posted the code of ethics, the committee charters and other governance information
            on the Companys website at www.mafbancorp.com. The Company will post on its
            website any amendments to the code of ethics and waivers, if any, applicable to
            any of its directors or executive officers. The foregoing information will also
            be available in print and free of charge to any shareholder who requests such information.

# Item 11. Executive Compensation

Information
            regarding compensation of executive officers and directors is included in the Companys
            proxy statement under the headings Directors Compensation, and
            Executive Compensation and the information included therein is incorporated
            herein by reference.

The
            information regarding compensation committee interlocks and insider participation
            is included in the registrants proxy statement under the headings Compensation
            Committee Interlocks and Insider Participation and the information included
            therein under the heading Compensation Committee Report is incorporated
            herein by reference (except that the Compensation Committee Report shall not be
            deemed to be filed with the Securities and Exchange Commission).

# Item 12. Security Ownership of Certain
            Beneficial Owners and Management and Related Stockholder Matters

Information
            regarding security ownership of certain beneficial owners and management is included
            in the Companys proxy statement under the headings Security Ownership
            of Certain Beneficial Owners, and Information About Directors and Others,
            and the information included therein is incorporated herein by reference.

# Equity Compensation Plans

The
            following table summarizes certain information about the equity compensation plans
            of the Company as of December 31, 2006:

|Plan Category                                                 | Number Of Securities
                    To Be Issued Upon
                    Exercise Of
                    Outstanding Options,
                    Warrants And Rights | Weighted-Average
                    Exercise Price Of
                    Outstanding
                    Options, Warrants
                    And Rights | Number Of Securities Remaining
                    Available For Future Issuance
                    Under Equity Compensation
                    Plans (Excluding Securities
                    Reflected In Column (A)
|------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
|Equity compensation plans approved
                    by     |                                                                                                                                                                             |                                                                                                                                                             |                                                                                                                                                                                                                           
|security holders                                              |                                                                                                                                                                             |                                                                                                                                                             |                                                                                                                                                                                                                           
|Equity compensation plans not approved
                    by |                                                                                                                                                                             |                                                                                                                                                            
|security holders                                              |                                                                                                                                                                             |                                                                                                                                                             |                                                                                                                                                                                                                           
|                                                              |                                                                                                                                                                             |                                                                                                                                                             |                                                                                                                                                                                                                           
|Total                                                         |                                                                                                                                                                             |                                                                                                                                                             |                                                                                                                                                                                                                           
|                                                              |                                                                                                                                                                             |                                                                                                                                                             |                                                                                                                                                                                                                           

---

| | (1) | Includes 46,344 stock options exercisable
                    at a weighted average price of $21.31 per share relating to options granted under
                    plans of acquired entities that were converted into MAF Bancorp stock options. No
                    further grants will be made under such plans.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | Includes 128,987 restricted stock
                    units granted to certain employees and non-employee directors.
| | --- | --------------------------------------------------------------------------------------------------------------------

| | (3) | Represents shares reserved for issuance
                    under deferred compensation plans, which shares may be issued to executive officers
                    and directors, if any, electing to defer cash compensation otherwise payable to
                    them. The number of shares allocated to plan participants is determined based on
                    the fair market value of shares at the time of compensation deferral.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# Item 13. Certain Relationships and
            Related Transactions, and Director Independence

Information
            regarding certain relationships and related party transactions is included in the
            Companys proxy statement under the heading Transactions with Certain
            Related Persons and Other Information, and the information included therein
            is incorporated herein by reference.

The
            information regarding the independence of the Companys directors is included
            in the Companys proxy statement under the heading Corporate Governance
            Matters - Director Independence, and the information included therein is incorporated
            herein by reference.

100

---

# Item 14. Principal Accountant Fees
            and Services

Information
            regarding fees paid to the independent auditors and the pre-approval policies and
            procedures of the Companys audit committee is included in the Companys
            proxy statement under the heading Proposal 2  Ratification of Independent
            Auditors, and the information included therein is incorporated herein by reference.

# PART IV

# Item 15. Exhibits and Financial
            Statements Schedules

(a)(1) Financial Statements

The
            following consolidated financial statements of the registrant and its subsidiaries
            are filed as a part of this document under Item 8. Financial Statements and
            Supplementary Data.

Consolidated
            Statements of Financial Condition at December 31, 2006 and 2005.

Consolidated
            Statements of Operations for the years ended December 31, 2006, 2005 and 2004.

Consolidated
            Statements of Changes in Stockholders Equity for the years ended December 31,
            2006, 2005 and 2004.

Consolidated
            Statements of Cash Flows for the years ended December 31, 2006, 2005 and 2004.

Notes
            to Consolidated Financial Statements.

Report
            of Management Regarding Internal Control Over Financial Reporting.

Report
            of Independent Registered Public Accounting Firm.

Report
            of Independent Registered Public Accounting Firm.

(a)(2) Financial Statement Schedules

All
            schedules are omitted because they are not required or are not applicable or the
            required information is shown in the consolidated financial statements or notes
            thereto.

(a)(3) Exhibits

The
            following exhibits are either filed as part of this report or are incorporated herein
            by reference:

| | 3.1 | Restated Certificate of Incorporation.
                    (Incorporated herein by reference to Exhibit 3.1 to Registrant's Form 8-K (File
                    No. 0-18121) dated December 19, 2000).
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3.2 | Amended and Restated By-laws of
                    Registrant. (Incorporated herein by reference to Exhibit No. 3 to Registrant's September
                    30, 2003 Form 10-Q (File No. 0-18121)).
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 4.1 | Certain instruments defining the
                    rights of the holders of long-term debt of the Company and of a subsidiary, involving
                    a total amount of indebtedness not in excess of 10% of the total assets of the Company
                    and its subsidiaries on a consolidated basis, have not been filed as Exhibits. The
                    Company hereby agrees to furnish a copy of any of these agreements to the Commission
                    upon request.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

101

---

Exhibit No. 10. Material Contracts

| | 10.1 | Credit Agreement dated as of July
                    17, 2006, between MAF Bancorp, Inc. and Harris, N.A. (Incorporated herein by reference
                    to Exhibit 10.1 to Registrant's September 30, 2006 Form 10-Q (File No. 0-18121)).
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.2 | Mid America Bank, fsb Management
                    Recognition and Retention Plan and Trust Agreement. (Incorporated herein by reference
                    to Exhibit No. 10.4 to Registrant's June 30, 1992 Form 10-K (File No. 0-18121)).*
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.3 | MAF Bancorp, Inc. 1990 Incentive
                    Stock Option Plan, as amended. (Incorporated herein by reference to Exhibit No.
                    10.2 to Registrant's June 30, 1999 Form 10-Q and to Exhibit A to Registrant's Proxy
                    Statement, dated March 23, 1998 (File No. 0-18121), relating to the 1998 Annual
                    Meeting of Shareholders).*
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.4 | Amendment dated May 23, 2000 to
                    the MAF Bancorp, Inc. 1990 Incentive Stock Option Plan, as amended. (Incorporated
                    herein by reference to Exhibit No. 10.3 to Registrant's December 31, 2000 Form 10-K
                    (File No. 0-18121)).*
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.5 | MAF Bancorp, Inc. 1993 Amended and
                    Restated Premium Price Stock Option Plan, as amended. (Incorporated herein by reference
                    to Exhibit 10.4 to Registrant's December 31, 2005 Form 10-K (File No. 0-18121)).*
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.6 | Amendment dated June 22, 1999 to
                    the MAF Bancorp, Inc. 1993 Amended and Restated Premium Price Stock Option Plan,
                    as amended. (Incorporated herein by reference to Exhibit No. 10.3 to Registrant's
                    June 30, 1999 Form 10-Q (File No. 0-18121)).*
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.7 | Amendment dated May 23, 2000 to
                    the MAF Bancorp, Inc. 1993 Amended and Restated Premium Price Stock Option Plan,
                    as amended. (Incorporated herein by reference to Exhibit No. 10.5 to Registrant's
                    December 31, 2000 Form 10-K (File No. 0-18121)).*
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.8 | MAF Bancorp, Inc. 2000 Stock Option
                    Plan. (Incorporated herein by reference to Exhibit B filed as part of Registrant's
                    Proxy Statement dated March 23, 2001 (File No. 0-18121), relating to the 2001 Annual
                    Meeting of Shareholders).*
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.9 | MAF Bancorp, Inc. Incentive Compensation
                    Plan (Incorporated herein by reference to Exhibit 10.1 to Registrant's Form S-4/A
                    dated October 14, 2003, Registration No. 333-108742).*
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.10 | Form of Non-Qualified Stock Option
                    Agreement. (Incorporated herein by reference to Exhibit 10.9 to Registrant's December
                    31, 2004 Form 10-K (File No. 0-18121)).*
| | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.11 | Form of Incentive Stock Option Agreement.
                    (Incorporated herein by reference to Exhibit 10.10 to Registrant's December 31,
                    2004 Form 10-K (File No. 0-18121)).*
| | ----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.12 | Form of Long-Term Incentive Compensation
                    Award Agreement. (Incorporated herein by reference to Exhibit 10.12 to Registrant's
                    December 31, 2005 Form 10-K (File No. 0-18121)).*
| | ----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.13 | Form of Restricted Stock Unit Award
                    Agreement.*+
| | ----- | --------------------------------------------------------------------

| | 10.14 | Amended and Restated EFC Bancorp,
                    Inc. 1998 Stock-Based Incentive Plan (Incorporated herein by reference to Appendix
                    A to the EFC Bancorp, Inc. Proxy Statement, dated March 26, 1999, relating to the
                    1999 Annual Meeting of Shareholders (File No. 1-13605)). *
| | ----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.15 | Amendment dated November 15, 2005
                    to the amended and restated EFC Bancorp, Inc. 1998 Stock- Based Incentive Plan.
                    *+
| | ----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------

---

| | * | Indicates management contracts or
                    compensatory plans or arrangements required to be filed as an exhibit.
| | - | ----------------------------------------------------------------------------------------------------------------------------

| | + | Filed herewith.
| | - | ---------------

102

---

| | 10.16 | Mid America Federal Savings and
                    Loan Association Deferred Compensation Trust Agreement. (Incorporated herein by
                    reference to Exhibit No. 10.8 to Registrant's June 30, 1990 Form 10-K (File No.
                    0-18121)).*
| | ----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.17 | Amendment dated May 16, 2001 to
                    the Mid America Bank, fsb Deferred Compensation Trust Agreement. (Incorporated herein
                    by reference to Exhibit No. 10.2 to Registrant's June 30, 2001 Form 10-Q (File No.
                    0-18121)).*
| | ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.18 | Mid America Bank, fsb Directors'
                    Deferred Compensation Plan. (Incorporated herein by reference to Exhibit No. 10.10
                    to Registrant's December 31, 1997 Form 10-K (File No. 0-18121)).*
| | ----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.19 | Mid America Bank, fsb Executive
                    Deferred Compensation Plan. (Incorporated herein by reference to Exhibit No. 10.11
                    to Registrant's December 31, 1997 Form 10-K (File No. 0-18121)).*
| | ----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.20 | Deferred Compensation Agreement
                    dated January 1, 1999 between St. Francis Bank, F.S.B. and Thomas R. Perz. (Incorporated
                    herein by reference to Exhibit No. 10.25 to Registrant's Form 10-K for the year
                    ended December 31, 2003 (File No. 0-18121)).*
| | ----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.21 | Deferred Compensation Agreements
                    dated January 1, 1998, January 1, 1996, January 19, 1994 and November 18, 1987 between
                    St. Francis Capital Corporation, St. Francis Bank, F.S.B., Bank Wisconsin and Thomas
                    R. Perz. (Incorporated herein by reference to Exhibit No. 10.26 to Registrant's
                    Form 10-K for the year ended December 31, 2003 (File No. 0-18121)).*
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.22 | Mid America Bank, fsb Supplemental
                    Executive Retirement Plan, as amended. (Incorporated herein by reference to Exhibit
                    No. 10.13 to Registrant's December 31, 1998 Form 10-K (File No. 0-18121)).*
| | ----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.23 | Amendment dated March 27, 2001 to
                    the Mid America Bank, fsb Supplemental Executive Retirement Plan, as amended. (Incorporated
                    herein by reference to Exhibit No. 10.1 to Registrant's March 31, 2001 Form 10-Q
                    (File No. 0-18121)).*
| | ----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.24 | Amendment dated January 24, 2006
                    to the Mid America Bank, fsb Supplemental Executive Retirement Plan, as amended.
                    *+
| | ----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.25 | Fidelity Federal Savings Bank Supplemental
                    Retirement Plan, as amended. (Incorporated herein by reference to Exhibit No. 10.33
                    to Registrants Form 10-K for the year ended December 31, 2003 (File No. 0-18121)).*
| | ----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.26 | Form of Employment Agreement, as
                    amended, between MAF Bancorp, Inc. and Allen Koranda, Kenneth Koranda and Jerry
                    Weberling. (Incorporated herein by reference to Exhibit No. 10.29 to Registrant's
                    December 31, 2005 Form 10-K (File No. 0-18121)).*
| | ----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.27 | Form of Employment Agreement, as
                    amended, between Mid America Bank, fsb and Allen Koranda, Kenneth Koranda and Jerry
                    Weberling. (Incorporated herein by reference to Exhibit No. 10.30 to Registrant's
                    December 31, 2005 Form 10-K (File No. 0-18121)).*
| | ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.28 | Form of Special Termination Agreement,
                    as amended, between MAF Bancorp, Inc., and various officers. (Incorporated herein
                    by reference to Exhibit No. 10.31 to Registrant's December 31, 2005 Form 10-K (File
                    No. 0-18121)).*
| | ----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.29 | Form of Special Termination Agreement,
                    as amended, between Mid America Bank, fsb, and various officers. (Incorporated herein
                    by reference to Exhibit No. 10.32 to Registrant's December 31, 2005 Form 10-K (File
                    No. 0-18121)).*
| | ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

| | * | Indicates management contracts or
                    compensatory plans or arrangements required to be filed as an exhibit.
| | - | ----------------------------------------------------------------------------------------------------------------------------

| | + | Filed herewith.
| | - | ---------------

103

---

| | 10.30 | Special Termination Agreement between
                    MAF Bancorp, Inc. and Edward A. Karasek (Incorporated herein by reference to Exhibit
                    No. 10.2 to Registrant's September 30, 2006 Form 10-Q (File No. 0-18121)).*
| | ----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.31 | Special Termination Agreement between
                    Mid America Bank, fsb, and Edward A. Karasek (Incorporated herein by reference to
                    Exhibit No. 10.3 to Registrant's September 30, 2006 Form 10-Q (File No. 0-18121)).*
| | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.32 | Special Termination Agreement between
                    MAF Bancorp, Inc. and James S. Eckel (Incorporated herein by reference to Exhibit
                    No. 10.4 to Registrant's September 30, 2006 Form 10-Q (File No. 0-18121)).*
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.33 | Special Termination Agreement between
                    Mid America Bank, fsb, and James S. Eckel (Incorporated herein by reference to Exhibit
                    No. 10.5 to Registrant's September 30, 2006 Form 10-Q (File No. 0-18121)).*
| | ----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.34 | Employment Agreement between MAF
                    Bancorp, Inc. and Thomas R. Perz. (Incorporated herein by reference to Exhibit No.
                    10.38 to Registrant's Form 10-K for the year ended December 31, 2003 (File No. 0-18121)).*
| | ----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.35 | Employment Agreement between Mid
                    America Bank, fsb and Thomas R. Perz. (Incorporated herein by reference to Exhibit
                    No. 10.39 to Registrant's Form 10-K for the year ended December 31, 2003 (File No.
                    0-18121)).*
| | ----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.36 | Agreement Regarding Post-Employment
                    Restrictive Covenants between MAF Bancorp, Inc. and Thomas R. Perz. (Incorporated
                    herein by reference to Exhibit No. 10.40 to Registrant's Form 10-K for the year
                    ended December 31, 2003 (File No. 0-18121)).*
| | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 12.1 | Statements re: Computation of ratio
                    of earnings to fixed charges. +
| | ---- | ---------------------------------------------------------------------------------------

| | 21.1 | Subsidiaries of the Registrant.+
| | ---- | --------------------------------

| | 23.1 | Consent of KPMG LLP.+
| | ---- | ---------------------

| | 24.1 | Power of Attorney (Included on Signature
                    Page to Registrant's Form 10-K for the year ended December 31, 2006 and incorporated herein by reference
                    (File No. 0-18121)).
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 31.1 | Certification of Chief Executive
                    Officer.+
| | ---- | --------------------------------------------------------------

| | 31.2 | Certification of Chief Financial
                    Officer.+
| | ---- | --------------------------------------------------------------

| | 32.1 | Certification of Chief Executive
                    Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
                    pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.+
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

| | * | Indicates management contracts or
                    compensatory plans or arrangements required to be filed as an exhibit.
| | - | ----------------------------------------------------------------------------------------------------------------------------

| | + | Filed herewith.
| | - | ---------------

104

---

# SIGNATURES

Pursuant
            to the requirements of Section 13 or 15(d) 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.

|    |  | 
|--- |  | 
|    |  | 
|    |  | 
|    |  | 
|By: |  | 
|    |  | 
|    |  | 
|    |  | 
|    |  | 
|    |  | 

Pursuant
            to the requirements of the Securities Exchange Act of 1934, this report has been
            signed below by the following persons on behalf of the registrant and in the capacities
            and on the dates indicated.

|                                                                  |  | 
|----------------------------------------------------------------- |  | 
|/s/ Allen H. Koranda                                              |  | 
|Allen H. Koranda                                                  |  | 
|Chairman of the Board and                                         |  | 
|Chief Executive Officer(Principal Executive Officer)              |  | 
|                                                                  |  | 
|/s/ Jerry A. Weberling                                            |  | 
|Jerry A. Weberling                                                |  | 
|Executive Vice President and                                      |  | 
|Chief Financial Officer and Director(Principal Financial Officer) |  | 
|                                                                  |  | 
|/s/ Christine Roberg                                              |  | 
|Christine Roberg                                                  |  | 
|First Vice President and Controller                               |  | 
|(Principal Accounting Officer)                                    |  | 
|                                                                  |  | 
|*                                                                 |  | 
|Kenneth R. Koranda                                                |  | 
|Vice Chairman of the Board                                        |  | 
|                                                                  |  | 
|*                                                                 |  | 
|Robert J. Bowles, M.D.                                            |  | 
|Director                                                          |  | 
|                                                                  |  | 
|*                                                                 |  | 
|David C. Burba                                                    |  | 
|Director                                                          |  | 

105

---

|                      |  | 
|--------------------- |  | 
|*                     |  | 
|Terry A. Ekl          |  | 
|Director              |  | 
|                      |  | 
|                      |  | 
|*                     |  | 
|Leo M. Flanagan       |  | 
|Director              |  | 
|                      |  | 
|                      |  | 
|*                     |  | 
|Joe F Hanauer         |  | 
|Director              |  | 
|                      |  | 
|                      |  | 
|*                     |  | 
|Babara L. Lamb        |  | 
|Director              |  | 
|                      |  | 
|*                     |  | 
|Edward W. Mentzer     |  | 
|Director              |  | 
|                      |  | 
|*                     |  | 
|Thomas R. Perz        |  | 
|Director              |  | 
|                      |  | 
|*                     |  | 
|Raymond S. Stolarczyk |  | 
|Director              |  | 
|                      |  | 
|*                     |  | 
|Lois B. Vasto         |  | 
|Director              |  | 
|                      |  | 
|*                     |  | 
|Andrew . Zych         |  | 
|Director              |  | 

* Signed pursuant to power of attorney (included as Exhibit 24.1 hereto)
on March 2, 2007 by:

/s/ Allen H. Koranda______________________________Allen H. Koranda, as attorney-in-fact

106

---

EXHIBIT INDEX

| | Exhibit No. 10.13 | Form of Restricted Stock Unit Award
                    Agreement.*+
| | ----------------- | --------------------------------------------------------------------

| | Exhibit No. 10.15 | Amendment dated November 15, 2005
                    to the amended and restated EFC Bancorp, Inc. 1998 Stock- Based Incentive Plan.*+
| | ----------------- | ---------------------------------------------------------------------------------------------------------------------------------------

| | Exhibit No. 10.24 | Amendment dated January 24, 2006
                    to the Mid America Bank, fsb Supplemental Executive Retirement Plan, as amended.*+
| | ----------------- | ---------------------------------------------------------------------------------------------------------------------------------------

| | Exhibit No. 12.1 | Statements re: Computation of ratio
                    of earnings to fixed charges.+
| | ---------------- | --------------------------------------------------------------------------------------

| | Exhibit No. 21.1 | Subsidiaries of the Registrant.+
| | ---------------- | --------------------------------

| | Exhibit No. 23.1 | Consent of KPMG LLP.+
| | ---------------- | ---------------------

| | Exhibit No. 31.1 | Certification of Chief Executive
                    Officer.+
| | ---------------- | --------------------------------------------------------------

| | Exhibit No. 31.2 | Certification of Chief Financial
                    Officer.+
| | ---------------- | --------------------------------------------------------------

| | Exhibit No. 32.1 | Certification of Chief Executive
                    Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
                    pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.+
| | ---------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

---

| | * | Indicates management contracts or
                    compensatory plans or arrangements required to be filed as an exhibit.
| | - | ----------------------------------------------------------------------------------------------------------------------------

| | + | Filed herewith.
| | - | ---------------

---