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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-K



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ANNUAL REPORT PURSUANT TO SECTION 13
OR 15(D)

OF THE SECURITIES EXCHANGE ACT OF 1934



For the fiscal year ended December 31, 2004



Commission File Number: 000-20867



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PARK BANCORP, INC.

(Exact name of registrant as specified in its charter)



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Delaware

(State of incorporation)



36-4082530

(IRS Employer Identification No.)



5400 South Pulaski Road, Chicago, Illinois

(Address of Principal Executive Offices)



60632

(ZIP Code)



(773) 582-8616

(Registrants telephone number, including area code)



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



None



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



Common stock, $.01, par value per share

(Title of each class)



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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 (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90
days.    Yes  x    No ̈



Indicate by 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 the Registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form
10-K. ̈



Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).    Yes ̈No  x



The aggregate market value of the voting stock of the Registrant held by non-affiliates was approximately $23,664,000 as of June 30, 2004.



As of March 18, 2005, the Registrant had outstanding 1,140,595 shares of
common stock.



Documents Incorporated by Reference



Selected portions of the definitive Proxy Statement for the
Registrants Annual Meeting of Stockholders to be held on May 4, 2005 are incorporated by reference into Part III.



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##### Table of Contents



PART I



ITEM 1. BUSINESS



General



Park Bancorp, Inc. (the Company) is a bank holding company engaged in the business of banking through its wholly owned subsidiary, Park Federal Savings Bank
(the Bank), and real estate development through its wholly owned subsidiary, PBI Development Corporation (PBI). The Bank is engaged in the business of retail banking, with operations conducted through its main office and two
branch offices located in Chicago and Westmont, Illinois. The Bank also has two wholly owned subsidiaries. GPS Development Corp. (GPS) is an Illinois corporation, which participates in residential real estate development projects. GPS
Corporation is an Illinois corporation, which conducts limited insurance activities.



The Bank attracts retail deposits from the general public in the areas surrounding its offices and invests those deposits, together with funds generated from operations and other borrowings, primarily in fixed-rate, one-to-four-family
residential mortgage loans, and securities. The Bank invests, on a limited basis, in multi-family mortgage, commercial real estate, construction, land, and consumer loans. The Banks revenues are derived principally from interest on its loans
and securities. The Banks primary sources of funds are deposits, advances from the Federal Home Loan Bank (FHLB), securities sold under repurchase agreements, and principal and interest payments on loans and securities.



Market Area and Competition



The Bank is a community-oriented savings bank. The Banks primary deposit gathering
area is concentrated in the communities surrounding its offices, while its lending activities primarily include areas throughout Cook, DuPage, and Will Counties.



The Banks market area is both an urban and suburban area with the manufacturing industry as the major industrial group, followed by
the services sector, and then the wholesale/retail sector. The Banks Chicago offices are located in diverse communities, which have a high percentage of customers of various ethnic backgrounds. Management of the Bank believes that its urban
communities are stable, residential neighborhoods of predominantly one-to-four-family residences and low to middle income families. The Banks Westmont office is located in DuPage County, which consists predominantly of middle to upper income
families.



The Bank does not formally track real estate values or construction
starts in its primary market areas; however, the officers and directors of the Bank maintain relationships with area contractors and real estate agents, which enable them to continually monitor the trends in housing construction and real estate
sales in the Banks primary market areas. In addition, the Bank obtains information on real estate sales on a periodic basis through public records. Management is not aware of any material adverse trends in real estate values in its market
area.



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The Banks competition for loans comes principally from savings institutions, mortgage banking companies, and
commercial banks. Its most direct competition for deposits has historically come from savings institutions, commercial banks, and credit unions. In addition, the Bank faces increasing competition for deposits and other financial products from
nonbank institutions such as brokerage firms and insurance companies in such areas as short-term money market funds, corporate and government securities funds, mutual funds, and annuities.



Lending Activities



General.The Banks loan portfolio consists primarily of conventional first mortgage loans secured by one-to-four-family
residences. At December 31, 2004, the Bank had total gross loans outstanding of $174.2 million, of which $96.0 million were one-to-four family residential mortgage loans, or 55.10% of the Banks total gross loans. The remainder of the portfolio
consists of $27.5 million of multi-family mortgage loans, or 15.80% of total gross loans; $19.2 million of commercial real estate loans, or 11.05% of total gross loans; $15.6 million of construction and land loans, or 8.93% of total gross loans; and
consumer and other loans of $15.9 million, or 9.12% of total gross loans. The Bank had no loans held for sale at December 31, 2004.



Loan Approval Procedures and Authority. The Board of Directors establishes the lending policies of the Bank and delegates lending authority and responsibility to
the Executive Committee, a management committee of the Bank. All real estate loans must be approved by the Executive Committee. The maximum loan amount is $500,000 unless approved by the Board of Directors. Pursuant to Office of Thrift Supervision
(OTS) regulations, loans to one borrower cannot exceed 15% of the Banks unimpaired capital and surplus without regulatory notification. The Bank has no loans to one borrower that are in excess of regulatory limits.



All table amounts throughout the Form 10-K are in thousands except share and per share data.



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The following table sets forth the composition of the Banks loan portfolio in dollar amounts and as a percentage of
the portfolio at the dates indicated.



|                                                      |  |                 |         |   |                 |        |   |        |   |         |                 |  |        |        |  |   |                 |   |  |        |   |  |                 |         |   |        |        |   |                 |   |         |   |  |        |  
|----------------------------------------------------- |  | --------------- | ------- | - | --------------- | ------ | - | ------ | - | ------- | --------------- |  | ------ | ------ |  | - | --------------- | - |  | ------ | - |  | --------------- | ------- | - | ------ | ------ | - | --------------- | - | ------- | - |  | ------ | -
|                                                      |  | At December 31, |        
|                                                      |  | 2004            |         |   | 2003            |        |   | 2002   |   |         | 2001            |  |        | 2000   | 
|                                                      |  | Amount          |         |   | Percentof Total |        |   | Amount |   |         | Percentof Total |  |        | Amount |  |   | Percentof Total |   |  | Amount |   |  | Percentof Total |         |   | Amount |        |   | Percentof Total |  
|Real estate                                           |  |                 |         |   |                 |        |   |        |   |         |                 |  |        |        |  |   |                 |   |  |        |   |  |                 |         |   |        |        |   |                 |   |         |   |  |        |  
|Residential                                           |  |                 |         |   |                 |        |   |        |   |         |                 |  |        |        |  |   |                 |   |  |        |   |  |                 |         |   |        |        |   |                 |   |         |   |  |        |  
|One-to-four-family                                    |  | $               | 95,966  |   |                 | 55.10  | % |        | $ | 100,136 |                 |  | 61.86  | %      |  | $ | 96,351          |   |  | 62.46  | % |  | $               | 87,620  |   |        | 63.00  | % |                 | $ | 71,375  |   |  | 70.23  | %
|Multi-family                                          |  |                 | 27,527  |   |                 | 15.80  |   |        |   | 19,167  |                 |  | 11.84  |        |  |   | 17,977          |   |  | 11.65  |   |  |                 | 17,279  |   |        | 12.43  |   |                 |   | 10,924  |   |  | 10.75  |  
|Commercial                                            |  |                 | 19,247  |   |                 | 11.05  |   |        |   | 16,998  |                 |  | 10.50  |        |  |   | 9,607           |   |  | 6.23   |   |  |                 | 8,548   |   |        | 6.15   |   |                 |   | 5,316   |   |  | 5.23   |  
|Construction and land                                 |  |                 | 15,549  |   |                 | 8.93   |   |        |   | 13,013  |                 |  | 8.04   |        |  |   | 11,159          |   |  | 7.23   |   |  |                 | 10,668  |   |        | 7.67   |   |                 |   | 9,130   |   |  | 8.98   |  
|Consumer and other                                    |  |                 | 15,887  |   |                 | 9.12   |   |        |   | 12,559  |                 |  | 7.76   |        |  |   | 19,166          |   |  | 12.43  |   |  |                 | 14,947  |   |        | 10.75  |   |                 |   | 4,882   |   |  | 4.81   |  
|                                                      |  |                 |         |   |                 |        |   |        |   |         |                 |  |        |        |  |   |                 |   |  |        |   |  |                 |         |   |        |        |   |                 |   |         |   |  |        |  
|Total loans, gross                                    |  |                 | 174,176 |   |                 | 100.00 | % |        |   | 161,873 |                 |  | 100.00 | %      |  |   | 154,260         |   |  | 100.00 | % |  |                 | 139,062 |   |        | 100.00 | % |                 |   | 101,627 |   |  | 100.00 | %
|                                                      |  |                 |         |   |                 |        |   |        |   |         |                 |  |        |        |  |   |                 |   |  |        |   |  |                 |         |   |        |        |   |                 |   |         |   |  |        |  
|Undisbursed portion of loans funds                    |  |                 | (4,802  | ) |                 |        |   |        |   | (1,812  | )               |  |        |        |  |   | (5,226          | ) |  |        |   |  |                 | (3,329  | ) |        |        |   |                 |   | (3,763  | ) |  |        |  
|Deferred loan origination fees and unearned discounts |  |                 | (534    | ) |                 |        |   |        |   | (526    | )               |  |        |        |  |   | (467            | ) |  |        |   |  |                 | (445    | ) |        |        |   |                 |   | (347    | ) |  |        |  
|Allowance for loan losses                             |  |                 | (1,374  | ) |                 |        |   |        |   | (578    | )               |  |        |        |  |   | (574            | ) |  |        |   |  |                 | (500    | ) |        |        |   |                 |   | (500    | ) |  |        |  
|                                                      |  |                 |         |   |                 |        |   |        |   |         |                 |  |        |        |  |   |                 |   |  |        |   |  |                 |         |   |        |        |   |                 |   |         |   |  |        |  
|Total loans, net                                      |  | $               | 167,466 |   |                 |        |   |        | $ | 158,957 |                 |  |        |        |  | $ | 147,993         |   |  |        |   |  | $               | 134,788 |   |        |        |   |                 | $ | 97,017  |   |  |        |  
|                                                      |  |                 |         |   |                 |        |   |        |   |         |                 |  |        |        |  |   |                 |   |  |        |   |  |                 |         |   |        |        |   |                 |   |         |   |  |        |  



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Loan Maturity.The following table shows the contractual maturity of the Banks gross loans at December 31,
2004. The table does not include principal prepayments.



|                                    |  |                    |        |                   |   |                      |  |                      |        |  |   |        |  |   |        |  |   |        
|----------------------------------- |  | ------------------ | ------ | ----------------- | - | -------------------- |  | -------------------- | ------ |  | - | ------ |  | - | ------ |  | - | -------
|                                    |  | Real Estate Loans  |        | Consumerand Other |   | TotalLoansReceivable
|                                    |  | One-to-Four-Family |        | Multi-Family      |   | -Commercial          |  | Constructionand Land |        | 
|Amounts due                         |  |                    |        |                   |   |                      |  |                      |        |  |   |        |  |   |        |  |   |        
|One year or less                    |  | $                  | 104    |                   | $ | 1,325                |  | $                    | 202    |  | $ | 9,226  |  | $ | 7,627  |  | $ | 18,484 
|                                    |  |                    |        |                   |   |                     
|After one year                      |  |                    |        |                   |   |                      |  |                      |        |  |   |        |  |   |        |  |   |        
|More than one year to three years   |  |                    | 214    |                   |   | 5,850                |  |                      | 1,844  |  |   | 5,821  |  |   | 1,954  |  |   | 15,683 
|More than three years to five years |  |                    | 385    |                   |   | 10,899               |  |                      | 6,170  |  |   | 502    |  |   | 4,858  |  |   | 22,814 
|More than five years to ten years   |  |                    | 5,289  |                   |   | 4,033                |  |                      | 698    |  |   |       |  |   | 1,448  |  |   | 11,468 
|More than ten years to twenty years |  |                    | 34,043 |                   |   | 5,420                |  |                      | 10,333 |  |   |       |  |   |       |  |   | 49,796 
|More than twenty years              |  |                    | 55,931 |                   |   |                     |  |                      |       |  |   |       |  |   |       |  |   | 55,931 
|                                    |  |                    |        |                   |   |                      |  |                      |        |  |   |        |  |   |        |  |   |        
|Total due after December 31, 2005   |  |                    | 95,862 |                   |   | 26,202               |  |                      | 19,045 |  |   | 6,323  |  |   | 8,260  |  |   | 155,692
|                                    |  |                    |        |                   |   |                      |  |                      |        |  |   |        |  |   |        |  |   |        
|Gross loans receivable              |  | $                  | 95,966 |                   | $ | 27,527               |  | $                    | 19,247 |  | $ | 15,549 |  | $ | 15,887 |  | $ | 174,176
|                                    |  |                    |        |                   |   |                      |  |                      |        |  |   |        |  |   |        |  |   |        



The following table sets forth at
December 31, 2004 the dollar amount of total gross loans receivable contractually due after December 31, 2005 and whether such loans have fixed interest rates or adjustable interest rates.



|                             |  |                             |         |            |   |        |  |   |        
|---------------------------- |  | --------------------------- | ------- | ---------- | - | ------ |  | - | -------
|                             |  | Due After December 31, 2005
|                             |  | Fixed                       |         | Adjustable |   | Total 
|Real estate loans            |  |                             |         |            |   |        |  |   |        
|Residential                  |  |                             |         |            |   |        |  |   |        
|One-to-four-family           |  | $                           | 88,981  |            | $ | 6,881  |  | $ | 95,862 
|Multi-family                 |  |                             | 25,307  |            |   | 895    |  |   | 26,202 
|Commercial                   |  |                             | 19,045  |            |   |       |  |   | 19,045 
|Construction and land        |  |                             | 6,323   |            |   |       |  |   | 6,323  
|Consumer and other           |  |                             | 1,969   |            |   | 6,291  |  |   | 8,260  
|                             |  |                             |         |            |   |        |  |   |        
|Total gross loans receivable |  | $                           | 141,625 |            | $ | 14,067 |  | $ | 155,692
|                             |  |                             |         |            |   |        |  |   |        



Origination and Purchase of
Loans. The Banks mortgage lending activities are conducted through its home office and two branch offices. Although the Bank may originate adjustable-rate mortgage loans, the substantial majority of the Banks loan originations are
fixed-rate mortgage loans. While the Bank retains for its portfolio all of the mortgage loans that it originates, the Bank may, in the future, sell mortgage loans that it originates depending on market conditions and the financial condition of the
Bank. The Bank has purchased loans or participated in loans originated by other institutions based upon the Banks investment needs and market opportunities.



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The following table sets forth the Banks loan originations, purchases, and principal repayments for the periods
indicated:



|                                    |  |                                 |         |   |      |   |         |      |  |   |         |  
|----------------------------------- |  | ------------------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                    |  | For the Year Ended December 31, |        
|                                    |  | 2004                            |         |   | 2003 |   |         | 2002 | 
|Beginning balance, net              |  | $                               | 158,957 |   |      | $ | 147,993 |      |  | $ | 134,788 |  
|Loans originated                    |  |                                 |         |   |      |   |         |      |  |   |         |  
|One-to-four-family                  |  |                                 | 19,431  |   |      |   | 37,967  |      |  |   | 30,553  |  
|Multi-family                        |  |                                 | 10,914  |   |      |   | 6,907   |      |  |   | 4,860   |  
|Commercial                          |  |                                 | 5,717   |   |      |   | 10,873  |      |  |   | 3,393   |  
|Construction and land               |  |                                 | 11,747  |   |      |   | 9,405   |      |  |   | 9,832   |  
|Consumer                            |  |                                 | 2,655   |   |      |   | 3,373   |      |  |   | 2,570   |  
|                                    |  |                                 |         |   |      |   |         |      |  |   |         |  
|Total loans originated              |  |                                 | 50,464  |   |      |   | 68,525  |      |  |   | 51,208  |  
|Loans purchased                     |  |                                 | 12,024  |   |      |   | 7,605   |      |  |   | 16,238  |  
|                                    |  |                                 |         |   |      |   |         |      |  |   |         |  
|                                    |  |                                 | 62,488  |   |      |   | 76,130  |      |  |   | 67,446  |  
|                                    |  |                                 |        
|Principal payments                  |  |                                 | (50,193 | ) |      |   | (68,576 | )    |  |   | (52,270 | )
|Change in allowance for loan losses |  |                                 | (796    | ) |      |   | (4      | )    |  |   | (74     | )
|Change in undisbursed loan funds    |  |                                 | (2,990  | ) |      |   | 3,414   |      |  |   | (1,897  | )
|                                    |  |                                 |         |   |      |   |         |      |  |   |         |  
|Ending balance, net                 |  | $                               | 167,466 |   |      | $ | 158,957 |      |  | $ | 147,993 |  
|                                    |  |                                 |         |   |      |   |         |      |  |   |         |  



One-to-Four-Family Mortgage
Lending. The Bank offers mortgage loans secured by one-to-four-family residences located in the Banks primary market area. Loan applications are obtained by the Banks loan officers through their contacts with the local real estate
industry, customers, and members of the local communities. The Banks policy is to originate one-to-four-family residential mortgage loans in amounts up to 80% of the lower of the appraised value or the selling price of the property securing
the loan and up to 95% of the appraised value or selling price if private mortgage insurance is obtained. The residential mortgage loans originated by the Bank are for maturity terms of up to 30 years.



The Bank offers adjustable rate mortgage (ARM) loans as a means of reducing its
exposure to changes in interest rates. However, the volume and types of ARM loans originated by the Bank have been affected by such market factors as the level of interest rates, competition, consumer preferences, and the availability of funds. In
recent years, the Bank has not originated a significant amount of ARM loans as compared to its originations of fixed-rate loans. ARM loans pose credit risks different from the risks inherent in fixed rate loans, primarily because as interest rates
rise, the underlying payments of the borrower rise, thereby increasing the potential for default. The ARM loans currently offered by the Bank do not provide for initial deep discount teaser interest rates. Although the Bank will continue
to offer ARM loans, there can be no assurance that in the future the Bank will be able to originate a sufficient volume of ARM loans to constitute a significant portion of the Banks loan portfolio.



Multi-Family Lending. The Bank originates multi-family mortgage loans secured by
properties located in the Banks primary market area. The amount of multi-family loans originated by the Bank depends upon market conditions.



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Pursuant to the Banks current underwriting policies, a multi-family mortgage loan may be made in an amount up to
80% of the appraised value of the underlying property. In addition, the Bank generally requires a debt service ratio of 120%. Properties securing a multi-family loan are appraised by an independent appraiser. Title and property insurance are
required on all multi-family loans.



The Banks underwriting policies
require that the borrower be able to demonstrate strong management skills and the ability to maintain the property for current rental income. The borrower is required to present evidence of the ability to repay the mortgage and a satisfactory credit
history. In making its assessment of the creditworthiness of the borrower, the Bank reviews the financial statements and the employment and credit history of the borrower as well as other related documentation. Loans secured by multi-family
residential properties generally involve a greater degree of risk than one-to-four-family residential mortgage loans. Because payments on loans secured by multi-family properties are often dependent on successful operation or management of the
properties, repayment of such loans may be subject to a greater extent to adverse conditions in the real estate market or the economy. The Bank seeks to minimize these risks through its underwriting policies, which require such loans to be qualified
at origination on the basis of the propertys income and debt coverage ratio.



Commercial Real Estate Lending. On a limited basis, the Bank originates commercial real estate loans that are generally secured by properties used for business purposes such as small office buildings or retail facilities located in
its primary market areas. The Banks underwriting procedures provide that commercial real estate loans may be made in amounts up to the lesser of 80% of the appraised value of the property or the sales price. The Bank has generally required
that the properties securing commercial real estate loans have debt service coverage ratios of at least 120%.



Loans secured by commercial real estate properties are generally larger and involve a greater degree of risk than one-to-four-family residential mortgage loans. Because payments on loans secured by commercial real
estate properties are often dependent on successful operation or management of the properties, repayment of such loans is subject to adverse conditions in the real estate market or the economy. The Bank seeks to minimize these risks through its
underwriting standards, which require such loans to be qualified on the basis of the propertys income and debt service ratio.



Construction and Land Lending. The Bank originates construction and land loans in its primary market areas. The Banks construction loans primarily are made
to finance development of one-to-four-family residential properties. These loans are primarily fixed-rate loans with maturities of one year or less. The Banks policies provide that construction loans may be made in amounts up to 80% of the
appraised value of the property for construction of one-to-four-family residences. The Bank requires an independent appraisal of the property. Loan proceeds are disbursed in increments as construction progresses and as regular inspections warrant.
Land loans generally do not exceed 75% of the actual cost or current appraised value of the property, whichever is less.



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Construction lending may be viewed as involving a greater degree of risk than one-to-four family mortgage lending. The
repayment of the construction loan is, to a great degree, dependent upon the successful and timely completion of the construction of the subject property. Construction delays or the financial impairment of the builder may further impair the
borrowers ability to repay the loan.



Consumer and Other Lending.
The Banks consumer and other loans generally consist of automobile loans, second mortgage loans, loans secured by deposits, commercial lines of credit secured by real estate, and participations purchased.



The Bank purchases one-to-four-family mortgage loans and loan participations from other
financial institutions in its primary market area. At December 31, 2004, the Bank had $8.5 million in purchased mortgage loans and loan participations serviced by others, totaling 4.88% of the total loan portfolio at that date, primarily secured by
one-to-four-family residences. The Bank may purchase loans to supplement reduced loan demand as needed and must meet the same underwriting criteria as loans originated by the Bank.



Delinquencies and Classified Assets. The Board of Directors and management perform a monthly review of all loans sixty days or more
past due. The procedures taken by the Bank with respect to delinquencies vary depending on the nature of the loan and period of delinquency. The Bank sends the borrower a written notice of nonpayment after the loan is first past due. If the loan is
not brought current and it becomes necessary to take legal action, which occurs after a loan is delinquent at least 60 days, the Bank may commence foreclosure proceedings. If a foreclosure action is instituted and the loan is not brought current,
paid in full, or refinanced before the foreclosure sale, the real property securing the loan is foreclosed upon and sold.



Federal regulations and the Banks Classification of Assets Policy require that the Bank utilize an internal asset classification system as a means of reporting
problem and potential problem assets. The Bank has incorporated the OTS internal asset classifications as a part of its credit monitoring system. The Bank currently classifies problem and potential problem assets as Substandard,
Doubtful, or Loss assets, depending upon the severity of the delinquency status or repayment capacity of the borrower. The likelihood of collection on the loan declines with each classification, and 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 allowance is not warranted. Assets that do not currently expose the Bank to
sufficient risk to warrant classification in one of the aforementioned categories but possess weaknesses are designated Special Mention.



The Banks Executive Committee reviews and classifies the Banks assets monthly and reports the results of its review to the Board of Directors. The Bank
classifies assets in accordance with the management guidelines described above. At December 31, 2004, the Bank had $509,000 of assets classified as Special Mention, $2,616,000 of assets classified as Substandard, and $84,000
of assets classified as Doubtful. No assets were classified as Loss.



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Non-Accrual and Past-Due Loans. The following table sets forth information regarding nonaccrual loans,
troubled-debt restructurings, and other real estate owned (REO). It is the policy of the Bank to cease accruing interest on loans 90 days or more past due. For the years ended December 31 presented below, the amount of interest income
that would have been recognized on nonaccrual loans is immaterial to the financial statements.



|                           |  |                 |       |      |   |      |  |      |     |      |   |     |  |   |    
|-------------------------- |  | --------------- | ----- | ---- | - | ---- |  | ---- | --- | ---- | - | --- |  | - | ---
|                           |  | At December 31,
|                           |  | 2004            |       | 2003 |   | 2002 |  | 2001 |     | 2000
|Nonaccrual loans           |  |                 |       |      |   |      |  |      |     |      |   |     |  |   |    
|Residential real estate    |  |                 |       |      |   |      |  |      |     |      |   |     |  |   |    
|One-to-four-family         |  | $               | 370   |      | $ | 544  |  | $    | 235 |      | $ | 122 |  | $ | 457
|Multi-family               |  |                 | 1,423 |      |   |     |  |      |    |      |   |    |  |   |   
|Commercial                 |  |                 | 958   |      |   |     |  |      |    |      |   |    |  |   |   
|Construction and land      |  |                 | 336   |      |   |     |  |      |    |      |   |    |  |   |   
|Consumer and other         |  |                 | 38    |      |   | 1    |  |      |    |      |   |    |  |   | 1  
|                           |  |                 |       |      |   |      |  |      |     |      |   |     |  |   |    
|Total nonperforming loans  |  |                 | 3,125 |      |   | 545  |  |      | 235 |      |   | 122 |  |   | 458
|REO                        |  |                 | 84    |      |   | 76   |  |      | 55  |      |   |    |  |   |   
|                           |  |                 |       |      |   |      |  |      |     |      |   |     |  |   |    
|Total nonperforming assets |  | $               | 3,209 |      | $ | 621  |  | $    | 290 |      | $ | 122 |  | $ | 458
|                           |  |                 |       |      |   |      |  |      |     |      |   |     |  |   |    



At December 31, 2004, there were five
loans totaling $3.8 million that were 60 to 89 days delinquent.



|                                                                      |  |                 |   |  |        |   |  |        |   |  |        |   |  |        |  
|--------------------------------------------------------------------- |  | --------------- | - |  | ------ | - |  | ------ | - |  | ------ | - |  | ------ | -
|                                                                      |  | At December 31, |  
|                                                                      |  | 2004            |   |  | 2003   |   |  | 2002   |   |  | 2001   |   |  | 2000   |  
|Allowance for loan losses as a percent of gross loans receivable      |  | 0.79            | % |  | 0.36   | % |  | 0.37   | % |  | 0.36   | % |  | 0.49   | %
|                                                                      |  |                 |   |  |       
|Allowance for loan losses as a per- cent of total nonperforming loans |  | 43.97           |   |  | 106.06 |   |  | 244.26 |   |  | 409.84 |   |  | 109.17 |  
|                                                                      |  |                 |   |  |       
|Nonperforming loans as a percent of gross loans receivable(1)         |  | 1.79            |   |  | 0.34   |   |  | 0.15   |   |  | 0.09   |   |  | 0.45   |  
|                                                                      |  |                 |   |  |       
|Nonperforming assets as a percentage of total assets(1)               |  | 1.20            |   |  | 0.23   |   |  | 0.12   |   |  | 0.05   |   |  | 0.19   |  

---

|(1) | Nonperforming assets consist of nonperforming loans and REO. Nonperforming loans consist of all loans 90 days or more past due.
|--- | -------------------------------------------------------------------------------------------------------------------------------



Allowance for Loan Losses. The allowance for loan losses is established through a
provision for loan losses based on managements evaluation of the loan portfolio, its classifications of individual loans, and the general economy. The allowance for loan losses is maintained at an amount management considers appropriate to
cover losses on loans receivable that are deemed probable and estimable. The allowance is based upon a number of factors, including current economic conditions, actual loss experience, and industry trends. In addition, various regulatory agencies,
as an integral part of their examination process, periodically review the Banks allowance for loan losses. Such agencies may require the Bank to make additional provisions for loan losses based upon information available at the time of the
review. The Bank will continue to monitor and modify the allowance for loan losses as conditions dictate.



9.



---

##### Table of Contents

The following table sets forth activity in the Banks allowance for loan losses for the years set forth in the
table.



|                                                   |  |      |       |   |      |   |     |      |  |   |      |   |  |      |     |   |  |   |     |  
|-------------------------------------------------- |  | ---- | ----- | - | ---- | - | --- | ---- |  | - | ---- | - |  | ---- | --- | - |  | - | --- | -
|                                                   |  | 2004 |       |   | 2003 |   |     | 2002 |  |   | 2001 |   |  | 2000 |    
|Balance at beginning of year                       |  | $    | 578   |   |      | $ | 574 |      |  | $ | 500  |   |  | $    | 500 |   |  | $ | 500 |  
|Provision for loan losses                          |  |      | 816   |   |      |   |    |      |  |   | 120  |   |  |      |    |   |  |   |    |  
|Charge-offs                                        |  |      |       |   |      |   |     |      |  |   |      |   |  |      |     |   |  |   |     |  
|One-to-four-family                                 |  |      |      |   |      |   |    |      |  |   | (19  | ) |  |      |    |   |  |   |    |  
|Consumer and other                                 |  |      | (20   | ) |      |   | (22 | )    |  |   | (27  | ) |  |      |    |   |  |   |    |  
|                                                   |  |      |       |   |      |   |     |      |  |   |      |   |  |      |     |   |  |   |     |  
|Total                                              |  |      | 1,374 |   |      |   | 552 |      |  |   | 574  |   |  |      |    |   |  |   |    |  
|Recoveries                                         |  |      |      |   |      |   | 26  |      |  |   |     |   |  |      |    |   |  |   |    |  
|                                                   |  |      |       |   |      |   |     |      |  |   |      |   |  |      |     |   |  |   |     |  
|Balance at end of year                             |  | $    | 1,374 |   |      | $ | 578 |      |  | $ | 574  |   |  | $    | 500 |   |  | $ | 500 |  
|                                                   |  |      |       |   |      |   |     |      |  |   |      |   |  |      |     |   |  |   |     |  
|Net charge-offs to average gross loans outstanding |  |      | 0.01  | % |      |   |    | %    |  |   | 0.03 | % |  |      |    | % |  |   |    | %



10.



---

##### Table of Contents

The following table sets forth the amount of the Banks allowance for loan losses, the percent of allowance for loan
losses to total allowance, and the percent of gross loans to total gross loans in each of the categories listed at the dates indicated.



|                                |  |                 |       |                                      |        |   |                                                       |        |   |        |      |                                      |  |        |                                                       |  |        |        |  |                                      |     |  |                                                       |   |  |        |   |                                      |   |     |                                                       |        |   |        |        |                                      |  |   |                                                       |  |        |   |  |        |  
|------------------------------- |  | --------------- | ----- | ------------------------------------ | ------ | - | ----------------------------------------------------- | ------ | - | ------ | ---- | ------------------------------------ |  | ------ | ----------------------------------------------------- |  | ------ | ------ |  | ------------------------------------ | --- |  | ----------------------------------------------------- | - |  | ------ | - | ------------------------------------ | - | --- | ----------------------------------------------------- | ------ | - | ------ | ------ | ------------------------------------ |  | - | ----------------------------------------------------- |  | ------ | - |  | ------ | -
|                                |  | At December 31, |      
|                                |  | 2004            |       |                                      | 2003   |   |                                                       | 2002   |   |        | 2001 |                                      |  | 2000   |                                                      
|                                |  | Amount          |       | Percent ofAllowanceto TotalAllowance |        |   | Percentof GrossLoans inEachCategoryto TotalGrossLoans |        |   | Amount |      | Percent ofAllowanceto TotalAllowance |  |        | Percentof GrossLoans inEachCategoryto TotalGrossLoans |  |        | Amount |  | Percent ofAllowanceto TotalAllowance |     |  | Percentof GrossLoans inEachCategoryto TotalGrossLoans |   |  | Amount |   | Percent ofAllowanceto TotalAllowance |   |     | Percentof GrossLoans inEachCategoryto TotalGrossLoans |        |   | Amount |        | Percent ofAllowanceto TotalAllowance |  |   | Percentof GrossLoans inEachCategoryto TotalGrossLoans | 
|One-to-four-family              |  | $               | 209   |                                      | 15.21  | % |                                                       | 55.11  | % |        | $    | 200                                  |  | 34.60  | %                                                     |  | 61.86  | %      |  | $                                    | 241 |  | 41.99                                                 | % |  | 62.46  | % |                                      | $ | 190 |                                                       | 38.00  | % |        | 63.00  | %                                    |  | $ | 177                                                   |  | 35.40  | % |  | 70.23  | %
|Multi-family                    |  |                 | 616   |                                      | 44.83  |   |                                                       | 15.79  |   |        |      | 61                                   |  | 10.55  |                                                       |  | 11.84  |        |  |                                      | 90  |  | 15.68                                                 |   |  | 11.65  |   |                                      |   | 60  |                                                       | 12.00  |   |        | 12.43  |                                      |  |   | 55                                                    |  | 11.00  |   |  | 10.75  |  
|Commercial                      |  |                 | 328   |                                      | 23.87  |   |                                                       | 11.02  |   |        |      | 68                                   |  | 11.76  |                                                       |  | 10.50  |        |  |                                      | 48  |  | 8.36                                                  |   |  | 6.23   |   |                                      |   | 59  |                                                       | 11.80  |   |        | 6.15   |                                      |  |   | 60                                                    |  | 12.00  |   |  | 5.23   |  
|Construction and land           |  |                 | 111   |                                      | 8.08   |   |                                                       | 8.95   |   |        |      | 104                                  |  | 17.99  |                                                       |  | 8.04   |        |  |                                      | 57  |  | 9.93                                                  |   |  | 7.23   |   |                                      |   | 57  |                                                       | 11.40  |   |        | 7.67   |                                      |  |   | 54                                                    |  | 10.80  |   |  | 8.98   |  
|Consumer and other              |  |                 | 110   |                                      | 8.01   |   |                                                       | 9.13   |   |        |      | 145                                  |  | 25.10  |                                                       |  | 7.76   |        |  |                                      | 138 |  | 24.04                                                 |   |  | 12.43  |   |                                      |   | 69  |                                                       | 13.80  |   |        | 10.75  |                                      |  |   | 49                                                    |  | 9.80   |   |  | 4.81   |  
|Unallocated                     |  |                 |      |                                      |       |   |                                                       |       |   |        |      |                                     |  |       |                                                       |  |       |        |  |                                      |    |  |                                                      |   |  |       |   |                                      |   | 65  |                                                       | 13.00  |   |        |       |                                      |  |   | 105                                                   |  | 21.00  |   |  |       |  
|                                |  |                 |       |                                      |        |   |                                                       |        |   |        |      |                                      |  |        |                                                       |  |        |        |  |                                      |     |  |                                                       |   |  |        |   |                                      |   |     |                                                       |        |   |        |        |                                      |  |   |                                                       |  |        |   |  |        |  
|Total allowance for loan losses |  | $               | 1,374 |                                      | 100.00 | % |                                                       | 100.00 | % |        | $    | 578                                  |  | 100.00 | %                                                     |  | 100.00 | %      |  | $                                    | 574 |  | 100.0                                                 | % |  | 100.00 | % |                                      | $ | 500 |                                                       | 100.00 | % |        | 100.00 | %                                    |  | $ | 500                                                   |  | 100.00 | % |  | 100.00 | %
|                                |  |                 |       |                                      |        |   |                                                       |        |   |        |      |                                      |  |        |                                                       |  |        |        |  |                                      |     |  |                                                       |   |  |        |   |                                      |   |     |                                                       |        |   |        |        |                                      |  |   |                                                       |  |        |   |  |        |  



11.



---

##### Table of Contents

Investment Activities



The investment policies of the Company and the Bank as established by the Board of Directors attempt to provide and maintain liquidity, generate a favorable return on
investments without incurring undue interest rate and credit risk, and complement the Banks lending activities. The policies provide the authority to invest in government agency securities, mortgage-backed securities, corporate bonds,
municipal securities, and equity securities.



Investments in mortgage-backed
securities involve a risk that actual prepayments will be greater than estimated prepayments over the life of the security, which may require adjustments to the amortization of any premium or accretion of any discount relating to such instruments,
thereby reducing or increasing, respectively, the net yield on such securities. There is also reinvestment risk associated with the cash flows from such securities. In addition, the market value of debt securities may be adversely affected by
changes in interest rates.



All government agency securities held at December
31, 2004 are callable at the option of the issuer, which also presents prepayment risk to the Company.



The following table sets forth information regarding the carrying amount and fair values of the Companys securities at the dates indicated.



|                             |  |                 |        |           |   |                |  |           |        |                |   |           |  |   |        |  |   |       
|---------------------------- |  | --------------- | ------ | --------- | - | -------------- |  | --------- | ------ | -------------- | - | --------- |  | - | ------ |  | - | ------
|                             |  | At December 31,
|                             |  | 2004            |        | 2003      |   | 2002          
|                             |  | CarryingAmount  |        | FairValue |   | CarryingAmount |  | FairValue |        | CarryingAmount |   | FairValue
|Available-for-sale           |  |                 |        |           |   |                |  |           |        |                |   |           |  |   |        |  |   |       
|Government agency securities |  | $               | 8,974  |           | $ | 8,974          |  | $         | 10,023 |                | $ | 10,023    |  | $ |       |  | $ |      
|Corporate bonds              |  |                 | 8,264  |           |   | 8,264          |  |           | 11,747 |                |   | 11,747    |  |   | 18,080 |  |   | 18,080
|Mortgage-backed security     |  |                 |        |           |   |                |  |           |        |                |   |           |  |   |        |  |   |       
|FNMA(1)                      |  |                 | 20,850 |           |   | 20,850         |  |           | 28,929 |                |   | 28,929    |  |   | 16,220 |  |   | 16,220
|FHLMC(2)                     |  |                 | 12,133 |           |   | 12,133         |  |           | 15,723 |                |   | 15,723    |  |   | 17,750 |  |   | 17,750
|GNMA(3)                      |  |                 | 3,801  |           |   | 3,801          |  |           |       |                |   |          |  |   |       |  |   |      
|Municipal securities         |  |                 |       |           |   |               |  |           |       |                |   |          |  |   | 1,259  |  |   | 1,259 
|Equity securities            |  |                 | 5,706  |           |   | 5,706          |  |           | 5,636  |                |   | 5,636     |  |   | 7,804  |  |   | 7,804 
|                             |  |                 |        |           |   |                |  |           |        |                |   |           |  |   |        |  |   |       
|Total available-for-sale     |  | $               | 59,728 |           | $ | 59,728         |  | $         | 72,058 |                | $ | 72,058    |  | $ | 61,113 |  | $ | 61,113
|                             |  |                 |        |           |   |                |  |           |        |                |   |           |  |   |        |  |   |       

---

|(1) | Federal National Mortgage Association.
|--- | --------------------------------------

|(2) | Federal Home Loan Mortgage Corporation.
|--- | ---------------------------------------

|(3) | Government National Mortgage Association.
|--- | -----------------------------------------



12.



---

##### Table of Contents

The table below sets forth certain information regarding the carrying amount, weighted average yields, and contractual
maturities of the Companys securities and mortgage-backed securities as of December 31, 2004. All of the Companys securities are classified as available-for-sale. Equity securities have no stated maturity and are included in the total
column only.



|                                 |  |                      |     |                      |                                  |   |                |                                  |                      |  |                     |                |  |                      |       |  |                |   |                      |   |        |                |      |                      |  |   |        |  |      |  
|-------------------------------- |  | -------------------- | --- | -------------------- | -------------------------------- | - | -------------- | -------------------------------- | -------------------- |  | ------------------- | -------------- |  | -------------------- | ----- |  | -------------- | - | -------------------- | - | ------ | -------------- | ---- | -------------------- |  | - | ------ |  | ---- | -
|                                 |  | At December 31, 2004 |    
|                                 |  | One Year or Less     |     |                      | More than One Year to Five Years |   |                | More than FiveYears to Ten Years |                      |  | More than Ten Years |                |  | Total                |      
|                                 |  | CarryingAmount       |     | WeightedAverageYield |                                  |   | CarryingAmount |                                  | WeightedAverageYield |  |                     | CarryingAmount |  | WeightedAverageYield |       |  | CarryingAmount |   | WeightedAverageYield |   |        | CarryingAmount |      | WeightedAverageYield | 
|Securities                       |  |                      |     |                      |                                  |   |                |                                  |                      |  |                     |                |  |                      |       |  |                |   |                      |   |        |                |      |                      |  |   |        |  |      |  
|Government agency securities     |  | $                    |    |                      |                                 | % |                | $                                | 5,003                |  | 3.02                | %              |  | $                    | 3,971 |  | 4.55           | % |                      | $ |       |                |     | %                    |  | $ | 8,974  |  | 3.70 | %
|Corporate notes                  |  |                      |    |                      |                                 |   |                |                                  | 8,264                |  | 3.40                |                |  |                      |      |  |               |   |                      |   |       |                |     |                      |  |   | 8,264  |  | 3.40 |  
|Equity securities                |  |                      |    |                      |                                 |   |                |                                  |                     |  |                    |                |  |                      |      |  |               |   |                      |   |       |                |     |                      |  |   | 5,706  |  | 2.80 |  
|                                 |  |                      |     |                      |                                  |   |                |                                  |                      |  |                     |                |  |                      |       |  |                |   |                      |   |        |                |      |                      |  |   |        |  |      |  
|Total securities                 |  | $                    |    |                      |                                 | % |                | $                                | 13,267               |  | 3.26                | %              |  | $                    | 3,971 |  | 4.55           | % |                      | $ |       |                |     | %                    |  | $ | 22,944 |  | 3.37 | %
|                                 |  |                      |     |                      |                                  |   |                |                                  |                      |  |                     |                |  |                      |       |  |                |   |                      |   |        |                |      |                      |  |   |        |  |      |  
|Mortgage-backed securities       |  |                      |     |                      |                                  |   |                |                                  |                      |  |                     |                |  |                      |       |  |                |   |                      |   |        |                |      |                      |  |   |        |  |      |  
|FNMA                             |  | $                    |    |                      |                                 | % |                | $                                | 242                  |  | 3.48                | %              |  | $                    |      |  |               | % |                      | $ | 20,608 |                | 4.23 | %                    |  | $ | 20,850 |  | 4.22 | %
|FHLMC                            |  |                      | 284 |                      | 3.19                             |   |                |                                  | 1,061                |  | 4.03                |                |  |                      |      |  |               |   |                      |   | 10,788 |                | 4.17 |                      |  |   | 12,133 |  | 4.13 |  
|GNMA                             |  |                      |    |                      |                                 |   |                |                                  |                     |  |                    |                |  |                      |      |  |               |   |                      |   | 3,801  |                | 4.13 |                      |  |   | 3,801  |  | 4.13 |  
|                                 |  |                      |     |                      |                                  |   |                |                                  |                      |  |                     |                |  |                      |       |  |                |   |                      |   |        |                |      |                      |  |   |        |  |      |  
|Total mortgage-backed securities |  | $                    | 284 |                      | 3.19                             | % |                | $                                | 1,303                |  | 3.93                | %              |  | $                    |      |  |               | % |                      | $ | 35,197 |                | 4.20 | %                    |  | $ | 36,784 |  | 4.18 | %
|                                 |  |                      |     |                      |                                  |   |                |                                  |                      |  |                     |                |  |                      |       |  |                |   |                      |   |        |                |      |                      |  |   |        |  |      |  



Included in the table above are $9.0
million of FHLB and FHLMC notes that are callable at the option of the issuing agency. Callable and variable rate FHLB advances totaled $20.0 million and $2.0 million at December 31, 2004, respectively. The Company has call risk on both the
investing and borrowing positions. If FHLB advances are called, the Company generally has the ability to refinance them, although the interest rates on new advances may be higher.



13.



---

##### Table of Contents

Sources of Funds



General. Deposits, loan payments, cash flows generated from operations, and FHLB advances are the primary sources of the funds used in lending, investing, and for
other general purposes.



Deposits. The Bank offers a variety of deposit
accounts with a range of interest rates and terms. The Banks deposits consist of passbook savings, NOW accounts, money market accounts, and certificates of deposit. The flow of deposits is influenced significantly by general economic
conditions, changes in money market rates, prevailing interest rates, and competition. At December 31, 2004, the Bank had $72.4 million of certificate accounts maturing in a year or less. The Banks deposits are obtained predominantly from the
areas surrounding its banking offices. The Bank relies primarily on customer service and competitive rates to attract and retain these deposits.



The following table presents the deposit activity of the Bank for the years indicated:



|                                              |  |                          |        |   |      |   |       |  |   |        |  
|--------------------------------------------- |  | ------------------------ | ------ | - | ---- | - | ----- |  | - | ------ | -
|                                              |  | Years Ended December 31, |       
|                                              |  | 2004                     |        |   | 2003 |   | 2002  | 
|Net deposits (withdrawals)                    |  | $                        | (7,197 | ) |      | $ | 3,073 |  | $ | (4,443 | )
|Interest credited on deposit accounts         |  |                          | 2,860  |   |      |   | 3,421 |  |   | 5,337  |  
|                                              |  |                          |        |   |      |   |       |  |   |        |  
|Total increase (decrease) in deposit accounts |  | $                        | (4,337 | ) |      | $ | 6,494 |  | $ | 894    |  
|                                              |  |                          |        |   |      |   |       |  |   |        |  



At December 31, 2004, the Bank had
$13.6 million in certificate accounts in amounts of $100,000 or more maturing as follows:



|                               |  |        |        |                     |      |  
|------------------------------ |  | ------ | ------ | ------------------- | ---- | -
|Maturity Period                |  | Amount |        | WeightedAverageRate |     
|Three months or less           |  | $      | 3,368  |                     | 2.83 | %
|Over three through six months  |  |        | 1,700  |                     | 1.93 |  
|Over six through twelve months |  |        | 2,890  |                     | 2.36 |  
|Over twelve months             |  |        | 5,679  |                     | 3.50 |  
|                               |  |        |        |                     |      |  
|Total                          |  | $      | 13,637 |                     | 2.90 | %
|                               |  |        |        |                     |      |  



14.



---

##### Table of Contents

The following table sets forth the distribution of the Banks deposit accounts for the years indicated.



|                              |  |              |         |                 |        |   |        |      |                 |  |        |        |  |                 |         |  |        |  
|----------------------------- |  | ------------ | ------- | --------------- | ------ | - | ------ | ---- | --------------- |  | ------ | ------ |  | --------------- | ------- |  | ------ | -
|                              |  | December 31, |        
|                              |  | 2004         |         |                 | 2003   |   |        | 2002 |                
|                              |  | Amount       |         | Percentof Total |        |   | Amount |      | Percentof Total |  |        | Amount |  | Percentof Total |        
|Passbook accounts             |  | $            | 34,749  |                 | 20.92  | % |        | $    | 36,368          |  | 21.33  | %      |  | $               | 34,626  |  | 21.12  | %
|Money market savings accounts |  |              | 11,482  |                 | 6.91   |   |        |      | 11,044          |  | 6.48   |        |  |                 | 8,576   |  | 5.23   |  
|NOW accounts                  |  |              | 10,240  |                 | 6.16   |   |        |      | 10,258          |  | 6.02   |        |  |                 | 8,804   |  | 5.37   |  
|Non-interest-bearing accounts |  |              | 6,680   |                 | 4.02   |   |        |      | 6,099           |  | 3.58   |        |  |                 | 4,478   |  | 2.73   |  
|                              |  |              |         |                 |        |   |        |      |                 |  |        |        |  |                 |         |  |        |  
|Total transaction accounts    |  |              | 63,151  |                 | 38.01  |   |        |      | 63,769          |  | 37.41  |        |  |                 | 56,484  |  | 34.45  |  
|Certificate accounts          |  |              |         |                 |        |   |        |      |                 |  |        |        |  |                 |         |  |        |  
|1.00% to 1.99%                |  |              | 8,847   |                 | 5.33   |   |        |      | 46,429          |  | 27.24  |        |  |                 | 7,299   |  | 4.45   |  
|2.00% to 2.99%                |  |              | 79,448  |                 | 47.82  |   |        |      | 33,470          |  | 19.63  |        |  |                 | 32,619  |  | 19.89  |  
|3.00% to 3.99%                |  |              | 7,413   |                 | 4.46   |   |        |      | 13,744          |  | 8.06   |        |  |                 | 47,111  |  | 28.73  |  
|4.00% to 4.99%                |  |              | 6,662   |                 | 4.01   |   |        |      | 8,191           |  | 4.81   |        |  |                 | 13,528  |  | 8.25   |  
|5.00% to 5.99%                |  |              | 250     |                 | .15    |   |        |      | 1,933           |  | 1.13   |        |  |                 | 3,753   |  | 2.29   |  
|6.00% to 6.99%                |  |              | 354     |                 | .21    |   |        |      | 2,926           |  | 1.72   |        |  |                 | 3,174   |  | 1.94   |  
|                              |  |              |         |                 |        |   |        |      |                 |  |        |        |  |                 |         |  |        |  
|Total certificate accounts    |  |              | 102,974 |                 | 61.99  |   |        |      | 106,693         |  | 62.59  |        |  |                 | 107,484 |  | 65.55  |  
|                              |  |              |         |                 |        |   |        |      |                 |  |        |        |  |                 |         |  |        |  
|Total deposits                |  | $            | 166,125 |                 | 100.00 | % |        | $    | 170,462         |  | 100.00 | %      |  | $               | 163,968 |  | 100.00 | %
|                              |  |              |         |                 |        |   |        |      |                 |  |        |        |  |                 |         |  |        |  



The following table presents, by
various rate categories, the amount of certificate accounts outstanding at the dates indicated and the periods to maturity of the certificate accounts outstanding at December 31, 2004.



|                     |  |                                           |        |             |   |             |  |             |       |                  |   |       |  |   |       |  |   |        
|-------------------- |  | ----------------------------------------- | ------ | ----------- | - | ----------- |  | ----------- | ----- | ---------------- | - | ----- |  | - | ----- |  | - | -------
|                     |  | Period to Maturity from December 31, 2004
|                     |  | Less than1 Year                           |        | 1 to 2Years |   | 2 to 3Years |  | 3 to 4Years |       | More than4 Years |   | Total
|Certificate accounts |  |                                           |        |             |   |             |  |             |       |                  |   |       |  |   |       |  |   |        
|1.00% to 1.99%       |  | $                                         | 8,847  |             | $ |            |  | $           |      |                  | $ |      |  | $ |      |  | $ | 8,847  
|2.00% to 2.99%       |  |                                           | 62,964 |             |   | 14,662      |  |             |      |                  |   |      |  |   |      |  |   | 77,626 
|3.00% to 3.99%       |  |                                           |       |             |   |            |  |             |      |                  |   | 3,742 |  |   | 3,672 |  |   | 7,414  
|4.00% to 4.99%       |  |                                           |       |             |   |            |  |             | 8,483 |                  |   |      |  |   |      |  |   | 8,483  
|5.00% to 5.99%       |  |                                           | 250    |             |   |            |  |             |      |                  |   |      |  |   |      |  |   | 250    
|6.00% to 6.99%       |  |                                           | 354    |             |   |            |  |             |      |                  |   |      |  |   |      |  |   | 354    
|                     |  |                                           |        |             |   |             |  |             |       |                  |   |       |  |   |       |  |   |        
|Total                |  | $                                         | 72,415 |             | $ | 14,662      |  | $           | 8,483 |                  | $ | 3,742 |  | $ | 3,672 |  | $ | 102,974
|                     |  |                                           |        |             |   |             |  |             |       |                  |   |       |  |   |       |  |   |        



15.



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Borrowings. Although deposits are the Banks primary source of funds, the Banks policy has been to
utilize borrowings, such as advances from the FHLB.



The Bank obtains advances
from the FHLB upon the security of its capital stock in the FHLB of Chicago and certain of its mortgage loans. Such advances are made pursuant to several different credit programs, each of which has its own interest rate and range of maturities. The
maximum amount that the FHLB will advance to member institutions fluctuates in accordance with the policies of the OTS and the FHLB. There were $63.9 million of FHLB advances outstanding at December 31, 2004, which carry interest rates ranging from
1.24% to 4.95% and mature on various dates, subject to certain call options by the FHLB.



The Companys borrowings also include collateralized borrowings through securities sold under repurchase agreements. The Company maintains physical control over the securities.



Information concerning securities sold under agreements to repurchase is summarized as
follows:



|                                          |  |      |       |   |      |   |        |  
|----------------------------------------- |  | ---- | ----- | - | ---- | - | ------ | -
|                                          |  | 2004 |       |   | 2003 |  
|Balance at year end                       |  | $    | 3,369 |   |      | $ | 6,904  |  
|Maximum month-end balance during the year |  |      | 6,105 |   |      |   | 10,789 |  
|Average balance during the year           |  |      | 4,670 |   |      |   | 9,006  |  
|Average interest rate at year end         |  |      | 3.75  | % |      |   | 2.93   | %
|Average interest rate during the year     |  |      | 3.37  | % |      |   | 2.93   | %



Subsidiary Activities



The Company engages in the business of purchasing unimproved land for
development into residential subdivisions of primarily single-family lots through their wholly owned subsidiaries, PBI and GPS. There were no gains or losses on the sale of real estate held for development for the years ended December 31, 2004,
2003, and 2002.



Employees



At December 31, 2004, the Company had 61 full-time equivalent employees. None of the
Companys employees are represented by any collective bargaining group. Management considers its relationship with employees to be excellent.



Regulation



The Bank is subject to regulation, examination, and supervision by the OTS, as its chartering agency, and the Federal Deposit Insurance Corporation (FDIC), as the deposit insurer. The Banks deposit
accounts are insured up to applicable limits by the FDIC. The Bank must file reports with the OTS and the FDIC concerning its activities and financial condition in addition to obtaining regulatory approvals prior to establishing branches or entering
into certain transactions such as mergers with, or acquisitions of, other financial institutions. The Bank is also required to either provide notice or apply to the OTS before making certain dividend payments. Periodic examinations by the OTS and
the FDIC test the Banks compliance with



16.



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various regulatory requirements. The Company, as a savings bank holding company, is also required to file certain reports and otherwise comply with the rules
and regulations of the OTS and the Securities and Exchange Commission (SEC) under the federal securities laws. This regulation and supervision establishes a comprehensive framework of activities in which a depository institution and its
holding company can engage and is intended primarily for the protection of the insurance fund and depositors, rather than the stockholders of the Company. The regulatory authorities have 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 allowances for regulatory purposes. Any change in the regulatory structure, the applicable
statutes, regulations or policies, whether by the OTS, the FDIC, the SEC, or the Congress, could have a material impact on the Company and the Bank and their operations.



Recent Federal Legislative Initiatives.Patriot Act of 2001. The Patriot Act of 2001, enacted in response to the
September 11, 2001 terrorists attacks, requires bank regulators to consider a financial institutions compliance with the Bank Secrecy Act (BSA) when reviewing applications from financial institutions. Under the BSA, a financial
institution is required to have systems in place to detect certain transactions, based on the size and nature of the transaction. Financial institutions are generally required to report cash transactions involving more than $10,000 to the United
Stated Treasury. In addition, financial institutions are required to file suspicious activity reports for transactions that involve more than $5,000 and which the financial institution knows, suspects or has reason to suspect involves illegal funds,
is designed to evade the requirements of the BSA or has no lawful purpose. The Banks compliance with the BSA therefore will be considered by its federal regulators when reviewing applications submitted by the Bank.



Impact of the Gramm-Leach-Bliley Act. In 1999, the Gramm-Leach-Bliley Act (the
GLB Act) was enacted, which, among other things, established a comprehensive framework to permit affiliations among commercial banks, insurance companies, and securities firms. The GLB Act significantly reforms various aspects of the financial
services business, including but not limited to: (i) establishing 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 nonfinancial entities.
The GLB Act restricts the powers of new unitary savings and loan association holding companies. Unitary savings and loan holding companies in existence or with applications filed with the OTS on or before May 4, 1999, such as the Company, retain
their authority under the prior law. All other unitary savings and loan holding companies are limited to financially related activities permissible for bank holding companies, as defined under the GLB Act. The GLB Act also prohibits non-financial
companies from acquiring grandfathered unitary savings and loan association holding companies.



The provisions in the GLB Act permitting full affiliations between bank holding companies or banks and other financial companies do not increase our 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.



17.



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The GLB Act imposes 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. Final regulations have been passed regarding customer privacy under the GLB Act. Compliance with such privacy regulations was voluntary until July 2001.



The Company does not believe that the GLB Act will have a material adverse affect upon its operations in the near term. However, 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.



ITEM 2. PROPERTIES



The Company is located and conducts its business at the Banks main office at 5400 South Pulaski Road, Chicago, Illinois 60632. In addition to the main office, the Bank has branch locations at 2740 West
55thStreet, Chicago, Illinois 60632 and 21 East Ogden Avenue, Westmont, Illinois 60559. The Company owns all three
of its offices. The Company believes that the current facilities are adequate to meet its present and immediately foreseeable needs. The Bank purchased property, for a price of $428,000, near the 55thStreet location for possible future expansion.



ITEM 3. LEGAL PROCEEDINGS



The Company and the Bank are not involved in any pending proceedings other than the legal proceedings occurring in the ordinary course of business. Such legal proceedings
in the aggregate are believed by management to be immaterial to the Companys business, financial condition, and results of operations.



ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS



No matters were submitted to a vote of stockholders during the fourth quarter of the year ended December 31, 2004.



18.



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##### Table of Contents



PART II



ITEM 5. MARKET FOR REGISTRANTS COMMON STOCK AND RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASE OF EQUITY SECURITIES



The Companys common stock is
traded on The Nasdaq Stock Market under the symbol PFED and has 602 stockholders as of December 31, 2004. The table below shows the reported high and low sales price of the common stock and dividends declared during the periods indicated
in 2004 and 2003.



|               |  |      |       |      |   |                   |  |      |      |     |   |                   |  |   |       |  |   |     
|-------------- |  | ---- | ----- | ---- | - | ----------------- |  | ---- | ---- | --- | - | ----------------- |  | - | ----- |  | - | ----
|               |  | 2004 |       | 2003
|               |  | High |       | Low  |   | DividendsDeclared |  | High |      | Low |   | DividendsDeclared
|First quarter  |  | $    | 31.66 |      | $ | 29.00             |  | $    | 0.15 |     | $ | 26.14             |  | $ | 22.85 |  | $ | 0.15
|Second quarter |  |      | 35.05 |      |   | 30.00             |  |      | 0.18 |     |   | 28.45             |  |   | 24.90 |  |   | 0.15
|Third quarter  |  |      | 32.99 |      |   | 30.30             |  |      | 0.18 |     |   | 28.10             |  |   | 25.80 |  |   | 0.15
|Fourth quarter |  |      | 32.50 |      |   | 30.30             |  |      | 0.18 |     |   | 29.79             |  |   | 27.50 |  |   | 0.15



The Companys Board of Directors
approved the repurchase by the Company of up to 50,000 shares of its common stock pursuant to a repurchase program that was publicly announced on September 2, 2003. As previously disclosed, the Company repurchased 2,000 shares with an average price
of $29.26 per share in the first quarter of 2004, 5,000 shares with an average price of $30.69 per share in the second quarter of 2004, and 2,000 shares with an average price of $30.86 per share in the third quarter of 2004. In November 2004, the
Company repurchased 2,100 shares with an average price of $31.06 per share.



ITEM 6. SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA



The
following tables set forth selected historical financial and other data of the Company for the periods and at the dates indicated. The information should be read in conjunction with the Consolidated Financial Statements and Notes thereto of the
Company contained elsewhere herein.



Selected Financial Data



|                                            |  |                                       |         |      |   |         |  |      |         |      |   |         |  |   |        
|------------------------------------------- |  | ------------------------------------- | ------- | ---- | - | ------- |  | ---- | ------- | ---- | - | ------- |  | - | -------
|                                            |  | At or for the year ended December 31,
|                                            |  | 2004                                  |         | 2003 |   | 2002    |  | 2001 |         | 2000
|Total assets                                |  | $                                     | 267,620 |      | $ | 266,063 |  | $    | 251,532 |      | $ | 243,448 |  | $ | 235,183
|Cash and cash equivalents                   |  |                                       | 13,752  |      |   | 11,081  |  |      | 23,998  |      |   | 27,909  |  |   | 4,066  
|Securities available-for-sale               |  |                                       | 59,728  |      |   | 72,058  |  |      | 61,113  |      |   | 65,704  |  |   | 125,220
|Loans receivable, net(1)                    |  |                                       | 167,466 |      |   | 158,957 |  |      | 147,993 |      |   | 134,788 |  |   | 97,017 
|Deposits                                    |  |                                       | 166,125 |      |   | 170,462 |  |      | 163,968 |      |   | 163,074 |  |   | 147,973
|Securities sold under repurchase agreements |  |                                       | 3,369   |      |   | 6,904   |  |      | 10,599  |      |   | 10,658  |  |   | 18,686 
|FHLB advances                               |  |                                       | 63,871  |      |   | 55,175  |  |      | 43,663  |      |   | 39,000  |  |   | 36,000 
|Stockholders equity                        |  |                                       | 30,907  |      |   | 29,540  |  |      | 29,894  |      |   | 27,278  |  |   | 29,279 



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##### Table of Contents

|                                                                 |  |                                       |   |  |        |   |  |        |   |  |        |   |  |        |  
|---------------------------------------------------------------- |  | ------------------------------------- | - |  | ------ | - |  | ------ | - |  | ------ | - |  | ------ | -
|                                                                 |  | At or for the year ended December 31, |  
|                                                                 |  | 2004                                  |   |  | 2003   |   |  | 2002   |   |  | 2001   |   |  | 2000   |  
|Interest income                                                  |  | 13,689                                |   |  | 13,653 |   |  | 14,675 |   |  | 16,519 |   |  | 16,006 |  
|Interest expense                                                 |  | 5,277                                 |   |  | 5,972  |   |  | 7,541  |   |  | 10,107 |   |  | 9,873  |  
|Net interest income                                              |  | 8,412                                 |   |  | 7,681  |   |  | 7,134  |   |  | 6,412  |   |  | 6,133  |  
|Provision for loan losses                                        |  | 816                                   |   |  |       |   |  | 120    |   |  |       |   |  |       |  
|Noninterest income                                               |  | 2,053                                 |   |  | 1,090  |   |  | 1,154  |   |  | 777    |   |  | 723    |  
|Noninterest expense                                              |  | 5,959                                 |   |  | 5,380  |   |  | 4,967  |   |  | 4,754  |   |  | 4,497  |  
|Income tax expense                                               |  | 1,162                                 |   |  | 1,141  |   |  | 1,036  |   |  | 831    |   |  | 802    |  
|Net income                                                       |  | 2,528                                 |   |  | 2,250  |   |  | 2,165  |   |  | 1,604  |   |  | 1,557  |  
|                                                                 |  |                                       |   |  |       
|Selected Financial Ratios and Other Data                         |  |                                       |   |  |        |   |  |        |   |  |        |   |  |        |  
|                                                                 | 
|                                                                 |  | At or for the Year Ended December 31, |  
|                                                                 |  | 2004                                  |   |  | 2003   |   |  | 2002   |   |  | 2001   |   |  | 2000   |  
|Performance ratios:                                              |  |                                       |   |  |        |   |  |        |   |  |        |   |  |        |  
|Return on average assets                                         |  | .93                                   | % |  | 0.85   | % |  | 0.88   | % |  | 0.65   | % |  | 0.68   | %
|Return on average equity                                         |  | 8.33                                  |   |  | 7.61   |   |  | 7.64   |   |  | 5.58   |   |  | 5.86   |  
|Average equity to average assets                                 |  | 11.22                                 |   |  | 11.23  |   |  | 11.53  |   |  | 11.67  |   |  | 11.64  |  
|Dividend payout ratio                                            |  | 29.11                                 |   |  | 28.98  |   |  | 27.85  |   |  | 38.09  |   |  | 44.64  |  
|Net interest rate spread(2)                                      |  | 3.16                                  |   |  | 2.86   |   |  | 2.74   |   |  | 2.18   |   |  | 2.30   |  
|Net interest margin(3)                                           |  | 3.32                                  |   |  | 3.07   |   |  | 3.04   |   |  | 2.68   |   |  | 2.80   |  
|Efficiency ratio(4)                                              |  | 56.94                                 |   |  | 61.34  |   |  | 59.93  |   |  | 66.12  |   |  | 65.59  |  
|Noninterest expense to average assets                            |  | 2.20                                  |   |  | 2.04   |   |  | 2.02   |   |  | 1.93   |   |  | 1.97   |  
|                                                                 |  |                                       |   |  |       
|Asset quality ratios:                                            |  |                                       |   |  |        |   |  |        |   |  |        |   |  |        |  
|Nonperforming loans as a percent of gross loans receivable(5)    |  | 1.79                                  | % |  | 0.34   | % |  | 0.15   | % |  | 0.09   | % |  | 0.45   | %
|Nonperforming assets as a percentage of total assets(5)          |  | 1.20                                  |   |  | 0.23   |   |  | 0.12   |   |  | 0.05   |   |  | 0.19   |  
|Allowance for loan losses as a percent of gross loans receivable |  | 0.79                                  |   |  | 0.36   |   |  | 0.37   |   |  | 0.38   |   |  | 0.49   |  
|Allowance for loan losses as a percent of nonperforming loans(5) |  | 43.97                                 |   |  | 106.06 |   |  | 244.26 |   |  | 409.84 |   |  | 109.17 |  
|                                                                 |  |                                       |   |  |       
|Other data:                                                      |  |                                       |   |  |        |   |  |        |   |  |        |   |  |        |  
|Number of full service offices                                   |  | 3                                     |   |  | 3      |   |  | 3      |   |  | 3      |   |  | 3      |  

---

|(1) | The allowance for loan losses at December 31, 2004, 2003 and 2002 was $1,374, $578, and $574
respectively, and $500 for the years ended December 31, 2001, and 2000.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | The net interest rate spread represents the difference between the weighted average yield on
interest-earning assets and the weighted average cost of interest-bearing liabilities.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | The net interest margin represents net interest income as a percent of average
interest-earning assets.
|--- | -------------------------------------------------------------------------------------------------------

|(4) | The efficiency ratio represents noninterest expense as a percent of net interest income
before the provision for loan losses and noninterest income.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Nonperforming assets consist of nonperforming loans and REO. Nonperforming loans consist of
all loans 90 days or more past due and all other nonaccrual loans.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------



20.



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##### Table of Contents

ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



General



The primary business of the Company is the ownership of the Bank. The Companys results of operations are dependent primarily on net
interest income, which is the difference between the interest income earned on interest-earning assets, such as loans and securities, and the interest expense on interest-bearing liabilities, such as deposits and borrowings. The Company also
generates noninterest income such as income from real estate development activities and service fees. Noninterest expense consists of employee compensation and benefits, occupancy and equipment expense, and other operating expenses. The
Companys results of operations are also significantly affected by general economic and competitive conditions, particularly changes in market interest rates, government policies, and actions of regulatory agencies.

|
|



Safe Harbor Statement Under
the Private Securities Litigation Reform Act of 1995



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



21.



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##### Table of Contents

Average Statement of Financial Condition



The following table sets forth certain information relating to the Companys Average Statement of Financial Condition and reflects the
average yield on assets and average cost of liabilities for the years ended December 31, 2004, 2003, and 2002. The yields and costs are derived by dividing interest income or expense by the average balance of assets or liabilities, respectively, for
the years shown. Average balances are derived from average month-end balances. Management does not believe that the use of average monthly balances instead of average daily balances has caused any material differences in the information presented.
Average balances of loans receivable include loans on which the Bank has discontinued accruing interest. Loan yields include fees which are considered adjustments to yields.



|                                                                                 |  |                         |         |   |          |   |                   |      |      |                |  |   |          |   |                   |   |        |                |      |   |          |   |                   |   |  |   |        |  |      |  
|-------------------------------------------------------------------------------- |  | ----------------------- | ------- | - | -------- | - | ----------------- | ---- | ---- | -------------- |  | - | -------- | - | ----------------- | - | ------ | -------------- | ---- | - | -------- | - | ----------------- | - |  | - | ------ |  | ---- | -
|                                                                                 |  | Year Ended December 31, |        
|                                                                                 |  | 2004                    |         |   | 2003     |   |                   | 2002 |     
|                                                                                 |  | AverageBalance          |         |   | Interest |   | AverageYield/Cost |      |      | AverageBalance |  |   | Interest |   | AverageYield/Cost |   |        | AverageBalance |      |   | Interest |   | AverageYield/Cost |  
|Assets                                                                           |  |                         |         |   |          |   |                   |      |      |                |  |   |          |   |                   |   |        |                |      |   |          |   |                   |   |  |   |        |  |      |  
|Interest-earnings assets                                                         |  |                         |         |   |          |   |                   |      |      |                |  |   |          |   |                   |   |        |                |      |   |          |   |                   |   |  |   |        |  |      |  
|Securities, net(1)                                                               |  | $                       | 35,639  |   |          | $ | 1,664             |      | 4.67 | %              |  | $ | 37,478   |   |                   | $ | 1,681  |                | 4.49 | % |          | $ | 41,513            |   |  | $ | 2,129  |  | 5.13 | %
|Loans receivable(2)                                                              |  |                         | 165,342 |   |          |   | 10,399            |      | 6.29 |                |  |   | 151,866  |   |                   |   | 10,239 |                | 6.74 |   |          |   | 145,447           |   |  |   | 10,742 |  | 7.39 |  
|Mortgage-backed securities, net(1)                                               |  |                         | 39,384  |   |          |   | 1,427             |      | 3.62 |                |  |   | 38,367   |   |                   |   | 1,481  |                | 3.86 |   |          |   | 23,034            |   |  |   | 1,235  |  | 5.36 |  
|Interest-earning deposits and other investments                                  |  |                         | 12,964  |   |          |   | 199               |      | 1.54 |                |  |   | 22,171   |   |                   |   | 252    |                | 1.14 |   |          |   | 24,547            |   |  |   | 569    |  | 2.31 |  
|                                                                                 |  |                         |         |   |          |   |                   |      |      |                |  |   |          |   |                   |   |        |                |      |   |          |   |                   |   |  |   |        |  |      |  
|Total interest-earning assets                                                    |  |                         | 253,329 |   |          |   | 13,689            |      | 5.40 |                |  |   | 249,882  |   |                   |   | 13,653 |                | 5.46 |   |          |   | 234,541           |   |  |   | 14,675 |  | 6.26 |  
|Non-interest-earning assets                                                      |  |                         | 17,306  |   |          |   |                   |      |      |                |  |   | 13,504   |   |                   |   |        |                |      |   |          |   | 11,363            |   |  |   |        |  |      |  
|                                                                                 |  |                         |         |   |          |   |                   |      |      |                |  |   |          |   |                   |   |        |                |      |   |          |   |                   |   |  |   |        |  |      |  
|Total assets                                                                     |  | $                       | 270,635 |   |          |   |                   |      |      |                |  | $ | 263,386  |   |                   |   |        |                |      |   |          | $ | 245,904           |   |  |   |        |  |      |  
|                                                                                 |  |                         |         |   |          |   |                   |      |      |                |  |   |          |   |                   |   |        |                |      |   |          |   |                   |   |  |   |        |  |      |  
|Liabilities and stockholders equity                                             |  |                         |         |   |          |   |                   |      |      |                |  |   |          |   |                   |   |        |                |      |   |          |   |                   |   |  |   |        |  |      |  
|Interest-bearing liabilities                                                     |  |                         |         |   |          |   |                   |      |      |                |  |   |          |   |                   |   |        |                |      |   |          |   |                   |   |  |   |        |  |      |  
|Passbook accounts                                                                |  | $                       | 35,524  |   |          |   | 273               |      | 0.77 |                |  |   | 36,091   |   |                   |   | 340    |                | 0.94 |   |          | $ | 34,530            |   |  |   | 506    |  | 1.47 |  
|Money market savings accounts                                                    |  |                         | 11,540  |   |          |   | 162               |      | 1.40 |                |  |   | 9,907    |   |                   |   | 153    |                | 1.54 |   |          |   | 8,153             |   |  |   | 153    |  | 1.88 |  
|NOW accounts                                                                     |  |                         | 17,099  |   |          |   | 54                |      | 0.32 |                |  |   | 15,671   |   |                   |   | 50     |                | 0.32 |   |          |   | 12,780            |   |  |   | 53     |  | 41   |  
|Certificate accounts                                                             |  |                         | 105,198 |   |          |   | 2,692             |      | 2.56 |                |  |   | 109,752  |   |                   |   | 3,260  |                | 2.97 |   |          |   | 107,739           |   |  |   | 4,408  |  | 4.09 |  
|                                                                                 |  |                         |         |   |          |   |                   |      |      |                |  |   |          |   |                   |   |        |                |      |   |          |   |                   |   |  |   |        |  |      |  
|Total deposits                                                                   |  |                         | 169,361 |   |          |   | 3,181             |      | 1.88 |                |  |   | 171,421  |   |                   |   | 3,803  |                | 2.22 |   |          |   | 163,202           |   |  |   | 5,120  |  | 3.14 |  
|FHLB advances and other borrowings                                               |  |                         | 66,313  |   |          |   | 2,096             |      | 3.16 |                |  |   | 58,285   |   |                   |   | 2,169  |                | 3.72 |   |          |   | 50,966            |   |  |   | 2,421  |  | 4.75 |  
|                                                                                 |  |                         |         |   |          |   |                   |      |      |                |  |   |          |   |                   |   |        |                |      |   |          |   |                   |   |  |   |        |  |      |  
|Total interest-bearing liabilities                                               |  |                         | 235,674 |   |          |   | 5,277             |      | 2.24 |                |  |   | 229,706  |   |                   |   | 5,972  |                | 2.60 |   |          |   | 214,168           |   |  |   | 7,541  |  | 3.52 |  
|                                                                                 |  |                         |         |   |          |   |                   |      |      |                |  |   |          |   |                   |   |        |                |      |   |          |   |                   |   |  |   |        |  |      |  
|Non-interest-bearing liabilities                                                 |  |                         | 4,604   |   |          |   |                   |      |      |                |  |   | 4,102    |   |                   |   |        |                |      |   |          |   | 3,385             |   |  |   |        |  |      |  
|                                                                                 |  |                         |         |   |          |   |                   |      |      |                |  |   |          |   |                   |   |        |                |      |   |          |   |                   |   |  |   |        |  |      |  
|Total liabilities                                                                |  |                         | 240,278 |   |          |   |                   |      |      |                |  |   | 233,808  |   |                   |   |        |                |      |   |          |   | 217,553           |   |  |   |        |  |      |  
|Stockholders equity                                                             |  |                         | 30,357  |   |          |   |                   |      |      |                |  |   | 29,578   |   |                   |   |        |                |      |   |          |   | 28,351            |   |  |   |        |  |      |  
|                                                                                 |  |                         |         |   |          |   |                   |      |      |                |  |   |          |   |                   |   |        |                |      |   |          |   |                   |   |  |   |        |  |      |  
|Total liabilities and stockholders equity                                       |  | $                       | 270,635 |   |          |   |                   |      |      |                |  | $ | 263,386  |   |                   |   |        |                |      |   |          | $ | 245,904           |   |  |   |        |  |      |  
|                                                                                 |  |                         |         |   |          |   |                   |      |      |                |  |   |          |   |                   |   |        |                |      |   |          |   |                   |   |  |   |        |  |      |  
|Net interest income                                                              |  |                         |         |   |          | $ | 8,412             |      |      |                |  |   |          |   |                   | $ | 7,681  |                |      |   |          |   |                   |   |  | $ | 7,134  |  |      |  
|                                                                                 |  |                         |         |   |          |   |                   |      |      |                |  |   |          |   |                   |   |        |                |      |   |          |   |                   |   |  |   |        |  |      |  
|Net interest rate spread(3)                                                      |  |                         |         |   |          |   |                   |      | 3.16 |                |  |   |          |   |                   |   |        |                | 2.86 |   |          |   |                   |   |  |   |        |  | 2.74 |  
|Net interest margin(4)                                                           |  |                         |         |   |          |   |                   |      | 3.32 |                |  |   |          |   |                   |   |        |                | 3.07 |   |          |   |                   |   |  |   |        |  | 3.04 |  
|Ratio of average interest-earning assets to average interest-bearing liabilities |  |                         | 107.49  | % |          |   |                   |      |      |                |  |   | 108.78   | % |                   |   |        |                |      |   |          |   | 109.51            | % |  |   |        |  |      |  

---

|(1) | Includes unamortized discounts and premiums.
|--- | --------------------------------------------

|(2) | Amount is net of deferred loan origination fees, undisbursed loan funds, unamortized discounts, and allowance for loan losses and includes non-performing loans.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Net interest rate spread represents the difference between the yield on average interest-earning assets and the average cost of interest-bearing liabilities.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Net interest margin represents net interest income divided by average interest-earning assets.
|--- | ----------------------------------------------------------------------------------------------



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Rate/Volume Analysis



The following table presents the extent to which changes in interest rates and changes in the volume of interest-earning assets and interest-bearing liabilities have
affected interest income and interest expense during the years indicated. Information is provided in each category with respect to: (i) changes attributable to changes in volume (changes in volume multiplied by prior rate); (ii) changes attributable
to changes in rate (changes in rate multiplied by prior volume); and (iii) the net change. The 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.



|                                                |  |                            |      |   |                            |   |      |     |  |   |        |   |  |      |      |   |     |   |        |   |  |   |        |  
|----------------------------------------------- |  | -------------------------- | ---- | - | -------------------------- | - | ---- | --- |  | - | ------ | - |  | ---- | ---- | - | --- | - | ------ | - |  | - | ------ | -
|                                                |  | 2004 Compared to 2003      |      |   | 2003 Compared to 2002      |  
|                                                |  | Increase (Decrease) Due to |      |   | Increase (Decrease) Due to |  
|                                                |  | Volume                     |      |   | Rate                       |   |      | Net |  |   | Volume |   |  | Rate |      |   | Net |  
|Interest earned on                              |  | $                          | (86  | ) |                            | $ | 69   |     |  | $ | (17    | ) |  | $    | (181 | ) |     | $ | (549   | ) |  | $ | (730   | )
|Securities, net                                 |  |                            |      |   |                            |   |      |     |  |   |        |   |  |      |      |   |     |   |        |   |  |   |        |  
|Loans receivable, net                           |  |                            | 848  |   |                            |   | (688 | )   |  |   | 160    |   |  |      | 433  |   |     |   | (936   | ) |  |   | (503   | )
|Mortgage-backed securities, net                 |  |                            | 37   |   |                            |   | (91  | )   |  |   | (54    | ) |  |      | 592  |   |     |   | (346   | ) |  |   | 246    |  
|Interest-earning deposits and other investments |  |                            | (142 | ) |                            |   | 89   |     |  |   | (53    | ) |  |      | (27  | ) |     |   | (8     | ) |  |   | (35    | )
|                                                |  |                            |      |   |                            |   |      |     |  |   |        |   |  |      |      |   |     |   |        |   |  |   |        |  
|Total interest-earning assets                   |  |                            | 657  |   |                            |   | (621 | )   |  |   | 36     |   |  |      | 817  |   |     |   | (1,839 | ) |  |   | (1,022 | )
|                                                |  |                            |      |   |                            |   |      |     |  |   |        |   |  |      |      |   |     |   |        |   |  |   |        |  
|Interest expense on                             |  |                            |      |   |                            |   |      |     |  |   |        |   |  |      |      |   |     |   |        |   |  |   |        |  
|Passbook savings accounts                       |  |                            | (4   | ) |                            |   | (63  | )   |  |   | (67    | ) |  |      | 15   |   |     |   | (181   | ) |  |   | (166   | )
|Money market savings accounts                   |  |                            | 23   |   |                            |   | (14  | )   |  |   | 9      |   |  |      | 27   |   |     |   | (27    | ) |  |   |       |  
|NOW accounts                                    |  |                            | 5    |   |                            |   | (1   | )   |  |   | 4      |   |  |      | 9    |   |     |   | (12    | ) |  |   | (3     | )
|Certificate accounts                            |  |                            | (117 | ) |                            |   | (451 | )   |  |   | (568   | ) |  |      | 59   |   |     |   | (1,207 | ) |  |   | (1,148 | )
|FHLB advances and other borrowings              |  |                            | 254  |   |                            |   | (327 | )   |  |   | (73    | ) |  |      | 273  |   |     |   | (525   | ) |  |   | (252   | )
|                                                |  |                            |      |   |                            |   |      |     |  |   |        |   |  |      |      |   |     |   |        |   |  |   |        |  
|Total interest-bearing liabilities              |  |                            | 161  |   |                            |   | (856 | )   |  |   | (695   | ) |  |      | 383  |   |     |   | (1,952 | ) |  |   | (1,569 | )
|                                                |  |                            |      |   |                            |   |      |     |  |   |        |   |  |      |      |   |     |   |        |   |  |   |        |  
|Change in net interest income                   |  | $                          | 496  |   |                            | $ | 235  |     |  | $ | 731    |   |  | $    | 434  |   |     | $ | 113    |   |  | $ | 547    |  
|                                                |  |                            |      |   |                            |   |      |     |  |   |        |   |  |      |      |   |     |   |        |   |  |   |        |  



Comparison of Financial Condition
at December 31, 2004 and December 31, 2003



Total assets at December 31,
2004 were $267.6 million compared to $266.1 million at December 31, 2003, an increase of $1.5 million. Cash and cash equivalents increased $2.7 million to $13.8 million at December 31, 2004 primarily as a result of the Company increasing its
liquidity at the end of the year. During 2004, loans increased by $8.5 million to $167.5 million, primarily as a result of a continued lower interest rate environment resulting in high volumes of loan originations. In addition, the Company purchased
$12.0 million of loan participations in 2004.



The allowance for loan losses
was $1.4 million and $578,000 for the years December 31, 2004 and 2003, respectively. Nonaccrual loans were $3.1 million at December 31, 2004 compared to $545,000 at the prior year-end. The increase was due primarily to a commercial building loan of
$958,000 and a condominium conversion loan of $1.8 million. Based on current information



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available to management, reserves of $816,000 have been established for these loans. Loans totaling $20,000 and $22,000 were charged-off during 2004 and
2003, respectively. There were no recoveries in 2004 and $26,000 in 2003.



Total liabilities at December 31, 2004 were $236.7 million compared to $236.5 million at December 31, 2003. Deposits decreased $4.3 million, and Securities sold under repurchase agreements decreased $3.5 million during 2004. These decreases
were due to the Companys continuing efforts to lower its cost of funds. To offset these decreases, the Company increased Federal Home Loan Bank advances by $8.7 million.



Stockholders equity at December 31, 2004 was $30.9 million, which is equivalent to 11.5% of total assets. Book value at December 31,
2004 was $28.81 per share. The increase in stockholders equity from December 31, 2003 was attributable to net income offset by a dividends paid of $736,000, unrealized losses on securities available-for-sale of $529,000 and repurchase of
11,100 shares at an average price of $30.54.



Comparison of Operating
Results for the Years Ended December 31, 2004 and 2003



General



Net income increased to $2.5 million in 2004 from $2.3 million in 2003. The
change is primarily due to increases in the Companys net interest income of $731,000 and noninterest income of $963,000, offset by a loan loss provision of $816,000 and an increase in noninterest expense of $579,000.



Net Interest Income



Interest income in 2004 was $13.7 million, the same as 2003. Average yield on interest-earning assets was 5.40% in 2004, compared to 5.46%
in 2003. Average interest-earning assets increased $3.5 million in 2004 from 2003.



Interest expense in 2004 was $5.3 million compared to $6.0 million in 2003. The reduction in interest expense is due to a 36 basis point decrease in the average cost of deposits and advances from 2003. This reduction was partially offset by
an increase of $6.0 million in average interest-bearing liabilities from 2003.



Net interest income in 2004 was $8.4 million compared to $7.7 million in 2003. The increase was primarily due to an increase in the net interest rate spread to 3.16% in 2004 from 2.86% in 2003 and an increase in the net interest margin to
3.32% in 2004 from 3.07% in 2003.



Provision for Loan Losses



Management establishes provisions for loan losses, which are charged to operations, at a
level management believes is appropriate to absorb probable incurred credit losses in the loan portfolio. In evaluating the level of the allowance for loan losses, management considers historical loss experience, the types of loans and the amount of
loans in the loan portfolio, adverse situations that may affect the borrowers ability to repay, estimated value of any underlying collateral, peer group information, and prevailing economic conditions. This



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evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available or as future
events change. There was a provision for loan losses of $816,000 in 2004 and no provision in 2003. This provision is specifically related to impaired loans of $2.6 million. There were no impaired loans in 2003.



Management assesses the allowance for loan losses on a quarterly basis and makes provisions
for loan losses as necessary in order to maintain the adequacy of the allowance. While management uses available information to recognize losses on loans, future loan loss provisions may be necessary based on changes in economic conditions. In
addition, various regulatory agencies, as an integral part of their examination process, periodically review the allowance for loan losses and may require us to recognize additional provisions based on their judgment of information available to them
at the time of their examination. The allowance for loan losses as of December 31, 2004 is maintained at a level that represents managements best estimate of inherent losses in the loan portfolio, and such losses were both probable and
reasonably estimable.



Noninterest Income



Noninterest income in 2004 was $2.1 million compared to $1.1 million in 2003. The increase
was primarily attributable to a $1.1 million gain on the sale of real estate held for expansion.



Noninterest Expense



Noninterest
expense in 2004 was $6.0 million compared to $5.4 million in 2003. The increase was attributable to higher compensation and occupancy and equipment costs due to the new facilities at the existing 55thStreet location.



Income Taxes



Income tax expense was
$1.2 million in 2004 compared to $1.1 million in 2003. The increase in income tax expense was due to an increase in pre-tax income in 2004. The effective tax rate was 31.5% for the year ended December 31, 2004 compared to 33.6% for the prior year.



Comparison of Operating Results for the Years Ended December 31, 2003 and
2002



General



Net income increased to $2.3 million in 2003 from $2.2 million in 2002. The increase is
primarily due to increases in the Companys net interest income, partially offset by an increase in noninterest expense and a decrease in noninterest income.



Net Interest Income



Interest income in 2003 was $13.7 million compared to $14.7 million in 2002. The decrease in interest income was primarily due to an increase in the average balance of
loans receivable and mortgage-backed securities of $21.8 million, partially offset by a $6.4 million decrease in the average balance of securities, interest-earning deposits and other investments due to calls and maturities. The average yield on
earning assets decreased 80 basis points due to a decreasing rate environment.



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Interest expense in 2003 was $6.0 million compared to $7.5 million in 2002. The decrease in interest expense is due to an
increase in the average balance of deposits and other borrowings of $15.5 million, offset by a decrease in the average rate paid on deposits and borrowings of 92 basis points.



Net interest income in 2003 was $7.7 million compared to $7.1 million in 2002. The increase was primarily due to an increase in the net
interest rate spread to 2.86% in 2003 from 2.74% in 2002 and an increase in the net interest margin to 3.07% in 2003 from 3.04% in 2002.



Provision for Loan Losses



There was no provision for loan losses provided in 2003 and $120,000 provided in 2002. The lack of provision is indicative of managements assessment that the
allowance for loan losses is adequate, given the trends in loan delinquencies and historical loss experience of the portfolio and current economic conditions. The provision in 2002 was due to increased charge off activity during 2002.



Noninterest Income



Noninterest income in 2003 was $1.1 million compared to $1.2 million in 2002. The decrease was primarily attributable to a gain on the sale
of real estate held for expansion of $126,000 in 2002, with no gains or losses in this area in 2003.



Noninterest Expense



Noninterest
expense in 2003 was $5.4 million compared to $5.0 million in 2002. The increase was primarily a result of increased compensation and benefits of $398,000 due to normal cost-of-living adjustments and increased health insurance costs.



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Income Taxes



Income tax expense was $1.1 million in 2003 compared to $1.0 million in 2002. The increase in income tax expense was primarily due to an increase in pre-tax income in
2003. The effective tax rate was 33.6% for the year ended December 31, 2003 compared to 32.4% for the prior year.



Liquidity and Capital Resources



The Companys primary sources of funds are deposits, principal and interest payments on loans and securities, proceeds from maturities and calls of securities, FHLB
advances, and securities sold under repurchase agreements. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates,
economic conditions, and competition. The Bank maintains a liquidity ratio substantially above the regulatory requirement. This requirement, which may be varied at the direction of the OTS depending upon economic conditions and deposit flows, is
based upon a percentage of deposits and short-term borrowings. The required ratio is currently 4.0%. The Banks average regulatory liquidity ratios were 43.54%, 48.12%, and 27.26% for the years ended December 31, 2004, 2003, and 2002,
respectively.



The Companys cash flows are comprised of three primary
classifications: cash flows from operating activities, investing activities, and financing activities. Net cash from operating activities were ($583,000), $1.5 million, and $1.6 million in 2004, 2003, and 2002, respectively. Net cash from investing
activities consisted primarily of disbursements for loan originations and the purchase of securities, offset by principal collections on loans, proceeds from maturing securities and paydowns on mortgage-backed securities. Net cash from investing
activities were $3.3 million, ($26.1) million and ($10.1) million in 2004, 2003 and 2002, respectively. Net cash from financing activities consisted primarily of the activity in deposit accounts, FHLB borrowings, and securities sold under repurchase
agreements in addition to the purchase of treasury stock. The net cash from financing activities was ($34,000), $11.8 million, and $4.6 million in 2004, 2003, and 2002, respectively.



At December 31, 2004, the Bank exceeded all of its regulatory capital requirements with a Tier 1 (core) capital level of $28.0 million, or
10.5% of adjusted total assets, which is above the required level of $10.7 million, or 4.0%; and total risk-based capital of $29.3 million, or 17.5% of risk-weighted assets, which is above the required level of $13.4 million, or 8.0%.



The Banks most liquid assets are cash and short-term investments. The levels of these
assets are dependent on the Banks operating, financing, lending, and investing activities during any given period. At December 31, 2004, cash and short-term investments totaled $13.8 million. The Bank has other sources of liquidity if a need
for additional funds arises, including the repayment of loans and mortgage-backed securities. The Bank may also utilize FHLB advances or the sale of securities available-for-sale as a source of funds.



Critical Accounting Policies



Allowance for Loan Losses: The allowance for loan losses represents managements
estimate of probable credit losses inherent in the loan portfolio. Estimating the amount of the allowance for loan losses requires significant judgment and the use of estimates related to the amount and



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timing of expected future cash flows on impaired loans, estimated losses on pools of homogeneous loans, both of which may be susceptible to significant
change. The loan portfolio also represents the largest asset type on the consolidated balance sheet. Loan losses are charged off against the allowance, while recoveries of amounts previously charged off are credited to the allowance. A provision for
loan losses is charged to operations based on managements periodic evaluation of the factors previously mentioned, as well as other pertinent factors.



There are many factors affecting the allowance for loan losses; some quantitative, while others require qualitative judgment. Although management believes its process for
determining the allowance adequately considers all potential factors that could potentially result in credit losses, the process includes subjective elements and may be susceptible to significant change. To the extent actual outcomes differ from
management estimates, additional provisions for credit losses could be required that could adversely affect earnings or financial position in future periods.



Commitments



At December 31, 2004, the Bank had outstanding commitments to originate mortgage loans of $1.9 million, as compared to $1.8 million in 2003. The Bank anticipates that it will have sufficient funds available to meet
its current loan origination commitments. Certificate accounts that are scheduled to mature in less than one year from December 31, 2004 totaled $72.4 million. Management expects that a substantial portion of the maturing certificate accounts will
be renewed at the Bank. However, if these deposits are not retained, the Bank may utilize FHLB advances or raise interest rates on deposits to attract new accounts, which may result in higher levels of interest expense.



The following tables disclose contractual obligations and commercial commitments of the
Company as of December 31, 2004:



|                                               |  |                       |         |                 |   |            |  |            |        |               |   |        |  |   |       
|---------------------------------------------- |  | --------------------- | ------- | --------------- | - | ---------- |  | ---------- | ------ | ------------- | - | ------ |  | - | ------
|                                               |  | Total                 |         | Less Than1 Year |   | 1  3Years |  | 4  5Years |        | After 5 Years
|Certificate of deposit                         |  | $                     | 102,974 |                 | $ | 72,415     |  | $          | 23,145 |               | $ | 7,068  |  | $ | 346   
|Securities sold under agreements to repurchase |  |                       | 3,369   |                 |   | 3,369      |  |            |       |               |   |       |  |   |      
|FHLB advances                                  |  |                       | 63,871  |                 |   | 18,706     |  |            | 18,218 |               |   | 16,947 |  |   | 10,000
|                                               |  |                       |         |                 |   |            |  |            |        |               |   |        |  |   |       
|Total contractual cash obligations             |  | $                     | 170,214 |                 | $ | 94,490     |  | $          | 41,363 |               | $ | 24,015 |  | $ | 10,346
|                                               |  |                       |         |                 |   |            |  |            |        |               |   |        |  |   |       
|                                               |  |                       |         |                 |  
|                                               |  | TotalAmountsCommitted |         | Less Than1 Year |   | 1  3Years |  | 4  5Years |        | Over 5 Years 
|Standby letters of credit                      |  | $                     | 960     |                 | $ | 400        |  | $          | 560    |               | $ |       |  | $ |      
|Loans in process                               |  |                       | 4,802   |                 |   | 4,802      |  |            |       |               |   |       |  |   |      
|Commitments to make loans (all fixed rate)     |  |                       | 1,856   |                 |   | 1,856      |  |            |       |               |   |       |  |   |      
|                                               |  |                       |         |                 |   |            |  |            |        |               |   |        |  |   |       
|Total commercial commitments                   |  | $                     | 7,618   |                 | $ | 7,058      |  | $          | 560    |               | $ |       |  | $ |      
|                                               |  |                       |         |                 |   |            |  |            |        |               |   |        |  |   |       



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Impact of Inflation and Changing Prices



The impact of inflation is reflected in the increased cost of operations. Unlike industrial companies, nearly all of the assets and
liabilities of the Company are monetary in nature. As a result, interest rates have a greater impact on the Companys performance than do the effects of general levels of inflation. Interest rates do not necessarily move in the same direction
or to the same extent as the price of goods and services.



ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



The
Banks interest rate sensitivity is monitored by management through the use of a model that estimates the change in net portfolio value (NPV) over a range of interest rate scenarios. NPV is the present value of expected cash flows
from assets, liabilities, and off-balance-sheet contracts. An NPV Ratio, in any interest rate scenario, is defined as the NPV in that scenario divided by the market value of assets in the same scenario. The Sensitivity Measure is the decline in the
NPV Ratio, in basis points, caused by a 2% increase or decrease in rates, whichever produces a larger decline. The higher an institutions Sensitivity Measure is, the greater its exposure to interest rate risk is considered to be. The OTS has
incorporated an interest rate risk component into its regulatory capital rule. Under the rule, an institution whose sensitivity measure exceeds 2% would be required to deduct an interest rate risk component in calculating its total capital for
purposes of the risk-based capital requirement. As of December 31, 2004, the Banks sensitivity measure, as measured by the OTS, resulting from a 200 basis point increase in interest rates was (23)% and would result in a $8.4 million decrease
in the NPV of the Bank. Accordingly, increases in interest rates would be expected to have a negative impact on the Banks operating results. The NPV Ratio sensitivity measure is below the threshold at which the Bank could be required to hold
additional risk-based capital under OTS regulations.



Certain shortcomings are
inherent in the methodology used in the above interest rate risk measurements. Modeling changes in NPV require the making of certain assumptions that may tend to oversimplify the manner in which actual yields and costs respond to changes in market
interest rates. First, the models assume that the composition of the Banks interest sensitive assets and liabilities existing at the beginning of a period remain constant over the period being measured. Second, the models assume that a
particular change in interest rates is reflected uniformly across the yield curve regardless of the duration to maturity or repricing of specific assets and liabilities. Third, the model does not take into account the impact of the Banks
business or strategic plans on the structure of interest-earning assets and interest-bearing liabilities. Accordingly, although the NPV measurement provides an indication of the Banks interest rate risk exposure at a particular point in time,
such measurement is not intended to and does not provide a precise forecast of the effect of changes in market interest rates on the Banks net interest income and will differ from actual results. The results of this modeling are monitored by
management and presented to the Board of Directors quarterly.



29.



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##### Table of Contents

The following tables show the NPV and projected change in the NPV of the Bank at December 31, 2004 and 2003 assuming an
instantaneous and sustained change in market interest rates of 100, 200, and 300 basis points.



Interest Rate Sensitivity of Net Portfolio Value (NPV)

December 31, 2004



|                  |  |                     |        |          |                            |         |          |  |     |           |  |       |        |  |      |    
|----------------- |  | ------------------- | ------ | -------- | -------------------------- | ------- | -------- |  | --- | --------- |  | ----- | ------ |  | ---- | ---
|                  |  | Net Portfolio Value |        |          | NPV as a % of PV of Assets |        
|Change in Rates   |  | $ Amount            |        | $ Change |                            |         | % Change |  |     | NPV Ratio |  |       | Change | 
|+ 300 bp          |  | $                   | 23,276 |          | $                          | (13,343 | )        |  | (36 | )%        |  | 9.12  | %      |  | (419 | )bp
|+ 200 bp          |  |                     | 28,233 |          |                            | (8,386  | )        |  | (23 | )         |  | 10.77 |        |  | (254 | )bp
|+ 100 bp          |  |                     | 32,984 |          |                            | (3,635  | )        |  | (10 | )         |  | 12.26 |        |  | (105 | )bp
|0 bp              |  |                     | 36,619 |          |                            |        |          |  |    |           |  | 13.31 |        |  |     |    
|- 100 bp          |  |                     | 38,301 |          |                            | 1,682   |          |  | 5   |           |  | 13.71 |        |  | 40   | bp 
|- 200 bp          |  |                     | N/A    |          |                            | N/A     |          |  | N/A |           |  | N/A   |        |  | N/A  |    
|- 300 bp          |  |                     | N/A    |          |                            | N/A     |          |  | N/A |           |  | N/A   |        |  | N/A  |    
|                 
|December 31, 2003 | 
|                  |  | Net Portfolio Value |        |          | NPV as a % of PV of Assets |        
|Change in Rates   |  | $ Amount            |        | $ Change |                            |         | % Change |  |     | NPV Ratio |  |       | Change | 
|+ 300 bp          |  | $                   | 16,153 |          | $                          | (15,808 | )        |  | (49 | )%        |  | 6.44  | %      |  | (527 | )bp
|+ 200 bp          |  |                     | 21,665 |          |                            | (10,296 | )        |  | (32 | )         |  | 8.39  |        |  | (332 | )bp
|+ 100 bp          |  |                     | 27,162 |          |                            | (4,799  | )        |  | (15 | )         |  | 10.22 |        |  | (149 | )bp
|0 bp              |  |                     | 31,961 |          |                            |        |          |  |    |           |  | 11.71 |        |  |     |    
|- 100 bp          |  |                     | 33,942 |          |                            | 1,981   |          |  | 6   |           |  | 12.23 |        |  | 52   | bp 
|- 200 bp          |  |                     | N/A    |          |                            | N/A     |          |  | N/A |           |  | N/A   |        |  | N/A  |    
|- 300 bp          |  |                     | N/A    |          |                            | N/A     |          |  | N/A |           |  | N/A   |        |  | N/A  |    



The Bank and the Company do not
maintain any securities for trading purposes. The Bank and the Company do not currently engage in trading activities or use derivative instruments in a material amount to control interest rate risk. In addition, interest rate risk is the most
significant market risk affecting the Bank and the Company. Other types of market risk, such as foreign currency exchange risk and commodity price risk, do not arise in the normal course of the Companys business activities and operations.



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA



See Index to Financial Information on page F-1.



ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE



Not applicable.



30.



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##### Table of Contents

ITEM 9A. CONTROLS AND PROCEDURES



As of the end of the period covered by this report, we carried out an evaluation, under the supervision, and with the participation of our
management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as contemplated by Exchange Act Rule 13a-15. 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) required to be included in the periodic reports the Company is required to file and submit to the SEC under the Exchange Act.



ITEM 9B. OTHER INFORMATION



None



31.



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##### Table of Contents



PART III



ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY



|(a) | Directors. The information required in response to this item regarding directors of the Company will be contained in the Companys definitive Proxy Statement (the Proxy
Statement) for its Annual Meeting of Stockholders to be held on May 4, 2005 under the caption Election of Directors - Information with Respect to the Nominees, Continuing Directors and Certain Executive Officers, Meetings of
the Board of Directors and Committees of the Board of Directors, and Section 16(A) Beneficial Ownership Reporting Compliance and are incorporated herein by reference.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(b) | Executive Officers of the Company. The information required in response to this item regarding executive officers of the Company will be contained in the Companys definitive
proxy statement under the caption Election of Directors  Information with Respect to the Nominees, Continuing Directors and Certain Executive Officers and is incorporated herein by reference.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(c) | The Company has adopted a Code of Ethics as required by the NASDAQ listing standards and the rules of the SEC. The Code of Ethics applies to all of the Companys directors,
officers, including the Companys Chief Executive Officer and Chief Financial Officer, and employees. The Code of Ethics is available upon request.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



ITEM 11. EXECUTIVE COMPENSATION



The information required in response to this item will be contained in the Proxy Statement under the captions Election of Directors - Directors
Compensation, Executive Compensation, Compensation Committee Report on Executive Compensation, Section 16(A) Beneficial Ownership Reporting Compliance, and Performance Graph and are incorporated
herein by reference.



ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS



The information
required in response to this item will be contained in the Proxy Statement under the captions Security Ownership of Certain Beneficial Owners, Directors, and Executive Officers and Election of Directors  Information with
Respect to the Nominees, Continuing Directors, and Certain Executive Officers and are incorporated herein by reference.



ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS



The information required in response to this item will be contained in the Proxy Statement under the caption Information with Respect to the Nominees, Continuing
Directors and Certain Executive Officers and is incorporated herein by reference.



32.



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##### Table of Contents



PART IV



ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES



The information required in response to this item will be contained in the Proxy Statement
under the caption Principal Accounting Firm Fees and is incorporated herein by reference.



ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES



|(a) | Documents filed as part of this report:
|--- | ---------------------------------------



| | 1,2 | Financial Statements and Schedules
| | --- | ----------------------------------



See Index to Financial Information on page F-1.



| | 3 | Exhibits
| | - | --------



See Exhibit Index on page 34.



33.



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##### Table of Contents



EXHIBIT INDEX



Park Bancorp, Inc.



Form 10-K for Fiscal Year Ended

December 31, 2004



|      |  |                                                                                                                                                                                                                        
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1   |  | Certificate of Incorporation of Park Bancorp, Inc. (Park Bancorp) (incorporated by reference to Exhibit 3.1 to Park Bancorps Registration Statement No.
333-4380)                                                   
|      | 
|3.2   |  | Bylaws of Park Bancorp, Inc. (incorporated by reference to Exhibit 3.2 to Park Bancorps Registration Statement No. 333-4380)                                                                                          
|      | 
|3.3   |  | Federal Stock Charter and Bylaws of Park Federal Savings Bank (incorporated by reference to Exhibit 2.1 to Park Bancorps Registration Statement No. 333-4380)                                                         
|      | 
|4.1   |  | Stock Certificate of Park Bancorp, Inc. (incorporated by reference to Exhibit 4.1 to Park Bancorps Registration Statement No. 333-4380)                                                                               
|      | 
|10.1* |  | Form of Park Federal Savings Bank Employee Stock Ownership Plan (incorporated by reference to Exhibit 10.1 to Park Bancorps Registration Statement No. 333-4380)                                                      
|      | 
|10.2* |  | ESOP Loan Commitment Letter and ESOP Loan Documents (incorporated by reference to Exhibit 10.2 to Park Bancorps Registration Statement No. 333-4380)                                                                  
|      | 
|10.3* |  | Form of Employment Agreements between Park Federal Savings Bank and Park Bancorp, Inc. and certain executive officers (incorporated by reference to Exhibit 10.3 to Park Bancorps
Registration Statement No. 333-4380)
|      | 
|10.4* |  | Form of Proposed Park Federal Savings Bank Employee Severance Compensation Plan (incorporated by reference to Exhibit 10.4 to Park Bancorps Registration Statement No.
333-4380)                                      
|      | 
|10.5* |  | Park Federal Savings Bank Supplemental Executive Retirement Plan (incorporated by reference to Exhibit 10.5 to Park Bancorps Registration Statement No. 333-4380)                                                     
|      | 
|10.6* |  | Park Bancorp, Inc. 1997 Stock-Based Incentive Plan (incorporated by reference to Exhibit 99.1 to Park Bancorps Registration Statement No. 333-33103)                                                                  
|      | 
|10.7* |  | Park Bancorp, Inc. 2003 Incentive Plan (incorporated by reference to Appendix A of Park Bancorp, Inc. Proxy Statement for the Annual Meeting of Stockholders in 2003)                                                  
|      | 
|23.0  |  | Consent of Independent Registered Public Accounting Firm                                                                                                                                                               
|      | 
|31.1  |  | Rule 13(a)-14(a) Certification (Chief Executive Officer)                                                                                                                                                               
|      | 
|31.2  |  | Rule 13(a)-14(a) Certification (Chief Financial Officer)                                                                                                                                                               
|      | 
|32.1  |  | Section 1350 Certification (Chief Executive Officer)                                                                                                                                                                   
|      | 
|32.2  |  | Section 1350 Certification (Chief Financial Officer)                                                                                                                                                                   

---

|* | Management contract or compensatory plan or arrangement required to be filed as an exhibit to this Form 10-K pursuant to Item 14(c) of Form 10-K.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------



34.



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##### Table of Contents

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 on the 30thday of March 2005.



PARK BANCORP, INC.By:

/s/ David A. RemijasDavid A. RemijasChairman of the Board,President, andChief Executive Officer




Pursuant to the requirements of
the Securities Exchange Act of 1933, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.



|                            |  |                                                                                                          |  |               
|--------------------------- |  | -------------------------------------------------------------------------------------------------------- |  | --------------
|Name                        |  | Title                                                                                                    |  | Date          
|/s/ David A. Remijas        |  | Chairman of the Board, President, and Chief
Executive Officer (principal executive officer)              |  | March 30, 2005
|David A. Remijas            |  |                                                                                                          | 
|                            |  |                                                                                                         
|/s/ Steven J. Pokrak        |  | Treasurer, Chief Financial Officer
(principal financial and accounting officer), and Corporate Secretary |  | March 30, 2005
|Steven J. Pokrak            |  |                                                                                                          | 
|                            |  |                                                                                                         
|/s/ Richard J. Remijas, Jr. |  | Executive Vice President, Chief Operating
Officer, Corporate Secretary, and Director                     |  | March 30, 2005
|Richard J. Remijas, Jr.     |  |                                                                                                          | 
|                            |  |                                                                                                          | 
|                            |  |                                                                                                         
|/s/ Robert W. Krug          |  | Director                                                                                                 |  | March 30, 2005
|Robert W. Krug              |  |                                                                                                          |  |               
|                            |  |                                                                                                         
|/s/ John J. Murphy          |  | Director                                                                                                 |  | March 30, 2005
|John J. Murphy              |  |                                                                                                          |  |               
|                            |  |                                                                                                         
|/s/ Victor H. Reyes         |  | Director                                                                                                 |  | March 30, 2005
|Victor H. Reyes             |  |                                                                                                          |  |               
|                            |  |                                                                                                         
|/s/ Paul Shukis             |  | Director                                                                                                 |  | March 30, 2005
|Paul Shukis                 |  |                                                                                                          |  |               





35.



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PARK BANCORP, INC. AND SUBSIDIARIES

Chicago, Illinois



CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2004, 2003, and 2002



INDEX TO FINANCIAL INFORMATION



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



F-1



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##### Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



Board of Directors

Park Bancorp, Inc.

Chicago,
Illinois



We have audited the accompanying consolidated statements of financial
condition of Park Bancorp, Inc. and Subsidiaries as of December 31, 2004 and 2003, and the related consolidated statements of income, stockholders equity, and cash flows for each of the three years in the period ended December 31, 2004. These
financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audits.



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



In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects, the financial position of Park Bancorp, Inc. and Subsidiaries as of December 31, 2004 and 2003, and the results of their operations and their cash flows for each of the three years in the
period ended December 31, 2004 in conformity with accounting principles generally accepted in the United States of America.



/s/ Crowe Chizek and Company LLC



Oak Brook, Illinois

February 22, 2005



F-2



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##### Table of Contents

PARK BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

December 31, 2004 and 2003

(In thousands,
except share and per share data)



|                                                                                                             |  |      |         |   |      |   |         |  
|------------------------------------------------------------------------------------------------------------ |  | ---- | ------- | - | ---- | - | ------- | -
|                                                                                                             |  | 2004 |         |   | 2003 |  
|ASSETS                                                                                                       |  |      |         |   |      |   |         |  
|Cash and due from banks                                                                                      |  | $    | 3,340   |   |      | $ | 3,719   |  
|Federal funds sold                                                                                           |  |      | 5,419   |   |      |   | 3,376   |  
|Interest-bearing deposits with other financial institutions                                                  |  |      | 4,993   |   |      |   | 3,986   |  
|                                                                                                             |  |      |         |   |      |   |         |  
|Total cash and cash equivalents                                                                              |  |      | 13,752  |   |      |   | 11,081  |  
|Time deposits with other financial institutions                                                              |  |      | 1,087   |   |      |   | 1,151   |  
|Securities available-for-sale                                                                                |  |      | 59,728  |   |      |   | 72,058  |  
|Loans receivable, net of allowance of $1,374 and $578                                                        |  |      | 167,466 |   |      |   | 158,957 |  
|Federal Home Loan Bank stock                                                                                 |  |      | 11,136  |   |      |   | 10,109  |  
|Premises and equipment, net                                                                                  |  |      | 4,815   |   |      |   | 4,627   |  
|Accrued interest receivable                                                                                  |  |      | 1,185   |   |      |   | 1,244   |  
|Bank-owned life insurance                                                                                    |  |      | 5,848   |   |      |   | 5,627   |  
|Other assets                                                                                                 |  |      | 2,603   |   |      |   | 1,209   |  
|                                                                                                             |  |      |         |   |      |   |         |  
|Total assets                                                                                                 |  | $    | 267,620 |   |      | $ | 266,063 |  
|                                                                                                             |  |      |         |   |      |   |         |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                         |  |      |         |   |      |   |         |  
|Liabilities                                                                                                  |  |      |         |   |      |   |         |  
|Deposits                                                                                                     |  |      |         |   |      |   |         |  
|Non-interest-bearing                                                                                         |  | $    | 6,805   |   |      | $ | 6,099   |  
|Interest-bearing                                                                                             |  |      | 159,320 |   |      |   | 164,363 |  
|                                                                                                             |  |      |         |   |      |   |         |  
|Total deposits                                                                                               |  |      | 166,125 |   |      |   | 170,462 |  
|                                                                                                             |  |     
|Securities sold under repurchase agreements                                                                  |  |      | 3,369   |   |      |   | 6,904   |  
|Advances from borrowers for taxes and insurance                                                              |  |      | 2,283   |   |      |   | 2,081   |  
|Federal Home Loan Bank advances                                                                              |  |      | 63,871  |   |      |   | 55,175  |  
|Accrued interest payable                                                                                     |  |      | 386     |   |      |   | 364     |  
|Other liabilities                                                                                            |  |      | 679     |   |      |   | 1,537   |  
|                                                                                                             |  |      |         |   |      |   |         |  
|Total liabilities                                                                                            |  |      | 236,713 |   |      |   | 236,523 |  
|                                                                                                             |  |     
|Stockholders equity                                                                                         |  |      |         |   |      |   |         |  
|Preferred stock, $.01 par value per share, authorized 1,000,000 shares; none issued and outstanding          |  |      |        |   |      |   |        |  
|Common stock, $.01 par value per share; authorized, 9,000,000 shares; issued, 2,734,138 and 2,733,138 shares |  |      | 27      |   |      |   | 27      |  
|Additional paid-in capital                                                                                   |  |      | 27,819  |   |      |   | 27,515  |  
|Retained earnings                                                                                            |  |      | 30,797  |   |      |   | 29,005  |  
|Treasury stock, 1,592,043 and 1,580,943 shares, at cost                                                      |  |      | (27,070 | ) |      |   | (26,731 | )
|Unearned ESOP shares                                                                                         |  |      | (694    | ) |      |   | (833    | )
|Accumulated other comprehensive income                                                                       |  |      | 28      |   |      |   | 557     |  
|                                                                                                             |  |      |         |   |      |   |         |  
|Total stockholders equity                                                                                   |  |      | 30,907  |   |      |   | 29,540  |  
|                                                                                                             |  |      |         |   |      |   |         |  
|Total liabilities and stockholders equity                                                                   |  | $    | 267,620 |   |      | $ | 266,063 |  
|                                                                                                             |  |      |         |   |      |   |         |  



See accompanying notes
to consolidated financial statements.



F-3



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##### Table of Contents

PARK BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

Years ended December 31, 2004, 2003, and 2002

(In thousands, except share and per share data)



|                                                            |  |      |        |      |   |        |  |   |       
|----------------------------------------------------------- |  | ---- | ------ | ---- | - | ------ |  | - | ------
|                                                            |  | 2004 |        | 2003 |   | 2002  
|Interest income                                             |  |      |        |      |   |        |  |   |       
|Loans receivable                                            |  | $    | 10,398 |      | $ | 10,239 |  | $ | 10,742
|Securities                                                  |  |      | 3,091  |      |   | 3,162  |  |   | 3,646 
|Interest-bearing deposits with other financial institutions |  |      | 200    |      |   | 252    |  |   | 287   
|                                                            |  |      |        |      |   |        |  |   |       
|                                                            |  |      | 13,689 |      |   | 13,653 |  |   | 14,675
|                                                            |  |      |       
|Interest expense                                            |  |      |        |      |   |        |  |   |       
|Deposits                                                    |  |      | 3,181  |      |   | 3,803  |  |   | 5,120 
|Federal Home Loan Bank advances and other borrowings        |  |      | 2,096  |      |   | 2,169  |  |   | 2,421 
|                                                            |  |      |        |      |   |        |  |   |       
|                                                            |  |      | 5,277  |      |   | 5,972  |  |   | 7,541 
|                                                            |  |      |        |      |   |        |  |   |       
|Net interest income                                         |  |      | 8,412  |      |   | 7,681  |  |   | 7,134 
|                                                            |  |      |       
|Provision for loan losses                                   |  |      | 816    |      |   |       |  |   | 120   
|                                                            |  |      |        |      |   |        |  |   |       
|Net interest income after provision for loan losses         |  |      | 7,596  |      |   | 7,681  |  |   | 7,014 
|                                                            |  |      |       
|Noninterest income                                          |  |      |        |      |   |        |  |   |       
|Gains on sales of securities                                |  |      | 285    |      |   | 297    |  |   | 346   
|Service fee income                                          |  |      | 281    |      |   | 342    |  |   | 276   
|Gain on sale of REO                                         |  |      | 120    |      |   |       |  |   |      
|Gain on sale of real estate held for expansion              |  |      | 1,075  |      |   |       |  |   | 126   
|Earnings on bank-owned life insurance                       |  |      | 221    |      |   | 282    |  |   | 303   
|Other operating income                                      |  |      | 71     |      |   | 169    |  |   | 103   
|                                                            |  |      |        |      |   |        |  |   |       
|                                                            |  |      | 2,053  |      |   | 1,090  |  |   | 1,154 
|                                                            |  |      |       
|Noninterest expense                                         |  |      |        |      |   |        |  |   |       
|Compensation and benefits                                   |  |      | 3,658  |      |   | 3,448  |  |   | 3,086 
|Occupancy and equipment                                     |  |      | 839    |      |   | 617    |  |   | 682   
|Federal deposit insurance premiums                          |  |      | 94     |      |   | 92     |  |   | 93    
|Data processing services                                    |  |      | 190    |      |   | 214    |  |   | 212   
|Advertising                                                 |  |      | 135    |      |   | 98     |  |   | 126   
|Other operating expenses                                    |  |      | 1,043  |      |   | 911    |  |   | 768   
|                                                            |  |      |        |      |   |        |  |   |       
|                                                            |  |      | 5,959  |      |   | 5,380  |  |   | 4,967 
|                                                            |  |      |        |      |   |        |  |   |       
|Income before income taxes                                  |  |      | 3,690  |      |   | 3,391  |  |   | 3,201 
|                                                            |  |      |       
|Income tax expense                                          |  |      | 1,162  |      |   | 1,141  |  |   | 1,036 
|                                                            |  |      |        |      |   |        |  |   |       
|Net income                                                  |  | $    | 2,528  |      | $ | 2,250  |  | $ | 2,165 
|                                                            |  |      |        |      |   |        |  |   |       
|Basic earnings per share                                    |  | $    | 2.36   |      | $ | 2.06   |  | $ | 1.92  
|                                                            |  |      |        |      |   |        |  |   |       
|Diluted earnings per share                                  |  | $    | 2.17   |      | $ | 1.91   |  | $ | 1.84  
|                                                            |  |      |        |      |   |        |  |   |       



See accompanying notes
to consolidated financial statements.



F-4



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##### Table of Contents

PARK BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

Years ended December 31, 2004, 2003, and 2002

(In thousands, except share and per share data)



|                                                           |  |             |    |                          |   |                  |  |   |               |   |  |                    |         |   |                                               |   |        |                          |  |   |                       |   |  |   |        |   |  |   |       |  
|---------------------------------------------------------- |  | ----------- | -- | ------------------------ | - | ---------------- |  | - | ------------- | - |  | ------------------ | ------- | - | --------------------------------------------- | - | ------ | ------------------------ |  | - | --------------------- | - |  | - | ------ | - |  | - | ----- | -
|                                                           |  | CommonStock |    | AdditionalPaid-inCapital |   | RetainedEarnings |  |   | TreasuryStock |   |  | UnearnedESOPShares |         |   | AccumulatedOther Compre- hensiveIncome (Loss) |   |        | TotalStockholdersEquity |  |   | Compre- hensiveIncome |  
|Balance at January 1, 2002                                 |  | $           | 27 |                          | $ | 26,600           |  | $ | 25,845        |   |  | $                  | (24,019 | ) |                                               | $ | (1,131 | )                        |  | $ | (44                   | ) |  | $ | 27,278 |   |  |   |       |  
|                                                           |  |             |    |                          |   |                  |  |  
|Comprehensive income                                       |  |             |    |                          |   |                  |  |   |               |   |  |                    |         |   |                                               |   |        |                          |  |   |                       |   |  |   |        |   |  |   |       |  
|Net income                                                 |  |             |   |                          |   |                 |  |   | 2,165         |   |  |                    |        |   |                                               |   |       |                          |  |   |                      |   |  |   | 2,165  |   |  | $ | 2,165 |  
|Change in fair value of securities available-for-sale, net |  |             |   |                          |   |                 |  |   |              |   |  |                    |        |   |                                               |   |       |                          |  |   | 924                   |   |  |   | 924    |   |  |   | 924   |  
|                                                           |  |             |    |                          |   |                  |  |   |               |   |  |                    |         |   |                                               |   |        |                          |  |   |                       |   |  |   |        |   |  |   |       |  
|Total comprehensive income                                 |  |             |    |                          |   |                  |  |   |               |   |  |                    |         |   |                                               |   |        |                          |  |   |                       |   |  |   |        |   |  | $ | 3,089 |  
|                                                           |  |             |    |                          |   |                  |  |   |               |   |  |                    |         |   |                                               |   |        |                          |  |   |                       |   |  |   |        |   |  |   |       |  
|Cash dividends declared ($.54 per share)                   |  |             |   |                          |   |                 |  |   | (603          | ) |  |                    |        |   |                                               |   |       |                          |  |   |                      |   |  |   | (603   | ) |  |   |       |  
|                                                           |  |             |    |                          |   |                  |  |  
|Purchase of 23,300 shares of treasury stock                |  |             |   |                          |   |                 |  |   |              |   |  |                    | (472    | ) |                                               |   |       |                          |  |   |                      |   |  |   | (472   | ) |  |   |       |  
|                                                           |  |             |    |                          |   |                  |  |  
|Exercise of 17,690 stock options                           |  |             |   |                          |   | 278              |  |   |              |   |  |                    |        |   |                                               |   |       |                          |  |   |                      |   |  |   | 278    |   |  |   |       |  
|                                                           |  |             |    |                          |   |                  |  |  
|ESOP shares released                                       |  |             |   |                          |   | 172              |  |   |              |   |  |                    |        |   |                                               |   | 152    |                          |  |   |                      |   |  |   | 324    |   |  |   |       |  
|                                                           |  |             |    |                          |   |                  |  |   |               |   |  |                    |         |   |                                               |   |        |                          |  |   |                       |   |  |   |        |   |  |   |       |  
|Balance at December 31, 2002                               |  |             | 27 |                          |   | 27,050           |  |   | 27,407        |   |  |                    | (24,491 | ) |                                               |   | (979   | )                        |  |   | 880                   |   |  |   | 29,894 |   |  |   |       |  
|                                                           |  |             |    |                          |   |                  |  |  
|Comprehensive income                                       |  |             |    |                          |   |                  |  |   |               |   |  |                    |         |   |                                               |   |        |                          |  |   |                       |   |  |   |        |   |  |   |       |  
|Net income                                                 |  |             |   |                          |   |                 |  |   | 2,250         |   |  |                    |        |   |                                               |   |       |                          |  |   |                      |   |  |   | 2,250  |   |  | $ | 2,250 |  
|Change in fair value of securities available-for-sale, net |  |             |   |                          |   |                 |  |   |              |   |  |                    |        |   |                                               |   |       |                          |  |   | (323                  | ) |  |   | (323   | ) |  |   | (323  | )
|                                                           |  |             |    |                          |   |                  |  |   |               |   |  |                    |         |   |                                               |   |        |                          |  |   |                       |   |  |   |        |   |  |   |       |  
|Total comprehensive income                                 |  |             |    |                          |   |                  |  |   |               |   |  |                    |         |   |                                               |   |        |                          |  |   |                       |   |  |   |        |   |  | $ | 1,927 |  
|                                                           |  |             |    |                          |   |                  |  |   |               |   |  |                    |         |   |                                               |   |        |                          |  |   |                       |   |  |   |        |   |  |   |       |  



(Continued)



F-5



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##### Table of Contents

PARK BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

Years ended December 31, 2004,
2003, and 2002

(In thousands, except share and per share data)



|                                                                      |  |             |    |                          |   |                  |  |   |               |   |  |                    |         |   |                                               |   |      |                          |  |   |                       |   |  |   |        |   |  |   |       |  
|--------------------------------------------------------------------- |  | ----------- | -- | ------------------------ | - | ---------------- |  | - | ------------- | - |  | ------------------ | ------- | - | --------------------------------------------- | - | ---- | ------------------------ |  | - | --------------------- | - |  | - | ------ | - |  | - | ----- | -
|                                                                      |  | CommonStock |    | AdditionalPaid-inCapital |   | RetainedEarnings |  |   | TreasuryStock |   |  | UnearnedESOPShares |         |   | AccumulatedOther Compre- hensiveIncome (Loss) |   |      | TotalStockholdersEquity |  |   | Compre- hensiveIncome |  
|Cash dividends declared ($.60 per share)                              |  | $           |   |                          | $ |                 |  | $ | (652          | ) |  | $                  |        |   |                                               | $ |     |                          |  | $ |                      |   |  | $ | (652   | ) |  |   |       |  
|                                                                      |  |             |    |                          |   |                  |  |  
|Purchase of 87,107 shares of treasury stock                           |  |             |   |                          |   |                 |  |   |              |   |  |                    | (2,240  | ) |                                               |   |     |                          |  |   |                      |   |  |   | (2,240 | ) |  |   |       |  
|                                                                      |  |             |    |                          |   |                  |  |  
|Exercise of 14,007 stock options                                      |  |             |   |                          |   | 221              |  |   |              |   |  |                    |        |   |                                               |   |     |                          |  |   |                      |   |  |   | 221    |   |  |   |       |  
|                                                                      |  |             |    |                          |   |                  |  |  
|ESOP shares released                                                  |  |             |   |                          |   | 244              |  |   |              |   |  |                    |        |   |                                               |   | 146  |                          |  |   |                      |   |  |   | 390    |   |  |   |       |  
|                                                                      |  |             |    |                          |   |                  |  |   |               |   |  |                    |         |   |                                               |   |      |                          |  |   |                       |   |  |   |        |   |  |   |       |  
|Balance at December 31, 2003                                          |  |             | 27 |                          |   | 27,515           |  |   | 29,005        |   |  |                    | (26,731 | ) |                                               |   | (833 | )                        |  |   | 557                   |   |  |   | 29,540 |   |  |   |       |  
|                                                                      |  |             |    |                          |   |                  |  |  
|Comprehensive income                                                  |  |             |    |                          |   |                  |  |   |               |   |  |                    |         |   |                                               |   |      |                          |  |   |                       |   |  |   |        |   |  |   |       |  
|Net income                                                            |  |             |   |                          |   |                 |  |   | 2,528         |   |  |                    |        |   |                                               |   |     |                          |  |   |                      |   |  |   | 2,528  |   |  | $ | 2,528 |  
|Change in fair value of securities securities available-for-sale, net |  |             |   |                          |   |                 |  |   |              |   |  |                    |        |   |                                               |   |     |                          |  |   | (529                  | ) |  |   | (529   | ) |  |   | (529  | )
|                                                                      |  |             |    |                          |   |                  |  |   |               |   |  |                    |         |   |                                               |   |      |                          |  |   |                       |   |  |   |        |   |  |   |       |  
|Total comprehensive income                                            |  |             |    |                          |   |                  |  |   |               |   |  |                    |         |   |                                               |   |      |                          |  |   |                       |   |  |   |        |   |  | $ | 1,999 |  
|                                                                      |  |             |    |                          |   |                  |  |   |               |   |  |                    |         |   |                                               |   |      |                          |  |   |                       |   |  |   |        |   |  |   |       |  
|Cash dividends declared ($.69 per share)                              |  |             |   |                          |   |                 |  |   | (736          | ) |  |                    |        |   |                                               |   |     |                          |  |   |                      |   |  |   | (736   | ) |  |   |       |  
|                                                                      |  |             |    |                          |   |                  |  |  
|Purchase of 11,100 shares of treasury stock                           |  |             |   |                          |   |                 |  |   |              |   |  |                    | (339    | ) |                                               |   |     |                          |  |   |                      |   |  |   | (339   | ) |  |   |       |  
|                                                                      |  |             |    |                          |   |                  |  |  
|Exercise of 1,000 stock options                                       |  |             |   |                          |   | 15               |  |   |              |   |  |                    |        |   |                                               |   |     |                          |  |   |                      |   |  |   | 15     |   |  |   |       |  
|                                                                      |  |             |    |                          |   |                  |  |  
|ESOP shares released                                                  |  |             |   |                          |   | 289              |  |   |              |   |  |                    |        |   |                                               |   | 139  |                          |  |   |                      |   |  |   | 428    |   |  |   |       |  
|                                                                      |  |             |    |                          |   |                  |  |   |               |   |  |                    |         |   |                                               |   |      |                          |  |   |                       |   |  |   |        |   |  |   |       |  
|Balance at December 31, 2004                                          |  | $           | 27 |                          | $ | 27,819           |  | $ | 30,797        |   |  | $                  | (27,070 | ) |                                               | $ | (694 | )                        |  | $ | 28                    |   |  | $ | 30,907 |   |  |   |       |  
|                                                                      |  |             |    |                          |   |                  |  |   |               |   |  |                    |         |   |                                               |   |      |                          |  |   |                       |   |  |   |        |   |  |   |       |  



See accompanying notes
to consolidated financial statements.



F-6



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##### Table of Contents

PARK BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended December 31, 2004, 2003, and 2002

(In thousands)



|                                                                          |  |      |         |   |      |   |         |      |  |   |         |  
|------------------------------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                                          |  | 2004 |         |   | 2003 |   |         | 2002 | 
|Cash flows from operating activities                                      |  |      |         |   |      |   |         |      |  |   |         |  
|Net income                                                                |  | $    | 2,528   |   |      | $ | 2,250   |      |  | $ | 2,165   |  
|Adjustments to reconcile net income to net cash from operating activities |  |      |         |   |      |   |         |      |  |   |         |  
|Net premium amortization on securities                                    |  |      | 131     |   |      |   | 156     |      |  |   | 22      |  
|Interest credited on time deposits                                        |  |      | (36     | ) |      |   | (34     | )    |  |   | (17     | )
|Dividend reinvestments                                                    |  |      | (109    | ) |      |   | (137    | )    |  |   | (161    | )
|Gains on sales of securities available-for-sale                           |  |      | (285    | ) |      |   | (297    | )    |  |   | (346    | )
|Gain on sale of real estate held for expansion                            |  |      | (1,075  | ) |      |   |        |      |  |   | (126    | )
|Gain on sale of REO                                                       |  |      | (120    | ) |      |   |        |      |  |   |        |  
|Earnings on bank-owned life insurance, net                                |  |      | (221    | ) |      |   | (246    | )    |  |   | (272    | )
|Provision for loan losses                                                 |  |      | 816     |   |      |   |        |      |  |   | 120     |  
|Depreciation                                                              |  |      | 392     |   |      |   | 283     |      |  |   | 296     |  
|Deferred income tax (benefit)                                             |  |      | 30      |   |      |   | 27      |      |  |   | (37     | )
|Deferred loan fees                                                        |  |      | 8       |   |      |   | 59      |      |  |   | 22      |  
|Net change in accrued interest receivable                                 |  |      | 59      |   |      |   | (49     | )    |  |   | 464     |  
|Net change in other assets                                                |  |      | (1,577  | ) |      |   | (386    | )    |  |   | (271    | )
|Net change in accrued interest payable                                    |  |      | 22      |   |      |   | (32     | )    |  |   | (434    |  
|Net change in other liabilities                                           |  |      | (888    | ) |      |   | 83      |      |  |   | 34      |  
|ESOP expense                                                              |  |      | 428     |   |      |   | 390     |      |  |   | 324     |  
|FHLB stock dividends                                                      |  |      | (686    | ) |      |   | (607    | )    |  |   | (194    | )
|                                                                          |  |      |         |   |      |   |         |      |  |   |         |  
|Net cash from operating activities                                        |  |      | (583    | ) |      |   | 1,460   |      |  |   | 1,589   |  
|                                                                          |  |      |        
|Cash flows from investing activities                                      |  |      |         |   |      |   |         |      |  |   |         |  
|Net change in loans                                                       |  |      | 2,691   |   |      |   | (3,418  | )    |  |   | 2,891   |  
|Loans purchased                                                           |  |      | (12,024 | ) |      |   | (7,605  | )    |  |   | (16,238 | )
|Maturities and calls of securities available-for-sale                     |  |      | 9,000   |   |      |   | 4,000   |      |  |   | 30,610  |  
|Purchases of securities available-for-sale                                |  |      | (14,766 | ) |      |   | (43,705 | )    |  |   | (39,000 | )
|Sales of securities available-for-sale                                    |  |      | 4,046   |   |      |   | 10,481  |      |  |   | 6,654   |  
|Principal repayments on mortgage-backed securities                        |  |      | 13,512  |   |      |   | 18,079  |      |  |   | 8,201   |  
|Purchases of Federal Home Loan Bank stock                                 |  |      | (2,000  | ) |      |   | (4,175  | )    |  |   | (2,000  | )
|Sales of Federal Home Loan Bank stock                                     |  |      | 1,659   |   |      |   | 2,000   |      |  |   |        |  
|Purchase of time deposits                                                 |  |      |        |   |      |   |        |      |  |   | (1,100  | )
|Maturities of time deposits                                               |  |      | 100     |   |      |   |        |      |  |   |        |  
|Proceeds from sales of real estate held for expansion                     |  |      | 1,530   |   |      |   |        |      |  |   | 154     |  
|Proceeds from sales of REO                                                |  |      | 120     |   |      |   |        |      |  |   |        |  
|Expenditures for premises and equipment                                   |  |      | (580    | ) |      |   | (1,786  | )    |  |   | (315    | )
|                                                                          |  |      |         |   |      |   |         |      |  |   |         |  
|Net cash from investing activities                                        |  |      | 3,288   |   |      |   | (26,129 | )    |  |   | (10,143 | )



(Continued)



F-7



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##### Table of Contents

PARK BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended December 31, 2004, 2003, and 2002

(In thousands)



|                                                              |  |      |        |   |      |   |         |      |  |   |        |  
|------------------------------------------------------------- |  | ---- | ------ | - | ---- | - | ------- | ---- |  | - | ------ | -
|                                                              |  | 2004 |        |   | 2003 |   |         | 2002 | 
|Cash flows from financing activities                          |  |      |        |   |      |   |         |      |  |   |        |  
|Net change in deposits                                        |  | $    | (4,337 | ) |      | $ | 6,494   |      |  | $ | 894    |  
|Net change in securities sold under repurchase agreements     |  |      | (3,535 | ) |      |   | (3,695  | )    |  |   | (59    | )
|Net change in advances from borrowers for taxes and insurance |  |      | 202    |   |      |   | 112     |      |  |   | (58    | )
|Stock options exercised                                       |  |      | 15     |   |      |   | 221     |      |  |   | 278    |  
|Dividends paid to stockholders                                |  |      | (736   | ) |      |   | (652    | )    |  |   | (603   | )
|Purchases of treasury stock                                   |  |      | (339   | ) |      |   | (2,240  | )    |  |   | (472   | )
|Federal Home Loan Bank advances                               |  |      | 17,735 |   |      |   | 26,175  |      |  |   | 11,663 |  
|Repayment of Federal Home Loan Bank advances                  |  |      | (9,039 | ) |      |   | (14,663 | )    |  |   | (7,000 | )
|                                                              |  |      |        |   |      |   |         |      |  |   |        |  
|Net cash from financing activities                            |  |      | (34    | ) |      |   | 11,752  |      |  |   | 4,643  |  
|                                                              |  |      |        |   |      |   |         |      |  |   |        |  
|Net change in cash and cash equivalents                       |  |      | 2,671  |   |      |   | (12,917 | )    |  |   | (3,911 |  
|                                                              |  |      |       
|Cash and cash equivalents at beginning of year                |  |      | 11,081 |   |      |   | 23,998  |      |  |   | 27,909 |  
|                                                              |  |      |        |   |      |   |         |      |  |   |        |  
|Cash and cash equivalents at end of year                      |  | $    | 13,752 |   |      | $ | 11,081  |      |  | $ | 23,998 |  
|                                                              |  |      |        |   |      |   |         |      |  |   |        |  
|Supplemental disclosures of cash flow information             |  |      |        |   |      |   |         |      |  |   |        |  
|Cash paid during the year for                                 |  |      |        |   |      |   |         |      |  |   |        |  
|Interest                                                      |  | $    | 5,255  |   |      | $ | 5,923   |      |  | $ | 7,975  |  
|Income taxes                                                  |  |      | 1,425  |   |      |   | 1,167   |      |  |   | 999    |  



See accompanying notes
to consolidated financial statements.



F-8



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##### Table of Contents

PARK BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2004, 2003, and 2002

(Table
amounts in thousands, except share and per share data)



NOTE 1 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES



Principles of Consolidation: The
accompanying consolidated financial statements include the accounts of Park Bancorp, Inc. (the Company) and its wholly owned subsidiaries, Park Federal Savings Bank (the Bank) and PBI Development Corporation
(PBI), which conducts real estate development activities. The Bank has two wholly owned subsidiaries: GPS Corporation, which conducts limited insurance activities, and GPS Development Corp. (GPS), which conducts real estate
development activities. All significant intercompany transactions and balances are eliminated in consolidation.



Business: The primary business of the Company is the ownership of the Bank. Through the Bank, the Company is engaged in the business of retail banking, with
operations conducted through its main office and two branches, located in Chicago and Westmont, Illinois. The Companys revenues primarily arise from interest income from retail lending activities and investments.



Use of Estimates: The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported
amounts of income and expenses during the reporting period. Actual results could differ from those estimates. The collectibility of loans, fair value of financial instruments, prepayment of mortgage-backed securities, and status of contingencies are
particularly subject to change.



Securities: Securities are classified
as available-for-sale when management may decide to sell those securities in response to changes in market interest rates, liquidity needs, changes in yields on alternative investments, and for other reasons. Securities available-for-sale are
carried at fair value. Unrealized gains and losses on securities available-for-sale are included as a separate component of stockholders equity, net of deferred income taxes. Realized gains and losses on disposition are based on the net
proceeds and the adjusted amortized cost of the securities sold, using the specific identification method. Interest income includes amortization of purchase premium or discount. Securities are written down to fair value when a decline in fair value
is not temporary.



Federal Home Loan Bank (FHLB) stock is carried
at cost.



Security Interest Income: Interest on securities includes
amortization of purchase premium or discount. Premiums and discounts on securities are amortized on the level-yield method without anticipating prepayments.



(Continued)



F-9



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##### Table of Contents

PARK BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2004, 2003, and 2002

(Table amounts in thousands, except share and per share data)



NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(Continued)



Loans Receivable: Loans receivable are stated at unpaid principal balances, less the allowance for loan losses, deferred loan
origination fees, and discounts.



Allowance for Loan Losses: The
allowance for loan losses is a valuation allowance for probable incurred credit losses, increased by the provision for loan losses and decreased by charge-offs, net of recoveries. Management estimates the allowance balance required using past loss
experience, economic conditions, information about specific borrower situations including their financial position and collateral values, and other factors. Allocations of the allowance may be made for specific loans, but the entire allowance is
available for any loan that, in managements judgment, should be charged off. Loan losses are charged off against the allowance when management believes that the uncollectibility of a loan balance is confirmed.



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



Loan Interest Income: Interest on loans is accrued over the term of the loans based
upon the principal outstanding. Management reviews loans delinquent 90 days or more to determine if loans should be placed on nonaccrual. Interest accrued but not received for loans delinquent 90 days or more is reserved against interest income. The
carrying values of impaired loans are periodically adjusted to reflect cash payments, revised estimates of future cash flows, and increases in the present value of expected cash flows due to the passage of time. Cash payments representing interest
income are reported as such. Other cash payments are reported as reductions in carrying value, while increases or decreases due to changes in estimates of future payments and due to the passage of time are reported as adjustments to the provision
for loan losses.



Loan Origination Fees: Loan origination fees, net of
certain direct loan origination costs, are deferred and recognized over the contractual life of the loan as a yield adjustment without anticipating prepayments.



Premises and Equipment: Premises and equipment are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over
the estimated useful lives of the assets. Buildings and related components have useful lives ranging from 5 to 40 years and furniture, fixtures, and equipment have useful lives ranging from 3 to 7 years.



(Continued)



F-10



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##### Table of Contents

PARK BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2004, 2003, and 2002

(Table amounts in thousands, except share and per share data)



NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(Continued)



Foreclosed Real Estate: Real estate acquired through foreclosure and similar proceedings is carried at cost (fair value at the date
of foreclosure) or at fair value less estimated costs to sell. Losses on disposition, including expenses incurred in connection with the disposition, are charged to operations.



Bank-Owned Life Insurance: The Bank has purchased life insurance policies on certain key executives. Bank-owned life insurance is
recorded at its cash surrender value, or the amount that can be realized.



Repurchase Agreements: Substantially all repurchase agreement liabilities represent amounts advanced by various customers. Securities are pledged to cover those liabilities, which are not covered by federal deposit insurance.



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



Employee Stock Ownership Plan: The cost of shares issued to the employee stock ownership plan (ESOP) but not yet allocated to participants is presented
in the consolidated balance sheet as a reduction of stockholders equity. Compensation expense is recorded based on the market price of the shares as they are committed to be released for allocation to participant accounts. The difference
between the market price and the cost of shares committed to be released is recorded as an adjustment to additional paid-in capital. Dividends on allocated ESOP shares are recorded as a reduction of retained earnings; dividends on unallocated ESOP
shares are reflected as a reduction of debt.



Shares are considered outstanding
for earnings per share calculations as they are committed to be released; unallocated shares are not considered outstanding.



(Continued)



F-11



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##### Table of Contents

PARK BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2004, 2003, and 2002

(Table amounts in thousands, except share and per share data)



NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(Continued)



Stock Compensation: Employee compensation expense under stock options is reported using the intrinsic value method. No stock-based
compensation cost is reflected in net income, as all options granted had an exercise plan equal to or greater than the market price of the underlying common stock at date of grant. The following table illustrates the effect on net income and
earnings per share if expense were measured using the fair value recognition provisions of FASB Statement No. 123, Accounting for Stock-Based Compensation.



|                                                                                  |  |      |       |   |      |   |       |      |  |   |       |  
|--------------------------------------------------------------------------------- |  | ---- | ----- | - | ---- | - | ----- | ---- |  | - | ----- | -
|                                                                                  |  | 2004 |       |   | 2003 |   |       | 2002 | 
|Net income as reported                                                            |  | $    | 2,528 |   |      | $ | 2,250 |      |  | $ | 2,165 |  
|Deduct: Stock-based compensation expense determined under fair value based method |  |      | (16   | ) |      |   | (15   | )    |  |   | (36   | )
|                                                                                  |  |      |       |   |      |   |       |      |  |   |       |  
|Pro forma net income                                                              |  | $    | 2,512 |   |      | $ | 2,235 |      |  | $ | 2,129 |  
|                                                                                  |  |      |       |   |      |   |       |      |  |   |       |  
|Basic earnings per share as reported                                              |  | $    | 2.36  |   |      | $ | 2.06  |      |  | $ | 1.92  |  
|Pro forma basic earnings per share                                                |  |      | 2.35  |   |      |   | 2.05  |      |  |   | 1.89  |  
|                                                                                  |  |      |      
|Diluted earnings per share as reported                                            |  | $    | 2.17  |   |      | $ | 1.91  |      |  | $ | 1.84  |  
|Pro forma diluted earnings per share                                              |  |      | 2.15  |   |      |   | 1.90  |      |  |   | 1.81  |  



Cash Flows: For the purpose of
this statement, cash and cash equivalents are defined to include the Companys cash on hand, demand balances, interest-bearing deposits with other financial institutions, and investments in certificates of deposit with maturities of less than
three months. Net cash flows are reported for customer loan and deposit transactions, repurchase agreements and advances from borrowers for taxes and insurance.



Comprehensive Income (Loss): Comprehensive income (loss) consists of net income and the unrealized gains and losses on securities available-for-sale, net of
taxes, which is also recognized as a separate component of stockholders equity.



Earnings Per Share: Basic earnings per share is based on net income divided by the weighted average number of shares outstanding during the period, including allocated and committed-to-be-released ESOP shares. Diluted earnings per
share shows the dilutive effect, if any, of additional common shares issuable under stock options.



(Continued)



F-12



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##### Table of Contents

PARK BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2004, 2003, and 2002

(Table amounts in thousands, except share and per share data)



NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(Continued)



Effect of Recently-Issued Standards that are Not Yet Adopted: FAS 123 Revised, requires all public companies to record compensation
cost for stock options provided to employees in return for employee service. The cost is measured at the fair value of the options when granted, and this cost is expensed over the employee service period, which is normally the vesting period of the
options. This will apply to awards granted or modified after the first quarter or year beginning after June 15, 2005. Compensation cost will also be recorded for prior option grants that vest after the date of adoption. The effect on results of
operations will depend on the level of future option grants and the calculation of the fair value of the options granted at such future date, as well as the vesting periods provided, and so cannot currently be predicted. Existing options that will
vest after adoption date are expected to result in additional compensation expense. There will be no significant effect on financial position as total equity will not change.



SOP 03-3 requires that a valuation allowance for loans acquired in a transfer, including in a business combination, reflect only losses
incurred after acquisition and should not be recorded at acquisition. It applies to any loan acquired in a transfer that showed evidence of credit quality deterioration since it was made.



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



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



(Continued)



F-13



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##### Table of Contents

PARK BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2004, 2003, and 2002

(Table amounts in thousands, except share and per share data)



NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(Continued)



Operating Segments: While the chief decision-makers monitor the revenue streams of the various products and services, the
identifiable segments are not material and operations are managed and financial performance is evaluated on a company-wide basis. Accordingly, all of the financial service operations are considered by management to be aggregated in one reportable
operating segment.



Reclassifications: Some items in the prior year
financial statements were reclassified to conform to the current year presentation.



NOTE 2 - SECURITIES



Securities available-for-sale are
summarized as follows:



|                             |  |           |        |                      |   |                       |  |   |      |  
|---------------------------- |  | --------- | ------ | -------------------- | - | --------------------- |  | - | ---- | -
|                             |  | FairValue |        | GrossUnrealizedGains |   | GrossUnrealizedLosses | 
|December 31, 2004            |  |           |        |                      |   |                       |  |   |      |  
|Corporate notes              |  | $         | 8,264  |                      | $ | 223                   |  | $ |     |  
|Government agency securities |  |           | 8,974  |                      |   | 11                    |  |   | (37  | )
|Equity securities            |  |           | 5,706  |                      |   | 78                    |  |   | (57  | )
|Mortgage-backed securities   |  |           |        |                      |   |                       |  |   |      |  
|GNMA                         |  |           | 3,801  |                      |   | 14                    |  |   | (27  | )
|FNMA                         |  |           | 20,850 |                      |   | 34                    |  |   | (223 | )
|FHLMC                        |  |           | 12,133 |                      |   | 97                    |  |   | (70  | )
|                             |  |           |        |                      |   |                       |  |   |      |  
|                             |  | $         | 59,728 |                      | $ | 457                   |  | $ | (414 | )
|                             |  |           |        |                      |   |                       |  |   |      |  
|December 31, 2003            |  |           |        |                      |   |                       |  |   |      |  
|Corporate notes              |  | $         | 11,747 |                      | $ | 674                   |  | $ |     |  
|Municipal securities         |  |           | 10,023 |                      |   | 44                    |  |   | (22  | )
|Equity securities            |  |           | 5,636  |                      |   | 120                   |  |   | (31  | )
|Mortgage-backed securities   |  |           |        |                      |   |                       |  |   |      |  
|FNMA                         |  |           | 28,929 |                      |   | 80                    |  |   | (20  | )
|FHLMC                        |  |           | 15,723 |                      |   | 41                    |  |   | (42  | )
|                             |  |           |        |                      |   |                       |  |   |      |  
|                             |  | $         | 72,058 |                      | $ | 959                   |  | $ | (115 | )
|                             |  |           |        |                      |   |                       |  |   |      |  



(Continued)



F-14



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##### Table of Contents

PARK BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2004, 2003, and 2002

(Table amounts in thousands, except share and per share data)



NOTE 2 - SECURITIES(Continued)



Securities with unrealized losses at year-end 2004 and 2003 not recognized in income are as follows:



|                             |  |                     |        |                |                   |      |           |       |                |        |  |           |      |                |  |   |        |  |   |      |  
|---------------------------- |  | ------------------- | ------ | -------------- | ----------------- | ---- | --------- | ----- | -------------- | ------ |  | --------- | ---- | -------------- |  | - | ------ |  | - | ---- | -
|                             |  | Less than 12 Months |        |                | 12 Months or More |      |           | Total |               
|                             |  | FairValue           |        | UnrealizedLoss |                   |      | FairValue |       | UnrealizedLoss |        |  | FairValue |      | UnrealizedLoss | 
|December 31, 2004            |  |                     |        |                |                   |      |           |       |                |        |  |           |      |                |  |   |        |  |   |      |  
|Government agency securities |  | $                   | 2,985  |                | $                 | (16  | )         |       | $              | 1,978  |  | $         | (21  | )              |  | $ | 4,963  |  | $ | (37  | )
|Equity securities            |  |                     |       |                |                   |     |           |       |                | 5,098  |  |           | (57  | )              |  |   | 5,098  |  |   | (57  | )
|Mortgage-backed securities   |  |                     |        |                |                   |      |           |       |                |        |  |           |      |                |  |   |        |  |   |      |  
|GNMA                         |  |                     | 1,977  |                |                   | (27  | )         |       |                |       |  |           |     |                |  |   | 1,977  |  |   | (27  | )
|FNMA                         |  |                     | 16,217 |                |                   | (205 | )         |       |                | 2,058  |  |           | (18  | )              |  |   | 18,275 |  |   | (223 | )
|FHLMC                        |  |                     | 4,060  |                |                   | (32  | )         |       |                | 1,525  |  |           | (38  | )              |  |   | 5,585  |  |   | (70  | )
|                             |  |                     |        |                |                   |      |           |       |                |        |  |           |      |                |  |   |        |  |   |      |  
|Total temporarily impaired   |  | $                   | 25,218 |                | $                 | (290 | )         |       | $              | 10,680 |  | $         | (124 | )              |  | $ | 35,898 |  | $ | (414 | )
|                             |  |                     |        |                |                   |      |           |       |                |        |  |           |      |                |  |   |        |  |   |      |  
|December 31, 2003            |  |                     |        |                |                   |      |           |       |                |        |  |           |      |                |  |   |        |  |   |      |  
|Government agency securities |  | $                   | 1,978  |                | $                 | (22  | )         |       | $              |       |  | $         |     |                |  | $ | 1,978  |  | $ | (22  | )
|Equity securities            |  |                     | 4,521  |                |                   | (25  | )         |       |                | 394    |  |           | (6   | )              |  |   | 4,915  |  |   | (31  | )
|Mortgage-backed securities   |  |                     |        |                |                   |      |           |       |                |        |  |           |      |                |  |   |        |  |   |      |  
|FNMA                         |  |                     | 6,439  |                |                   | (20  | )         |       |                |       |  |           |     |                |  |   | 6,439  |  |   | (20  | )
|FHLMC                        |  |                     | 8,000  |                |                   | (35  | )         |       |                | 976    |  |           | (7   | )              |  |   | 8,976  |  |   | (42  | )
|                             |  |                     |        |                |                   |      |           |       |                |        |  |           |      |                |  |   |        |  |   |      |  
|Total temporarily impaired   |  | $                   | 20,938 |                | $                 | (102 | )         |       | $              | 1,370  |  | $         | (13  | )              |  | $ | 22,308 |  | $ | (115 | )
|                             |  |                     |        |                |                   |      |           |       |                |        |  |           |      |                |  |   |        |  |   |      |  



Unrealized losses on the above-named
securities have not been recognized into income because the issuers of these securities are of high credit quality, management has the intent and ability to hold these securities for the foreseeable future, and the decline in fair value is largely
due to increased market interest rates. The Companys management believes that the fair value of these securities will recover in the future.



(Continued)



F-15



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##### Table of Contents

PARK BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2004, 2003, and 2002

(Table amounts in thousands, except share and per share data)



NOTE 2 - SECURITIES(Continued)



Contractual maturities of debt securities available-for-sale at December 31, 2004 were as follows. Securities not due at a single maturity date, primarily mortgage-backed
and equity securities, are shown separately.



|                            |  |            |        
|--------------------------- |  | ---------- | -------
|                            |  | Fair Value
|Due within one year         |  | $          |       
|Due one to five years       |  |            | 13,267 
|Due five years to ten years |  |            | 3,971  
|Due after ten years         |  |            |       
|                            |  |            |        
|                            |  |            | 17,238 
|Equity securities           |  |            | 5,706  
|Mortgage-backed securities  |  |            | 36,784 
|                            |  |            |        
|                            |  |            | $59,728
|                            |  |            |        



Securities with a carrying value of
$5,974,000 and $7,503,000 at December 31, 2004 and 2003, respectively, were pledged to secure securities sold under repurchase agreements and public deposits as required or permitted by law.



Sales of securities are summarized as follows:



|                      |  |                                 |       |      |   |        |  |   |      
|--------------------- |  | ------------------------------- | ----- | ---- | - | ------ |  | - | -----
|                      |  | For the Year Ended December 31,
|                      |  | 2004                            |       | 2003 |   | 2002  
|Proceeds from sales   |  | $                               | 4,046 |      | $ | 10,481 |  | $ | 6,654
|Gross realized gains  |  |                                 | 285   |      |   | 305    |  |   | 346  
|Gross realized losses |  |                                 |      |      |   | 8      |  |   |     



NOTE 3 - LOANS RECEIVABLE



The Company grants mortgages and installment loans to and obtains
deposits from customers located primarily in Cook, DuPage, and Will Counties, Illinois. Substantially all loans are secured by specific items of collateral, primarily residential real estate and consumer assets.



(Continued)



F-16



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##### Table of Contents

PARK BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2004, 2003, and 2002

(Table amounts in thousands, except share and per share data)



NOTE 3 - LOANS RECEIVABLE(Continued)



Loans receivable are summarized as follows at:



|                                   |  |              |         |   |      |   |         |  
|---------------------------------- |  | ------------ | ------- | - | ---- | - | ------- | -
|                                   |  | December 31, |        
|                                   |  | 2004         |         |   | 2003 |  
|Mortgage loans                     |  |              |         |   |      |   |         |  
|Principal balances                 |  |              |         |   |      |   |         |  
|One-to-four-family residential     |  | $            | 95,966  |   |      | $ | 100,136 |  
|Multi-family residential           |  |              | 27,527  |   |      |   | 19,167  |  
|Commercial, construction, and land |  |              | 34,796  |   |      |   | 30,011  |  
|                                   |  |              |         |   |      |   |         |  
|                                   |  |              | 158,289 |   |      |   | 149,314 |  
|Undisbursed portion of loans       |  |              | (4,802  | ) |      |   | (1,812  | )
|Net deferred loan origination fees |  |              | (534    | ) |      |   | (526    | )
|                                   |  |              |         |   |      |   |         |  
|Total mortgage loans               |  |              | 152,953 |   |      |   | 146,976 |  
|Consumer loans                     |  |              | 7,429   |   |      |   | 5,796   |  
|Participations and loans purchased |  |              | 8,458   |   |      |   | 6,763   |  
|Allowance for loan losses          |  |              | (1,374  | ) |      |   | (578    | )
|                                   |  |              |         |   |      |   |         |  
|                                   |  | $            | 167,466 |   |      | $ | 158,957 |  
|                                   |  |              |         |   |      |   |         |  



A summary of activity in the allowance
for loan losses follows:



|                          |  |      |       |   |      |   |     |      |  |   |     |  
|------------------------- |  | ---- | ----- | - | ---- | - | --- | ---- |  | - | --- | -
|                          |  | 2004 |       |   | 2003 |   |     | 2002 | 
|Beginning balance         |  | $    | 578   |   |      | $ | 574 |      |  | $ | 500 |  
|Provision for loan losses |  |      | 816   |   |      |   |    |      |  |   | 120 |  
|Recoveries                |  |      |      |   |      |   | 26  |      |  |   |    |  
|Loans charged off         |  |      | (20   | ) |      |   | (22 | )    |  |   | (46 | )
|                          |  |      |       |   |      |   |     |      |  |   |     |  
|Ending balance            |  | $    | 1,374 |   |      | $ | 578 |      |  | $ | 574 |  
|                          |  |      |       |   |      |   |     |      |  |   |     |  



The Company had impaired loans
totaling $2,616,000 at December 31, 2004. An allowance of $816,000 has been established. The impaired loans of $2,616,000 became impaired during the fourth quarter of 2004. No interest income is being recognized during the impairment. There were no
impaired loans as of December 31, 2003 or 2002.



Nonperforming loans were as
follows:



|                                             |  |              |       |      |   |    
|-------------------------------------------- |  | ------------ | ----- | ---- | - | ---
|                                             |  | December 31,
|                                             |  | 2004         |       | 2003
|Loans past due over 90 days still on accrual |  | $            |      |      | $ |   
|Nonaccrual loans                             |  |              | 3,125 |      |   | 545



(Continued)



F-17



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##### Table of Contents

PARK BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2004, 2003, and 2002

(Table amounts in thousands, except share and per share data)



NOTE 3 - LOANS RECEIVABLE(Continued)



Nonperforming loans and impaired loans are defined differently. Some loans may be included in both categories, whereas other loans may only
be included in one category.



The Company has granted loans to certain
officers, directors, and their related interests. All such loans are current in their contractual payments for both principal and interest.



Activity in the loan accounts of officers, directors, and their related interests follows for the year ended December 31, 2004:



|                             |  |   |      |  
|---------------------------- |  | - | ---- | -
|Balance at beginning of year |  | $ | 804  |  
|Loans originated             |  |   | 334  |  
|Principal repayments         |  |   | (233 | )
|                             |  |   |      |  
|Balance at end of year       |  | $ | 905  |  
|                             |  |   |      |  



NOTE 4 - PREMISES AND EQUIPMENT



Premises and equipment consist of the following at:



|                                      |  |              |        |   |      |   |        |  
|------------------------------------- |  | ------------ | ------ | - | ---- | - | ------ | -
|                                      |  | December 31, |       
|                                      |  | 2004         |        |   | 2003 |  
|Cost                                  |  |              |        |   |      |   |        |  
|Land                                  |  | $            | 918    |   |      | $ | 944    |  
|Buildings and improvements            |  |              | 3,718  |   |      |   | 3,488  |  
|Real estate held for future expansion |  |              | 522    |   |      |   | 428    |  
|Furniture and fixtures                |  |              | 2,032  |   |      |   | 1,937  |  
|                                      |  |              |        |   |      |   |        |  
|Total cost                            |  |              | 7,190  |   |      |   | 6,797  |  
|Less accumulated depreciation         |  |              | (2,375 | ) |      |   | (2,170 | )
|                                      |  |              |        |   |      |   |        |  
|                                      |  | $            | 4,815  |   |      | $ | 4,627  |  
|                                      |  |              |        |   |      |   |        |  



(Continued)



F-18



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##### Table of Contents

PARK BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2004, 2003, and 2002

(Table amounts in thousands, except share and per share data)



NOTE 5 - DEPOSITS



Certificate of deposit accounts with balances of $100,000 or more totaled $13,637,000 at December 31, 2004 and $14,878,000 at December 31, 2003.



At December 31, 2004, scheduled maturities of certificates of deposit are as follows:



|           |  |   |        
|---------- |  | - | -------
|2005       |  | $ | 72,415 
|2006       |  |   | 14,662 
|2007       |  |   | 8,483  
|2008       |  |   | 3,742  
|2009       |  |   | 3,296  
|Thereafter |  |   | 376    
|           |  |   |        
|           |  | $ | 102,974
|           |  |   |        



NOTE 6 - FEDERAL HOME LOAN ADVANCES



At year-end, advances from the Federal Home Loan Bank were as follows:



|                                                                                           |  |      |        |   |      |   |        |  
|------------------------------------------------------------------------------------------ |  | ---- | ------ | - | ---- | - | ------ | -
|                                                                                           |  | 2004 |        |   | 2003 |  
|Maturities January 2004 through July 2011, primarily fixed rates from 1.24% to 4.95%       |  | $    | 61,871 |   |      | $ | 53,175 |  
|                                                                                           |  |     
|Maturity July 2007, at a current floating rate of 1 month LIBOR +2.00% with a cap of 5.00% |  |      | 2,000  |   |      |   | 2,000  |  
|                                                                                           |  |      |        |   |      |   |        |  
|Total                                                                                      |  | $    | 63,871 |   |      | $ | 55,175 |  
|                                                                                           |  |      |        |   |      |   |        |  
|Average interest rate                                                                      |  |      | 3.29   | % |      |   | 3.05   | %



The Company will incur a penalty if
the advances are repaid prior to their maturity dates. Advances totaling $20.0 million are callable quarterly in whole or in part by the FHLB.



The Company maintains a collateral pledge agreement covering advances whereby the Company has agreed to at all times keep on hand, free of all other pledges, liens, and
encumbrances, fully disbursed, whole first mortgages on improved residential property not more than 90 days delinquent, aggregating no less than 145% of the outstanding advances from the FHLB.



(Continued)



F-19



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##### Table of Contents

PARK BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2004, 2003, and 2002

(Table amounts in thousands, except share and per share data)



NOTE 6 - FEDERAL HOME LOAN ADVANCES(Continued)



Maturities over the next five years and thereafter are:



|           |  |   |       
|---------- |  | - | ------
|2005       |  | $ | 18,706
|2006       |  |   | 14,333
|2007       |  |   | 3,885 
|2008       |  |   | 10,311
|2009       |  |   | 6,636 
|Thereafter |  |   | 10,000
|           |  |   |       
|           |  | $ | 63,871
|           |  |   |       



NOTE 7 - EMPLOYEE BENEFIT PLANS



The Bank maintains a 401(k) plan covering substantially all employees.
The plan allows participant salary deferrals into the plan along with a matching contribution provided by the Bank. Contributions to the 401(k) plan are made at the discretion of the Board of Directors and charged to expense annually. Total
contributions to the plan were $72,000, $71,000, and $62,000 for 2004, 2003, and 2002, respectively.



The Bank maintains a nonqualified supplemental executive retirement plan (SERP) to provide certain officers and highly compensated employees with additional retirement benefits. The SERP is designed to
restore benefits to participants in the qualified plan whose retirement benefits were reduced as the result of changes in the Internal Revenue Code. SERP expense was $55,000, $97,000, and $79,000 for 2004, 2003, and 2002, respectively.



The Bank established an ESOP for the benefit of substantially all employees. The ESOP
borrowed $2,160,990 from the Company and used those funds to acquire 216,099 shares of the Companys stock at $10 per share, the initial public offering price.



Shares issued to the ESOP are allocated to ESOP participants based on principal repayments made by the ESOP on the loan from the Company.
The loan is secured by shares purchased with the loan proceeds and will be repaid by the ESOP with funds from the Banks discretionary contributions to the ESOP and earnings on ESOP assets. Principal payments are scheduled to occur over a
fifteen-year period. However, in the event the Banks contributions exceed the minimum debt service requirements, additional principal payments will be made.



(Continued)



F-20



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##### Table of Contents

PARK BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2004, 2003, and 2002

(Table amounts in thousands, except share and per share data)



NOTE 7 - EMPLOYEE BENEFIT PLANS (Continued)



During 2004, 2003, and 2002, 13,904, 14,573, and 15,242 shares of stock, with an average fair value of $30.76, $26.80, and $21.23 per share were committed to be
released, resulting in ESOP compensation expense of $428,000, $390,000, and $324,000, respectively. ESOP shares increased 3,442 as of December 31, 2004 due to shares being purchased with dividends received on allocated shares. ESOP shares had been
reduced by 0 and 152 as of December 31, 2004 and 2003, respectively, because of terminations. Shares held by the ESOP at December 31, 2004 and 2003 are as follows:



|                                 |  |      |         |      |   |        
|-------------------------------- |  | ---- | ------- | ---- | - | -------
|                                 |  | 2004 |         | 2003
|Allocated shares                 |  |      | 138,278 |      |   | 120,932
|Unallocated shares               |  |      | 69,384  |      |   | 83,288 
|                                 |  |      |         |      |   |        
|Total ESOP shares                |  |      | 207,662 |      |   | 204,220
|                                 |  |      |         |      |   |        
|Fair value of unallocated shares |  | $    | 2,130   |      | $ | 2,420  
|                                 |  |      |         |      |   |        



The Company adopted a stock option
plan in 1997 under the terms of which 270,144 shares of the Companys common stock were reserved for issuance. All options granted become exercisable over a five-year period from the date of grant. All options granted expire ten years from the
date of grant.



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



|                                 |  |         |   |      |                              |       |        |         |   |                              |   |        |  |         |                              |  |   |      
|-------------------------------- |  | ------- | - | ---- | ---------------------------- | ----- | ------ | ------- | - | ---------------------------- | - | ------ |  | ------- | ---------------------------- |  | - | -----
|                                 |  | 2004    |   | 2003 |                              | 2002 
|                                 |  | Shares  |   |      | WeightedAverageExercisePrice |       | Shares |         |   | WeightedAverageExercisePrice |   | Shares |  |         | WeightedAverageExercisePrice
|Outstanding at beginning of year |  | 238,447 |   |      | $                            | 17.09 |        | 207,117 |   |                              | $ | 15.72  |  | 224,807 |                              |  | $ | 15.72
|Granted                          |  |        |   |      |                              |      |        | 45,337  |   |                              |   | 22.95  |  |        |                              |  |   |     
|Exercised                        |  | (1,000  | ) |      |                              | 15.44 |        | (14,007 | ) |                              |   | 15.74  |  | (17,690 | )                            |  |   | 15.75
|Forfeited                        |  |        |   |      |                              |       |        |        |   |                              |   |        |  |        |                              |  |   |     
|                                 |  |         |   |      |                              |       |        |         |   |                              |   |        |  |         |                              |  |   |      
|Outstanding at end of year       |  | 237,447 |   |      |                              | 17.10 |        | 238,447 |   |                              |   | 17.09  |  | 207,117 |                              |  |   | 15.72
|                                 |  |         |   |      |                              |       |        |         |   |                              |   |        |  |         |                              |  |   |      
|Options exercisable at year end  |  | 201,177 |   |      |                              | 16.05 |        | 188,346 |   |                              |   | 15.72  |  | 197,589 |                              |  |   | 15.73



(Continued)



F-21



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##### Table of Contents

PARK BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2004, 2003, and 2002

(Table amounts in thousands, except share and per share data)



NOTE 7- EMPLOYEE BENEFIT PLANS (Continued)



At December 31, 2004, the options have a weighted average remaining life of four years. The exercise price equaled the market value on the date the options were
granted. Exercise prices range from $15.44 to $22.95.



The Company adopted an
Incentive Compensation Plan during 2003 under the terms of which 100,000 shares of the Companys common stock were reserved for issuance. Of the shares authorized for issuance under the plan, up to 40,000 may be issued with respect to awards of
restricted stock and restricted units and up to 40,000 may be issued pursuant to stock options under which the exercise price was less than the fair market value (but not less than 50% of the fair market value) of a share of common stock on the date
the award was granted. In addition, as required by Code Section 162(m), the plan includes a limit of 50,000 shares of common stock as the maximum number of shares that may be subject to awards made to any one individual. At December 31, 2004, no
shares have been granted.



NOTE 8 - EARNINGS PER SHARE



The following table presents a reconciliation of the components used to compute basic and
diluted earnings per share for 2004, 2003, and 2002:



|                                                           |  |      |           |      |   |           |  |   |          
|---------------------------------------------------------- |  | ---- | --------- | ---- | - | --------- |  | - | ---------
|                                                           |  | 2004 |           | 2003 |   | 2002     
|Basic earnings per share                                   |  |      |           |      |   |           |  |   |          
|Net income available to common stockholders                |  | $    | 2,528     |      | $ | 2,250     |  | $ | 2,165    
|Weighted average common shares outstanding                 |  |      | 1,070,497 |      |   | 1,091,205 |  |   | 1,126,266
|                                                           |  |      |           |      |   |           |  |   |          
|Basic earnings per share                                   |  | $    | 2.36      |      | $ | 2.06      |  | $ | 1.92     
|                                                           |  |      |           |      |   |           |  |   |          
|Diluted earnings per share                                 |  |      |           |      |   |           |  |   |          
|Net income available to common stockholders                |  | $    | 2,528     |      | $ | 2,250     |  | $ | 2,165    
|Weighted average common shares outstanding                 |  |      | 1,070,497 |      |   | 1,091,205 |  |   | 1,126,266
|Dilutive effect of stock options                           |  |      | 95,510    |      |   | 84,468    |  |   | 50,018   
|                                                           |  |      |           |      |   |           |  |   |          
|Average common shares and dilutive potential common shares |  |      | 1,166,007 |      |   | 1,175,673 |  |   | 1,176,284
|                                                           |  |      |           |      |   |           |  |   |          
|Diluted earnings per share                                 |  | $    | 2.17      |      | $ | 1.91      |  | $ | 1.84     
|                                                           |  |      |           |      |   |           |  |   |          



(Continued)



F-22



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##### Table of Contents

PARK BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2004, 2003, and 2002

(Table amounts in thousands, except share and per share data)



NOTE 9 - REGULATORY CAPITAL



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



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



At year end, the Banks actual capital levels and minimum required levels
were:



|                                                 |  |        |        |       |                                              |   |        |                                                                                   |        |  |     |        |  |       |        |  |      |  
|------------------------------------------------ |  | ------ | ------ | ----- | -------------------------------------------- | - | ------ | --------------------------------------------------------------------------------- | ------ |  | --- | ------ |  | ----- | ------ |  | ---- | -
|                                                 |  | Actual |        |       | Minimum Requiredfor CapitalAdequacy Purposes |   |        | Minimum Required to Be Well Capitalized Under Prompt CorrectiveAction Regulations |       
|                                                 |  | Amount |        | Ratio |                                              |   | Amount |                                                                                   | Ratio  |  |     | Amount |  | Ratio |       
|2004                                             |  |        |        |       |                                              |   |        |                                                                                   |        |  |     |        |  |       |        |  |      |  
|Total capital (to risk-weighted assets)          |  | $      | 29,329 |       | 17.5                                         | % |        | $                                                                                 | 13,446 |  | 8.0 | %      |  | $     | 16,808 |  | 10.0 | %
|Tier 1 (core) capital (to risk-weighted assets)  |  |        | 27,955 |       | 16.6                                         |   |        |                                                                                   | 6,736  |  | 4.0 |        |  |       | 10,104 |  | 6.0  |  
|Tier 1 (core) capital (to adjusted total assets) |  |        | 27,955 |       | 10.5                                         |   |        |                                                                                   | 10,631 |  | 4.0 |        |  |       | 13,289 |  | 5.0  |  
|                                                 |  |        |        |       |                                              |  
|2003                                             |  |        |        |       |                                              |   |        |                                                                                   |        |  |     |        |  |       |        |  |      |  
|Total capital (to risk-weighted assets)          |  | $      | 25,406 |       | 16.0                                         | % |        | $                                                                                 | 12,713 |  | 8.0 | %      |  | $     | 15,892 |  | 10.0 | %
|Tier 1 (core) capital (to risk-weighted assets)  |  |        | 24,828 |       | 15.6                                         |   |        |                                                                                   | 6,357  |  | 4.0 |        |  |       | 9,535  |  | 6.0  |  
|Tier 1 (core) capital (to adjusted total assets) |  |        | 24,828 |       | 9.5                                          |   |        |                                                                                   | 10,490 |  | 4.0 |        |  |       | 13,113 |  | 5.0  |  



The Bank at December 31, 2004 was
categorized as well capitalized. Management is not aware of any conditions or events since the most recent notification that would change the Banks category.



(Continued)



F-23



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##### Table of Contents

PARK BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2004, 2003, and 2002

(Table amounts in thousands, except share and per share data)



NOTE 9 - REGULATORY CAPITAL (Continued)



Federal regulations require the Qualified Thrift Lender (QTL) test, which mandates that approximately 65% of assets be maintained in housing-related finance
and other specified areas. If the QTL test is not met, limits are placed on growth, branching, new investments, and FHLB advances or the Bank must convert to a commercial bank charter. Management believes that this test is met.



NOTE 10 - INCOME TAXES



Federal income tax expense consists of the following:



|                       |  |      |       |      |   |       |  |   |       |  
|---------------------- |  | ---- | ----- | ---- | - | ----- |  | - | ----- | -
|                       |  | 2004 |       | 2003 |   | 2002  | 
|Currently payable tax  |  | $    | 1,132 |      | $ | 1,114 |  | $ | 1,073 |  
|Deferred tax (benefit) |  |      | 30    |      |   | 27    |  |   | (37   | )
|                       |  |      |       |      |   |       |  |   |       |  
|Income tax expense     |  | $    | 1,162 |      | $ | 1,141 |  | $ | 1,036 |  
|                       |  |      |       |      |   |       |  |   |       |  



Due to interest income earned on
certain U.S. government agency securities, there was no state income tax expense in 2004, 2003, or 2002. The state of Illinois does not tax interest earned on such securities.



The federal income tax expense differs from the amounts determined by applying the statutory federal income tax rate of 34% to income before
income taxes as a result of the following items:



|                                          |  |        |       |   |                                      |      |   |        |   |       |                                      |  |      |        |  |   |                                      |   |  |      |  
|----------------------------------------- |  | ------ | ----- | - | ------------------------------------ | ---- | - | ------ | - | ----- | ------------------------------------ |  | ---- | ------ |  | - | ------------------------------------ | - |  | ---- | -
|                                          |  | 2004   |       |   | 2003                                 |      |   | 2002   |  
|                                          |  | Amount |       |   | Percentageof IncomeBeforeIncomeTaxes |      |   | Amount |   |       | Percentageof IncomeBeforeIncomeTaxes |  |      | Amount |  |   | Percentageof IncomeBeforeIncomeTaxes |  
|Income tax computed at the statutory rate |  | $      | 1,255 |   |                                      | 34.0 | % |        | $ | 1,153 |                                      |  | 34.0 | %      |  | $ | 1,088                                |   |  | 34.0 | %
|ESOP expense                              |  |        | 98    |   |                                      | 2.6  |   |        |   | 83    |                                      |  | 2.4  |        |  |   | 58                                   |   |  | 1.8  |  
|Tax-exempt income                         |  |        |      |   |                                      |     |   |        |   | (12   | )                                    |  | (0.4 | )      |  |   | (19                                  | ) |  | (0.6 | )
|Bank-owned life insurance                 |  |        | (75   | ) |                                      | (2.0 | ) |        |   | (84   | )                                    |  | (2.5 | )      |  |   | (92                                  | ) |  | (2.9 | )
|Other items, net                          |  |        | (116  | ) |                                      | (3.1 | ) |        |   | 1     |                                      |  | 1    |        |  |   | 1                                    |   |  | 1    |  
|                                          |  |        |       |   |                                      |      |   |        |   |       |                                      |  |      |        |  |   |                                      |   |  |      |  
|                                          |  | $      | 1,162 |   |                                      | 31.5 | % |        | $ | 1,141 |                                      |  | 33.6 | %      |  | $ | 1,036                                |   |  | 32.4 | %
|                                          |  |        |       |   |                                      |      |   |        |   |       |                                      |  |      |        |  |   |                                      |   |  |      |  



(Continued)



F-24



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##### Table of Contents

PARK BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2004, 2003, and 2002

(Table amounts in thousands, except share and per share data)



NOTE 10 - INCOME TAXES(Continued)



Prior to 1997, the Bank had qualified under provisions of the Internal Revenue Code that allowed it to deduct from taxable income a provision based on a percentage of
taxable income which differed from the provision charged to income. Retained earnings at December 31, 2004 include approximately $3,298,000 for which no deferred federal income tax liability has been recorded. The amount of deferred tax liabilities
related to this approximates $1,121,000.



Deferred tax assets (liabilities) are
comprised of the following at year end:



|                                              |  |      |      |   |      |   |      |  
|--------------------------------------------- |  | ---- | ---- | - | ---- | - | ---- | -
|                                              |  | 2004 |      |   | 2003 |  
|Deferred loan fees                            |  | $    | 182  |   |      | $ | 179  |  
|ESOP and Supplemental Retirement Plan expense |  |      | 206  |   |      |   | 189  |  
|Bad debt deduction                            |  |      | 467  |   |      |   | 197  |  
|                                              |  |      |      |   |      |   |      |  
|                                              |  |      | 855  |   |      |   | 565  |  
|                                              |  |     
|Unrealized gain on securities held for sale   |  |      | (15  | ) |      |   | (287 | )
|FHLB stock dividends                          |  |      | (518 | ) |      |   | (362 | )
|Depreciation                                  |  |      | (339 | ) |      |   | (171 | )
|Other                                         |  |      | (13  | ) |      |   | (18  | )
|                                              |  |      |      |   |      |   |      |  
|                                              |  |      | (885 | ) |      |   | (838 | )
|                                              |  |      |      |   |      |   |      |  
|Net deferred tax liability                    |  | $    | (30  | ) |      | $ | (273 | )
|                                              |  |      |      |   |      |   |      |  



NOTE 11 - COMMITMENTS



The Company is a party to financial instruments with off-balance-sheet
risk in the normal course of business to meet the financing needs of its customers. These financial instruments consist of standby letters of credit and commitments to make loans and fund loans in process.



The Companys exposure to credit loss in the event of nonperformance by the other party
to these financial instruments is represented by the contractual amount of these instruments. The Company follows the same credit policy to make such commitments as is followed for those loans recorded on the statement of financial condition.



(Continued)



F-25



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##### Table of Contents

PARK BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2004, 2003, and 2002

(Table amounts in thousands, except share and per share data)



NOTE 11 - COMMITMENTS(Continued)



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



|                                           |  |      |       |      |   |      
|------------------------------------------ |  | ---- | ----- | ---- | - | -----
|                                           |  | 2004 |       | 2003
|Commitments to make loans (all fixed rate) |  | $    | 1,856 |      | $ | 1,763
|Unused lines of credit                     |  |      | 4,010 |      |   | 3,632
|Letters of credit                          |  |      | 960   |      |   | 1,527
|Loans in process                           |  |      | 4,802 |      |   | 1,812



The loan commitments at December 31,
2004 have terms of up to 60 days and rates in the range of 5.25% to 6.50%.



Since certain commitments to make loans and fund loans in process may expire without being used, the amounts above do not necessarily represent future cash commitments. No losses are anticipated as a result of these transactions.



NOTE 12 - FAIR VALUES OF FINANCIAL INSTRUMENTS



The carrying amount and estimated fair value of financial instruments at year end are as
follows:



|                                                |  |                |          |   |                     |   |          |                |  |   |                     |   |  |   |          |  
|----------------------------------------------- |  | -------------- | -------- | - | ------------------- | - | -------- | -------------- |  | - | ------------------- | - |  | - | -------- | -
|                                                |  | 2004           |          |   | 2003                |  
|                                                |  | CarryingAmount |          |   | EstimatedFair Value |   |          | CarryingAmount |  |   | EstimatedFair Value |  
|Financial assets                                |  |                |          |   |                     |   |          |                |  |   |                     |   |  |   |          |  
|Cash and cash equivalents                       |  | $              | 13,752   |   |                     | $ | 13,752   |                |  | $ | 11,081              |   |  | $ | 11,081   |  
|Time deposits in other financial institutions   |  |                | 1,087    |   |                     |   | 1,087    |                |  |   | 1,151               |   |  |   | 1,151    |  
|Securities available-for-sale                   |  |                | 59,728   |   |                     |   | 59,728   |                |  |   | 72,058              |   |  |   | 72,058   |  
|Loans receivable, net                           |  |                | 167,466  |   |                     |   | 169,540  |                |  |   | 158,957             |   |  |   | 161,036  |  
|FHLB stock                                      |  |                | 11,136   |   |                     |   | 11,136   |                |  |   | 10,109              |   |  |   | 10,109   |  
|Accrued interest receivable                     |  |                | 1,185    |   |                     |   | 1,185    |                |  |   | 1,244               |   |  |   | 1,244    |  
|                                                |  |                |          |  
|Financial liabilities                           |  |                |          |   |                     |   |          |                |  |   |                     |   |  |   |          |  
|Deposits with no fixed maturity dates           |  | $              | (63,151  | ) |                     | $ | (63,151  | )              |  | $ | (63,769             | ) |  | $ | (63,769  | )
|Deposits with fixed maturity dates              |  |                | (102,974 | ) |                     |   | (102,697 | )              |  |   | (106,693            | ) |  |   | (107,814 | )
|Securities sold under repurchase agreements     |  |                | (3,369   | ) |                     |   | (3,369   | )              |  |   | (6,904              | ) |  |   | (6,904   | )
|Advances from borrowers for taxes and insurance |  |                | (2,283   | ) |                     |   | (2,283   | )              |  |   | (2,081              | ) |  |   | (2,081   | )
|FHLB advances                                   |  |                | (63,871  | ) |                     |   | (64,749  | )              |  |   | (55,175             | ) |  |   | (57,028  | )
|Accrued interest payable                        |  |                | (386     | ) |                     |   | (386     | )              |  |   | (364                | ) |  |   | (364     | )



(Continued)



F-26



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##### Table of Contents

PARK BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2004, 2003, and 2002

(Table amounts in thousands, except share and per share data)



NOTE 12 - FAIR VALUES OF FINANCIAL INSTRUMENTS (Continued)



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



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



Other assets and liabilities of the Company not defined as financial instruments, such as property and equipment, are not included in the
above disclosures. Also not included are nonfinancial instruments typically not recognized in financial statements such as the value of core deposits, customer goodwill, and similar items.



While the above estimates are based on managements judgment of the most appropriate
factors, there is no assurance that if the Company disposed of these items on December 31, 2004 or December 31, 2003, the fair values would have been achieved, because the market value may differ depending on the circumstances. The estimated fair
values at December 31, 2004 and December 31, 2003 should not necessarily be considered to apply at subsequent dates.



NOTE 13 - OTHER COMPREHENSIVE INCOME



Other comprehensive income components and related taxes were as follows.



|                                                                     |  |      |      |   |      |   |      |      |  |   |       |  
|-------------------------------------------------------------------- |  | ---- | ---- | - | ---- | - | ---- | ---- |  | - | ----- | -
|                                                                     |  | 2004 |      |   | 2003 |   |      | 2002 | 
|Unrealized holding gains and losses on securities available-for-sale |  | $    | (516 | ) |      | $ | (181 | )    |  | $ | 1,735 |  
|Reclassification adjustments for gains recorded in income            |  |      | (285 | ) |      |   | (297 | )    |  |   | (346  | )
|                                                                     |  |      |      |   |      |   |      |      |  |   |       |  
|Net unrealized gains and losses                                      |  |      | (801 | ) |      |   | (478 | )    |  |   | 1,389 |  
|Tax effect                                                           |  |      | 272  |   |      |   | 155  |      |  |   | (465  | )
|                                                                     |  |      |      |   |      |   |      |      |  |   |       |  
|Other comprehensive income (loss)                                    |  | $    | (529 | ) |      | $ | (323 | )    |  | $ | 924   |  
|                                                                     |  |      |      |   |      |   |      |      |  |   |       |  



(Continued)



F-27



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##### Table of Contents

PARK BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2004, 2003, and 2002

(Table amounts in thousands, except share and per share data)



NOTE 14 - PARENT COMPANY FINANCIAL STATEMENTS



Presented below are the condensed statements of financial condition, statements of income, and statements of cash flows for Park Bancorp,
Inc.



CONDENSED STATEMENTS OF FINANCIAL CONDITION

December 31, 2004 and 2003



|                                                 |  |      |        |      |   |       
|------------------------------------------------ |  | ---- | ------ | ---- | - | ------
|                                                 |  | 2004 |        | 2003
|ASSETS                                           |  |      |        |      |   |       
|Cash and cash equivalents                        |  | $    | 997    |      | $ | 1,598 
|Securities available-for-sale                    |  |      | 607    |      |   | 1,115 
|Loans receivable, net                            |  |      | 157    |      |   | 78    
|ESOP loan                                        |  |      | 849    |      |   | 990   
|Investment in bank subsidiary                    |  |      | 28,300 |      |   | 25,871
|Investment in real estate development subsidiary |  |      | 1      |      |   | 1     
|Accrued interest receivable and other assets     |  |      |       |      |   | 63    
|                                                 |  |      |        |      |   |       
|Total assets                                     |  | $    | 30,911 |      | $ | 29,716
|                                                 |  |      |        |      |   |       
|LIABILITIES AND STOCKHOLDERS EQUITY             |  |      |        |      |   |       
|Liabilities                                      |  |      |        |      |   |       
|Accrued expenses and other liabilities           |  | $    | 4      |      | $ | 176   
|Stockholders equity                             |  |      | 30,907 |      |   | 29,540
|                                                 |  |      |        |      |   |       
|Total liabilities and stockholders equity       |  | $    | 30,911 |      | $ | 29,716
|                                                 |  |      |        |      |   |       



(Continued)



F-28



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##### Table of Contents

PARK BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2004, 2003, and 2002

(Table amounts in thousands, except share and per share data)



NOTE 14 - PARENT COMPANY FINANCIAL STATEMENTS (Continued)



CONDENSED STATEMENTS OF INCOME

For the years ended December 31, 2004, 2003, and 2002



|                                                                                |  |      |       |   |      |   |       |      |  |   |       |  
|------------------------------------------------------------------------------- |  | ---- | ----- | - | ---- | - | ----- | ---- |  | - | ----- | -
|                                                                                |  | 2004 |       |   | 2003 |   |       | 2002 | 
|Operating income                                                                |  |      |       |   |      |   |       |      |  |   |       |  
|Dividends from subsidiaries                                                     |  | $    |      |   |      | $ |      |      |  | $ |      |  
|Gains on sales of securities                                                    |  |      | 119   |   |      |   | 113   |      |  |   | 242   |  
|Interest income                                                                 |  |      |       |   |      |   |       |      |  |   |       |  
|Securities (including dividends)                                                |  |      | 33    |   |      |   | 80    |      |  |   | 213   |  
|Loans                                                                           |  |      | 10    |   |      |   | 17    |      |  |   |      |  
|ESOP loan                                                                       |  |      | 72    |   |      |   | 82    |      |  |   | 92    |  
|Interest-bearing deposits with other financial institutions                     |  |      | 11    |   |      |   | 15    |      |  |   | 31    |  
|                                                                                |  |      |       |   |      |   |       |      |  |   |       |  
|Total operating income                                                          |  |      | 245   |   |      |   | 307   |      |  |   | 578   |  
|Operating expenses                                                              |  |      |       |   |      |   |       |      |  |   |       |  
|Interest on borrowings                                                          |  |      |      |   |      |   |      |      |  |   | 10    |  
|Other expenses                                                                  |  |      | 292   |   |      |   | 306   |      |  |   | 274   |  
|                                                                                |  |      |       |   |      |   |       |      |  |   |       |  
|Total operating expenses                                                        |  |      | 292   |   |      |   | 306   |      |  |   | 284   |  
|                                                                                |  |      |       |   |      |   |       |      |  |   |       |  
|Income before income taxes and equity in undistributed earnings of subsidiaries |  |      | (47   | ) |      |   | 1     |      |  |   | 294   |  
|Income taxes                                                                    |  |      | (125  | ) |      |   | (14   | )    |  |   | 77    |  
|                                                                                |  |      |       |   |      |   |       |      |  |   |       |  
|Income before equity in undistributed earnings of subsidiaries                  |  |      | 78    |   |      |   | 15    |      |  |   | 217   |  
|                                                                                |  |      |      
|Equity in undistributed earnings of bank subsidiary                             |  |      | 2,448 |   |      |   | 2,235 |      |  |   | 1,956 |  
|Equity in undistributed earnings of real estate subsidiary                      |  |      | 2     |   |      |   |      |      |  |   | (8    | )
|                                                                                |  |      |       |   |      |   |       |      |  |   |       |  
|Net income                                                                      |  | $    | 2,528 |   |      | $ | 2,250 |      |  | $ | 2,165 |  
|                                                                                |  |      |       |   |      |   |       |      |  |   |       |  



(Continued)



F-29



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##### Table of Contents

PARK BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2004, 2003, and 2002

(Table amounts in thousands, except share and per share data)



NOTE 14 - PARENT COMPANY FINANCIAL STATEMENTS (Continued)



CONDENSED STATEMENT OF CASH FLOWS

For the years ended December 31, 2004, 2003, and 2002



|                                                                          |  |      |        |   |      |   |        |      |  |   |        |  
|------------------------------------------------------------------------- |  | ---- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                                                          |  | 2004 |        |   | 2003 |   |        | 2002 | 
|Cash flows from operating activities                                      |  |      |        |   |      |   |        |      |  |   |        |  
|Net income                                                                |  | $    | 2,528  |   |      | $ | 2,250  |      |  | $ | 2,165  |  
|Adjustments to reconcile net income to net cash from operating activities |  |      |        |   |      |   |        |      |  |   |        |  
|Net discount accretion                                                    |  |      |       |   |      |   | (34    | )    |  |   | (39    | )
|Gain on sale of securities available-for-sale                             |  |      | (119   | ) |      |   | (113   | )    |  |   | (242   | )
|Equity in undistributed earnings of subsidiaries                          |  |      | (2,450 | ) |      |   | (2,235 | )    |  |   | (1,948 | )
|Change in                                                                 |  |      |        |   |      |   |        |      |  |   |        |  
|Other assets                                                              |  |      | 19     |   |      |   | (67    | )    |  |   | (27    | )
|Other liabilities                                                         |  |      | (172   | ) |      |   | 175    |      |  |   | (198   | )
|                                                                          |  |      |        |   |      |   |        |      |  |   |        |  
|Net cash from operating activities                                        |  |      | (194   | ) |      |   | (24    | )    |  |   | (289   |  
|Cash flows from investing activities                                      |  |      |        |   |      |   |        |      |  |   |        |  
|Purchase of securities available-for-sale                                 |  |      | (282   | ) |      |   | (543   | )    |  |   | (716   | )
|Sale of securities available-for-sale                                     |  |      | 873    |   |      |   | 1,444  |      |  |   | 1,495  |  
|Maturities and calls of securities available-for-sale                     |  |      |       |   |      |   |       |      |  |   | 4,000  |  
|Net change in loans receivable                                            |  |      | (79    | ) |      |   | (78    | )    |  |   |       |  
|Payment received on ESOP loan                                             |  |      | 141    |   |      |   | 141    |      |  |   | 142    |  
|Capital contribution to subsidiary                                        |  |      |       |   |      |   |       |      |  |   | (61    | )
|                                                                          |  |      |        |   |      |   |        |      |  |   |        |  
|Net cash from investing activities                                        |  |      | 653    |   |      |   | 964    |      |  |   | 4,860  |  
|Cash flows from financing activities                                      |  |      |        |   |      |   |        |      |  |   |        |  
|Net change in securities sold under repurchase agreements                 |  |      |       |   |      |   |       |      |  |   | (968   | )
|Stock options exercised                                                   |  |      | 15     |   |      |   | 221    |      |  |   | 278    |  
|Purchase of treasury stock                                                |  |      | (339   | ) |      |   | (2,240 | )    |  |   | (472   | )
|Dividends paid to stockholders                                            |  |      | (736   | ) |      |   | (652   | )    |  |   | (603   | )
|                                                                          |  |      |        |   |      |   |        |      |  |   |        |  
|Net cash from financing activities                                        |  |      | (1,060 | ) |      |   | (2,671 | )    |  |   | (1,765 | )
|                                                                          |  |      |        |   |      |   |        |      |  |   |        |  
|Net change in cash and cash equivalents                                   |  |      | (601   | ) |      |   | (1,731 | )    |  |   | 2,806  |  
|Cash and cash equivalents at beginning of year                            |  |      | 1,598  |   |      |   | 3,329  |      |  |   | 523    |  
|                                                                          |  |      |        |   |      |   |        |      |  |   |        |  
|Cash and cash equivalents at end of year                                  |  | $    | 997    |   |      | $ | 1,598  |      |  | $ | 3,329  |  
|                                                                          |  |      |        |   |      |   |        |      |  |   |        |  



(Continued)



F-30



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##### Table of Contents

PARK BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2004, 2003, and 2002

(Table amounts in thousands, except share and per share data)



NOTE 15 - QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)



|               |  |                |       |                   |   |           |  |                        |     |                               |   |     |  |   |    
|-------------- |  | -------------- | ----- | ----------------- | - | --------- |  | ---------------------- | --- | ----------------------------- | - | --- |  | - | ---
|               |  | InterestIncome |       | NetInterestIncome |   | NetIncome |  | EarningsPer ShareBasic |     | EarningsPer ShareFullyDiluted
|2004           |  |                |       |                   |   |           |  |                        |     |                               |   |     |  |   |    
|First quarter  |  | $              | 3,482 |                   | $ | 2,213     |  | $                      | 664 |                               | $ | .62 |  | $ | .57
|Second quarter |  |                | 3,342 |                   |   | 2,066     |  |                        | 564 |                               |   | .53 |  |   | .48
|Third quarter  |  |                | 3,436 |                   |   | 2,101     |  |                        | 642 |                               |   | .60 |  |   | .55
|Fourth quarter |  |                | 3,429 |                   |   | 2,032     |  |                        | 658 |                               |   | .61 |  |   | .57
|               |  |                |       |                   |  
|2003           |  |                |       |                   |   |           |  |                        |     |                               |   |     |  |   |    
|First quarter  |  | $              | 3,459 |                   | $ | 1,835     |  | $                      | 489 |                               | $ | .44 |  | $ | .42
|Second quarter |  |                | 3,264 |                   |   | 1,670     |  |                        | 395 |                               |   | .36 |  |   | .33
|Third quarter  |  |                | 3,433 |                   |   | 1,974     |  |                        | 692 |                               |   | .64 |  |   | .59
|Fourth quarter |  |                | 3,497 |                   |   | 2,202     |  |                        | 674 |                               |   | .62 |  |   | .57



F-31