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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2005

PARK BANCORP, INC.

(Exact name of registrant as specified in its charter)

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)

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)

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

Yes ̈No  x

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

Yes ̈No  x

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. x

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



|                         |  |                    |  |                        
|------------------------ |  | ------------------ |  | -----------------------
|Large accelerated filer ̈ |  | Accelerated filer ̈ |  | Non-accelerated filer x

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

The aggregate market value of the common stock of the Registrant held by non-affiliates was approximately $27,572,000 based on the
closing price of the common stock of $30.50 on June 30, 2005.

As of March 17, 2006, the Registrant had outstanding 1,125,275 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 3, 2006 are incorporated into Part III.



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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 in Illinois.

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.



2.



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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, 2005, the Bank had total gross loans outstanding of $167.5 million, of which $89.9 million were one-to-four family residential
mortgage loans, or 53.69% of the Banks total gross loans. The remainder of the portfolio consists of $27.9 million of multi-family mortgage loans, or 16.68% of total gross loans; $18.1 million of commercial real estate loans, or 10.84% of
total gross loans; $14.6 million of construction and land loans, or 8.71% of total gross loans; and consumer and other loans of $16.9 million, or 10.08% of total gross loans. The Bank had no loans held for sale at December 31, 2005.

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.



3.



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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, |        
|                                   |  | 2005            |         |   | 2004            |        |   | 2003   |   |         | 2002            |  |        | 2001   | 
|                                   |  | Amount          |         |   | Percentof Total |        |   | Amount |   |         | Percentof Total |  |        | Amount |  |   | Percentof Total |   |  | Amount |   |  | Percentof Total |         |   | Amount |        |   | Percentof Total |  
|Real estate                        |  |                 |         |   |                 |        |   |        |   |         |                 |  |        |        |  |   |                 |   |  |        |   |  |                 |         |   |        |        |   |                 |   |         |   |  |        |  
|Residential                        |  |                 |         |   |                 |        |   |        |   |         |                 |  |        |        |  |   |                 |   |  |        |   |  |                 |         |   |        |        |   |                 |   |         |   |  |        |  
|One-to-four-family                 |  | $               | 89,904  |   |                 | 53.69  |   |        | $ | 95,966  |                 |  | 55.10  | %      |  | $ | 100,136         |   |  | 61.86  | % |  | $               | 96,351  |   |        | 62.46  | % |                 | $ | 87,620  |   |  | 63.00  | %
|Multi-family                       |  |                 | 27,939  |   |                 | 16.68  |   |        |   | 27,527  |                 |  | 15.80  |        |  |   | 19,167          |   |  | 11.84  |   |  |                 | 17,977  |   |        | 11.65  |   |                 |   | 17,279  |   |  | 12.43  |  
|Commercial                         |  |                 | 18,145  |   |                 | 10.84  |   |        |   | 19,247  |                 |  | 11.05  |        |  |   | 16,998          |   |  | 10.50  |   |  |                 | 9,607   |   |        | 6.23   |   |                 |   | 8,548   |   |  | 6.15   |  
|Construction and land              |  |                 | 14,585  |   |                 | 8.71   |   |        |   | 15,549  |                 |  | 8.93   |        |  |   | 13,013          |   |  | 8.04   |   |  |                 | 11,159  |   |        | 7.23   |   |                 |   | 10,668  |   |  | 7.67   |  
|Consumer and other                 |  |                 | 16,879  |   |                 | 10.08  |   |        |   | 15,887  |                 |  | 9.12   |        |  |   | 12,559          |   |  | 7.76   |   |  |                 | 19,166  |   |        | 12.43  |   |                 |   | 14,947  |   |  | 10.75  |  
|                                   |  |                 |         |   |                 |        |   |        |   |         |                 |  |        |        |  |   |                 |   |  |        |   |  |                 |         |   |        |        |   |                 |   |         |   |  |        |  
|Total loans, gross                 |  |                 | 167,452 |   |                 | 100.00 | % |        |   | 174,176 |                 |  | 100.00 | %      |  |   | 161,873         |   |  | 100.00 | % |  |                 | 154,260 |   |        | 100.00 | % |                 |   | 139,062 |   |  | 100.00 | %
|                                   |  |                 |         |   |                 |        |   |        |   |         |                 |  |        |        |  |   |                 |   |  |        |   |  |                 |         |   |        |        |   |                 |   |         |   |  |        |  
|Undisbursed portion of loans       |  |                 | (5,918  | ) |                 |        |   |        |   | (4,802  | )               |  |        |        |  |   | (1,812          | ) |  |        |   |  |                 | (5,226  | ) |        |        |   |                 |   | (3,329  | ) |  |        |  
|Net Deferred loan origination fees |  |                 | (457    | ) |                 |        |   |        |   | (534    | )               |  |        |        |  |   | (526            | ) |  |        |   |  |                 | (467    | ) |        |        |   |                 |   | (445    | ) |  |        |  
|Allowance for loan losses          |  |                 | (2,368  | ) |                 |        |   |        |   | (1,374  | )               |  |        |        |  |   | (578            | ) |  |        |   |  |                 | (574    | ) |        |        |   |                 |   | (500    | ) |  |        |  
|                                   |  |                 |         |   |                 |        |   |        |   |         |                 |  |        |        |  |   |                 |   |  |        |   |  |                 |         |   |        |        |   |                 |   |         |   |  |        |  
|Total loans, net                   |  | $               | 158,709 |   |                 |        |   |        | $ | 167,466 |                 |  |        |        |  | $ | 158,957         |   |  |        |   |  | $               | 147,993 |   |        |        |   |                 | $ | 134,788 |   |  |        |  
|                                   |  |                 |         |   |                 |        |   |        |   |         |                 |  |        |        |  |   |                 |   |  |        |   |  |                 |         |   |        |        |   |                 |   |         |   |  |        |  



4.



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Loan Maturity.The following table shows the contractual maturity of the Banks gross loans at
December 31, 2005. The table does not include principal prepayments.



|                                    |  |                     |        |              |   |            |  |                      |        |                   |   |                      |  |   |        |  |   |        
|----------------------------------- |  | ------------------- | ------ | ------------ | - | ---------- |  | -------------------- | ------ | ----------------- | - | -------------------- |  | - | ------ |  | - | -------
|                                    |  | Real Estate Loans   |        |              |   |           
|                                    |  | One-to- Four-Family |        | Multi-Family |   | Commercial |  | Constructionand Land |        | Consumerand Other |   | TotalLoansReceivable
|Amounts due                         |  |                     |        |              |   |            |  |                      |        |                   |   |                      |  |   |        |  |   |        
|One year or less                    |  | $                   | 863    |              | $ | 2,232      |  | $                    | 164    |                   | $ | 9,888                |  | $ | 5,218  |  | $ | 18,365 
|After one year                      |  |                     |        |              |   |            |  |                      |        |                   |   |                      |  |   |        |  |   |        
|More than one year to three years   |  |                     | 317    |              |   | 9,659      |  |                      | 3,201  |                   |   | 2,637                |  |   | 5,468  |  |   | 21,282 
|More than three years to five years |  |                     | 151    |              |   | 8,802      |  |                      | 5,985  |                   |   | 2,060                |  |   | 4,316  |  |   | 21,314 
|More than five years to ten years   |  |                     | 3,375  |              |   | 1,787      |  |                      | 581    |                   |   |                     |  |   | 1,877  |  |   | 7,620  
|More than ten years to twenty years |  |                     | 29,610 |              |   | 5,459      |  |                      | 8,214  |                   |   |                     |  |   |       |  |   | 43,283 
|More than twenty years              |  |                     | 55,588 |              |   |           |  |                      |       |                   |   |                     |  |   |       |  |   | 55,588 
|                                    |  |                     |        |              |   |            |  |                      |        |                   |   |                      |  |   |        |  |   |        
|Total due after December 31, 2006   |  |                     | 89,041 |              |   | 25,707     |  |                      | 17,981 |                   |   | 4,697                |  |   | 11,661 |  |   | 149,087
|                                    |  |                     |        |              |   |            |  |                      |        |                   |   |                      |  |   |        |  |   |        
|Gross loans receivable              |  | $                   | 89,904 |              | $ | 27,939     |  | $                    | 18,145 |                   | $ | 14,585               |  | $ | 16,879 |  | $ | 167,452
|                                    |  |                     |        |              |   |            |  |                      |        |                   |   |                      |  |   |        |  |   |        

The following table sets forth at December 31, 2005 the dollar amount of total gross loans receivable
contractually due after December 31, 2006 and whether such loans have fixed interest rates or adjustable interest rates.



|                             |  |                             |         |            |   |        |  |   |        
|---------------------------- |  | --------------------------- | ------- | ---------- | - | ------ |  | - | -------
|                             |  | Due After December 31, 2006
|                             |  | Fixed                       |         | Adjustable |   | Total 
|Real estate loans            |  |                             |         |            |   |        |  |   |        
|Residential                  |  |                             |         |            |   |        |  |   |        
|One-to-four-family           |  | $                           | 82,662  |            | $ | 6,379  |  | $ | 89,041 
|Multi-family                 |  |                             | 24,828  |            |   | 879    |  |   | 25,707 
|Commercial                   |  |                             | 15,074  |            |   | 2,907  |  |   | 17,981 
|Construction and land        |  |                             | 4,538   |            |   | 159    |  |   | 4,697  
|Consumer and other           |  |                             | 5,653   |            |   | 6,008  |  |   | 11,661 
|                             |  |                             |         |            |   |        |  |   |        
|Total gross loans receivable |  | $                           | 132,755 |            | $ | 16,332 |  | $ | 149,087
|                             |  |                             |         |            |   |        |  |   |        

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.



5.



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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, |        
|                                    |  | 2005                            |         |   | 2004 |   |         | 2003 | 
|Beginning balance, net              |  | $                               | 167,466 |   |      | $ | 158,957 |      |  | $ | 147,993 |  
|Loans originated                    |  |                                 |         |   |      |   |         |      |  |   |         |  
|One-to-four-family                  |  |                                 | 16,665  |   |      |   | 19,431  |      |  |   | 37,967  |  
|Multi-family                        |  |                                 | 5,800   |   |      |   | 10,914  |      |  |   | 6,907   |  
|Commercial                          |  |                                 | 5,431   |   |      |   | 5,717   |      |  |   | 10,873  |  
|Construction and land               |  |                                 | 8,168   |   |      |   | 11,747  |      |  |   | 9,405   |  
|Consumer                            |  |                                 | 4,579   |   |      |   | 2,655   |      |  |   | 3,373   |  
|                                    |  |                                 |         |   |      |   |         |      |  |   |         |  
|Total loans originated              |  |                                 | 40,643  |   |      |   | 50,464  |      |  |   | 68,525  |  
|Loans purchased                     |  |                                 | 12,390  |   |      |   | 12,024  |      |  |   | 7,605   |  
|                                    |  |                                 |         |   |      |   |         |      |  |   |         |  
|                                    |  |                                 | 53,033  |   |      |   | 62,488  |      |  |   | 76,130  |  
|Principal payments                  |  |                                 | (59,680 | ) |      |   | (50,193 | )    |  |   | (68,576 | )
|Change in allowance for loan losses |  |                                 | (994    | ) |      |   | (796    | )    |  |   | (4      | )
|Change in undisbursed loan funds    |  |                                 | (1,116  | ) |      |   | (2,990  | )    |  |   | 3,414   |  
|                                    |  |                                 |         |   |      |   |         |      |  |   |         |  
|Ending balance, net                 |  | $                               | 158,709 |   |      | $ | 167,466 |      |  | $ | 158,957 |  
|                                    |  |                                 |         |   |      |   |         |      |  |   |         |  

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.



6.



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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.



7.



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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, 2005, the Bank had $10.4 million in purchased mortgage loans and loan participations serviced by
others, totaling 5.97% of the total loan portfolio. 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, 2005, the Bank had $3.6 million of assets classified as Special Mention, $4.0 million of assets classified as
Substandard, and $1.8 million of assets classified as Doubtful. No assets were classified as Loss.



8.



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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 year ended December 31, 2005, the amount of interest income that
would have been recognized on nonaccrual loans was $245,000, the comparable amount for prior years was immaterial to the financial statements.



|                           |  |                 |       |      |   |       |  |      |     |      |   |     |  |   |    
|-------------------------- |  | --------------- | ----- | ---- | - | ----- |  | ---- | --- | ---- | - | --- |  | - | ---
|                           |  | At December 31,
|                           |  | 2005            |       | 2004 |   | 2003  |  | 2002 |     | 2001
|Nonaccrual loans           |  |                 |       |      |   |       |  |      |     |      |   |     |  |   |    
|Residential real estate    |  |                 |       |      |   |       |  |      |     |      |   |     |  |   |    
|One-to-four-family         |  | $               | 448   |      | $ | 370   |  | $    | 544 |      | $ | 235 |  | $ | 122
|Multi-family               |  |                 | 3,355 |      |   | 1,423 |  |      |    |      |   |    |  |   |   
|Commercial                 |  |                 | 941   |      |   | 958   |  |      |    |      |   |    |  |   |   
|Construction and land      |  |                 |      |      |   | 336   |  |      |    |      |   |    |  |   |   
|Consumer and other         |  |                 |      |      |   | 38    |  |      | 1   |      |   |    |  |   |   
|                           |  |                 |       |      |   |       |  |      |     |      |   |     |  |   |    
|Total nonperforming loans  |  |                 | 4,744 |      |   | 3,125 |  |      | 545 |      |   | 235 |  |   | 122
|REO                        |  |                 | 132   |      |   | 84    |  |      | 76  |      |   | 55  |  |   |   
|                           |  |                 |       |      |   |       |  |      |     |      |   |     |  |   |    
|Total nonperforming assets |  | $               | 4,876 |      | $ | 3,209 |  | $    | 621 |      | $ | 290 |  | $ | 122
|                           |  |                 |       |      |   |       |  |      |     |      |   |     |  |   |    

At December 31, 2005, there were 5 loans totaling $ 473,000 that were 60 to 89 days delinquent.



|                                                                    |  |                 |   |  |       |   |  |        |   |  |        |   |  |        |  
|------------------------------------------------------------------- |  | --------------- | - |  | ----- | - |  | ------ | - |  | ------ | - |  | ------ | -
|                                                                    |  | At December 31, |  
|                                                                    |  | 2005            |   |  | 2004  |   |  | 2003   |   |  | 2002   |   |  | 2001   |  
|                                                                    |  |                 |   |  |      
|Allowance for loan losses as a percent of gross loans receivable    |  | 1.41            | % |  | 0.79  | % |  | 0.36   | % |  | 0.37   | % |  | 0.36   | %
|                                                                    |  |                 |   |  |      
|Allowance for loan losses as a percent of total nonperforming loans |  | 49.92           |   |  | 43.97 |   |  | 106.06 |   |  | 244.26 |   |  | 409.84 |  
|                                                                    |  |                 |   |  |      
|Nonperforming loans as a percent of gross loans receivable(1)       |  | 2.83            |   |  | 1.79  |   |  | 0.34   |   |  | 0.15   |   |  | 0.09   |  
|                                                                    |  |                 |   |  |      
|Nonperforming assets as a percentage of total assets(1)             |  | 2.04            |   |  | 1.20  |   |  | 0.23   |   |  | 0.12   |   |  | 0.05   |  



|(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.



---

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



|                                                   |  |      |       |   |      |   |       |      |  |   |      |   |  |      |      |   |  |   |     |  
|-------------------------------------------------- |  | ---- | ----- | - | ---- | - | ----- | ---- |  | - | ---- | - |  | ---- | ---- | - |  | - | --- | -
|                                                   |  | 2005 |       |   | 2004 |   |       | 2003 |  |   | 2002 |   |  | 2001 |     
|Balance at beginning of year                       |  | $    | 1,374 |   |      | $ | 578   |      |  | $ | 574  |   |  | $    | 500  |   |  | $ | 500 |  
|Provision for loan losses                          |  |      | 997   |   |      |   | 816   |      |  |   |     |   |  |      | 120  |   |  |   |    |  
|Charge-offs                                        |  |      |       |   |      |   |       |      |  |   |      |   |  |      |      |   |  |   |     |  
|One-to-four-family                                 |  |      |      |   |      |   |      |      |  |   |     |   |  |      | (19  | ) |  |   |    |  
|Consumer and other                                 |  |      | (3    | ) |      |   | (20   | )    |  |   | (22  | ) |  |      | (27  | ) |  |   |    |  
|                                                   |  |      |       |   |      |   |       |      |  |   |      |   |  |      |      |   |  |   |     |  
|Total                                              |  |      | 2,368 |   |      |   | 1,374 |      |  |   | 552  |   |  |      | 574  |   |  |   | 500 |  
|Recoveries                                         |  |      |      |   |      |   |      |      |  |   | 26   |   |  |      |     |   |  |   |    |  
|                                                   |  |      |       |   |      |   |       |      |  |   |      |   |  |      |      |   |  |   |     |  
|Balance at end of year                             |  | $    | 2,368 |   |      | $ | 1,374 |      |  | $ | 578  |   |  | $    | 574  |   |  | $ | 500 |  
|                                                   |  |      |       |   |      |   |       |      |  |   |      |   |  |      |      |   |  |   |     |  
|Net charge-offs to average gross loans outstanding |  |      |      | % |      |   | 0.01  | %    |  |   |     | % |  |      | 0.03 | % |  |   |    | %



10.



---

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, |      
|                                |  | 2005            |       |                                      | 2004   |   |                                                       | 2003   |   |        | 2002 |                                      |  | 2001   |                                                      
|                                |  | Amount          |       | Percent ofAllowanceto TotalAllowance |        |   | Percent ofGrossLoans inEachCategoryto TotalGrossLoans |        |   | Amount |      | Percent ofAllowanceto TotalAllowance |  |        | Percent ofGrossLoans inEachCategoryto TotalGrossLoans |  |        | Amount |  | Percent ofAllowanceto TotalAllowance |     |  | Percent ofGrossLoans inEachCategoryto TotalGrossLoans |   |  | Amount |   | Percent ofAllowanceto TotalAllowance |   |     | Percent ofGrossLoans inEachCategoryto TotalGrossLoans |        |   | Amount |        | Percent ofAllowanceto TotalAllowance |  |   | Percent ofGrossLoans inEachCategoryto TotalGrossLoans | 
|One-to-four-family              |  | $               | 217   |                                      | 9.16   | % |                                                       | 53.69  | % |        | $    | 209                                  |  | 15.21  | %                                                     |  | 55.11  | %      |  | $                                    | 200 |  | 34.60                                                 | % |  | 61.86  | % |                                      | $ | 241 |                                                       | 41.99  | % |        | 62.46  | %                                    |  | $ | 190                                                   |  | 38.00  | % |  | 63.00  | %
|Multi-family                    |  |                 | 1,576 |                                      | 66.56  |   |                                                       | 16.68  |   |        |      | 616                                  |  | 44.83  |                                                       |  | 15.79  |        |  |                                      | 61  |  | 10.55                                                 |   |  | 11.84  |   |                                      |   | 90  |                                                       | 15.68  |   |        | 11.65  |                                      |  |   | 60                                                    |  | 12.00  |   |  | 12.43  |  
|Commercial                      |  |                 | 369   |                                      | 15.58  |   |                                                       | 10.84  |   |        |      | 328                                  |  | 23.87  |                                                       |  | 11.02  |        |  |                                      | 68  |  | 11.76                                                 |   |  | 10.50  |   |                                      |   | 48  |                                                       | 8.36   |   |        | 6.23   |                                      |  |   | 59                                                    |  | 11.80  |   |  | 6.15   |  
|Construction and land           |  |                 | 90    |                                      | 3.80   |   |                                                       | 8.71   |   |        |      | 111                                  |  | 8.08   |                                                       |  | 8.95   |        |  |                                      | 104 |  | 17.99                                                 |   |  | 8.04   |   |                                      |   | 57  |                                                       | 9.93   |   |        | 7.23   |                                      |  |   | 57                                                    |  | 11.40  |   |  | 7.67   |  
|Consumer and other              |  |                 | 116   |                                      | 4.90   |   |                                                       | 10.08  |   |        |      | 110                                  |  | 8.01   |                                                       |  | 9.13   |        |  |                                      | 145 |  | 25.10                                                 |   |  | 7.76   |   |                                      |   | 138 |                                                       | 24.04  |   |        | 12.43  |                                      |  |   | 69                                                    |  | 13.80  |   |  | 10.75  |  
|Unallocated                     |  |                 |      |                                      |       |   |                                                       |       |   |        |      |                                     |  |       |                                                       |  |       |        |  |                                      |    |  |                                                      |   |  |       |   |                                      |   |    |                                                       |       |   |        |       |                                      |  |   | 65                                                    |  | 13.00  |   |  |       |  
|                                |  |                 |       |                                      |        |   |                                                       |        |   |        |      |                                      |  |        |                                                       |  |        |        |  |                                      |     |  |                                                       |   |  |        |   |                                      |   |     |                                                       |        |   |        |        |                                      |  |   |                                                       |  |        |   |  |        |  
|Total allowance for loan losses |  | $               | 2,368 |                                      | 100.00 | % |                                                       | 100.00 | % |        | $    | 1,374                                |  | 100.00 | %                                                     |  | 100.00 | %      |  | $                                    | 578 |  | 100.00                                                | % |  | 100.00 | % |                                      | $ | 574 |                                                       | 100.00 | % |        | 100.00 | %                                    |  | $ | 500                                                   |  | 100.00 | % |  | 100.00 | %
|                                |  |                 |       |                                      |        |   |                                                       |        |   |        |      |                                      |  |        |                                                       |  |        |        |  |                                      |     |  |                                                       |   |  |        |   |                                      |   |     |                                                       |        |   |        |        |                                      |  |   |                                                       |  |        |   |  |        |  



11.



---

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, 2005 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,
|                             |  | 2005            |        | 2004      |   | 2003          
|                             |  | CarryingAmount  |        | FairValue |   | CarryingAmount |  | FairValue |        | CarryingAmount |   | FairValue
|Available-for-sale           |  |                 |        |           |   |                |  |           |        |                |   |           |  |   |        |  |   |       
|Government agency securities |  | $               | 10,819 |           | $ | 10,819         |  | $         | 8,974  |                | $ | 8,974     |  | $ | 10,023 |  | $ | 10,023
|Corporate bonds              |  |                 | 7,019  |           |   | 7,019          |  |           | 8,264  |                |   | 8,264     |  |   | 11,747 |  |   | 11,747
|Mortgage-backed security     |  |                 |        |           |   |                |  |           |        |                |   |           |  |   |        |  |   |       
|FNMA(1)                      |  |                 | 14,743 |           |   | 14,743         |  |           | 20,850 |                |   | 20,850    |  |   | 28,929 |  |   | 28,929
|FHLMC(2)                     |  |                 | 8,303  |           |   | 8,303          |  |           | 12,133 |                |   | 12,133    |  |   | 15,723 |  |   | 15,723
|GNMA(3)                      |  |                 | 2,881  |           |   | 2,881          |  |           | 3,801  |                |   | 3,801     |  |   |       |  |   |      
|Equity securities            |  |                 | 6,372  |           |   | 6,372          |  |           | 5,706  |                |   | 5,706     |  |   | 5,636  |  |   | 5,636 
|                             |  |                 |        |           |   |                |  |           |        |                |   |           |  |   |        |  |   |       
|Total available-for-sale     |  | $               | 50,137 |           | $ | 50,137         |  | $         | 59,728 |                | $ | 59,728    |  | $ | 72,058 |  | $ | 72,058
|                             |  |                 |        |           |   |                |  |           |        |                |   |           |  |   |        |  |   |       



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



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



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



12.



---

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, 2005. 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, 2005 |      
|                                 |  | 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     |  | $                    | 998   |                      | 4.53                             | % |                | $                                | 7,876                |  | 4.86                | %              |  | $                    | 1,945 |  | 5.54           | % |                      | $ |       |                |     | %                    |  | $ | 10,819 |  | 4.95 | %
|Corporate notes                  |  |                      | 6,014 |                      | 4.82                             |   |                |                                  | 1,003                |  | 4.94                |                |  |                      |      |  |               |   |                      |   |       |                |     |                      |  |   | 7,019  |  | 4.84 |  
|Equity securities                |  |                      |      |                      |                                 |   |                |                                  |                     |  |                    |                |  |                      |      |  |               |   |                      |   |       |                |     |                      |  |   | 6,372  |  | 3.99 |  
|                                 |  |                      |       |                      |                                  |   |                |                                  |                      |  |                     |                |  |                      |       |  |                |   |                      |   |        |                |      |                      |  |   |        |  |      |  
|Total securities                 |  | $                    | 7,014 |                      | 4.78                             | % |                | $                                | 8,879                |  | 4.87                | %              |  | $                    | 1,945 |  | 5.54           | % |                      | $ |       |                |     | %                    |  | $ | 24,210 |  | 4.67 | %
|                                 |  |                      |       |                      |                                  |   |                |                                  |                      |  |                     |                |  |                      |       |  |                |   |                      |   |        |                |      |                      |  |   |        |  |      |  
|Mortgage-backed securities       |  |                      |       |                      |                                  |   |                |                                  |                      |  |                     |                |  |                      |       |  |                |   |                      |   |        |                |      |                      |  |   |        |  |      |  
|FNMA                             |  | $                    | 29    |                      | 4.55                             | % |                | $                                | 74                   |  | 3.12                | %              |  | $                    |      |  |               | % |                      | $ | 14,640 |                | 5.59 | %                    |  | $ | 14,743 |  | 5.58 | %
|FHLMC                            |  |                      | 213   |                      | 4.82                             |   |                |                                  | 524                  |  | 4.98                |                |  |                      |      |  |               |   |                      |   | 7,566  |                | 5.48 |                      |  |   | 8,303  |  | 5.43 |  
|GNMA                             |  |                      |      |                      |                                 |   |                |                                  |                     |  |                    |                |  |                      |      |  |               |   |                      |   | 2,881  |                | 5.34 |                      |  |   | 2,881  |  | 5.34 |  
|                                 |  |                      |       |                      |                                  |   |                |                                  |                      |  |                     |                |  |                      |       |  |                |   |                      |   |        |                |      |                      |  |   |        |  |      |  
|Total mortgage-backed securities |  | $                    | 242   |                      | 4.79                             | % |                | $                                | 598                  |  | 4.75                | %              |  | $                    |      |  |               | % |                      | $ | 25,087 |                | 5.53 | %                    |  | $ | 25,927 |  | 5.51 | %
|                                 |  |                      |       |                      |                                  |   |                |                                  |                      |  |                     |                |  |                      |       |  |                |   |                      |   |        |                |      |                      |  |   |        |  |      |  

Included in the table above are $9.0 million of FHLB notes that are callable at the option of the issuing agency.
Callable and variable rate FHLB advances totaled $13.0 million and $2.0 million at December 31, 2005, 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.



---

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, 2005, the
Bank had $63.2 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,
|                                              |  | 2005                     |         |   | 2004 |   |        | 2003
|Net deposits (withdrawals)                    |  | $                        | (19,970 | ) |      | $ | (7,197 | )    |  | $ | 3,073
|Interest credited on deposit accounts         |  |                          | 2,849   |   |      |   | 2,860  |      |  |   | 3,421
|                                              |  |                          |         |   |      |   |        |      |  |   |      
|Total increase (decrease) in deposit accounts |  | $                        | (17,121 | ) |      | $ | (4,337 | )    |  | $ | 6,494
|                                              |  |                          |         |   |      |   |        |      |  |   |      

At December 31, 2005, the Bank had $12.0 million in certificate accounts in amounts of $100,000 or more
maturing as follows:



|                               |  |        |        |                     |      |  
|------------------------------ |  | ------ | ------ | ------------------- | ---- | -
|Maturity Period                |  | Amount |        | WeightedAverageRate |     
|Three months or less           |  | $      | 2,642  |                     | 2.87 | %
|Over three through six months  |  |        | 739    |                     | 3.26 |  
|Over six through twelve months |  |        | 2,655  |                     | 3.65 |  
|Over twelve months             |  |        | 5,992  |                     | 3.96 |  
|                               |  |        |        |                     |      |  
|Total                          |  | $      | 12,028 |                     | 3.61 | %
|                               |  |        |        |                     |      |  



14.



---

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



|                              |  |              |         |                 |        |   |        |      |                 |  |        |        |  |                 |         |  |        |  
|----------------------------- |  | ------------ | ------- | --------------- | ------ | - | ------ | ---- | --------------- |  | ------ | ------ |  | --------------- | ------- |  | ------ | -
|                              |  | December 31, |        
|                              |  | 2005         |         |                 | 2004   |   |        | 2003 |                
|                              |  | Amount       |         | Percent ofTotal |        |   | Amount |      | Percent ofTotal |  |        | Amount |  | Percent ofTotal |        
|Passbook accounts             |  | $            | 35,469  |                 | 23.81  | % |        | $    | 34,749          |  | 20.92  | %      |  | $               | 36,368  |  | 21.33  | %
|Money market savings accounts |  |              | 7,556   |                 | 5.07   |   |        |      | 11,482          |  | 6.91   |        |  |                 | 11,044  |  | 6.48   |  
|NOW accounts                  |  |              | 7,916   |                 | 5.31   |   |        |      | 10,240          |  | 6.16   |        |  |                 | 10,258  |  | 6.02   |  
|Non-interest-bearing accounts |  |              | 6,525   |                 | 4.38   |   |        |      | 6,680           |  | 4.02   |        |  |                 | 6,099   |  | 3.58   |  
|                              |  |              |         |                 |        |   |        |      |                 |  |        |        |  |                 |         |  |        |  
|Total transaction accounts    |  |              | 57,466  |                 | 38.57  |   |        |      | 63,151          |  | 38.01  |        |  |                 | 63,769  |  | 37.41  |  
|Certificate accounts          |  |              |         |                 |        |   |        |      |                 |  |        |        |  |                 |         |  |        |  
|1.00% to 1.99%                |  |              | 2,257   |                 | 1.51   |   |        |      | 8,847           |  | 5.33   |        |  |                 | 46,429  |  | 27.24  |  
|2.00% to 2.99%                |  |              | 16,769  |                 | 11.25  |   |        |      | 79,448          |  | 47.82  |        |  |                 | 33,470  |  | 19.63  |  
|3.00% to 3.99%                |  |              | 35,065  |                 | 23.53  |   |        |      | 7,413           |  | 4.46   |        |  |                 | 13,744  |  | 8.06   |  
|4.00% to 4.99%                |  |              | 35,873  |                 | 24.08  |   |        |      | 6,662           |  | 4.01   |        |  |                 | 8,191   |  | 4.81   |  
|5.00% to 5.99%                |  |              | 118     |                 | .08    |   |        |      | 250             |  | .15    |        |  |                 | 1,933   |  | 1.13   |  
|6.00% to 6.99%                |  |              | 1,456   |                 | .98    |   |        |      | 354             |  | .21    |        |  |                 | 2,926   |  | 1.72   |  
|                              |  |              |         |                 |        |   |        |      |                 |  |        |        |  |                 |         |  |        |  
|Total certificate accounts    |  |              | 91,538  |                 | 61.43  |   |        |      | 102,974         |  | 61.99  |        |  |                 | 106,693 |  | 62.59  |  
|                              |  |              |         |                 |        |   |        |      |                 |  |        |        |  |                 |         |  |        |  
|Total deposits                |  | $            | 149,004 |                 | 100.00 | % |        | $    | 166,125         |  | 100.00 | %      |  | $               | 170,462 |  | 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, 2005.



|                     |  |                                           |        |             |   |             |  |             |       |                  |   |       |  |   |       |  |   |       
|-------------------- |  | ----------------------------------------- | ------ | ----------- | - | ----------- |  | ----------- | ----- | ---------------- | - | ----- |  | - | ----- |  | - | ------
|                     |  | Period to Maturity from December 31, 2005
|                     |  | Less than1 Year                           |        | 1 to 2Years |   | 2 to 3Years |  | 3 to 4Years |       | More than4 Years |   | Total
|Certificate accounts |  |                                           |        |             |   |             |  |             |       |                  |   |       |  |   |       |  |   |       
|1.00% to 1.99%       |  | $                                         | 2,257  |             | $ |            |  | $           |      |                  | $ |      |  | $ |      |  | $ | 2,257 
|2.00% to 2.99%       |  |                                           | 15,093 |             |   | 1,411       |  |             | 265   |                  |   |      |  |   |      |  |   | 16,769
|3.00% to 3.99%       |  |                                           | 20,600 |             |   | 9,261       |  |             | 3,369 |                  |   | 1,529 |  |   | 306   |  |   | 35,065
|4.00% to 4.99%       |  |                                           | 25,222 |             |   | 4,809       |  |             | 2,762 |                  |   | 1,655 |  |   | 1,425 |  |   | 35,873
|5.00% to 5.99%       |  |                                           | 52     |             |   | 66          |  |             |      |                  |   |      |  |   |      |  |   | 118   
|6.00% to 6.99%       |  |                                           | 14     |             |   | 1,442       |  |             |      |                  |   |      |  |   |      |  |   | 1,456 
|                     |  |                                           |        |             |   |             |  |             |       |                  |   |       |  |   |       |  |   |       
|Total                |  | $                                         | 63,238 |             | $ | 16,989      |  | $           | 6,396 |                  | $ | 3,184 |  | $ | 1,731 |  | $ | 91,538
|                     |  |                                           |        |             |   |             |  |             |       |                  |   |       |  |   |       |  |   |       



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 $53.5 million of FHLB advances outstanding at December 31, 2005, which carry interest rates ranging from 1.96% to 5.00% 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:



|                                          |  |      |       |   |      |   |       |  
|----------------------------------------- |  | ---- | ----- | - | ---- | - | ----- | -
|                                          |  | 2005 |       |   | 2004 |  
|Balance at year end                       |  | $    | 3,222 |   |      | $ | 3,369 |  
|Maximum month-end balance during the year |  |      | 3,222 |   |      |   | 6,105 |  
|Average balance during the year           |  |      | 3,219 |   |      |   | 4,670 |  
|Average interest rate at year end         |  |      | 3.93  | % |      |   | 3.75  | %
|Average interest rate during the year     |  |      | 3.89  | % |      |   | 3.37  | %

Subsidiary Activities

The Company engages in the business of purchasing unimproved land for development into residential subdivisions of primarily single-family lots through its wholly owned subsidiaries, PBI and GFS. There were no gains or losses on the sales
of real estate held for development for the years ended December 31, 2005, 2004, and 2003.

Employees

At December 31, 2005, 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. Federal Deposit Insurance Reform Act of 2005. On February 1, 2006, the Federal Deposit Insurance Reform Act of 2005 (the Insurance Reform Act) was
signed into law. The Insurance Reform Act calls for the merger of the bank insurance fund and savings association insurance fund in to a single deposit insurance fund (DIF), which is to take place by July 1, 2006. In addition, the
Insurance Reform Act increases the deposit insurance coverage limit to $250,000 for certain retirement accounts (mostly IRAs, Keogh accounts, 457 Plans for state employees and 401 (k) accounts) and indexes future insurance
coverage to inflation beginning in 2011. The Insurance Reform Act also allows the FDIC to raise or lower the designated reserve ratio between 1.15% and 1.50% on an annual basis. It also authorizes certain one-time premium assessment credits to
insured institutions, awards DIF dividends under certain circumstances, and authorizes the FDIC to revise the current risk-based system for determining assessments. The FDIC is required to promulgate regulations implementing the requirements of the
Insurance Reform Act by November 2006. Until the FDIC promulgates these regulations, it is uncertain what, if any, impact this legislation will have on our operations.

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 BSA also requires the Bank to establish
and follow customer identification procedures when opening new accounts for customers. 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



17.



---

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.

The GLB Act imposes 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.

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.



18.



---

|ITEM 1A. | RISK FACTORS
|-------- | ------------

Our business, financial condition and results of
operations are subject to various risks, including those discussed below, which may affect the value of our common stock. Set forth below are certain risk factors which we believe to be relevant to an understanding of our business. This list should
not be considered a comprehensive list of all potential risks and uncertainties. You should also refer to the other information included in this Form 10-K, including our consolidated financial statements and related notes for the year ended
December 31, 2005.

Significant risk factors include:

Interest Rate Risk.Our earnings and profitability depend significantly on our net interest income, which is the difference between the interest earned on loans and investments and the interest paid on deposits and borrowings. Since
interest rates can fluctuate in response to general economic conditions and the policies of various governmental and regulatory agencies, including the Federal Reserve Board, our asset-liability management strategy may not be able to prevent changes
in interest rates from having a material adverse effect on our earnings.

Geographic Risk.We operate primarily in the Chicago market and a
prolonged economic downturn in this market could have a negative impact on earnings.

Credit Risk.Our loan customers may not repay their loans
according to their terms and the collateral may be insufficient to repay the loan. Management makes various assumptions in determining the adequacy of the allowance for loan losses and if those assumptions are incorrect, the result could have an
adverse affect on earnings. See Managements Discussion and Analysis of Financial Condition and Results of Operations for discussion of our allowance for loan losses.

Regulatory Risk.We are subject to extensive federal and state legislation and supervision which governs nearly every aspect of our business. The burden of compliance has in the past and will continue to have
an impact on the banking industry and changes to these laws could affect our ability to deliver or expand our services. See Business  Regulation.

Industry Risk.We operate in a rapidly changing environment having numerous competitors including other banks, thrifts, savings institutions and credit unions as well as brokerage firms, mortgage brokers and insurance companies. Our
profitability depends upon our continued success in competing in the Chicago market.

Operational Risk.We are subject to operations risks,
including, but not limited to, an interruption or breach in security of information systems, customer or employee fraud and catastrophic failures. While we maintain a system of internal controls and insurance coverage where applicable, an event may
occur that has an adverse affect on earnings.

Personnel Risk.Our success depends upon the continued service of our senior management team and our
ability to attract and retain qualified financial services personnel. Loss of key personnel could negatively impact our earnings through loss of their customer relationships and the potential difficulty promptly replacing officers in this
competitive environment.



19.



---

|ITEM 1B. | UNRESOLVED STAFF COMMENTS
|-------- | -------------------------

Not
applicable.



|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 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, 2005.



20.



---

PART II



|ITEM 5. | MARKET FOR COMPANYS COMMON STOCK, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|------- | --------------------------------------------------------------------------------------------------------

The Companys common stock is traded on the NASDAQ National Market under the symbol PFED. The Company had 590 stockholders of record at December 31,
2005. The table below shows the reported high and low sales price of the common stock and dividends declared during the periods indicated in 2005 and 2004.



|               |  |      |       |      |   |                   |  |      |      |     |   |                   |  |   |       |  |   |     
|-------------- |  | ---- | ----- | ---- | - | ----------------- |  | ---- | ---- | --- | - | ----------------- |  | - | ----- |  | - | ----
|               |  | 2005 |       | 2004
|               |  | High |       | Low  |   | DividendsDeclared |  | High |      | Low |   | DividendsDeclared
|First quarter  |  | $    | 32.42 |      | $ | 30.25             |  | $    | 0.18 |     | $ | 31.66             |  | $ | 29.00 |  | $ | 0.15
|Second quarter |  |      | 32.41 |      |   | 29.40             |  |      | 0.18 |     |   | 35.05             |  |   | 30.00 |  |   | 0.18
|Third quarter  |  |      | 32.00 |      |   | 29.00             |  |      | 0.18 |     |   | 32.99             |  |   | 30.30 |  |   | 0.18
|Fourth quarter |  |      | 31.50 |      |   | 28.36             |  |      | 0.18 |     |   | 32.50             |  |   | 30.30 |  |   | 0.18

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 August 2, 2005. As previously disclosed, the Company repurchased 3,000 shares with an average price of $31.60 per share in the first quarter of 2005, 4,435 shares with an
average price of $30.38 per share in the second quarter of 2005, 18,400 shares with an average price of $31.80 per share in the third quarter of 2005 and 7,092 shares with an average price of $30.00 per share in November of 2005.



|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,
|                                            |  | 2005                                  |         | 2004 |   | 2003    |  | 2002 |         | 2001
|Total assets                                |  | $                                     | 239,468 |      | $ | 267,620 |  | $    | 266,063 |      | $ | 251,532 |  | $ | 243,448
|Cash and cash equivalents                   |  |                                       | 5,193   |      |   | 13,752  |  |      | 11,081  |      |   | 23,998  |  |   | 27,909 
|Securities available-for-sale               |  |                                       | 50,137  |      |   | 59,728  |  |      | 72,058  |      |   | 61,113  |  |   | 65,704 
|Loans receivable, net(1)                    |  |                                       | 158,709 |      |   | 167,466 |  |      | 158,957 |      |   | 147,993 |  |   | 134,788
|Deposits                                    |  |                                       | 149,004 |      |   | 166,125 |  |      | 170,462 |      |   | 163,968 |  |   | 63,074 
|Securities sold under repurchase agreements |  |                                       | 3,222   |      |   | 3,369   |  |      | 6,904   |      |   | 10,599  |  |   | 10,658 
|FHLB advances                               |  |                                       | 53,499  |      |   | 63,871  |  |      | 55,175  |      |   | 43,663  |  |   | 39,000 
|Stockholders equity                        |  |                                       | 29,902  |      |   | 30,907  |  |      | 29,540  |      |   | 29,894  |  |   | 27,278 
|Interest income                             |  |                                       | 13,265  |      |   | 13,689  |  |      | 13,653  |      |   | 14,675  |  |   | 6,519  
|Interest expense                            |  |                                       | 5,826   |      |   | 5,277   |  |      | 5,972   |      |   | 7,541   |  |   | 10,107 
|Net interest income                         |  |                                       | 7,439   |      |   | 8,412   |  |      | 7,681   |      |   | 7,134   |  |   | 6,412  
|Provision for loan losses                   |  |                                       | 997     |      |   | 816     |  |      |        |      |   | 120     |  |   |       
|Noninterest income                          |  |                                       | 794     |      |   | 2,053   |  |      | 1,090   |      |   | 1,154   |  |   | 777    
|Noninterest expense                         |  |                                       | 6,449   |      |   | 5,959   |  |      | 5,380   |      |   | 4,967   |  |   | 4,754  
|Income tax expense                          |  |                                       | 157     |      |   | 1,162   |  |      | 1,141   |      |   | 1,036   |  |   | 831    
|Net income                                  |  |                                       | 630     |      |   | 2,528   |  |      | 2,250   |      |   | 2,165   |  |   | 1,604  



21.



---

Selected Financial Ratios and Other Data



|                                                                 |  |                                       |   |  |       |   |  |        |   |  |        |   |  |        |  
|---------------------------------------------------------------- |  | ------------------------------------- | - |  | ----- | - |  | ------ | - |  | ------ | - |  | ------ | -
|                                                                 |  | At or for the Year Ended December 31, |  
|                                                                 |  | 2005                                  |   |  | 2004  |   |  | 2003   |   |  | 2002   |   |  | 2001   |  
|Performance ratios:                                              |  |                                       |   |  |       |   |  |        |   |  |        |   |  |        |  
|Return on average assets                                         |  | 0.25                                  | % |  | 0.93  | % |  | 0.85   | % |  | 0.88   | % |  | 0.65   | %
|Return on average equity                                         |  | 2.06                                  |   |  | 8.33  |   |  | 7.61   |   |  | 7.64   |   |  | 5.58   |  
|Average equity to average assets                                 |  | 12.02                                 |   |  | 11.22 |   |  | 11.23  |   |  | 11.53  |   |  | 11.67  |  
|Dividend payout ratio                                            |  | 121.11                                |   |  | 29.11 |   |  | 28.98  |   |  | 27.85  |   |  | 38.09  |  
|Net interest rate spread(2)                                      |  | 2.97                                  |   |  | 3.16  |   |  | 2.86   |   |  | 2.74   |   |  | 2.18   |  
|Net interest margin(3)                                           |  | 3.15                                  |   |  | 3.32  |   |  | 3.07   |   |  | 3.04   |   |  | 2.68   |  
|Efficiency ratio(4)                                              |  | 78.33                                 |   |  | 56.94 |   |  | 61.34  |   |  | 59.93  |   |  | 66.12  |  
|Noninterest expense to average assets                            |  | 2.53                                  |   |  | 2.20  |   |  | 2.04   |   |  | 2.02   |   |  | 1.93   |  
|Asset quality ratios:                                            |  |                                       |   |  |       |   |  |        |   |  |        |   |  |        |  
|Nonperforming loans as a percent of gross loans receivable(5)    |  | 2.83                                  | % |  | 1.79  | % |  | 0.34   | % |  | 0.15   | % |  | 0.09   | %
|Nonperforming assets as a percentage of total assets(5)          |  | 2.04                                  |   |  | 1.20  |   |  | 0.23   |   |  | 0.12   |   |  | 0.05   |  
|Allowance for loan losses as a percent of gross loans receivable |  | 1.41                                  |   |  | 0.79  |   |  | 0.36   |   |  | 0.37   |   |  | 0.36   |  
|Allowance for loan losses as a percent of nonperforming loans(5) |  | 49.92                                 |   |  | 43.97 |   |  | 106.06 |   |  | 244.26 |   |  | 409.84 |  
|Other data:                                                      |  |                                       |   |  |       |   |  |        |   |  |        |   |  |        |  
|Number of full service offices                                   |  | 3                                     |   |  | 3     |   |  | 3      |   |  | 3      |   |  | 3      |  



|(1) | The allowance for loan losses at December 31, 2005, 2004, 2003, 2002 and 2001 was
$2,368, $1,374, $578, $574 and $500, respectively.
|--- | ------------------------------------------------------------------------------------------------------------------------------------



|(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.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------



22.



---

|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 Litigation Reform Act of 1995, as amended, and is including this statement for purposes of
these safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe future plans, strategies and expectations of the Company, are generally identifiable by use of the words believe,
expect, intend, anticipate, estimate, project, or similar expressions. The Companys ability to predict results or the actual effect of future plans or strategies is inherently
uncertain. Factors that could have a material adverse 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.



23.



---

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, 2005, 2004, and 2003. 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, |        
|                                                                                 |  | 2005                    |         |          | 2004 |                   |  | 2003   |               
|                                                                                 |  | AverageBalance          |         | Interest |      | AverageYield/Cost |  |        | AverageBalance |  | Interest |         | AverageYield/Cost |   |        | AverageBalance |        | Interest |  | AverageYield/Cost |        
|Assets                                                                           |  |                         |         |          |      |                   |  |        |                |  |          |         |                   |   |        |                |        |          |  |                   |         |  |   |        |  |        |  
|Interest-earnings assets                                                         |  |                         |         |          |      |                   |  |        |                |  |          |         |                   |   |        |                |        |          |  |                   |         |  |   |        |  |        |  
|Securities, net(1)                                                               |  | $                       | 34,656  |          | $    | 1,531             |  | 4.42   | %              |  | $        | 35,639  |                   |   | 1,664  |                | 4.67   | %        |  | $                 | 37,478  |  | $ | 1,681  |  | 4.49   | %
|Loans receivable(2)                                                              |  |                         | 162,195 |          |      | 10,292            |  | 6.35   |                |  |          | 165,342 |                   |   | 10,398 |                | 6.29   |          |  |                   | 151,866 |  |   | 10,239 |  | 6.74   |  
|Mortgage-backed securities, net(1)                                               |  |                         | 31,540  |          |      | 1,182             |  | 3.75   |                |  |          | 39,384  |                   |   | 1,427  |                | 3.62   |          |  |                   | 38,367  |  |   | 1,481  |  | 3.86   |  
|Interest-earning deposits and other investments                                  |  |                         | 7,916   |          |      | 260               |  | 3.28   |                |  |          | 12,964  |                   |   | 200    |                | 1.54   |          |  |                   | 22,171  |  |   | 252    |  | 1.14   |  
|                                                                                 |  |                         |         |          |      |                   |  |        |                |  |          |         |                   |   |        |                |        |          |  |                   |         |  |   |        |  |        |  
|Total interest-earning assets                                                    |  |                         | 236,307 |          | $    | 13,265            |  | 5.61   |                |  |          | 253,329 |                   |   | 13,689 |                | 5.40   |          |  |                   | 249,882 |  |   | 13,653 |  | 5.46   |  
|Non-interest-earning assets                                                      |  |                         | 18,735  |          |      |                   |  |        |                |  |          | 17,306  |                   |   |        |                |        |          |  |                   | 13,504  |  |   |        |  |        |  
|                                                                                 |  |                         |         |          |      |                   |  |        |                |  |          |         |                   |   |        |                |        |          |  |                   |         |  |   |        |  |        |  
|Total assets                                                                     |  | $                       | 255,042 |          |      |                   |  |        |                |  | $        | 270,635 |                   |   |        |                |        |          |  | $                 | 263,386 |  |   |        |  |        |  
|                                                                                 |  |                         |         |          |      |                   |  |        |                |  |          |         |                   |   |        |                |        |          |  |                   |         |  |   |        |  |        |  
|Liabilities and stockholders equity                                             |  |                         |         |          |      |                   |  |        |                |  |          |         |                   |   |        |                |        |          |  |                   |         |  |   |        |  |        |  
|Interest-bearing liabilities                                                     |  |                         |         |          |      |                   |  |        |                |  |          |         |                   |   |        |                |        |          |  |                   |         |  |   |        |  |        |  
|Passbook accounts                                                                |  | $                       | 34,585  |          |      | 266               |  | 0.77   |                |  |          | 35,524  |                   |   | 273    |                | 0.77   |          |  |                   | 36,091  |  |   | 340    |  | 0.94   |  
|Money market savings accounts                                                    |  |                         | 9,043   |          |      | 143               |  | 1.58   |                |  |          | 11,540  |                   |   | 162    |                | 1.40   |          |  |                   | 9,907   |  |   | 153    |  | 1.54   |  
|NOW accounts                                                                     |  |                         | 16,547  |          |      | 57                |  | 0.34   |                |  |          | 17,099  |                   |   | 54     |                | 0.32   |          |  |                   | 15,671  |  |   | 50     |  | 0.32   |  
|Certificate accounts                                                             |  |                         | 98,606  |          |      | 3,103             |  | 3.15   |                |  |          | 105,198 |                   |   | 2,692  |                | 2.56   |          |  |                   | 109,752 |  |   | 3,260  |  | 2.97   |  
|                                                                                 |  |                         |         |          |      |                   |  |        |                |  |          |         |                   |   |        |                |        |          |  |                   |         |  |   |        |  |        |  
|Total deposits                                                                   |  |                         | 158,781 |          |      | 3,569             |  | 2.25   |                |  |          | 169,361 |                   |   | 3,181  |                | 1.88   |          |  |                   | 171,421 |  |   | 3,803  |  | 2.22   |  
|FHLB advances and other borrowings                                               |  |                         | 62,012  |          |      | 2,257             |  | 3.64   |                |  |          | 66,313  |                   |   | 2,096  |                | 3.16   |          |  |                   | 58,285  |  |   | 2,169  |  | 3.72   |  
|                                                                                 |  |                         |         |          |      |                   |  |        |                |  |          |         |                   |   |        |                |        |          |  |                   |         |  |   |        |  |        |  
|Total interest-bearing liabilities                                               |  |                         | 220,793 |          |      | 5,826             |  | 2.64   |                |  |          | 235,674 |                   |   | 5,277  |                | 2.24   |          |  |                   | 229,706 |  |   | 5,972  |  | 2.60   |  
|                                                                                 |  |                         |         |          |      |                   |  |        |                |  |          |         |                   |   |        |                |        |          |  |                   |         |  |   |        |  |        |  
|Non-interest-bearing liabilities                                                 |  |                         | 3,604   |          |      |                   |  |        |                |  |          | 4,604   |                   |   |        |                |        |          |  |                   | 4,102   |  |   |        |  |        |  
|                                                                                 |  |                         |         |          |      |                   |  |        |                |  |          |         |                   |   |        |                |        |          |  |                   |         |  |   |        |  |        |  
|Total liabilities                                                                |  |                         | 224,397 |          |      |                   |  |        |                |  |          | 240,278 |                   |   |        |                |        |          |  |                   | 233,808 |  |   |        |  |        |  
|Stockholders equity                                                             |  |                         | 30,645  |          |      |                   |  |        |                |  |          | 30,357  |                   |   |        |                |        |          |  |                   | 29,578  |  |   |        |  |        |  
|                                                                                 |  |                         |         |          |      |                   |  |        |                |  |          |         |                   |   |        |                |        |          |  |                   |         |  |   |        |  |        |  
|Total liabilities and stockholders equity                                       |  | $                       | 255,042 |          |      |                   |  |        |                |  | $        | 270,635 |                   |   |        |                |        |          |  | $                 | 263,386 |  |   |        |  |        |  
|                                                                                 |  |                         |         |          |      |                   |  |        |                |  |          |         |                   |   |        |                |        |          |  |                   |         |  |   |        |  |        |  
|Net interest income                                                              |  |                         |         |          | $    | 7,439             |  |        |                |  |          |         |                   | $ | 8,412  |                |        |          |  |                   |         |  | $ | 7,681  |  |        |  
|                                                                                 |  |                         |         |          |      |                   |  |        |                |  |          |         |                   |   |        |                |        |          |  |                   |         |  |   |        |  |        |  
|Net interest rate spread(3)                                                      |  |                         |         |          |      |                   |  | 2.97   | %              |  |          |         |                   |   |        |                | 3.16   | %        |  |                   |         |  |   |        |  | 2.86   | %
|Net interest margin(4)                                                           |  |                         |         |          |      |                   |  | 3.15   | %              |  |          |         |                   |   |        |                | 3.32   | %        |  |                   |         |  |   |        |  | 3.07   | %
|Ratio of average interest-earning assets to average interest-bearing liabilities |  |                         |         |          |      |                   |  | 107.03 | %              |  |          |         |                   |   |        |                | 107.49 | %        |  |                   |         |  |   |        |  | 108.78 | %



|(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.
|--- | ----------------------------------------------------------------------------------------------



24.



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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.



|                                                |  |                            |      |   |                            |   |      |     |  |   |        |   |  |      |      |   |     |   |      |   |  |   |      |  
|----------------------------------------------- |  | -------------------------- | ---- | - | -------------------------- | - | ---- | --- |  | - | ------ | - |  | ---- | ---- | - | --- | - | ---- | - |  | - | ---- | -
|                                                |  | 2005 Compared to 2004      |      |   | 2004 Compared to 2003      |  
|                                                |  | Increase (Decrease) Due to |      |   | Increase (Decrease) Due to |  
|                                                |  | Volume                     |      |   | Rate                       |   |      | Net |  |   | Volume |   |  | Rate |      |   | Net |  
|Interest earned on                              |  |                            |      |   |                            |   |      |     |  |   |        |   |  |      |      |   |     |   |      |   |  |   |      |  
|Securities, net                                 |  | $                          | (44  | ) |                            | $ | (89  | )   |  | $ | (133   | ) |  | $    | (86  | ) |     | $ | 69   |   |  | $ | (17  | )
|Loans receivable, net                           |  |                            | (200 | ) |                            |   | 93   |     |  |   | (107   | ) |  |      | 848  |   |     |   | (688 | ) |  |   | 160  |  
|Mortgage-backed securities, net                 |  |                            | (294 | ) |                            |   | 49   |     |  |   | (245   | ) |  |      | 37   |   |     |   | (91  | ) |  |   | (54  | )
|Interest-earning deposits and other investments |  |                            | (165 | ) |                            |   | 226  |     |  |   | 61     |   |  |      | (142 | ) |     |   | 89   |   |  |   | (53  | )
|                                                |  |                            |      |   |                            |   |      |     |  |   |        |   |  |      |      |   |     |   |      |   |  |   |      |  
|Total interest-earning assets                   |  |                            | (703 | ) |                            |   | 279  |     |  |   | (424   | ) |  |      | 657  |   |     |   | (621 | ) |  |   | 36   |  
|                                                |  |                            |      |   |                            |   |      |     |  |   |        |   |  |      |      |   |     |   |      |   |  |   |      |  
|Interest expense on                             |  |                            |      |   |                            |   |      |     |  |   |        |   |  |      |      |   |     |   |      |   |  |   |      |  
|Passbook savings accounts                       |  |                            | (7   | ) |                            |   |     |     |  |   | (7     | ) |  |      | (4   | ) |     |   | (63  | ) |  |   | (67  | )
|Money market savings accounts                   |  |                            | (39  | ) |                            |   | 20   |     |  |   | (19    | ) |  |      | 23   |   |     |   | (14  | ) |  |   | 9    |  
|NOW accounts                                    |  |                            | (1   | ) |                            |   | 4    |     |  |   | 3      |   |  |      | 5    |   |     |   | (1   | ) |  |   | 4    |  
|Certificate accounts                            |  |                            | (208 | ) |                            |   | 619  |     |  |   | 411    |   |  |      | (117 | ) |     |   | (451 | ) |  |   | (568 | )
|FHLB advances and other borrowings              |  |                            | (157 | ) |                            |   | 318  |     |  |   | 161    |   |  |      | 254  |   |     |   | (327 | ) |  |   | (73  | )
|                                                |  |                            |      |   |                            |   |      |     |  |   |        |   |  |      |      |   |     |   |      |   |  |   |      |  
|Total interest-bearing liabilities              |  |                            | (412 | ) |                            |   | 961  |     |  |   | 549    |   |  |      | 161  |   |     |   | (856 | ) |  |   | (695 | )
|                                                |  |                            |      |   |                            |   |      |     |  |   |        |   |  |      |      |   |     |   |      |   |  |   |      |  
|Change in net interest income                   |  | $                          | (291 | ) |                            | $ | (682 | )   |  | $ | (973   | ) |  | $    | 496  |   |     | $ | 235  |   |  | $ | 731  |  
|                                                |  |                            |      |   |                            |   |      |     |  |   |        |   |  |      |      |   |     |   |      |   |  |   |      |  

Comparison of Financial Condition at December 31, 2005 and December 31, 2004

Total assets at December 31, 2005 were $239.5 million compared to $267.6 million at December 31, 2004, a decrease of $28.1 million. Cash and cash equivalents
decreased $8.6 million to $5.2 million at December 31, 2005, primarily as a result of the Company decreasing its liquidity at the end of the year. During 2005, loans decreased by $8.8 million to $158.7 million, primarily due to a rising
interest rate environment, resulting in lower volumes of loan originations. In addition, the Company purchased $12.0 million of loan participations in 2005.

The allowance for loan losses was $2.4 million and $1.4 million for the years December 31, 2005 and 2004, respectively. Nonaccrual loans were $4.7 million at December 31, 2005 compared to $3.1 million at the prior year-end. The
increase was due to a condominium conversion loan of $1.8 million. Based on current information available to management, a reserve of $926,000 has



25.



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been established for this loan. Nonaccrual loans also include a commercial building loan of $941,000 and a condominium conversion loan of $1.5 million. Based
on current information available to management, reserves of $863,000 have been established for these loans. These loan relationships have deteriorated and subsequent to December 31, 2005, the Company has foreclosed on one condominium conversion
and is in the process of foreclosure on the commercial building and the second condominium conversion. Therefore, management began to consider these loans as collateral dependent and increased its loss provisions accordingly. Loans totaling $3,000
and $20,000 were charged-off during 2005 and 2004, respectively. There were no recoveries in 2005 and 2004.

Total liabilities at December 31, 2005
were $209.6 million compared to $236.7 million at December 31, 2004. Deposits decreased $17.1 million, and advances from the Federal Home Loan Bank decreased $10.4 million. These decreases were due to the Companys continuing efforts to
manage its cost of funds.

Stockholders equity at December 31, 2005 was $29.9 million, which is equivalent to 12.5% of total assets. Book value
at December 31, 2005 was $27.97 per share. The decrease in stockholders equity from December 31, 2004 was attributable to the repurchase of 32,927 shares at an average price of $31.20, unrealized loss on securities available-for-sale
of $583,000, dividends paid of $763,000, offset by net income and 16,107 options exercised at an average price of $15.65.

Comparison of Operating
Results for the Years Ended December 31, 2005 and 2004

General

Net income decreased to $1.9 million in 2005 from $2.5 million in 2004. The change is primarily due to decreases in the Companys net interest income of $973,000 and
noninterest income of $1.3 million and an increase in noninterest expense of $490,000, and loan loss provision of $181,000 and a decrease in income tax expense of $1.0 million.

Net Interest Income

Interest income
in 2005 was $13.3 million, compared to $13.7 million in 2004. Average yield on interest-earning assets was 5.61% in 2005, compared to 5.40% in 2004. Average interest-earning assets decreased $17.0 million in 2005 from 2004.

Interest expense in 2005 was $5.8 million compared to $5.3 million in 2004. The change in interest expense is due to a 40 basis point increase in the average cost of
interest-bearing liabilities from 2004. This change was partially offset by a decrease of $14.9 million in average interest-bearing liabilities from 2004.

Net interest income in 2005 was $7.4 million compared to $8.4 million in 2004. The change was primarily due to a decrease in the net interest rate spread to 2.97% in 2005 from 3.16% in 2004 and a decrease in the net interest margin to 3.15%
in 2005 from 3.32% in 2004.



26.



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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 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 $997,000 in 2005 and $816,000 in 2004. Management began to consider the condominium conversion loans as collateral dependent and
increased its loss provisions for 2005 accordingly.

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, 2005 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 2005 was $794,000 compared to $2.1 million in 2004. The change was primarily due to a $1.1 million gain on the sale of real estate held for expansion in 2004.

Noninterest Expense

Noninterest
expense in 2005 was $6.5 million compared to $6.0 million in 2004. The change was primarily due to higher compensation expense and losses from a limited partnership.

Income Taxes

Income tax expense was
$157,000 in 2005 compared to $1.2 million in 2004. The change in income tax expense was due to a decrease in pre-tax income in 2005 and tax credits of $108,000. The effective tax rate was 19.9% for the year ended December 31, 2005 compared to
31.5% for the prior year.



27.



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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 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.

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 was 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.



28.



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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.

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 36.26%, 43.54%, and 48.12% for the years ended
December 31, 2005, 2004, and 2003, 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 $2.4 million, ($583,000), and $1.5 million in 2005, 2004, and 2003, 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 $18.3 million, $3.3
million and ($26.1) million in 2005, 2004 and 2003, 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 ($29.2) million, ($34,000), and $11.8 million in 2005, 2004, and 2003, respectively.

At December 31, 2005, the Bank exceeded all of its regulatory capital requirements with a Tier 1 (core) capital level of $26.8 million, or 11.2% of adjusted total assets, which is above the required level of $9.6 million, or 4.0%; and
total risk-based capital of $27.4 million, or 17.4% of risk-weighted assets, which is above the required level of $12.6 million, or 8.0%.



29.



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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, 2005, cash and short-term investments totaled $5.2 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 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, 2005, the Bank had outstanding
commitments to originate mortgage loans of $1.3 million, as compared to $1.9 million in 2004. 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, 2005 totaled $63.2 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.



30.



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The following tables disclose contractual obligations and commercial commitments of the
Company as of December 31, 2005:



|                                               |  |                       |        |                  |   |             |  |            |        |               |   |        |  |   |  
|---------------------------------------------- |  | --------------------- | ------ | ---------------- | - | ----------- |  | ---------- | ------ | ------------- | - | ------ |  | - | -
|                                               |  | Total                 |        | Less Than 1 Year |   | 1  3 Years |  | 4 5 Years |        | After 5 Years
|Securities sold under agreements to repurchase |  | $                     | 3,222  |                  | $ | 122         |  | $          |       |               | $ | 3,100  |  | $ | 
|FHLB advances                                  |  |                       | 53,499 |                  |   | 22,333      |  |            | 21,575 |               |   | 9,591  |  |   | 
|                                               |  |                       |        |                  |   |             |  |            |        |               |   |        |  |   |  
|Total contractual cash obligations             |  | $                     | 56,721 |                  | $ | 22,455      |  | $          | 21,575 |               | $ | 12,691 |  | $ | 
|                                               |  |                       |        |                  |   |             |  |            |        |               |   |        |  |   |  
|                                               |  |                       |        |                  |  
|                                               |  | TotalAmountsCommitted |        | Less Than 1 Year |   | 1  3 Years |  | 4 5 Years |        | Over 5 Years 
|                                               |  |                       |        |                  |   |             |  |            |        |               |   |        |  |   |  
|Standby letters of credit                      |  | $                     | 1,420  |                  | $ | 420         |  | $          | 1,000  |               | $ |       |  | $ | 
|Loans in process                               |  |                       | 5,918  |                  |   | 5,918       |  |            |       |               |   |       |  |   | 
|Commitments to make Loans (all fixed rate)     |  |                       | 1,274  |                  |   | 1,274       |  |            |       |               |   |       |  |   | 
|                                               |  |                       |        |                  |   |             |  |            |        |               |   |        |  |   |  
|Total commercial commitments                   |  | $                     | 8,612  |                  | $ | 7,612       |  | $          | 1,000  |               | $ |       |  | $ | 
|                                               |  |                       |        |                  |   |             |  |            |        |               |   |        |  |   |  

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



31.



---

component in calculating its total capital for purposes of the risk-based capital requirement. As of December 31, 2005, the Banks sensitivity
measure, as measured by the OTS, resulting from a 200 basis point increase in interest rates was (24)% and would result in a $8.5 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.

The following tables show the NPV and projected change in the NPV of the Bank at December 31, 2005 and 2004 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, 2005



|                |    |  |                     |        |          |                            |         |          |  |     |           |  |       |        |  |      |      
|--------------- | -- |  | ------------------- | ------ | -------- | -------------------------- | ------- | -------- |  | --- | --------- |  | ----- | ------ |  | ---- | -----
|                |    |  | Net Portfolio Value |        |          | NPV as a % of PV of Assets |        
|Change in Rates |    |  | $ Amount            |        | $ Change |                            |         | % Change |  |     | NPV Ratio |  |       | Change | 
|+ 300           | bp |  | $                   | 22,320 |          | $                          | (12,813 | )        |  | (36 | )%        |  | 9.82  | %      |  | (452 | )  bp
|+ 200           | bp |  |                     | 26,639 |          |                            | (8,494  | )        |  | (24 | )         |  | 11.43 |        |  | (291 | )  bp
|+ 100           | bp |  |                     | 31,080 |          |                            | (4,053  | )        |  | (12 | )         |  | 13.00 |        |  | (134 | )  bp
|0               | bp |  |                     | 35,133 |          |                            |        |          |  |    |           |  | 14.34 |        |  |     |      
|- 100           | bp |  |                     | 37,578 |          |                            | 2,445   |          |  | 7   |           |  | 15.06 |        |  | 72   | bp   
|- 200           | bp |  |                     | 38,255 |          |                            | 3,122   |          |  | 9   |           |  | 15.16 |        |  | 82   | bp   
|- 300           | bp |  |                     | N/A    |          |                            | N/A     |          |  | N/A |           |  | N/A   |        |  | N/A  |      



32.



---

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   |    

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-l.



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

Not applicable.



|ITEM 9A. | CONTROLS AND PROCEDURES
|-------- | -----------------------

The Company maintains disclosure controls
and procedures that are designed to ensure that information required to be disclosed in the Companys reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commissions rules and forms, and that such information is accumulated and communicated to the Companys management, including its Chief Executive Officer and Chief Financial Officer, as
appropriate to allow timely decisions regarding required disclosure.

As of the end of the period covered by this report, the Company carried out an
evaluation, with the participation of management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the disclosure controls and procedures pursuant to the Exchange Act Rule 13a-15(b). Based upon this
evaluation, the Chief Executive Officer and Chief Financial



33.



---

Officer concluded that our disclosure controls and procedures were not effective as of December 31, 2005, because of the material weaknesses disclosed
below.

A material weakness is a significant deficiency (as defined in Public Company Accounting Oversight Board Auditing Standard No. 2), or a
combination of significant deficiencies, that results in there being more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis by management or
employees in the normal course of performing their assigned functions.

As of December 31, 2005, the Company did not properly apply generally accepted
accounting principles regarding certain transactions. Specifically, these transactions related to specific allowances for two loan relationships. These transactions were identified after discussion with the Companys independent registered
public accounting firm and were corrected after the release of the Companys earnings for the fourth quarter and year ended December 31, 2005.

In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Because of the material weaknesses described above,
management believes that, as of December 31, 2005, the Companys internal control over financial reporting was not effective.



|ITEM 9B. | OTHER INFORMATION
|-------- | -----------------

None

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 3,
2006 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.



34.



---

|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
|-------- | --------------------------------------------------------------

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



|ITEM 14. | PRINCIPAL ACCOUNTING 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.



35.



---

PART IV



|ITEM 15. | EXHIBITS, 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 i.



36.



---

PARK BANCORP, INC. AND SUBSIDIARIES

Chicago, Illinois

CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2005, 2004, and 2003

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



---

LOGO

Crowe Chizek and Company LLC

Member Horwath International

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, 2005 and 2004, and the related consolidated statements of income, stockholders equity, and cash flows for each of the three years in the period ended December 31, 2005. 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, 2005 and 2004, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 2005 in conformity with U.S. generally accepted accounting principles.



LOGOCrowe Chizek and Company LLC


Oak Brook, Illinois

March 31, 2006



F-2



---

PARK BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

December 31, 2005 and 2004

(In thousands,
except share and per share data)



|                                                                                                             |  |      |         |   |      |   |         |  
|------------------------------------------------------------------------------------------------------------ |  | ---- | ------- | - | ---- | - | ------- | -
|                                                                                                             |  | 2005 |         |   | 2004 |  
|ASSETS                                                                                                       |  |      |         |   |      |   |         |  
|Cash and due from banks                                                                                      |  | $    | 4,530   |   |      | $ | 3,340   |  
|Federal funds sold                                                                                           |  |      |        |   |      |   | 5,419   |  
|Interest-bearing deposits with other financial institutions                                                  |  |      | 663     |   |      |   | 4,993   |  
|                                                                                                             |  |      |         |   |      |   |         |  
|Total cash and cash equivalents                                                                              |  |      | 5,193   |   |      |   | 13,752  |  
|Time deposits with other financial institutions                                                              |  |      |        |   |      |   | 1,087   |  
|Securities available-for-sale                                                                                |  |      | 50,137  |   |      |   | 59,728  |  
|Loans receivable, net of allowance of $2,368 and $1,374                                                      |  |      | 158,709 |   |      |   | 167,466 |  
|Federal Home Loan Bank stock                                                                                 |  |      | 9,793   |   |      |   | 11,136  |  
|Premises and equipment, net                                                                                  |  |      | 4,920   |   |      |   | 4,815   |  
|Accrued interest receivable                                                                                  |  |      | 1,058   |   |      |   | 1,185   |  
|Bank-owned life insurance                                                                                    |  |      | 7,119   |   |      |   | 5,848   |  
|Other assets                                                                                                 |  |      | 2,539   |   |      |   | 2,603   |  
|                                                                                                             |  |      |         |   |      |   |         |  
|Total assets                                                                                                 |  | $    | 239,468 |   |      | $ | 267,620 |  
|                                                                                                             |  |      |         |   |      |   |         |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                         |  |      |         |   |      |   |         |  
|Liabilities                                                                                                  |  |      |         |   |      |   |         |  
|Deposits                                                                                                     |  |      |         |   |      |   |         |  
|Non-interest-bearing                                                                                         |  | $    | 6,525   |   |      | $ | 6,805   |  
|Interest-bearing                                                                                             |  |      | 142,479 |   |      |   | 159,320 |  
|                                                                                                             |  |      |         |   |      |   |         |  
|Total deposits                                                                                               |  |      | 149,004 |   |      |   | 166,125 |  
|Securities sold under repurchase agreements                                                                  |  |      | 3,222   |   |      |   | 3,369   |  
|Advances from borrowers for taxes and insurance                                                              |  |      | 2,200   |   |      |   | 2,283   |  
|Federal Home Loan Bank advances                                                                              |  |      | 53,499  |   |      |   | 63,871  |  
|Accrued interest payable                                                                                     |  |      | 477     |   |      |   | 386     |  
|Other liabilities                                                                                            |  |      | 1,164   |   |      |   | 679     |  
|                                                                                                             |  |      |         |   |      |   |         |  
|Total liabilities                                                                                            |  |      | 209,566 |   |      |   | 236,713 |  
|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, 2,750,245 and 2,734,138 shares |  |      | 27      |   |      |   | 27      |  
|Additional paid-in capital                                                                                   |  |      | 28,424  |   |      |   | 27,819  |  
|Retained earnings                                                                                            |  |      | 30,664  |   |      |   | 30,797  |  
|Treasury stock, 1,624,970 and 1,592,043 shares, at cost                                                      |  |      | (28,097 | ) |      |   | (27,070 | )
|Unearned ESOP shares                                                                                         |  |      | (561    | ) |      |   | (694    | )
|Accumulated other comprehensive income (loss)                                                                |  |      | (555    | ) |      |   | 28      |  
|                                                                                                             |  |      |         |   |      |   |         |  
|Total stockholders equity                                                                                   |  |      | 29,902  |   |      |   | 30,907  |  
|                                                                                                             |  |      |         |   |      |   |         |  
|Total liabilities and stockholders equity                                                                   |  | $    | 239,468 |   |      | $ | 267,620 |  
|                                                                                                             |  |      |         |   |      |   |         |  

See accompanying notes to consolidated financial statements.



F-3



---

PARK BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

Years ended December 31, 2005, 2004, and 2003

(In thousands, except share and per share data)



|                                                            |  |      |        |      |   |        |  |   |       
|----------------------------------------------------------- |  | ---- | ------ | ---- | - | ------ |  | - | ------
|                                                            |  | 2005 |        | 2004 |   | 2003  
|Interest income                                             |  |      |        |      |   |        |  |   |       
|Loans receivable                                            |  | $    | 10,292 |      | $ | 10,398 |  | $ | 10,239
|Securities                                                  |  |      | 2,713  |      |   | 3,091  |  |   | 3,162 
|Interest-bearing deposits with other financial institutions |  |      | 260    |      |   | 200    |  |   | 252   
|                                                            |  |      |        |      |   |        |  |   |       
|                                                            |  |      | 13,265 |      |   | 13,689 |  |   | 13,653
|Interest expense                                            |  |      |        |      |   |        |  |   |       
|Deposits                                                    |  |      | 3,569  |      |   | 3,181  |  |   | 3,803 
|Federal Home Loan Bank advances and other borrowings        |  |      | 2,257  |      |   | 2,096  |  |   | 2,169 
|                                                            |  |      |        |      |   |        |  |   |       
|                                                            |  |      | 5,826  |      |   | 5,277  |  |   | 5,972 
|                                                            |  |      |        |      |   |        |  |   |       
|Net interest income                                         |  |      | 7,439  |      |   | 8,412  |  |   | 7,681 
|Provision for loan losses                                   |  |      | 997    |      |   | 816    |  |   |      
|                                                            |  |      |        |      |   |        |  |   |       
|Net interest income after provision for loan losses         |  |      | 6,442  |      |   | 7,596  |  |   | 7,681 
|Noninterest income                                          |  |      |        |      |   |        |  |   |       
|Gains on sales of securities                                |  |      | 152    |      |   | 285    |  |   | 297   
|Service fee income                                          |  |      | 288    |      |   | 281    |  |   | 342   
|Gain on sale of REO                                         |  |      | 36     |      |   | 120    |  |   |      
|Gain on sale of real estate held for expansion              |  |      |       |      |   | 1,075  |  |   |      
|Earnings on bank-owned life insurance                       |  |      | 271    |      |   | 221    |  |   | 282   
|Other operating income                                      |  |      | 47     |      |   | 71     |  |   | 169   
|                                                            |  |      |        |      |   |        |  |   |       
|                                                            |  |      | 794    |      |   | 2,053  |  |   | 1,090 
|Noninterest expense                                         |  |      |        |      |   |        |  |   |       
|Compensation and benefits                                   |  |      | 3,765  |      |   | 3,658  |  |   | 3,448 
|Occupancy and equipment                                     |  |      | 874    |      |   | 839    |  |   | 617   
|Federal deposit insurance premiums                          |  |      | 92     |      |   | 94     |  |   | 92    
|Data processing services                                    |  |      | 202    |      |   | 190    |  |   | 214   
|Advertising                                                 |  |      | 164    |      |   | 135    |  |   | 98    
|Other operating expenses                                    |  |      | 1,352  |      |   | 1,043  |  |   | 911   
|                                                            |  |      |        |      |   |        |  |   |       
|                                                            |  |      | 6,449  |      |   | 5,959  |  |   | 5,380 
|                                                            |  |      |        |      |   |        |  |   |       
|Income before income taxes                                  |  |      | 787    |      |   | 3,690  |  |   | 3,391 
|Income tax expense                                          |  |      | 157    |      |   | 1,162  |  |   | 1,141 
|                                                            |  |      |        |      |   |        |  |   |       
|Net income                                                  |  | $    | 630    |      | $ | 2,528  |  | $ | 2,250 
|                                                            |  |      |        |      |   |        |  |   |       
|Basic earnings per share                                    |  | $    | 0.59   |      | $ | 2.36   |  | $ | 2.06  
|                                                            |  |      |        |      |   |        |  |   |       
|Diluted earnings per share                                  |  | $    | 0.54   |      | $ | 2.17   |  | $ | 1.91  
|                                                            |  |      |        |      |   |        |  |   |       

See accompanying notes to consolidated financial statements.



F-4



---

PARK BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

Years ended December 31, 2005, 2004, and 2003

(In thousands, except share and per share data)



|                                                           |  |             |    |                          |   |                  |  |   |               |   |  |                    |         |   |                                             |   |      |                          |  |   |                      |   |  |   |        |   |  |   |       |  
|---------------------------------------------------------- |  | ----------- | -- | ------------------------ | - | ---------------- |  | - | ------------- | - |  | ------------------ | ------- | - | ------------------------------------------- | - | ---- | ------------------------ |  | - | -------------------- | - |  | - | ------ | - |  | - | ----- | -
|                                                           |  | CommonStock |    | AdditionalPaid-inCapital |   | RetainedEarnings |  |   | TreasuryStock |   |  | UnearnedESOPShares |         |   | AccumulatedOtherCompre-hensiveIncome (Loss) |   |      | TotalStockholdersEquity |  |   | Compre-hensiveIncome |  
|Balance at January 1, 2003                                 |  | $           | 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 |  
|                                                           |  |             |    |                          |   |                  |  |   |               |   |  |                    |         |   |                                             |   |      |                          |  |   |                      |   |  |   |        |   |  |   |       |  
|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 available-for-sale, net |  |             |   |                          |   |                 |  |   |              |   |  |                    |        |   |                                             |   |     |                          |  |   | (529                 | ) |  |   | (529   | ) |  |   | (529  | )
|                                                           |  |             |    |                          |   |                  |  |   |               |   |  |                    |         |   |                                             |   |      |                          |  |   |                      |   |  |   |        |   |  |   |       |  
|Total comprehensive income                                 |  |             |    |                          |   |                  |  |   |               |   |  |                    |         |   |                                             |   |      |                          |  |   |                      |   |  |   |        |   |  | $ | 1,999 |  
|                                                           |  |             |    |                          |   |                  |  |   |               |   |  |                    |         |   |                                             |   |      |                          |  |   |                      |   |  |   |        |   |  |   |       |  

(Continued)



F-5



---

PARK BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

Years ended December 31,
2005, 2004, and 2003

(In thousands, except share and per share data)



|                                                           |  |             |    |                          |   |                  |  |   |               |   |  |                    |         |   |                                             |   |      |                          |  |   |                      |   |  |   |        |   |  |   |      |  
|---------------------------------------------------------- |  | ----------- | -- | ------------------------ | - | ---------------- |  | - | ------------- | - |  | ------------------ | ------- | - | ------------------------------------------- | - | ---- | ------------------------ |  | - | -------------------- | - |  | - | ------ | - |  | - | ---- | -
|                                                           |  | CommonStock |    | AdditionalPaid-inCapital |   | RetainedEarnings |  |   | TreasuryStock |   |  | UnearnedESOPShares |         |   | AccumulatedOtherCompre-hensiveIncome (Loss) |   |      | TotalStockholdersEquity |  |   | Compre-hensiveIncome |  
|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 |   |  |   |      |  
|Comprehensive income                                       |  |             |    |                          |   |                  |  |   |               |   |  |                    |         |   |                                             |   |      |                          |  |   |                      |   |  |   |        |   |  |   |      |  
|Net income                                                 |  |             |   |                          |   |                 |  |   | 630           |   |  |                    |        |   |                                             |   |     |                          |  |   |                     |   |  |   | 630    |   |  | $ | 630  |  
|Change in fair value of securities available-for-sale, net |  |             |   |                          |   |                 |  |   |              |   |  |                    |        |   |                                             |   |     |                          |  |   | (583                 | ) |  |   | (583   | ) |  |   | (583 | )
|                                                           |  |             |    |                          |   |                  |  |   |               |   |  |                    |         |   |                                             |   |      |                          |  |   |                      |   |  |   |        |   |  |   |      |  
|Total comprehensive income                                 |  |             |    |                          |   |                  |  |   |               |   |  |                    |         |   |                                             |   |      |                          |  |   |                      |   |  |   |        |   |  | $ | 47   |  
|                                                           |  |             |    |                          |   |                  |  |   |               |   |  |                    |         |   |                                             |   |      |                          |  |   |                      |   |  |   |        |   |  |   |      |  
|Cash dividends declared ($.72 per share)                   |  |             |   |                          |   |                 |  |   | (763          | ) |  |                    |        |   |                                             |   |     |                          |  |   |                     |   |  |   | (763   | ) |  |   |      |  
|Purchase of 32,927 shares of treasury stock                |  |             |   |                          |   |                 |  |   |              |   |  |                    | (1,027  | ) |                                             |   |     |                          |  |   |                     |   |  |   | (1,027 | ) |  |   |      |  
|Exercise of 16,107 stock options                           |  |             |   |                          |   | 331              |  |   |              |   |  |                    |        |   |                                             |   |     |                          |  |   |                     |   |  |   | 331    |   |  |   |      |  
|ESOP shares released                                       |  |             |   |                          |   | 274              |  |   |              |   |  |                    |        |   |                                             |   | 133  |                          |  |   |                     |   |  |   | 407    |   |  |   |      |  
|                                                           |  |             |    |                          |   |                  |  |   |               |   |  |                    |         |   |                                             |   |      |                          |  |   |                      |   |  |   |        |   |  |   |      |  
|Balance at December 31, 2005                               |  | $           | 27 |                          | $ | 28,424           |  | $ | 30,664        |   |  | $                  | (28,097 | ) |                                             | $ | (561 | )                        |  | $ | (555                 | ) |  | $ | 29,902 |   |  |   |      |  
|                                                           |  |             |    |                          |   |                  |  |   |               |   |  |                    |         |   |                                             |   |      |                          |  |   |                      |   |  |   |        |   |  |   |      |  

See accompanying notes to consolidated financial statements.



F-6



---

PARK BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended December 31, 2005, 2004, and 2003

(In thousands)



|                                                                          |  |      |         |   |      |   |         |      |  |   |         |  
|------------------------------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                                          |  | 2005 |         |   | 2004 |   |         | 2003 | 
|Cash flows from operating activities                                      |  |      |         |   |      |   |         |      |  |   |         |  
|Net income                                                                |  | $    | 630     |   |      | $ | 2,528   |      |  | $ | 2,250   |  
|Adjustments to reconcile net income to net cash from operating activities |  |      |         |   |      |   |         |      |  |   |         |  
|Net premium amortization on securities                                    |  |      | 111     |   |      |   | 131     |      |  |   | 156     |  
|Interest credited on time deposits                                        |  |      | (18     | ) |      |   | (36     | )    |  |   | (34     | )
|Dividend reinvestments                                                    |  |      | (194    | ) |      |   | (109    | )    |  |   | (137    | )
|Gains on sales of securities available-for-sale                           |  |      | (152    | ) |      |   | (285    | )    |  |   | (297    | )
|Gain on sale of real estate held for expansion                            |  |      |        |   |      |   | (1,075  | )    |  |   |        |  
|Gain on sale of REO                                                       |  |      | (36     | ) |      |   | (120    | )    |  |   |        |  
|Earnings on bank-owned life insurance, net                                |  |      | (271    | ) |      |   | (221    | )    |  |   | (246    | )
|Provision for loan losses                                                 |  |      | 997     |   |      |   | 816     |      |  |   |        |  
|Depreciation                                                              |  |      | 401     |   |      |   | 392     |      |  |   | 283     |  
|Deferred income tax (benefit)                                             |  |      | (214    | ) |      |   | 30      |      |  |   | 27      |  
|Deferred loan fees                                                        |  |      | (77     | ) |      |   | 8       |      |  |   | 59      |  
|Net change in accrued interest receivable                                 |  |      | 127     |   |      |   | 59      |      |  |   | (49     | )
|Net change in other assets                                                |  |      | 627     |   |      |   | (1,577  | )    |  |   | (386    | )
|Net change in accrued interest payable                                    |  |      | 91      |   |      |   | 22      |      |  |   | (32     | )
|Net change in other liabilities                                           |  |      | 485     |   |      |   | (888    | )    |  |   | 83      |  
|ESOP expense                                                              |  |      | 407     |   |      |   | 428     |      |  |   | 390     |  
|FHLB stock dividends                                                      |  |      | (558    | ) |      |   | (686    | )    |  |   | (607    | )
|                                                                          |  |      |         |   |      |   |         |      |  |   |         |  
|Net cash from operating activities                                        |  |      | 2,356   |   |      |   | (583    | )    |  |   | 1,460   |  
|Cash flows from investing activities                                      |  |      |         |   |      |   |         |      |  |   |         |  
|Net change in loans                                                       |  |      | 20,095  |   |      |   | 2,691   |      |  |   | (3,418  | )
|Loans purchased                                                           |  |      | (12,390 | ) |      |   | (12,024 | )    |  |   | (7,605  | )
|Maturities and calls of securities available-for-sale                     |  |      |        |   |      |   | 9,000   |      |  |   | 4,000   |  
|Purchases of securities available-for-sale                                |  |      | (2,826  | ) |      |   | (14,766 | )    |  |   | (43,705 | )
|Sales of securities available-for-sale                                    |  |      | 1,374   |   |      |   | 4,046   |      |  |   | 10,481  |  
|Principal repayments on mortgage-backed securities                        |  |      | 10,394  |   |      |   | 13,512  |      |  |   | 18,079  |  
|Purchases of Federal Home Loan Bank stock                                 |  |      |        |   |      |   | (2,000  | )    |  |   | (4,175  | )
|Sales of Federal Home Loan Bank stock                                     |  |      | 1,901   |   |      |   | 1,659   |      |  |   | 2,000   |  
|Maturities of time deposits                                               |  |      | 1,105   |   |      |   | 100     |      |  |   |        |  
|Purchase of bank-owned life insurance                                     |  |      | (1,000  | ) |      |   |        |      |  |   |        |  
|Proceeds from sales of real estate held for expansion                     |  |      |        |   |      |   | 1,530   |      |  |   |        |  
|Proceeds from sales of REO                                                |  |      | 120     |   |      |   | 120     |      |  |   |        |  
|Expenditures for premises and equipment                                   |  |      | (506    | ) |      |   | (580    | )    |  |   | (1,786  | )
|                                                                          |  |      |         |   |      |   |         |      |  |   |         |  
|Net cash from investing activities                                        |  |      | 18,267  |   |      |   | 3,288   |      |  |   | (26,129 | )

(Continued)



F-7



---

PARK BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended December 31, 2005, 2004, and
2003

(In thousands)



|                                                              |  |      |         |   |      |   |        |      |  |   |         |  
|------------------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------ | ---- |  | - | ------- | -
|                                                              |  | 2005 |         |   | 2004 |   |        | 2003 | 
|Cash flows from financing activities                          |  |      |         |   |      |   |        |      |  |   |         |  
|Net change in deposits                                        |  | $    | (17,121 | ) |      | $ | (4,337 | )    |  | $ | 6,494   |  
|Net change in securities sold under repurchase agreements     |  |      | (147    | ) |      |   | (3,535 | )    |  |   | (3,695  | )
|Net change in advances from borrowers for taxes and insurance |  |      | (83     | ) |      |   | 202    |      |  |   | 112     |  
|Stock options exercised                                       |  |      | 331     |   |      |   | 15     |      |  |   | 221     |  
|Dividends paid to stockholders                                |  |      | (763    | ) |      |   | (736   | )    |  |   | (652    | )
|Purchases of treasury stock                                   |  |      | (1,027  | ) |      |   | (339   | )    |  |   | (2,240  | )
|Federal Home Loan Bank advances                               |  |      | 18,334  |   |      |   | 17,735 |      |  |   | 26,175  |  
|Repayment of Federal Home Loan Bank advances                  |  |      | (28,706 | ) |      |   | (9,039 | )    |  |   | (14,663 | )
|                                                              |  |      |         |   |      |   |        |      |  |   |         |  
|Net cash from financing activities                            |  |      | (29,182 | ) |      |   | (34    | )    |  |   | 11,752  |  
|                                                              |  |      |         |   |      |   |        |      |  |   |         |  
|Net change in cash and cash equivalents                       |  |      | (8,559  | ) |      |   | 2,671  |      |  |   | (12,917 | )
|Cash and cash equivalents at beginning of year                |  |      | 13,752  |   |      |   | 11,081 |      |  |   | 23,998  |  
|                                                              |  |      |         |   |      |   |        |      |  |   |         |  
|Cash and cash equivalents at end of year                      |  | $    | 5,193   |   |      | $ | 13,752 |      |  | $ | 11,081  |  
|                                                              |  |      |         |   |      |   |        |      |  |   |         |  
|Supplemental disclosures of cash flow information             |  |      |         |   |      |   |        |      |  |   |         |  
|Cash paid during the year for                                 |  |      |         |   |      |   |        |      |  |   |         |  
|Interest                                                      |  | $    | 5,735   |   |      | $ | 5,255  |      |  | $ | 5,923   |  
|Income taxes                                                  |  |      | 320     |   |      |   | 1,425  |      |  |   | 1,167   |  

See accompanying notes to consolidated financial statements.



F-8



---

PARK BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2005, 2004, and 2003

(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



---

PARK BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2005, 2004, and 2003

(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



---

PARK BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2005, 2004, and 2003

(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



---

PARK BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2005, 2004, and 2003

(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.



|                                                                                  |  |      |      |   |      |   |       |      |  |   |       |  
|--------------------------------------------------------------------------------- |  | ---- | ---- | - | ---- | - | ----- | ---- |  | - | ----- | -
|                                                                                  |  | 2005 |      |   | 2004 |   |       | 2003 | 
|Net income as reported                                                            |  | $    | 630  |   |      | $ | 2,528 |      |  | $ | 2,250 |  
|Deduct: Stock-based compensation expense determined under fair value based method |  |      | (12  | ) |      |   | (16   | )    |  |   | (15   | )
|                                                                                  |  |      |      |   |      |   |       |      |  |   |       |  
|Pro forma net income                                                              |  | $    | 618  |   |      | $ | 2,512 |      |  | $ | 2,235 |  
|                                                                                  |  |      |      |   |      |   |       |      |  |   |       |  
|Basic earnings per share as reported                                              |  | $    | 0.59 |   |      | $ | 2.36  |      |  | $ | 2.06  |  
|Pro forma basic earnings per share                                                |  |      | 0.58 |   |      |   | 2.35  |      |  |   | 2.05  |  
|Diluted earnings per share as reported                                            |  | $    | 0.54 |   |      | $ | 2.17  |      |  | $ | 1.91  |  
|Pro forma diluted earnings per share                                              |  |      | 0.53 |   |      |   | 2.15  |      |  |   | 1.90  |  

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



---

PARK BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2005, 2004, and 2003

(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. 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.

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



---

PARK BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2005, 2004, and 2003

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

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(Continued)

Operating Segments: While management
monitors 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 |        | Gross Unrealized Gains |   | Gross Unrealized Losses | 
|December 31, 2005            |  |           |        |                        |   |                         |  |   |      |  
|Corporate notes              |  | $         | 7,019  |                        | $ | 6                       |  | $ | (1   | )
|Government agency securities |  |           | 10,819 |                        |   |                        |  |   | (181 | )
|Equity securities            |  |           | 6,372  |                        |   | 26                      |  |   | (136 | )
|Mortgage-backed securities   |  |           |        |                        |   |                         |  |   |      |  
|GNMA                         |  |           | 2,881  |                        |   |                        |  |   | (36  | )
|FNMA                         |  |           | 14,743 |                        |   | 9                       |  |   | (411 | )
|FHLMC                        |  |           | 8,303  |                        |   | 23                      |  |   | (139 | )
|                             |  |           |        |                        |   |                         |  |   |      |  
|                             |  | $         | 50,137 |                        | $ | 64                      |  | $ | (904 | )
|                             |  |           |        |                        |   |                         |  |   |      |  
|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 | )
|                             |  |           |        |                        |   |                         |  |   |      |  



(Continued)

F-14



---

PARK BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2005, 2004, and 2003

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

NOTE 2 - SECURITIES(Continued)

Securities with unrealized losses at year-end 2005 and 2004 not recognized in
income are as follows:



|                             |  |                     |        |                |                   |      |           |       |                |        |  |           |      |                |  |   |        |  |   |      |  
|---------------------------- |  | ------------------- | ------ | -------------- | ----------------- | ---- | --------- | ----- | -------------- | ------ |  | --------- | ---- | -------------- |  | - | ------ |  | - | ---- | -
|                             |  | Less than 12 Months |        |                | 12 Months or More |      |           | Total |               
|                             |  | FairValue           |        | UnrealizedLoss |                   |      | FairValue |       | UnrealizedLoss |        |  | FairValue |      | UnrealizedLoss | 
|December 31, 2005            |  |                     |        |                |                   |      |           |       |                |        |  |           |      |                |  |   |        |  |   |      |  
|Corporate notes              |  | $                   | 1,000  |                | $                 | (1   | )         |       | $              |       |  | $         |     |                |  | $ | 1,000  |  | $ | (1   | )
|Government agency securities |  |                     | 5,931  |                |                   | (69  | )         |       |                | 4,888  |  |           | (112 | )              |  |   | 10,819 |  |   | (181 | )
|Equity securities            |  |                     | 305    |                |                   | (5   | )         |       |                | 5,719  |  |           | (131 | )              |  |   | 6,024  |  |   | (136 | )
|Mortgage-backed securities   |  |                     |        |                |                   |      |           |       |                |        |  |           |      |                |  |   |        |  |   |      |  
|GNMA                         |  |                     | 1,265  |                |                   | (19  | )         |       |                | 1,616  |  |           | (17  | )              |  |   | 2,881  |  |   | (36  | )
|FNMA                         |  |                     | 927    |                |                   | (7   | )         |       |                | 13,087 |  |           | (404 | )              |  |   | 14,014 |  |   | (411 | )
|FHLMC                        |  |                     | 2,237  |                |                   | (21  | )         |       |                | 4,054  |  |           | (118 | )              |  |   | 6,291  |  |   | (139 | )
|                             |  |                     |        |                |                   |      |           |       |                |        |  |           |      |                |  |   |        |  |   |      |  
|Total temporarily impaired   |  | $                   | 11,665 |                | $                 | (122 | )         |       | $              | 29,364 |  | $         | (782 | )              |  | $ | 41,029 |  | $ | (904 | )
|                             |  |                     |        |                |                   |      |           |       |                |        |  |           |      |                |  |   |        |  |   |      |  
|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   |  | $                   | 25,239 |                | $                 | (280 | )         |       | $              | 10,659 |  | $         | (134 | )              |  | $ | 35,898 |  | $ | (414 | )
|                             |  |                     |        |                |                   |      |           |       |                |        |  |           |      |                |  |   |        |  |   |      |  

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



---

PARK BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2005, 2004, and 2003

(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, 2005 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         |  | $          | 7,014 
|Due one to five years       |  |            | 8,879 
|Due five years to ten years |  |            | 1,945 
|Due after ten years         |  |            |      
|                            |  |            |       
|                            |  |            | 17,838
|Equity securities           |  |            | 6,372 
|Mortgage-backed securities  |  |            | 25,927
|                            |  |            |       
|                            |  | $          | 50,137
|                            |  |            |       

Securities with a carrying value of $6,906,000 and $5,974,000 at December 31, 2005 and 2004, 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 EndedDecember 31,
|                      |  | 2005                           |       | 2004 |   | 2003 
|Proceeds from sales   |  | $                              | 1,374 |      | $ | 4,046 |  | $ | 10,481
|Gross realized gains  |  |                                | 152   |      |   | 285   |  |   | 305   
|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



---

PARK BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2005, 2004, and 2003

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

NOTE 3 - LOANS RECEIVABLE(Continued)

Loans receivable are summarized as follows at:



|                                   |  |              |         |   |      |   |         |  
|---------------------------------- |  | ------------ | ------- | - | ---- | - | ------- | -
|                                   |  | December 31, |        
|                                   |  | 2005         |         |   | 2004 |  
|Mortgage loans                     |  |              |         |   |      |   |         |  
|Principal balances                 |  |              |         |   |      |   |         |  
|One-to-four-family residential     |  | $            | 89,904  |   |      | $ | 95,966  |  
|Multi-family residential           |  |              | 27,939  |   |      |   | 27,527  |  
|Commercial, construction, and land |  |              | 32,730  |   |      |   | 34,796  |  
|                                   |  |              |         |   |      |   |         |  
|                                   |  |              | 150,573 |   |      |   | 158,289 |  
|Undisbursed portion of loans       |  |              | (5,918  | ) |      |   | (4,802  | )
|Net deferred loan origination fees |  |              | (457    | ) |      |   | (534    | )
|                                   |  |              |         |   |      |   |         |  
|Total mortgage loans               |  |              | 144,198 |   |      |   | 152,953 |  
|Consumer loans                     |  |              | 6,524   |   |      |   | 7,429   |  
|Participations and loans purchased |  |              | 10,355  |   |      |   | 8,458   |  
|Allowance for loan losses          |  |              | (2,368  | ) |      |   | (1,374  | )
|                                   |  |              |         |   |      |   |         |  
|                                   |  | $            | 158,709 |   |      | $ | 167,466 |  
|                                   |  |              |         |   |      |   |         |  

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



|                          |  |      |       |   |      |   |       |      |  |   |     |  
|------------------------- |  | ---- | ----- | - | ---- | - | ----- | ---- |  | - | --- | -
|                          |  | 2005 |       |   | 2004 |   |       | 2003 | 
|Beginning balance         |  | $    | 1,374 |   |      | $ | 578   |      |  | $ | 574 |  
|Provision for loan losses |  |      | 997   |   |      |   | 816   |      |  |   |    |  
|Recoveries                |  |      |      |   |      |   |      |      |  |   | 26  |  
|Loans charged off         |  |      | (3    | ) |      |   | (20   | )    |  |   | (22 | )
|                          |  |      |       |   |      |   |       |      |  |   |     |  
|Ending balance            |  | $    | 2,368 |   |      | $ | 1,374 |      |  | $ | 578 |  
|                          |  |      |       |   |      |   |       |      |  |   |     |  

The Company had impaired loans totaling $4,296,000 and $2,616,000 at December 31, 2005 and 2004,
respectively. An allowance of $1,795,000 has been designated for these loans. No interest income is being recognized during the impairment. There were no impaired loans as of December 31, 2003.

Nonperforming loans were as follows:



|                                             |  |              |       |      |   |      
|-------------------------------------------- |  | ------------ | ----- | ---- | - | -----
|                                             |  | December 31,
|                                             |  | 2005         |       | 2004
|Loans past due over 90 days still on accrual |  | $            |      |      | $ |     
|Nonaccrual loans                             |  |              | 4,744 |      |   | 3,125

(Continued)



F-17



---

PARK BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2005, 2004, and 2003

(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, 2005:



|                             |  |   |      |  
|---------------------------- |  | - | ---- | -
|Balance at beginning of year |  | $ | 905  |  
|Loans originated             |  |   | 30   |  
|Principal repayments         |  |   | (151 | )
|                             |  |   |      |  
|Balance at end of year       |  | $ | 784  |  
|                             |  |   |      |  

NOTE 4 - PREMISES AND EQUIPMENT

Premises and equipment consist of the following at:



|                                      |  |              |        |   |      |   |        |  
|------------------------------------- |  | ------------ | ------ | - | ---- | - | ------ | -
|                                      |  | December 31, |       
|                                      |  | 2005         |        |   | 2004 |  
|Cost                                  |  |              |        |   |      |   |        |  
|Land                                  |  | $            | 918    |   |      | $ | 918    |  
|Buildings and improvements            |  |              | 3,823  |   |      |   | 3,718  |  
|Real estate held for future expansion |  |              | 755    |   |      |   | 522    |  
|Furniture and fixtures                |  |              | 1,732  |   |      |   | 2,032  |  
|                                      |  |              |        |   |      |   |        |  
|Total cost                            |  |              | 7,228  |   |      |   | 7,190  |  
|Less accumulated depreciation         |  |              | (2,308 | ) |      |   | (2,375 | )
|                                      |  |              |        |   |      |   |        |  
|                                      |  | $            | 4,920  |   |      | $ | 4,815  |  
|                                      |  |              |        |   |      |   |        |  

(Continued)



F-18



---

PARK BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2005, 2004, and 2003

(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 $12,028,000 at
December 31,2005 and $13,637,000 at December 31, 2004.

At December 31, 2005, scheduled maturities of certificates of deposit are as
follows:



|           |  |   |       
|---------- |  | - | ------
|2006       |  | $ | 63,238
|2007       |  |   | 16,989
|2008       |  |   | 6,396 
|2009       |  |   | 3,184 
|2010       |  |   | 1,371 
|Thereafter |  |   | 360   
|           |  |   |       
|           |  | $ | 91,538
|           |  |   |       

NOTE 6 - FEDERAL HOME LOAN ADVANCES

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



|                                                                                           |  |      |        |   |      |   |        |  
|------------------------------------------------------------------------------------------ |  | ---- | ------ | - | ---- | - | ------ | -
|                                                                                           |  | 2005 |        |   | 2004 |  
|Maturities January 2006 through January 2011, primarily fixed rates from 1.96% to 4.95%    |  | $    | 51,499 |   |      | $ | 61,871 |  
|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                                                                                      |  | $    | 53,499 |   |      | $ | 63,871 |  
|                                                                                           |  |      |        |   |      |   |        |  
|Average interest rate                                                                      |  |      | 3.91   | % |      |   | 3.29   | %

The Company may incur a penalty if the advances are repaid prior to their maturity dates. Advances totaling $13.0
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 133% of the outstanding
advances from the FHLB.

(Continued)



F-19



---

PARK BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2005, 2004, and 2003

(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:



|           |  |   |       
|---------- |  | - | ------
|2006       |  | $ | 14,333
|2007       |  |   | 8,460 
|2008       |  |   | 13,115
|2009       |  |   | 7,797 
|2010       |  |   | 1,794 
|Thereafter |  |   | 8,000 
|           |  |   |       
|           |  | $ | 53,499
|           |  |   |       

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 $74,000, $72,000, and $71,000 for 2005, 2004, and 2003, 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 $77,000, $55,000, and $97,000 for
2005, 2004, and 2003, 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



---

PARK BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2005, 2004, and 2003

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

NOTE 7 - EMPLOYEE BENEFIT PLANS(Continued)

During 2005, 2004, and 2003, 13,236, 13,904, and 14,573 shares of
stock, with an average fair value of $30.75, $30.76, and $26.80 per share were committed to be released, resulting in ESOP compensation expense of $407,000, $428,000, and $390,000, respectively. ESOP shares increased 3,139 as of December 31,
2005 due to shares being purchased with dividends received on allocated shares. ESOP shares had been reduced by 14,146 and 0 as of December 31, 2005 and 2004, respectively, because of terminations. Shares held by the ESOP at December 31,
2005 and 2004 are as follows:



|                                 |  |      |         |      |   |        
|-------------------------------- |  | ---- | ------- | ---- | - | -------
|                                 |  | 2005 |         | 2004
|Allocated shares                 |  |      | 140,507 |      |   | 138,278
|Unallocated shares               |  |      | 56,148  |      |   | 69,384 
|                                 |  |      |         |      |   |        
|Total ESOP shares                |  |      | 196,655 |      |   | 207,662
|                                 |  |      |         |      |   |        
|Fair value of unallocated shares |  | $    | 1,763   |      | $ | 2,130  
|                                 |  |      |         |      |   |        

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:



|                                 |  |         |   |      |                              |       |        |         |   |                              |   |        |  |         |                              |  |   |      
|-------------------------------- |  | ------- | - | ---- | ---------------------------- | ----- | ------ | ------- | - | ---------------------------- | - | ------ |  | ------- | ---------------------------- |  | - | -----
|                                 |  | 2005    |   | 2004 |                              | 2003 
|                                 |  | Shares  |   |      | WeightedAverageExercisePrice |       | Shares |         |   | WeightedAverageExercisePrice |   | Shares |  |         | WeightedAverageExercisePrice
|Outstanding at beginning of year |  | 237,447 |   |      | $                            | 17.10 |        | 238,447 |   |                              | $ | 17.09  |  | 207,117 |                              |  | $ | 15.72
|Granted                          |  |        |   |      |                              |      |        |        |   |                              |   |       |  | 45,337  |                              |  |   | 22.95
|Exercised                        |  | (16,107 | ) |      |                              | 15.73 |        | (1,000  | ) |                              |   | 15.44  |  | (14,007 | )                            |  |   | 15.74
|Forfeited                        |  |        |   |      |                              |      |        |        |   |                              |   |       |  |        |                              |  |   |     
|                                 |  |         |   |      |                              |       |        |         |   |                              |   |        |  |         |                              |  |   |      
|Outstanding at end of year       |  | 221,340 |   |      |                              | 17.20 |        | 237,447 |   |                              |   | 17.10  |  | 238,447 |                              |  |   | 17.09
|                                 |  |         |   |      |                              |       |        |         |   |                              |   |        |  |         |                              |  |   |      
|Options exercisable at year end  |  | 194,138 |   |      |                              | 16.39 |        | 201,177 |   |                              |   | 16.05  |  | 188,346 |                              |  |   | 15.72

(Continued)



F-21



---

PARK BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2005, 2004, and 2003

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

NOTE 7 - EMPLOYEE BENEFIT PLANS(Continued)

At December 31, 2005, the options have a weighted average remaining life of two 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 31,2005, 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 2005, 2004,
and 2003:



|                                                           |  |      |           |      |   |           |  |   |          
|---------------------------------------------------------- |  | ---- | --------- | ---- | - | --------- |  | - | ---------
|                                                           |  | 2005 |           | 2004 |   | 2003     
|Basic earnings per share                                   |  |      |           |      |   |           |  |   |          
|Net income available to common stockholders                |  | $    | 630       |      | $ | 2,528     |  | $ | 2,250    
|Weighted average common shares outstanding                 |  |      | 1,065,125 |      |   | 1,070,497 |  |   | 1,091,205
|                                                           |  |      |           |      |   |           |  |   |          
|Basic earnings per share                                   |  | $    | 0.59      |      | $ | 2.36      |  | $ | 2.06     
|                                                           |  |      |           |      |   |           |  |   |          
|Diluted earnings per share                                 |  |      |           |      |   |           |  |   |          
|Net income available to common stockholders                |  | $    | 630       |      | $ | 2,528     |  | $ | 2,250    
|Weighted average common shares outstanding                 |  |      | 1,065,125 |      |   | 1,070,497 |  |   | 1,091,205
|Dilutive effect of stock options                           |  |      | 94,100    |      |   | 95,510    |  |   | 84,468   
|                                                           |  |      |           |      |   |           |  |   |          
|Average common shares and dilutive potential common shares |  |      | 1,159,225 |      |   | 1,166,007 |  |   | 1,175,673
|                                                           |  |      |           |      |   |           |  |   |          
|Diluted earnings per share                                 |  | $    | 0.54      |      | $ | 2.17      |  | $ | 1.91     
|                                                           |  |      |           |      |   |           |  |   |          

(Continued)



F-22



---

PARK BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2005, 2004, and 2003

(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 toBe Well
Capitalized Under Prompt CorrectiveAction Regulations |       
|                                                 |  | Amount |        | Ratio |                                              |   | Amount |                                                                                  | Ratio  |  |     | Amount |  | Ratio |       
|2005                                             |  |        |        |       |                                              |   |        |                                                                                  |        |  |     |        |  |       |        |  |      |  
|Total capital (to risk-weighted assets)          |  | $      | 27,422 |       | 17.4                                         | % |        | $                                                                                | 12,623 |  | 8.0 | %      |  | $     | 15,779 |  | 10.0 | %
|Tier 1 (core) capital (to risk-weighted assets)  |  |        | 26,849 |       | 17.0                                         |   |        |                                                                                  | 6,312  |  | 4.0 |        |  |       | 9,468  |  | 6.0  |  
|Tier 1 (core) capital (to adjusted total assets) |  |        | 26,849 |       | 11.2                                         |   |        |                                                                                  | 9,558  |  | 4.0 |        |  |       | 11,947 |  | 5.0  |  
|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  |  

The Bank at December 31, 2005 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



---

PARK BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2005, 2004, and 2003

(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:



|                       |  |      |      |   |      |   |       |  |   |      
|---------------------- |  | ---- | ---- | - | ---- | - | ----- |  | - | -----
|                       |  | 2005 |      |   | 2004 |   | 2003 
|Currently payable tax  |  | $    | 430  |   |      | $ | 1,132 |  | $ | 1,114
|Deferred tax (benefit) |  |      | (273 | ) |      |   | 30    |  |   | 27   
|                       |  |      |      |   |      |   |       |  |   |      
|Income tax expense     |  | $    | 157  |   |      | $ | 1,162 |  | $ | 1,141
|                       |  |      |      |   |      |   |       |  |   |      

Due to interest income earned on certain U.S. government agency securities, there was no state income tax expense
in 2005, 2004, or 2003. 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:



|                                          |  |        |      |   |                                      |       |   |        |   |       |                                      |  |      |        |  |   |                                      |   |  |      |  
|----------------------------------------- |  | ------ | ---- | - | ------------------------------------ | ----- | - | ------ | - | ----- | ------------------------------------ |  | ---- | ------ |  | - | ------------------------------------ | - |  | ---- | -
|                                          |  | 2005   |      |   | 2004                                 |       |   | 2003   |  
|                                          |  | Amount |      |   | Percentageof IncomeBeforeIncomeTaxes |       |   | Amount |   |       | Percentageof IncomeBeforeIncomeTaxes |  |      | Amount |  |   | Percentageof IncomeBeforeIncomeTaxes |  
|Income tax computed at the statutory rate |  | $      | 268  |   |                                      | 34.0  | % |        | $ | 1,255 |                                      |  | 34.0 | %      |  | $ | 1,153                                |   |  | 34.0 | %
|ESOP expense                              |  |        | 93   |   |                                      | 11.8  |   |        |   | 98    |                                      |  | 2.6  |        |  |   | 83                                   |   |  | 2.4  |  
|Tax-exempt income                         |  |        |     |   |                                      |      |   |        |   |      |                                      |  |     |        |  |   | (12                                  | ) |  | (0.4 | )
|Bank-owned life insurance                 |  |        | (92  | ) |                                      | (11.7 | ) |        |   | (75   | )                                    |  | (2.0 | )      |  |   | (84                                  | ) |  | (2.5 | )
|Low income housing credits                |  |        | (108 | ) |                                      | (13.7 | ) |        |   |      |                                      |  |     |        |  |   |                                     |   |  |     |  
|Other items, net                          |  |        | (4   | ) |                                      | (0.5  | ) |        |   | (116  | )                                    |  | (3.1 | )      |  |   | 1                                    |   |  | 0.1  |  
|                                          |  |        |      |   |                                      |       |   |        |   |       |                                      |  |      |        |  |   |                                      |   |  |      |  
|                                          |  | $      | 157  |   |                                      | 19.9  | % |        | $ | 1,162 |                                      |  | 31.5 | %      |  | $ | 1,141                                |   |  | 33.6 | %
|                                          |  |        |      |   |                                      |       |   |        |   |       |                                      |  |      |        |  |   |                                      |   |  |      |  

(Continued)



F-24



---

PARK BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2005, 2004, and 2003

(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, 2005 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:



|                                              |  |      |       |   |      |   |      |  
|--------------------------------------------- |  | ---- | ----- | - | ---- | - | ---- | -
|                                              |  | 2005 |       |   | 2004 |  
|Deferred loan fees                            |  | $    | 155   |   |      | $ | 182  |  
|ESOP and Supplemental Retirement Plan expense |  |      | 229   |   |      |   | 206  |  
|Unrealized loss on securities held for sale   |  |      | 286   |   |      |   |     |  
|Bad debt deduction                            |  |      | 805   |   |      |   | 467  |  
|Other                                         |  |      | 5     |   |      |   |     |  
|                                              |  |      |       |   |      |   |      |  
|                                              |  |      | 1,480 |   |      |   | 855  |  
|Unrealized gain on securities held for sale   |  |      |      |   |      |   | (15  | )
|FHLB stock dividends                          |  |      | (602  | ) |      |   | (518 | )
|Depreciation                                  |  |      | (334  | ) |      |   | (339 | )
|Other                                         |  |      |      |   |      |   | (13  | )
|                                              |  |      |       |   |      |   |      |  
|                                              |  |      | (936  | ) |      |   | (885 | )
|                                              |  |      |       |   |      |   |      |  
|Net deferred tax asset (liability)            |  | $    | 544   |   |      | $ | (30  | )
|                                              |  |      |       |   |      |   |      |  

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



---

PARK BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2005, 2004, and 2003

(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:



|                                           |  |      |       |      |   |      
|------------------------------------------ |  | ---- | ----- | ---- | - | -----
|                                           |  | 2005 |       | 2004
|Commitments to make loans (all fixed rate) |  | $    | 1,274 |      | $ | 1,856
|Unused lines of credit                     |  |      | 4,712 |      |   | 4,010
|Letters of credit                          |  |      | 1,420 |      |   | 960  
|Loans in process                           |  |      | 5,918 |      |   | 4,802

The loan commitments at December 31, 2005 have terms of up to 60 days and
rates in the range of 6.00% to 7.75%.

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:



|                                                |  |                |         |   |                     |   |         |                |  |   |                     |   |  |   |          |  
|----------------------------------------------- |  | -------------- | ------- | - | ------------------- | - | ------- | -------------- |  | - | ------------------- | - |  | - | -------- | -
|                                                |  | 2005           |         |   | 2004                |  
|                                                |  | CarryingAmount |         |   | EstimatedFair Value |   |         | CarryingAmount |  |   | EstimatedFair Value |  
|Financial assets                                |  |                |         |   |                     |   |         |                |  |   |                     |   |  |   |          |  
|Cash and cash equivalents                       |  | $              | 5,193   |   |                     | $ | 5,193   |                |  | $ | 13,752              |   |  | $ | 13,752   |  
|Time deposits in other financial institutions   |  |                |        |   |                     |   |        |                |  |   | 1,087               |   |  |   | 1,087    |  
|Securities available-for-sale                   |  |                | 50,137  |   |                     |   | 50,137  |                |  |   | 59,728              |   |  |   | 59,728   |  
|Loans receivable, net                           |  |                | 158,709 |   |                     |   | 158,101 |                |  |   | 167,466             |   |  |   | 169,540  |  
|FHLB stock                                      |  |                | 9,793   |   |                     |   | 9,793   |                |  |   | 11,136              |   |  |   | 11,136   |  
|Accrued interest receivable                     |  |                | 1,058   |   |                     |   | 1,058   |                |  |   | 1,185               |   |  |   | 1,185    |  
|Financial liabilities                           |  |                |         |   |                     |   |         |                |  |   |                     |   |  |   |          |  
|Deposits with no fixed maturity dates           |  | $              | (57,466 | ) |                     | $ | (57,466 | )              |  | $ | (63,151             | ) |  | $ | (63,151  | )
|Deposits with fixed maturity dates              |  |                | (91,538 | ) |                     |   | (90,901 | )              |  |   | (102,974            | ) |  |   | (102,697 | )
|Securities sold under repurchase agreements     |  |                | (3,222  | ) |                     |   | (3,222  | )              |  |   | (3,369              | ) |  |   | (3,369   | )
|Advances from borrowers for taxes and insurance |  |                | (2,200  | ) |                     |   | (2,200  | )              |  |   | (2,283              | ) |  |   | (2,283   | )
|FHLB advances                                   |  |                | (53,499 | ) |                     |   | (52,729 | )              |  |   | (63,871             | ) |  |   | (64,749  | )
|Accrued interest payable                        |  |                | (477    | ) |                     |   | (477    | )              |  |   | (386                | ) |  |   | (386     | )

(Continued)



F-26



---

PARK BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2005, 2004, and 2003

(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, 2005 or December 31, 2004, the fair values would have been achieved, because the market value may differ depending on the circumstances.
The estimated fair values at December 31, 2005 and December 31, 2004 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.



|                                                           |  |      |      |   |      |   |      |      |  |   |      |  
|---------------------------------------------------------- |  | ---- | ---- | - | ---- | - | ---- | ---- |  | - | ---- | -
|                                                           |  | 2005 |      |   | 2004 |   |      | 2003 | 
|Unrealized holding losses on securities available-for-sale |  | $    | (731 | ) |      | $ | (516 | )    |  | $ | (181 | )
|Reclassification adjustments for losses recorded in income |  |      | (152 | ) |      |   | (285 | )    |  |   | (297 | )
|                                                           |  |      |      |   |      |   |      |      |  |   |      |  
|Net unrealized gains and losses                            |  |      | (883 | ) |      |   | (801 | )    |  |   | (478 | )
|Tax effect                                                 |  |      | 301  |   |      |   | 272  |      |  |   | 155  |  
|                                                           |  |      |      |   |      |   |      |      |  |   |      |  
|Other comprehensive loss                                   |  | $    | (583 | ) |      | $ | (529 | )    |  | $ | (323 | )
|                                                           |  |      |      |   |      |   |      |      |  |   |      |  

(Continued)



F-27



---

PARK BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2005, 2004, and 2003

(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, 2005 and 2004



|                                                 |  |      |        |      |   |       
|------------------------------------------------ |  | ---- | ------ | ---- | - | ------
|                                                 |  | 2005 |        | 2004
|ASSETS                                           |  |      |        |      |   |       
|Cash and cash equivalents                        |  | $    | 176    |      | $ | 997   
|Securities available-for-sale                    |  |      | 653    |      |   | 607   
|Loans receivable, net                            |  |      | 398    |      |   | 157   
|ESOP loan                                        |  |      | 707    |      |   | 849   
|Investment in bank subsidiary                    |  |      | 27,870 |      |   | 28,300
|Investment in real estate development subsidiary |  |      | 1      |      |   | 1     
|Accrued interest receivable and other assets     |  |      | 104    |      |   |      
|                                                 |  |      |        |      |   |       
|Total assets                                     |  | $    | 29,909 |      | $ | 30,911
|                                                 |  |      |        |      |   |       
|LIABILITIES AND STOCKHOLDERS EQUITY             |  |      |        |      |   |       
|Liabilities                                      |  |      |        |      |   |       
|Accrued expenses and other liabilities           |  | $    | 7      |      | $ | 4     
|Stockholders equity                             |  |      | 29,902 |      |   | 30,907
|                                                 |  |      |        |      |   |       
|Total liabilities and stockholders equity       |  | $    | 29,909 |      | $ | 30,911
|                                                 |  |      |        |      |   |       

(Continued)



F-28



---

PARK BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2005, 2004, and 2003

(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, 2005, 2004, and 2003



|                                                                                |  |      |       |   |      |   |       |      |  |   |       |  
|------------------------------------------------------------------------------- |  | ---- | ----- | - | ---- | - | ----- | ---- |  | - | ----- | -
|                                                                                |  | 2005 |       |   | 2004 |   |       | 2003 | 
|Operating income                                                                |  |      |       |   |      |   |       |      |  |   |       |  
|Dividends from subsidiaries                                                     |  | $    | 1,000 |   |      | $ |      |      |  | $ |      |  
|Gains on sales of securities                                                    |  |      | 127   |   |      |   | 119   |      |  |   | 113   |  
|Interest income                                                                 |  |      |       |   |      |   |       |      |  |   |       |  
|Securities (including dividends)                                                |  |      | 19    |   |      |   | 33    |      |  |   | 80    |  
|Loans                                                                           |  |      | 22    |   |      |   | 10    |      |  |   | 17    |  
|ESOP loan                                                                       |  |      | 62    |   |      |   | 72    |      |  |   | 82    |  
|Interest-bearing deposits with other financial institutions                     |  |      | 16    |   |      |   | 11    |      |  |   | 15    |  
|                                                                                |  |      |       |   |      |   |       |      |  |   |       |  
|Total operating income                                                          |  |      | 1,246 |   |      |   | 245   |      |  |   | 307   |  
|Operating expenses                                                              |  |      |       |   |      |   |       |      |  |   |       |  
|Interest on borrowings                                                          |  |      |      |   |      |   |      |      |  |   |      |  
|Other expenses                                                                  |  |      | 301   |   |      |   | 292   |      |  |   | 306   |  
|                                                                                |  |      |       |   |      |   |       |      |  |   |       |  
|Total operating expenses                                                        |  |      | 301   |   |      |   | 292   |      |  |   | 306   |  
|                                                                                |  |      |       |   |      |   |       |      |  |   |       |  
|Income before income taxes and equity in undistributed earnings of subsidiaries |  |      | 945   |   |      |   | (47   | )    |  |   | 1     |  
|Income taxes                                                                    |  |      | (24   | ) |      |   | (125  | )    |  |   | (14   | )
|                                                                                |  |      |       |   |      |   |       |      |  |   |       |  
|Income before equity in undistributed earnings of subsidiaries                  |  |      | 921   |   |      |   | 78    |      |  |   | 15    |  
|Equity in undistributed earnings of bank subsidiary                             |  |      | (291  | ) |      |   | 2,448 |      |  |   | 2,235 |  
|Equity in undistributed earnings of real estate subsidiary                      |  |      |      |   |      |   | 2     |      |  |   |      |  
|                                                                                |  |      |       |   |      |   |       |      |  |   |       |  
|Net income                                                                      |  | $    | 630   |   |      | $ | 2,528 |      |  | $ | 2,250 |  
|                                                                                |  |      |       |   |      |   |       |      |  |   |       |  

(Continued)



F-29



---

PARK BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2005, 2004, and 2003

(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, 2005, 2004, and 2003



|                                                                          |  |      |        |   |      |   |        |      |  |   |        |  
|------------------------------------------------------------------------- |  | ---- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                                                          |  | 2005 |        |   | 2004 |   |        | 2002 | 
|Cash flows from operating activities                                      |  |      |        |   |      |   |        |      |  |   |        |  
|Net income                                                                |  | $    | 630    |   |      | $ | 2,528  |      |  | $ | 2,250  |  
|Adjustments to reconcile net income to net cash from operating activities |  |      |        |   |      |   |        |      |  |   |        |  
|Net discount accretion                                                    |  |      |       |   |      |   |       |      |  |   | (34    | )
|Gain on sale of securities available-for-sale                             |  |      | (127   | ) |      |   | (119   | )    |  |   | (113   | )
|Equity in undistributed earnings of subsidiaries                          |  |      | 291    |   |      |   | (2,450 | )    |  |   | (2,235 | )
|Change in                                                                 |  |      |        |   |      |   |        |      |  |   |        |  
|Other assets                                                              |  |      | (104   | ) |      |   | 19     |      |  |   | (67    | )
|Other liabilities                                                         |  |      | 23     |   |      |   | (172   | )    |  |   | 175    |  
|                                                                          |  |      |        |   |      |   |        |      |  |   |        |  
|Net cash from operating activities                                        |  |      | 713    |   |      |   | (194   | )    |  |   | (24    | )
|Cash flows from investing activities                                      |  |      |        |   |      |   |        |      |  |   |        |  
|Purchase of securities available-for-sale                                 |  |      | (326   | ) |      |   | (282   | )    |  |   | (543   | )
|Sale of securities available-for-sale                                     |  |      | 350    |   |      |   | 873    |      |  |   | 1,444  |  
|Net change in loans receivable                                            |  |      | (241   | ) |      |   | (79    | )    |  |   | (78    | )
|Payment received on ESOP loan                                             |  |      | 142    |   |      |   | 141    |      |  |   | 141    |  
|                                                                          |  |      |        |   |      |   |        |      |  |   |        |  
|Net cash from investing activities                                        |  |      | (75    | ) |      |   | 653    |      |  |   | 964    |  
|Cash flows from financing activities                                      |  |      |        |   |      |   |        |      |  |   |        |  
|Stock options exercised                                                   |  |      | 331    |   |      |   | 15     |      |  |   | 221    |  
|Purchase of treasury stock                                                |  |      | (1,027 | ) |      |   | (339   | )    |  |   | (2,240 | )
|Dividends paid to stockholders                                            |  |      | (763   | ) |      |   | (736   | )    |  |   | (652   | )
|                                                                          |  |      |        |   |      |   |        |      |  |   |        |  
|Net cash from financing activities                                        |  |      | (1,459 | ) |      |   | (1,060 | )    |  |   | (2,671 | )
|                                                                          |  |      |        |   |      |   |        |      |  |   |        |  
|Net change in cash and cash equivalents                                   |  |      | (821   | ) |      |   | (601   | )    |  |   | (1,731 | )
|Cash and cash equivalents at beginning of year                            |  |      | 997    |   |      |   | 1,598  |      |  |   | 3,329  |  
|                                                                          |  |      |        |   |      |   |        |      |  |   |        |  
|Cash and cash equivalents at end of year                                  |  | $    | 176    |   |      | $ | 997    |      |  | $ | 1,598  |  
|                                                                          |  |      |        |   |      |   |        |      |  |   |        |  

(Continued)



F-30



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PARK BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2005, 2004, and 2003

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

NOTE 15 - QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)



|               |  |                |       |                   |   |           |  |   |                       |   |  |                               |      |   |  |   |      |  
|-------------- |  | -------------- | ----- | ----------------- | - | --------- |  | - | --------------------- | - |  | ----------------------------- | ---- | - |  | - | ---- | -
|               |  | InterestIncome |       | NetInterestIncome |   | NetIncome |  |   | EarningsPerShareBasic |   |  | EarningsPer ShareFullyDiluted |     
|2005           |  |                |       |                   |   |           |  |   |                       |   |  |                               |      |   |  |   |      |  
|First quarter  |  | $              | 3,270 |                   | $ | 1,871     |  | $ | 300                   |   |  | $                             | .28  |   |  | $ | .26  |  
|Second quarter |  |                | 3,376 |                   |   | 1,929     |  |   | 394                   |   |  |                               | .37  |   |  |   | .34  |  
|Third quarter  |  |                | 3,269 |                   |   | 1,803     |  |   | 168                   |   |  |                               | .16  |   |  |   | .15  |  
|Fourth quarter |  |                | 3,350 |                   |   | 1,836     |  |   | (232                  | ) |  |                               | (.22 | ) |  |   | (.20 | )
|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  |  

The third and fourth quarters of 2005 were impacted by a provision for loan losses of $317,000 and $680,000
respectively. These provisions were recorded to establish specific reserves on impaired loans. No provision for loan losses was recorded during the first or second quarter of 2005.



F-31



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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 7thday of April 2006.



PARK BANCORP, INC.By:

/s/ David A. RemijasDavid A. Remijas Chairman of the Board, President, and Chief 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 David A.
Remijas               |  | Chairman of the Board, President, and Chief Executive Officer (principal executive officer)              |  | April 7, 2006
|                                                    |  |                                                                                                         
|/s/ Steven J. Pokrak Steven J.
Pokrak               |  | Treasurer, Chief Financial Officer (principal financial and accounting officer), and Corporate Secretary |  | April 7, 2006
|                                                    |  |                                                                                                         
|/s/ Richard J. Remijas, Jr. Richard J.
Remijas, Jr. |  | Executive Vice President, Chief Operating Officer, and Director                                          |  | April 7, 2006
|                                                    |  |                                                                                                         
|/s/ Robert W. Krug Robert W.
Krug                   |  | Director                                                                                                 |  | April 7, 2006
|                                                    |  |                                                                                                         
|/s/ John J. Murphy John J.
Murphy                   |  | Director                                                                                                 |  | April 7, 2006
|                                                    |  |                                                                                                         
|/s/ Victor H. Reyes Victor H.
Reyes                 |  | Director                                                                                                 |  | April 7, 2006
|                                                    |  |                                                                                                         
|/s/ Paul Shukis Paul
Shukis                         |  | Director                                                                                                 |  | April 7, 2006



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PARK BANCORP, INC. AND SUBSIDIARIES

EXHIBIT INDEX

Park Bancorp, Inc.

Form 10-K for Fiscal Year Ended

December 31, 2005



|     |   |  |                                                                                                                                                                                                                        
|---- | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |  
|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 Auditors                                                                                                                                                                                        
|     |  
|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)                                                                                                                                                                   

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|* | 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.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------